STATEMENT OF PREFERENCES
OF SELECT ASSET FUND III
SELECT ASSET FUND III, a Delaware business trust having its
registered Delaware office in the City of Wilmington (the "Company"),
certifies that:
FIRST: Pursuant to authority expressly vested in the Board of
Trustees of the Company by its Agreement and Declaration of Trust (the
"Declaration"), the Board of Trustees has reclassified an aggregate of 600
shares of its authorized but unissued shares of beneficial interests as a
single series of preferred stock, 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 600 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 Declaration which are
applicable to preferred stock of the Company, as are set forth in
this Statement of Preferences. The Series A AMPS shall constitute a
separate series of preferred stock of the Company, and each share of
Series A 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 Company 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 this Statement of Preferences.
"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.
"Administration Agreement" shall mean the Administration
Agreement between the Company 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 Company and which initially shall be
Comerica Bank & Trust, National Association.
"Agent Member" shall mean a member of, or participant in, the
Securities Depository.
"AMPS" means the Series A AMPS.
"AMPS Dividend Amount" shall have the meaning set forth in
Section 3.4 of this Statement of Preferences.
"AMPS Rate" shall have the meaning set forth in Section 3.3 of
this Statement of Preferences.
"AMPS Redemption Amount" shall have the meaning specified in
Section 4.4 of this Statement of Preferences.
"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 The Bank of New York.
"Auction Agent Agreement" shall mean the Auction Agent
Agreement between the Company 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 this Statement of Preferences.
"Auction Rate" shall have the meaning set forth in Section
3.8(c)(ii) of this Statement of Preferences.
"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, First 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 this Statement of Preferences.
"Bid" shall have the meaning set forth in Section 3.8(a)(i) of
this Statement of Preferences.
"Bidder" shall have the meaning set forth in Section 3.8(a)(i)
of this Statement of Preferences.
"Board of Trustees" or "Board" means the Board of Trustees of
the Company or any duly authorized committee thereof.
"Broker-Dealer" shall mean Merrill Lynch, Pierce, Fenner &
Smith Incorporated and its successive successors.
"Broker-Dealer Agreement" shall mean the Broker-Dealer Agreement
among the Company, 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
Broker-Dealer, 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 this Statement of Preferences.
"Certificate of S&P Required Asset Coverage" shall have the
meaning set forth in Section 5.3 of this Statement of Preferences.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and the Treasury regulations promulgated thereunder.
"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 Company, 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 Company.
"Commission" shall mean the Securities and Exchange Commission.
"Company" means Select Asset Fund III, a Delaware business
trust, and its successors.
"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, as the case may be, is less than
the Moody's Required Asset Coverage or the S&P Required Asset Coverage, as
the case may be, or as of which the aggregate Fair Market Value of the
Securities and other assets of the Company is less than 130% of the sum of
the aggregate redemption amount for all shares of AMPS then Outstanding and
the aggregate AMPS Redemption Amount (as defined in the applicable
statement of preferences relating to any other Preferred Stock issued by
the Company and rated by the Rating Agencies) applicable to any other
Preferred Stock of the Company 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
Company 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 such date of determination; 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, 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
the date of determination.
"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 Company, and which initially shall be
Comerica Bank & Trust, National Association.
"Custodian Agreement" shall mean the Custodian Contract by and
between the Custodian and the Company, 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
Company initially issues the shares of AMPS.
"Declaration" shall mean the Declaration of Trust, as amended
and supplemented from time to time (including this Statement of Preferences
and the statement of preferences with respect to any other Preferred
Stock).
"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 this Statement of Preferences.
"Dividend Period" shall have the meaning set forth in Section
3.3 of this Statement of Preferences.
"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 Company, (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 shall have executed a
Purchaser's Letter and who is listed as the holder of a beneficial interest
in Shares of AMPS (which have not been called for redemption) in the
records 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 Company 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 Company 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 amount quoted to the Company by the Pricing Service.
If such bids are not so quoted and the Pricing Service reports no such
amount, 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 this Statement of Preferences.
