1940 Act File No. 811-08713
As filed with the Securities and Exchange Commission on June 19th, 1998.
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
REGISTRATION STATEMENT UNDER
/X/ THE INVESTMENT COMPANY ACT OF 1940
Central Investment Fund, Inc.
(Exact name of Registrant as Specified in Charter)
Central Investment Fund, Inc.
c/o Comerica Bank
411 W. Lafayette Avenue
Detroit, Michigan 48226
Attention: James A. McIntosh
President
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (313) 222-5783
James A. McIntosh
Comerica Bank
411 W. Lafayette Avenue
Detroit, MI 48226
(Name and Address of Agent for Service)
With copies to:
Richard T. Prins, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
(212) 735-3000
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PART A -- INFORMATION REQUIRED IN A PROSPECTUS
Item 1. OUTSIDE FRONT COVER.
Not applicable.
Item 2. COVER PAGES; OTHER OFFERING INFORMATION.
Not applicable.
Item 3. FEE TABLE AND SYNOPSIS.
1. Costs and Expenses.
SHAREHOLDER TRANSACTION EXPENSES
Sales Load (as a percentage of
offering price) . . . . . . . . . . . . . . . . . None
Dividend Reinvestment and Cash
Purchase Plan Fees . . . . . . . . . . . . . . . . None
ANNUAL EXPENSES (AS A PERCENTAGE OF NET
ASSETS ATTRIBUTABLE TO COMMON SHARES)
Management Fees . . . . . . . . . . . . . . . . . . . 0.46%
Interest Payments on Borrowed Funds . . . . . . . . . . %*
Other Expenses . . . . . . . . . . . . . . . . . . . . 0.24%
TOTAL ANNUAL EXPENSES . . . . . . . . . . . . . . . . 0.70%
_____________________
[* Less than 0.005%]
Example 1 year 3 years 5 years 10 years
You would pay the
following expenses
on a $1,000 invest-
ment, assuming a 5%
annual return: $ 7 $ 20 $ 27 $ 48
This example should not be considered a representation of future
expenses, which may be greater or lesser than those shown.
2. Synopsis.
Not applicable.
Item 4. FINANCIAL HIGHLIGHTS.
Not applicable.
Item 5. PLAN OF DISTRIBUTION.
Not applicable.
Item 6. SELLING SHAREHOLDERS.
Not applicable.
Item 7. USE OF PROCEEDS.
Not applicable.
Item 8. GENERAL DESCRIPTION OF THE REGISTRANT.
1. General.
Central Investment Fund, Inc. (the "Company") is a closed-end
diversified management investment company which was incorporated
under the laws of the State of Maryland on March 4, 1998.
2.-4. Investment Objectives and Policies; Risk Factors and
Other Policies.
The Company's investment objective is long term capital
appreciation with income as a secondary objective. The Company
may seek to realize its investment objective primarily through
investing and trading in securities of various types, including
common stock, preferred stock, convertible debentures, non-
convertible debentures, bonds, notes and various money market
instruments such as commercial paper, bankers acceptances and
money market funds. Such securities may be issued by U.S. or
non-U.S. issuers, may be denominated in U.S. dollars or any non-
U.S. currency, may be, if a debt obligation, of any term, either
secured or unsecured and of any credit quality at least
investment grade at the time of investment, and may be traded
primarily in the U.S. or in non-U.S. markets. The Company
intends to issue preferred stock and, so long as any preferred
stock is outstanding, expects to invest primarily in common
stocks of large and medium capitalization U.S. companies, non-
U.S. companies whose shares are listed on a U.S. exchange and
American depositary receipts ("ADRs") of non-U.S. companies that
are traded in the U.S.
The Company's investment objective is fundamental and cannot be
changed without shareholder approval. There can be no assurance
that the Company will achieve its investment objective.
The following sets forth certain of the Company's significant
investment policies, which are not fundamental and may be changed
without shareholder approval. The Company will provide prior
notice to its securityholders if it determines to commence any
practice as to which it states herein that it does not currently
propose to engage in such practice or to expand materially any
practice identified herein as insignificant to the Company.
Foreign Securities. From time to time, the Company may invest
and trade in securities of non-U.S. issuers and securities
denominated or quoted in non-U.S. currencies. Investments in
securities of non-U.S. issuers and securities denominated or
whose prices are quoted in non-U.S. currencies pose currency
exchange risks (including blockage, devaluation and non-exchange-
ability) as well as a range of other potential risks which could
include, depending on the country involved, expropriation,
confiscatory taxation, political or social instability,
illiquidity, price volatility and market manipulation. In
addition, less information may be available regarding securities
of non-U.S. issuers and non-U.S. issuers may not be subject to
accounting, auditing and financial reporting standards and
requirements comparable to or as uniform as those of U.S.
issuers. Transaction costs of investing in non-U.S. securities
markets are generally higher than in the U.S. There is generally
less government supervision and regulation of exchanges, brokers
and issuers than there is in the U.S. The Company might have
greater difficulty taking appropriate legal action in non-U.S.
courts. Non-U.S. markets also have different clearance and
settlement procedures which, in some markets, have at times
failed to keep pace with the volume of transactions, thereby
creating substantial delays and settlement failures that could
adversely affect the Company's performance.
The Company may purchase ADRs, which are receipts issued by U.S.
banks or trust companies in respect of securities of foreign
issuers held on deposit for use in the U.S. securities markets.
While ADRs may not necessarily be denominated in the same
currency as the securities into which they may be converted, many
of the risks associated with foreign securities may also apply to
ADRs.
Investment Grade Fixed Income Securities. The Company may also
invest and trade in (i) mortgage-backed securities and other
securities issued or guaranteed by the U.S. government or its
agencies and instrumentalities, (ii) mortgage-backed and asset-
backed securities rated AAA by Standard & Poor's Ratings Services
("S&P") or Aaa by Moody's Investors Service, Inc. ("Moody's") and
(iii) corporate debt securities rated at the time of investment
no lower than the fourth highest rating category by either S&P or
Moody's. Securities rated in the fourth highest rating category
"BBB" (including those rated as low as BBB-) by S&P or "Baa"
(including those rated as low as Baa3) by Moody's are investment
grade securities and are considered by S&P "as having an adequate
capacity to pay interest and repay principal. Such securities
normally exhibit adequate protection parameters, but adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay", and are considered by
Moody's "as medium grade obligations, i.e., they are neither
highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well."
Lending Securities. By lending its portfolio securities, the
Company 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 Company. The Company may lend its
portfolio securities so long as the terms and the structure of
such loans are not inconsistent with requirements of the
Investment Company Act of 1940 (the "1940 Act"), which currently
require that (i) the borrower pledge and maintain with the
Company 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 Company at any time and (iv) the Company receive reasonable
interest on the loan (which may include the Company'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 Company will not lend portfolio
securities if, as a result, the aggregate of such loans exceeds
the value of the Company's total assets (including such loans).
Loan arrangements made by the Company will comply with all other
applicable regulatory requirements. All relevant facts and
circumstances, including the creditworthiness of the institution
to which the loan is made, will be monitored by the Company, and
will be considered in making decisions with respect to lending of
securities, subject to review by the Company's Board of
Directors.
The Company 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 Company's Board of
Directors. In addition, voting rights may pass with the loaned
securities, but if a material event were to occur affecting such
securities, the loan must be called and the securities voted.
Short Selling. The Company may make short sales of securities.
A short sale is a transaction in which the Company sells a
security it does not own in anticipation that the market price of
that security will decline. The Company may make short sales
both as a form of hedging to offset potential declines in long
positions in similar securities and in order to maintain
portfolio flexibility.
When the Company makes a short sale, it must borrow the security
sold short and deliver it to the broker-dealer through which it
made the short sale as collateral for its obligation to deliver
the security upon conclusion of the sale. The Company may have
to pay a fee to borrow particular securities and is often
obligated to pay over any payments received on such borrowed
securities.
The Company's obligation to replace the borrowed security will be
secured by collateral deposited with the broker-dealer, usually
cash, U.S. government securities or other high grade liquid
securities similar to those borrowed. The Company will also be
required to deposit similar collateral with its custodian to the
extent, if any, necessary so that the value of both collateral
deposits in the aggregate is at all times equal to at least 100%
of the current market value of the security sold short.
Depending on arrangements made with the broker-dealer from which
it borrowed the security regarding payment over any payments
received by the Company on such security, the Company may not
receive any payments (including interest) on its collateral
deposited with such broker-dealer.
If the price of the security sold short increases between the
time of the short sale and the time the Company replaces the
borrowed security, the Company will incur a loss; conversely, if
the price declines, the Company will realize a gain. Any gain
will be decreased, and any loss increased, by the transaction
costs described above. Although the Company's gain is limited to
the price at which it sold the security short, its potential loss
is theoretically unlimited.
The Company may also make short sales "against the box," which
involves the short sale of a security already owned by the
Company with delivery of other units of such security borrowed
from others.
When-Issued and Forward Commitment Securities. The Company may
purchase securities on a "when-issued" basis and may purchase or
sell securities 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 Company 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 Company disposes of the right to acquire a when-
issued security prior to its acquisition or disposes of its right
to deliver or receive against a forward commitment, it can incur
a gain or loss. At the time the Company enters into a
transaction on a when-issued or forward commitment basis, it will
segregate with the custodian cash or other 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 exceed the corresponding
obligations of the Company. There is always a risk that the
securities may not be delivered and that the Company may incur a
loss. Settlements in the ordinary course are not treated by the
Company as when-issued or forward commitment transactions and
accordingly are not subject to the foregoing restrictions.
Leverage. The Company intends to sell shares of auction market
preferred stock, liquidation preference $100,000 per share (the
"Preferred Stock") in transactions not involving any public
offering of securities. The issuance of the Preferred Stock will
result in the leveraging of the Common Stock. Utilization of
leverage through the issuance of preferred stock involves certain
risks. So long as the Company is able to realize a higher net
return on its incremental investment portfolio than the then
current dividend rate of any Preferred Stock together with other
related expenses, the effect of the leverage will be to cause
holders of Common Stock to realize a higher current net
investment income than if the Company were not so leveraged. On
the other hand, to the extent that the then current dividend rate
on any Preferred Stock approaches the net return on the Company's
incremental investment portfolio, the benefit of leverage to
holders of Common Stock will be reduced, and if the then current
dividend rate on any Preferred Stock were to exceed the net
return on the Company's incremental portfolio, the Company's
leveraged capital structure would result in a lower rate of
return to holders of Common Stock than if the Company were not so
leveraged. If the Company's current investment income were not
sufficient to meet dividend requirements on any Preferred Stock
and other expenses, it could be necessary for the Company to
liquidate certain of its investments, thereby reducing the net
asset value attributable to the Company's Common Stock.
Under the requirements of the 1940 Act, the value of the
Company's total assets, less all liabilities and indebtedness of
the Company, must at least be equal, immediately after any such
issuance of preferred stock, to 200% of the aggregate liquidation
value of any outstanding Preferred Stock. Such percentage must
also be met any time the Company pays a dividend or makes any
other distribution on Common Stock (other than a distribution in
Common Stock) or any time the Company repurchases Common Stock,
in each case after giving effect to such dividend, distribution
or repurchase. In order to maintain passthrough tax status under
Subchapter M of the Internal Revenue Code of 1986 (the "Code"),
the Company must distribute at least 90% of its investment income
each year. Failure to maintain such status might impair the
ability of the Company to make required payments on its Preferred
Stock.
Under the 1940 Act, the holders of Preferred Stock, voting as a
class, must have the right to elect at least two directors at all
times, and, subject to the prior rights, if any, of the holders
of any other class of senior securities outstanding, to elect a
majority of the directors if at any time dividends on such class
of securities shall be unpaid in an amount equal to two full
years' dividends on such securities, and to continue to be so
represented until all dividends in arrears shall have been paid
or otherwise provided for. In addition, the vote of a majority
of the holders of Preferred Stock, voting as a class, is required
to approve any plan of reorganization adversely affecting the
Preferred Stock, or any action requiring a vote of security
holders pursuant to Section 13(a) of the 1940 Act, including,
among other things, changes in the Company's subclassification as
a closed-end investment company or changes in its fundamental
investment policies.
The Company is authorized to borrow money from banks or
otherwise. The Company expects to borrow money through the
issuance of long-term notes in transactions not involving the
public offering of any securities and in connection with short
term clearance of transactions and other temporary uses. The
Company expects that its average borrowings outstanding will not
affect the return to the holders of its Common Stock by more than
.005% and would not adversely affect the return to the holders of
its Common Stock by more than .02% even if its negative return on
its portfolio securities is 10% per year.
Borrowing by the Company creates an opportunity for increased net
income but, at the same time, creates special risk
considerations. For example, leveraging may exaggerate changes
in the net asset value of the Company's shares and in the yield
on the Company's portfolio. Although the principal amount of
such borrowings will be fixed, the Company's assets may change in
value during the time the borrowing is outstanding. Borrowing
will create interest expenses for the Company which can exceed
the income from the assets retained. To the extent the income
derived from securities purchased with borrowed funds exceeds the
interest the Company will have to pay, the Company's net income
will be greater than if borrowing were not used. Conversely, if
the income from the assets obtained with borrowed funds is not
sufficient to cover the cost of borrowing, the net income of the
Company will be less than if borrowing were not used, and
therefore the amount available for distribution to stockholders
as dividends will be reduced.
The Company expects that some of its borrowings may be made on a
secured basis. In such situations, either the custodian will
segregate the pledged assets for the benefit of the lender or
arrangements will be made with (i) the lender to act as a
subcustodian if the lender is a bank or otherwise qualifies as a
custodian of investment company assets or (ii) a suitable
subcustodian.
Although the Company may purchase and sell futures contracts and
options thereon on stock and bond indices, as well as options on
particular securities, the Company does not expect to do so.
5. Share Price Data.
Not Applicable.
6. Business Development Companies.
Not Applicable.
Item 9. MANAGEMENT.
1. General.
The Company's investment activities will be managed by World
Asset Management, its investment adviser pursuant to an
investment advisory agreement (the "Advisory Agreement") between
the Company and World Asset Management, and the Company's other
activities and affairs will be managed by its administrator, in
each case subject to overall supervision by its Board of
Directors, which is responsible under Maryland law to act in what
it believes is the best interests of the Company.
World Asset Management (the "Adviser") is a Delaware limited
liability company with principal offices at 225 East Brown
Street, Suite 250, Birmingham, Michigan 48009. The Adviser is
owned by Munder Capital Management, a Delaware general
partnership, the general partners of which are WAM Holdings, Inc.
Old MCM, Inc. and Munder Group, L.L.C. WAM Holdings, Inc. has
offices at One Detroit Center, Detroit, Michigan 48243 and is a
wholly owned subsidiary of Comerica Bank-Ann Arbor, N.A., which,
in turn, is a wholly owned subsidiary of Comerica Incorporated, a
publicly held bank holding company. Mr. Lee P. Munder, Munder
Capital Management's Chairman, owns a controlling stock interest
in Old MCM, Inc. and a controlling membership interest in Munder
Group, L.L.C., which have offices at 480 Pierce Street,
Birmingham, Michigan 48009. Currently, Old MCM, Inc. holds more
than a 50% membership interest in the Adviser, as represented by
the members' capital accounts. As a result, Mr. Munder, who is
not affiliated with Comerica Bank, may be deemed to control the
Adviser. In addition, employees of Munder Capital Management may
acquire additional partnership interests in Munder Capital
Management from time to time through Munder Group, L.L.C. It is
anticipated in July of 1998 that Comerica Incorporated through
its subsidiaries will purchase 85% of Mr. Munder's interest in
Munder Capital Management. If the sale is consummated, Comerica
Incorporated will control 88% of the partnership interests of
Munder Capital Management.
The Adviser is an independent investment adviser with more than
$16 billion under management in domestic and foreign equity and
domestic fixed income assets. Its business was developed in the
last 17 years, first as a department and then as wholly-owned
incorporated subsidiary of Comerica Incorporated and one of its
predecessors, Manufacturers Bank, N.A.
The Adviser will have the discretion to supervise, manage and
direct the Company's assets, in accordance with the objectives,
policies and restrictions set forth in response to Item 8 under
"Investment Objectives and Policies," as amended from time to
time, or as set forth in written instructions furnished by the
Company. It will be the Company's responsibility to advise the
Adviser of any modifications thereof as they occur. The Adviser
may, without prior consultation with the Company and at such
times when the Adviser deems appropriate, (a) purchase, sell,
invest, reinvest, exchange, convert, trade in and otherwise deal
with such assets; and (b) place all orders for the purchase or
sale of portfolio securities with or through brokers, dealers or
issuers selected by it or designated by the Company. The Adviser
will vote the proxies solicited by or with respect to the issuers
of the Company's portfolio securities.
Mr. Todd B. Johnson will be primarily responsible for making day-
to-day portfolio decisions. Mr. Johnson is President and Chief
Investment Officer of World Asset Management. He has served as a
Director of World Asset Management since 1994, a Portfolio
Manager of Woodbridge Capital Management from 1992 to 1994 and
Second Vice President and Investment Officer, Manufacturers Bank,
N.A. (formerly Manufacturers National Bank of Detroit) from 1992
to 1994; Investment Officer of Manufacturers National Bank of
Detroit from 1990 to 1992; and Investment Analyst for
Manufacturers National Bank of Detroit from 1988 to 1990.
The fees for services as Adviser will be one hundredth of one
percent per annum (0.01%) of the average of the month end
aggregate fair market value of the equity securities held in the
Company's portfolio and will be computed and payable as of the
last business day of each calendar quarter. In the event that
services commence or terminate other than at the beginning of a
quarter, the fee will be prorated accordingly.
The Advisory Agreement also provides that in the absence of
willful misfeasance, bad faith or negligence in the performance
of its duties, or by reason of its reckless disregard of its
obligations and duties thereunder, World Asset Management is not
liable to the Company for any act or omission by World Asset
Management in the supervision or management of its respective
investment activities or for any loss sustained by the Company.
The Advisory Agreement may be terminated at any time on 30 days
notice by one party to the other; provided that such termination
by the Company must be directed or approved in accordance with
the 1940 Act.
Mr. James A. McIntosh, a Director and President of the Company,
is an officer of Comerica Bank, a wholly owned subsidiary of
Comerica Incorporated which is affiliated with World Asset
Management as described above. On March 24, 1998, the Company
entered into agreements with Comerica Bank by which it undertook
to act as the custodian of the Company's assets, and to provide
administrative services to the Company. Ms. Jane S. Miller, an
Assistant Secretary and a Director of the Company, is also a Vice
President of Comerica Bank. Mr. Robert H. Bockrath II, the
Secretary and Treasurer of the Company, is also an Assistant Vice
President of Comerica Bank.
World Asset Management is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended, and such
registration is currently effective.
Comerica Bank, with principal offices at One Detroit Center, 500
Woodward Avenue, Detroit, Michigan 48226, will act as the
Company's custodian and will provide administrative services to
the extent not provided by the Company's officers, accountants
and counsel. Comerica Bank will be paid fees, consisting of a
percentage of assets, which are expected to be $1,165,000 in the
aggregate.
IBJ Schroder Bank & Trust Company, with principal offices at One
State Street, New York, New York 10004, will act as the Company's
transfer agent and dividend paying agent.
The Company is responsible for all of its expenses, including
organization expenses, brokerage expense, management of its
assets and business affairs, custody of its assets, insurance,
legal counsel, accounting services and interest on indebtedness.
2. Non-resident Managers.
Not Applicable
3. Control Persons.
As of the date hereof, Comerica Bank, as trustee for various
employee benefit plans, owns all of the outstanding common stock
of the Company. No officer or director of the Company owns any
common stock of the Company. Comerica Incorporated is the
ultimate parent of Comerica Bank.
Item 10. CAPITAL STOCK, LONG-TERM DEBT AND OTHER SECURITIES.
1. Capital Stock.
The aggregate number of shares of capital stock which the Company
shall have authority to issue is 200 million shares, par value
$.01 per share.
Except as the Board of Directors shall provide otherwise,
pursuant to the authority granted in the Company's Amended
Articles of Incorporation, all the authorized shares of the
Company are designated as common stock. The shares of common
stock have no preemptive, conversion, exchange or redemption
rights. Each share of common stock has equal voting, dividend,
distribution and liquidation rights. Shares of common stock are
not subject to further calls or to assessment by the Company.
The Board of Directors is authorized to classify or reclassify
any unissued shares of stock (into one or more series or classes
of common stock or preferred stock) 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.
The Company's Amended Articles of Incorporation provide that if
the Company issues preferred stock the Company's existence will
terminate 30 days after all preferred stock outstanding is
redeemed unless the Board of Directors within such time period
determines by resolution that the Company's existence shall not
terminate.
The outstanding Preferred Stock of the Company is preferred to
the Common Stock with respect to the payment of dividends and
rights upon liquidation and each series of Preferred Stock is
redeemable at any time at the option of the Company, in whole but
not in part, and is subject to mandatory redemption in whole or
in part upon the occurrence of certain events such as failure to
maintain adequate asset coverage to support a AAA rating. The
1940 Act requires, among other things, that the holders of
Preferred Stock and any other preferred stock, voting together as
a separate class, have the right to elect at least two directors
at all times. If at any time accumulated dividends on the
outstanding shares of Preferred Stock equal to at least two full
years' dividends are due and unpaid, then until the full amount
of such unpaid dividends are paid or duly provided for, holders
of the shares of Preferred Stock (together with the holders of
shares of any other preferred stock entitled to elect a majority
of the directors of the Company) will be entitled to elect the
smallest number of new directors that, when added to the number
of directors then constituting the Board of Directors, will
constitute a majority of the Board of Directors. The holders of
Preferred Stock have certain other voting rights as required
under the Company's Amended Articles of Incorporation, Maryland
law and the 1940 Act.
The Company will distribute to the holders of its Common Stock
from time to time during each year substantially all of its
taxable investment income in excess of the dividends paid to
holders of the Preferred Stock and any other preferred stock. No
dividend distributions will be made to the holders of the Common
Stock if dividends on the Preferred Stock are in arrears or if,
after giving effect thereto, an S&P Required Asset Coverage test
would not be satisfied or the asset coverage (as defined in the
1940 Act) with respect to the outstanding shares of preferred
stock would be less than 200%. Certain amendments affecting
definitions in Articles Supplementary of the Company may be made
without shareholder approval.
2. Long-Term Debt.
The Company has issued $480,500.00 in principal amount of
Floating Rate Notes Due 2023 (the "Notes") in transactions not
involving any public offering of securities. The Notes are
unsecured and are not subordinated to other indebtedness of the
Company. The Notes are issued in registered form, without
coupons. The Notes are not subject to any sinking fund. The
Notes are redeemable at the option of the Company or as a result
of a Mandatory Redemption Event (as defined below). In addition,
each holder of Notes will have the option to require the Company
to redeem his Notes on each anniversary of the date of issuance,
upon 60 days' prior written notice.
Interest on the Notes will be payable on March 15 and September
15 of each year, commencing on September 15, 1998, and at
maturity (each, an "Interest Payment Date"). Interest payable on
each Interest Payment Date will include interest accrued from and
including the immediately preceding Interest Payment Date (or the
date of original issue in the case of the first Interest Payment
Date) to and excluding such Interest Payment Date. The Notes
will bear interest from the date of issuance to and including
March 14, 1999 at the rate of 10% per annum. Thereafter, the
Notes will bear interest, based on their principal amount, for
each Interest Period (as defined below), until maturity, at a
rate per annum equal to the sum of (i) the Treasury Bill Rate (as
defined in the Note) as of the first day of such Interest Period
and (ii) 4% per annum. Interest on the Notes will be computed
and paid on the basis of a 360-day year consisting of twelve
months of 30 days each, and in the case of incomplete months, on
the number of days actually elapsed divided by 30 days. The
interest rate on the Notes will in no event be higher than the
maximum rate permitted by applicable law. "Interest Period"
shall mean a yearly period beginning on March 15 and ending on
March 14 of the following year.
The Notes are subject to mandatory redemption in whole in the
event of a Mandatory Redemption Event, at a redemption price
equal to 100% of the principal amount thereof, together with
accrued interest to but excluding the date fixed for redemption.
A "Mandatory Redemption Event" will be deemed to have occurred on
the earliest date, if any, as of which all preferred stock of the
Company issued prior to such date shall have been redeemed. The
Notes may be redeemed on any Interest Payment Date, upon not less
than 30 nor more than 60 days' notice by mail, at the option of
the Company, in whole or from time to time in part, at a
redemption price equal to 100% of the principal amount thereof,
together with accrued interest to but excluding the date fixed
for redemption; provided that, if less than all the outstanding
Notes are to be redeemed, the redemption will be made by lot, on
a pro rata basis, or in such other manner as will not
discriminate unfairly against any holder of the Notes. The Notes
held by each holder are subject to redemption, in whole or in
part (in whole multiples of $500), at the option of such holder
on each anniversary date of their initial issuance, upon not less
than 60 nor more than 90 day's notice to the Company, at a
redemption price equal to 100% of the principal amount thereof,
together with accrued interest to but excluding the date fixed
for redemption.
Pursuant to certain restrictive covenants contained in the Notes,
the Company may not: (1) incur any indebtedness for money
borrowed except (a) the indebtedness evidenced by the Notes, (b)
in connection with the redemption of one or more series of
preferred stock or (c) other indebtedness in a principal amount
not to exceed at any one time outstanding an amount equal to 10%
of the Company's net asset value; (2) declare dividends or make
other distributions on shares of its capital stock or purchase
any such shares if, at the time of the declaration, distribution
or purchase, as applicable (and after giving effect thereto),
asset coverage (as defined in the 1940 Act) with respect to the
Notes would be less than 300% (or such other percentage as may in
the future be required by law or, if lower, such other percentage
as may in the future be permitted by order of the Securities and
Exchange Commission ("SEC")), except that dividends may be
declared upon any preferred stock if asset coverage with respect
to the Notes would equal or exceed 200% (or such other percentage
as may in the future be required by law or, if lower, such other
percentage as may in the future be permitted by order of the
SEC); or (3) consolidate or merge with or into any other
corporation or sell or transfer all or substantially all of its
properties and assets to another corporation unless (a) the
successor corporation is a corporation organized and existing
under the laws of the United States of America or a State thereof
or the District of Columbia and assumes payment of the principal
of and interest on the Notes and the performance and the
observance of the other terms of the Notes, and (b) no default or
event of default under the Notes shall have happened and be
continuing.
