As filed with the Securities and Exchange Commission on January , 2000
Securities Act Registration No. 333-
Investment Company Registration No. 811-6512
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. | |
Post-Effective Amendment No. | |
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 | |
AMENDMENT NO. 6 |X|
----------------------
THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC.
(Exact Name of Registrant as Specified In Charter)
800 Scudders Mill Road
Plainsboro, New Jersey 08536
(Address of Principal Executive Offices)
(800) 688-0928
(Registrant's Telephone Number, including Area Code)
Ralph L. Schlosstein, President
The BlackRock Insured Municipal Term Trust Inc.
345 Park Avenue
New York, New York 10154
(Name and Address of Agent for Service)
----------------------
Copies to:
Richard T. Prins, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Thomas A. DeCapo, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street
Boston, Massachusetts 02108-3194
Cynthia G. Cobden, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
----------------------
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
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CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
PROPOSED PROPOSED
TITLE OF SECURITIES AMOUNT BEING MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Auction Rate Municipal Preferred Stock, Series M7 1,616 shares $25,000 $40,400,000 $10,666
(Liquidation preference $25,000 per share)...........
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THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC.
CROSS REFERENCE SHEET
Part A-Prospectus
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ITEMS IN PART A OF FORM N-2
SPECIFIED IN PROSPECTUS LOCATION IN PROSPECTUS
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Item 1. Outside Front Cover...................................................Cover page
Item 2. Inside Front and Outside Back Cover Page..............................Inapplicable
Item 3. Fee Table and Synopsis................................................Inapplicable
Item 4. Financial Highlights..................................................Financial Highlights
Item 5. Plan of Distribution..................................................Cover Page; Prospectus Summary; the Auction;
Underwriting
Item 6. Selling Shareholders..................................................Inapplicable
Item 7. Use of Proceeds.......................................................Use of Proceeds; Investment Objective and Policies
Item 8. General Description of the Registrant.................................Cover Page; Prospectus Summary The Trust;
Investment Objective and Policies
Item 9. Management............................................................Prospectus Summary; Management of the Trust
Item 10. Capital Stock, Long-Term Debt, and Other Securities...................Capitalization; Investment Objective and Policies;
Description of New Preferred Shares; the Auction;
Tax Matters
Item 11. Defaults and Arrears on Senior Securities............................ Inapplicable
Item 12. Legal Proceedings.....................................................Inapplicable
Item 13. Table of Contents of the Statement of Additional Table of Contents of the Statement of Additional
Information...........................................................Information
Part B-Statement of Additional Information
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ITEMS IN PART B OF FORM N-2 LOCATION IN STATEMENT OF
ADDITIONAL INFORMATION
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Item 14. Cover Page...........................................................Cover Page
Item 15. Table of Contents....................................................Back Cover Page
Item 16. General Information and History......................................Inapplicable
Item 17. Investment Objective and Policies....................................Investment Objective and Policies; Investment
Policies and Techniques
Item 18. Management...........................................................Management of the Trust
Item 19. Control Persons and Principal Holders of Securities..................Management of the Trust
Item 20. Investment Advisory and Other Services...............................Management of the Trust
Item 21. Brokerage Allocation and Other Practices.............................Portfolio Transactions
Item 22. Tax Status...........................................................Tax Matters
Item 23. Financial Statements.................................................Financial Statements (incorporated by reference)
Part C-Other Information
</TABLE>
Items 24-33 have been answered in Part C of this Registration Statement
The information in this Prospectus is not complete and may be changed. We
may not sell these securities until the Registration Statement filed with
the Securities and Exchange Commission is effective. This Prospectus is not
an offer to sell these securities and is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED , 2000
PROSPECTUS
$40,400,000
THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC.
AUCTION RATE MUNICIPAL PREFERRED STOCK ("NEW PREFERRED SHARES")
1,616 SHARES, SERIES M7
LIQUIDATION PREFERENCE $25,000 PER SHARE
The BlackRock Insured Municipal Term Trust Inc. (the "Trust") is a
closed-end, diversified management investment company.
The Trust's investment objective is:
o to provide current income that is exempt from regular Federal income
tax; and
o to return $10 per common share (the initial public offering price
per common share) to holders of common shares on or about December 31,
2010.
The Trust seeks to achieve its investment objective by investing at
least 80% of its total assets in a diversified portfolio of municipal
obligations insured as to the timely payment of both principal and
interest. The Trust may invest up to 20% of its total assets in uninsured
municipal obligations which are:
o rated at the time of investment Aaa by Moody's or AAA by S&P;
o guaranteed by an entity with a Aaa or AAA rating;
o backed by an escrow or trust account containing sufficient U.S.
Government or U.S. Government agency securities to ensure timely
payment of principal and interest; or
o determined by the Trust's investment adviser to be of Aaa or AAA
credit quality at the time of investment.
The Trust seeks to return $10 per common share to common shareholders on or
about December 31, 2010 (when the Trust will terminate) by actively
managing its portfolio of municipal obligations which will have an average
final maturity on or about such date and by retaining each year a small
portion of its net investment income, which portion will not exceed 10% for
any year, as determined in accordance with the Federal income tax rules
applicable to the Trust. No assurance can be given that the Trust will
achieve its investment objective. BlackRock Financial Management, Inc. (the
"Adviser") acts as the investment adviser to the Trust. The address of the
Trust is 800 Scudders Mill Road, Plainsboro, New Jersey 08536 and its
telephone number is (800) 688-0928.
This prospectus contains important information about the Trust.
You should read the prospectus before deciding whether to invest and retain
it for future reference. A statement of additional information, dated ,
2000, containing additional information about the Trust, has been filed
with the Securities and Exchange Commission and is incorporated by
reference in its entirety into this prospectus. You can review the table of
contents of the statement of additional information on page of this
prospectus. You may request a free copy of the statement of additional
information by calling (800) 227-7236. You may also obtain the statement of
additional information and other information regarding the Trust on the
Securities and Exchange Commission web site (http://www.sec.gov).
------------------------
INVESTING IN THE NEW PREFERRED SHARES INVOLVES CERTAIN RISKS. SEE
"RISKS" BEGINNING ON PAGE ___. THE MINIMUM PURCHASE AMOUNT OF THE NEW PREFERRED
SHARES IS $25,000.
(continued on following page)
Neither the Securities and Exchange Commission ("SEC") nor any
state securities commission has approved or disapproved these securities or
determined if this prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
-----------------------
Per Share Total
--------- -----
Public Offering Price $25,000 $40,400,000
Sales Load $ $
Proceeds to Trust (before expenses)1 $ $
------------------------
1 Offering expenses payable by the Trust are estimated to be
$300,000.
The underwriters are offering the New Preferred Shares subject to various
conditions. The underwriters expect to deliver the New Preferred Shares to
purchasers, in book-entry form, through the facilities of The Depository
Trust Company on or about ___, 2000.
February , 2000
The Trust is offering 1,616 newly issued shares of Auction Rate
Municipal Preferred Stock, Series M7. We refer to these shares as the "New
Preferred Shares" throughout this prospectus and the related statement of
additional information. Except for the initial dividend rate and initial
dividend period, the terms of the New Preferred Shares are the same as the
terms of the Trust's currently outstanding Series M7 Preferred Shares
(together with the Trust's outstanding Series M28 Preferred Shares, the
"Preferred Shares").
The dividend rate for the initial dividend period (the period
from the date of issue through ____, 2000) will be ___%, and will be paid
on _________, 2000. After the initial dividend period, the dividend rate on
the New Preferred Shares for each subsequent dividend period generally will
be determined pursuant to weekly auctions. The letter/numeral indication
"M7" means that the auction for the New Preferred Shares normally will be
held every Monday and that the dividend period normally will be 7 days.
Prospective purchasers should carefully review the auction procedures
described in this prospectus, including the appendices, and should note:
o a buy order (called a "bid") or sell order is a commitment
to buy or sell New Preferred Shares based on the results of
an auction;
o auctions will be conducted by telephone; and
o purchases and sales will be settled on the next business day
after the auction.
The New Preferred Shares will not be listed on an exchange. You
may only buy or sell New Preferred Shares through an order placed at an
auction with or through a broker-dealer that has entered into an agreement
with the auction agent and the Trust, or in a secondary market maintained
by certain broker-dealers. These broker-dealers are not required to
maintain this market, and it may not provide you with liquidity.
Dividends on New Preferred Shares, to the extent payable from
tax-exempt income earned on the Trust's investments, will be exempt from
regular Federal income tax in the hands of owners of such shares. All or a
portion of the Trust's dividends may be subject to the Federal alternative
minimum tax. The Trust is required to allocate net capital gains and other
taxable income, if any, proportionately between common shares and Preferred
Shares, including the New Preferred Shares, based on the percentage of
total dividends distributed to each class for that year. The Trust may at
its election give notice of the amount of any income subject to regular
Federal income tax to be included in a dividend on a New Preferred Share in
advance of the related auction. If the Trust does not give such advance
notice, it generally will be required to pay additional amounts to holders
of New Preferred Shares in order to adjust for their receipt of income
subject to regular Federal income tax.
The New Preferred Shares are redeemable, in whole or in part, at
the option of the Trust on any date dividends are paid on the New Preferred
Shares (except during certain non-call periods), and will be subject to
mandatory redemption, in certain circumstances, at a redemption price of
$25,000 per share plus accumulated but unpaid dividends to the redemption
date (whether or not declared), plus a premium in certain circumstances.
The Trust intends to redeem all of the New Preferred Shares and all of its
other Preferred Shares no later than the last dividend payment date in
respect of each series prior to December 31, 2010 (when the Trust will
terminate).
The New Preferred Shares do not represent a deposit or
obligation of, and are not guaranteed or endorsed by, any bank or other
insured depository institution. The New Preferred Shares are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve
Board or any other government agency.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. THE TRUST HAS NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. THE TRUST IS NOT MAKING AN OFFER OF THESE SECURITIES
IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT
THE INFORMATION PROVIDED BY THIS PROSPECTUS IS ACCURATE AS OF ANY DATE
OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS.
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY......................................................4
FINANCIAL HIGHLIGHTS....................................................8
THE TRUST...............................................................9
USE OF PROCEEDS........................................................10
CAPITALIZATION.........................................................10
INVESTMENT OBJECTIVE AND POLICIES......................................11
MUNICIPAL OBLIGATIONS..................................................12
INSURANCE..............................................................13
OTHER INVESTMENT PRACTICES.............................................15
RISKS..................................................................16
MANAGEMENT OF THE TRUST................................................18
DESCRIPTION OF PREFERRED SHARES........................................21
DESCRIPTION OF NEW PREFERRED SHARES....................................21
THE AUCTION............................................................28
TAXES..................................................................31
DETERMINATION OF NET ASSET VALUE.......................................32
REPURCHASE OF COMMON SHARES............................................32
DESCRIPTION OF CAPITAL STOCK...........................................32
CUSTODIAN..............................................................34
UNDERWRITING...........................................................35
TRANSFER AGENT, DIVIDEND
DISBURSING AGENT AND REGISTRAR.........................................35
LEGAL OPINIONS.........................................................36
EXPERTS................................................................36
REPORTS TO STOCKHOLDERS................................................36
AVAILABLE INFORMATION..................................................36
TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION..........37
APPENDIX A............................................................A-1
PROSPECTUS SUMMARY
The following information is a summary of, and is qualified in its
entirety by reference to, more detailed information included in this
prospectus and the Trust's statement of additional information.
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THE TRUST.......................................... The BlackRock Insured Municipal Term Trust Inc. (the "Trust")
is a diversified, closed-end management investment company.
As of December 31, 1999, the Trust had [ ] shares of
common stock outstanding and 5,200 preferred shares
outstanding in two series: 2,600 preferred shares designated
Series M7 and 2,600 preferred shares designated Series M28.
The Trust's common shares are traded on the New York Stock
Exchange under the symbol "BMT." The Trust will distribute
substantially all of its net assets on or about December 31, 2010,
when the Trust will terminate.
THE OFFERING....................................... The Trust is offering 1,616 New Preferred Shares. The purchase
price for each New Preferred Share is $25,000 plus accumulated
dividends, if any, from the date the share is first issued. Except
for the initial dividend rate and the length of the initial dividend
period for the New Preferred Shares, the rights and preferences
of the New Preferred Shares are the same as the Trust's
outstanding Series M7 preferred shares. The Trust intends to
redeem all of its Preferred Shares (including the New Preferred
Shares) no later than the last dividend payment date prior to
December 31, 2010 (when the Trust will terminate).
The New Preferred Shares are being offered by a group of
underwriters listed under "Underwriting."
INVESTMENT OBJECTIVE AND POLICIES.................. The Trust's investment objective is to provide current income
exempt from regular Federal income tax and to return $10 per
common share (the initial offering price per common share) to
holders of common shares on or about December 31, 2010. No
assurance can be given that the Trust will achieve its investment
objective.
The Trust seeks to achieve its investment objective by
investing at least 80% of its total assets in a diversified
portfolio of municipal obligations insured as to the timely
payment of both principal and interest by insurers with
claims-paying abilities rated at the time of investment Aaa
by Moody's Investors Service, Inc. ("Moody's") or AAA by
Standard & Poor's Rating Services ("S&P") or which are
determined by the Adviser to have equivalent claims-paying
abilities. The Trust may invest up to 20% of its total
assets in uninsured municipal obligations which are:
o rated at the time of investment Aaa by Moody's or AAA by
S&P;
o guaranteed by an entity with a Aaa or AAA rating;
o backed by an escrow or trust account containing
sufficient U.S. Government or U.S. Government
agency securities to ensure timely payment of
principal and interest; or
o determined by the Adviser to be of Aaa or AAA credit
quality at the investment.
The Trust seeks to return $10 per common share to holders of
common shares on or about December 31, 2010 (when the Trust
will terminate) by actively managing its portfolio of
tax-exempt municipal obligations which will have an average
final maturity on or about such date and by retaining each
year a small portion of its net investment income, which
portion will not exceed 10% for any year as determined in
accordance with the Federal income tax rules applicable to
the Trust.
INVESTMENT ADVISER................................. BlackRock Financial Management, Inc. (the "Adviser") acts as
the Trust's investment adviser. The Adviser is responsible for
the investment strategy of the Trust. The Adviser and its
affiliates comprise a global asset management firm with assets
of approximately $148 billion under management as of
September 30, 1999.
RISK FACTORS....................................... Before investing in New Preferred Shares, you should consider
carefully the following risks of such an investment:
o if an auction fails you may not be able to sell some or all
of your shares;
o because of the nature of the market for New Preferred
Shares, you may receive less than the price you paid for
your shares if you sell them outside of the auction,
especially when market interest rates are rising;
o a rating agency could downgrade the rating assigned to the
New Preferred Shares, which could affect liquidity;
o the Trust may be forced to redeem your shares to meet
regulatory or rating agency requirements or may voluntarily
redeem your shares in certain circumstances;
o in extraordinary circumstances the Trust may not earn
sufficient income from its investments to pay dividends;
o if interest rates rise, the value of the Trust's investment
portfolio will decline, reducing the asset coverage for the
New Preferred Shares; and
o if an issuer of a municipal bond in which the Trust invests
experiences financial difficulty or defaults, there may be a
negative impact on the income and net asset value of the
Trust's portfolio.
SECONDARY MARKET TRADING........................... The New Preferred Shares will not be listed on a stock exchange.
Instead, you may buy or sell New Preferred Shares at a periodic
auction by submitting orders to a broker-dealer (a "Broker-
Dealer") that has entered into a separate agreement with the
auction agent and the Trust or to a broker-dealer that has entered
into an agreement with a Broker-Dealer. In addition to the
auctions, Broker-Dealers and other broker-dealers may maintain
a separate secondary trading market in New Preferred Shares,
but may discontinue this activity at any time. You may transfer
shares outside of auctions only to or through a Broker-Dealer, a
broker-dealer that has entered into a separate agreement with a
Broker-Dealer, or other persons as the Trust may agree. There
can be no assurance that a secondary trading market for the New
Preferred Shares will develop, or if it does develop, that
it will provide holders with liquidity of investment.
DIVIDENDS AND DIVIDEND PERIODS..................... After their initial dividend period, the New Preferred Shares
normally will have a dividend period consisting of seven days.
The board of directors of the Trust may, from time to time,
declare a special dividend period upon giving notice to the
holders of the New Preferred Shares.
Dividends on the New Preferred Shares offered hereby are
cumulative from the date they are first issued and are
payable when, as and if declared by the board of directors
of the Trust, out of funds legally available therefor. The
Trust will pay the initial dividend for the New Preferred
Shares on [____________] and thereafter generally on each
succeeding Tuesday, subject to certain exceptions.
After the initial dividend period, the dividend rate for the
New Preferred Shares will be determined by auction. The
dividend rate for the initial dividend period is ___% and
the first auction will be held on ___.
TAXES.............................................. Because in normal circumstances the Trust will invest
substantially all of its assets in municipal obligations that pay
interest that is exempt from regular Federal income tax, the
income you receive will ordinarily be exempt from Federal
income tax. Your income may be subject to state and local taxes.
All or a portion of the income from these bonds may be subject
to the Federal alternative minimum tax, so New Preferred Shares
may not be a suitable investment if you are subject to this tax or
would become subject to such tax by investing in New Preferred
Shares. Taxable income or gain earned by the Trust will be
allocated proportionately to holders of the Trust's preferred
shares and common shares, based on the percentage of total
dividends paid to each class for that year. Accordingly, certain
specified New Preferred Share dividends may be subject to
income tax on income or gains attributed to the Trust. The Trust
may at its election give notice before any applicable auction of
the amount of any taxable income and gain to be distributed for
the period relating to that auction. If the Trust does not provide
such notice, the Trust generally will make holders of New
Preferred Shares whole for taxes owing on dividends paid to
shareholders that include taxable income or gain.
ALTERNATIVE MINIMUM TAX............................ All or a portion of the Trust's dividends may be subject to
federal Alternative Minimum Tax ("AMT").
LIQUIDATION PREFERENCE............................. The liquidation preference of each New Preferred Share will be
$25,000, plus an amount equal to accumulated but unpaid
dividends (whether or not earned or declared) plus the premium,
if any, resulting from the designation of a premium call period.
RATINGS............................................ It is a condition to their issuance that the New Preferred Shares
be issued with a rating of "aaa" from Moody's and "AAA" from
S&P.
REDEMPTION......................................... Holders of New Preferred Shares will not have the right to cause
the Trust to redeem their shares. The Trust may, however, be
required by applicble law or by rating agency guidelines to
redeem New Preferred Shares if, for example, the Trust does
not meet an asset coverage ratio required by law or correct
a failure to meet a rating agency guideline in a timely
manner. The Trust may also voluntarily redeem New Preferred
Shares.
VOTING RIGHTS...................................... The Investment Company Act of 1940 requires that the holders
of New Preferred Shares and of currently outstanding Preferred
Shares, voting together as a single class separate from the
holders of common shares, have the right to elect at least two
directors of the Trust at all times and to elect a majority of the
directors at any time when two years' dividends on the Preferred
Shares are unpaid. The holders of New Preferred Shares and any
other outstanding preferred shares will vote as a separate class
on certain other matters as required under the Trust's charter, the
Investment Company Act of 1940 and Maryland law.
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FINANCIAL HIGHLIGHTS
The table below sets forth certain specified information for a
share of common stock of the Trust outstanding throughout each period
presented. The financial highlights for each period presented (other than
for the six months ended June 30, 1999) have been audited by Deloitte &
Touche LLP, the Trust's independent auditors, whose report covering each of
the five years in the period ended December 31, 1998, is included in the
Trust's most recent Annual Report and is incorporated by reference in the
statement of additional information. The financial highlights should be
read in conjunction with the financial statements and notes thereto
included in the Trust's most recent Annual Report and the Semi-Annual
Report for the six months ended June 30, 1999, which are available without
charge from the Trust.
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YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
SIX MONTHS SEPTEMBER
ENDED JUNE 28, 1992
30, 1999 THROUGH
PER COMMON SHARE OPERATING (UNAUDITED) DECEMBER
PERFORMANCE: ------------ 1998 1997 1996 1995 1994 1993 31, 1992
---- ---- ---- ---- ---- ----
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Net asset value, beginning of the period.....$ 11.22 $ 11.20 $ 10.87 $ 11.02 $ 9.73 $ 11.18 $ 9.93 $ 9.40
-------- ------- ------- -------- -------- -------- -------- ---------
Net investment income..................... 0.42 0.85 0.84 0.83 0.84 0.82 0.83 0.61
Net realized and unrealized gain (loss)
on investments (0.40) (0.03) 0.29 (0.18) 1.27 (1.48) 1.18 0.56
-------- ------- ------- -------- -------- -------- -------- ---------
Net increase (decrease) from investment
operation (0.02) 0.82 1.13 0.65 2.11 (0.66) 2.01 1.17
-------- ------- ------- -------- -------- -------- -------- ---------
Dividends and distributions:
Dividends from net investment income to:
Preferred shareholders.................. (0.08) (0.18) (0.18) (0.18) (0.20) (0.14) (0.12) (0.09)
Common shareholders..................... (0.31) (0.62) (0.62) (0.62) (0.62) (0.62) (0.63) (0.42)
Distributions from net realized gain on investments
to:
Preferred shareholders.................. -- -- -- -- -- (0.01) (0.00) --
Common shareholders..................... -- -- -- -- -- (0.02) (0.01) --
Distributions in excess of net realized gain on
investments to:
Preferred shareholders.................. -- -- -- -- -- -- -- --
Common shareholders..................... -- -- -- -- -- -- -- --
-------- ------- ------- -------- -------- -------- -------- ---------
Total dividends and distributions............ (0.39) (0.80) (0.80) (0.80) (0.82) (0.79) (0.76) (0.51)
Capital charge with respect to issuance of shares -- -- -- -- -- -- -- --
Net asset value, end of period*..............$ 10.85 $ 11.22 $ 11.20 $ 10.87 $ 11.02 $ 9.73 $ 11.18 $ 9.93##
Market value, end of period*.................$ 10.88 $ 11.50 $ 11.00 $ 10.13 $ 10.00 $ 8.50 $ 10.50 $ 9.88
TOTAL INVESTMENT RETURN...................... (2.75)% 10.53% 15.22% 7.59% 25.31% (13.38)% 12.92% 9.51%
RATIOS TO AVERAGE NET ASSETS OF
COMMON SHAREHOLDERS:
Expenses++................................... 0.95%+++ 0.93% 0.94% 0.97% 0.96% 1.04% 0.96% 0.98%+++
Net investment income before preferred stock +++ ++
dividends++.................................. 7.66% 7.56% 7.66% 7.66% 7.97% 7.99% 7.75% 7.60%+
Preferred stock dividends.................... 1.41%+++ 1.53% 1.62% 1.61% 1.87% 1.44% 1.14% 1.21%+++
Net Investment income available to common +++ ++
shareholders................................. 6.25% 6.03% 6.04% 6.05% 6.10% 6.55% 6.61% 6.39%+
SUPPLEMENTAL DATA:
Average net assets of common shareholders (in
thousands)...................................$288,369 $290,004 $283,531 $281,521 $ 272,868 $265,851 $275,162 $247,807
Portfolio turnover........................... 0% 0% 1% 1% 1% 31% 1% 37%
Net assets of common shareholders, end of per
(in thousands)...........................$280,839 $290,469 $289,962 $281,470 $285,226 $251,856 $289,449 $ 256,956
Preferred stock outstanding (in thousands)...$130,000 $130,000 $130,000 $130,000 $130,000 $130,000 $130,000 $ 130,000
Asset coverage per share of preferred stock, $ 79,007 $80,859 $80,762 $ 79,129 $ 79,851 $146,868 $161,327 $ 148,829
period#......................................
</TABLE>
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* Net asset value and market value are published in Barron's each
Saturday and The Wall Street Journal each Monday. ** Commencement of
investment operations.
*** Actual amount paid to preferred shareholders was $0.0013 per common
share. # A stock split occurred on July 24, 1995.
## Net asset value immediately after the closing of the initial public
offering was $9.38.
+ Total investment return is calculated assuming a purchase of common
stock at the current market price on the first day and a sale at the
current market price on the last day of the period reported. Dividends
and distributions, if any, are assumed for purposes of this
calculation to be reinvested at prices obtained under the Trust's
dividend reinvestment plan. Total investment return does not reflect
brokerage commissions. Total investment returns for periods of less
than one year are not annualized.
++ Ratios are calculated on the basis of income and expenses applicable
to both the common and preferred shares, relative to the average net
assets of common shareholders.
+++ Annualized.
@ Certain changes have been made to the ratios to average net assets of
common shareholders for the period ended December 31, 1992 to conform
to current year presentation.
THE TRUST
The BlackRock Insured Municipal Term Trust Inc. (the "Trust") is a
diversified, closed-end management investment company. The Trust was
incorporated under the laws of the State of Maryland on December 23, 1991,
and has registered under the Investment Company Act of 1940 (the "1940
Act"). The Trust will distribute substantially all of its net assets on or
about December 31, 2010, when the Trust will terminate. The Trust's
principal office is located at 1285 Avenue of the Americas New York, NY
10019 and its telephone number is (212) 713-2848.
The Trust commenced investment operations on February 28, 1992,
upon the closing of the initial public offering of 22,500,000 of its common
shares. The net proceeds of such offering were approximately $211.5
million. In March 1992, the Trust, pursuant to an over-allotment option
granted to the underwriters in the initial public offering, sold an
additional 3.4 million of its common shares for net proceeds of
approximately $31.7 million. On April 27, 1992, the Trust issued shares of
preferred stock in the following amounts and with the following
designations: Preferred Shares Series M7 - 1,300 shares and Preferred
Shares Series M28 - 1,300 shares. Each series of preferred shares was
issued with a liquidation preference per share of $50,000, plus accumulated
and unpaid dividends. On May 16, 1995, shareholders approved a proposal to
split each preferred share into two shares and simultaneously reduce each
share's liquidation preference from $50,000 to $25,000, plus in each case
accumulated and unpaid dividends, which occurred on July 24, 1995.
As of December 31, 1999, 25,885,639 common shares of the Trust
were outstanding and 5,200 preferred shares were outstanding in two series:
2,600 Preferred Shares Series M7 and 2,600 Preferred Shares Series M28. The
Trust's common shares are traded on the New York Stock Exchange under the
symbol "BMT".
The following table provides information about the Preferred Shares since
their issuance:
Amount Outstanding
Exclusive of Treasury Asset Coverage Involuntary Liquidating
As of Securities Per Share* Preference Per Share
----- ---------- ---------- --------------------
12/31/1992 2,600 $ 148,829 $ 50,000
12/31/1993 2,600 $ 161,327 $ 50,000
12/31/1994 2,600 $ 146,868 $ 50,000
12/31/1995** 5,200 $ 79,851 $ 25,000
12/31/1996 5,200 $ 79,129 $ 25,000
12/31/1997 5,200 $ 80,762 $ 25,000
12/31/1998 5,200 $ 80,859 $ 25,000
* Calculated by dividing net assets by the number of Preferred Shares
outstanding.
** A 2-for-1 stock split with respect to the Preferred Shares occurred on
July 24, 1995. ......................
The following table provides information about the Trust's outstanding
shares as of December 31, 1999:
<TABLE>
<CAPTION>
Amount Held by
the Trust or for
Title of Class Amount Authorized its Account Amount Outstanding
-------------- ----------------- ----------- ------------------
<S> <C> <C> <C>
Common Shares 200,000,000 0
Series M7 Preferred Shares 2,600 0 2,600
Series M28 Preferred Shares 2,600 0 2,600
</TABLE>
USE OF PROCEEDS
The net proceeds of the offerings will be $39,696,000, after
payment of offering expenses (estimated to be $300,000) and the
underwriting discount.
The net proceeds of the offering will be invested in accordance
with the Trust's investment objective and policies as stated below. It is
presently anticipated that the Trust will be able to invest substantially
all of the net proceeds in municipal securities that meet its objective and
policies at or shortly (within [six to eight] weeks) after the completion
of the offering. To the extent that all of the proceeds cannot be so
invested, pending such investment, they will be invested in short-term,
high quality tax-exempt securities. If necessary in order to fully invest
the net proceeds of the offerings immediately, the Trust may also purchase,
as temporary investments, short-term, taxable investments, the income on
which is subject to regular Federal income tax.
CAPITALIZATION
The following table sets forth the unaudited capitalization of the
Trust as of _____________, 2000, and as adjusted to give effect to the
issuance of the New Preferred Shares pursuant to the offering.
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
----------------- ---------------
<S> <C> <C>
Shareholders' equity:
Preferred Stock, par value $.01 per share (5,200 shares issued; 6,816
preferred shares issued and outstanding, as adjusted, at $25,000 per share
liquidation preference).................................................. $ 130,000,000 $ 170,400,000
Common Shares, par value $.01 per share (shares issued and outstanding).......
Paid in capital in excess at par ..........................................
Undistributed net investment income........................................
Accumulated net realized loss..............................................
Unrealized appreciation of investments.....................................
-------------- -------------
Net assets................................................................. $ $
============== =============
</TABLE>
INVESTMENT OBJECTIVE AND POLICIES
The Trust's investment objective is to provide current income
exempt from regular Federal income tax and to return $10 per common share
to holders of common shares on or about December 31, 2010. No assurance can
be given that the Trust will achieve its investment objective.
The Trust seeks to achieve its investment objective by investing
at least 80% of its total assets in a diversified portfolio of municipal
obligations insured as to the timely payment of both principal and interest
by insurers with claims-paying abilities rated at the time of Investment
Aaa by Moody's Investors Service, Inc. ("Moody's") or AAA by Standard &
Poor's Ratings Services ("S&P") or which are determined by the Trust's
investment adviser, BlackRock Financial Management, Inc. (the "Adviser"),
to have equivalent claims-paying abilities. The Trust may invest up to 20%
of its total assets in uninsured municipal obligations which are:
o rated at the time of investment Aaa by Moody's or AAA by
S&P;
o guaranteed by an entity with a Aaa or AAA rating;
o backed by an escrow or trust account containing sufficient
U.S. Government or U.S. Government agency securities to
ensure timely payment of principal and interest; or
o determined by the Trust's Adviser to be of Aaa or AAA credit
quality at the time of investment.
Generally, municipal obligations which are covered by insurance or a
guarantee would not be rated Aaa or AAA, and might not be considered to be
of investment grade credit quality in the absence of such insurance or
guarantee. In determining whether to purchase a particular municipal
obligation which is covered by insurance or a guarantee, the Adviser
considers the credit quality of the underlying issuer (among other factors
such as price, yield and maturity), although such credit quality will not
necessarily be the determinative factor in making the investment decision.
Municipal obligations which are backed by an escrow or trust
account which contains U.S. Government or U.S. Government agency securities
("collateralized obligations") generally are not insured and may not be
rated Aaa by Moody's or AAA by S&P, and may not be of equivalent credit
quality in the view of the Adviser. Collateralized obligations include, but
are not limited to, municipal obligations that have been (i) advance
refunded where the proceeds of the funding have been used to purchase U.S.
Government or U.S. Government agency securities that are placed in escrow
and whose interest or maturity principal payments, or both, are sufficient
to cover the remaining scheduled debt service on the municipal obligations,
or (ii) issued under state and local housing finance programs which use the
issuance proceeds to fund mortgages that are then exchanged for U.S.
Government or U.S. Government agency securities and deposited with a
trustee as security for the municipal obligations. These collateralized
obligations are normally regarded as having the credit characteristics of
the underlying U.S. Government or U.S. Government agency securities.
The Trust seeks to return $10 per common share to holders of
common shares on or about December 31, 2010 (when the Trust will terminate)
by actively managing its portfolio of tax-exempt municipal obligations,
which will have an average final maturity on or about such date and by
retaining each year a small portion of its net investment income, which
portion will not exceed 10% for any year as determined in accordance with
the Federal income tax rules applicable to the Trust. The purpose of
retaining a small portion of net investment income is to enhance the
Trust's ability to return to investors $10 per common share outstanding
upon the Trust's termination. Such retained income will serve to increase
the net asset value of the Trust and a portion of such retained income will
be available to offset capital losses, if any. However, if the Trust
realizes any capital losses on dispositions of securities that are not
offset by capital gains on the disposition of other securities or the
retention of net investment income, the Trust may return less than $10 for
each common share outstanding at the end of the Trust's term. In addition,
the leverage caused by the Trust's issuance of preferred stock may increase
the possibility of incurring capital losses and the difficulty of
subsequently incurring capital gains to offset such losses. However, the
Adviser believes that it will be able to manage the Trust's assets so that
the Trust will not realize capital losses which are not offset by capital
gains over the life of the Trust on the disposition of its other assets and
retained net investment income. Although neither the Adviser nor the Trust
can guarantee these results, their achievement should enable the Trust, on
or about December 31, 2010, to have available for distribution to holders
of its common shares $10 for each common share then outstanding.
Moody's highest rating category is Aaa. S&P's highest rating
category is AAA. The process of determining ratings for municipal
obligations by Moody's and S&P includes consideration of the likelihood of
the receipt by securityholders of all distributions, the nature of the
underlying securities, the credit quality of the guarantor, if any, and the
structural, legal and tax aspects associated with such securities.
Publications of Moody's indicate that it assigns a Aaa rating to securities
that "are judged to be of the best quality" and "carry the smallest degree
of investment risk." Publications of S&P indicate that it assigns a AAA
rating to securities for which the obligor's "capacity to meet its
financial commitment on the obligation is extremely strong."
In normal circumstances, the Trust disposes of insured municipal
obligations in its portfolio if the claims-paying ability of their insurer
declines below Aaa in the case of Moody's or AAA in the case of S&P, unless
the Trust obtains appropriate alternate insurance covering such municipal
obligations. The Trust may deviate from the foregoing policy relating to
the disposal of municipal obligations when, in the Adviser's judgment,
appropriate alternative insurance is not available or is unduly costly or
if the Adviser believes that an insurer whose claims-paying ability rating
has been lowered is taking steps which will cause its rating to be restored
promptly to the Aaa or AAA level. Similarly, the Trust intends to dispose
of uninsured municipal obligations rated Aaa or AAA or guaranteed by an
entity with such a rating if their credit quality (or that of their
guarantor) declines below Aaa or AAA, or, if they are not rated, the
Adviser no longer believes them to be of triple-A credit quality.
The Trust currently does not, and does not expect to, invest more
than 25% of its total assets (taken at market value) in municipal
obligations whose issuers are located in the same state. All or a portion
of the Trust's dividends paid in respect of its common shares, its
outstanding preferred shares and the New Preferred Shares may be subject to
Federal alternative minimum tax ("AMT"). See "Municipal Obligations."
The Trust may utilize certain options, futures, interest rate
swaps and related transactions for hedging purposes. To the extent the
Trust utilizes hedging strategies or invests in taxable securities, the
Trust's ability to achieve its investment objective of providing high
current income exempt from regular Federal income tax may be limited.
Accordingly, in normal circumstances, the Trust's use of such practices is
not significant.
On a temporary defensive basis, the Trust may invest without limit
in securities issued by the U.S. Government or its agencies or
instrumentalities, repurchase agreements collateralized by such securities,
or certificates of deposit, time deposits or bankers' acceptances for
purposes of enhancing liquidity and/or preserving capital. The Trust may
also invest in municipal obligations with maturities of less than one year,
other debt obligations of corporate issuers, such as interest-paying
corporate bonds, commercial paper and certificates of deposit, bankers'
acceptances and interest-bearing savings accounts of banks having assets
greater than $1 billion and which are members of the Federal Deposit
Insurance Corporation. During temporary defensive periods, the current
dividend rate on any Preferred Shares, including the New Preferred Shares,
will be more likely to approximate or exceed the net rate of return on the
Trust's investment portfolio, with the consequence that the leverage
resulting from the New Preferred Shares may become less beneficial or
adverse to the holders of common shares.
MUNICIPAL OBLIGATIONS
Municipal obligations include debt obligations issued by states,
cities and local authorities, and possessions and certain territories of
the United States to obtain funds for various public purposes. These
purposes include the construction of public facilities such as airports,
bridges, highways, housing, hospitals, mass transportation, schools,
streets and water and sewer works. Other public purposes for which
municipal obligations may be issued include the refinancing of outstanding
obligations and the obtaining of funds for general operating expenses and
for loans to other public institutions and facilities. Subject to the
credit standard policies described under "Investment Objective and
Policies," there are two categories of municipal obligations in which the
Trust may invest in normal circumstances: (i) "public purpose" obligations
that generate interest that is tax-exempt under regular Federal income tax
rules and is not treated as a preference item for AMT; and (ii) qualified
"private activity" obligations (typically industrial revenue bonds) that
generate income that is tax-exempt under regular Federal income tax rules
but must, if issued after August 7, 1986, be included in computing AMT. The
Trust will not invest in municipal obligations that generate interest that
by its terms is subject to Federal income tax other than AMT.
The types of municipal obligations in which the Trust may invest
include general obligation bonds, revenue bonds, municipal lease
obligations, installment purchase contract obligations, variable and
floating rate obligations, zero coupon securities, tax-exempt notes and
municipal commercial paper.
The yields on municipal obligations are dependent on a variety of
factors, including interest and income tax rates, the condition of the
general money market and the municipal obligations market, the size of the
particular issue, the maturity of the obligation and the rating of the
issue. The ratings of Moody's and S&P represent their opinions as to the
quality of those municipal obligations that they rate.
It should be emphasized that ratings are general and are not
absolute standards of quality. Consequently, municipal obligations with the
same maturity, coupon and rating may have different yields while
obligations of the same maturity and coupon with different ratings may have
the same yield. The market value of outstanding municipal obligations will
vary with changes in prevailing interest rate levels and as a result of
changing evaluations of the ability of their issuers to meet interest and
principal payments.
The terms of municipal obligations often give their issuers the
right periodically to "call" or prepay their municipal obligations. Issuers
will exercise call rights when interest rates decline and they can
refinance their municipal obligations at lower interest rates. At the time
the Trust was formed, most of the municipal obligations available in the
market were subject to call provisions. When municipal obligations are
called by their issuers, the Adviser reinvests the proceeds from the called
securities in other municipal obligations. Because the Trust has a limited
term, the Adviser reinvests the proceeds in municipal obligations maturing
prior to the expiration of the term. As the Trust approaches its
termination date on December 31, 2010, the Adviser will be required to
reinvest in shorter term municipal obligations with relatively lower
interest rates.
Obligations of issuers of municipal obligations may be subject to
the provisions of bankruptcy, insolvency and other laws affecting the
rights and remedies of creditors, such as the United States Bankruptcy Code
and other applicable laws. In addition, the obligations of such issuers may
become subject to the laws enacted in the future by Congress or state
legislatures or referenda extending the time for payment of principal
and/or interest, or imposing other constraints upon enforcement of such
obligations or upon municipalities to levy taxes. There is also the
possibility that, as a result of legislation or other conditions, the power
or ability of any issuer to pay, when due, the principal of and interest on
its municipal obligations may be materially affected.
INSURANCE
The Trust generally invests at least 80% of its total assets in a
diversified portfolio of municipal obligations insured as to the timely
payment of both principal and interest by insurers with claims-paying
abilities rated Aaa by Moody's or AAA by S&P at the time of investment or,
if not rated, which are determined by the Adviser to have equivalent
claims-paying abilities. See Appendix B to the statement of additional
information for a brief description of Moody's and S&P's insurance
claims-paying ability ratings.
Certain insurance companies will issue policies guaranteeing the
timely payment of principal of, and interest on, particular municipal
obligations or on a portfolio of municipal obligations. Insurance may be
purchased by the issuer of a municipal obligation or by a third party at
the time of issuance of the municipal obligation ("Original Issue
Insurance") or by the Trust or a third party subsequent to the original
issuance of a municipal obligation ("Secondary Insurance"). In each case, a
single premium is paid to the insurer by the party purchasing the insurance
when the insurance is obtained. Original Issue Insurance and Secondary
Insurance policies are non-cancellable and remain in effect for so long as
the insured municipal obligation is outstanding and the insurer is in
business. Accordingly, whether a particular municipal obligation is covered
by Original Issue Insurance as opposed to Secondary Insurance will not, in
and of itself, be determinative to the Trust in making an investment
decision to purchase such municipal obligation.
The Trust may also purchase insurance covering certain municipal
obligations which it intends to purchase for its portfolio or which it
already owns ("Portfolio Insurance"). Portfolio Insurance policies
guarantee the timely payment of principal of, and interest on, covered
municipal obligations only while they are owned by the Trust. Such policies
are non-cancellable and remain in effect until the Trust terminates
provided the Trust pays the applicable insurance premiums and the insurer
remains in business. Municipal obligations in the Trust's portfolio covered
by a Portfolio Insurance policy will not be covered by such policy after
they are sold by the Trust unless the Trust elects to obtain some form of
Secondary Insurance for them at the time of sale. The Trust would obtain
such Secondary Insurance only if, in the Adviser's view, it would be
economically advantageous for the Trust to do so.
The Trust may purchase municipal obligations covered by Original
Issue Insurance provided by AMBAC Indemnity Corporation ("AMBAC"), Bond
Investors Guaranty Insurance Company ("BIGI"), Capital Markets Assurance
Company ("CAPMAC"), Municipal Bond Investors Assurance Corporation
("MBIA"), Financial Security Assurance Inc. ("FSA") and Financial Guaranty
Insurance Company ("FGIC"); each has received insurance claims-paying
ability ratings of Aaa from Moody's and AAA from S&P. See Appendix B to the
statement of additional information for a description of Moody's and S&P's
insurance claims-paying ability ratings and financial data regarding each
of these insurers. The Trust may also purchase Secondary Insurance and
Portfolio Insurance policies from any of such insurers. In the future, the
Trust may purchase municipal obligations covered by Original Issue
Insurance provided by, and may purchase Secondary and Portfolio Insurance
from, other insurers (not listed above) whose claims-paying abilities are
rated Aaa by Moody's or AAA by S&P or, if unrated, are of comparable credit
quality in the view of the Adviser. Any payments received from an insurer,
whether the insurance is obtained by the Trust or by other parties, is
treated for Federal income tax purposes in the same manner as if the
payments were received directly from the issuer of the municipal
obligations. See "Taxes".
The Adviser anticipates that a majority of insured tax-exempt
municipal obligations purchased by the Trust will be insured under policies
obtained by parties other than the Trust. The Trust does not pay the
premiums for such policies; rather the cost of such policies may be
reflected in a higher purchase price for such insured municipal
obligations. Accordingly, the yield on such municipal obligations may be
lower than that on equivalent uninsured municipal obligations. The cost of
insurance purchased by the Trust will increase its expenses, and the yield
on the Trust's portfolio will be reduced accordingly.
In the event the claims-paying ability rating of an insurer of
municipal obligations in the Trust's portfolio were to be lowered from Aaa
or AAA (in the case of Moody's or S&P, respectively), or if the Adviser
anticipates such a lowering or otherwise does not believe an insurer's
claims-paying ability merits its existing triple-A rating, the Trust may
seek to obtain additional insurance from an insurer whose claims-paying
ability is rated Aaa by Moody's or AAA by S&P or, if the Adviser determines
that the costs of obtaining such additional insurance outweigh the
benefits, the Trust may elect not to obtain additional insurance. In making
such determination, the Adviser will consider the costs of the additional
insurance, the new claims-paying ability rating and financial condition of
the existing insurer and the creditworthiness of the issuer and/or
guarantor of the underlying municipal obligations. The Adviser may also
determine not to purchase additional insurance in such circumstances if it
believes that the insurer is taking steps which will cause its triple-A
claims-paying ability rating to be restored promptly. The foregoing
policies also will be applied in the case of insurers whose claims-paying
abilities are not rated but which are determined by the Adviser to be
comparable to Aaa or AAA. See "Investment Objective and Policies".
Although the Adviser periodically reviews the financial condition
of each insurer, there can be no assurance that the insurers will be able
to honor their obligations in all circumstances. The Trust cannot predict
the consequences of a state takeover of an insurer's obligations and, in
particular, whether such an insurer (or its state regulatory agency or a
subsequent purchaser) could or would honor all of the insurer's contractual
obligations including any outstanding insurance contracts insuring the
timely payment of principal and interest on municipal obligations. The
Trust cannot predict the impact which such events might have on the market
values of such municipal obligations. In the event of a default by an
insurer on its obligations in respect of any municipal obligations in the
Trust's portfolio, the Trust would look to the issuer and/or guarantor of
the relevant municipal obligation for payments of principal and interest
and such issuer and/or guarantor may not be rated Aaa by Moody's or AAA by
S&P or, in the view of the Adviser, be of equivalent credit quality.
Accordingly, the Trust could be exposed to greater risk of non-payment in
such circumstances, which could adversely affect the Trust's net asset
value and the market price per common share. Alternatively, the Trust could
elect to dispose of such municipal obligations; however, the market prices
for such municipal obligations may be lower than the Trust's purchase price
for them and the Trust could sustain a capital loss as a result. Capital
losses incurred by the Trust which are not offset by capital gains may
adversely affect the Trust's net asset value and the Trust's ability to
return $10 per common share outstanding to investors on or about December
31, 2010.
Although the insurance on municipal obligations reduces financial
or credit risk in respect of the insured obligations (i.e., the possibility
that owners of the insured tax-exempt municipal obligations will not
receive timely scheduled payments of principal or interest), insured
tax-exempt municipal obligations remain subject to market risk (i.e.,
fluctuations in market value as a result of changes in prevailing interest
rates). Accordingly, insurance on municipal obligations does not insure the
market value of the Trust's assets or the net asset value or the market
price for the common shares. Furthermore, insurance, while guaranteeing
scheduled payments of principal and interest on a timely basis, will not
make accelerated payments of principal and interest on municipal
obligations where the terms of the instrument governing such municipal
obligations require acceleration in the event of a default. In general, the
Trust does not intend to hold municipal obligations in its portfolio which
are covered only by Portfolio Insurance unless the Trust has an irrevocable
option to obtain permanent insurance covering such municipal obligations
from the insurer providing the Portfolio Insurance or such municipal
obligations mature by their terms on or before December 31, 2010.
As of December 31, 1999, approximately % of the market value of
the Trust's portfolio was invested in long-term municipal obligations and
approximately % was invested in short-term and medium-term securities.
[All] of such long-term municipal obligations are rated Aaa by Moody's or
AAA by S&P or are insured by an insurer with a claims-paying ability rating
of Aaa by Moody's or AAA by S&P or guaranteed by an entity with such a
rating. As described under "Description of New Preferred Shares - Rating
Agency Guidelines and Asset Coverage," in calculating the discounted value
of insured municipal obligations held in the Trust's portfolio for the
purpose of determining compliance with certain rating agency guidelines
applicable to the Trust's preferred shares, the Trust may, in certain
circumstances, utilize the insurance claims-paying ability rating of an
insurer of a municipal obligation or the rating of a guarantor thereof in
lieu of the Moody's or S&P's rating on the underlying municipal obligation.
OTHER INVESTMENT PRACTICES
Certain of the other investment practices in which the Trust may
engage that are described herein or in the statement of additional
information may give rise to income that is subject to regular Federal
income tax. For additional investment practices, see "Investment Policies
and Techniques" in the statement of additional information. Accordingly, in
normal circumstances, the Trust does not intend to engage in such practices
to a significant extent. Moreover, the Trust intends that, so long as New
Preferred Shares are outstanding, its portfolio will reflect guidelines
established by Moody's and S&P in connection with the Trust's receipt of a
rating for such shares on the date they are first issued of at least "aaa"
from Moody's and "AAA" from S&P. Such guidelines may preclude or limit the
Trust from engaging in many of the investment practices described under
this caption or in the statement of additional information. In particular,
for so long as New Preferred Shares are rated by Moody's, unless the
Moody's ratings guidelines change from those presently applicable as
described under "Description of New Preferred Shares -- Rating Agency
Guidelines and Asset Coverage," the Trust will not buy or sell futures
contracts or options thereon or write put or call options (except covered
call options) on portfolio securities unless it receives written
confirmation from Moody's that engaging in such transactions would not
impair the ratings then assigned to the New Preferred Shares by Moody's
except that the Trust may sell exchange traded futures contracts based on
the Municipal Index or Treasury Bonds and purchase exchange traded put
options on such futures contracts and write exchange traded call options on
such futures contracts (collectively "Moody's Hedging Transactions")
subject to the limitations described below. For so long as New Preferred
Shares are rated by S&P, unless S&P's ratings guidelines change from those
presently applicable as described under "Description of New Preferred
Shares -- Rating Agency Guidelines and Asset Coverage," the Trust will not
buy or sell futures contracts or options thereon or write put options
(except covered put options) or call options (except covered call options)
on portfolio securities unless it receives written confirmation from S&P
that engaging in such transactions will not impair the ratings then
assigned to the New Preferred Shares by S&P except that the Trust may buy
and sell futures contracts based on the Municipal Index or Treasury Bonds
and purchase put and call options on such contracts (collectively "S&P
Hedging Transactions") subject to the limitations described below.
HEDGING
Although in normal circumstances the Trust does not intend to
invest more than 5% of its assets in instruments other than municipal
obligations, the Trust may also enter into certain hedging transactions. In
particular, the Trust may purchase and sell futures contracts,
exchange-listed and over-the-counter put and call options on securities,
financial indices and futures contracts and may enter into various interest
rate transactions (collectively, "Hedging Transactions"). Hedging
Transactions may be used to attempt to protect against possible changes in
the market value of the Trust's portfolio resulting from fluctuations in
the debt securities markets and changes in interest rates, to protect the
Trust's unrealized gains in the value of its portfolio securities, to
facilitate the sale of such securities, for investment purposes or to
establish a position in the securities markets as a temporary substitute
for purchasing particular securities. Any or all of these techniques may be
used at any time. There is no particular strategy that requires use of one
technique rather than another. Use of any Hedging Transaction is a function
of market conditions. The Hedging Transactions that the Trust may use are
described in the statement of additional information. The ability of the
Trust to hedge successfully will depend on the Adviser's ability to predict
pertinent market movements, which cannot be assured.
OTHER INVESTMENT TECHNIQUES
The Trust may engage in other types of transactions, including
investment in restricted and illiquid securities, repurchase and reverse
repurchase agreements, when-issued and forward commitment transactions,
borrowing, securities lending and other transactions. For a description of
such types of transactions, see "Investment Policies and Techniques - Other
Investment Policies and Techniques" in the statement of additional
information.
RISKS
Risk is inherent in all investing. Investing in any investment
company security involves risk, including the risk that you may receive
little or no return on your investment or that you may lose part or all of
your investment. Therefore, before investing you should consider carefully
the following risks that you assume when you invest in New Preferred
Shares.
INTEREST RATE RISK
The Trust issues preferred shares (including the New Preferred
Shares), which pay dividends based on short-term interest rates. The Trust
then uses the proceeds from the sale of preferred shares to buy municipal
obligations, which pay interest based on long-term rates. Both long-term
and short-term interest rates may fluctuate. If short-term interest rates
rise, the preferred shares dividend rates may rise so that the amount of
dividends paid to holders of preferred shares exceeds the income from the
portfolio securities purchased with the proceeds from the sale of preferred
shares. Because income from the Trust's entire investment portfolio (not
just the portion of the portfolio purchased with the proceeds of the
preferred shares offering) is available to pay preferred share dividends,
however, preferred share dividend rates would need to greatly exceed the
yield on the Trust's portfolio before the Trust's ability to pay preferred
share dividends would be impaired. Generally, municipal obligations will
decrease in value when interest rates rise and increase in value when
interest rates decline. If long-term rates rise, the value of the Trust's
investment portfolio will decline, reducing the amount of assets serving as
asset coverage for the preferred shares.
AUCTION RISK
The dividend rate for the New Preferred Shares normally is set
through an auction process. In the auction, holders of New Preferred Shares
may indicate the dividend rate at which they would be willing to hold or
sell their New Preferred Shares or purchase additional New Preferred
Shares. The auction also provides liquidity for the sale of New Preferred
Shares. An auction fails if there are more New Preferred Shares offered for
sale than there are buyers. You may not be able to sell your New Preferred
Shares at an auction if the auction fails. Also, if you place hold orders
(orders to retain New Preferred Shares) at an auction only at a specified
dividend rate, and that rate exceeds the rate set at the auction, you will
not retain your New Preferred Shares. Finally, if you buy shares or elect
to retain shares without specifying a dividend rate below which you would
not wish to buy or continue to hold those shares, you could receive a lower
rate of return on your shares than the market rate. See "The Auction".
SECONDARY MARKET RISK
If you try to sell your New Preferred Shares between auctions, you
may not be able to sell any or all of your shares, or you may not be able
to sell them for $25,000 per share or $25,000 per share plus accumulated
dividends. If the Trust has designated a Special Dividend Period (a rate
period of more than seven days), changes in interest rates could affect the
price you would receive if you sold your shares in the secondary market.
Broker-dealers that maintain a secondary trading market for New Preferred
Shares are not required to maintain this market, and the Trust is not
required to redeem shares either if an auction or an attempted secondary
market sale fails because of a lack of buyers. New Preferred Shares are not
listed on a stock exchange or the NASDAQ stock market. If you sell your New
Preferred Shares to a broker-dealer between auctions, you may receive less
than the price you paid for them, especially if market interest rates have
risen since the last auction.
RATINGS AND ASSET COVERAGE RISK
While it is a condition to the issuance of the New Preferred
Shares that Moody's assign a rating of aaa and S&P a rating of AAA to the
New Preferred Shares, such ratings do not eliminate or necessarily mitigate
the risks of investing in New Preferred Shares. Moody's or S&P could
downgrade New Preferred Shares, which may make your shares less liquid at
an auction or in the secondary market. If Moody's or S&P downgrades the New
Preferred Shares, the Trust may alter its portfolio or redeem New Preferred
Shares in an effort to improve the rating, although there is no assurance
that it will be able to do so to the extent necessary to restore the prior
rating. The Trust may voluntarily redeem New Preferred Shares. See
"Description of New Preferred Shares-Rating Agency Guidelines and Asset
Coverage" for a description of the asset maintenance tests the Trust must
meet.
CREDIT RISK
Credit risk refers to an issuer's ability to make timely payments
of interest and principal. Credit risk should be low for the Trust because
it invests primarily in insured municipal obligations.
MUNICIPAL OBLIGATIONS MARKET RISK
Investing in the market for municipal obligations involves certain
risks. The amount of public information available about the municipal
obligations in the Trust's portfolio is generally less than that for
corporate equities or bonds, and the investment performance of the Trust
may therefore be more dependent on the analytical abilities of the Adviser
than a stock fund or taxable bond fund. The secondary market for municipal
obligations also tends to be less well-developed or liquid than many other
securities markets, which may adversely affect the Trust's ability to sell
its portfolio securities at attractive prices.
The ability of municipal issuers to make timely payments of
interest and principal may be diminished during general economic downturns
and as governmental cost burdens are reallocated among Federal, state and
local governments. In addition, laws enacted in the future by Congress or
state legislatures or referenda could extend the time for payment of
principal and/or interest, or impose other constraints on enforcement of
such obligations, or on the ability of municipalities to levy taxes.
Insurance on municipal obligations held by the Trust may reduce, but will
not necessarily eliminate, such risks. Issuers of municipal securities
might seek protection under the bankruptcy laws. In the event of bankruptcy
of such an issuer, the Trust could experience delays in collecting
principal and interest and the Trust may not, in all circumstances, be able
to collect all principal and interest to which it is entitled. To enforce
its rights in the event of a default in the payment of interest or
repayment of principal, or both, the Trust may take possession of and
manage the assets securing the issuer's obligations on such securities,
which may increase the Trust's operating expenses. Any income derived from
the Trust's ownership or operation of such assets may not be tax-exempt.
REINVESTMENT RISK
Reinvestment risk is the risk that income from the Trust's
portfolio will decline if and when the Trust invests the proceeds from
matured, traded, prepaid or called bonds at lower interest rates. This risk
will increase as the Trust approaches its termination date, because the
Trust will reinvest such proceeds in municipal obligations with maturities
on or about its termination date, and shorter term municipal obligations
generally pay lower rates of interest than longer term municipal
obligations. A decline in income could affect the Trust's ability to pay
dividends on the New Preferred Shares.
INFLATION RISK
Inflation is the reduction in the purchasing power of money
resulting from the increase in the price of goods and services. Inflation
risk is the risk that the inflation adjusted (or "real") value of an
investment in New Preferred Shares or the income from that investment will
be worth less in the future. As inflation occurs, the real value of the New
Preferred Shares and distributions declines. In an inflationary period,
however, it is expected that, through the auction process, dividend rates
on the New Preferred Shares would increase, tending to offset this risk.
MANAGEMENT OF THE TRUST
DIRECTORS AND OFFICERS
The board of directors is responsible for the overall management
of the Trust, including supervision of the duties performed by the Adviser.
There are eight directors of the Trust. Two of the directors are
"interested persons" (as defined in the 1940 Act). The names and business
addresses of the directors and officers of the Trust and their principal
occupations and other affiliations during the past five years are set forth
under "Management of the Trust" in the statement of additional information.
INVESTMENT ADVISER
BlackRock Financial Management, Inc. acts as the Trust's
investment adviser (the "Adviser"). BlackRock Advisors, Inc. together with
its investment advisory subsidiaries, including the Adviser, is a global
asset management firm with assets of approximately $148 billion under
management as of September 30, 1999. The Adviser has its principal office
at 345 Park Avenue, New York, New York 10154. BlackRock Advisors and its
subsidiaries constitute the asset management arm of PNC Bank, N.A., and
together have over 671 employees. The Adviser and its affiliates provide
fixed income, liquidity, equity, alternative investment, and risk
management products for clients worldwide. As of September 30, 1999, the
Adviser managed approximately $83 billion in various fixed income sectors,
including $8 billion in municipal securities. The Adviser and its
affiliates also manage approximately $50 billion in cash or other
short-term, highly liquid investments, including. Among these products, the
Adviser and its affiliates manage 13 closed-end, six open-end and six money
market municipal funds. In addition, the Adviser manages portfolios of
municipal securities for large insurance companies and high net worth
individuals.
INVESTMENT PHILOSOPHY
The Adviser's investment decision-making process for the municipal
bond sector is subject to the same discipline, oversight and investment
philosophy that the firm applies to other sectors of the fixed income
market.
The Adviser uses a relative value strategy that evaluates the
trade-off between risk and return to seek to achieve the Trust's investment
objective. This strategy is combined with disciplined risk control
techniques and applied in sector, sub-sector and individual security
selection decisions. The Adviser's extensive personnel and technology
resources are the key drivers of the investment philosophy.
The Adviser's Municipal Bond Team. The Adviser uses a team
approach to managing municipal portfolios. The Adviser believes that this
approach offers substantial benefits over one that is dependent on the
market wisdom or investment expertise of only a few individuals.
The Adviser's municipal bond team includes three portfolio
managers and six credit research analysts. The team is led by Kevin M.
Klingert, a managing director and portfolio manager at the Adviser. Mr.
Klingert is a senior portfolio manager and head of municipal bonds at the
Adviser, a position he has held since joining the Adviser in 1991. Mr.
Klingert has over 15 years of experience in the municipal market. Prior to
joining the Adviser, Mr. Klingert was an Assistant Vice President in the
Unit Investment Trust Department at Merrill Lynch, Pierce, Fenner & Smith,
which he joined in 1985. Mr. Klingert has primary responsibility for
managing client portfolios with a special emphasis on municipal securities.
The portfolio management team also includes Craig Kasap. Mr. Kasap has been
a portfolio manager at the Adviser for over two years and is a member of
the Adviser's Investment Strategy Group. Prior to joining the Adviser in
1997, Mr. Kasap spent three years as a municipal bond trader with Keystone
Investments in Boston where he was involved in formulating the firm's
municipal bond investment strategies. James McGinley is also a member of
the Adviser's municipal bond portfolio management team and Investment
Strategy Group. Prior to joining the Adviser in 1999 as a Vice President,
Mr. McGinley worked at Prudential Securities as an Associate Vice President
in Municipal Research.
The Adviser's municipal bond portfolio managers are responsible
for 25 municipal bond portfolios, valued as of September 30, 1999 at
approximately $5.5 billion, plus approximately an additional $2.5 billion
in municipal bonds held across portfolios with broader investment mandates.
The team is responsible for portfolios with a variety of investment
objective and constraints, including national funds and state-specific
funds. As of September 30, 1999, the team managed 13 closed-end municipal
funds with over $3 billion in assets.
The Adviser's Investment Process. The Adviser has in-depth
expertise in the fixed income market. The Adviser applies the same
risk-controlled, active sector rotation style (discussed below) to the
management process for all of its fixed income portfolios. The Adviser
believes that it is unique in its integration of taxable and municipal bond
specialists. Both taxable and municipal bond portfolio managers share the
same trading floor and interact frequently for determining the firm's
overall investment strategy. This interaction allows each portfolio manager
to access the combined experience and expertise of the entire portfolio
management group at the Adviser.
The Adviser's portfolio management process emphasizes research and
analysis of specific sectors and securities, not interest rate speculation.
The Adviser believes that market-timing strategies can be highly volatile
and potentially produce inconsistent results. Instead, the Adviser thinks
that value over the long-term is best achieved through a risk-controlled
approach, focusing on sector allocation, security selection and yield curve
management (discussed below).
In the municipal market, the Adviser believes one of the most
important determinants of value is supply and demand. The Adviser's ability
to monitor investor flows and frequency and seasonality of issuance is
helpful in anticipating the impact of supply and demand on sectors. The
Adviser believes that the breadth and expertise of its municipal bond team
allows it to anticipate issuance flows, forecast which sectors are likely
to have the most supply and plan its investment strategy accordingly.
The Adviser also believes that over the long-term, intense credit
analysis will add value and avoid significant relative performance
impairments. The municipal credit team is led by Susan C. Heide, Ph.D who,
since December 15, 1998, has been managing director responsible for
municipal credit research at the Adviser. Ms. Heide supervises a team of
five municipal research analysts who have an average of 10 years of
experience in municipal credit research. Between 1993 and December 15,
1998, Ms. Heide served as a director at the Adviser, specializing in the
credit analysis of municipal securities.
The Adviser's approach to credit risk incorporates a combination
of sector-based top-down macro-analysis of industry sectors to determine
relative weightings with an issuer-specific, bottom-up detailed credit
analysis of issuers and structures. The sector-based approach focuses on
rotating into sectors that are undervalued and exiting sectors when
fundamentals or technicals become unattractive. The issuer-specific
approach focuses on identifying special opportunities where the market
undervalues a credit, and devoting concentrated resources to research the
credit and monitor the position. The Adviser's analytic process focuses on
anticipating changes in credit trends before market recognition. Credit
research is a critical element of the Adviser's municipal process. The
Adviser's yield curve management process involves, among other things, an
evaluation of the risk/return trade off for bonds having different
durations, and selecting bonds believed to present an attractive yield
relative to the degree of interest rate risk involved.
THE INVESTMENT ADVISORY AGREEMENT
Pursuant to an Investment Advisory Agreement (the "Advisory
Agreement"), the Adviser manages the investment of the Trust's assets and
provides such investment research, advice and supervision, in conformity
with the Trust's investment objective and policies, as necessary for the
operations of the Trust.
The Advisory Agreement provides, among other things, that the
Adviser will bear all expenses of its employees and overhead incurred in
connection with its duties under the Advisory Agreement, and will pay all
directors' fees and salaries of the Trust's directors and officers who are
affiliated persons (as such term is defined in the 1940 Act) of the
Adviser, except that the board of directors may approve reimbursement for
the time spent on Trust operations of personnel who spend substantial time
on the operations (other than the provision of investment advice) of the
Trust or other investment companies advised by the Adviser. The Advisory
Agreement provides that the Trust shall pay to the Adviser for its services
a monthly fee at the annual rate of 0.35% of the Trust's average weekly net
asset value. The liquidation value of any outstanding preferred shares
(including the New Preferred Shares) of the Trust is not taken into account
in determining the Trust's average weekly net asset value.
Although the Adviser intends to devote such time and effort to the
business of the Trust as is reasonably necessary to perform its duties to
the Trust, the services of the Adviser are not exclusive and the Adviser
provides similar services to other investment companies and other clients
and may engage in other activities.
The Advisory Agreement also provides that, in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of
its obligations thereunder, the Adviser is not liable to the Trust or any
of the Trust's stockholders for any act or omission by the Adviser in the
supervision or management of its respective investment activities or for
any loss sustained by the Trust or the Trust's stockholders and provides
for indemnification by the Trust of the Adviser, its partners, officers,
employees, agents and control persons for liabilities incurred by them in
connection with their services to the Trust, subject to certain limitations
and conditions.
The Advisory Agreement will continue in effect, provided that each
continuance is specifically approved at least annually by both (i) the vote
of a majority of the Trust's board of directors or the vote of a majority
of the outstanding voting securities of the Trust (as such term is defined
in the 1940 Act) and (ii) by the vote of a majority of the directors who
are not parties to such Agreement or interested persons (as such term is
defined in the 1940 Act) of any such party, cast in person at a meeting
called for the purpose of voting on such approval. The Advisory Agreement
may be terminated as a whole at any time by the Trust, without the payment
of any penalty, upon the vote of a majority of the Trust's board of
directors or a majority of the outstanding voting securities of the Trust
or by the Adviser, on 60 days' written notice by either party to the other.
Except as otherwise provided by order of the SEC or any rule or provision
of the 1940 Act, the Agreement will terminate automatically in the event of
its assignment (as such term is defined in the 1940 Act and the rules
thereunder).
THE ADMINISTRATION AGREEMENT
Princeton Administrators, L.P. (the "Administrator"), 800 Scudders
Mill Road, Plainsboro, New Jersey 08536, acts as administrator for the
Trust. [The Administrator is an affiliate of _________________________, one
of the underwriters of this offering.] Under the Administration Agreement
with the Trust (the "Administration Agreement"), the Administrator
administers the Trust's corporate affairs subject to the supervision of the
Trust's board of directors and in connection therewith furnishes the Trust
with office facilities together with such ordinary clerical and bookkeeping
services (e.g., preparation of annual and other reports to stockholders and
the SEC and filing of Federal, state and local income tax returns) as are
not being furnished by the custodian. In connection with its administration
of the corporate affairs of the Trust, the Administrator will bear the
following expenses:
o the salaries and expenses of all personnel of the
Administrator; and
o all expenses incurred by the Administrator in connection
with administering the ordinary course of the Trust's
business, other than those assumed by the Trust, as
described below.
The Administration Agreement provides that the Trust shall pay to
the Administrator a monthly fee for its services and the facilities
furnished by the Administrator at the annual rate of 0.10% of the Trust's
average weekly net asset value. The liquidation value of any outstanding
preferred shares (including the New Preferred Shares) of the Trust is not
taken into account in determining the Trust's average weekly net asset
value.
The Administration Agreement is terminable on 60 days' prior
written notice by either party to the other.
EXPENSES OF THE TRUST
Except as indicated above, the Trust will pay all of its expenses,
including fees of the directors not affiliated with the Adviser and board
meeting expenses: fees of the Adviser and the Administrator; interest
charges; taxes; organization expenses; charges and expenses of the Trust's
legal counsel and independent accountants, and of the transfer agent,
registrar and dividend disbursing agent of the Trust; expenses of
repurchasing shares; expenses of issuing any preferred shares (including
the New Preferred Shares) or indebtedness; expenses of printing and mailing
share certificates, stockholder reports, notices, proxy statements and
reports to governmental offices; brokerage and other expenses connected
with the execution, recording and settlement of portfolio security
transactions; expenses connected with negotiating, effecting purchase or
sale, or registering privately issued portfolio securities; custodial fees
and expenses for all services to the Trust, including safekeeping of funds
and securities and maintaining required books and accounts; expenses of
calculating and publishing the net asset value of the Trust's shares;
expenses of membership in investment company associations; expenses of
fidelity bonding and other insurance expenses including insurance premiums;
expenses of stockholders meetings; SEC and state registration fees; New
York Stock Exchange listing fees; and fees payable to the National
Association of Securities Dealers, Inc. in connection with this offering
and fees of any rating agencies retained to rate any preferred shares
(including the New Preferred Shares) issued by the Trust.
DESCRIPTION OF PREFERRED SHARES
Certain of the capitalized terms used herein are defined in the
Articles Supplementary and Articles of Amendment of the Trust attached as
Appendices C-1, C-2 and C-3 to the statement of additional information.
The Preferred Shares of each series are shares of preferred stock
of the Trust that entitle their holders to receive dividends when, as and
if declared by the board of directors, out of funds legally available
therefor, at a rate per annum that may vary for the successive Dividend
Periods for each such series. In general, the Applicable Rate for a
particular Dividend Period for a particular series of Preferred Shares will
be determined by an Auction conducted on the day before the start of such
Dividend Period. Existing Holders and Potential Holders of Preferred Shares
may participate in Auctions therefor, although Existing Holders desiring to
continue to hold all of their Preferred Shares regardless of the Applicable
Rate resulting from Auctions need not participate. For an explanation of
Auctions and the method of determining the Applicable Rate, see "The
Auction". The Trust intends to redeem all of the Preferred Shares of each
series no later than the last Dividend Payment Date in respect of each
series prior to December 31, 2010 (when the Trust will terminate).
A Dividend Payment Date and an Auction Date for the Trust's
outstanding Series M28 Preferred Shares may coincide with a Dividend
Payment Date and an Auction Date for the Series M7 Preferred Shares
(including the New Preferred Shares); however, the Series M28 Preferred
Shares will have a Dividend Period of 28 days in length and the Series M7
Preferred Shares (including the New Preferred Shares) will have a Dividend
Period of seven days in length (except in the case of the Initial Dividend
Period or a Special Dividend Period in respect of either series).
The Preferred Shares have a liquidation preference of $25,000 per
share plus an amount equal to accumulated but unpaid dividends (whether or
not carried or declared) plus the premium, if any, resulting from the
designation of a Premium Call Period and are fully paid and non-assessable.
The Preferred Shares are not convertible into common shares or other
capital stock of the Trust and the holders thereof have no preemptive
rights. The Preferred Shares are generally subject to redemption at the
option of the Trust on any Dividend Payment Date with respect thereto
(provided that no Preferred Shares shall be subject to optional redemption
during a Non-Call Period) and, in certain circumstances, are subject to
mandatory redemption by the Trust. Except with regard to their respective
Initial Dividend Periods and Initial Dividend Rates and except for the
timing of their respective Auction Dates and Dividend Payment Dates, the
rights and preferences of each series of Preferred Shares are the same.
In connection with the auction procedures described below,
Deutsche Bank Group is the Auction Agent, the transfer agent, registrar,
dividend disbursing agent and redemption agent for the Preferred Shares.
DESCRIPTION OF NEW PREFERRED SHARES
The following is a brief description of the terms of the New
Preferred Shares. For the complete terms of the New Preferred Shares,
including definitions of terms used but not defined, please refer to the
detailed description of the New Preferred Shares in the Articles
Supplementary and Articles of Amendment attached as Appendices C-1, C-2 and
C-3 to the statement of additional information. We refer to the Articles
Supplementary and Articles of Amendment in this prospectus collectively as
the "Articles Supplementary."
GENERAL
The Trust is authorized to issue 200 million shares of capital
stock, $.01 par value. The board of directors of the Trust is authorized to
classify and reclassify any unissued shares of capital stock from time to
time by setting or changing the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications or
terms or conditions of redemption of such shares of stock. In connection
with the offerings of New Preferred Shares described herein, the board of
directors intends to reclassify 1,616 shares of unissued capital stock as
New Preferred Shares.
The New Preferred Shares will rank on parity with the currently
outstanding Preferred Shares of the Trust as to the payment of dividends
and the distribution of assets upon liquidation. Each New Preferred Share
carries one vote on matters that New Preferred Shares can be voted. New
Preferred Shares, when issued, will be fully paid and non-assessable and
have no preemptive, conversion or cumulative voting rights.
DIVIDENDS AND DIVIDEND PERIODS
General. The following is a general description of dividends and
Dividend Periods. The Initial Dividend Period for the New Preferred Shares
will be ___ days and the dividend rate for this period will be __%.
Subsequent Dividend Periods generally will be seven days and the dividend
rates for those periods will be determined by auction. The Trust, subject
to certain conditions, may change the length of subsequent Dividend Periods
by designating them as Special Dividend Periods. See "--Designation of
Special Dividend Periods" below.
Dividend Payment Dates. Dividends on New Preferred Shares will be
payable, when, as and if declared by the board of directors, out of legally
available funds in accordance with the Trust's charter and applicable law,
on _____________, 2000, and thereafter generally on each Tuesday. However,
if dividends are payable on a Tuesday that is not a Business Day, then
dividends will generally be payable on the next day, if such day is a
Business Day, or as otherwise specified in the Trust's charter. In
addition, the Trust may specify different Dividend Payment Dates in the
Notice of Special Dividend Period issued for a Special Dividend Period of
more than 91 days.
Dividends will be paid through the Securities Depository on each
Dividend Payment Date. The Securities Depository, in accordance with its
current procedures, is expected to distribute dividends received from the
Auction Agent in same-day funds on each Dividend Payment Date to Agent
Members. These Agent Members are in turn expected to distribute such
dividends to the persons for whom they are acting as agents. However, each
of the current Broker-Dealers has indicated to the Trust that dividend
payments will be available in same-day funds on each Dividend Payment Date
to customers that use such Broker-Dealer or that Broker-Dealer's designee
as Agent Member.
Calculation of Dividend Payment. The Trust computes the dividend
per New Preferred Share by multiplying the Applicable Rate in effect by a
fraction. The numerator of this fraction will normally be seven (i.e. the
number of days in the Dividend Period) and the denominator will normally be
365. If the Trust has designated a Special Dividend Period of 365 days or
more, then the numerator will be the number of days in the Dividend Period,
and the denominator will be 360. In either case, this rate is then
multiplied by $25,000 to arrive at dividends per share.
Dividends on New Preferred Shares will accumulate from the date of
their original issue. For each Dividend Payment Period after the Initial
Dividend Period, the dividend rate will be the dividend rate determined at
the Auction, except as provided below. The dividend rate that results from
an Auction for New Preferred Shares will not be greater than the Maximum
Applicable Rate. In the case of a Special Dividend Period for which Bid
Requirements are specified, the dividend rate will not be less than the
Minimum Applicable Rate specified in the Notice of Special Dividend Period.
During Dividend Periods for which no Bid Requirements are specified, there
will be no Minimum Applicable Rate.
The Maximum Applicable Rate for any regular Dividend Payment
Period will be the Applicable Percentage of the higher of the 30-day "AA"
Composite Commercial Paper Rate and the Taxable Equivalent of the
Short-Term Municipal Bond Rate. In the case of a Special Dividend Period,
the Maximum Applicable Rate for any Dividend Payment Period included in
such Special Dividend Period will be the Applicable Percentage (determined
on the date of the Notice of Special Dividend Period in the case of any
such Notice that specifies a Maximum Applicable Rate applicable to such
Special Dividend Payment Period) of the Special Dividend Period Reference
Rate for such Dividend Payment Period. The Applicable Percentage will be
determined based on (i) the lower of the credit rating or ratings assigned
on such date to such shares by Moody's and S&P (or if Moody's or S&P or
both shall not make such rating available, the equivalent of either or both
of such ratings by a Substitute Rating Agency or two Substitute Rating
Agencies or, in the event that only one such rating shall be available,
such rating) and (ii) whether the Trust has provided notification to the
Auction Agent prior to the Auction establishing the Applicable Rate for any
dividend period that net capital gains or other taxable income will be
included in such dividend on New Preferred Shares as follows:
Applicable Applicable
Percentage: Percentage:
Credit Ratings No Notification Notification
Moody's S&P
"aa3" or higher AA- or higher 110% 150%
"a3" to "al" A- to A+ 125% 160%
"baa3" to "baal" BBB- to BBB+ 150% 250%
"ba3" to "bal" BB- to BB+ 200% 275%
Below "ba3" Below BB- 250% 300%
Prior to each Dividend Payment Date, the Trust is required to deposit with
the Auction Agent sufficient funds for the payment of declared dividends.
The failure to make such deposit will not result in the cancellation of any
Auction. The Trust does not intend to establish any reserves for the
payment of dividends.
Additional Dividends. If, in the case of a Dividend Period of 28
days or fewer, the Trust retroactively allocates any net capital gain or
other taxable income to a dividend paid on New Preferred Shares and did not
give advance notice thereof to the Auction Agent as described below under
"The Auction-Auction Procedures" (the amount of the retroactive allocation
referred to herein as a "Retroactive Taxable Allocation") solely by reason
of the fact that the retroactive allocation is made as a result of the
redemption of all or a portion of the outstanding New Preferred Shares or
the liquidation of the Trust, the Trust will, within 90 days (and generally
within 60 days) after the end of the Trust's fiscal year for which a
Retroactive Taxable Allocation is made, provide notice thereof to the
Auction Agent and to each holder of New Preferred Shares (initially
expected to be Cede & Co. as nominee of the Securities Depository) during
such fiscal year at the holder's address listed on the stock books of the
Trust. The Trust will, within 30 days after such notice is given to the
Auction Agent, pay to the Auction Agent (who will then distribute to such
holders of New Preferred Shares), out of funds legally available therefor,
an amount equal to the aggregate Additional Dividend (as defined below)
with respect to all Retroactive Taxable Allocations made to such holders
during the fiscal year in question. See "Taxes".
If, in the case of a Dividend Period of 35 days or more, the Trust
makes a Retroactive Taxable Allocation to a dividend paid on New Preferred
Shares, the Trust will, within 90 days (and generally within 60 days) after
the end of the Trust's fiscal year for which a Retroactive Taxable
Allocation is made, provide notice thereof to the Auction Agent and to each
holder of New Preferred Shares (initially expected to be Cede & Co., as
nominee of the Securities Depository) during such fiscal year at the
holder's address list on the stock books of the Trust. The Trust will,
within 30 days after such notice is given to the Auction Agent, pay to the
Auction Agent (who will then distribute to such holders of New Preferred
Shares), out of funds legally available therefor, an amount equal to the
aggregate Additional Dividend (as defined below) with respect to all
Retroactive Taxable Allocations made to such holders during the fiscal year
in question. See "Taxes".
In no other instance will the Trust be required to make payments
to holders of New Preferred Shares to offset the tax effect of any
reallocation of net capital gain or other taxable income.
An "Additional Dividend" means an amount paid to a holder of New
Preferred Shares that, when taken together with the aggregate amount of
Retroactive Taxable Allocations allocated to such holder with respect to
the fiscal year in question, would cause the holder's dividends from the
aggregate of both the Retroactive Taxable Allocations and the Additional
Dividend to be equal to the amount of the dividends that would have been
received and retained by the holder if the Retroactive Taxable Allocations
had not been made.
Additional Dividends shall be calculated:
o without consideration being given to the time value of
money;
o assuming that no holder of New Preferred Shares is subject
to AMT with respect to dividends received from the Trust;
and
o assuming that each Retroactive Taxable Allocation would be
taxable in the hands of each holder of New Preferred Shares
at the maximum marginal regular Federal income tax rate
applicable to individuals or corporations, whichever is
greater, in effect at the end of the fiscal year in
question.
Although the Trust generally intends to designate any Additional Dividend
as an exempt-interest dividend to the extent permitted by applicable law,
it is possible that all or a portion of any Additional Dividend will be
taxable to the recipient thereof. See "Taxes." The Trust will not pay a
further Additional Dividend with respect to any taxable portion of an
Additional Dividend.
Restrictions on Dividends and Other Distributions. Except as
otherwise described herein, when the Trust has any preferred shares
outstanding, including the New Preferred Shares, the Trust may not declare,
pay or set apart for payment, any dividend or other distribution (other
than a dividend or distribution paid in, or in options, warrants or rights
to subscribe for or purchase, its common shares) in respect of common
shares. In addition, the Trust may not call for redemption, redeem,
purchase or otherwise acquire for consideration any common shares (except
by conversion into or exchange for shares of the Trust ranking junior to
the New Preferred Shares as to the payment of dividends and the
distribution of assets upon liquidation). However, the Trust is not
confined by the above restrictions if:
o immediately after such transaction, the Discounted Value of
the Trust's portfolio would be equal to or greater than the
Preferred Shares Basic Maintenance Amount and the 1940 Act
Preferred Shares Asset Coverage (see "-- Rating Agency
Guidelines and Asset Coverage" below),
o full cumulative dividends on the New Preferred Shares due on
or prior to the date of the transaction have been declared
and paid or shall have been declared and sufficient funds
for the payment thereof deposited with the Auction Agent;
o any Additional Dividend required to be paid on or before the
date of such declaration or payment has been paid; and
o the Trust has redeemed the full number of New Preferred
Shares required to be redeemed by any provision for
mandatory redemption contained in the Articles
Supplementary.
Except as set forth in the next sentence, the Trust will not
declare, pay or set apart for payment any dividend on any shares of the
Trust ranking, as to the payment of dividends, on a parity with New
Preferred Shares for any period unless the Trust has declared and paid or
contemporaneously declares and pays full cumulative dividends on the New
Preferred Shares through its most recent Dividend Payment Date. However,
when the Trust has not paid dividends in full on the New Preferred Shares
through the most recent Dividend Payment Date or upon any shares of the
Trust ranking, as to the payment of dividends, on a parity with New
Preferred Shares through their most recent respective Dividend Payment
Dates, the Trust will declare all dividends upon New Preferred Shares and
any shares of the Trust ranking, as to the payment of dividends, on a
parity with New Preferred Shares, pro rata so that the amount of dividends
declared per share on New Preferred Shares and such other class or series
of shares will in all cases bear to each other the same ratio that
accumulated dividends per share on the New Preferred Shares and such other
class or series of shares bear to each other.
Designation of Special Dividend Periods. The Trust may, at its
sole option and whenever permitted by law, declare a Special Dividend
Period. To declare a Special Dividend Period, the Trust will give notice (a
"Request for Special Dividend Period") to the Auction Agent and to each
Broker-Dealer and request that the next succeeding Dividend Period for such
series of New Preferred Shares be a number of days (other than seven)
evenly divisible by seven and specified in such notice. For any Auction
occurring after the initial Auction, the Trust may not give a Request for
Special Dividend Period unless Sufficient Clearing Bids were made in the
last occurring Auction and unless full cumulative dividends, any amounts
due with respect to mandatory redemptions, and any Additional Dividends
payable prior to such date have been paid in full. The Trust must have also
received confirmation from Moody's and S&P or any Substitute Rating Agency
that the proposed Special Dividend Period will not adversely affect such
agency's then-current rating on the New Preferred Shares. A Request for
Special Dividend Period will also specify any proposed Bid Requirements.
Upon receiving a Request for Special Dividend Period, the Broker-Dealer(s)
will jointly determine whether, given the factors set forth in the Articles
Supplementary, it is advisable that the Trust issue a Notice of Special
Dividend Period for the New Preferred Shares as contemplated by the Request
for Special Dividend Period and, if advisable, the Specific Redemption
Provisions and will give the Trust and the Auction Agent notice of its
determination. If no Broker-Dealer objects to the Notice of Special
Dividend Period, the Trust may issue such notice specifying the duration of
the Special Dividend Period, the Bid Requirements, if any, and the Specific
Redemption Provisions, if any.
REDEMPTION
Mandatory Redemption. If the Trust does not timely cure a failure
to maintain (a) a Discounted Value of its portfolio equal to the Preferred
Shares Basic Maintenance Amount or (b) the 1940 Act Preferred Shares Asset
Coverage, in accordance with the requirements of the rating agencies that
rate the New Preferred Shares, the Trust must redeem all or a portion of
the New Preferred Shares. This mandatory redemption will take place on a
date that the board of directors specifies out of legally available funds
in accordance with the Trust's charter and applicable law, at the
redemption price of $25,000 per share plus accumulated but unpaid dividends
(whether or not earned or declared) to the date fixed for redemption. The
mandatory redemption will be limited to the number of New Preferred Shares
necessary to restore the required Discounted Value or the 1940 Act
Preferred Shares Asset Coverage, as the case may be.
Optional Redemption. To the extent permitted under the 1940 Act
and Maryland law, upon giving a Notice of Redemption, as provided below,
the Trust, at its option, may redeem the New Preferred Shares, in whole or
in part, out of funds legally available therefor, on any Dividend Payment
Date at the optional redemption price per share of $25,000 per share plus
an amount equal to accumulated but unpaid dividends (whether or not earned
or declared) to the date fixed for redemption plus the premium, if any,
resulting from the designation of a Premium Call Period; provided that no
New Preferred Shares shall be subject to optional redemption during a
Non-Call Period. In addition, holders of New Preferred Shares may be
entitled to receive Additional Dividends in the event of redemption of such
New Preferred Shares to the extent provided herein. The Trust has the
authority to redeem the New Preferred Shares for any reason and may redeem
all or part of then-outstanding New Preferred Shares if it anticipates that
the Trust's leveraged capital structure will result in a lower rate of
return to holders of common shares of the Trust for any significant period
of time than that obtainable if such common shares were not leveraged. The
Trust intends to redeem all of its outstanding preferred shares (including
the New Preferred Shares) prior to the last Dividend Payment Date in
respect of each series prior to December 31, 2010 (when the Trust will
terminate).
LIQUIDATION
Upon a voluntary or involuntary liquidation of the Trust, the
holders of outstanding New Preferred Shares will receive, from the assets
of the Trust available for distribution to its shareholders, the
liquidation preference plus all accumulated but unpaid dividends (whether
or not earned or declared) plus the premium, if any, resulting from the
designation of a Premium Call Period and any applicable Additional
Dividends before any payment is made to the common shares. The holders of
outstanding New Preferred Shares will be entitled to receive these amounts
subject to the rights of holders of any series or class of shares,
including other series of Preferred Shares, ranking on a parity with the
New Preferred Shares with respect to the distribution of assets upon
liquidation of the Trust. After the payment to the holders of New Preferred
Shares of the full preferential amounts provided for as described, the
holders of New Preferred Shares will have no right or claim to any of the
remaining assets of the Trust.
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 other corporation, nor the merger or consolidation of any other
corporation into or with the Trust, is a voluntary or involuntary
liquidation for the purposes of the foregoing paragraph.
RATING AGENCY GUIDELINES AND ASSET COVERAGE
The Trust is required under guidelines of Moody's and S&P to
maintain assets having in the aggregate a Discounted Value at least equal
to the Preferred Shares Basic Maintenance Amount. Moody's and S&P have each
established separate guidelines for calculating Discounted Value. To the
extent any particular portfolio holding does not satisfy a rating agency's
guidelines, all or a portion of the holding's value will not be included in
the rating agency's calculation of Discounted Value. The Moody's and S&P
guidelines do not impose any limitations on the percentage of the Trust's
assets that may be invested in holdings not eligible for inclusion in the
calculation of the Discounted Value of the Trust's portfolio. The amount of
such assets included in the portfolio at any time may vary depending upon
the rating, diversification and other characteristics of the eligible
assets included in the portfolio. The Preferred Shares Basic Maintenance
Amount includes the sum of (a) the aggregate liquidation preference of New
Preferred Shares then outstanding and (b) certain accrued and projected
payment obligations of the Trust.
The Trust is also required under rating agency guidelines to
maintain, with respect to New Preferred Shares, as of the last Business Day
of each month in which any such shares are outstanding, asset coverage of
at least 200% with respect to senior securities which are equity shares,
including the New 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 equity shares of a closed-end
investment company as a condition of declaring dividends on its common
shares) ("1940 Act Preferred Shares Asset Coverage"). Based on the
composition of the portfolio of the Trust and market conditions as of
__________ ___, 2000, the 1940 Act Preferred Shares Asset Coverage with
respect to all of the Trust's preferred shares, assuming the issuance on
that date of all New Preferred Shares offered hereby and giving effect to
the deduction of related sales load and related offering costs estimated at
$704,000, would have been computed as follows:
Value of Trust assets less liabilities
not constituting senior securities = $ = %
---------------------------------- ---------
Senior securities representing indebtedness $
plus
liquidation value of the preferred shares
In the event the Trust does not timely cure a failure to maintain
(a) a Discounted Value of its portfolio equal to the Preferred Shares Basic
Maintenance Amount or (b) the 1940 Act Preferred Shares Asset Coverage, in
each case in accordance with the requirements of the rating agency or
agencies then rating the New Preferred Shares, the Trust will be required
to redeem New Preferred Shares as described under "--Redemption--Mandatory
Redemption" above.
Pursuant to S&P guidelines, for so long as the New Preferred
Shares are rated by S&P, the Trust will also be required under the Articles
Supplementary to have, as of each Valuation Date, Deposit Securities with
maturity or tender payment dates not later than the Dividend Payment Date
(collectively, "Dividend Coverage Assets") for each share of New Preferred
Shares outstanding that follows such Valuation Date and having in the
aggregate a value not less than the Dividend Coverage Amount (the "Minimum
Liquidity Level"). The "Dividend Coverage Amount", as of any Valuation
Date, means (A) the aggregate amount of cash dividends that will accumulate
on outstanding New Preferred Shares to (but not including) the next
Dividend Payment Date that follows such Valuation Date less (B) the
combined fair market value of Deposit Securities irrevocably deposited for
the payment of cash dividends on New Preferred Shares. "Deposit Securities"
means cash, the book value of municipal obligations sold for which payment
is due within five Business Days and before the next Valuation Date and
municipal obligations rated at least A-1 + or SP- I + by S&P, VMIG-1 or
MIG-1 by Moody's. The definitions of "Deposit Securities", "Dividend
Coverage Assets" and "Dividend Coverage Amount" may be changed from time to
time by the Trust without shareholder approval, but only in the event the
Trust receives confirmation from S&P that any such change would not impair
the ratings then assigned by S&P to New Preferred Shares.
The Trust may, but is not required to, adopt any modifications to
the guidelines that may be established by Moody's or S&P. Failure to adopt
any such modifications, however, may result in a change in the ratings
described above or a withdrawal of ratings altogether. In addition, any
rating agency providing a rating for the New Preferred Shares may, at any
time, change or withdraw any such rating. The Board may, without
shareholder approval, amend, alter or repeal any or all of the definitions
and related provisions which have been adopted by the Trust pursuant to the
rating agency guidelines in the event the Trust receives written
confirmation from Moody's or S&P, as the case may be, that any such
amendment, alteration or repeal would not impair the rating then assigned
to the New Preferred Shares.
As recently described by Moody's and S&P, a preferred stock rating
is an assessment of the capacity and willingness of an issuer to pay
preferred stock obligations. The rating on the New Preferred Shares is not
a recommendation to purchase, hold or sell those shares, inasmuch as the
rating does not comment as to market price or suitability for a particular
investor. The rating agency guidelines described above also do not address
the likelihood that an owner of New Preferred Shares will be able to sell
such shares in an Auction or otherwise. The ratings are based on current
information furnished to Moody's and S&P by the Trust and the Adviser and
information obtained from other sources. The ratings may be changed,
suspended or withdrawn as a result of changes in, or the unavailability of,
such information. The common shares have not been rated by a nationally
recognized statistical rating organization.
A rating agency's guidelines will apply to New Preferred Shares
only so long as the rating agency is rating the shares. The Trust will pay
certain fees to Moody's and S&P for rating the New Preferred Shares.
VOTING RIGHTS
Except as otherwise provided in this prospectus and in the
statement of additional information or as otherwise required by law,
holders of New Preferred Shares will have equal voting rights with holders
of common shares and any other preferred shares of the Trust (one vote per
share) and will vote together with holders of common shares and any other
preferred shares as a single class.