"Indebtedness" shall mean, with respect to the Company, any
indebtedness of the Company 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
Company 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 this Statement of Preferences.
"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 this Statement of Preferences.
"Mandatory Redemption Event" shall have the meaning set forth
in Section 4.2 of this Statement of Preferences.
"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) the Rate Multiple on such Auction Date.
"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, "Moody's" shall be deemed to refer to such
other nationally recognized rating agency designated by the Board of
Trustees.
"Moody's Eligible Assets" shall mean any of the following held
by the Company: (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 Company 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
Company outstanding on such date, (g) the aggregate amount of all accrued
and unpaid interest, to and including such date, on all Indebtedness of the
Company outstanding on such date, (h) the Excess Interest Coverage Amount,
if any, with respect to all Indebtedness of the Company outstanding on such
date, (i) the amount of anticipated expenses of the Company 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 Company as of such date of determination to the extent
not included above, (j) the Moody's Required Asset Coverage (as defined in
the applicable statement of preferences relating to any other Preferred
Stock issued by the Company and rated by Moody's), if any, applicable to
any other Preferred Stock of the Company 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 and transactions 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
Company 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 Company 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
Company 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 this Statement of Preferences.
"Notice of Revocation" shall have the meaning set forth in
paragraph 3.1(g) of this Statement of Preferences.
"Notice of Special Dividend Period" shall have the meaning set
forth in paragraph 3.1(g) of this Statement of Preferences.
"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 Company or other counsel unless the
context specifies otherwise.
"Order" shall have the meaning set forth in Section 3.8(a)(i)
of this Statement of Preferences.
"Outstanding," when used with respect to AMPS, shall mean, as
of a particular date, all AMPS theretofore issued and delivered by the
Company, except:
(1) any such share of AMPS theretofore cancelled
by the Company or delivered to the Company 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 Company in trust for or was paid by the
Auction Agent or the Company to the Holder of such share
pursuant to this Statement of Preferences; and
(3) any such share in exchange for or in lieu of which other
shares have been issued and delivered pursuant to this
Statement of Preferences.
"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 The Bank of New York.
"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 an interest in Shares of 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 Company, including the AMPS.
"Pricing Service" shall mean Interactive Data Corporation or
any other pricing service approved by the Board of Trustees.
"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" shall have the meaning set forth under
"Specific Redemption Provisions" below.
"Qualified Dividends" shall have the meaning set forth in
Section 3.5(c)(i) of this Statement of Preferences.
"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 Company 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.
"Rate Multiple" for shares of AMPS on any Auction Date, shall
mean the percentage, determined as set forth below, based on the prevailing
rating of such shares in effect at the close of business on the Business
Day next preceding such Auction Date:
Prevailing Rating..................... Percentage
"AA-"/"aa3" or higher................. 150%
"A-"/"a3" or higher................... 200%
"BBB-"/"baa3" or higher............... 225%
Below "BBB-"/"baa3"................... 275%
For purposes of this definition, the "prevailing rating" of shares of AMPS
shall be (i) "AA-"/"aa3" or higher if such shares have a rating of "AA-" or
better by S&P and/or "aa3" or better by Moody's or the equivalent of such
rating by S&P and/or Moody's or a substitute rating agency selected as
provided below, (ii) if not "AA-"/"aa3" or higher, then "A- "/"a3" if such
shares have a rating of "A-" or better by S&P and/or "a3" or better by
Moody's or the equivalent of such rating by S&P and/or Moody's or a
substitute rating agency selected as provided below, (iii) if not
"AA-"/"aa3" or higher or "A-"/"a3", then "BBB-"/"baa3" if such shares have
a rating of "BBB-" by S&P and/or "baa3" or better by Moody's or the
equivalent of such rating by S&P and/or Moody's or a substitute rating
agency selected as provided below, and (iv) if not "AA-"/"aa3" or higher,
"A-"/ "a3" or "BBB-"/ "baa3", then "Below "BBB-"/ "baa3"". The Company
shall take all reasonable action necessary to enable S&P and/or Moody's, as
the case may be, to provide a rating for shares of AMPS. If S&P and/or
Moody's shall not make such a rating available, the Company, subject to the
approval of the Broker-Dealer, or, in its absence, a majority of the
outstanding shares of AMPS not held by the Company or its Affiliates, shall
select one or more nationally recognized statistical rating organizations
(as that term is used in the rules and regulations of the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended
from time to time) to act as a substitute rating agency in respect of the
AMPS and the Company shall take all reasonable action to enable such rating
agency to provide a rating for shares of AMPS.