Modifications and amendments of the Notes may be made by the
Company with the consent of the holders of a majority in
principal amount of the outstanding Notes; provided, however,
that no such modification or amendment may, without the consent
of the holder of each outstanding Note affected thereby, (a)
change the stated maturity date of the principal of, or any
installment of principal of or interest on, any Note, (b) reduce
the principal amount of, or interest on, any Note, or (c) reduce
the percentage in principal amount of outstanding Notes, the
consent of the holders of which is required for modification or
amendment of the Notes or for waiver of compliance with certain
provisions of the Notes or for waiver of certain defaults.
Modifications and amendments of the Notes may be made by the
Company without the consent of any holder of Notes to evidence a
successor to the Company, to add to the Company's covenants or
Events of Default, to change or eliminate any provision not
adversely affecting any interests of holders of outstanding Notes
in any material respect or to cure any ambiguity or
inconsistency. The holders of a majority in principal amount of
the outstanding Notes may on behalf of the holders of all Notes
waive compliance by the Company with certain restrictive
provisions of the Notes or waive any past default under the
Notes, except a default in the payment of the principal of, or
interest on, any Note or in respect of any provision which under
the Notes cannot be modified or amended without the consent of
the holder of each outstanding Note affected.
3. General.
Not Applicable
4. Taxes.
The Company intends to qualify each year and elect to be treated
as a regulated investment company for federal income tax
purposes. In order to so qualify, the Company must, among other
things, (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to loans of securities
and gains from the sale or other disposition of securities or
certain other related income; (b) generally derive less than 30%
of its gross income from gains from the sale or other disposition
of securities and certain other investments held for less than
three months; and (c) diversify its holdings so that at the end
of each fiscal quarter (i) at least 50% of the value of the
Company's assets is represented by cash, U.S. government
securities, securities of other regulated investment companies,
and other securities which, with respect to any one issuer, do
not represent more than 5% of the value of the Company's assets
nor more than 10% of the voting securities of such issuer, and
(ii) not more than 25% of the value of the Company's assets is
invested in the securities of any one issuer (other than U.S.
government securities or the securities of other regulated
investment companies).
If the Company qualifies as a regulated investment company and
distributes to its stockholders at least 90% of its net
investment income (including tax-exempt interest and net short-
term capital gain but not net capital gain, which is the excess
of net long-term capital gains over net short-term capital
losses), then the Company will not be subject to federal income
tax on the income so distributed. However, the Company would be
subject to corporate income tax (currently at a maximum marginal
rate of 35%) on any undistributed income other than tax-exempt
income. In addition, the Company will be subject to a
nondeductible 4% excise tax on the amount by which the income it
distributes in any calendar year is less than a required amount.
The required distribution for a calendar year equals the sum of
(a) 98% of the Company's ordinary income (excluding tax-exempt
interest income) for such calendar year; (b) 98% of the excess of
capital gains over capital losses for the one-year period ending
October 31; and (c) 100% of the undistributed ordinary income and
gains from prior years. For purposes of the excise tax, any
income or capital gains retained by, and taxed in the hands of,
the Company will be treated as having been distributed.
Any capital losses resulting from the disposition of securities
can only be used to offset capital gains and cannot be used to
reduce the Company's ordinary income. Such capital losses may be
carried forward by the Company for 8 years.
Except as described below, in general all distributions to
stockholders attributable to the Company's net investment income
(including any tax-exempt interest income distributed) will be
taxable as ordinary income.
To the extent the Company realizes net capital gains, it intends
to distribute such gains at least annually and designate them as
capital gain dividends. Capital gain dividends are taxable as
long-term capital gains, regardless of how long the shares have
been held. The Company may elect to retain net capital gains and
pay corporate income tax thereon. In such event, the Company
would most likely make an election which would require each
stockholder of record on the last day of the Company's taxable
year to include in income for tax purposes his proportionate
share of the Company's undistributed net capital gain. If such
an election is made, each stockholder would be entitled to credit
his proportionate share of the tax paid by the Company against
his federal income tax liabilities and to claim refunds to the
extent that the credit exceeds such liabilities. In addition,
the stockholder would be entitled to increase the basis of his
shares for federal income tax purposes by an amount equal to 65%
of his proportionate share of the undistributed net capital gain.
Dividends distributed by the Company will be eligible for the
dividends received deduction in the hands of corporate
stockholders to the extent the Company derives eligible income
from dividends paid by U.S. corporations. In order to qualify
for the dividends received deduction, the Company must hold the
shares with respect to which the dividends are paid for more than
45 consecutive days. The 45-day holding period is reduced for
periods in which the shares are subject to diminished risk of
loss. The dividends received deduction is also reduced by the
percentage, if any, of the cost of the shares that is debt-
financed.
Liquidating distributions which in the aggregate exceed a
stockholder's basis in shares will be treated as gain from the
sale of the shares; if a stockholder receives in the aggregate
liquidating distributions which are less than such basis, such
stockholder will recognize a loss to that extent.
Dividends and other distributions by the Company are generally
taxable to the stockholders at the time the dividend or
distribution is made. Any dividends declared by the Company in
October, November or December and made payable to stockholders of
record in such a month would be taxable to stockholders as of
December 31, provided that the dividend is paid in the following
January.
If a stockholder purchases shares at a cost that reflects an
anticipated dividend, such dividend will be taxable even though
it represents economically in whole or in part a return of the
purchase price. Investors should consider the tax implications
of buying shares shortly prior to a dividend distribution.
The Company will, within 60 days after the close of its taxable
year, send written notices to stockholders regarding the tax
status of all distributions made during the year.
In general, if a share is sold, the seller will recognize gain or
loss equal to the difference between the amount realized on the
sale and the seller's adjusted basis in the share. However, any
loss recognized by a stockholder within six months of purchasing
the shares will be treated as a long-term capital loss to the
extent of any long-term capital gain distributions received by
the stockholder and the stockholder's share of undistributed
long-term capital gains. In addition, any loss realized on a
sale of shares will be disallowed to the extent the shares
disposed of are replaced within a 61-day period beginning 30 days
before and ending 30 days after the disposition of the shares.
In such a case, the basis of the shares acquired will be adjusted
to reflect the disallowed loss. Any gain or loss realized upon a
sale of shares by a stockholder who is not a dealer in securities
will be treated as capital gain or loss.
The Company may be required to withhold federal income tax at the
rate of 31% of any payments made to a stockholder if the
stockholder has not provided a correct taxpayer identification
number and certain required certifications to the Company, or if
the Secretary of the Treasury notifies the Company that the
number provided by a stockholder is not correct or that the
stockholder has not reported all interest and dividend income
required to be shown on the stockholder's federal income tax
return.
The Company expects to pay dividends on its shares out of its net
investment income at least once each year. The Company expects
to pay capital gains distributions on its net long-term capital
gains, if any, at least once each year unless the Company elects
to retain such distributions and pay corporate tax as described
above. The Company has no dividend reinvestment plan.
5. Outstanding Securities.
(1) (2) (3) (4)
Amount Held by Amount Outstanding
Amount the Company or Exclusive of
Title of Class Authorized for its Account Amount in (3)
Common Stock 199,998,000 0 45,742,144.95
shares shares
Preferred Stock 2,000 0 2,000
shares shares
Notes $500,000 0 $480,500
6. Securities Ratings
Not applicable.
Item 11. DEFAULTS AND ARREARS ON SENIOR SECURITIES.
Not applicable.
Item 12. LEGAL PROCEEDINGS.
The Company is not subject to any pending or, to its knowledge,
threatened legal proceedings.
Item 13. TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.
Not Applicable
PART B -- INFORMATION REQUIRED IN A STATEMENT OF
ADDITIONAL INFORMATION
Item 14. COVER PAGE.
Not Applicable
Item 15. TABLE OF CONTENTS.
Not Applicable
Item 16. GENERAL INFORMATION AND HISTORY.
Not Applicable
Item 17. INVESTMENT OBJECTIVE AND POLICIES.
The Company'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 Company's
outstanding voting securities (defined in the 1940 Act as the
lesser of (a) more than 50 percent of the outstanding shares or
(b) 67 percent or more of the shares represented at a meeting at
which more than 50 percent of the outstanding shares are
represented). All other investment policies or practices are
considered by the Company 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 the time a transaction is effected, later changes
in percentage resulting from changing market values will not be
considered a deviation from policy. The Company may not:
1. invest more than 25 percent of the value of its total assets
in any one industry;
2. issue senior securities other than (a) preferred stock not
in excess of the maximum amount permitted by the 1940 Act or by
the SEC by rule or by order, whichever is greater, (b) senior
securities other than preferred stock (including borrowing money,
including on margin if margin securities are owned, and providing
guaranties) not in excess of the maximum amount permitted by the
1940 Act or by the SEC by rule or by order, whichever is greater,
and (c) borrowings up to five percent 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 Company's obligations under reverse repurchase
agreements, 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;
3. make loans of money or property to any person, except
through loans and guaranties to entities, the acquisition of
fixed income obligations consistent with the Company's investment
objective and policies, the acquisition of securities subject to
repurchase agreements and the loan of portfolio securities in
accordance with such regulatory requirements as may be applicable
at the time of a particular loan;
4. 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 securities the Company may be
deemed to be an underwriter;
5. purchase or sell real estate or interests therein in excess
of the Company's total assets;
6. purchase or sell commodities or purchase or sell commodity
contracts except for hedging purposes; or
7. 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 the Company's aggregate short
sales of a particular class of securities, except short sales
"against the box" which are not subject to such limitation, does
not exceed 25 percent of the then-outstanding securities of that
class.
Although the Company expects that most of its investments will be
relatively long term in nature, changes in particular portfolio
holdings may be made at any time a particular security is no
longer considered to be appropriate.
Item 18. MANAGEMENT.
Set forth below are the names, ages, addresses, positions held
with the Company and principal occupations during the last five
years of the directors and officers of the Company. There are no
family relationships between any of the persons listed.
Directors who are interested persons of the Company are denoted
by an asterisk (*).
(1) (2) (3)
Name, Positions Held Principal Occupations
Age and Address With Company during Past 5 Years
James A. McIntosh, President and First Vice President,
47* Director Comerica Bank, since
411 W. Lafayette 1994; Vice President,
Avenue Comerica Bank, from
Detroit, MI 48226 1992 to 1994; Vice
President Manufacturers
Bank, N.A. (formerly
Manufacturers National
Bank of Detroit) from
1987 to 1992.
Jane S. Miller, Director Vice President,
55* Comerica Bank, since
411 W. Lafayette 1992; Prior to 1992,
Avenue Associate Counsel,
Detroit, MI 48226 Ameritrust Company, N.A.
William R. Latham Director Chairman, Department
III, 53 of Economics,
Department of University of
Economics Delaware, since
University of 1990; Director,
Delaware Secretary and
Newark, DE 19716 Treasurer of First
Federal Capital
Funding II, Inc.,
from 1986 to 1992.
Donald J. Puglisi, Director Managing Director of
52 Puglisi & Associates
850 Library Avenue an investment management,
Suite 204 accounting and
Newark, DE 19711 administrative
services consulting
firm which he founded
in 1973. Member of the
faculty of the
University of Delaware
since 1971.
John F. Sase, 47 Director Head of research
18823 San Quentin project, Focus Hope,
Lathrup Village, since 1992;
MI 48076 Consultant, Sase
Associates, since
1992; Member of the
faculty at School of
Business Administration,
Oakland University,
since 1992; Ph.D.
Urban Industrial
Economics, Wayne
State University.
Robert H. Bockrath Secretary Assistant Vice
II, 30 and President, Comerica
411 W. Lafayette Treasurer Bank, since 1997;
Avenue prior to 1997, Trust
Detroit, MI 48226 Officer, Comerica Bank.
No director or officer of the Company, no affiliated person of the
Company and no affiliated person of an affiliate or principal
underwriter of the Company will receive as much as $60,000 in
aggregate remuneration from the Company for any fiscal year or any
annual pension or retirement benefits. Messrs. Latham, Puglisi and
Sase will each receive $2900 per year as non-interested directors for
the Company. They will each receive $18,300 per year in total
compensation as non-independent directors for the Company and other
investment companies that have the same investment adviser.
Item 19. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
See response to Item 9.3.
Item 20. INVESTMENT ADVISORY AND OTHER SERVICES.
See Response to Item 9.1.
Comerica Bank, 411 W. Lafayette Avenue, Detroit, Michigan 48226, is
the Company's custodian. Comerica Bank is chartered by the State of
Michigan and engages in the customary business of a commercial bank
with trust powers. Comerica Bank will act as custodian for all of the
Company's assets, calculate its net asset value and compliance with
various financial requirements and will also act as administrator.
Ernst & Young LLP, One Detroit Center, Suite 1700, 500 Woodward
Avenue, Detroit, Michigan 48226, are the Company's independent public
accountants. Such firm will provide accounting and auditing services
and tax services for the Company.
Item 21. BROKERAGE ALLOCATION AND OTHER PRACTICES.
Subject to the policies established by the Board of Directors of the
Company, World Asset Management is primarily responsible for the
execution of the Company's portfolio transactions and the allocation
of brokerage. In executing such transactions, consideration is given
to such factors as price of the security, the size and difficulty of
the order, the reliability, integrity, financial condition and general
execution and operational capabilities of competitive brokers and
dealers and their expertise in particular markets. Although World
Asset Management will generally seek reasonably competitive commission
rates, the Company will not necessarily pay the lowest commission
available. The Company has no obligations to deal with any broker or
group of brokers in executing transactions in portfolio securities.
Under the 1940 Act, affiliated persons of the Company are prohibited
from dealing with the Company as principal in the purchase and sale of
securities. Because transactions in the over-the-counter market
usually involve transactions with dealers acting as principal for
their own account, the Company will not deal with affiliated persons
of the Company in connection with such transactions. However,
affiliated persons of the Company may serve as its broker in the over-
the-counter market and other transactions conducted on an agency basis
subject to compliance with applicable regulatory requirements.
The Board of Directors of the Company has adopted certain policies
incorporating the standards of Rule 17e-1 issued by the SEC under the
1940 Act, which require that the commissions paid to certain
affiliated persons of the Company must be reasonable and fair compared
to the commissions, fees or other remuneration received or to be
received by other brokers in connection with comparable transactions
involving similar securities during a comparable period of time. The
rule and procedures also contain review requirements and require the
Company to furnish reports to the Board of Directors of the Company
and to maintain records in connection with such reviews.
Item 22. TAX STATUS.
See Response to Item 10.4.
Item 23. FINANCIAL STATEMENTS.
None.
PART C -- OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS.
1. Financial Statements
None.
2. Exhibits
a. Charter of the Company.
b. By-laws of the Company.
c. Not applicable.
d. Not applicable.
e. Not applicable.
f. The Company agrees to furnish to the SEC copies of the
constituent instruments defining the rights of holders of
long-term debt of the Company or any subsidiary.
g. Investment Management Agreement between the Company and
World Asset Management.
h. Not applicable.
i. Not applicable.
j. Custodian Contract between the Company and Comerica Bank.
k. Administration Agreement between the Company and Comerica
Bank.
l. Not applicable.
m. Not applicable.
n. Not applicable.
o. Not applicable.
p. Not applicable.
q. Not applicable.
r. Not applicable.
Item 25. MARKETING ARRANGEMENTS.
Not applicable.
Item 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Not applicable.
Item 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH COMPANY.
See Response to Items 9.3 and 19. The common stock of Select Asset
Fund, Series 1, Inc., Select Asset Fund, Series 2, Inc., Great Lakes
Fund, Inc., Huron Investment Fund, Inc., Central Asset Fund, Inc., and
Lernoult Investment Fund, Inc., each of which is a Maryland
corporation, is wholly-owned by Comerica Bank as trustee for various
employee benefit plans and accordingly the Company may be deemed to be
under common control with such other companies.
Item 28. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
Number of
Title of Class Record Holders
Common Stock 1
Auction Market Preferred
Stock, Series A 1*
Auction Market Preferred
Stock, Series B 1*
Auction Market Preferred
Stock, Series C 1*
Floating Rate Notes
Due 2023 131
_________________
* On the date hereof, the Auction Market Preferred Stock, Series A,
the Auction Market Preferred Stock, Series B and the Auction
Market Preferred Stock, Series C, are held through The Depository
Trust Company for the account of approximately 25, 25 and 25
holders, respectively.
Item 29. INDEMNIFICATION.
Under the Company's Amended Articles of Incorporation and By-
Laws, the directors and officers of the Company will be
indemnified to the fullest extent allowed and in the manner
provided by Maryland law and applicable provisions of the 1940
Act, including advancing of expenses incurred in connection
therewith. Indemnification shall not be provided however to any
officer or director against any liability to the Company 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 Company or its stockholders for
money damages in certain instances. The Company's Amended
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 Company shall be
personally liable to the Company or its stockholders. The
Company's Amended Articles of Incorporation also provide that no
amendment of the Company's Amended 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.
Insofar as indemnification for liabilities under the Securities
Act of 1933, as amended (the "Act"), may be permitted to the
directors and officers, the Company 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. If a
claim for indemnification against such liabilities under the Act
(other than for expenses incurred in a successful defense) is
asserted against the Company by the directors or officers, the
Company 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 of 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.
Item 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See Exhibit filed in response to Item 24.2.g.
Item 31. LOCATION OF ACCOUNTS AND RECORDS.
Accounts, books and other records required to be maintained by
Section 31(a) of the 1940 Act and the rules promulgated
thereunder are maintained at Comerica Bank, IBJ Schroder Bank &
Trust Company and Merrill Lynch & Co.
Item 32. MANAGEMENT SERVICES.
Not applicable.
Item 33. UNDERTAKINGS.
Not applicable.
SIGNATURE
Pursuant to the requirements of the Investment Company Act of
1940, the Company has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Detroit, and State of Michigan, on the 19th day of June, 1998.
Central Investment Fund, Inc.
By: /s/ James A. McIntosh
--------------------------
Name: James A. McIntosh
Title: President
ARTICLES OF INCORPORATION
OF
CENTRAL INVESTMENT FUND, INC.
* * * * *
ARTICLE I
THE UNDERSIGNED, Mark Diffenbaugh, whose post office address is
300 East Lombard 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 Central Investment Fund, Inc. (the
"Corporation").
ARTICLE III
PURPOSES AND POWERS
The purposes for which the Corporation is formed are 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, 300 East Lombard 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 300 East Lombard 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, each of which shall have a par value of one cent
($.01) per share and all of which shall have an 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 the 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 two or more classes are outstanding.
(3) 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.
(4) In the event of the liquidation or dissolution of the
Corporation, the holders of the Common Stock shall be entitled to receive
all the assets of the Corporation not attributable to other classes of
stock through any preference. 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.
(5) Unless otherwise expressly provided in the Charter of the
Corporation, and except as required under applicable law, on each matter
submitted to a vote of stockholders for approval, 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 or series thereof, and all shares of all classes
or series of capital stock shall vote together as a single class; provided,
however, that (i) as to any matter with respect to which a separate vote of
any class or series is required by the Investment Company Act of 1940 (the
"1940 Act"), the Maryland General Corporation Law or the Charter of the
Corporation, such class or series shall vote separately as a class or
series with respect to such matter in addition to the vote of the holders
of all classes or series of capital stock of the Corporation voting
together as a single class (unless the 1940 Act, the Maryland General
Corporation Law or the Charter of the Corporation shall provide that the
separate vote of such class or series shall apply in lieu of the vote of
all the holders of all classes or series, in which case, such class or
series shall vote separately as a class or series with respect to such
matter and no vote of any other class or series shall be necessary with
respect to such matter); and (ii) as to any matter which does not affect
the express contract rights as set forth in the Charter of the Corporation
of any particular class or series, including the liquidation of a
particular class or series as described in subsection (1) above, only the
holders of shares of the one or more affected classes or series shall be
entitled to vote thereon.
(6) Except as otherwise provided in the Charter of the
Corporation creating any class or series of capital stock, the Corporation
shall be entitled to purchase shares of its capital stock, to the extent
that the Corporation may lawfully effect such purchase 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.
(7) Except as otherwise provided in the Charter of the
Corporation creating any class or series of capital stock, 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.
(8) 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.
(9) All persons who shall acquire capital stock or other
securities of the Corporation shall acquire the same subject to the
provisions of the Charter of the Corporation 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 five (5), which number may be increased or decreased 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). The names of the
persons who shall act as directors until their successors are duly elected
and qualified are:
James A. McIntosh
Jane S. Miller
William R. Latham III
Donald J. Puglisi
John F. Sase
A director shall hold office until his successor shall be elected
and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. 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 series or the sole remaining director
elected by that class or series may fill any vacancy among the number of
directors elected by that class or series. A director elected by the Board
of Directors to fill any vacancy in the Board of Directors shall serve
until his successor shall be elected and shall qualify, subject, however,
to prior death, resignation, retirement, disqualification or removal from
office. At any meeting of stockholders, stockholders shall be entitled to
elect directors to fill any vacancies in the Board of Directors that have
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), and any director so elected by the stockholders shall hold
office until the next annual meeting of stockholders or until death,
resignation or retirement or until a successor is elected and qualified;
provided, however, that if the stockholders of any class or series of the
capital stock of the Corporation are entitled separately to elect one or
more directors, only the stockholders of that class or series may elect a
successor to fill a vacancy on the Board of Directors which results from
the removal of a director elected by that class or series. A director may
be removed with or without cause and only by the affirmative vote of a
majority of all the votes entitled to be cast in an election of such
Director; provided, however, that if the stockholders of any class or
series are entitled separately to elect one or more directors, the director
elected by a class or series may not be removed without cause except by the
affirmative vote of a majority of all of the votes of that class or series.
(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 the Charter or in the By-Laws of the Corporation or under
applicable law.
(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 applicable law.
Furthermore, to the fullest extent permitted by Maryland law, as it may be
amended or interpreted from time to time, but subject to the limitations
imposed by any other applicable law, no director or officer of the
Corporation shall be personally liable to the Corporation or its
stockholders for money damages. 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 (3) 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 applicable law.
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
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 Maryland
General Corporation Law or the 1940 Act. 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 or notice otherwise required by the By-Laws of the
Corporation, 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 1940 Act, or other applicable statute,
the Charter of the Corporation, or the By-Laws of the Corporation, 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. A quorum shall be present with respect to
matters as to which only the holders of one class or series of stock may
vote if a majority of the shares of that class or series are present at the
meeting in person or by proxy, and the absence of holders of a majority of
shares with respect to one class or series shall have no effect with
respect to any other class or series of stock.
Except as otherwise provided in the Charter of the Corporation
and notwithstanding any provision of the Maryland General Corporation Law
requiring approval by the stockholders (or any class of stockholders or any
series thereof) 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 maybe 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 or any series
thereof).
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 applicable law 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
TERM OF EXISTENCE
The Corporation's existence shall be perpetual; provided,
however, that if the Corporation shall hereafter issue any capital stock
which ranks prior to the Corporation's Common Stock with respect to the
payment of dividends or the distribution of assets upon liquidation, which
shall thereafter be redeemed by the Corporation, the Corporation's
existence shall terminate thirty (30) days after the earliest date as of
which all such preferred stock shall have been redeemed, unless the Board
of Directors, prior to the expiration of said thirty (30) day period,
determines to continue the Corporation's existence, in which case the
Corporation's existence thereafter shall be perpetual subject, as often as
may be necessary, to the foregoing provision and exception.
ARTICLE XII
AMENDMENT
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in the Charter of the Corporation, in the
manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned incorporator of Central
Investment Fund, 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 4th day of March, 1998.
/s/ Mark Diffenbaugh
--------------------
Mark Diffenbaugh
ARTICLES SUPPLEMENTARY
OF CENTRAL INVESTMENT FUND, INC.
CENTRAL INVESTMENT FUND, 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 authority expressly vested in the Board of
Directors of the Corporation by Article V of its Amended Articles of
Incorporation, the Board of Directors has reclassified an aggregate of
2,000 shares of its authorized but unissued capital stock as two (2)
separate series of preferred stock, the first series consisting of 1,000
shares and the second series consisting of 1,000 shares, and 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 A AMPS: A series of 1,000 shares of preferred stock,
par value $.01 per share, liquidation preference $100,000 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 a redemption or liquidation, is hereby
designated "Auction Market Preferred Stock, Series A" ("Series A
AMPS"). Each share of Series A AMPS shall accumulate dividends
from the Date of Original Issue (this initially capitalized term
and other initially capitalized terms not otherwise defined
herein shall have the meanings specified in Section 1.1 hereof)
thereof and shall have such other preferences, limitations and
relative voting rights, in addition to those required by
applicable law or set forth in the Charter of the Corporation
which are applicable to preferred stock of the Corporation, as
are set forth in these Articles Supplementary. The Series A AMPS
shall constitute a separate series of preferred stock of the
Corporation, and each share of Series A AMPS shall be identical.
Series B AMPS: A series of 1,000 shares of preferred stock,
par value $.01 per share, liquidation preference $100,000 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 a redemption or liquidation, is hereby
designated "Auction Market Preferred Stock, Series B" ("Series B
AMPS"). Each share of Series B AMPS shall accumulate dividends
from the Date of Original Issue (this initially capitalized term
and other initially capitalized terms not otherwise defined
herein shall have the meanings specified in Section 1.1 hereof)
thereof and shall have such other preferences, limitations and
relative voting rights, in addition to those required by
applicable law or set forth in the Charter of the Corporation
which are applicable to preferred stock of the Corporation, as
are set forth in these Articles Supplementary. The Series B AMPS
shall constitute a separate series of preferred stock of the
Corporation, and each share of Series B AMPS shall be identical.
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1. Certain Definitions. The following terms shall have the
following meanings, unless the context otherwise requires:
"'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 Moody's, or the equivalent of such
rating by S&P or Moody's 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 Certificate" shall mean a letter or certificate
signed by or on behalf of a nationally recognized independent public
accounting firm.
"Additional Dividends" shall have the meaning set forth in
Section 3.5(a) of these Articles Supplementary.
"Adjusted Value" of each Moody's Eligible Asset and each S&P
Eligible Asset is computed as follows:
(i) Cash shall be valued at 100% of the face value thereof; and
(ii) Each common stock shall be valued at the amount obtained by
dividing the Fair Market Value thereof by the applicable Discount Factor.
