Exhibit K2
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AUCTION AGENT AGREEMENT
between
THE NEW AMERICA HIGH INCOME FUND, INC.
and
BANKERS TRUST COMPANY
Dated as of May 6, 1997
Relating to
Auction Term Preferred Stock
of
THE NEW AMERICA HIGH INCOME FUND, INC.
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TABLE OF CONTENTS
Page
1. Definitions and Rules of Construction....................................................................1
1.1 Terms Defined by Reference to ATP Provisions....................................................1
1.2 Terms Defined Herein............................................................................1
1.3 Rules of Construction...........................................................................3
2. The Auction..............................................................................................3
2.1 Purpose; Incorporation by Reference of Auction Procedures and Settlement
Procedures......................................................................................3
2.2 Preparation of Each Auction; Maintenance of Registry of Beneficial Owners.......................3
2.3 Information Concerning Rates....................................................................6
2.4 Auction Schedule................................................................................6
2.5 Designation of Dividend Period..................................................................7
2.6 Notice of Auction Results.......................................................................8
2.7 Broker-Dealers..................................................................................8
2.8 Ownership of ATP................................................................................8
2.9 Access to and Maintenance of Auction Records....................................................9
2.10 Dividend and Redemption Price Deposit...........................................................9
3. The Auction Agent as Dividend and Redemption Price Disbursing Agent......................................9
4. The Auction Agent as Transfer Agent and Registrar.......................................................10
4.1 Issue of Share Certificates....................................................................10
4.2 Registration of Transfer of Shares.............................................................10
4.3 Removal of Legend on Restricted Shares.........................................................10
4.4 Lost Share Certificates........................................................................10
4.5 Disposition of Canceled Certificates; Record Retention.........................................10
4.6 Share Transfer Books...........................................................................10
4.7 Return of Funds................................................................................11
5. Representations and Warranties of the Fund..............................................................11
6. The Auction Agent.......................................................................................12
6.1 Duties and Responsibilities....................................................................12
6.2 Rights of the Auction Agent....................................................................12
(i)
Page
6.3 Auction Agent's Disclaimer.....................................................................13
6.4 Compensation, Expenses and Indemnification.....................................................13
7. Miscellaneous...........................................................................................14
7.1 Term of Agreement..............................................................................14
7.2 Communications.................................................................................14
7.3 Entire Agreement...............................................................................15
7.4 Benefits.......................................................................................15
7.5 Amendment; Waiver..............................................................................16
7.6 Successors and Assigns.........................................................................16
7.7 Severability...................................................................................16
7.8 Execution in Counterparts......................................................................16
7.9 Governing Law..................................................................................16
(ii)
EXHIBITS
EXHIBIT A - Form of Broker-Dealer Agreement
EXHIBIT B - Form of Master Purchaser's Letter
EXHIBIT C - Settlement Procedures
EXHIBIT D - Form of ATP Provisions
EXHIBIT E - Form of Notice of Auction Dates
EXHIBIT F - Form of Notice of Proposed Designation of Alternate
Term Period
EXHIBIT G - Form of Notice of Designation of Alternate Term Period
EXHIBIT H - Form of Notice of Determination Not to Designate
Alternate Term Period
(iii)
AUCTION AGENT AGREEMENT dated as of May 6, 1997 between THE NEW AMERICA
HIGH INCOME FUND, INC., a Maryland corporation (the "Fund"), and BANKERS TRUST
COMPANY, a New York banking corporation (the "Auction Agent").
WHEREAS, the Fund has issued two series of preferred stock, par value
$1.00 per share, liquidation preference $50,000 per share, designated Auction
Term Preferred Stock, Series A ("ATP Series A"), and Auction Term Preferred
Stock, Series B ("ATP Series B"); proposes to issue an additional series of
preferred stock, par value $1.00 per share, liquidation preference $25,000,
designated Auction Term Preferred Stock, Series C ("ATP Series C") and may in
the future designate additional series of Auction Term Preferred Stock (together
with the ATP Series A, ATP Series B, and ATP Series C, referred to as the "ATP")
pursuant to the ATP Provisions (as hereinafter defined), and desires that the
Auction Agent perform certain duties in connection with the ATP upon the terms
and subject to the conditions of this Agreement, and hereby appoints the Auction
Agent to act in the capacities set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Fund and the Auction Agent agree as follows:
1. Definitions and Rules of Construction.
1.1 Terms Defined by Reference to ATP Provisions. Capitalized terms not
defined herein shall have the respective meanings specified in the ATP
Provisions.
1.2 Terms Defined Herein. As used herein and in the Settlement
Procedures, the following terms shall have the following meanings, unless the
context otherwise requires:
(a) "Agent Member" of any Person shall mean the member
of, or participant in, the Securities Depository.