"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
Company, or (ii) if only one of such rating agencies is then rating the
AMPS at the request of the Company, such rating agency, or (iii) if neither
of such rating agencies is then rating the AMPS at the request of the
Company, any nationally recognized statistical rating organization
designated by the Company.
"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 this Statement of Preferences.
"Redemption Notice" shall have the meaning set forth in Section
4.5 of this Statement of Preferences.
"Redemption Premium" shall have the meaning set forth in
Section 4.4 of this Statement of Preferences.
"Registration Statement" shall mean the Company'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 this Statement of Preferences.
"Response" has the meaning set forth in paragraph 3.1(g) of
this Statement of Preferences.
"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 if S&P shall no
longer be assigning a rating to the AMPS at the request of the Company,
"S&P" shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Board of Trustees.
"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 the 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 the 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 accumulated 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 the AMPS next succeeding such date of
determination is sixteen (16) days or more after such date, the amount of
dividends which will accumulate on the AMPS for the next sixteen (16) days,
or (ii) in all other cases, the amount of dividends which will accumulate
on the 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 Company outstanding on such date, (g) the aggregate amount of all
accrued and unpaid interest, to and including such date, on all
Indebtedness of the Company outstanding on such date, (h) the Excess
Interest Coverage Amount, if any, with respect to all Indebtedness of the
Company outstanding on such date, (i) the amount of anticipated expenses of
the Company 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 Company as of such date of
determination to the extent not included above, (j) the S&P Required Asset
Coverage (as defined in the applicable statement of preferences relating to
any other Preferred Stock issued by the Company and rated by S&P), if any,
applicable to any other Preferred Stock of the Company 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 Company: (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 Company
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
Company'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 Company 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 (2) above, the aggregate Fair Market Value of such holdings, when
added to the aggregate Fair Market Value of the Company'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 Company'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 Company's S&P Eligible Assets, when added to the
aggregate Fair Market Value of the Company's holdings of all other
similarly eligible shares of each other issuer in excess of 5% of the
aggregate Fair Market Value of the Company's S&P Eligible Assets, does not
exceed 30% of the aggregate Fair Market Value of the Company'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 Company from time to time.
"Securities Act" shall mean the Securities Act of 1933.
"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.
"Sell Order" shall have the meaning set forth in Section
3.8(a)(i)(B) of this Statement of Preferences.
"Series A AMPS" shall have the meaning specified in the
preamble to this Statement of Preferences under the heading "Designation."
"Series" of AMPS shall mean the Series A AMPS and any
additional series of Auction Market Preferred Stock issued in the future.
"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 Trustees of the Company,
after consultation with the Auction Agent and the Broker-Dealer, during
which the AMPS shall not be subject to redemption at the option of the
Company except for redemption pursuant to Section 4.2 in connection with a
Mandatory Redemption Event or redemption in connection with voluntary
liquidation of the Company after shareholder approval thereof or
involuntary liquidation and (ii) a period (a "Premium Call Period")
determined by the Board of Trustees of the Company, after consultation with
the Auction Agent and the Broker- Dealers, during which 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 Trustees of
the Company after consultation with the Auction Agent and the
Broker-Dealer; provided, however, that the Company shall not adopt Specific
Redemption Provisions unless each Rating Agency advises the Company in
writing that such adoption shall not adversely affect its then-current
ratings on the AMPS.
"Statement of Preferences" shall mean this Statement of
Preferences of the Company, as amended, modified or supplemented from time
to time.
"Stock Register" shall mean the register of Holders maintained
on behalf of the Company 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 this Statement of Preferences.
"Submitted Hold Order" shall have the meaning set forth in
Section 3.8(c)(i) of this Statement of Preferences.