In connection with the election of the Trust's directors, holders
of outstanding preferred shares of the Trust, including New Preferred
Shares, voting as a separate class, are entitled to elect two of the
Trust's directors, and the remaining directors are elected by holders of
common shares and preferred shares, including New Preferred Shares, voting
together as a single class. In addition, if at any time dividends (whether
or not earned or declared) on outstanding preferred shares of the Trust,
including New Preferred Shares, are due and unpaid in an amount equal to
two full years of dividends, and sufficient cash or specified securities
have not been deposited with the Auction Agent for the payment of such
dividends, then, the sole remedy of holders of outstanding preferred shares
of the Trust, including New Preferred Shares, is that the number of
directors constituting the board of directors will be automatically
increased by the smallest number that, when added to the two directors
elected exclusively by the holders of preferred shares of the Trust,
including New Preferred Shares, as described above, would constitute a
majority of the board of directors. The holders of preferred shares of the
Trust, including New Preferred Shares, will be entitled to elect that
smallest number of additional directors at a special meeting of
shareholders held as soon as possible and at all subsequent meetings at
which directors are to be elected. The terms of office of the persons who
are directors at the time of that election will continue. If the Trust
thereafter shall pay, or declare and set apart for payment, in full, all
dividends payable on all outstanding preferred shares of the Trust,
including New Preferred Shares, the special voting rights stated above will
cease, and the terms of office of the additional directors elected by the
holders of the preferred shares will automatically terminate.
As long as any preferred shares of the Trust are outstanding, the
Trust will not, without the affirmative vote or consent of the holders of
at least a majority of the Preferred Shares (including New Preferred
Shares) outstanding at the time (voting as a separate class):
(a) authorize, create or issue, or increase the authorized or
issued amount of, any class or series of stock ranking prior
to or on a parity with the Preferred Shares (including the
New Preferred Shares) with respect to payment of dividends
or the distribution of assets on liquidation, or increase
the authorized amount of the Preferred Shares (including the
New Preferred Shares) or any other preferred stock, unless
the Trust obtains written confirmation from Moody's (if
Moody's is then rating preferred shares), S&P (if S&P is
then rating preferred shares) or any Substitute Rating
Agency (if any such Substitute Rating Agency is then rating
preferred shares) that the issuance of such class or series
would not impair the rating then assigned by such rating
agency to the Preferred Shares) and the Trust continues to
comply with Section 13 of the 1940 Act, the 1940 Act
Preferred Shares Asset Coverage requirements and the
Preferred Shares Basic Maintenance Amount requirements, in
which case the vote or consent of the holders of the
Preferred Shares (including the New Preferred Shares) is not
required;
(b) amend, alter or repeal the provisions of the Trust's charter
whether by merger, consolidation or otherwise, so as to
adversely affect any of the contract rights expressly set
forth in the Trust's charter of holders of Preferred Shares
(including the New Preferred Shares) or any other preferred
stock;
(c) authorize the Trust's conversion from a closed-end to an
open-end investment company; or
(d) amend the provisions of the Trust's charter which provide
for the classification of the board of directors of the
Trust into three classes, each with a term of office of
three years with only one class of directors standing for
election in any year (presently Article VI of the Trust's
charter).
To the extent permitted under the 1940 Act, the Trust shall not
approve any of the actions set forth in (a) or (b) above which adversely
affects the rights expressly set forth in the Trust's charter of a holder
of shares of a series of preferred shares differently than those of a
holder of shares of any other series of preferred shares without the
affirmative vote of the holders of at least a majority of the shares of
each series adversely affected and outstanding at such time, in person or
by proxy, at a meeting (each such adversely affected series voting
separately as a class) or by the unanimous written consent of the holders
of all outstanding preferred shares. Unless a higher percentage is provided
for under the Trust's charter, the affirmative vote of the holders of a
majority of the outstanding preferred shares, including New Preferred
Shares, voting together as a single class, will be required to approve any
plan of reorganization (including bankruptcy proceedings) adversely
affecting such shares or any action requiring a vote of security holders
under Section 13(a) of the 1940 Act. Notwithstanding the preceding
sentence, to the extent permitted by Maryland General Corporation Law, no
vote of holders of common stock, either separately or together with holders
of preferred shares as a single class, are necessary to take the actions
contemplated by (a) and (b) above and the holders of common shares will not
be entitled to vote in respect of such matters, unless, in the case of the
actions contemplated by (b) above, the action would adversely affect the
contract rights expressly set forth in the charter of the holders of common
shares.
The foregoing voting provisions will not apply with respect to New
Preferred Shares if, at or prior to the time when a vote is required, such
shares have been (i) redeemed or (ii) called for redemption and sufficient
funds have been deposited in trust to effect such redemption.
THE AUCTION
GENERAL
The Trust's charter provides that, except as otherwise described
herein, the Applicable Rate for the New Preferred Shares for each Dividend
Period after the Initial Dividend Period shall be equal to the rate per
annum that the Auction Agent advises has resulted on the Business Day
preceding the first day of such subsequent Dividend Period (an "Auction
Date") from implementation of the auction procedures (the "Auction
Procedures") set forth in the Trust's charter and summarized below, in
which persons determine to hold or offer to sell or, based on dividend
rates bid by them, offer to purchase or sell New Preferred Shares. Each
periodic implementation of the Auction Procedures is referred to herein as
an "Auction." See the Articles Supplementary for a more complete
description of the Auction process.
Auction Agency Agreement. The Trust will enter into an Auction
Agency Agreement (the "Auction Agency Agreement") with the Auction Agent
(currently, Deutsche Bank Group) which provides, among other things, that
the Auction Agent will follow the Auction Procedures to determine the
Applicable Rate for New Preferred Shares so long as the Applicable Rate for
New Preferred Shares is to be based on the results of an Auction.
The Auction Agent may terminate the Auction Agency Agreement upon
notice to the Trust no earlier than [45] days after such notice. If the
Auction Agent should resign, the Trust will use its best efforts to enter
into an agreement with a successor Auction Agent containing substantially
the same terms and conditions as the Auction Agency Agreement. The Trust
may remove the Auction Agent provided that prior to such removal the Trust
has entered into such an agreement with a successor Auction Agent.
Broker-Dealer Agreements. Each Auction requires the participation
of one or more Broker-Dealers. The Auction Agent will enter into agreements
(collectively, the "Broker-Dealer Agreements") with several Broker-Dealers
selected by the Trust, which provide for the participation of those
Broker-Dealers in Auctions for New Preferred Shares.
The Auction Agent after each Auction for New Preferred Shares will
pay to each Broker-Dealer, from funds provided by the Trust, a service
charge at the annual rate of 1/4 of 1% in the case of any Auction
immediately preceding a Dividend Period of less than one year, or a
percentage agreed to by the Trust and the Broker-Dealers in the case of any
Auction immediately preceding a Dividend Period of one year or longer, of
the purchase price of New Preferred Shares placed by such Broker-Dealer at
such Auction. For the purposes of the preceding sentence, New Preferred
Shares will be placed by a Broker-Dealer if such shares were (a) the
subject of Hold Orders deemed to have been submitted to the Auction Agent
by the Broker-Dealer and were acquired by such Broker-Dealer for its own
account or were acquired by such Broker-Dealer for its customers who are
Beneficial Owners or (b) the subject of an Order submitted by such
Broker-Dealer that is (i) a Submitted Bid of an Existing Holder that
resulted in such Existing Holder continuing to hold such shares as a result
of the Auction or (ii) a Submitted Bid of a Potential Holder that resulted
in such Potential Holder purchasing such shares as a result of the Auction
or (iii) a valid Hold Order.
The Trust may request the Auction Agent to terminate one or more
Broker-Dealer Agreements at any time, provided that at least one
Broker-Dealer Agreement is in effect after such termination.
AUCTION PROCEDURES
Prior to the Submission Deadline on each Auction Date for the New
Preferred Shares, each customer of a Broker-Dealer who is listed on the
records of that Broker-Dealer (or, if applicable, the Auction Agent) as a
holder of New Preferred Shares (a "Beneficial Owner") may submit orders
("Orders") with respect to New Preferred Shares to that Broker-Dealer as
follows:
1. Hold Order--indicating its desire to hold New Preferred
Shares without regard to the Applicable Rate for the next
Dividend Period thereof.
2. Bid--indicating its desire to sell New Preferred Shares
at $25,000 per share if the Applicable Rate for shares of
such series for the next Dividend Period thereof is less
than the rate or spread specified in such Bid.
3. Sell Order--indicating its desire to sell New Preferred
Shares at $25,000 per share without regard to the
Applicable Rate for shares of such series for the next
Dividend Period thereof.
A Beneficial Owner may submit different types of Orders to its
Broker-Dealer with respect to New Preferred Shares then held by such
Beneficial Owner. A Beneficial Owner that submits a Bid to its
Broker-Dealer having a rate higher than the Maximum Applicable Rate on the
Auction Date therefor will be treated as having submitted a Sell Order to
its Broker-Dealer. A Beneficial Owner that fails to submit an Order to its
Broker-Dealer will be deemed to have submitted a Hold Order to its
Broker-Dealer; provided however, that if a Beneficial Owner fails to submit
an Order to its Broker-Dealer for an Auction relating to a Dividend Period
of more than 91 days, such Beneficial Owner will be deemed to have
submitted a Sell Order to its Broker-Dealer. A Sell Order shall constitute
an irrevocable offer to sell the New Preferred Shares subject thereto. A
Beneficial Owner that offers to become the Beneficial Owner of additional
New Preferred Shares is, for purposes of such offer, a Potential Beneficial
Owner as discussed below.
A customer of a Broker-Dealer that is not a Beneficial Owner of
New Preferred Shares but that wishes to purchase New Preferred Shares, or
that is a Beneficial Owner that wishes to purchase additional New Preferred
Shares (in each case, a "Potential Beneficial Owner"), may submit Bids to
its Broker-Dealer in which it offers to purchase New Preferred Shares at
$25,000 per share if the Applicable Rate for the next Dividend Period
thereof is not less than the rate specified in such Bid. A Bid placed by a
Potential Beneficial Owner specifying a rate higher than the Maximum
Applicable Rate on the Auction Date therefor will not be accepted.
Any Bid by an Existing Holder that specifies a Spread with respect
to an Auction in which a Spread is not included in any Bid Requirements or
in which there are no Bid Requirements and an Order that does not specify a
Spread with respect to an Auction in which a Spread is included in any Bid
Requirements shall be treated as a Sell Order.
The Broker-Dealers in turn will submit the Orders of their
respective customers who are Beneficial Owners and Potential Beneficial
Owners to the Auction Agent, designating themselves (unless otherwise
permitted by the Trust) as Existing Holders in respect of shares subject to
Orders submitted or deemed submitted to them by Beneficial Owners and as
Potential Holders in respect of shares subject to Orders submitted to them
by Potential Beneficial Owners. However, neither the Trust nor the Auction
Agent will be responsible for a Broker-Dealer's failure to comply with the
foregoing. Any Order placed with the Auction Agent by a Broker-Dealer as or
on behalf of an Existing Holder or a Potential Holder will be treated in
the same manner as an Order placed with a Broker-Dealer by a Beneficial
Owner or Potential Beneficial Owner. Similarly, any failure by a
Broker-Dealer to submit to the Auction Agent an Order in respect of any New
Preferred Shares held by it or customers who are Beneficial Owners will be
treated in the same manner as a Beneficial Owner's failure to submit to its
Broker-Dealer an Order in respect of New Preferred Shares held by it. A
Broker-Dealer may also submit Orders to the Auction Agent for its own
account as an Existing Holder or Potential Holder, provided it is not an
affiliate of the Trust.
If Sufficient Clearing Bids for New Preferred Shares exist (that
is, the number of shares subject to Bids submitted or deemed submitted to
the Auction Agent by Broker-Dealers as or on behalf of Potential Holders
with rates or spreads equal to or lower than the Maximum Applicable Rate is
at least equal to the number of New Preferred Shares subject to Sell Orders
submitted or deemed submitted to the Auction Agent by Broker-Dealers as or
on behalf of Existing Holders), the Applicable Rate for New Preferred
Shares for the next succeeding Dividend Period thereof will be the lowest
rate specified in the Submitted Bids which, taking into account such rate
and all lower rates bid by Broker-Dealers as or on behalf of Existing
Holders and Potential Holders, would result in Existing Holders and
Potential Holders owning the New Preferred Shares available for purchase in
the Auction. If Sufficient Clearing Bids for New Preferred Shares do not
exist, the Applicable Rate for the next succeeding Dividend Period thereof
will be the Maximum Applicable Rate on the Auction Date therefor. In such
event, Beneficial Owners of New Preferred Shares that have submitted or are
deemed to have submitted Sell Orders may not be able to sell in such
Auction all shares subject to such Sell Orders. If all of the Outstanding
New Preferred Shares are the subject of Submitted Hold Orders, then the
Dividend Period next succeeding the Auction shall automatically be the same
length as the immediately preceding Dividend Period and the Applicable Rate
for the next succeeding Dividend Period will be the higher of the 30-day
"AA" Composite Commercial Paper Rate and the Taxable Equivalent of the
Short-Term Municipal Bond Rate multiplied by 1 minus the maximum marginal
regular Federal individual income tax rate then applicable to ordinary
income or the maximum marginal regular Federal corporate tax rate then
applicable, whichever is greater (or 90% of such rate if the Trust has
provided notification to the Auction Agent prior to the Auction
establishing the Applicable Rate that net capital gains or other taxable
income will be included in such dividend on New Preferred Shares) on the
date of the Auction.
The Auction Procedures include a pro rata allocation of shares for
purchase and sale, which may result in an Existing Holder continuing to
hold or selling, or a Potential Holder purchasing, a number of New
Preferred Shares that is different than the number of shares specified in
its Order. To the extent the allocation procedures have that result,
Broker-Dealers that have designated themselves as Existing Holders or
Potential Holders in respect of customer Orders will be required to make
appropriate pro rata allocations among their respective customers.
Settlement of purchases and sales will be made on the next
Business Day (also a Dividend Payment Date) after the Auction Date through
the Securities Depository. Purchasers will make payment through their Agent
Members in same-day funds to the Securities Depository against delivery to
their respective Agent Members. The Securities Depository will make payment
to the sellers' Agent Members in accordance with the Securities
Depository's normal procedures, which now provide for payment against
delivery by their Agent Members in same-day funds.
The Auctions for New Preferred Shares will normally be held every
Monday, and each subsequent Dividend Period will normally begin on the
following Tuesday.
Whenever the Trust intends to include any net capital gains or
other income taxable for Federal income tax purposes in any dividend on New
Preferred Shares, the Trust may, at its election, notify the Auction Agent
of the amount to be so included not later than the Dividend Payment Date
next preceding the Auction Date on which the Applicable Rate for such
dividend is to be established. Whenever the Auction Agent receives such
notice from the Trust, it will be required in turn to notify each
Broker-Dealer, who, on or prior to such Auction Date, in accordance with
its Broker-Dealer Agreement, will be required to notify its customers who
are Beneficial Owners and Potential Beneficial Owners believed by it to be
interested in submitting an Order in the Auction to be held on such Auction
Date. In the event of such notice, the Trust will not be required to pay an
Additional Dividend with respect to such dividend.
SECONDARY MARKET TRADING AND TRANSFER OF NEW PREFERRED SHARES
The Broker-Dealers are expected to maintain a secondary trading
market in New Preferred Shares outside of Auctions, but are not obligated
to do so, and may discontinue such activity at any time. There can be no
assurance that any secondary trading market in New Preferred Shares will
provide owners with liquidity of investment. The New Preferred Shares are
not registered on any stock exchange or on the Nasdaq Stock Market.
Investors who purchase shares in an Auction for a Special Dividend Period
in which the Bid Requirements, if any, do not require a Bid to specify a
Spread, should note that because the dividend rate on such shares will be
fixed for the length of such Dividend Period, the value of the shares may
fluctuate in response to changes in interest rates, and may be more or less
than their original cost if sold on the open market in advance of the next
Auction therefor, depending upon market conditions. Investors who purchase
shares in an Auction for a Special Dividend Period in which the Bid
Requirements require a Bid to specify a Spread should be aware that the
value of their shares may also fluctuate and may be more or less than their
original cost if sold on the open market in advance of the next Auction,
particularly if market spreads narrow or widen in a manner unfavorable to
such purchaser's position.
A Beneficial Owner or an Existing Holder may sell, transfer or
otherwise dispose of New Preferred Shares only in whole shares and only:
o pursuant to a Bid or Sell Order placed with the Auction
Agent in accordance with the Auction Procedures;
o to a Broker-Dealer; or
o to such other persons as may be permitted by the Trust;
provided, however, that
o a sale, transfer or other disposition of New 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 the foregoing 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
o 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.
For the meaning of defined terms used but not defined, see the
Articles Supplementary and Articles of Amendment attached as Appendices
C-1, C-2 and C-3 to the statement of additional information.
TAXES
FEDERAL INCOME TAX MATTERS
The Trust has qualified and elected, and intends to continue to
qualify, as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), and intends to
distribute at least 90% of its net investment income (including taxable
income, tax-exempt interest and net short-term capital gain, but not net
capital gain, which is the excess of net long-term capital gain over net
short-term capital loss) and substantially all of its net capital gain to
its shareholders. The Trust will not be subject to Federal income tax on
any net investment income and net capital gain that it distributes to its
shareholders, but will be subject to Federal income tax at the regular
corporate income tax rate on any net investment income (other than net
tax-exempt interest income) that it retains.
The Trust expects that substantially all of the Trust's dividends
to the common shareholders and Preferred Shareholders will qualify as
"exempt-interest dividends." A shareholder treats an exempt-interest
dividend as interest on state and local bonds which is exempt from regular
Federal income tax. Some or all of an exempt-interest dividend, however,
may be subject to Federal alternative minimum tax imposed on the
shareholder. Different Federal alternative minimum tax rules apply to
individuals and to corporations. In addition to exempt-interest dividends,
the Trust also may distribute to its shareholders amounts that are treated
as long-term capital gain or ordinary income. The Trust will allocate
distributions to shareholders that are treated as tax-exempt interest and
as long-term capital gain and ordinary income, if any, proportionately
among the common shares and Preferred Shares, including the New Preferred
Shares. The Trust intends to notify Preferred Shares, including New
Preferred Shares in advance if it will allocate income to them that is not
exempt from regular Federal income tax. In certain circumstances the Trust
will make payments to such shareholders to offset the tax effects of the
taxable distribution. See "Description of New Preferred Shares--Dividends
and Dividend Periods-Additional Dividends."
The sale or other disposition of common shares or Preferred Shares
of the Trust will normally result in capital gain or loss to shareholders.
Present law taxes both long-term and short-term capital gains of
corporations at the rates applicable to ordinary income. For non-corporate
taxpayers, under current law short-term capital gains and ordinary income
will be taxed at a maximum rate of 39.6%, while long-term capital gains
will generally be taxed at a maximum rate of 20%. Because of certain
limitations on itemized deductions and the deduction for personal
exemptions applicable to higher income taxpayers, the effective rate of tax
may be higher in certain circumstances. Losses realized by a shareholder on
the sale or exchange of shares of the Trust held for six months or less are
disallowed to the extent of any exempt-interest dividends received with
respect to such shares, and, if not disallowed, such losses are treated as
long-term capital losses to the extent of any distribution of net capital
gain received with respect to such shares. A shareholder's holding period
is suspended for any periods during which the shareholder's risk of loss is
diminished as a result of holding one or more other positions in
substantially similar or related property, or through certain options or
short sales. Any loss realized on a sale or exchange of shares of the Trust
will be disallowed to the extent those shares of the Trust are replaced by
other shares within a period of 61 days beginning 30 days before and ending
30 days after the date of disposition of the original shares. In that
event, the basis of the replacement shares of the Trust will be adjusted to
reflect the disallowed loss.
The statement of additional information contains a more detailed
summary of the Federal tax rules that apply to the Trust and its
shareholders. Legislative, judicial or administrative action may change the
tax rules that apply to the Trust or its shareholders, and any such change
may be retroactive. You should consult with your tax adviser about Federal
income tax matters.
STATE AND LOCAL TAX MATTERS
While exempt-interest dividends are exempt from regular Federal
income tax, they may not be exempt from state or local income or other
taxes. Some states exempt from state income tax that portion of any
exempt-interest dividend that is derived from interest that a regulated
investment company receives on its holdings of securities of that state and
its political subdivisions and instrumentalities. Therefore, the Trust will
report annually to its shareholders the percentage of interest income the
Trust earned during the preceding year on tax-exempt obligations and the
Trust will indicate, on a state-by-state basis, the source of this income.
You should consult with your tax adviser about state and local tax matters.
DETERMINATION OF NET ASSET VALUE
The net asset value of common shares of the Trust will be computed
based upon the value of the Trust's portfolio securities and other assets.
Net asset value per common share of the Trust will be determined as of the
close of the regular trading session on the New York Stock Exchange no less
frequently than Friday of each week and the last business day of each
month, provided, however, that if any such day is a holiday or
determination of net asset value on such day is impracticable, the net
asset value shall be calculated on such earlier or later day as determined
by the Adviser. The Trust calculates net asset value per common share of
the Trust by subtracting the Trust's liabilities (including accrued
expenses, dividends payable and any borrowings of the Trust) and the
liquidation value of any outstanding preferred shares (including New
Preferred Shares) of the Trust from the Trust's total assets (the value of
the securities the Trust holds plus cash or other assets, including
interest accrued but not yet received) and dividing the result by the total
number of common shares of the Trust outstanding.
The Trust values its fixed income securities by using market
quotations provided by pricing services, prices provided by market makers
or estimates of market values obtained from yield data relating to
instruments or securities with similar characteristics in accordance with
procedures established by the board of directors of the Trust. Short-term
securities which mature in 60 days or less are valued at amortized cost,
which approximates market value. Any securities or other assets for which
current market quotations are not readily available are valued at their
fair value as determined in good faith under procedures established by and
under the general supervision and responsibility of the Trust's board of
directors.
REPURCHASE OF COMMON SHARES
Shares of closed-end investment companies often trade at a
discount to their net asset values, and the Trust's common shares may also
trade at a discount to their net asset value. The market price of the
Trust's common shares will be determined by such factors as relative demand
for and supply of such common shares in the market, the Trust's net asset
value, general market and economic conditions and other factors beyond the
control of the Trust. Although the Trust's common shareholders will not
have the right to redeem their common shares, the Trust may take action to
repurchase common shares in the open market or make tender offers for its
common shares at their net asset value. This may, but will not necessarily,
have the effect of reducing any market discount from net asset value. See
"Repurchase of Common Shares" in the statement of additional information.
DESCRIPTION OF CAPITAL STOCK
The Trust is authorized to issue 200 million shares of capital
stock, $.01 par value. The board of directors of the Trust is authorized to
classify and reclassify any unissued shares of capital stock from time to
time by setting or changing the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications or
terms or conditions of redemption of such shares of stock. In connection
with the offerings of New Preferred Shares described herein, the board of
directors intends to reclassify 1,616 shares of unissued capital stock as
New Preferred Shares.
COMMON SHARES
The Trust's charter provides that the Trust will terminate on
December 31, 2010, without stockholder approval. In connection with such
termination, the Trust will liquidate all of its assets and distribute to
holders of outstanding common shares the net proceeds from such liquidation
after making appropriate provision for any liabilities of the Trust and the
payment of any liquidation preferences and accumulated but unpaid dividends
on any outstanding shares of Preferred Stock. Prior to such termination,
however, the board of directors of the Trust will consider whether it is in
the best interests of stockholders to terminate and liquidate the Trust on
December 31, 2010 without stockholder approval notwithstanding the
foregoing provision of the charter. In considering this matter, the board
of directors will take into account, among other factors, the adverse
effect which capital losses realized upon disposition of securities in
connection with liquidation (if any such losses are anticipated) would have
on the Trust and its stockholders. In the event that the board of directors
determines that under the circumstances, termination and liquidation of the
Trust on December 31, 2010 without a stockholder vote would not be in the
best interests of stockholders, the board of directors will call a special
meeting of stockholders to consider an appropriate amendment to the Trust's
charter. The Trust's charter would require the affirmative vote of the
holders of at least 75% of outstanding shares of capital stock to approve
such an amendment. The foregoing provisions of the Trust's charter are
governed by the laws of the State of Maryland and not the 1940 Act. All
common shares are equal as to dividends, assets and voting privileges and
have no conversion, preemptive or other subscription rights.
The Trust has no present intention of offering any additional
shares of capital stock other than New Preferred Shares as described
herein. Any additional offerings of shares of capital stock, if made, will
require approval by the Trust's board of directors. Any additional offering
of common shares will be subject to the requirements of the 1940 Act that
common shares may not be issued at a price below the then current net asset
value (exclusive of underwriting discounts and commissions) except in
connection with an offering to existing stockholders or with the consent of
a majority of the Trust's common shareholders.
On January __, 2000, there were ___________ common shares of the
Trust issued and outstanding.
So long as any New Preferred Shares or any other preferred shares
of the Trust are outstanding, holders of common shares of the Trust will
not be entitled to receive any net income of or other distributions from
the Trust unless all accumulated dividends on outstanding preferred shares
(including the New Preferred Shares) have been paid, and unless asset
coverage (as defined in the 1940 Act) with respect to such preferred shares
would be at least 200% after giving effect to such distributions. See
"Description of New Preferred Shares-Dividends and Dividend Periods" for
other restrictions on dividends to holders of common shares which will be
applicable for so long as any preferred shares of the Trust are
outstanding.
The common shares have traded on the New York Stock Exchange (the
"Exchange") since February 21, 1992 under the symbol BMT.
At ______________________, 2000, the net asset value per common share
was $__________ and the closing price per common share on the Exchange was
$__________.
PREFERRED STOCK
Under the Trust's charter, the Trust is authorized to issue 200
million shares of capital stock, $.01 par value. The board of directors of
the Trust is authorized to classify and reclassify any unissued shares of
capital stock from time to time by setting or changing the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications or terms or conditions of redemption of such
shares of stock. In connection with the offerings of New Preferred Shares
described herein, the board of directors intends to reclassify 1,616 shares
of unissued capital stock as New Preferred Shares. Under the 1940 Act, the
Trust is permitted to have outstanding more than one series of preferred
shares so long as no single series has a priority over another series as to
the distribution of assets of the Trust or the payment of dividends.
Holders of common shares and outstanding preferred shares of the Trust have
no preemptive right to purchase any preferred shares (including the New
Preferred Shares) that might be issued. It is anticipated that the net
asset value per share of the New Preferred Stock will equal its original
purchase price per share plus accrued dividends per share. See "Description
of New Preferred Shares" for a description of the rights, preferences,
privileges and other terms of the New Preferred Shares.
ANTITAKEOVER PROVISIONS OF THE CHARTER AND BY-LAWS
The Trust presently has provisions in its charter and By-Laws
(commonly referred to as "antitakeover" provisions) which may have the
effect of limiting the ability of other entities or persons to acquire
control of the Trust, to cause it to engage in certain transactions or to
modify its structure.
First, a director elected by the holders of capital stock (i.e.,
the common shares, the New Preferred Shares and any other preferred shares)
or by the holders of Preferred Shares, including the New Preferred Shares,
and any other preferred shares may be removed from office only for cause by
vote of the holders of at least 75% of the shares of capital stock or
preferred shares, as the case may be, of the Trust entitled to be voted on
the matter. Second, the affirmative vote of a majority of the directors and
of the holders of at least 75% of the Trust's outstanding shares of capital
stock entitled to be voted on the matter, voting as a single class, and the
affirmative vote of a majority of outstanding preferred shares, voting as a
separate class, will be required to authorize the Trust's conversion from a
closed-end to an open-end investment company, which conversion would result
in delisting of the common shares from the New York Stock Exchange.
Conversion to an open-end investment company would require redemption of
all outstanding preferred shares of the Trust. Third, the board of
directors is classified into three classes, each with a term of three years
with only one class of directors standing for election in any year. Such
classification may prevent replacement of a majority of the directors for
up to a two year period. The affirmative vote of at least 75% of the
Trust's outstanding shares of capital stock entitled to be voted on the
matter, voting as a single class, and the affirmative vote of a majority of
outstanding preferred shares, voting as a separate class will be required
to amend the charter or By-Laws to change any of the foregoing provisions.
In addition, under the Trust's charter, the Trust has elected to
be subject to provisions of the Maryland General Corporation Law that
generally provide that, unless an exemption is available, certain mergers,
consolidations, shares exchanges, asset sales, stock issuances,
liquidations or dissolutions, recapitalizations, and other transaction
("Business Combinations") with a beneficial owner of 10% or more of the
voting power of a Maryland corporation (an "Interested Stockholder") or any
affiliate of an Interested Stockholder are prohibited for a period of five
years following the most recent date on which the Interested Stockholder
became an Interested Stockholder. Thereafter, such a Business Combination
must be recommended by the board of directors and approved by the
affirmative vote of at least (i) 80% of the votes entitled to be cast by
outstanding shares of voting stock of the corporation and (ii) 662/3% of
the votes entitled to be cast by holders of voting stock other than voting
stock held by the Interested Stockholder who is (or whose affiliate is) a
party to the Business Combination or an affiliate or associate of the
Interested Stockholder (with dissenting stockholders having certain
appraisal rights), unless certain value and other standards are satisfied
or some other statutory exemption is available. The vote specified in the
preceding sentence will be required to amend the charter to change the
provisions subjecting the Trust to the provisions of the Maryland General
Corporation Law discussed above.
The percentage of votes required under these provisions, which are
greater than the minimum requirements under Maryland law absent the
elections described above or in the 1940 Act, will make more difficult a
change in the Trust's business or management and may have the effect of
depriving holders of common shares of an opportunity to sell shares at a
premium over prevailing market prices by discouraging a third party from
seeking to obtain control of the Trust in a tender offer or similar
transaction. The Trust's board of directors, however, has considered these
antitakeover provisions and believes they are in the best interests of
shareholders.
CUSTODIAN
The Trust's securities and cash are held under a Custodial
Agreement with State Street Bank and Trust Company (the "Custodian"), 225
Franklin Street, Boston, Massachusetts.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and the Trust has agreed to sell to such underwriter, the number
of New Preferred Shares set forth opposite the name of such underwriter.
Number of
Series M7
Name Preferred Shares
- ------------------- --------------------------
Total ..................... 1,616
===============
The underwriting agreement provides that the obligations of the
underwriters to purchase the shares included in this offering are subject
to the approval of certain legal matters by counsel and to certain other
conditions. The underwriters are obligated to purchase all the New
Preferred Shares if they purchase any of the shares. In the underwriting
agreement, the Trust and the Adviser have agreed to indemnify the
underwriters against certain liabilities, including liabilities arising
under the Securities Act of 1933, or to contribute payments the
underwriters may be required to make for any of those liabilities.
The underwriters, for whom ___________ [and ] are acting as
representatives, propose to initially offer some of the New Preferred
Shares directly to the public at the public offering price set forth on the
cover page of this prospectus and some of the New Preferred Shares to
certain dealers at the public offering price less a concession not in
excess of $ per share. The sales load the Trust will pay of per share is
equal to % of the initial offering price. The underwriters may allow, and
such dealers may reallow, a concession not in excess of $
per share on sales to certain other dealers. After the initial public
offering, the underwriters may change the public offering price and the
concession. Investors must pay for any New Preferred Shares purchased in
the initial public offering on or before , 2000.
The Trust anticipates that the underwriters may from time to time
act as brokers or dealers in executing the Trust's portfolio transactions
after they have ceased to be underwriters. The underwriters are active
underwriters of, and dealers in, securities and act as market makers in a
number of such securities, and therefore can be expected to engage in
portfolio transactions with the Trust.
The Trust anticipates that the underwriters or their respective
affiliates may, from time to time, act in Auctions as Broker-Dealers and
receive fees as set forth under "The Auction." [Each of such firms may also
provide information to be used in ascertaining the applicable reference
rates.] Each of the underwriters engages in transactions with, and perform
services for, the Trust in the ordinary course of business.
TRANSFER AGENT, DIVIDEND
DISBURSING AGENT AND REGISTRAR
The transfer agent, dividend disbursing agent and registrar for
the New Preferred Shares will be Deutsche Bank Group, [4 Albany Street, New
York, New York]. The transfer agent, dividend disbursing agent and
registrar for the common shares of the Trust is State Street Bank and Trust
Company.
LEGAL OPINIONS
Certain legal matters in connection with the New Preferred Shares
offered hereby will be passed upon for the Trust by Skadden, Arps, Slate,
Meagher & Flom LLP, New York, New York and for the Underwriters by Simpson
Thacher & Bartlett, New York, New York. Such counsel will rely, as to
matters of Maryland law, on the opinion of Miles & Stockbridge, Baltimore,
Maryland.
EXPERTS
The data in the "Financial Highlights" section of this prospectus
are based upon financial statements that have been audited by Deloitte &
Touche LLP, Two World Center, New York, New York, independent auditors, as
indicated in their reports with respect thereto, and are included in
reliance on their reports given on their authority as experts in auditing
and accounting.
REPORTS TO STOCKHOLDERS
The Trust sends unaudited semiannual reports and audited annual
reports, including a list of investments held, to stockholders.
AVAILABLE INFORMATION
The Trust is subject to the informational requirements of the
Securities Exchange Act of 1934 and the 1940 Act and in accordance
therewith is required to file reports, proxy statements and other
information with the SEC. Any such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
of the SEC, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and the SEC's New York Regional Office, Seven World Trade Center,
New York, New York 10048 and its Chicago Regional Office, Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661. Reports, proxy statements and other information concerning the Trust
can also be inspected at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
Additional information regarding the Trust and the New Preferred
Shares is contained in the Registration Statement on Form N-2, including
amendments, exhibits and schedules thereto, relating to such shares filed
by the Trust with the SEC. This prospectus does not contain all of the
information set forth in the Registration Statement, including any
amendments, exhibits and schedules thereto. For further information with
respect to the Trust and the shares offered hereby, reference is made to
the Registration Statement. Statements contained in this prospectus as to
the contents of any contract or other document referred to are not
necessarily complete and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
A copy of the Registration Statement may be inspected without
charge at the SEC's principal office in Washington, D.C., and copies of all
or any part thereof may be obtained from the SEC upon the payment of
certain fees prescribed by the SEC. The SEC maintains a web site
(http://www.sec.gov) that contains the Registration Statement, other
documents incorporated by reference, and other information the Trust has
filed electronically with the SEC, including proxy statements and reports
filed under the Securities Exchange Act of 1934.
TABLE OF CONTENTS FOR THE
STATEMENT OF ADDITIONAL INFORMATION
Page
Investment Objective and Policies..................................... 11
Experts............................................................... 36
Statement of Additional Information .................................. S-1
Investment Policies and Techniques.................................... S-4
Management of the Trust .............................................. S-7
Portfolio Transactions and Brokerage ................................. S-11
Additional Information Concerning the Auctions for New Preferred Shares.. S-12
Repurchase of Common Shares ............................................ S-14
Tax Matters............................................................. S-15
Financial Statements.................................................... S-19
Appendix A - General Characteristics and Risks of Hedging Transactions.. A-1
Appendix B - Insurance Ratings ......................................... B-1
Appendix C-1 - Articles of Amendment.................................... C-1-1
Appendix C-2 - Articles of Amendment.................................... C-2-1
Appendix C-3 - Articles Supplementary.....................................C-3-1
APPENDIX A
TAX EQUIVALENT YIELD TABLE
The table below gives the approximate yield a security must earn
at various income brackets to produce after-tax yields equivalent to those
of tax-exempt bonds yielding from 4% to 6% under the regular Federal income
tax law and tax rates applicable to individuals for 2000.
<TABLE>
<CAPTION>
(TAXABLE INCOME*) MARGINAL TAX EXEMPT YIELD OF:
INCOME
TAX 4% 4.5% 5% 5.5% 6%
SINGLE RETURN JOINT RETURN BRACKET IS EQUIVALENT TO A FULLY TAXABLE YIELD OF:
- -------------------- -------------------- ------------ -------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Up to $26,250 Up to $43,850 15.00% 4.71% 5.29% 5.88% 6.47% 7.06%
$26,251 - $63,550 $43,851 - $105,950 28.00 5.56 6.25 6.94 7.64 8.33
$63,551 - $132,600 $105,951 - $161,450 31.00 5.80 6.52 7.25 7.97 8.70
$132,601 - $288,350 $161,451 - $288,350 36.00 6.25 7.03 7.81 8.59 9.38
Over $288,350 Over $288,350 39.60 6.62 7.45 8.28 9.11 9.93
</TABLE>
---------------
*Net amount subject to Federal personal income tax after deductions
and exemptions.
The above indicated Federal income tax brackets do not take into
account the effect of a reduction in the deductibility of itemized
deductions for individual taxpayers with adjusted gross income in excess of
$128,950. The tax brackets also do not show the effects of phaseout of
personal exemptions for single filers with adjusted gross income in excess
of $128,950 and joint filers with adjusted gross income in excess of
$193,400. The effective tax brackets and equivalent taxable yields of those
taxpayers will be higher than those indicated above.
Yields shown are for illustration purposes only and are not meant to
represent the Trust's actual yield. No assurance can be given that the
Trust will achieve any specific tax-exempt yield. While it is expected that
the Trust will invest principally in obligations the interest from which is
exempt from the regular Federal income tax, other income received by the
Trust may be taxable. The table does not take into account state or local
taxes, if any, payable on Trust distributions. It should also be noted that
the interest earned on certain "private activity bonds", while exempt from
the regular Federal income tax, is treated as a tax preference item which
could subject the recipient to the AMT. The illustrations assume that the
AMT is not applicable and do not take into account any tax credits that may
be available.
The information set forth above is as of the date of this prospectus.
Subsequent tax law changes could result in prospective or retroactive
changes in the tax brackets, tax rates, and tax-equivalent yields set forth
above. Investors should consult their tax adviser for additional
information.
===============================================================================
$40,400,000
THE BLACKROCK INSURED
MUNICIPAL TERM TRUST INC.
AUCTION RATE MUNICIPAL PREFERRED STOCK
1,616 SHARES, SERIES M7
---------------------
PROSPECTUS
, 2000
---------------------
==============================================================================
The information in this statement of additional information is not complete
and may be changed. We may not sell these securities until the Registration
Statement filed with the Securities and Exchange Commission is effective.
This statement of additional information is not an offer to sell these
securities and is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED ,2000
THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC.
STATEMENT OF ADDITIONAL INFORMATION
The BlackRock Insured Municipal Term Trust Inc. (the "Trust") is a
closed-end, diversified management investment company. This statement of
additional information relating to New Preferred Shares does not constitute
a prospectus, but should be read in conjunction with the prospectus
relating hereto dated ________ __, 2000. This statement of additional
information does not include all information that a prospective investor
should consider before purchasing New Preferred Shares, and investors
should obtain and read the prospectus prior to purchasing such shares. A
copy of the prospectus may be obtained without charge by calling (888)
825-2257. You may also obtain a copy of the prospectus on the Securities
and Exchange Commission's web site (http://www.sec.gov). Capitalized terms
used but not defined in this statement of additional information have the
meanings given to them in the prospectus or the Articles Supplementary and
Articles of Amendment attached to this Statement of Additional Information
as Appendices C-1, C-2 and C-3.
TABLE OF CONTENTS
Page
Investment Objective and Policies.........................................S-2
Investment Policies and Techniques........................................S-4
Management of the Trust...................................................S-7
Portfolio Transactions and Brokerage.....................................S-11
Additional Information Concerning the Auctions for New Preferred Shares..S-12
Repurchase of Common Shares..............................................S-14
Tax Matters..............................................................S-15
Financial Statements.....................................................S-19
Appendix A - General Characteristics and Risks of Hedging Transactions....A-1
Appendix B - Insurance Ratings............................................B-1
Appendix C-1 - Articles of Amendment....................................C-1-1
Appendix C-2 - Articles of Amendment....................................C-2-1
Appendix C-3 - Articles Supplementary...................................C-3-1
This statement of additional information is dated _________ , 2000.
INVESTMENT OBJECTIVE AND POLICIES
The Trust has not established any limit on the percentage of its
portfolio that may be invested in municipal obligations subject to the
alternative minimum tax provisions of Federal tax law. New Preferred Shares
may not be a suitable investment for investors who are subject to the
Federal alternative minimum tax or who would become subject to such tax by
purchasing New Preferred Shares. The suitability of an investment in New
Preferred Shares will depend upon a comparison of the after-tax yield
likely to be provided from the Trust with that from comparable tax-exempt
investments not subject to the alternative minimum tax, and from comparable
fully taxable investments, in light of each such investor's tax position.
Special considerations apply to corporate investors. See "Tax Matters."
The types of municipal obligations in which the Trust may invest
include general obligation bonds, revenue bonds, municipal lease
obligations, installment purchase contract obligations, variable and
floating rate obligations, zero coupon securities, tax-exempt notes and
municipal commercial paper.
The two principal classifications of municipal obligations are
"general obligation" bonds and "revenue" bonds. General obligation bonds
are secured by the issuer's pledge of its full faith, credit and taxing
power for the payment of principal and interest. Revenue bonds are payable
only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or
other specific revenue source. Industrial development, private activity and
pollution control bonds are in most cases revenue bonds and do not
generally constitute the pledge of the credit or taxing power of the issuer
of such bonds. There are, of course, depending on numerous factors,
variations in the quality of municipal obligations both within a particular
classification and between classifications.
Also included within the general category of municipal obligations
are certain lease obligations or installment purchase contract obligations
and participations therein (hereinafter collectively called "lease
obligations") of municipal authorities or entities. Although lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to budget for, appropriate
and make the payments due under the lease obligation. Interest on lease
obligations is tax-exempt to the same extent as if the municipality had
issued debt obligations to finance the underlying project or purchase.
However, certain lease obligations contain "non-appropriation" clauses
which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated
for such purpose on a yearly basis. In addition to the "non-appropriation"
risk, these securities represent a relatively new type of financing that
has not yet developed the depth of marketability associated with more
conventional bonds and some lease obligations may be illiquid. Although
"non-appropriation" lease obligations are generally secured by the leased
property, disposition of the property in the event of foreclosure might
prove difficult. In addition, the tax treatment of such obligations in the
event of non-appropriation is unclear. The Trust does not intend to invest
more than 10% of its total assets in lease obligations that contain
"non-appropriation" clauses.
Certain municipal obligations may carry variable or floating rates
of interest whereby the rate of interest is not fixed but varies with
changes in specified market rates or indices, such as a bank prime rate or
a tax-exempt money market index. Accordingly, the yield on such obligations
can be expected to fluctuate with changes in prevailing interest rates.
Other municipal obligations include zero coupon securities, which
are debt obligations that do not entitle the holder to any periodic
payments prior to maturity and are issued and traded at a discount from
their face amounts. The discount varies depending on the time remaining
until maturity, prevailing interest rates, liquidity of the security and
perceived credit quality of the issuer. Zero coupon municipal obligations
may be created by investment banks under proprietary programs in which they
strip the interest component from the principal component and sell both
separately. The market prices of zero coupon securities are generally more
volatile than the market prices of securities that pay interest
periodically and are likely to respond to changes in interest rates to a
greater degree than do securities having similar maturities and credit
quality that do pay periodic interest.
The term municipal obligations also includes obligations, such as
tax-exempt notes, municipal commercial paper and municipal lease
obligations, having relatively short-term maturities, although, as noted
above, the Trust intends to invest its assets in a portfolio of municipal
obligations which will have an average final maturity on or about the
Trust's termination date of December 31, 2010, except in temporary
defensive situations in which case investments in short-term assets may be
increased.
INVESTMENT RESTRICTIONS
The Trust's investment objective and the following investment
restrictions are fundamental and cannot be changed without the approval of
the holders of a majority of the Trust's outstanding voting securities
(defined in the 1940 Act as the lesser of (a) more than 50% of the
outstanding shares (including common shares, New Preferred Shares and any
other outstanding preferred shares) or (b) 67% or more of the shares
(including common shares and New Preferred Shares and any other outstanding
preferred shares) represented at a meeting at which more than 50% of the
outstanding shares (including common shares and New Preferred Shares and
any other outstanding preferred shares) are represented) and the approval
of the holders of a majority of New Preferred Shares and any other
outstanding preferred shares voting separately as a class. All other
investment policies or practices are considered by the Trust not to be
fundamental and accordingly may be changed without stockholder approval. If
a percentage restriction on investment or use of assets set forth below is
adhered to at a time a transaction is effected, later changes in percentage
resulting from changing market values will not be considered a deviation
from policy. The Trust may not:
(1) with respect to 75% of its total assets, invest more
than 5% of the value of its total assets (taken at market value at
time of purchase) in the outstanding securities of any other
issuer or own more than 10% of the outstanding voting securities
of any one issuer, in each case other than securities issued or
guaranteed by the U.S. government or any agency or instrumentality
thereof or other investment companies;
(2) invest 25% of more of the value of its total assets
in any one industry provided that such limitation shall not be
applicable to municipal obligations other than those municipal
obligations backed only by assets and revenues of non-governmental
users;
(3) issue senior securities other than (a) preferred
shares not in excess of the excess of 50% of its total assets over
any senior securities described in clause (b) below that are
outstanding, (b) senior securities other than preferred shares
(including borrowing money, including on margin if margin
securities are owned and through entering into reverse repurchase
agreements) not in excess of 331/3% of its total assets, and (c)
borrowings up to 5% of its total assets for temporary purposes
without regard to the amount of senior securities outstanding
under clauses (a) and (b) above; provided, however, that the
Trust's obligations under interest rate swaps, when issued and
forward commitment transactions and similar transactions are not
treated as senior securities if covering assets are appropriately
segregated; or pledge its assets other than to secure such
issuances or in connection with Hedging Transactions, short sales,
when-issued and forward commitment transactions and similar
investment strategies. For purposes of clauses (a), (b) and (c)
above, "total assets" shall be calculated after giving effect to
the net proceeds of any such issuance and net of any liabilities
and indebtedness that do not constitute senior securities except
for such liabilities and indebtedness as are excluded from
treatment as senior securities by the proviso to this item (3);
(4) make loans of money or property to any person, except
through loans of portfolio securities, the purchase of fixed
income securities consistent with the Trust's investment objective
and policies or the acquisition of securities subject to
repurchase agreements;
(5) underwrite the securities of other issuers, except to
the extent that in connection with the disposition of portfolio
securities or the sale of its own shares the Trust may be deemed
to be an underwriter;
(6) invest for the purpose of exercising control over any
issuer, except that the Trust may contol a portfolio subsidiary;
(7) purchase or sell real estate of interests therein
other than municipal obligations secured by real estate or
interests therein;
(8) purchase or sell commodities or commodity contracts
except for hedging purposes; or
(9) make any short sale of securities except in
conformity with applicable laws, rules and regulations and unless,
giving effect to such sale, the market value of all securities
sold short does not exceed 25% of the value of the Trust's total
assets and the Trust's aggregate short sales of a particular class
of securities does not exceed 25% of the then outstanding
securities of that class.
The Trust has no intention to file a voluntary application for
relief under Federal bankruptcy law of any similar application under state
law for as long as the Trust is solvent and does not foresee becoming
insolvent.
INVESTMENT POLICIES AND TECHNIQUES
The following information supplements the discussion of the
Trust's investment objective, policies and techniques that are described in
the prospectus.
HEDGING TRANSACTIONS
The following descriptions of types of hedging transactions in
which the Trust may engage supplements the information in the prospectus
under the caption "Other Investment Practices -- Hedging." For additional
information, see Appendix A "General Characteristics and Risks of Hedging
Transactions."
Interest Rate Transactions. Among the Hedging Transactions into
which the Trust may enter are interest rate swaps and the purchase or sale
of interest rate caps and floors. The Trust expects to enter into these
transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio as a duration management technique
or to protect against any increase in the price of securities the Trust
anticipates purchasing at a later date. The Trust intends to use these
transactions as a hedge and not as a speculative investment. The Trust will
not sell interest rate caps or floors that it does not own. Interest rate
swaps involve the exchange by the Trust with another party of their
respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments with respect to a notional
amount of principal. The purchase of an interest rate cap entitles the
purchaser, to the extent that a specified index exceeds a predetermined
interest rate, to receive payments of interest on a notional principal
amount from the party selling such interest rate cap. The purchase of an
interest rate floor entitles the purchaser, to the extent that a specified
index falls below a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such
interest rate floor.
The Trust may enter into interest rate swaps, caps and floors on
either an asset-based or liability-based basis, depending on whether it is
hedging its assets or liabilities, and will usually enter into interest
rate-swaps on a net basis, i.e., the two payment streams are netted out,
with the Trust receiving or paying, as the case may be, only the net amount
of the two payments on the payment dates. Inasmuch as these Hedging
Transactions are entered into for good faith hedging purposes, the Adviser
and the Trust believe such obligations do not constitute senior securities
and, accordingly, will not treat them as being subject to its borrowing
restrictions. The Trust will accrue the net amount of the excess, if any,
of the Trust's obligations over its entitlements with respect to each
interest rate swap on a daily basis and will segregate with a custodian an
amount of cash or liquid securities having an aggregate net asset value at
least equal to the accrued excess. The Trust will not enter into any
interest rate swap, cap or floor transaction unless the unsecured senior
debt or the claims-paying ability of the other party thereto is rated in
the highest rating category of at least one nationally recognized rating
organization at the time of entering into such transaction. If there is a
default by the other party to such a transaction, the Trust will have
contractual remedies pursuant to the agreements related to the transaction.
The swap market has grown substantially in recent years with a large number
of banks and investment banking firms acting both as principals and as
agents utilizing standardized swap documentation. Caps and floors are more
recent innovations for which standardized documentation has not yet been
developed and, accordingly, they are less liquid than swaps.
Futures Contracts and Options on Futures Contracts. In connection
with its hedging and other risk management strategies, the Trust may also
enter into contracts for the purchase or sale for future delivery ("futures
contracts") of debt securities, aggregates of debt securities, financial
indices, and U.S. Government debt securities or options on the foregoing to
hedge the value of its portfolio securities that might result from a change
in interest rates or market movements. The Trust will engage in such
transactions only for bona fide hedging, risk management and other
appropriate portfolio management purposes, in each case, in accordance with
the rules and regulations of the Commodity Futures Trading Commission.
Calls on Securities Indices and Futures Contracts. In order to
enhance income or reduce fluctuations in net asset value, the Trust may
sell or purchase call options ("calls") on municipal obligations and
indices based upon the prices of debt securities that are traded on US.
securities exchanges and in the over-the-counter markets. A call option
gives the purchaser of the option the right to buy, and obligates the
seller to sell, the underlying security, futures contract or index at the
exercise price at any time or at a specified time during the option period.
All such calls sold by the Trust must be "covered" as long as the call is
outstanding (i.e., the Trust must own the instrument subject to the call or
other securities or assets acceptable for applicable segregation and
coverage requirements). A call sold by the Trust exposes the Trust during
the term of the option to possible loss of opportunity to realize
appreciation in the market price of the underlying security, index or
futures contract and may require the Trust to hold an instrument which it
might otherwise have sold. The purchase of a call gives the Trust the right
to buy the underlying instrument or index at a fixed price. Calls on
futures contracts on municipal obligations written by the Trust must also
be covered by assets or instruments acceptable under applicable segregation
and coverage requirements.
Puts on Securities Indices and Futures Contracts. As with calls,
the Trust may purchase put options ("puts") on municipal obligations
(whether or not it holds such securities in its portfolio). For the same
purposes the Trust may also sell puts on municipal obligations financial
indices and puts on futures contracts on municipal obligations if the
Trust's contingent obligations on such puts are secured by segregated
assets consisting of cash or liquid high grade debt securities having a
value not less than the exercise price. The Trust will not sell puts if, as
a result, more than 50% of the Trust's assets would be required to cover
its potential obligation under its hedging and other investment
transactions. In selling puts, there is a risk that the Trust may be
required to buy the underlying instrument or index at higher than the
current market price.
The principal risks relating to the use of Hedging Transactions
are: (i) less than perfect correlation between the prices of the hedging
instrument and the market value of the securities in the Trust's portfolio;
(ii) possible lack of a liquid secondary market for closing out a position
in such instruments; (iii) losses resulting from interest rate or other
market movements not anticipated by the Adviser; and (iv) the obligation to
meet additional variation margin or other payment requirements. See
Appendix A "General Characteristics and Risks of Hedging Transactions."
Certain provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), may restrict or affect the ability of the Trust to
engage in Hedging Transactions. See "Tax Matters" and the prospectus.
OTHER INVESTMENT POLICIES AND TECHNIQUES
Restricted and Illiquid Securities. Certain of the Trust's
investments may be illiquid. Illiquid securities are subject to legal or
contractual restrictions on disposition or lack an established secondary
trading market. The sale of restricted and illiquid securities often
requires more time and results in higher brokerage charges or dealer
discounts and other selling expenses than does the sale of securities
eligible for trading on national securities exchanges or in the
over-the-counter markets. Restricted securities may sell at a price lower
than similar securities that are not subject to restrictions on resale.
Repurchase Agreements. The Trust may invest temporarily, without
limitation, in repurchase agreements, which are agreements pursuant to
which securities are acquired by the Trust from a third party with the
understanding that they will be repurchased by the seller at a fixed price
on an agreed date. These agreements may be made with respect to any of the
portfolio securities in which the Trust is authorized to invest. Repurchase
agreements may be characterized as loans secured by the underlying
securities. The Trust may enter into repurchase agreements with (i) member
banks of the Federal Reserve System having total assets in excess of $500
million and (ii) securities dealers, provided that such banks or dealers
meet the creditworthiness standards established by the Trust's board of
directors ("Qualified Institutions"). The Adviser will monitor the
continued creditworthiness of Qualified Institutions, subject to the
supervision of the Trust's board of directors. The resale price reflects
the purchase price plus an agreed upon market rate of interest which is
unrelated to the coupon rate or date of maturity of the purchased security.
The collateral is marked to market daily. Such agreements permit the Trust
to keep all its assets earning interest while retaining "overnight"
flexibility in pursuit of investments of a longer-term nature.
The use of repurchase agreements involves certain risks. For
example, if the seller of securities under a repurchase agreement defaults
on its obligation to repurchase the underlying securities, as a result of
its bankruptcy or otherwise, the Trust will seek to dispose of such
securities, which action could involve costs or delays. If the seller
becomes insolvent and subject to liquidation or reorganization under
applicable bankruptcy or other laws, the Trust's ability to dispose of the
underlying securities may be restricted. Finally, it is possible that the
Trust may not be able to substantiate its interest in the underlying
securities. To minimize this risk, the securities underlying the repurchase
agreement will be held by the custodian at all times in an amount at least
equal to the repurchase price, including accrued interest. If the seller
fails to repurchase the securities, the Trust may suffer a loss to the
extent proceeds from the sale of the underlying securities are less than
the repurchase price.
Reverse Repurchase Agreements. The Trust may enter into reverse
repurchase agreements with respect to its portfolio investments subject to
the investment restrictions set forth herein and in the prospectus. Reverse
repurchase agreements involve the sale of securities held by the Trust with
an agreement by the Trust to repurchase the securities at an agreed upon
price, date and interest payment. At the time the Trust enters into a
reverse repurchase agreement, it may establish and maintain a segregated
account with its custodian containing liquid instruments having a value not
less than the repurchase price (including accrued interest). If the Trust
establishes and maintains such a segregated account, a reverse repurchase
agreement will not be considered a borrowing by the Trust; however, under
circumstances in which the Trust does not establish and maintain such a
segregated account, such reverse repurchase agreement will be considered a
borrowing for the purpose of the Trust's limitation on borrowings. The use
by the Trust of reverse repurchase agreements involves many of the same
risks of leverage since the proceeds derived from such reverse repurchase
agreements may be invested in additional securities. Reverse repurchase
agreements involve the risk that the market value of the securities
acquired in connection with the reverse repurchase agreement may decline
below the price of the securities the Trust has sold but is obligated to
repurchase. Also, reverse repurchase agreements involve the risk that the
market value of the securities retained in lieu of sale by the Trust in
connection with the reverse repurchase agreement may decline in price.
If the buyer of securities under a reverse repurchase agreement
files for bankruptcy or becomes insolvent, such buyer or its trustee or
receiver may receive an extension of time to determine whether to enforce
the Trust's obligation to repurchase the securities, and the Trust's use of
the proceeds of the reverse repurchase agreement may effectively be
restricted pending such decision. Also, the Trust would bear the risk of
loss to the extent that the proceeds of the reverse repurchase agreement
are less than the value of the securities subject to such agreement.
When-Issued and Forward Commitment Securities. The Trust may
purchase municipal obligations on a "when-issued" basis and may purchase or
sell municipal obligations on a "forward commitment" basis in order to
hedge against anticipated changes in interest rates and prices. When such
transactions are negotiated, the price, which is generally expressed in
yield terms, is fixed at the time the commitment is made, but delivery and
payment for the securities take place at a later date. When-issued
securities and forward commitments may be sold prior to the settlement
date, but the Trust will enter into when-issued and forward commitments
only with the intention of actually receiving or delivering the securities,
as the case may be. If the Trust disposes of the right to acquire a
when-issued municipal obligation prior to its acquisition or disposes of
its right to deliver or receive against a forward commitment, it might
incur a gain or loss. At the time the Trust enters into a transaction on a
when-issued or forward commitment basis, it will segregate with the
custodian cash or liquid high grade debt securities with a value not less
than the value of the when-issued or forward commitment securities. The
value of these assets will be monitored daily to ensure that their marked
to market value will at all times equal or exceed the corresponding
obligations of the Trust. There is always a risk that the securities may
not be delivered and that the Trust may incur a loss. Settlements in the
ordinary course, which may take substantially more than five business days,
are not treated by the Trust as when-issued or forward commitment
transactions and accordingly are not subject to the foregoing restrictions.
Borrowings. Although it has no present intention of doing so, the
Trust receives the right to borrow funds to the extent permitted as
described under the caption "Investment Objective and Policies --
Investment Restrictions." The proceeds of borrowings may be used for any
valid purpose including, without limitation, liquidity, investing and
repurchases of capital stock of the Trust. Borrowing is a form of leverage
and, in that respect, entails risks, including volatility in net asset
value, market value and income available for distribution.
Lending of Securities. The Trust may lend its portfolio securities
to Qualified Institutions. By lending its portfolio securities, the Trust
attempts to increase its income through the receipt of interest on the
loan. Any gain or loss in the market price of the securities loaned that
may occur during the term of the loan will be for the account of the Trust.
The Trust may lend its portfolio securities so long as the terms and the
structure of such loans are not inconsistent with requirements of the 1940
Act, which currently require that (i) the borrower pledge and maintain with
the Trust collateral consisting of cash, a letter of credit issued by a
domestic U.S. bank, or securities issued or guaranteed by the U.S.
Government having a value at all times not less than 100% of the value of
the securities loaned, (ii) the borrower add to such collateral whenever
the price of the securities loaned rises (i.e., the value of the loan is
"marked to the market" on a daily basis), (iii) the loan be made subject to
termination by the Trust at any time and (iv) the Trust receive reasonable
interest on the loan (which may include the Trust's investing any cash
collateral in interest bearing short-term investments), any distributions
on the loaned securities and any increase in their market value. The Trust
will not lend portfolio securities if, as a result, the aggregate of such
loans exceeds 331/3% of the value of the Trust's total assets (including
such loans). Loan arrangements made by the Trust will comply with all other
applicable regulatory requirements, including the rules of the New York
Stock Exchange, which rules presently require the borrower, after notice,
to redeliver the securities within the normal settlement time of five
business days. All relevant facts and circumstances, including the
creditworthiness of the Qualified Institution, will be monitored by the
Adviser, and will be considered in making decisions with respect to lending
of securities, subject to review by the Trust's board of directors.
The Trust may pay reasonable negotiated fees in connection with
loaned securities, so long as such fees are set forth in a written contract
and approved by the Trust's board of directors. In addition, voting rights
may pass with the loaned securities, but if a material event were to occur
affecting such a loan, the loan must be called and the securities voted.
Zero Coupon Bonds. The Trust may invest in zero coupon bonds. A
zero coupon bond is a bond that does not pay interest for its entire life.
The market prices of zero coupon bonds are affected to a greater extent by
changes in prevailing levels of interest rates and thereby tend to be more
volatile in price than securities that pay interest periodically. In
addition, because the Trust accrues income with respect to these securities
prior to the receipt of such interest, it may have to dispose of portfolio
securities under disadvantageous circumstances in order to obtain cash
needed to pay income dividends in amounts necessary to avoid unfavorable
tax consequences.
MANAGEMENT OF THE TRUST
The officers of the Trust manage its day to day operations. The
officers are directly responsible to the Trust's board of directors which
sets broad policies for the Trust and chooses its officers. The following
is a list of the directors and officers of the Trust and a brief statement
of their present positions and principal occupations during the past five
years. Directors who are interested persons of the Trust (as defined in the
1940 Act) are denoted by an asterisk (*). The business address of the
Trust, the Adviser and their board members and officers is 345 Park Avenue,
New York, New York 10154, unless specified otherwise below. The directors
listed below are either trustees or directors of other closed-end funds in
which BlackRock Financial Management, Inc. or an affiliate acts as
investment adviser.
<TABLE>
<CAPTION>
Principal Occupation
During the Past Five
Name and Address Title Years and Other Affiliations
- ---------------- ----- ----------------------------
<S> <C> <C>
Andrew F. Brimmer Director President of Brimmer & Company, Inc., a
4400 MacArthur Blvd., N.W. Washington, D.C. based economic and financial
Suite 302 consulting firm. Director of CarrAmerica Realty
Washington, DC 20007 Corporation and Borg-Warner Automotive.
Age: 72 Formerly member of the Board of Governors the
Federal Reserve System. Formerly Director of AirBorne
Express, BankAmerica Corporation (Bank of America),
BellSouth Corporation, College Retirement Equities Fund
(Trustee), Commodity Exchange, Inc. (Public Governor),
Connecticut Mutual Life Insurance Company, E.I. duPont de
Nemours & Company, Equitable Life Assurance Society of the
United States, Gannett Company (publishing), MNC Financial
Corporation (American Security Bank), NMC Capital
Management, Navistar International Corporation (truck
manufacturing), and UAL Corporation (United Airlines).
Richard E. Cavanagh Director President and Chief Executive Officer of The
845 Third Avenue Conference Board, Inc., a leading global business
New York, NY 10022 membership organization, from 1995-present.
Age: 52 Former Executive Dean of the John F. Kennedy
School of Government at Harvard University from
1988-1995. Acting Director, Harvard Center for
Government (1991-1993). Formerly Partner (principal) of
McKinsey & Company, Inc. (1980- 1988). Former Executive
Director of Federal Cash Management, White House Office
of Management and Budget (1977-1979). Co-author, THE
WINNING PERFORMANCE (best selling management book
published in 13 national editions). Trustee, Wesleyan
University, Drucker Foundation, Educational Testing
Services (ETS) and Airplanes Group, Aircraft Finance
Trust (AFT). Director, Arch Chemicals (chemicals),
Fremont Group (investments) and The Guardian Life
Insurance Company of America (insurance).
Kent Dixon Director Consultant/Investor. Former President and Chief
9495 Blind Pass Road Executive Officer of Empire Federal Savings Bank
Unit #602 of America and Banc PLUS Savings Association,
St. Petersburg, FL 33706 former Chairman of the Board, President and Chief
Age: 61 Executive Officer of Northeast Savings. Former
Director of ISFA (the owner of INVEST, a national securities
brokerage service designed for banks and thrift
Frank J. Fabozzi Director Consultant. Editor of THE JOURNAL OF
858 Tower View Circle PORTFOLIO MANAGEMENT and Adjunct
New Hope, PA 18938 Professor of Finance at the School of Management
Age: 50 at Yale University. Director, Guardian Mutual
Trusts Group. Author and editor of several books on
fixed income portfolio management. Visiting
Professor of Finance and Accounting at the Sloan
School of Management, Massachusetts Institute of
Technology from 1986 to August 1992.
Laurence D. Fink* Director Chairman and Chief Executive Officer of
Age: 47 BlackRock Financial Management, Inc. and
BlackRock Inc. Formerly a Managing Director of The First
Boston Corporation, member of its Management Committee,
co-head of its Taxable Fixed Income Division and head of its
Mortgage and Real Estate Products Group (December 1980-March
1988). Currently, Chairman of the board and Director of each
of BlackRock Financial Management, Inc.'s Trusts and
Anthracite Capital, Inc. Trustee of New York University
Medical Center, Dwight Englewood School, National Outdoor
Leadership School and Phoenix House. A Director of VIMRx
Pharmaceuticals, Inc. and Innovir Laboratories, Inc.
James Clayburn LaForce, Jr. Director Dean Emeritus of The John E. Anderson Graduate
P.O. Box 1595 School of Management, University of California
Pauma Valley, CA 92061 since July 1, 1993. Director, Imperial Credit
Age: 69 Industries (mortgage banking), Jacobs Engineering
Group, Inc., Rockwell International Corporation, Payden &
Rygel Investment Trusts (investment companies), Timken
Company (roller bearing and steel) and Motor Cargo
Industries (transportation). Acting Dean of The School of
Business, Hong Kong University of Science and Technology
1990-1993. From 1978 to September 1993, Dean of The John E.
Anderson Graduate School of Management, University of
California.
Walter F. Mondale Director Partner, Dorsey & Whitney, a law firm (December
220 South Sixth Street 1996-present, September 1987-August 1993).
Minneapolis, MN 55402 Formerly U.S. Ambassador to Japan (1993-1996).
Age: 71 Formerly Vice President of the United States, U.S.
Senator and Attorney General of the State of
Minnesota. 1984 Democratic Nominee for President
of the United States.
Ralph L. Schlosstein* Director and President President of BlackRock Financial Management, Inc.
Age: 48 and BlackRock Inc. Formerly a Managing Director
of Lehman Brothers, Inc. and co-head of its
Mortgage and Savings Institutional Group.
Currently President of each of the closed-end funds
in which BlackRock Financial Management, Inc.
acts as investment adviser. Trustee of Denison
University and New Visions for Public Education in
New York City. A Director of the Pulte Corporation
and a member of the Visiting Board of Overseers of
the John F. Kennedy School of Government at
Harvard University.
Keith T. Anderson Vice President Managing Director of BlackRock Financial
Age: 40 Management, Inc. since January 1991. Director of
BlackRock Financial Management, Inc. from April
1988 to January 1991. From February 1987 to April
1988, Vice President at The First Boston
Corporation in the Fixed Income Research
Department. Previously Vice President and Senior
Portfolio Manager at Criterion Investment
Management Company (now Nicholas-Applegate).
Henry Gabbay Treasurer Managing Director and Chief Operating Officer of
Age: 52 BlackRock Financial Management, Inc. since
January 1990. Director of BlackRock Financial
Management, Inc. from February 1989 to January
1990. From September 1984 to February 1989, Vice
President at The First Boston Corporation.
Robert S. Kapito Vice President Managing Director and Vice Chairman of BlackRock
Age: 42 Financial Management, Inc. since March 1988.
Formerly Vice President the First Boston Corporation in
the Mortgage Products Group (from December 1985 to
March 1988).
James Kong Assistant Treasurer Managing Director of BlackRock Financial
Age: 39 Management, Inc. since January 1996. Director of
BlackRock Financial Management, Inc. from
January 1993 to January 1996. Vice President and
Associate of BlackRock Financial Management, Inc.
from January 1991 and April 1989 to January 1993
and January 1991, respectively. From April 1987 to
April 1989, Assistant Vice President at The First
Boston Corporation in the CMO/ABO
Administration Department. Previously affiliated
with Deloitte Haskins & Sells (now Deloitte &
Touche LLP).
Karen H. Sabath Secretary Managing Director of BlackRock Financial
Age: 34 Management, Inc. since January 1993. Vice
President and Associate of BlackRock Financial
Management, Inc. from January 1989 and August
1988 to January 1993 and January 1989,
respectively. From June 1986 to July 1988,
Associate at The First Boston Corporation in the
Mortgage Finance Department. From August 1988
to December 1992, Associate Vice President of
BlackRock Advisers.
Michael C. Huebsch Vice President Managing Director of the BlackRock Financial
Age: 41 Management, Inc. since January 1991. Director of
BlackRock Financial Management, Inc. from
January 1989 to January 1991. From July 1985 to
January 1989, Vice President at The First Boston
Corporation in the Fixed Income Research
Department.
Kevin Klingert Vice President Managing Director of BlackRock Financial
Age: 37 Management, Inc. since January 1996. Director of
BlackRock Financial Management, Inc. from
January 1994 to January 1996. Vice President of
BlackRock Financial Management, Inc. from
October 1991 to January 1994. From March 1985 to
October 1991, Assistant Vice President at Merrill
Lynch, Pierce, Fenner & Smith in the Unit
Investment Trust Department.
Richard Shea, Esq. Vice President Effective January 2000 Managing Director of
Age: 40 BlackRock Financial Management, Inc. Director of
BlackRock Financial Management, Inc. from
January 1996 to January 2000. Vice President of
BlackRock Financial Management, Inc. from
February 1993 to January 1996. From December
1988 to February 1993, Associate Vice President
and Tax Counsel at Prudential Securities
Incorporated. From August 1984 to December
1988, Senior Tax Specialist at Laventhol &
Horwath.
</TABLE>
As of _________, 2000, no person is known to the Trust to own of
record or beneficially 5% or more of the outstanding common shares or
preferred shares, except Cede & Co., Bowling Green Station, P.O. Box 20,
New York, NY 10274-0020, which owned of record _____ of the outstanding
common shares.
Laurence D. Fink and Ralph L. Schlosstein serve as members of the
executive committee of the board of directors. The executive committee,
which meets between regular meetings of the board of directors, is
authorized to exercise all of the powers of the board of directors except
as otherwise set forth in the charter.
The Trust has an Audit Committee consisting of those directors who
are not interested persons of BlackRock Advisors, Inc. or the Adviser.
No officer or employee of the Trust receives any compensation from
the Trust for serving as an officer or director of the Trust. The Trust
pays each director who is not an "interested person" of the Trust (as
defined in the 1940 Act) $[6,000] per year plus $[1,500] per board meeting
attended in person or by telephone for travel and out-of-pocket expenses.
The aggregate estimated compensation received by each current
director of the Trust for the fiscal year ending December 31, 1999 and the
aggregate estimated compensation to be received by each current
director/trustee of the BlackRock family of funds for the fiscal year
ending December 31, 1999 as a whole are estimated as follows:
<TABLE>
<CAPTION>
1999 Estimated
Aggregate Estimated Total Compensation from
Compensation From the Trust and Fund
Name of Board Member Trust Complex Paid to Board Member*
- -------------------- ----- ----------------------------
<S> <C> <C>
Andrew R. Brimmer $ $160,000
Richard E. Cavanagh $ $160,000
Kent Dixon $ $160,000
Frank J. Fabozzi $ $160,000
Laurence D. Fink N/A N/A
James Grosfeld** $ $
James Clayburn LaForce, Jr. $ $160,000
Ralph L. Schlosstein N/A N/A
Walter F. Mondale $ $160,000
</TABLE>
* The BlackRock family of funds consists of 23 closed-end funds.
Total compensation from the Trust and Trust complex paid to each
board member is capped at $160,000; Director fees paid by the
Trust may be reduced based on the Trust's relative net asset
value in the event that the cap is applicable.
** Resigned on November 17, 1999.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is responsible for decisions to buy and sell
securities for the Trust, the selection of brokers and dealers to effect
the transactions and the negotiation of prices and any brokerage
commissions. The securities in which the Trust invests are traded
principally in the over-the-counter market. In the over-the-counter market,
securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although
price of the security usually includes a mark-up to the dealer. Securities
purchased in underwritten offerings generally include, in the price, a
fixed amount of compensation for the manager(s), underwriter(s) and
dealer(s). The Trust may also purchase certain money market instruments
directly from an issuer, in which case no commissions or discounts are
paid. Purchases and sales of debt securities on a stock exchange are
effected through brokers who charge a commission for their services.
The Adviser is responsible for effecting securities transactions
of the Trust and will do so in a manner deemed fair and reasonable to
shareholders of the Trust and not according to any formula. The Adviser's
primary considerations in selecting the manner of executing securities
transactions for the Trust will be prompt execution of orders, the size and
breadth of the market for the security, the reliability, integrity and
financial condition and execution capability of the firm, the size of the
difficulty in executing the order, and the best net price. There are many
instances when, in the judgment of the Adviser, more than one firm can
offer comparable execution services. In selecting among such firms,
consideration is given to those firms which supply research and other
services in addition to execution services. Consideration may also be given
to the sale of shares of the Trust. However, it is not the policy of the
Adviser, absent special circumstances, to pay higher commissions to a firm
because it has supplied such research or other services.
The Adviser is able to fulfill its obligations to furnish a
continuous investment program to the Trust without receiving such
information from brokers; however, it considers access to such information
to be an important element of financial management. Although such
information is considered useful, its value is not determinable, as it must
be reviewed and assimilated by the Adviser, and does not reduce the
Adviser's normal research activities in rendering investment advice. It is
possible that the Adviser's expenses could be materially increased if it
attempted to purchase this type of information or generate it through its
own staff.
One or more of the other investment companies or accounts which
the Adviser manages may own from time to time some of the same investments
as the Trust. Investment decisions for the Trust are made independently
from those of such other investment companies or accounts; however, from
time to time, the same investment decision may be made for more than one
company or account. When two or more companies or accounts seek to purchase
or sell the same securities, the securities actually purchased or sold will
be allocated among the companies and accounts on a good faith equitable
basis by the Adviser in its discretion in accordance with the accounts'
various investment objective. In some cases, this system may adversely
affect the price or size of the position obtainable for the Trust. In other
cases, however, the ability of the Trust to participate in volume
transactions may produce better execution for the Trust. It is the opinion
of the Trust's board of directors that this advantage, when combined with
the other benefits available due to the Adviser's organization, outweighs
any disadvantages that may be said to exist from exposure to simultaneous
transactions.
Although the investment management agreement contains no
restrictions on portfolio turnover, it is not the Trust's policy to engage
in transactions with the objective of seeking profits from short-term
trading. It is expected that the annual portfolio turnover rate of the
Trust will be approximately 100% excluding securities having a maturity of
one year or less. Because it is difficult to predict accurately portfolio
turnover rates, actual turnover may be higher or lower. Higher portfolio
turnover results in increased Trust expenses, including brokerage
commissions, dealer mark-ups and other transaction costs on the sale of
securities and on the reinvestment in other securities.
ADDITIONAL INFORMATION CONCERNING
THE AUCTIONS FOR NEW PREFERRED SHARES
GENERAL
Auction Agency Agreement. The Trust will enter into an Auction
Agency Agreement (the "Auction Agency Agreement") with the Auction Agent
(currently, Deutsche Bank Group) which provides, among other things, that
the Auction Agent will follow the Auction Procedures for purposes of
determining the Applicable Rate for the New Preferred Shares so long as the
Applicable Rate for such shares is to be based on the results of an
Auction.
Broker-Dealer Agreements. Each Auction requires the participation
of one or more Broker-Dealers. The Auction Agent will enter into agreements
(collectively, the "Broker-Dealer Agreements") with several Broker-Dealers
selected by the Trust, which provide for the participation of those
Broker-Dealers in Auctions for New Preferred Shares. See "Broker-Dealers"
below.
Securities Depository. The Depository Trust Company ("DTC") will
act as the Securities Depository for the Agent Members with respect to the
New Preferred Shares. One certificate for all of the New Preferred Shares
will be registered in the name of Cede & Co., as nominee of the Securities
Depository. Such certificate will bear a legend to the effect that such
certificate is issued subject to the provisions restricting transfers of
shares of New Preferred Shares contained in the Articles Supplementary. The
Trust will also issue stop-transfer instructions to the transfer agent for
New Preferred Shares. Prior to the commencement of the right of holders of
preferred shares of the Trust to elect a majority of the Trust's directors,
as described under "Description of New Preferred Shares-Voting Rights" in
the prospectus, Cede & Co. will be the holder of record of all shares of
the New Preferred Shares and owners of such shares will not be entitled to
receive certificates representing their ownership interest in such shares.
DTC, a New York-chartered limited purpose trust company, performs
services for its participants (including the Agent Members), some of whom
(and/or their representatives) own DTC. DTC maintains lists of its
participants and will maintain the positions (ownership interests) held by
each such participant (the "Agent Member") in New Preferred Shares, whether
for its own account or as a nominee for another person. Additional
information concerning DTC and the DTC depository system is included as an
Exhibit to the Registration Statement of which this statement of additional
information forms a part.
CONCERNING THE AUCTION AGENT
The Auction Agent will act as agent for the Trust in connection
with Auctions. In the absence of bad faith or negligence on its part, the
Auction Agent will not be liable for any action taken, suffered, or omitted
or for any error of judgment made by it in the performance of its duties
under the Auction Agency Agreement and will not be liable for any error of
judgment made in good faith unless the Auction Agent will have been
negligent in ascertaining the pertinent facts.
The Auction Agent may rely upon, as evidence of the identities of
the Existing Holders of New Preferred Shares, the Auction Agent's registry
of Existing Holders, the results of Auctions and notices from any
Broker-Dealer (or other Person, if permitted by the Trust) with respect to
transfers described under "The Auction" in the prospectus and notices from
the Trust. The Auction Agent is not required to accept any such notice for
an Auction unless it is received by the Auction Agent by 3:00 p.m., New
York City time, on the Business Day preceding such Auction.
The Auction Agent may terminate the Auction Agency Agreement upon
notice to the Trust on a date no earlier than 60 days after such notice. If
the Auction Agent should resign, the Trust will use its best efforts to
enter into an agreement with a successor Auction Agent containing
substantially the same terms and conditions as the Auction Agency
Agreement. The Trust may remove the Auction Agent provided that prior to
such removal the Trust shall have entered into such an agreement with a
successor Auction Agent.
BROKER-DEALERS
The Auction Agent after each Auction for New Preferred Shares will
pay to each Broker-Dealer, from funds provided by the Trust, a service
charge at the annual rate of 0.25% in the case of any Auction immediately
preceding a Dividend Period of less than one year, or a percentage agreed
to by the Trust and the Broker-Dealers in the case of any Auction
immediately preceding a Dividend Period of one year or longer, of the
purchase price of shares of New Preferred Shares placed by such
Broker-Dealer at such Auction. For the purposes of the preceding sentence,
New Preferred Shares will be placed by a Broker-Dealer if such shares were
(a) the subject of Hold Orders deemed to have been submitted to the Auction
Agent by the Broker-Dealer and were acquired by such Broker- Dealer for its
own account or were acquired by such Broker-Dealer for its customers who
are Beneficial Owners or (b) the subject of an Order submitted by such
Broker-Dealer that is (i) a Submitted Bid of an Existing Holder that
resulted in such Existing Holder continuing to hold such shares as a result
of the Auction or (ii) a Submitted Bid of a Potential Holder that resulted
in such Potential Holder purchasing such shares as a result of the Auction
or (iii) a valid Hold Order. The Trust may request the Auction Agent to
terminate one or more Broker-Dealer Agreements at any time, provided that
at least one Broker-Dealer Agreement is in effect after such termination.
The Broker-Dealer Agreements provide that a Broker-Dealer (other
than an affiliate of the Trust) may submit Orders in Auctions for its own
account, unless the Trust notifies all Broker-Dealers that they may no
longer do so, in which case Broker-Dealers may continue to submit Hold
Orders and Sell Orders for their own accounts. Any Broker-Dealer that is an
affiliate of the Trust may submit Orders in Auctions, but only if such
Orders are not for its own account. If a Broker-Dealer submits an Order for
its own account in any Auction, it might have an advantage over other
Bidders because it would have knowledge of all Orders submitted by it in
that Auction; such Broker-Dealer, however, would not have knowledge of
Orders submitted by other Broker-Dealers in that Auction.
REPURCHASE OF COMMON SHARES
The Trust is a closed-end investment company and as such its
common shareholders will not have the right to cause the Trust to redeem
their shares. Instead, the Trust's common shares will trade in the open
market at a price that will be a function of several factors, including
dividend levels (which are in turn affected by expenses), net asset value,
call protection, price, dividend stability, relative demand for and supply
of such shares in the market, general market and economic conditions and
other factors. Because shares of a closed-end investment company may
frequently trade at prices lower than net asset value, the Trust's board of
directors may consider action that might be taken to reduce or eliminate
any material discount from net asset value in respect of common shares,
which may include the repurchase of such shares in the open market or in
private transactions, the making of a tender offer for such shares at net
asset value, or the conversion of the Trust to an open-end investment
company. The board of directors may not decide to take any of these
actions. In addition, there can be no assurance that share repurchases or
tender offers, if undertaken, will reduce market discount.
Notwithstanding the foregoing, at any time when preferred shares
of the Trust are outstanding, the Trust may not purchase, redeem or
otherwise acquire any of its common shares unless (1) all accrued preferred
shares dividends have been paid and (2) at the time of such purchase,
redemption or acquisition, the net asset value of the Trust's portfolio
(determined after deducting the acquisition price of the common shares) is
at least 200% of the liquidation value of the outstanding preferred shares
(expected to equal the original purchase price per share plus any accrued
and unpaid dividends thereon). The staff of the SEC currently requires that
any tender offer made by a closed-end investment company for its shares
must be at a price equal to the net asset value of such shares on the close
of business on the last day of the tender offer. Any service fees incurred
in connection with any tender offer made by the Trust will be borne by the
Trust and will not reduce the stated consideration to be paid to tendering
shareholders.
Subject to its investment limitations, the Trust may borrow to
finance the repurchase of common shares or to make a tender offer. Interest
on any borrowings to finance share repurchase transactions or the
accumulation of cash by the Trust in anticipation of share repurchases or
tenders will reduce the Trust's net income. Any share repurchase, tender
offer or borrowing that might be approved by the Trust's board of directors
would have to comply with the Securities Exchange Act of 1934 and the 1940
Act and the rules and regulations under each of those acts.
Although the decision to take action in response to a discount
from net asset value will be made by the board of directors at the time it
considers such issue, it is the board's present policy, which may be
changed by the board of directors, not to authorize repurchases of common
shares or a tender offer for such shares if (1) such transactions, if
consummated, would (a) result in the delisting of the common shares from
the New York Stock Exchange, or (b) impair the Trust's status as a
regulated investment company under the Internal Revenue Code of 1986 (which
would make the Trust a taxable entity, causing the Trust's income to be
taxed at the corporate level in addition to the taxation of shareholders
who receive dividends from the Trust) or as a registered closed-end
investment company under the 1940 Act; (2) the Trust would not be able to
liquidate portfolio securities in an orderly manner and consistent with the
Trust's investment objective and policies in order to repurchase shares; or
(3) there is, in the board's judgment, any (a) material legal action or
proceeding instituted or threatened challenging such transactions or
otherwise materially adversely affecting the Trust, (b) general suspension
of or limitation on prices for trading securities on the New York Stock
Exchange, (c) declaration of a banking moratorium by Federal or state
authorities or any suspension of payment by United States banks in which
the Trust invests, (d) material limitation affecting the Trust or the
issuers of its portfolio securities by Federal or state authorities on the
extension of credit by lending institutions or on the exchange of foreign
currency, (e) commencement of war, armed hostilities or other international
or national calamity directly or indirectly involving the United States, or
(f) other event or condition which would have a material adverse effect
(including any adverse tax effect) on the Trust or its shareholders if
shares were repurchased. The board of directors may in the future modify
these conditions in light of experience.
The repurchase by the Trust of its common shares at prices below
net asset value will result in an increase in the net asset value of those
shares that remain outstanding. However, there can be no assurance that
share repurchases or tenders at or below net asset value will result in the
Trust's common shares trading at a price equal to their net asset value.
Nevertheless, the fact that the Trust's shares may be the subject of
repurchase or tender offers at net asset value from time to time, or that
the Trust may be converted to an open-end company, may reduce any spread
between market price and net asset value that might otherwise exist.
In addition, a purchase by the Trust of its common shares will
decrease the Trust's total assets which would likely have the effect of
increasing the Trust's expense ratio. Any purchase by the Trust of its
common shares at a time when preferred shares are outstanding will increase
the leverage applicable to the outstanding common shares then remaining and
decrease the asset coverage of the preferred shares.
Before deciding whether to take any action if the common shares
trade below net asset value, the Trust's board of directors would likely
consider all relevant factors, including the extent and duration of the
discount, the liquidity of the Trust's portfolio, the impact of any action
that might be taken on the Trust or its shareholders and market
considerations. Based on these considerations, even if the Trust's shares
should trade at a discount, the board of directors may determine that, in
the interest of the Trust and its shareholders, no action should be taken.
TAX MATTERS
The Trust has qualified and elected, and intends to continue to
qualify under the Code, as a regulated investment company and to satisfy
conditions which enable dividends on common shares or Preferred Shares
which are attributable to interest on tax-exempt municipal securities to be
exempt from Federal income tax in the hands of owners of such shares,
subject to the possible application of the Federal alternative minimum tax.
To qualify for tax treatment as a regulated investment company,
the Trust must, among other things: (a) distribute to its shareholders at
least an amount equal to the sum of (i) 90% of its net investment income
(which is its investment company taxable income as that term is defined in
the Code but determined without regard to the deduction for dividends paid)
and (ii) 90% of its net tax-exempt income and (b) diversify its holdings so
that, at the end of each fiscal quarter of the Trust (i) at least 50% of
the market value of the Trust's assets is represented by cash, cash items,
U.S. government securities and securities of other regulated investment
companies, and other securities, with these other securities limited, with
respect to any one issuer, to an amount not greater in value than 5% of the
Trust's total assets, and to not more than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the market value
of the Trust's assets is invested in the securities of any one issuer
(other than U.S. government securities or securities of other regulated
investment companies). In meeting these requirements, the Trust may be
restricted in the utilization of certain of the investment techniques
described above and in the prospectus. If in any year the Trust should fail
to qualify for tax treatment as a regulated investment company, the Trust
would incur a regular Federal corporate income tax upon its taxable income
for that year, and distributions to its shareholders would be taxable to
such holders as ordinary income to the extent of the Trust's earnings and
profits. A regulated investment company that fails to distribute, by the
close of each calendar year, at least an amount equal to the sum of 98% of
its ordinary taxable income for such year and 98% of its capital gain net
income for the one year period ending October 31 in such year, plus any
shortfalls from the prior year's required distribution, is liable for a 4%
excise tax on the portion of the undistributed amount of such income that
is less than the required amount for such distributions. To avoid the
imposition of this excise tax, the Trust generally makes the required
distributions of its ordinary taxable income, if any, and its capital gain
net income, to the extent possible, by the close of each calendar year.
Certain of the Trust's investment practices are subject to special
provisions of the Code that, among other things, may defer the use of
certain deductions or losses of the Trust, affect the holding period of
securities held by the Trust and alter the character of the gains or losses
realized by the Trust. These provisions may also require the Trust to
recognize income or gain without receiving cash with which to make
distributions in the amounts necessary to satisfy the requirements for
maintaining regulated investment company status and for avoiding income and
excise taxes. The Trust will monitor its transactions and may make certain
tax elections in order to mitigate the effect of these rules and prevent
disqualification of the Trust as a regulated investment company.
The Trust intends to qualify to pay "exempt-interest" dividends,
as defined in the Code on its common shares and Preferred Shares. In order
for any distributions to owners of the Trust's Preferred Shares to be
eligible to be treated as exempt-interest dividends, such Preferred Shares
must be treated as stock for Federal income tax purposes. Under the Code,
at the close of each quarter of its taxable year, if at least 50% of the
value of its total assets consists of municipal bonds, the Trust will be
qualified to pay exempt-interest dividends to its shareholders.
Exempt-interest dividends are dividends or any part thereof (other than a
capital gain dividend) paid by the Trust which are attributable to interest
on municipal bonds and are so designated by the Trust within 60 days of the
Trust's fiscal year-end. Exempt-interest dividends will be exempt from
Federal income tax, subject to the possible application of the Federal
alternative minimum tax. Insurance proceeds received by the Trust under any
insurance policies in respect of scheduled interest payments on defaulted
municipal bonds, as described herein, will generally be excludable from
gross income under Section 103(a) of the Code. In the case of
non-appropriation by a political subdivision, however, there can be no
assurance that payments made by the issuer representing interest on such
"non-appropriation" municipal lease obligations will be excludable from
gross income for Federal income tax purposes. See "Investment Objective and
Policies" above. Gains of the Trust that are attributable to market
discount on certain municipal obligations acquired after April 30, 1993 are
treated as ordinary income. The interest on private activity bonds in most
instances is not Federally tax-exempt to a person who is a "substantial
user" of a facility financed by such bonds or a "related person" of such
"substantial user." As a result, the Trust may not be an appropriate
investment for shareholders who are considered either a "substantial user"
or a "related person" within the meaning of the Code. In general, a
"substantial user" of a facility includes a "non- exempt person who
regularly uses a part of such facility in his trade or business." "Related
persons" are in general defined to include persons among whom there exists
a relationship, either by family or business, which would result in a
disallowance of losses in transactions among them under various provisions
of the Code (or if they are members of the same controlled group of
corporations under the Code), including a partnership and each of its
partners (and certain members of their families), an S corporation and each
of its shareholders (and certain members of their families) and various
combinations of these and other relationships. The foregoing is not a
complete description of all of the provisions of the Code covering the
definitions of "substantial user" and "related person." The Code provides
that every holder of Preferred Shares required to file a tax return must
include for information purposes on such return the amount of tax-exempt
interest received during the taxable year, including any exempt-interest
dividends received from the Trust.
Federal tax law imposes an alternative minimum tax with respect to
both corporations and individuals. Interest on certain municipal
obligations, such as bonds issued to make loans for housing purposes or to
private entities (but not to certain tax-exempt organizations such as
universities and non-profit hospitals) is included as an item of tax
preference in determining the amount of a taxpayer's alternative minimum
taxable income. To the extent that the Trust receives income from municipal
obligations subject to the Federal alternative minimum tax, a portion of
the dividends paid by it, although otherwise exempt from Federal income
tax, will be taxable to its shareholders to the extent that their tax
liability is determined under the alternative minimum tax. The Trust will
annually supply a report indicating the percentage of the Trust's income
attributable to municipal obligations subject to the Federal alternative
minimum tax. In addition, for certain corporations, alternative minimum
taxable income is increased by 75% of the difference between an alternative
measure of income ("adjusted current earnings") and the amount otherwise
determined to be the alternative minimum taxable income. Interest on all
municipal obligations, and therefore all distributions by the Trust that
would otherwise be tax-exempt, is included in calculating a corporation's
adjusted current earnings. Certain small corporations are not subject to
the alternative minimum tax.
Tax-exempt income, including exempt-interest dividends paid by the
Trust, is taken into account in calculating the amount of social security
and railroad retirement benefits that may be subject to Federal income tax.