(b) "ATP Provisions" shall mean the Articles Supplementary
designating the ATP Series A, ATP Series B, ATP Series C, and any additional
series of Auction Term Preferred Stock as may be designated at some future time,
and establishing the rights and preferences thereof pursuant to the Articles of
Incorporation, as amended, attached hereto as Exhibit D.
(c) "Auction" shall have the meaning specified in
Section 2.1 hereof.
(d) "Auction Procedures" shall mean the auction
procedures constituting Part II of the ATP Provisions.
(e) "Authorized officer" shall mean each Senior Vice
President, Vice President, Assistant Vice President, Assistant Treasurer and
Assistant Secretary of the Auction Agent and every other officer or employee of
the Auction Agent designated as an "Authorized officer" for purposes hereof in a
communication to the Fund.
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(f) "Broker-Dealer" shall mean any broker-dealer, commercial
bank or other entity permitted by law to perform the functions of a
Broker-Dealer that is a member of or a participant in, the Securities Depository
or is an affiliate of such member or participant, has been selected by the Fund
and has entered into a Broker-Dealer Agreement that remains effective.
(g) "Broker-Dealer Agreement" shall mean each agreement
between the Auction Agent as agent for the Fund and a Broker-Dealer
substantially in the form attached hereto as Exhibit A.
(h) "Existing Holder" means (a) a person who has signed a
Master Purchaser's Letter and beneficially owns shares of a series of ATP listed
in that person's name in the records of the Auction Agent or (b) the beneficial
owner of shares of a series of ATP which are listed under such person's
Broker-Dealer's name in the records of the Auction Agent, which Broker-Dealer
shall have signed a Master Purchaser's Letter.
(i) "Fund Officer" shall mean the Chairman of the Board of
Directors of the Fund, the President, each Vice President (whether or not
designated by a number or word or words added before or after the title "Vice
President"), the Secretary, the Treasurer, each Assistant Secretary and each
Assistant Treasurer of the Fund and every other officer or employee of the Fund
designated as a "Fund officer" for purposes hereof in a notice to the Auction
Agent.
(j) "Master Purchaser's Letter" means a letter substantially
in the form of or containing provisions similar to those in the form attached
hereto as Exhibit B which is required to be executed by (1) each prospective
purchaser of shares of a series of the ATP or (2) the Broker-Dealer through whom
such shares will be held.
(k) "Person" means and includes an individual, a partnership,
a corporation, a trust, an unincorporated association, a joint venture or other
entity or a government or any agency or political subdivision thereof.
(l) "Potential Holder," when used with respect to shares of a
series of the ATP, means any person, including any Existing Holder of shares of
such series, (i) who shall have executed a Master Purchaser's Letter or whose
shares will be listed under such person's Broker-Dealer in the records of the
Auction Agent, which Broker-Dealer shall have executed a Master Purchaser's
Letter, and (ii) who may be interested in acquiring shares of such series (or,
in the case of an Existing Holder or such person, additional shares of such
series).
(m) "Settlement Procedures" shall mean the Settlement
Procedures attached hereto as Exhibit C.
(n) "Underwriter" shall mean ▇▇▇▇▇▇ Brothers Inc. and
any other person named as an underwriter of the ATP in the Underwriting
Agreement or any schedule thereto.
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(o) "Underwriting Agreement" shall mean the Underwriting
Agreement dated May __, 1997 among the Fund, the Underwriter and the Adviser.
1.3 Rules of Construction. Unless the context or use indicates another
or different meaning or intent, the following rules shall apply to the
construction of this Agreement:
(a) Words importing the singular number shall include
the plural number and vice versa.
(b) The captions and headings herein are solely for
convenience of reference and shall not constitute a part of this Agreement nor
shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto" and other words of
similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day
shall be to New York City time.
2. The Auction.
2.1 Purpose; Incorporation by Reference of Auction Procedures
and Settlement Procedures.
(a) The ATP Provisions provide that the Applicable Rate per
annum for each series of ATP for each Dividend Period after the Initial Dividend
Period with respect to each series of ATP shall, except under certain
conditions, be equal to the rate per annum that a bank or trust company
appointed by the Fund advises has resulted on the Business Day preceding the
first day of such Dividend Period from implementation of the Auction Procedures
for such series. Each periodic implementation of the Auction Procedures is
hereinafter referred to as an "Auction." The Board of Directors has adopted a
resolution appointing Bankers Trust Company as Auction Agent for purposes of the
Auction Procedures for each series of the ATP. The Auction Agent accepts such
appointment and agrees to follow the procedures set forth in this Section 2 and
the Auction Procedures for the purpose of determining the Applicable Rate for
each series of ATP for each Dividend Period thereof for which the Applicable
Rate is to be determined by an Auction.
(b) All of the provisions contained in the Auction Procedures
and the Settlement Procedures are incorporated herein by reference in their
entirety and shall be deemed to be a part hereof to the same extent as if such
provisions were fully set forth herein.
2.2 Preparation of Each Auction; Maintenance of Registry of
Beneficial Owners.