"Submitted Order" shall have the meaning set forth in Section
3.8(c)(i) of this Statement of Preferences.
"Submitted Sell Order" shall have the meaning set forth in
Section 3.8(c)(i) of this Statement of Preferences.
"Subsequent Dividend Period" shall have the meaning set forth
in Section 3.3 of this Statement of Preferences.
"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 Company 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 this Statement of Preferences.
"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 Company 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 Company 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 this Statement of Preferences.
ARTICLE II
THE SHARES
2.1 Limitation on Issuance of Shares. No Shares may be issued
under the provisions of this Statement of Preferences 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 600 shares of Series
A 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 Company, 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 Company and the Auction Agent 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) Neither an Existing Holder nor
any holder of a beneficial interest in any Shares held by an Existing
Holder may 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
Company, 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 Company, or the Company 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 this Statement of
Preferences 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 Company 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, the
provisions of this Section 2.3 may be amended or supplemented from time to
time by the Board of Trustees 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 Company 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 Company 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 Company 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 Company 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 Company 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 Company will not reissue any Preferred Stock previously
purchased or redeemed by the Company unless (i) prior to such reissuance
the Company 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 AMPS will be entitled
to receive, when, as and if declared by the Board of Trustees, 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 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 365 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 365 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
such succeeding date and the following 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 Company 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
Company), 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 Trustees 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 Trustees.
(c) On or prior to each Dividend Distribution Date, the Company
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 shares of any other class or series of stock of the Company
ranking on a parity with the AMPS for any Dividend Period or part thereof
unless ratable cumulative dividends (including Additional Dividends) have
been or contemporaneously are declared and paid on each of the Shares of
AMPS through the most recent Dividend Distribution Date applicable thereto.
Any dividend payment made on the AMPS will be first credited against the
dividends accumulated thereon with respect to the earliest Dividend Period
for which full 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 Company 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 Company 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 Company prior to the applicable Regular Record Date therefor.
(g) With respect to each Dividend Period for the AMPS (other
than the Initial Dividend Period) that the Company desires to be a Special
Dividend Period, the Company 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 Company may not
give a Request for Special Dividend Period (and any such request shall be
null and void) unless Sufficient Clearing Bids were made in the last
occurring Auction for the 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 the 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 the 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-Dealer shall determine whether, given the factors set forth below,
it is advisable that the Company issue a Notice of Special Dividend Period
for the AMPS as contemplated by such Request for Special Dividend Period
and, if advisable, the Specific Redemption Provisions, and shall give the
Company 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-Dealer 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
Company, and (6) the Dividend Periods and dividend rates at which current
and potential beneficial holders of AMPS would remain or become beneficial
holders.
If the Response of the Broker-Dealer states that given the
factors set forth above it is not advisable that the Company give a Notice
of Special Dividend Period for the AMPS, the Company may not give a Notice
of Special Dividend Period in respect of such Request for Special Dividend
Period. In the event the Response of the Broker-Dealer does not indicate
that it is not advisable that the Company give a Notice of Special Dividend
Period for the AMPS, the Company 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 Company shall not give a Notice of Special Dividend Period
or convert to a Special Dividend Period and, if the Company has given a
Notice of Special Dividend, the Company is required to give telephonic and
written notice of revocation (a "Notice of Revocation") to the Auction
Agent, the 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 the 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
Company) or S&P Eligible Assets (if S&P and not Moody's is rating the AMPS
at the request of the Company) or Moody's Eligible Assets (if Moody's and
not S&P is rating the AMPS at the request of the Company) 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 the third Business Day preceding
the related Auction Date, (y) the Broker-Dealer advises the Company that
after consideration of the factors listed above it has concluded that it is
advisable to give a Notice of Revocation or (z) the Company has determined
to terminate the Special Dividend Period for any reason.
If the Company 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 Company for any reason gives a Notice of Revocation with
respect to a Notice of Special Dividend Period for the AMPS, the next
succeeding Dividend Period for the 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 Company may not
again give a Notice of Special Dividend Period for the 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
the AMPS.