The calculation of Adjusted Value, Moody's Required Asset
Coverage and S&P Required Asset Coverage may be made on bases other than
those set forth therein if the relevant Rating Agency has advised the
Corporation in writing that the revised calculation of Adjusted Value,
Moody's Required Asset Coverage and S&P Required Asset Coverage would not
adversely affect its then-current rating of the shares of AMPS.
To the extent operation of the foregoing sentence is not
enforceable, the calculation of Adjusted Value, Moody's Required Asset
Coverage and S&P Required Asset Coverage and the elements thereof
(including Moody's Eligible Assets and S&P Eligible Assets and the elements
thereof) and the definitions of such elements shall be adjusted from time
to time and without further action by the Board of Directors and the
Stockholders to reflect changes made thereto independently by the relevant
Rating Agency if the relevant Rating Agency has advised the Corporation in
writing separately (a) of such adjustments and (b) that the revised
calculation of Adjusted Value, Moody's Required Asset Coverage and S&P
Required Asset Coverage would not cause such Rating Agency to reduce or
withdraw its then-current rating of the shares of AMPS. The adjustments
contemplated by the preceding sentence shall be made effective upon the
time the Corporation receives the written notice from the Rating Agency to
the effect specified in clause (b) of the preceding sentence.
"Administration Agreement" shall mean the Administration
Agreement dated as of March 16, 1998 between the Corporation and the
Administrator, and any similar agreement with a successor or substitute
administrator, in each case, as from time to time amended or supplemented.
"Administrator" shall mean the other party to the Administration
Agreement with the Corporation and which shall initially be Comerica Bank.
"Agent Member" shall mean a member of, or participant in, the
Securities Depository.
"AMPS" means, collectively, the Series A AMPS and the Series B
AMPS.
"AMPS Dividend Amount" shall have the meaning set forth in
Section 3.4 of these Articles Supplementary.
"AMPS Rate" shall have the meaning set forth in Section 3.3 of
these Articles Supplementary.
"AMPS Redemption Amount" shall have the meaning specified in
Section 4.4 of these Articles Supplementary.
"Articles Supplementary" shall mean these Articles Supplementary
of the Corporation.
"Auction" shall mean each periodic implementation of the Auction
Procedures.
"Auction Agent" shall mean (a) a bank or trust company duly
organized under the laws of the United States of America or any state or
territory thereof having its principal place of business in the Borough of
Manhattan in the City of New York, and having a combined capital stock,
surplus and undivided profits of at least $15,000,000, or (b) a member of
the National Association of Securities Dealers, Inc., having capitalization
of at least $15,000,000 and which initially shall be IBJ Schroder Bank &
Trust Company.
"Auction Agent Agreement" shall mean the Auction Agent Agreement
dated as of March 16, 1998 between the Corporation and the Auction Agent
and any similar agreement with a successor or substitute Auction Agent, in
each case as from time to time amended or supplemented.
"Auction Date" shall mean the Business Day immediately preceding
the first day of each Dividend Period, other than the Initial Dividend
Period applicable thereto.
"Auction Procedures" shall mean the procedures set forth in
Section 3.8 of these Articles Supplementary.
"Auction Rate" shall have the meaning set forth in Section
3.8(c)(ii) of these Articles Supplementary.
"Auction Record Date" shall mean the second Business Day next
preceding the first day of any Dividend Period applicable thereto.
"Authorized Officer" shall mean the Chairman of the Board, each
Executive Officer, President, Senior Vice President, Executive Vice
President, Vice President, Assistant Vice President, Treasurer and
Assistant Treasurer of the Custodian or the Auction Agent, as the case may
be, and every other officer or employee of the Custodian or the Auction
Agent, as the case may be, designated as such by any of the foregoing.
"Available AMPS" shall have the meaning set forth in Section
3.8(c)(i)(A) of these Articles Supplementary.
"Bid" shall have the meaning set forth in Section 3.8(a)(i) of
these Articles Supplementary.
"Bidder" shall have the meaning set forth in Section 3.8(a)(i) of
these Articles Supplementary.
"Board of Directors" or "Board" means the Board of Directors of
the Corporation or any duly authorized committee thereof.
"Broker-Dealer" shall mean Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
"Broker-Dealer Agreement" shall mean the Broker-Dealer Agreement
dated as of March 16, 1998, among the Corporation, the Auction Agent and
the Broker-Dealer pursuant to which the Broker-Dealer agrees to participate
in Auctions as set forth in the Auction Procedures, and any similar
agreement with a successor or substitute Auction Agent, in each case, as
from time to time amended or supplemented.
"Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and is not a Saturday, Sunday or other day on
which banks in New York, New York are authorized or obligated by law or
executive order to close.
"Cash" shall mean (i) checks certified in United States dollars
by a bank whose short-term rating is P-1 (or higher) by Moody's (if the
AMPS are rated by Moody's) and A-1+ by S&P (if the AMPS are rated by S&P)
and (ii) demand deposits maintained at a bank whose short-term rating is
P-1 (or higher) by Moody's (if the AMPS are rated by Moody's) and A-1+ by
S&P (if the AMPS are rated by S&P).
"Certificate of Moody's Required Asset Coverage" shall have the
meaning set forth in Section 5.1 of these Articles Supplementary.
"Certificate of S&P Required Asset Coverage" shall have the
meaning set forth in Section 5.3 of these Articles Supplementary.
"Charter" shall mean the Articles of Incorporation, as amended
and supplemented from time to time (including these Articles Supplementary)
of the Corporation.
"Closed Period" shall mean, with respect to each Series of AMPS,
(i) each period commencing at 11:00 A.M., New York City time, on the third
Business Day immediately preceding each Dividend Distribution Date
applicable thereto and ending immediately prior to the opening of business
on such Dividend Distribution Date, and (ii) any time after the Corporation
ascertains that a Mandatory Redemption Event has occurred.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time. Each reference to a section of the Code herein shall be
deemed to include the United States Treasury Regulations proposed or in
effect thereunder and applicable to the AMPS or the use of proceeds
thereof, and also includes all applicable amendments and successor
provisions unless the context clearly requires otherwise.
"Commercial Paper Dealers" shall mean Merrill Lynch, Pierce,
Fenner & Smith Incorporated and such other commercial paper dealer or
dealers as the Auction Agent may from time to time select in consultation
with the Corporation, or, in lieu of any thereof, their respective
affiliates or successors.
"Common Stock" shall mean the common stock, par value $.01 per
share, of the Corporation.
"Commission" shall mean the Securities and Exchange Commission.
"Cure Date" shall mean the second Business Day after each
Business Day as of which the aggregate Adjusted Value of all Moody's
Eligible Assets or S&P Eligible Assets is less than the Moody's Required
Asset Coverage or the S&P Required Asset Coverage, respectively, or as of
which the aggregate Fair Market Value of the Securities and other assets of
the Corporation is less than 130% of the sum of the aggregate AMPS
Redemption Amount for all shares of AMPS then Outstanding and the aggregate
AMPS Redemption Amount (as defined in the applicable articles supplementary
relating to any other Preferred Stock issued by the Corporation and rated
by the Rating Agencies) applicable to any other Preferred Stock of the
Corporation outstanding on such date.
"Current Additional Dividend Amount" shall be calculated as the
product of:
(A) the square of a fraction (i) the numerator of which is one
minus the product of (x) 100% minus the percentage specified in Section
243(a)(1) of the Code to be used in calculating the dividends received
deduction multiplied by (y) the highest Federal regular tax rate applicable
to ordinary income recognized by corporations and (ii) the denominator of
which is one minus the highest Federal regular tax rate applicable to net
capital gain recognized by corporations;
(B) the aggregate amount of net capital gains realized by the
Corporation during the period commencing on the first day of the taxable
year in which such date of determination occurs and ending on the last day
(which day shall be subsequent to the first day of such taxable year) of
the calendar month next preceding such date of determination; and
(C) the quotient of (1) Current AMPS Dividends and (2) the sum
of (x) Current AMPS Dividends and (y) the amount of the distributions paid
to the holders of the Common Stock as dividends during the current fiscal
year to date; provided, however, that, in the event the amount of
liabilities used in the calculation of either of the Moody's Required Asset
Coverage or the S&P Required Asset Coverage includes any redemption price
payable with respect to the shares of AMPS called for redemption, Current
AMPS Dividends shall be determined outstanding, for purposes of this clause
(C), without including such shares of AMPS called for redemption.
"Current AMPS Dividends" shall mean the amount of the
distributions paid to Holders of AMPS and of any other Preferred Stock as
dividends during (and that are attributable to) the current fiscal year to
date.
"Custodian" shall mean one or more banks or trust companies
authorized under the laws of the United States of America, the State of New
York or the State of Michigan to engage in the bank or trust business
within the State of New York or the State of Michigan and designated as a
depositary of the assets of the Corporation, and which initially shall be
Comerica Bank.
"Custodian Agreement" shall mean the Custodian Contract dated as
of March 16, 1998, by and between the Custodian and the Corporation, and
any similar agreement with a successor or substitute Custodian, in each
case, as from time to time amended or supplemented.
"Date of Original Issue" shall mean the date on which the
Corporation initially issues the shares of AMPS.
"Deposit Assets" shall mean, collectively, (a) Cash or (b)
non-callable direct obligations of the United States government or debt
securities rated P-1 (or higher) by Moody's (if the AMPS are rated by
Moody's) and A-1+ by S&P (if the AMPS are rated by S&P), in each case which
mature on or before the Business Day prior to (i) the applicable Redemption
Date, in the case of a deposit in connection with a redemption of AMPS or
(ii) the applicable Dividend Distribution Date, in the case of a deposit in
connection with the payment of any dividends on the AMPS.
"Discount Factor" shall mean, with respect to any asset specified
below, the following applicable number:
Type of Eligible Asset Discount Factors
For S&P For S&P
For Moody's Seasoned Unseasoned
Eligible Eligible Eligible
Assets Assets Assets
Common stocks issued
by utilities. . . . . . . . . 1.22 1.85 2.44
Common stocks issued
by industrial
companies. . . . . . . . . . . 1.36 1.85 2.44
Common stocks issued by
financial companies. . . . . . 1.36 1.85 2.44
Common stocks issued by
transportation companies. . . . 1.51 1.85 2.44
Common stocks issued by
other companies. . . . . . . . - 1.85 2.44
"Dividend Distribution Date" shall have the meaning set forth in
Section 3.1(b) of these Articles Supplementary.
"Dividend Period" shall have the meaning set forth in Section 3.3
of these Articles Supplementary.
"Dividends Received Deduction" shall mean the dividends received
deduction available to those corporate holders of AMPS who satisfy the
holding period and other applicable requirements of the Code as provided by
Sections 243 and 854 of the Code.
"Excess Interest Coverage Amount," as of any date of
determination of Moody's Required Asset Coverage or S&P Required Asset
Coverage, shall mean, with respect to any Indebtedness of the Corporation,
(a) zero, if the next interest payment date in respect of such Indebtedness
succeeding such date of determination is equal to or greater than sixteen
(16) days after such date of determination and (b) if the number of days
referred to in the preceding clause (a) is less than sixteen (16), an
amount equal to the aggregate principal amount of such Indebtedness
outstanding on such date of determination multiplied by (i) 130% multiplied
by (ii) the then current rate per annum at which such Indebtedness bears
interest multiplied by (iii) a fraction, the numerator of which is sixteen
(16) minus the number of days referred to in the preceding clause (a) and
the denominator of which is 365.
"Existing Holder" shall mean a person who is listed as the record
owner of AMPS (which are not called for redemption) in the Stock Register
of the Auction Agent.
"Fair Market Value" as of any date in question shall mean (a)
with respect to securities, the Market Price (as defined below) of such
security as of the close of business on the Business Day immediately
preceding the date in question, (b) with respect to Cash, the dollar amount
thereof or (c) with respect to any other property, the fair market value
thereof, as determined by the Corporation in good faith, using any method
reasonable under the circumstances. The "Market Price" shall be: the
lower of (i) the lower of the bid prices, if any, quoted to the Corporation
by two or more New York Stock Exchange member firms or National Association
of Securities Dealers member firms (at least one of such quotes being in
writing) or (ii) the price quoted to the Corporation by the Pricing
Service. If such bids are not so quoted and the Pricing Service reports no
such price, the Fair Market Value of such security (x) for purposes of
Section 4.2(b) and the definition of "Market Capitalization", shall be
determined in accordance with clause (c) of the second preceding sentence
and (y) shall be zero for all other purposes.
"Holder" shall mean a person in whose name a share of AMPS is
registered in the Stock Register.
"Hold Order" shall have the meaning set forth in Section
3.8(a)(i) of these Articles Supplementary.
"Indebtedness" shall mean, with respect to the Corporation, any
indebtedness of the Corporation in respect of borrowed money or evidenced
by bonds, notes, debentures or similar instruments, if and to the extent
any of the foregoing would appear as a liability upon a balance sheet of
the Corporation prepared in accordance with generally accepted accounting
principles.
"Industry Classification" means a six-digit industry
classification in the Standard Industry Classification system published by
the United States.
"Initial Dividend Period" shall have the meaning set forth in
Section 3.3 of these Articles Supplementary.
"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.
"Issuer" shall mean any one or all (as the context requires) of
the issuers of the Securities.
"Liquidation Premium" shall have the meaning set forth in Section
6.1 of these Articles Supplementary.
"Mandatory Redemption Event" shall have the meaning set forth in
Section 4.2 of these Articles Supplementary.
"Market Capitalization" shall mean, with respect to any issue of
common stock, as of any date, the product of (a) the number of shares of
such common stock issued and outstanding as of the close of business on the
date of determination thereof and (b) the Fair Market Value per share of
such common stock as of the close of business on the date of determination
thereof.
"Maximum Rate", on any date of determination, shall mean the rate
(rounded up to the next highest one one-thousandth (.001) of 1%)
determined by multiplying (a) for any Dividend Period other than a Special
Dividend Period, the 60 Day "AA" Composite Commercial Paper Rate as of the
close of business on the Business Day immediately preceding the Auction
Date in question, and, for any Special Dividend Period, the Special
Dividend Period Reference Rate as of the close of business on the Business
Day immediately preceding the date on which the notice of Special Dividend
Period relating to the Auction Date in question is given, in each case by
(b) 125%.
"Moody's" shall mean Moody's Investors Service, Inc., a
corporation organized and existing under the laws of the State of Delaware,
its successors and their assigns or, if Moody's shall no longer be
assigning a rating to the AMPS, such other nationally recognized rating
agency so rating the AMPS.
"Moody's Eligible Assets" shall mean any of the following held by
the Corporation: (a) Deposit Assets and (b) common stocks that satisfy all
of the following conditions: (i) the senior unsecured debt of the issuer
of such common stock is rated Baa3 or better by Moody's or A- or better by
S&P, (ii) such common stock is traded on the New York Stock Exchange or the
American Stock Exchange, (iii) the Market Capitalization of such issue of
common stock exceeds $500 million, (iv) the issuer of such common stock has
paid cash dividends on a regular basis during the period of thirty-six (36)
months immediately prior thereto and (v) dividends on such common stock are
paid in United States dollars; provided, however, that the number of shares
of common stock of any single issuer held by the Corporation shall be
included in Moody's Eligible Assets only to the extent that such number
does not exceed the average weekly trading volume of such common stock
during the preceding 30 day period. In addition, (i) common stock issued
by any one issuer in a Non-Utility Industry may comprise no more than 6% of
Moody's Eligible Assets, (ii) common stock issued by any one issuer in a
Utility Industry may comprise no more than 4% of Moody's Eligible Assets,
(iii) common stock issued by issuers within the same Non-Utility Industry
may comprise no more than 20% of Moody's Eligible Assets, (iv) common stock
issued by issuers within the same Utility Industry may comprise no more
than 50% of Moody's Eligible Assets and (v) common stock issued by issuers
within any Utility Industry and located within the same state may comprise
no more than 7% of Moody's Eligible Assets. Notwithstanding the foregoing,
an asset will not be considered a Moody's Eligible Asset if it (i) is held
in a margin account, (ii) is subject to any material lien, mortgage,
pledge, security interest or security agreement of any kind or (iii) has
been deposited irrevocably for the payment of dividends, redemption
payments or any other payment or obligation hereunder.
"Moody's Excess Dividend Coverage Amount," for a particular
Series of AMPS, as of any date of determination of Moody's Required Asset
Coverage, shall mean (a) zero, if the next Dividend Distribution Date
applicable to such Series of AMPS succeeding such date of determination is
equal to or greater than sixteen (16) days after such date of determination
and (b) if the number of days referred to in the preceding clause (a) is
less than sixteen (16), an amount equal to the aggregate liquidation
preference of such Series of AMPS multiplied by (i) 154% multiplied by (ii)
the Maximum Rate as of such date of determination multiplied by (iii) a
fraction, the numerator of which is sixteen (16) minus the number of days
referred to in the preceding clause (a) and the denominator of which is
365.
"Moody's Required Asset Coverage" as of any date of determination
shall mean the sum of, without duplication, (a) the aggregate liquidation
preference of all shares of AMPS Outstanding on such date, (b) the
aggregate amount of all accrued and unpaid dividends on such AMPS to and
including such date, (c) to the extent not already included in clause (a)
or (b) above, (i) if the Dividend Distribution Date with respect to a
particular Series of AMPS next succeeding such date of determination is
sixteen days or more after such date, the amount of dividends which will
accrue on such Series of AMPS for the next sixteen days, or (ii) in all
other cases, the amount of dividends which will accrue on such Series of
AMPS to the next Dividend Distribution Date applicable thereto, (d) an
amount (but not less than zero) equal to the Current Additional Dividend
Amount, (e) the Moody's Excess Dividend Coverage Amount, if any, for the
AMPS, (f) 300% of the aggregate principal amount of all Indebtedness of the
Corporation outstanding on such date, (g) the aggregate amount of all
accrued and unpaid interest, to and including such date, on all
Indebtedness of the Corporation outstanding on such date, (h) the Excess
Interest Coverage Amount, if any, with respect to all Indebtedness of the
Corporation outstanding on such date, (i) the amount of anticipated
expenses of the Corporation for the number of days subsequent to such date
of determination and prior to the next Dividend Distribution Date, but not
less than 49 days, and any current liabilities of the Corporation as of
such date of determination to the extent not included above, (j) the
Moody's Required Asset Coverage (as defined in the applicable articles
supplementary relating to any other Preferred Stock issued by the
Corporation and rated by Moody's), if any, applicable to any other
Preferred Stock of the Corporation outstanding on such date (without
counting the Moody's Required Asset Coverage, or any component thereof, for
any such Preferred Stock more than once) and (k) from and after the date of
call for redemption, the premium, if any, on any Optional Redemption of one
or more Series of AMPS.
"Nasdaq" shall mean The Nasdaq Stock Market, owned and operated
by the National Association of Securities Dealers, Inc., providing brokers
and dealers with price quotations for securities traded over-the-counter.
"Net After-Tax Return" shall mean, with respect to any dividend
paid on the AMPS, the amount of such dividend less the federal corporate
income tax to which such dividend would be subject, giving effect to the
actual or assumed (as the case may be) amount of such dividend effectively
designated under Section 854 of the Code as eligible for the Dividends
Received Deduction. For this purpose, in the case of any dividend (i) the
applicable income tax rate shall be assumed to be the highest marginal
federal income tax rate applicable to ordinary income received by
corporations under the law in effect at the time of the payment of such
dividend if received by a domestic corporation reporting taxable income
based on a calendar year, without consideration being given to the time
value of money and assuming that no Holder of AMPS is subject to the
Federal alternative minimum tax with respect to dividends received from the
Corporation and (ii) assuming the full amount of such dividend were
effectively designated under Section 854 of the Code (or any successor
provision) as eligible for the Dividends Received Deduction, the holder
receiving such dividend shall be assumed to be entitled to the Dividends
Received Deduction with respect to such dividend in an amount equal to the
maximum amount provided in Section 243(a)(1) of the Code (or any successor
provision) as in effect at the time of payment of such dividend.
"1940 Act" shall mean the Investment Company Act of 1940.
"1940 Act AMPS Asset Coverage Requirement" shall mean asset
coverage, as defined in Section 18(h) of the 1940 Act, of at least 200%
with respect to all outstanding senior securities of the Corporation which
are stock, including all Outstanding AMPS and other Preferred Stock (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 or, if lower, such other percentage as may be
permitted to the Corporation by order of the Commission.
"Non-Call Period" shall have the meaning set forth under
"Specific Redemption Provisions" below.
"Non-Utility Industry" shall mean the following:
1. Aerospace and Defense: Major Contractor, Subsystems,
Research, Aircraft Manufacturing, Arms, Ammunition
2. Automobile: Automotive Equipment, Auto-Manufacturing, Auto
Parts Manufacturing, Personal Use Trailers, Motor Homes,
Dealers
3. Banking: Bank Holding, Savings and Loans, Consumer Credit,
Small Loan, Agency, Factoring, Receivables
4. Beverage, Food and Tobacco: Beer and Ale, Distillers, Wines
and Liquors, Distributors, Soft Drink Syrup, Bottlers,
Bakery, Mill Sugar, Canned Foods, Corn Refiners, Dairy
Products, Meat Products, Poultry Products, Snacks, Packaged
Foods, Distributors, Candy, Gum, Seafood, Frozen Food,
Cigarettes, Cigars, Leaf/Snuff, Vegetable Oil
5. Buildings and Real Estate: Brick, Cement, Climate Controls,
Contracting, Engineering, Construction, Hardware, Forest
Products (building-related only), Plumbing, Roofing,
Wallboard, Real Estate, Real Estate Development, REITS, Land
Development
6. Chemicals, Plastics and Rubber: Chemicals
(non-agriculture), Industrial Gases, Sulphur, Plastics,
Plastic Products, Abrasives, Coatings, Paints, Varnish,
Fabricating
7. Containers, Packaging and Glass: Glass, Fiberglass,
Containers made of: Glass, Metal, Paper, Plastic, Wood or
Fiberglass
8. Personal and Non-Durable Consumer Products (Manufacturing
Only): Soaps, Perfumes, cosmetics, Toiletries, Cleaning
Supplies, School Supplies
9. Diversified/Conglomerate Manufacturing
10. Diversified/Conglomerate Service
11. Diversified Natural Resources, Precious Metals and Minerals:
Fabricating, Distribution Mining and Sales
12. Ecological: Pollution Control, Waste Removal, Waste
Treatment, Waste Disposal
13. Electronics: Computer Hardware, Electric Equipment,
Components, Controllers, Motors, Household Appliances,
Information Service Communication Systems, Radios, TVs, Tape
Machines, Speakers, Printers, Drivers, Technology
14. Finance: Investment Brokerage, Leasing, Syndication,
Securities
15. Farming and Agriculture: Livestock, Grains, Produce;
Agricultural Chemicals, Agricultural Equipment, Fertilizers
16. Grocery: Grocery Stores, Convenience Food Stores
17. Healthcare, Education and Childcare: Ethical Drugs,
Proprietary Drugs, Research, Health Care Centers, Nursing
Homes, HMOs, Hospitals, Hospital Supplies, Medical Equipment
18. Home and Office Furnishings, Housewares and Durable Consumer
Products: Carpets, Floor Coverings, Furniture, Cooking,
Ranges
19. Hotels, Motels, Inns and Gaming
20. Insurance: Life, Property and Casualty, Broker, Agent,
Surety
21. Leisure, Amusement, Motion Pictures, Entertainment:
Boating, Bowling, Billiards, Musical Instruments, Fishing,
Photo Equipment, Records, Tapes, Sports, Outdoor Equipment
(Camping), Tourism, Resorts, Games, Toy Manufacturing,
Motion Picture Production Theaters, Motion Picture
Distribution
22. Machinery (Non-Agriculture, Non-Construction,
Non-Electronic): Industrial, Machine Tools, Steam
Generators
23. Mining, Steel, Iron and Non Precious Metals: Coal, Copper,
Lead, Uranium, Zinc, Aluminum, Stainless Steel, Integrated
Steel, Ore Production, Refractories, Steel Mill Machinery,
Mini-Mills, Fabricating, Distribution and Sales
24. Oil and Gas: Crude Producer, Retailer, Well Supply, Service
and Drilling
25. Personal, Food and Miscellaneous Services
26. Printing, Publishing and Broadcasting: Graphic Arts, Paper,
Paper Products, Business Forms, Magazines, Books,
Periodicals, Newspapers, Textbooks, Radio, T.V., Cable,
Broadcasting Equipment
27. Cargo Transport: Rail, Shipping, Railroads, Rail-car
Builders, Ship Builders, Containers, Container Builders,
Parts, Overnight Mail, Trucking, Truck Manufacturing,
Trailer Manufacturing, Air Cargo, Transport
28. Retail Stores: Apparel, Toy, Variety, Drugs, Department,
Mail Order Catalog, Showroom
29. Telecommunications: Local, Long Distance, Independent,
Telephone, Telegraph, Satellite, Equipment, Research,
Cellular
30. Textiles and Leather: Producer, Synthetic Fiber, Apparel
Manufacturer, Leather Shoes
31. Personal Transportation: Air, Bus, Rail, Car Rental
32. Sovereigns: Semi-sovereigns, Canadian Provinces,
Supra-National Agencies
"Normal Dividend Distribution Date" shall have the meaning set
forth in Section 3.1(b) of these Articles Supplementary.
"Notice of Revocation" shall have the meaning set forth in
paragraph 3.1(g) of these Articles Supplementary.
"Notice of Special Dividend Period" shall have the meaning set
forth in paragraph 3.1(g) of these Articles Supplementary.
"Opinion of Counsel" shall mean an opinion in writing signed by
Skadden, Arps, Slate, Meagher & Flom LLP or such other attorney or firm of
attorneys who may be counsel for the Corporation or other counsel unless
the context specifies otherwise.
"Order" shall have the meaning set forth in Section 3.8(a)(i) of
these Articles Supplementary.
"Outstanding," when used with respect to AMPS, shall mean, as of
a particular date, all AMPS theretofore issued and delivered by the
Corporation, except:
(1) any such share of AMPS theretofore cancelled by the
Corporation or delivered to the Corporation for cancellation;
(2) any such share of AMPS as to which a Redemption Notice shall
have been given and for whose payment at the redemption thereof
Deposit Assets in the necessary amount are held by the Auction
Agent or the Corporation in trust for or was paid by the Auction
Agent or the Corporation to the Holder of such share pursuant to
these Articles Supplementary; and
(3) any such share in exchange for or in lieu of which other
shares have been issued and delivered pursuant to these Articles
Supplementary.