(a) Not later than seven days prior to the first Auction Date
for any series of ATP, the Fund shall provide the Auction Agent with a list of
the Broker-Dealers and a
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manually signed copy of each Broker-Dealer Agreement for execution by the
Auction Agent. Not later than seven days prior to any Auction Date for any
series of ATP for which any change in such list of Broker-Dealers is to be
effective, the Fund will notify the Auction Agent in writing of such change and,
if any such change involves the addition of a Broker-Dealer to such list, shall
cause to be delivered to the Auction Agent for execution by the Auction Agent a
Broker-Dealer Agreement signed by such Broker-Dealer; provided, however, that if
the Fund proposes to designate any Alternate Term Period of any series of ATP
pursuant to Section 4 of Part I of the ATP Provisions, not later than 11:00
A.M., New York City time, on the Business Day next-preceding the Auction next
preceding the first day of such Alternate Term Period, upon the written request
of the Auction Agent, the Fund shall provide the Auction Agent with a list of
the Broker-Dealers for such series and a manually signed copy of each
Broker-Dealer Agreement or a new Schedule A to the Broker-Dealer Agreement
(which Schedule A shall replace and supersede any previous Schedule A to such
Broker-Dealer Agreement) with each Broker-Dealer for such series. The Auction
Agent and the Fund shall have entered into a Broker-Dealer Agreement with each
Broker-Dealer prior to the participation of any such Broker-Dealer in any
Auction.
(b) In the event that any Auction Date for any series of ATP
shall be changed after the Auction Agent shall have given the notice referred to
in clause (vii) of paragraph (a) of the Settlement Procedures, or after the
notice referred to in Section 2.5(a) hereof, if applicable, the Auction Agent,
by such means as the Auction Agent deems practicable, shall give notice of such
change to the Broker-Dealers for such series not later than the earlier of 9:15
A.M. on the new Auction Date or 9:15 A.M. on the old Auction Date.
(c) (i) The Auction Agent shall maintain a registry of the
beneficial owners of the shares of each series of ATP who shall constitute
Existing Holders of shares of such series of ATP for purposes of Auctions and
shall indicate thereon the identity of the respective Broker-Dealer of each
Existing Holder, if any, on whose behalf such Broker-Dealer submitted the most
recent order in any Auction which resulted in such Existing Holder continuing to
hold or purchasing shares of such series of ATP. The Auction Agent shall keep
such registry current and accurate. The Fund shall provide or cause to be
provided to the Auction Agent at or prior to the Date of Original Issue of each
series of ATP a list of the initial Existing Holders of the shares of each such
series, the number of shares purchased by each such Existing Holder and the
respective Broker-Dealer of each such Existing Holder or the affiliate thereof
through which each such Existing Holder purchased such shares. At the request of
the Fund, the Auction Agent shall advise the Fund in writing as to whether the
number of Existing Holders is 500 or more or any Existing Holder owns 5% or more
of the outstanding shares of any series of ATP. The Auction Agent may rely upon,
as conclusive evidence of the identities of the Existing Holders of shares of
any series of ATP, (A) such list, (B) the results of Auctions and (C) notices
from any Existing Holder, the Agent Member of any Existing Holder or the
Broker-Dealer of any Existing Holder as described in the first sentence of
Section 2.2(c)(iii) hereof.
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(ii) In the event of any partial redemption of
any series of ATP, the Auction Agent shall, at least two Business Days prior to
the next Auction for such series, request the Agent Member of each Existing
Holder of shares of ATP of such series to disclose to the Auction Agent (upon
selection by such Agent Member of the Existing Holders whose shares of ATP of
such series are to be redeemed) the number of shares of ATP of such series, if
any, of such Existing Holder which are subject to such redemption, provided the
Auction Agent has been furnished with the name and telephone number of a person
or department at such Agent Member from which it shall request such information.
Upon any refusal of an Agent Member to release such information, the Auction
Agent shall deliver to such Agent Member a facsimile copy of the Existing
Holder's Master Purchaser's Letter, which authorizes and instructs such Agent
Member to release such information to the Auction Agent. In the absence of
receiving any such information with respect to an Existing Holder, from such
Existing Holder's Agent Member or otherwise, the Auction Agent may continue to
treat such Existing Holder as the beneficial owner of the number of shares of
ATP of such series shown in the Auction Agent's registry.
(iii) The Auction Agent shall be required to
register a transfer of shares of ATP of any series from an Existing Holder of
such shares of ATP to another Person only if such transfer is made to a Person
that has delivered, or on whose behalf has been delivered, a signed Master
Purchaser's Letter to the Auction Agent and if (A) such transfer is pursuant to
an Auction or (B) the Auction Agent has been notified in writing (I) in a notice
substantially in the form of Exhibit D to the Broker-Dealer Agreement by such
Existing Holder, the Agent Member of such Existing Holder or the Broker-Dealer
of such Existing Holder of such transfer or (II) in a notice substantially in
the form of Exhibit E to the Broker-Dealer Agreement by the Broker-Dealer of any
Person that purchased or sold such ATP in an Auction of the failure of such
shares of ATP to be transferred as a result of such Auction. The Auction Agent
is not required to accept any such notice for an Auction unless it is received
by the Auction Agent by 3:00 P.M. on the Business Day preceding such Auction.