3.2 Restrictions on Dividends and Other Payments. So long as
any Shares of AMPS are outstanding, the Company 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 Company 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 Company 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 Company
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 Company) or S&P
Eligible Assets (if S&P and not Moody's is rating the AMPS at the request
of the Company) or Moody's Eligible Assets (if Moody's and not S&P is
rating the AMPS at the request of the Company) 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 any 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 Company has redeemed the Shares of AMPS required to be
redeemed by any provision for mandatory redemption contained in this
Statement of Preferences.
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 the AMPS shall be equal to
(a) the rate or rates per annum established by the Board of Trustees 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 and ending on but excluding the last Dividend Distribution Date with
respect to the Initial Dividend Period established by the Board of Trustees
(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 the 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 the
AMPS the dividend rate for the next succeeding Dividend Period 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 for any Dividend Period or part thereof (the "AMPS Dividend Amount")
shall be calculated by (i) multiplying the AMPS Rate 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 Company 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 full dividends (whether or
not earned or declared) with respect to the 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 to be redeemed
(including an amount equal to dividends thereon, whether or not earned or
declared, accumulated but unpaid to such Redemption Date and the Redemption
Premium, if any), 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 the AMPS that is or immediately follows the date the Company
remedies such failure as provided in the third sentence of this paragraph,
the dividend rate for the AMPS for each Dividend Period or Redemption Date
applicable thereto shall be equal to 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 Company, if the Company 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 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 the 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
Company 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 the AMPS that is or immediately precedes the date of such
remedy, then the dividend rate for the 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 the AMPS. In the event of any such remedy described in the
preceding sentence, the Company will, not more than 30 nor less than five
Business Days prior to the next Auction Date notify the Auction Agent, all
Holders of the Shares of the 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 AMPS in respect of any Dividend Period
applicable thereto, the Holders of the AMPS 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 Company pursuant to Sections 3.1, 3.2, 3.3 and 3.4 to Holders of any
Series of AMPS in any taxable year cannot be designated by the Company as
fully eligible for the Dividends Received Deduction, then, except in the
circumstances set forth below in Sections 3.5(e), (f) and (g), without
further action by the Board of Trustees, to the extent of funds legally
available therefor, additional dividends ("Additional Dividends") for that
year shall accumulate and shall become payable with respect to the 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 or portion
thereof during which the AMPS were outstanding) of Shares 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 the AMPS by
the Company had been 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 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 Company in
which one or more dividends at one or more AMPS Rates for the AMPS have
been declared, the Company shall make a calculation pursuant to this
Section 3.5 of the Additional Dividends, if any, with respect to the AMPS
for such 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 any
capital gain or other income not eligible for the Dividends Received
Deduction ("non-DRD income") is allocated pursuant to the provisions hereof
and shall be payable on a date fixed by the Board after the calculation of
the amount thereof. The Company 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
Company 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) In determining the amount of any Additional Dividends to be
paid in respect of the AMPS for any year, the Company will allocate the
AMPS holders' share (determined by taking into account the Additional
Dividends that will be paid as a result of such allocation) of any non-DRD
income distributions made on the AMPS during that year, beginning first
with the distribution made on the last Distribution Date for such year and,
if such share exceeds the amount of such distribution, to the distribution
on the next preceding Distribution Date, continuing in reverse order of the
distributions' occurrence until an amount equal to the AMPS' share of such
non-DRD income has been allocated to distributions for such year.
Notwithstanding the foregoing, if in the Opinion of Counsel an allocation
by the Company other than as set forth above should be treated for federal
income tax purposes as appropriate within the meaning of applicable law,
the Company may utilize such other method of allocation.
(d) Notwithstanding subsections (b) and (c) above, if the
Company is prohibited by applicable law, rule, regulation or interpretation
from allocating non-DRD income as provided above, the Company will allocate
distributions on the AMPS consisting of non-DRD income in a manner
determined in good faith by the Board of Trustees to be just and equitable
to the Holders.
(e) If the Company'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 Company 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
such AMPS.