Distributions to shareholders by the Trust of net income received,
if any, from taxable temporary investments and net short-term capital
gains, if any, realized by the Trust will be taxable to its shareholders as
ordinary income. Distributions by the Trust of net capital gain (which is
the excess of net long-term capital gain over net short-term capital loss),
if any, are taxable as long-term capital gain, regardless of the length of
time the shareholder has owned common shares or Preferred Shares. The
amount of taxable income allocable to the Trust's Preferred Shares will
depend upon the amount of such income realized by the Trust, but is not
generally expected to be significant. Except for dividends paid on
Preferred Shares which include an allocable portion of any net capital gain
or other taxable income, the Trust anticipates that all dividends paid on
shares of its Preferred Shares will constitute exempt-interest dividends
for Federal income tax purposes. Distributions, if any, in excess of the
Trust's earnings and profits will first reduce the adjusted tax basis of a
shareholder's shares and, after that basis has been reduced to zero, will
constitute capital gains to the shareholder (assuming the shares are held
as a capital asset). As long as the Trust qualifies as a regulated
investment company under the Code, no part of its distributions to
shareholders will qualify for the dividends-received deduction for
corporations.
The Internal Revenue Service (the "IRS") requires that a regulated
investment company that has two or more classes of shares designate to each
such class proportionate amounts of each type of its income for each tax
year based upon the percentage of total dividends distributed to each class
for such year. The Trust intends each year to allocate, to the fullest
extent practicable, net tax-exempt interest, net capital gain and other
taxable income, if any, between its common shares and preferred shares,
including the Preferred Shares, in proportion to the total dividends paid
to each class with respect to such year. To the extent permitted under
applicable law, the Trust reserves the right to make special allocations of
income within a class, consistent with the objective of the Trust. The
Trust may, at its election, notify the Auction Agent of the amount of any
net capital gain or other income taxable for Federal income tax purposes to
be included in any dividend on shares of its Preferred Shares prior to the
Auction establishing the Applicable Rate for such dividend. If the Trust
allocates any net capital gain or other taxable income for Federal income
tax purposes to its Preferred Shares without having given advance notice
thereof as described above, the Trust generally will be required to make
payments to owners of its Preferred Shares to which such allocation was
made in order to offset the Federal income tax effect of the taxable income
so allocated as described under "Description of Preferred Shares-Dividends
and Dividend Periods-Additional Dividends" in the prospectus.
Although dividends generally will be treated as distributed when
paid, dividends declared in October, November or December, payable to
shareholders of record on a specified date in one of those months and paid
during the following January will be treated as having been distributed by
the Trust (and received by the shareholders) on December 31 of the year
declared.
If at any time when the Trust's Preferred Shares are outstanding
the Trust fails to meet the Preferred Shares Basic Maintenance Amount or
the 1940 Act Preferred Shares Asset Coverage, the Trust will be required to
suspend distributions to holders of its common shares until such
maintenance amount or asset coverage, as the case may be, is restored. See
"Description of New Preferred Shares-Dividends and Dividend Periods" in the
prospectus. This may prevent the Trust from distributing at least an amount
equal to the sum of 90% of its investment company taxable income and 90% of
its net tax-exempt interest income, and may therefore jeopardize the
Trust's qualification for taxation as a regulated investment company or
cause the Trust to incur a tax liability or a non-deductible 4% excise tax
on the undistributed taxable income (including gain), or both. Upon failure
to meet the Preferred Shares Basic Maintenance Amount or the 1940 Act
Preferred Shares Asset Coverage, the Trust will be required to redeem its
shares of Preferred Shares in order to maintain or restore such maintenance
amount or asset coverage and avoid the adverse consequences to the Trust
and its shareholders of failing to qualify as a regulated investment
company. There can be no assurance, however, that any such redemption would
achieve such objective.
The Trust may, at its option, redeem its Preferred Shares in whole
or in part, and is required to redeem Preferred Shares to the extent
required to maintain the Preferred Shares Basic Maintenance Amount and the
1940 Act Preferred Shares Asset Coverage. Gain or loss, if any, resulting
from a redemption of Preferred Shares will be taxed as gain or loss from
the sale or exchange of Preferred Shares under Section 302 of the Code
rather than as a dividend, but only if the redemption distribution (a) is
deemed not to be essentially equivalent to a dividend, (b) is in complete
redemption of an owner's interest in the Trust, (c) is substantially
disproportionate with respect to the owner, or (d) with respect to a
non-corporate owner, is in partial liquidation of the owner's interest in
the Trust. For purposes of (a), (b) and (c) above, a shareholder's
ownership of common shares will be taken into account.
The sale or other disposition of common shares or Preferred Shares
of the Trust will normally result in capital gain or loss to shareholders.
Present law taxes both long-term and short-term capital gains of
corporations at the rates applicable to ordinary income. For non-corporate
taxpayers, however, under current law short-term capital gains and ordinary
income will be taxed at a maximum rate of 39.6% while long-term capital
gains generally will be taxed at a maximum rate of 20%. However, because of
the limitations on itemized deductions and the deduction for personal
exemptions applicable to higher income taxpayers, the effective rate of tax
may be higher in certain circumstances. Losses realized by a shareholder on
the sale or exchange of shares of the Trust held for six months or less are
disallowed to the extent of any distribution of exempt-interest dividends
received with respect to such shares, and, if not disallowed, such losses
are treated as long-term capital losses to the extent of any distribution
of net capital gain received with respect to such shares. A shareholder's
holding period is suspended for any periods during which the shareholder's
risk of loss is diminished as a result of holding one or more other
positions in substantially similar or related property, or through certain
options or short sales. Any loss realized on a sale or exchange of shares
of the Trust will be disallowed to the extent those shares of the Trust are
replaced by other shares within a period of 61 days beginning 30 days
before and ending 30 days after the date of disposition of the original
shares. In that event, the basis of the replacement shares of the Trust
will be adjusted to reflect the disallowed loss.
The Code provides that interest on indebtedness incurred or
continued to purchase or carry the Trust's shares to which exempt-interest
dividends are allocated is not deductible. Under rules used by the IRS for
determining when borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase or ownership of
shares may be considered to have been made with borrowed funds even though
such funds are not directly used for the purchase or ownership of such
shares.
Nonresident alien individuals and certain foreign corporations and
other entities ("foreign investors") generally are subject to U.S.
withholding tax at the rate of 30% (or possibly a lower rate provided by an
applicable tax treaty) on distributions of net investment income (which
includes net short-term capital gain). To the extent received by foreign
investors, exempt-interest dividends, distributions of net capital gain and
gain from the sale or other disposition of Preferred Shares generally are
exempt from United States Federal income taxation. Different tax
consequences may result if the owner is engaged in a trade or business in
the United States or, in the case of an individual, is present in the
United States for 183 or more days during a taxable year.
The Trust is required in certain circumstances to backup withhold
31% of taxable dividends and certain other payments paid to non-corporate
holders of the Trust's shares who do not furnish to the Trust their correct
taxpayer identification number (in the case of individuals, their social
security number) and certain certifications, or who are otherwise subject
to backup withholding. Backup withholding is not an additional tax. Any
amounts withheld from payments made to a shareholder may be refunded or
credited against such shareholder's United States Federal income tax
liability, if any, provided that the required information is furnished to
the IRS.
The foregoing is a general, summary of the provisions of the Code
and regulations thereunder presently in effect as they directly govern the
taxation of the Trust and its shareholders. These provisions are subject to
change by legislative or administrative action, and any such change may be
retroactive. Moreover, the foregoing does not address many of the factors
that may be determinative of whether an investor will be liable for the
alternative minimum tax. Shareholders are advised to consult their own tax
advisers for more detailed information concerning the Federal income tax
consequences of purchasing, holding and disposing of Trust shares.
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS
Deloitte & Touche LLP, located at Two World Financial Center, New
York, New York, provides auditing services to the Trust. The financial
statements and independent auditors report incorporated by reference into
this statement of additional information have been so incorporated and the
financial highlights included in the prospectus have been so included, in
reliance upon the report of Deloitte & Touche LLP given on their authority
as experts in auditing and accounting.
INCORPORATION BY REFERENCE
The Trust's Portfolio of Investments, dated December 31, 1998
(audited); Statement of Assets and Liabilities, dated December 31, 1998
(audited); Statement of Operations for the year ended December 31, 1998
(audited); Statement of Changes in Net Investment Assets for the two years
ended December 31, 1998 (audited) and the independent auditors report
included in the Trust's Annual Report for the fiscal year ended December
31, 1998 and the Trust's Portfolio of Investments, dated June 30, 1999
(unaudited); Statement of Assets and Liabilities, dated June 30, 1999
(unaudited); Statement of Operations for the period ended June 30, 1999
(unaudited); and Statement of Changes in Net Investment Assets for the
period ended June 30, 1999 (unaudited) included in the Trust's Semi-Annual
Report for the six-month period ended June 30, 1999 (the "Reports"), which
accompany this statement of additional information, are incorporated herein
by reference. The Trust will furnish, without charge, a copy of the Reports
upon written request to the Trust at 800 Scudders Mill Road, Plainsboro,
New Jersey 08536 or by telephone request at (800) 688-0928.
ADDITIONAL INFORMATION
A Registration Statement on Form N-2, including amendments
thereto, relating to the shares offered hereby, has been filed by the Trust
with the Securities and Exchange Commission, Washington, D.C. The
prospectus and this statement of additional information do not contain all
of the information set forth in the Registration Statement, including any
exhibits and schedules thereto. For further information with respect to the
Trust and the shares offered hereby, reference is made to the Registration
Statement. Statements contained in the prospectus and this statement of
additional information as to the contents of any contract or other document
referred to are not necessarily complete and in each instance reference is
made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all
respects by such reference.
A copy of the Registration Statement may be inspected without
charge at the SEC's principal office in Washington, D.C., and copies of all
or any part thereof may be obtained from the SEC upon the payment of
certain fees prescribed by the SEC. The SEC maintains a web site
(http://www.sec.gov) that contains the Registration Statement, other
documents incorporated by reference, and other information the Trust has
filed electronically with the SEC, including proxy statements and reports
filed under the Securities Exchange Act of 1934.
APPENDIX A
GENERAL CHARACTERISTICS AND
RISKS OF HEDGING TRANSACTIONS
In order to hedge against changes in the value of its portfolio
securities, the Trust may from time to time engage in certain hedging
strategies. The Trust will engage in such activities from time to time in
the Adviser's discretion, and may not necessarily be engaging in such
activities when movements in interest rates that could affect the value of
the assets of the Trust occur. The Trust's ability to pursue certain of
these strategies may be limited by the Commodity Exchange Act, applicable
regulations of the Commodity Futures Trading Commission ("CFTC") and the
federal income tax requirements applicable to regulated investment
companies.
PUT AND CALL OPTIONS ON SECURITIES AND INDICES
The Trust may purchase and sell put and call options on securities
and financial indices. A put option gives the purchaser of the option the
right to sell and the seller the obligation to buy the underlying security
at the exercise price during the option period. Index options are similar
to options on securities except that, rather than taking or making delivery
of securities underlying the option at a specified price upon exercise, an
index option gives the holder the right to receive cash upon exercise of
the option if the level of the index upon which the option is based is
greater, in the case of a call, or less, in the case of a put, than the
exercise price of the option. The purchase of a put option on a debt
security would be designed to protect the Trust's holdings in a security
against a substantial decline in the market value. A call option gives the
purchaser of the option the right to buy and the seller the obligation to
sell the underlying security at the exercise price during the option
period. The purchase of a call option on a security would be intended to
protect the Trust against an increase in the price of a security that it
intended to purchase in the future. In the case of either put or call
options that it has purchased, if the option expires without being sold or
exercised, the Trust will experience a loss in the amount of the option
premium plus any related commissions. When the Trust sells put and call
options, it receives a premium as the seller of the option. The premium
that the Trust receives for selling the option will serve as a partial
hedge, in the amount of the option premium, against changes in the value of
the securities in its portfolio. During the term of the option, however, a
covered call seller has, in return for the premium on the option, given up
the opportunity for capital appreciation above the exercise price of the
option if the value of the underlying security increases, but has retained
the risk of loss should the price of the underlying security decline.
Conversely, a secured put seller retains the risk of loss should the market
value of the underlying security decline below the exercise price of the
option, less the premium received on the sale of the option. The Trust is
authorized to purchase and sell exchange listed options and
over-the-counter options ("OTC Options") which are privately negotiated
with the counterparty to such contract. Listed options are issued by the
Options Clearing Corporation ("OCC"), which guarantees the performance of
the obligations of the parties to such options. All put and call options
written by the Trust will be covered.
The Trust's ability to close out its position as a purchaser or
seller of an exchange-listed put or call option is dependent upon the
existence of a liquid secondary market. Among the possible reasons for the
absence of a liquid secondary market on an exchange are: (i) insufficient
trading interest in certain options; (ii) restrictions on transactions
imposed by an exchange; (iii) trading halts, suspensions or other
restrictions imposed with respect to particular classes or series of
options or underlying securities; (iv) interruption of the normal
operations on an exchange; (v) inadequacy of the facilities of an exchange
or OCC to handle current trading volume; or (vi) a decision by one or more
exchanges to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that exchange
(or in that class or series of options) would cease to exist, although
outstanding options on that exchange that had been listed by the OCC as a
result of trades on that exchange would generally continue to be
exercisable in accordance with their terms. OTC options are purchased from
or sold to dealers, financial institutions or other counterparties which
have entered into direct agreements with the Trust. With OTC Options, such
variables as expiration date, exercise price and premium will be agreed
upon between the Trust and the counterparty, without the intermediation of
a third party such as the OCC. If the counterparty fails to make or take
delivery of the securities underlying an option it has written, or
otherwise settle the transaction in accordance with the terms of that
option as written, the Trust would lose the premium paid for the option as
well as any anticipated benefit of the transaction. As the Trust must rely
on the credit quality of the counterparty rather than the guarantee of the
OCC, it will only enter into OTC Options with counterparties with the
highest long-term credit ratings, and with primary U.S. Government
securities dealers recognized by the Federal Reserve Bank in New York.
The hours of trading for options on debt securities may not
conform to the hours during which the underlying securities are traded. To
the extent that the option markets close before the markets for the
underlying securities, significant price and rate movements can take place
in the underlying markets that cannot be reflected in the option markets.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Characteristics. The Trust may purchase and sell futures contracts
and purchase put and call options on such futures contracts traded on
recognized domestic exchanges as a hedge against anticipated interest rate
changes or other market movements and future risk management. The sale of a
futures contract creates an obligation by the Trust, as seller, to deliver
the specific type of financial instrument called for in the contract at a
specified future time for a specified price. Options on futures contracts
are similar to options on securities except that an option on a futures
contract gives the purchaser the right in return for the premium paid to
assume a position in a futures contract (a long position if the option is a
call and a short position if the option is a put).
Margin Requirements. At the time a futures contract is purchased
or sold, the Trust must allocate cash or securities as a deposit payment
("initial margin"). It is expected that the initial margin that the Trust
will pay may range from approximately 1% to approximately 5% of the value
of the instruments underlying the contract. In certain circumstances,
however, such as periods of high volatility, the Trust may be required by
an exchange to increase the level of its initial margin payment
Additionally, initial margin requirements may be increased in the future
pursuant to regulatory action. An outstanding futures contract is valued
daily and the payment in cash of "variation margin" may be required, a
process known as "marking to the market." Transactions in listed options
and futures are usually settled by entering into an offsetting transaction,
and are subject to the risk that this position may not be able to be closed
if no offsetting transaction can be arranged.
Limitations on Use of Futures Contracts and Options on Futures
Contracts. The Trust's use of futures contracts and options on futures
contracts will in all cases be consistent with applicable regulatory
requirements and in particular, the rules and regulations of the CFTC and
will be entered into only for bona fide hedging purposes or other
appropriate risk management and duration management or other appropriate
portfolio strategies. In addition, the Trust may not sell futures contracts
if the value of such futures contracts exceeds the total market value of
the Trust's portfolio securities.
The Trust will not engage in transactions in futures contracts or
options thereon for speculative purposes but only as a hedge against
changes resulting from market conditions in the values of securities in its
portfolio. In addition, the Trust will not enter into a futures contract or
option thereon if, immediately thereafter, the sum of the amount of its
initial deposits and premiums on open contracts and options would exceed 5%
of the Trust's total assets (taken at current value); provided, however,
that in the case of an option that is in-the-money at the time of the
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation. Also, when required, a segregated account of cash or cash
equivalents will be maintained and marked to market in an amount equal to
the market value of the contract. The Adviser reserves the right to comply
with such different standards as may be established from time to time by
CFTC rules and regulations with respect to the purchase and sale of futures
contracts and options thereon.
Segregation and Cover Requirements. Futures contracts, interest rate
swaps, caps, floors and collars, and options on securities, indices and
futures contracts sold by the Trust are generally subject to segregation
and coverage requirements established by either the CFTC or the SEC, with
the result that, if the Trust does not hold the instrument underlying the
futures contract or option, the Trust will be required to segregate on an
ongoing basis with its custodian, cash, U.S. Government securities, or
other liquid high grade debt obligations in an amount at least equal to the
Trust's obligations with respect to such instruments. Such amounts will
fluctuate as the market value of the obligations increases or decreases.
The segregation requirement can result in the Trust maintaining positions
it would otherwise liquidate and consequently segregating assets with
respect thereto at a time when it might be disadvantageous to do so.
---------------
Hedging Transactions present certain risks. In particular, the
variable degree of correlation between price movements of hedging
instruments and price movements in the position being hedged creates the
possibility that losses on the hedge may be greater than gains in the value
of the Trust's positions. In addition, certain hedging instruments and
markets may not be liquid in all circumstances. As a result, in volatile
markets, the Trust may not be able to close out a transaction in certain of
these instruments without incurring losses substantially greater than the
initial deposit. Although the contemplated use of these instruments should
tend to minimize the risk of loss due to a decline in the value of the
hedged position, at the same time they tend to limit any potential gain
which might result from an increase in the value of such position. The
ability of the Trust to hedge successfully will depend on the Adviser's
ability to predict pertinent market movements, which cannot be assured.
Finally, the daily variation margin deposit requirements in futures
contracts that the Trust has sold create an ongoing greater potential
financial risk than do options transactions, where the exposure is limited
to the cost of the initial premium and transaction costs paid by the Trust.
Losses due to Hedging Transactions will reduce net asset value.
The Trust's use of Hedging Transactions may be limited or affected
by certain provisions of the Code and rating agency guidelines.
APPENDIX B
INSURANCE RATINGS
The Trust will purchase or obtain insurance in respect of
municipal obligations only from insurers having claims-paying ability
ratings of Aaa from Moody's Investors Service, ("Moody's") and AAA from
Standard & Poor's ("S&P") or, if unrated, which are viewed by the Adviser
to have similar claims-paying abilities.
A Moody's insurance claims-paying ability rating is an opinion of
the ability of an insurance company to repay punctually senior policyholder
obligations and claims. An insurer with an insurance claims-paying ability
rating of Aaa is adjudged by Moody's to be of the best quality. In the
opinion of Moody's, the policy obligations of an insurance company with an
insurance claims-paying ability rating of Aaa carry the smallest degree of
credit risk and, while the financial strength of these companies is likely
to change, such changes as can be visualized are most unlikely to impair
the company's fundamentally strong position. An S&P insurance claims-paying
ability rating is an assessment of an operating insurance company's
financial capacity to meet obligations under an insurance policy in
accordance with the terms. An insurer with an insurance claims-paying
ability rating of AAA has the highest rating assigned by S&P. Capacity to
honor insurance contracts is adjudged by S&P to be extremely strong and
highly likely to remain so over a long period of time.
An insurance claims-paying ability rating by Moody's or S&P does
not constitute an opinion on any specific contract in that such an opinion
can only be rendered upon the review of the specific insurance contract.
Furthermore, an insurance claims-paying ability rating does not take into
account deductibles, surrender or cancellation penalties or the timeliness
of payment; nor does it address the ability of a company to meet non-policy
obligations (i.e., debt contracts).
The assignment of ratings by Moody's or S&P to debt issues that
are fully or partially supported by insurance policies, contracts or
guarantees is a separate process from the determination of claims-paying
ability ratings. The likelihood of a timely flow of funds from the insurer
to the trustee for the bondholders is a key element in the rating
determination for such debt issues.
Each of AMBAC Indemnity Corporation ("AMBAC"), Bond Investors
Guaranty Insurance Company ("BIGI"), Capital Markets Assurance Company
("CAPMAC"), Municipal Bond Investors Assurance Corporation ("MBIA"),
Financial Guaranty Insurance Company ("FGIC") and Financial Security
Assurance, Inc. ("FSA") has a claims-paying ability rating of Aaa from
Moody's and AAA from S&P, and the Trust expects to purchase insurance from
any such firm in respect of particular municipal obligations.
AMBAC has received a letter ruling from the Internal Revenue
Service which holds in effect that insurance proceeds representing maturing
interest on defaulted municipal obligations paid by AMBAC to municipal bond
funds substantially similar to the Trust, under policy provisions
substantially identical to the policy described herein, will be excludable
from Federal gross income under Section 103(a) of the Internal Revenue
Code.
As of September 30, 1999, AMBAC's insured portfolio (unaudited)
was approximately $232 billion supported by approximately $4.8 billion in
claims paying resources (unaudited).
As of September 30, 1999, BIGI's insured portfolio (unaudited) was
approximately $_________ supported by approximated $_________ in claims
paying resources (unaudited).
As of September 30, 1999, CAPMAC's insured portfolio (unaudited)
was approximately $_________ supported by approximated $_________ in claims
paying resources (unaudited).
As of September 30, 1999, MBIA's insured portfolio (unaudited) was
approximately $396 billion supported by approximately $8.3 billion in
claims paying resources (unaudited).
As of September 30, 1999, FGIC's insured portfolio (unaudited) was
approximately $136 billion supported by approximately $2.7 billion in
claims paying resources (unaudited).
As of September 30, 1999, FSA's insured portfolio (unaudited) was
approximately $126 billion supported by approximately $2.4 billion in
claims paying resources (unaudited).
None of AMBAC, MBIA, FGIC and FSA or any associate thereof, has
any material business relationship, direct or indirect, with the Trust.
AMBAC, MBIA, FGIC and FSA are subject to regulation by the
department of insurance in each state in which they are qualified to do
business. Such regulation, however, is not a guarantee that any of AMBAC,
MBIA, FGIC or FSA will be able to perform on its contractual insurance in
the event a claim should be made thereunder at some time in the future.
The information relating to AMBAC, MBIA, FGIC and FSA set forth
above, including the financial information, has been furnished by such
corporations. Financial information with respect to AMBAC, MBIA, FGIC and
FSA appears in reports filed by AMBAC, MBIA, FGIC and FSA with insurance
regulatory authorities and is subject to audit and review by such
authorities. No representation is made herein as to the accuracy or
adequacy of such information with respect to AMBAC, MBIA, FGIC or FSA or as
to the absence of material adverse changes in such information subsequent
to the date thereof.
APPENDIX C-1
ARTICLES OF AMENDMENT
OF
THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC.
The undersigned, on behalf of THE BLACKROCK INSURED MUNICIPAL TERM
TRUST INC., a Maryland corporation having its principal Maryland office in
the City of Baltimore (the "Corporation") , hereby certifies to the State
Department of Assessments and Taxation of Maryland ("SDAT") that:
FIRST: The charter of the Corporation is hereby amended by
deleting the provisions of the Articles Supplementary of the Corporation
(which were approved and received for record by SDAT on April 24, 1992) in
their entirety, and inserting in lieu thereof the following provisions:
"FIRST: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by article fifth of its Charter, the Board of
Directors has reclassified 2,600 authorized and unissued shares of common
stock of the Corporation as preferred stock of the Corporation and has
given general authorization for the issuance of two series of 1,300 shares
each, as the case may be, of preferred stock, par value $.01 per share,
liquidation preference $50,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared)
thereon plus the premium, if any, resulting from the designation of a
Premium Call Period, designated respectively Auction Rate Municipal
Preferred Stock, Series M28 and Auction Rate Municipal Preferred Stock,
Series M7.
SECOND: The Executive Committee of the Board of Directors of
the Corporation, acting in accordance with Sections 2-208 and 2-411 of the
Maryland General Corporation Law, has fixed the preferences, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption, of the shares of each such series of preferred
stock as follows:
DESIGNATION
SERIES M28: A series of 1,300 shares of preferred
stock, par value $.01 per share, liquidation preference $50,000
per share plus an amount equal to accumulated but unpaid dividends
(whether or not earned or declared) thereon plus the premium, if
any, resulting from the designation of a Premium Call Period, is
hereby designated "Auction Rate Municipal Preferred Stock, Series
M28." Each share of Auction Rate Municipal Preferred Stock, Series
M28 shall be issued on April 27, 1992; have an Initial Dividend
Rate of 3.25% per annum and the Initial Dividend Payment Date
shall be May 26, 1992; and have such other preferences,
limitations and relative voting rights, in addition to those
required by applicable law or set forth in the Corporation's
Charter applicable to preferred stock of the Corporation, as are
set forth in these Articles Supplementary. The Auction Rate
Municipal Preferred Stock, Series M28 shall constitute a separate
series of preferred stock of the Corporation, and each share of
Auction Rate Municipal Preferred Stock, Series M28 shall be
identical.
SERIES M7: A series of 1,300 shares of preferred
stock, par value $.01 per share, liquidation preference $50,000
per share plus an amount equal to accumulated but unpaid dividends
(whether or not earned or declared) thereon plus the premium, if
any, resulting from the designation of a Premium Call Period, is
hereby designated "Auction Rate Municipal Preferred Stock, Series
M7." Each share of Auction Rate Municipal Preferred Stock, Series
M7 shall be issued on April 27, 1992; have an Initial Dividend
Rate of 3.25% per annum and the Initial Dividend Payment Date
shall be May 5, 1992; and have such other preferences, limitations
and relative voting rights, in addition to those required by
applicable law or set forth in the Corporation's Charter
applicable to preferred stock of the Corporation, as are set forth
in these Articles Supplementary. The Auction Rate Municipal
Preferred Stock, Series M7 shall constitute a separate series of
preferred stock of the Corporation, and each share of Auction Rate
Municipal Preferred Stock, Series M7 shall be identical.
1. Definitions. A. Unless the context or use indicates another
or different meaning or intent, in these Articles Supplementary the
following terms have the following meanings, whether used in the singular
or plural:
"'AA' Composite Commercial Paper Rate" for any period less than
183 days as of any date means (i) the Interest Equivalent of the rate on
commercial paper for such period placed on behalf of issuers whose
corporate bonds are rated "AA" by S&P, or the equivalent of such rating by
S&P or another nationally recognized statistical rating organization, as
the rate for such period is made available on a discount basis or otherwise
by the Federal Reserve Bank of New York for the Business Day immediately
preceding such date, or (ii) in the event that the Federal Reserve Bank of
New York does not make available such a rate, then the arithmetic average
of the Interest Equivalent of the rate on commercial paper for such period
placed on behalf of such issuers, as quoted to the Auction Agent on a
discount basis or otherwise by the Commercial Paper Dealers for the close
of business on the Business Day immediately preceding such date. If a
Commercial Paper Dealer does not quote a rate required to determine the
"AA" Composite Commercial Paper Rate for such period, the "AA" Composite
Commercial Paper Rate for such period will be determined on the basis of
the quotation or quotations furnished by any Substitute Commercial Paper
Dealer or Substitute Commercial Paper Dealers selected by the Corporation
to provide such rate or rates not being supplied by the Commercial Paper
Dealer.
"Accountant's Confirmation" has the meaning set forth in paragraph
7(c) of these Articles Supplementary.
"Additional Dividend" has the meaning set forth in paragraph 2(e) of
these Articles Supplementary.
"Adviser" means the Corporation's investment adviser, BlackRock
Financial Management L.P., formerly Blackstone Financial Management L.P.,
and any successor thereto.
"Affiliate" shall mean any Person, known to the Auction Agent to be
controlled by, in control of, or under common control with, the
Corporation.
"Agent Member" means a member of the Securities Depository that will
act on behalf of an Existing Holder of one or more Preferred Shares or a
Potential Holder.
"Anticipation Notes" means the following Municipal Obligations: tax
anticipation notes, revenue anticipation notes and tax and revenue
anticipation notes.
"Applicable Percentage" has the meaning set forth in paragraph
11(a)(vi) of these Articles Supplementary.
"Applicable Rate" means (i) for purposes of the Auction Procedures,
the rate per annum or, in connection with any Auction in which Bid
Requirements are imposed by the Corporation, the method by which one or
more such rates may be determined, at which cash dividends are payable (if
declared) on the Preferred Shares or Other Preferred Shares, as the case
may be, for any Dividend Period and any Dividend Payment Period included
therein and (ii) for purposes of determining the amount of cash dividends
payable (if declared) at any Dividend Payment Date, the rate per annum
(including in the case of any Applicable Rate expressed as a Spread the
rate per annum determined by periodic application of such Spread to the
applicable Reference Index or Reference Security at the frequency and
weighting, if any, specified in the related Bid Requirements, subject to
any Maximum Applicable Rate or Minimum Applicable Rate applicable to such
Dividend Payment Period) at which cash dividends are payable (if declared)
on the Preferred Shares, and includes, to the extent provided by paragraph
2(c)(i) of these Articles Supplementary, any late charge provided for by
such paragraph.
"Auction" means a periodic operation of the Auction Procedures.
"Auction Agent" means Bankers Trust Company unless and until another
commercial bank, trust company or other financial institution appointed by
a resolution of the Board of Directors of the Corporation or a duly
authorized committee thereof enters into an agreement with the Corporation
to follow the Auction Procedures for the purpose of determining the
Applicable Rate and to act as transfer agent, registrar, dividend
disbursing agent and redemption agent for the Preferred Shares and Other
Preferred Shares.
"Auction Procedures" means the procedures for conducting Auctions set
forth in paragraph 11 of these Articles Supplementary.
"Bid Requirements" means (i) any requirement for a Special Dividend
Period longer than 91 days that Bids by Potential Holders shall be
expressed as a Spread below, at or above the rate of a specified Reference
Index or Reference Security, (ii) the Reference Index or Reference
Security, the most recently announced rate thereof and the frequency with
which the rate of Reference Index or the Reference Security, as the case
may be, shall be recalculated for purposes of determining rates expressed
as Spreads thereon in accordance with these Articles Supplementary, which
frequency shall be the same as the frequency with which the person
maintaining the Reference Index being utilized recalculates such Reference
Index, or the same as the frequency with which the interest rate on the
Reference Security being utilized changes or such other frequency as the
Corporation shall specify (which specification may include a formula
specified by the Corporation indicating the weighting to be given to each
recalculation of the Reference Index or change in the rate of the Reference
Security during a specified period), (iii) the frequency of Dividend
Payment Dates during such Special Dividend Period (which shall not be more
often than the frequency specified pursuant to clause (ii) above), (iv) one
or more Minimum Applicable Rate or Rates (the Indicated Minimum Applicable
Rate or Rates in the case of Bid Requirements set forth in a Request for
Special Dividend Period) and/or (v) one or more Special Dividend Period
Reference Rate or Rates and the Maximum Applicable Rate or Rates (the
Indicated Maximum Applicable Rate or Rates in the case of Bid Requirements
set forth in a Request for Special Dividend Period) derivable from such
Special Dividend Period Reference Rate or Rates, in each case as set forth
in the Notice of Special Dividend Period for such Special Dividend Period.
"Broker-Dealer" shall mean any broker-dealer, or other entity
permitted by law to perform the functions required of a Broker-Dealer in
paragraph 11 of these Articles Supplementary, that has been selected by the
Corporation and has entered into a Broker-Dealer Agreement with the Auction
Agent that remains effective.
"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 paragraph 11 of these Articles
Supplementary.
"Business Day" means a day on which the New York Stock Exchange, Inc.
is open for trading and which is not a Saturday, Sunday or other day on
which banks in The City of New York are authorized or obligated by law to
close.
"Charter" means the Charter, as amended and supplemented (including
these Articles Supplementary), of the Corporation on file in the State
Department of Assessments and Taxation of Maryland.
"Closing Transaction" means the termination of a futures contract or
option position by taking a position opposite thereto.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Paper Dealers" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated and such other commercial paper dealer or dealers as the
Corporation may from time to time appoint, or, in lieu of any thereof,
their respective affiliates or successors.
"Common Stock" means the common stock, par value $.01 per share, of
the Corporation.
"Corporation" means The BlackRock Insured Municipal Term Trust Inc., a
Maryland corporation.
"Date of Original Issue" means, April 27, 1992, with respect to the
Preferred Shares and the date on which the Corporation originally issues
any Other Preferred Shares with respect to such Other Preferred Shares.
"Deposit Securities" means cash, the book value of Municipal
Obligations sold for which payment is due within five Business Days with
counterparties rated at least Baa by Moody's and before the next Dividend
Payment Date or Valuation Date, as the case may be, and Municipal
Obligations rated at least A-1+ or SP-l+ by S&P, VMIG-1 or MIG- 1 by
Moody's.
"Discounted Value" means (i) with respect to a Moody's Eligible Asset,
the lower of par and the quotient of the Market Value thereof divided by
the applicable Moody's Discount Factor and (ii) with respect to an S&P
Eligible Asset, the quotient of the Market Value thereof divided by the
applicable S&P Discount Factor.
"Dividend Coverage Amount," as of any Valuation Date, means (i) the
aggregate amount of cash dividends that will accumulate on all Outstanding
Preferred Shares and Other Preferred Shares, in each case to (but not
including) the next Dividend Payment Date therefor that follows such
Valuation Date (calculated, in the case of cash dividends determined by
application of a Spread to a Reference Index or Reference Security, by
assuming that the Applicable Rate in effect for the immediately preceding
Dividend Payment Period will remain in effect until the next Dividend
Payment Period) plus the aggregate amount of any liabilities of the
Corporation that are required to be paid on or prior to the next Dividend
Payment Date less (ii) the combined Market Value of Deposit Securities
irrevocably deposited with the Auction Agent for the payment of cash
dividends on all Preferred Shares and Other Preferred Shares.
"Dividend Coverage Assets," as of any Valuation Date, means, in the
case of Preferred Shares and Other Preferred Shares, Deposit Securities
with maturity or tender payment dates not later in each case than the
Dividend Payment Date therefor that follows such Valuation Date.
"Dividend Payment Date," with respect to Preferred Shares, has
the meaning set forth in paragraph 2(b)(i) of these Articles Supplementary
and, with respect to Other Preferred Shares, has the equivalent meaning.
"Dividend Payment Period" means the Initial Dividend Period and any
Subsequent Dividend Payment Period.
"Dividend Period" means the Initial Dividend Period, any 28-day
Dividend Period (in the case of Series M28 Preferred Shares) or 7-day
Dividend Period (in the case of Series M7 Preferred Shares) and any Special
Dividend Period.
"Existing Holder" means a Person who is listed as the holder of record
of Preferred Shares in the Stock Books.
"Holder" means a Person identified as a holder of record of Preferred
Shares in the Stock Register.
"Independent Accountant" means a nationally recognized accountant, or
firm of accountants, that is, with respect to the Corporation, an
independent public accountant or firm of independent public accountants
under the Securities Act of 1933, as amended.
"Indicated Maximum Applicable Rate" means the Maximum Applicable Rate
that would apply if the Auction with respect to which it is specified were
conducted on the date of the Request for Special Dividend Period in which
such Indicated Maximum Applicable Rate is specified.
"Indicated Minimum Applicable Rate" means the Minimum Applicable Rate
that would apply if the Auction with respect to which it is specified were
conducted on the date of the Request for Special Dividend Period in which
such Indicated Minimum Applicable Rate is specified.
"Initial Dividend Payment Date" means with respect to each series of
Preferred Shares and Other Preferred Shares, the Initial Dividend Payment
Date specified herein.
"Initial Dividend Period," with respect to Preferred Shares, has the
meaning set forth in paragraph 2(c)(i) of these Articles Supplementary and,
with respect to Other Preferred Shares, has the equivalent meaning.
"Initial Dividend Rate," with respect to each series of Preferred
Shares, means the rate per annum applicable to the Initial Dividend Period
for such series of Preferred Shares and, with respect to Other Preferred
Shares, has the equivalent meaning.
"Initial Margin" means the amount of cash or securities deposited with
a broker as a margin payment at the time of purchase or sale of a futures
contract.
"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.
"Mandatory Redemption Price" means $50,000 per share of Preferred
Shares plus an amount equal to accumulated but unpaid dividends (whether or
not earned or declared) to the date fixed for redemption plus the premium,
if any, resulting from the designation of a Premium Call Period.
"Market Value" of any asset of the Corporation shall be the market
value thereof determined by the Pricing Service. Market Value of any asset
shall include any interest accrued thereon. The Pricing Service shall value
portfolio securities at the lower of the quoted bid price or the mean
between the quoted bid and ask price or the yield equivalent when
quotations are not readily available. Securities for which quotations are
not readily available shall be valued at fair value as determined by the
Pricing Service using methods which include consideration of: yields or
prices of municipal obligations of comparable quality, type of issue,
coupon, maturity and rating; indications as to value from dealers; and
general market conditions. The Pricing Service may employ electronic data
processing techniques and/or a matrix system to determine valuations. If
the Pricing Service fails to provide the Market Value of any Municipal
Obligation, such Municipal Obligation shall be valued at the lower of two
bid quotations (one of which shall be in writing) obtained by the
Corporation from two dealers who are members of the National Association of
Securities Dealers, Inc. and are making a market in such Municipal
Obligations. Futures contracts and options are valued at closing prices for
such instruments established by the exchange or board of trade on which
they are traded, or if market quotations are not readily available, are
valued at fair value as determined by the Pricing Service or if the Pricing
Service is not able to value such instruments they shall be valued at fair
value on a consistent basis using methods determined in good faith by the
Board of Directors.
"Maximum Applicable Rate," for any Dividend Payment Period with
respect to Preferred Shares, has the meaning set forth in paragraph
11(a)(vi) of these Articles Supplementary and, with respect to Other
Preferred Shares, has the equivalent meaning.
"Maximum Marginal Tax Rate" means the maximum marginal regular Federal
individual income tax rate applicable to ordinary income or the maximum
marginal regular Federal corporate income tax rate, whichever is greater.
"Maximum Potential Additional Dividend Liability," as of any Valuation
Date, means the aggregate amount of Additional Dividends that would be due
if the Corporation were to make Retroactive Taxable Allocations, with
respect to any fiscal year, estimated based upon dividends paid and the
amount of undistributed realized net capital gains and other taxable income
earned by the Corporation, as of the end of the calendar month immediately
preceding such Valuation Date and assuming such Additional Dividends are
fully taxable.
"Minimum Applicable Rate," for any Dividend Payment Period with
respect to Preferred Shares, has the meaning set forth in paragraph
11(a)(vii) of these Articles Supplementary and, with respect to Other
Preferred Shares, has the equivalent meaning.
"Minimum Liquidity Level" means, as of any Valuation Date, an
aggregate Market Value of the Corporation's Dividend Coverage Assets not
less than the Dividend Coverage Amount.
"Moody's" means Moody's Investors Service or its successors.
"Moody's Discount Factor" means, for purposes of determining the
Discounted Value of any Moody's Eligible Asset which is a Municipal
Obligation, the percentage determined by reference to (i) (A) the rating by
Moody's or S&P on such asset or (B) in the event the Municipal Obligation
is insured under an insurance policy which guarantees the timely payment of
interest on such Municipal Obligation and principal thereof to maturity,
the Moody's insurance claims-paying ability rating of the issuer of the
insurance policy (provided that for purposes of clause (B) if the insurance
claims-paying ability of an issuer of an insurance policy is not rated by
Moody's but is rated by S&P, such issuer shall be deemed to have a Moody's
insurance claims-paying ability rating which is one full category lower
than the S&P insurance claims-paying ability rating) and (ii) the shortest
Moody's Collateral Period set forth opposite such rating that is the same
length as or is longer than the Moody's Exposure Period, in accordance with
the table set forth below:
<TABLE>
<CAPTION>
RATING CATEGORY
---------------------------------------------------------------
MOODY'S COLLATERAL PERIOD AAA* AA* A* BAA* OTHER**
- -------------------------------- ----------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
7 weeks or less.......................................... 151% 159% 168% 202% 229%
8 weeks or less but greater than seven weeks............. 154 164 173 205 235
9 weeks or less but greater than eight weeks............. 158 169 179 209 242
</TABLE>
- -----------------
* Moody's rating.
** Municipal Obligations not rated by Moody's but rated BBB-, BBB or BBB+
by S&P.
; provided, however, in the event a Moody's Discount Factor applicable to a
Municipal Obligation is determined by reference to an insurance
claims-paying ability rating in accordance with clause (i)(B), such Moody's
Discount Factor shall be increased by an amount equal to 50% of the
difference between (a) the percentage set forth in the foregoing table
under the applicable rating category and (b) the percentage set forth in
the foregoing table under the rating category which is one category lower
than the applicable rating category. If a Municipal Obligation is covered
by a Portfolio Insurance policy which provides the Trust with an option to
obtain Permanent Insurance with respect to such Municipal Obligation and
such Portfolio Insurance policy has been approved in writing by Moody's,
the Moody's Discount Factor rating category shall be determined by
averaging the insurance claims paying ability rating of the Portfolio
Insurance provider and the next lowest rating category.
Notwithstanding the foregoing, (i) the Moody's Discount Factor for
short-term Municipal Obligations will be 115% so long as such Municipal
Obligations are rated at least MIG-1, VMIG-1 or P-1 by Moody's or 125% if
such Obligations are not rated by Moody's but are rated A-l+ or SP-1+ or AA
by S&P and mature or have a demand feature at par exercisable in 30 days or
less, and (ii) no Moody's Discount Factor will be applied to cash or to
Municipal Receivables (except to the extent provided in the definition
thereof).
"Moody's Eligible Asset" means cash, a Municipal Receivable or a
Municipal Obligation that (i) pays interest in cash, (ii) is publicly rated
Baa or higher by Moody's or, if not rated by Moody's but rated by S&P, is
rated at least BBB by S&P (provided that, for purposes of determining the
Moody's Discount Factor applicable to any such S&P- rated Municipal
Obligation, such Municipal Obligation (excluding any short-term Municipal
Obligation) will be deemed to have a Moody's rating which is one full
rating category lower than its S&P rating), (iii) does not have its Moody's
rating suspended by Moody's and (iv) is part of an issue of Municipal
Obligations of at least $10,000,000. Municipal Obligations issued by any
one issuer, not rated by Moody's and rated BBB by S&P may comprise no more
than 4% of total Municipal Obligations which are Moody's Eligible Assets;
such BBB rated Municipal Obligations, if any, together with any Municipal
Obligations issued by the same issuer and rated Baa by Moody's or A by S&P,
may comprise no more than 6% of total Municipal Obligations which are
Moody's Eligible Assets; such BBB, A and Baa rated Municipal Obligations,
if any, together with any Municipal Obligations issued by the same issuer
and rated A by Moody's or AA by S&P, may comprise no more than 10% of total
Municipal Obligations which are Moody's Eligible Assets; and such BBB, Baa,
A and AA rated Municipal Obligations, if any, together with any Municipal
Obligations issued by the same issuer and rated Aa by Moody's or AAA by
S&P, may comprise no more than 20% of total Municipal Obligations which are
Moody's Eligible Assets. Municipal Obligations issued by issuers located
within a single state or territory, not rated by Moody's and rated BBB by
S&P, may comprise no more than 12% of total Municipal Obligations which are
Moody's Eligible Assets; such BBB rated Municipal Obligations, if any,
together with any Municipal Obligations issued by issuers located within
the same state or territory and rated Baa by Moody's or A by S&P, may
comprise no more than 20% of total Municipal Obligations which are Moody's
Eligible Assets; such BBB, Baa and A rated Municipal Obligations, if any,
together with any Municipal Obligations issued by issuers located within
the same state or territory and rated A by Moody's or AA by S&P, may
comprise no more than 40% of total Municipal Obligations which are Moody's
Eligible Assets; and such BBB, Baa, A and AA rated Municipal Obligations,
if any, together with any Municipal Obligations issued by issuers located
within the same state or territory and rated Aa by Moody's or AAA by S&P,
may comprise no more than 60% of total Municipal Obligations which are
Moody's Eligible Assets. Additionally, Municipal Obligations whose ratings
are determined by the claims paying ability ratings of the providers of
Portfolio Insurance may comprise no more than 10% of the total Municipal
Obligations which are Moody's Eligible Assets. When the Corporation sells a
Municipal Obligation and agrees to repurchase it at a future date, the
Corporation must count as a liability for the purposes of the Preferred
Shares Basic Maintenance Amount the amount of the repurchase price of such
Municipal Obligation and such Municipal Obligation is considered a Moody's
Eligible Asset to the extent it satisfies Moody's current guidelines. When
the Corporation buys a Municipal Obligation and agrees to sell it to
another party at a future date and the long-term debt of such other party
is rated at least A2 and the transaction has a term of 30 days or less, the
cash to be received by the Corporation will be counted as a Moody's
Eligible Asset; otherwise such Municipal Obligation will be counted as a
Moody's Eligible Asset to the extent it satisfies Moody's current
guidelines.
Notwithstanding the foregoing, an asset will not be considered a
Moody's Eligible Asset if it is held in a margin account or if it is
subject to any material lien, mortgage, pledge, security interest or
security agreement of any kind, except for (i) Liens to secure payment for
services rendered or cash advanced to the Corporation by the Adviser, the
custodian of the Corporation's assets, the Auction Agent or any
Broker-Dealers and (ii) any Lien by virtue of a repurchase agreement. In
addition, an asset irrevocably deposited for the payment of any of the
items set forth in clauses (i) A through G of the Preferred Shares Basic
Maintenance Amount will not be considered Moody's Eligible Assets.
For purposes of the definition of Moody's Eligible Asset, references
to the S&P rating BBB shall be deemed to include the S&P ratings BBB-, BBB
and BBB+.
"Moody's Exposure Period" means a period that is the same length or
longer than the number of days used in calculating the cash dividend
component of the Preferred Shares Basic Maintenance Amount and shall
initially be the period commencing on a given Valuation Date and ending 48
days thereafter.
"Moody's Hedging Transaction" means the selling of an exchange traded
futures contract based on the Municipal Index or Treasury Bonds or the
purchase of an exchange traded put option on such a futures contract or the
writing of an exchange traded call option on such a futures contract.
"Moody's Volatility Factor" means 100% during any Dividend Period of
greater than 49 days until 49 days prior to the last day of such Dividend
Period; otherwise, "Moody's Volatility Factor" means 272% except during
that time period where legislation increasing the federal income tax rate
has been enacted into law and such increase has not yet taken effect, in
which case for such time period Moody's Volatility Factor shall be
determined by reference to the increase in the Maximum Marginal Tax Rate as
follows: for increases of up to 5%, 292%; for increases greater than 5% and
up to 10%, 313%; for increases greater than 10% and up to 15%, 338%; for
increases greater than 15% and up to 20%, 364%; for increases greater than
20% and up to 25%, 396%; for increases greater than 25% and up to 30%,
432%; for increases greater than 30% and up to 35%, 472%; for increases
greater than 35% and up to 40%, 520%.
"Municipal Index" means The Bond Buyer Municipal Bond Index.
"Municipal Obligations" means "Municipal Obligations" as defined in
the Corporation's Registration Statement on Form N-2 (File Nos. 33-44735
and 811-6512) on file with the Securities and Exchange Commission, as such
Registration Statement may be amended from time to time.
"Municipal Receivables" means no more than the aggregate of the
following: (i) the book value of receivables for Municipal Obligations sold
as of or prior to a relevant Valuation Date if such receivables are due
within five Business Days of such Valuation Date, and if the trades which
generated such receivables are (A) settled through clearing house firms
with respect to which the Corporation has received prior written
authorization from Moody's or (B) with counterparties having a Moody's
long-term debt rating of at least Baa3; and (ii) the Moody's Discounted
Value of Municipal Obligations sold as of or prior to such Valuation Date
which generated receivables, if such receivables are due within five
Business Days of such Valuation Date but do not comply with either of
conditions (A) or (B) of the preceding clause (i).
"1940 Act" means the Investment Company Act of 1940, as amended from
time to time.
"1940 Act Preferred Shares Asset Coverage" means asset coverage, as
defined in section 18(h) of the 1940 Act, of at least 200% with respect to
all outstanding senior securities of the Corporation which are stock,
including all outstanding Preferred Shares and Other Preferred Shares (or
such other asset coverage as may in the future be specified in or under the
1940 Act as the minimum asset coverage for senior securities which are
stock of a closed-end investment company as a condition of paying dividends
on its common stock).
"1940 Act Cure Date," with respect to the failure by the Corporation
to maintain the 1940 Act Preferred Shares Asset Coverage (as required by
paragraph 6 of these Articles Supplementary) as of the last Business Day of
each month, means the last Business Day of the following month.
"Non-Call Period" has the meaning set forth under "Specific Redemption
Provisions" below.
"Non-Payment Period," with respect to each series of Preferred Shares,
means any period commencing on and including the day on which the
Corporation shall fail to (i) declare, prior to the close of business on
the second Business Day preceding any Dividend Payment Date, for payment on
or (to the extent permitted by paragraph 2(c)(i) of these Articles
Supplementary) within three Business Days after such Dividend Payment Date
to the Holders as of 12:00 noon, New York City time, on the Business Day
preceding such Dividend Payment Date, the full amount of any dividend on
Preferred Shares payable on such Dividend Payment Date or (ii) deposit,
irrevocably in trust, in same-day funds, with the Auction Agent by 12:00
noon, New York City time, (A) on such Dividend Payment Date the full amount
of any cash dividend on such shares payable (if declared) on such Dividend
Payment Date or (B) on any redemption date for any Preferred Shares called
for redemption, the Mandatory Redemption Price per share of such Preferred
Shares or, in the case of an optional redemption, the Optional Redemption
Price per share, and ending on and including the Business Day on which, by
12:00 noon, New York City time, all unpaid cash dividends and unpaid
redemption prices shall have been so deposited or shall have otherwise been
made available to Holders in same-day funds; provided that, a Non-Payment
Period shall not end unless the Corporation shall have given at least five
days' but no more than 30 days' written notice of such deposit or
availability to the Auction Agent, all Existing Holders (at their addresses
appearing in the Stock Books) and the Securities Depository.
Notwithstanding the foregoing, the failure by the Corporation to deposit
the funds provided for by clauses (ii)(A) and (ii)(B) above within three
Business Days after a Dividend Payment Date or any Redemption Date, as the
case may be, in each case to the extent contemplated by paragraph 2(c)(i)
of these Articles Supplementary, shall not constitute a "Non-Payment
Period."
"Non-Payment Period Rate" means, initially, 250% of the 30-day "AA"
Composite Commercial Paper Rate (or 300% of such rate if the Corporation
has provided notification to the Auction Agent prior to the Auction
establishing the Applicable Rate for any dividend pursuant to paragraph
2(f) hereof that net capital gains or other taxable income will be included
in such dividend on Preferred Shares). Such percentages will be used to
calculate the Applicable Rate for any Non-Payment Period which occurs
during a Special Dividend Period on either series of Preferred Shares and
will be applied to the applicable Special Dividend Period Reference Rate
then in effect with respect to such series. However, the Board of Directors
of the Corporation shall have the authority to adjust, modify, alter or
change from time to time the initial Non-Payment Period Rate if the Board
of Directors of the Corporation determines and Moody's and S&P (and any
Substitute Rating Agency in lieu of Moody's or S&P in the event either of
such parties shall not rate the Preferred Shares) advise the Corporation in
writing that such adjustment, modification, alteration or change will not
adversely affect their then-current ratings on the Preferred Shares.
"Normal Dividend Payment Date" has the meaning set forth in paragraph
2(b)(i) of these Articles Supplementary.
"Notice of Redemption" means any notice with respect to the redemption
of Preferred Shares pursuant to paragraph 4 of these Articles
Supplementary.
"Notice of Revocation" has the meaning set forth in paragraph
2(c)(iii) of these Articles Supplementary.
"Notice of Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of these Articles Supplementary.
"Optional Redemption Price" shall mean $50,000 per share plus an
amount equal to accumulated but unpaid dividends (whether or not earned or
declared) to the date fixed for redemption plus the premium, if any,
resulting from the designation of a Premium Call Period.
"Original Issue Insurance" means insurance guaranteeing the timely
payment of principal of, and interest on, a Municipal Obligation purchased
by the issuer of a Municipal Obligation or by a third party at the time of
issuance of such Municipal Obligation.
"Other Preferred Shares" means the Auction Rate Municipal Preferred
Stock of the Corporation, other than the Preferred Shares.
"Outstanding" means, as of any date (i) with respect to Preferred
Shares, Preferred Shares theretofore issued by the Corporation except,
without duplication, (A) any Preferred Shares theretofore cancelled or
delivered to the Auction Agent for cancellation, or redeemed by the
Corporation, or as to which a Notice of Redemption shall have been given
and moneys shall have been deposited in trust by the Corporation pursuant
to paragraph 4(c) and (B) any Preferred Shares as to which the Corporation
or any Affiliate thereof shall be an Existing Holder and (ii) with respect
to shares of Other Preferred Stock, has the equivalent meaning.
"Parity Stock" means the Preferred Shares and each other outstanding
series of Preferred Stock the holders of which, together with the holders
of the Preferred Shares, shall be entitled to the receipt of dividends or
of amounts distributable upon liquidation, dissolution or winding up, as
the case may be, in proportion to the full respective preferential amounts
to which they are entitled, without preference or priority one over the
other.
"Permanent Insurance" means insurance guaranteeing the timely payment
of principal of, and interest on, a Municipal Obligation purchased by the
Corporation upon payment of a single, predetermined insurance premium
pursuant to an irrevocable commitment of the issuer of Portfolio Insurance
covering such Municipal Obligation.
"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.
"Portfolio Insurance" means insurance guaranteeing the timely payment
of principal of, and interest on, a covered Municipal Obligation only while
such Municipal Obligation is owned by the Corporation.
"Potential Holder" shall mean any Person, including any Existing
Holder, who may be interested in acquiring Preferred Shares (or, in the
case of an Existing Holder, additional Preferred Shares).
"Preferred Shares" means, as the case may be, Auction Rate Municipal
Preferred Stock, Series M28 or Auction Rate Municipal Preferred Stock,
Series M7.
"Preferred Shares Basic Maintenance Amount," as of any Valuation Date,
means the dollar amount equal to (i) the sum of (A) the product of the
number of Preferred Shares and Other Preferred Shares outstanding on such
Valuation Date multiplied by $50,000 plus the premium, if any, resulting
from the designation of a Premium Call Period; (B) the aggregate amount of
cash dividends that will have accumulated (whether or not earned or
declared) for each share of Preferred Shares and Other Preferred Shares
outstanding, in each case, to (but not including) the next Dividend Payment
Date therefor that follows such Valuation Date (calculated, in the case of
cash dividends determined by application of a Spread to a Reference Index
or Reference Security, by assuming that the Applicable Rate in effect for
the immediately preceding Dividend Payment Period will remain in effect
until the next Dividend Payment Period); (C) the aggregate amount of cash
dividends that would accumulate at the then current Maximum Applicable Rate
(assuming notification has been given to the Auction Agent that net capital
gains or other taxable income will be included in the relevant dividend as
contemplated pursuant to paragraphs 2(f) and 11(a)(vi) of these Articles
Supplementary) on any Preferred Shares and Other Preferred Shares
outstanding from such Dividend Payment Date through the 48th day after such
Valuation Date, multiplied by the larger of the Moody's Volatility Factor
and the S&P Volatility Factor determined from time to time by Moody's and
S&P, respectively (except that if such Valuation Date occurs during a
Non-Payment Period, the cash dividend for purposes of calculation would
accumulate at the then current Non-Payment Period Rate); (D) the amount of
anticipated expenses of the Corporation for the 90 days subsequent to such
Valuation Date; (E) the amount of the Corporation's Maximum Potential
Additional Dividend Liability as of such Valuation Date; and (F) any
current liabilities as of such Valuation Date to the extent not reflected
in any of (i)(A) through (i)(E) (including, without limitation, and
immediately upon determination, payables for Municipal Obligations
purchased as of such Valuation Date) less (ii) the lesser of (A) either the
Discounted Value of the Corporation's assets irrevocably deposited by the
Corporation for the payment of any of (i)(A) through (i)(F) or the face
value of such irrevocably deposited assets that mature prior to the payment
date of the liabilities for which they are being deposited and are either
fully guaranteed by the U.S. government or have a rating of either P-1,
VMIG-1 or MIG-1 by Moody's and A-l+ or SP-1+ by S&P and (B) the Market
Value of any of the Corporation's assets irrevocably deposited by the
Corporation for the payment of any of (i)(A) through (i)(F)
For purposes of determining as of any Valuation Date whether the
Corporation has Moody's Eligible Assets and S&P Eligible Assets each with
an aggregate Discounted Value at least equal to the Preferred Shares Basic
Maintenance Amount, the Corporation shall include as a liability in the
calculation of the Preferred Shares Basic Maintenance Amount an amount
calculated semi-annually equal to 150% of the estimated cost of obtaining
Permanent Insurance with respect to Moody's Eligible Assets or S&P Eligible
Assets, as applicable, that are (i) covered by Portfolio Insurance policies
which provide the Corporation with the option to obtain such Permanent
Insurance and (ii) are discounted by a Moody's Discount Factor or S&P
Discount Factor, as applicable, determined by reference to the insurance
claims-paying ability rating of the issuer of such Portfolio Insurance
policy.
"Preferred Shares Basic Maintenance Cure Date," with respect to the
failure by the Corporation to satisfy the Preferred Shares Basic
Maintenance Amount (as required by paragraph 7(a) of these Articles
Supplementary) as of a given Valuation Date, means the fifth Business Day
following such Valuation Date.
"Preferred Shares Basic Maintenance Report" means a report signed by
the President, Treasurer, or Vice President of the Corporation which sets
forth, as of the related Valuation Date, the assets of the Corporation, the
Market Value and the Discounted Value thereof (seriatim and in aggregate),
and the Preferred Shares Basic Maintenance Amount.
"Preferred Stock" means the preferred stock of the Corporation, and
includes Preferred Shares and Other Preferred Shares.
"Premium Call Period" has the meaning set forth under "Specific
Redemption Provisions" below.
"Pricing Service" shall mean J.J. Kenny Co., Inc. or any pricing
service designated by the Board of Directors of the Corporation provided
the Corporation obtains written assurance from S&P that such designation
will not impair the rating then assigned by S&P to the Preferred Shares.
"Quarterly Valuation Date" means the last Business Day of each fiscal
quarter of the Corporation in each fiscal year of the Corporation,
commencing June 30, 1992.
"Reference Index" shall mean an index of interest rates on Treasury
Securities, Municipal Obligations or high quality commercial paper or
dividend rates on preferred stock of issuers registered as closed-end
management investment companies under the 1940 Act that invest primarily in
Municipal Obligations or any other index or instrument selected and
approved by the Corporation's Board of Directors, after consultation with
the Broker-Dealers and made available to the Auction Agent, as being an
appropriate index or instrument, in each case expressed as a rate and
devised and calculated not less often than monthly by one or more parties
that are not affiliated with the Corporation and made available to the
Corporation, the Auction Agent, the Broker-Dealers and existing and
potential beneficial owners of the Preferred Shares.
"Reference Rate" means the higher of the 30-day "AA" Composite
Commercial Paper Rate and the Taxable Equivalent of the Short-Term
Municipal Bond Rate, or, in the case of a Special Dividend Period with a
single Applicable Rate throughout such Special Dividend Period, the Special
Dividend Period Reference Rate or, in the case of a Special Dividend Period
with a varying Applicable Rate, the Reference Rate specified in the
definition of S&P Volatility Factor that most closely approximates the
length of the interval between periodic applications of the Spread to the
relevant Reference Index or Reference Security.
"Reference Security" shall mean, in the case of a debt obligation, a
particular debt obligation which is publicly traded, which is non-callable
prior to the termination of the Special Dividend Period with respect to
which such Reference Security is relevant and the out standing aggregate
principal amount of which at the time of the Notice of Special Dividend
Period exceeds $100 million or, in the case of a preferred stock, a
preferred stock issue which is publicly traded, which is non-redeemable
prior to the termination of the Special Dividend Period with respect to
which such Reference Security is relevant and the outstanding liquidation
value of which at the time if the Notice of Special Dividend Period exceeds
$50 million.
"Request for Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of these Articles Supplementary.
"Response" has the meaning set forth in paragraph 2(c)(iii) of these
Articles Supplementary.
"Retroactive Taxable Allocation" has the meaning set forth in
paragraph 2(e) of these Articles Supplementary.
"Right," with respect to Preferred Shares, has the meaning set forth
in paragraph 2(e) of these Articles Supplementary and, with respect to
Other Preferred Shares, has the equivalent meaning.
"Rightholder" has the meaning set forth in paragraph 2(e) of these
Articles Supplementary.
"S&P" means Standard & Poor's Corporation or its successors.
"S&P Discount Factor" means, for purposes of determining the
Discounted Value of any S&P Eligible Asset, the percentage determined by
reference to (a) (i) in the event a Municipal Obligation is covered by a
Portfolio Insurance policy which does not provide the Corporation with the
option to obtain Permanent Insurance with respect to such Municipal
Obligation, or is not covered by bond insurance, the S&P or Moody's rating
on such Municipal Obligation, (ii) in the event a Municipal Obligation is
covered by an Original Issuance Insurance policy or a Secondary Insurance
policy, the S&P insurance claims-paying ability rating of the issuer of the
policy or (iii) in the event a Municipal Obligation is covered by a
Portfolio Insurance policy which provides the Corporation with the option
to obtain Permanent Insurance with respect to such Municipal Obligation and
such Portfolio Insurance policy has been reviewed and approved in writing
by S&P, at the Corporation's option, the S&P or Moody's rating on such
Municipal Obligation or the S&P insurance claims-paying ability rating of
the issuer of the Portfolio Insurance policy and (b) the shortest S&P
Collateral Period set forth opposite such rating that is the same length as
or is longer than the S&P Exposure Period, in accordance with the table set
forth below:
<TABLE>
<CAPTION>
RATING CATEGORY
---------------------------------------------------
S&P COLLATERAL PERIOD AAA* AA* A* BBB*
- --------------------------- ----------- --------- ----------- ------------
<S> <C> <C> <C> <C>
40 Business Days................. 190% 195% 210% 250%
22 Business Days................. 170 175 190 230
10 Business Days................. 155 160 175 215
7 Business Days.................. 150 155 170 210
3 Business Days.................. 130 135 150 190
</TABLE>
- ----------------
* S&P rating.
Notwithstanding the foregoing, (i) the S&P Discount Factor for
short-term Municipal Obligations will be 115%, so long as such Municipal
Obligations are rated A-1+ or SP-l+ by S&P or 125% if such Municipal
Obligations are not rated by S&P but are rated VMIG-1, P-1 or MIG-l by
Moody's and mature or have a demand feature exercisable in 30 days or less;
provided, however, that such Moody's rated short-term Municipal Obligations
must be backed by a letter of credit, liquidity facility or guarantee from
a bank or other financial institution, such bank or institution having a
short-term rating of at least A-l+ from S&P; and further provided that such
short-term Municipal Obligations rated by Moody's but not rated by S&P may
comprise no more than 50% of short-term Municipal Obligations that qualify
as S&P Eligible Assets and (ii) no S&P Discount Factor will be applied to
cash or to the book value of Municipal Obligations sold for which payment
is due within five Business Days. Anticipation Notes rated SP-1+ or, if not
rated by S&P, rated MIG-1 or VMIG-l by Moody's, which do not mature or have
a demand feature at par exercisable in 30 days and which do not have a
long-term rating, will be considered to be short-term Municipal Obligations
for purposes of determining the Discounted Value of S&P Eligible Assets.
"S&P Eligible Asset" means cash or the book value of Municipal
Obligations sold for which payment is due within five Business Days of a
Valuation Date or a Municipal Obligation that (i) is issued by any of the
50 states, the territories and their subdivisions, counties, cities, towns,
villages, and school districts, agencies, such as authorities and special
districts created by the states, and certain federally sponsored agencies
such as local housing authorities (payments made on these bonds are exempt
from regular federal income taxes and are generally exempt from state and
local taxes in the state of issuance) ; (ii) is interest bearing and pays
interest at least semiannually; (iii) is payable with respect to principal
and interest in United States Dollars; (iv) is publicly rated BBB or higher
by S&P or, if not rated by S&P but rated by Moody's, is rated at least A by
Moody's (provided that such Moody's-rated Municipal Obligations will be
included in S&P Eligible Assets only to the extent the Market Value of such
Municipal Obligations does not exceed 50% of the aggregate Market Value of
the S&P Eligible Assets; and further provided that, for purposes of
determining the S&P Discount Factor applicable to any such Moody's-rated
Municipal Obligation, such Municipal Obligation will be deemed to have an
S&P rating which is one full rating category lower than its Moody's
rating); (v) is not subject to a covered call or covered put option written
by the Corporation; (vi) is not part of a private placement of Municipal
Obligations; and (vii) is part of an issue of Municipal Obligations with an
original issue size of at least $20 million or, if of an issue with an
original issue size below $20 million (but in no event below $10 million),
is issued by an issuer with a total of at least $50 million of securities
outstanding. Notwithstanding the foregoing:
(A) Municipal Obligations of any one issuer or guarantor
(excluding bond insurers) will be considered S&P
Eligible Assets only to the extent the Market Value of
such Municipal Obligations does not exceed 10% of the
aggregate Market Value of the S&P Eligible Assets,
provided that 2% is added to the applicable S&P
Discount Factor for every 1% by which the Market Value
of such Municipal Obligations exceeds 5% of the
aggregate Market Value of the S&P Eligible Assets; and
(B) Municipal Obligations guaranteed or insured by any one
bond insurer will be considered S&P Eligible Assets
only to the extent the fair market value of such
municipal securities does not exceed 25% of the
aggregate fair market value of the S&P Eligible Assets.
(C) Municipal Obligations issued by issuers in any one
state or territory will be considered S&P Eligible
Assets only to the extent the Market Value of such
Municipal Obligations does not exceed 20% of the
aggregate Market Value of the S&P Eligible Assets.
"S&P Exposure Period" means the maximum period of time following a
Valuation Date, including the Valuation Date and the Preferred Shares Basic
Maintenance Cure Date, (currently 10 Business Days) that the Corporation
has under these Articles Supplementary to cure any failure to maintain, as
of such Valuation Date, the Discounted Value for its portfolio at least
equal to the Preferred Shares Basic Maintenance Amount (as described in
paragraph 7 (a) of these Articles Supplementary).
"S&P Hedging Transaction" means the purchasing or selling of a futures
contract based on the Municipal Index or Treasury Bonds or the purchasing
of an option on such a futures contract.
"S&P Volatility Factor" means, with respect to each Series of
Preferred Shares, 277% during the Initial Dividend Period. Thereafter, "S&P
Volatility Factor" means, depending on the applicable Reference Rate, the
following:
Reference Rate
Taxable Equivalent of the
Short-Term Municipal
Bond Rate......................... 277%
30-day "AA" Composite
Commercial Paper Rate............. 228%
60-day "AA" Composite
Commercial Paper Rate............. 228%
90-day "AA" Composite
Commercial Paper Rate.............. 222%
180-day "AA" Composite
Commercial Paper Rate............. 217%
1-year U.S. Treasury
Bill Rate......................... 198%
2-year U.S. Treasury
Note Rate......................... 185%
3-year U.S. Treasury
Note Rate......................... 178%
4-year U.S. Treasury
Note Rate......................... 171%
5-year U.S. Treasury
Note Rate......................... 169%
Notwithstanding the foregoing, the S&P Volatility Factor may mean such
other potential dividend rate increase factor as S&P advises the
Corporation in writing is applicable.
"Secondary Insurance" means insurance guaranteeing the timely payment
of principal of, and interest on, a Municipal Obligation purchased by the
Corporation or a third party subsequent to the original issuance of such
Municipal Obligation.
"Securities Depository" means The Depository Trust Company or any
successor company or other entity selected by the Corporation as securities
depository for the Preferred Shares that agrees to follow the procedures
required to be followed by such securities depository in connection with
the Preferred Shares.
"Series M7 Preferred Shares" means the Auction Rate Municipal
Preferred Stock, Series M7, liquidation preference $50,000 per share plus
an amount equal to accumulated but unpaid dividends thereon (whether or not
earned or declared), plus the premium, if any, resulting from the
designation of a Premium Call Period, of the Corporation.
"Series M28 Preferred Shares" means the Auction Rate Municipal
Preferred Stock, Series M28, liquidation preference $50,000 per share plus
an amount equal to accumulated but unpaid dividends thereon (whether or not
earned or declared) plus the premium, if any, resulting from the
designation of a Premium Call Period, of the Corporation.
"Service" means the United States Internal Revenue Service.
"7-day Dividend Period" means any Dividend Period of 7 days for a
series of Preferred Shares.
"Special Dividend Period" means a Dividend Period consisting of a
specified number of days (other than 28 in the case of the Series M28
Preferred Shares or 7 in the case of the Series M7 Preferred Shares),
evenly divisible by seven (in each case subject to adjustment as provided
in paragraph 2(c) (iii)).
"Special Dividend Period Reference Rate" means the rate or rates per
annum specified by the Corporation (which may be expressed as the lower of
a specified rate or rates or a Spread under, at or over the Reference Index
or Reference Security being specified for such Special Dividend Period) in
the Notice of Special Dividend Period relating to a particular Special
Dividend Period and specifying a Reference Index or Reference Security or,
if the Corporation shall fail to so specify any such rate or rates, then
(i), in the case of a Special Dividend Period of 182 days or
less, the "AA" Composite Commercial Paper Rate which most closely matches
the length of the Special Dividend Period, provided that in no case shall
the Special Dividend Reference Rate be a "AA" Composite Commercial Paper
Rate which is shorter in time than the 30-day "AA" Composite Commercial
Paper Rate, or, in the case of a Special Dividend Period of longer than 182
days, the Treasury Rate which most closely matches the length of the
Special Dividend Period.
"Specific Redemption Provisions" means, with respect to a Special
Dividend Period either, or any combination of, (i) a period (a "Non-Call
Period") determined by the Board of Directors of the Corporation, after
consultation with the Auction Agent and the Broker-Dealers, during which
the Preferred Shares subject to such Dividend Period shall not be subject
to redemption at the option of the Corporation and (ii) a period (a
"Premium Call Period"), consisting of a number of whole years and
determined by the Board of Directors of the Corporation, after consultation
with the Auction Agent and the Broker-Dealers, during each year of which
the Preferred Shares subject to such Dividend Period shall be redeemable at
a price per share equal to $50,000 plus accumulated but unpaid dividends
plus a premium expressed as a percentage of $50,000 as determined by the
Board of Directors of the Corporation after consultation with the Auction
Agent and the Broker-Dealers; provided, however, that the Corporation shall
not adopt Specific Redemption Provisions unless Moody's and S&P or any
Substitute Rating Agency advises the Corporation in writing that such
adoption will not adversely affect their then-current ratings on the
Preferred Shares.
"Spread" means the negative or positive difference or the absence of
any difference, expressed in whole and fractional basis points, below, at
or above a Reference Index or Reference Security specified by the
Corporation in a Notice of Special Dividend Period.
"Stock Books" means the books maintained by the Auction Agent setting
forth at all times a current list, as determined by the Auction Agent, of
Existing Holders of the Preferred Shares.
"Stock Register" means the register of Holders maintained on behalf of
the Corporation by the Auction Agent in its capacity as transfer agent and
registrar for the Preferred Shares.
"Subsequent Dividend Payment Period," with respect to Preferred
Shares, has the meaning set forth in paragraph 2(c) (i) of these Articles
Supplementary and, with respect to Other Preferred Shares, has the
equivalent meaning.
"Substitute Commercial Paper Dealers" means such Substitute Commercial
Paper Dealer or Dealers as the Corporation may from time to time appoint
or, in lieu of any thereof, their respective affiliates or successors.
"Substitute Rating Agency" and "Substitute Rating Agencies" shall mean
(i) with respect to the Series M28 Preferred Shares only a nationally
recognized securities rating organization and two nationally recognized
securities rating organizations, respectively, selected by Merrill Lynch,
Pierce, Fenner & Smith Incorporated, or its respective affiliates and
successors, after consultation with the Corporation, to act as a substitute
rating agency or substitute rating agencies, as the case may be, to
determine the credit ratings of Series M28 Preferred Shares or (ii) with
respect to the Series M7 Preferred Shares shall mean a nationally
recognized securities rating organization and two nationally recognized
securities rating organizations, respectively, selected by Lehman Special
Securities Incorporated, or its respective affiliates and successors, after
consultation with the Corporation, to act as a substitute rating agency or
substitute rating agencies, as the case may be, to determine the credit
rating of the Series M7 Preferred Shares.
"Taxable Equivalent of the Short-Term Municipal Bond Rate" means (i)
90% of (A) the per annum rate expressed on an interest equivalent basis
equal to the index, made available for the Business Day immediately
preceding such date but in any event not later than 8:30 A.M., New York
City time, on such date by Kenny Information Systems or any successor
thereto, based upon 30-day yield evaluations at par of bonds the interest
on which is excludable for Federal income tax purposes under the Code, of
not less than "high grade" component issuers selected by Kenny Information
Systems or any such successor from time to time in its discretion, which
component issuers shall include, without limitation, issuers of general
obligation bonds but shall exclude any bonds the interest on which is
subject to the Federal alternative minimum tax or similar tax under the
Code, unless all bonds the interest on which is so excludable for Federal
income tax purposes are subject to such tax and (B) divided by 1 minus the
Maximum Marginal Regular Federal individual income tax rate applicable to
the character of the income being distributed or the maximum marginal
regular Federal corporate income tax rate applicable to the character of
the income being distributed (in each case expressed as a decimal),
whichever is greater; or (ii) in lieu of the rate determined pursuant to
clause (i) above, a percentage, determined by the Corporation, of (A) the
per annum rate expressed on an interest equivalent basis equal to any
substitute index prepared by any person (other than an Affiliate of the
Corporation), selected from time to time by the Corporation, based on bonds
the interest on which is excludable from gross income for Federal income
tax purposes under the Code, and (B) divided by 1 minus the Maximum
Marginal Regular Federal individual income tax rate applicable to the
character of the income being distributed or the Maximum Marginal Regular
Federal corporate income tax rate applicable to the character of the income
being distributed (in each case expressed as a decimal) , whichever is
greater, as made available on a discount basis or otherwise by the preparer
of such index for the Business Day immediately preceding such date but in
any event not later than 8:30 A.M., New York City time, on such date;
provided that the Corporation shall not select any such substitute index or
determine any such percentage unless the Corporation has received
confirmation from Moody's and S&P (or any Substitute Rating Agency) that
the use of such index or percentage would not affect the ratings assigned
to the Preferred Shares by Moody's and S&P (or any Substitute Rating
Agency); provided, however, that if the index then used by the Corporation
for purposes of determining the Taxable Equivalent of the Short-Term
Municipal Bond Rate is not made so available by 8:30 A.M., the case of the
index described in clause (i) above or by the preparer of such index in the
case of any substitute index described in clause (ii) above, the Taxable
Equivalent of the Short-Term Municipal Bond Rate shall mean the per annum
rate expressed on an interest equivalent basis equal to the most recent
such index so made available for any preceding Business Day, without being
multiplied by the 90% factor in the case of the index described in such
clause (i) or the percentage determined by the Corporation referred to in
such clause (ii) in the case of the index described in clause (ii).
"30-day 'AA' Composite Commercial Paper Rate," on any date, means (i)
the Interest Equivalent of the 30-day rate on commercial paper placed on
behalf of issuers whose corporate bonds are rated "AA" by S&P, or the
equivalent of such rating by S&P or another nationally recognized
statistical rating organization, as such 30-day rate is made available on a
discount basis or otherwise by the Federal Reserve Bank of New York for the
Business Day immediately preceding such date, or (ii) in the event that the
Federal Reserve Bank of New York does not make available such a rate, then
the arithmetical average of the Interest Equivalent of the 30-day rate on
commercial paper placed on behalf of such issuers, as quoted to the Auction
Agent on a discount basis or otherwise by the Commercial Paper Dealer for
the close of business on the Business Day immediately preceding such date.
If the Commercial Paper Dealer does not quote a rate required to determine
the 30-day "AA" Composite Commercial Paper Rate, the 30-day "AA" Composite
Commercial Paper Rate will be determined on the basis of the quotation or
quotations furnished by any Substitute Commercial Paper Dealer or
Substitute Commercial Paper Dealers selected by the Corporation to provide
such rate or rates not being supplied by the Commercial Paper Dealer.
"Treasury Bonds" means United States Treasury Bonds with remaining
maturities of ten years or more.
"Treasury Rate," on any date for any Special Dividend Period exceeding
182 days, means:
(i) the yield on the most recently auctioned non-callable
direct obligations of the U.S. Government (excluding
"flower" bonds) with a remaining maturity closest to
the duration of such Special Dividend 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 by
The Wall Street Journal, then the arithmetic average of
the yields on the most recently auctioned non-callable
direct obligations of the U.S. Government (excluding
"flower" bonds) with a remaining maturity closest to
the duration of such Special Dividend Period as quoted
on a discount basis or otherwise by the U.S. Government
Securities Dealers to the Auction Agent for the close
of business on the Business Day immediately preceding
such date.
If any U.S. Government Securities Dealer does not quote a rate
required to determine the Treasury Rate, the Treasury 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 Dealers selected by the
Corporation 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.
"Treasury Securities" means United States Treasury bills, notes or
bonds.
"28-day Dividend Period" means any Dividend Period of 28 days for a
series of Preferred Shares.
"U.S. Government Securities Dealer" means Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Shearson Lehman Brothers Inc. or their
respective affiliates or successors, if such entity is a U.S. Government
securities dealer. As used herein, "Substitute U.S. Government Securities
Dealer" shall mean A.G. Edwards & Sons, Inc., Kidder, Peabody & Co.
Incorporated, PaineWebber Incorporated and Prudential Securities
Incorporated or their respective affiliates or successors, if such entity
is a U.S. Government securities dealer, provided that none of such entities
shall be a U.S. Government Securities Dealer.
"Valuation Date" means, for purposes of determining whether the
Corporation is maintaining the Preferred Shares Basic Maintenance Amount
and the Minimum Liquidity Level, each Friday which is a Business Day, or
the Business Day preceding any Friday which is not a Business Day, and the
Date of Original Issue.
"Variation Margin" means, in connection with an outstanding futures
contract owned or sold by the Corporation, the amount of cash or securities
paid to and received from a broker (subsequent to the Initial Margin
payment) from time to time as the price of such futures contract
fluctuates.
B. The foregoing definitions of Accountant's
Confirmation, Deposit Securities, Discounted Value, Dividend
Coverage Amount, Dividend Coverage Assets, Independent Accountant,
Market Value, Maximum Potential Additional Dividend Liability,
Minimum Liquidity Level, Moody's Discount Factor, Moody's Eligible
Asset, Moody's Exposure Period, Moody's Hedging Transaction,
Moody's Volatility Factor, Preferred Shares Basic Maintenance
Amount, Preferred Shares Basic Maintenance Cure Date, Preferred
Shares Basic Maintenance Report, Reference Rate, S&P Discount
Factor, S&P Eligible Asset, S&P Exposure Period, S&P Hedging
Transaction, S&P Volatility Factor and Valuation Date have been
determined by the Board of Directors of the Corporation in order
to obtain an "aaa" rating from Moody's and an AAA rating from S&P
on the Preferred Shares on their Date of Original Issue; and such
definitions shall be adjusted from time to time and without
further action by the Board of Directors to reflect changes made
thereto independently by Moody's, S&P or any Substitute Rating
Agency if each of Moody's, S&P and any Substitute Rating Agency
has advised the Corporation in writing (i) separately or
collectively of such adjustments and (ii) collectively that such
adjustments will not adversely affect their then-current ratings
on the Preferred Shares. The adjustments contemplated by the
preceding sentence shall be made effective upon the time the
Corporation receives the written notice from Moody's, S&P and any
Substitute Rating Agency contemplated by clause (ii) of the
preceding sentence.
1. Dividends. A. The Holders shall be entitled to receive, when,
as and if declared by the Board of Directors of the Corporation, out of
funds legally available therefor, cumulative dividends each consisting of
(i) cash at the Applicable Rate and (ii) an uncertificated Right to receive
cash as set forth in paragraph 2(e) below, and no more, payable on the
respective dates set forth below. Dividends on the Preferred Shares so
declared and payable shall be paid (i) in preference to and in priority
over any dividends declared and payable on the Common Stock, and (ii) to
the extent permitted by law and to the extent available, out of net
tax-exempt income earned on the Corporation's investments. To the extent
permitted by law, dividends on Preferred Shares will be designated as
exempt-interest dividends. For the purposes of this section, the term "net
tax-exempt income" shall exclude capital gains and other taxable income of
the Corporation.
A. (i) Cash dividends on Preferred Shares shall
accumulate from the Date of Original Issue. With respect to the
Series M7 Preferred Shares and Series M28 Preferred Shares,
dividends will be payable commencing on the Initial Dividend
Payment Date with respect to each series of Preferred Shares.
Following the Initial Dividend Payment Date for the Series M7
Preferred Shares and Series M28 Preferred Shares, dividends on the
Preferred Shares will be payable, at the option of the
Corporation, (ii) with respect to any Dividend Period of more than
35 and fewer than 92 days, on the day next succeeding each period
of 30 days to occur during such Dividend Period (or in the case of
any Dividend Period of more than 91, days as specified in the
relevant Notice of Special Dividend Period), and on the day next
succeeding the last day thereof, (iv) with respect to any Dividend
Period of 365 days or more, month on the first day of each
calendar month during such Dividend Period (or in the case of any
Dividend Period of more than 91 days, as specified in the relevant
Notice of Special Dividend Period), and on the day, next
succeeding the last day thereof (each such date referred to in
clauses (i), (ii), (iii) and (iv) being hereinafter referred to as
a "Normal Dividend Payment Date"), except that (i) if such Normal
Dividend Payment Date is not a Business Day, then the Dividend
Payment Date shall be the next succeeding date if both such dates
following the Normal Dividend payment Date are Business Days, or
(ii) if the date following such Normal Dividend Payment Date is
not a Business Day, then the Dividend Payment Date will be the
date next preceding such Normal Dividend Payment Date if such both
such date and such Normal Dividend Payment Date are Business Days
or (iii) if such Normal Dividend Payment Date and either the
preceding date or the succeeding date are not Business Days, then
the Dividend Payment Date shall be the first Business Day next
preceding such Normal Dividend Payment Date that is next succeeded
by a Business Day. If, however, the Securities Depository shall
make available to its participants and members in funds
immediately available in New York City on Dividend Payment Dates,
the amount due as dividends on such Dividend Payment Dates (and
the Securities Depository shall have so advised the Corporation ),
and if the day that otherwise would be the Dividend Payment Date
is not a Business Day, then the Dividend Payment Date shall be the
next succeeding Business Day. Although any particular Dividend
Payment Date may not occur on a Normal Dividend Payment Date
because of the exceptions discussed above, the next succeeding
Dividend Payment Date shall be, subject to such provisos, the next
Normal Dividend Payment Date. If for any reason a Dividend Payment
Date cannot be fixed as described above, then the Board of
Directors shall fix the Dividend Payment Date. Each dividend
payment date determined as provided above is hereinafter referred
to as a "Dividend Payment Date."
(ii) Each dividend shall be paid to the Holders as they
appear in the Stock Register as of 12:00 noon, New York
City time, on the Business Day preceding the Dividend
Payment Date. Dividends in arrears for any past
Dividend Period may be declared and paid at any time,
without reference to any regular Dividend Payment Date,
to the Holders as they appear on the Stock Register on
a date, not exceeding 15 days prior to the payment date
therefor, as may be fixed by the Board of Directors of
the Corporation.
B. (i) During the period from and including the
Date of Original Issue to but with respect to the Series M7
Preferred Shares and Series M28 Preferred Shares, excluding the
Initial Dividend Payment Date (the "Initial Dividend Period"), the
Applicable Rate shall be the Initial Dividend Rate. Commencing on
the Initial Dividend Payment Date, with respect to the Series M7
Preferred Shares and Series M28 Preferred Shares, the Applicable
Rate for each subsequent Dividend Period or portion thereof
(hereinafter referred to as a "Subsequent Dividend Payment
Period"), which Subsequent Dividend Payment Period shall commence
on a Dividend Payment Date and shall end on the calendar day prior
to the next Dividend Payment Date, shall be equal to the lesser of
(x) the Maximum Applicable Rate for such Dividend Period or for
such Subsequent Dividend Payment Period included therein or (y)
the greater of (i) the Minimum Applicable Rate for such Dividend
Period or for such Subsequent Dividend Payment Period included
therein or (ii) the rate per annum that results for such Dividend
Period or Subsequent Dividend Payment Period included therein from
implementation of the Auction Procedures including any periodic
application of a Spread to a specified Reference Index or
Reference Security.
Notwithstanding the foregoing sentence, the
Applicable Rate for each Dividend Period commencing during a
Non-Payment Period shall be equal to the Non-Payment Period Rate
and each Dividend Payment Period for Preferred Shares of any
series, commencing after the first day of, and during, a
NonPayment Period shall be a 28-day Dividend Payment Period (in
the case of the Series M28 Preferred Shares) or a 7-day Dividend
Payment Period (in the case of the Series M7 Preferred Shares).
Except in the case of the willful failure of the Corporation to
pay a dividend on a Dividend Payment Date or to redeem any
Preferred Shares on the date set for such redemption, any amount
of any dividend due on any Dividend Payment Date (if, prior to the
close of business on the second Business Day preceding such
Dividend Payment Date, the Corporation has declared such dividend
payable on such Dividend Payment Date to the Holders of such
Preferred Shares as of 12:00 noon, New York City time, on the
Business Day preceding such Dividend Payment Date) or redemption
price with respect to any Preferred Shares not paid to such
Holders when due may be paid to such Holders in the same form of
funds by 12:00 noon, New York City time, on any of the first three
Business Days after such Dividend Payment Date or due date, as the
case may be, provided that, such amount is accompanied by a late
charge calculated for such period of non-payment at the
Non-Payment Period Rate applied to the amount of such non-payment
based on the actual number of days comprising such period divided
by 365. In the case of a willful failure of the Corporation to pay
a dividend on a Dividend Payment Date or to redeem any Preferred
Shares on the date set for such redemption, the preceding sentence
shall not apply and the Applicable Dividend Rate for the Dividend
Period commencing during the Non-Payment Period resulting from
such failure shall be the Non-Payment Period Rate. For the
purposes of the foregoing, payment to a person in same-day funds
on any Business Day at any time shall be considered equivalent to
payment to such person in New York Clearing House (next-day) funds
at the same time on the preceding Business Day, and any payment
made after 12:00 noon, New York City time, on any Business Day
shall be considered to have been made instead in the same form of
funds and to the same person before 12:00 noon, New York City
time, on the next Business Day.
(ii) The amount of cash dividends per share of Preferred
Shares payable (if declared) for any Dividend Payment
Period or part thereof shall be computed by multiplying
the Applicable Rate for such Dividend Payment Period by
a fraction, the numerator of which shall be the number
of days in such Dividend Payment Period or part thereof
such share was outstanding and the denominator of which
shall be 365 (or 360 for a Dividend Period of 365 days
or more), multiplying the amount so obtained by
$50,000, and rounding the amount so obtained to the
nearest cent.
(iii) With respect to each Dividend Period that the
Corporation desires to be a Special Dividend Period,
the Corporation may, at its sole option and to the
extent permitted by law, by telephonic and written
notice (a "Request for Special Dividend Period") to the
Auction Agent and to each Broker-Dealer, request that
the next succeeding Dividend Period for such series of
Preferred Shares be a number of days (other than 28 in
the case of Series M28 Preferred Shares or 7 in the
case of Series M7 Preferred Shares), evenly divisible
by seven and specified in such notice, provided that
for any Auction occurring after the initial Auction,
the Corporation may not give a Request for Special
Dividend Period (and any such request shall be null and
void) unless Sufficient Clearing Bids were made in the
last occurring Auction and unless full cumulative
dividends, any amounts due with respect to mandatory
redemptions, and any Additional Dividends payable prior
to such date have been paid in full. Such Request for
Special Dividend Period, in the case of a Dividend
Period of 182 days or less, shall be given on or prior
to the 4th day but not more than 7 days prior to an
Auction Date for the Preferred Shares and, in the case
of a Dividend Period of more than 182 days, shall be
given on or prior to the 14th day but not more than 28
days prior to an Auction Date for the Preferred Shares.
Such Request for Special Dividend Period shall also
specify any proposed Bid Requirements. Upon receiving
such Request for Special Dividend Period, the
Broker-Dealer(s) shall jointly determine whether, given
the factors set forth below, it is advisable that the
Corporation issue a Notice of Special Dividend Period
for the Preferred Shares as contemplated by such
Request for Special Dividend Period and, if advisable,
the Specific Redemption Provisions and shall give the
Corporation and the Auction Agent written notice (a
"Response") of such determination by no later than the
third day prior to such Auction Date. In making such
determination the Broker-Dealer(s) will consider (1)
existing short-term and long-term market rates and
indices of such short-term and long-term rates, (2)
existing market supply and demand for short-term and
long-term securities, (3) existing yield curves for
short-term and long-term securities comparable to the
Preferred Shares, (4) industry and financial conditions
which may affect the Preferred Shares, (5) the
investment objective of the Corporation, and (6) the
Dividend Periods and dividend rates at which current
and potential beneficial holders of the Preferred
Shares would remain or become beneficial holders. If
none of the Broker- Dealer(s) give the Corporation and
the Auction Agent a Response by such third day or if
the Response of all of the Broker-Dealers providing a
Response states that given the factors set forth above
it is not advisable that the Corporation give a Notice
of Special Dividend Period for the Preferred Shares,
the Corporation may not give a Notice of Special
Dividend Period in respect of such Request for Special
Dividend Period. In the event the Response of at least
one Broker-Dealer does not indicate that it is not
advisable that the Corporation give a Notice of Special
Dividend Period for the Preferred Shares, the
Corporation may by no later than the second day prior
to such Auction Date give a notice (a "Notice of
Special Dividend Period") to the Auction Agent, the
Securities Depository and each Broker-Dealer which
notice will specify the duration of the Special
Dividend Period, the Bid Requirements (if any)
applicable to the Auction relating to such Special
Dividend Period and Specific Redemption Provisions (if
any). The Corporation shall not give a Notice of
Special Dividend Period or convert to a Special
Dividend Period and, if the Corporation has given a
Notice of Special Dividend, the Corporation is required
to give telephonic and written notice of revocation (a
"Notice of Revocation") to the Auction Agent, each
Broker-Dealer, and the Securities Depository on or
prior to the Business Day prior to the relevant Auction
Date if it has not obtained the advice in writing of
Moody's and S&P or any Substitute Rating Agency that
the proposed Special Dividend Period will not adversely
affect their then-current rating on the Preferred
Shares or if (w) either the 1940 Act Preferred Shares
Asset Coverage is not satisfied or the Corporation
shall fail to maintain S&P Eligible Assets and Moody's
Eligible Assets each with an aggregate Discounted Value
at least equal to the Preferred Shares Basic
Maintenance Amount, in each case on each of the two
Valuation Dates immediately preceding the Business Day
prior to the relevant Auction Date (and in each case,
with respect to Moody's Eligible Assets, using a
Moody's Exposure Period equivalent to 14 days longer
than normal) on an actual basis and on a pro forma
basis giving effect to the proposed Special Dividend
Period (using as a pro forma dividend rate with respect
to such Special Dividend Period the dividend rate which
the Broker-Dealers shall advise the Corporation is an
approximately equal rate for securities similar to the
Preferred Shares with an equal frequency of
recalculation of the Reference Index or Reference
Security as is utilized by the Corporation with respect
to the first Dividend Payment Period within such
Special Dividend Period and using as a pro forma
Maximum Applicable Rate the highest rate specified in
the Notice of Special Dividend Period for the Dividend
Payment Periods covering not less than the first 49
days of such proposed Special Dividend Period or, if no
such rate is specified in the Notice of Special
Dividend Period, the Maximum Applicable Rate resulting
by operation of the definition of Special Dividend
Period Reference Rate for the Special Dividend Period
specified in such Notice of Special Dividend Period),
(x) sufficient funds for the payment of dividends
payable on the immediately succeeding Dividend Payment
Date have not been irrevocably deposited with the
Auction Agent by the close of business on the third
Business Day preceding the related Auction Date, (y)
the Broker-Dealer(s) jointly advise the Corporation
that after consideration of the factors listed above
they have concluded that it is advisable to give a
Notice of Revocation or (z) the Corporation has
determined to terminate the Special Dividend Period for
any reason. If the Corporation is prohibited from
giving a Notice of Special Dividend Period as a result
of any of the factors enumerated in clause (w), (x),
(y) or (z) of the prior sentence or if the Corporation
gives a Notice of Revocation with respect to a Notice
of Special Dividend Period, the next succeeding
Dividend Period will be a 28-day Period (in the case of
Series M28 Preferred Shares) or a 7-day Dividend Period
(in the case of Series M7 Preferred Shares) provided
that if the then-current Dividend Period in the case of
the Series M28 Preferred Shares is a Special Dividend
Period of less than 28 days, the next succeeding
Dividend Period for such series will be the same length
as the current Dividend Period. In addition, in the
event Sufficient Clearing Bids are not made in the
applicable Auction or such Auction is not held for any
reason, such next succeeding Dividend Period will be a
28-day Dividend Period (in the case of Series M28
Preferred Shares) or a 7-day Dividend Period (in the
case of Series M7 Preferred Shares) and the Corporation
may not again give a Notice of Special Dividend Period
for the Preferred Shares (and any such attempted notice
shall be null and void) until Sufficient Clearing Bids
have been made in an Auction with respect to a 28-day
Dividend Period (in the case of Series M28 Preferred
Shares) or a 7-day Dividend Period (in the case of
Series M7 Preferred Shares).