(iv) The Auction Agent is not required to accept
the Master Purchaser's Letter of any Potential Holder who wishes to submit a Buy
Order for the first time in an Auction or of any Potential Holder or Existing
Holder who wishes to amend its Master Purchaser's Letter unless such letter or
amendment is received by the Auction Agent by 3:00 P.M. on the Business Day
preceding such Auction.
(d) The Auction Agent may request the Broker-Dealers, as set
forth in the Broker-Dealer Agreement, to provide the Auction Agent with a list
of their respective customers that such Broker-Dealers believe are Existing
Holders of shares of any series of ATP. The Auction Agent shall keep
confidential such registry of Existing Holders and shall not disclose the
identities of the Existing Holders of such shares of ATP to any Person other
than the Fund and the Broker-Dealer that provided such information.
5
2.3 Information Concerning Rates.
(a) On each Auction Date, the Auction Agent shall determine
the AA Composite Commercial Paper Rate or the Treasury Index Rate, as the case
may be, and the Maximum Applicable Rate. if the AA Composite Commercial Paper
Rate or the Treasury Index Rate, as the case may be, is not quoted on an
interest basis, if the rate obtained by the Auction Agent is quoted on a
discount basis, or if the rate obtained by the Auction Agent is quoted on
another basis the Auction Agent shall convert the quoted rate to an interest
rate after consultation with the Fund as to the method of such conversion. Not
later than 9:30 A.M. on each Auction Date the Auction Agent shall notify the
Fund and the Broker-Dealers of the Maximum Applicable Rate so determined and the
AA Composite Commercial Paper Rate or the Treasury Index Rate, as the case may
be, used to make such determination.
(b) If any AA Composite Commercial Paper Rate is to be based
on rates supplied by Commercial Paper Dealers and one or more of the Commercial
Paper Dealers shall not provide a quotation for the determination of such AA
Composite Commercial Paper Rate, the Auction Agent shall immediately notify the
Fund so that the Fund can determine whether to subject a Substitute Commercial
Paper Dealer or Substitute Commercial Paper Dealers to provide the quotation or
quotations not being supplied by any Commercial Paper Dealer or Commercial Paper
Dealers. The Fund shall promptly advise the Auction Agent of any such selection.
(c) If any Treasury Index Rate is to be based on rates
supplied by U.S. Government Securities Dealers and one or more of the U.S.
Government Securities Dealers shall not provide a quotation for the
determination of such Treasury Rate, the Auction Agent shall immediately notify
the Fund so that the Fund can determine whether to select a Substitute U.S.
Government Securities Dealer or Substitute U.S. Government Securities Dealers to
provide the quotation or quotations not being supplied by any U.S. Government
Securities Dealers. The Fund shall promptly advise the Auction Agent of any such
selection.
2.4 Auction Schedule. The Auction Agent shall conduct Auctions for each
series of ATP in accordance with the schedule set forth below. Such schedule may
be changed by the Auction Agent with the consent of the Fund, which consent
shall not be unreasonably withheld or delayed. The Auction Agent shall give
written notice of any such change to each Broker-Dealer. Such notice shall be
given prior to the close of business on the Business Day next preceding the
first Auction Date on which any such change shall be effective.
Time Event
By 9:30 A.M. Auction Agent advises the
Fund and Broker-Dealers of the
Maximum Applicable Rate and the
Reference Rate(s), used in
determining such Maximum Applicable
Rate as set forth in Section 2.3(a)
hereof, with respect to each series
of ATP.
6
9:30 A.M. - 1:00 P.M. Auction Agent assembles information
communicated to it by Broker-
Dealers as provided in Section 4(a)
of the Auction Procedures.
Submission Deadline 1:00 P.M.
Not earlier than 1:00 P.M. Auction Agent makes determination
pursuant to Section 5(a) of the
Auction Procedures.
By approximately 3:00 P.M. Auction Agent advises Fund of
results of Auction as provided in
Section 5(b) of the Auction
Procedures. Submitted Orders are
accepted and rejected and shares of
ATP of the respective Series
allocated as provided in
Section 6 of the Auction
Procedures. Auction Agent gives
notice of Auction results as set
forth in Paragraph (a) of the
Settlement Procedures.