(f) No Additional Dividends shall become payable as a result of
any change in the law or any change in administrative or judicial
interpretation of current law concerning the eligibility for the Dividends
Received Deduction of amounts paid with respect to such series of AMPS.
(g) No Additional Dividends shall become payable as a result of
the fact that all or a portion of any Additional Dividend will not be
eligible for the Dividends Received Deduction.
3.6 Calculation of Maximum Rate and AMPS Rates. The Company
shall cause the Auction Agent to calculate the Maximum Rate on each Auction
Date. The Company 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, the Company shall request that the Securities Depository
deliver to the Company a position listing showing at the close of business
on the immediately preceding Regular Record Date the aggregate liquidation
preference of Outstanding Shares of AMPS and by 2:00 P.M., New York City
time, on each such Business Day, the Company shall have obtained such a
position listing from the Securities Depository. On the basis of such
position listing, the Company shall determine the aggregate amounts of
dividends distributable on the next succeeding Dividend Distribution Date
with respect to the AMPS to the Holders. The Company shall advise the
Securities Depository of each Regular Record Date for the Shares of AMPS at
least two Business Days prior thereto.
(b) As promptly as practicable after the Date of Original Issue
and each Dividend Distribution Date with respect thereto, and in any event
at least 10 days prior to the next Dividend Distribution Date following
such Date of Original Issue or such Dividend Distribution Date, as the case
may be, the Company 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.
In the event that any day that is scheduled to be a Dividend Distribution
Date with respect to the AMPS shall be changed after the Company 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 Company shall, by such means as the Company
deems practicable, give notice of such change to the Auction Agent and to
the Holders of Shares of AMPS.
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, as used in this Section 3.8, "Existing Holders"
and "Potential Holders" mean Existing Holders and Potential Holders of AMPS
and "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 Company 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 Company 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 Company 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 Company 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 Company 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 Company shall instruct the Auction Agent to
advise the Company 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 65% 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 Company 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 Company 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 Company 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 Company 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
Trustees may interpret the provisions of this Article III to resolve any
inconsistency or ambiguity, remedy any formal defect or make any other
amendment, modification or supplement that does not adversely affect the
rights of Holders of AMPS or that a majority of the Trustees then in office
finds to be in the best interests of the Holders of the AMPS.
ARTICLE IV
REDEMPTION
4.1 Optional Redemption. To the extent permitted under the 1940
Act and Delaware Law, upon giving a Redemption Notice, the Company at its
option may redeem the Shares 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 AMPS shall be redeemed pursuant to this Section 4.1
unless all of the Outstanding Shares of AMPS are simultaneously redeemed,
(b) no Shares 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
classes and series of 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 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 Company) or S&P Eligible Assets (if S&P and not Moody's is rating the
AMPS at the request of the Company) or Moody's Eligible Assets (if Moody's
and not S&P is rating the AMPS at the request of the Company) held by the
Company 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 Company after shareholder approval thereof or
involuntary liquidation, no Shares of AMPS may be redeemed pursuant to this
Section 4.1 in the event that a Non-Call Period is in effect with respect
to the AMPS pursuant to a Specific Redemption Provision.
4.2 Mandatory Redemption. To the extent permitted under the
1940 Act and Delaware Law and notwithstanding that a No-Call Period may be
in effect pursuant to a Specific Redemption Provision, the Shares 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 Company, either (A) the aggregate Adjusted Value of all
Moody's Eligible Assets held by the Company 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 Company 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 Company, 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 Company, 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 Company is less than 130% of the sum of the aggregate
AMPS redemption amount for all Shares of AMPS then Outstanding and the
aggregate redemption amount applicable to any other Preferred Stock of the
Company then outstanding, and such aggregate Fair Market Value remains less
than 130% of such amount through the close of business on the applicable
Cure Date;
(c) the Company ceases to qualify as a "regulated investment
company" within the meaning of the Code or is subject to federal income
taxation as a corporation with respect to its investment income; 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 Company 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 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 called for
redemption 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 AMPS 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 Company 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 Company 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 Company 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 Company 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 Company 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 Company 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 Company 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 Company 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 three months after the date of redemption, the Company
shall cause the Paying Agent to pay over to the Company 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 Company 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 Company 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 Company and except to the
extent waived by Moody's, as of each Business Day and each Cure Date, the
Company 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 Company
shall cause the Administrator to deliver (by facsimile or otherwise) a
Certificate of Moody's 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 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 Company shall, except to the extent waived by Moody's cause the
Administrator to deliver to the Company, 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 this Statement of Preferences, 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 Company 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 Company
shall cause to be delivered to Moody's, promptly after receipt thereof by
the Company (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 Company.