C. (i) Holders shall not be entitled to any
dividends, whether payable in cash, property or stock, in excess
of full cumulative dividends, as herein provided, on the Preferred
Shares. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment on the Preferred Shares
that may be in arrears.
(ii) For so long as any share of the Preferred Shares is
outstanding, the Corporation shall not declare, pay or
set apart for payment any dividend or other
distribution (other than a dividend or distribution
paid in shares of, or options, warrants or rights to
subscribe for or purchase, Common Stock or other stock,
if any, ranking junior to the Preferred Shares as to
dividends or upon liquidation) in respect of the Common
Stock or any other stock of the Corporation ranking
junior to or on a parity with the Preferred Shares as
to dividends or upon liquidation, or call for
redemption, redeem, purchase or otherwise acquire for
consideration any shares of the Common Stock or any
other such junior stock (except by conversion into or
exchange for stock of the Corporation ranking junior to
the Preferred Shares as to dividends and upon
liquidation) or any other such Parity Stock (except by
conversion into or exchange for stock of the
Corporation ranking junior to or on a parity with the
Preferred Shares as to dividends and upon liquidation),
unless (A) immediately after such transaction, the
Corporation shall have Moody's Eligible Assets and S&P
Eligible Assets each with an aggregate Discounted Value
equal to or greater than the Preferred Shares Basic
Maintenance Amount and the Corporation shall maintain
the 1940 Act Preferred Shares Asset Coverage, (B) full
cumulative dividends on Preferred Shares and shares of
Other Preferred Shares due on or prior to the date of
the transaction have been declared and paid or shall
have been declared and sufficient funds for the payment
thereof deposited with the Auction Agent, (C) any
Additional Dividend required to be paid under paragraph
2(e) below on or before the date of such declaration or
payment has been paid and (D) the Corporation has
redeemed the full number of Preferred Shares required
to be redeemed by any provision for mandatory
redemption contained herein.
D. Each dividend shall consist of (i) cash at the
Applicable Rate and (ii) an uncertificated right (a "Right") to
receive an Additional Dividend (as defined below). Each Right
shall thereafter be independent of the share or Preferred Shares
on which the dividend was paid. The Corporation shall cause to be
maintained a record of each Right received by the respective
Holders. The Corporation shall not be required to recognize any
transfer of a Right.
If, in the case of a Dividend Period of 28 days or fewer, the
Corporation retroactively allocates any net capital gains or other taxable
income to Preferred Shares without having given advance notice thereof to
the Auction Agent as described in paragraph 2(f) hereof (the amount of such
allocation referred to herein as a "Retroactive Taxable Allocation") solely
by reason of the fact that such allocation is made as a result of the
redemption of all or a portion of the outstanding Preferred Shares or the
liquidation of the Corporation, the Corporation will, within 90 days (and
generally within 60 days) after the end of the Corporation's fiscal year
for which a Retroactive Taxable Allocation is made, provide notice thereof
to the Auction Agent and to each holder of a Right applicable to such
Preferred Shares (initially Cede & Co. as nominee of The Depository Trust
Company) during such fiscal year at such holder's address as the same
appears or last appeared on the Stock Books of the Corporation. The
Corporation will, within 30 days after such notice is given to the Auction
Agent, pay to the Auction Agent (who will, then distribute to such holders
of Rights), out of funds legally available therefor, an amount equal to the
aggregate Additional Dividend with respect to all Retroactive Taxable
Allocations made to such holders during the fiscal year in question.
If the Corporation, in the case of a Dividend Period of 35 days or
more, makes a Retroactive Taxable Allocation to a dividend paid on
Preferred Shares, the Corporation will, within 90 days (and generally
within 60 days) after the end of the Corporation's fiscal year for which a
Retroactive Taxable Allocation is made, provide notice thereof to the
Auction Agent and to each holder of a Right applicable to such Preferred
Shares (initially Cede & Co. as nominee of The Depository Trust Company)
during such fiscal year at such holder's address as the same appears or
last appeared on the Stock Books of the Corporation. The Corporation will,
within 30 days after such notice is given to the Auction Agent, pay to the
Auction Agent (who will then distribute to such holders of Rights), out of
funds legally available therefor, an amount equal to the aggregate
Additional Dividend with respect to all Retroactive Taxable Allocations
made to such holders during the fiscal year in question.
An "Additional Dividend" means payment to a holder of Preferred Shares
of an amount which, when taken together with the aggregate amount of
Retroactive Taxable Allocations allocated to such holder with respect to
the fiscal year in question, would cause such holder's dividends from the
aggregate of both the Retroactive Taxable Allocations and the Additional
Dividend to be equal to the dollar amount of the dividends which would have
been received and retained by such holder if the Retroactive Taxable
Allocations had not been made. Such Additional Dividend shall be calculated
(i) without consideration being given to the time value of money; (ii)
assuming that no holder of Preferred Shares is subject to the Federal
alternative minimum tax with respect to dividends received from the
Corporation; and (iii) assuming that each Retroactive Taxable Allocation
would be taxable in the hands of each holder of Preferred Shares at the
maximum marginal combined regular Federal income tax rate applicable to
individuals or corporations, whichever is greater, in effect during the
fiscal year in question.
E. Whenever the Corporation intends to include any net
capital gains or other taxable income in any dividend on Preferred
Shares the Applicable Rate for which will be established at the
next succeeding Auction, the Corporation will, in the case of a
Dividend Period of 28 days or fewer, and may, in the case of a
Dividend Period of 35 days or more, notify the Auction Agent of
the amount to be so included at least five Business Days prior to
the Auction Date on which the Applicable Rate for such dividend is
to be established. If, in the case of a Dividend Period of 28 days
or fewer, the Corporation retroactively allocates any net capital
gains or other taxable income to a dividend paid on Preferred
Shares without having given advance notice thereof to the Auction
Agent as described in paragraph 2(f) hereof solely by reason of
the fact that such allocation is made as a result of the
redemption of all or a portion of the outstanding Preferred
Shares or the liquidation of the Corporation, the Corporation
will make certain payments to holders of Preferred Shares to
offset the tax effect thereof. If, in the case of a Dividend
Period of 35 days or more, the Corporation allocates any net
capital gains or other taxable income to a dividend paid on
Preferred Shares without having given advance notice thereof to
the Auction Agent as described in Paragraph 2(f) hereof, the
Corporation will make certain payments to holders of Preferred
Shares to offset the tax effect thereof.
F. No fractional share of Preferred Shares shall be issued.
1. Liquidation Rights. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the
Holders shall be entitled to receive, out of the assets of the Corporation
available for distribution to shareholders, before any distribution or
payment is made upon any Common Stock or any other capital stock ranking
junior in right of payment upon liquidation to the Preferred Shares, the
sum of $50,000 per share plus accumulated but unpaid dividends (whether or
not earned or declared) thereon plus the premium, if any, resulting from
the designation of a Premium Call Period to the date of distribution, and
after such payment the holders of Preferred Shares will be entitled to no
other payments other than Additional Dividends as provided in paragraph
2(e) hereof. If upon any liquidation, dissolution or winding up of the
Corporation, the amounts payable with respect to the Preferred Shares and
any other outstanding class or series of Preferred Stock of the Corporation
ranking on a parity with the Preferred Shares as to payment upon
liquidation are not paid in full, the Holders and the holders of such other
class or series will share ratably in any such distribution of assets in
proportion to the respective preferential amounts to which they are
entitled. After payment of the full amount of the liquidating distribution
to which they are entitled, the Holders will not be entitled to any further
participation in any distribution of assets by the Corporation except for
any Additional Dividends. A consolidation or merger of the Corporation with
or into any other corporation or corporations or a sale, whether for cash,
shares of stock, securities or properties, of all or substantially all or
any part of the assets of the Corporation shall not be deemed or construed
to be a liquidation, dissolution or winding up of the Corporation.
1. Redemption. A. Preferred Shares shall be redeemable by
the Corporation as provided below:
(i) To the extent permitted under the 1940 Act and
Maryland law, upon giving a Notice of Redemption,
the Corporation at its option may redeem Preferred
Shares, in whole or in part, out of funds legally
available therefor, at the Optional Redemption
Price per share, on any Dividend Payment Date;
provided that no Preferred Shares shall be subject
to optional redemption during a Non-Call Period.
In addition, holders of Preferred Shares which are
redeemed shall be entitled to receive Additional
Dividends to the extent provided herein. The
Corporation may not give a Notice of Redemption
relating to an optional redemption as described in
this paragraph 4(a) (i) or effect an optional
redemption unless, at the time of giving such
Notice of Redemption or effecting such optional
redemption, the Corporation 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
due to Holders by reason of the redemption of
their Preferred Shares on such redemption date
and, if as a result of such optional redemption,
the Corporation would fail to maintain S&P
Eligible Assets and Moody's Eligible Assets each
with an aggregate Discounted Value, equal to the
Preferred Shares Basic Maintenance Amount.
(ii) The Corporation shall redeem, out of funds legally
available therefor, at the Mandatory Redemption
Price per share, Preferred Shares to the extent
permitted under the 1940 Act and Maryland law, on
a date fixed by the Board of Directors, if the
Corporation fails to maintain Moody's Eligible
Assets and S&P Eligible Assets each with an
aggregate Discounted Value equal to or greater
than the Preferred Shares Basic Maintenance Amount
as provided in paragraph 7(a) or to satisfy the
1940 Act Preferred Shares Asset Coverage as
provided in paragraph 6 and such failure is not
cured on or before the Preferred Shares Basic
Maintenance Cure Date or the 1940 Act Cure Date
(herein respectively referred to as the "Cure
Date"), as the case may be. In addition, holders
of Preferred Shares so redeemed shall be entitled
to receive Additional Dividends to the extent
provided herein. The number of Preferred Shares to
be redeemed shall be equal to the lesser of (i)
the minimum number of Preferred Shares the
redemption of which, if deemed to have occurred
immediately prior to the opening of business on
the Cure Date, would together with all shares of
Other Preferred Stock subject to redemption or
retirement, result in the Corporation having S&P
Eligible Assets and Moody's Eligible Assets each
with an aggregate Discounted Value equal to or
greater than the Preferred Shares Basic
Maintenance Amount or satisfaction of the 1940 Act
Preferred Shares Asset Coverage, as the case may
be, on such Cure Date (provided that, if there is
no such minimum number of Preferred Shares and
shares of Other Preferred Stock the redemption of
which would have such result, all Preferred Shares
and shares of Other Preferred Stock then
outstanding shall be redeemed), and (ii) the
maximum number of Preferred Shares, together with
all shares of other Preferred Stock subject to
redemption or retirement, that can be redeemed out
of funds expected to be legally available therefor
on such redemption date. In determining the number
of Preferred Shares required to be redeemed in
accordance with the foregoing, the Corporation
shall allocate the number required to be redeemed
which would result in the Corporation having
Moody's Eligible Assets and S&P Eligible Assets
each with an aggregate Discounted Value equal to
or greater than the Preferred Shares Basic
Maintenance Amount or satisfaction of the 1940 Act
Preferred Shares Asset Coverage, as the case may
be, pro rata among Preferred Shares, Other
Preferred Shares and other Preferred Stock subject
to redemption pursuant to provisions similar to
those contained in this paragraph 4(a) (ii)
provided that, Preferred Shares which may not be
redeemed at the option of the Corporation (a) will
be subject to mandatory redemption only to the
extent that other shares are not available to
satisfy the number of shares required to be
redeemed and (b) will be selected for redemption
in an ascending order of outstanding number of
days in the Non-Call Period during which such
shares are not subject to optional redemption
(with shares with the lowest number of days to be
redeemed first) and by lot in the event of shares
having an equal number of days in such period. The
Corporation shall effect such redemption on a
Business Day which is not later than 30 days after
such Cure Date, except that if the Corporation
does not have funds legally available for the
redemption of all of the required number of
Preferred Shares and shares of other Preferred
Stock which are subject to mandatory redemption or
the Corporation otherwise is unable to effect such
redemption on or prior to 30 days after such Cure
Date, the Corporation shall redeem those Preferred
Shares which it is unable to redeem on the
earliest practicable date on which it is able to
effect such redemption out of funds legally
available therefor.
A. Notwithstanding any other provision of this paragraph
4, no Preferred Shares may be redeemed pursuant to paragraph 4(a)
(i) of these Articles Supplementary unless all dividends in
arrears on all remaining outstanding shares of Parity Stock shall
have been or are being contemporaneously paid or declared and set
apart for payment. In the event that less than all the outstanding
Preferred Shares are to be redeemed and there is more than one
Holder, the shares to be redeemed shall be selected by lot or such
other method as the Corporation shall deem fair and equitable.
B. Whenever Preferred Shares are to be redeemed, the
Corporation, not less than 20 or more than 60 days prior to the
date fixed for redemption, shall mail a notice ("Notice of
Redemption") by first-class mail, postage prepaid, to each Holder
of Preferred Shares to be redeemed and to the Auction Agent. The
Corporation shall cause the Notice of Redemption also to be
published in the eastern and national editions of The Wall Street
Journal. The Notice of Redemption to set forth (i) the redemption
date, (ii) the amount of the redemption price, (iii) the aggregate
number of Preferred Shares to be redeemed, (iv) the place or
places where Preferred Shares are to be surrendered for payment of
the redemption price, (v) a statement that dividends on the shares
to be redeemed shall cease to accumulate on such redemption date
(except that holders may be entitled to Additional Dividends) and
(vi) the provision of these Articles Supplementary pursuant to
which such shares are being redeemed. No defect in the Notice of
Redemption or in the mailing or publication thereof shall affect
the validity of the redemption proceedings, except as required by
applicable law.
If the Notice of Redemption shall have been given as aforesaid and,
concurrently or thereafter, the Corporation shall have deposited in trust
with the Auction Agent a cash amount equal to the redemption payment for
the Preferred Shares as to which such Notice of Redemption has been given
with irrevocable instructions and authority to pay the redemption price to
the Holders of such shares, then upon the date of such deposit or, if no
such deposit is made, then upon such date fixed for redemption (unless the
Corporation shall default in making the redemption payment), all rights of
the Holders of such shares as shareholders of the Corporation by reason of
the ownership of such shares will cease and terminate (except their right
to receive the redemption price in respect thereof and any additional
dividends, but without interest), and such shares shall no longer be deemed
outstanding. The Corporation shall be entitled to receive, from time to
time, from the Auction Agent the interest, if any, on such moneys deposited
with it and the Holders of any shares so redeemed shall have no claim to
any of such interest. In case the Holder of any shares so called for
redemption shall not claim the redemption payment for his shares within one
year after the date of redemption, the Auction Agent shall, upon demand,
pay over to the Corporation such amount remaining on deposit and the
Auction Agent shall thereupon be relieved of all responsibility to the
Holder of such shares called for redemption and such Holder thereafter
shall look only to the Corporation for the redemption payment.
1. Voting Rights. A. General. Except as otherwise provided in the
Charter, each Holder of Preferred Shares shall be entitled to one vote for
each share held on each matter submitted to a vote of stockholders of the
Corporation to which the stockholders are entitled to vote, and the holders
of outstanding shares of Preferred Stock, including Preferred Shares, and
of shares of Common Stock shall vote together as a single class with
respect to all matters on which all stockholders are entitled to vote.
Notwithstanding the preceding sentence, at the first annual meeting of
stockholders, the holders of outstanding shares of Preferred Stock,
including Preferred Shares, represented in person or by proxy shall be
entitled as a class, and to the exclusion of the holders of all other
securities and classes of capital stock of the Corporation, to elect one
Class I director and one Class II director and shall thereafter be so
entitled to elect any successors from time to time to the Class I and Class
II directors so elected at any meeting of shareholders in which successors
are elected. At each meeting of shareholders at which entire classes of
Class I and Class II directors are to be elected, or at any meeting at
which a successor to a director elected by the holders of Preferred Stock
in accordance with this Section is to be elected (including directors
elected pursuant to this sentence), the holders of outstanding shares of
Preferred Stock, including Preferred Shares, represented in person or by
proxy shall be entitled as a class and to the exclusion of the holders of
all other securities and classes of capital stock of the Corporation to
elect one Class I and one Class II director or to elect such successor. In
the event that the Charter is amended to eliminate the classification of
the Corporation's Board of Directors, the holders of outstanding shares of
Preferred Stock, including Preferred Shares, represented in person or by
proxy shall be entitled as a class, and to the exclusion of the holders of
all other securities and classes of capital stock of the Corporation, to
elect two directors. Subject to paragraph 5(b) hereof, the holders of
outstanding shares of capital stock of the Corporation, voting as a single
class, shall elect the balance of the directors.
A. Right to Elect Majority of Board of Directors. During
any period in which any one or more of the conditions described
below shall exist (such period being referred to herein as a
"Voting Period"), the number of directors constituting the Board
of Directors shall be automatically increased by the smallest
number that, when added to the two directors elected exclusively
by the holders of shares of Preferred Stock, would constitute a
majority of the Board of Directors as so increased by such
smallest, number; and the holders of shares of Preferred Stock
shall be entitled, voting as a class on a one-vote-per-share basis
(to the exclusion of the holders of all other securities and
classes of capital stock of the Corporation), to elect such
smallest number of additional directors, together with the two
directors that such holders are in any event entitled to elect. A
Voting Period shall commence:
(i) if at any time accumulated dividends (whether or
not earned or declared, and whether or not funds
are then legally available in an amount sufficient
therefor) on the outstanding Preferred Shares
equal to at least two full years' dividends 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
dividends; or
(ii) if at any time holders of any Preferred Stock are
entitled to elect a majority of the directors of
the Corporation under the 1940 Act.
Upon the termination of a Voting Period, the voting rights described
in this paragraph 5(b) shall cease, subject always, however, to the
revesting of such voting rights in the Holders upon the further occurrence
of any of the events described in this paragraph 5 (b).
B. Right to Vote with Respect to Certain Other Matters.
So long as any Preferred Shares are outstanding, the Corporation
shall not, without the affirmative vote of the holders of a
majority of the Outstanding shares of Preferred Stock outstanding
at the time, in person or by proxy, at a meeting (voting
separately as one class) or by the unanimous written consent of
the holders of all Outstanding shares of Preferred Stock: (i)
authorize, create or issue, or increase the authorized or issued
amount of, any class or series of stock ranking prior to or on a
parity with any series of Preferred Stock with respect to payment
of dividends or the distribution of assets on liquidation, or
increase the authorized amount of Preferred Shares or any other
Preferred Stock (except that, notwithstanding the foregoing, but
subject to the provisions of Section 13 of the 1940 Act, the Board
of Directors, without the vote or consent of the Holders of
Preferred Shares, may from time to time authorize, create and
issue, and may increase the authorized or issued amount of,
classes or series of Preferred Stock, including Preferred Shares,
ranking on a parity with the Preferred Shares with respect to the
payment of dividends and the distribution of assets upon
dissolution, liquidation or winding up of the affairs of the
Corporation, subject to continuing compliance by the Corporation
with 1940 Act Preferred Shares Asset Coverage and Preferred Shares
Basic Maintenance Amount requirements, provided that the Fund
obtains written confirmation from Moody's (if Moody's is then
rating Preferred Shares), S&P (if S&P is then rating Preferred
Shares) or any Substitute Rating Agency (if any such Substitute
Rating Agency is then rating Preferred Shares) that the issuance
of such class or series would not impair the rating then assigned
by such rating agency to the Preferred Shares), (ii) amend, alter
or repeal the provisions of the Charter whether by merger,
consolidation or otherwise, so as to adversely affect any of the
contract rights expressly set forth in the Charter of holders of
Preferred Shares or any Other Preferred Stock, (iii) authorize the
Corporation's conversion from a closed-end to an open-end
investment company as defined in Section 5(a) of the 1940 Act, or
(iv) amend the provisions of the Charter which provide for the
classification of the Board of Directors of the Corporation into
three classes, each with a term of office of three years with only
one class of directors standing for election in any year
(presently Article VI of the Charter). To the extent permitted
under the 1940 Act, the Corporation shall not approve any of the
actions set forth in clause (i) or (ii) which adversely affects
the contract rights expressly set forth in the Charter of a Holder
of shares of a series of Preferred Shares differently than those
of a Holder of shares of any other series of Preferred Shares
without the affirmative vote of the holders of at least a majority
of the Preferred Shares of each series adversely affected and
Outstanding at such time, in person or by proxy, at a meeting
(each such adversely affected series voting separately as a class)
or by the unanimous written consent of the holders of all
Outstanding shares of Preferred Stock. The Corporation shall
notify Moody's and S&P 10 Business Days prior to any such vote
described in clauses (i) and (ii) . Unless a higher percentage is
provided for under the Charter, the affirmative vote of the
holders of a majority of the Outstanding shares of Preferred
Stock, including Preferred Shares, voting together as a single
class, will be required to approve any plan of reorganization
(including bankruptcy proceedings) adversely affecting such shares
or any action requiring a vote of security holders under Section
13(a) of the 1940 Act. The class vote of holders of shares of
Preferred Stock, including Preferred Shares, described above will
in each case be in addition to a separate vote of the requisite
percentage of shares of Common Stock and shares of Preferred
Stock, including Preferred Shares, voting together as a single
class necessary to authorize the action in question.
Notwithstanding the preceding sentence, to the extent permitted by
Maryland General Corporation Law, no vote of holders of Common
Stock, either separately or together with holders of Preferred
Shares as a single class, shall be necessary to take the actions
contemplated by clauses (i) and (ii) of the first sentence of this
Section 5(c) and the holders of Common Stock shall not be entitled
to vote in respect of such matters, unless, in the case of the
actions contemplated by clause (ii) of the first sentence of this
section 5 (c), the action would adversely affect the contract
rights expressly set forth in the Charter of the holders of Common
Stock.
C. Voting Procedures.
(i) As soon as practicable after the accrual of any
right of the Holders of shares of Preferred Stock
to elect additional directors as described in
paragraph 5(b) above, the Corporation shall notify
the Secretary of the Corporation and instruct the
Secretary to call a special meeting of such
Holders, by mailing a notice of such special
meeting to such Holders, such meeting to be held
not less than 10 nor more than 20 days after the
date of mailing of such notice. If the Secretary
of the Corporation does not call such a special
meeting, it may be called by Holders of at least
25% of the votes entitled to be cast at such
meeting on like notice. The record date for
determining the Holders entitled to notice of and
to vote at such special meeting shall be
the close of business on the fifth Business Day
preceding the day on which such notice is mailed. At
any such special meeting and at each meeting held
during a Voting Period, such Holders, voting together
as a class (to the exclusion of the holders of all
other securities and classes of capital stock of the
Corporation), shall be entitled to elect the number of
directors prescribed in paragraph 5(b) above on a
one-vote-per-share basis. At any such meeting or
adjournment thereof in the absence of a quorum, a
majority of such holders present in person or by proxy
shall have the power to adjourn the meeting without
notice, other than by an announcement at the meeting,
to a date not more than 120 days after the original
record date.
(ii) For purposes of determining any rights of the
Holders to vote on any matter or the number of
shares required to constitute a quorum, whether
such right is created by these Articles
Supplementary, by the other provisions of the
Charter, by statute or otherwise, a share of
Preferred Shares which is not outstanding shall
not be counted.
(iii) The terms of office of all persons who are
directors of the Corporation at the time of a
special meeting of Holders and holders of other
Preferred Stock to elect directors shall continue,
notwithstanding the election at such meeting by
the Holders and such other holders of the number
of directors that they are entitled to elect, and
the persons so elected by the Holders and such
other holders, together with the two incumbent
directors elected by the Holders and such other
holders of Preferred Stock and the remaining
incumbent directors elected by the holders of the
Common Stock and Preferred Stock, shall constitute
the duly elected directors of the Corporation.
(iv) The terms of office of the additional directors
elected by the Holders and holders of other
Preferred Stock pursuant to paragraph 5(b) above
shall terminate on the earliest date permitted by
the Maryland General Corporation Law following the
termination of a Voting Period, the remaining
directors shall constitute the directors of the
Corporation and the voting rights of the Holders
and such other holders to elect additional
directors pursuant to paragraph 5(b) above shall
cease, subject to the provisions of the last
sentence of paragraph 5(b)(ii).
D. Exclusive Remedy. Unless otherwise required by law,
the Holders of Preferred Shares shall not have any relative rights
or preferences or other special rights other than those
specifically set forth herein. The Holders of Preferred Shares
shall have no preemptive rights or rights to cumulative voting. In
the event that the Corporation fails to pay any dividends on the
Preferred Shares, the exclusive remedy of the Holders shall be the
right to vote for directors pursuant to the provisions of this
paragraph 5.
E. Notification to Moody's and S&P. 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 Corporation
shall, not later than ten business days prior to the date on which
such vote is to be taken, notify Moody's and S&P that such vote is
to be taken and the nature of the action with respect to which
such vote is to be taken. Upon completion of any such vote, the
Corporation shall notify Moody's and S&P as to the result of such
vote.
1. 1940 Act Preferred Shares Asset Coverage. The Corporation shall
maintain, as of the last Business Day of each month in which any share of
Preferred Shares is outstanding, the 1940 Act Preferred Shares Asset
Coverage.
1. Preferred Shares Basic Maintenance Amount. A. The Corporation
shall maintain, on each Valuation Date, and shall verify to its
satisfaction that it is maintaining on such Valuation Date, (i) Moody's
Eligible Assets having an aggregate Discounted Value equal to or greater
than the Preferred Shares Basic Maintenance Amount and (ii) S&P Eligible
Assets having an aggregate Discounted Value equal to or greater than the
Preferred Shares Basic Maintenance Amount. Upon any failure to maintain the
required Discounted Value, the Corporation will use its best efforts to
alter the composition of its portfolio to retain the Preferred Shares Basic
Maintenance Amount on or prior to the Preferred Shares Basic Maintenance
Cure Date.
A. On or before 5:00 p.m., New York City time, on the
third Business Day after a Valuation Date on which the
Corporation fails to satisfy the Preferred Shares Basic
Maintenance Amount, the Corporation shall complete and deliver to
the Auction Agent, Moody's and S&P a complete Preferred Shares
Basic Maintenance Report as of the date of such failure, which
will be deemed to have been delivered to the Auction Agent if the
Auction Agent receives a copy or telecopy, telex or other
electronic transcription thereof and on the same day the
Corporation mails to the Auction Agent for delivery on the next
Business Day the complete Preferred Shares Basic Maintenance
Report. The Corporation shall also give a notice of cure of its
failure to satisfy the Preferred Shares Basic Maintenance Amount
along with the complete Preferred Shares Basic Maintenance Report
to the Auction Agent, Moody's and S&P within three Business Days
of its determination that it has satisfied such requirement
following any period during which it has failed to satisfy such
requirement. The Corporation will also deliver a Preferred Shares
Basic Maintenance Report to the Auction Agent as of (i) the
fifteenth day of each month (or, if such day is not a Business
Day, the next succeeding Business Day) and (ii) the last,
Business Day of each month, in each case on or before the third
Business Day after such day. The Corporation will also deliver a
Preferred Shares Basic Maintenance Report to Moody's or S&P, as
the case may be, for each Valuation Date that the Discounted
Value of Moody's Eligible Assets or S&P Eligible Assets is less
than or equal to 125% of the Preferred Shares Basic Maintenance
Amount, provided, however, that if the Valuation Date is every
day that is a Business Day, the Corporation will deliver a
Preferred Shares Basic Maintenance Report to Moody's or S&P, as
the case may be, for each Valuation Date that the Discounted
Value of Moody's Eligible Assets or S&P Eligible Assets is less
than or equal to 105% of the Preferred Shares Basic Maintenance
Amount. The Corporation will deliver a Preferred Shares Basic
Maintenance Report to Moody's upon request and when the
Corporation redeems any shares of Common Stock. The Corporation
will deliver a Preferred Shares Basic Maintenance Report to S&P
upon request. A failure by the Corporation to deliver a Preferred
Shares Basic Maintenance Report under this paragraph 7(b) shall
be deemed to be delivery of a Preferred Shares Basic Maintenance
Report indicating the Discounted Value for S&P Eligible Assets
and Moody's Eligible Assets of the Corporation is less than the
Preferred Shares Basic Maintenance Amount, as of the relevant
Valuation Date.
B. Within ten Business Days after the date of delivery of
a Preferred Shares Basic Maintenance Report and a Certificate of
Minimum Liquidity in accordance with paragraph 7(b) above
relating to a Quarterly Valuation Date, the Corporation shall
cause the Independent Accountant to confirm in writing to the
Auction Agent, Moody's and S&P (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 Corporation
during the quarter ending on such Quarterly Valuation Date) and
(with respect to S&P only while S&P is rating the Preferred
Shares) such Certificate, (ii) that, in such Report (and in such
randomly selected Report), the Corporation correctly determined
the assets of the Corporation which constitute S&P Eligible
Assets or Moody's Eligible Assets, as the case may be, at such
Quarterly Valuation Date in accordance with these Articles
Supplementary, (iii) that, in such Report (and in such randomly
selected Report) , the Corporation determined whether the
Corporation had, at such Quarterly Valuation Date (and at the
Valuation Date addressed in such randomly-selected Report) in
accordance with these Articles Supplementary, S&P Eligible Assets
of an aggregate Discounted Value at least equal to the Preferred
Shares Basic Maintenance Amount and Moody's Eligible Assets of an
aggregate Discounted Value at least equal to the Preferred Shares
Basic Maintenance Amount, (iv) that (with respect to S&P only) in
such Certificate, the Corporation determined the Minimum
Liquidity Level and the Corporation's Deposit Securities in
accordance with these Articles Supplementary, including maturity
or tender date, (v) with respect to the S&P rating on Municipal
Obligations, the issuer name, issue size and coupon rate listed
in such Report and (with respect to S&P only) such Certificate,
that the Independent Accountant has requested that S&P verify
such information and the Independent Accountant shall provide a
listing in its letter of any differences, (vi) with respect to
the Moody's ratings on Municipal Obligations, the issuer name,
issue size and coupon rate listed in such Report and (with
respect to S&P only) such Certificate, that such information has
been verified by Moody's (in the event such information is not
verified by Moody's, the Independent Accountant will inquire of
Moody's what such information is, and provide a listing in its
letter of any differences), and (vii) with respect to the bid or
mean price (or such alternative permissible factor used in
calculating the Market Value) provided by the custodian of the
Corporation's assets to the Corporation for purposes of valuing
securities in the Corporation's portfolio, the Independent
Accountant has traced the price used in such Report and (with
respect to S&P only) such Certificate to the bid or mean price
listed in such Report and (with respect to S&P only) such
Certificate as provided to the Corporation 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) (such confirmation is herein called the
"Accountant's Confirmation").
C. Within ten Business Days after the date of delivery to
the Auction Agent, S&P and Moody's of a Preferred Shares Basic
Maintenance Report in accordance with paragraph 7(b) above
relating to any Valuation Date on which the Corporation failed to
maintain S&P Eligible Assets with an aggregate Discounted Value
and Moody's Eligible Assets with an aggregate Discounted Value
equal to or greater than the Preferred Shares Basic Maintenance
Amount, and relating to the Preferred Shares Basic Maintenance
Cure Date with respect to such failure, the Independent
Accountant will provide to the Auction Agent, S&P and Moody's an
Accountant's Confirmation as to such Preferred Shares Basic
Maintenance Report.
D. If any Accountant's Confirmation delivered pursuant to
subparagraph (c) or (d) of this paragraph 7 shows that an error
was made in the Preferred Shares Basic Maintenance Report for a
particular Valuation Date for which such Accountant's
Confirmation was required to be delivered, or shows that a lower
aggregate Discounted Value for the aggregate of all S&P Eligible
Assets or Moody's Eligible Assets, as the case may be, of the
Corporation was determined by the Independent Accountant, the
calculation or determination made by such Independent Accountant
shall be final and conclusive and shall be binding on the
Corporation, and the Corporation shall accordingly amend and
deliver the Preferred Shares Basic Maintenance Report to the
Auction Agent, S&P and Moody's promptly following receipt by the
Corporation of such Accountant's Confirmation.
E. On or before 5:00 p.m., New York City time, on the
first Business Day after the Date of Original Issue of the
Preferred Shares, the Corporation will complete and deliver to
S&P and Moody's a Preferred Shares Basic Maintenance Report as of
the close of business on such Date of Original Issue. Within five
business days of such Date of Original Issue, the Corporation
shall cause the Independent Accountant to confirm in writing to
S&P and Moody's (i) the mathematical accuracy of the calculations
reflected in such Report and (ii) that the aggregate Discounted
Value of S&P Eligible Assets and the aggregate Discounted Value
of Moody's Eligible Assets reflected thereon equals or exceeds
the Preferred Shares Basic Maintenance Amount reflected thereon.
F. For so long as Preferred Shares are rated by Moody's,
in managing the Corporation's portfolio, the Corporation shall
require that the Adviser will not alter the composition of the
Corporation's portfolio if, in the reasonable belief of the
Adviser, the effect of any such alteration would be to cause the
Corporation to have Moody's Eligible Assets with an aggregate
Discounted Value, as of the immediately preceding Valuation Date,
less than the Preferred Shares Basic Maintenance Amount as of
such Valuation Date; provided, however, that in the event that,
as of the immediately preceding Valuation Date, the aggregate
Discounted Value of Moody's Eligible Assets exceeded the
Preferred Shares Basic Maintenance Amount by twenty-five percent
or less (or, in the event the Valuation Date is every day that is
a Business Day, five percent or less), the Adviser will not alter
the composition of the Corporation's portfolio in a manner
reasonably expected to reduce the aggregate Discounted Value of
Moody's Eligible Assets unless the Corporation shall have
confirmed that, after giving effect to such alteration, the
aggregate Discounted Value of Moody's Eligible Assets would
exceed the Preferred Shares Basic Maintenance Amount.
1. Minimum Liquidity Level. (i) For so long as any Preferred
Shares are rated by S&P, the Corporation shall be required to have, as of
each Valuation Date, Dividend Coverage Assets having in the aggregate a
value not less than the Dividend Coverage Amount.
(i) As of each Valuation Date as long as any Preferred
Shares are rated by S&P, the Corporation shall
determine (A) the Market Value of the Dividend
Coverage Assets owned by the Corporation as of
that Valuation Date, (B) the Dividend Coverage
Amount on that Valuation Date, and (C) whether the
Minimum Liquidity Level is met as of that
Valuation Date. The calculations of the Dividend
Coverage Assets, the Dividend Coverage Amount and
whether the Minimum Liquidity Level is met shall
be set forth in a certificate (a "Certificate of
Minimum Liquidity") dated as of the Valuation
Date. The Preferred Shares Basic Maintenance
Report and the Certificate of Minimum Liquidity
may be combined in one certificate. The
Corporation shall cause the Certificate of Minimum
Liquidity to be delivered to S&P not later than
the close of business on the third Business Day
after the Valuation Date applicable to such
Certificate pursuant to paragraph 7 (b). The
Minimum Liquidity Level shall be deemed to be met
as of any date of determination if the Corporation
has timely delivered a Certificate of Minimum
Liquidity relating to such date which states that
the same has been met and which is not manifestly
inaccurate. In the event that a Certificate of
Minimum Liquidity is not delivered to S&P when
required, the Minimum Liquidity Level shall be
deemed not to have been met as of the applicable
date.
(ii) If the Minimum Liquidity Level is not met as of
any Valuation Date, then the Corporation shall
purchase or otherwise acquire Dividend Coverage
Assets to the extent necessary so that the Minimum
Liquidity Level is met as of the fifth Business
Day following such Valuation Date. The Corporation
shall, by such fifth Business Day, provide to S&P
a Certificate of Minimum Liquidity setting forth
the calculations of the Dividend Coverage Assets
and the Dividend Coverage Amount and showing that
the Minimum Liquidity Level is met as of such
fifth Business Day together with a report of the
custodian of the Corporation's assets confirming
the amount of the Corporation's Dividend Coverage
Assets as of such fifth Business Day.
1. Certain Other Restrictions. A. So long as there are Preferred
Shares Outstanding, the Corporation will enter into futures and options
transactions only for bona fide hedging purposes and not for leveraging or
speculative purposes. So long as Moody's and S&P are rating the Preferred
Shares, the Corporation will only engage in futures or options transactions
in accordance with the then-current guidelines of such ratings agencies,
only if it is valuing its assets daily and only after it has received
written confirmation from Moody's and S&P, as appropriate, that such
transactions would not impair the ratings then assigned by S&P and Moody's
to Preferred Shares. The S&P guidelines in effect as of the Date of
Original Issue are set forth in their entirety in the following paragraph.
The Corporation may engage in futures and options transactions in
accordance therewith and such transactions shall have the consequences
included in such guidelines set forth therein (as such guidelines are
amended, modified and supplemented from time to time by S&P), provided,
however, that it may not engage in any such transactions unless it has
satisfied the relevant provisions of this paragraph relating to complying
with Moody's guidelines and obtaining written confirmation from Moody's and
S&P.
For so long as Preferred Shares are rated by S&P, the Corporation will
not, unless it has received written confirmation from S&P that any such
action would not impair the rating then assigned by S&P to Preferred
Shares, purchase or sell futures contracts or options thereon or write
uncovered put or uncovered call options on portfolio securities except
(provided that the Corporation has received such written confirmation in
advance from S&P) that (i) the Corporation may engage in S&P Hedging
Transactions based on the Municipal Index, provided that (A) the
Corporation shall not engage in any S&P Hedging Transaction based on the
Municipal Index (other than Closing Transactions) which would cause the
Corporation at the time of such transaction to own or have sold (1) more
than 1,000 outstanding futures contracts based on the Municipal Index, (2)
outstanding futures contracts based on Municipal Index exceeding in number
25% of the quotient of the fair market value of the Corporation's total
assets divided by 100,000 or (3) outstanding futures contracts based on the
Municipal Index exceeding in number 10% of the average number of daily
traded futures contracts based on the Municipal Index in the month prior to
the time of effecting such transaction as reported by The Wall Street
Journal and (ii) the Corporation may engage in S&P Hedging Transactions
based on Treasury Bonds, provided that (A) the Corporation shall not engage
in any S&P Hedging Transactions based on Treasury Bonds (other than Closing
Transactions) which would cause the Corporation at the time of such
transaction to own or have sold the lesser of (1) outstanding futures
contracts based on Treasury Bonds exceeding in number 25% of the quotient
of the fair market value of the Corporation's total assets divided by
100,000 or (2) outstanding futures contracts based on Treasury Bonds
exceeding in number 10% of the average number of daily traded futures
contracts based on Treasury Bonds in the month prior to the time of
effecting such transaction as reported by The Wall Street Journal. For so
long as Preferred Shares are rated by S&P, the Corporation will engage in
Closing Transactions to close out any outstanding futures contract which
the Corporation owns or has sold or any outstanding option thereon owned by
the Corporation in the event (i) the Corporation does not have S&P Eligible
Assets with an aggregate Discounted Value equal to or greater than the
Preferred Shares Basic Maintenance Amount on two consecutive Valuation
Dates and (ii) the Corporation is required to pay Variation Margin on the
second such Valuation Date. For so long as Preferred Shares are rated by
S&P, the Corporation will engage in a Closing Transaction to close out any
outstanding futures contract or option thereon in the month prior to the
delivery month under the terms of such futures contract or option thereon
unless the Corporation holds securities deliverable under such terms. For
purposes of calculating the Discounted Value of S&P Eligible Assets to
determine compliance with the Preferred Shares Basic Maintenance Amount,
such Discounted Value shall be reduced by an amount equal to (i) 30% of the
aggregate settlement value, as marked to market, of any outstanding futures
contracts based on the Municipal Index which are owned by the Trust plus
(ii) 25% of the aggregate settlement value, as marked to market, of any
outstanding futures contracts based on Treasury Bonds which contracts are
owned by the Corporation. For so long as Preferred Shares are rated by S&P,
when the Corporation writes a futures contract or option thereon, it will
maintain an amount of cash, cash equivalents or short-term, fixed-income
securities in a segregated account with the Corporation's custodian, so
that the amount so segregated plus the amount of Initial Margin and
Variation Margin held in the account of the Corporation's broker equals the
fair market value of the futures contract, except that in the event the
Corporation writes a futures contract or option thereon which requires
delivery of an underlying security, the Corporation shall hold such
underlying security.
A. For so long as Preferred Shares are rated by Moody's or S&P, the
Corporation will not, unless it has received written confirmation from
Moody's and/or S&P, as the case may be, that such action would not impair
the ratings then assigned to Preferred Shares by Moody's and/or S&P, as the
case may be, (i) borrow money, (ii) engage in short sales of securities,
(iii) lend any securities, (iv) issue any class or series of stock ranking
prior to or on a parity with the Preferred Shares with respect to the
payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up of the Corporation, (v) reissue any Preferred
Shares previously purchased or redeemed by the Corporation, (vi) merge or
consolidate into or with any other corporation, (vii) change the Pricing
Service or (viii) engage in reverse repurchase agreements.
10. Notice. All notices or communications, unless otherwise specified
in these Articles Supplementary, shall be sufficiently given if in writing
and delivered in person or mailed by first-class mail, postage prepaid.
Notice shall be deemed given on the earlier of the date received or the
date seven days after which such notice is mailed.
1. Auction Procedures. A. Certain definitions. As used in this
paragraph 11, the following terms shall have the following meanings, unless
the context otherwise requires:
(i) "Auction Date" shall mean the first Business Day preceding
the first day of a Dividend Period.
(ii) "Available Preferred Shares" shall have the meaning
specified in paragraph 11(d)(i) below.
(iii) "Bid" shall have the meaning specified in paragraph
11(b)(i) below.
(iv) "Bidder" shall have the meaning specified in paragraph
11(b)(i) below.
(v) "Hold Order" shall have the meaning specified in paragraph
11(b)(i) below.
(vi) "Maximum Applicable Rate," for any Dividend Payment Period
for the Preferred Shares will be the Applicable Percentage
of the higher of the 30-day "AA" Composite Commercial Paper
Rate and the Taxable Equivalent of the Short-Term Municipal
Bond Rate except in the case of a Special Dividend Period in
which case the Maximum Applicable Rate for any Dividend
Payment Period included in such Special Dividend Period will
be the Applicable Percentage (determined on the date of the
Notice of Special Dividend Period in the case of any such
Notice that specifies a Maximum Applicable Rate applicable
to such Special Dividend Payment Period) of the Special
Dividend Period Reference Rate for such Dividend Payment
Period. The Applicable Percentage will be determined based
on (i) the lower of the credit rating or ratings assigned on
such date to such shares by Moody's and S&P (or if Moody's
or S&P or both shall not make such rating available, the
equivalent of either or both of such ratings by a Substitute
Rating Agency or two Substitute Rating Agencies or, in the
event that only one such rating shall be available, such
rating) and (ii) whether the Corporation has provided
notification to the Auction Agent prior to the Auction
establishing the Applicable Rate for any dividend pursuant
to paragraph 2(f) hereof that net capital gains or other
taxable income will be included in such dividend on
Preferred Shares as follows:
Applicable Applicable
Percentage: Percentage:
Credit Ratings No Notification Notification
- -------------------------------------- ------------------ ----------------
Moody's S&P
- -------------------- -------------
"aa3" or higher AA- or higher 110% 150%
"a3"to "a1" A- to A+ 125% 160%
"baa3" to "baa1" BBB- to BBB+ 150% 250%
"ba3" to "ba1" BB- to BB+ 200% 275%
Below "ba3" Below BB- 250% 300%
The Corporation will take all reasonable action necessary to enable
Moody's and S&P to provide a rating for both series of Preferred Shares. If
either Moody's or S&P shall not make such a rating available, or neither
Moody's nor S&P shall make such a rating available, Merrill Lynch, Pierce,
Fenner & Smith Incorporated or its affiliates and successors together with
Lehman Special Securities Incorporated or its affiliates and successors,
after consultation with the Corporation, will select a nationally
recognized statistical rating organization (a "Substitute Rating Agency")
or two nationally recognized statistical rating organizations ("Substitute
Rating Agencies") to act as Substitute Rating Agency or Substitute Rating
Agencies, as the case may be; provided that if such a rating is not made
available with respect to the Series M28 Preferred Shares only, Merrill
Lynch, Pierce, Fenner & Smith or its affiliates and successors, after
consultation with the Corporation, shall select a Substitute Rating Agency
or Agencies and if such rating is not made available with respect to the
Series M7 Preferred Shares only, Lehman Special Securities Incorporated or
its affiliates and successors, after consultation with the Corporation,
shall select a Substitute Rating Agency or Agencies.
(vii) "Minimum Applicable Rate," for any Dividend Payment Period
included in a Special Dividend Period for which Bid
Requirements are imposed will be such rate as may be
specified by the Corporation in the Notice of Special
Dividend Period relating to the Special Dividend Period
within which such Dividend Payment Period occurs.
(viii) "Order" shall have the meaning specified in paragraph
11(b)(i) below.
(ix) "Preferred Shares" shall mean the Preferred Shares being
auctioned pursuant to this paragraph 11.
(x) "Sell Order" shall have the meaning specified in paragraph
11(b)(i) below.
(xi) "Submission Deadline" shall mean 1:00 P.M., New York City
time, on any Auction Date or such other time on any Auction
Date as may be specified by the Auction Agent from time to
time as the time by which each Broker-Dealer must submit to
the Auction Agent in writing all Orders obtained by it for
the Auction to be conducted on such Auction Date.
(xii) "Submitted Bid" shall have the meaning specified in
paragraph 11(d)(i) below.
(xiii) "Submitted Hold Order" shall have the meaning specified in
paragraph 11(d)(i) below.
(xiv) "Submitted Order" shall have the meaning specified in
paragraph 11(d)(i) below.
(xv) "Submitted Sell Order" shall have the meaning specified in
paragraph 11(d)(i) below.
(xvi) "Sufficient Clearing Bids" shall have the meaning specified
in paragraph 11(d)(i) below.
(xvii) "Winning Bid Rate" shall have the meaning specified in
paragraph 11(d)(i) below.
A. Orders by Existing Holders and Potential Holders.
(i) On or prior to the Submission Deadline on each Auction Date:
(1) each Existing Holder may submit to a Broker-Dealer
information as to:
(A) the number of Outstanding shares, if any, of Preferred
Shares held by such Existing Holder which such Existing
Holder desires to continue to hold without regard to
the Applicable Rate for the next succeeding Dividend
Period;
(B) the number of Outstanding shares, if any, of Preferred
Shares held by such Existing Holder which such Existing
Holder desires to continue to hold, provided that the
Applicable Rate for the next succeeding Dividend Period
shall not be less than the rate per annum or, in the
case of an Auction with Bid Requirements including a
Spread, the Spread specified by such Existing Holder;
and/or
(C) the number of Outstanding shares, if any, of Preferred
Shares held by such Existing Holder which such Existing
Holder offers to sell without regard to the Applicable
Rate for the next succeeding Dividend Period; and
(2) each Broker-Dealer, using a list of Potential Holders that
shall be maintained in good faith for the purpose of
conducting a competitive Auction, shall contact Potential
Holders, including Persons that are not Existing Holders, on
such list to determine the number of Outstanding shares, if
any, of Preferred Shares which each such Potential Holder
offers to purchase, provided that the Applicable Rate for
the next succeeding Dividend Period shall not be less than
the rate per annum or Spread specified by such Potential
Holder.
For the purposes hereof, the communication to a Broker-Dealer of
information referred to in clause (A) or (B) of this paragraph 11(b)(i) is
hereinafter referred to an "Order" and each Existing Holder and each
Potential Holder placing an Order is hereinafter referred to as a "Bidder";
an Order containing the information referred to in clause (A)(1) of this
paragraph 11(b) (i) is hereinafter referred to as a "Hold Order"; an Order
containing the information referred to in clause (A)(2) or (B) of this
paragraph 11(b)(i) is hereinafter referred to as a "Bid"; and an Order
containing the information referred to in clause (A)(3) of this paragraph
11(b)(i) is hereinafter referred to as a "Sell Order".
(ii) (1) A Bid by an Existing Holder shall constitute an irrevocable
offer to sell:
(A) the number of Outstanding Preferred Shares specified in
such Bid if the Applicable Rate determined on such
Auction Date shall be less than the rate per annum or
Spread specified in such Bid; or
(B) such number of a lesser number of Outstanding Preferred
Shares to be determined as set forth in paragraph
11(e)(i)(D) if the Applicable Rate determined on such
Auction Date shall be equal to the rate per annum or
Spread specified therein; or
(C) a lesser number of Outstanding Preferred Shares to be
determined as set forth in paragraph 11(e)(ii)(C) if
such specified rate per annum shall be higher than the
Maximum Applicable Rate and Sufficient Clearing Bids do
not exist.
(2) A Sell Order by an Existing Holder shall constitute an
irrevocable offer to sell:
(A) the number of Outstanding Preferred Shares specified in
such Sell Order; or
(B) such number or a lesser number of Outstanding Preferred
Shares to be determined as set forth in paragraph
11(e)(ii)(C) if Sufficient Clearing Bids do not exist.
(3) A Bid by a Potential Holder shall constitute an irrevocable
offer to purchase:
(A) the number of Outstanding Preferred Shares specified in
such Bid if the Applicable Rate determined on such
Auction Date shall be higher than the rate per annum or
Spread specified in such Bid; or
(B) such number or a lesser number of Outstanding Preferred
Shares to be determined as set forth in paragraph
11(e)(i)(E) if the Applicable Rate determined on such
Auction Date shall be equal to the rate per annum or
Spread specified therein.
B. Submission of Orders by Broker-Dealers to Auction Agent.
(i) Each Broker-Dealer shall submit in writing or through the
Auction Agent's Auction Processing System to the Auction
Agent prior to the Submission Deadline on each Auction Date
all Orders obtained by such Broker-Dealer and specifying
with respect to each Order:
(1) the name of the Bidder placing such Order;
(2) the aggregate number of Outstanding Preferred Shares
that are the subject of such Order;
(3) to the extent that such Bidder is an Existing Holder:
(A) the number of Outstanding shares, if any, of
Preferred Shares subject to any Hold Order placed
by such Existing Holder;
(B) the number of Outstanding shares, if any, of
Preferred Shares subject to any Bid placed by such
Existing Holder and the rate per annum or Spread
specified in such Bid; and
(C) the number of Outstanding shares, if any, of
Preferred Shares subject to any Sell Order placed
by such Existing Holder; and
(4) (i) to the extent such Bidder is a Potential Holder,
the rate per annum or Spread specified in such
Potential Holder's Bid.
(ii) If any rate per annum or Spread 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% and shall round
such Spread to the next highest one-thousandth (.001) of a
basis point.
(iii) If an Order or Orders covering all of the Outstanding
Preferred Shares held by an 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
on behalf of such Existing Holder covering the number of
Outstanding Preferred Shares held by such Existing Holder
and not subject to Orders submitted to the Auction Agent;
provided, however, that with respect to an Auction to
establish a Special Dividend Period longer than 91 days, the
Auction Agent shall deem a Sell Order to have been submitted
on behalf of such Existing Holder covering such number of
Outstanding Preferred Shares.
(iv) If one or more Orders on behalf of an Existing Holder
covering in the aggregate more than the number of
Outstanding Preferred Shares held by such Existing Holder
are submitted to the Auction Agent, such Orders shall be
considered valid as follows and in the following order of
priority:
(1) any Hold Order submitted on behalf of such Existing
Holder shall be considered valid up to and including
the number of Outstanding Preferred Shares held by such
Existing Holder; provided that if more than one Hold
Order is submitted on behalf of such Existing Holder
and the number of Preferred Shares subject to such Hold
Orders exceeds the number of Outstanding Preferred
Shares held by such Existing Holder, the number of
Preferred Shares subject to each of such Hold Orders
shall be reduced pro rata so that such Hold Orders, in
the aggregate, will cover exactly the number of
Outstanding Preferred Shares held by such Existing
Holder;
(2) any Bids submitted on behalf of such Existing Holder
shall be considered valid, in the ascending order of
their respective rates per annum or Spread, if more
than one Bid is submitted on behalf of such Existing
Holder, up to and including the excess of the number of
Outstanding Preferred Shares held by such Existing
Holder over the number of Preferred Shares subject to
any Hold Order referred to in paragraph 11(c)(iv)(A)
above (and if more than one Bid submitted on behalf of
such Existing Holder specifies the same rate per annum
or Spread and together they cover more than the
remaining number of shares that can be the subject of
valid Bids after application of paragraph 11(c)(iv)(A)
above and of the foregoing portion of this paragraph
11(c)(iv)(B) to any Bid or Bids specifying a lower rate
or rates per annum or Spread, the number of shares
subject to each of such Bids shall be reduced pro rata
so that such Bids, in the aggregate, cover exactly such
remaining number of shares) ; and the number of shares,
if any, subject to Bids not valid under this paragraph
11(c)(iv)(B) shall be treated as the subject of a Bid
by a Potential Holder; and
(3) any Sell Order shall be considered valid up to and
including the excess of the number of Outstanding
Preferred Shares held by such Existing Holder over the
number of Preferred Shares subject to Hold Orders
referred to in paragraph 11(c)(iv)(A) and Bids referred
to in paragraph 11(c)(iv)(B); provided that if more
than one Sell Order is submitted on behalf of any
Existing Holder and the number of Preferred Shares
subject to such Sell Orders is greater than such
excess, the number of Preferred Shares subject to each
of such Sell Orders shall be reduced pro rata so that
such Sell Orders, in the aggregate, cover exactly the
number of Preferred Shares equal to such excess.
(v) If more than one Bid is submitted on behalf of any Potential
Holder, each Bid submitted shall be a separate Bid with the
rate per annum or Spread and number of Preferred Shares
specified.
(vi) Any Bid by an Existing Holder that specifies a Spread, with
respect to an Auction in which a Spread is not included in
any Bid Requirements or in which there are no Bid
Requirements and any Order that does not specify a Spread
with respect to an Auction in which a Spread is included in
any Bid Requirements shall be treated as a Sell Order.
C. Determination of Sufficient Clearing Bids, Winning Bid Rate
and Applicable Rate.
(i) Not earlier than the Submission Deadline on each Auction
Date, the Auction Agent shall assemble all Orders submitted
or deemed submitted to it by the Broker-Dealers (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 shall
determine:
(1) the excess of the total number of Outstanding Preferred
Shares over the number of Outstanding Preferred Shares
that are the subject of Submitted Hold Orders (such
excess being hereinafter referred to as the "Available
Preferred Shares");
(2) from the Submitted Orders whether the number of
Outstanding Preferred Shares that are the subject of
Submitted Bids by Potential Holders specifying one or
more rates per annum or Spreads that result in one or
more rates per annum on such date equal to or lower
than the Maximum Applicable Rate in effect for the
first Dividend Payment Period after the Auction Date
exceeds or is equa1 to the sum of:
(A) the number of Outstanding Preferred Shares that
are the subject of Submitted Bids by Existing
Holders specifying one or more rates per annum or
Spreads that result in one or more rates per annum
on such date higher than such Maximum Applicable
Rate, and
(B) the number of Outstanding Preferred Shares that
are subject to Submitted Sell Orders (if such
excess or such equality exists (other than because
the number of Outstanding Preferred Shares in
clauses (1) and (2) above are each zero because
all of the Outstanding Preferred Shares are the
subject of Submitted Hold Orders), such Submitted
Bids by Potential Holders being hereinafter
referred to collectively as "Sufficient Clearing
Bids"); and
(3) if Sufficient Clearing Bids exist, the lowest rate per
annum or, in the case of an Auction with Bid
Requirements including a Spread, the lowest Spread
specified in the Submitted Bids (the "Winning Bid
Rate") that if:
(A) each Submitted Bid from Existing Holders
specifying the Winning Bid Rate and all other
Submitted Bids from Existing Holders specifying
lower rates per annum or Spreads were rejected,
thus entitling such Existing Holders to continue
to hold the Preferred Shares that are the subject
of such Submitted Bids, and
(B) each Submitted Bid from Potential Holders
specifying the Winning Bid Rate and all other
Submitted Bids from Potential Holders specifying
lower rates per annum or Spreads were accepted,
thus entitling the Potential Holders to purchase
the Preferred Shares that are the subject of such
Submitted Bids, would result in the number of
shares subject to all Submitted Bids specifying
the Winning Bid Rate or a lower rate per annum or
Spread being at least equal to the Available
Preferred Shares.
(4) For purposes of these Articles Supplementary, a
positive Spread shall be considered lower than another
positive Spread to the extent it is a lower number, a
Spread of zero shall be considered lower than a
positive Spread, a negative Spread shall be considered
lower than a Spread of zero and a negative Spread shall
be considered lower than another negative Spread to the
extent it is a higher number.
(ii) Promptly after the Auction Agent has made the determinations
pursuant to paragraph 11(d)(i), the Auction Agent shall advise
the Corporation of the Maximum Applicable Rate (or, in the event
the Corporation has specified a Maximum Applicable Rate or Rates,
or a Minimum Applicable Rate or Rates the Auction Agent shall
confirm to the Corporation the calculation of such Maximum
Applicable Rate or Rates or such Minimum Applicable Rate or
Rates) and, based on such determinations, the Applicable Rate for
the next succeeding Dividend Period as follows:
(1) if Sufficient Clearing Bids exist, that the Applicable Rate
for the next succeeding Dividend Period shall be equal to
the Winning Bid Rate, subject to the effect of any
applicable Minimum Applicable Rate and any applicable
Maximum Applicable Rate;
(2) if Sufficient Clearing Bids do not exist (other than because
all of the Outstanding Preferred Shares are the subject of
Submitted Hold Orders and other than in the event the
Auction is being conducted with respect to a Special
Dividend Period), that the Applicable Rate for the next
succeeding Dividend Period shall be equal to the Maximum
Applicable Rate;
(3) if all of the Outstanding Preferred Shares are the subject
of Submitted Hold Orders that the Dividend Period next
succeeding the Auction shall automatically be the same
length as the immediately preceding Dividend Period and the
Applicable Rate for the next succeeding Dividend Period will
be the higher of the 30-day "AA" Composite Commercial Paper
Rate and the Taxable Equivalent of the Short-Term Municipal
Bond Rate multiplied by 1 minus the maximum marginal regular
Federal individual income tax rate then applicable to
ordinary income or the maximum marginal regular Federal
corporate tax rate then applicable, whichever is greater (or
90% of such rate if the Corporation has provided
notification to the Auction Agent prior to the Auction
establishing the Applicable Rate for any dividend pursuant
to paragraph 2(f) hereof that net capital gains or other
taxable income will be included in such dividend on
Preferred Shares) on the date of the Auction; or
(4) If the Auction is being conducted with respect to a Special
Dividend Period and Sufficient Clearing Bids do not exist,
that the Dividend Period next succeeding the Auction shall
automatically be 28 days (in the case of Series M28
Preferred Shares) or 7 days (in the case of Series M7
Preferred Shares) and the Applicable Rate for the next
succeeding Dividend Period will be as set forth in paragraph
11(d) (ii) (C) above.
D. Acceptance and Rejection of Submitted Bids and Submitted Sell
Orders and Allocation of Shares. Based on the determinations made pursuant
to paragraph 11(d)(i), the Submitted Bids and Submitted Sell Orders shall
be accepted or rejected and the Auction Agent shall take such other action
as set forth below:
(i) If Sufficient Clearing Bids have been made, subject to the
provisions of paragraph 11(e)(iii) and paragraph 11(e)(iv),
Submitted Bids and Submitted Sell Orders shall be accepted or
rejected in the following order of priority and all other
Submitted Bids shall be rejected:
(1) the Submitted Sell Orders of Existing Holders shall be
accepted and the Submitted Bid of each of the Existing
Holders specifying any rate per annum or Spread that is
higher than the Winning Bid Rate shall be accepted, thus
requiring each such Existing Holder to sell the Outstanding
Preferred Shares that are the subject of such Submitted Sell
Order or Submitted Bid;
(2) the Submitted Bid of each of the Existing Holders specifying
any rate per annum or Spread that is lower than the Winning
Bid Rate shall be rejected, thus entitling each such
Existing Holder to continue to hold the Outstanding
Preferred Shares that are the subject of such Submitted Bid;
(3) the Submitted Bid of each of the Potential Holders
specifying any rate per annum that is lower than the Winning
Bid Rate or Spread shall be accepted;
(4) the Submitted Bid of each of the Existing Holders specifying
a rate per annum or Spread that is equal to the Winning Bid
Rate shall be rejected, thus entitling each such Existing
Holder to continue to hold the Outstanding Preferred Shares
that are the subject of such Submitted Bid, unless the
number of Outstanding Preferred Shares subject to all such
Submitted Bids shall be greater than the number of
Outstanding Preferred Shares ("Remaining Shares") equal to
the excess of the Available Preferred Shares over the number
of Outstanding Preferred Shares subject to Submitted Bids
described in paragraph 11(e)(i)(B) and paragraph
11(e)(i)(C), in which event the Submitted Bids of each such
Existing Holder shall be accepted, and each such Existing
Holder shall be required to sell Outstanding Preferred
Shares, but only in an amount equal to the difference
between (1) the number of Outstanding Preferred Shares then
held by such Existing Holder subject to such Submitted Bid
and (2) the number of Preferred Shares obtained by
multiplying (x) the number of Remaining Shares by (y) 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 sum of the numbers of Outstanding Preferred
Shares subject to such Submitted Bids made by all such
Existing Holders that specified a rate per annum equal or
Spread to the Winning Bid Rate; and
(5) the Submitted Bid of each of the Potential Holders
specifying a rate per annum or Spread that is equal to the
Winning Bid Rate shall be accepted but only in an amount
equal to the number of Outstanding Preferred Shares obtained
by multiplying (x) the difference between the Available
Preferred Shares and the number of Outstanding Preferred
Shares subject to Submitted Bids described in paragraph
11(e)(i)(B), paragraph 11(e)(i)(C) and paragraph 11(e)(i)(D)
by (y) 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 sum of the
numbers of Outstanding Preferred Shares subject to such
Submitted Bids made by all such Potential Holders that
specified a rate per annum or Spread equal to the Winning
Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other than
because all of the Outstanding Preferred Shares are subject
to Submitted Hold Orders), subject to the provisions of
paragraph 11(e)(iii), Submitted Orders shall be accepted or
rejected as follows in the following order of priority and
all other Submitted Bids shall be rejected:
(1) The Submitted Bid of each Existing Holder specifying
any rate per annum or Spread that is equal to or lower
than the Maximum Applicable Rate (a Bid specifying a
Spread being converted to a rate per annum for this
purpose by applying the Spread to the most recently
available Reference Index or Reference Security) shall
be rejected, thus entitling such Existing Holder to
continue to hold the Outstanding Preferred Shares that
are the subject of such Submitted Bid;
(2) the Submitted Bid of each Potential Holder specifying
any rate per annum or Spread that is equal to or lower
than the Maximum Applicable Rate (a Bid specifying a
Spread being converted to a rate per annum for this
purpose by applying the Spread to the most recently
available Reference Index or Reference Security) shall
be accepted, thus requiring such Potential Holder to
purchase the Outstanding Preferred Shares that are the
subject of such Submitted Bid; and
(3) the Submitted Bids of each Existing Holder specifying
any rate per annum or Spread that is higher than the
Maximum Applicable Rate (a Bid specifying a Spread
being converted to a rate per annum for this purpose by
applying the Spread to the most recently available
Reference Index or Reference Security) shall be
accepted and the Submitted Sell Orders of each Existing
Holder shall be accepted, in both cases only in an
amount equal to the difference between (1) the number
of Outstanding Preferred Shares then held by such
Existing Holder subject to such Submitted Bid or
Submitted Sell Order and (2) the number of Preferred
Shares obtained by multiplying (x) the difference
between the Available Preferred Shares and the
aggregate number of Outstanding Preferred Shares
subject to Submitted Bids described in paragraph
11(e)(ii)(A) and paragraph 11(e)(ii)(B) by (y) a
fraction the numerator of which shall be the number of
Outstanding Preferred Shares held by such Existing
Holder subject to such Submitted Bid or Submitted Sell
Order and the denominator of which shall be the number
of Outstanding Preferred Shares subject to all such
Submitted Bids and Submitted Sell Orders.
(iii) if, as a result of the procedures described in paragraph
11(e)(i) or paragraph 11(e)(ii), 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
share of Preferred Shares on any Auction Date, the Auction
Agent shall, in such manner as in its sole discretion it
shall determine, round up or down the number of Preferred
Shares to be purchased or sold by any Existing Holder or
Potential Holder on such Auction Date so that each
Outstanding share of Preferred Shares purchased or sold by
each Existing Holder or Potential Holder on such Auction
Date shall be a whole share of Preferred Shares.
(iv) If, as a result of the procedures described in paragraph
11(e)(i), any Potential Holder would be entitled or required
to purchase less than a whole share of Preferred Shares on
any Auction Date, the Auction Agent shall, in such manner as
in its sole discretion it shall determine, allocate
Preferred Shares for purchase among Potential Holders so
that only whole Preferred Shares are purchased on such
Auction Date by any Potential Holder, even if such
allocation results in one or more of such Potential Holders
not purchasing any Preferred Shares on such Auction Date.
(v) Based on the results of each Auction, the Auction Agent
shall determine, with respect to each Broker-Dealer that
submitted Bids or Sell Orders on behalf of Existing Holders
or Potential Holders, the aggregate number of Outstanding
Preferred Shares to be purchased and the aggregate number of
Outstanding Preferred Shares to be sold by such Potential
Holders and Existing Holders and, to the extent that such
aggregate number of Outstanding shares to be purchased and
such aggregate number of Outstanding shares to be sold
differ, the Auction Agent shall determine to which other
Broker-Dealer or Broker-Dealers acting for one or more
purchasers such Broker-Dealer shall deliver, or from which
other Broker-Dealer or Broker- Dealers acting for one or
more sellers such Broker-Dealer shall receive, as the case
may be, Outstanding Preferred Shares.
E. Miscellaneous. An Existing Holder (A) may sell, transfer or
otherwise dispose of Preferred Shares only pursuant to a Bid or Sell
Order in accordance with the procedures described in this paragraph 11
or to or through a broker-dealer, provided that in the case of all
transfers other than pursuant to Auctions such Existing Holder, its
Broker-Dealer or its Agent Member advises the Auction Agent of such
transfer and (B) except as otherwise required by law, shall have the
ownership of the Preferred Shares held by it maintained in book entry
form by the Securities Depository in the account of its Agent Member,
which in turn will maintain records of such Existing Holder's
beneficial ownership. Neither the Corporation nor any Affiliate shall
submit an Order in any Auction. Any Existing Holder that is an
Affiliate shall not sell, transfer or otherwise dispose of Preferred
Shares to any Person other than the Corporation. All of the
Outstanding Preferred Shares of each series shall be represented by a
single certificate registered in the name of the nominee of the
Securities Depository unless otherwise required by law or unless there
is no Securities Depository. If there is no Securities Depository, at
the Corporation's option and upon its receipt of such documents as it
deems appropriate, any Preferred Shares may be registered in the Stock
Register in the name of the Existing Holder thereof and such Existing
Holder thereupon will be entitled to receive certificates therefor and
required to deliver certificates therefor upon transfer or exchange
thereof.
1. Securities Depository; Stock Certificates. A. If there is a
Securities Depository, one certificate for all of the Preferred Shares of
each series shall be issued to the Securities Depository and registered in
the name of the Securities Depository or its nominee. Additional
certificates may be issued as necessary to represent Preferred Shares. All
such certificates shall bear a legend to the effect that such certificates
are issued subject to the provisions restricting the transfer of Preferred
Shares contained in these Articles Supplementary. Unless the Corporation
shall have elected, during a Non-Payment Period, to waive this requirement,
the Corporation will also issue stop-transfer instructions to the Auction
Agent for the Preferred Shares. Except as provided in paragraph (b) below,
the Securities Depository or its nominee will be the Holder, and no
Existing Holder shall receive certificates representing its ownership
interest in such shares.
A. If the Applicable Rate applicable to all Preferred Shares of a
series shall be the Non-Payment Period Rate or there is no Securities
Depository, the Corporation may at its option issue one or more new
certificates with respect to such shares (without the legend referred
to in paragraph 12 (a)) registered in the names of the Existing
Holders or their nominees and rescind the stop-transfer instructions
referred to in paragraph 12(a) with respect to such shares.
1. Interpretations. The Board of Directors may interpret the
provisions of these Articles Supplementary to resolve any inconsistency or
ambiguity, remedy any formal defect or make any other change or
modification that does not adversely affect the rights of Existing Holders
of Preferred Shares."
SECOND: The amendment to the charter of the Corporation set forth in
these Articles of Amendment was advised by the Board of Directors of the
Corporation and approved by the stockholders of the Corporation at a
special meeting of the stockholders of the Corporation held on July 13,
1994.
THIRD: The amendment to the charter of the Corporation set forth in
these Articles of Amendment does not increase the authorized capital stock
of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be executed by its President and its corporate seal to be
affixed hereto and attested to by its Secretary as of the 13th day of July,
1994.
THE BLACKROCK INSURED MUNICIPAL TERM TRUST
INC.
(SEAL)
By:_____________________________________
Ralph L. Schlosstein
President
ATTEST:
_______________________________
Barbara G. Novick
Secretary
The undersigned, the President of The BlackRock Insured Municipa1 Term
Trust Inc., hereby acknowledges the foregoing to be the corporate act of
such Corporation and that, to the best of his knowledge, information and
belief, the matters and facts set forth therein are true in all material
respects, and that this statement has been made under the penalties of
perjury.
_________________________________
Ralph L. Schlosstein
President
APPENDIX C-2
THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC.
ARTICLES OF AMENDMENT
THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC., a Maryland
corporation (the "Corporation"), hereby certifies as follows:
FIRST: For the purposes of these Articles of Amendment, the following
terms, when used herein in capitalized form, shall have the meanings
indicated: (a) "Articles Supplementary" shall mean the Articles
Supplementary of the Corporation which (i) created the classes of capital
stock of the Corporation designated as the "Auction Rate Municipal
Preferred Stock, Series M28" and the "Auction Rate Municipal Preferred
Stock, Series M7" and (ii) were amended pursuant to Articles of Amendment
that were filed with, and approved for record by, the Maryland State
Department of Assessments and Taxation on July 21, 1994; and (b) "Effective
Date" shall mean 5:00 p.m. (Eastern Daylight Time) on the date that these
Articles of Amendment are filed with, and accepted for record by, the
Maryland State Department of Assessments and Taxation in accordance with
the Maryland General Corporation Law.
SECOND: The amendment to the Charter of the Corporation hereinafter
set forth in these Articles of Amendment shall become effective at the
Effective Date.
THIRD: Effective as of the Effective Date, the Charter of the
Corporation shall be, and is hereby, amended for the purposes of changing
and reclassifying certain of the shares of the authorized capital stock of
the Corporation into additional authorized shares of the "Auction Rate
Municipal Preferred Stock, Series M28" and the "Auction Rate Municipal
Preferred Stock, Series M7" and decreasing the liquidation preferences
thereof as follows:
(a) By striking out the "DESIGNATION" set forth in the first paragraph
of Article SECOND of the Articles Supplementary and inserting in lieu
thereof the following:
"SERIES M28: A series of 2,600 shares of preferred stock,
par value $.01 per share, liquidation preference of $25,000 per
share plus an amount equal to accumulated but unpaid dividends
(whether or not earned or declared) thereon plus the premium, if
any, resulting from the designation of a Premium Call Period, is
hereby designated "Auction Rate Municipal Preferred Stock, Series
M28." Each share of Auction Rate municipal Preferred Stock, Series
M28 shall have such preferences, limitations and relative voting
rights, in addition to those required by applicable law or set
forth in the Corporation's Charter applicable to preferred stock
of the Corporation, as are set forth in these Articles
Supplementary. The Auction Rate Municipal Preferred Stock, Series
M28 shall constitute a separate series of preferred stock of the
Corporation, and each share of the Auction Rate Municipal
Preferred Stock, Series M28 shall be identical."
"SERIES M7: A series of 2,600 shares of preferred stock,
par value $.0l per share, liquidation preference of $25,000 per
share plus an amount equal to accumulated but unpaid dividends
(whether or not earned or declared) thereon plus the premium, if
any, resulting from the designation of a Premium Call Period, is
hereby designated "Auction Rate Municipal Preferred Stock, Series
M7." Each share of Auction Rate Municipal Preferred Stock, Series
M7 shall have such preferences, limitations and relative voting
rights, in addition to those required by applicable law or set
forth in the Corporation's Charter applicable to preferred stock
of the Corporation, as are set forth in these Articles
Supplementary. The Auction Rate Municipal Preferred Stock, Series
M7 shall constitute a separate series of preferred stock of the
Corporation, and each share of the Auction Rate Municipal
Preferred Stock, Series M7 shall be identical."
(b) By striking out the first sentence of Paragraph 3 (Liquidation
Rights) of Article SECOND of the Articles Supplementary and inserting in
lieu thereof the following:
"3. Liquidation Rights. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary,
the Holders shall be entitled to receive, out of the assets of
the Corporation available for distribution to shareholders,
before any distribution or payment is made upon any Common Stock
or any other capital stock ranking junior in right of payment
upon liquidation to the Preferred Shares, the sum of $25,000 plus
accumulated but unpaid dividends (whether or not earned or
declared) thereon plus the premium, if any, resulting from the
designation of a Premium Call Period to the date of distribution,
and after such payment the holders of Preferred Shares will be
entitled to no other payments other than Additional Dividends as
provided in paragraph 2(e) hereof."
FOURTH: Effective as of the Effective Date, each share of the issued
and outstanding "Auction Rate Municipal Preferred Stock, Series M28" shall
be converted into two (2) shares of the "Auction Rate Municipal Preferred
Stock, Series M28," each of which shall have all of the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption as are
afforded to each and every other share of the "Auction Rate Municipal
Preferred Stock, Series M28" pursuant to the Charter of the Corporation (as
amended by these Articles of Amendment) and the Maryland General
Corporation Law.
FIFTH: Effective as of the Effective Date, each share of the issued
and outstanding "Auction Rate Municipal Preferred Stock, Series M7" shall
be converted into two (2) shares of the "Auction Rate municipal Preferred
Stock, Series M7," each of which shall have all of the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption as are
afforded to each and every other share of the "Auction Rate Municipal
Preferred Stock, Series M7" pursuant to the Charter of the Corporation (as
amended by these Articles of Amendment) and the Maryland General
Corporation Law.
SIXTH: The amendment to the Charter of the Corporation set forth in
these Articles of Amendment was advised by the Board of Directors of the
Corporation in accordance with the Charter and Bylaws of the Corporation
and the Maryland General Corporation Law.
SEVENTH: The amendment to the Charter of the Corporation set forth in
these Articles of Amendment was approved by the stockholders of the
Corporation at a meeting of the stockholders of the Corporation held on May
16, 1995 in accordance with the Charter and Bylaws of the Corporation and
the Maryland General Corporation Law.
EIGHTH: The amendment to the Charter of the Corporation set forth in
these Articles of Amendment changes and reclassifies certain of the
authorized shares of the capital stock of the Corporation into additional
authorized shares of the "Auction Rate Municipal Preferred Stock, Series
M28" and the "Auction Rate Municipal Preferred Stock, Series M7,"
respectively, but does not increase the aggregate number of authorized
shares of the capital stock of the Corporation. Prior to the Effective
Date, there were 1,300 authorized shares of the "Auction Rate Municipal
Preferred Stock, Series M28." As of the Effective Dater there will be 2,600
shares of the "Auction Rate Municipal Preferred Stock, Series M28. "Prior
to the Effective Date, there were 1,300 authorized shares of the "Auction
Rate Municipal Preferred Stock, Series M7." As of the Effective Date, there
will be 2,600 shares of the "Auction Rate Municipal Preferred Stock, Series
M7."
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be executed in its name and on its behalf by its President and
its corporate seal to be affixed and attested to by its Secretary as of the
___ day of June, 1995.
ATTEST: THE BLACKROCK INSURED MUNICIPAL TERM
TRUST INC.
_____________________
Karen H. Sabath By:________________________________________
Secretary Ralph L. Schlosstein
President
The undersigned, being duly elected and acting President of The
BlackRock Insured Municipal Term Trust Inc. hereby acknowledges that the
foregoing Articles of Amendment, of which this certificate is a part, is
the act and deed of The BlackRock Insured Municipal Term Trust Inc., and
certifies, under the penalties for perjury, to the best of his knowledge,
information and belief, that all matters and facts set forth therein are
true in all material respects.
____________________________________________
Ralph L. Schlosstein
APPENDIX C-3
FORM OF
ARTICLES SUPPLEMENTARY
OF THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC.
THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC., a Maryland
corporation having its principal Maryland office in the City of Baltimore
(the "Corporation"), certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: Pursuant to the authority expressly vested in the Board of
Directors of the Corporation by article fifth of its Charter, the Board of
Directors has reclassified 1,616 authorized and unissued shares of common
stock of the Corporation as preferred stock of the Corporation by
increasing the number of shares of stock designated as Auction Rate
Municipal Preferred Stock, Series M7 from 2,600 to 4,216.
SECOND: All of the authorized shares of the Auction Rate Municipal
Preferred Stock, Series M7 shall be subject in all respects to the
preferences, voting powers, restrictions, qualifications, and terms and
conditions of redemption applicable to shares of Auction Rate Municipal
Preferred Stock, Series M7 as provided in the Corporation's Charter;
provided, however, that the Initial Dividend Period for such 1,616 shares
shall be days and the Initial Dividend Rate for such shares shall be
%.
IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be signed and acknowledged in its name and on its behalf
on this ___ day of ________________, 2000, by its President, who
acknowledges that these Articles Supplementary are the act of the
Corporation and, to the best of his knowledge, information and belief and
under penalties of perjury, all matters and facts contained in these
Articles Supplementary are true in all material respects.
THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC.
By:____________________________________________
Ralph L. Schlosstein
President
Attest:
______________________________
Karen H. Sabath
Secretary
PART C - OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(1) FINANCIAL STATEMENTS:
Included in Part A of the Registration Statement
Financial Highlights for the period ended December 31, 1992 each of the six
years ended December 31, 1998 and the period ended June 30, 1999
PART I
Incorporated by reference to Registrant's most recent Annual and
Semi-Annual Reports to Shareholders dated December 31, 1998 and June 30,
1999, respectively:
Independent Auditors Report for year ended December 31, 1998
Portfolio of Investments, December 31, 1998 (audited)
Portfolio of Investments, June 30, 1999 (unaudited)
Statement of Net Assets, December 31, 1998 (audited)
Statement of Net Assets, June 30, 1999 (unaudited)
Statement of Operations for the year ended December 31, 1998 (audited)
Statement of Operations for the six-month period ended June 30, 1999
(unaudited)
Statement of Changes in Net Assets for the two years ended December 31,
1998 (audited)
Statement of Changes in Net Assets for the six-month period ended June 30,
1999 (unaudited)
(2) EXHIBITS
The exhibits to this Registration Statement are listed in the Exhibit Index
located elsewhere herein.
ITEM 25: MARKETING ARRANGEMENTS
See Sections ___ and ___ of the Purchase Agreement filed as an Exhibit
herein.
ITEM 26: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Securities and Exchange Commission fees $
Printing and engraving expenses
Legal fees
Accounting expenses
Rating Agency fees
Blue Sky filing fees and expenses
Miscellaneous expenses
Total* $
- ----------
* Estimated
ITEM 27: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The Trust is not under common control with any person except to the extent
that the existence of identical boards of directors or trustees as the case
may be, at other investment companies advised by the Adviser would render
the Trust under common control with such other investment companies. The
Trust does not control any person.
ITEM 28: NUMBER OF HOLDERS OF SECURITIES
At December 31, 1999:
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
------------------------------------------------
Common Stock, $.01 par value
Preferred Shares, $.01 par value
ITEM 29: INDEMNIFICATION
Under Registrant's Articles of Incorporation and By-Laws, the directors and
officers of Registrant will be indemnified to the fullest extent allowed
and in the manner provided by Maryland law and applicable provisions of the
Investment Company Act of 1940, including advancing of expenses incurred in
connection therewith. Indemnification shall not be provided however to any
officer or director against any liability to the Registrant or its
securityholders to which he or she 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 or her office.
Article 2, Section 405.2 of the Maryland General Corporation Law provides
that the Articles of Incorporation of a Maryland corporation may limit the
extent to which directors or officers may be personally liable to the
Corporation or its stockholders for money damages in certain instances. The
Registrant's Articles of Incorporation provide that, to the fullest extent
permitted by Maryland law, as it may be amended or interpreted from time to
time, no director or officer of the Registrant shall be personally liable
to the Registrant or its stockholders. The Registrant's Articles of
Incorporation also provide that no amendment of the Registrant's Articles
of Incorporation or repeal of any of its provisions shall limit or
eliminate any of the benefits provided to directors and officers in respect
of any act or omission that occurred prior to such amendment or repeal.
The underwriting agreements filed as Exhibit h hereto contain provisions
requiring indemnification of the Registrant's underwriters by the
Registrant.
ITEM 30: BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See "Management of the Trust" in the Prospectus and for information
regarding the business of the investment adviser. For information as to the
business, profession, vocation or employment of a substantial nature of
each of the officers and directors of BlackRock Financial Management Inc.,
reference is made to the Adviser's current Form ADV filed under the
Investment Advisers Act of 1940, incorporated herein by reference.
ITEM 31: LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of the Registrant are maintained in part at the
office of the Adviser at 345 Park Avenue, New York, NY 10154, in part at
the offices of State Street, 1776 Heritage Drive, North Quincy,
Massachusetts 02171, in part at the offices of State Street Bank & Trust
Company, 150 Royal Street, Canton, Massachusetts 02021 and in part at the
offices of the Administrator, 800 Scudders Mill Road, Plainsboro, New Jersey
08536.
ITEM 32: MANAGEMENT SERVICES
Except as described in Part I of this Registration Statement under the
caption "Management of the Trust," the Registrant is not a party to any
management service related contract.
ITEM 33: UNDERTAKINGS
(1) Registrant undertakes to suspend the offering of its shares until it
amends its prospectus if (a) subsequent to the effective date of its
Registration Statement, the net assets value declines more than 10 percent
from its net asset value as of the effective date of the Registration
Statement, or (b) the net asset value increases to an amount greater than
its net proceeds as stated in the prospectus.
(2) Not applicable
(3) Not applicable
(4) Not applicable
(5) Registrant undertakes that:
(a) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the
form of prospectus filed as a part of a registration
statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant under Rule 497(h)
under the Securities Act of 1933 shall be deemed to be a
part of this Registration Statement as of the time it was
declared effective.
(b) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering
thereof.
(6) Registrant undertakes to send by first class mail or other means
designed to ensure equally prompt delivery, within two business days of
receipt of a written or oral request, any Statement of Additional
Information.
(7) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or proceeding
(is asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York,
on the ___ day of January, 2000.
THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC.
*
____________________________________
Ralph L. Schlosstein
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
*
_______________________________
Ralph L. Schlosstein President (Principal Executive Officer)
and Director January 3, 2000
*
_______________________________
Henry Gabbay Treasurer (Principal Financial
and Accounting Officer) January 3, 2000
*
______________________________
Laurence D. Fink Director January 3, 2000
*
_______________________________
Andrew F. Brimmer Director January 3, 2000
*
_______________________________
Richard E. Cavanagh Director January 3, 2000
*
_______________________________
Kent Dixon Director January 3, 2000
*
_______________________________
Frank J. Fabozzi Director January 3, 2000
*
_______________________________
James Clayburn LaForce, Jr. Director January 3, 2000
*
_______________________________
Walter F. Mondale Director January 3, 2000
</TABLE>
- --------------
* Signed by Karen Sabath pursuant to power of attorney, dated January 3, 2000.
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER PAGE
- ------ ----
a. (1) Articles of Incorporation*
(2) Articles of Amendment dated July 15, 1994 (for outstanding
preferred shares)* (3) Articles of Amendment dated July 20, 1995
(for outstanding preferred shares)* (4) Form of Articles
Supplementary (for New Preferred Shares)*
b. By-Laws*
c. None
d. (1) Specimen Stock Certificate Representing Shares of
Common Stock*
(2) Form of Specimen Stock Certificate Representing Series M7
Preferred Shares*
(3) Form of Specimen Stock Certificate Representing Series M28
Preferred Shares*
e. Dividend Reinvestment Plan*
f. Not Applicable
g. (1) Advisory Agreement*
(2) Administration Agreement*
h. (1) Form of Purchase Agreement for initial public offeringt+
(2) Form of Master Agreement Among Underwriters for initial public
offering+
(3) Form of Master Selected Dealer Agreement for initial public
offering+
i. Not Applicable
j. (1) Custodian Agreement*
(2) Transfer Agent Agreement*
k. (1) Auction Agent Agreement*
(2) Broker-Dealer Agreement*
(3) Depository Agreement*
l. Opinion and consent of counsel+
m. Not Applicable
n. Consent of Independent Accountants+
o. Not Applicable
p. Not Applicable
q. Not Applicable
r. Code of Ethics+
s. Powers of Attorney*
- --------------
* Filed herewith.
+ To be filed by amendment.
ARTICLES OF INCORPORATION
OF
THE BLACKSTONE INSURED MUNICIPAL TERM TRUST INC.
* * * * *
ARTICLE I
THE UNDERSIGNED, John B. Frisch, whose post office address is 10
Light Street, Baltimore, Maryland 21202, being at least eighteen (18) years
of age, hereby forms a corporation under and by virtue of the Maryland
General Corporation Law.
ARTICLE II
NAME
The name of the Corporation is The Blackstone Insured Municipal
Term Trust Inc. (the "Corporation").
ARTICLE III
PURPOSES AND POWERS
The purposes for which the Corporation is formed are to act as an
investment company under the federal Investment Company Act of 1940, as
amended (the "1940 Act"), and to exercise and enjoy all of the general
powers, rights and privileges granted to, or conferred upon, corporations
by the Maryland General Corporation Law now or hereafter in force.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the Corporation
in the State of Maryland is c/o The Corporation Trust Incorporated, 32
South Street, Baltimore, Maryland 21202. The name of the resident agent of
the Corporation in the State of Maryland is The Corporation Trust
Incorporated, a corporation of the State of Maryland, and the post office
address of the resident agent is 32 South Street, Baltimore, Maryland
21202.
ARTICLE V
CAPITAL STOCK
(1) The total number of shares of capital stock of all classes
which the Corporation shall have authority to issue is Two Hundred Million
(200,000,000) shares, all of which shall have a par value of one cent
($.01) per share and of the aggregate par value of Two Million Dollars
($2,000,000).
(2) (a) The Board of Directors of the Corporation is authorized to
classify or to reclassify, from time to time, any unissued shares of stock
of the Corporation, whether now or hereafter authorized, by setting,
changing or eliminating the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, or terms
and conditions of or rights to require redemption of the stock.
(b) Without limiting the generality of the foregoing, the
dividends and distributions or other payments with respect to the stock of
the Corporation, and with respect to each class that hereafter may be
created, shall be in such amount as may be declared from time to time by
the Board of Directors, and such dividends and distributions may vary from
class to class to such extent and for such purposes as the Board of
Directors may deem appropriate, including, but not limited to, the purpose
of complying with requirements of regulatory or legislative authorities.
(c) Until such time as Board of Directors shall provide
otherwise pursuant to the authority granted in this section (2) all the
authorized shares of the Corporation are designated as Common Stock. Shares
of the Common Stock and the holders thereof, and shares of any class and
the holders thereof, shall be subject to the following provisions,
provided, however, that if no shares of any class other than Common Stock
are outstanding, the shares of the Common Stock and the holders thereof
shall nevertheless be subject to the following provisions except to the
extent that such provisions are by their terms applicable only when shares
of the two or more classes are outstanding.
(3) The net asset value of each share of the Corporation's capital
stock issued, sold or purchased at net asset value shall be the current net
asset value per share as determined in accordance with procedures adopted
from time to time by the Board of Directors which comply with the 1940 Act.
(4) Shares of each class of stock shall be entitled to such
dividends or distributions, in stock or in cash or both, as may be declared
from time to time by the Board of Directors, acting in its sole discretion,
with respect to such class.
(5) In the event of the liquidation or dissolution of the
Corporation, the holders of the Common Stock of the Corporation's stock
shall be entitled to receive all the assets of the Corporation not
attributable to other classes of stock through any purchases. The assets so
distributable to the stockholders shall be distributed among such
stockholders in proportion to the number of shares of that class held by
them and recorded on the books of the Corporation.
(6) Unless otherwise expressly provided in these Articles of
Incorporation, including any Articles Supplementary creating any class of
capital stock, on each matter submitted to a vote of stockholders, each
holder of a share of capital stock of the Corporation shall be entitled to
one vote for each share standing in such holder's name on the books of the
Corporation, irrespective of the class thereof, and all shares of all
classes of capital stock shall vote together as a single class; provided,
however, that as to any matter with respect to which a separate vote of any
class is required by the 1940 Act or any rules, regulations or orders
issued thereunder, or the Maryland General Corporation Law, such
requirement as to separate vote by that class shall apply in lieu of a vote
of all classes voting together as a single class as described above.