2.5 Designation of Dividend Period.
(a) The ATP Provisions provide that, subject to the Fund's
option to designate an Alternate Term Period as referred to in paragraph (b) of
this Section 2.5, (i) the Dividend Period (other than the initial Dividend
Period) for each series of ATP will be a Standard Term Period. Any such
designation of an Alternate Term Period shall be effective only if (i) notice
thereof shall have been given as provided herein, (ii) any failure to pay in a
timely manner to the Auction Agent the full amount of any dividend on, or the
redemption price of, the ATP shall have been cured, (iii) Sufficient Clearing
orders shall have existed in an Auction held on the Auction Date immediately
preceding the first day of such proposed Dividend Period other than a Standard
Term Period, (iv) if the Fund shall have mailed a Notice of Redemption with
respect to any shares, the Redemption Price with respect to such shares shall
have been deposited with the Auction Agent, and (v) in the case of an Alternate
Term Period, the Fund has provided notice and an ATP Basic Maintenance Report to
Fitch (if Fitch is then rating the ATP) and Moody's (if ▇▇▇▇▇'▇ is then rating
the ATP).
(b) Pursuant to the ATP Provisions, the Fund may, at its
option, designate an Alternate Term Period for any series of ATP in the manner
described below and in Section 4 of Part I of the ATP Provisions. If the Fund
proposes to designate any succeeding Alternate Term Period the Fund shall
deliver to the Auction Agent:
(i) A notice of such proposed Alternate Term
Period in the form of Exhibit F hereto not less than 15 nor more than 30 days
prior to the first day of such proposed Alternate Term Period. The Auction Agent
on behalf of the Fund shall deliver such notice by first-class mail, postage
prepaid, to each Existing Holder of shares of such series of ATP at the address
specified in such Existing Holder's Master Purchaser's Letter and to the
Broker-Dealers for such series as promptly as practicable after its receipt of
such notice from the Fund.
(ii) A notice in the form of Exhibit G hereto
not later than 3:00 P.M. on the second Business Day next preceding the first day
of such proposed Alternate Term Period, of either (x) its determination, subject
to certain conditions, to proceed with such
7
Alternate Term Period, in which case the Fund shall specify the terms of the
Specific Redemption Provisions, if any, or (y) its determination not to proceed
with such Alternate Period in which latter event the succeeding Dividend Period
shall be a Standard Term Period. The Auction Agent shall promptly deliver such
notice to the Broker-Dealers, but in no event later than 3:00 P.M. on the date
of such notice.
(iii) If the Fund fails to deliver either such
notice with respect to any designation of any proposed Alternate Term Period to
the Auction Agent by 3:00 P.M., New York City time, on the second Business Day
next preceding the first day of such proposed Alternate Term Period, the Fund
shall be deemed to have delivered a notice to the Auction Agent with respect to
such Dividend Period to the effect that it has determined not to proceed with
the designation of an Alternate Term Period, thereby resulting in a Standard
Term Period.
2.6 Notice of Auction Results. On each Auction Date for any series of
ATP, the Auction Agent shall notify Broker-Dealers of the results of the Auction
held on such date by telephone as set forth in paragraph (a) of the Settlement
Procedures.
2.7 Broker-Dealers.
(a) Not later than 12:00 Noon on each Auction Date for any
series of ATP, the Fund shall pay to the Auction Agent an amount in cash equal
to the aggregate fees payable to the Broker-Dealers for such series pursuant to
Section 2.8 of the Broker-Dealer Agreement for such series. The Auction Agent
shall apply such moneys as set forth in Section 2.8 of each such Broker-Dealer
Agreement.
(b) The Fund shall obtain the consent of the Auction Agent
prior to selecting any Person to act as a Broker-Dealer, which consent shall not
be unreasonably withheld.
(c) The Auction Agent shall terminate any Broker-Dealer
Agreement as set forth therein if so directed by the Fund.
(d) Subject to the Auction Agent's having consented to the
selection of the relevant Broker-Dealer pursuant to Section 2.8(b) hereof, the
Auction Agent shall from time to time enter into such Broker-Dealer Agreements
with one or more Broker-Dealers as the Fund shall request, and shall enter into
such schedules to any such Broker-Dealer Agreements as the Fund shall request,
which schedules, among other things, shall set forth the series of ATP to which
such Broker-Dealer Agreement relates.
2.8 Ownership of ATP. The Fund shall notify the Auction Agent if the
Fund or any affiliate of the Fund acquires any shares of ATP of any series.
Neither the Fund nor any affiliate of the Fund shall submit any Order in any
Auction for ATP, except as set forth in the next sentence. Any Broker-Dealer
that is an affiliate of the Fund may submit Orders in Auctions, but only if such
orders are not for its own account. For purposes of this Section
8
2.8 a Broker-Dealer shall not be deemed to be an affiliate of the Fund solely
because one or more of the directors or executive officers of such Broker-Dealer
or of any Person controlled by, in control of or under common control with such
Broker-Dealer is also a Director of the Fund. The Auction Agent shall have no
duty or liability with respect to enforcement of this Section 2.8.