"Paying Agent" shall mean one or more banks or trust companies
authorized under the laws of the United States of America or the State of
New York to engage in the bank or trust business within the State of New
York and designated as paying agent for the AMPS and which initially shall
be IBJ Schroder Bank & Trust Company.
"Person" shall include an individual, association, unincorporated
organization, corporation, partnership, joint venture, business trust,
limited liability company or a government or any agency or a political
subdivision thereof, or any other entity.
"Potential Holder" shall mean any person, including any Existing
Holder, who shall have executed a Purchaser's Letter and who may be
interested in acquiring AMPS (or, in the case of an Existing Holder
thereof, an additional number of shares of AMPS).
"Preferred Stock" shall mean the preferred stock, par value $.01
per share, of the Corporation, including the AMPS.
"Pricing Service" shall mean Interactive Data Corporation or any
other pricing service approved by the Board of Directors.
"Purchaser's Letter" shall mean a letter substantially in the
form of Exhibit E to the Broker-Dealer Agreement as the same may be changed
from time to time by the Broker-Dealer.
"Premium Call Period" has the meaning set forth under "Specific
Redemption Provisions" below.
"Qualified Dividends" shall have the meaning set forth in Section
3.5(c)(i) of these Articles Supplementary.
"Qualifying Purchaser" shall mean (a) initially, an institutional
investor that qualifies as an accredited investor as defined in Section
501(a)(1)-(3) of Regulation D under the Securities Act or a qualified
institutional buyer as defined in Rule 144A under the Securities Act and
(b) after delivery by the Corporation of a notice to the Auction Agent
specifying that each purchaser of AMPS must have a minimum amount of total
assets or net worth, an institutional investor described in clause (a)
above that has such minimum amount of total assets or net worth.
"Rating Agencies" shall mean (i) each of Moody's and S&P if both
such rating agencies are then rating the AMPS at the request of the
Corporation, or (ii) if only one of such rating agencies is then rating the
AMPS at the request of the Corporation, such rating agency, or (iii) if
neither of such rating agencies is then rating the AMPS at the request of
the Corporation, any nationally recognized statistical rating organization
designated by the Corporation.
"Redemption Date" shall mean the date fixed for any optional or
mandatory redemption of AMPS in accordance with the applicable provisions
of Article IV of these Articles Supplementary.
"Redemption Notice" shall have the meaning set forth in Section
4.5 of these Articles Supplementary.
"Redemption Premium" shall have the meaning set forth in Section
4.4 of these Articles Supplementary.
"Registration Statement" shall mean the Corporation's
Registration Statement on Form N-2 filed with the Commission, as the same
may be amended or supplemented from time to time.
"Regular Record Date," with respect to any Dividend Distribution
Date, shall mean the Business Day next preceding such Dividend Distribution
Date.
"Request for Special Dividend Period" has the meaning set forth
in paragraph 3.1(g) of these Articles Supplementary.
"Response" has the meaning set forth in paragraph 3.1(g) of these
Articles Supplementary.
"Rule 144A" shall mean Rule 144A promulgated under the Securities
Act.
"S&P" shall mean Standard & Poor's Ratings Services, a division
of The McGraw-Hill Companies, Inc., a corporation organized and existing
under the laws of the State of Delaware, its successors and their assigns,
and if such corporation shall be dissolved or liquidated or shall no longer
perform the functions of a securities rating agency, "S&P" shall be deemed
to refer to any other nationally recognized securities rating agency
designated by the Corporation.
"S&P Eligible Assets" shall mean the sum of S&P Seasoned Eligible
Assets and S&P Unseasoned Eligible Assets.
"S&P Excess Dividend Coverage Amount," for a particular Series of
AMPS, as of any date of determination of S&P Required Asset Coverage, shall
mean (a) zero, if the next Dividend Distribution Date applicable to such
Series succeeding such date of determination is equal to or greater than
sixteen (16) days after such date of determination and (b) if the number of
days referred to in the preceding clause (a) is less than sixteen (16), an
amount equal to the aggregate liquidation preference of such Series of AMPS
multiplied by (i) 186% multiplied by (ii) the Maximum Rate as of such date
of determination multiplied by (iii) a fraction, the numerator of which is
sixteen (16) minus the number of days referred to in the preceding clause
(a) and the denominator of which is 365.
"S&P Required Asset Coverage" as of any date of determination
shall mean the sum of, without duplication, (a) the aggregate liquidation
preference of all shares of AMPS Outstanding on such date, (b) the
aggregate amount of all accrued and unpaid dividends on such AMPS to and
including such date whether or not earned or declared, (c) to the extent
not already included in clause (a) or (b) above, (i) if the Dividend
Distribution Date with respect to a particular Series of AMPS next
succeeding such date of determination is sixteen (16) days or more after
such date, the amount of dividends which will accrue on such Series of AMPS
for the next sixteen (16) days, or (ii) in all other cases, the amount of
dividends which will accrue on such Series of AMPS to the next Dividend
Distribution Date applicable thereto, (d) an amount (but not less than
zero) equal to the Current Additional Dividend Amount, (e) the S&P Excess
Dividend Coverage Amount, if any, for the AMPS, (f) 300% of the aggregate
principal amount of all Indebtedness of the Corporation outstanding on such
date, (g) the aggregate amount of all accrued and unpaid interest, to and
including such date, on all Indebtedness of the Corporation outstanding on
such date, (h) the Excess Interest Coverage Amount, if any, with respect to
all Indebtedness of the Corporation outstanding on such date, (i) the
amount of anticipated expenses of the Corporation for the number of days
subsequent to such date of determination and prior to the next Dividend
Distribution Date, but not less than 90 days, and any current liabilities
of the Corporation as of such date of determination to the extent not
included above, (j) the S&P Required Asset Coverage (as defined in the
applicable articles supplementary relating to any other Preferred Stock
issued by the Corporation and rated by S&P), if any, applicable to any
other Preferred Stock of the Corporation outstanding on such date (without
counting the S&P Required Asset Coverage, or any component thereof, for any
such Preferred Stock more than once) and (k) from and after the date of
call for redemption, the premium, if any, on any Optional Redemption of the
AMPS.
"S&P Seasoned Eligible Assets" shall mean any of the following
held by the Corporation: (a) Deposit Assets and (b) common stocks that
satisfy all of the following conditions: (i) such common stock (including
the common stock of any predecessor or constituent issuer) has been traded
on a recognized national securities exchange or quoted on the National
Market System (or any equivalent or successor thereto) of Nasdaq for at
least 450 days, (ii) the Market Capitalization of such issuer of common
stock exceeds $100 million, (iii) the issuer of such common stock is not an
entity that is treated as a partnership for federal income taxes, (iv) if
such issuer is organized under the laws of any jurisdiction other than the
United States, any state thereof, any possession or territory thereof or
the District of Columbia, the common stock of such issuer held by the
Corporation is traded on a recognized national securities exchange or
quoted on the National Market System of Nasdaq either directly or in the
form of depository receipts and (v) if such issuer is registered as an
investment company under the 1940 Act, such issuer does not invest more
than 25% of the value of its gross assets in securities that are not S&P
Eligible Assets by reason of clause (iv) above; provided, however, that the
Corporation's holdings of the common stock of any single issuer that
satisfies the conditions set forth in clauses (i) through (v) above shall
be included in S&P Seasoned Eligible Assets only to the extent that
(1) such holdings may be sold publicly by the Corporation at any time
without registration, (2) to the extent remaining eligible after the
operation of item (1) above, such holdings do not exceed a number of shares
representing the average weekly trading volume of such common stock during
the preceding 30 day period, (3) to the extent remaining eligible after the
operation of items (1) and (3) above, the aggregate Fair Market Value of
such holdings, when added to the aggregate Fair Market Value of the
Corporation's holdings of all other similarly eligible shares of common
stock of issuers in the same Industry Classification, does not exceed 25%
of the aggregate Fair Market Value of the Corporation's S&P Eligible Assets
and (4) to the extent remaining eligible after the operation of items (1)
through (3) above, the aggregate Fair Market Value of such holdings in
excess of 5% of the aggregate Fair Market Value of the Corporation's S&P
Eligible Assets, when added to the aggregate Fair Market Value of the
Corporation's holdings of all other similarly eligible shares of each other
issuer in excess of 5% of the aggregate Fair Market Value of the
Corporation's S&P Eligible Assets, does not exceed 30% of the aggregate
Fair Market Value of the Corporation's S&P Eligible Assets.
Notwithstanding the foregoing, an asset will not be considered an S&P
Seasoned Eligible Asset if it (A) is held in a margin account, (B) is
subject to any material lien, mortgage, pledge, security interest or
security agreement of any kind or (C) has been deposited irrevocably for
the payment of dividends, redemption payments or any other payment or
obligation hereunder.
"S&P Unseasoned Eligible Assets" shall mean any common stock that
would be an S&P Seasoned Eligible Asset but for the fact that the 450
trading day requirement of clause (i) of the definition thereof is not
satisfied.
"Securities" shall mean the portfolio of securities owned by the
Corporation from time to time.
"Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
"Securities Depository" shall mean The Depository Trust Company,
New York, New York or another recognized securities depository selected by
the Custodian, which maintains a book-entry system in respect of the AMPS.
"Securities Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended from time to time.
"Sell Order" shall have the meaning set forth in Section
3.8(a)(i)(B) of these Articles Supplementary.
"Series A AMPS" shall have the meaning specified in the preamble
to these Articles Supplementary under the heading "Designation."
"Series B AMPS" shall have the meaning specified in the preamble
to these Articles Supplementary under the heading "Designation."
"Series of AMPS" shall mean the Series A AMPS or the Series B
AMPS, respectively.
"Share" or "Shares" shall mean a share or shares of AMPS.
"60-Day 'AA' Composite Commercial Paper Rate," on any date of
determination, shall mean: (i) the interest equivalent of the 60-day rate
on commercial paper placed on behalf of issuers whose corporate bonds are
rated "AA" by S&P or "Aa" by Moody's, or the equivalent of such rating by
another nationally recognized securities rating agency, as such 60-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 of
determination; or (ii) if the Federal Reserve Bank of New York does not
make available any such rate, then the arithmetic average of the interest
equivalent of the 60-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 Dealers, for the close of business on the Business
Day immediately preceding such date of determination. If any Commercial
Paper Dealer does not quote a commercial paper rate required to determine
the "AA" Composite Commercial Paper Rate, the "AA" Composite Commercial
Paper Rate shall be determined on the basis of the quotation or quotations
furnished by the remaining Commercial Paper Dealer or Commercial Paper
Dealers and any Substitute Commercial Paper Dealer or Substitute Commercial
Paper Dealers selected by the Auction Agent to provide such quotation or
quotations not being supplied by any Commercial Paper Dealer or Commercial
Paper Dealers, as the case may be, or if the Auction Agent does not select
any such Substitute Commercial Paper Dealer or Substitute Commercial Paper
Dealers, by the remaining Commercial Paper Dealer or Commercial Paper
Dealers. For purposes of this definition, the "interest equivalent" of a
rate stated on a discount basis (a "discount rate" for commercial paper of
a given day's maturity) shall be equal to the product of (A) 100 times (B)
the quotient (rounded upwards to the next higher one-thousandth (.001) of
1%) of (x) the discount rate (expressed in decimals) divided by (y) the
difference between (1) 1.00 and (2) a fraction, the numerator of which
shall be the product of the discount rate (expressed in decimals) times the
number of days in which such commercial paper matures and the denominator
of which shall be 360.
"Special Dividend Period" shall mean a Dividend Period consisting
of a specified number of days greater than 49 days.
"Special Dividend Period Reference Rate" shall mean, 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 60-day "AA" Composite Commercial Paper Rate, and, in the
case of a Special Dividend Period longer than 182 days, the Treasury Rate
which most closely matches the length of the Special Dividend Period.
"Specific Redemption Provisions" shall mean, 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-Dealer, during
which a particular Series of the AMPS shall not be subject to redemption at
the option of the Corporation except for redemption pursuant to Section 4.2
in connection with a Mandatory Redemption Event or redemption in connection
with voluntary liquidation of the Corporation after shareholder approval
thereof or involuntary liquidation and (ii) a period (a "Premium Call
Period") determined by the Board of Directors of the Corporation, after
consultation with the Auction Agent and the Broker-Dealers, during which a
particular Series of the AMPS shall be redeemable at a price per share
equal to $100,000 plus (a) all accrued and unpaid dividends thereon whether
or not earned or declared to but excluding the Redemption Date in the case
of (i) a redemption occurring on a Dividend Distribution Date or (ii) a
redemption occurring as a result of a Mandatory Redemption Event or (b) the
Redemption Premium in all other cases plus a premium, which may vary during
such Premium Call Period, expressed as one or more percentages of $100,000
as determined by the Board of Directors of the Corporation after
consultation with the Auction Agent and the Broker-Dealer; provided,
however, that the Corporation shall not adopt Specific Redemption
Provisions unless each Rating Agency advises the Corporation in writing
that such adoption shall not adversely affect its then-current ratings on
the AMPS.
"Stock Register" shall mean the register of Holders maintained on
behalf of the Corporation by the Auction Agent in its capacity as transfer
agent and registrar for the Shares.
"Submission Deadline" shall mean 1:00 P.M., New York City time,
on any Auction Date or such other time on any Auction Date by which the
Broker-Dealer is required to submit Orders to the Auction Agent as
specified by the Auction Agent from time to time.
"Submitted Bid" shall have the meaning set forth in Section
3.8(c)(i) of these Articles Supplementary.
"Submitted Hold Order" shall have the meaning set forth in
Section 3.8(c)(i) of these Articles Supplementary.
"Submitted Order" shall have the meaning set forth in Section
3.8(c)(i) of these Articles Supplementary.
"Submitted Sell Order" shall have the meaning set forth in
Section 3.8(c)(i) of these Articles Supplementary.
"Subsequent Dividend Period" shall have the meaning set forth in
Section 3.3 of these Articles Supplementary.
"Substitute Commercial Paper Dealers" shall mean The First Boston
Corporation or Morgan Stanley & Co. Incorporated, or such other commercial
paper dealer or dealers as the Auction Agent may from time to time select
in consultation with the Corporation or, in lieu of any thereof, their
respective affiliates or successors, if such Person is a commercial paper
dealer, provided that neither such Person nor any of its affiliates or
successors shall be a Commercial Paper Dealer.
"Sufficient Clearing Bids" shall have the meaning set forth in
Section 3.8(c)(i)(B) of these Articles Supplementary.
"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.
"U.S. Government Securities Dealer" means Merrill Lynch, Pierce,
Fenner & Smith Incorporated or its 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, another leading
U.S. Government securities dealer; or the 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.
"Utility Industry" shall mean the following:
1. Electric
2. Water
3. Hydro Power
4. Gas
5. Diversified
"Winning Bid Rate" shall have the meaning set forth in Section
3.8(c)(i)(C) of these Articles Supplementary.
ARTICLE II
THE SHARES
2.1. Limitation on Issuance of Shares. No Shares may be issued
under the provisions of these Articles Supplementary except in accordance
with the provisions of this Article II.
2.2. Book-Entry Only For Shares. (a) Except as otherwise
provided herein, one fully registered certificate for 1,000 shares of
Series A AMPS and one fully registered certificate for 1,000 shares of
Series B AMPS shall be registered in the name of the Securities Depository
or its nominee, and ownership thereof shall be maintained in book-entry
form by the Securities Depository for the account of the Agent Members
thereof. Initially, such Shares shall be registered in the name of Cede &
Co., as the nominee of The Depository Trust Company. Transfers of
beneficial ownership interests in such Shares which are registered in the
name of Cede & Co. will be accomplished by book entries made by the
Securities Depository and in turn by the Agent Members who act on behalf of
the beneficial owners of such Shares.
Neither the Corporation, the Paying Agent, the Auction Agent nor
any of their respective affiliates shall have any responsibility or
obligation with respect to:
(i) the accuracy of the records of the Securities
Depository or any Agent Member or the Auction Agent with respect to
any beneficial ownership interest in the Shares;
(ii) the delivery to any Agent Member, any beneficial owner
of the Shares or any other Person, other than the Securities
Depository, of any notice or proxy with respect to the Shares;
(iii) the payment to any Agent Member, any beneficial owner
of the Shares or any other Person, other than the Securities
Depository, of any amount distributable with respect to the Shares; or
(iv) the failure of the Securities Depository to effect any
transfer or to provide the Auction Agent with current information
regarding registration of transfer.
(b) The Corporation may treat the Securities Depository as, and
deem the Securities Depository to be, the absolute owner of the Shares for
all purposes whatsoever, except as otherwise required by applicable law.
2.3. Limitations on Transfer. (a) An Existing Holder may not
offer to sell, transfer, pledge, hypothecate or otherwise dispose of (each,
a "transfer") any AMPS or any interest therein unless such transfer is to a
Qualifying Purchaser and an applicable exemption from the registration
requirements of the Securities Act and any state securities laws is
available. An Existing Holder may transfer or otherwise dispose of its
beneficial interest in AMPS only pursuant to a Bid or Sell Order placed in
any Auction or, with the prior consent of the Auction Agent upon
consultation by the Auction Agent with and at the direction of the
Corporation, to or through the Broker-Dealer or to another Person that is a
Qualifying Purchaser, provided that in no case shall any AMPS be so
transferable to any Person that has not signed and delivered to the Auction
Agent or Broker-Dealer, as the case may be, a duly executed Purchaser's
Letter and that, in the case of all proposed transfers other than pursuant
to an Auction, the transferor, the Broker-Dealer or the Broker-Dealer's
Agent Member shall have advised the Auction Agent or Broker-Dealer, as the
case may be, of such proposed transfer prior to the proposed date of
transfer and no such transfer shall be permitted or effective unless the
Auction Agent or Broker-Dealer, as the case may be, shall have confirmed in
writing to the Corporation, or the Corporation shall have confirmed in
writing to the Auction Agent, that such transfer will not conflict with the
requirements of the first sentence of this Section 2.3.
Notwithstanding anything contained in these Articles
Supplementary to the contrary, no AMPS or any interest therein may be
transferred unless the entire beneficial interest of the transferor therein
is so transferred. Any attempted transfer of any AMPS or any interest
therein, except as aforesaid, shall be null and void and of no force or
effect.
(b) In connection with any transfer, the Corporation may require
an unqualified Opinion of Counsel to the effect that such transfer may be
effected without registration under the Securities Act.
(c) The certificates representing the Shares and any other
evidence of an interest in such Shares shall bear legends stating that the
Shares have not been registered under the Securities Act and are subject to
the restrictions on transfer described in this Section 2.3. By purchasing
a Share, each purchaser shall be deemed to have agreed to such restrictions
on transfer.
(d) Without the vote or consent of any Holder of AMPS, to the
extent permitted by Maryland law, the certificates representing Shares and
the provisions of this Section 2.3 may be amended or supplemented from time
to time by the Corporation to modify the restrictions on and procedures for
resale and other transfers of the Shares and interests therein to reflect
(i) any registration of the Shares under applicable law or (ii) any change
in applicable law or regulation (or the interpretation thereof) or in
practices relating to the resale or other transfer of restricted securities
generally if the Corporation shall have received an Opinion of Counsel to
the effect that such amendment or supplement is necessary or appropriate to
conform to such change in law, regulations or practices.
(e) In order to preserve the exemption for resales and transfers
provided by Rule 144A under the Securities Act, the Corporation shall
provide to any Holder of a Share and any prospective purchaser designated
by such Holder, upon request of such Holder or such prospective purchaser,
such information required by Rule 144A as will enable the resale of such
Share to be made pursuant to Rule 144A. However, the Corporation shall not
be required to provide with respect to any Share more information than is
required by Rule 144A as of the date such Share is issued but may elect to
do so if necessary under subsequent revisions of Rule 144A. In addition,
the Corporation may from time to time modify the foregoing restrictions on
resale and other transfers (including the form of Purchaser's Letter),
without the consent or vote of any Holder of Shares, but upon notice to all
Holders of Shares, in order to reflect any amendment to Rule 144A or change
in the interpretation thereof or practices thereunder if the Corporation
shall have received an Opinion of Counsel to the effect that such amendment
or supplement is necessary or appropriate.
2.4. Other Restrictions. For so long as any AMPS are
Outstanding, the Corporation will not reissue any Preferred Stock
previously purchased or redeemed by the Corporation unless (i) prior to
such reissuance the Corporation receives written confirmation from the
Rating Agencies that such reissuance would not result in a reduction or
withdrawal of the rating then assigned to the AMPS by the Rating Agencies
and (ii) after giving pro forma effect to such reissuance the Adjusted
Value of all Moody's Eligible Assets and S&P Eligible Assets would equal or
exceed the Moody's Required Asset Coverage and the S&P Required Asset
Coverage, respectively.
ARTICLE III
DIVIDENDS
3.1. General. (a) The holders of Shares of each Series of AMPS
will be entitled to receive, when, as and if declared by the Board of
Directors, out of funds legally available therefor, cumulative cash
dividends, at the rate determined in accordance with Section 3.3.
(b) Dividends on the Shares of AMPS of a particular Series will
accumulate from the Date of Original Issue applicable thereto and will be
payable, if declared, on each date determined pursuant to this sentence,
which date shall be either (i) with respect to the Initial Dividend Period,
on the day after the last day of such Initial Dividend Period, (ii) with
respect to any Dividend Period of 49 days or more and fewer than 180 days
other than the Initial Dividend Period, on the day next succeeding each
period of 49 days to occur during such Dividend Period unless and until the
number of days remaining in such Dividend Period would be less than 49, in
which case in lieu thereof such Dividend Distribution Date shall be on the
day next succeeding the last day of such Dividend Period, or (iii) with
respect to any Dividend Period of 180 days or more other than the Initial
Dividend Period, quarterly on the last day of each calendar quarter during
such Dividend Period and, if the last day of such Dividend Period is not
the last day of a calendar quarter, on the day next succeeding the last day
thereof (each such date referred to in clauses (i), (ii) and (iii) being
hereinafter referred to as a "Normal Dividend Distribution Date"), except
that (A) if such Normal Dividend Distribution Date is not a Business Day,
then the Dividend Distribution Date shall be the next succeeding date if
both such date and the next succeeding date are Business Days, (B) if
either of such dates are not Business Days, then the Dividend Distribution
Date will be the date next preceding such Normal Dividend Distribution Date
and (C) if such Shares have been called for redemption, or the date of
distribution thereon in the event of any liquidation, dissolution or
winding up of the Corporation has been scheduled to occur, on the date that
would otherwise be the Dividend Distribution Date and if such date is the
last Business Day of the year, then the Dividend Distribution Date will be
the next to the last Business Day of such year; provided, however, that if
the Securities Depository shall make available to its participants and
members in funds immediately available in New York on such Dividend
Distribution Dates, the amount due as dividends on such Dividend
Distribution Dates (and the Securities Depository shall have so advised the
Corporation), and if the day that otherwise would be the Dividend
Distribution Date is not a Business Day, then the Dividend Distribution
Date shall be the next succeeding Business Day (unless the Normal Dividend
Distribution Date is December 31 in which case the Dividend Distribution
Date shall be the preceding Business Day or, in the case of the exception
in clause (C) above, the second preceding Business Day). Although any
particular Dividend Distribution Date may not occur on a Normal Dividend
Distribution Date because of the exceptions set forth above, the next
succeeding Dividend Distribution Date shall be, subject to such provisos,
the next Normal Dividend Distribution Date. If for any reason a Dividend
Distribution Date cannot be fixed as described above, then the Board of
Directors shall fix the Dividend Distribution Date. Each dividend payment
date determined as provided above and each dividend payment date for an
Additional Dividend is hereinafter referred to as a "Dividend Distribution
Date." Each dividend shall be paid to the Holders as they appear in the
Stock Register as of 12:00 noon, New York time, on the Business Day
immediately preceding the Dividend Distribution Date. Dividends in arrears
for any past Dividend Distribution Date may be declared and paid at any
time, without reference to any regular Dividend Distribution Date, to the
Holders as they appear in 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.
(c) On or prior to each Dividend Distribution Date, the
Corporation shall deposit with the Paying Agent sufficient funds for the
payment of declared dividends.
(d) Holders of Shares of AMPS will not be entitled to any
dividends, whether payable in cash, property or stock, in excess of full
cumulative dividends (including any applicable Additional Dividends). No
interest will be payable in respect of any dividend payment or payments on
the Shares of AMPS which may be in arrears.
(e) No dividends shall be declared or paid or set apart for
payment on the AMPS of a particular Series for any Dividend Period or part
thereof unless full cumulative dividends (including Additional Dividends)
have been or contemporaneously are declared and paid on each of the Shares
of AMPS of such Series through the most recent Dividend Distribution Date
applicable thereto. Any dividend payment made on the AMPS of a particular
Series will be first credited against the dividends accumulated thereon
with respect to the earliest Dividend Period for which dividends have not
been paid. No Holder shall be entitled to any dividends or Additional
Dividends, whether payable in cash, property or shares, in excess of full
cumulative dividends and Additional Dividends, as provided in this Section
3.1. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment on the AMPS that may be in arrears. In
case the stated dividends on the AMPS, or shares of any other class or
series of stock of the Corporation ranking on a parity with the AMPS as to
dividends, are not paid in full, the AMPS and such other shares of stock of
the Corporation ranking on a parity with the AMPS as to dividends shall
share ratably in the payment of dividends, including accumulations, if any,
in accordance with the sums which would be payable on such shares if all
dividends were declared and paid in full.
(f) So long as the Shares are registered in the name of the
Securities Depository or a nominee thereof, payment of dividends
distributable with respect to the Shares shall be made to the Securities
Depository by wire transfer provided proper wire instructions are received
by the Corporation prior to the applicable Regular Record Date therefor.
(g) With respect to each Dividend Period for a particular Series
of AMPS (other than the Initial 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 request, by telephonic and
written notice (a "Request for Special Dividend Period") to the Auction
Agent and to each Broker-Dealer, that the next succeeding Dividend Period
be a number of days (greater than 49) specified in the notice (a "Special
Dividend Period"), 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 for such
particular Series of AMPS 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 180 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 such particular Series of AMPS and, in the
case of a Dividend Period of more than 180 days, shall be given on or prior
to the 5th day but not more than 28 days prior to an Auction Date for such
particular Series of AMPS. The Request for Special Dividend Period shall
also state any Specific Redemption Provisions that will apply during such
Special Dividend Period.