(7) The Corporation shall be entitled to purchase shares of its
capital stock, to the extent that the Corporation may lawfully effect such
purpose under the laws of the State of Maryland, upon such terms and
conditions and for such consideration as the Board of Directors shall deem
advisable.
(8) All shares purchased by the Corporation shall constitute
authorized but unissued shares and the number of the authorized shares of
stock of the Corporation shall not be reduced by the number of any shares
purchased by it. Unless and until their classification is changed in
accordance with section (2) of this Article V, all shares of capital stock
so purchased shall continue to belong to the same class to which they
belonged at the time of their purchase.
(9) The Corporation may issue shares of stock in fractional
denominations to the same extent as its whole shares, and shares in
fractional denominations shall be shares of capital stock having
proportionately to the respective fractions represented thereby all the
rights of whole shares, including without limitation, the right to vote,
the right to receive dividends and distributions, and the right to
participate upon liquidation of the Corporation, but excluding the right to
receive a stock certificate representing fractional shares.
(10) All persons who shall acquire capital stock or other
securities of the Corporation shall acquire the same subject to the
provisions of these Articles of Incorporation and the By-Laws of the
Corporation, as each may be amended from time to time.
ARTICLE VI
PROVISIONS FOR DEFINING, LIMITING AND
REGULATING CERTAIN POWERS OF THE CORPORATION
AND OF THE DIRECTORS AND STOCKHOLDERS
(1) The number of directors of the Corporation shall initially be
two (2), which number may be increased by or pursuant to the By-Laws of the
Corporation but shall never be less than two (2), unless the Corporation
has three (3) or more stockholders during which time the number of
directors shall never be less than three (3). In addition, and
notwithstanding the preceding sentence, the number of the Corporation's
directors shall be increased by or pursuant to the Corporation's By-Laws to
a number greater than or equal to three prior to or at the Corporation's
first annual meeting of stockholders (the "initial annual meeting"). The
names of the persons who shall act as directors until the initial annual
meeting and until their successors are duly elected and qualify are:
Ralph L. Schlosstein
Laurence D. Fink
Beginning with the initial annual meeting, the directors shall be
divided into three classes, designated Class I, Class II and Class III.
Each class shall consist, as nearly as may be possible, of one-third of the
total number of directors constituting the entire Board of Directors. At
the initial annual meeting of stockholders, Class I directors shall be
elected for a one-year term, Class II directors for a two-year term and
Class III directors for a three-year term. At each annual meeting of
stockholders beginning with the annual meeting of stockholders next
succeeding the initial annual meeting, successors to the class of directors
whose term expires at that annual meeting shall be elected for a three-year
term. A director elected at an annual meeting shall hold office until the
annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify, subject, however, to prior
death, resignation, retirement, disqualification or removal from office. If
the number of directors is changed, any increase or decrease shall be
apportioned among the classes, as of the annual meeting of stockholders
next succeeding any such change, so as to maintain a number of directors in
each class as nearly equal as possible. In no case shall a decrease in the
number of directors shorten the term of any incumbent director. Any vacancy
on the Board of Directors that results from an increase in the number of
directors may be filled by a majority of the entire Board of Directors,
provided that a quorum is present, and any other vacancy occurring in the
Board of Directors may be filled by a majority of the directors then in
office, whether or not sufficient to constitute a quorum, or by a sole
remaining director; provided, however, that if the stockholders of any
class of the Corporation's capital stock are entitled separately to elect
one or more directors, a majority of the remaining directors elected by
that class or the sole remaining director elected by that class may fill
any vacancy among the number of directors elected by that class. A director
elected by the Board of Directors to fill any vacancy in the Board of
Directors shall serve until the next annual meeting of stockholders and
until his successor shall be elected and shall qualify, subject, however,
to prior death, resignation, retirement, disqualification or removal from
office. At any annual meeting of stockholders, any director elected to fill
any vacancy in the Board of Directors that has arisen since the preceding
annual meeting of stockholders (whether or not any such vacancy has been
filled by election of a new director by the Board of Directors) shall hold
office for a term which coincides with the remaining term of the class to
which such directorship was previously assigned, if such vacancy arose
other than by an increase in the number of directors, and until his
successor shall be elected and shall qualify. In the event such vacancy
arose due to an increase in the number of directors, any director so
elected to fill such vacancy at an annual meeting shall hold office for a
term which coincides with that of the class to which such directorship has
been apportioned as heretofore provided, and until his successor shall be
elected and shall qualify. A director may be removed for cause only, and
not without cause, and only by action taken by the holders of at least
seventy-five percent (75%) of the shares of capital stock then entitled to
vote in an election of such director.
(2) The Board of Directors of the Corporation is hereby empowered
to authorize the issuance from time to time of shares of capital stock,
whether now or hereafter authorized, for such consideration as the Board of
Directors may deem advisable, subject to such limitations as may be set
forth in these Articles of Incorporation or in the By-Laws of the
Corporation or in the Maryland General Corporation Law or the 1940 Act.
(3) Each person who at any time is or was a director or officer of
the Corporation shall be indemnified by the Corporation to the fullest
extent permitted by the Maryland General Corporation Law as it may be
amended or interpreted from time to time, including the advancing of
expenses, subject to any limitations imposed by the 1940 Act and the Rules
and Regulations promulgated thereunder. Furthermore, to the fullest extent
permitted by Maryland law, as it may be amended or interpreted from time to
time, subject to the limitations imposed by the 1940 Act and the Rules and
Regulations promulgated thereunder, no director or officer of the
Corporation shall be personally liable to the Corporation or its
stockholders. No amendment of the Charter of the Corporation or repeal of
any of its provisions shall limit or eliminate any of the benefits provided
to any person who at any time is or was a director or officer of the
Corporation under this Section in respect of any act or omission that
occurred prior to such amendment or repeal.
(4) The Board of Directors of the Corporation shall have the
exclusive authority to make, alter or repeal from time to time any of the
By-Laws of the Corporation except any particular By-Law which is specified
as not subject to alteration or repeal by the Board of Directors, subject
to the requirements of the 1940 Act and the Rules and Regulations
promulgated thereunder.
ARTICLE VII
DENIAL OF PREEMPTIVE RIGHTS
No stockholder of the Corporation shall by reason of his holding
shares of capital stock have any preemptive or preferential right to
purchase or subscribe to any shares of capital stock of the Corporation,
now or hereafter authorized, or any notes, debentures, bonds or other
securities convertible into shares of capital stock, now or hereafter to be
authorized, whether or not the issuance of any such shares of capital
stock, or notes, debentures, bonds or other securities would adversely
affect the dividend or voting rights of such stockholder; and the Board of
Directors may issue shares of any class of capital stock of the
Corporation, or any notes, debentures, bonds, or other securities
convertible into shares of any class of capital stock of the Corporation,
either, whole or in part, to the existing stockholders.
ARTICLE VIII
CERTAIN VOTES OF STOCKHOLDERS
(1) Except as otherwise provided in these Articles of
Incorporation and notwithstanding any provision of the Maryland General
Corporation Law (other than Sections 3-601 through 3-603 of the Maryland
General Corporation Law, or any successors thereto) requiring approval by
the stockholders (or any class of stockholders) of any action by the
affirmative vote of a greater proportion than a majority of the votes
entitled to be cast on the matter, any such action may be taken or
authorized upon the concurrence of a majority of the number of votes
entitled to be cast thereon (or a majority of the votes entitled to be cast
thereon as a separate class).
(2) Notwithstanding the terms of Section 3-603(e)(l)(iv) of the
Maryland General Corporation Law (or any successor thereto) and the
provisions of Section (1) of this Article VIII, the Corporation hereby
expressly elects to be subject to the requirements of Section 3-602 of the
Maryland General Corporation Law. The amendment, alteration, modification,
or repeal of this Section (2) of Article VIII of these Articles of
Incorporation shall require the vote specified in Section 3-602 of the
Maryland General Corporation Law.
ARTICLE IX
DETERMINATION BINDING
Any determination made in good faith, so far as accounting matters
are involved, in accordance with accepted accounting practice by or
pursuant to the authority of the direction of the Board of Directors, as to
the amount of assets, obligations or liabilities of the Corporation, as to
the amount of net income of the Corporation from dividends and interest for
any period or amounts at any time legally available for the payment of
dividends, as to the amount of any reserves or charges set up and the
propriety thereof, as to the time of or purpose for creating reserves or as
to the use, alteration or cancellation of any reserves or charges (whether
or not any obligation or liability for which such reserves or charges shall
have been created, shall have been paid or discharged or shall be then or
thereafter required to be paid or discharged), as to the price of any
security owned by the Corporation or as to any other matters relating to
the issuance, sale, redemption or other acquisition or disposition of
securities or shares of capital stock of the Corporation, and any
reasonable determination made in good faith by the Board of Directors shall
be final and conclusive, and shall be binding upon the Corporation and all
holders of its capital stock, past, present and future, and shares of the
capital stock of the Corporation are issued and sold on the condition and
understanding, evidenced by the purchase of shares of capital stock or
acceptance of share certificates, that any and all such determinations
shall be binding as aforesaid. No provision of these Articles of
Incorporation shall be effective to (a) require a waiver of compliance with
any provision of the Securities Act of 1933, as amended, or the 1940 Act,
or of any valid rule, regulation or order of the Securities and Exchange
Commission thereunder or (b) protect or purport 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 X
PRIVATE PROPERTY OF STOCKHOLDERS
The private property of stockholders shall not be subject to the
payment of corporate debts to any extent whatsoever.
ARTICLE XI
LIMITED TERM OF EXISTENCE
The Corporation shall have a limited period of existence and shall
cease to exist at the close of business on December 31, 2010, except that
the Corporation shall continue to exist for the purpose of paying,
satisfying, and discharging any existing debts or obligations, collecting
and distributing its assets, and doing all other acts required to liquidate
and wind up its business and affairs. After the close of business on
December 31, 2010, if the Corporation has not liquidated and wound up its
business and affairs, the directors shall become trustees of the
Corporation's assets for purposes of liquidation with the full powers
granted to directors of a corporation which has voluntarily dissolved under
Subtitle 4 of Title 3 of the Maryland General Corporation Law or any
successor statute as are necessary to liquidate the Corporation and wind up
its affairs, but in no event with lesser powers than the powers granted by
such subtitle granted under the Maryland General Corporation Law as of the
date of incorporation of the Corporation.
The Board of Directors may, to the extent it deems it appropriate,
adopt a plan of termination at any time during the twelve months
immediately preceding December 31, 2010, which plan of termination may set
forth the terms and conditions for implementing the termination of the
Corporation's existence under this Article XI. Stockholders of the
Corporation shall not be entitled to vote on the adoption of any such plan
or the termination of the Corporation's existence under this Article XI.
ARTICLE XII
CONVERSION TO OPEN-END COMPANY
Notwithstanding any other provisions of these Articles of
Incorporation or the ByLaws of the Corporation, a favorable vote of a
majority of the total number of directors fixed in accordance with the
By-Laws of the Corporation and the favorable vote of the holders of at
least seventy-five percent (75%) of the shares of capital stock of the
Corporation entitled to be voted on the matter shall be required to
approve, adopt or authorize an amendment to these Articles of Incorporation
that makes the Common Stock or any other class of capital stock a
"redeemable security" as that term is defined in the 1940 Act.
The Corporation shall notify the holders of all capital securities
of the approval, in accordance with the preceding paragraph of this Article
XII, of any amendment to these Articles of Incorporation that makes the
Common Stock a "redeemable security" (as that term is defined in the 1940
Act) no later than thirty (30) days prior to the date of filing of such
amendment with the Department of Assessments and Taxation (or any successor
agency) of the State of Maryland; such amendment may not be so filed,
however, until the later of (a) ninety (90) days following the date of
approval of such amendment by the holders of capital securities in
accordance with the preceding paragraph of this Article XII and (b) the
next January 1 or July 1, whichever is sooner, following the date of such
approval by holders of capital securities.
ARTICLE XIII
AMENDMENT
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in these Articles of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
Notwithstanding any other provisions of these Articles of Incorporation or
the By-Laws of the Corporation (and notwithstanding the fact that a lesser
percentage may be specified by law, these Articles of Incorporation or the
By-Laws of the Corporation), the amendment or repeal of Section (1),
Section (3), Section (4) of Article VI, Section (1) of Article VIII,
Article X, Article XI, Article XII or this Article XIII of these Articles
of Incorporation shall require the affirmative vote of the holders of at
least seventy-five percent (75%) of the shares then entitled to be voted on
the matter.
IN WITNESS WHEREOF, the undersigned incorporator of The Blackstone
Insured Municipal Term Trust Inc. hereby executes the foregoing Articles of
Incorporation and acknowledges the same to be his act and further
acknowledges that, to the best of his knowledge, the matters and facts set
forth therein are true in all material respects under the penalties of
perjury.
Dated the 23rd day of December, 1991.
John B. Frisch
ARTICLES OF AMENDMENT
OF
THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC.
The undersigned, on behalf of THE BLACKROCK INSURED MUNICIPAL TERM
TRUST INC., a Maryland corporation having its principal Maryland office in
the City of Baltimore (the "Corporation") , hereby certifies to the State
Department of Assessments and Taxation of Maryland ("SDAT") that:
FIRST: The charter of the Corporation is hereby amended by
deleting the provisions of the Articles Supplementary of the Corporation
(which were approved and received for record by SDAT on April 24, 1992) in
their entirety, and inserting in lieu thereof the following provisions:
"FIRST: Pursuant to authority expressly vested in the
Board of Directors of the Corporation by article fifth of its Charter, the
Board of Directors has reclassified 2,600 authorized and unissued shares of
common stock of the Corporation as preferred stock of the Corporation and
has given general authorization for the issuance of two series of 1,300
shares each, as the case may be, of preferred stock, par value $.01 per
share, liquidation preference $50,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared)
thereon plus the premium, if any, resulting from the designation of a
Premium Call Period, designated respectively Auction Rate Municipal
Preferred Stock, Series M28 and Auction Rate Municipal Preferred Stock,
Series M7.
SECOND: The Executive Committee of the Board of Directors
of the Corporation, acting in accordance with Sections 2-208 and 2-411 of
the Maryland General Corporation Law, has fixed the preferences, voting
powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption, of the shares of each such series of
preferred stock as follows:
DESIGNATION
SERIES M28: A series of 1,300 shares of
preferred stock, par value $.01 per share, liquidation preference
$50,000 per share plus an amount equal to accumulated but unpaid
dividends (whether or not earned or declared) thereon plus the
premium, if any, resulting from the designation of a Premium Call
Period, is hereby designated "Auction Rate Municipal Preferred
Stock, Series M28." Each share of Auction Rate Municipal Preferred
Stock, Series M28 shall be issued on April 27, 1992; have an
Initial Dividend Rate of 3.25% per annum and the Initial Dividend
Payment Date shall be May 26, 1992; and have such other
preferences, limitations and relative voting rights, in addition
to those required by applicable law or set forth in the
Corporation's Charter applicable to preferred stock of the
Corporation, as are set forth in these Articles Supplementary. The
Auction Rate Municipal Preferred Stock, Series M28 shall
constitute a separate series of preferred stock of the
Corporation, and each share of Auction Rate Municipal Preferred
Stock, Series M28 shall be identical.
SERIES M7: A series of 1,300 shares of preferred
stock, par value $.01 per share, liquidation preference $50,000
per share plus an amount equal to accumulated but unpaid dividends
(whether or not earned or declared) thereon plus the premium, if
any, resulting from the designation of a Premium Call Period, is
hereby designated "Auction Rate Municipal Preferred Stock, Series
M7." Each share of Auction Rate Municipal Preferred Stock, Series
M7 shall be issued on April 27, 1992; have an Initial Dividend
Rate of 3.25% per annum and the Initial Dividend Payment Date
shall be May 5, 1992; and have such other preferences, limitations
and relative voting rights, in addition to those required by
applicable law or set forth in the Corporation's Charter
applicable to preferred stock of the Corporation, as are set forth
in these Articles Supplementary. The Auction Rate Municipal
Preferred Stock, Series M7 shall constitute a separate series of
preferred stock of the Corporation, and each share of Auction Rate
Municipal Preferred Stock, Series M7 shall be identical.
1. Definitions. (a) Unless the context or use indicates
another or different meaning or intent, in these Articles Supplementary the
following terms have the following meanings, whether used in the singular
or plural:
"'AA' Composite Commercial Paper Rate" for any period
less than 183 days as of any date means (i) the Interest Equivalent of the
rate on commercial paper for such period placed on behalf of issuers whose
corporate bonds are rated "AA" by S&P, or the equivalent of such rating by
S&P or another nationally recognized statistical rating organization, as
the rate for such period is made available on a discount basis or otherwise
by the Federal Reserve Bank of New York for the Business Day immediately
preceding such date, or (ii) in the event that the Federal Reserve Bank of
New York does not make available such a rate, then the arithmetic average
of the Interest Equivalent of the rate on commercial paper for such period
placed on behalf of such issuers, as quoted to the Auction Agent on a
discount basis or otherwise by the Commercial Paper Dealers for the close
of business on the Business Day immediately preceding such date. If a
Commercial Paper Dealer does not quote a rate required to determine the
"AA" Composite Commercial Paper Rate for such period, the "AA" Composite
Commercial Paper Rate for such period will be determined on the basis of
the quotation or quotations furnished by any Substitute Commercial Paper
Dealer or Substitute Commercial Paper Dealers selected by the Corporation
to provide such rate or rates not being supplied by the Commercial Paper
Dealer.
"Accountant's Confirmation" has the meaning set forth in
paragraph 7(c) of these Articles Supplementary.
"Additional Dividend" has the meaning set forth in
paragraph 2(e) of these Articles Supplementary.
"Adviser" means the Corporation's investment adviser,
BlackRock Financial Management L.P., formerly Blackstone Financial
Management L.P., and any successor thereto.
"Affiliate" shall mean any Person, known to the Auction
Agent to be controlled by, in control of, or under common control with, the
Corporation.
"Agent Member" means a member of the Securities
Depository that will act on behalf of an Existing Holder of one or more
Preferred Shares or a Potential Holder.
"Anticipation Notes" means the following Municipal
Obligations: tax anticipation notes, revenue anticipation notes and tax and
revenue anticipation notes.
"Applicable Percentage" has the meaning set forth in
paragraph 11(a)(vi) of these Articles Supplementary.
"Applicable Rate" means (i) for purposes of the Auction
Procedures, the rate per annum or, in connection with any Auction in which
Bid Requirements are imposed by the Corporation, the method by which one or
more such rates may be determined, at which cash dividends are payable (if
declared) on the Preferred Shares or Other Preferred Shares, as the case
may be, for any Dividend Period and any Dividend Payment Period included
therein and (ii) for purposes of determining the amount of cash dividends
payable (if declared) at any Dividend Payment Date, the rate per annum
(including in the case of any Applicable Rate expressed as a Spread the
rate per annum determined by periodic application of such Spread to the
applicable Reference Index or Reference Security at the frequency and
weighting, if any, specified in the related Bid Requirements, subject to
any Maximum Applicable Rate or Minimum Applicable Rate applicable to such
Dividend Payment Period) at which cash dividends are payable (if declared)
on the Preferred Shares, and includes, to the extent provided by paragraph
2(c)(i) of these Articles Supplementary, any late charge provided for by
such paragraph.
"Auction" means a periodic operation of the Auction
Procedures.
"Auction Agent" means Bankers Trust Company unless and
until another commercial bank, trust company or other financial institution
appointed by a resolution of the Board of Directors of the Corporation or a
duly authorized committee thereof enters into an agreement with the
Corporation to follow the Auction Procedures for the purpose of determining
the Applicable Rate and to act as transfer agent, registrar, dividend
disbursing agent and redemption agent for the Preferred Shares and Other
Preferred Shares.
"Auction Procedures" means the procedures for conducting
Auctions set forth in paragraph 11 of these Articles Supplementary.
"Bid Requirements" means (i) any requirement for a
Special Dividend Period longer than 91 days that Bids by Potential Holders
shall be expressed as a Spread below, at or above the rate of a specified
Reference Index or Reference Security, (ii) the Reference Index or
Reference Security, the most recently announced rate thereof and the
frequency with which the rate of Reference Index or the Reference Security,
as the case may be, shall be recalculated for purposes of determining rates
expressed as Spreads thereon in accordance with these Articles
Supplementary, which frequency shall be the same as the frequency with
which the person maintaining the Reference Index being utilized
recalculates such Reference Index, or the same as the frequency with which
the interest rate on the Reference Security being utilized changes or such
other frequency as the Corporation shall specify (which specification may
include a formula specified by the Corporation indicating the weighting to
be given to each recalculation of the Reference Index or change in the rate
of the Reference Security during a specified period), (iii) the frequency
of Dividend Payment Dates during such Special Dividend Period (which shall
not be more often than the frequency specified pursuant to clause (ii)
above), (iv) one or more Minimum Applicable Rate or Rates (the Indicated
Minimum Applicable Rate or Rates in the case of Bid Requirements set forth
in a Request for Special Dividend Period) and/or (v) one or more Special
Dividend Period Reference Rate or Rates and the Maximum Applicable Rate or
Rates (the Indicated Maximum Applicable Rate or Rates in the case of Bid
Requirements set forth in a Request for Special Dividend Period) derivable
from such Special Dividend Period Reference Rate or Rates, in each case as
set forth in the Notice of Special Dividend Period for such Special
Dividend Period.
"Broker-Dealer" shall mean any broker-dealer, or other
entity permitted by law to perform the functions required of a
Broker-Dealer in paragraph 11 of these Articles Supplementary, that has
been selected by the Corporation and has entered into a Broker-Dealer
Agreement with the Auction Agent that remains effective.
"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 paragraph 11 of these Articles
Supplementary.
"Business Day" means a day on which the New York Stock
Exchange, Inc. is open for trading and which is not a Saturday, Sunday or
other day on which banks in The City of New York are authorized or
obligated by law to close.
"Charter" means the Charter, as amended and supplemented
(including these Articles Supplementary), of the Corporation on file in the
State Department of Assessments and Taxation of Maryland.
"Closing Transaction" means the termination of a futures
contract or option position by taking a position opposite thereto.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Paper Dealers" means Merrill Lynch, Pierce,
Fenner & Smith Incorporated and such other commercial paper dealer or
dealers as the Corporation may from time to time appoint, or, in lieu of
any thereof, their respective affiliates or successors.
"Common Stock" means the common stock, par value $.01 per
share, of the Corporation.
"Corporation" means The BlackRock Insured Municipal Term
Trust Inc., a Maryland corporation.
"Date of Original Issue" means, April 27, 1992, with
respect to the Preferred Shares and the date on which the Corporation
originally issues any Other Preferred Shares with respect to such Other
Preferred Shares.
"Deposit Securities" means cash, the book value of
Municipal Obligations sold for which payment is due within five Business
Days with counterparties rated at least Baa by Moody's and before the next
Dividend Payment Date or Valuation Date, as the case may be, and Municipal
Obligations rated at least A-1+ or SP-l+ by S&P, VMIG-1 or MIG-1 by
Moody's.
"Discounted Value" means (i) with respect to a Moody's
Eligible Asset, the lower of par and the quotient of the Market Value
thereof divided by the applicable Moody's Discount Factor and (ii) with
respect to an S&P Eligible Asset, the quotient of the Market Value thereof
divided by the applicable S&P Discount Factor.
"Dividend Coverage Amount," as of any Valuation Date,
means (i) the aggregate amount of cash dividends that will accumulate on
all Outstanding Preferred Shares and Other Preferred Shares, in each case
to (but not including) the next Dividend Payment Date therefor that follows
such Valuation Date (calculated, in the case of cash dividends determined
by application of a Spread to a Reference Index or Reference Security, by
assuming that the Applicable Rate in effect for the immediately preceding
Dividend Payment Period will remain in effect until the next Dividend
Payment Period) plus the aggregate amount of any liabilities of the
Corporation that are required to be paid on or prior to the next Dividend
Payment Date less (ii) the combined Market Value of Deposit Securities
irrevocably deposited with the Auction Agent for the payment of cash
dividends on all Preferred Shares and Other Preferred Shares.
"Dividend Coverage Assets," as of any Valuation Date,
means, in the case of Preferred Shares and Other Preferred Shares, Deposit
Securities with maturity or tender payment dates not later in each case
than the Dividend Payment Date therefor that follows such Valuation Date.
"Dividend Payment Date," with respect to Preferred
Shares, has the meaning set forth in paragraph 2(b)(i) of these Articles
Supplementary and, with respect to Other Preferred Shares, has the
equivalent meaning.
"Dividend Payment Period" means the Initial Dividend
Period and any Subsequent Dividend Payment Period.
"Dividend Period" means the Initial Dividend Period, any
28-day Dividend Period (in the case of Series M28 Preferred Shares) or
7-day Dividend Period (in the case of Series M7 Preferred Shares) and any
Special Dividend Period.
"Existing Holder" means a Person who is listed as the
holder of record of Preferred Shares in the Stock Books.
"Holder" means a Person identified as a holder of record
of Preferred Shares in the Stock Register.
"Independent Accountant" means a nationally recognized
accountant, or firm of accountants, that is, with respect to the
Corporation, an independent public accountant or firm of independent public
accountants under the Securities Act of 1933, as amended.
"Indicated Maximum Applicable Rate" means the Maximum
Applicable Rate that would apply if the Auction with respect to which it is
specified were conducted on the date of the Request for Special Dividend
Period in which such Indicated Maximum Applicable Rate is specified.
"Indicated Minimum Applicable Rate" means the Minimum
Applicable Rate that would apply if the Auction with respect to which it is
specified were conducted on the date of the Request for Special Dividend
Period in which such Indicated Minimum Applicable Rate is specified.
"Initial Dividend Payment Date" means with respect to
each series of Preferred Shares and Other Preferred Shares, the Initial
Dividend Payment Date specified herein.
"Initial Dividend Period," with respect to Preferred
Shares, has the meaning set forth in paragraph 2(c)(i) of these Articles
Supplementary and, with respect to Other Preferred Shares, has the
equivalent meaning.
"Initial Dividend Rate," with respect to each series of
Preferred Shares, means the rate per annum applicable to the Initial
Dividend Period for such series of Preferred Shares and, with respect to
Other Preferred Shares, has the equivalent meaning.
"Initial Margin" means the amount of cash or securities
deposited with a broker as a margin payment at the time of purchase or sale
of a futures contract.
"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.
"Mandatory Redemption Price" means $50,000 per share of
Preferred Shares plus an amount equal to accumulated but unpaid dividends
(whether or not earned or declared) to the date fixed for redemption plus
the premium, if any, resulting from the designation of a Premium Call
Period.
"Market Value" of any asset of the Corporation shall be
the market value thereof determined by the Pricing Service. Market Value of
any asset shall include any interest accrued thereon. The Pricing Service
shall value portfolio securities at the lower of the quoted bid price or
the mean between the quoted bid and ask price or the yield equivalent when
quotations are not readily available. Securities for which quotations are
not readily available shall be valued at fair value as determined by the
Pricing Service using methods which include consideration of: yields or
prices of municipal obligations of comparable quality, type of issue,
coupon, maturity and rating; indications as to value from dealers; and
general market conditions. The Pricing Service may employ electronic data
processing techniques and/or a matrix system to determine valuations. If
the Pricing Service fails to provide the Market Value of any Municipal
Obligation, such Municipal Obligation shall be valued at the lower of two
bid quotations (one of which shall be in writing) obtained by the
Corporation from two dealers who are members of the National Association of
Securities Dealers, Inc. and are making a market in such Municipal
Obligations. Futures contracts and options are valued at closing prices for
such instruments established by the exchange or board of trade on which
they are traded, or if market quotations are not readily available, are
valued at fair value as determined by the Pricing Service or if the Pricing
Service is not able to value such instruments they shall be valued at fair
value on a consistent basis using methods determined in good faith by the
Board of Directors.
"Maximum Applicable Rate," for any Dividend Payment
Period with respect to Preferred Shares, has the meaning set forth in
paragraph 11(a)(vi) of these Articles Supplementary and, with respect to
Other Preferred Shares, has the equivalent meaning.
"Maximum Marginal Tax Rate" means the maximum marginal
regular Federal individual income tax rate applicable to ordinary income or
the maximum marginal regular Federal corporate income tax rate, whichever
is greater.
"Maximum Potential Additional Dividend Liability," as of
any Valuation Date, means the aggregate amount of Additional Dividends that
would be due if the Corporation were to make Retroactive Taxable
Allocations, with respect to any fiscal year, estimated based upon
dividends paid and the amount of undistributed realized net capital gains
and other taxable income earned by the Corporation, as of the end of the
calendar month immediately preceding such Valuation Date and assuming such
Additional Dividends are fully taxable.
"Minimum Applicable Rate," for any Dividend Payment
Period with respect to Preferred Shares, has the meaning set forth in
paragraph 11(a)(vii) of these Articles Supplementary and, with respect to
Other Preferred Shares, has the equivalent meaning.
"Minimum Liquidity Level" means, as of any Valuation
Date, an aggregate Market Value of the Corporation's Dividend Coverage
Assets not less than the Dividend Coverage Amount.
"Moody's" means Moody's Investors Service or its successors.
"Moody's Discount Factor" means, for purposes of
determining the Discounted Value of any Moody's Eligible Asset which is a
Municipal Obligation, the percentage determined by reference to (i) (A) the
rating by Moody's or S&P on such asset or (B) in the event the Municipal
Obligation is insured under an insurance policy which guarantees the timely
payment of interest on such Municipal Obligation and principal thereof to
maturity, the Moody's insurance claims-paying ability rating of the issuer
of the insurance policy (provided that for purposes of clause (B) if the
insurance claims-paying ability of an issuer of an insurance policy is not
rated by Moody's but is rated by S&P, such issuer shall be deemed to have a
Moody's insurance claims-paying ability rating which is one full category
lower than the S&P insurance claims-paying ability rating) and (ii) the
shortest Moody's Collateral Period set forth opposite such rating that is
the same length as or is longer than the Moody's Exposure Period, in
accordance with the table set forth below:
<TABLE>
<CAPTION>
Rating Category
---------------------------------------------------------------
Moody's Collateral Period Aaa* Aa* A* Baa* Other**
- ----------------------------- ----------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
7 weeks or less..................................... 151% 159% 168% 202% 229%
8 weeks or less but greater than seven weeks........ 154 164 173 205 235
9 weeks or less but greater than eight weeks........ 158 169 179 209 242
- -----------------
* Moody's rating.
** Municipal Obligations not rated by Moody's but rated BBB-, BBB or BBB+
by S&P.
</TABLE>
; provided, however, in the event a Moody's Discount Factor applicable to a
Municipal Obligation is determined by reference to an insurance
claims-paying ability rating in accordance with clause (i)(B), such Moody's
Discount Factor shall be increased by an amount equal to 50% of the
difference between (a) the percentage set forth in the foregoing table
under the applicable rating category and (b) the percentage set forth in
the foregoing table under the rating category which is one category lower
than the applicable rating category. If a Municipal Obligation is covered
by a Portfolio Insurance policy which provides the Trust with an option to
obtain Permanent Insurance with respect to such Municipal Obligation and
such Portfolio Insurance policy has been approved in writing by Moody's,
the Moody's Discount Factor rating category shall be determined by
averaging the insurance claims paying ability rating of the Portfolio
Insurance provider and the next lowest rating category.
Notwithstanding the foregoing, (i) the Moody's Discount
Factor for short-term Municipal Obligations will be 115% so long as such
Municipal Obligations are rated at least MIG-1, VMIG-1 or P-1 by Moody's or
125% if such Obligations are not rated by Moody's but are rated A-l+ or
SP-1+ or AA by S&P and mature or have a demand feature at par exercisable
in 30 days or less, and (ii) no Moody's Discount Factor will be applied to
cash or to Municipal Receivables (except to the extent provided in the
definition thereof).
"Moody's Eligible Asset" means cash, a Municipal
Receivable or a Municipal Obligation that (i) pays interest in cash, (ii)
is publicly rated Baa or higher by Moody's or, if not rated by Moody's but
rated by S&P, is rated at least BBB by S&P (provided that, for purposes of
determining the Moody's Discount Factor applicable to any such S&P-rated
Municipal Obligation, such Municipal Obligation (excluding any short-term
Municipal Obligation) will be deemed to have a Moody's rating which is one
full rating category lower than its S&P rating), (iii) does not have its
Moody's rating suspended by Moody's and (iv) is part of an issue of
Municipal Obligations of at least $10,000,000. Municipal Obligations issued
by any one issuer, not rated by Moody's and rated BBB by S&P may comprise
no more than 4% of total Municipal Obligations which are Moody's Eligible
Assets; such BBB rated Municipal Obligations, if any, together with any
Municipal Obligations issued by the same issuer and rated Baa by Moody's or
A by S&P, may comprise no more than 6% of total Municipal Obligations which
are Moody's Eligible Assets; such BBB, A and Baa rated Municipal
Obligations, if any, together with any Municipal Obligations issued by the
same issuer and rated A by Moody's or AA by S&P, may comprise no more than
10% of total Municipal Obligations which are Moody's Eligible Assets; and
such BBB, Baa, A and AA rated Municipal Obligations, if any, together with
any Municipal Obligations issued by the same issuer and rated Aa by Moody's
or AAA by S&P, may comprise no more than 20% of total Municipal Obligations
which are Moody's Eligible Assets. Municipal Obligations issued by issuers
located within a single state or territory, not rated by Moody's and rated
BBB by S&P, may comprise no more than 12% of total Municipal Obligations
which are Moody's Eligible Assets; such BBB rated Municipal Obligations, if
any, together with any Municipal Obligations issued by issuers located
within the same state or territory and rated Baa by Moody's or A by S&P,
may comprise no more than 20% of total Municipal Obligations which are
Moody's Eligible Assets; such BBB, Baa and A rated Municipal Obligations,
if any, together with any Municipal Obligations issued by issuers located
within the same state or territory and rated A by Moody's or AA by S&P, may
comprise no more than 40% of total Municipal Obligations which are Moody's
Eligible Assets; and such BBB, Baa, A and AA rated Municipal Obligations,
if any, together with any Municipal Obligations issued by issuers located
within the same state or territory and rated Aa by Moody's or AAA by S&P,
may comprise no more than 60% of total Municipal Obligations which are
Moody's Eligible Assets. Additionally, Municipal Obligations whose ratings
are determined by the claims paying ability ratings of the providers of
Portfolio Insurance may comprise no more than 10% of the total Municipal
Obligations which are Moody's Eligible Assets. When the Corporation sells a
Municipal Obligation and agrees to repurchase it at a future date, the
Corporation must count as a liability for the purposes of the Preferred
Shares Basic Maintenance Amount the amount of the repurchase price of such
Municipal Obligation and such Municipal Obligation is considered a Moody's
Eligible Asset to the extent it satisfies Moody's current guidelines. When
the Corporation buys a Municipal Obligation and agrees to sell it to
another party at a future date and the long-term debt of such other party
is rated at least A2 and the transaction has a term of 30 days or less, the
cash to be received by the Corporation will be counted as a Moody's
Eligible Asset; otherwise such Municipal Obligation will be counted as a
Moody's Eligible Asset to the extent it satisfies Moody's current
guidelines.
Notwithstanding the foregoing, an asset will not be
considered a Moody's Eligible Asset if it is held in a margin account or if
it is subject to any material lien, mortgage, pledge, security interest or
security agreement of any kind, except for (i) Liens to secure payment for
services rendered or cash advanced to the Corporation by the Adviser, the
custodian of the Corporation's assets, the Auction Agent or any
Broker-Dealers and (ii) any Lien by virtue of a repurchase agreement. In
addition, an asset irrevocably deposited for the payment of any of the
items set forth in clauses (i) A through G of the Preferred Shares Basic
Maintenance Amount will not be considered Moody's Eligible Assets.
For purposes of the definition of Moody's Eligible Asset,
references to the S&P rating BBB shall be deemed to include the S&P ratings
BBB-, BBB and BBB+.
"Moody's Exposure Period" means a period that is the same
length or longer than the number of days used in calculating the cash
dividend component of the Preferred Shares Basic Maintenance Amount and
shall initially be the period commencing on a given Valuation Date and
ending 48 days thereafter.
"Moody's Hedging Transaction" means the selling of an
exchange traded futures contract based on the Municipal Index or Treasury
Bonds or the purchase of an exchange traded put option on such a futures
contract or the writing of an exchange traded call option on such a futures
contract.
"Moody's Volatility Factor" means 100% during any
Dividend Period of greater than 49 days until 49 days prior to the last day
of such Dividend Period; otherwise, "Moody's Volatility Factor" means 272%
except during that time period where legislation increasing the federal
income tax rate has been enacted into law and such increase has not yet
taken effect, in which case for such time period Moody's Volatility Factor
shall be determined by reference to the increase in the Maximum Marginal
Tax Rate as follows: for increases of up to 5%, 292%; for increases greater
than 5% and up to 10%, 313%; for increases greater than 10% and up to 15%,
338%; for increases greater than 15% and up to 20%, 364%; for increases
greater than 20% and up to 25%, 396%; for increases greater than 25% and up
to 30%, 432%; for increases greater than 30% and up to 35%, 472%; for
increases greater than 35% and up to 40%, 520%.
"Municipal Index" means The Bond Buyer Municipal Bond Index.
"Municipal Obligations" means "Municipal Obligations" as
defined in the Corporation's Registration Statement on Form N-2 (File Nos.
33-44735 and 811-6512) on file with the Securities and Exchange Commission,
as such Registration Statement may be amended from time to time.
"Municipal Receivables" means no more than the aggregate
of the following: (i) the book value of receivables for Municipal
Obligations sold as of or prior to a relevant Valuation Date if such
receivables are due within five Business Days of such Valuation Date, and
if the trades which generated such receivables are (A) settled through
clearing house firms with respect to which the Corporation has received
prior written authorization from Moody's or (B) with counterparties having
a Moody's long-term debt rating of at least Baa3; and (ii) the Moody's
Discounted Value of Municipal Obligations sold as of or prior to such
Valuation Date which generated receivables, if such receivables are due
within five Business Days of such Valuation Date but do not comply with
either of conditions (A) or (B) of the preceding clause (i).
"1940 Act" means the Investment Company Act of 1940, as
amended from time to time.
"1940 Act Preferred Shares Asset Coverage" means asset
coverage, as defined in section 18(h) of the 1940 Act, of at least 200%
with respect to all outstanding senior securities of the Corporation which
are stock, including all outstanding Preferred Shares and Other Preferred
Shares (or such other asset coverage as may in the future be specified in
or under the 1940 Act as the minimum asset coverage for senior securities
which are stock of a closed-end investment company as a condition of paying
dividends on its common stock).
"1940 Act Cure Date," with respect to the failure by the
Corporation to maintain the 1940 Act Preferred Shares Asset Coverage (as
required by paragraph 6 of these Articles Supplementary) as of the last
Business Day of each month, means the last Business Day of the following
month.
"Non-Call Period" has the meaning set forth under
"Specific Redemption Provisions" below.
"Non-Payment Period," with respect to each series of
Preferred Shares, means any period commencing on and including the day on
which the Corporation shall fail to (i) declare, prior to the close of
business on the second Business Day preceding any Dividend Payment Date,
for payment on or (to the extent permitted by paragraph 2(c)(i) of these
Articles Supplementary) within three Business Days after such Dividend
Payment Date to the Holders as of 12:00 noon, New York City time, on the
Business Day preceding such Dividend Payment Date, the full amount of any
dividend on Preferred Shares payable on such Dividend Payment Date or (ii)
deposit, irrevocably in trust, in same-day funds, with the Auction Agent by
12:00 noon, New York City time, (A) on such Dividend Payment Date the full
amount of any cash dividend on such shares payable (if declared) on such
Dividend Payment Date or (B) on any redemption date for any Preferred
Shares called for redemption, the Mandatory Redemption Price per share of
such Preferred Shares or, in the case of an optional redemption, the
Optional Redemption Price per share, and ending on and including the
Business Day on which, by 12:00 noon, New York City time, all unpaid cash
dividends and unpaid redemption prices shall have been so deposited or
shall have otherwise been made available to Holders in same-day funds;
provided that, a NonPayment Period shall not end unless the Corporation
shall have given at least five days' but no more than 30 days' written
notice of such deposit or availability to the Auction Agent, all Existing
Holders (at their addresses appearing in the Stock Books) and the
Securities Depository. Notwithstanding the foregoing, the failure by the
Corporation to deposit the funds provided for by clauses (ii)(A) and
(ii)(B) above within three Business Days after a Dividend Payment Date or
any Redemption Date, as the case may be, in each case to the extent
contemplated by paragraph 2(c)(i) of these Articles Supplementary, shall
not constitute a "Non-Payment Period."
"Non-Payment Period Rate" means, initially, 250% of the
30-day "AA" Composite Commercial Paper Rate (or 300% of such rate if the
Corporation has provided notification to the Auction Agent prior to the
Auction establishing the Applicable Rate for any dividend pursuant to
paragraph 2(f) hereof that net capital gains or other taxable income will
be included in such dividend on Preferred Shares). Such percentages will be
used to calculate the Applicable Rate for any Non-Payment Period which
occurs during a Special Dividend Period on either series of Preferred
Shares and will be applied to the applicable Special Dividend Period
Reference Rate then in effect with respect to such series. However, the
Board of Directors of the Corporation shall have the authority to adjust,
modify, alter or change from time to time the initial Non-Payment Period
Rate if the Board of Directors of the Corporation determines and Moody's
and S&P (and any Substitute Rating Agency in lieu of Moody's or S&P in the
event either of such parties shall not rate the Preferred Shares) advise
the Corporation in writing that such adjustment, modification, alteration
or change will not adversely affect their then-current ratings on the
Preferred Shares.
"Normal Dividend Payment Date" has the meaning set forth
in paragraph 2(b)(i) of these Articles Supplementary.
"Notice of Redemption" means any notice with respect to
the redemption of Preferred Shares pursuant to paragraph 4 of these
Articles Supplementary.
"Notice of Revocation" has the meaning set forth in
paragraph 2(c)(iii) of these Articles Supplementary.
"Notice of Special Dividend Period" has the meaning set
forth in paragraph 2(c)(iii) of these Articles Supplementary.
"Optional Redemption Price" shall mean $50,000 per share
plus an amount equal to accumulated but unpaid dividends (whether or not
earned or declared) to the date fixed for redemption plus the premium, if
any, resulting from the designation of a Premium Call Period.
"Original Issue Insurance" means insurance guaranteeing
the timely payment of principal of, and interest on, a Municipal Obligation
purchased by the issuer of a Municipal Obligation or by a third party at
the time of issuance of such Municipal Obligation.
"Other Preferred Shares" means the Auction Rate Municipal
Preferred Stock of the Corporation, other than the Preferred Shares.
"Outstanding" means, as of any date (i) with respect to
Preferred Shares, Preferred Shares theretofore issued by the Corporation
except, without duplication, (A) any Preferred Shares theretofore cancelled
or delivered to the Auction Agent for cancellation, or redeemed by the
Corporation, or as to which a Notice of Redemption shall have been given
and moneys shall have been deposited in trust by the Corporation pursuant
to paragraph 4(c) and (B) any Preferred Shares as to which the Corporation
or any Affiliate thereof shall be an Existing Holder and (ii) with respect
to shares of Other Preferred Stock, has the equivalent meaning.
"Parity Stock" means the Preferred Shares and each other
outstanding series of Preferred Stock the holders of which, together with
the holders of the Preferred Shares, shall be entitled to the receipt of
dividends or of amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in proportion to the full respective
preferential amounts to which they are entitled, without preference or
priority one over the other.
"Permanent Insurance" means insurance guaranteeing the
timely payment of principal of, and interest on, a Municipal Obligation
purchased by the Corporation upon payment of a single, predetermined
insurance premium pursuant to an irrevocable commitment of the issuer of
Portfolio Insurance covering such Municipal Obligation.
"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.
"Portfolio Insurance" means insurance guaranteeing the
timely payment of principal of, and interest on, a covered Municipal
Obligation only while such Municipal Obligation is owned by the
Corporation.
"Potential Holder" shall mean any Person, including any
Existing Holder, who may be interested in acquiring Preferred Shares (or,
in the case of an Existing Holder, additional Preferred Shares).
"Preferred Shares" means, as the case may be, Auction Rate
Municipal Preferred Stock, Series M28 or Auction Rate Municipal Preferred Stock,
Series M7.
"Preferred Shares Basic Maintenance Amount," as of any
Valuation Date, means the dollar amount equal to (i) the sum of (A) the
product of the number of Preferred Shares and Other Preferred Shares
outstanding on such Valuation Date multiplied by $50,000 plus the premium,
if any, resulting from the designation of a Premium Call Period; (B) the
aggregate amount of cash dividends that will have accumulated (whether or
not earned or declared) for each share of Preferred Shares and Other
Preferred Shares outstanding, in each case, to (but not including) the next
Dividend Payment Date therefor that follows such Valuation Date
(calculated, in the case of cash dividends determined by application of a
Spread to a Reference Index or Reference Security, by assuming that the
Applicable Rate in effect for the immediately preceding Dividend Payment
Period will remain in effect until the next Dividend Payment Period); (C)
the aggregate amount of cash dividends that would accumulate at the then
current Maximum Applicable Rate (assuming notification has been given to
the Auction Agent that net capital gains or other taxable income will be
included in the relevant dividend as contemplated pursuant to paragraphs
2(f) and 11(a)(vi) of these Articles Supplementary) on any Preferred Shares
and Other Preferred Shares outstanding from such Dividend Payment Date
through the 48th day after such Valuation Date, multiplied by the larger of
the Moody's Volatility Factor and the S&P Volatility Factor determined from
time to time by Moody's and S&P, respectively (except that if such
Valuation Date occurs during a Non-Payment Period, the cash dividend for
purposes of calculation would accumulate at the then current Non-Payment
Period Rate); (D) the amount of anticipated expenses of the Corporation for
the 90 days subsequent to such Valuation Date; (E) the amount of the
Corporation's Maximum Potential Additional Dividend Liability as of such
Valuation Date; and (F) any current liabilities as of such Valuation Date
to the extent not reflected in any of (i)(A) through (i)(E) (including,
without limitation, and immediately upon determination, payables for
Municipal Obligations purchased as of such Valuation Date) less (ii) the
lesser of (A) either the Discounted Value of the Corporation's assets
irrevocably deposited by the Corporation for the payment of any of (i)(A)
through (i)(F) or the face value of such irrevocably deposited assets that
mature prior to the payment date of the liabilities for which they are
being deposited and are either fully guaranteed by the U.S. government or
have a rating of either P-1, VMIG-1 or MIG-1 by Moody's and A-l+ or SP-1+
by S&P and (B) the Market Value of any of the Corporation's assets
irrevocably deposited by the Corporation for the payment of any of (i)(A)
through (i)(F)
For purposes of determining as of any Valuation Date
whether the Corporation has Moody's Eligible Assets and S&P Eligible Assets
each with an aggregate Discounted Value at least equal to the Preferred
Shares Basic Maintenance Amount, the Corporation shall include as a
liability in the calculation of the Preferred Shares Basic Maintenance
Amount an amount calculated semi-annually equal to 150% of the estimated
cost of obtaining Permanent Insurance with respect to Moody's Eligible
Assets or S&P Eligible Assets, as applicable, that are (i) covered by
Portfolio Insurance policies which provide the Corporation with the option
to obtain such Permanent Insurance and (ii) are discounted by a Moody's
Discount Factor or S&P Discount Factor, as applicable, determined by
reference to the insurance claims-paying ability rating of the issuer of
such Portfolio Insurance policy.
"Preferred Shares Basic Maintenance Cure Date," with
respect to the failure by the Corporation to satisfy the Preferred Shares
Basic Maintenance Amount (as required by paragraph 7(a) of these Articles
Supplementary) as of a given Valuation Date, means the fifth Business Day
following such Valuation Date.
"Preferred Shares Basic Maintenance Report" means a
report signed by the President, Treasurer, or Vice President of the
Corporation which sets forth, as of the related Valuation Date, the assets
of the Corporation, the Market Value and the Discounted Value thereof
(seriatim and in aggregate), and the Preferred Shares Basic Maintenance
Amount.
"Preferred Stock" means the preferred stock of the
Corporation, and includes Preferred Shares and Other Preferred Shares.
"Premium Call Period" has the meaning set forth under
"Specific Redemption Provisions" below.
"Pricing Service" shall mean J.J. Kenny Co., Inc. or any
pricing service designated by the Board of Directors of the Corporation
provided the Corporation obtains written assurance from S&P that such
designation will not impair the rating then assigned by S&P to the
Preferred Shares.
"Quarterly Valuation Date" means the last Business Day of
each fiscal quarter of the Corporation in each fiscal year of the
Corporation, commencing June 30, 1992.
"Reference Index" shall mean an index of interest rates
on Treasury Securities, Municipal Obligations or high quality commercial
paper or dividend rates on preferred stock of issuers registered as
closed-end management investment companies under the 1940 Act that invest
primarily in Municipal Obligations or any other index or instrument
selected and approved by the Corporation's Board of Directors, after
consultation with the Broker-Dealers and made available to the Auction
Agent, as being an appropriate index or instrument, in each case expressed
as a rate and devised and calculated not less often than monthly by one or
more parties that are not affiliated with the Corporation and made
available to the Corporation, the Auction Agent, the Broker-Dealers and
existing and potential beneficial owners of the Preferred Shares.
"Reference Rate" means the higher of the 30-day "AA"
Composite Commercial Paper Rate and the Taxable Equivalent of the
Short-Term Municipal Bond Rate, or, in the case of a Special Dividend
Period with a single Applicable Rate throughout such Special Dividend
Period, the Special Dividend Period Reference Rate or, in the case of a
Special Dividend Period with a varying Applicable Rate, the Reference Rate
specified in the definition of S&P Volatility Factor that most closely
approximates the length of the interval between periodic applications of
the Spread to the relevant Reference Index or Reference Security.
"Reference Security" shall mean, in the case of a debt
obligation, a particular debt obligation which is publicly traded, which is
non-callable prior to the termination of the Special Dividend Period with
respect to which such Reference Security is relevant and the out-standing
aggregate principal amount of which at the time of the Notice of Special
Dividend Period exceeds $100 million or, in the case of a preferred stock,
a preferred stock issue which is publicly traded, which is non-redeemable
prior to the termination of the Special Dividend Period with respect to
which such Reference Security is relevant and the outstanding liquidation
value of which at the time if the Notice of Special Dividend Period exceeds
$50 million.
"Request for Special Dividend Period" has the meaning set
forth in paragraph 2(c)(iii) of these Articles Supplementary.
"Response" has the meaning set forth in paragraph
2(c)(iii) of these Articles Supplementary.
"Retroactive Taxable Allocation" has the meaning set
forth in paragraph 2(e) of these Articles Supplementary.
"Right," with respect to Preferred Shares, has the
meaning set forth in paragraph 2(e) of these Articles Supplementary and,
with respect to Other Preferred Shares, has the equivalent meaning.
"Rightholder" has the meaning set forth in paragraph 2(e)
of these Articles Supplementary.
"S&P" means Standard & Poor's Corporation or its successors.
"S&P Discount Factor" means, for purposes of determining
the Discounted Value of any S&P Eligible Asset, the percentage determined
by reference to (a) (i) in the event a Municipal Obligation is covered by a
Portfolio Insurance policy which does not provide the Corporation with the
option to obtain Permanent Insurance with respect to such Municipal
Obligation, or is not covered by bond insurance, the S&P or Moody's rating
on such Municipal Obligation, (ii) in the event a Municipal Obligation is
covered by an Original Issuance Insurance policy or a Secondary Insurance
policy, the S&P insurance claims-paying ability rating of the issuer of the
policy or (iii) in the event a Municipal Obligation is covered by a
Portfolio Insurance policy which provides the Corporation with the option
to obtain Permanent Insurance with respect to such Municipal Obligation and
such Portfolio Insurance policy has been reviewed and approved in writing
by S&P, at the Corporation's option, the S&P or Moody's rating on such
Municipal Obligation or the S&P insurance claims-paying ability rating of
the issuer of the Portfolio Insurance policy and (b) the shortest S&P
Collateral Period set forth opposite such rating that is the same length as
or is longer than the S&P Exposure Period, in accordance with the table set
forth below:
<TABLE>
<CAPTION>
Rating Category
---------------------------------------------------
S&P Collateral Period AAA* AA* A* BBB*
- ------------------------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
40 Business Days................................................ 190% 195% 210% 250%
22 Business Days................................................ 170 175 190 230
10 Business Days................................................ 155 160 175 215
7 Business Days................................................. 150 155 170 210
3 Business Days................................................. 130 135 150 190
- ----------------
* S&P rating.
</TABLE>
Notwithstanding the foregoing, (i) the S&P Discount Factor for
short-term Municipal Obligations will be 115%, so long as such Municipal
Obligations are rated A-1+ or SP-l+ by S&P or 125% if such Municipal
Obligations are not rated by S&P but are rated VMIG-1, P-1 or MIG-l by
Moody's and mature or have a demand feature exercisable in 30 days or less;
provided, however, that such Moody's rated short-term Municipal Obligations
must be backed by a letter of credit, liquidity facility or guarantee from
a bank or other financial institution, such bank or institution having a
short-term rating of at least A-l+ from S&P; and further provided that such
short-term Municipal Obligations rated by Moody's but not rated by S&P may
comprise no more than 50% of short-term Municipal Obligations that qualify
as S&P Eligible Assets and (ii) no S&P Discount Factor will be applied to
cash or to the book value of Municipal Obligations sold for which payment
is due within five Business Days. Anticipation Notes rated SP-1+ or, if not
rated by S&P, rated MIG-1 or VMIG-l by Moody's, which do not mature or have
a demand feature at par exercisable in 30 days and which do not have a
long-term rating, will be considered to be short-term Municipal Obligations
for purposes of determining the Discounted Value of S&P Eligible Assets.
"S&P Eligible Asset" means cash or the book value of Municipal
Obligations sold for which payment is due within five Business Days of a
Valuation Date or a Municipal Obligation that (i) is issued by any of the
50 states, the territories and their subdivisions, counties, cities, towns,
villages, and school districts, agencies, such as authorities and special
districts created by the states, and certain federally sponsored agencies
such as local housing authorities (payments made on these bonds are exempt
from regular federal income taxes and are generally exempt from state and
local taxes in the state of issuance) ; (ii) is interest bearing and pays
interest at least semiannually; (iii) is payable with respect to principal
and interest in United States Dollars; (iv) is publicly rated BBB or higher
by S&P or, if not rated by S&P but rated by Moody's, is rated at least A by
Moody's (provided that such Moody's-rated Municipal Obligations will be
included in S&P Eligible Assets only to the extent the Market Value of such
Municipal Obligations does not exceed 50% of the aggregate Market Value of
the S&P Eligible Assets; and further provided that, for purposes of
determining the S&P Discount Factor applicable to any such Moody's-rated
Municipal Obligation, such Municipal Obligation will be deemed to have an
S&P rating which is one full rating category lower than its Moody's
rating); (v) is not subject to a covered call or covered put option written
by the Corporation; (vi) is not part of a private placement of Municipal
Obligations; and (vii) is part of an issue of Municipal Obligations with an
original issue size of at least $20 million or, if of an issue with an
original issue size below $20 million (but in no event below $10 million),
is issued by an issuer with a total of at least $50 million of securities
outstanding. Notwithstanding the foregoing:
(1) Municipal Obligations of any one issuer or guarantor
(excluding bond insurers) will be considered S&P Eligible Assets only
to the extent the Market Value of such Municipal Obligations does not
exceed 10% of the aggregate Market Value of the S&P Eligible Assets,
provided that 2% is added to the applicable S&P Discount Factor for
every 1% by which the Market Value of such Municipal Obligations
exceeds 5% of the aggregate Market Value of the S&P Eligible Assets;
and
(2) Municipal Obligations guaranteed or insured by any
one bond insurer will be considered S&P Eligible Assets only to the
extent the fair market value of such municipal securities does not
exceed 25% of the aggregate fair market value of the S&P Eligible
Assets.
(3) Municipal Obligations issued by issuers in any one
state or territory will be considered S&P Eligible Assets only to the
extent the Market Value of such Municipal Obligations does not exceed
20% of the aggregate Market Value of the S&P Eligible Assets.
"S&P Exposure Period" means the maximum period of time following a
Valuation Date, including the Valuation Date and the Preferred Shares Basic
Maintenance Cure Date, (currently 10 Business Days) that the Corporation
has under these Articles Supplementary to cure any failure to maintain, as
of such Valuation Date, the Discounted Value for its portfolio at least
equal to the Preferred Shares Basic Maintenance Amount (as described in
paragraph 7 (a) of these Articles Supplementary).
"S&P Hedging Transaction" means the purchasing or selling of a
futures contract based on the Municipal Index or Treasury Bonds or the
purchasing of an option on such a futures contract.
"S&P Volatility Factor" means, with respect to each Series of
Preferred Shares, 277% during the Initial Dividend Period. Thereafter, "S&P
Volatility Factor" means, depending on the applicable Reference Rate, the
following:
Reference Rate
Taxable Equivalent of the
Short-Term Municipal
Bond Rate...................................................... 277%
30-day "AA" Composite
Commercial Paper Rate.......................................... 228%
60-day "AA" Composite
Commercial Paper Rate.......................................... 228%
90-day "AA" Composite
Commercial Paper Rate.......................................... 222%
180-day "AA" Composite
Commercial Paper Rate.......................................... 217%
1-year U.S. Treasury
Bill Rate...................................................... 198%
2-year U.S. Treasury
Note Rate...................................................... 185%
3-year U.S. Treasury
Note Rate...................................................... 178%
4-year U.S. Treasury
Note Rate...................................................... 171%
5-year U.S. Treasury
Note Rate...................................................... 169%
Notwithstanding the foregoing, the S&P Volatility Factor may mean such
other potential dividend rate increase factor as S&P advises the
Corporation in writing is applicable.
"Secondary Insurance" means insurance guaranteeing the
timely payment of principal of, and interest on, a Municipal Obligation
purchased by the Corporation or a third party subsequent to the original
issuance of such Municipal Obligation.
"Securities Depository" means The Depository Trust
Company or any successor company or other entity selected by the
Corporation as securities depository for the Preferred Shares that agrees
to follow the procedures required to be followed by such securities
depository in connection with the Preferred Shares.
"Series M7 Preferred Shares" means the Auction Rate
Municipal Preferred Stock, Series M7, liquidation preference $50,000 per
share plus an amount equal to accumulated but unpaid dividends thereon
(whether or not earned or declared), plus the premium, if any, resulting
from the designation of a Premium Call Period, of the Corporation.
"Series M28 Preferred Shares" means the Auction Rate
Municipal Preferred Stock, Series M28, liquidation preference $50,000 per
share plus an amount equal to accumulated but unpaid dividends thereon
(whether or not earned or declared) plus the premium, if any, resulting
from the designation of a Premium Call Period, of the Corporation.
"Service" means the United States Internal Revenue Service.
"7-day Dividend Period" means any Dividend Period of 7
days for a series of Preferred Shares.
"Special Dividend Period" means a Dividend Period
consisting of a specified number of days (other than 28 in the case of the
Series M28 Preferred Shares or 7 in the case of the Series M7 Preferred
Shares), evenly divisible by seven (in each case subject to adjustment as
provided in paragraph 2(c) (iii)).
"Special Dividend Period Reference Rate" means the rate
or rates per annum specified by the Corporation (which may be expressed as
the lower of a specified rate or rates or a Spread under, at or over the
Reference Index or Reference Security being specified for such Special
Dividend Period) in the Notice of Special Dividend Period relating to a
particular Special Dividend Period and specifying a Reference Index or
Reference Security or, if the Corporation shall fail to so specify any such
rate or rates, then (i), in the case of a Special Dividend Period of 182
days or less, the "AA" Composite Commercial Paper Rate which most closely
matches the length of the Special Dividend Period, provided that in no case
shall the Special Dividend Reference Rate be a "AA" Composite Commercial
Paper Rate which is shorter in time than the 30-day "AA" Composite
Commercial Paper Rate, or, in the case of a Special Dividend Period of
longer than 182 days, the Treasury Rate which most closely matches the
length of the Special Dividend Period.
"Specific Redemption Provisions" means, with respect to a
Special Dividend Period either, or any combination of, (i) a period (a
"Non-Call Period") determined by the Board of Directors of the Corporation,
after consultation with the Auction Agent and the Broker-Dealers, during
which the Preferred Shares subject to such Dividend Period shall not be
subject to redemption at the option of the Corporation and (ii) a period (a
"Premium Call Period"), consisting of a number of whole years and
determined by the Board of Directors of the Corporation, after consultation
with the Auction Agent and the Broker-Dealers, during each year of which
the Preferred Shares subject to such Dividend Period shall be redeemable at
a price per share equal to $50,000 plus accumulated but unpaid dividends
plus a premium expressed as a percentage of $50,000 as determined by the
Board of Directors of the Corporation after consultation with the Auction
Agent and the Broker-Dealers; provided, however, that the Corporation shall
not adopt Specific Redemption Provisions unless Moody's and S&P or any
Substitute Rating Agency advises the Corporation in writing that such
adoption will not adversely affect their then-current ratings on the
Preferred Shares.
"Spread" means the negative or positive difference or the
absence of any difference, expressed in whole and fractional basis points,
below, at or above a Reference Index or Reference Security specified by the
Corporation in a Notice of Special Dividend Period.
"Stock Books" means the books maintained by the Auction
Agent setting forth at all times a current list, as determined by the
Auction Agent, of Existing Holders of the Preferred Shares.
"Stock Register" means the register of Holders maintained
on behalf of the Corporation by the Auction Agent in its capacity as
transfer agent and registrar for the Preferred Shares.
"Subsequent Dividend Payment Period," with respect to
Preferred Shares, has the meaning set forth in paragraph 2(c) (i) of these
Articles Supplementary and, with respect to Other Preferred Shares, has the
equivalent meaning.
"Substitute Commercial Paper Dealers" means such
Substitute Commercial Paper Dealer or Dealers as the Corporation may from
time to time appoint or, in lieu of any thereof, their respective
affiliates or successors.
"Substitute Rating Agency" and "Substitute Rating
Agencies" shall mean (i) with respect to the Series M28 Preferred Shares
only a nationally recognized securities rating organization and two
nationally recognized securities rating organizations, respectively,
selected by Merrill Lynch, Pierce, Fenner & Smith Incorporated, or its
respective affiliates and successors, after consultation with the
Corporation, to act as a substitute rating agency or substitute rating
agencies, as the case may be, to determine the credit ratings of Series M28
Preferred Shares or (ii) with respect to the Series M7 Preferred Shares
shall mean a nationally recognized securities rating organization and two
nationally recognized securities rating organizations, respectively,
selected by Lehman Special Securities Incorporated, or its respective
affiliates and successors, after consultation with the Corporation, to act
as a substitute rating agency or substitute rating agencies, as the case
may be, to determine the credit rating of the Series M7 Preferred Shares.
"Taxable Equivalent of the Short-Term Municipal Bond
Rate" means (i) 90% of (A) the per annum rate expressed on an interest
equivalent basis equal to the index, made available for the Business Day
immediately preceding such date but in any event not later than 8:30 A.M.,
New York City time, on such date by Kenny Information Systems or any
successor thereto, based upon 30-day yield evaluations at par of bonds the
interest on which is excludable for Federal income tax purposes under the
Code, of not less than "high grade" component issuers selected by Kenny
Information Systems or any such successor from time to time in its
discretion, which component issuers shall include, without limitation,
issuers of general obligation bonds but shall exclude any bonds the
interest on which is subject to the Federal alternative minimum tax or
similar tax under the Code, unless all bonds the interest on which is so
excludable for Federal income tax purposes are subject to such tax and (B)
divided by 1 minus the Maximum Marginal Regular Federal individual income
tax rate applicable to the character of the income being distributed or the
maximum marginal regular Federal corporate income tax rate applicable to
the character of the income being distributed (in each case expressed as a
decimal), whichever is greater; or (ii) in lieu of the rate determined
pursuant to clause (i) above, a percentage, determined by the Corporation,
of (A) the per annum rate expressed on an interest equivalent basis equal
to any substitute index prepared by any person (other than an Affiliate of
the Corporation), selected from time to time by the Corporation, based on
bonds the interest on which is excludable from gross income for Federal
income tax purposes under the Code, and (B) divided by 1 minus the Maximum
Marginal Regular Federal individual income tax rate applicable to the
character of the income being distributed or the Maximum Marginal Regular
Federal corporate income tax rate applicable to the character of the income
being distributed (in each case expressed as a decimal) , whichever is
greater, as made available on a discount basis or otherwise by the preparer
of such index for the Business Day immediately preceding such date but in
any event not later than 8:30 A.M., New York City time, on such date;
provided that the Corporation shall not select any such substitute index or
determine any such percentage unless the Corporation has received
confirmation from Moody's and S&P (or any Substitute Rating Agency) that
the use of such index or percentage would not affect the ratings assigned
to the Preferred Shares by Moody's and S&P (or any Substitute Rating
Agency); provided, however, that if the index then used by the Corporation
for purposes of determining the Taxable Equivalent of the Short-Term
Municipal Bond Rate is not made so available by 8:30 A.M., the case of the
index described in clause (i) above or by the preparer of such index in the
case of any substitute index described in clause (ii) above, the Taxable
Equivalent of the Short-Term Municipal Bond Rate shall mean the per annum
rate expressed on an interest equivalent basis equal to the most recent
such index so made available for any preceding Business Day, without being
multiplied by the 90% factor in the case of the index described in such
clause (i) or the percentage determined by the Corporation referred to in
such clause (ii) in the case of the index described in clause (ii).
"30-day 'AA' Composite Commercial Paper Rate," on any
date, means (i) the Interest Equivalent of the 30-day rate on commercial
paper placed on behalf of issuers whose corporate bonds are rated "AA" by
S&P, or the equivalent of such rating by S&P or another nationally
recognized statistical rating organization, as such 30-day rate is made
available on a discount basis or otherwise by the Federal Reserve Bank of
New York for the Business Day immediately preceding such date, or (ii) in
the event that the Federal Reserve Bank of New York does not make available
such a rate, then the arithmetical average of the Interest Equivalent of
the 30-day rate on commercial paper placed on behalf of such issuers, as
quoted to the Auction Agent on a discount basis or otherwise by the
Commercial Paper Dealer for the close of business on the Business Day
immediately preceding such date. If the Commercial Paper Dealer does not
quote a rate required to determine the 30-day "AA" Composite Commercial
Paper Rate, the 30- day "AA" Composite Commercial Paper Rate will be
determined on the basis of the quotation or quotations furnished by any
Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers
selected by the Corporation to provide such rate or rates not being
supplied by the Commercial Paper Dealer.
"Treasury Bonds" means United States Treasury Bonds with
remaining maturities of ten years or more.
"Treasury Rate," on any date for any Special Dividend
Period exceeding 182 days, means:
(i) the yield on the most recently
auctioned non- callable direct obligations of the U.S. Government
(excluding "flower" bonds) with a remaining maturity closest to
the duration of such Special Dividend 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 by The Wall Street Journal, then the arithmetic
average of the yields on the most recently auctioned non-callable
direct obligations of the U.S. Government (excluding "flower"
bonds) with a remaining maturity closest to the duration of such
Special Dividend Period as quoted on a discount basis or otherwise
by the U.S. Government Securities Dealers to the Auction Agent for
the close of business on the Business Day immediately preceding
such date.
If any U.S. Government Securities Dealer does not quote a
rate required to determine the Treasury Rate, the Treasury 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 Dealers selected by the
Corporation 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.
"Treasury Securities" means United States Treasury bills,
notes or bonds.
"28-day Dividend Period" means any Dividend Period of 28
days for a series of Preferred Shares.
"U.S. Government Securities Dealer" means Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Shearson Lehman Brothers Inc. or
their respective affiliates or successors, if such entity is a U.S.
Government securities dealer. As used herein, "Substitute U.S. Government
Securities Dealer" shall mean A.G. Edwards & Sons, Inc., Kidder, Peabody &
Co. Incorporated, PaineWebber Incorporated and Prudential Securities
Incorporated or their respective affiliates or successors, if such entity
is a U.S. Government securities dealer, provided that none of such entities
shall be a U.S. Government Securities Dealer.
"Valuation Date" means, for purposes of determining
whether the Corporation is maintaining the Preferred Shares Basic
Maintenance Amount and the Minimum Liquidity Level, each Friday which is a
Business Day, or the Business Day preceding any Friday which is not a
Business Day, and the Date of Original Issue.
"Variation Margin" means, in connection with an
outstanding futures contract owned or sold by the Corporation, the amount
of cash or securities paid to and received from a broker (subsequent to the
Initial Margin payment) from time to time as the price of such futures
contract fluctuates.
(b) The foregoing definitions of Accountant's
Confirmation, Deposit Securities, Discounted Value, Dividend Coverage
Amount, Dividend Coverage Assets, Independent Accountant, Market Value,
Maximum Potential Additional Dividend Liability, Minimum Liquidity Level,
Moody's Discount Factor, Moody's Eligible Asset, Moody's Exposure Period,
Moody's Hedging Transaction, Moody's Volatility Factor, Preferred Shares
Basic Maintenance Amount, Preferred Shares Basic Maintenance Cure Date,
Preferred Shares Basic Maintenance Report, Reference Rate, S&P Discount
Factor, S&P Eligible Asset, S&P Exposure Period, S&P Hedging Transaction,
S&P Volatility Factor and Valuation Date have been determined by the Board
of Directors of the Corporation in order to obtain an "aaa" rating from
Moody's and an AAA rating from S&P on the Preferred Shares on their Date of
Original Issue; and such definitions shall be adjusted from time to time
and without further action by the Board of Directors to reflect changes
made thereto independently by Moody's, S&P or any Substitute Rating Agency
if each of Moody's, S&P and any Substitute Rating Agency has advised the
Corporation in writing (i) separately or collectively of such adjustments
and (ii) collectively that such adjustments will not adversely affect their
then-current ratings on the Preferred Shares. The adjustments contemplated
by the preceding sentence shall be made effective upon the time the
Corporation receives the written notice from Moody's, S&P and any
Substitute Rating Agency contemplated by clause (ii) of the preceding
sentence.
2. Dividends. (a) The Holders shall be entitled to
receive, when, as and if declared by the Board of Directors of the
Corporation, out of funds legally available therefor, cumulative dividends
each consisting of (i) cash at the Applicable Rate and (ii) an
uncertificated Right to receive cash as set forth in paragraph 2(e) below,
and no more, payable on the respective dates set forth below. Dividends on
the Preferred Shares so declared and payable shall be paid (i) in
preference to and in priority over any dividends declared and payable on
the Common Stock, and (ii) to the extent permitted by law and to the extent
available, out of net tax-exempt income earned on the Corporation's
investments. To the extent permitted by law, dividends on Preferred Shares
will be designated as exempt-interest dividends. For the purposes of this
section, the term "net tax-exempt income" shall exclude capital gains and
other taxable income of the Corporation.
(b) (i) Cash dividends on Preferred Shares shall
accumulate from the Date of Original Issue. With respect to the
Series M7 Preferred Shares and Series M28 Preferred Shares,
dividends will be payable commencing on the Initial Dividend
Payment Date with respect to each series of Preferred Shares.
Following the Initial Dividend Payment Date for the Series M7
Preferred Shares and Series M28 Preferred Shares, dividends on the
Preferred Shares will be payable, at the option of the
Corporation, (ii) with respect to any Dividend Period of more than
35 and fewer than 92 days, on the day next succeeding each period
of 30 days to occur during such Dividend Period (or in the case of
any Dividend Period of more than 91, days as specified in the
relevant Notice of Special Dividend Period), and on the day next
succeeding the last day thereof, (iv) with respect to any Dividend
Period of 365 days or more, month on the first day of each
calendar month during such Dividend Period (or in the case of any
Dividend Period of more than 91 days, as specified in the relevant
Notice of Special Dividend Period), and on the day, next
succeeding the last day thereof (each such date referred to in
clauses (i), (ii), (iii) and (iv) being hereinafter referred to as
a "Normal Dividend Payment Date"), except that (i) if such Normal
Dividend Payment Date is not a Business Day, then the Dividend
Payment Date shall be the next succeeding date if both such dates
following the Normal Dividend payment Date are Business Days, or
(ii) if the date following such Normal Dividend Payment Date is
not a Business Day, then the Dividend Payment Date will be the
date next preceding such Normal Dividend Payment Date if such both
such date and such Normal Dividend Payment Date are Business Days
or (iii) if such Normal Dividend Payment Date and either the
preceding date or the succeeding date are not Business Days, then
the Dividend Payment Date shall be the first Business Day next
preceding such Normal Dividend Payment Date that is next succeeded
by a Business Day. If, however, the Securities Depository shall
make available to its participants and members in funds
immediately available in New York City on Dividend Payment Dates,
the amount due as dividends on such Dividend Payment Dates (and
the Securities Depository shall have so advised the Corporation ),
and if the day that otherwise would be the Dividend Payment Date
is not a Business Day, then the Dividend Payment Date shall be the
next succeeding Business Day. Although any particular Dividend
Payment Date may not occur on a Normal Dividend Payment Date
because of the exceptions discussed above, the next succeeding
Dividend Payment Date shall be, subject to such provisos, the next
Normal Dividend Payment Date. If for any reason a Dividend Payment
Date cannot be fixed as described above, then the Board of
Directors shall fix the Dividend Payment Date. Each dividend
payment date determined as provided above is hereinafter referred
to as a "Dividend Payment Date."
(ii) Each dividend shall be paid to the
Holders as they appear in the Stock Register as of 12:00 noon, New
York City time, on the Business Day preceding the Dividend Payment
Date. Dividends in arrears for any past Dividend Period may be
declared and paid at any time, without reference to any regular
Dividend Payment Date, to the Holders as they appear on the Stock
Register on a date, not exceeding 15 days prior to the payment
date therefor, as may be fixed by the Board of Directors of the
Corporation.
(c) (i) During the period from and including the
Date of Original Issue to but with respect to the Series M7
Preferred Shares and Series M28 Preferred Shares, excluding the
Initial Dividend Payment Date (the "Initial Dividend Period"), the
Applicable Rate shall be the Initial Dividend Rate. Commencing on
the Initial Dividend Payment Date, with respect to the Series M7
Preferred Shares and Series M28 Preferred Shares, the Applicable
Rate for each subsequent Dividend Period or portion thereof
(hereinafter referred to as a "Subsequent Dividend Payment
Period"), which Subsequent Dividend Payment Period shall commence
on a Dividend Payment Date and shall end on the calendar day prior
to the next Dividend Payment Date, shall be equal to the lesser of
(x) the Maximum Applicable Rate for such Dividend Period or for
such Subsequent Dividend Payment Period included therein or (y)
the greater of (i) the Minimum Applicable Rate for such Dividend
Period or for such Subsequent Dividend Payment Period included
therein or (ii) the rate per annum that results for such Dividend
Period or Subsequent Dividend Payment Period included therein from
implementation of the Auction Procedures including any periodic
application of a Spread to a specified Reference Index or
Reference Security.
Notwithstanding the foregoing sentence, the
Applicable Rate for each Dividend Period commencing during a
Non-Payment Period shall be equal to the NonPayment Period Rate
and each Dividend Payment Period for Preferred Shares of any
series, commencing after the first day of, and during, a
Non-Payment Period shall be a 28-day Dividend Payment Period (in
the case of the Series M28 Preferred Shares) or a 7- day Dividend
Payment Period (in the case of the Series M7 Preferred Shares).
Except in the case of the willful failure of the Corporation to
pay a dividend on a Dividend Payment Date or to redeem any
Preferred Shares on the date set for such redemption, any amount
of any dividend due on any Dividend Payment Date (if, prior to the
close of business on the second Business Day preceding such
Dividend Payment Date, the Corporation has declared such dividend
payable on such Dividend Payment Date to the Holders of such
Preferred Shares as of 12:00 noon, New York City time, on the
Business Day preceding such Dividend Payment Date) or redemption
price with respect to any Preferred Shares not paid to such
Holders when due may be paid to such Holders in the same form of
funds by 12:00 noon, New York City time, on any of the first three
Business Days after such Dividend Payment Date or due date, as the
case may be, provided that, such amount is accompanied by a late
charge calculated for such period of non-payment at the NonPayment
Period Rate applied to the amount of such non-payment based on the
actual number of days comprising such period divided by 365. In
the case of a willful failure of the Corporation to pay a dividend
on a Dividend Payment Date or to redeem any Preferred Shares on
the date set for such redemption, the preceding sentence shall not
apply and the Applicable Dividend Rate for the Dividend Period
commencing during the Non-Payment Period resulting from such
failure shall be the Non-Payment Period Rate. For the purposes of
the foregoing, payment to a person in same-day funds on any
Business Day at any time shall be considered equivalent to payment
to such person in New York Clearing House (next-day) funds at the
same time on the preceding Business Day, and any payment made
after 12:00 noon, New York City time, on any Business Day shall be
considered to have been made instead in the same form of funds and
to the same person before 12:00 noon, New York City time, on the
next Business Day.
(ii) The amount of cash dividends per
share of Preferred Shares payable (if declared) for any Dividend
Payment Period or part thereof shall be computed by multiplying
the Applicable Rate for such Dividend Payment Period by a
fraction, the numerator of which shall be the number of days in
such Dividend Payment Period or part thereof such share was
outstanding and the denominator of which shall be 365 (or 360 for
a Dividend Period of 365 days or more), multiplying the amount so
obtained by $50,000, and rounding the amount so obtained to the
nearest cent.
(iii) With respect to each Dividend
Period that the Corporation desires to be a Special Dividend
Period, the Corporation may, at its sole option and to the extent
permitted by law, by telephonic and written notice (a "Request for
Special Dividend Period") to the Auction Agent and to each
Broker-Dealer, request that the next succeeding Dividend Period
for such series of Preferred Shares be a number of days (other
than 28 in the case of Series M28 Preferred Shares or 7 in the
case of Series M7 Preferred Shares), evenly divisible by seven and
specified in such notice, provided that for any Auction occurring
after the initial Auction, the Corporation may not give a Request
for Special Dividend Period (and any such request shall be null
and void) unless Sufficient Clearing Bids were made in the last
occurring Auction and unless full cumulative dividends, any
amounts due with respect to mandatory redemptions, and any
Additional Dividends payable prior to such date have been paid in
full. Such Request for Special Dividend Period, in the case of a
Dividend Period of 182 days or less, shall be given on or prior to
the 4th day but not more than 7 days prior to an Auction Date for
the Preferred Shares and, in the case of a Dividend Period of more
than 182 days, shall be given on or prior to the 14th day but not
more than 28 days prior to an Auction Date for the Preferred
Shares. Such Request for Special Dividend Period shall also
specify any proposed Bid Requirements. Upon receiving such Request
for Special Dividend Period, the Broker-Dealer(s) shall jointly
determine whether, given the factors set forth below, it is
advisable that the Corporation issue a Notice of Special Dividend
Period for the Preferred Shares as contemplated by such Request
for Special Dividend Period and, if advisable, the Specific
Redemption Provisions and shall give the Corporation and the
Auction Agent written notice (a "Response") of such determination
by no later than the third day prior to such Auction Date. In
making such determination the Broker-Dealer(s) will consider (1)
existing short-term and long-term market rates and indices of such
short-term and long-term rates, (2) existing market supply and
demand for short-term and long-term securities, (3) existing yield
curves for short-term and long-term securities comparable to the
Preferred Shares, (4) industry and financial conditions which may
affect the Preferred Shares, (5) the investment objective of the
Corporation, and (6) the Dividend Periods and dividend rates at
which current and potential beneficial holders of the Preferred
Shares would remain or become beneficial holders. If none of the
Broker-Dealer(s) give the Corporation and the Auction Agent a
Response by such third day or if the Response of all of the
Broker-Dealers providing a Response states that given the factors
set forth above it is not advisable that the Corporation give a
Notice of Special Dividend Period for the Preferred Shares, the
Corporation may not give a Notice of Special Dividend Period in
respect of such Request for Special Dividend Period. In the event
the Response of at least one Broker-Dealer does not indicate that
it is not advisable that the Corporation give a Notice of Special
Dividend Period for the Preferred Shares, the Corporation may by
no later than the second day prior to such Auction Date give a
notice (a "Notice of Special Dividend Period") to the Auction
Agent, the Securities Depository and each Broker-Dealer which
notice will specify the duration of the Special Dividend Period,
the Bid Requirements (if any) applicable to the Auction relating
to such Special Dividend Period and Specific Redemption Provisions
(if any). The Corporation shall not give a Notice of Special
Dividend Period or convert to a Special Dividend Period and, if
the Corporation has given a Notice of Special Dividend, the
Corporation is required to give telephonic and written notice of
revocation (a "Notice of Revocation") to the Auction Agent, each
Broker-Dealer, and the Securities Depository on or prior to the
Business Day prior to the relevant Auction Date if it has not
obtained the advice in writing of Moody's and S&P or any
Substitute Rating Agency that the proposed Special Dividend Period
will not adversely affect their then-current rating on the
Preferred Shares or if (w) either the 1940 Act Preferred Shares
Asset Coverage is not satisfied or the Corporation shall fail to
maintain S&P Eligible Assets and Moody's Eligible Assets each with
an aggregate Discounted Value at least equal to the Preferred
Shares Basic Maintenance Amount, in each case on each of the two
Valuation Dates immediately preceding the Business Day prior to
the relevant Auction Date (and in each case, with respect to
Moody's Eligible Assets, using a Moody's Exposure Period
equivalent to 14 days longer than normal) on an actual basis and
on a pro forma basis giving effect to the proposed Special
Dividend Period (using as a pro forma dividend rate with respect
to such Special Dividend Period the dividend rate which the
Broker-Dealers shall advise the Corporation is an approximately
equal rate for securities similar to the Preferred Shares with an
equal frequency of recalculation of the Reference Index or
Reference Security as is utilized by the Corporation with respect
to the first Dividend Payment Period within such Special Dividend
Period and using as a pro forma Maximum Applicable Rate the
highest rate specified in the Notice of Special Dividend Period
for the Dividend Payment Periods covering not less than the first
49 days of such proposed Special Dividend Period or, if no such
rate is specified in the Notice of Special Dividend Period, the
Maximum Applicable Rate resulting by operation of the definition
of Special Dividend Period Reference Rate for the Special Dividend
Period specified in such Notice of Special Dividend Period), (x)
sufficient funds for the payment of dividends payable on the
immediately succeeding Dividend Payment Date have not been
irrevocably deposited with the Auction Agent by the close of
business on the third Business Day preceding the related Auction
Date, (y) the Broker-Dealer(s) jointly advise the Corporation that
after consideration of the factors listed above they have
concluded that it is advisable to give a Notice of Revocation or
(z) the Corporation has determined to terminate the Special
Dividend Period for any reason. If the Corporation is prohibited
from giving a Notice of Special Dividend Period as a result of any
of the factors enumerated in clause (w), (x), (y) or (z) of the
prior sentence or if the Corporation gives a Notice of Revocation
with respect to a Notice of Special Dividend Period, the next
succeeding Dividend Period will be a 28-day Period (in the case of
Series M28 Preferred Shares) or a 7-day Dividend Period (in the
case of Series M7 Preferred Shares) provided that if the
then-current Dividend Period in the case of the Series M28
Preferred Shares is a Special Dividend Period of less than 28
days, the next succeeding Dividend Period for such series will be
the same length as the current Dividend Period. In addition, in
the event Sufficient Clearing Bids are not made in the applicable
Auction or such Auction is not held for any reason, such next
succeeding Dividend Period will be a 28-day Dividend Period (in
the case of Series M28 Preferred Shares) or a 7-day Dividend
Period (in the case of Series M7 Preferred Shares) and the
Corporation may not again give a Notice of Special Dividend Period
for the Preferred Shares (and any such attempted notice shall be
null and void) until Sufficient Clearing Bids have been made in an
Auction with respect to a 28-day Dividend Period (in the case of
Series M28 Preferred Shares) or a 7-day Dividend Period (in the
case of Series M7 Preferred Shares).
(d) (i) Holders shall not be entitled to any
dividends, whether payable in cash, property or stock, in excess
of full cumulative dividends, as herein provided, on the Preferred
Shares. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment on the Preferred Shares
that may be in arrears.
(ii) For so long as any share of the
Preferred Shares is outstanding, the Corporation shall not
declare, pay or set apart for payment any dividend or other
distribution (other than a dividend or distribution paid in shares
of, or options, warrants or rights to subscribe for or purchase,
Common Stock or other stock, if any, ranking junior to the
Preferred Shares as to dividends or upon liquidation) in respect
of the Common Stock or any other stock of the Corporation ranking
junior to or on a parity with the Preferred Shares as to dividends
or upon liquidation, or call for redemption, redeem, purchase or
otherwise acquire for consideration any shares of the Common Stock
or any other such junior stock (except by conversion into or
exchange for stock of the Corporation ranking junior to the
Preferred Shares as to dividends and upon liquidation) or any
other such Parity Stock (except by conversion into or exchange for
stock of the Corporation ranking junior to or on a parity with the
Preferred Shares as to dividends and upon liquidation), unless (A)
immediately after such transaction, the Corporation shall have
Moody's Eligible Assets and S&P Eligible Assets each with an
aggregate Discounted Value equal to or greater than the Preferred
Shares Basic Maintenance Amount and the Corporation shall maintain
the 1940 Act Preferred Shares Asset Coverage, (B) full cumulative
dividends on Preferred Shares and shares of Other Preferred Shares
due on or prior to the date of the transaction have been declared
and paid or shall have been declared and sufficient funds for the
payment thereof deposited with the Auction Agent, (C) any
Additional Dividend required to be paid under paragraph 2(e) below
on or before the date of such declaration or payment has been paid
and (D) the Corporation has redeemed the full number of Preferred
Shares required to be redeemed by any provision for mandatory
redemption contained herein.
(e) Each dividend shall consist of (i) cash at
the Applicable Rate and (ii) an uncertificated right (a "Right") to receive
an Additional Dividend (as defined below). Each Right shall thereafter be
independent of the share or Preferred Shares on which the dividend was
paid. The Corporation shall cause to be maintained a record of each Right
received by the respective Holders. The Corporation shall not be required
to recognize any transfer of a Right.
If, in the case of a Dividend Period of 28 days
or fewer, the Corporation retroactively allocates any net capital gains or
other taxable income to Preferred Shares without having given advance
notice thereof to the Auction Agent as described in paragraph 2(f) hereof
(the amount of such allocation referred to herein as a "Retroactive Taxable
Allocation") solely by reason of the fact that such allocation is made as a
result of the redemption of all or a portion of the outstanding Preferred
Shares or the liquidation of the Corporation, the Corporation will, within
90 days (and generally within 60 days) after the end of the Corporation's
fiscal year for which a Retroactive Taxable Allocation is made, provide
notice thereof to the Auction Agent and to each holder of a Right
applicable to such Preferred Shares (initially Cede & Co. as nominee of The
Depository Trust Company) during such fiscal year at such holder's address
as the same appears or last appeared on the Stock Books of the Corporation.
The Corporation will, within 30 days after such notice is given to the
Auction Agent, pay to the Auction Agent (who will, then distribute to such
holders of Rights), out of funds legally available therefor, an amount
equal to the aggregate Additional Dividend with respect to all Retroactive
Taxable Allocations made to such holders during the fiscal year in
question.
If the Corporation, in the case of a Dividend
Period of 35 days or more, makes a Retroactive Taxable Allocation to a
dividend paid on Preferred Shares, the Corporation will, within 90 days
(and generally within 60 days) after the end of the Corporation's fiscal
year for which a Retroactive Taxable Allocation is made, provide notice
thereof to the Auction Agent and to each holder of a Right applicable to
such Preferred Shares (initially Cede & Co. as nominee of The Depository
Trust Company) during such fiscal year at such holder's address as the same
appears or last appeared on the Stock Books of the Corporation. The
Corporation will, within 30 days after such notice is given to the Auction
Agent, pay to the Auction Agent (who will then distribute to such holders
of Rights), out of funds legally available therefor, an amount equal to the
aggregate Additional Dividend with respect to all Retroactive Taxable
Allocations made to such holders during the fiscal year in question.
An "Additional Dividend" means payment to a
holder of Preferred Shares of an amount which, when taken together with the
aggregate amount of Retroactive Taxable Allocations allocated to such
holder with respect to the fiscal year in question, would cause such
holder's dividends from the aggregate of both the Retroactive Taxable
Allocations and the Additional Dividend to be equal to the dollar amount of
the dividends which would have been received and retained by such holder if
the Retroactive Taxable Allocations had not been made. Such Additional
Dividend shall be calculated (i) without consideration being given to the
time value of money; (ii) assuming that no holder of Preferred Shares is
subject to the Federal alternative minimum tax with respect to dividends
received from the Corporation; and (iii) assuming that each Retroactive
Taxable Allocation would be taxable in the hands of each holder of
Preferred Shares at the maximum marginal combined regular Federal income
tax rate applicable to individuals or corporations, whichever is greater,
in effect during the fiscal year in question.
(f) Whenever the Corporation intends to include
any net capital gains or other taxable income in any dividend on Preferred
Shares the Applicable Rate for which will be established at the next
succeeding Auction, the Corporation will, in the case of a Dividend Period
of 28 days or fewer, and may, in the case of a Dividend Period of 35 days
or more, notify the Auction Agent of the amount to be so included at least
five Business Days prior to the Auction Date on which the Applicable Rate
for such dividend is to be established. If, in the case of a Dividend
Period of 28 days or fewer, the Corporation retroactively allocates any net
capital gains or other taxable income to a dividend paid on Preferred
Shares without having given advance notice thereof to the Auction Agent as
described in paragraph 2(f) hereof solely by reason of the fact that such
allocation is made as a result of the redemption of all or a portion of the
outstanding Preferred Shares or the liquidation of the Corporation, the
Corporation will make certain payments to holders of Preferred Shares to
offset the tax effect thereof. If, in the case of a Dividend Period of 35
days or more, the Corporation allocates any net capital gains or other
taxable income to a dividend paid on Preferred Shares without having given
advance notice thereof to the Auction Agent as described in Paragraph 2(f)
hereof, the Corporation will make certain payments to holders of Preferred
Shares to offset the tax effect thereof.
(g) No fractional share of Preferred Shares
shall be issued.
3. Liquidation Rights. Upon any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the
Holders shall be entitled to receive, out of the assets of the Corporation
available for distribution to shareholders, before any distribution or
payment is made upon any Common Stock or any other capital stock ranking
junior in right of payment upon liquidation to the Preferred Shares, the
sum of $50,000 per share plus accumulated but unpaid dividends (whether or
not earned or declared) thereon plus the premium, if any, resulting from
the designation of a Premium Call Period to the date of distribution, and
after such payment the holders of Preferred Shares will be entitled to no
other payments other than Additional Dividends as provided in paragraph
2(e) hereof. If upon any liquidation, dissolution or winding up of the
Corporation, the amounts payable with respect to the Preferred Shares and
any other outstanding class or series of Preferred Stock of the Corporation
ranking on a parity with the Preferred Shares as to payment upon
liquidation are not paid in full, the Holders and the holders of such other
class or series will share ratably in any such distribution of assets in
proportion to the respective preferential amounts to which they are
entitled. After payment of the full amount of the liquidating distribution
to which they are entitled, the Holders will not be entitled to any further
participation in any distribution of assets by the Corporation except for
any Additional Dividends. A consolidation or merger of the Corporation with
or into any other corporation or corporations or a sale, whether for cash,
shares of stock, securities or properties, of all or substantially all or
any part of the assets of the Corporation shall not be deemed or construed
to be a liquidation, dissolution or winding up of the Corporation.