2.9 Access to and Maintenance of Auction Records. The Auction Agent
shall, upon the receipt of prior written notice from the Fund, afford to the
Fund access at reasonable times during normal business hours to all books,
records, documents and other information concerning the conduct and results of
Auctions. The Auction Agent shall maintain records relating to an Auction for a
period of six years after such Auction and such records shall, in reasonable
detail, accurately and fairly reflect the actions taken by the Auction Agent
hereunder.
2.10 Dividend and Redemption Price Deposit. The Fund shall pay to the
Auction Agent, not later than 12:00 noon, New York City time, (A) on the
Business Day next preceding any Dividend Payment Date for any series of ATP, in
funds available on such Dividend Payment Date in The City of New York, New York,
the full amount of any dividends to be paid on such Dividend Payment Date on any
share of such series, and (B) on the Business Day next preceding any redemption
date for any series of ATP in funds available on such redemption date for such
series in The City of New York, New York, the Redemption Price to be paid on
such redemption date for the shares of any such series after notice of
redemption is given as set forth in the ATP Provisions.
3. The Auction Agent as Dividend and Redemption Price Disbursing Agent. The
Auction Agent, as dividend and redemption price disbursing agent, shall pay to
the Holders of shares of ATP of any series (i) on each Dividend Payment Date for
such series, dividends on the shares of ATP of such series, (ii) an any date
fixed for redemption of shares of ATP of any series, the Redemption Price of any
shares of such series called for redemption and (iii) any late charge related to
any payment of dividends or Redemption Price, in each case after receipt of the
necessary funds from the Fund with which to pay such dividends, Redemption Price
or late charge. The amount of dividends for any Dividend Period for any series
of ATP to be paid by the Auction Agent to the Holders of such shares of such
series will be determined by the Fund as set forth in Section 2 of Part I of the
ATP Provisions with respect to such series. The Redemption Price of any shares
to be paid by the Auction Agent to the Holders will be determined by the Fund as
set forth in Section 3 of Part I of the ATP Provisions with respect to such
series. The Fund shall notify the Auction Agent in writing of a decision to
redeem shares of any series of ATP at least five days prior to the date a notice
of redemption is required to be mailed to the Holders of the shares to be
redeemed by paragraph (b) of Section 3 of Part I of the ATP Provisions. Such
notice by the Fund to the Auction Agent shall contain the information required
by paragraph (b) of Section 3 of Part I of the ATP Provisions to be stated in
the notice of redemption required to be mailed by the Auction Agent to such
Holders.
9
4. The Auction Agent as Transfer Agent and Registrar.
4.1 Issue of Share Certificates. Upon the Date of original Issue of
each series or ATP, one certificate representing all of the shares of each
series issued on such date shall be issued by the Fund and, at the request of
the Fund, registered in the name of Cede & Co. and countersigned by the Auction
Agent.
4.2 Registration of Transfer of Shares. Shares of each series of
ATP shall be registered solely in the name of the Securities Depository or its
nominee.
4.3 Removal of Legend on Restricted Shares. All requests for removal of
legends on shares of any series of ATP indicating restrictions on transfer shall
be accompanied by an opinion of counsel stating that such legends may be removed
and such shares freely transferred, such opinion to be delivered under cover of
a letter from a Fund Officer authorizing the Auction Agent to remove the legend
on the basis of said opinion.
4.4 Lost Share Certificates. The Auction Agent shall issue and register
replacement certificates for certificates represented to have been lost, stolen
or destroyed upon the fulfillment of such requirements as shall be deemed
appropriate by the Fund and the Auction Agent, subject at all times to
provisions of law, the By-Laws of the Fund governing such matters and
resolutions adopted by the Fund with respect to lost securities. The Auction
Agent may issue new certificates in exchange for and upon the cancellation of
mutilated certificates. Any request by the Fund to the Auction Agent to issue a
replacement or new certificate pursuant to this Section 4.4 shall be deemed to
be a representation and warranty by the Fund to the Auction Agent that such
issuance will comply with such provisions of law and the By-Laws and resolutions
of the Fund.
4.5 Disposition of Canceled Certificates; Record Retention. The Auction
Agent shall retain all share certificates which have been cancelled in transfer
or exchange and all accompanying documentation in accordance with applicable
rules and regulations of the Securities and Exchange Commission for two calendar
years. Upon the expiration of this two-year period, the Auction Agent shall
deliver to the Fund the cancelled certificates and accompanying documentation.
The Fund also shall undertake to furnish to the Securities and Exchange
Commission and to the Board of Governors of the Federal Reserve System, upon
demand, at either the principal office or at any regional office, complete,
correct and current hard copies of any and all such records. Thereafter such
records shall not be destroyed by the Fund without the concurrence of the
Auction Agent.