Upon receiving such Request for Special Dividend Period, the
Broker-Dealers 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 particular Series of AMPS 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
day prior to such Auction Date. In making such determination the Broker-
Dealers 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 such
AMPS, (4) industry and financial conditions which may affect such AMPS, (5)
the investment objective of the Corporation, and (6) the Dividend Periods
and dividend rates at which current and potential beneficial holders of
such particular Series of AMPS would remain or become beneficial holders.
If the Response of all of the Broker-Dealers who give 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 particular
Series of AMPS, 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 any Broker-Dealer does not indicate that it is not
advisable that the Corporation give a Notice of Special Dividend Period for
such particular Series of AMPS, 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 and the Maximum Rate therefor 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 of the Rating Agencies that the proposed Special
Dividend Period will not adversely affect their then-current rating on such
particular Series of AMPS or if (w) either the 1940 Act AMPS Asset Coverage
Requirement is not satisfied or there shall not be maintained S&P Eligible
Assets and Moody's Eligible Assets (if Moody's and S&P are rating the AMPS
at the request of the Corporation) or S&P Eligible Assets (if S&P and not
Moody's is rating the AMPS at the request of the Corporation) or Moody's
Eligible Assets (if Moody's and not S&P is rating the AMPS at the request
of the Corporation) with an aggregate Adjusted Value which equals or
exceeds the Moody's Required Asset Coverage and/or the S&P Required Asset
Coverage, as the case may be, (x) sufficient funds for the payment of
dividends payable on the immediately succeeding Dividend Distribution Date
have not been irrevocably deposited with the Auction Agent by the close of
business on third Business Day preceding the related Auction Date, (y) all
of the Broker-Dealers 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 clause (w), (x), (y) or (z) of the prior
sentence or if the Corporation for any reason gives a Notice of Revocation
with respect to a Notice of Special Dividend Period for any particular
Series of AMPS, the next succeeding Dividend Period for such particular
Series of AMPS will be a 49-day Dividend Period. In addition, in the event
Sufficient Clearing Bids are not made in the Auction or such Auction is not
held for any reason, such next succeeding Dividend Period will be a 49-day
Dividend Period and the Corporation may not again give a Notice of Special
Dividend Period for any particular Series of AMPS (and any such attempted
notice shall be null and void) until Sufficient Clearing Bids have been
made in an Auction with respect to a 49-day Dividend Period for such
particular Series of AMPS.
3.2. Restrictions on Dividends and Other Payments. So long as
any Shares of AMPS are outstanding, the Corporation will not declare, pay
or set apart for payment any dividend or other distribution (other than a
dividend or distribution paid in shares of, or options, warrants or rights
to subscribe for or purchase, Common Stock or other stock, if any, ranking
junior to the Shares of AMPS as to dividends or upon liquidation) in
respect of Common Stock or any other stock of the Corporation ranking
junior to or on a parity with the Shares of AMPS as to dividends or upon
liquidation, or call for redemption, redeem, purchase or otherwise acquire
for consideration any shares of Common Stock or any other such junior stock
(except by conversion into or exchange for stock of the Corporation ranking
junior to the AMPS as to dividends and upon liquidation) or any such parity
stock (except by conversion into or exchange for stock of the Corporation
ranking junior to or on a parity with the AMPS as to dividends and upon
liquidation), unless (A) immediately after such transaction, (i) the
Adjusted Value of Moody's Eligible Assets and S&P Eligible Assets (if
Moody's and S&P are rating the AMPS at the request of the Corporation) or
S&P Eligible Assets (if S&P and not Moody's is rating the AMPS at the
request of the Corporation) or Moody's Eligible Assets (if Moody's and not
S&P is rating the AMPS at the request of the Corporation) would equal or
exceed the Moody's Required Asset Coverage and/or the S&P Required Asset
Coverage, as the case may be, and (ii) the 1940 Act AMPS Asset Coverage
Requirement would be satisfied, (B) full cumulative dividends (including
the then current Additional Dividends which shall be due and payable but be
unpaid) on the Shares of AMPS due on or prior to the date of the
transaction have been declared and paid or Deposit Assets have been
deposited for such payment and (C) the Corporation has redeemed the Shares
of AMPS required to be redeemed by any provision for mandatory redemption
contained in these Articles Supplementary.
3.3. Calculation of AMPS Dividend Rate. Except as provided in
Section 3.4(b), the rate (the "AMPS Rate") per annum at which dividends
shall be payable (if declared) with respect to a particular Series of AMPS
shall be equal to (a) the rate or rates per annum established by the Board
of Directors for each of the periods ending on but excluding a Dividend
Distribution Date during the period commencing on and including the Date of
Original Issue for such Series of AMPS and ending on but excluding the last
Dividend Distribution Date with respect to such Series with respect to the
Initial Dividend Period established by the Board of Directors (the "Initial
Dividend Period") and (b) the rate per annum that results from
implementation of the Auction Procedures pursuant to Section 3.8 (the
"Auction Rate") for each subsequent period which either is a Special
Dividend Period or is the 49-day period commencing on the last Normal
Dividend Distribution Date for the preceding Dividend Period with respect
to such Series of AMPS (each a "Subsequent Dividend Period" and together
with the Initial Dividend Period a "Dividend Period"); provided that if, on
any Auction Date, an Auction is not held for any reason with respect to a
particular Series of AMPS the dividend rate for the next succeeding
Dividend Period for such Series of AMPS shall equal the Maximum Rate on
such Auction Date for a Dividend Period that is not a Special Dividend
Period; and provided further that in no event shall the Auction Rate exceed
the Maximum Rate.
3.4. Calculation of Cash Dividends Distributable on AMPS. (a)
The aggregate amount of dividends distributable to each Holder of Shares of
AMPS of a particular Series for any Dividend Period or part thereof (the
"AMPS Dividend Amount") shall be calculated by (i) multiplying the AMPS
Rate for such Series of AMPS for such Dividend Period or part thereof by
$100,000, (ii) (A) in the case of a Dividend Period of less than 365 days,
multiplying such product by the actual number of days in such Dividend
Period or part thereof concerned, or (B) in the case of a Dividend Period
of 365 days or more, multiplying such product by 30 multiplied by the sum
of the number of 30-day months (calculated on the basis of a 360-day year
consisting of twelve months of 30 days each), plus, in the case of
incomplete months, the number of days actually elapsed divided by 30 days,
in the Dividend Period or part thereof concerned, (iii) dividing such
product by 360 and (iv) rounding the remainder to the nearest cent
(one-half a cent being rounded upwards).
(b) If the Corporation fails to deposit, in same-day funds, with
the Paying Agent by 12:00 noon, New York City time, (A) on any Dividend
Distribution Date an amount sufficient to pay the dividends (whether or not
earned or declared) with respect to a particular Series of AMPS payable on
such Dividend Distribution Date or (B) on any Redemption Date an amount
sufficient to redeem on such date fixed for redemption the Shares of AMPS
of a particular Series to be redeemed (including an amount equal to
dividends thereon, whether or not earned or declared, accumulated but
unpaid to such Redemption Date), then, in either case, beginning with the
Dividend Distribution Date or Redemption Date, as the case may be, on which
such failure occurs and continuing until the Dividend Distribution Date
with respect to such Series of AMPS that is or immediately follows the date
the Corporation remedies such failure as provided in the third sentence of
this paragraph, the dividend rate for such Series of AMPS for each Dividend
Period or Redemption Date applicable thereto shall be equal to 200% of the
Maximum Rate in effect on the second Business Day preceding the first day
of such Dividend Period. Notwithstanding the foregoing and provided such
failure is not due to the willful negligence of the Corporation, if the
Corporation remedies such failure by depositing, in same-day funds, with
the Paying Agent by 12:00 noon, New York City time, on the first, second or
third Business Day following such Dividend Distribution Date or date fixed
for redemption, as the case may be, an amount equal to (x) the unpaid
dividends or unpaid redemption payments plus (y) a late charge computed at
an annual rate of 200% of the Maximum Rate in effect on the second Business
Day preceding the date of such failure applied to the amount of such unpaid
dividends or unpaid redemption payments based on the number of days elapsed
from the applicable Dividend Distribution Date or date fixed for redemption
to the date on which funds for such dividends or redemption payments are
deposited with the Paying Agent divided by 360, then the dividend rate for
such Series of AMPS for the then-current Dividend Period applicable thereto
will be the AMPS Rate established on the immediately preceding Auction Date
applicable thereto. If, subsequent to the three-Business Day grace period
referred to in the preceding sentence, the Corporation remedies such
failure to pay dividends or the redemption payments by depositing with the
Paying Agent all amounts required by the first sentence of this paragraph
plus all dividends (computed at the rate specified in the first sentence of
this paragraph) accumulated (whether or not earned or declared) but unpaid
to the Dividend Distribution Date with respect to such Series that is or
immediately precedes the date of such remedy, then the dividend rate for
such Series of AMPS in respect of each Dividend Period applicable thereto
commencing after such remedy will be determined in accordance with the
Auction Procedures until such time as there is another failure to pay
either dividends or the redemption payments with respect to such Series of
AMPS. In the event of any such remedy described in the preceding sentence,
the Corporation will, not more than 30 nor less than five Business Days
prior to the next Auction Date with respect to such Series, notify the
Auction Agent, all Holders of the Shares of such Series of AMPS and the
Securities Depository in writing of the date of the next Auction.
(c) After payment in full of the AMPS Dividend Amounts for
all Outstanding Shares of a particular Series of AMPS in respect of any
Dividend Period applicable thereto, the Holders of the AMPS of such Series
will not be entitled to any further distributions in respect of such
Dividend Period other than distributions of Additional Dividends as
provided in Section 3.5.
3.5. Additional Dividends. (a) If any of the dividends paid by
the Corporation pursuant to Sections 3.1, 3.2 and 3.3 to Holders of any
Series of AMPS in any taxable year cannot be designated by the Corporation
as fully eligible for the Dividends Received Deduction, then, without
further action by the Board of Directors, to the extent of funds legally
available therefor, additional dividends ("Additional Dividends") for that
year shall accumulate and shall become payable with respect to such Series
of AMPS as set forth below such that the Net After-Tax Return to a Holder
(calculated in a manner which assumes that such Holder entitled to receive
such prior dividends by reason of being a Holder on the date immediately
preceding payment has been a Holder for the entire relevant taxable year)
of Shares of such Series of AMPS which is a domestic corporation from any
such prior dividend and the Additional Dividend relating to such prior
dividend will be the same as the Net After-Tax Return that would have been
derived from such prior dividend if all of the dividends (other than
Additional Dividends) paid on such Series of AMPS by the Corporation had
been designated by the Corporation as fully eligible for the Dividends
Received Deduction, calculated by assuming any Additional Dividends to be
eligible for the Dividends Received Deduction, and by assuming any dividend
designated as a capital gain dividend pursuant to clause (c) hereof as
eligible for any preferential tax treatment provided under applicable law
for net long-term capital gain recognized by corporations.
(b) Shortly after the end of each fiscal year of the Corporation
in which one or more dividends at one or more AMPS Rates for a particular
Series of AMPS have been declared, the Corporation shall make a calculation
pursuant to paragraphs (c) and (e) below of the Additional Dividends, if
any, with respect to such Series for such year. The calculation of the
amount of such Additional Dividends, if any, shall be based on the income
and expenses of the Corporation to the end of such immediately preceding
fiscal year. Each such Additional Dividend shall be payable to Holders of
record as of the record date established by the Board for determining
Holders entitled to receive distribution of the dividend to which such
income not eligible for the Dividends Received Deduction is allocated
pursuant to the provisions hereof and shall be payable on a date fixed by
the Board as promptly as practicable after the calculation of the amount
thereof, but in any event must be paid within the time limit and in such a
manner as will permit the Corporation to treat each such Additional
Dividend as having been paid during such immediately preceding fiscal year
for Federal tax purposes. The Corporation shall (1) deposit with the
Paying Agent or (2) irrevocably instruct its bank to segregate in a
separate trust account sufficient funds for the payment of such Additional
Dividends not later than noon on the date on which such Additional
Dividends become payable and shall give the Paying Agent, or its bank,
irrevocable instructions to apply such funds and, if applicable, the income
and proceeds therefrom, to the payment of such Additional Dividends. If
the Company instructs its bank to segregate funds pursuant to clause (2) in
the preceding sentence, the Paying Agent shall have no obligation to take
any action until such time as sufficient funds are deposited by the Company
with the Paying Agent. The Corporation may direct the Paying Agent, or its
bank, to invest any such available funds in Deposit Assets. All such funds
(to the extent necessary to pay the full amount of such Additional
Dividends) shall be held in trust for the benefit of the Holders of the
Shares of AMPS entitled thereto. If, for any taxable year, all dividends
paid on the AMPS of such Series are eligible in full for the Dividends
Received Deduction, then the amount of each Additional Dividend with
respect to such Series with respect to such taxable year shall be zero.
(c) If for any taxable year the Corporation realizes net capital
gain, then the Corporation shall:
(i) allocate to the distributions made on each series of
AMPS and any other Preferred Stock of the Corporation for a
taxable year, to the extent permitted under applicable law,
dividends received by the Corporation for such taxable year that
would have qualified for the Dividends Received Deduction if the
Corporation were not a regulated investment company ("Qualified
Dividends"), and allocate the remainder of such dividends to the
distributions made on the Common Stock for such taxable year;
(ii) allocate to the distributions made on the Common Stock
for such taxable year, to the extent permitted under applicable
law, the net capital gain of the Corporation for such taxable
year, and allocate the remainder of such net capital gain to the
distributions (including Additional Dividends) made for such
taxable year on each series of AMPS and any other Preferred Stock
of the Corporation outstanding on the last day of such taxable
year, in each case in the same proportion as the amount of such
distributions on such series bears to the sum of such
distributions on all such series of AMPS and Preferred Stock;
(iii) designate one or more of the distributions made on
the Common Stock for such taxable year, to the extent permitted
under applicable law, as derived (in whole or in part, as the
case may be) from the portion of the net capital gain of the
Corporation for such taxable year that is allocated to the
distributions on the Common Stock for such taxable year;
(iv) designate as derived (in whole or in part, as the
case may be) from net capital gain allocated to the distributions
made on each Series of AMPS outstanding on the last day of such
taxable year, first, all or a portion of the distribution paid as
dividends on the last Dividend Distribution Date for such year on
which a distribution is made with respect to such Series of AMPS,
and thereafter, if the net capital gain allocated to the
distributions made on such Series of AMPS for such taxable year
exceeds the amount of the dividend paid on such last Dividend
Distribution Date, all or a portion of each distribution paid as
dividends on each next preceding Dividend Distribution Date for
such taxable year on which a distribution is made with respect to
such Series of AMPS, in reverse order of their occurrence, until
an amount equal to the amount of the net capital gain allocated
to the distributions made with respect to such Series of AMPS for
such year has been so designated; and
(v) designate as derived (in whole or in part) from
Qualified Dividends allocated to the distributions made on each
Series of AMPS outstanding on any day during such taxable year,
first, all or a portion of the distribution paid as dividends on
the first Dividend Distribution Date for such year on which a
distribution is made with respect to such Series of AMPS, and
thereafter, all or a portion of each distribution paid as
dividends on each next successive Dividend Distribution Date for
such taxable year on which a distribution is made with respect to
such Series of AMPS, in the order of their occurrence, until an
amount equal to the amount of the Qualified Dividends allocated
to the distributions made with respect to such Series of AMPS for
such year has been so designated.
(d) Notwithstanding the provisions of paragraph (c) above, if in
the Opinion of Counsel an allocation and designation by the Corporation of
its distributions as consisting of net capital gain or of Qualifying
Dividends, respectively, other than as set forth in paragraph (c) above,
would be treated for federal income tax purposes as proportionate within
the meaning of applicable law, the Corporation may utilize such other
method of allocation and designation.
(e) Notwithstanding the provisions of paragraph (c) above, if
(x) the difference of (1) the sum of the distributions paid as dividends
and Additional Dividends on any Series of AMPS and any other Preferred
Stock of the Corporation and (2) the Qualified Dividends allocable to any
Series of AMPS and any other Preferred Stock of the Corporation exceeds the
amounts payable as dividends and Additional Dividends on the last Dividend
Distribution Date for the taxable year, or (y) the Corporation is
prohibited by applicable law, rule, regulation or interpretation from
designating dividends and Additional Dividends as derived from net capital
gain or as qualified for the Dividends Received Deduction as provided in
paragraph (c) above, the Corporation shall designate distributions made as
dividends and Additional Dividends on any Series of AMPS as derived from
net capital gain or as Qualified Dividends in a manner determined by the
Board of Directors to be just and equitable to the Holders.
(f) If the Corporation's designations of dividends qualifying
for the Dividends Received Deduction and as derived from net capital gain
are not given effect for federal income tax purposes, the Corporation will
not be required to pay Additional Dividends on any Series of AMPS to
compensate for the resulting reduction in the Net After-Tax Return to the
holders of any Series of AMPS. Moreover, no Additional Dividends shall
become payable as a result of any change in the law concerning the
eligibility for the Dividends Received Deduction of amounts paid with
respect to any Series of AMPS.
(g) For purposes of this Section 3.5, except as otherwise
provided by applicable law, any dividend declared by the Corporation in
October, November or December of any calendar year and payable to
shareholders of record on a specified date in such month, and actually paid
by the Corporation during January of the following calendar year shall be
deemed to have been paid by the Corporation on December 31 of the year
during which it was declared, unless otherwise stipulated by the Board.
3.6. Calculation of Maximum Rate and AMPS Rates. The
Corporation shall cause the Auction Agent to calculate the Maximum Rate on
each Auction Date. The Corporation shall cause the Auction Agent to
calculate the AMPS Rate for each Dividend Period. The Auction Agent's
determination of the AMPS Rate shall (in the absence of manifest error) be
final and binding upon all parties.
3.7. Position Listings; Notices. (a) By 10:00 A.M., New York
City time, on the Business Day immediately preceding the first day of each
Dividend Period for a particular Series of AMPS, the Corporation shall
request that the Securities Depository deliver to the Corporation a
position listing showing at the close of business on the immediately
preceding Regular Record Date with respect to such Series the aggregate
liquidation preference of Outstanding Shares of such Series and by 2:00
P.M., New York City time, on each such Business Day, the Corporation shall
have obtained such a position listing from the Securities Depository. On
the basis of such position listing, the Corporation shall determine the
aggregate amounts of dividends distributable on the next succeeding
Dividend Distribution Date with respect to such Series to the Holders of
Shares of such Series. The Corporation shall advise the Securities
Depository of each Regular Record Date for the Shares of such Series at
least two Business Days prior thereto.
(b) As promptly as practicable after the Date of Original Issue
for each Series of AMPS and each Dividend Distribution Date with respect
thereto, and in any event at least 10 days prior to the next Dividend
Distribution Date with respect thereto following such Date of Original
Issue or such Dividend Distribution Date, as the case may be, the
Corporation shall advise:
(i) the Auction Agent of such next Dividend Distribution
Date; and
(ii) the Securities Depository of the AMPS Rate and the
AMPS Dividend Amount applicable to such Series.
In the event that any day that is scheduled to be a Dividend Distribution
Date with respect to the AMPS of a particular Series shall be changed after
the Corporation shall have given the notice referred to in clause (i) of
the preceding sentence, not later than 9:15 A.M., New York City time, on
the Business Day next preceding the earlier of the new Dividend
Distribution Date or the old Dividend Distribution Date, the Corporation
shall, by such means as the Corporation deems practicable, give notice of
such change to the Auction Agent and to the Holders of Shares of such
Series.
3.8. Auction Procedures. An Auction shall be conducted on each
Auction Date on which there is an Auction Agent, in the following manner
(it being understood that a separate Auction will be conducted on a
different Auction Date for each separate Series of AMPS and, accordingly,
as used in this Section 3.8, "AMPS" means the Series of AMPS subject to the
related Auction and "Existing Holders" and "Potential Holders" mean
Existing Holders and Potential Holders of such Series of AMPS; as used in
this Section 3.8, "stated value" of any AMPS refers to the liquidation
preference thereof of $100,000 per share):
(a) (i) Prior to the Submission Deadline on each Auction Date:
(A) Each Existing Holder of AMPS may submit to the Broker-Dealer
information as to:
(I) the stated value of Outstanding AMPS, if any, held
by such Existing Holder which such Existing Holder desires
to continue to hold without regard to the Auction Rate for
the next succeeding Dividend Period;
(II) the stated value of Outstanding AMPS, if any,
held by such Existing Holder which such Existing Holder
offers to sell if the Auction Rate for the next succeeding
Dividend Period shall be less than the rate per annum
specified by such Existing Holder; and/or
(III) the stated value of Outstanding AMPS, if any,
held by such Existing Holder which such Existing Holder
offers to sell without regard to the Auction Rate for the
next succeeding Dividend Period.
(B) The Broker-Dealer may contact Potential Holders to determine
the stated value of AMPS which each such Potential Holder
offers to purchase if the Auction Rate for the next
succeeding Dividend Period shall be not less than the rate
per annum specified by such Potential Holder.
For the purposes hereof, the communication to the Broker-Dealer
of information referred to in clause (A)(I), (A)(II), (A)(III) or (B) of
this paragraph (i) is hereinafter referred to as an "Order" and
collectively as "Orders" and each Existing Holder and each Potential Holder
placing an Order is hereinafter referred to as a "Bidder" and collectively
as "Bidders"; an Order containing the information referred to in (x) clause
(A)(I) of this paragraph (i) is hereinafter referred to as a "Hold Order"
and collectively as "Hold Orders," (y) clause (A)(II) or (B) of this
paragraph (i) is hereinafter referred to as a "Bid" and collectively as
"Bids" and (z) clause (A)(III) of this paragraph (i) is hereinafter
referred to as a "Sell Order" and collectively as "Sell Orders."
(ii) (A) A Bid by an Existing Holder shall constitute an
irrevocable offer to sell:
(I) the stated value of Outstanding AMPS specified in
such Bid if the Auction Rate determined as provided in this
Section 3.8 shall be less than the rate specified in such
Bid; or
(II) such stated value or a lesser stated value of
Outstanding AMPS to be determined as set forth in paragraph
(d)(i)(D) hereof if the Auction Rate determined as provided
in this Section 3.8 shall be equal to the rate specified in
such Bid; or
(III) such stated value or a lesser stated value of
Outstanding AMPS to be determined as set forth in paragraph
(d)(ii)(C) hereof if the rate specified shall be higher than
the applicable Maximum Rate and Sufficient Clearing Bids
have not been made.
(B) A Sell Order by an Existing Holder shall constitute an
irrevocable offer to sell:
(I) the stated value of Outstanding AMPS specified in
such Sell Order; or
(II) such stated value or a lesser stated value of
Outstanding AMPS as set forth in paragraph (d)(ii)(C) hereof
if Sufficient Clearing Bids have not been made.
(C) A Bid by a Potential Holder shall constitute an irrevocable
offer to purchase:
(I) the stated value of Outstanding AMPS specified in
such Bid if the Auction Rate determined as provided in this
Section 3.8 shall be higher than the rate specified in such
Bid; or
(II) such stated value or a lesser stated value of
Outstanding AMPS as set forth in paragraph (d)(i)(E) hereof
if the Auction Rate determined as provided in this Section
3.8 shall be equal to the rate specified in such Bid.
(D) A Bid by a Potential Holder specifying a rate per annum
higher than the applicable Maximum Rate will not be
considered.
(b) (i) The Corporation shall instruct the Broker-Dealer to
submit in writing to the Auction Agent prior to the Submission
Deadline on each Auction Date all Orders obtained by the Broker-Dealer
and shall specify with respect to each such Order:
(A) the name of the Bidder placing such Order;
(B) the aggregate stated value of AMPS that are the subject of
such Order;
(C) the number of Persons for which Submitted Bids are being
made and the stated value of AMPS for which each such Bid is
being made;
(D) to the extent that such Bidder is an Existing Holder:
(I) the stated value of AMPS, if any, subject to any
Hold Order placed by such Existing Holder;
(II) the stated value of AMPS, if any, subject to any
Bid placed by such Existing Holder and the rate specified in
such Bid; and
(III) the stated value of AMPS, if any, subject to any
Sell Order placed by such Existing Holder;
and
(E) to the extent such Bidder is a Potential Holder, the rate
specified in such Potential Holder's Bid.
(ii) If any rate specified in any Bid contains more than
three figures to the right of the decimal point, the Corporation shall
instruct the Auction Agent to round such rate up to the next highest
one one-thousandth (.001) of 1%.
(iii) If an Order or Orders covering all Outstanding AMPS
held by any Existing Holder is not submitted to the Auction Agent
prior to the Submission Deadline, the Corporation shall instruct the
Auction Agent to deem a Hold Order to have been submitted on behalf of
such Existing Holder covering the stated value of Outstanding AMPS
held by such Existing Holder and not subject to an Order submitted to
the Auction Agent; provided, however, that with respect to an Auction
to establish a Special Dividend Period, the Auction Agent shall deem a
Sell Order to have been submitted on behalf of such Existing Holder
covering such number of Outstanding AMPS.
(iv) Neither the Corporation nor the Auction Agent shall be
responsible for any failure or delay of the Broker-Dealer to submit an
Order to the Auction Agent on behalf of any Existing Holder or
Potential Holder.
(v) If any Existing Holder submits through the
Broker-Dealer to the Auction Agent one or more Orders covering in the
aggregate more than the stated value of Outstanding AMPS held by such
Existing Holder, such Orders shall be considered valid as follows and
in the following order of priority:
(A) All Hold Orders of such Existing Holder shall be considered
valid, but only up to and including in the aggregate the
stated value of AMPS held by such Existing Holder, and if
the aggregate stated value of AMPS subject to such Hold
Orders exceeds the aggregate stated value of AMPS held by
such Existing Holder, the aggregate stated value of AMPS
subject to each such Hold Order shall be reduced pro rata to
cover the aggregate stated value of Outstanding AMPS held by
such Existing Holder;
(B) (I) any Bid of such Existing Holder shall be
considered valid up to and including the excess of the
stated value of Outstanding AMPS held by such Existing
Holder over the aggregate stated value of AMPS subject to
any Hold Orders referred to in clause (A) of this paragraph
(v);
(II) subject to subclause (I) of this clause (B), if
more than one Bid with the same rate is submitted on behalf
of such Existing Holder and the aggregate stated value of
Outstanding AMPS subject to such Bids is greater than such
excess, such Bids shall be considered valid up to and
including the stated value of such excess and the stated
value of AMPS subject to each Bid with the same rate shall
be reduced pro rata to cover the stated value of AMPS equal
to such excess;
(III) subject to subclause (I) and (II) of this clause
(B), if more than one Bid with different rates is submitted
on behalf of such Existing Holder, such bids shall be
considered valid first in the ascending order of their
respective rates until the highest rate is reached at which
such excess exists and then at such rate up to and including
the stated value of such excess; and
(IV) in any such event, the aggregate stated value of
Outstanding AMPS, if any, subject to Bids not valid under
this clause (B) shall be treated as the subject of a Bid by
a Potential Holder at the rate therein specified; and
(C) All Sell Orders shall be considered valid up to and
including the excess of the stated value of Outstanding AMPS
held by such Existing Holder over the aggregate stated value
of AMPS subject to Hold Orders referred to in clause (A) of
this paragraph (v) and valid Bids referred to in clause (B)
of this paragraph (v).