4. Redemption. (a) Preferred Shares shall be redeemable
by the Corporation as provided below:
(i) To the extent permitted under the
1940 Act and Maryland law, upon giving a Notice of Redemption, the
Corporation at its option may redeem Preferred Shares, in whole or
in part, out of funds legally available therefor, at the Optional
Redemption Price per share, on any Dividend Payment Date; provided
that no Preferred Shares shall be subject to optional redemption
during a Non-Call Period. In addition, holders of Preferred Shares
which are redeemed shall be entitled to receive Additional
Dividends to the extent provided herein. The Corporation may not
give a Notice of Redemption relating to an optional redemption as
described in this paragraph 4(a) (i) or effect an optional
redemption unless, at the time of giving such Notice of Redemption
or effecting such optional redemption, the Corporation 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 due to Holders by reason
of the redemption of their Preferred Shares on such redemption
date and, if as a result of such optional redemption, the
Corporation would fail to maintain S&P Eligible Assets and Moody's
Eligible Assets each with an aggregate Discounted Value, equal to
the Preferred Shares Basic Maintenance Amount.
(ii) The Corporation shall redeem, out
of funds legally available therefor, at the Mandatory Redemption
Price per share, Preferred Shares to the extent permitted under
the 1940 Act and Maryland law, on a date fixed by the Board of
Directors, if the Corporation fails to maintain Moody's Eligible
Assets and S&P Eligible Assets each with an aggregate Discounted
Value equal to or greater than the Preferred Shares Basic
Maintenance Amount as provided in paragraph 7(a) or to satisfy the
1940 Act Preferred Shares Asset Coverage as provided in paragraph
6 and such failure is not cured on or before the Preferred Shares
Basic Maintenance Cure Date or the 1940 Act Cure Date (herein
respectively referred to as the "Cure Date"), as the case may be.
In addition, holders of Preferred Shares so redeemed shall be
entitled to receive Additional Dividends to the extent provided
herein. The number of Preferred Shares to be redeemed shall be
equal to the lesser of (i) the minimum number of Preferred Shares
the redemption of which, if deemed to have occurred immediately
prior to the opening of business on the Cure Date, would together
with all shares of Other Preferred Stock subject to redemption or
retirement, result in the Corporation having S&P Eligible Assets
and Moody's Eligible Assets each with an aggregate Discounted
Value equal to or greater than the Preferred Shares Basic
Maintenance Amount or satisfaction of the 1940 Act Preferred
Shares Asset Coverage, as the case may be, on such Cure Date
(provided that, if there is no such minimum number of Preferred
Shares and shares of Other Preferred Stock the redemption of which
would have such result, all Preferred Shares and shares of Other
Preferred Stock then outstanding shall be redeemed), and (ii) the
maximum number of Preferred Shares, together with all shares of
other Preferred Stock subject to redemption or retirement, that
can be redeemed out of funds expected to be legally available
therefor on such redemption date. In determining the number of
Preferred Shares required to be redeemed in accordance with the
foregoing, the Corporation shall allocate the number required to
be redeemed which would result in the Corporation having Moody's
Eligible Assets and S&P Eligible Assets each with an aggregate
Discounted Value equal to or greater than the Preferred Shares
Basic Maintenance Amount or satisfaction of the 1940 Act Preferred
Shares Asset Coverage, as the case may be, pro rata among
Preferred Shares, Other Preferred Shares and other Preferred Stock
subject to redemption pursuant to provisions similar to those
contained in this paragraph 4(a) (ii) provided that, Preferred
Shares which may not be redeemed at the option of the Corporation
(a) will be subject to mandatory redemption only to the extent
that other shares are not available to satisfy the number of
shares required to be redeemed and (b) will be selected for
redemption in an ascending order of outstanding number of days in
the Non-Call Period during which such shares are not subject to
optional redemption (with shares with the lowest number of days to
be redeemed first) and by lot in the event of shares having an
equal number of days in such period. The Corporation shall effect
such redemption on a Business Day which is not later than 30 days
after such Cure Date, except that if the Corporation does not have
funds legally available for the redemption of all of the required
number of Preferred Shares and shares of other Preferred Stock
which are subject to mandatory redemption or the Corporation
otherwise is unable to effect such redemption on or prior to 30
days after such Cure Date, the Corporation shall redeem those
Preferred Shares which it is unable to redeem on the earliest
practicable date on which it is able to effect such redemption out
of funds legally available therefor.
(b) Notwithstanding any other provision of this
paragraph 4, no Preferred Shares may be redeemed pursuant to paragraph 4(a)
(i) of these Articles Supplementary unless all dividends in arrears on all
remaining outstanding shares of Parity Stock shall have been or are being
contemporaneously paid or declared and set apart for payment. In the event
that less than all the outstanding Preferred Shares are to be redeemed and
there is more than one Holder, the shares to be redeemed shall be selected
by lot or such other method as the Corporation shall deem fair and
equitable.
(c) Whenever Preferred Shares are to be
redeemed, the Corporation, not less than 20 or more than 60 days prior to
the date fixed for redemption, shall mail a notice ("Notice of Redemption")
by first-class mail, postage prepaid, to each Holder of Preferred Shares to
be redeemed and to the Auction Agent. The Corporation shall cause the
Notice of Redemption also to be published in the eastern and national
editions of The Wall Street Journal. The Notice of Redemption to set forth
(i) the redemption date, (ii) the amount of the redemption price, (iii) the
aggregate number of Preferred Shares to be redeemed, (iv) the place or
places where Preferred Shares are to be surrendered for payment of the
redemption price, (v) a statement that dividends on the shares to be
redeemed shall cease to accumulate on such redemption date (except that
holders may be entitled to Additional Dividends) and (vi) the provision of
these Articles Supplementary pursuant to which such shares are being
redeemed. No defect in the Notice of Redemption or in the mailing or
publication thereof shall affect the validity of the redemption
proceedings, except as required by applicable law.
If the Notice of Redemption shall have been
given as aforesaid and, concurrently or thereafter, the Corporation shall
have deposited in trust with the Auction Agent a cash amount equal to the
redemption payment for the Preferred Shares as to which such Notice of
Redemption has been given with irrevocable instructions and authority to
pay the redemption price to the Holders of such shares, then upon the date
of such deposit or, if no such deposit is made, then upon such date fixed
for redemption (unless the Corporation shall default in making the
redemption payment), all rights of the Holders of such shares as
shareholders of the Corporation by reason of the ownership of such shares
will cease and terminate (except their right to receive the redemption
price in respect thereof and any additional dividends, but without
interest), and such shares shall no longer be deemed outstanding. The
Corporation shall be entitled to receive, from time to time, from the
Auction Agent the interest, if any, on such moneys deposited with it and
the Holders of any shares so redeemed shall have no claim to any of such
interest. In case the Holder of any shares so called for redemption shall
not claim the redemption payment for his shares within one year after the
date of redemption, the Auction Agent shall, upon demand, pay over to the
Corporation such amount remaining on deposit and the Auction Agent shall
thereupon be relieved of all responsibility to the Holder of such shares
called for redemption and such Holder thereafter shall look only to the
Corporation for the redemption payment.
5. Voting Rights. (a) General. Except as otherwise
provided in the Charter, each Holder of Preferred Shares shall be entitled
to one vote for each share held on each matter submitted to a vote of
stockholders of the Corporation to which the stockholders are entitled to
vote, and the holders of outstanding shares of Preferred Stock, including
Preferred Shares, and of shares of Common Stock shall vote together as a
single class with respect to all matters on which all stockholders are
entitled to vote. Notwithstanding the preceding sentence, at the first
annual meeting of stockholders, the holders of outstanding shares of
Preferred Stock, including Preferred Shares, represented in person or by
proxy shall be entitled as a class, and to the exclusion of the holders of
all other securities and classes of capital stock of the Corporation, to
elect one Class I director and one Class II director and shall thereafter
be so entitled to elect any successors from time to time to the Class I and
Class II directors so elected at any meeting of shareholders in which
successors are elected. At each meeting of shareholders at which entire
classes of Class I and Class II directors are to be elected, or at any
meeting at which a successor to a director elected by the holders of
Preferred Stock in accordance with this Section is to be elected (including
directors elected pursuant to this sentence), the holders of outstanding
shares of Preferred Stock, including Preferred Shares, represented in
person or by proxy shall be entitled as a class and to the exclusion of the
holders of all other securities and classes of capital stock of the
Corporation to elect one Class I and one Class II director or to elect such
successor. In the event that the Charter is amended to eliminate the
classification of the Corporation's Board of Directors, the holders of
outstanding shares of Preferred Stock, including Preferred Shares,
represented in person or by proxy shall be entitled as a class, and to the
exclusion of the holders of all other securities and classes of capital
stock of the Corporation, to elect two directors. Subject to paragraph 5(b)
hereof, the holders of outstanding shares of capital stock of the
Corporation, voting as a single class, shall elect the balance of the
directors.
(b) Right to Elect Majority of Board of
Directors. During any period in which any one or more of the conditions
described below shall exist (such period being referred to herein as a
"Voting Period"), the number of directors constituting the Board of
Directors shall be automatically increased by the smallest number that,
when added to the two directors elected exclusively by the holders of
shares of Preferred Stock, would constitute a majority of the Board of
Directors as so increased by such smallest, number; and the holders of
shares of Preferred Stock shall be entitled, voting as a class on a
one-vote-per-share basis (to the exclusion of the holders of all other
securities and classes of capital stock of the Corporation), to elect such
smallest number of additional directors, together with the two directors
that such holders are in any event entitled to elect. A Voting Period shall
commence:
(i) if at any time accumulated
dividends (whether or not earned or declared, and whether or not
funds are then legally available in an amount sufficient therefor)
on the outstanding Preferred Shares equal to at least two full
years' dividends 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 dividends; or
(ii) if at any time holders of any
Preferred Stock are entitled to elect a majority of the directors
of the Corporation under the 1940 Act.
Upon the termination of a Voting Period, the
voting rights described in this paragraph 5(b) shall cease, subject always,
however, to the revesting of such voting rights in the Holders upon the
further occurrence of any of the events described in this paragraph 5 (b).
(c) Right to Vote with Respect to Certain Other
Matters. So long as any Preferred Shares are outstanding, the Corporation
shall not, without the affirmative vote of the holders of a majority of the
Outstanding shares of Preferred Stock outstanding at the time, in person or
by proxy, at a meeting (voting separately as one class) or by the unanimous
written consent of the holders of all Outstanding shares of Preferred
Stock: (i) authorize, create or issue, or increase the authorized or issued
amount of, any class or series of stock ranking prior to or on a parity
with any series of Preferred Stock with respect to payment of dividends or
the distribution of assets on liquidation, or increase the authorized
amount of Preferred Shares or any other Preferred Stock (except that,
notwithstanding the foregoing, but subject to the provisions of Section 13
of the 1940 Act, the Board of Directors, without the vote or consent of the
Holders of Preferred Shares, may from time to time authorize, create and
issue, and may increase the authorized or issued amount of, classes or
series of Preferred Stock, including Preferred Shares, ranking on a parity
with the Preferred Shares with respect to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up of the
affairs of the Corporation, subject to continuing compliance by the
Corporation with 1940 Act Preferred Shares Asset Coverage and Preferred
Shares Basic Maintenance Amount requirements, provided that the Fund
obtains written confirmation from Moody's (if Moody's is then rating
Preferred Shares), S&P (if S&P is then rating Preferred Shares) or any
Substitute Rating Agency (if any such Substitute Rating Agency is then
rating Preferred Shares) that the issuance of such class or series would
not impair the rating then assigned by such rating agency to the Preferred
Shares), (ii) amend, alter or repeal the provisions of the Charter whether
by merger, consolidation or otherwise, so as to adversely affect any of the
contract rights expressly set forth in the Charter of holders of Preferred
Shares or any Other Preferred Stock, (iii) authorize the Corporation's
conversion from a closed-end to an open-end investment company as defined
in Section 5(a) of the 1940 Act, or (iv) amend the provisions of the
Charter which provide for the classification of the Board of Directors of
the Corporation into three classes, each with a term of office of three
years with only one class of directors standing for election in any year
(presently Article VI of the Charter). To the extent permitted under the
1940 Act, the Corporation shall not approve any of the actions set forth in
clause (i) or (ii) which adversely affects the contract rights expressly
set forth in the Charter of a Holder of shares of a series of Preferred
Shares differently than those of a Holder of shares of any other series of
Preferred Shares without the affirmative vote of the holders of at least a
majority of the Preferred Shares of each series adversely affected and
Outstanding at such time, in person or by proxy, at a meeting (each such
adversely affected series voting separately as a class) or by the unanimous
written consent of the holders of all Outstanding shares of Preferred
Stock. The Corporation shall notify Moody's and S&P 10 Business Days prior
to any such vote described in clauses (i) and (ii) . Unless a higher
percentage is provided for under the Charter, the affirmative vote of the
holders of a majority of the Outstanding shares of Preferred Stock,
including Preferred Shares, voting together as a single class, will be
required to approve any plan of reorganization (including bankruptcy
proceedings) adversely affecting such shares or any action requiring a vote
of security holders under Section 13(a) of the 1940 Act. The class vote of
holders of shares of Preferred Stock, including Preferred Shares, described
above will in each case be in addition to a separate vote of the requisite
percentage of shares of Common Stock and shares of Preferred Stock,
including Preferred Shares, voting together as a single class necessary to
authorize the action in question. Notwithstanding the preceding sentence,
to the extent permitted by Maryland General Corporation Law, no vote of
holders of Common Stock, either separately or together with holders of
Preferred Shares as a single class, shall be necessary to take the actions
contemplated by clauses (i) and (ii) of the first sentence of this Section
5(c) and the holders of Common Stock shall not be entitled to vote in
respect of such matters, unless, in the case of the actions contemplated by
clause (ii) of the first sentence of this section 5 (c), the action would
adversely affect the contract rights expressly set forth in the Charter of
the holders of Common Stock.
(d) Voting Procedures.
(i) As soon as practicable after the
accrual of any right of the Holders of shares of Preferred Stock
to elect additional directors as described in paragraph 5(b)
above, the Corporation shall notify the Secretary of the
Corporation and instruct the Secretary to call a special meeting
of such Holders, by mailing a notice of such special meeting to
such Holders, such meeting to be held not less than 10 nor more
than 20 days after the date of mailing of such notice. If the
Secretary of the Corporation does not call such a special meeting,
it may be called by Holders of at least 25% of the votes entitled
to be cast at such meeting on like notice. The record date for
determining the Holders entitled to notice of and to vote at such
special meeting shall be the close of business on the fifth
Business Day preceding the day on which such notice is mailed. At
any such special meeting and at each meeting held during a Voting
Period, such Holders, voting together as a class (to the exclusion
of the holders of all other securities and classes of capital
stock of the Corporation), shall be entitled to elect the number
of directors prescribed in paragraph 5(b) above on a
one-vote-per-share basis. At any such meeting or adjournment
thereof in the absence of a quorum, a majority of such holders
present in person or by proxy shall have the power to adjourn the
meeting without notice, other than by an announcement at the
meeting, to a date not more than 120 days after the original
record date.
(ii) For purposes of determining any
rights of the Holders to vote on any matter or the number of
shares required to constitute a quorum, whether such right is
created by these Articles Supplementary, by the other provisions
of the Charter, by statute or otherwise, a share of Preferred
Shares which is not outstanding shall not be counted.
(iii) The terms of office of all
persons who are directors of the Corporation at the time of a
special meeting of Holders and holders of other Preferred Stock to
elect directors shall continue, notwithstanding the election at
such meeting by the Holders and such other holders of the number
of directors that they are entitled to elect, and the persons so
elected by the Holders and such other holders, together with the
two incumbent directors elected by the Holders and such other
holders of Preferred Stock and the remaining incumbent directors
elected by the holders of the Common Stock and Preferred Stock,
shall constitute the duly elected directors of the Corporation.
(iv) The terms of office of the
additional directors elected by the Holders and holders of other
Preferred Stock pursuant to paragraph 5(b) above shall terminate
on the earliest date permitted by the Maryland General Corporation
Law following the termination of a Voting Period, the remaining
directors shall constitute the directors of the Corporation and
the voting rights of the Holders and such other holders to elect
additional directors pursuant to paragraph 5(b) above shall cease,
subject to the provisions of the last sentence of paragraph
5(b)(ii).
(e) Exclusive Remedy. Unless otherwise required
by law, the Holders of Preferred Shares shall not have any relative rights
or preferences or other special rights other than those specifically set
forth herein. The Holders of Preferred Shares shall have no preemptive
rights or rights to cumulative voting. In the event that the Corporation
fails to pay any dividends on the Preferred Shares, the exclusive remedy of
the Holders shall be the right to vote for directors pursuant to the
provisions of this paragraph 5.
(f) Notification to Moody's and S&P. 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 Corporation shall, not
later than ten business days prior to the date on which such vote is to be
taken, notify Moody's and S&P that such vote is to be taken and the nature
of the action with respect to which such vote is to be taken. Upon
completion of any such vote, the Corporation shall notify Moody's and S&P
as to the result of such vote.
6. 1940 Act Preferred Shares Asset Coverage. The
Corporation shall maintain, as of the last Business Day of each month in
which any share of Preferred Shares is outstanding, the 1940 Act Preferred
Shares Asset Coverage.
7. Preferred Shares Basic Maintenance Amount. (a) The
Corporation shall maintain, on each Valuation Date, and shall verify to its
satisfaction that it is maintaining on such Valuation Date, (i) Moody's
Eligible Assets having an aggregate Discounted Value equal to or greater
than the Preferred Shares Basic Maintenance Amount and (ii) S&P Eligible
Assets having an aggregate Discounted Value equal to or greater than the
Preferred Shares Basic Maintenance Amount. Upon any failure to maintain the
required Discounted Value, the Corporation will use its best efforts to
alter the composition of its portfolio to retain the Preferred Shares Basic
Maintenance Amount on or prior to the Preferred Shares Basic Maintenance
Cure Date.
(b) On or before 5:00 p.m., New York City time,
on the third Business Day after a Valuation Date on which the Corporation
fails to satisfy the Preferred Shares Basic Maintenance Amount, the
Corporation shall complete and deliver to the Auction Agent, Moody's and
S&P a complete Preferred Shares Basic Maintenance Report as of the date of
such failure, which will be deemed to have been delivered to the Auction
Agent if the Auction Agent receives a copy or telecopy, telex or other
electronic transcription thereof and on the same day the Corporation mails
to the Auction Agent for delivery on the next Business Day the complete
Preferred Shares Basic Maintenance Report. The Corporation shall also give
a notice of cure of its failure to satisfy the Preferred Shares Basic
Maintenance Amount along with the complete Preferred Shares Basic
Maintenance Report to the Auction Agent, Moody's and S&P within three
Business Days of its determination that it has satisfied such requirement
following any period during which it has failed to satisfy such
requirement. The Corporation will also deliver a Preferred Shares Basic
Maintenance Report to the Auction Agent as of (i) the fifteenth day of each
month (or, if such day is not a Business Day, the next succeeding Business
Day) and (ii) the last, Business Day of each month, in each case on or
before the third Business Day after such day. The Corporation will also
deliver a Preferred Shares Basic Maintenance Report to Moody's or S&P, as
the case may be, for each Valuation Date that the Discounted Value of
Moody's Eligible Assets or S&P Eligible Assets is less than or equal to
125% of the Preferred Shares Basic Maintenance Amount, provided, however,
that if the Valuation Date is every day that is a Business Day, the
Corporation will deliver a Preferred Shares Basic Maintenance Report to
Moody's or S&P, as the case may be, for each Valuation Date that the
Discounted Value of Moody's Eligible Assets or S&P Eligible Assets is less
than or equal to 105% of the Preferred Shares Basic Maintenance Amount. The
Corporation will deliver a Preferred Shares Basic Maintenance Report to
Moody's upon request and when the Corporation redeems any shares of Common
Stock. The Corporation will deliver a Preferred Shares Basic Maintenance
Report to S&P upon request. A failure by the Corporation to deliver a
Preferred Shares Basic Maintenance Report under this paragraph 7(b) shall
be deemed to be delivery of a Preferred Shares Basic Maintenance Report
indicating the Discounted Value for S&P Eligible Assets and Moody's
Eligible Assets of the Corporation 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 and a Certificate
of Minimum Liquidity in accordance with paragraph 7(b) above relating to a
Quarterly Valuation Date, the Corporation shall cause the Independent
Accountant to confirm in writing to the Auction Agent, Moody's and S&P (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 Corporation during
the quarter ending on such Quarterly Valuation Date) and (with respect to
S&P only while S&P is rating the Preferred Shares) such Certificate, (ii)
that, in such Report (and in such randomly selected Report), the
Corporation correctly determined the assets of the Corporation which
constitute S&P Eligible Assets or Moody's Eligible Assets, as the case may
be, at such Quarterly Valuation Date in accordance with these Articles
Supplementary, (iii) that, in such Report (and in such randomly selected
Report) , the Corporation determined whether the Corporation had, at such
Quarterly Valuation Date (and at the Valuation Date addressed in such
randomly-selected Report) in accordance with these Articles Supplementary,
S&P Eligible Assets of an aggregate Discounted Value at least equal to the
Preferred Shares Basic Maintenance Amount and Moody's Eligible Assets of an
aggregate Discounted Value at least equal to the Preferred Shares Basic
Maintenance Amount, (iv) that (with respect to S&P only) in such
Certificate, the Corporation determined the Minimum Liquidity Level and the
Corporation's Deposit Securities in accordance with these Articles
Supplementary, including maturity or tender date, (v) with respect to the
S&P rating on Municipal Obligations, the issuer name, issue size and coupon
rate listed in such Report and (with respect to S&P only) such Certificate,
that the Independent Accountant has requested that S&P verify such
information and the Independent Accountant shall provide a listing in its
letter of any differences, (vi) with respect to the Moody's ratings on
Municipal Obligations, the issuer name, issue size and coupon rate listed
in such Report and (with respect to S&P only) such Certificate, that such
information has been verified by Moody's (in the event such information is
not verified by Moody's, the Independent Accountant will inquire of Moody's
what such information is, and provide a listing in its letter of any
differences), and (vii) with respect to the bid or mean price (or such
alternative permissible factor used in calculating the Market Value)
provided by the custodian of the Corporation's assets to the Corporation
for purposes of valuing securities in the Corporation's portfolio, the
Independent Accountant has traced the price used in such Report and (with
respect to S&P only) such Certificate to the bid or mean price listed in
such Report and (with respect to S&P only) such Certificate as provided to
the Corporation 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) (such confirmation is herein
called the "Accountant's Confirmation").
(d) Within ten Business Days after the date of
delivery to the Auction Agent, S&P and Moody's of a Preferred Shares Basic
Maintenance Report in accordance with paragraph 7(b) above relating to any
Valuation Date on which the Corporation failed to maintain S&P Eligible
Assets with an aggregate Discounted Value and Moody's Eligible Assets with
an aggregate Discounted Value equal to or greater than the Preferred Shares
Basic Maintenance Amount, and relating to the Preferred Shares Basic
Maintenance Cure Date with respect to such failure, the Independent
Accountant will provide to the Auction Agent, S&P and Moody's an
Accountant's Confirmation as to such Preferred Shares Basic Maintenance
Report.
(e) If any Accountant's Confirmation delivered
pursuant to subparagraph (c) or (d) of this paragraph 7 shows that an error
was made in the Preferred Shares Basic Maintenance Report for a particular
Valuation Date for which such Accountant's Confirmation was required to be
delivered, or shows that a lower aggregate Discounted Value for the
aggregate of all S&P Eligible Assets or Moody's Eligible Assets, as the
case may be, of the Corporation was determined by the Independent
Accountant, the calculation or determination made by such Independent
Accountant shall be final and conclusive and shall be binding on the
Corporation, and the Corporation shall accordingly amend and deliver the
Preferred Shares Basic Maintenance Report to the Auction Agent, S&P and
Moody's promptly following receipt by the Corporation of such Accountant's
Confirmation.
(f) On or before 5:00 p.m., New York City time,
on the first Business Day after the Date of Original Issue of the Preferred
Shares, the Corporation will complete and deliver to S&P and Moody's a
Preferred Shares Basic Maintenance Report as of the close of business on
such Date of Original Issue. Within five business days of such Date of
Original Issue, the Corporation shall cause the Independent Accountant to
confirm in writing to S&P and Moody's (i) the mathematical accuracy of the
calculations reflected in such Report and (ii) that the aggregate
Discounted Value of S&P Eligible Assets and the aggregate Discounted Value
of Moody's Eligible Assets reflected thereon equals or exceeds the
Preferred Shares Basic Maintenance Amount reflected thereon.
(g) For so long as Preferred Shares are rated by
Moody's, in managing the Corporation's portfolio, the Corporation shall
require that the Adviser will not alter the composition of the
Corporation's portfolio if, in the reasonable belief of the Adviser, the
effect of any such alteration would be to cause the Corporation to have
Moody's Eligible Assets with an aggregate Discounted Value, as of the
immediately preceding Valuation Date, less than the Preferred Shares Basic
Maintenance Amount as of such Valuation Date; provided, however, that in
the event that, as of the immediately preceding Valuation Date, the
aggregate Discounted Value of Moody's Eligible Assets exceeded the
Preferred Shares Basic Maintenance Amount by twenty-five percent or less
(or, in the event the Valuation Date is every day that is a Business Day,
five percent or less), the Adviser will not alter the composition of the
Corporation's portfolio in a manner reasonably expected to reduce the
aggregate Discounted Value of Moody's Eligible Assets unless the
Corporation shall have confirmed that, after giving effect to such
alteration, the aggregate Discounted Value of Moody's Eligible Assets would
exceed the Preferred Shares Basic Maintenance Amount.
8. Minimum Liquidity Level. (i) For so long as any
Preferred Shares are rated by S&P, the Corporation shall be required to
have, as of each Valuation Date, Dividend Coverage Assets having in the
aggregate a value not less than the Dividend Coverage Amount.
(ii) As of each Valuation Date as long
as any Preferred Shares are rated by S&P, the Corporation shall
determine (A) the Market Value of the Dividend Coverage Assets
owned by the Corporation as of that Valuation Date, (B) the
Dividend Coverage Amount on that Valuation Date, and (C) whether
the Minimum Liquidity Level is met as of that Valuation Date. The
calculations of the Dividend Coverage Assets, the Dividend
Coverage Amount and whether the Minimum Liquidity Level is met
shall be set forth in a certificate (a "Certificate of Minimum
Liquidity") dated as of the Valuation Date. The Preferred Shares
Basic Maintenance Report and the Certificate of Minimum Liquidity
may be combined in one certificate. The Corporation shall cause
the Certificate of Minimum Liquidity to be delivered to S&P not
later than the close of business on the third Business Day after
the Valuation Date applicable to such Certificate pursuant to
paragraph 7 (b). The Minimum Liquidity Level shall be deemed to be
met as of any date of determination if the Corporation has timely
delivered a Certificate of Minimum Liquidity relating to such date
which states that the same has been met and which is not
manifestly inaccurate. In the event that a Certificate of Minimum
Liquidity is not delivered to S&P when required, the Minimum
Liquidity Level shall be deemed not to have been met as of the
applicable date.
(iii) If the Minimum Liquidity Level is
not met as of any Valuation Date, then the Corporation shall
purchase or otherwise acquire Dividend Coverage Assets to the
extent necessary so that the Minimum Liquidity Level is met as of
the fifth Business Day following such Valuation Date. The
Corporation shall, by such fifth Business Day, provide to S&P a
Certificate of Minimum Liquidity setting forth the calculations of
the Dividend Coverage Assets and the Dividend Coverage Amount and
showing that the Minimum Liquidity Level is met as of such fifth
Business Day together with a report of the custodian of the
Corporation's assets confirming the amount of the Corporation's
Dividend Coverage Assets as of such fifth Business Day.
9. Certain Other Restrictions. (a) So long as there are
Preferred Shares Outstanding, the Corporation will enter into futures and
options transactions only for bona fide hedging purposes and not for
leveraging or speculative purposes. So long as Moody's and S&P are rating
the Preferred Shares, the Corporation will only engage in futures or
options transactions in accordance with the then-current guidelines of such
ratings agencies, only if it is valuing its assets daily and only after it
has received written confirmation from Moody's and S&P, as appropriate,
that such transactions would not impair the ratings then assigned by S&P
and Moody's to Preferred Shares. The S&P guidelines in effect as of the
Date of Original Issue are set forth in their entirety in the following
paragraph. The Corporation may engage in futures and options transactions
in accordance therewith and such transactions shall have the consequences
included in such guidelines set forth therein (as such guidelines are
amended, modified and supplemented from time to time by S&P), provided,
however, that it may not engage in any such transactions unless it has
satisfied the relevant provisions of this paragraph relating to complying
with Moody's guidelines and obtaining written confirmation from Moody's and
S&P.
For so long as Preferred Shares are rated by S&P, the
Corporation will not, unless it has received written confirmation from S&P
that any such action would not impair the rating then assigned by S&P to
Preferred Shares, purchase or sell futures contracts or options thereon or
write uncovered put or uncovered call options on portfolio securities
except (provided that the Corporation has received such written
confirmation in advance from S&P) that (i) the Corporation may engage in
S&P Hedging Transactions based on the Municipal Index, provided that (A)
the Corporation shall not engage in any S&P Hedging Transaction based on
the Municipal Index (other than Closing Transactions) which would cause the
Corporation at the time of such transaction to own or have sold (1) more
than 1,000 outstanding futures contracts based on the Municipal Index, (2)
outstanding futures contracts based on Municipal Index exceeding in number
25% of the quotient of the fair market value of the Corporation's total
assets divided by 100,000 or (3) outstanding futures contracts based on the
Municipal Index exceeding in number 10% of the average number of daily
traded futures contracts based on the Municipal Index in the month prior to
the time of effecting such transaction as reported by The Wall Street
Journal and (ii) the Corporation may engage in S&P Hedging Transactions
based on Treasury Bonds, provided that (A) the Corporation shall not engage
in any S&P Hedging Transactions based on Treasury Bonds (other than Closing
Transactions) which would cause the Corporation at the time of such
transaction to own or have sold the lesser of (1) outstanding futures
contracts based on Treasury Bonds exceeding in number 25% of the quotient
of the fair market value of the Corporation's total assets divided by
100,000 or (2) outstanding futures contracts based on Treasury Bonds
exceeding in number 10% of the average number of daily traded futures
contracts based on Treasury Bonds in the month prior to the time of
effecting such transaction as reported by The Wall Street Journal. For so
long as Preferred Shares are rated by S&P, the Corporation will engage in
Closing Transactions to close out any outstanding futures contract which
the Corporation owns or has sold or any outstanding option thereon owned by
the Corporation in the event (i) the Corporation does not have S&P Eligible
Assets with an aggregate Discounted Value equal to or greater than the
Preferred Shares Basic Maintenance Amount on two consecutive Valuation
Dates and (ii) the Corporation is required to pay Variation Margin on the
second such Valuation Date. For so long as Preferred Shares are rated by
S&P, the Corporation will engage in a Closing Transaction to close out any
outstanding futures contract or option thereon in the month prior to the
delivery month under the terms of such futures contract or option thereon
unless the Corporation holds securities deliverable under such terms. For
purposes of calculating the Discounted Value of S&P Eligible Assets to
determine compliance with the Preferred Shares Basic Maintenance Amount,
such Discounted Value shall be reduced by an amount equal to (i) 30% of the
aggregate settlement value, as marked to market, of any outstanding futures
contracts based on the Municipal Index which are owned by the Trust plus
(ii) 25% of the aggregate settlement value, as marked to market, of any
outstanding futures contracts based on Treasury Bonds which contracts are
owned by the Corporation. For so long as Preferred Shares are rated by S&P,
when the Corporation writes a futures contract or option thereon, it will
maintain an amount of cash, cash equivalents or short-term, fixed-income
securities in a segregated account with the Corporation's custodian, so
that the amount so segregated plus the amount of Initial Margin and
Variation Margin held in the account of the Corporation's broker equals the
fair market value of the futures contract, except that in the event the
Corporation writes a futures contract or option thereon which requires
delivery of an underlying security, the Corporation shall hold such
underlying security.
(b) For so long as Preferred Shares are rated by
Moody's or S&P, the Corporation will not, unless it has received written
confirmation from Moody's and/or S&P, as the case may be, that such action
would not impair the ratings then assigned to Preferred Shares by Moody's
and/or S&P, as the case may be, (i) borrow money, (ii) engage in short
sales of securities, (iii) lend any securities, (iv) issue any class or
series of stock ranking prior to or on a parity with the Preferred Shares
with respect to the payment of dividends or the distribution of assets upon
dissolution, liquidation or winding up of the Corporation, (v) reissue any
Preferred Shares previously purchased or redeemed by the Corporation, (vi)
merge or consolidate into or with any other corporation, (vii) change the
Pricing Service or (viii) engage in reverse repurchase agreements.
10. Notice. All notices or communications, unless
otherwise specified in these Articles Supplementary, shall be sufficiently
given if in writing and delivered in person or mailed by first-class mail,
postage prepaid. Notice shall be deemed given on the earlier of the date
received or the date seven days after which such notice is mailed.
11. Auction Procedures. (a) Certain definitions. As used in
this paragraph 11, the following terms shall have the following meanings, unless
the context otherwise requires:
(i) "Auction Date" shall mean the first
Business Day preceding the first day of a Dividend Period.
(ii) "Available Preferred Shares" shall
have the meaning specified in paragraph 11(d)(i) below.
(iii) "Bid" shall have the meaning
specified in paragraph 11(b)(i) below.
(iv) "Bidder" shall have the meaning
specified in paragraph 11(b)(i) below.
(v) "Hold Order" shall have the meaning
specified in paragraph 11(b)(i) below.
(vi) "Maximum Applicable Rate," for any
Dividend Payment Period for the Preferred Shares will be the
Applicable Percentage of the higher of the 30-day "AA" Composite
Commercial Paper Rate and the Taxable Equivalent of the Short-Term
Municipal Bond Rate except in the case of a Special Dividend
Period in which case the Maximum Applicable Rate for any Dividend
Payment Period included in such Special Dividend Period will be
the Applicable Percentage (determined on the date of the Notice of
Special Dividend Period in the case of any such Notice that
specifies a Maximum Applicable Rate applicable to such Special
Dividend Payment Period) of the Special Dividend Period Reference
Rate for such Dividend Payment Period. The Applicable Percentage
will be determined based on (i) the lower of the credit rating or
ratings assigned on such date to such shares by Moody's and S&P
(or if Moody's or S&P or both shall not make such rating
available, the equivalent of either or both of such ratings by a
Substitute Rating Agency or two Substitute Rating Agencies or, in
the event that only one such rating shall be available, such
rating) and (ii) whether the Corporation has provided notification
to the Auction Agent prior to the Auction establishing the
Applicable Rate for any dividend pursuant to paragraph 2(f) hereof
that net capital gains or other taxable income will be included in
such dividend on Preferred Shares as follows:
<TABLE>
<CAPTION>
Credit Ratings Applicable Applicable
- -------------------------------------------------------- Percentage: Percentage:
Moody's S&P No Notification Notification
- -------------------------- -------------------------- ---------------------------- ------------------------------
<S> <C> <C> <C>
"aa3" or higher AA- or higher 110% 150%
"a3"to "a1" A- to A+ 125% 160%
"baa3" to "baa1" BBB- to BBB+ 150% 250%
"ba3" to "ba1" BB- to BB+ 200% 275%
Below "ba3" Below BB- 250% 300%
</TABLE>
The Corporation will take all reasonable action necessary
to enable Moody's and S&P to provide a rating for both series of Preferred
Shares. If either Moody's or S&P shall not make such a rating available, or
neither Moody's nor S&P shall make such a rating available, Merrill Lynch,
Pierce, Fenner & Smith Incorporated or its affiliates and successors
together with Lehman Special Securities Incorporated or its affiliates and
successors, after consultation with the Corporation, will select a
nationally recognized statistical rating organization (a "Substitute Rating
Agency") or two nationally recognized statistical rating organizations
("Substitute Rating Agencies") to act as Substitute Rating Agency or
Substitute Rating Agencies, as the case may be; provided that if such a
rating is not made available with respect to the Series M28 Preferred
Shares only, Merrill Lynch, Pierce, Fenner & Smith or its affiliates and
successors, after consultation with the Corporation, shall select a
Substitute Rating Agency or Agencies and if such rating is not made
available with respect to the Series M7 Preferred Shares only, Lehman
Special Securities Incorporated or its affiliates and successors, after
consultation with the Corporation, shall select a Substitute Rating Agency
or Agencies.
(vii) "Minimum Applicable Rate," for
any Dividend Payment Period included in a Special Dividend Period
for which Bid Requirements are imposed will be such rate as may be
specified by the Corporation in the Notice of Special Dividend
Period relating to the Special Dividend Period within which such
Dividend Payment Period occurs.
(viii) "Order" shall have the meaning
specified in paragraph 11(b)(i) below.
(ix) "Preferred Shares" shall mean the
Preferred Shares being auctioned pursuant to this paragraph 11.
(x) "Sell Order" shall have the meaning
specified in paragraph 11(b)(i) below.
(xi) "Submission Deadline" shall mean
1:00 P.M., New York City time, on any Auction Date or such other
time on any Auction Date as may be specified by the Auction Agent
from time to time as the time by which each Broker-Dealer must
submit to the Auction Agent in writing all Orders obtained by it
for the Auction to be conducted on such Auction Date.
(xii) "Submitted Bid" shall have the
meaning specified in paragraph 11(d)(i) below.
(xiii) "Submitted Hold Order" shall
have the meaning specified in paragraph 11(d)(i) below.
(xiv) "Submitted Order" shall have the
meaning specified in paragraph 11(d)(i) below.
(xv) "Submitted Sell Order" shall have
the meaning specified in paragraph 11(d)(i) below.
(xvi) "Sufficient Clearing Bids" shall
have the meaning specified in paragraph 11(d)(i) below.
(xvii) "Winning Bid Rate" shall have
the meaning specified in paragraph 11(d)(i) below.
(b) Orders by Existing Holders and Potential
Holders.
(i) On or prior to the Submission
Deadline on each Auction Date:
(A) each Existing Holder may submit to a
Broker-Dealer information as to:
(1) the number of Outstanding shares, if any, of
Preferred Shares held by such Existing Holder which such Existing
Holder desires to continue to hold without regard to the
Applicable Rate for the next succeeding Dividend Period;
(2) the number of Outstanding shares, if any, of
Preferred Shares held by such Existing Holder which such Existing
Holder desires to continue to hold, provided that the Applicable
Rate for the next succeeding Dividend Period shall not be less
than the rate per annum or, in the case of an Auction with Bid
Requirements including a Spread, the Spread specified by such
Existing Holder; and/or
(3) the number of Outstanding shares, if any, of
Preferred Shares held by such Existing Holder which such Existing
Holder offers to sell without regard to the Applicable Rate for
the next succeeding Dividend Period; and
(B) each Broker-Dealer, using a list of
Potential Holders that shall be maintained in good faith for the
purpose of conducting a competitive Auction, shall contact
Potential Holders, including Persons that are not Existing
Holders, on such list to determine the number of Outstanding
shares, if any, of Preferred Shares which each such Potential
Holder offers to purchase, provided that the Applicable Rate for
the next succeeding Dividend Period shall not be less than the
rate per annum or Spread specified by such Potential Holder.
For the purposes hereof, the communication to a
Broker-Dealer of information referred to in clause (A) or (B) of this
paragraph 11(b)(i) is hereinafter referred to an "Order" and each Existing
Holder and each Potential Holder placing an Order is hereinafter referred
to as a "Bidder"; an Order containing the information referred to in clause
(A)(1) of this paragraph 11(b) (i) is hereinafter referred to as a "Hold
Order"; an Order containing the information referred to in clause (A)(2) or
(B) of this paragraph 11(b)(i) is hereinafter referred to as a "Bid"; and
an Order containing the information referred to in clause (A)(3) of this
paragraph 11(b)(i) is hereinafter referred to as a "Sell Order".
(ii) (A) A Bid by an Existing Holder
shall constitute an irrevocable offer to sell:
(1) the number of Outstanding Preferred Shares
specified in such Bid if the Applicable Rate determined on such
Auction Date shall be less than the rate per annum or Spread
specified in such Bid; or
(2) such number of a lesser number of
Outstanding Preferred Shares to be determined as set forth in
paragraph 11(e)(i)(D) if the Applicable Rate determined on such
Auction Date shall be equal to the rate per annum or Spread
specified therein; or
(3) a lesser number of Outstanding Preferred
Shares to be determined as set forth in paragraph 11(e)(ii)(C) if
such specified rate per annum shall be higher than the Maximum
Applicable Rate and Sufficient Clearing Bids do not exist.
(B) A Sell Order by an Existing Holder shall
constitute an irrevocable offer to sell:
(1) the number of Outstanding Preferred Shares
specified in such Sell Order; or
(2) such number or a lesser number of
Outstanding Preferred Shares to be determined as set forth in
paragraph 11(e)(ii)(C) if Sufficient Clearing Bids do not exist.
(C) A Bid by a Potential Holder shall constitute
an irrevocable offer to purchase:
(1) the number of Outstanding Preferred Shares
specified in such Bid if the Applicable Rate determined on such
Auction Date shall be higher than the rate per annum or Spread
specified in such Bid; or
(2) such number or a lesser number of
Outstanding Preferred Shares to be determined as set forth in
paragraph 11(e)(i)(E) if the Applicable Rate determined on such
Auction Date shall be equal to the rate per annum or Spread
specified therein.
(c) Submission of Orders by Broker-Dealers to
Auction Agent.
(i) Each Broker-Dealer shall submit in
writing or through the Auction Agent's Auction Processing System
to the Auction Agent prior to the Submission Deadline on each
Auction Date all Orders obtained by such Broker-Dealer and
specifying with respect to each Order:
(A) the name of the Bidder placing such Order;
(B) the aggregate number of Outstanding
Preferred Shares that are the subject of such Order;
(C) to the extent that such Bidder is an
Existing Holder:
(1) the number of Outstanding shares, if any, of
Preferred Shares subject to any Hold Order placed by such Existing
Holder;
(2) the number of Outstanding shares, if any, of
Preferred Shares subject to any Bid placed by such Existing Holder
and the rate per annum or Spread specified in such Bid; and
(3) the number of Outstanding shares, if any, of
Preferred Shares subject to any Sell Order placed by such Existing
Holder; and
(D) (i) to the extent such Bidder is a Potential
Holder, the rate per annum or Spread specified in such Potential
Holder's Bid.
(ii) If any rate per annum or Spread
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% and shall round
such Spread to the next highest one-thousandth (.001) of a basis
point.
(iii) If an Order or Orders covering
all of the Outstanding Preferred Shares held by an 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 on behalf of such Existing Holder covering the number of
Outstanding Preferred Shares held by such Existing Holder and not
subject to Orders submitted to the Auction Agent; provided,
however, that with respect to an Auction to establish a Special
Dividend Period longer than 91 days, the Auction Agent shall deem
a Sell Order to have been submitted on behalf of such Existing
Holder covering such number of Outstanding Preferred Shares.
(iv) If one or more Orders on behalf of
an Existing Holder covering in the aggregate more than the number
of Outstanding Preferred Shares held by such Existing Holder are
submitted to the Auction Agent, such Orders shall be considered
valid as follows and in the following order of priority:
(A) any Hold Order submitted on behalf of such
Existing Holder shall be considered valid up to and including the
number of Outstanding Preferred Shares held by such Existing
Holder; provided that if more than one Hold Order is submitted on
behalf of such Existing Holder and the number of Preferred Shares
subject to such Hold Orders exceeds the number of Outstanding
Preferred Shares held by such Existing Holder, the number of
Preferred Shares subject to each of such Hold Orders shall be
reduced pro rata so that such Hold Orders, in the aggregate, will
cover exactly the number of Outstanding Preferred Shares held by
such Existing Holder;
(B) any Bids submitted on behalf of such
Existing Holder shall be considered valid, in the ascending order
of their respective rates per annum or Spread, if more than one
Bid is submitted on behalf of such Existing Holder, up to and
including the excess of the number of Outstanding Preferred Shares
held by such Existing Holder over the number of Preferred Shares
subject to any Hold Order referred to in paragraph 11(c)(iv)(A)
above (and if more than one Bid submitted on behalf of such
Existing Holder specifies the same rate per annum or Spread and
together they cover more than the remaining number of shares that
can be the subject of valid Bids after application of paragraph
11(c)(iv)(A) above and of the foregoing portion of this paragraph
11(c)(iv)(B) to any Bid or Bids specifying a lower rate or rates
per annum or Spread, the number of shares subject to each of such
Bids shall be reduced pro rata so that such Bids, in the
aggregate, cover exactly such remaining number of shares) ; and
the number of shares, if any, subject to Bids not valid under this
paragraph 11(c)(iv)(B) shall be treated as the subject of a Bid by
a Potential Holder; and
(C) any Sell Order shall be considered valid up
to and including the excess of the number of Outstanding Preferred
Shares held by such Existing Holder over the number of Preferred
Shares subject to Hold Orders referred to in paragraph
11(c)(iv)(A) and Bids referred to in paragraph 11(c)(iv)(B);
provided that if more than one Sell Order is submitted on behalf
of any Existing Holder and the number of Preferred Shares subject
to such Sell Orders is greater than such excess, the number of
Preferred Shares subject to each of such Sell Orders shall be
reduced pro rata so that such Sell Orders, in the aggregate, cover
exactly the number of Preferred Shares equal to such excess.
(v) If more than one Bid is submitted
on behalf of any Potential Holder, each Bid submitted shall be a
separate Bid with the rate per annum or Spread and number of
Preferred Shares specified.
(vi) Any Bid by an Existing Holder that
specifies a Spread, with respect to an Auction in which a Spread
is not included in any Bid Requirements or in which there are no
Bid Requirements and any Order that does not specify a Spread with
respect to an Auction in which a Spread is included in any Bid
Requirements shall be treated as a Sell Order.
(d) Determination of Sufficient Clearing Bids,
Winning Bid Rate and Applicable Rate.
(i) Not earlier than the Submission
Deadline on each Auction Date, the Auction Agent shall assemble
all Orders submitted or deemed submitted to it by the
Broker-Dealers (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 shall
determine:
(A) the excess of the total number of
Outstanding Preferred Shares over the number of Outstanding
Preferred Shares that are the subject of Submitted Hold Orders
(such excess being hereinafter referred to as the "Available
Preferred Shares");
(B) from the Submitted Orders whether the number
of Outstanding Preferred Shares that are the subject of Submitted
Bids by Potential Holders specifying one or more rates per annum
or Spreads that result in one or more rates per annum on such date
equal to or lower than the Maximum Applicable Rate in effect for
the first Dividend Payment Period after the Auction Date exceeds
or is equa1 to the sum of:
(1) the number of Outstanding Preferred Shares
that are the subject of Submitted Bids by Existing Holders
specifying one or more rates per annum or Spreads that result in
one or more rates per annum on such date higher than such Maximum
Applicable Rate, and
(2) the number of Outstanding Preferred Shares
that are subject to Submitted Sell Orders (if such excess or such
equality exists (other than because the number of Outstanding
Preferred Shares in clauses (1) and (2) above are each zero
because all of the Outstanding Preferred Shares are the subject of
Submitted Hold Orders), such Submitted Bids by Potential Holders
being hereinafter referred to collectively as "Sufficient Clearing
Bids"); and
(C) if Sufficient Clearing Bids exist, the
lowest rate per annum or, in the case of an Auction with Bid
Requirements including a Spread, the lowest Spread specified in
the Submitted Bids (the "Winning Bid Rate") that if:
(1) each Submitted Bid from Existing Holders
specifying the Winning Bid Rate and all other Submitted Bids from
Existing Holders specifying lower rates per annum or Spreads were
rejected, thus entitling such Existing Holders to continue to hold
the Preferred Shares that are the subject of such Submitted Bids,
and
(2) each Submitted Bid from Potential Holders
specifying the Winning Bid Rate and all other Submitted Bids from
Potential Holders specifying lower rates per annum or Spreads were
accepted, thus entitling the Potential Holders to purchase the
Preferred Shares that are the subject of such Submitted Bids,
would result in the number of shares subject to all Submitted Bids
specifying the Winning Bid Rate or a lower rate per annum or
Spread being at least equal to the Available Preferred Shares.
(D) For purposes of these Articles
Supplementary, a positive Spread shall be considered lower than
another positive Spread to the extent it is a lower number, a
Spread of zero shall be considered lower than a positive Spread, a
negative Spread shall be considered lower than a Spread of zero
and a negative Spread shall be considered lower than another
negative Spread to the extent it is a higher number.
(ii) Promptly after the Auction Agent has made
the determinations pursuant to paragraph 11(d)(i), the Auction
Agent shall advise the Corporation of the Maximum Applicable Rate
(or, in the event the Corporation has specified a Maximum
Applicable Rate or Rates, or a Minimum Applicable Rate or Rates
the Auction Agent shall confirm to the Corporation the calculation
of such Maximum Applicable Rate or Rates or such Minimum
Applicable Rate or Rates) and, based on such determinations, the
Applicable Rate for the next succeeding Dividend Period as
follows:
(A) if Sufficient Clearing Bids exist, that the
Applicable Rate for the next succeeding Dividend Period shall be
equal to the Winning Bid Rate, subject to the effect of any
applicable Minimum Applicable Rate and any applicable Maximum
Applicable Rate;
(B) if Sufficient Clearing Bids do not exist
(other than because all of the Outstanding Preferred Shares are
the subject of Submitted Hold Orders and other than in the event
the Auction is being conducted with respect to a Special Dividend
Period), that the Applicable Rate for the next succeeding Dividend
Period shall be equal to the Maximum Applicable Rate;
(C) if all of the Outstanding Preferred Shares
are the subject of Submitted Hold Orders that the Dividend Period
next succeeding the Auction shall automatically be the same length
as the immediately preceding Dividend Period and the Applicable
Rate for the next succeeding Dividend Period will be the higher of
the 30-day "AA" Composite Commercial Paper Rate and the Taxable
Equivalent of the Short-Term Municipal Bond Rate multiplied by 1
minus the maximum marginal regular Federal individual income tax
rate then applicable to ordinary income or the maximum marginal
regular Federal corporate tax rate then applicable, whichever is
greater (or 90% of such rate if the Corporation has provided
notification to the Auction Agent prior to the Auction
establishing the Applicable Rate for any dividend pursuant to
paragraph 2(f) hereof that net capital gains or other taxable
income will be included in such dividend on Preferred Shares) on
the date of the Auction; or
(D) If the Auction is being conducted with
respect to a Special Dividend Period and Sufficient Clearing Bids
do not exist, that the Dividend Period next succeeding the Auction
shall automatically be 28 days (in the case of Series M28
Preferred Shares) or 7 days (in the case of Series M7 Preferred
Shares) and the Applicable Rate for the next succeeding Dividend
Period will be as set forth in paragraph 11(d) (ii) (C) above.
(e) Acceptance and Rejection of Submitted Bids
and Submitted Sell Orders and Allocation of Shares. Based on the
determinations made pursuant to paragraph 11(d)(i), the Submitted Bids and
Submitted Sell Orders shall be accepted or rejected and the Auction Agent
shall take such other action as set forth below:
(i) If Sufficient Clearing Bids have
been made, subject to the provisions of paragraph 11(e)(iii) and
paragraph 11(e)(iv), Submitted Bids and Submitted Sell Orders
shall be accepted or rejected in the following order of priority
and all other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing
Holders shall be accepted and the Submitted Bid of each of the
Existing Holders specifying any rate per annum or Spread that is
higher than the Winning Bid Rate shall be accepted, thus requiring
each such Existing Holder to sell the Outstanding Preferred Shares
that are the subject of such Submitted Sell Order or Submitted
Bid;
(B) the Submitted Bid of each of the Existing
Holders specifying any rate per annum or Spread that is lower than
the Winning Bid Rate shall be rejected, thus entitling each such
Existing Holder to continue to hold the Outstanding Preferred
Shares that are the subject of such Submitted Bid;
(C) the Submitted Bid of each of the Potential
Holders specifying any rate per annum that is lower than the
Winning Bid Rate or Spread shall be accepted;
(D) the Submitted Bid of each of the Existing
Holders specifying a rate per annum or Spread that is equal to the
Winning Bid Rate shall be rejected, thus entitling each such
Existing Holder to continue to hold the Outstanding Preferred
Shares that are the subject of such Submitted Bid, unless the
number of Outstanding Preferred Shares subject to all such
Submitted Bids shall be greater than the number of Outstanding
Preferred Shares ("Remaining Shares") equal to the excess of the
Available Preferred Shares over the number of Outstanding
Preferred Shares subject to Submitted Bids described in paragraph
11(e)(i)(B) and paragraph 11(e)(i)(C), in which event the
Submitted Bids of each such Existing Holder shall be accepted, and
each such Existing Holder shall be required to sell Outstanding
Preferred Shares, but only in an amount equal to the difference
between (1) the number of Outstanding Preferred Shares then held
by such Existing Holder subject to such Submitted Bid and (2) the
number of Preferred Shares obtained by multiplying (x) the number
of Remaining Shares by (y) 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 sum of the numbers of Outstanding Preferred
Shares subject to such Submitted Bids made by all such Existing
Holders that specified a rate per annum equal or Spread to the
Winning Bid Rate; and
(E) the Submitted Bid of each of the Potential
Holders specifying a rate per annum or Spread that is equal to the
Winning Bid Rate shall be accepted but only in an amount equal to
the number of Outstanding Preferred Shares obtained by multiplying
(x) the difference between the Available Preferred Shares and the
number of Outstanding Preferred Shares subject to Submitted Bids
described in paragraph 11(e)(i)(B), paragraph 11(e)(i)(C) and
paragraph 11(e)(i)(D) by (y) 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 sum
of the numbers of Outstanding Preferred Shares subject to such
Submitted Bids made by all such Potential Holders that specified a
rate per annum or Spread equal to the Winning Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other
than because all of the Outstanding Preferred Shares are subject
to Submitted Hold Orders), subject to the provisions of paragraph
11(e)(iii), Submitted Orders shall be accepted or rejected as
follows in the following order of priority and all other Submitted
Bids shall be rejected:
(A) The Submitted Bid of each Existing Holder
specifying any rate per annum or Spread that is equal to or lower
than the Maximum Applicable Rate (a Bid specifying a Spread being
converted to a rate per annum for this purpose by applying the
Spread to the most recently available Reference Index or Reference
Security) shall be rejected, thus entitling such Existing Holder
to continue to hold the Outstanding Preferred Shares that are the
subject of such Submitted Bid;
(B) the Submitted Bid of each Potential Holder
specifying any rate per annum or Spread that is equal to or lower
than the Maximum Applicable Rate (a Bid specifying a Spread being
converted to a rate per annum for this purpose by applying the
Spread to the most recently available Reference Index or Reference
Security) shall be accepted, thus requiring such Potential Holder
to purchase the Outstanding Preferred Shares that are the subject
of such Submitted Bid; and
(C) the Submitted Bids of each Existing Holder
specifying any rate per annum or Spread that is higher than the
Maximum Applicable Rate (a Bid specifying a Spread being converted
to a rate per annum for this purpose by applying the Spread to the
most recently available Reference Index or Reference Security)
shall be accepted and the Submitted Sell Orders of each Existing
Holder shall be accepted, in both cases only in an amount equal to
the difference between (1) the number of Outstanding Preferred
Shares then held by such Existing Holder subject to such Submitted
Bid or Submitted Sell Order and (2) the number of Preferred Shares
obtained by multiplying (x) the difference between the Available
Preferred Shares and the aggregate number of Outstanding Preferred
Shares subject to Submitted Bids described in paragraph
11(e)(ii)(A) and paragraph 11(e)(ii)(B) by (y) a fraction the
numerator of which shall be the number of Outstanding Preferred
Shares held by such Existing Holder subject to such Submitted Bid
or Submitted Sell Order and the denominator of which shall be the
number of Outstanding Preferred Shares subject to all such
Submitted Bids and Submitted Sell Orders.
(iii) if, as a result of the procedures
described in paragraph 11(e)(i) or paragraph 11(e)(ii), 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 share of Preferred Shares on any Auction Date, the
Auction Agent shall, in such manner as in its sole discretion it
shall determine, round up or down the number of Preferred Shares
to be purchased or sold by any Existing Holder or Potential Holder
on such Auction Date so that each Outstanding share of Preferred
Shares purchased or sold by each Existing Holder or Potential
Holder on such Auction Date shall be a whole share of Preferred
Shares.
(iv) If, as a result of the procedures
described in paragraph 11(e)(i), any Potential Holder would be
entitled or required to purchase less than a whole share of
Preferred Shares on any Auction Date, the Auction Agent shall, in
such manner as in its sole discretion it shall determine, allocate
Preferred Shares for purchase among Potential Holders so that only
whole Preferred Shares are purchased on such Auction Date by any
Potential Holder, even if such allocation results in one or more
of such Potential Holders not purchasing any Preferred Shares on
such Auction Date.
(v) Based on the results of each
Auction, the Auction Agent shall determine, with respect to each
Broker-Dealer that submitted Bids or Sell Orders on behalf of
Existing Holders or Potential Holders, the aggregate number of
Outstanding Preferred Shares to be purchased and the aggregate
number of Outstanding Preferred Shares to be sold by such
Potential Holders and Existing Holders and, to the extent that
such aggregate number of Outstanding shares to be purchased and
such aggregate number of Outstanding shares to be sold differ, the
Auction Agent shall determine to which other Broker-Dealer or
Broker-Dealers acting for one or more purchasers such
Broker-Dealer shall deliver, or from which other Broker-Dealer or
Broker-Dealers acting for one or more sellers such Broker-Dealer
shall receive, as the case may be, Outstanding Preferred Shares.
(f) Miscellaneous. An Existing Holder (A) may
sell, transfer or otherwise dispose of Preferred Shares only pursuant to a
Bid or Sell Order in accordance with the procedures described in this
paragraph 11 or to or through a broker-dealer, provided that in the case of
all transfers other than pursuant to Auctions such Existing Holder, its
Broker-Dealer or its Agent Member advises the Auction Agent of such
transfer and (B) except as otherwise required by law, shall have the
ownership of the Preferred Shares held by it maintained in book entry form
by the Securities Depository in the account of its Agent Member, which in
turn will maintain records of such Existing Holder's beneficial ownership.
Neither the Corporation nor any Affiliate shall submit an Order in any
Auction. Any Existing Holder that is an Affiliate shall not sell, transfer
or otherwise dispose of Preferred Shares to any Person other than the
Corporation. All of the Outstanding Preferred Shares of each series shall
be represented by a single certificate registered in the name of the
nominee of the Securities Depository unless otherwise required by law or
unless there is no Securities Depository. If there is no Securities
Depository, at the Corporation's option and upon its receipt of such
documents as it deems appropriate, any Preferred Shares may be registered
in the Stock Register in the name of the Existing Holder thereof and such
Existing Holder thereupon will be entitled to receive certificates therefor
and required to deliver certificates therefor upon transfer or exchange
thereof.
12. Securities Depository; Stock Certificates. (a) If
there is a Securities Depository, one certificate for all of the Preferred
Shares of each series shall be issued to the Securities Depository and
registered in the name of the Securities Depository or its nominee.
Additional certificates may be issued as necessary to represent Preferred
Shares. All such certificates shall bear a legend to the effect that such
certificates are issued subject to the provisions restricting the transfer
of Preferred Shares contained in these Articles Supplementary. Unless the
Corporation shall have elected, during a Non-Payment Period, to waive this
requirement, the Corporation will also issue stop-transfer instructions to
the Auction Agent for the Preferred Shares. Except as provided in paragraph
(b) below, the Securities Depository or its nominee will be the Holder, and
no Existing Holder shall receive certificates representing its ownership
interest in such shares.
(b) If the Applicable Rate applicable to all
Preferred Shares of a series shall be the Non-Payment Period Rate or there
is no Securities Depository, the Corporation may at its option issue one or
more new certificates with respect to such shares (without the legend
referred to in paragraph 12 (a)) registered in the names of the Existing
Holders or their nominees and rescind the stop-transfer instructions
referred to in paragraph 12(a) with respect to such shares.
13. Interpretations. The Board of Directors may interpret
the provisions of these Articles Supplementary to resolve any inconsistency
or ambiguity, remedy any formal defect or make any other change or
modification that does not adversely affect the rights of Existing Holders
of Preferred Shares."
SECOND: The amendment to the charter of the Corporation
set forth in these Articles of Amendment was advised by the Board of
Directors of the Corporation and approved by the stockholders of the
Corporation at a special meeting of the stockholders of the Corporation
held on July 13, 1994.
THIRD: The amendment to the charter of the Corporation
set forth in these Articles of Amendment does not increase the authorized
capital stock of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused these
Articles of Amendment to be executed by its President and its corporate
seal to be affixed hereto and attested to by its Secretary as of the 13th
day of July, 1994.
THE BLACKROCK INSURED MUNICIPAL
TERM TRUST INC.
(SEAL)
By: ___________________________
Ralph L. Schlosstein
President
ATTEST:
______________________
Barbara G. Novick
Secretary
The undersigned, the President of The BlackRock Insured
Municipa1 Term Trust Inc., hereby acknowledges the foregoing to be the
corporate act of such Corporation and that, to the best of his knowledge,
information and belief, the matters and facts set forth therein are true in
all material respects, and that this statement has been made under the
penalties of perjury.
________________________
Ralph L. Schlosstein
President
THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC.
ARTICLES OF AMENDMENT
THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC., a Maryland corporation
(the "Corporation"), hereby certifies as follows:
FIRST: For the purposes of these Articles of Amendment, the following
terms, when used herein in capitalized form, shall have the meanings indicated:
(a) "Articles Supplementary" shall mean the Articles Supplementary of the
Corporation which (i) created the classes of capital stock of the Corporation
designated as the "Auction Rate Municipal Preferred Stock, Series M28" and the
"Auction Rate Municipal Preferred Stock, Series M7" and (ii) were amended
pursuant to Articles of Amendment that were filed with, and approved for record
by, the Maryland State Department of Assessments and Taxation on July 21, 1994;
and (b) "Effective Date" shall mean 5:00 p.m. (Eastern Daylight Time) on the
date that these Articles of Amendment are filed with, and accepted for record
by, the Maryland State Department of Assessments and Taxation in accordance with
the Maryland General Corporation Law.
SECOND: The amendment to the Charter of the Corporation hereinafter set
forth in these Articles of Amendment shall become effective at the Effective
Date.
THIRD: Effective as of the Effective Date, the Charter of the Corporation
shall be, and is hereby, amended for the purposes of changing and reclassifying
certain of the shares of the authorized capital stock of the Corporation into
additional authorized shares of the "Auction Rate Municipal Preferred Stock,
Series M28" and the "Auction Rate Municipal Preferred Stock, Series M7" and
decreasing the liquidation preferences thereof as follows:
(a) By striking out the "DESIGNATION" set forth in the first
paragraph of Article SECOND of the Articles Supplementary and inserting in lieu
thereof the following:
"SERIES M28: A series of 2,600 shares of preferred stock, par value
$.01 per share, liquidation preference of $25,000 per share plus an amount
equal to accumulated but unpaid dividends (whether or not earned or
declared) thereon plus the premium, if any, resulting from the designation
of a Premium Call Period, is hereby designated "Auction Rate Municipal
Preferred Stock, Series M28." Each share of Auction Rate municipal
Preferred Stock, Series M28 shall have such preferences, limitations and
relative voting rights, in addition to those required by applicable law or
set forth in the Corporation's Charter applicable to preferred stock of the
Corporation, as are set forth in these Articles Supplementary. The Auction
Rate Municipal Preferred Stock, Series M28 shall constitute a separate
series of preferred stock of the Corporation, and each share of the Auction
Rate Municipal Preferred Stock, Series M28 shall be identical."
"SERIES M7: A series of 2,600 shares of preferred stock, par value
$.0l per share, liquidation preference of $25,000 per share plus an amount
equal to accumulated but unpaid dividends (whether or not earned or
declared) thereon plus the premium, if any, resulting from the designation
of a Premium Call Period, is hereby designated "Auction Rate Municipal
Preferred Stock, Series M7." Each share of Auction Rate Municipal Preferred
Stock, Series M7 shall have such preferences, limitations and relative
voting rights, in addition to those required by applicable law or set forth
in the Corporation's Charter applicable to preferred stock of the
Corporation, as are set forth in these Articles Supplementary. The Auction
Rate Municipal Preferred Stock, Series M7 shall constitute a separate
series of preferred stock of the Corporation, and each share of the Auction
Rate Municipal Preferred Stock, Series M7 shall be identical."
(b) By striking out the first sentence of Paragraph 3 (Liquidation
Rights) of Article SECOND of the Articles Supplementary and inserting in lieu
thereof the following:
"3. Liquidation Rights. Upon any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the Holders shall
be entitled to receive, out of the assets of the Corporation available for
distribution to shareholders, before any distribution or payment is made
upon any Common Stock or any other capital stock ranking junior in right of
payment upon liquidation to the Preferred Shares, the sum of $25,000 plus
accumulated but unpaid dividends (whether or not earned or declared)
thereon plus the premium, if any, resulting from the designation of a
Premium Call Period to the date of distribution, and after such payment the
holders of Preferred Shares will be entitled to no other payments other
than Additional Dividends as provided in paragraph 2(e) hereof."
FOURTH: Effective as of the Effective Date, each share of the issued and
outstanding "Auction Rate Municipal Preferred Stock, Series M28" shall be
converted into two (2) shares of the "Auction Rate Municipal Preferred Stock,
Series M28," each of which shall have all of the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption as are afforded to each
and every other share of the "Auction Rate Municipal Preferred Stock, Series
M28" pursuant to the Charter of the Corporation (as amended by these Articles of
Amendment) and the Maryland General Corporation Law.
FIFTH: Effective as of the Effective Date, each share of the issued and
outstanding "Auction Rate Municipal Preferred Stock, Series M7" shall be
converted into two (2) shares of the "Auction Rate municipal Preferred Stock,
Series M7," each of which shall have all of the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption as are afforded to each
and every other share of the "Auction Rate Municipal Preferred Stock, Series M7"
pursuant to the Charter of the Corporation (as amended by these Articles of
Amendment) and the Maryland General Corporation Law.
SIXTH: The amendment to the Charter of the Corporation set forth in these
Articles of Amendment was advised by the Board of Directors of the Corporation
in accordance with the Charter and Bylaws of the Corporation and the Maryland
General Corporation Law.
SEVENTH: The amendment to the Charter of the Corporation set forth in these
Articles of Amendment was approved by the stockholders of the Corporation at a
meeting of the stockholders of the Corporation held on May 16, 1995 in
accordance with the Charter and Bylaws of the Corporation and the Maryland
General Corporation Law.
EIGHTH: The amendment to the Charter of the Corporation set forth in these
Articles of Amendment changes and reclassifies certain of the authorized shares
of the capital stock of the Corporation into additional authorized shares of the
"Auction Rate Municipal Preferred Stock, Series M28" and the "Auction Rate
Municipal Preferred Stock, Series M7," respectively, but does not increase the
aggregate number of authorized shares of the capital stock of the Corporation.
Prior to the Effective Date, there were 1,300 authorized shares of the "Auction
Rate Municipal Preferred Stock, Series M28." As of the Effective Dater there
will be 2,600 shares of the "Auction Rate Municipal Preferred Stock, Series M28.
"Prior to the Effective Date, there were 1,300 authorized shares of the "Auction
Rate Municipal Preferred Stock, Series M7." As of the Effective Date, there will
be 2,600 shares of the "Auction Rate Municipal Preferred Stock, Series M7."
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
to be executed in its name and on its behalf by its President and its corporate
seal to be affixed and attested to by its Secretary as of the ___ day of June,
1995.
ATTEST: THE BLACKROCK INSURED MUNICIPAL
TERM TRUST INC.
_______________________________
Karen H. Sabath By:____________________________
Secretary Ralph L. Schlosstein
President
The undersigned, being duly elected and acting President of The BlackRock
Insured Municipal Term Trust Inc. hereby acknowledges that the foregoing
Articles of Amendment, of which this certificate is a part, is the act and deed
of The BlackRock Insured Municipal Term Trust Inc., and certifies, under the
penalties for perjury, to the best of his knowledge, information and belief,
that all matters and facts set forth therein are true in all material respects.
_________________________________
Ralph L. Schlosstein
ARTICLES SUPPLEMENTARY
OF THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC.
THE BLACKROCK INSURED MUNICIPAL TERM TRUST INC., a Maryland
corporation having its principal Maryland office in the City of Baltimore
(the "Corporation"), certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: Pursuant to the authority expressly vested in the Board of
Directors of the Corporation by article fifth of its Charter, the Board of
Directors has reclassified 2,600 authorized and unissued shares of common
stock of the Corporation as preferred stock of the Corporation by
increasing the number of shares of stock designated as Auction Rate
Municipal Preferred Stock, Series T7 from 2,060 to 4,660.
SECOND: All of the authorized shares of the Auction Rate Municipal
Preferred Stock, Series T7 shall be subject in all respects to the
preferences, voting powers, restrictions, qualifications, and terms and
conditions of redemption applicable to shares of Auction Rate Municipal
Preferred Stock, Series T7 as provided in the Corporation's Charter;
provided, however, that the Initial Dividend Period for such 2,600 shares
shall be ____ days and the Initial Dividend Rate for such shares shall be
___%.
IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be signed and acknowledged in its name and on its behalf
on this ___ day of ________________, 2000, by its President, who
acknowledges that these Articles Supplementary are the act of the
Corporation and, to the best of his knowledge, information and belief and
under penalties of perjury, all matters and facts contained in these
Articles Supplementary are true in all material respects.
THE BLACKROCK INSURED MUNICIPAL TERM TRUST
INC.
By:_____________________________
Ralph L. Schlosstein
President
Attest:
____________________________________
Karen H. Sabath
Secretary
BY-LAWS
OF
THE BLACKSTONE INSURED MUNICIPAL TERM TRUST INC.
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the Corporation shall
be in the City of Baltimore, State of Maryland.
Section 2. Principal Executive Office. The principal executive offices of
the Corporation shall be at 1285 Avenue of the Americas, New York, New York
10019.
Section 3. Other Offices. The Corporation may have such other offices in
such places as the Board of Directors may from time to time determine.
ARTICLE II
Meetings of Stockholders
Section 1. Annual Meeting. An annual meeting of the stockholders of the
Corporation for the election of directors and for the transaction of such other
business as may properly be brought before the meeting shall be held in November
of each year.
Section 2. Special Meetings. Special meetings of the stockholders, unless
otherwise provided by law or by the Articles of Incorporation, may be called for
any purpose or purposes by a majority of the Board of Directors, the President,
or on the written request of the holders of at least 25% of the outstanding
capital stock of the Corporation entitled to vote at such meeting.
Section 3. Place of Meetings. Annual and special meetings of the
stockholders shall be held at such place within the United States as the Board
of Directors may from time to time determine.
Section 4. Notice of Meetings; Waiver of Notice. Notice of the place, date
and time of the holding of each annual and special meeting of the stockholders
and the purpose or purposes of each special meeting shall be given personally or
by mail, not less than ten nor more than ninety days before the date of such
meeting, to each stockholder entitled to vote at such meeting and to each other
stockholder entitled to notice of the meeting. Notice by mail shall be deemed to
be duly given when deposited in the United States mail addressed to the
stockholder at his address as it appears on the records of the Corporation, with
postage thereon prepaid.
Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting. When a meeting is adjourned to another
time and place, unless the Board of Directors, after the adjournment, shall fix
a new record date for an adjourned meeting, or the adjournment is for more than
one hundred and twenty days after the original record date, notice of such
adjourned meeting need not be given if the time and place to which the meeting
shall be adjourned were announced at the meeting at which the adjournment is
taken.
Section 5. Quorum. At all meetings of the stockholders, the holders of a
majority of the shares of stock of the Corporation entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for the
transaction of any business, except as otherwise provided by statute or by the
Articles of Incorporation. In the absence of a quorum no business may be
transacted, except that the holders of a majority of the shares of stock present
in person or by proxy and entitled to vote may adjourn the meeting from time to
time, without notice other than announcement thereat except as otherwise
required by these By-Laws, until the holders of the requisite amount of shares
of stock shall be so present. At any such adjourned meeting at which a quorum
may be present any business may be transacted which might have been transacted
at the meeting as originally called. The absence from any meeting, in person or
by proxy, of holders of the number of shares of stock of the Corporation in
excess of a majority thereof which may be required by the laws of the State of
Maryland, the Investment Company Act of 1940, as amended, or other applicable
statute, the Articles of Incorporation, or these By-Laws, for action upon any
given matter shall not prevent action at such meeting upon any other matter or
matters which may properly come before the meeting, if there shall be present
thereat, in person or by proxy, holders of the number of shares of stock of the
Corporation required for action in respect of such other matter or matters.
Section 6. Organization. At each meeting of the stockholders, the Chairman
of the Board (if one has been designated by the Board), or in the Chairman of
the Board's absence or inability to act, the President, or in the absence or
inability of the Chairman of the Board and the President, a Vice President,
shall act as chairman of the meeting. The Secretary, or in the Secretary's
absence or inability to act, any person appointed by the chairman of the
meeting, shall act as secretary of the meeting and keep the minutes thereof.
Section 7. Order of Business. The order of business at all meetings of the
stockholders shall be as determined by the chairman of the meeting.
Section 8. Voting. Except as otherwise provided by statute or the Articles
of Incorporation, each holder of record of shares of stock of the Corporation
having voting power shall be entitled at each meeting of the stockholders to one
vote for every share of such stock standing in such stockholder's name on the
record of stockholders of the Corporation as of the record date determined
pursuant to Section 9 of this Article or if such record date shall not have been
so fixed, then at the later of (i) the close of business on the day on which
notice of the meeting is mailed or (ii) the thirtieth day before the meeting.
Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the stockholder
executing it, except in those cases where such proxy states that it is
irrevocable and where an irrevocable proxy is permitted by law. Except as
otherwise provided by statute, the Articles of Incorporation or these ByLaws,
any corporate action to be taken by vote of the stockholders shall be authorized
by a majority of the total votes cast at a meeting of stockholders by the
holders of shares present in person or represented by proxy and entitled to vote
on such action.
If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute or
these By-Laws, or determined by the chairman of the meeting to be advisable, any
such vote need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.
Section 9. Fixing of Record Date. The Board of Directors may set a record
date for the purpose of determining stockholders entitled to vote at any meeting
of the stockholders. The record date, which may not be prior to the close of
business on the day the record date is fixed, shall be not more than ninety nor
less than ten days before the date of the meeting of the stockholders. All
persons who were holders of record of shares at such time, and not others, shall
be entitled to vote at such meeting and any adjournment thereof.
Section 10. Inspectors. The Board may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspector shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may, and on the
request of any stockholder entitled to vote thereat shall, appoint inspectors.
Each inspector, before entering upon the discharge of his duties, shall take and
sign an oath to execute faithfully the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The inspectors
shall determine the number of shares outstanding and the voting powers of each,
the number of shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
result, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the chairman of the meeting or any
stockholder entitled to vote thereat, the inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. No director or candidate for the office
of director shall act as inspector of an election of directors. Inspectors need
not be stockholders.
Section 11. Consent of Stockholders in Lieu of Meeting. Except as otherwise
provided by statute or the Articles of Incorporation, any action required to be
taken at any annual or special meeting of stockholders, or any action which may
be taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if the following are
filed with the records of stockholders meetings: (i) a unanimous written consent
which sets forth the action and is signed by each stockholder entitled to vote
on the matter and (ii) a written waiver of any right to dissent signed by each
stockholder entitled to notice of the meeting but not entitled to vote thereat.
ARTICLE III
Board of Directors
Section 1. General Powers. Except as otherwise provided in the Articles of
Incorporation, the business and affairs of the Corporation shall be managed
under the direction of the Board of Directors. All powers of the Corporation may
be exercised by or under authority of the Board of Directors except as conferred
on or reserved to the stockholders by law or by the Articles of Incorporation or
these By-Laws.
Section 2. Number of Directors. The number of directors shall be fixed from
time to time by resolution of the Board of Directors adopted by a majority of
the Directors then in office; provided, however, that the number of directors
shall in no event be less than three nor more than nine. Any vacancy created by
an increase in Directors may be filled in accordance with Section 6 of this
Article III. No reduction in the number of directors shall have the effect of
removing any director from office prior to the expiration of his term. Directors
need not be stockholders.
Section 3. Election and Term of Directors. Each class of Directors as to
which vacancies exist shall be elected by written ballot at the annual meeting
of stockholders, or a special meeting held for that purpose unless otherwise
provided by statute or the Articles of Incorporation. The term of office of each
director shall be from the time of his election and qualification until the
expiration of the term of his class or until the annual election of directors
next succeeding his election and until his successor shall have been elected and
shall have qualified, or until his death, or until he shall have resigned, or
have been removed as hereinafter provided in these By-Laws, or as otherwise
provided by statute or the Articles of Incorporation.
Section 4. Resignation. A director of the Corporation may resign at any
time by giving written notice of his resignation to the Board or the Chairman of
the Board or the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 5. Removal of Directors. Any director of the Corporation may be
removed for cause (but not without cause) by the stockholders by a vote of
seventy-five percent (75%) of the votes entitled to be cast for the election of
directors.
Section 6. Vacancies. Subject to the provisions of the Investment Company
Act of 1940, as amended, any vacancies in the Board, whether arising from death,
resignation, removal, an increase in the number of directors or any other cause,
shall be filled by a vote of the Board of Directors in accordance with the
Articles of Incorporation.
Section 7. Place of Meetings. Meetings of the Board may be held at such
place as the Board may from time to time determine or as shall be specified in
the notice of such meeting.
Section 8. Regular Meeting. Regular meetings of the Board may be held
without notice at such time and place as may be determined by the Board of
Directors.
Section 9. Special Meetings. Special meetings of the Board may be called by
two or more directors of the Corporation or by the Chairman of the Board or the
President.
Section 10. Annual Meeting. The annual meeting of each newly elected Board
of Directors (including a Board of Directors to which only one class of
Directors has been newly elected) shall be held as soon as practicable after the
meeting of stockholders at which directors were elected. No notice of such
annual meeting shall be necessary if held immediately after the adjournment, and
at the site, of the meeting of stockholders. If not so held, notice shall be
given as hereinafter provided for special meetings of the Board of Directors.
Section 11. Notice of Special Meetings. Notice of each special meeting of
the Board shall be given by the Secretary as hereinafter provided, in which
notice shall be stated the time and place of the meeting. Notice of each such
meeting shall be delivered to each director, either personally or by telephone
or any standard form of telecommunication, at least twenty-four hours before the
time at which such meeting is to be held, or mailed by first-class mail, postage
prepaid, addressed to him at his residence or usual place of business, at least
three days before the day on which such meeting is to be held.
Section 12. Waiver of Notice of Meetings. Notice of any special meeting
need not be given to any director who shall, either before or after the meeting,
sign a written waiver of notice which is filed with the records of the meeting
or who shall attend such meeting. Except as otherwise specifically required by
these ByLaws, a notice or waiver of notice of any meeting need not state the
purpose of such meeting.
Section 13. Quorum and Voting. One-third, but not less than two, of the
members of the entire Board shall be present in person at any meeting of the
Board in order to constitute a quorum for the transaction of business at such
meeting, and except as otherwise expressly required by statute, the Articles of
Incorporation, these By-Laws, the Investment Company Act of 1940, as amended, or
other applicable statute, the act of a majority of the directors present at any
meeting at which a quorum is present shall be the act of the Board; provided,
however, that the approval of any contract with an investment adviser or
principal underwriter, as such terms are defined in the Investment Company Act
of 1940, as amended, which the Corporation enters into or any renewal or
amendment thereof, the approval of the fidelity bond required by the Investment
Company Act of 1940, as amended, and the selection of the Corporations's
independent public accountants shall each require the affirmative vote of a
majority of the directors who are not interested persons, as defined in the
Investment Company Act of 1940, as amended, of the Corporation. In the absence
of a quorum at any meeting of the Board, a majority of the directors present
thereat may adjourn such meeting to another time and place until a quorum shall
be present thereat. Notice of the time and place of any such adjourned meeting
shall be given to the directors who were not present at the time of the
adjournment and, unless such time and place were announced at the meeting at
which the adjournment was taken, to the other directors. At any adjourned
meeting at which a quorum is present, any business may be transacted which might
have been transacted at the meeting as originally called.
Section 14. Organization. The Board may, by resolution adopted by a
majority of the entire Board, designate a Chairman of the Board, who shall
preside at each meeting of the Board. In the absence or inability of the
Chairman of the Board to preside at a meeting, the President or, in his absence
or inability to act, another director chosen by a majority of the directors
present, shall act as chairman of the meeting and preside thereat. The Secretary
(or, in his absence or inability to act, any person appointed by the Chairman)
shall act as secretary of the meeting and keep the minutes thereof.
Section 15. Written Consent of Directors in Lieu of a Meeting. Subject to
the provisions of the Investment Company Act of 1940, as amended, 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 all members of the Board
or committee, as the case may be, consent thereto in writing, and the writings
or writing are filed with the minutes of the proceedings of the Board or
committee.
Section 16. Compensation. Directors may receive compensation for services
to the Corporation in their capacities as directors or otherwise in such manner
and in such amounts as may be fixed from time to time by the Board.
Section 17. Investment Policies. It shall be the duty of the Board of
Directors to ensure that the purchase, sale, retention and disposal of portfolio
securities and the other investment practices of the Corporation are at all
times consistent with the investment policies and restrictions with respect to
securities investments and otherwise of the Corporation, as recited in the
Prospectus included in the registration statement of the Corporation covering
the initial public offering of shares of its capital stock, as filed with the
Securities and Exchange Commission (or as such investment policies and
restrictions may be modified by the Board of Directors or, if required, by
majority vote of the stockholders of the Corporation in accordance with the
Investment Company Act of 1940, as amended) and as required by the Investment
Company Act of 1940, as amended. The Board, however, may delegate the duty of
management of the assets and the administration of its day to day operations to
one or more individuals or corporate management companies and/or investment
advisers pursuant to a written contract or contracts which have obtained the
requisite approvals, including the requisite approvals of renewals thereof, of
the Board of Directors and/or the stockholders of the Corporation in accordance
with the provisions of the Investment Company Act of 1940, as amended.
Section 18. Asset Value. The Board of Directors shall determine the times
and method of calculation of the net asset value per share of the Fund subject
to conditions with the requirements of the 1940 Act.
ARTICLE IV
Committees
Section 1. Committees of the Board. The Board of Directors may from time to
time, by resolution adopted by a majority of the whole Board, designate one or
more committees of the Board, each such committee to consist of two or more
directors and to have such powers and duties as the Board of Directors may, by
resolution, prescribe.
Section 2. General. One-third, but not less than two, of the members of any
committee shall be present in person at any meeting of such committee in order
to constitute a quorum for the transaction of business at such meeting, and the
act of a majority present shall be the act of such committee. The Board may
designate a chairman of any committee and such chairman or any two members of
any committee may fix the time and place of its meetings unless the Board shall
otherwise provide. In the absence or disqualification of any member of any
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. The Board shall
have the power at any time to change the membership of any committee, to fill
all vacancies, to designate alternate members to replace any absent or
disqualified member, or to dissolve any such committee. Nothing herein shall be
deemed to prevent the Board from appointing one or more committees consisting in
whole or in part of persons who are not directors of the Corporation; provided,
however, that no such committee shall have or may exercise any authority or
power of the Board in the management of the business or affairs of the
Corporation.
ARTICLE V
Officers, Agents and Employees
Section 1. Number of Qualifications. The officers of the Corporation shall
be a President, who shall be a director of the Corporation, a Secretary and a
Treasurer, each of whom shall be elected by the Board of Directors. The Board of
Directors may elect or appoint one or more Vice Presidents and may also appoint
such other officers, agents and employees as it may deem necessary or proper.
Any two or more offices may be held by the same person, except the offices of
President and Vice President, but no officer shall execute, acknowledge or
verify any instrument as an officer in more than one capacity. Such officers
shall be elected by the Board of Directors each year at its first meeting held
after the annual meeting of stockholders, each to hold office until the meeting
of the stockholders and until his successor shall have been duly elected and
shall have qualified, or until his death, or until he shall have resigned, or
have been removed, as hereinafter provided in these By-Laws. The Board may from
time to time elect, or delegate to the President the power to appoint, such
officers (including one or more Assistant Vice Presidents, one or more Assistant
Treasurers and one or more Assistant Secretaries) and such agents, as may be
necessary or desirable for the business of the Corporation. Such officers and
agents shall have such duties and shall hold their offices for such terms as may
be prescribed by the Board or by the appointing authority.
Section 2. Resignations. Any officer of the Corporation may resign at any
time by giving written notice of resignation to the Board, the Chairman of the
Board, President or the Secretary. Any such resignation shall take effect at the
time specified therein or, if the time when it shall become effective shall not
be specified therein, immediately upon its receipt; and, unless otherwise
specified therein, the acceptance of such resignation shall be necessary to make
it effective.
Section 3. Removal of Officer, Agent or Employee. Any officer, agent or
employee of the Corporation may be removed by the Board of Directors with or
without cause at any time, and the Board may delegate such power of removal as
to agents and employees not elected or appointed by the Board of Directors. Such
removal shall be without prejudice to such person's contract rights, if any, but
the appointment of any person as an officer, agent or employee of the
Corporation shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office, either arising from death,
resignation, removal or any other cause, may be filled for the unexpired portion
of the term of the office which shall be vacant, in the manner prescribed in
these By-Laws for the regular election or appointment to such office.
Section 5. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer in respect of other officers under his control.
Section 6. Bonds or Other Security. If required by the Board, any officer,
agent or employee of the Corporation shall give a bond or other security for the
faithful performance of his duties, in such amount and with such surety or
sureties as the Board may require.
Section 7. President. The President shall be the chief executive officer of
the Corporation. In the absence of the Chairman of the Board (or if there be
none), he shall preside at all meetings of the stockholders and of the Board of
Directors. He shall have, subject to the control of the Board of Directors,
general charge of the business and affairs of the Corporation. He may employ and
discharge employees and agents of the Corporation, except such as shall be
appointed by the Board, and he may delegate these powers.
Section 8. Vice President. Each Vice President shall have such powers and
perform such duties as the Board of Directors or the President may from time to
time prescribe.
Section 9. Treasurer. The Treasurer shall
(a) have charge and custody of, and be responsible for, all the funds
and securities of the Corporation, except those which the Corporation has
placed in the custody of a bank or trust company or member of a national
securities exchange (as that term is defined in the Securities Exchange Act
of 1934, as amended) pursuant to a written agreement designating such bank
or trust company or member of a national securities exchange as a custodian
or sub-custodian of the property of the Corporation;
(b) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation;
(c) cause all moneys and other valuables to be deposited to the credit
of the Corporation;
(d) receive, and give receipts for, moneys due and payable, to the
Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the investment
of its funds as ordered or authorized by the Board, taking proper vouchers
therefor; and
(f) in general, perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him
by the Board or the President.
Section 10. Secretary. The Secretary shall
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board, the committees of the
Board and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation
(unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all
other documents to be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly
kept and filed; and
(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him
by the Board or the President.
Section 11. Delegation of Duties. In case of the absence of any officer of
the Corporation, or for any other reason that the Board may deem sufficient, the
Board may confer for the time being the powers or duties, or any of them, of
such officer upon any other officer or upon any director.
ARTICLE VI
Indemnification
Each officer and director of the Corporation shall be indemnified by the
Corporation to the full extent permitted under the General Laws of the State of
Maryland, including the advancing of expenses, except that such indemnity shall
not protect any such person against any liability to the Corporation or any
stockholder thereof to which such person 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. Absent a court determination that
an officer or director seeking indemnification was not liable on the merits or
guilty of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office, the decision by the
Corporation to indemnify such person must be based upon the reasonable
determination of independent counsel or nonparty independent directors, after
review of the facts, that such officer or director is not guilty of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
The Corporation may purchase insurance on behalf of an officer or director
protecting such person to the full extent permitted under the General Laws of
the State of Maryland, from liability arising from his activities as officer or
director of the Corporation. The Corporation, however, may not purchase
insurance on behalf of any officer or director of the Corporation that protects
or purports to protect such person from liability to the Corporation or to its
stockholders to which such officer or director 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.
The Corporation may indemnify or purchase insurance to the extent provided
in this Article VI on behalf of an employee or agent who is not an officer or
director of the Corporation.
ARTICLE VII
Capital Stock
Section 1. Stock Certificates. Each holder of stock of the Corporation
shall be entitled upon request to have a certificate or certificates, in such
form as shall be approved by the Board, representing the number of shares of the
Corporation owned by him, provided, however, that certificates for fractional
shares will not be delivered in any case. The certificates representing shares
of stock shall be signed by or in the name of the Corporation by the President
or a Vice President and by the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer and sealed with the seal of the Corporation.
Any or all of the signatures or the seal on the certificate may be a facsimile.
In case any officer, transfer agent or registrar who has signed or whose
fascimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate shall be
issued, it may be issued by the Corporation with the same effect as if such
officer, transfer agent or registrar were still in office at the date of issue.
Section 2. Books of Accounts and Record of Stockholders. There shall be
kept at the principal executive office of the Corporation correct and complete
books and records of account of all the business and transactions of the
Corporation. There shall be made available upon request of any stockholder, in
accordance with Maryland law, a record containing the number of shares of stock
issued during a specified period not to exceed twelve months and the
consideration received by the Corporation for each such share.
Section 3. Transfers of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent or
transfer clerk, and on surrender of the certificate or certificates, if issued,
for such shares properly endorsed or accompanied by a duly executed stock
transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
rights of a person in whose name any share or shares stand on the record of
stockholders as the owner of such share or shares for all purposes, including,
without limitation, the rights to receive dividends or other distributions, and
to vote as such owner, and the Corporation shall not be bound to recognize any
equitable or legal claim to or interest in any such share or shares on the part
of any other person.
Section 4. Regulations. The Board may make such additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to bear
the signature or signatures of any of them.
Section 5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificates representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it which the owner thereof shall
allege to have been lost or destroyed or which shall have been mutilated, and
the Board may, in its discretion, require such owner or his legal
representatives to give to the Corporation a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or issuance of a new certificate. Anything
herein to the contrary notwithstanding, the Board, in its absolute discretion,
may refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.