5.3 Certificate of S&P Required Asset Coverage. So long as S&P
is rating the AMPS at the request of the Company and except to the extent
waived by S&P, as of each Business Day and each Cure Date, the Company
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 Company shall cause the Administrator
to 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 Company shall cause, except
to the extent waived by S&P, the Administrator to deliver to the Company,
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 this Statement of Preferences, 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
Company 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 Company shall
cause to be delivered to S&P, promptly after receipt thereof by the Company
(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 Company and (g) whenever
requested by S&P.
5.5 Delivery of Accountant's Certificate to S&P. The Company
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 Company'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
Company 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 Company) or S&P
Eligible Assets (if S&P and not Moody's is rating the AMPS at the request
of the Company) or Moody's Eligible Assets (if Moody's and not S&P is
rating the AMPS at the request of the Company) 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 Company 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 Company or S&P is not
rating the AMPS at the request of the Company, 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 Company shall apply during the period
that such Person is not rating the AMPS at the request of the Company.
ARTICLE VI
LIQUIDATION
6.1 Liquidation Rights. Upon any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, the holders of
Shares of AMPS will be entitled to receive, out of the assets of the
Company available for distribution to its stockholders, before any
distribution or payment is made upon any shares of Common Stock or any
other shares of beneficial interest of the Company 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 AMPS shall equal the product of (i) accumulated 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 Company are insufficient to make the
full liquidating payment on each outstanding Share of AMPS and full
liquidating payments on the shares of any other class or series of stock of
the Company ranking on a parity with AMPS as to liquidation, 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 Company 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 Company shall not be deemed or construed to be a liquidation,
dissolution or winding up of the Company within the meaning of this Article
VI.
ARTICLE VII
VOTING
7.1 Voting Rights. Except as otherwise provided in the
Declaration 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 Company, 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 Trustees. (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 Company's
trustees.
(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 or any
other Preferred Stock equal to at least two full years' dividends on the
AMPS or any such other Preferred Stock 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 trustees of the Company 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
trustees constituting the Board of Trustees shall automatically be
increased by the smallest number that, when added to the two trustees
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
Trustees 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 trustees that, together
with the two trustees which such holders will be in any event entitled to
elect, constitutes a majority of the total number of trustees of the
Company as so increased. If the Company 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 trustees elected by the Holders of AMPS
and any other Preferred Stock (but not of the trustees with respect to
whose election the holders of Common Stock were entitled to vote or the two
trustees the Holders of AMPS and any other Preferred Stock have the right
to elect in any event) will terminate immediately and automatically.
7.3 Right of Vote with Respect to Certain Other Matters. (a)
Without the affirmative vote or written consent of the Holders (excluding
the Company 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, the Company shall not:
(i) authorize, create or issue (or reclassify any
authorized shares of beneficial interest of the Company 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
Declaration, whether by merger, consolidation or otherwise, so as to
adversely affect the contract rights of holders of AMPS expressly set
forth in the Declaration, except (A) as otherwise contemplated by
Sections 2.3 and 3.9 hereof or (B) amendments, modifications,
supplements 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,
if the relevant Rating Agency has advised the Company in writing that
the revised provisions relating to 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, a majority of
the Board of Trustees then in office has found that such changes are
in the best interests of the holders of the AMPS and has approved
such changes.