(vi) If more than one Bid for AMPS is submitted on behalf
of any Potential Holder, each Bid submitted shall be a separate Bid
with the rate and stated value therein specified.
(vii) Any Bid or Sell Order submitted by an Existing Holder
not equal to an integral multiple of the stated value of AMPS shall be
rejected and shall be deemed a Hold Order. Any Bid submitted by a
Potential Holder not covering an integral multiple of the stated value
of AMPS shall be rejected.
(viii) Any Order submitted in an Auction by the
Broker-Dealer to the Auction Agent prior to the Submission Deadline on
any Auction Date shall be irrevocable.
(c) (i) The Corporation shall instruct the Auction Agent to
assemble, not earlier than the Submission Deadline on each Auction
Date, all valid Orders submitted or deemed submitted to it by the
Broker-Dealer (each such Order as submitted or deemed submitted by the
Broker-Dealer being hereinafter referred to individually as a
"Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order,"
as the case may be, or as a "Submitted Order" and collectively as
"Submitted Hold Orders," "Submitted Bids" or "Submitted Sell Orders,"
as the case may be, or as "Submitted Orders"), and shall instruct the
Auction Agent to determine:
(A) the excess of the aggregate stated value of Outstanding AMPS
on such Auction Date over the sum of the aggregate stated
value of Outstanding AMPS subject to Submitted Hold Orders
on such Auction Date (such excess being hereinafter referred
to as the "Available AMPS"); and
(B) from such Submitted Orders whether:
(I) the aggregate stated value of Outstanding AMPS
subject to Submitted Bids by Potential Holders specifying
one or more rates equal to or lower than the applicable
Maximum Rate;
exceeds or is equal to the sum of:
(II) the aggregate stated value of Outstanding AMPS
subject to Submitted Bids by Existing Holders specifying one
or more rates higher than the applicable Maximum Rate; and
(III) the aggregate stated value of Outstanding AMPS
subject to Submitted Sell Orders
(in the event such excess or such equality exists, other than because
the sum of the stated value of AMPS in subclauses (II) and (III) above
is zero because all of the Outstanding AMPS are subject to Submitted
Hold Orders, there shall exist "Sufficient Clearing Bids" and such
Submitted Bids in subclause (I) above shall be hereinafter referred to
collectively as "Sufficient Clearing Bids"); and
(C) if Sufficient Clearing Bids have been made, the lowest rate
specified in such Submitted Bids (which shall be the
"Winning Bid Rate") such that if:
(I) (aa) each such Submitted Bid from Existing Holders
specifying such lowest rate and (bb) all other Submitted
Bids from Existing Holders specifying lower rates were
rejected, thus entitling such Existing Holders to continue
to hold the stated value of AMPS subject to such Submitted
Bids; and
(II) (aa) each such Submitted Bid from Potential
Holders specifying such lowest rate and (bb) all other
Submitted Bids from Potential Holders specifying lower rates
were accepted, thus entitling such Potential Holders to
purchase the stated value of AMPS subject to such Submitted
Bids,
the result would be that such Existing Holders described in
subclause (I) above would continue to hold an aggregate stated
value of Outstanding AMPS which, when added to the aggregate
stated value of Outstanding AMPS to be purchased by such
Potential Holders described in subclause (II) above, would equal
not less than the stated value of Available AMPS.
(ii) The Corporation shall instruct the Auction Agent to
advise the Corporation and the Broker-Dealer, promptly after the
Auction Agent has made the determinations pursuant to paragraph (i) of
this subsection (c), of the applicable Maximum Rate and the components
thereof on the Auction Date and, based on such determinations, the
rate (the "Auction Rate") for the next succeeding Dividend Period as
follows:
(A) if Sufficient Clearing Bids have been made, that the Auction
Rate for the next succeeding Dividend Period shall be equal
to the Winning Bid Rate so determined;
(B) if Sufficient Clearing Bids have not been made (other than
because all of the Outstanding AMPS are subject to Submitted
Hold Orders) that the Auction Rate for the next succeeding
Dividend Period shall be equal to the applicable Maximum
Rate for a Dividend Period that is not a Special Dividend
Period;
(C) if all Outstanding AMPS are subject to Submitted Hold
Orders, that the Auction Rate for the next succeeding
Dividend Period shall be equal to 59% of the 60-day "AA"
Composite Commercial Paper Rate on the Auction Date; or
(D) if the Auction is being conducted with respect to a Special
Dividend Period and Sufficient Clearing Bids do not exist,
then the Dividend Period next succeeding the Auction shall
automatically be 49 days and the Auction Rate for the next
succeeding Dividend Period will be as set forth in paragraph
3.8 (c)(ii)(B) above.
(d) Based on the determinations made pursuant to paragraph
(c)(i) hereof, Submitted Bids and Submitted Sell Orders shall be accepted
or rejected and the Corporation shall instruct the Auction Agent to take
such other action as set forth below:
(i) If Sufficient Clearing Bids have been made, all
Submitted Sell Orders shall be accepted and, subject to the provisions
of paragraphs (d)(iii) and (iv) hereof, Submitted Bids shall be
accepted or rejected as follows in the following order of priority and
all other Submitted Bids shall be rejected:
(A) Existing Holders' Submitted Bids specifying any rate that is
higher than the Winning Bid Rate shall be accepted, thus
requiring each such Existing Holder to sell the aggregate
stated value of AMPS subject to such Submitted Bids;
(B) Existing Holders' Submitted Bids specifying any rate that is
lower than the Winning Bid Rate shall be rejected, thus
entitling each such Existing Holder to continue to hold the
aggregate stated value of AMPS subject to such Submitted
Bids;
(C) Potential Holders' Submitted Bids specifying any rate that
is lower than the Winning Bid Rate shall be accepted;
(D) each Existing Holder's Submitted Bid specifying a rate that
is equal to the Winning Bid Rate shall be rejected, thus
entitling such Existing Holder to continue to hold the
aggregate stated value of AMPS subject to such Submitted
Bid, unless the aggregate stated value of Outstanding AMPS
subject to all such Submitted Bids shall be greater than the
stated value of AMPS (the "remaining value") equal to the
excess of the Available AMPS over the aggregate stated value
of AMPS subject to Submitted Bids described in clauses (B)
and (C) of this Section 3.8(d)(i), in which event such
Submitted Bid of such Existing Holder shall be rejected in
part, and such Existing Holder shall be entitled to continue
to hold the stated value of AMPS subject to such Submitted
Bid, but only in a stated value equal to the aggregate
stated value of AMPS obtained by multiplying the remaining
value by a fraction, the numerator of which shall be the
stated value of Outstanding AMPS held by such Existing
Holder subject to such Submitted Bid and the denominator of
which shall be the sum of the stated value of Outstanding
AMPS subject to such submitted Bids made by all such
Existing Holders that specified a rate equal to the Winning
Bid Rate; and
(E) each Potential Holder's Submitted Bid specifying a rate that
is equal to the Winning Bid Rate shall be accepted but only
in a stated value equal to the stated value of AMPS obtained
by multiplying the excess of the aggregate stated value of
Available AMPS over the aggregate stated value of AMPS
subject to Submitted Bids described in clauses (B), (C) and
(D) of this Section 3.8(d)(i) by a fraction, the numerator
of which shall be the aggregate stated value of Outstanding
AMPS subject to such Submitted Bid and the denominator of
which shall be the sum of the stated value of Outstanding
AMPS subject to Submitted Bids made by all such Potential
Holders that specified a rate equal to the Winning Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other
than because all of the Outstanding AMPS are subject to Submitted Hold
Orders), subject to the provisions of paragraph (d)(iii) hereof,
Submitted Orders shall be accepted or rejected as follows in the
following order of priority and all other Submitted Bids shall be
rejected:
(A) Existing Holders' Submitted Bids specifying any rate that is
equal to or lower than the applicable Maximum Rate shall be
rejected, thus entitling each such Existing Holder to
continue to hold the aggregate stated value of AMPS subject
to such Submitted Bids;
(B) Potential Holders' Submitted Bids specifying any rate that
is equal to or lower than the applicable Maximum Rate shall
be accepted, thus requiring such Potential Holders to
purchase the aggregate stated value of AMPS subject to such
Submitted Bids; and
(C) each Existing Holder's Submitted Bids specifying any rate
that is higher than the applicable Maximum Rate and the
Submitted Sell Order of each Existing Holder shall be
accepted, thus entitling each Existing Holder that submitted
any such Submitted Bid or Submitted Sell Order to sell the
AMPS subject to such Submitted Bid or Submitted Sell Order,
but in both cases only in a stated value equal to the
aggregate stated value of AMPS obtained by multiplying the
aggregate stated value of AMPS subject to Submitted Bids
described in clause (B) of this Section 3.8(d)(ii) by a
fraction, the numerator of which shall be the aggregate
stated value of Outstanding AMPS held by such Existing
Holder subject to such Submitted Bid or Submitted Sell Order
and the denominator of which shall be the aggregate stated
value of Outstanding AMPS subject to all such Submitted Bids
and Submitted Sell Orders.
(iii) The Corporation shall instruct the Auction Agent that
if, as a result of the procedures described in paragraphs (d)(i) or
(ii) hereof, 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 AMPS 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 Shares of AMPS to be
purchased or sold by an Existing Holder or Potential Holder, as the
case may be, on such Auction Date so that only whole Shares of AMPS
will be entitled or required to be sold or purchased.
(iv) The Corporation shall instruct the Auction Agent that
if, as a result of the procedures described in paragraph (d)(i)
hereof, any Potential Holder would be entitled or required to purchase
less than a whole Share of AMPS on any Auction Date, the Auction Agent
shall, in such manner in its sole discretion it shall determine,
allocate Shares of AMPS for purchase among Potential Holders so that
only whole Shares of AMPS are purchased on such Auction Date by any
Potential Holder, even if such allocation results in one or more of
the Potential Holders not purchasing any Shares of AMPS on such
Auction Date.
(v) If all Outstanding AMPS are subject to Submitted Hold
Orders, all Submitted Bids shall be rejected.
(e) The Corporation shall instruct the Auction Agent that based
on the results of each Auction, the Auction Agent shall determine the
aggregate stated value of AMPS to be purchased and the aggregate stated
value of AMPS to be sold by Potential Holders and Existing Holders on whose
behalf the Broker-Dealer submitted Bids or Sell Orders.
3.9. Interpretations, Changes or Modifications. The Board of
Directors may interpret the provisions of this Article III 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 Holders
of AMPS.
ARTICLE IV
REDEMPTION
4.1. Optional Redemption. To the extent permitted under the
1940 Act and Maryland Law, upon giving a Redemption Notice, the Corporation
at its option may redeem the Shares of one or more Series of AMPS at any
time or from time to time, at a redemption price equal to the AMPS
Redemption Amount; provided, however, that (a) no Shares of a particular
Series of AMPS shall be redeemed pursuant to this Section 4.1 unless all of
the Outstanding Shares of such Series are simultaneously redeemed, (b) no
Shares of any Series of AMPS may be redeemed pursuant to this Section 4.1
unless all dividends in arrears on the Outstanding Shares of AMPS and on
all other series of Preferred Stock ranking on a parity with the AMPS with
respect to the payment of dividends or upon liquidation, have been or are
being contemporaneously paid or Deposit Assets irrevocably set aside for
such payment, (c) no Shares of any Series of AMPS may be redeemed pursuant
to this Section 4.1 unless the aggregate Adjusted Value of all Moody's
Eligible Assets and S&P Eligible Assets (if Moody's and S&P are rating the
AMPS at the request of the Corporation) or S&P Eligible Assets (if S&P and
not Moody's is rating the AMPS at the request of the Corporation) or
Moody's Eligible Assets (if Moody's and not S&P is rating the AMPS at the
request of the Corporation) held by the Corporation at the time of the
redemption equals or exceeds the Moody's Required Asset Coverage and/or the
S&P Required Asset Coverage, as the case may be; provided, however, that if
such time of redemption is prior to 1:00 p.m. on an applicable Cure Date
arising under Section 4.2(a) and if giving effect to such redemption the
deficiency referred to in Section 4.2(a) would not exist at 1:00 p.m. on
the applicable Cure Date, then such Adjusted Value need not exceed the
Moody's Required Asset Coverage and/or the S&P Required Asset Coverage, as
the case may be, at the time of such redemption and (d) except for
redemption in connection with voluntary liquidation of the Corporation
after shareholder approval thereof or involuntary liquidation, no Shares of
AMPS of a particular Series may be redeemed pursuant to this Section 4.1 in
the event that a Non-Call Period is in effect with respect to such Series
pursuant to a Specific Redemption Provision.
4.2. Mandatory Redemption. To the extent permitted under the
1940 Act and Maryland Law and notwithstanding that a No-Call Period may be
in effect pursuant to a Specific Redemption Provision, the Shares of each
Series of AMPS are subject to mandatory redemption in whole or in part in
the event of a Mandatory Redemption Event.
The occurrence of any of the following will be a "Mandatory
Redemption Event":
(a) (i) if both Moody's and S&P are rating the AMPS at the
request of the Corporation, either (A) the aggregate Adjusted Value of all
Moody's Eligible Assets held by the Corporation as of the close of business
on any Business Day is less than the Moody's Required Asset Coverage as of
such Business Day and such deficiency continues to exist as of 1:00 p.m.
(New York time) on the applicable Cure Date or (B) the aggregate Adjusted
Value of all S&P Eligible Assets held by the Corporation as of the close of
business on any Business Day is less than the S&P Required Asset Coverage
as of such Business Day and such deficiency continues to exist as of 1:00
p.m. (New York time) on the applicable Cure Date or (ii) if Moody's and not
S&P is rating the AMPS at the request of the Corporation, clause (A) above
shall be operative and the state of affairs described therein shall exist
and clause (B) above shall not be operative or (iii) if S&P and not Moody's
is rating the AMPS at the request of the Corporation, clause (B) above
shall be operative and the state of affairs described therein shall exist
and clause (A) above shall not be operative;
(b) (i) the aggregate Fair Market Value of the Securities and
other assets of the Corporation is less than 130% of the sum of the
aggregate AMPS Redemption Amount for all Shares of AMPS then Outstanding
and the aggregate AMPS Redemption Amount (as defined in the applicable
articles supplementary relating to any other Preferred Stock issued by the
Corporation and rated by the Rating Agencies) applicable to any other
Preferred Stock of the Corporation then outstanding, and such aggregate
Fair Market Value remains less than 130% of such aggregate AMPS Redemption
Amount through the close of business on the applicable Cure Date;
(c) the Corporation ceases to qualify as a "regulated investment
company" within the meaning of the Code; or
(d) Merrill Lynch, Pierce, Fenner & Smith Incorporated ceases to
be the Broker-Dealer.
4.3. Timing of Mandatory Redemption. Upon the occurrence of a
Mandatory Redemption Event, the Corporation will notify each Holder, the
Custodian, the Paying Agent and the Broker-Dealer of the occurrence of such
Mandatory Redemption Event as soon as practicable after it obtains
knowledge thereof and will cause (i) in the case of a Mandatory Redemption
Event described in Section 4.2(a), (b) or (c), all of the Shares of AMPS to
be called for redemption separately for each Series of AMPS as soon as
practicable after such Mandatory Redemption Event (but in no event later
than the next Business Day) and effect the redemption of such AMPS not
later than 10 days after the applicable Cure Date and (ii) in the case of
the Mandatory Redemption Event described in Section 4.2(d), all of the
Shares of AMPS to be redeemed separately for each Series of AMPS on the
next succeeding Dividend Distribution Date.
4.4. Distributions Upon Redemption. Upon any redemption, each
Holder of Shares of AMPS to be redeemed will be entitled to receive out of
funds legally available therefor, an amount (the "AMPS Redemption Amount")
equal to the liquidation preference of such AMPS plus (a) all accrued and
unpaid dividends whether or not earned or declared thereon to but excluding
the Redemption Date in the case of (i) a redemption occurring on a Dividend
Distribution Date (or if the exception in clause (C) of Section 3.1(b) is
satisfied, the next day after a Dividend Distribution Date) with respect to
such Series or (ii) a redemption occurring as a result of a Mandatory
Redemption Event or (b) the Redemption Premium in all other cases plus the
premium, if any, if a Premium Call Period is in effect pursuant to Specific
Redemption Provisions. The "Redemption Premium" with respect to a Share of
AMPS shall equal the product of (i) accrued but unpaid dividends thereon up
to but excluding the Redemption Date and (ii) a fraction the numerator of
which is one minus the product of (A) 100% minus the percentage specified
in Section 243(a)(1) of the Code to be used in calculating the Dividends
Received Deduction multiplied by (B) the highest Federal tax rate
applicable to ordinary income recognized by corporations and the
denominator of which is one minus the highest Federal regular tax rate
applicable to net short-term capital gain recognized by corporations. The
references in the preceding sentence and in Section 6.1 hereof to the
highest Federal tax rate applicable to corporations shall be applied by
treating the calendar year in which the Redemption Premium (or Liquidation
Premium in the case of Section 6.1 hereof) is paid as the relevant taxable
year, and, in the event of a change in such rate with an effective date
other than the first day of the calendar year, giving effect to the
provisions of Section 15 of the Code.
In connection with a Mandatory Redemption Event, if the net
assets of the Corporation are insufficient to pay in full the aggregate
AMPS Redemption Amount and the aggregate redemption price of all other
Preferred Stock required to be redeemed, such net assets will be
distributed, out of funds legally available therefor, among the holders of
Shares of AMPS and the holders of shares of such other Preferred Stock
ratably in accordance with the respective preferential amounts which would
be payable on all of such stock if all such amounts payable upon such
redemption were paid in full.
4.5. Notice of Redemption. Not more than 60 days before any
Redemption Date (and on the same date as the notice to the Securities
Depository), the Corporation will cause a notice (a "Redemption Notice") of
any redemption to be mailed to the Holders of AMPS to be redeemed provided,
however in the case of a redemption pursuant to Section 4.2(a), (b) or (c)
the Corporation will cause a Redemption Notice to be mailed to the Holders
of AMPS to be redeemed as soon as practicable after the occurrence of such
events. Failure to mail a Redemption Notice to a Holder or a defect in any
notice so mailed will not affect the validity of the proceedings for the
redemption of the AMPS. Each Redemption Notice will set forth the
certificate numbers or other identifying information of the AMPS to be
redeemed, the date of issuance of such AMPS, the Redemption Date, the AMPS
Redemption Amount to be paid, the address and phone number of the Paying
Agent, the date of the Redemption Notice, the date on which funds will be
available for payment of the AMPS Redemption Amount at the principal
corporate trust office of the Paying Agent, and that from and after the
close of business on the Business Day immediately preceding the Redemption
Date dividends on the AMPS to be redeemed will cease to accrue and be
payable.
The Corporation will cause to be delivered to the Securities
Depository a notice of redemption of AMPS on or prior to the Redemption
Date. Such notice will give the Securities Depository notice of the record
date selected by the Corporation for the purpose of a redemption (each a
"Redemption Record Date"). The notice to the Securities Depository of the
Redemption Record Date shall specify, among other things, the Redemption
Record Date and the Redemption Date. Failure to deliver a notice of
redemption to the Securities Depository or a defect in any notice so
delivered will not affect the validity of the proceedings for the
redemption of the AMPS to be redeemed.
If the Corporation gives notice of redemption, and concurrently
or thereafter deposits in trust with the Paying Agent Deposit Assets in an
amount sufficient to redeem the Shares of AMPS to be redeemed, with
irrevocable instructions and authority to pay the redemption price to the
Holders thereof, then upon the date of such deposit or, if no such deposit
is made, upon such date fixed for redemption (unless the Corporation shall
default in making payment of the redemption price), all rights of the
Holders of such Shares will cease and terminate, except the right to
receive the redemption price thereof, but without interest, and such Shares
will no longer be deemed to be Outstanding. The Corporation shall be
entitled to receive, from time to time, from the Paying 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 twenty-four months after the date of
redemption, the Corporation shall cause the Paying Agent to pay over to the
Corporation such amount remaining on deposit and the Paying 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.
4.6. Cancellation. Shares so redeemed, presented and
surrendered shall be cancelled upon the surrender for payment thereof.
Until such surrender for payment, amounts payable upon redemption of Shares
shall be held by the Corporation or the Paying Agent uninvested.
ARTICLE V
REQUIRED ASSET COVERAGE
5.1. Certificate of Moody's Required Asset Coverage. So long as
Moody's is rating the AMPS at the request of the Corporation and except to
the extent waived by Moody's, as of each Business Day and each Cure Date,
the Corporation shall cause the Administrator to determine the aggregate
Adjusted Value of all Moody's Eligible Assets on that day and whether such
aggregate Adjusted Value on such date equals or exceeds the Moody's
Required Asset Coverage on such date. The calculations of the Adjusted
Value of all Moody's Eligible Assets and Moody's Required Asset Coverage,
and whether the aggregate Adjusted Value of Moody's Eligible Assets equals
or exceeds the Moody's Required Asset Coverage shall be set forth in a
certificate substantially in the form of Schedule II to the Administration
Agreement (a "Certificate of Moody's Required Asset Coverage"), dated as of
each such Business Day and Cure Date and signed by an Authorized Officer.
The Corporation shall cause the Administrator to deliver (by facsimile or
otherwise) a Certificate of Moody's Required Asset Coverage to the
Corporation by 11:00 a.m. New York time on the Business Day to which such
certificate relates. With respect to the Certificate of Moody's Required
Asset Coverage relating to (1) each Business Day which is the first
Business Day in the months of January, April, July and October of each
year, and (2) another day during each calendar quarter, which day shall be
selected at random by the independent accountants signing the Accountant's
Certificate referred to below, the Corporation shall, except to the extent
waived by Moody's, cause the Administrator to deliver to the Corporation,
within three Business Days of each such date, an Accountant's Certificate
(in substantially such form as may be agreed upon by the Company and the
Administrator with the consent of Moody's) certifying as to (i) the
mathematical accuracy of the calculations reflected in the related
Certificate of Moody's Required Asset Coverage, including the calculation
of the Adjusted Value of the Moody's Eligible Assets referred to therein
and confirming that the Moody's Eligible Assets referred to therein conform
to the definition of Moody's Eligible Assets herein, (ii) that the
methodology used by the Administrator in determining whether the Adjusted
Value of Moody's Eligible Assets equals or exceeds the Moody's Required
Asset Coverage is in accordance with the applicable requirements of these
Articles Supplementary, and (iii) that the written or published price
quotations used in such determination conform to such written or published
quotations and that the Moody's Eligible Assets listed in such Certificate
of Moody's Required Asset Coverage constitute Moody's Eligible Assets as
defined herein. In the event that a Certificate of Moody's Required Asset
Coverage is not delivered to the Corporation when required, the Moody's
Required Asset Coverage will be deemed not to have been met as of the
applicable date. If such Accountant's Certificate shall differ from the
Administrator's calculations, then the Accountant's Certificate shall
control unless any such difference results from an error in calculation by
the preparers of the Accountant's Certificate.
5.2. Notice of Moody's Required Asset Coverage. The Corporation
shall cause to be delivered to Moody's, promptly after receipt thereof by
the Corporation (but in no event later than the close of business on the
second Business Day next succeeding the following dates) the Certificate of
Moody's Required Asset Coverage with respect to each of the following
dates, unless waived by Moody's: (a) the Date of Original Issue for the
AMPS, (b) each date as of which the Adjusted Value of all Moody's Eligible
Assets is less than the Moody's Required Asset Coverage, (c) each Cure
Date, (d) each date as of which the Adjusted Value of all Moody's Eligible
Assets is less than or equal to 105% of the Moody's Required Asset
Coverage, (e) each Business Day which is the first Business Day in the
months of January, April, July and October and (f) the date on which any
Common Stock is redeemed by the Corporation.
5.3. Certificate of S&P Required Asset Coverage. So long as S&P
is rating the AMPS at the request of the Corporation and except to the
extent waived by S&P, as of each Business Day and each Cure Date, the
Corporation shall cause the Administrator to determine the aggregate
Adjusted Value of all S&P Eligible Assets on that day and whether such
aggregate Adjusted Value on such date equals or exceeds the S&P Required
Asset Coverage on such date. The calculations of the Adjusted Value of all
S&P Eligible Assets and S&P Required Asset Coverage, and whether the
aggregate Adjusted Value of S&P Eligible Assets equals or exceeds the S&P
Required Asset Coverage shall be set forth in a certificate substantially
in the form of Schedule II to the Administration Agreement (a "Certificate
of S&P Required Asset Coverage"), dated as of each such Business Day and
Cure Date and signed by an Authorized Officer. The Corporation shall cause
the Administrator to deliver (by facsimile or otherwise) a Certificate of
S&P Required Asset Coverage to the Corporation by 11:00 a.m. New York time
on the Business Day to which such certificate relates. With respect to the
Certificate of S&P Required Asset Coverage relating to (1) each Business
Day which is the first Business Day in the months of January, April, July
and October of each year, and (2) another day during each calendar quarter,
which day shall be selected at random by the independent accountants
signing the Accountant's Certificate referred to below, the Corporation
shall, except to the extent waived by S&P, cause the Administrator to
deliver to the Corporation, within three Business Days of each such date,
an Accountant's Certificate (in substantially such form as may be agreed
upon by the Company and the Administrator with the consent of S&P)
certifying as to (i) the mathematical accuracy of the calculations
reflected in the related Certificate of S&P Required Asset Coverage,
including the calculation of the Adjusted Value of the S&P Eligible Assets
referred to therein and confirming that the S&P Eligible Assets referred to
therein conform to the definition of S&P Eligible Assets herein, (ii) that
the methodology used by the Administrator in determining whether the
Adjusted Value of S&P Eligible Assets equals or exceeds the S&P Required
Asset Coverage is in accordance with the applicable requirements of these
Articles Supplementary, and (iii) that the written or published price
quotations used in such determination conform to such written or published
quotations and that the S&P Eligible Assets listed in such Certificate of
S&P Required Asset Coverage constitute S&P Eligible Assets as defined
herein. In the event that a Certificate of S&P Required Asset Coverage is
not delivered to the Corporation when required, the S&P Required Asset
Coverage will be deemed not to have been met as of the applicable date. If
such Accountant's Certificate shall differ from the Administrator's
calculations, then the Accountant's Certificate shall control unless any
such difference results from an error in calculation by the preparers of
the Accountant's Certificate.