Section 6. Fixing of a Record Date for Dividends and Distributions. The
Board may fix, in advance, a date not more than ninety days preceding the date
fixed for the payment of any dividend or the making of any distribution. Once
the Board of Directors fixes a record date as the record date for the
determination of the stockholders entitled to receive any such dividend or
distribution, in such case only the stockholders of record at the time so fixed
shall be entitled to receive such dividend or distribution.
Section 7. Information to Stockholders and Others. Any stockholder of the
Corporation or his agent may inspect and copy during usual business hours the
Corporation's By-Laws, minutes of the proceedings of its stockholders, annual
statements of its affairs, and voting trust agreements on file at its principal
office.
ARTICLE VIII
Seal
The seal of the Corporation shall be circular in form and shall bear, in
addition to any other emblem or device approved by the Board of Directors, the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal" and "Maryland". Said seal may be used by causing it or a facsimile thereof
to be impressed or affixed or in any other manner reproduced.
ARTICLE IX
Fiscal Year
Unless otherwise determined by the Board, the fiscal year of the
Corporation shall end on the 31st day of December.
ARTICLE X
Depositories and Custodians
Section 1. Depositories. The funds of the Corporation shall be with such
banks or other depositories as the Board of Directors of the Corporation may
from time to time determine.
Section 2. Custodians. All securities and other investments shall be
deposited in the safe keeping of such banks or other companies as the Board of
Directors of the Corporation may from time to time determine. Every arrangement
entered into with any bank or other company for the safe keeping of the
securities and investments of the Corporation shall contain provisions complying
with the Investment Company Act of 1940, as amended, and the general rules and
regulations thereunder.
ARTICLE XI
Execution of Instruments
Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts, acceptances,
bills of exchange and other orders or obligations for the payment of money shall
be signed by such officer or officers or person or persons as the Board of
Directors by resolution shall from time to time designate.
Section 2. Sale or Transfer of Securities. Stock certificates, bonds or
other securities at any time owned by the Corporation may be held on behalf of
the Corporation or sold, transferred or otherwise disposed of subject to any
limits imposed by these By-Laws and pursuant to authorization by the Board and,
when so authorized to be held on behalf of the Corporation or sold, transferred
or otherwise disposed of, may be transferred from the name of the Corporation by
the signature of the President or a Vice President or the Treasurer or pursuant
to any procedure approved by the Board of Directors, subject to applicable law.
ARTICLE XII
Independent Public Accountants
The firm of independent public accountants which shall sign or certify the
financial statements of the Corporation which are filed with the Securities and
Exchange Commission shall be selected annually by the Board of Directors and
ratified by the stockholders in accordance with the provisions of the Investment
Company Act of 1940, as amended.
ARTICLE XIII
Annual Statement
The books of account of the Corporation shall be examined by an independent
firm of public accountants at the close of each annual period of the Corporation
and at such other times as may be directed by the Board. A report to the
stockholders based upon each such examination shall be mailed to each
stockholder of the Corporation of record on such date with respect to each
report as may be determined by the Board, at his address as the same appears on
the books of the Corporation. Such annual statement shall also be available at
the annual meeting of stockholders and be placed on file at the Corporation's
principal office in the State of Maryland. Each such report shall show the
assets and liabilities of the Corporation as of the close of the annual or
quarterly period covered by the report and the Securities in which the funds of
the Corporation were then invested. Such report shall also show the
Corporation's income and expenses for the period from the end of the
Corporation's preceding fiscal year to the close of the annual or quarterly
period covered by the report and any other information required by the
Investment Company Act of 1940, as amended, and shall set forth such other
matters as the Board or such firm of independent public accountants shall
determine.
ARTICLE XIV
Amendments
The Board of Directors, by affirmative vote of a majority thereof, shall
have the exclusive right to amend, alter or repeal these By-Laws at any regular
or special meeting of the Board of Directors, except any particular By-Law which
is specified as not subject to alteration or repeal by the Board of Directors,
subject to the requirements of the Investment Company Act of 1940, as amended.
Number
BMT
[GRAPHIC OMITTED]
COMMON STOCK
PAR VALUE $.01
INCORPORATED UNDER THE LAWS
OF THE STATE OF MARYLAND
[GRAPHIC OMITTED]
Shares
THIS CERTIFICATE
IS TRANSFERABLE IN
BOSTON, MA OR IN
NEW YORK, NY
CUSIP 092506 10 4
SEE REVERSE FOR CERTAIN DEFINITIONS
The Blackstone Insured Municipal Term Trust Inc.
THIS CERTIFIES THAT
IS THE OWNER OF
FULL PAID AND NONASSESSABLE SHARES OF THE COMMON
STOCK OF
The Blackstone Insured Municipal Term Trust Inc., transferable on the books of
the Corporation by the holder hereof in person or by duly authorized attorney
upon surrender of this Certificate properly endorsed. This Certificate and the
shares represented hereby are issued and shall be subject to all of the
provisions of the Articles of Incorporation and By-Laws of the Corporation, each
as from time to time amended, to all of which the holder by acceptance hereof
assents. This Certificate is not valid until countersigned and registered by the
Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
[THE BLACKSTONE INSURED MUNICIPAL TERM TRUST, INC.
CORPORATE
SEAL
1991
MARYLAND]
DATED
/s/ Barbara Novick /s/ [ILLEGIBLE]
SECRETARY PRESIDENT
COUNTERSIGNED AND REGISTERED
STATE STREET BANK [ILLEGIBLE]
TRUST COMPANY
[ILLEGIBLE]
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
THE BLACKSTONE INSURED MUNICIPAL TERM TRUST INC.
The Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof of the
Corporation and the qualifications, limitations, or restrictions of such
preferences and/or rights The Corporation will also furnish without charge to
each stockholder who so requests a description of the authority of the
Corporation's board of directors to set the relative rights and preferences of
unissued series of the Corporation s capital stock. Such requests may be made to
the Corporation or the transfer agent.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT -- Custodian
(Cust) (Minor)
under Uniform Gifts to Minors Act
--------------------------
(State)
Additional abbreviations may also be used though not in the above list
For value received, _____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING
POSTAL ZIP CODE OF ASSIGNEE
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------
- --------------------------------------------------------------------
_____ Shares
of the Stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint
- -------------------------------------------------------------------------------
Attorney to transfer the said Stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated: ___________________
----------------------------------------
Signature
NOTICE: THE SIGNATURE TO THIS
ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER.
Auction Rate Municipal SHARES
Preferred Stock, Series M7 1,300
THE BLACKSTONE INSURED MUNICIPAL TERM TRUST, INC.
INCORPORATED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF MARYLAND CERTAIN DEFINITIONS
THIS CERTIFICATE IS TRANSFERABLE CUSIP 092506 20 3
IN NEW YORK NY
THIS CERTIFIES THAT
CEDE & CO.
IS THE OWNER OF One Thousand Three Hundred (1,300)
FULLY PAID AND NON-ASSESSABLE SHARES OF AUCTION RATE MUNICIPAL PREFERRED
STOCK, SERIES M7, PAR VALUE $.01 PER SHARE, LIQUIDATION PREFERENCE $50,000
PER SHARE PLUS AN AMOUNT EQUAL TO ACCUMULATED BUT UNPAID DIVIDENDS (WHETHER
OR NOT EARNED OR DECLARED) THEREON PLUS THE PREMIUM, IF ANY, RESULTING FROM
THE DESIGNATION OF A PREMIUM CALL PERIOD OF
THE BLACKSTONE INSURED MUNICIPAL TERM TRUST INC.
transferable on the books of said Corporation in person or by duly
authorized attorney upon surrender of this certificate properly endorsed.
This certificate is not valid until countersigned by the Transfer
Agent and registered by the Registrar.
In Witness Whereof, THE BLACKSTONE INSURED MUNICIPAL TERM TRUST INC.
has caused its corporate seal to be hereto affixed and this certificate to
be executed in its name and behalf by its duly authorized officer.
Dated: April 27, 1992
Countersigned and Registered: /s/ [Illegible]
BANKERS TRUST COMPANY -----------------------------------
(New York) Transfer Agent President
/s/ [Illegible]
-----------------------------------
Treasurer
By
Authorized Signature
/s/ [ILLEGIBLE]
- -------------------------------
THE TRANSFER OF THE SHARES OF AUCTION RATE MUNICIPAL PREFERRED STOCK
REPRESENTED HEREBY IS SUBJECT TO THE RESTRICTIONS CONTAINED IN THE
CORPORATION'S CHARTER, AND THE PURCHASER'S LETTERS REFERRED TO THEREIN. THE
CORPORATION WILL FURNISH INFORMATION ABOUT SUCH RESTRICTION TO ANY
STOCKHOLDER, WITHOUT CHARGE, UPON REQUEST TO THE SECRETARY OF THE
CORPORATION.
THE BLACKSTONE INSURED MUNICIPAL TERM TRUST INC.
A full statement of the designations and any preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the shares of
each class of stock which the Corporation is authorized to issue and the
differences in the relative rights and preferences between the shares of
each series to the extent that they have been set, and the authority of the
Board of Directors to set the relative rights and preferences of subsequent
series, will be furnished by the Corporation to any stockholder, without
charge, upon request to the Secretary of the Corporation at its principal
office.
The following abbreviations, when used in the inscription on the
face of this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN
ACT--_____Custodian_______
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with rights under Uniform Gifts
of survivorship and not as to to Minors Act _______
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For value received ____________ hereby sell, assign and transfer unto
Please insert social security or other
identifying number of assignee
----------------------------
/ /
/---------------------------/
- ----------------------------------------------------------------------------
(Please Print or Typewrite Name and Address, Including Zip Code of Assignee)
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
shares of the capital stock represented by the within certificate, and do
hereby irrevocably constitute and appoint
- ----------------------------------------------------------------------------
Attorney to transfer the said stock on the books of the within named
Corporation with full power of substitution in the premises.
Dated _______________
NOTICE:
------------------------------------------------------
The Signature to this assignment must correspond with
the name as written upon the face of the Certificate
in every particular, without alteration or englargement
or any change whatever.
Auction Rate Municipal SHARES
Preferred Stock, Series M28 1,300
THE BLACKSTONE INSURED MUNICIPAL TERM TRUST, INC.
INCORPORATED UNDER THE LAWS SEE REVERSE
FOR
OF THE STATE OF MARYLAND CERTAIN DEFINITIONS
THIS CERTIFICATE IS TRANSFERABLE CUSIP 092506 30 2
IN NEW YORK NY
THIS CERTIFIES THAT
CEDE & CO.
IS THE OWNER OF One Thousand Three Hundred (1,300)
FULLY PAID AND NON-ASSESSABLE SHARES OF AUCTION RATE MUNICIPAL PREFERRED
STOCK, SERIES M28, PAR VALUE $.01 PER SHARE, LIQUIDATION PREFERENCE $50,000 PER
SHARE PLUS AN AMOUNT EQUAL TO ACCUMULATED BUT UNPAID DIVIDENDS (WHETHER OR NOT
EARNED OR DECLARED) THEREON PLUS THE PREMIUM, IF ANY, RESULTING FROM THE
DESIGNATION OF A PREMIUM CALL PERIOD OF
THE BLACKSTONE INSURED MUNICIPAL TERM TRUST INC.
transferable on the books of said Corporation in person or by duly
authorized attorney upon surrender of this certificate properly endorsed.
This certificate is not valid until countersigned by the Transfer Agent and
registered by the Registrar.
In Witness Whereof, THE BLACKSTONE INSURED MUNICIPAL TERM TRUST INC. has
caused its corporate seal to be hereto affixed and this certificate to be
executed in its name and behalf by its duly authorized officer.
Dated: April 27, 1992
Countersigned and Registered: /s/ [Illegible]
BANKERS TRUST COMPANY -----------------------------------
(New York) Transfer Agent President
/s/ [Illegible]
-----------------------------------
Treasurer
By
Authorized Signature
/s/ [ILLEGIBLE]
- -------------------------------
THE TRANSFER OF THE SHARES OF AUCTION RATE MUNICIPAL PREFERRED STOCK REPRESENTED
HEREBY IS SUBJECT TO THE RESTRICTIONS CONTAINED IN THE CORPORATION'S CHARTER,
AND THE PURCHASER'S LETTERS REFERRED TO THEREIN. THE CORPORATION WILL FURNISH
INFORMATION ABOUT SUCH RESTRICTION TO ANY STOCKHOLDER, WITHOUT CHARGE, UPON
REQUEST TO THE SECRETARY OF THE CORPORATION.
THE BLACKSTONE INSURED MUNICIPAL TERM TRUST INC.
A full statement of the designations and any preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the shares of each
class of stock which the Corporation is authorized to issue and the differences
in the relative rights and preferences between the shares of each series to the
extent that they have been set, and the authority of the Board of Directors to
set the relative rights and preferences of subsequent series, will be furnished
by the Corporation to any stockholder, without charge, upon request to the
Secretary of the Corporation at its principal office.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN
ACT--_____Custodian_______
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with rights under Uniform Gifts
of survivorship and not as to to Minors Act _______
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For value received ____________ hereby sell, assign and transfer unto
Please insert social security or other
identifying number of assignee
----------------------------
/ /
/---------------------------/
- -------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address, Including Zip Code of Assignee)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------____ shares
of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint
- --------------------------------------------------------------------___Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated _______________
NOTICE:
- -------------------------------------------------------------------------------
The Signature to this assignment must correspond with the
name as written upon the face of the Certificate in every
particular, without alteration or englargement or any change
whatever.
TERMS AND CONDITIONS OF
DIVIDEND REINVESTMENT PLAN
1. You, State Street Bank and Trust Company, will act as Agent for
me, and will open an account for me under the Dividend Reinvestment Plan
(the "Plan") in the same name as my present shares are registered, and put
the Plan into effect for me as of the first record date for a dividend or
capital gains distribution after you receive the Authorization duly
executed by me.
2. Whenever The BlackRock Insured Municipal Term Trust Inc. (the
"Trust") declares a distribution from capital gains or an income dividend
payable in cash you shall use such cash to purchase additional shares of
Trust common stock for me in the open market or otherwise. Such purchases
will be made on or shortly after the payable date for such dividend or
distribution, and in no event more than 45 days after such date except
where temporary curtailment or suspension of purchase is necessary to
comply with applicable provisions of federal securities law.
3. For all purposes of the Plan:
(a) The market price of the Trust's
common stock on a particular date shall be the mean between the highest and
lowest sales prices on the New York Stock Exchange on that date, or, if
there is no sale on such Exchange on that date, then the mean between the
closing bid and asked quotations for such stock on such Exchange on such
date.
(b) The net asset value per share of the Trust's common stock on a
particular date shall be as determined by or on behalf of the Trust; and
(c) All dividends, distributions and other payment shall be made
net of any applicable withholding tax.
4. The open-market purchases provided for above may be made on any
securities exchange where the Trust's common stock is traded, in the
over-the-counter market or in negotiated transactions and may be on such
terms as to price, delivery and otherwise as you shall determine. My funds
held by you uninvested will not bear interest, and it is understood that,
in any event, you shall have no liability in connection with any inability
to purchase shares within 45 days after the initial date of such purchase
as herein provided, or with the timing of any purchases effected. You shall
have no responsibility as to the value of the common stock of the Trust
acquired for my account. For the purposes of cash investments you may
commingle my funds with those of other shareholders of the Trust for whom
you similarly act as Agent, and the average price (including brokerage
commissions) of all shares purchased by you as Agent shall be the price per
share allocable to me in connection therewith.
5. You may hold my shares acquired pursuant to my authorization,
together with the shares of other shareholders of the Trust acquired
pursuant to similar authorizations, in noncertificated form in your name or
that of your nominee. You will forward to me any proxy solicitation
material and will vote any shares so held for me only in accordance with
the proxy returned by me to the Trust. Upon my written request, you will
deliver to me, without charge, a certificate or certificates for the full
shares.
6. You will confirm to me each acquisition made for my account as
soon as practical but not later than 60 days after the date thereof.
Although I may from time to time have an undivided fractional interest
(computed to three decimal places) in a share of the Trust, no certificates
for a fractional share will be issued. However, dividends and distributions
on fractional shares will be credited to my account. In the event of
termination of my account under the Plan, you will adjust for any such
undivided fractional interest in cash at the market value of the Trust's
shares at the time of termination less the pro rata expense of any sale
required to make such adjustment.
7. Any stock dividends or split shares distributed by the Trust on
shares held by you for me will be credited to my account. In the event
that the Trust makes available to its shareholders rights to purchase
additional shares or other securities, the shares held for me under the
Plan will be added to other shares held by me in calculating the number of
rights to be issued to me.
8. Your service fee for handling capital gains distributions or
income dividends will be paid by the Trust. I will be charged a pro rata
share of brokerage commissions on all open-market purchases.
9. I may terminate my account under the Plan by notifying you by
telephone or in writing. Such termination will be effective immediately if
my notice is received by you not less than ten days prior to any dividend
or distribution record date; otherwise such termination will be effective
on the first trading day after the payment date for such dividend or
distribution with respect to any subsequent dividend or distribution. The
Plan may be terminated by you or the Trust upon notice in writing mailed to
me at least 90 days prior to any record date for the payment of any
dividend or distribution by the Trust. Upon any termination you will cause
a certificate or certificates for the full shares held for me under the
Plan and cash adjustment for any fraction to be delivered to me without
charge. If I elect by notice to you in writing in advance of such
termination to have you sell part or all of my shares and remit the
proceeds to me, you are authorized to deduct a $2.50 fee plus brokerage
commission for this transaction from the proceeds.
10. These terms and conditions may be amended or supplemented by
you or the Trust at any time or times but, except when necessary or
appropriate to comply with applicable law or the rules or policies of the
Securities and Exchange Commission or any other regulatory authority, only
by mailing to me appropriate written notice at least 90 days prior to the
record date for the first dividend or distribution to which such amendment
or supplement applies if by the Trust or if by you 90 days prior to the
effective date of such amendment or supplement. The amendment or supplement
shall be deemed to be accepted by me unless, prior to the effective date
thereof, you receive written notice of the termination of my account under
the Plan. Any such amendment may include an appointment by you in your
place and stead of a successor Agent under these terms and conditions, with
full power and authority to perform all or any of the acts to be performed
by the Agent under these terms and conditions. Upon any such appointment of
an Agent for the purpose of receiving dividends and distributions, the
Trust will be authorized to pay to such successor Agent, for my account,
all dividends and distributions payable on common stock of the Trust held
in my name or under the Plan for retention or application by such successor
Agent as provided in these terms and conditions.
11. You shall at all times act in good faith and agree to use your
best efforts within reasonable limits to ensure the accuracy of all
services performed under this Agreement and to comply with applicable law,
but assume no responsibility, and shall not be liable for loss or damage
due to errors unless such error is caused by your negligence, bad faith, or
willful misconduct or that of your employees.
12. These terms and conditions shall be governed by the laws of the
Commonwealth of Massachusetts.
THE BLACKROCK This form is for shareholders who hold
INSURED MUNICIPAL stock in their own names. If your shares
TERM TRUST INC. are held through a brokerage firm,
bank, or other nominee, you should
DIVIDEND REINVESTMENT PLAN instruct your nominee to participate on
your behalf. If you wish to participate
in the Plan, but your brokerage firm,
bank or other nominee is unable to
participate on your behalf, you should
request it to re-register your shares in
your own name, which will enable your
participation in the Plan.
AUTHORIZATION FOR REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
(Please read carefully before signing)
I hereby authorize the BlackRock Insured Municipal Term Trust Inc.
(the "Trust") to pay to State Street Bank and Trust Company for my account
all income dividends and capital gains distributions payable to me on
shares of Common Stock of the Trust now or hereafter registered in my name,
and hereby elect to receive in shares of Common Stock all such dividends
and distributions payable in cash, except as set forth below.
I hereby appoint State Street Bank and Trust Company as my Agent,
subject to the Terms and Conditions of the Dividend Reinvestment Plan (the
"Plan") set forth in the accompanying brochure, and authorize State Street
Bank and Trust Company, as such Agent, in accordance with such Terms and
Conditions to apply all such income dividends and capital gains
distributions payable solely in cash, after deducting the charges as
provided in such Terms and Conditions, to the purchase of shares of Common
Stock of the Trust.
(continued on other side)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, dated February 19, 1992, between The Blackstone Insured
Municipal Term Trust Inc. (the "Trust"), a Maryland corporation, and
Blackstone Financial Management L.P. (the "Adviser"), a Delaware limited
partnership.
In consideration of the mutual promises and agreements herein
contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is agreed by and between the parties hereto as
follows:
1. In General
The Adviser agrees, all as more fully set forth herein, to act as
investment adviser to the Trust with respect to the investment of the
Trust's assets and to supervise and arrange the purchase of securities for
and the sale of securities held in the investment portfolio of the Trust.
2. Duties and obligations of the Adviser with respect to
investments of assets of the Trust
(a) Subject to the succeeding provisions of this section
and subject to the direction and control of the Trust's Board of Directors,
the Adviser shall (i) act as investment adviser for and supervise and
manage the investment and reinvestment of the Trust's assets and in
connection therewith have complete discretion in purchasing and selling
securities and other assets for the Trust and in voting, exercising
consents and exercising all other rights appertaining to such securities
and other assets on behalf of the Trust; (ii) supervise continuously the
investment program of the Trust and the composition of its investment
portfolio; and (iii) arrange, subject to the provisions of paragraph 3
hereof, for the purchase and sale of securities and other assets held in
the investment portfolio of the Trust.
(b) In the performance of its duties under this
Agreement, the Adviser shall at all times conform to, and act in accordance
with, any requirements imposed by (i) the provisions of the Investment
Company Act of 1940 (the "Act"), and of any rules or regulations in force
thereunder; (ii) any other applicable provision of law; (iii) the
provisions of the Articles of Incorporation and By-Laws of the Trust, as
such documents are amended from time to time; (iv) the investment objective
and policies of the Trust as set forth in its Registration Statement on
Form N-2 (file Nos.33-44735 and 811-6512); and (v) any policies and
determinations of the Board of Directors of the Trust.
(c) The Adviser will bear all costs and expenses of its
partners and employees and any overhead incurred in connection with its
duties hereunder and shall bear the costs of any salaries or directors fees
of any officers or directors of the Trust who are affiliated persons (as
defined in the Act) of the Adviser except that the Board of Directors of
the Trust may approve reimbursement to the Adviser of the pro rata portion
of the salaries, bonuses, health insurance, retirement benefits and all
similar employment costs for the time spent on Trust operations (other than
the provision of investment advice) of all personnel employed by the
Adviser who devote substantial time to Trust operations or the operations
of other investment companies advised by the Adviser.
(d) The Adviser shall give the Trust the benefit of its
best judgment and effort in rendering services hereunder, but the Adviser
shall not be liable for any act or omission or for any loss sustained by
the Trust in connection with the matters to which this Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
(e) Nothing in this Agreement shall prevent the Adviser
or any partner, officer, employee or other affiliate thereof from acting as
investment adviser for any other person, firm or corporation, or from
engaging in any other lawful activity, and shall not in any way limit or
restrict the Adviser or any of its partners, officers, employees or agents
from buying, selling or trading any securities for its or their own
accounts or for the accounts of others for whom it or they may be acting,
provided, however that the Adviser will undertake no activities which, in
its judgment, will adversely affect the performance of its obligations
under this Agreement.
3. Portfolio Transactions and Brokerage
The Adviser is authorized, for the purchase and sale of the
Trust's portfolio securities, to employ such securities dealers as may, in
the judgment of the Adviser, implement the policy of the Trust to obtain
the best net results taking into account such factors as price, including
dealer spread, the size, type and difficulty of the transaction involved,
the firm's general execution and operational facilities and the firm's risk
in positioning the securities involved. Consistent with this policy, the
Adviser is authorized to direct the execution of the Trust's portfolio
transactions to dealers and brokers furnishing statistical information or
research deemed by the Adviser to be useful or valuable to the performance
of its investment advisory functions for the Trust.
4. Compensation of the Adviser
(a) The Trust agrees to pay to the Adviser and the
Adviser agrees to accept as full compensation for all services rendered by
the Adviser as such, a fee computed and payable monthly in an amount equal
to .35% of the Trust's average weekly net asset value on an annualized
basis until termination of the Trust pursuant to its Articles of
Incorporation. For any period less than a month during which this Agreement
is in effect, the fee shall be prorated according to the proportion which
such period bears to a full month of 28, 29, 30 or 31 days, as the case may
be.
(b) For purposes of this Agreement, the net assets of the
Trust shall be calculated pursuant to the procedures adopted by resolutions
of the Directors of the Trust for calculating the net asset value of the
Trust's shares or delegating such calculations to third parties, provided,
however, that the liquidation value of any outstanding preferred stock of
the Trust shall not be taken into account in calculating the Trust's
average weekly net asset value for purposes of Section 4(a) of this
Agreement.
5. Indemnity.
(a) The Trust hereby agrees to indemnify the Adviser and
each of the Adviser's partners, officers, employees, agents, associates and
controlling persons and the partners, officers, employees and agents
thereof (including any individual who serves at the Adviser's request as
director, officer, partner, trustee or the like of another corporation)
(each such person being an "indemnitee") against any liabilities and
expenses, including amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and counsel fees (all as provided in
accordance with applicable corporate law) reasonably incurred by such
indemnitee in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, before any court or
administrative or investigative body in which he may be or may have been
involved as a party or otherwise or with which he may be or may have been
threatened, while acting in any capacity set forth above in this
Section 5 or thereafter by reason of his having acted in any such capacity,
except with respect to any matter as to which he shall have been
adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interest of the Trust and furthermore, in the
case of any criminal proceeding, so long as he had no reasonable cause to
believe that the conduct was unlawful, provided, however, that (1) no
indemnitee shall be indemnified hereunder against any liability to the
Trust or its shareholders or any expense of such indemnitee arising by
reason of (i) willful misfeasance, (ii) bad faith, (iii) gross negligence
or (iv) reckless disregard of the duties involved in the conduct of his
position (the conduct referred to in such clauses (i) through (iv) being
sometimes referred to herein as "disabling conduct"), (2) as to any matter
disposed of by settlement or a compromise payment by such indemnitee,
pursuant to a consent decree or otherwise, no indemnification either for
said payment or for any other expenses shall be provided unless there has
been a determination that such settlement or compromise is in the best
interests of the Trust and that such indemnitee appears to have acted in
good faith in the reasonable belief that his action was in the best
interest of the Trust and did not involve disabling conduct by such
indemnitee and (3) with respect to any action, suit or other proceeding
voluntarily prosecuted by any indemnitee as plaintiff, indemnification
shall be mandatory only if the prosecution of such action, suit or other
proceeding by such indemnitee was authorized by a majority of the full
Board of the Trust.
(b) The Trust shall make advance payments in connection
with the expenses of defending any action with respect to which
indemnification might be sought hereunder if the Trust receives a written
affirmation of the indemnitee's good faith belief that the standard of
conduct necessary for indemnification has been met and a written
undertaking to reimburse the Trust unless it is subsequently determined
that he is entitled to such indemnification and if the directors of the
Trust determine that the facts then known to them would not preclude
indemnification. In addition, at least one of the following conditions must
be met: (A) the indemnitee shall provide a security for his undertaking,
(B) the Trust shall be insured against losses arising by reason of any
lawful advances, or (C) a majority of a quorum consisting of directors of
the Trust who are neither "interested persons" of the Trust (as defined in
Section 2(a)(19) of the Act) nor parties to the proceeding ("Disinterested
Non-Party Directors") or an independent legal counsel in a written opinion,
shall determine, based on a review of readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that the
indemnitee ultimately will be found entitled to indemnification.
(c) All determinations with respect to indemnification
hereunder shall be made (1) by a final decision on the merits by a court or
other body before whom the proceeding was brought that such indemnitee is
not liable by reason of disabling conduct or, (2) in the absence of such a
decision, by (i) a majority vote of a quorum of the Disinterested Non-party
Directors of the Trust, or (ii) if such a quorum is not obtainable or even,
if obtainable, if a majority vote of such quorum so directs, independent
legal counsel in a written opinion. All determinations that advance
payments in connection with the expense of defending any proceeding shall
be authorized shall be made in accordance with the immediately preceding
clause (2) above.
The rights accruing to any indemnitee under these
provisions shall not exclude any other right to which he may be lawfully
entitled.
6. Duration and Termination
This Agreement shall become effective on the date it is approved
by the stockholder of the Trust and shall continue in effect for a
period of two years and thereafter from year to year, but only so long
as such continuation is specifically approved at least annually in
accordance with the requirements of the Act.
This Agreement may be terminated by the Adviser at any time without
penalty upon giving the Trust sixty days written notice (which notice may
be waived by the Trust) and may be terminated by the Trust at any time
without penalty upon giving the Adviser sixty days notice (which notice may
be waived by the Adviser), provided that such termination by the Trust
shall be directed or approved by the vote of a majority of the Directors of
the Trust in office at the time or by the vote of the holders of a
"majority" (as defined in the Act) of the voting securities of the Trust at
the time outstanding and entitled to vote. This Agreement shall terminate
automatically in the event of its assignment (as "assignment" is defined in
the Act.) The Adviser is a partnership and will notify the Trust promptly
after any change in the membership of such partnership.
7. Notices
Any notice under this Agreement shall be in writing to the
other party at such address as the other party may designate from time to
time for the receipt of such notice and shall be deemed to be received on
the earlier of the date actually received or on the fourth day after the
postmark if such notice is mailed first class postage prepaid.
8. Governing Law
This Agreement shall be construed in accordance with the laws
of the State of New York for contracts to be performed entirely therein
without reference to choice of law principles thereof and in accordance
with the applicable provisions of the Act.
IN WITNESS WHEREOF, the parties hereto have caused the
foregoing instrument to be executed by their duly authorized officers as of
the day and the year first above written.
THE BLACKSTONE INSURED MUNICIPAL
TERM TRUST INC.
By /s/ Ralph L. Schlosstein, President
-------------------------------------
Ralph L. Schlosstein, President
BLACKSTONE FINANCIAL MANAGEMENT L.P.
By /s/ Laurence D. Fink
-------------------------------------
Laurence D. Fink, General Partner
ADMINISTRATION AGREEMENT
Agreement made as of (date) between The Blackstone Insured Municipal
Term Trust Inc., a Maryland corporation ("Trust") and Mitchell Hutchins
Asset Management Inc., a Delaware corporation ("Mitchell Hutchins").
WHEREAS, the Trust intends to operate as a closed-end management
investment company, and is so registered under the Investment Company Act
of 1940, as amended ("1940 Act"); and
WHEREAS, the Trust wishes to retain Mitchell Hutchins to provide
certain administrative services to the Trust, under the terms and
conditions stated below, and Mitchell Hutchins is willing to provide such
services for the compensation set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties agree as follows:
1. Appointment. The Trust hereby appoints Mitchell Hutchins as
administrator of the Trust, and Mitchell Hutchins accepts such appointment
and agrees that it will furnish the services set forth in paragraph 2
below.
2. Services and Duties of Mitchell Hutchins. Subject to the supervision of
the Trust's board of directors ("Board"), Mitchell Hutchins will furnish
the following services to the Trust:
(a) Mitchell Hutchins will assist in preparing the financial information
relating to the Trust for the Trust's periodic reports to
shareholders, proxy material and earnings press releases.
(b) Mitchell Hutchins will assemble all reports required to be filed with
the Securities and Exchange Commission ("SEC") on Form N-SAR, or such
other form as the SEC may substitute for Form N-SAR, and file such
completed form with the SEC.
(c) Mitchell Hutchins will assist in providing to the Trust's independent
accountants such information as is necessary for such accountants to
prepare and file the Trust's federal income and excise tax returns
and the Trust's state and local tax returns.
(d) Mitchell Hutchins will assist the Trust's investment adviser in
monitoring compliance of the Trust's operations with the 1940 Act and
with its investment policies and limitations as currently in effect.
(e) Mitchell Hutchins will arrange for the dissemination to <PAGE>
shareholders of the Trust's proxy materials (but not prepare such
materials) and oversee the tabulation of proxies by the Trust's
transfer agent.
(f) Mitchell Hutchins will negotiate contractual arrangements with the
Trust's agents, including custodians, transfer agents, dividend
disbursing agents, accounting agents, independent accountants and
printing companies, and monitor the performance of such agents
pursuant to such arrangements.
(g) Mitchell Hutchins will oversee the calculation of the Trust's net
asset value in accordance with the Trust's registration statement
under the 1940 Act and Securities Act of 1933, as amended, by the
Trust's accounting agent and monitor the performance of such agent in
making the Trust's net asset value available for public
dissemination.
(h) Mitchell Hutchins will oversee the maintenance of the Trust's books
and records under Rule 31a-1 under the 1940 Act by the custodian and
accounting agent, as applicable.
(i) Mitchell Hutchins will establish the accounting policies of the
Trust; establish and monitor the Trust's operating expense budgets
and process the payment of bills that have been approved by an
authorized officer of the Trust.
(j) Mitchell Hutchins will assist the Trust in determining the amount of
dividends and distributions available to be paid by the Trust to its
shareholders; prepare and arrange for the printing of dividend notices to
shareholders; and provide the transfer and dividend disbursing agent and
custodian with such information as is required for such parties to effect
the payment of dividends and distributions and to implement the Trust's
dividend reinvestment plan. Mitchell Hutchins will not be responsible for
the preparation and dissemination of press releases regarding such
dividends and distributions.
(k) If requested by the Board, Mitchell Hutchins will designate one or
more employees of Mitchell Hutchins to serve as treasurer and/or
assistant treasurers of the Trust.
3 Public Inquiries. Mitchell Hutchins will not be responsible for replying
to requests for information concerning the Trust from shareholders, brokers
or the public. The Trust shall notify Mitchell Hutchins of the appropriate
party to whom such requests should be directed, and Mitchell Hutchins will
refer such requests to the party designated by the Trust.
4. Compliance with the Trust's Governing Documents and Applicable Law. In
all matters relating to the performance of services under this Agreement,
Mitchell Hutchins will act in conformity with the Articles of
Incorporation, By-Laws and registration statement of the Trust and with the
directions of the Board and will conform to and comply with the
requirements of the 1940 Act and all other applicable federal or state
laws and regulations.
5. Services Not Exclusive. Mitchell Hutchins' services hereunder are not
deemed to be exclusive, and Mitchell Hutchins is free to render
administrative or other services to other funds, trusts or clients so long
as Mitchell Hutchins' services under this Agreement are not impaired
thereby.
6. Expenses. During the term of this Agreement, Mitchell Hutchins will
provide such office space and personnel as are necessary to perform its
duties under the Agreement at its own expense and will assume all other
expenses incurred by it in connection with its services under this
Agreement, except that the Trust shall reimburse Mitchell Hutchins for
out-of-pocket expenses incurred by employees of Mitchell Hutchins in
connection with their attendance outside the New York metropolitan area
requested by the Board at meetings of the Board or any committee thereof or
any other meeting at which the Trust requires the attendance of a Mitchell
Hutchins employee or employees.
7. Compensation. For the services provided and expenses assumed by Mitchell
Hutchins under this Agreement, the Trust will pay Mitchell Hutchins a fee,
calculated weekly and paid monthly, at the annual rate of _.__% of average
weekly net assets of the Trust.
8. Limitation of Liability. Mitchell Hutchins will not be liable for any
error of judgment of mistake of law or for any loss suffered by the Trust
of its shareholders in connection with the performance of its duties under
this Agreement, except a loss resulting from willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its duties under this Agreement.
9. Duration and Termination. This Agreement will become effective upon the
date hereinabove written and shall continue in effect thereafter until
termination by Mitchell Hutchins or the Trust upon 60 days' written notice
to the other.
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change,
waiver, discharge or termination is sought.
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of the Agreement shall otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and shall be governed by Delaware law.
CUSTODIAN CONTRACT
Between
BLACKSTONE INSURED MUNICIPAL TERM TRUST, INC.
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
Page
----
1. Employment of Custodian and Property to be Held By It ...................1
2. Duties of the Custodian with Respect to Property of the Fund Held
by the Custodian ........................................................2
2.1 Holding Securities ................................................2
2.2 Delivery of Securities ............................................2
2.3 Registration of Securities ........................................7
2.4 Bank Accounts .....................................................8
2.5 Availability of Federal Funds .....................................8
2.6 Collection of Income ..............................................9
2.7 Payment of Fund Monies ............................................9
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased .............................................12
2.9 Appointment of Agents ............................................13
2.10 Deposit of Fund Assets in Securities System ......................13
2.10A Fund Assets Held in the Custodian's Direct Paper System ..........16
2.11 Segregated Account ...............................................18
2.12 Ownership Certificates for Tax Purposes ..........................19
2.13 Proxies ..........................................................19
2.14 Communications Relating to Fund Portfolio Securities .............19
2.15 Proper Instructions ..............................................20
2.16 Actions Permitted Without Express Authority ......................21
2.17 Evidence of Authority ............................................22
3. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income ..........................22
4. Records ................................................................23
5. Opinion of Fund's Independent Accountant ...............................24
6. Reports to Fund by Independent Public Accountants ......................24
7. Compensation of Custodian ..............................................24
8. Responsibility of Custodian ............................................24
9. Effective Period, Termination and Amendment ............................26
10. Successor Custodian ....................................................27
11. Interpretive and Additional Provisions .................................29
12. Massachusetts Law to Apply .............................................29
13. Prior Contracts ........................................................30
CUSTODIAN CONTRACT
This Contract between Blackstone Insured Municipal Term Trust, Inc.,
a corporation organized and existing under the laws of Maryland, having its
principal place of business at 345 Park Avenue, New York, New York, 10154,
hereinafter called the "Fund", and State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian",
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of its assets
pursuant to the provisions of the Articles of Incorporation. The Fund
agrees to deliver to the Custodian all securities and cash owned by it, and
all payments of income, payments of principal or capital distributions
received by it with respect to all securities owned by the Fund from time
to time, and the cash consideration received by it for such new or treasury
shares of capital stock, $10 par value, ("Shares") of the Fund as may be
issued or sold from time to time. The Custodian shall not be responsible
for any property of the Fund held or received by the Fund and not delivered
to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.15), the Custodian shall from time to time employ one or more
sub-custodians, but only in accordance with an applicable vote by the Board
of Directors of the Fund, and provided that the Custodian shall have no
more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the Fund Held By the
Custodian
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of the Fund all non-cash property, including all
securities owned by the Fund, other than (a) securities which are
maintained pursuant to Section 2.10 in a clearing agency which acts
as a securities depository or in a book-entry system authorized by
the U.S. Department of the Treasury, collectively referred to herein
as "Securities System" and (b) commercial paper of an issuer for
which State Street Bank and Trust Company acts as issuing and paying
agent ("Direct Paper") which is deposited and/or maintained in the
Direct Paper System of the Custodian pursuant to Section 2.10A.
2.2 Delivery of Securities. The Custodian shall release and deliver
securities owned by the Fund held by the Custodian or in a Securities
System account of the Custodian or in the Custodian's Direct Paper
book entry system account ("Direct Paper System Account") only upon
receipt of Proper Instructions, which may be continuing instructions
when deemed appropriate by the parties, and only in the following
cases:
1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered into
by the Fund;
3) In the case of a sale effected through a Securities System,
in accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee or nominees
of the Custodian or into the name or nominee name of any
agent appointed pursuant to Section 2.9 or into the name or
nominee name of any sub-custodian appointed pursuant to
Article 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in
any such case, the new securities are to be delivered to the
Custodian;
7) Upon the sale of such securities for the account of the
Fund, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street
delivery" custom; provided that in any such case, the
Custodian shall have no responsibility or liability for any
loss arising from the delivery of such securities prior to
receiving payment for such securities except as may arise
from the Custodian's own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts
or temporary securities for definitive securities; provided
that, in any such case, the new securities and cash, if any,
are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Fund, but only against receipt of adequate collateral
as agreed upon from time to time by the Custodian and the
Fund, which may be in the form of cash or obligations issued
by the United States government, its agencies or
instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned
by the Fund prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings
by the Fund requiring a pledge of assets by the Fund, but
only against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the
"Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance
with the rules of The Options Clearing Corporation and of
any registered national securities exchange, or of any
similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the
Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract Market, or
any similar organization or organizations, regarding account
deposits in connection with transactions by the Fund; and
14) For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions, a certified
copy of a resolution of the Board of Directors or of the
Executive Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant Secretary,
specifying the securities to be delivered, setting forth the
purpose for which such delivery is to be made, declaring
such purpose to be a proper corporate purpose, and naming
the person or persons to whom delivery of such securities
shall be made.
2.3 Registration of Securities. Securities held by the Custodian (other
than bearer securities) shall be registered in the name of the Fund
or in the name of any nominee of the Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the appointment of a
nominee to be used in common with other registered investment
companies having the same investment adviser as the Fund, or in
the name or nominee name of any agent appointed pursuant to
Section 2.9 or in the name or nominee name of any sub-custodian
appointed pursuant to Article 1. All securities accepted by the
Custodian on behalf of the Fund under the terms of this Contract
shall be in "street name" or other good delivery form. If,
however, the Fund directs the Custodian to maintain securities in
"street name", the Custodian shall utilize its best efforts only
to timely collect income due the Fund on such securities and to
notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the name of the Fund, subject only to draft or
order by the Custodian acting pursuant to the terms of this Contract,
and shall hold in such account or accounts, subject to the provisions
hereof, all cash received by it from or for the account of the Fund,
other than cash maintained by the Fund in a bank account established
and used in accordance with Rule 17f-3 under the Investment Company
Act of 1940. Funds held by the Custodian for the Fund may be
deposited by it to its credit as Custodian in the Banking Department
of the Custodian or in such other banks or trust companies as it may
in its discretion deem necessary or desirable; provided, however,
that every such bank or trust company shall be qualified to act as a
custodian under the Investment Company Act of 1940 and that each such
bank or trust company and the funds to be deposited with each such
bank or trust company shall be approved by vote of a majority of the
Board of Directors of the Fund. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be withdrawable by
the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund
and the Custodian, the Custodian shall, upon the receipt of Proper
Instructions, make federal funds available to the Fund as of
specified times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for Shares of the
Fund which are deposited into the Fund's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other
payments with respect to registered securities held hereunder to
which the Fund shall be entitled either by law or pursuant to custom
in the securities business, and shall collect on a timely basis all
income and other payments with respect to bearer securities if, on
the date of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such income, as
collected, to the Fund's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach and present
for payment all coupons and other income items requiring presentation
as and when they become due and shall collect interest when due on
securities held hereunder. Income due the Fund on securities loaned
pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the
Fund with such information or data as may be necessary to assist the
Fund in arranging for the timely delivery to the Custodian of the
income to which the Fund is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out monies of the Fund in the following cases only:
1) Upon the purchase of securities, options, futures contracts
or options on futures contracts for the account of the Fund
but only (a) against the delivery of such securities or
evidence of title to such options, futures contracts or
options on futures contracts to the Custodian (or any bank,
banking firm or trust company doing business in the United
States or abroad which is qualified under the Investment
Company Act of 1940, as amended, to act as a custodian and
has been designated by the Custodian as its agent for this
purpose) registered in the name of the Fund or in the name
of a nominee of the Custodian referred to in Section 2.3
hereof or in proper form for transfer; (b) in the case of a
purchase effected through a Securities System, in accordance
with the conditions set forth in Section 2.10 hereof; (c) in
the case of a purchase involving the Direct Paper System, in
accordance with the conditions set forth in Section 2.10A;
(d) in the case of repurchase agreements entered into
between the Fund and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against
delivery of the securities either in certificate form or
through an entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Fund of
securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase
such securities from the Fund or (e) for transfer to a time
deposit account of the Fund in any bank, whether domestic or
foreign; such transfer may be effected prior to receipt of a
confirmation from a broker and/or the applicable bank
pursuant to Proper Instructions from the Fund as defined in
Section 2.15;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2
hereof;
3) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments
for the account of the Fund: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be
in whole or part capitalized or treated as deferred
expenses;
4) For the payment of any dividends declared pursuant to the
governing documents of the Fund;
5) For payment of the amount of dividends received in respect
of securities sold short;
6) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors or of the Executive
Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or
persons to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of securities for the account
of the Fund is made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written instructions
from the Fund to so pay in advance, the Custodian shall be absolutely
liable to the Fund for such securities to the same extent as if the
securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, to act as a custodian, as its agent to carry out such of
the provisions of this Article 2 as the Custodian may from time to time
direct; provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities hereunder.
2.10 Deposit of Fund Assets in Securities Systems. The Custodian may deposit
and/or maintain securities owned by the Fund in a clearing agency
registered with the Securities and Exchange Commission under Section
17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities System" in accordance
with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the
following provisions:
1) The Custodian may keep securities of the Fund in a
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in
the Securities System which shall not include any assets of
the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of
the Fund which are maintained in a Securities System shall
identify by book-entry those securities belonging to the
Fund;
3) The Custodian shall pay for securities purchased for the
account of the Fund upon (i) receipt of advice from the
Securities System that such securities have been transferred
to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund upon
(i) receipt of advice from the Securities System that
payment for such securities has been transferred to the
Account, and (ii) the making of an entry on the records of
the Custodian to reflect such transfer and payment for the
account of the Fund. Copies of all advices from the
Securities System of transfers of securities for the account
of the Fund shall identify the Fund, be maintained for the
Fund by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund
confirmation of each transfer to or from the account of the
Fund in the form of a written advice or notice and shall
furnish to the Fund copies of daily transaction sheets
reflecting each day's transactions in the Securities System
for the account of the Fund.
4) The Custodian shall provide the Fund with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and
procedures for safeguarding securities deposited in the
Securities System;
5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 9
hereof;
6) Anything to the contrary in this Contract notwithstanding,
the Custodian shall be liable to the Fund for any loss or
damage to the Fund resulting from use of the Securities
System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any
of its or their employees or from failure of the Custodian
or any such agent to enforce effectively such rights as it
may have against the Securities System; at the election of
the Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim against
the Securities System or any other person which the
Custodian may have as a consequence of any such loss or
damage if and to the extent that the Fund has not been made
whole for any such loss or damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System
The Custodian may deposit and/or maintain securities owned by the
Fund in the Direct Paper System of the Custodian subject to the
following provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper
Instructions;
2) The Custodian may keep securities of the Fund in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper
System which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or
otherwise for customers;
3) The records of the Custodian with respect to securities of
the Fund which are maintained in the Direct Paper System
shall identify by book-entry those securities belonging to
the Fund;
4) The Custodian shall pay for securities purchased for the
account of the Fund upon the making of an entry on the
records of the Custodian to reflect such payment and
transfer of securities to the account of the Fund. The
Custodian shall transfer securities sold for the account of
the Fund upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment
for the account of the Fund;
5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of
a written advice or notice, of Direct Paper on the next
business day following such transfer and shall furnish to
the Fund copies of daily transaction sheets reflecting each
day's transaction in the Securities System for the account
of the Fund;
6) The Custodian shall provide the Fund with any report on its
system of internal accounting control as the Fund may
reasonably request from time to time.
2.11 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts
for and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities, including securities maintained
in an account by the Custodian pursuant to Section 2.10 hereof, (i)
in accordance with the provisions of any agreement among the Fund,
the Custodian and a broker-dealer registered under the Exchange Act
and &member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to compliance
with the rules of The Options Clearing Corporation and of any
registered national securities exchange (or the Commodity Futures
Trading Commission or any registered contract market), or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund, (ii) for
purposes of segregating cash or government securities in connection
with options purchased, sold or written by the Fund or commodity
futures contracts or options thereon purchased or sold by the Fund,
(iii) for the purposes of compliance by the Fund with the procedures
required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of,
in addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors or of the Executive
Committee signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes
to be proper corporate purposes.
2.12 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to securities of the Fund held by it and in
connection with transfers of securities.
2.13 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in
the name of the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Fund such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.14 Communications Relating to Fund Portfolio Securities. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to
the Fund all written information (including, without limitation,
pendency of calls and maturities of securities and expirations of
rights in connection therewith and notices of exercise of call and
put options written by the Fund and the maturity of futures contracts
purchased or sold by the Fund) received by the Custodian from issuers
of the securities being held for the Fund. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Fund
all written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Fund desires
to take action with respect to any tender offer, exchange offer or
any other similar transaction, the Fund shall notify the Custodian at
least three business days prior to the date on which the Custodian is
to take such action.
2.15 Proper Instructions. Proper Instructions as used throughout this
Article 2 means a writing signed or initialled by one or more person
or persons as the Board of Directors shall have from time to time
authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral
instructions will be considered Proper Instructions if the
Custodian reasonably believes them to have been given by a person
authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions
to be confirmed in writing. Upon receipt of a certificate
of the Secretary or an Assistant Secretary as to the authorization by
the Board of Directors of the Fund accompanied by a detailed
description of procedures approved by the Board of Directors, Proper
Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board of
Directors and the Custodian are satisfied that such procedures afford
adequate safeguards for the Fund's assets. For purposes of this
Section, Proper Instructions shall include instructions received by
the Custodian pursuant to any three-party agreement which requires a
segregated asset account in accordance with Section 2.11.
2.16 Actions Permitted without Express Authority. The Custodian may in its
discretion, without express authority from the Fund:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Fund;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Fund except as otherwise directed by the Board of
Directors of the Fund.
2.17 Evidence of Authority. The Custodian shall be protected in acting
upon any instructions, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been
properly executed by or on behalf of the Fund. The Custodian may
receive and accept a certified copy of a vote of the Board of
Directors of the Fund as conclusive evidence (a) of the authority of
any person to act in accordance with such vote or (b) of any
determination or of any action by the Board of Directors pursuant to
the Articles of Incorporation as described in such vote, and such
vote may be considered as in full force and effect until receipt by
the Custodian of written notice to the contrary.
3. Duties of Custodian with Respect to the Books of Account and Calculation
of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information
to the entity or entities appointed by the Board of Directors of the Fund
to keep the books of account of the Fund and/or compute the net asset value
per share of the outstanding shares of the Fund or, if directed in writing
to do so by the Fund, shall itself keep such books of account and/or
compute such net asset value per share. If so directed, the Custodian shall
also calculate weekly the net income of the Fund as described in the Fund's
currently effective prospectus and shall advise the Fund and the Transfer
Agent weekly of the total amounts of such net income and, if instructed in
writing by an officer of the Fund to do so, shall advise the Transfer Agent
periodically of the division of such net income among its various
components. The calculations of the net asset value per share and the
weekly income of the Fund shall be made at the time or times described from
time to time in the Fund's currently effective prospectus.
4. Records
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet
the obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder. All such records shall be the property of the Fund and shall at
all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The
Custodian shall, at the Fund's request, supply the Fund with a tabulation
of securities owned by the Fund and held by the Custodian and shall, when
requested to do so by the Fund and for such compensation as shall be agreed
upon between the Fund and the Custodian, include certificate numbers in
such tabulations.
5. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from
the Fund's independent accountants with respect to its activities hereunder
in connection with the preparation of the Fund's Form N-2, and Form N-SAR
or other annual reports to the Securities and Exchange Commission and with
respect to any other requirements of such Commission.
6. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for
safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this
Contract; such reports, shall be of sufficient scope and in sufficient
detail, as may reasonably be required by the Fund to provide reasonable
assurance that any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, the reports shall so
state.
7. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time
between the Fund and the Custodian.
8. Responsibility of Custodian
So long as and to the extent that it is in the exercise
of reasonable care, the Custodian shall not be responsible for the title,
validity or genuineness of any property or evidence of title thereto
received by it or delivered by it pursuant to this Contract and shall be
held harmless in acting upon any notice, request, consent, certificate or
other instrument reasonably believed by it to be genuine and to be signed
by the proper party or parties, including any futures commission merchant
acting pursuant to the terms of a three-party futures or options agreement.
The Custodian shall be held to the exercise of reasonable care in carrying
out the provisions of this Contract, but shall be kept indemnified by and
shall be without liability to the Fund for any action taken or omitted by
it in good faith without negligence. It shall be entitled to rely on and
may act upon advice of counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may,
in the opinion of the Custodian, result in the Custodian or its nominee
assigned to the Fund being liable for the payment of money or incurring
liability of some other form, the Fund, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the Custodian in
an amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not
limited to securities settlements, foreign exchange contracts and assumed
settlement) or in the event that the Custodian or its nominee shall incur
or be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract, except
such as may arise from its or its nominee's own negligent action, negligent
failure to act or willful misconduct, any property at any time held for the
account of the Fund shall be security therefor and should the Fund fail to
repay the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of the Fund assets to the extent necessary to
obtain reimbursement.
9. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided,
may be amended at any time by mutual agreement of the parties hereto and
may be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take effect
not sooner than thirty (30) days after the date of such delivery or
mailing; provided, however that the Custodian shall not act under Section
2.10 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Directors of the Fund
has approved the initial use of a particular Securities System and the
receipt of an annual certificate of the Secretary or an Assistant Secretary
that the Board of Directors has reviewed the use by the Fund of such
Securities System, as required in each case by Rule 17f-4 under
the Investment Company Act of 1940, as amended and that the Custodian shall
not act under Section 2.1OA hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Directors has approved the initial use of the Direct Paper System and the
receipt of an annual certificate of the Secretary or an Assistant Secretary
that the Board of Directors has reviewed the use by the Fund of the Direct
Paper System; provided further, however, that the Fund shall not amend or
terminate this Contract in contravention of any applicable federal or state
regulations, or any provision of the Articles of Incorporation, and further
provided, that the Fund may at any time by action of its Board of Directors
(i) substitute another bank or trust company for the Custodian by giving
notice as described above to the Custodian, or (ii) immediately terminate
this Contract in the event of the appointment of a conservator or receiver
for the Custodian by the Comptroller of the Currency or upon the happening
of a like event at the direction of an appropriate regulatory agency or
court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and
shall likewise reimburse the Custodian for its costs, expenses and
disbursements.
10. Successor Custodian
If a successor custodian shall be appointed by the Board of Directors
of the Fund, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed and in
the form for transfer, all securities then held by it hereunder and shall
transfer to an account of the successor custodian all of the Fund's
securities held in a Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of the
Board of Directors of the Fund, deliver at the office of the Custodian and
transfer such securities, funds and other properties in accordance with
such vote.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board of Directors shall have been
delivered to the Custodian on or before the date when such termination
shall become effective, then the Custodian shall have the right to deliver
to a bank or trust company, which is a bank" as defined in the Investment
Company Act of 1940, doing business in Boston, Massachusetts, of its own
selection, having an aggregate capital, surplus, and undivided profits, as
shown by its last published report, of not less than $25,000,000, all
securities, funds and other properties held by the Custodian and all
instruments held by the Custodian relative thereto and all other property
held by it under this Contract and to transfer to an account of such
successor custodian all of the Fund's securities held in any Securities
System. Thereafter, such bank or trust company shall be the successor of
the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to
or of the Board of Directors to appoint a successor custodian, the
Custodian shall be entitled to fair compensation for its services during
such period as the Custodian retains possession of such securities, funds
and other properties and the provisions of this Contract relating to the
duties and obligations of the Custodian shall remain in full force and
effect.
11. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and
the Fund may from time to time agree on such provisions interpretive of or
in addition to the provisions of this Contract as may in their joint
opinion be consistent wish the general tenor of this Contract. Any such
interpretive or additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such interpretive or
additional provisions shall contravene any applicable federal or state
regulations or any provision of the Articles of Incorporation of the Fund.
No interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Contract.
12. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
13. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody
of the Fund's assets.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative
and its seal to be hereunder affixed as of the day of , 1992.
ATTEST BLACKSTONE INSURED MUNICIPAL TERM
TRUST, INC.
By
-------------------------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ Nancy Stokes By /s/ [ILLEGIBLE]
- ----------------------------------- --------------------------------------
Assistant Secretary Vice President
STATE STREET SANK AND TRUST COMPANY
Custodian Fee Schedule
BLACKSTONE FINANCIAL MANAGEMENT
Blackstone Income Trust Blackstone Short Duration Fund
Blackstone High Income Fund Blackstone Strategic Term Trust
Blackstone Advantage Term Trust Blackstone 1998 Term Trust
Blackstone Target Term Trust Blackstone Municipal Target Term Trust
Blackstone FNMA Fund Blackstone Freddie MAC Fund
Blackstone Insured Municipal Blackstone North American Gov't Income
Term Trust Trust
Additional Blackstone funds will be incorporated into this fee
schedule via an addendum to this document.
I. Administration
Custody Service -- Maintain custody of fund assets. Settle portfolio
purchase. and sales. Report buy and sell fails. Determine and collect
portfolio income. Make cash disbursements and report cash
transactions. Maintain investment ledgers, provide selected portfolio
transactions, position and income reports.
The administration fee shown above is an annual charge, billed and
payable monthly, in the same manner as the Fund Advisory and Fund
Management Fee.
ANNUAL FEES PER PORTFOLIO
Fund Net Assets Annual Fees
First $500 Million 3 BP
Next $500 Million 1.75 BP
Next $1 Billion 1.3 BP
Excess 1.25 BP
These fees will take the total domestic assets of all the above BFM
portfolios into account.
Global Custody
Service provided include: Cash Movements, Foreign Communication, Foreign
Exchange (local currency settlements)
Annual Fees
Canada 10BP
II. Fund Accounting Service
Maintain general ledger and capital stock accounts. Prepare daily
trial balance. Calculate net asset value weekly. Provide selected
general ledger reports. Securities yield or market value quotations
will be provided to State Street by the fund.
Annual Fees, Based on Fund Assets
First $250M $15,000 per fund
Excess $250M -- $750M $15,000 per fund
Excess $750M .25 BP
III. Portfolio Trades-- For each line item processed
State Street Bank Repos $ 7.00
New York Physical Settlements $25.00
Maturity Collections $ 8.00
Fed Book Entry Settlements $12.00
Canadian Transactions $30.00
All Other Trades $16.00
IV. Options
Option charge for each option written or
closing contract, per issue, per broker $25.00
Option expiration charge, per issue, per broker $15.00
Option exercised charge, per issue, per broker $15.00
V. Lending of Securities
Deliver loaned securities versus cash collateral $20.00
Deliver loaned securities versus securities
collateral $30.00
Receive/deliver additional cash collateral $ 6.00
Substitutions of securities collateral $30.00
Deliver cash collateral versus receipt of loaned
securities $15.00
Deliver securities collateral versus receipt of loaned
securities $25.00
Loan administration -- mark-to-market per day, per loan $ 3.00
VI. Futures
Transactions -- no security movement $10.00
VII. Holdings Charge
For each issue maintained -- monthly charge $ 5.00
VIII. Principal Reduction Payments
Paydown on Government Securities, per paydown $ 8.00
IX. Social Services
Fees for activities such as fund consolidation or reorganization,
extraordinary security shipments, the preparation of special reports,
daily fund pricing and quotes from sources other than BFM will be
subject to negotiation.
X. Out-of-Pocket-Expenses
A billing for the recovery of applicable out-of-pocket expenses will
be made as of the end of each month. Out-of-pocket expenses include,
but are not limited to the following:
Telephone
Wire Charges ($5.25 per wire in and $5.00 out)
Postage and Insurance
Courier Service
Duplicating
Legal Fees
Supplies Related to Fund Records
Rush Transfer -- $8.00 Each
Transfer Fees
Sub-custodian Charges
Price Waterhouse Audit Letter
Federal Reserve Fee for Return Check Items over $2,500 - $4.25 GNMA
Transfer - $15.00 Each
XI. This fee schedule will be effective September 1, 1991. The term of this
fee schedule is one year.
BLACKSTONE FINANCIAL MANAGEMENT STATE STREET BANK & TRUST CO.
BY: BY: /s/ [ILLEGIBLE]
------------------------------- -------------------------------------
TITLE: TITLE: Vice President
---------------------------- ---------------------------------
DATE: DATE: 2/5/92
----------------------------- ----------------------------------
020492
REGISTRAR,
TRANSFER AGENCY AND SERVICE AGREEMENT
between
BLACKSTONE INSURED MUNICIPAL TERM TRUST, INC.
and
STATE STREET BANK AND TRUST COMPANY
2A290
WP1683C
TABLE OF CONTENTS
Page
----
Article 1 Terms of Appointment; Duties of the Bank ................... 1
Article 2 Fees and Expenses .......................................... 4
Article 3 Representations and Warranties of the Bank ................. 4
Article 4 Representations and Warranties of the Fund ................. 5
Article 5 Indemnification ............................................ 6
Article 6 Covenants of the Fund and the Bank ......................... 9
Article 7 Termination of Agreement ................................... 10
Article 8 Assignment ................................................. 10
Article 9 Amendment .................................................. 11
Article 10 Massachusetts Law to Apply ................................. 11
Article 11 Merger of Agreement ........................................ 11
REGISTRAR, TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the day of , 1992, by and between
BLACKSTONE INSURED MUNICIPAL TERM TRUST, INC., a Maryland corporation,
having its principal office and place of business at 345 Park Avenue, New
York, New York, 10154, (the "Fund"), and STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company having its principal office and
place of business at 225 Franklin Street, Boston, Massachusetts 02110 (the
"Bank").
WHEREAS, the Fund desires to appoint the Bank as its registrar,
transfer agent, dividend disbursing agent, custodian of certain retirement
plans and agent in connection with certain other activities and the Bank
desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of the Bank
1.01 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints the Bank to act as, and the
Bank agrees to act as registrar, transfer agent for the Fund's authorized
and issued shares of its common stock ("Shares"), dividend disbursing
agent, custodian of certain retirement plans and agent in connection with
any dividend reinvestment plan as set out in the prospectus of the Fund,
corresponding to the date of this Agreement.
1.02 The Bank agrees that it will perform the following
services:
(a) In accordance with procedures established from time to time
by agreement between the Fund and the Bank, the Bank shall:
(i) Issue and record the appropriate number of Shares as
authorized and hold such Shares in the appropriate
Shareholder account;
(ii) Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate documentation;
(iii) Execute transactions directly with broker-dealers
authorized by the Fund who shall thereby be deemed to
be acting on behalf of the Fund;
(iv) Prepare and transmit payments for dividends and
distributions declared by the Fund;
(v) Act as agent for Shareholders pursuant to the
dividend reinvestment and cash purchase plan as
amended from time to time in accordance with the
terms of the agreement to be entered into between the
Shareholders and the Bank in substantially the form
attached as Exhibit A hereto;
(vi) Issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon
receipt by the Bank of indemnification satisfactory
to the Bank and protecting the Bank and the Fund, and
the Bank as its option, may issue replacement
certificates in place of mutilated stock certificates
upon presentation thereof and without such indemnity;
and
(vii) Report abandoned property to the various states as
authorized by the Fund per policies and principles
agreed upon by the Fund and the Bank.
(b) In addition to and neither in lieu nor in contravention of
the services set forth in the above paragraph (a), the Bank shall: (i)
perform all of the customary services of a registrar, transfer agent,
dividend disbursing agent, custodian of certain retirement plans and agent
of the dividend reinvestment and cash purchase plan as described in Article
1 consistent with those requirements in effect as at the date of this
Agreement. The detailed definition, frequency, limitations and associated
costs (if any) set out in the attached fee schedule, include but not
limited to: maintaining all Shareholder accounts, preparing Shareholder
meeting lists, mailing proxies, receiving and tabulating proxies and
mailing Shareholder reports to current Shareholders, withholding taxes on
U.S. resident and non-resident alien accounts where applicable, preparing
and filing U.S. Treasury Department Forms 1099 and other appropriate forms
required with respect to dividends and distributions by federal authorities
for all registered Shareholders.
Article 2 Fees and Expenses
2.01 For the performance by the Bank pursuant to this
Agreement, the Fund agrees to pay the Bank an annual maintenance fee as set
out in the initial fee schedule attached hereto. Such fees and
out-of-pocket expenses and advances identified under Section 2.02 below may
be changed from time to time subject to mutual written agreement between
the Fund and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the
Fund agrees to reimburse the Bank for out-of-pocket expenses or advances
incurred by the Bank for the items set out in the fee schedule attached
hereto. In addition, any other expenses incurred by the Bank at the request
or with the consent of the Fund, will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses
within five days following the receipt of the respective billing notice.
Postage and the cost of materials for mailing of dividends, proxies, Fund
reports and other mailings to all Shareholder accounts shall be advanced to
the Bank by the Fund at least seven (7) days prior to the mailing date of
such materials.
Article 3 Representations and Warranties of the Bank
The Bank represents and warrants to the Fund that:
3.01 It is a trust company duly organized and existing and in
good standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the
Commonwealth of Massachusetts.
3.03 It is empowered under applicable laws and by its Charter
and By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to the Bank that:
4.01 It is a corporation duly organized and existing and in
good standing under the laws of Maryland.
4.02 It is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Articles of
Incorporation and By-Laws have been taken to authorize it to enter into and
perform this Agreement.
4.04 It is a closed-end, diversified investment company
registered under the Investment Company Act of 1940, as amended.
4.05 To the extent required by federal securities laws a
registration statement under the Securities Act of 1933, as amended is
currently effective and appropriate state securities law filings have been
made with respect to all Shares of the Fund being offered for sale;
information to the contrary will result in immediate notification to the
Bank.
4.06 It shall make all required filings under federal and
state securities laws.
Article 5 Indemnification
5.01 The Bank shall not be responsible for, and the Fund shall
indemnify and hold the Bank harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and liability
arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that such actions
are taken in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any representation or warranty
of the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records and documents which (i) are received
or relied upon by the Bank or its agents or subcontractors and/or furnished
to it or performed by or on behalf of the Fund, and (ii) have been
prepared, maintained and/or performed by the Fund or any other person or
firm on behalf of the Fund.
(d) The reliance on, or the carrying out by the Bank or its
agents or subcontractors of any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in
such state.
5.02 The Bank shall indemnify and hold the Fund harmless from
and against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable to any
action or failure or omission to act by the Bank as a result of the Bank's
lack of good faith, negligence or willful misconduct.
5.03 At any time the Bank may apply to any officer of the Fund
for instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by the Bank
under this Agreement, and the Bank and its agents or subcontractors shall
not be liable and shall be indemnified by the Fund for any action taken or
omitted by it in reliance upon such instructions or upon the opinion of
such counsel. The Bank, its agents and subcontractors shall be protected
and indemnified in acting upon any paper or document furnished by or on
behalf of the Fund, reasonably believed to be genuine and to have been
signed by the proper person or persons, or upon any instruction,
information, data, records or documents provided the Bank or its agents or
subcontractors by telephone, in person, machine readable input, telex, CRT
data entry or other similar means authorized by the Fund, and shall not be
held to have notice of any change of authority of any person, until receipt
of written notice thereof from the Fund. The Bank, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Fund, and the proper
countersignature of any former transfer agent or former registrar, or of a
co-transfer agent or co-registrar.
5.04 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God,
strikes, equipment or transmission failure or damage reasonably beyond its
control, or other causes reasonably beyond its control, such party shall
not be liable for damages to the other for any damages resulting from such
failure to perform or otherwise from such causes.
5.05 Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this Agreement
or for any consequential damages arising out of any act or failure to act
hereunder.
5.06 In order that the indemnification provisions contained in
this Article 5 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such assertion,
and shall keep the other party advised with respect to all developments
concerning such claim. The party who may be required to indemnify shall
have the option to participate with the party seeking indemnification in
the defense of such claim. The party seeking indemnification shall in no
case confess any claim or make any compromise in any case in which the
other party may be required to indemnify it except with the other party's
prior written consent.
Article 6 Covenants of the Fund and the Bank
6.01 The Fund shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Board of
Directors of the Fund authorizing the appointment of the Bank and the
execution and delivery of this Agreement.
(b) A copy of the Articles of Incorporation and By-Laws of the
Fund and all amendments thereto.
6.02 The Bank hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the Fund for safekeeping
of stock certificates, check forms and facsimile signature imprinting
devices, if any; and for the preparation or use, and for keeping account
of, such certificates, forms and devices.
6.03 The Bank shall keep records relating to the services to
be performed hereunder, in the form and manner as it may deem advisable. To
the extent required by Section 31 of the Investment Company Act of 1940, as
amended, and the Rules thereunder, the Bank agrees that all such records
prepared or maintained by the Bank relating to the services to be performed
by the Bank hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section and Rules,
and will be surrendered promptly to the Fund on and in accordance with its
request.
6.04 The Bank and the Fund agree that all books, records,
information and data pertaining to the business of the other party which
are exchanged or received pursuant to the negotiation or the carrying out
of this Agreement shall remain confidential, and shall not be voluntarily
disclosed to any other person, except as may be required by law.
6.05 In cases of any requests or demands for the inspection of
the Shareholder records of the Fund, the Bank will endeavor to notify the
Fund and to secure instructions from an authorized officer of the Fund as
to such inspection. The Bank reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the Shareholder
records to such person.
Article 7 Termination of Agreement
7.01 This Agreement may be terminated by either party upon one
hundred twenty (120) days written notice to the other.
7.02 Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and material
will be borne by the Fund. Additionally, the Bank reserves the right to
charge for any other reasonable expenses associated with such termination
and/or a charge equivalent to the average of three (3) month's fees.
Article 8 Assignment
8.01 Except as provided in Section 8.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
8.02 This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted successors and
assigns.
8.03 The Bank may, without further consent on the part of the
Fund, subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly
registered as a transfer agent pursuant to Section 17A(c)(1) of the
Securities Exchange Act of 1934, as amended ("Section 17A(c)(l)"), (ii) a
BFDS subsidiary duly registered as a transfer agent pursuant to Section
17A(c)(l) or (iii) a BFDS affiliate; provided, however, that the Bank shall
be as fully responsible to the Fund for the acts and omissions of any
subcontractor as it is for its own acts and omissions.
Article 9 Amendment
9.01 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a
resolution of the Board of Directors of the Fund.
Article 10 Massachusetts Law to Apply
10.01 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the
Commonwealth of Massachusetts.
Article 11 Merger of Agreement
11.01 This Agreement constitutes the entire agreement between
the parties hereto and supersedes any prior agreement with respect to the
subject hereof whether oral or written.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their names and on their behalf by and through
their duly authorized officers, as of the day and year first above written.
BLACKSTONE INSURED MUNICIPAL TERM
TRUST, INC.
BY:_________________________________
ATTEST:
- ---------------------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/ [ILLEGIBLE]
---------------------------------
Vice President
ATTEST:
/s/ Nancy Stokes
- ---------------------------
Assistant Secretary
[LOGO] State Street
BLACKSTONE INSURED MUNICIPAL TERM TRUST, INC.
FEE SCHEDULE
Monthly Dividends
FEES
$9.00 per shareholder account per annum. Includes the issuance and
registration of the first 5,000 credit certificates. Excess credits to be
billed at $1.50 each.
For each dividend reinvestment per participant $ .75
For each optional cash infusion $ .75
ACCOUNT MAINTENANCE SERVICES
o Establishing new accounts
o Preparation and mailing of W-9 solicitation to new accounts without
T.I.N.'s.
o Address changes
o Processing T.I.N. changes
o Processing routine and non-routine transfers of ownership
o Issuance of credit certificates (see limits)
o Posting debit and credit transactions
o Providing a daily transfer journal of ownership changes
o Responding to written shareholder communications
o Responding to shareholder telephone inquiries
o Placing stop transfers
o Releasing stop transfers
o Replacing lost certificates
o Registration of credit certificates (see limits)
DIVIDEND DISBURSEMENT SERVICES
o Generate and mail monthly dividend checks
o Replace lost dividend checks
o Processing of backup withholding and remittance
o Preparation and filing of Federal Tax Forms 1099 and 1042
o Preparation and filing of State Tax information as directed
o Preparation of escheatment information (shares and dividends)
DIVIDEND REINVESTMENT SERVICES PROVIDED
o Addressing and mailing of enrollment confirmation notice
o Processing optional cash investments and acknowledging same
o The monthly reinvestment of dividend proceeds for participants
o Participant withdrawal or sell requests
o Preparation, mailing and filing of Federal Tax Form 1099B for sales
ANNUAL MEETING SERVICE
o Preparation for mailing of proxies, proxy statement, annual report
and business reply envelope
o Providing one set of labels of banks, brokers and nominees for broker
search
o Providing a record date list
o Tabulation of returned proxies
o Daily reporting of tabulation results
o Interface support during solicitation effort
o Providing one inspector of election at annual meeting
o Providing an annual meeting voted list
ADDRESSING AND MAILING SERVICES
o Preparing labels for the mailing of three (3) quarterly reports
o Addressing and mailing new shareholder welcome materials on a
bi-weekly basis
INFORMATIONAL SERVICES PROVIDED
o Complete listing of males, females and custodian accounts 100 shares
and over
o One (1) complete statistical report
-- shareholders by state
-- shareholders by classification code
-- shareholders by share grouping
PUBLIC OFFERINGS
o Initial Public Offering
$1,000.00 Administrative Fee
$1.25 Per Certificate Issued
o Overallotment
$500.00 Administrative Fee and Certificate Issuance
o Secondary Public Offerings
$1,000.00 Administrative Fee and Certificate Issuance
TERM OF FEE CONTRACT
o Two years from date of execution
o Minimum $1,000. per month
o Escalation Clause -- The per account annual fee in effect during 1994
shall be equal to the fee for 1993 increased by the lesser of (i) 6%
or, (ii) the percentage increase in the U. S. Department of Labor
national index of "Cost of Services Less Rent" for the year 1993. The
fee for 1994-1996, after taking into effect this increase, will not
change.
MISCELLANEOUS
o All out--of-pocket expenses such as postage, stationery, etc. will be
billed as incurred.
ADDITIONAL SERVICES
o Services over and above this Fee Schedule will be invoiced in
accordance with our current Schedule of Services.
BLACKSTONE INSURED MUNICIPAL STATE STREET BANK AND TRUST CO.
TERM TRUST, INC.
BY: _______________________________ BY:____________________________
TITLE _____________________________ TITLE__________________________
DATE ______________________________ DATE___________________________
AUCTION AGENT AGREEMENT
between
THE BLACKSTONE INSURED MUNICIPAL TERM TRUST INC.
and
BANKERS TRUST COMPANY
Dated as of April 27, 1992
Relating to
Auction Rate Municipal Preferred Stock
(the "Preferred Shares")
Series M28 and Series M7
of
THE BLACKSTONE INSURED MUNICIPAL TERM TRUST INC.
===========================================================================
THIS AUCTION AGENT AGREEMENT dated as of April 27, 1992,
between THE BLACKSTONE INSURED MUNICIPAL TERM TRUST INC., a Maryland
corporation (the "Company"), and BANKERS TRUST COMPANY, a New York banking
corporation.
The Company proposes to duly authorize and issue 1,300 shares
of Auction Rate Municipal Preferred stock, Series M28, with a par value of
$.01 per share and a liquidation preference of $50,000 per share plus an
amount equal to accumulated but unpaid dividends (whether or not earned or
declared) plus the premium, if any, resulting from the designation of a
Premium Call Period ("Series M28 Preferred Shares"), and 1,300 shares of
Auction Rate Municipal Preferred Stock, Series M7, with a par value of $.01
per share and a liquidation preference of $50,000 per share plus an amount
equal to accumulated but unpaid dividends (whether or not earned or
declared) plus the premium, if any, resulting from the designation of a
Premium Call Period ("Series M7 Preferred Shares"), both pursuant to the
Company's Articles Supplementary (as defined below). The Series M28
Preferred Shares and the Series M7 Preferred Shares are sometimes herein
together referred to as the "Preferred Shares". A separate Auction (as
defined below) will be conducted for each series of Preferred Shares. The
Company desires that Bankers Trust Company perform certain duties as agent
in connection with each Auction of Preferred Shares (the "Auction Agent")
and as the transfer agent, registrar, dividend disbursing agent and
redemption agent with respect to the Preferred Shares (the "Paying Agent")
upon the terms and conditions of this Agreement, and hereby appoints
Bankers Trust Company as said Auction Agent and Paying Agent in accordance
with those terms and conditions (hereinafter generally referred to as the
"Auction Agent" except in Sections 3 and 4 below).
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Company and the Auction Agent agree as
follows:
1. Definitions and Rules of Construction.
1.1 Terms Defined by Reference to Articles Supplementary
Capitalized terms not defined herein shall have the respective
meanings specified in the Articles Supplementary.
1.2 Terms Defined Herein.
As used herein and in the Settlement Procedures (as defined
below), the following terms shall have the following meanings, unless the
context otherwise requires:
(a) "Affiliate" shall mean any Person made known to the
Auction Agent to be controlled by, in control of or under common control
with, the Company, or its successors.
(b) "Agent Member" of any Person shall mean such Person's
agent member of the Securities Depository who is identified as such in such
Person's Purchaser's Letter.
(c) "Articles Supplementary" shall mean the Articles
Supplementary of the Company, establishing the powers, preferences and
rights of the Series M28 Preferred Shares and the Series M7 Preferred
Shares filed on April 15, 1992 in the Office of the State Department of
Assessments and Taxation of the State of Maryland.
(d) "Auction" shall have the meaning specified in Section 2.1
hereof.
(e) "Auction Procedures" shall mean the Auction
Procedures that are set forth in Paragraph 11 of the Articles
Supplementary.
(f) "Authorized Officer" shall mean each Senior Vice
President, Vice President, Assistant Vice President, Trust Officer and
Assistant Secretary and Assistant Treasurer of the Auction Agent assigned
to its Corporate Trust and Agency Group and every other officer or employee
of the Auction Agent designated as an "Authorized Officer" for purposes
hereof in a communication to the Company.
(g) "Broker-Dealer Agreement" shall mean each agreement
between the Auction Agent and a Broker-Dealer substantially in the form
attached hereto as Exhibit A.
(h) "Company Officer" shall mean the Chairman, the
President, each Vice President (whether or not designated by a number or
word or words added before or after the title "Vice President"), the
Secretary, the Treasurers each Assistant Secretary and each Assistant
Treasurer of the Company and every other officer or employee of the Company
designated as a "Company Officer" for purposes hereof in a notice from the
Company to the Auction Agent.
(i) "Holder" shall be a holder of record of one or more
shares of Series M28 Preferred Shares or Series M7 Preferred Shares, as the
case may be, listed as such in the stock register maintained by the Paying
Agent pursuant to Section 4.6.
(j) "Purchaser's Letter" shall mean a letter addressed to
the Company, the Auction Agent and a Broker-Dealer, substantially in the
form attached to the Broker-Dealer Agreement as Exhibit A.
(k) "Settlement Procedures" shall mean the Settlement
Procedures attached to the Broker-Dealer Agreement as Exhibit B.
1.3 Rules of Construction.
Unless the context or use indicates another or different
meaning or intent, the following rules shall apply to the construction of
this Agreement:
(a) Words importing the singular number shall include the
plural number and vice versa.
(b) The captions and headings herein are solely for
convenience of reference and shall not constitute a part of this Agreement
nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other
words of similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day
shall be to New York City time.
2. The Auction.
2.1 Purpose; Incorporation by Reference of Auction Procedures and
Settlement Procedures.
(a) The Articles Supplementary provide that the
Applicable Rate on Series M28 Preferred Shares or Series M7 Preferred
Shares, as the case may be, for each Dividend Period therefor after the
Initial Dividend Period shall be the rate per annum that a commercial bank,
trust company, or other financial institution appointed by the Company
advises results from implementation of the Auction Procedures. The Board of
Directors of the Company has adopted a resolution appointing Bankers Trust
Company as Auction Agent for purposes of the Auction Procedures. The
Auction Agent hereby accepts such appointment and agrees that, on each
Auction Date, it shall follow the procedures set forth in this Section 2
and the Auction Procedures for the purpose of determining the Applicable
Rate for the Series M28 Preferred Shares or the Series M7 Preferred Shares,
as the case may be, for the next Dividend Period therefor. Each periodic
operation of such procedures is hereinafter referred to as an "Auction".
(b) All of the provisions contained in the Auction
Procedures and the Settlement Procedures are incorporated herein by
reference in their entirety and shall be deemed to be a part hereof to the
same extent as if such provisions were fully set forth herein.
2.2 Preparation for Each Auction; Maintenance of Registry of Beneficial
Owners.
(a) At the time of closing of the initial issuance and
sale of the Preferred Shares (the "Closing"), the Company shall provide the
Auction Agent with a list of initial Broker-Dealers previously approved by
the Auction Agent and shall cause to be delivered to the Auction Agent for
execution by the Auction Agent a Broker-Dealer Agreement signed by each
such Broker-Dealer. Subsequent to the Closing and pursuant to Section
2.5(b) and subject to Section 2.5(c) hereof, the Auction Agent may, from
time to time, designate additional Broker Deal- ers. The Auction Agent
shall keep the list of Broker Dealers current and accurate, and shall
indicate thereon, or on a separate list, the identity of each Existing
Holder, if any, whose most recent Order was submitted by a Broker-Dealer on
such list and resulted in such Existing Holder continuing to hold or
purchasing Preferred Shares. Not later than seven days prior to any Auction
Date for which any change in such list of Broker-Dealers is to be
effective, the Auction Agent shall notify the Company in writing of such
change and, if any such change is the addition of a Broker-Dealer to such
list, the Auction Agent shall have entered into a Broker-Dealer Agreement
with such additional Broker-Dealer prior to the participation of any such
Broker-Dealer in any Auction.
(b) (i) In the event that the Auction Date for any
Auction shall be changed after the Auction Agent shall have given the
notice referred to in clause (vii) of paragraph (a) of the Settlement
Procedures, the Auction Agent, by such means as the Auction Agent deems
practicable, shall give notice of such change to the Broker-Dealers not
later than the earlier of 9:15 A.M. on the new Auction Date or 9:15 A.M. on
the old Auction Date.
(ii) If, after the date of this Agreement, there is any
change in the prevailing rating of Preferred Shares by either of the rating
agencies (or substitute or successor rating agencies) referred to in the
definition of the Maximum Applicable Rate, thereby resulting in any change
in the corresponding percentage for the Preferred Shares, as set forth in
said definition (the "Percentage"), the Company shall notify the Auction
Agent in writing of such change in the Percentage prior to 9:00 A.M. on the
Auction Date for Preferred Shares next succeeding such change. The
Percentage for the Preferred Shares on the date of this Agreement is 110%.
The Auction Agent shall be entitled to rely on the last Percentage of which
it has received notice from the Company (or, in the absence of such notice,
the Percentage set forth in the preceding sentence) in determining the
Maximum Applicable Rate as set forth in Section 2.2(e)(i) hereof.
(c) With respect to each Dividend Period that is a
Special Dividend Period, on or prior to the fourth day but not more than
seven days prior to an Auction Date for either series of the Preferred
Shares, the Company may, at its sole option and to the extent permitted by
law, by telephonic and written notice (a "Request for Special Dividend
Period") to the Auction Agent and to each Broker-Dealers request that the
next succeeding Dividend Period for such series of Preferred Shares will be
a number of days (other than 28 in the case of the Series M28 Preferred
Shares or 7 in the case of the Series M7 Preferred Shares) evenly divisible
by 7 and specified in such notice, provided that for any Auction occurring
after the initial Auction, the Company may not give a Request for Special
Dividend Period (and any such request shall be null and void) unless
sufficient Clearing Bids were made in the last occurring Auction and unless
full cumulative dividends, any amounts due with respect to mandatory
redemptions and any Additional Dividends payable prior to such date have
been paid in full. Such Request for Special Dividend Period, in the case of
a Dividend period of 182 days or less, shall be made on or prior to the 4th
day but not more than 7 days prior to an Auction Date for such series of
Preferred Shares and, in the case of a Dividend Period of more than 182
days, shall be given on or prior to the 14th day but not more than 28 days
prior to an Auction Date for such series of Preferred Shares. Upon
receiving such Request for Special Dividend Period, the Broker-Dealer(s)
shall jointly determine whether given the factors set forth in paragraph
2(c)(iii) of the Articles Supplementary it is advisable that the Company
issue a Notice of Special Dividend Period for the particular series of
Preferred Shares as contemplated by such Request for Special Dividend
Period and shall give the Company and the Auction Agent written notice (a
"Response") of such determination by no later than the third day prior to
such Auction Date. If the Broker-Dealer(s) shall not give the Company and
the Auction Agent a Response by such third day or if the Response states
that given the factors referred to above it is not advisable that the
Company give a Notice of Special Dividend Period (as defined below) for the
particular series of Preferred Shares, the Company may not give a Notice of
Special Dividend Period in respect of such Request for Special Dividend
Period. In the event the Response indicates that it is advisable that the
Company give a Notice of Special Dividend Period for the particular series
of Preferred Shares, the Company will by no later than the second day prior
to such Auction Date give a notice (a "Notice of Special Dividend Period")
to the Auction Agent, the Securities Depository and each Broker-Dealer,
which notice will specify the dura- tion of the Special Dividend Period,
the Maximum Applicable Rate therefor and Specific Redemption Provisions, if
any. The Company shall not give a Notice of Special Dividend period or
convert to a Special Dividend Period, or, if such Notice of Special
Dividend Period shall have already been given, shall give telephonic and
written notice of revocation (a "Notice of Revocation") to the Auction
Agent, each Broker-Dealer, and the Securities Depository on or prior to the
Business Day prior to the relevant Auction Date if (i) it has not obtained
the advice in writing of Moody's and S&P or any Substitute Rating Agency
that the proposed Special Dividend Period will not adversely affect their
then-current rating on the Preferred Shares, (ii) either the 1940 Act
Preferred Shares Coverage is not satisfied or the Company shall fail to
maintain S&P Eligible Assets and Moody's Eligible Assets each with an
aggregate Discounted Value at least equal to the Preferred Shares Basic
Maintenance Amount in each case on each of the two Valuation Dates
immediately preceding the Business Day prior to the relevant Auction Date
on an actual basis and on a pro forma basis giving effect to the proposed
Special Dividend Period (using as a pro forma dividend rate with respect to
such Special Dividend Period the dividend rate which the Broker-Dealers
shall advise the Company is an approximately equal rate for securities
similar to the Preferred Shares with an equal dividend period), (iii)
sufficient funds for the payment of dividends payable on the immediately
succeeding Dividend Payment Date have not been irrevocably deposited with
the Auction Agent by the close of business on the third Business Day
preceding the related Auction Date or (iv) the Broker-Dealer(s) jointly
advise the Company that after consideration of the factors referred to
above they have concluded that it is advisable to give a Notice of
Revocation. If the Company is prohibited from giving a Notice of Special
Dividend Period as a result of the factors enumerated in clause (i), (ii),
(iii) or (iv) of the preceding sentence or if the Company gives a Notice of
Revocation with respect to a Notice of Special Dividend Period, the next
succeeding Dividend Period will be a 28-day Dividend Period in the case of
the Series M28 Preferred Shares and a 7-day Dividend Period in the case of
the Series M7 Preferred Shares, provided that if the then-current Dividend
Period in the case of the Series M28 Preferred Shares is a Special Dividend
Period of less than 28 days, the next succeeding Dividend Period will be
the same length as the current Dividend Period. In addition, in the event
suf- ficient Clearing Bids are not made in any Auction or an Auction is not
held for any reason, the next succeeding Dividend period will be a 28-day
Dividend Period (in the case of Series M28 Preferred Shares) or a 7-day
Dividend Period (in the case of Series M7 Preferred Shares) and the Company
may not again give a Notice of Special Dividend period (and any such
attempted notice shall be null and void) until sufficient Clearing Bids
have been made in an Auction with respect to a 28-day Dividend Period (in
the case of Series M28 Preferred Shares or a 7-day Dividend period (in the
case of Series M7 Preferred Shares).
(d)(i) Whenever the Company intends to include any net
capital gains or other taxable income in any dividend on Preferred Shares,
the Company will notify the Auction Agent of the amount to be so included
at least five Business Days prior to the Auction Date on which the
Applicable Rate for such dividend is to be established. Whenever the
Auction Agent receives such notice from the Company, it will in turn notify
each Broker Dealer, who, on or prior to such Auction Date, in accordance
with its Broker-Dealer Agreement, will notify its Existing Holders and
Potential Holders believed to be interested in submitting an Order in the
Auction to be held on such Auction Date.
(ii) If the Company makes a Retroactive Taxable
Allocation, the Company will, within 90 days (and generally within 60 days)
after the end of its fiscal year for which a Retroactive Taxable Allocation
is made provide notice thereof to the Auction Agent and to each holder of
Preferred Shares (initially the Securities Depository) during such fiscal
year at such holder's address as the same appears or last appeared on the
stock books of the Company. The Company will, within 30 days after such
notice is given to the Auction Agent, pay to the Auction Agent (who will
then distribute to such holders of Preferred Shares), a cash amount equal
to the aggregate Additional Dividend with respect to all Retroactive
Taxable Allocations made to such holders during the fiscal year in
question.
(e)(i) On each Auction Date, the Auction Agent shall
determine the Maximum Applicable Rate from the higher of the 30-day "AA"
Composite Commercial Paper Rate and the Taxable Equivalent of the
Short-Term Municipal Bond Rate (except in the case of a Special
Dividend Period in which case the Maximum Applicable Rate shall be
determined from the higher of the Special Dividend period Reference Rate
and the Taxable Equivalent of the Short-Term Municipal Bond Rate. If any
such rate on which the Maximum Applicable Rate is to be based is not quoted
on an interest basis but is quoted on a discount basis, the Auction Agent
shall convert the quoted rate to an Interest Equivalent, as set forth in
Paragraph 1 of the Articles Supplementary; or, if the rate obtained by the
Auction Agent is not quoted on an interest or discount basis, the Auction
Agent shall convert the quoted rate to an interest rate after consultation
with the Company as to the method of such conversion. Not later than 9:30
A.M. on each Auction Date for each series of Preferred Shares, the Auction
Agent shall notify the Company and the Broker-Dealers of the applicable
rate so determined and the Maximum Applicable Rate.
(ii) If the rate on which the Maximum Applicable Rate is
to be based is the 30-day "AA" Composite Commercial Paper Rate and such
rate is to be based on rates supplied by Commercial Paper Dealers and one
or more of the Commercial Paper Dealers shall not provide a quotation for
the determination of the 30-day "AA" Composite Commercial Paper Rate, the
Auction Agent shall immediately notify the Company so that the Company can
determine whether to select a Substitute Commercial Paper Dealer or
Substitute Commercial Paper Dealers to provide the quotation or quotations
not being supplied by any Commercial Paper Dealer or Commercial Paper
Dealers. The Company shall promptly advise the Auction Agent of any such
selection. If the Company does not select any such Substitute Commercial
Paper Dealer or Substitute Commercial Paper Dealers, then the rates shall
be supplied by the remaining Commercial Paper Dealer or Commercial Paper
Dealers.
(f) (i) The Auction Agent shall maintain by series a
current registry of the beneficial owners of the shares of both series of
Preferred Shares who shall constitute the Existing Holders for purposes of
each Auction. The Company shall use its best efforts to provide or cause to
be provided to the Auction Agent within ten days following the date of
Closing a list of the initial Existing Holders of Series M28 Preferred
Shares and Series M7 Preferred Shares and the respective Broker-Dealer of
each such Existing Holder through which such Existing Holder purchased such
shares. The Auction Agent may rely upon as evidence of the identities of
the Existing Holders, such list, the results of each Auction and notices
from any Existing Holder, the Agent Member of any Existing Holder or the
Broker-Dealer of any Existing Holder with respect to such Existing Holder's
transfer of any Preferred Shares to another Person.