(b) Without the affirmative vote of the holders of a majority
(or such higher percentage provided for under the Declaration) of the AMPS
Outstanding and any other outstanding 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 Company 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 Declaration or Delaware law. Voluntary liquidation of the
Company after shareholder approval thereof or involuntary liquidation of
the Company or a merger or consolidation of the Company with or into, or a
sale or conveyance of all or substantially all of the assets of the Company
to, another entity 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 Declaration of the
holders of AMPS or any other Preferred Stock within the meaning of Section
7.3(a)(ii).
(d) Without the affirmative vote or written consent of the
Holders (excluding the Company and any of its subsidiaries) of at least 66
2/3% of the Shares of the Outstanding AMPS and other outstanding Preferred
Stock and separately by any series if such series is affected differently
than the other series then outstanding, unless the Company 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 Company
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 Company 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 Trustees 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 shares of beneficial interest of the Company into) shares
of any class or series of beneficial interest 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 beneficial
interest ranking prior to the shares of any series of Preferred Stock
or (B) issue any shares of beneficial interest 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 Company) and AAA (or a comparable successor
rating) by S&P (if S&P is then rating the AMPS at the request of the
Company) 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 Company;
provided, however, that the Company 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 Company 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 Company and
(E) liens arising by operation of law (provided that, in the event
the Company has received actual notice of any such liens, the Company
is contesting in good faith the validity of such liens by appropriate
proceedings);
(v) voluntarily complete the liquidation of the Company
or consolidate or merge with or into any other entity, or, except in
connection with the redemption of the AMPS and other Preferred Stock
or portfolio management, sell, lease or convey (which shall not
include distributions in kind) all or substantially all of the assets
of the Company to a single purchaser that is not an affiliated person
of the Company; provided, however, that this clause (v) shall not
apply to any consolidation or merger of the Company with or into, or
a sale or conveyance of all or substantially all of the assets of the
Company to, any other closed-end diversified management investment
company registered under Section 8 of the 1940 Act, if (A) the
surviving or transferee entity (the "Surviving Entity") has
investment objectives and policies substantially similar to the
investment objectives and policies of the Company 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 Entity 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 remains outstanding and
the Surviving Entity has received confirmation from the Rating
Agencies that such transaction will not affect the then current
rating assigned by the Rating Agencies to the AMPS; or
(vi) except as otherwise permitted by Section 2.3, 3.9 or
Section 7.3(a)(ii)(B), amend the Declaration or any provision of the
by-laws of the Company in any manner that materially and adversely
affects the rights of holders of shares of any series of Preferred
Stock (an amendment of the Declaration 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)).
Notwithstanding anything contained herein which may be inconsistent or to
the contrary, the Company 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 trustees as described in Section 7.2(b), the Company shall
notify the Secretary of the Company 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 Company 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 trustees 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 beneficial
interest of the Company), shall be entitled to elect the number of trustees
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 trustees. 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 trustees 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 this Statement of Preferences, 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 trustees of the
Company at the time of a special meeting of Holders and holders of any
other Preferred Stock to elect trustees shall continue, notwithstanding the
election at such meeting by the Holders and holders of other Preferred
Stock of the number of trustees 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 trustees, shall constitute the duly elected
trustees of the Company.
(d) The terms of office of the additional trustees elected by
the Holders and holders of other Preferred Stock pursuant to Section 7.2(b)
shall terminate on the earliest date permitted by Delaware law following
the termination of a Voting Period, the remaining trustees shall constitute
the trustees of the Company and the voting rights of the Holders and
holders of other Preferred Stock to elect trustees shall cease.
(e) So long as a Voting Period continues, the trustees 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 Trustees of a trusteeship 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 trustees (or the remaining trustee) 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
Company fails to pay any dividends on the AMPS, the exclusive remedy of the
Holders shall be the right to vote for trustees 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 Company 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 Company shall
notify the Rating Agencies as to the result of such vote.
IN WITNESS WHEREOF, SELECT ASSET FUND III has caused these
presents to be signed in its name and on its behalf by its President,
attested by its Assistant Secretary, and the said officer of the Company
acknowledge said instrument to be the corporate act of the Company, 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 as of September 5, 2000.
SELECT ASSET FUND III
by /s/
------------------------
Name: James A. McIntosh
Title: President
Attest:
Assistant Secretary