5.4. Notice of S&P Required Asset Coverage. The Corporation
shall cause to be delivered to S&P, promptly after receipt thereof by the
Corporation (but in no event later than the close of business on the second
Business Day next succeeding the following dates) the Certificate of S&P
Required Asset Coverage with respect to each of the following dates, unless
waived by S&P: (a) the Date of Original Issue for the AMPS, (b) each date
as of which the Adjusted Value of all S&P Eligible Assets is less than the
S&P Required Asset Coverage, (c) each Cure Date, (d) each date as of which
the Adjusted Value of all S&P Eligible Assets is less than or equal to 105%
of the S&P Required Asset Coverage, (e) each Business Day which is the
first Business Day in the months of January, April, July and October, (f)
the date on which any Common Stock is redeemed by the Corporation and (g)
whenever requested by S&P.
5.5. Delivery of Accountant's Certificate to S&P. The
Corporation shall cause to be delivered to S&P as soon as practicable after
receipt thereof (but in no event later than 5 business days after the
Corporation's receipt thereof) the Accountant's Certificate relating to the
Certificate of S&P Required Asset Coverage with respect to each of the
following dates, unless waived by S&P: (a) the Date of Original Issue for
the AMPS; (b) each Cure Date; (c)(1) each Business Day which is the first
Business Day in the months of January, April, July and October and (2)
another day during each calendar quarter, which day shall be selected at
random by the independent accountants signing the Accountant's Certificate.
5.6. Alteration of Portfolio Composition. During any period in
which the Adjusted Value of all Moody's Eligible Assets or S&P Eligible
Assets is equal to or less than 105%, but greater than 100%, of the Moody's
Required Asset Coverage or S&P Required Asset Coverage, respectively, the
Corporation will not alter the composition of its investment portfolio
without first determining that after giving pro forma effect to such
alteration the Adjusted Value of Moody's Eligible Assets and S&P Eligible
Assets (if Moody's and S&P are rating the AMPS at the request of the
Corporation) or S&P Eligible Assets (if S&P and not Moody's is rating the
AMPS at the request of the Corporation) or Moody's Eligible Assets (if
Moody's and not S&P is rating the AMPS at the request of the Corporation)
would equal or exceed the Moody's Required Asset Coverage or S&P Required
Asset Coverage, as the case may be.
5.7. 1940 Act AMPS Asset Coverage Requirement. The Corporation
shall maintain, as of the last business day of each month in which any
Share of AMPS is Outstanding, the 1940 Act AMPS Asset Coverage Requirement.
5.8. Rating of the AMPS by Moody's or S&P. If at any time
Moody's is not rating the AMPS at the request of the Corporation or S&P is
not rating the AMPS at the request of the Corporation, then none of the
provisions in Sections 2.4, 3.1(g), 3.2, 4.1, 4.2, 5.1 through 5.7 and
7.3(d) herein (including the definitions relating to Moody's or S&P, as the
case may be, in Section 1.1 herein) relating to whichever of Moody's and
S&P is not rating the AMPS at the request of the Corporation shall apply
during the period that such Person is not rating the AMPS at the request of
the Corporation.
ARTICLE VI
LIQUIDATION
6.1. Liquidation Rights. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the
holders of Shares of each Series of AMPS will be entitled to receive, out
of the assets of the Corporation available for distribution to its
stockholders, before any distribution or payment is made upon any shares of
Common Stock or any other capital stock of the Corporation ranking junior
in right of payment upon liquidation to the AMPS, $100,000 per share plus
(a) the amount of any dividends accumulated but unpaid (whether or not
earned or declared) thereon to the date of distribution in the case where
the date of distribution occurs on a Dividend Distribution Date (or if the
exception in clause (C) of Section 3.1(b) is satisfied, the next day after
a Dividend Distribution Date) with respect to such Series or (b) the
Liquidation Premium in all other cases, and after such payment the holders
of AMPS will be entitled to no other payments. The "Liquidation Premium"
with respect to the Shares of a particular Series of AMPS shall equal the
product of (i) accrued but unpaid dividends on such Shares up to but
excluding the date of distribution and (ii) a fraction the numerator of
which is one minus the product of (A) 100% minus the percentage specified
in Section 243(a)(1) of the Code to be used in calculating the Dividends
Received Deduction multiplied by (B) the highest Federal tax rate
applicable to ordinary income recognized by corporations and the
denominator of which is one minus the highest Federal regular tax rate
applicable to net short-term capital gain recognized by corporations. If
such assets of the Corporation are insufficient to make the full
liquidating payment on each outstanding Share of AMPS and liquidating
payments on any other series of Preferred Stock, then such assets will be
distributed among the holders of Shares of AMPS and the holders of shares
of such other series of Preferred Stock ratably in accordance with the
respective preferential amounts which would be payable on all of such stock
if all such liquidating amounts payable were paid in full. 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 within the meaning of this
Article VI.
ARTICLE VII
VOTING
7.1. Voting Rights. Except as otherwise provided in the Charter
and except as otherwise provided by applicable law, each Holder of AMPS
will be entitled to one vote for each share held on each matter submitted
to a vote of stockholders of the Corporation, and the holders of
outstanding shares of Preferred Stock entitled to vote thereon, including
AMPS, and of shares of Common Stock shall vote together as a single class.
7.2. Election of Directors. (a) Holders of AMPS and any other
Preferred Stock, voting together as a separate class, shall be entitled and
have the exclusive right at all times to elect two of the Corporation's
directors.
(b) If at any time (i) accumulated dividends (whether or not
earned or declared, and whether or not funds are then legally available in
an amount sufficient therefor) on the Outstanding Shares of AMPS equal to
at least two full years' dividends shall be due and unpaid and sufficient
Cash or Deposit Assets shall not have been deposited with the Paying Agent
for the payment of such accumulated dividends or (ii) Holders of AMPS and
any other Preferred Stock are entitled to elect a majority of the directors
of the Corporation under the 1940 Act (any such time during which such
events specified in clause (i) or (ii) above occur and shall be continuing
is referred to herein as a "Voting Period"), then the number of directors
constituting the Board of Directors shall automatically be increased by the
smallest number that, when added to the two directors elected exclusively
by the Holders of AMPS and any other Preferred Stock as provided in Section
7.2(a), would constitute a majority of the Board of Directors as so
increased by such smallest number; and the Holders of AMPS and any other
Preferred Stock, voting together as a separate class, will be entitled to
elect the smallest number of additional directors that, together with the
two directors which such holders will be in any event entitled to elect,
constitutes a majority of the total number of directors of the Corporation
as so increased. If the Corporation thereafter shall pay, or declare and
set apart for payment in full, all dividends payable on all Outstanding
AMPS and any other Preferred Stock for all past Dividend Periods (in the
case of a Voting Period caused by the event described in clause (i) above)
or if the events giving rise to a Voting Period are cured or otherwise
cease to exist (in the case of a Voting Period by an event described in
clause (ii) above), such special voting rights shall cease, and the terms
of office of all of the additional directors elected by the Holders of AMPS
and any other Preferred Stock (but not of the directors with respect to
whose election the holders of Common Stock were entitled to vote or the two
directors the Holders of AMPS and any other Preferred Stock have the right
to elect in any event) will terminate automatically thereafter on the
earliest date permitted by the Maryland General Corporation Law.
7.3. Right of Vote with Respect to Certain Other Matters. (a)
Without the affirmative vote of the Holders (excluding the Corporation and
any of its subsidiaries) of a majority of the outstanding AMPS and any
other Preferred Stock having voting rights on such matter, voting together
as a separate class without regard to series and separately by any series
if such series is affected differently than the other series then
outstanding, voting in person or by proxy at a special meeting called for
the purpose, or the unanimous written consent of the holders of AMPS and
any other Preferred Stock having voting rights on such matter acting
without such a meeting, the Corporation shall not:
(i) authorize, create or issue (or reclassify any
authorized capital stock of the Corporation into), or increase the
authorized or issued amount of, any class or series of stock ranking
prior to the AMPS with respect to payment of dividends or the
distribution of assets on liquidation; or
(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 AMPS, except (A) as otherwise contemplated by Sections
2.3 and 3.9 hereof or (B) amendments, alterations or repeals of any or
all of the various provisions of Sections 5.1 through 5.5, including
any defined terms used therein and including the definitions of
Adjusted Value, Discount Factor, Moody's Eligible Assets, S&P Eligible
Assets and Fair Market Value, to the extent provided in the definition
of "Adjusted Value".
(b) Without the affirmative vote of the holders of a majority
(or such higher percentage provided for under the Charter) of the
outstanding AMPS and any other Preferred Stock having voting rights on such
matter, voting together as a separate class without regard to series and
separately by any series if such series is affected differently than other
series then outstanding, the Corporation shall not approve any plan of
reorganization (as such term is defined in the 1940 Act) adversely
affecting such shares or any action requiring a vote of security holders
under Section 13(a) of the 1940 Act.
(c) The class vote of holders of AMPS and any other Preferred
Stock having voting rights described above shall in each case be in
addition to a separate vote of the requisite percentage of shares of Common
Stock and AMPS and any other Preferred Stock having voting rights, voting
together as a single class, necessary to authorize the action in question
to the extent that such separate vote shall be required specifically by the
terms of the Charter or the Maryland General Corporation Law. Voluntary
liquidation of the Company after shareholder approval thereof or
involuntary liquidation of the Corporation or a merger or consolidation of
the Corporation with or into, or a sale or conveyance of all or
substantially all of the assets of the Corporation to, another corporation
under the circumstances described in the proviso to clause (v) of Section
7.3(d) hereof shall not be deemed to adversely affect any of the contract
rights expressly set forth in the Charter of the holders of AMPS or any
other Preferred Stock within the meaning of Section 7.3(a)(ii).
(d) Without the affirmative vote of the Holders (excluding the
Corporation and any of its subsidiaries) of at least 66 2/3% of the Shares
of the AMPS and other Preferred Stock then Outstanding and separately by
any series if such series is affected differently than the other series
then outstanding, voting in person or by proxy at a special meeting called
for the purpose, or the unanimous written consent of the holders of Shares
of AMPS and other Preferred Stock then Outstanding without such a meeting,
unless the Corporation receives confirmation from the Rating Agencies that
such action will not adversely affect their then current ratings of the
Shares of AMPS (in which case, the vote provided for in this sentence shall
not be required), the Corporation shall not:
(i) institute proceedings to be adjudicated a bankrupt or
insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against it, or file a petition or an answer or consent to
a petition seeking reorganization or relief under any applicable
federal or state law relating to bankruptcy, or consent to the
appointment of a receiver, liquidator, assignee, trustee sequestrator
(or other similar official) of the Corporation or a substantial part
of its property, or make any assignment for the benefit of creditors,
or, except as may be required by any fiduciary obligation of the Board
of Directors or as may be required by applicable law, admit in writing
its inability to pay its debts generally as they become due, or take
any corporate action in furtherance of any such action;
(ii) (A) create, authorize or issue (or reclassify any
authorized capital shares of the Corporation into) shares of any class
or series of capital stock ranking prior to the shares of any series
of Preferred Stock with respect to the payment of dividends or the
distribution of assets, or any securities convertible into, or
warrants, options or similar rights to purchase, acquire or receive
shares of any class or series of capital stock ranking prior to the
shares of any series of Preferred Stock or (B) issue any shares of
capital stock ranking on a parity with any series of Preferred Stock
with respect to the payment of dividends and the distribution of
assets unless, with respect to this clause (B), such parity stock is
rated "aaa" (or a comparable successor rating by Moody's (if Moody's
is then rating the AMPS at the request of the Corporation) and AAA (or
a comparable successor rating) by S&P (if S&P is then rating the AMPS
at the request of the Corporation) at the time of issuance of such
parity stock;
(iii) except in connection with the redemption of one or
more series of Preferred Stock, create, authorize, issue, assume,
incur or suffer to exist any indebtedness for borrowed money or any
direct or indirect guarantee of such indebtedness by the Corporation;
provided, however, that the Corporation may (without any requirement
to obtain the affirmative vote or any consent of any holder of Shares
of the AMPS) create, authorize, issue, assume, incur or suffer to
exist any indebtedness for borrowed money or any direct or indirect
guarantee of such indebtedness if the Adjusted Value of Moody's
Eligible Assets and S&P Eligible Assets, respectively, would equal or
exceed the Moody's Required Asset Coverage and/or S&P Required Asset
Coverage, respectively, as the case may be, on the date of such
transaction after giving effect thereto and not later than the date of
such transaction, the Custodian provides to the Corporation a
Certificate of Moody's Required Asset Coverage and/or a Certificate of
S&P Required Asset Coverage showing compliance with this proviso;
(iv) create, incur or suffer to exist, or agree to create,
incur or suffer to exist, or consent to cause or permit in the future
(upon the happening of a contingency or otherwise) the creation,
incurrence or existence of any material lien, mortgage, pledge,
charge, security interest, security agreement, conditional sale or
trust receipt or other material encumbrance of any kind upon any of
its Moody's Eligible Assets or S&P Eligible Assets, except (A) liens
the validity of which are being contested in good faith by appropriate
proceedings, (B) liens for taxes that are not then due and payable or
that can be paid thereafter without penalty, (C) liens, pledges,
charges, security interests, security agreements or other encumbrances
arising in connection with any indebtedness permitted under clause
(iii) above, (D) liens to secure payment for services rendered by the
Broker-Dealer, Auction Agent, the Custodian, or the Paying Agent or
others providing services to the Corporation and (E) liens arising by
operation of law (provided that, in the event the Corporation has
received actual notice of any such liens, the Corporation is
contesting in good faith the validity of such liens by appropriate
proceedings);
(v) voluntarily liquidate the Corporation or consolidate or
merge with or into any other corporation, or, except in connection
with the redemption of the AMPS and other Preferred Stock, sell, lease
or convey all or substantially all of the assets of the Corporation to
a single purchaser; provided, however, that this clause (v) shall not
apply to any consolidation or merger of the Corporation with or into,
or a sale or conveyance of all or substantially all of the assets of
the Corporation to, any other closed-end diversified management
investment company registered under Section 8 of the 1940 Act, if (A)
the surviving or transferee corporation (the "Surviving Corporation")
has investment objectives and policies substantially similar to the
investment objectives and policies of the Corporation and owns a
portfolio of securities consisting primarily of common stocks that
conform to the definitions of "Moody's Eligible Assets" and "S&P
Eligible Assets" herein, as applicable, and (B) in connection with
such transaction, either (1) each Share of AMPS is converted into or
exchanged for a share of auction market preferred stock of the
Surviving Corporation having terms substantially similar to the AMPS
and having a rating assigned by the Rating Agencies not lower than the
rating assigned by the Rating Agencies to the AMPS immediately prior
to such transaction or (2) each Share of AMPS shall remain outstanding
and the Surviving Corporation shall have received confirmation from
the Rating Agencies that such transaction will not affect the then
current rating assigned by the Rating Agencies to the AMPS.
(vi) except as otherwise permitted by Section 2.3, 3.9 or
Section 7.3(a)(ii)(B), amend the Charter or any provision of the
by-laws of the Corporation in any manner that materially and adversely
affects the rights of holders of shares of any series of Preferred
Stock (an amendment of the Charter in connection with a transaction
described in the proviso to clause (v) of this Section 7.3(d) shall
not be deemed to materially and adversely affect the rights of holders
of shares of any series of Preferred Stock within the meaning of this
clause (vi)); or
(vii) amend the Charter to increase or decrease the number
of authorized shares of any series of Preferred Stock.
Notwithstanding anything contained herein which may be inconsistent or to
the contrary, the Corporation shall not take any of the actions described
in the foregoing clause (ii) or clause (iii) of this Section 7.3(d) or
change the Pricing Service without prior confirmation from the Rating
Agencies, or lend any of its securities or enter into any reverse
repurchase agreement without prior confirmation from S&P, that such action
will not adversely affect its then current rating of the Shares of AMPS.
7.4. Voting Procedures. (a) As soon as practicable after the
accrual of any right of the Holders and holders of other Preferred Stock to
elect additional directors as described in Section 7.2(b), the Corporation
shall notify the Secretary of the Corporation and instruct the Secretary to
call or cause to be called a special meeting of the Holders and holders of
other Preferred Stock by mailing or causing to be mailed a notice of such
special meeting to the Holders and holders of other Preferred Stock, 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
or cause to be called such a special meeting, it may be called by Holders
and holders of other Preferred Stock of at least 25% of the vote entitled
to be cast at such meeting on like notice. The record date for determining
the Holders and holders of other Preferred Stock entitled to notice of and
to vote at such special meeting shall be the close of business on the fifth
Business Day preceding the date on which such notice is mailed. At any
such special meeting and at each meeting of stockholders held during a
Voting Period at which directors are to be elected, the Holders and holders
of other Preferred Stock, by majority vote, 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 Section 7.2(b) above on a one-vote-per-share basis.
The Holders of one-third of the Shares of the AMPS and such other Preferred
Stock then outstanding, present in person or by proxy, will constitute a
quorum for the election of directors. At any such meeting or adjournment
thereof in the absence of a quorum, a majority of the Holders and holders
of other Preferred Stock present in person or by proxy shall have the power
to adjourn the meeting for the election of directors without notice, other
than by an announcement at the meeting, to a date not more than 120 days
after the original record date.
(b) For purposes of determining any right of the Holders and
holders of other Preferred Stock to vote on any matter, whether such right
is created by these Articles Supplementary, by statute or otherwise, no
Holder and holders of any other Preferred Stock shall be entitled to vote
and no share of AMPS or any other Preferred Stock shall be deemed to be
"Outstanding" for the purpose of voting or determining the number of shares
required to constitute a quorum, if prior to or concurrently with the time
of determination of shares entitled to vote or shares deemed outstanding
for quorum purposes, as the case may be, sufficient funds for the
redemption of such shares have been deposited in trust with the Paying
Agent for that purpose and the requisite Redemption Notice with respect to
such shares shall have been given as provided in Section 4.5.
(c) The term of office of all persons who are directors of the
Corporation at the time of a special meeting of Holders and holders of any
other Preferred Stock to elect directors shall continue, notwithstanding
the election at such meeting by the Holders and holders of other Preferred
Stock of the number of directors that they are entitled to elect, and the
persons so elected by the Holders and holders of any other Preferred Stock,
together with the incumbent directors, shall constitute the duly elected
directors of the Corporation.
(d) The terms of office of the additional directors elected by
the Holders and holders of other Preferred Stock pursuant to Section 7.2(b)
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 holders of other Preferred Stock to elect
directors shall cease.
(e) So long as a Voting Period continues, the directors elected
by the Holders and holders of other Preferred Stock shall (subject to the
provisions of any applicable law) be subject to removal only by the vote of
the Holders of a majority of shares of the AMPS and other Preferred Stock
outstanding. Any vacancy on the Board of Directors of a directorship
elected by the Holders and holders of other Preferred Stock occurring by
reason of such removal or otherwise may be filled only by vote of the
Holders and holders of other Preferred Stock in accordance with the
provision of paragraph 7.2(b) above, and if not so filled such vacancy
shall (subject to the provisions of any applicable law) be filled by a
majority of the remaining directors (or the remaining director) who were
elected by the Holders and holders of other Preferred Stock.
(f) Parity Stock; Exclusive Remedy. Unless otherwise required
by law, the Holders of AMPS shall not have any relative rights or
preferences or other special rights other than those specifically set forth
herein and each Share of AMPS shall rank on a parity with all other
Preferred Stock now existing in respect of the payment of dividends and
distribution of assets upon liquidation. The Holders of AMPS shall have no
preemptive rights or rights to cumulative voting. In the event that the
Corporation fails to pay any dividends on the AMPS, the exclusive remedy of
the Holders shall be the right to vote for directors pursuant to the
provisions of this Article VII and the Holders of AMPS shall have no cause
of action against the Company for money damages or other relief with
respect to the failure to pay such dividends.
(g) Notification to the Rating Agencies. In the event a vote of
Holders of AMPS is required pursuant to the provisions of Section 13(a) of
the 1940 Act, the Corporation shall, not later than ten days prior to the
date on which such vote is to be taken, notify the Rating Agencies 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 the Rating Agencies as to the result of such vote.
IN WITNESS WHEREOF, CENTRAL INVESTMENT FUND, INC. has caused
these presents to be signed in its name and on its behalf by its President,
and its corporate seal to be hereunto affixed and attested by its
Secretary, and the said officer of the Corporation acknowledge said
instrument to be the corporate act of the Corporation, and state under the
penalties of perjury that to the best of their knowledge, information and
belief the matters and facts therein set forth with respect to approval are
true in all material respects, all on March 1, 1998.
CENTRAL INVESTMENT FUND, INC.
by: /s/ James A. McIntosh
--------------------------
Name: James A. McIntosh
Title: President
Attest:
/s/ Jane S. Miller
--------------------
Jane S. Miller
Assistant Secretary
BY-LAWS
OF
CENTRAL INVESTMENT FUND, 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 c/o Merrill Lynch & Co.,
250 Vesey Street, North Tower, World Financial Center, New York, New York,
10281-1613.
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. The Corporation shall not
hold annual meetings of its stockholders in any year in which the election
of directors is not required under applicable law.
Section 2. Special Meetings. Special meetings of the
stockholders, unless otherwise provided by law or by the Charter, 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 Charter. 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 applicable statute, the Charter 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 to act of the Chairman of the Board and the
President, a Vice President or Treasurer, 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 Charter, 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 Charter or
these By-Laws, 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 Charter, 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 Charter, 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 Charter 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 two 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 Director shall
be elected by written ballot at a meeting of stockholders unless otherwise
provided by statute or the Charter. The term of office of each director
shall be from the time of his election and qualification until the
expiration of his term or until the 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 Charter.
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 applicable law, 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 Charter.
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. 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 11. 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 By-Laws, a notice or waiver of
notice of any meeting need not state the purpose of such meeting.
Section 12. 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 bus- nebs at such meeting, and except as otherwise expressly
required by statute, the Charter or these By-Laws, 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 which the Corporation
enters into or any renewal or amendment thereof, the approval of any
fidelity bond and the selection of the Corporation's independent public
accountants shall each require the affirmative vote of a majority of the
directors who are not interested persons of the Corporation. Whether or not
a quorum is present 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 13. 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 14. Written Consent of Directors in Lieu of a Meeting.
Any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if 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 15. 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 16. 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 any registration statement of the Corporation
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). 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 officers,
individuals or management companies and/or investment advisers.
Section 17. 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 compliance with the requirements of the Investment Company
Act of 1940.
ARTICLE IV
Committee
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, 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 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 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 applicable law.
Furthermore, to the fullest extent permitted by Maryland law, as it may be
amended or interpreted from time to time, but subject to the limitations
imposed by any other applicable law, no director or officer of the
Corporation shall be personally liable to the Corporation or its
stockholders for money damages. 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 in respect of any act or omission that
occurred prior to such amendment or repeal.
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 facsimile
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 discre-
tion 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 deposited 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.
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 Pres-
ident or a Vice President or the Treasurer or pursuant to any procedure
approved by the Board of Directors, subject to applicable law.
ARTICLE XII
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 applicable law and shall set forth
such other matters as the Board or such firm of independent public
accountants shall determine.
ARTICLE XIII
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 applicable
law.
INVESTMENT MANAGEMENT AGREEMENT
Date: March 24, 1998
Account No.
Investment advisory agreement by and between Central Investment Fund, Inc.
(the Client), and World Asset Management.
The Client, being duly authorized, hereby employs World Asset Management to
provide investment advisory services for an Investment Management Account
(Account), to be established on behalf of the Client in accordance with the
following terms and conditions described herein:
1. Authority. World Asset Management will have the following power and
authority with respect to the Account. World Asset Management shall
have discretion to supervise, manage and direct the assets in the
Account other than any shares of common stock of Select Asset Fund,
Series 1, Inc. ("SAF 1") and, as agent and attorney-in-fact with full
power and authority on behalf of the Client, in accordance with the
objectives, policies and restrictions set forth in Client's
registration statement on Form N-2 as amended from time to time or as
set forth in written instructions furnished by the Client. It shall
be Client's responsibility to advise World Asset Management of any
modification of objectives as they occur. World Asset Management may,
without prior consultation with the Client and at such times when
World Asset Management deems appropriate, (a) purchase, sell, invest,
reinvest, exchange, convert, trade in and otherwise deal with such
assets in accordance with the cash management requirements of the
Client communicated by the officers of the Client to World Asset
Management; and (b) place all orders for the purchase or sale of
portfolio securities for the account with or through brokers, dealers
or issuers selected by it or designated by the Client. World Asset
Management shall not vote the proxies solicited by or with respect to
the issuers of securities in which assets of the Account may be
invested from time to time.
2. Brokerage. World Asset Management shall use its best efforts to
effect securities transactions through brokers who offer the best
execution for the least commissions in the overall best interest of
the Client unless otherwise directed by the Client.
3. Fees. Compensation to World Asset Management for its services shall
be calculated in accordance with the attached Schedule of Fees
(Appendix A). The fee shall be paid quarterly in arrears.
4. Reports to Client. World Asset Management will send Client an Account
statement containing an inventory of the investments in the Account as
soon as reasonably possible after the end of each calendar quarter.
Copies of confirmations of transactions executed will be sent promptly
to the Custodian. World Asset Management does not assume
responsibility for the accuracy of information furnished by Client or
any other person.