(ii) In the event of any partial redemption of any Series
M28 Preferred Shares or Series M7 Preferred Shares, as the case may be,
upon notice by the Company to the Auction Agent of such partial redemption,
the Auction Agent shall promptly request the Securities Depository to
notify the Auction Agent of the identities of the Agent Members (and the
respective numbers of Preferred Shares) from the accounts of which
Preferred Shares have been called for redemption and the person or
department at such Agent Member to contact regarding such redemption and,
at least two Business Days prior to the next Auction with respect to
Preferred Shares of the series being partially redeemed, the Auction Agent
shall request each Agent Member so identified to disclose to the Auction
Agent (upon selection by such Agent Member of the Existing Holders whose
Preferred Shares are to be redeemed) the number of Preferred Shares of such
series of Preferred Shares of each such Existing Holder, if any, to be
redeemed by the Company; provided that the Auction Agent has been furnished
with the name and telephone number of a person or department at such Agent
Member from which it is to request such information. If necessary to
procure such information, the Auction Agent shall deliver to each Agent
Member a facsimile copy of the Purchaser's Letter of each Existing Holder
represented by such Agent Member, which authorizes and instructs such Agent
Member to release such information to the Auction Agent. In the absence of
receiving any such information with respect to an Existing Holder, from
such Existing Holder's Agent Member or otherwise, the Auction Agent may
continue to treat such Existing Holder as the beneficial owner of the
number of Series M28 Preferred Shares or Series M7 Preferred Shares shown
in the Auction Agent's registry of beneficial owners.
(iii) The Auction Agent shall register a transfer of the
beneficial ownership of Series M28 Preferred Shares or Series M7 Preferred
Shares from an Existing Holder to another Person only if such transfer is
made to a Person that has delivered a signed Purchaser's Letter to the
Auction Agent and only if (A) such transfer is pursuant to an Auction or
(B) if such transfer is made other than pursuant to an Auction, the Auction
Agent has been notified in writing in a notice substantially in the form of
Exhibit D to the Broker-Dealer Agreement, by such Existing Holder, the
Agent Member of such Existing Holder, or the Broker-Dealer of such Existing
Holder of such transfer. The Auction Agent is not required to accept any
notice of transfer delivered for an Auction unless it is received by the
Auction Agent by 3:00 P.M. on the Business Day next preceding the
applicable Auction Date. The Auction Agent shall rescind a transfer made on
the registry of the beneficial owners of any Preferred Shares if the
Auction Agent has been notified in writing in a notice substantially in the
form of Exhibit E to the Broker-Dealer Agreement by the Agent Member or the
Broker-Dealer of any Person that (i) purchased any Preferred Shares and the
seller failed to deliver such shares or (ii) sold any Preferred Shares and
the purchaser failed to make payment to such Person upon delivery to the
purchaser of such shares.
(g) The Auction Agent may request that the
Broker-Dealers, as set forth in Section 3.2(c) of the Broker-Dealer
Agreements, provide the Auction Agent with a list of their respective
customers that such Broker-Dealers believe are Existing Holders of shares
of either series of Preferred Shares. The Auction Agent shall keep
confidential any such information and shall not disclose any such
information so provided to any Person other than the relevant Broker-Dealer
and the Company provided that the Auction Agent reserves the right to
disclose any such information if it is advised by its counsel that its
failure to do so would be unlawful.
2.3 Auction Schedule.
The Auction Agent shall conduct Auctions for both series of
Preferred Shares in accordance with the schedule set forth below. Such
schedule may be changed by the Auction Agent with the consent of the
Company, which consent shall not be unreasonably withheld. The Auction
Agent shall give notice of any such change to each Broker-Dealer. Such
notice shall be received prior to the first Auction Date on which any such
change shall be effective.
Time Event
By 9:30 A.M. Auction Agent advises the Company and the
Broker-Dealers of the Maximum Applicable
Rate as determined from the higher of the
30-day "AA" Composite Commercial Paper
Rate and the Taxable Equivalent of the
Short-Term Municipal Bond Rate (except in
the case of a Special Dividend Period in
which case the Maximum Applicable Rate
shall be the higher of the Special
Dividend Period Reference Rate and the
Taxable Equivalent of the Short-Term
Municipal Bond Rate) as set forth in
Section 2.2(e)(i) hereof.
9:30 A.M. - 1:00 P.M. Auction Agent assembles information
communicated to it by Broker-Dealers as
provided in Paragraph 11(c)(i) of the
Articles Supplementary. Submission
deadline is 1:00 P.M.
Not earlier than 1:00 P.M. Auction Agent makes determination pursuant to
Paragraph 11(d)(i) of the Articles
Supplementary.
By approximately 3:00 P.M. Auction Agent advises Company of results of
Auction as provided in paragraph
11(d)(ii) of the Articles
Supplementary.
Submitted Bids and Submitted Sell
Orders are accepted and rejected in
whole or in part and shares of
Preferred Shares allocated as
provided in paragraph 11(e) of the
Articles Supplementary.
Auction Agent gives notice of
Auction results as set forth in
Section 2.4 hereof.
2.4 Notice of Auction Results.
On each Auction Date, the Auction Agent shall notify
Broker-Dealers of the results of the Auction held on such date by telephone
or through the Auction Agent's Auction Processing System as set forth in
Paragraph (a) of the Settlement Procedures.
2.5 Broker-Dealers.
(a) Not later than 12:00 noon on each Auction Date for
both series of Preferred Shares, the Company shall pay to the Auction Agent
in New York Clearing House or similar next-day funds an amount in cash
equal to, (i) in the case of any Auction Date immediately preceding any
Dividend Period of 364 days or less, the product of (A) a fraction the
numerator of which is the number of days in such Dividend Period
(calculated by counting the first day of such Dividend Period but excluding
the last day thereof) and the denominator of which is 365, times (B) 1/4 of
1%, times (C) $50,000, times (D) the sum of the aggregate number of
Outstanding shares of such series of Preferred Shares for which the Auction
is conducted and (ii) in the case of any Auction Date immediately preceding
any Dividend Period of more than 364 days, the amount determined by mutual
consent of the Company and the Broker-Dealer or Broker-Dealers pursuant to
Section 3.5 of the Broker-Dealer Agreements. The Auction Agent shall apply
such monies as set forth in Section 3.5 of the Broker-Dealer Agreements and
shall thereafter remit to the Company any remaining funds paid to the
Auction Agent pursuant to this Section 2.5(a).
(b) Subject to Section 2.5(c) hereof, the Auction Agent
is hereby authorized by the Company to designate at any time or from time
to time any Person to act as a Broker-Dealer without the prior written
approval of the Company. The Auction Agent may designate an Affiliate of
the Company or of itself to act as a Broker-Dealer subject to Section
2.5(c) hereof.
(c) The Auction Agent shall terminate any Broker-Dealer
Agreement as set forth therein if so directed by the Company.
(d) Notwithstanding Section 2.5(b) hereof, no person may
act as a Broker-Dealer unless such person shall have entered into a
Broker-Dealer Agreement with the Auction Agent.
(e) The Auction Agent shall maintain a list of
Broker-Dealers.
2.6 Ownership of Series M28 Preferred Shares and Series M7
Preferred Shares and Submission of Bids by Company and
Affiliates.
Neither the Company nor any Affiliate of the Company may submit
any Sell Order or Bid, directly or indirectly, in any Auction, except that
an Affiliate of the Company that is a Broker-Dealer may submit a Sell Order
or Bid on behalf of an Existing Holder or Potential Holder. The Company
shall notify the Auction Agent if the Company or, to the best of the
Company's knowledge, any Affiliate of the Company becomes an Existing
Holder of any Preferred Shares. Any Preferred Shares redeemed, purchased or
otherwise acquired (i) by the Company shall not be reissued or (ii) by its
Affiliates shall not be transferred (other than to the Company). The
Auction Agent shall have no duty or liability with respect to enforcement
of this Section 2.6.
2.7 Access to and Maintenance of Auction Records.
The Auction Agent shall afford to the Company, its agents,
independent public accountants and counsel, access at reasonable times
during normal business hours to review and make extracts or copies (at the
Company's sole cost and expense) of all books, records, documents and other
information concerning the conduct and results of Auctions, provided that
any such agent, accountant, or counsel shall furnish the Auction Agent with
a letter from the Company requesting that the Auction Agent afford such
person access. The Auction Agent shall maintain records relating to any
Auction for a period of two years after such Auction (unless requested by
the Company to maintain such records for such longer period not in excess
of four years, then for such longer period), and such records shall, in
reasonable detail, accurately and fairly reflect the actions taken by the
Auction Agent hereunder. The Company agrees to keep any information
regarding the customers of any Broker-Dealer received from the Auction
Agent in connection with this Agreement or any Auction confidential and
shall not disclose such information or permit the disclosure of such
information without the prior written consent of the applicable
Broker-Dealer to anyone except such agent, accountant or counsel engaged to
audit or review the results of Auctions as permitted by this Section 2.7.
Any such agent, accountant or counsel, before having access to such
information, shall agree to keep such information confidential and not to
disclose such information or permit disclosure of such information without
the prior written consent of the applicable Broker-Dealer.
3. The Auction Agent as Paying Agent.
3.1 Paying Agent.
The Board of Directors of the Company has adopted a resolution
appointing Bankers Trust Company as transfer agent, registrar, dividend
disbursing agent and redemption agent for the Company in connection with
any Preferred Shares (the "Paying Agent"). The Paying Agent hereby accepts
such appointment and agrees to act in accordance with its standard
procedures and the provisions of the Articles Supplementary which are
specified herein as Paying Agent with respect to the Preferred Shares and
as set forth in this Section 3.
3.2 The Company's Notices to Paying Agent.
Whenever any Preferred Shares are to be redeemed, the Company
shall promptly deliver to the Paying Agent the Notice of Redemption, which
will be mailed by the Company to each Holder, at least five days prior to
the date such Notice of Redemption is required to be mailed by the Articles
Supplementary. The Paying Agent shall have no responsibility to confirm or
verify the accuracy of any such notice.
3.3 Company to Provide Funds for Dividends and Redemptions and
Additional Dividends
(a) Not later than noon, on the Business Day immediately
preceding each Dividend Payment Date, the Company shall deposit with the
Paying Agent an aggregate amount of New York Clearing House or similar
next-day funds equal to the declared dividends to be paid to Holders on
such Dividend Payment Date and shall give the paying Agent irrevocable
instructions to apply such funds to the payment of such dividends on such
Dividend Payment Date.
(b) If the Company shall give the Notice of Redemption
then, by noon of the Business Day immediately preceding the date fixed for
redemption, the Company shall deposit in trust with the Paying Agent an
aggregate amount of New York Clearing House or similar next day funds
sufficient to redeem such Preferred Shares called for redemption and shall
give the Paying Agent irrevocable instructions and authority to pay the
redemption price to the Holders of Preferred Shares called for redemption
upon surrender of the certificate or certificates therefor.
(c) If the Company provides notice to the Auction Agent
of a Retroactive Taxable Allocation, the Company shall, within 30 days
after such notice is given and by noon of the Business Day immediately
preceding the date fixed for payment of an Additional Dividend, deposit in
trust with the Paying Agent an aggregate amount of New York Clearing House
or similar next-day funds equal to such Additional Dividend and shall give
the Paying Agent irrevocable instructions and authority to pay the
Additional Dividends to Holders (or former Holders) of Preferred Shares
entitled thereto.
3.4 Disbursing Dividends, Redemption Price and Additional Dividends.
After receipt of the New York Clearing House or similar
next-day funds and instructions from the Company described in Sections
3.3(a), (b) and (c) above, the Paying Agent shall pay to the Holders (or
former Holders) entitled thereto (i) on each corresponding Dividend Payment
Date, dividends on the Series M28 Preferred Shares or Series M7 Preferred
Shares, as the case may be, (ii) on any date fixed for redemption, the
redemption price of any Preferred Shares called for redemption and (iii) on
the date fixed for payment of an Additional Dividend, such Additional
Dividend. The amount of dividends for any Dividend Period to be paid by the
Paying Agent to Holders will be determined by the Company as set forth in
Paragraph 2 of the Articles Supplementary. The redemption price to be paid
by the Paying Agent to the Holders of any Preferred Shares called for
redemption will be determined as set forth in Paragraph 4 of the Articles
Supplementary. The amount of Additional Dividends to be paid by the Paying
Agent in the event of a Retroactive Taxable Allocation to Holders will be
determined by the Company pursuant to paragraph 2(e) of the Articles
Supplementary. The Company shall notify the Paying Agent in writing of a
decision to redeem any Preferred Shares on or prior to the date specified
in Section 3.2 above, and such notice by the Company to the Paying Agent
shall contain the information required to be stated in the Notice of
Redemption required to be mailed by the Company to such Holders. The Paying
Agent shall have no duty to determine the redemption price and may rely on
the amount thereof set forth in the Notice of Redemption.
4. The paying Agent as Transfer Agent and Registrar.
4.l Original Issue of Stock Certificates.
On the Date of Original Issue, one certificate for all Series
M28 Preferred Shares and one certificate for all shares of Series M7
Preferred Shares shall be issued by the Company and registered in the name
of Cede & Co., as nominee of the Securities Depository, and countersigned
by the Paying Agent.
4.2 Registration of Transfer or Exchange of Preferred Shares.
Except as provided in this Section 4.2, the shares of both
series of Preferred Shares shall be registered solely in the name of the
Securities Depository or its nominee. If the Securities Depository shall
give notice of its intention to resign as such, and if the Company shall
not have selected a substitute Securities Depository acceptable to the
Paying Agent prior to such resignation, then upon such resignation, the
shares of each series of Preferred Shares may, at the Company's request, be
registered for transfer or exchange, and new certificates thereupon shall
be issued in the name of the designated transferee or transferees, upon
surrender of the old certificates in form deemed by the Paying Agent
properly endorsed for transfer with (a) all necessary endorsers' signatures
guaranteed in such manner and form as the Paying Agent may require by a
guarantor reasonably believed by the Paying Agent to be responsible, (b)
such assurances as the Paying Agent shall deem necessary or appropriate to
evidence the genuineness and effectiveness of each necessary endorsement
and (c) satisfactory evi- dence of compliance with all applicable laws
relating to the collection of taxes or funds necessary for the payment of
such taxes. If the certificates for Preferred Shares are not held by the
Securities Depository or its nominees, payments upon transfer of shares in
an Auction shall be made in same-day funds to the Auction Agent against
delivery of certificates therefor.
4.3 Removal of Legend.
Any request for removal of a legend indicating a restriction on
transfer from certificates evidencing Series M28 Preferred Shares or Series
M7 Preferred Shares shall be accompanied by an opinion of counsel stating
that such legend may be removed and such shares transferred free of the
restriction described in such legend, said opinion to be delivered under
cover of a letter from a Company officer authorizing the Paying Agent to
remove the legend on the basis of said opinion.
4.4 Lost Stock Certificates.
The Paying Agent shall issue and register replacement
certificates for certificates represented to have been lost, stolen or
destroyed, upon the fulfillment of such requirements as shall be deemed
appropriate by the Company and the Paying Agent, subject at all times to
provisions of law, the By-Laws of the Company governing such matters and
resolutions adopted by the Company with respect to lost securities. The
Paying Agent may issue new certificates in exchange for and upon the
cancellation of mutilated certificates. Any request by the Company to the
Paying Agent to issue a replacement or new certificate pursuant to this
Section 4.4 shall be deemed to be a representation and warranty by the
Company to the Paying Agent that such issuance will comply with such
provisions of applicable law and the By-Laws and resolutions of the
Company.
4.5 Disposition of Cancelled Certificates; Record Retention.
The Paying Agent shall retain stock certificates which have
been cancelled in transfer or in exchange and accompanying documentation in
accordance with applicable rules and regulations of the Securities and
Exchange Commission for two calendar years from the date of such
cancellation. The Paying Agent shall afford to the Company, its agents and
counsel access at reasonable times during normal business hours to review
and make extracts or copies (at the Company's sole cost and expense) of
such certificates and accompanying documentation. Upon the expiration of
this two-year period, the Paying Agent shall deliver to the Company the
cancelled certificates and accompanying documentation. The Company shall,
at its expense, retain such records for a minimum additional period of four
calendar years from the date of delivery of the records to the Company and
shall make such records available during this period at any time, or from
time to time, for reasonable periodic, special, or other examinations by
representatives of the Securities and Exchange Commission. The Company
shall also undertake to furnish to the Securities and Exchange Commission,
upon demand, at either the principal office or at any regional office,
complete, correct and current hard copies of any and all such records.
Thereafter such records shall not be destroyed by the Company without the
approval of the Paying Agent, which shall not be unreasonably withheld, but
will be safely stored for possible future reference.
4.6 Stock Register.
The Paying Agent shall maintain the stock register, which shall
contain a list of the Holders, the number of Preferred Shares held by each
Holder and the address of each Holder. The Paying Agent shall record in the
stock register any change of address of a Holder upon notice by such
Holder. In case of any request or demand for the inspection of the stock
register or any other books of the Company in the possession of the Paying
Agent, the Paying Agent will notify the Company and secure instructions as
to permitting or refusing such inspection. The Paying Agent reserves the
right, however, to exhibit the stock register or other records to any
person in case it is advised by its counsel that its failure to do so would
(i) be unlawful or (ii) expose it to liability, unless the Company shall
have offered indemnification satisfactory to the Paying Agent.
4.7 Return of Funds.
Any funds deposited with the Paying Agent by the Company for
any reason under this Agreement, including for the payment of dividends or
the redemption of shares of any series of Preferred Shares, that remain
with the paying Agent after 12 months shall be repaid to the Company upon
the written request of the Company.
5. Representations and Warranties.
(a) The Company represents and warrants to the Auction
Agent that:
(i) the Company is a duly incorporated and validly
existing corporation in good standing under the laws of the State of
Maryland and has full power to execute and deliver this Agreement and to
authorize, create and issue the Series M28 Preferred Shares and the shares
of Series M7 Preferred Shares;
(ii) the Company is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended,
as a closed-end, diversified management investment company;
(iii) this Agreement has been duly and validly
authorized, executed and delivered by the Company and constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject as to such enforceability to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equitable principles;
(iv) the forms of the certificates evidencing the Series
M28 Preferred Shares and the shares of Series M7 Preferred Shares comply
with all applicable laws of the State of Maryland;
(v) the Series M28 Preferred Shares and the shares of
Series M7 Preferred Shares have been duly and validly authorized by the
Company and, upon completion of the initial sale of the shares of each
series of Preferred Shares and receipt of payment therefor, will be validly
issued, fully paid and nonassessable;
(vi) the offering of the shares of Series M28 Preferred
Shares and the shares of Series M7 Preferred Shares has been registered
under the Securities Act of 1933, as amended, and no action by or before
any governmental body or authority of the United States or of any state
thereof is required in connection with the execution and delivery of this
Agreement or the issuance of the shares of any such series of Preferred
Shares except as required by applicable state securities or insurance laws,
all of which have been taken;
(vii) the execution and delivery of this Agreement and
the issuance and delivery of the Series M28 Preferred Shares and the Series
M7 Preferred Shares do not and will not conflict with, violate, or result
in a breach of, the terms, conditions or provisions of, or constitute a
default under, the Charter or the By-Laws of the Company, any law or
regulation applicable to the Company, any order or decree of any court or
public authority having jurisdiction over the Company, or any mortgage,
indenture, contract, agreement or undertaking to which the Company is a
party or by which it is bound; and
(viii) no taxes are payable upon or in respect of the
execution of this Agreement or the issuance of the shares of any series of
Preferred Shares.
(b) The Auction Agent represents and warrants to the
Company that the Auction Agent is duly organized and is validly existing as
a banking corporation in good standing under the laws of the State of New
York and has the corporate power to enter into and perform its obligations
under this Agreement.
6. The Auction Agent.
6.1 Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the
Company hereunder and owes no fiduciary duties to any Person except as
provided by this Agreement.
(b) The Auction Agent undertakes to perform such duties
and only such duties as are specifically set forth in this Agreement, and
no implied covenants or obligations shall be read into this Agreement
against the Auction Agent.
(c) In the absence of bad faith or negligence on its
part, the Auction Agent shall not be liable for any action taken, suffered
or omitted or for any error of judgment made by it in the performance of
its duties under this Agreement. The Auction Agent shall not be liable for
any error of judgment made in good faith unless the Auction Agent shall
have been negligent in ascertaining (or failing to ascertain) the pertinent
facts.
6.2 Rights of the Auction Agent.
(a) The Auction Agent may rely and shall be protected in
acting or refraining from acting upon any communication authorized hereby
and upon any written instruction, notice, request, direction, consent,
report, certificate, share certificate or other instrument, paper or
document reasonably believed by it to be genuine. The Auction Agent shall
not be liable for acting upon any telephone communication authorized hereby
which the Auction Agent believes in good faith to have been given by the
Company or by a Broker-Dealer. The Auction Agent may record telephone
communications with the Company or with the Broker-Dealers or both.
(b) The Auction Agent may consult with counsel of its
choice, and the written advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance,
expend or risk its own funds or otherwise incur or become exposed to
financial liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise
its rights hereunder either directly or by or through agents or attorneys.
6.3 Auction Agent's Disclaimer.
The Auction Agent makes no representation as to the validity or
adequacy of this Agreement, the Broker-Dealer Agreements or the Preferred
Shares.
6.4 Compensation, Expenses and Indemnification.
(a) The Company shall pay the Auction Agent from time to
time reasonable compensation for all services rendered by it under this
Agreement and the Broker-Dealer Agreements.
(b) The Company shall reimburse the Auction Agent upon
its request for all reasonable expenses, disbursements and advances
incurred or made by the Auction Agent in accordance with any provision of
this Agreement and the Broker-Dealer Agreements (including the reasonable
compensation, expenses and disbursements of its agents and counsel), except
any expense, disbursement and advances attributable to its negligence or
bad faith.
(c) The Company shall indemnify the Auction Agent for,
and hold it harmless against, any loss, liability or expense incurred
without negligence or bad faith on its part, arising out of or in
connection with its agency under this Agreement and the Broker-Dealer
Agreements, including the costs and expenses of defending itself against
any claim or liability in connection with its exercise or performance of
any of its duties hereunder and thereunder, except such as may result from
its negligence or bad faith.
7. Miscellaneous.
7.1 Term of Agreement.
(a) The term of this Agreement is unlimited unless it
shall be terminated as provided in this Section 7.1. The Company may
terminate this Agreement at any time by so notifying the Auction Agent,
provided that if any Preferred Shares remain outstanding the Company has
entered into an agreement in substantially the form of this Agreement with
a successor auction agent. The Auction Agent may terminate this Agreement
upon prior notice to the Company on the date specified in such notice,
which shall be no earlier than 60 days after the delivery of such notice.
If the Auction Agent resigns while any shares of Preferred Shares remain
outstanding, the Company shall use its best efforts to enter into an
agreement with a successor auction agent containing substantially the same
terms and conditions as this Agreement.
(b) Except as otherwise provided in this Section 7.1(b),
the respective rights and duties of the Company and the Auction Agent under
this Agreement shall cease upon termination of this Agreement. The
Company's representations warranties, covenants and obligations to the
Auction Agent under Sections 5 and 6.4 hereof shall survive the termination
hereof. Upon termination of this Agreement, the Auction Agent shall (i)
resign as Auction Agent under the Broker-Dealer Agreements, (ii) at the
Company's request, promptly deliver to the Company copies of all books and
records maintained by it in connection with its duties hereunder, and (iii)
at the request of the Company, promptly transfer to the Company or any
successor auction agent any funds deposited by the Company with the Auction
Agent (whether in its capacity as Auction Agent or Paying Agent) pursuant
to this Agreement which have not previously been distributed by the Auction
Agent in accordance with this Agreement.
7.2 Communications.
Except for (i) communications authorized to be made by
telephone pursuant to this Agreement or the Auction Procedures and (ii)
communications in connection with Auctions (other than those expressly
required to be in writing), all notices, requests and other communications
to any party hereunder shall be in writing (including telecopy or similar
writing) and shall be given to such party addressed to it at its address,
or telecopy number set forth below:
If to the Company, The Blackstone Insured Municipal
addressed : Term Trust Inc.
345 Park Avenue, 31st Floor
New York, NY 10154
Attention: Treasurer
Telephone No.: (212) 935-2626
Telecopier No.: (212) 935-1370
If to the Auction Bankers Trust Company
Agent, addressed 4 Albany Street
New York, NY 10006
Attention: Auction Rate Securities
Telephone No.: (212) 250-6850
Telecopier No.: (212) 250-6215
or such other address or telecopy number as such party may hereafter
specify for such purpose by notice to the other party. Each such notice,
request or communication shall be effective when delivered at the address
specified herein. Communications shall be given on behalf of the Company by
a Company Officer and on behalf of the Auction Agent by an Authorized Officer.
7.3 Entire Agreement.
This Agreement contains the entire agreement between the
parties relating to the subject matter hereof, and there are no other
representations, endorsements, promises, agreements or understandings,
oral, written or inferred between the parties relating to the subject
matter hereof except for agreements relating to the compensation of the
Auction Agent.
7.4 Benefits.
Nothing herein, express or implied, shall give to any Person,
other than the Company, the Auction Agent and their respective successors
and assigns, any benefit of any legal or equitable right, remedy or claim
hereunder.
7.5 Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be
modified, amended, rescinded, cancelled or waived, in whole or in part,
except by a written instrument signed by a duly authorized representative
of the party to be charged. The Company shall notify the Auction Agent of
any change in the Articles Supplementary prior to the effective date of any
such change.
(b) Failure of either party hereto to exercise any right
or remedy hereunder in the event of a breach hereof by the other party
shall not constitute a waiver of any such right or remedy with respect to
any subsequent breach.
7.6 Successor and Assigns.
This Agreement shall be binding upon, inure to the benefit of,
and be enforceable by, the respective successors and permitted assigns of
each of the Company and the Auction Agent. This Agreement may not be
assigned by either party hereto absent the prior written consent of the
other party, which consent shall not be unreasonably withheld.
7.7 Severability.
If any clause, provision or section hereof shall be ruled
invalid or unenforceable by any court of competent jurisdiction, the
invalidity or unenforceability of such clause, provision or section shall
not affect any of the remaining clauses, provisions or sections hereof.
7.8 Execution in Counterparts.
This Agreement may be executed in several counterparts, each of
which shall be an original and all of which shall constitute but one and
the same instrument.
7.9 Governing Law.
This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to agreements made and to
be performed in said state.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly
authorized officers as of the date first above written.
THE BLACKSTONE INSURED
MUNICIPAL TERM TRUST INC.
By: /s/ Ralph L. Schlosstein*
-------------------------
Ralph L. Schlosstein,
President
BANKERS TRUST COMPANY
By: /s/ Paul N. Sheridan,
------------------------
Paul N. Sheridan,
Assistant Treasurer
* signed pursuant to
Power of Attorney
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose name
appears below in such person's capacity as an officer and/or director of
The Blackstone Investment Quality Trust Inc. (the "Trust") constitutes and
appoints Henry Gabbay his or her true and lawful attorney-in-fact and agent
with full power of substitution and resubstitution, for him or her and in
his or her name, place and stead, in any and all capacities, to sign any
all documents in connection with the organization, offering and sale of the
Trust's shares of common stock, including, without limitation, all
documents necessary or appropriate (i) to qualify the Trust to do business
in New York; (ii) to give notice to the Commodities Futures Trading
Commission; (iii) to obtain a Federal Employer Identification Number; (iv)
to effect listing of the Trust's shares of common stock on the New York
Stock Exchange; (v) to provide the Trust's counsel with support for legal
opinions; (vi) to amend the Trust's Charter; (vii) to execute Unanimous
Consents of the Trust's Board of Directors or Executive Committee in Lieu
of a Meeting; and (viii) to effect the closings; granting unto said
attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could
do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute may lawfully do or cause to be
done by virtue hereof. This Power of Attorney does not grant to said
attorney-in-fact and agent the power or authority to sign the Trust's
Registration Statement or any amendments thereto.
This Power of Attorney may be executed in multiple
counterparts, each of which shall be deemed an original, but which taken
together shall constitute one instrument.
Signature Title Notarized
/s/ Laurence D. Fink Director
- -------------------------
Laurence D. Fink
/s/ Ralph L. Schlossstein Director,
- ------------------------- President
Ralph L. Schlosstein
- ------------------------- Secretary
Barbara G. Novick
- --------------------------------------------------------------------------------
BROKER-DEALER AGREEMENT
between
BANKERS TRUST COMPANY
and
A.G. EDWARDS & SONS, INC.
Dated as of April 27, 1992
Relating to
AUCTION RATE MUNICIPAL PREFERRED STOCK
(the "Preferred Shares")
SERIES M28 and SERIES M7
of
THE BLACKSTONE INSURED MUNICIPAL TERM TRUST INC.
- --------------------------------------------------------------------------------
BROKER-DEALER AGREEMENT dated as of April 27, 1992 between
Bankers Trust Company, a New York banking corporation (the "Auction Agent")
(not in its individual capacity but solely as agent of The Blackstone
Insured Municipal Term Trust Inc., a Maryland corporation (the "Company"),
pursuant to authority granted to it in the Auction Agent Agreement dated as
of April 27, 1992, between the company and the Auction Agent (the "Auction
Agent Agreement")) and A.G. Edwards & Sons, Inc. (together with its
successors and assigns hereinafter referred to as "BD").
The Company has duly authorized and issued 1,300 shares of
Auction Rate Municipal Preferred Stock, Series M28, with a par value of
$.01 per share and a liquidation preference of $50,000 per stare plus an
amount equal to accumulated but unpaid dividends (whether or not earned or
declared) plus the premium, if any, resulting from the designation of a
Premium Call Period ("Series M28 Preferred Shares") and 1,300 shares of
Auction Rate Municipal Preferred Stock, Series M7, with a par value of $.01
per share and a liquidation preference of $50,000 per share plus an amount
equal to accumulated but unpaid dividends (whether or not earned or
declared) plus the premium, if any, resulting from the designation of a
Premium Call Period ("Series M7 Preferred Shares"), both pursuant to the
Company's Articles Supplementary (as defined below). The Series M28
Preferred Shares and the Series M7 Preferred Shares are sometimes herein
together referred to as the "Preferred Shares."
The Company's Articles Supplementary provide that the dividend
rate on the Series M28 Preferred Shares and the Series M7 Preferred Shares
for each Dividend Period therefor after the Initial Dividend Period shall
be the Applicable Rate therefor, which in each case, in general, shall be
the rate per annum that a commercial bank, trust company or other financial
institution appointed by the Company advises results from implementation of
the Auction Procedures (as defined below). The Board of Directors of the
Company has adopted a resolution appointing Bankers Trust Company as
Auction Agent for purposes of the Auction Procedures, and pursuant to
Section 2.5(d) of the Auction Agent Agreement, the Company has authorized
and directed the Auction Agent to execute and deliver this Agreement.
The Auction Procedures require the participation of one or more
Broker-Dealers.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the Auction Agent and BD agree as follows:
1. Definitions and Rules of Construction.
1.1 Terms Defined by Reference to the Articles Supplementary.
Capitalized terms not defined herein shall have the respective meanings
specified in the Articles Supplementary of the Company.
1.2 Terms Defined Herein. As used herein and in the Settlement
Procedures (as defined below), the following terms shall have the following
meanings, unless the context otherwise requires:
(a) "Articles Supplementary" shall mean the Articles
Supplementary of the Company, establishing the powers, preferences and
rights of the Series M28 Preferred Shares and the Series M7 Preferred
Shares filed on April 15, 1992 in the office of the State Department of
Assessments and Taxation of the State of Maryland.
(b) "Auction" shall have the meaning specified in Section 3.1
hereof.
(c) "Auction Procedures" shall mean the Auction Procedures
that are set forth in Paragraph 11 of the Articles Supplementary.
(d) "Authorized Officer" shall mean each Senior Vice
President, Vice President, Assistant Vice President, Trust Officer,
Assistant Secretary and Assistant Treasurer of the Auction Agent assigned
to its Corporate Trust and Agency Group and every other officer or employee
of the Auction Agent designated as an "Authorized Officer" for purposes of
this Agreement in a communication to BD.
(e) "BD Officer" shall mean each officer or employee of
BD designated as a "BD Officer" for purposes of this Agreement in a
communication to the Auction Agent.
(f) "Broker-Dealer Agreement" shall mean this Agreement
and any substantially similar agreement between the Auction Agent and a
Broker-Dealer.
(g) "Purchaser's Letter" shall mean a letter addressed to
the Company, the Auction Agent and a Broker-Dealer, substantially in the
form attached hereto as Exhibit A.
(h) "Settlement Procedures" shall mean the Settlement
Procedures attached hereto as Exhibit B.
1.3 Rules of Construction. Unless the context or use indicates
another or different meaning or intent, the following rules shall apply to
the construction of this Agreement:
(a) Words importing the singular number shall include the
plural number and vice versa.
(b) The captions and headings herein are solely for
convenience of reference and shall not constitute a part of this Agreement
nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other
words of similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day
shall be to New York City time.
2. Notification of Dividend Period and Advance Notice of
Allocation of Taxable Income.
(a) The provisions contained in paragraph 2 of the
Articles Supplementary concerning the notification of a Special Dividend
Period will be followed by the Auction Agent and BD and the provisions
contained therein are incorporated herein by reference in their entirety
and shall be deemed to be a part of this Agreement to the same extent as if
such provisions were fully set forth herein.
(b) Whenever the Company intends to include any net
capital gains or other taxable income in any dividend on Preferred Shares,
the Company will notify the Auction Agent of the amount to be so included
at least five Business Days prior to the Auction Date on which the
Applicable Rate for such dividend is to be established. Whenever the
Auction Agent receives such notice from the Company, it will in turn notify
BD, who, on or prior to such Auction Date, will notify its Existing Holders
and Potential Holders believed to be interested in submitting an Order in
the Auction to be held on such Auction Date.
3. The Auction.
3.1 Purpose; Incorporation by Reference of Auction Procedures and
Settlement Procedures.
(a) On each Auction Date, the provisions of the Auction
Procedures will be followed by the Auction Agent for the purpose of
determining the Applicable Rate for the Series M28 Preferred Shares or the
Series M7 Preferred Shares, as the case may be for the next Dividend Period
therefor. Each periodic operation of such procedures is hereinafter
referred to as an "Auction."
(b) All of the provisions contained in the Auction
Procedures and the Settlement Procedures are incorporated herein by
reference in their entirety and shall be deemed to be a part of this
Agreement to the same extent as if such provisions were fully set forth
herein.
(c) BD is delivering herewith a Purchaser's Letter
executed by BD and, in the case of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Lehman Special Securities Inc., A.G. Edwards & Sons, Inc.,
Kidder, Peabody & Co. Incorporated, Legg Mason Wood Walker Incorporated,
PaineWebber Incorporated and Prudential Securities Incorporated, a list of
persons to whom BD will initially sell the shares of the Series M28
Preferred Shares and the Series M7 Preferred Shares, the number of shares
of both such series of Preferred Shares BD will sell to each such person
and the number of shares of both such series of Preferred Shares BD will
hold for its own account. BD agrees to act as, and assumes the obligations
of and limitations and restrictions placed upon, a Broker-Dealer under this
Agreement. BD understands that other Persons meeting the requirements
specified in the definition of "Broker-Dealer" contained in Paragraph 1 of
the Articles Supplementary may execute a Broker-Dealer Agreement and a
Purchaser's Letter and participate as Broker-Dealers in Auctions.
(d) BD and other Broker-Dealers may participate in
Auctions for their own accounts, provided that BD or such other
Broker-Dealers, as the case may be, has executed a Purchaser's Letter.
However, the Company may by notice to BD and all other Broker-Dealers
prohibit all Broker-Dealers from submitting Bids in Auctions for their own
accounts, provided that Broker-Dealers may continue to submit Hold Orders
and Sell Orders.
3.2 Preparation for Each Auction.
(a) Not later than 9:30 A.M. on each Auction Date for
both series of Preferred Shares, the Auction Agent shall advise BD by
telephone of the Maximum Applicable Rate in effect on such Auction Date as
determined from the higher of the 30-day "AA" Composite Commercial Paper
Rate and the Taxable Equivalent of the Short-Term Municipal Bond Rate
(except in the case of a Special Dividend Period in which case the Maximum
Applicable Rate shall be determined from the higher of the Special Dividend
Period Reference Rate and the Taxable Equivalent of the Short-Term
Municipal Bond Rate).
(b) In the event that the Auction Date for any Auction
shall be changed after the Auction Agent has given the notice referred to
in clause (vii) of paragraph (a) of the Settlement Procedures, the Auction
Agent, by such means as the Auction Agent deems practicable, shall give
notice of such change to BD not later than the earlier of 9:15 A.M. on the
new Auction Date or 9:15 A.M. on the old Auction Date. Thereafter, BD shall
promptly notify customers of BD that BD believes are Existing Holders of
shares of Series M28 Preferred Shares or Series M7 Preferred Shares, as the
case may be, of such change in the Auction Date.
(c) The Auction Agent from time to time may request BD to
provide it with a list of the respective customers BD believes are Existing
Holders of shares of Series M28 Preferred Shares or Series M7 Preferred
Shares. BD shall comply with any such request, and the Auction Agent shall
keep confidential any such information, including information received as
to the identity of Bidders in any Auction, and shall not disclose any such
information so provided to any Person other than the Company; and such
information shall not be used by the Auction Agent or its officers,
employees, agents or representatives for any purpose other than such
purposes as are described herein. The Auction Agent stall transmit any list
of customers BD believes are Existing Holders of shares of Series M28
Preferred Shares or Series M7 Preferred Shares and information related
thereto only to its officers, employees, agents or representatives in the
Corporate Trust and Agency Group who need to know such information for the
purposes of acting in accordance with this Agreement and shall prevent the
transmission of such information to others and shall cause its officers,
employees, agents and representatives to abide by the foregoing
confidentiality restrictions; provided, however, that the Auction Agent
shall have no responsibility or liability for the actions of any of its
officers, employees, agents or representatives after they have left the
employ of the Auction Agent.
(d) The Auction Agent is not required to accept the
Purchaser's Letter for any Potential Holder for an Auction unless it is
received by the Auction Agent by 3:00 P.M. on the Business Day next
preceding such Auction.
3.3 Auction Schedule; Method of Submission of Orders.
(a) The Company and the Auction Agent shall conduct
Auctions for both series of Preferred Shares in accordance with the
schedule set forth below. Such schedule may be changed at any time by the
Auction Agent with the consent of the Company, which consent shall not be
unreasonably withheld. The Auction Agent shall give notice of any such
change to BD. Such notice shall be received prior to the first Auction Date
on which any such change shall be effective.
Time Event
---- -----
By 9:30 A.M. Auction Agent advises the Company and
Broker-Dealers of the Maximum Applicable Rate as
determined from the higher of the 30-day "AA"
Composite Commercial Paper Rate and the Taxable
Equivalent of the Short-Term Municipal Bond Rate
(except in the case of a Special Dividend Period
in which case the Maximum Applicable Rate shall be
the higher of the Special Dividend Period
Reference Rate and the Taxable Equivalent of the
Short-Term Municipal Bond Rate) as set forth in
Section 3.2(a) hereof.
9:30 A.M. - 1:00 P.M. Auction Agent assembles information communicated
to it by Broker-Dealers as provided in Paragraph
11(c)(i) of the Articles Supplementary. Submission
Deadline is 1:00 P.M.
Not earlier than Auction Agent makes determinations pursuant to 1:00 P.M.
Paragraph 11(d)(i) of the Articles Supplementary.
By approximately Auction Agent advises Company of results of
3:00 P.M. Auction as provided in Paragraph 11(d)(ii) of the
Articles Supplementary.
Submitted Bids and Submitted Sell Orders are
accepted and rejected in whole or in part and
shares of Preferred Shares are allocated as
provided in Paragraph 11(e) of the Articles
Supplementary.
Auction Agent gives notice of Auction results
as set forth in Section 3.4(a) hereof.
(b) BD agrees to maintain a list of Potential Holders and
to contact the Potential Holders on such list on or prior to each Auction
Date for the purposes set forth in Paragraph 11 of the Articles
Supplementary.
(c) BD agrees not to sell, assign or dispose of any
Series M28 Preferred Shares or Series M7 Preferred Shares to any Person who
has not delivered a signed Purchaser's Letter to the Auction Agent.
(d) BD shall submit Orders to the Auction Agent in
writing in substantially the form attached hereto as Exhibit C. BD shall
submit separate Orders to the Auction Agent for each Potential Holder or
Existing Holder on whose behalf BD is submitting an Order and shall not net
or aggregate the Orders of Potential Holders or Existing Holders on whose
behalf BD is submitting Orders.
(e) BD shall deliver to the Auction Agent (i) a written
notice, substantially in the form attached hereto as Exhibit D, of
transfers of shares of Series M28 Preferred Shares or Series M7 Preferred
Shares made through BD by an Existing Holder to another Person other than
pursuant to an Auction, and (ii) a written notice, substantially in the
form attached hereto as Exhibit E, of the failure of any shares of Series
M28 Preferred Shares or Series M7 Preferred Shares to be transferred to or
by any Person that purchased or sold shares of Series M28 Preferred Shares,
Series M7 Preferred Shares or through BD pursuant to an Auction. The
Auction Agent is not required to accept any notice delivered pursuant to
the terms of the foregoing sentence with respect to an Auction unless it is
received by the Auction Agent by 3:00 P.M. on the Business Day next
preceding the applicable Auction Date.
3.4 Notice of Auction Results.
(a) On each Auction Date, the Auction Agent shall notify
BD by telephone as set forth in paragraph (a) of the Settlement Procedures.
On the Business Day next succeeding such Auction Date, the Auction Agent
shall notify BD in writing of the disposition of all Orders submitted by BD
in the Auction held on such Auction Date.
(b) BD shall notify each Existing Holder or Potential
Holder on whose behalf BD has submitted an Order as set forth in paragraph
(b) of the Settlement Procedures and take such other action as is required
of BD pursuant to the Settlement Procedures.
If any Existing Holder selling Preferred Shares in an
Auction fails to deliver such shares, the BD of any Person that was to have
purchased shares of Series M28 Preferred Shares or Series M7 Preferred
Shares in such Auction may deliver to such Person a number of whole shares
of such Series M28 Preferred Shares or Series M7 Preferred Shares, as the
case may be, that is less than the number of shares that otherwise was to
be purchased by such Person. In such event, the number of shares of such
Series M28 Preferred Shares or Series M7 Preferred Shares, to be so
delivered shall be determined by such BD. Delivery of such lesser number of
shares shall constitute good delivery. Upon the occurrence of any such
failure to deliver shares, such BD shall deliver to the Auction Agent the
notice required by Section [ILLEGIBLE] hereof. Notwithstanding the
foregoing terms of this Section 3.4(b), any delivery or non-delivery of
shares of Series M28 Preferred Shares or Series M7 Preferred Shares which
represents any departure from the results of an Auction, as determined by
the Auction Agent, shall be of no effect unless and until the Auction Agent
shall have been notified of such delivery or non-delivery in accordance
with the terms of Section 3.3(e)(ii) hereof. The Auction Agent shall have
no duty or liability with respect to enforcement of this Section 3.4(b).
3.5 Service Charge to Be Paid to BD. On the Business Day next
succeeding each Auction Date for each series of Preferred Shares, the
Auction Agent shall pay to BD from moneys received from the Company an
amount equal to, (a) in the case of any Auction Date immediately preceding
any Dividend Period of 364 days or less the product of (i) a fraction the
numerator of which is the number of days in such Dividend Period
(calculated by counting the first day of such Dividend Period but excluding
the last day thereof) and the denominator of which is 365, times (ii) 1/4
of 1%, times (iii) $50,000, times (iv) the sum of (A) the aggregate number
of shares of such series of Preferred Shares placed by BD in the applicable
Auction that were (x) the subject of a Submitted Bid of an Existing Holder
submitted by BD and continued to be held as a result of such submission and
(y) the subject of a Submitted Bid of a Potential Holder submitted by BD
and were purchased as a result of such submission plus (B) the aggregate
number of shares of such series of Preferred Shares subject to valid Hold
Orders (determined in accordance with Paragraph 11 of the Articles
Supplementary) submitted to the Auction Agent by BD plus (C) the number of
shares of such series of Preferred Shares deemed to be subject to Hold
Orders by Existing Holders pursuant to Paragraph 11 of the Articles
Supplementary that were acquired by such Existing Holders through BD and
(b) in the case of any Auction Date immediately preceding any Dividend
Period of more than 364 days, that amount as mutually agreed on by the
Company and BD, based on the selling concession that would be applicable to
an underwriting of fixed or variable rate preferred shares with a similar
final maturity or variable rate dividend period, respectively, at the
commencement of the Dividend Period with respect to such Auction.
For purposes of subclause (iv)(C) of the foregoing sentence, if
any Existing Holder who acquired shares of Series M28 Preferred Shares or
Series M7 Preferred Shares through BD transfers those shares to another
Person other than pursuant to an Auction, then the Broker-Dealer for the
shares so transferred shall continue to be BD, provided, however, that if
the transfer was effected by, or if the transferee is, a Broker-Dealer
other than BD, then such Broker-Dealer shall be the Broker-Dealer for such
shares.
4. The Auction Agent.
4.1 Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the
Company hereunder and owes no fiduciary duties to any other Person by
reason of this Agreement.
(b) The Auction Agent undertakes to perform such duties
and only such duties as are specifically set forth in this Agreement, and
no implied covenants or obligations shall be read into this Agreement
against the Auction Agent.
(c) In the absence of bad faith or negligence on its
part, the Auction Agent shall not be liable for any action taken, suffered,
or omitted or for any error of judgment made by it in the performance of
its duties under this Agreement. The Auction Agent shall not be liable for
any error of judgment made in good faith unless the Auction Agent shall
have been negligent in ascertaining (or failing to ascertain) the pertinent
facts.
4.2 Rights of the Auction Agent.
(a) The Auction Agent may rely and shall be protected in
acting or refraining from acting upon any communication authorized by this
Agreement and upon any written instruction, notice, request, direction,
consent, report, certificate, share certificate or other instrument, paper
or document believed by it to be genuine. The Auction Agent shall not be
liable for acting upon any telephone communication authorized by this
Agreement which the Auction Agent believes in good faith to have been given
by the Company or by BD. The Auction Agent may record telephone
communications with BD.
(b) The Auction Agent may consult with counsel of its own
choice, and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance,
expend or risk its own funds or otherwise incur or become exposed to
financial liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise
its rights hereunder either directly or by or through agents or attorneys.
4.3 Auction Agent's Disclaimer. The Auction Agent makes no
representation as to the validity or adequacy of this Agreement or the
Series M28 Preferred Shares or the Series M7 Preferred Shares.
5. Miscellaneous.
5.1 Termination. Any party may terminate this Agreement at any
time upon five days' prior notice to the other party.
5.2 Agent Member. At the date hereof, BD is a participant of the
Securities Depository.
5.3 Communications. Except for (i) communications authorized to
be made by telephone pursuant to this Agreement or the Auction Procedures
and (ii) communications in connection with the Auctions (other than those
expressly required to be in writing), all notices, requests and other
communications to any party hereunder shall be in writing (including
telecopy or similar writing) and shall be given to such party, addressed to
it, at its address or telecopy number set forth below:
If to BD A.G. Edwards & Sons, Inc.
addressed: #1 North Jefferson Avenue
St. Louis, MO 63103
Attention: Howard Posner
Telecopier No.: (314) 289-6010
Telephone No.: (314) 289-3039
If to the Auction Bankers Trust Company
Agent, addressed: 4 Albany Street
New York, New York 10006
Attention: Auction Rate Securities
Telecopier No.: (212) 250-6850
Telephone No.: (212) 250-6215
or such other address or telecopy number as such party may hereafter
specify for such purpose by notice to the other party. Each such notice,
request or communication shall be effective when delivered at the address
specified herein. Communications shall be given on behalf of BD by a BD
Officer and on behalf of the Auction Agent by an Authorized Officer. BD may
record telephone communications with the Auction Agent.
5.4 Entire Agreement. This Agreement contains the entire
agreement between the parties relating to the subject matter hereof, and
there are no other representations, endorsements, promises, agreements or
understandings, oral, written or inferred, between the parties relating to
the subject matter hereof.
5.5 Benefits. Nothing in this Agreement, express or implied,
shall give to any person, other than the Company, the Auction Agent and BD
and their respective successors and assigns, any benefit of any legal or
equitable right, remedy or claim under this Agreement.
5.6 Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be
modified, amended, rescinded, cancelled or waived, in whole or in part,
except by a written instrument signed by a duly authorized representative
of the party to be charged.
(b) Failure of either party to this Agreement to exercise
any right or remedy hereunder in the event of a breach of this Agreement by
the other party shall not constitute a waiver of any such right or remedy
with respect to any subsequent breach.
5.7 Successors and Assigns. This Agreement shall be binding upon,
inure to the benefit of, and be enforceable by, the respective successors
and permitted assigns of each of BD and the Auction Agent. This Agreement
may not be assigned by either party hereto absent the prior written consent
of the other party; provided, however, that this Agreement may be assigned
by the Auction Agent to a successor Auction Agent selected by the Company
without the consent of BD.
5.8 Severability. If any clause, provision or section of this
Agreement shall be ruled invalid or unenforceable by any court of competent
jurisdiction, the invalidity or unenforceability of such clause, provision
or section shall not affect any remaining clause, provision or section
hereof.
5.9 Execution in Counterparts. This Agreement may be executed
in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable
to agreements made and to be performed in said State.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly
authorized officers as of the date first above written.
BANKERS TRUST COMPANY
By: /s/ [ILLEGIBLE]
-----------------------------------------
Title: Asst Treas
A.G. EDWARDS & SONS, INC.
By: /s/ Howard R. Posner
-----------------------------------------
Title:
HOWARD R. POSNER
SENIOR VICE PRESIDENT
EXHIBIT A
TO BE SUBMITTED TO YOUR BROKER-DEALER WHO WILL THEN DELIVER COPIES ON YOUR
BEHALF TO THE RESPECTIVE TRUST COMPANY OR REMARKETING AGENT. MASTER
PURCHASER'S LETTER
Relating to
Securities Involving Rate Settings
Through Auctions or Remarketings
THE COMPANY
A REMARKETING AGENT
THE TRUST COMPANY
A BROKER-DEALER
AN AGENT MEMBER
OTHER PERSONS
Dear Sirs:
1. This letter is designed to apply to publicly or privately offered
debt or equity securities ("Securities") of any issuer ("Company") which
are described in any final prospectus or other offering materials relating
to such Securities as the same may be amended or supplemented
(collectively, with respect to the particular Securities concerned, the
"Prospectus") and which involve periodic rate settings through auctions
("Auctions") or remarketing procedures ("Remarketings"). This letter shall
be for the benefit of any Company and of any trust company, auction agent,
paying agent (collectively, "trust company"), remarketing agent,
broker-dealer, agent member, securities depository or other interested
person in connection with any Securities and related Auctions or
Remarketings (it being understood that such persons may be required to
execute specified agreements and nothing herein shall alter such
requirements). The terminology used herein is intended to be general in its
application and not to exclude any Securities in respect of which (in the
Prospectus or otherwise) alternative terminology is used.
2. We may from time to time offer to purchase, purchase, offer to sell
and/or sell Securities of any Company as described in the Prospectus
relating thereto. We agree that this letter shall apply to all such
purchases, sales and offers and to Securities owned by us. We understand
that the dividend/interest rate on Securities may be based from time to
time on the results of Auctions or Remarketings as set forth in the
Prospectus.
3. We agree that any bid or sell order placed by us in an Auction or a
Remarketing shall constitute an irrevocable offer (except as otherwise
described in the Prospectus) by us to purchase or sell the Securities
subject to such bid or sell order, or such lesser amount of Securities as
we shall be required to sell or purchase as a result of such Auction or
Remarketing, at the applicable price, all as set forth in the Prospectus,
and that if we fail to place a bid or sell order with respect to Securities
owned by us with a broker-dealer on any Auction or Remarketing date, or a
broker-dealer to which we communicate a bid or sell order fails to submit
such bid or sell order to the trust company or remarketing agent concerned,
we shall be deemed to have placed a hold order with respect to such
Securities as described in the Prospectus. We authorize any broker-dealer
that submits a bid or sell order as our agent in Auctions or Remarketings
to execute contracts for the sale of Securities covered by such bid or sell
order. We recognize that the payment by such broker-dealer for Securities
purchased on our behalf shall not relieve us of any liability to such
broker-dealer for payment for such Securities.
4. We understand that in a Remarketing, the dividend or interest rate
or rates on the Securities and the allocation of Securities tendered for
sale between dividend or interest periods of different lengths will be
based from time to time on the determinations of one or more remarketing
agents, and we agree to be conclusively bound by such determinations. We
further agree to the payment of different dividend or interest rates to
different holders of Securities depending on the length of the dividend or
interest period elected by such holders. We agree that any notice given by
us to a remarketing agent (or to a broker-dealer for transmission to a
remarketing agent) of our desire to tender Securities in a Remarketing
shall constitute an irrevocable (except to the limited extent set forth in
the Prospectus) offer by us to sell the Securities specified in such
notice, or such lesser number of Securities as we shall be required to sell
as a result of such Remarketing in accordance with the terms set forth in
the Prospectus, and we authorize the remarketing agent to sell, transfer or
otherwise dispose of such Securities as set forth in the Prospectus.
5. We agree that, during the applicable period as described in the
Prospectus, dispositions of Securities can be made only in the
denominations set forth in the Prospectus and we will sell, transfer or
otherwise dispose of any Securities held by us from time to time only
pursuant to a bid or sell order placed in an Auction, in a Remarketing, to
or through a broker-dealer or, when permitted in the Prospectus, to a
person that has signed and delivered to the applicable trust company or a
remarketing agent a letter substantially in the form of this letter (or
other applicable purchaser's letter) provided that in the case of all
transfers other than pursuant to Auctions or Remarketings we or our
broker-dealer or our agent member shall advise such trust company or a
remarketing agent of such transfer. We understand that a restrictive legend
will be placed on certificates representing the Securities and
stop-transfer instructions will be issued to the transfer agent and or
registrar, all as set forth in the Prospectus.
6. We agree that, during the applicable period as described in the
Prospectus, ownership of Securities shall be represented by one or more
global certificates registered in the name of the applicable securities
depository or its nominee that we will not be entitled to receive any
certificate representing the Securities and that our ownership of any
Securities will be maintained in book entry form by the securities
depository for the account of our agent member, which in turn will maintain
records of our beneficial ownership. We authorize and instruct our agent
member to disclose to the applicable trust company or remarketing agent
such information concerning our beneficial ownership of Securities as such
trust company or remarketing agent shall request.
7. We acknowledge that partial deliveries of Securities purchased in
Auctions or Remarketings may be made to us and such deliveries shall
constitute good delivery as set forth in the Prospectus.
8. This letter is not a commitment by us to purchase any Securities.
9. This letter supersedes any prior-dated version of this master
purchaser's letter, and supplements any prior or post-dated purchaser's
letter specific to particular Securities, and this letter may only be
revoked by a signed writing delivered to the original recipients hereof.
10. The descriptions of Auction or Remarketing procedures set forth in
each applicable Prospectus are incorporated by reference herein and in case
of any conflict between this letter, any purchaser's letter specific to
particular Securities and any such description, such description shall
control.
11. Any xerographic or other copy of this letter shall be deemed of
equal effect as a signed original.
12. Our agent member of The Depository Trust Company currently is
13. Our personnel authorized to place orders with broker-dealers for
the purposes set forth in the Prospectus in Auctions or Remarketings
currently is/are , telephone number ( )
14. Our taxpayer identification number is
15. In the case of each offer to purchase, purchase, offer to sell or
sale by us of Securities not registered under the Securities Act of 1933,
as amended (the "Act"), we represent and agree as follows:
A. We understand and expressly acknowledge that the Securities
have not been and will not be registered under the Act and,
accordingly, that the Securities may not be reoffered, resold or
otherwise pledged, hypothecated or transferred unless an applicable
exemption from the registration requirements of the Act is available.
B. We hereby confirm that any purchase of Securities made by us
will be for our own account, or for the account of one or more
parties for which we are acting as trustee or agent with complete
investment discretion and with authority to bind such parties, and
not with a view to any public resale or distribution thereof. We and
each other party for which we are acting which will acquire
Securities will be "accredited investors" within the meaning of
Regulation D under the Act with respect to the Securities to be
purchased by us or such party, as the case may be, will have
previously invested in similar types of instruments and will be able
and prepared to bear the economic risk of investing in and holding
such Securities.
C. We acknowledge that prior to purchasing any Securities we
shall have received a Prospectus (or private placement memorandum)
with respect thereto and acknowledge that we will have had access to
such financial and other information, and have been afforded the
opportunity to ask such questions of representatives of the Company
and receive answers thereto, as we deem necessary in connection with
our decision to purchase Securities.
D. We recognize that the Company and broker-dealers will rely
upon the truth and accuracy of the foregoing investment
representations and agreements, and we agree that each of our
purchases of Securities now or in the future shall be deemed to
constitute our concurrence in all of the foregoing which shall be
binding on us and each party for which we are acting as set forth in
Subparagraph B above.
_______________________________________
(Name of Purchaser)
By_____________________________________
Printed Name:
Title:
Dated:_____________________________
Mailing Address of Purchaser
- -----------------------------------
- -----------------------------------
- -----------------------------------
EXHIBIT B
SETTLEMENT PROCEDURES
Capitalized terms used herein shall have the respective meanings specified
in the Prospectus.
(a) On each Auction Date, the Auction Agent shall notify by telephone
the Broker-Dealers that participated in the Auction held on such Auction
Date and submitted an Order on behalf of any Existing Holder or Potential
Holder of:
(i) the Applicable Rate fixed for the next succeeding Dividend
Period;
(ii) whether Sufficient Clearing Bids existed for the
determination of the Applicable Rate;
(iii) if such Broker-Dealer (a "Seller's Broker-Dealer")
submitted a Bid or Sell Order on behalf of an Existing Holder, the
number of shares, if any, of Preferred Shares to be sold by such
Existing Holder;
(iv) if such Broker-Dealer (a "Buyer's Broker-Dealer")
submitted a Bid on behalf of a Potential Holder, the number of
shares, if any, of Preferred Shares to be purchased by such Potential
Holder;
(v) if the aggregate number of Preferred Shares to be sold by
all Existing Holders on whose behalf such Broker-Dealer submitted a
Bid or a Sell Order exceeds the aggregate number of Preferred Shares
to be purchased by all potential Holders on whose behalf such
Broker-Dealer submitted a Bid, the name or names of one or more
Buyer's Broker-Dealers (and the name of the Agent Member, if any, of
each such Buyer's Broker-Dealer) acting for one or more purchasers of
such excess number of Preferred Shares and the number of such shares
to be purchased from one or more Existing Holders on whose behalf
such Broker-Dealer acted by one or more Potential Holders on whose
behalf each of such Buyer's Broker-Dealers acted;
(vi) if the aggregate number of Preferred Shares to be
purchased by all Potential Holders on whose behalf such Broker-Dealer
submitted a Bid exceeds the aggregate number of Preferred Shares to
be sold by all Existing Holders on whose behalf such Broker-Dealer
submitted a Bid or a Sell Order, the name or names of one or more
Seller's Broker-Dealers (and the name of the Agent Member, if any, of
each such Seller's Broker-Dealer) acting for one or more sellers of
such excess number of Preferred Shares and the number of such shares
to be sold to one or more Potential Holders on whose behalf such
Broker-Dealer acted by one or more Existing Holders on whose
behalf each of such Seller's Broker-Dealers acted; and
(vii) the Auction Date of the next succeeding Auction with
respect to the Preferred Shares.
(b) On each Auction Date, each Broker-Dealer that submitted an Order
on behalf of any Existing Holder or Potential Holder shall:
(i) in the case of a Broker-Dealer that is a Buyer's
Broker-Dealer, instruct each Potential Holder on whose behalf such
Broker-Dealer submitted a Bid that was accepted, in whole or in part,
to instruct such Potential Holder's Agent Member to pay to such
Broker-Dealer (or its Agent Member) through the Securities Depository
the amount necessary to purchase the number of Preferred Shares
to be purchased pursuant to such Bid against receipt of such
shares and advise such Potential Holder of the Applicable Rate
for the next succeeding Dividend Period;
(ii) in the case of a Broker-Dealer that is a Seller's
Broker-Dealer, instruct each Existing Holder on whose behalf such
Broker-Dealer submitted a Sell Order that was accepted, in whole or
in part, or a Bid that was accepted, in whole or in part, to instruct
such Existing Holder's Agent Member to deliver to such Broker-Dealer
(or its Agent Member) through the Securities Depository the number of
Preferred Shares to be sold pursuant to such Order against payment
therefor and advise any such Existing Holder that will continue to
hold Preferred Shares of the Applicable Rate for the next succeeding
Dividend Period;
(iii) advise each Existing Holder on whose behalf such
Broker-Dealer submitted a Hold Order of the Applicable Rate for the
next succeeding Dividend Period;
(iv) advise each Existing Holder on whose behalf such
Broker-Dealer submitted an Order of the Auction Date for the next
succeeding Auction; and
(v) advise each Potential Holder on whose behalf such
Broker-Dealer submitted a Bid that was accepted, in whole or in part,
of the Auction Date for the next succeeding Auction;
(c) On the basis of the information provided to it pursuant to (a)
above, each Broker-Dealer that submitted a Bid or a Sell Order on behalf of
a Potential Holder or an Existing Holder shall, in such manner and at such
time or times as in its sole discretion it may determine, allocated any
funds received by it pursuant to (b)(i) above and any Preferred Shares
received by it pursuant to (b)(ii) above among the Potential Holders, if
any, on whose behalf such Broker-Dealer submitted Bids, the Existing
Holders, if any, on whose behalf such Broker-Dealer submitted Bids that
were accepted or Sell Orders, and any Broker-Dealer or Broker-Dealers
identified to it by the Auction Agent pursuant to (a)(v) or (a)(vi) above.
(d) On each Auction Date:
(i) each Potential Holder and Existing Holder shall instruct
its Agent Member as provided in (b)(i) or (ii) above, as the case may
be;
(ii) each Seller's Broker-Dealer which is not an Agent Member
of the Securities Depository shall instruct its Agent Member to (A)
pay through the Securities Depository to the Agent Member of the
Existing Holder delivering shares to such Broker-Dealer pursuant to
(b)(ii) above the amount necessary to purchase such shares against
receipt of such shares, and (B) deliver such shares through the
Securities Depository to a Buyer's Broker-Dealer (or its Agent
Member) identified to such Seller's Broker-Dealer pursuant to (a)(v)
above against payment therefor, and
(iii) each Buyer's Broker-Dealer which is not an Agent Member
of the Securities Depository shall instruct its Agent Member to (A)
pay through the Securities Depository to a Seller's Broker-Dealer (or
its Agent Member) identified pursuant to (a)(vi) above the amount
necessary to purchase the shares to be purchased pursuant to (b)(i)
above against receipt of such shares, and (B) deliver such shares
through the Securities Depository to the Agent Member of the
purchaser thereof against payment therefor.
(e) On the day after the Auction Date:
(i) each Bidder's Agent Member referred to in (d)(i) above shall
instruct the Securities Depository to execute the transactions
described under (b)(i) or (ii) above, and the Securities Depository
shall execute such transactions;
(ii) each Seller's Broker-Dealer or its Agent Member shall
instruct the Securities Depository to execute the transactions
described in (d)(ii) above, and the Securities Depository shall
execute such transactions, and
(iii) each Buyer's Broker-Dealer or its Agent Member shall
instruct the Securities Depository to execute the transactions
described in (d)(iii) above, and the Securities Depository shall
execute such transactions.
(f) If an Existing Holder selling Preferred Shares in an Auction
fails to deliver such shares (by authorized book-entry), a Broker-Dealer
may deliver to the Potential Holder on behalf of which it submitted a Bid
that was accepted a number of whole Preferred Shares that is less than the
number of shares that otherwise was to be purchased by such Potential
Holder. In such event, the number of Preferred Shares to be so delivered
shall be determined solely by such Broker-Dealer. Delivery of such lesser
number of shares shall constitute good delivery. Notwithstanding the
foregoing terms of this paragraph (f), any delivery or non-delivery of
shares which shall represent any departure from the results of an Auction,
as determined by the Auction Agent, shall be of no effect unless and until
the Auction Agent shall have been notified of such delivery or non-delivery
in accordance with the provisions of the Auction Agent Agreement and the
Broker-Dealer Agreements.
EXHIBIT C
BANKERS TRUST COMPANY
AUCTION BID FORM
Submit To: Bankers Trust Co.
4 Albany Street
New York, New York 10006
Attention: Auction Rate Securities
Issue: The Blackstone Insured Municipal
Term Trust Inc.
Series: _____________________________
Auction Date: _____________________________
Telephone (212) 250-6215
Facsimile (212) 250-6850
The undersigned Broker-Dealer submits the following Order on behalf of the
Bidder listed below:
Name of Bidder:__________________________________
EXISTING HOLDER
Shares now held_____________________ HOLD _________________
BID at rate of _________________
SELL _________________
POTENTIAL HOLDER
# of shares bid _________________
BID at rate of _________________
Notes:
(1) If submitting more than one Bid for one Bidder, use additional
Auction Bid Forms.
(2) If one or more Bids covering in the aggregate more than the number of
outstanding shares held by any Existing Holder are submitted, such
Bids shall be considered valid in the order of priority set forth in
the Auction Procedures on the above issue.
(3) A Hold or Sell may be placed only by an Existing Holder covering a
number of shares not greater than the number of shares currently
held.
(4) Potential Holders may make only Bids, each of which must specify a
rate. If more than one Bid is submitted on behalf of any Potential
Holder, each Bid submitted shall be a separate Bid with the rate
specified.
(5) Bids may contain no more than three figures to the right of the
decimal point (.001 of 1%). Fractions will not accepted.
NAME OF BROKER-DEALER ____________________________________
Authorized Signature _____________________________________
EXHIBIT D
(To be used only for transfers made other than pursuant to an
Auction).
TRANSFER FORM
Re: The Blackstone Insured Municipal Term Trust Inc.
Series [M28][M7] Preferred Shares (the
"Preferred Shares")
We are (check one):
/ / the Existing Holder named below;
/ / the Broker-Dealer for such Existing Holder; or
/ / the Agent Member for such Existing Holder.
We hereby notify you that such Existing Holder has transferred ________
shares of [Series M28] [Series M7] Preferred Shares to ____________.
--------------------------
(Name of Existing Holder)
--------------------------
(Name of Broker-Dealer)
--------------------------
(Name of Agent Member)
By:_______________________
Printed Name:
Title:
EXHIBIT E
(To be used only for failures to deliver
Preferred Shares sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
Complete either I or II
I. We are a Broker-Dealer for _________________(the "Purchaser"), which
purchased ________ Series [M28][M7] Preferred Shares of The
Blackstone Insured Municipal Term Trust Inc. in the Auction held on
______________________ from the seller of such shares.
II. We are a Broker-Dealer for ________________________ (the "Seller"),
which sold ________ Series [M28][M7] Preferred Shares of The
Blackstone Municipal Target Term Trust Inc. in the Auction held on
________________________ to the Purchaser of such shares.
We hereby notify you that (check one) --
_______ the Seller failed to deliver such shares to the Purchaser
_______ the Purchaser failed to make payment to the Seller upon delivery
of such shares
Name: __________________________
(Name of Broker-Dealer)
By: __________________________
Printed Name:
Title:
Auction Rate Municipal SHARES
Preferred Stock, Series M7 1,300
THE BLACKSTONE INSURED MUNICIPAL TERM TRUST, INC.
INCORPORATED UNDER THE LAWS SEE REVERSE
FOR
OF THE STATE OF MARYLAND CERTAIN DEFINITIONS
THIS CERTIFICATE IS TRANSFERABLE CUSIP 092506 20 3
IN NEW YORK NY
THIS CERTIFIES THAT
CEDE & CO.
IS THE OWNER OF One Thousand Three Hundred (1,300)
FULLY PAID AND NON-ASSESSABLE SHARES OF AUCTION RATE MUNICIPAL
PREFERRED STOCK, SERIES M7, PAR VALUE $.01 PER SHARE, LIQUIDATION
PREFERENCE $50,000 PER SHARE PLUS AN AMOUNT EQUAL TO ACCUMULATED BUT UNPAID
DIVIDENDS (WHETHER OR NOT EARNED OR DECLARED) THEREON PLUS THE PREMIUM, IF
ANY, RESULTING FROM THE DESIGNATION OF A PREMIUM CALL PERIOD OF
THE BLACKSTONE INSURED MUNICIPAL TERM TRUST INC.
transferable on the books of said Corporation in person or by duly
authorized attorney upon surrender of this certificate properly endorsed.
This certificate is not valid until countersigned by the Transfer
Agent and registered by the Registrar.
In Witness Whereof, THE BLACKSTONE INSURED MUNICIPAL TERM TRUST INC.
has caused its corporate seal to be hereto affixed and this certificate to
be executed in its name and behalf by its duly authorized officer.
Dated: April 27, 1992
Countersigned and Registered: /s/ [Illegible]
BANKERS TRUST COMPANY -----------------------------------
(New York) Transfer Agent President
/s/ [Illegible]
-----------------------------------
Treasurer
By
Authorized Signature
/s/ [ILLEGIBLE]
- -------------------------------
THE TRANSFER OF THE SHARES OF AUCTION RATE MUNICIPAL PREFERRED STOCK
REPRESENTED HEREBY IS SUBJECT TO THE RESTRICTIONS CONTAINED IN THE
CORPORATION'S CHARTER, AND THE PURCHASER'S LETTERS REFERRED TO THEREIN. THE
CORPORATION WILL FURNISH INFORMATION ABOUT SUCH RESTRICTION TO ANY
STOCKHOLDER, WITHOUT CHARGE, UPON REQUEST TO THE SECRETARY OF THE
CORPORATION.
THE BLACKSTONE INSURED MUNICIPAL TERM TRUST INC.
A full statement of the designations and any preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption of the
shares of each class of stock which the Corporation is authorized to issue
and the differences in the relative rights and preferences between the
shares of each series to the extent that they have been set, and the
authority of the Board of Directors to set the relative rights and
preferences of subsequent series, will be furnished by the Corporation to
any stockholder, without charge, upon request to the Secretary of the
Corporation at its principal office.
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they were
written out in full according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN
ACT--_____Custodian_______
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with rights under Uniform Gifts
of survivorship and not as to to Minors Act _______
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For value received ____________ hereby sell, assign and transfer unto
Please insert social security or other
identifying number of assignee
----------------------------
/ /
/---------------------------/
- --------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address, Including Zip Code of Assignee)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------_____ shares
of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint
- --------------------------------------------------------------------____Attorney
to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated _______________
NOTICE:
- -----------------------------------------------------------
The Signature to this assignment must correspond with
the name as written upon the face of the Certificate
in every particular, without alteration or
englargement or any change whatever.
Auction Rate Municipal SHARES
Preferred Stock, Series M28 1,300
THE BLACKSTONE INSURED MUNICIPAL TERM TRUST, INC.
INCORPORATED UNDER THE LAWS SEE REVERSE
FOR
OF THE STATE OF MARYLAND CERTAIN DEFINITIONS
THIS CERTIFICATE IS TRANSFERABLE CUSIP 092506 30 2
IN NEW YORK NY
THIS CERTIFIES THAT
CEDE & CO.
IS THE OWNER OF One Thousand Three Hundred (1,300)
FULLY PAID AND NON-ASSESSABLE SHARES OF AUCTION RATE MUNICIPAL
PREFERRED STOCK, SERIES M28, PAR VALUE $.01 PER SHARE, LIQUIDATION
PREFERENCE $50,000 PER SHARE PLUS AN AMOUNT EQUAL TO ACCUMULATED BUT UNPAID
DIVIDENDS (WHETHER OR NOT EARNED OR DECLARED) THEREON PLUS THE PREMIUM, IF
ANY, RESULTING FROM THE DESIGNATION OF A PREMIUM CALL PERIOD OF
THE BLACKSTONE INSURED MUNICIPAL TERM TRUST INC.
transferable on the books of said Corporation in person or by duly
authorized attorney upon surrender of this certificate properly endorsed.
This certificate is not valid until countersigned by the Transfer
Agent and registered by the Registrar.
In Witness Whereof, THE BLACKSTONE INSURED MUNICIPAL TERM TRUST INC.
has caused its corporate seal to be hereto affixed and this certificate to
be executed in its name and behalf by its duly authorized officer.
Dated: April 27, 1992
Countersigned and Registered: /s/ [Illegible]
BANKERS TRUST COMPANY -----------------------------------
(New York) Transfer Agent President
/s/ [Illegible]
-----------------------------------
Treasurer
By
Authorized Signature
/s/ [ILLEGIBLE]
- -------------------------------
<
THE TRANSFER OF THE SHARES OF AUCTION RATE MUNICIPAL PREFERRED STOCK
REPRESENTED HEREBY IS SUBJECT TO THE RESTRICTIONS CONTAINED IN THE
CORPORATION'S CHARTER, AND THE PURCHASER'S LETTERS REFERRED TO THEREIN. THE
CORPORATION WILL FURNISH INFORMATION ABOUT SUCH RESTRICTION TO ANY
STOCKHOLDER, WITHOUT CHARGE, UPON REQUEST TO THE SECRETARY OF THE
CORPORATION.
THE BLACKSTONE INSURED MUNICIPAL TERM TRUST INC.
A full statement of the designations and any preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption of the
shares of each class of stock which the Corporation is authorized to issue
and the differences in the relative rights and preferences between the
shares of each series to the extent that they have been set, and the
authority of the Board of Directors to set the relative rights and
preferences of subsequent series, will be furnished by the Corporation to
any stockholder, without charge, upon request to the Secretary of the
Corporation at its principal office.
The following abbreviations, when used in the inscription on
the face of this certificate, shall be construed as though they were
written out in full according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN
ACT--_____Custodian_______
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with rights under Uniform Gifts
of survivorship and not as to to Minors Act _______
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For value received ____________ hereby sell, assign and transfer unto
Please insert social security or other
identifying number of assignee
----------------------------
/ /
/---------------------------/
- --------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address, Including Zip Code of Assignee)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------_____ shares
of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint
- --------------------------------------------------------------------____Attorney
to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated _______________
NOTICE:
- -----------------------------------------------------------
The Signature to this assignment must correspond with
the name as written upon the face of the Certificate
in every particular, without alteration or
englargement or any change whatever.
DEPOSITORY AGREEMENT
THE BLACKSTONE INSURED MUNICIPAL TERM TRUST INC.
and
BANKERS TRUST COMPANY
April 27, 1992
The Depository Trust Company
55 Water Street
New York, New York 10041
Attention: General Counsel's Office
Re: The Blackstone Insured Municipal
Term Trust Inc. -- Issuance of Auction
Rate Municipal Preferred Stock
Ladies and Gentlemen:
The purpose of this letter is to set forth certain matters
relating to the issuance and sales by The Blackstone Insured Municipal Term
Trust Inc., a Maryland corporation (the "Issuer"), of 1,300 shares of
Auction Rate Municipal Preferred Stock, Series M28 (the "Series M28
Preferred Shares") and 1,300 shares of Auction Rate Municipal Preferred
Stock, Series M7 (the "Series M7 Preferred Shares"). The Series M28
Preferred Shares and the Series M7 Preferred Shares are sometimes herein
together called the "Preferred Shares". A description of the Series M28
Preferred Shares and its related offering is contained in a prospectus,
dated April 20, 1992, and a description of the Series M7 Preferred Shares
and its related concurrent offering is contained in a prospectus, dated
April 20, 1992 (collectively, the "Prospectuses"). Bankers Trust Company,
in its capacity as Auction Agent (as defined in the Prospectuses), will act
as the transfer agent, registrar, dividend disbursing agent and redemption
agent with respect to the Preferred Shares. The Preferred Shares are being
offered in two concurrent offerings: by underwriters represented by Merrill
Lynch, Pierce, Fenner & Smith Incorporated in the case of the Series M28
Preferred Shares, and by underwriters represented by Shearson Lehman
Brothers Inc. in the case of the Series M7 Preferred Shares (collectively,
the "Underwriters") and are being distributed through The Depository Trust
Company ("DTC").
To induce DTC to accept the Preferred Shares as eligible for
deposit at DTC and to act in accordance with its rules (the "DTC Rules")
with respect to the Preferred Shares, the Issuer and the Auction Agent make
the following representations to DTC:
1. Subsequent to the issuance of the Preferred Shares on April 27,
1992 the Issuer shall cause the Underwriters to deposit with DTC
one share certificate representing the Series M28 Preferred Shares
and one share certificate representing the Series M7 Preferred
Shares, each registered in the name of DTC's nominee, CEDE & CO.,
which will respectively represent the total number of Series M28
Preferred Shares and Series M7 Preferred Shares, and said
certificates shall remain in DTC's custody.
2. The Prospectus describes provisions for the solicitation of
consents from, and voting by, holders of the Preferred Shares
under certain circumstances. The Issuer shall establish a
record date or record dates for such purposes and give DTC
notice of such record date or dates not less than 15 calendar
days in advance of such record date or dates to the extent
practicable.
3. In the event of a full or partial redemption of outstanding
Preferred shares the Issuer or the Auction Agent shall give DTC
notice of such event not less than 20 days nor more than 60
days prior to the redemption date.
4. In the event of a partial redemption of the Preferred Shares
outstanding, the Issuer or the Auction Agent shall send DTC a
notice specifying: the number of the Series M28 Preferred
Shares and the Series M7 Preferred Shares, respectively, to be
redeemed and the date such notice is to be mailed to
shareholders of the Issuer or published ("Publication Date").
Such notice shall be sent to DTC by a secure means (e.g.,
legible facsimile transmission, registered or certified mail,
overnight express delivery or hand delivery) in a timely manner
designed to assure that such notice is in DTC's possession no
later than the close of business on the Business Day (as
defined in the Prospectus) before the Publication Date. (The
Issuer or the Auction Agent sending such notice shall have a
method to verify subsequently the use of such means and
timeliness of the notice.) In the event of a partial
redemption, the Publication Date shall not be less than 20 days
nor more than 60 days prior to the redemption date.
5. The Prospectuses indicate that the dividend rate for each of the
Series M28 Preferred Shares and the Series M7 Preferred Shares may
vary from time to time. Absent other existing arrangements with DTC,
the Issuer or the Auction Agent shall give DTC notice of each such
change in the dividend rate on the same day the new rate is
determined by telephone to the Supervisor of the Dividend
Announcement Section at (212) 709-1270 and such notice shall be
followed by prompt written confirmation sent by a secure means as
described in paragraph 4 above to:
Manager, Announcements, Dividend
Department
The Depository Trust Company
7 Hanover Square, 22nd Floor
New York, New York 10004
6. The Prospectuses indicate that each purchaser of any Preferred
Shares must sign a Purchaser's Letter (as defined in the
Prospectuses) that contains provisions restricting transfer of
the Preferred Shares purchased. The Issuer and the Auction
Agent acknowledge that as long as CEDE & CO. is the sole record
owner of the Preferred Shares, CEDE & CO. shall be entitled to
all voting rights applicable to the Preferred Shares and to
receive the full amount of all dividends, liquidation proceeds
and redemption proceeds payable with respect to the Preferred
Shares. The Issuer and the Auction Agent acknowledge that DTC
shall treat any DTC Participant (defined in the DTC Rules to
mean, generally, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other
organizations for whom DTC, directly or indirectly, holds
securities) having Preferred Shares credited to its DTC account
as entitled to the full benefits of ownership of such Preferred
Shares even if the credits of Preferred Shares to the DTC
account of such DTC participant result from transfers or
failures to transfer in violation of the provisions of the
Purchaser's Letter. Without limiting the generality of the
preceding sentence, the Issuer and the Auction Agent
acknowledge that DTC shall treat any DTC Participant having
Preferred Shares credited to its account as entitled to receive
dividends, distributions and voting rights, if any, in respect
of such Preferred Shares and, subject to Section 16 hereof, to
receive certificates evidencing such Preferred Shares if such
certificates are to be issued in accordance with the Issuer's
Charter (as defined in the Prospectuses). (The treatment by DTC
of the effects of the crediting by it of Preferred Shares to
the accounts of DTC Participants described in the preceding two
sentences shall not affect the rights of the Issuer,
participants in Auctions (as defined in the Prospectuses)
relating to the Preferred Shares, purchasers, sellers or
holders of Preferred Shares against any DTC Participant.) DTC
shall have no responsibility to ascertain that any transfer of
Preferred Shares is made in accordance with the provisions of
the Purchaser's Letter.
7. The Prospectuses indicate that in the event the Issuer
retroactively allocates any net capital gains or other taxable
income to either series of Preferred Shares without having
given advance notice thereof to the Auction Agent as described
in the Prospectuses solely by reason of the fact that such
allocation is made as a result of the redemption of all or a
portion of the outstanding shares of any series of Preferred
Shares or the liquidation of the Issuer (the amount of such
allocation referred to herein as a "Retroactive Taxable
Allocation"), the Issuer will, within 90 days (and generally
within 60 days) after the end of the Issuer's fiscal year for
which a Retroactive Taxable Allocation is made, provide notice
thereof to the Auction Agent and to each holder of Preferred
Shares (initially Cede & Co. as nominee of DTC) during such
fiscal year at such holder's address as the same appears or
last appeared on the stock books of the Issuer. The Issuer
will, within 30 days after such notice is given to the Auction
Agent, pay to the Auction Agent (who will then distribute to
such holders of Preferred Shares), out of funds legally
available therefor, an amount equal to the aggregate Additional
Dividend (as defined in the Prospectuses) with respect to all
Retroactive Taxable Allocations made to such holders during the
fiscal year in question.
8. The Issuer will notify DTC, at least 10 business days prior to
the payment date for any Additional Dividends, of (i) the
record date for holders of Preferred Shares entitled to receive
Additional Dividends, (ii) the amount of Additional Dividends
payable on a per share basis to such holders and (iii) the
CUSIP number set forth on the share certificate representing
such Preferred Shares.
9. The Prospectuses indicate that in the event of a Response (as
defined in the Prospectuses) it is advisable that the Issuer give a
Notice of Special Dividend Period (as defined in the Prospectuses)
for the Preferred Shares, the Issuer will by no later than the
second day prior to such Auction Date give a Notice of Special
Dividend (as defined in the Prospectuses) to the Auction Agent, DTC
and each Broker-Dealer, which notice will specify the duration of
the Special Dividend Period and the Maximum Applicable Rate therefor
and the Specific Redemption Provisions, if any. The Issuer is
required to give telephonic and written notice (a "Notice of
Revocation") to the Auction Agent, each Broker-Dealer, and DTC on or
prior to the Business Day prior to the relevant Auction Date under
the circumstances specified in the Prospectus.
10. All notices and payment advices sent to DTC shall contain the
CUSIP number set forth on the share certificate representing
the Series M28 Preferred Shares or on the share certificate
representing the Series M7 Preferred Shares, as the case may
be.
11. Except as provided in paragraph 5 of this letter, notices to
DTC by facsimile transmission shall be sent to (212) 709-1093
or (212) 709- 1094. Except as provided in paragraph 5 hereof,
notices to DTC by any other means shall be sent to:
Manager, Reorganization
Department
Reorganization Window
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, New York 10004
12. Dividend payments shall be received by CEDE & CO., as nominee
of DTC, or its registered assigns in same-day funds on each
payment date or the equivalent as agreed between the Issuer or
the Auction Agent and DTC ("Fed-Funds"). Such payment shall be
made payable to the order of "CEDE & CO." Absent any other
agreement between the Issuer or the Auction Agent and DTC such
payments shall be addressed as follows:
Manager, Cash Receipts,
Dividends
The Depository Trust Company
7 Hanover Square, 24th Floor
New York, New York 10004
13. Redemption payments shall be made in Fed-Funds in the manner
set forth in the SDFS Paying Agent Operating Procedures, a copy
of which has been previously furnished to the Auction Agent.
14. DTC may direct the Issuer or the Auction Agent to use any other
telephone number for facsimile transmission, address, or
department of DTC as the number, address or department to which
payments of dividends, redemption proceeds or notices may be
sent.
15. In the event of a redemption or any other similar transaction
necessitating a reduction in the number of Preferred Shares
outstanding, DTC in its discretion may: (a) request the Issuer
or the Auction Agent to issue and authenticate a new share
certificate representing the remaining outstanding Series M28
Preferred Shares or the remaining outstanding Series M7
Preferred Shares, as the case may be, or (b) may make
appropriate notation on the Series M28 or Series M7 Preferred
Shares certificate, as the case may be, indicating the date and
the amount of the reduction except in the case of the
termination of the Issuer pursuant to its Charter, in which
case the certificates will be presented to the Issuer or the
Auction Agent for cancellation.
16. In the event the Issuer determines that beneficial owners of the
Preferred Shares (generally, the Existing Holders as defined in the
Issuer's Charter) shall be able to obtain certificates representing
the Series M28 Preferred Shares or the Series M7 Preferred Shares,
as the case may be (as provided for in the Issuer's Charter), the
Issuer or the Auction Agent shall notify DTC of the availability of
share certificates representing the Series M28 Preferred Shares or
the Series M7 Preferred Shares, as the case may be, and shall issue,
transfer and exchange such certificates as required by DTC and
others in appropriate amounts.
17. DTC may determine to discontinue providing its services as
securities depository with respect to the Preferred Shares at any
time by giving reasonable notice to the Issuer or the Auction Agent
(at which time DTC will confirm with the Auction Agent the aggregate
amount of the respective Series M28 Preferred Shares and the Series
M7 Preferred Shares outstanding). Under such circumstances the
Issuer or the Auction Agent will cooperate with DTC in taking
appropriate action to provide for a substitute or successor
securities depository or to make available one or more separate
certificates evidencing the Series M28 Preferred Shares and the
Series M7 Preferred Shares, as the case may be, to any DTC
Participant having such shares credited to its DTC account.
18. The Issuer hereby authorizes DTC to provide to the Auction
Agent position listings of its DTC participants with respect to
the Preferred Shares from time to time at the request of the
Auction Agent and at DTC's customary fee, and also authorizes
DTC, in the event of a partial redemption of either the Series
M28 Preferred Shares or the Series M7 Preferred Shares, to
provide, and DTC hereby agrees to provide, the Auction Agent,
upon request, with the names of those DTC Participants whose
positions in such Preferred Shares have been selected for
redemption by DTC. DTC agrees to use its best efforts to notify
the Auction Agent of those DTC Participants whose positions in
the Preferred Shares have been selected for redemption by DTC
and to provide the Auction Agent with the names of the persons
or departments at such DTC participants to contact regarding
such redemption. The Issuer authorizes the Auction Agent to
provide DTC with such signatures, exemplars of signatures and
authorizations to act as may be deemed necessary by DTC to
permit DTC to discharge obligations to its DTC Participants and
appropriate regulatory authorities.
This authorization, unless revoked by the Issuer, shall
continue with respect to the Preferred Shares while any such
Preferred Shares are on deposit at DTC, until and unless the
Auction Agent shall no longer be acting. In such event, the
Issuer shall provide DTC with similar evidence of the
authorization of any successor thereto so to act.
19. Nothing herein shall be deemed to require the Auction Agent to
advance funds on behalf of the Issuer.
Very truly yours,
THE BLACKSTONE INSURED
MUNICIPAL TERM TRUST INC.
as Issuer
By: /s/ Ralph L. Schlosstein*
------------------------------------
Ralph L. Schlosstein,
President
BANKERS TRUST COMPANY
as Auction Agent
By: /s/ Paul N. Sheridan
------------------------------------
Paul N. Sheridan,
Assistant Treasurer
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By: /s/ Richard B. Nesson
------------------------
Title
cc: Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Shearson Lehman Brothers Inc.
* signed pursuant to Power of Attorney
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose name
appears below in such person's capacity as an officer and/or director of
The Blackstone Investment Quality Term Trust Inc. (the "Trust") constitutes
and appoints Henry Gabbay his or her true and lawful attorney-in-fact and
agent with full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all capacities, to sign
any and all documents in connection with the organization, offering and
sale of the Trust's shares of common stock, including, without limitation,
all documents necessary or appropriate (i) to qualify the Trust to do
business in New York; (ii) to give notice to the Commodities Futures
Trading Commission; (iii) to obtain a Federal Employer Identification
number; (iv) to effect listing of the Trust's shares of common stock on the
New York Stock Exchange; (v) to provide the Trust's counsel with support
for legal opinions; (vi) to amend the Trust's Charter; (vii) to execute
Unanimous Consents of the Trust's Board of Directors or Executive Committee
in Lieu of a Meeting; and (viii) to effect the closings; granting unto said
attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and to be done in and about the premises,
as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent or his substitute may lawfully do or cause to be done by virtue
hereof. This Power of Attorney does not grant to said attorney-in-fact and
agent the power or authority to sign the Trust's Registration Statement or
any amendments thereto.
This Power of Attorney may be executed in multiple
counterparts, each of which shall be deemed an original, but which taken
together shall constitute one instrument.
Signature Title Notarized
- --------- ----- ---------
/s/ Laurence D. Fink Director
- ------------------------
Laurence D. Fink
/s/ Ralph L. Schlosstein Director,
- ------------------------ President
Ralph L. Schlosstein
- ------------------------ Secretary
Barbara a. Novick
POWER OF ATTORNEY
That each of the undersigned officers and directors of The BlackRock
Insured Municipal Term Trust Inc., a corporation formed under the laws of
the State of Maryland (the "Trust"), do constitute and appoint Ralph L.
Schlosstein, Laurence D. Fink and Karen H. Sabath, and each of them, his or
her true and lawful attorneys and agents, each with full power and
authority (acting alone and without the other) to execute in the name and
on behalf of each of the undersigned as such officer or director, a
Registration Statement on Form N-2, including any pre-effective amendments
and/or any post-effective amendments hereto and any subsequent Registration
Statement of the Trust pursuant to Rule 462(b) of the Securities Act of
1933, as amended (the "1933 Act") and any other filings in connection
therewith, and to file the same under the 1933 Act or the Investment
Company Act of 1940, as amended, or otherwise, with respect to the
registration and offering by the Trust of its preferred stock, liquidation
preference $25,000 per share, granting to such attorneys and agents and
each of them, full power of substitution and revocation in the premises;
and ratifying and confirming all that such attorneys and agents or any of
them, may do or cause to be done by virtue of these presents.
This Power of Attorney may be executed in multiple counterparts, each
of which shall be deemed an original, but which taken together shall
constitute one instrument.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney this 3rd day of January, 2000.
/s/ Dr. Andrew F. Brimmer
----------------------------
Dr. Andrew F. Brimmer
Director
/s/ Richard E. Cavanagh
-----------------------------
Richard E. Cavanagh
Director
/s/ Kent Dixon
--------------------------------
Kent Dixon
Director
/s/ Frank J. Fabozzi
-------------------------------
Frank J. Fabozzi
Director
/s/ James Clayburn LaForce, Jr.
---------------------------------
James Clayburn LaForce, Jr.
Director
/s/ Walter F. Mondale
---------------------------------
Walter F. Mondale
Director
/s/ Ralph L. Schlosstein
---------------------------------
Ralph L. Schlosstein
Director and President
/s/ Laurence D. Fink
----------------------------------
Laurence D. Fink
Director
/s/ Henry Gabbay
----------------------------------
Henry Gabbay
Treasurer