4.6 Share Transfer Books. For so long as the Auction Agent, Bankers
Trust Company, is acting as the transfer agent for any series of ATP pursuant to
this Agreement, it shall maintain a share transfer book containing a list of the
Holders of the shares of each series of ATP, the number of shares of each series
held by such Holders and the address of each Holder. The Auction Agent shall
record in such share transfer books any change of address of a Holder upon
notice by such Holder. In case of any request or demand for the inspection of
10
the share transfer books of the Fund or any other books in the possession of the
Auction Agent, the Auction Agent will notify the Fund and secure instructions as
to permitting or refusing such inspection. The Auction Agent reserves the right,
however, to exhibit the share transfer books or other books to any Person in
case it is advised by its counsel that its failure to do so would be unlawful.
4.7 Return of Funds. Any funds deposited with the Auction Agent
hereunder by the Fund for any reason, including but not limited to redemption of
shares of ATP of any series, the remain unpaid after 90 days shall be repaid to
the Fund upon the written request of the Fund, together with interest, if any,
earned thereon.
5. Representations and Warranties of the Fund. The Fund represents and
warrants to the Auction Agent that:
(a) The Fund has been duly organized and is validly existing
as a corporation under the laws of the State of Maryland and has all necessary
corporate power and authority to execute and deliver this Agreement and to
authorize, create and issue the shares of each series of ATP;
(b) This Agreement has been duly and validly authorized,
executed and delivered by the Fund and, assuming due authorization, execution
and delivery by the Auction Agent, constitutes the legal, valid and binding
obligation of the Fund subject, as to enforceability, to bankruptcy, insolvency,
reorganization, moratorium, receivership or similar laws, whether statutory or
decisional, relating to or affecting creditors' rights and to general equitable
principles (regardless of whether enforcement is sought in equity or at law);
(c) The form of the certificate evidencing the shares of
ATP complies with all applicable laws of the State of Maryland;
(d) The shares of ATP, when issued, delivered and paid for on
the Date of Original Issue as contemplated by the Underwriting Agreement, will
have been duly authorized, validly issued, fully paid and nonassessable, except
as provided under Maryland law;
(e) Assuming the Underwriter complies with its obligations
under the Underwriting Agreement and that the purchasers of the ATP comply with
their obligations in the Master Purchaser's Letters, no consent, authorization
or order of, or filing or registration with, any court, governmental agency or
official (except such as have been obtained and such as may be required under
the Securities Act of 1933, as amended, or the Investment Company Act of 1940,
as amended, or under the blue sky or state securities laws) is required in
connection with the execution and delivery of this Agreement or the issuance of
the shares of the ATP; and
11
(f) The issuance and sale of the ATP, the execution, delivery
and performance of this Agreement, the compliance by the Fund with all
provisions hereof, and the consummation of the transactions contemplated hereby
or by the Underwriting Agreement or the Broker-Dealer Agreements, will not
conflict with, constitute a breach of any of the terms or provisions of, or a
default under, or result in the creation or imposition of any material lien,
charge or encumbrance upon any of the assets of the Fund pursuant to the terms
of any agreement, indenture or instrument to which the Fund is a party or by
which the Fund is bound, or result in a violation of the Articles of
Incorporation, ATP Provisions or By-Laws of the Fund or of any order, rule or
regulation of any court or governmental agency having jurisdiction over the Fund
or its property which conflict, breach, default, lien or violation, individually
or in the aggregate, would have a material adverse effect on the business,
financial position or results of operations of the Fund.
6. The Auction Agent.
6.1 Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Fund
hereunder and owes no fiduciary duties to any other Person by reason of this
Agreement.
(b) The Auction Agent undertakes to perform such duties and
only such duties as are specifically set forth in this Agreement and the
Broker-Dealer Agreements, and no implied covenants or obligations shall be read
into this Agreement against the Auction Agent.
(c) In the absence of bad faith or gross negligence on its
part, the Auction Agent shall not be liable for any action taken, suffered, or
omitted or for any effort of judgment made by it in the performance of its
duties under this Agreement except that the Auction Agent shall be liable for
any effort of judgment made in good faith if the Auction Agent shall have been
grossly negligent in ascertaining the pertinent facts.
(d) Any funds deposited with the Auction Agent hereunder by
the Fund for any reason, including the payment of dividends or the redemption of
shares of ATP of any series, that remain with the Auction Agent after 90 days
shall be repaid to the Fund as provided in Section 4.7 hereof.
6.2 Rights of the Auction Agent.
(a) The Auction Agent may rely and shall be protected in
acting or refraining from acting upon any communication authorized hereby and
upon any written instruction, notice, request, direction, consent, report,
certificate, share certificate or other instrument, paper or document believed
by it to be genuine. The Auction Agent shall not be liable for acting upon any
telephone communication authorized hereby which the Auction Agent believes in
good faith to have been given by the Fund or by any Broker-Dealer. The
12
Auction Agent may record telephone communications with the Fund or with any
Broker-Dealer.
(b) The Auction Agent may consult with counsel reasonably
acceptable to the Fund and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend
or risk its own funds or otherwise incur or become exposed to financial
liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys and shall
not be responsible for any misconduct on the part of any agent or attorney
appointed by it with due care hereunder except as set forth above in Section
6.1(c).