5. Limit of Liability. It is understood that World Asset Management
shall act in good faith and shall not be liable for any loss incurred
in connection with recommendations or investments made or other action
taken on behalf of the Account due to errors of judgment or by reason
of its advice, including action taken or omitted prior to a written
notice of termination. World Asset Management shall not be excluded
from liability for losses occasioned by reason of its willful
misfeasance, bad faith or negligence in the performance of its duties,
or by reason of its reckless disregard of its obligations and duties
hereunder. Subject to the foregoing, World Asset Management shall not
be responsible for any loss incurred solely by reason of any act or
omission of the Client, a custodian or any broker or dealer.
6. Recourse Against World Asset Management. World Asset Management's
authority hereunder shall not be impaired because of the fact that
World Asset Management may effect transactions with respect to
securities for its own account or for the accounts of others that it
manages. These transactions may involve identical or similar
securities and may be executed at the same or different times. Except
for negligence or malfeasance, or violation of applicable law, neither
World Asset Management nor any of its partners, employees or agents
shall be liable hereunder for any action performed or omitted to be
performed or for any errors of judgment in managing the Account;
provided, however, as the federal securities laws impose liabilities
under certain circumstances on persons who act in good faith, nothing
herein shall in any way constitute a waiver or limitation of any
rights that Client may have under any federal securities laws.
Subject to the foregoing, if any loss is suffered due solely to the
acts or omissions of a custodian, broker, dealer or underwriter to
which World Asset Management has given investment instructions
pursuant to the authority granted World Asset Management herein,
Client will look to the custodian, broker, dealer or underwriter, and
not to World Asset Management, for restitution and recovery.
7. Representations of World Asset Management and Client. World Asset
Management represents that it is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended and that such
registration is currently effective.
Client represents that employment of World Asset Management is
authorized by, has been accomplished in accordance with, and does not
violate, the documents governing the Account. Client will furnish
World Asset Management with true copies of all governing documents.
8. Communications. Instructions from Client to World Asset Management
may be given orally and, where deemed necessary, may be confirmed in
writing as soon as practicable. World Asset Management shall be fully
protected in acting upon any such communications which it considers to
be authentic.
9. Non-Exclusive Agreement. World Asset Management acts as adviser to
other clients and may give advice, and take action, with respect to
any of those clients that may differ from the advice given, or the
timing or nature of action taken, with respect to the Account. World
Asset Management shall have no obligation to purchase or sell for the
Account, or to recommend for purchase or sale by the Account, any
security that World Asset Management, its partners, employees, or
affiliates may purchase or sell for themselves or for any other
client.
10. Entire Agreement; Amendments. This Agreement constitutes the entire
agreement of the parties with respect to management of the Account and
can be amended only by a written amendment signed by World Asset
Management and the Client; provided that such amendment shall be
directed or approved as required by the Investment Company Act of
1940.
11. Assignment. This Agreement shall terminate automatically in the event
of its assignment (as "assignment" is defined in the Investment
Company Act of 1940 and regulations promulgated thereunder). World
Asset Management is a partnership and will notify the Client promptly
after any change in the membership of such partnership.
12. Termination. This Agreement may be terminated at any time by World
Asset Management or the Client by thirty (30) days notice to the
other; provided that such termination by the Client shall be directed
or approved in accordance with the Investment Company Act of 1940.
13. Notices. Unless otherwise specified herein, all notices, instructions
and advices with respect to security transactions or any other matters
contemplated by this Agreement shall be deemed duly given when
deposited by first class mail addressed to World Asset Management at
100 Renaissance Center, 38th Floor, Detroit, Michigan, 48243, USA and
when deposited by first class mail addressed to the Client to the
address appearing below and to any custodian designated by the Client,
at such address as it may specify to World Asset Management in
writing, or at such other address or addresses as shall be specified,
in each case, in a notice similarly given.
14. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Michigan.
CENTRAL INVESTMENT FUND, INC.
By: /s/ James A. McIntosh
--------------------------
James A. McIntosh
Its: President
411 West Lafayette
Detroit, Michigan 48226
Accepted and Agreed to in
Detroit, Michigan
By: /s/ World Asset Management
---------------------------
World Asset Management
Date: 3/19/98
APPENDIX A
MANAGEMENT FEES
The fee for services as investment adviser will be one hundredth of one
percent per annum (0.01%) of the aggregate fair market value of the equity
securities (other than equity securities of open or closed-end investment
companies), in the account. The fee shall be payable quarterly, in
arrears, on the basis of the average of the month end fair market values of
assets in the account during the calendar quarter. In the event that
services commence or terminate other than at the beginning of a quarter,
the fee will be prorated accordingly. Statements for the fees will be sent
directly to the company to the attention of James A. McIntosh.
CUSTODIAN CONTRACT
Between
CENTRAL INVESTMENT FUND, INC.
and
COMERICA BANK
CUSTODIAN CONTRACT
This Contract between Central Investment Fund, Inc., a
corporation organized and existing under the laws of Maryland, having its
principal place of business at 411 W. Lafayette Avenue, Detroit, Michigan
48226, hereinafter called the "Fund", and Comerica Bank, a Michigan
banking corporation, having its principal place of business at 411 W.
Lafayette Avenue, Detroit, Michigan 48226, 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 ("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
Comerica Incorporated 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 ("Investment Company Act"). 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 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, 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; or
(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 the 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, 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 Exchange Act, 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; and
(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.
2.10 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; and
(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 a 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 private placement memorandum
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 private placement memorandum.
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,
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 furnish such information with respect to
its activities hereunder as the Fund's independent accountant may request
in connection with the accountant's verification of the Fund's securities
and similar investments as required by Rule 17f-2 under the Investment
Company Act, 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 periodic financial reports
required to be filed with the Securities and Exchange Commission, or other
filings, 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 in an amount as detailed in Schedule
A, attached hereto, which may be amended from time to time with the written
consent of the parties hereto. The Custodian may charge such compensation
and any expenses incurred by the Custodian in the performance of its duties
pursuant to such agreement against any money held on behalf of the Fund.
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 settlements) 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. The Fund will
use reasonable efforts to avoid cash overdrafts in its account and will
provide offsetting balances with respect to any cash overdrafts that may
occur from time to time.
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, as amended, and that the Custodian
shall not act under Section 2.10A 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 such successor 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 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 with 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. New York Law to Apply
This Contract shall be governed by and construed in accordance
with laws of the State of New York without reference to choice of law
principles thereof and in accordance with the Investment Company Act. In
the case of any conflict the Investment Company Act shall control.
13. Prior Contract
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.
14. Counterparts
This Agreement may be executed by the parties hereto in
counterparts, and if executed in more than one counterpart, the separate
instruments shall constitute one agreement.
15. Shareholder Communications
Securities and Exchange Commission Rule 14b-2 requires banks
which hold securities for the account of customers to respond to requests
by issuers of securities for the names, addresses and holdings of
beneficial owners of securities of that issuer held by the bank unless the
beneficial owner has expressly objected to disclosure of this information.
The Fund hereby instructs the Custodian to not disclose any such
information to issuers who so request.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly authorized
representative as of the 24th day of March, 1998.
CENTRAL INVESTMENT FUND, INC.
By: /s/ David C. Gylfe
---------------------------
Name: David C. Gylfe
Title: Assistant Secretary
COMERICA BANK
By: /s/ James A. McIntosh
---------------------------
Name: James A. McIntosh
Title: First Vice President
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 . . . . . . . . . . . . . . . . . 3
2.3 Registration of Securities. . . . . . . . . . . . . . . 9
2.4 Bank Accounts . . . . . . . . . . . . . . . . . . . . . 10
2.5 Availability of Federal Funds. . . . . . . . . . . . . . 11
2.6 Collection of Income . . . . . . . . . . . . . . . . . . 12
2.7 Payment of Fund Monies . . . . . . . . . . . . . . . . . 13
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased . . . . . . . . . . . . . . . . 16
2.9 Appointment of Agents . . . . . . . . . . . . . . . . . 17
2.10 Deposit of Fund Assets in Securities Systems . . . . . . 18
2.10A Fund Assets Held in the Custodian's Direct Paper System 22
2.11 Segregated Account . . . . . . . . . . . . . . . . . . . 24
2.12 Ownership Certificates for Tax Purposes . . . . . . . . 26
2.13 Proxies . . . . . . . . . . . . . . . . . . . . . . . . 26
2.14 Communications Relating to Fund Portfolio Securities . . 26
2.15 Proper Instructions . . . . . . . . . . . . . . . . . . 27
2.16 Actions Permitted without Express Authority . . . . . . 29
2.17 Evidence of Authority . . . . . . . . . . . . . . . . . 30
3. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income . . . . . . . . . 31
4. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5. Opinion of Fund's Independent Accountant . . . . . . . . . . . . 32
6. Reports to Fund by Independent Public Accountants . . . . . . . 33
7. Compensation of Custodian . . . . . . . . . . . . . . . . . . . 34
8. Responsibility of Custodian . . . . . . . . . . . . . . . . . . 34
9. Effective Period, Termination and Amendment . . . . . . . . . . 36
10. Successor Custodian . . . . . . . . . . . . . . . . . . . . . . 38
11. Interpretive and Additional Provisions . . . . . . . . . . . . . 40
12. New York Law to Apply . . . . . . . . . . . . . . . . . . . . . 40
13. Prior Contract . . . . . . . . . . . . . . . . . . . . . . . . . 41
14. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
15. Shareholder Communications . . . . . . . . . . . . . . . . . . . 41
Schedule A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Schedule A
Custodian will be paid a combined fee for its services under
this contract and its services under the Administration Agreement, dated
March 19, 1998, between itself and the Fund as set forth in Schedule III to
such Administration Agreement.
CENTRAL INVESTMENT FUND, INC.
ADMINISTRATION AGREEMENT
ADMINISTRATION AGREEMENT, made as of the 24th day of March, 1998
between Central Investment Fund, Inc., a Maryland corporation (the
"Company"), and Comerica Bank, a Michigan corporation (the
"Administrator"). When used with reference to a particular series of the
Company's preferred shares, initially capitalized terms not defined herein
shall have the respective meanings ascribed to such terms in the Articles
Supplementary of the Company relating to such series of preferred shares.
WITNESSETH:
WHEREAS, the Company desires to retain the Administrator as its
agent for certain administrative services, and the Administrator is willing
to furnish such administrative services on the terms and conditions
hereinafter set forth,
NOW, THEREFORE, the parties agree as follows:
1. The Company hereby appoints the Administrator as its agent to
provide the services set forth below, subject to the overall supervision
and approval of the Board of Directors of the Company for the period and on
the terms set forth in this Agreement. The Administrator hereby accepts
such appointment and agrees during such period to render the services
herein described and to assume the obligations herein set forth, for the
compensation herein provided.
2. Subject to the supervision, direction and control of the
Board of Directors and officers of the Company, the Administrator shall
provide facilities for meetings of the Board of Directors and shareholders
of the Company and office facilities and personnel to assist the officers
of the Company in the performance of the following services:
(a) Oversee the determination, pursuant to Schedule I
hereto, and publication of, the Company's net asset value in accordance
with the Company's policy as adopted from time to time by the Board of
Directors;
(b) Oversee the maintenance of certain books and records of
the Company as required under Rule 31a-1(b)(1)-(4) of the Investment
Company Act;
(c) Arrange for preparation by the Company's independent
accountants, for review, approval and execution by officers of the Company,
the Company's federal, state and local income tax returns, reporting forms,
and any other required tax returns, as may be determined by the Company and
the Board of Directors;
(d) Arrange for payment of the Company's expenses;
(e) Prepare for review and approval by officers of the
Company financial information for the Company's reports required to be
filed with the Securities and Exchange Commission and its semi-annual and
annual reports, proxy statements and other communications with shareholders
required or otherwise to be sent to Company shareholders, and arrange for
the printing and dissemination of such reports and communications to
shareholders;
(f) Prepare for review by an officer of the Company the
Company's periodic financial reports required to be filed with the
Securities and Exchange Commission (the "SEC") on such forms, or other
filings, as may be determined by the Company and the Board of Directors;
(g) Prepare reports relating to the business and affairs of
the Company as may be mutually agreed upon and not otherwise appropriately
prepared by the Company or by the Company's custodian, counsel or auditors;
(h) Implement the accounting policies of the Company
established by the Company;
(i) Provide such assistance to the Company's custodian and
the Company's counsel and auditors as generally may be reasonably requested
in carrying on the business and operations of the Company;
(j) Respond to, or refer to the Company's officers or
transfer agent, shareholder inquiries relating to the Company;
(k) Provide to Standard & Poor's Ratings Services ("S&P")
such copies of information (including notices and certificates in
connection with Required Asset Coverage as detailed in Schedule II) in the
Administrator's possession as may reasonably be requested by S&P to assist
in the rating of the Company's preferred shares; provided, however, that
such providing of information shall be limited to information in the form
maintained by the Administrator at the time of such request;
(l) Perform required asset coverage tests and calculations
for S&P as detailed in Schedule II; and
(m) Perform the function of notes paying agent for the
Floating Rate Notes due 2023 issued by the Company.
All services are to be furnished through the medium of any
directors, officers or employees of the Administrator as the Administrator
deems appropriate in order to fulfill its obligations hereunder.
Each party shall bear all its own expenses incurred in connection
with this Agreement. Printing and dissemination expenses, such as those
for reports to shareholders and proxy statements, shall be expenses of the
Company, as shall fees of the Company's independent accountants but only in
connection with (i) the preparation of the tax returns and reporting forms
referred to in Section 2(c) hereof, (ii) the preparation of any
accountant's certificates required in connection with calculations of the
required asset coverage of any outstanding preferred stock of the Company
and (iii) the annual audit of the Company's financial statements, it being
understood that the Administrator shall bear all other accounting fees and
expenses.
3. The Company will pay the Administrator a fee as detailed in
Schedule III attached hereto, which may be amended from time to time with
the written consent of the parties hereto.
4. The Administrator assumes no responsibility under this
Agreement other than to render the services called for hereunder, and
specifically assumes no responsibilities for investment advice or the
investment or reinvestment of the Company's assets.
5. (a) In the absence of bad faith or negligence on its part,
the Administrator 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. In no event shall the Administrator be liable
to the Company or any third party for special, indirect, or consequential
damages, or lost profits or loss of business arising under or in connection
with this Agreement, even if informed of the possibility of such damages
and regardless of the form of action. The Administrator shall not be
liable for any error of judgment made in good faith unless the
Administrator shall have been negligent in ascertaining or failing to
ascertain the pertinent facts.
(b) As used in this Paragraph 5, the term "Administrator"
shall include any affiliates of the Administrator performing services for
the Company contemplated hereby, and directors, officers, agents and
employees of the Administrator and such affiliates.
(c) The Administrator may, with respect to questions of
law, apply for and obtain the advice and opinion of legal counsel
satisfactory to the Administrator, which may include counsel to the Company
(which shall be at the expense of the Company within a reasonable budget
established by the Company after consultation with the Administrator) or
counsel to the Administrator (which shall be at the expense of the
Administrator), and with respect to the application of generally accepted
accounting principles, apply for and obtain the advice and opinion of the
Company's accounting experts, which shall be at the expense of the Company
if in connection with the matters referred to in clauses (i), (ii) or (iii)
of the last paragraph of Section 2 hereof. The Administrator shall be
fully protected with respect to any action taken or omitted by it in good
faith in conformity with such advice or opinion.
(d) The Company shall indemnify and hold harmless the
Administrator from and against any and all costs, expenses, damages,
liabilities and claims, and reasonable attorneys' and accountants' fees
relating thereto, which are sustained or incurred or which may be asserted
against the Administrator, by reason of or as a result of any action taken
or omitted to be taken by the Administrator in good faith hereunder or in
reliance upon (i) any law, act, regulation or interpretation of the same
even though the same may thereafter have been altered, changed, amended or
repealed after such action was taken or omitted, (ii) any offering
materials of the Company, in connection with the sale of securities of the
Company, (iii) any instructions of an officer of the Company, or (iv) any
opinion of legal counsel for the Company, or the Administrator (if a copy
of such opinion is provided to the Company before such action was taken or
omitted), or arising out of transactions or other activities of the Company
which occurred prior to the commencement of this Agreement; provided, that
the Company shall not indemnify the Administrator for costs, expenses,
damages, liabilities or claims arising out of the Administrator's own
negligence, bad faith or willful misconduct. This indemnity shall be a
continuing obligation of the Company, its successors and assigns,
notwithstanding the termination of this Agreement.
(e) Actions taken or omitted in reliance on oral or written
instructions, or upon any information, order, indenture, stock certificate,
power of attorney, assignment, affidavit or other instrument believed by
the Administrator to be genuine or bearing the signature of a person or
persons believed to be authorized to sign, countersign or execute the same,
or upon the opinion of legal counsel for the Company or its own counsel,
shall be conclusively presumed to have been taken or omitted in good faith.
6. At any time the Administrator may apply to an officer of the
Company for written instructions with respect to any matter arising in
connection with the Administrator's duties and obligations under this
Agreement, and the Administrator shall not be liable for any action taken
or omitted to be taken by the Administrator in good faith in accordance
with such instructions. Such application by the Administrator for
instructions from an officer of the Company may, at the option of the
Administrator, set forth in writing any action proposed to be taken or
omitted to be taken by the Administrator with respect to its duties or
obligations under this Agreement and the date on and/or after which such
action shall be taken, and the Administrator shall not be liable for any
action taken or omitted to be taken in accordance with a proposal included
in any such application on or after the date specified therein unless,
prior to taking or omitting to take any such action, the Administrator has
received written instructions in response to such application specifying
the action to be taken or omitted. The Administrator may consult counsel
to the Company at the expense of the Company (within a reasonable budget
established by the Company after consultation with the Administrator), or
its own counsel at its own expense, and shall be fully protected with
respect to anything done or omitted by it in good faith in accordance with
the advice or opinion of such counsel.
7. This Agreement shall become effective immediately and shall
continue in effect unless terminated as herein provided. This Agreement
may be terminated by either party hereto (without penalty) at any time upon
not less than 30 days' prior written notice to the other party hereto.
8. The services of the Administrator to the Company hereunder
are not exclusive and nothing in this Agreement shall limit or restrict the
right of the Administrator to engage in any other business or to render
services of any kind to any other corporation, firm, individual or
association. The Administrator shall be deemed to be an independent
contractor, unless otherwise expressly provided or authorized by this
Agreement.
9. During the term of this Agreement, the Company agrees to
furnish the Administrator at the principal office of the Administrator
prior to use thereof drafts and final copies of all placement memoranda,
prospectuses, proxy statements, reports to shareholders, sales literature,
or other material prepared for distribution to shareholders of the Company
or the public that refer in any way to the Administrator. If the
Administrator reasonably objects to such references within five business
days (or such other time as may be mutually agreed) after receipt thereof,
the Company will modify such references in a manner reasonably satisfactory
to the Administrator. In the event of termination of this Agreement, the
Company will continue to furnish to the Administrator copies of any of the
above-mentioned materials that refer in any way to the Administrator. The
Company shall timely furnish or otherwise make available to the
Administrator such other information relating to the business affairs of
the Company, its directors, officers, and service providers, as the
Administrator at any time, or from time to time, reasonably requests in
order to discharge its obligations hereunder.
10. This Agreement may be amended only by mutual written
consent.
11. Any notice of other communication required to be given in
writing pursuant to this Agreement shall be deemed duly given if delivered
or mailed by registered mail, postage prepaid, (l) to the Administrator at
Comerica Bank, 411 W. Lafayette Avenue, Detroit, Michigan 48226, Attention:
Robert H. Bockrath II; (2) to the Company at c/o Merrill Lynch, Pierce,
Fenner & Smith Incorporated, World Financial Center, New York, New York
10281-1323, Attention: Auction Desk.
12. This Agreement sets forth the agreement and understanding of
the parties hereto solely with respect to the matters covered hereby and
the relationship between the Company and Comerica Bank as Administrator.
Nothing in this Agreement shall govern, restrict or limit in any respect
any other business dealings between the parties hereto unless otherwise
expressly provided herein.
13. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without reference to
choice of law principles thereof and in accordance with the Investment
Company Act of 1940 (the "Investment Company Act"). In the case of any
conflict, the Investment Company Act shall control.
14. This Agreement may be executed by the parties hereto in
counterparts, and if executed in more than one counterpart, the separate
instruments shall constitute one agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
CENTRAL INVESTMENT FUND, INC.
By: /s/ David C. Gylfe
----------------------------
Name: David C. Gylfe
Title: Assistant Secretary
COMERICA BANK, as Administrator
By: /s/ James A. McIntosh
----------------------------
Name: James A. McIntosh
Title: First Vice President
Schedule I
The net asset value of a share of the Common Stock as at the time
of a particular determination shall be calculated by subtracting the
Company's liabilities (including accrued expenses and dividends payable)
and the liquidation value of any preferred stock outstanding from the
Company's total assets (the value of the securities the Company holds plus
cash or other assets, including interest and dividends accrued but not yet
received) and dividing the result by the total number of shares of Common
Stock-outstanding. The value of the securities the Company holds shall be
based on the closing prices quoted by Muller Data Corporation or any other
pricing service approved by Standard & Poor's Ratings Services. Expenses
are to be accrued as directed by the Board of Directors of the Company.
Schedule II
Certificate of S&P Required Asset Coverage.
For each series of the Company's preferred shares which is rated
by S&P the Administrator shall determine, as of each Business Day and each
Cure Date, the aggregate Adjusted Value of all S&P Eligible Assets on that
day and whether such aggregate Adjusted Value on such date equals or
exceeds the S&P Required Asset Coverage on such date. The calculations of
the Adjusted Value of all S&P Eligible Assets and S&P Required Asset
Coverage, and whether the aggregate Adjusted Value of S&P Eligible Assets
equals or exceeds the S&P Required Asset Coverage shall be set forth in a
certificate (a "Certificate of S&P Required Asset Coverage"), dated as of
each such Business Day and Cure Date and signed by an Authorized Custodian
Officer. The Administrator shall deliver (by facsimile or otherwise) a
Certificate of S&P Required Asset Coverage to the Company by 11:00 a.m. New
York time on the Business Day to which such certificate relates. With
respect to the Certificate of S&P Required Asset Coverage relating to (1)
each Business Day which is the first Business Day in the months of January,
April, July and October of each year, and (2) another day during each
calendar quarter, which day shall be selected at random by the independent
accountants signing the Accountant's Certificate referred to below, the
Administrator shall deliver to the Company, within three Business Days of
each such date, an Accountant's Certificate) certifying as to (i) the
mathematical accuracy of the calculations reflected in the related
Certificate of S&P Required Asset Coverage, including the calculation of
the Adjusted Value of the S&P Eligible Assets referred to therein and
confirming that the S&P Eligible Assets referred to therein conform to the
definition of S&P Eligible Assets set forth in the Articles Supplementary,
(ii) that the methodology used by the Administrator in determining whether
the Adjusted Value of S&P Eligible Assets equals or exceeds the S&P
Required Asset Coverage is in accordance with the applicable requirements
of the Articles Supplementary, and (iii) that the written or published
price quotations used in such determination conform to such written or
published quotations and that the S&P Eligible Assets listed in such
Certificate of S&P Required Asset Coverage constitute S&P Eligible Assets
as defined in the Articles Supplementary.
Notices to S&P.
For each series of the Company's preferred shares which is rated
by S&P the Administrator shall:
(a) deliver to S&P, as soon as practicable (but in no event
later than the close of business on the second Business Day next succeeding
the following dates) the Certificate of S&P Required Asset Coverage with
respect to each of the following dates: (i) the Date of Original Issue,
(ii) each date as of which the Adjusted Value of all S&P Eligible Assets is
less than the S&P Required Asset Coverage, (iii) each Cure Date, (iv) each
date as of which the Adjusted Value of all S&P Eligible Assets is less than
or equal to 105% of the S&P Required Asset Coverage, (v) each Business Day
which is the first Business Day in the months of January, April, July and
October, and (vi) the date on which any Common Stock is redeemed by the
Company.
(b) deliver to S&P, promptly after same become available,
the following: (i) a copy of each Accountant's Certificate which differs
from the Administrator's calculations of S&P Required Asset Coverage; (ii)
a copy of each Accountant's Certificate relating to the Certificates of S&P
Required Asset Coverage with respect to (1) the Date of Original Issue for
each Series of preferred shares; (2) each Cure Date; (3)(A) each business
day which is the first business day in the months of January, April, July
and October and (B) another day during each calendar quarter, which day
shall be selected at random by the independent accountant's signing the
Accountant's Certificate; (iii) a copy of each amendment to the Articles
Supplementary; (iv) notice of the failure to distribute the full Dividend
Amount payable on any Dividend Distribution Date; (v) notice of the
inability of the Pricing Service to price, or the unavailability of price
quotes with respect to, any issue of common stock included in the S&P
Eligible Assets; and (vi) a copy of each written notice from the Broker-
Dealer changing any previously scheduled Dividend Distribution Date.
Notices to Company and Broker-dealer.
The Administrator will direct the independent auditors to
distribute such certifications as follows: In addition to providing the
required asset coverage certifications to S&P.
Company: Robert H. Bockrath II, Treasurer
c/o Comerica Bank
P.O. Box 75000
Detroit, MI 48275-3465
Telephone: (313) 222-3263
Fax: (313) 222-6301
Broker/dealer: Harish Raghavan, Managing Director
c/o Merrill Lynch & Co.
250 Vesey Street
North Tower - 16th Floor
New York, NY 10281
Telephone: (212) 449-0303
Fax: (212) 449-8617
Shauna Holahan, Director
c/o Merrill Lynch & Co.
250 Vesey Street
North Tower - 7th Floor
New York, NY 10281
Telephone: (212) 449-4940
Fax (212) 449-2761
The Administrator will promptly notify the Company and the
Broker-dealer as enumerated above in case of any failure to meet the
required asset coverage.
Schedule III
The Company will pay the Administrator an annual fee for its
services under this Agreement and the Custodian Contract, dated March __,
1998, in an amount calculated by multiplying (i) the Total of the Fund's
Net Asset Value (i.e., total assets less total liabilities with liquidation
preference of preferred stock not being treated as a liability) at the end
of the relevant fiscal year of the Fund, by (ii) the percentage indicated
on the matrix below with respect to the relevant fiscal year of the Fund.
Period
Fund Fiscal Year of Initial Funding 0.25%
1st Full Fund Fiscal Year 0.25%
2nd Full Fund Fiscal Year 0.15%
3rd and Subsequent Fund Fiscal Years 0.06%