6.3 Auction Agent's Disclaimer. The Auction Agent makes no
representation as to the validity or adequacy of this Agreement (except as to
the Auction Agent's duties hereunder and as to the due authorization, execution
and delivery of this Agreement), the Broker-Dealer Agreements (except as to the
Auction Agent's duties thereunder) or the shares of any series of ATP.
6.4 Compensation, Expenses and Indemnification.
(a) The Fund shall pay the Auction Agent from time to time
reasonable compensation for all services rendered by it under this Agreement and
the Broker-Dealer Agreements in such amounts as may be agreed to by the Fund and
the Auction Agent from time to time.
(b) The Fund shall reimburse the Auction Agent upon its
request for all reasonable expenses, disbursements and advances incurred or made
by the Auction Agent in accordance with any provision of this Agreement and the
Broker-Dealer Agreements (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any expense or disbursement
attributable to its gross negligence or bad faith.
(c) The Fund shall indemnify the Auction Agent for and hold it
harmless against, any loss, liability or expense incurred without gross
negligence or bad faith on its part, arising out of or in connection with its
agency under this Agreement and the Broker-Dealer Agreements, including the
costs and expenses of defending itself against any claim or liability in
connection with its exercise or performance of its duties hereunder and
thereunder for which indemnification is provided by this subsection.
13
7. Miscellaneous.
7.1 Term of Agreement.
(a) The term of this Agreement is unlimited unless it shall be
terminated as provided in this Section 7.1. The Fund may terminate this
Agreement any time by so notifying the Auction Agent in writing, provided that
the Fund has entered into an agreement in substantially the form of this
Agreement with a successor auction agent. The Auction Agent may terminate this
Agreement upon written notice to the Fund, such termination to be effective on
the earlier of (i) the date specified in such notice which shall not be earlier
than 90 days after the giving of such notice or (ii) the date on which a
successor trust company is appointed by the Fund pursuant to an agreement
containing substantially the same terms and conditions as this Agreement.
(b) Except as otherwise provided in this paragraph (b), the
respective rights and duties of the Fund and the Auction Agent under this
Agreement shall cease upon termination of this Agreement. The Fund's obligations
under Section 6.4 hereof and its representations and warranties contained in
Section 5 hereof and the Auction Agent's obligations and liabilities under
Sections 2.9 and 4.5 hereof shall survive the termination hereof. Upon
termination of this Agreement, the Auction Agent shall, at the Fund's request,
promptly deliver to the Fund copies of all books and records maintained by it in
connection with its duties hereunder.
7.2 Communications. Except for (a) communications authorized to be by
telephone pursuant to this Agreement or the Auction Procedures and (b)
communications in connection with Auctions (other than those expressly required
to be in writing) and unless otherwise specified by the terms of this Agreement
all notices, requests and other communications to any party hereunder shall be
in writing (including telecopy or similar writing) given to such person at its
address or telecopy number set forth below:
14
If to the Company, addressed: The New America High Income Fund, Inc.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy sent to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, P.C.
▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Auction Agent, addressed: Bankers Trust Company
Four ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Auction Rate Securities
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the party to whom the communication is addressed
shall have previously communicated to the other party. Communications shall be
given on behalf of the Fund by a Fund Officer and on behalf of the Auction Agent
by an Authorized Officer. Communications shall be effective when received at the
proper address.
7.3 Entire Agreement. This Agreement contains the entire agreement
among the parties relating to the subject matter hereof, and there are no other
representations, endorsements, promises, agreements or understandings, oral,
written or inferred, between the parties. This Agreement supersedes terminates
all prior agreements between the parties including without limitation the
Auction Agent Agreement dated January 4, 1994.
7.4 Benefits. Nothing herein, express or implied, shall give to any
Person, other than the Fund, the Auction Agent and their respective successors
and assigns, any benefit of any legal or equitable right, remedy or claim
hereunder.
15
7.5 Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be
modified, amended, rescinded, cancelled or waived, in whole or in part, except
by a written instrument signed by a duly authorized representative of the party
to be charged. The Fund shall notify the auction Agent and each Broker-Dealer of
any change in the Fund's Articles, prior to the effective date of any such
change.
(b) Failure of either party hereto to exercise any right or
remedy hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such rights or remedies with respect to any
subsequent breach.
7.6 Successors and Assigns. This Agreement shall be binding upon, inure
to the benefit of, and be enforceable by, the respective successors of each of
the Fund and the Auction Agent.
7.7 Severability. If any clause, provision or section hereof shall be
ruled invalid or unenforceable by any court of competent jurisdiction, the
invalidity or unenforceability of such clause, provision or section shall not
affect any of the remaining clauses, provisions or sections hereof.
7.8 Execution in Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
7.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
16
IN WITNESS WHEREOF, the parties hereto have caused this Auction Agent
Agreement to be duly executed and delivered by their proper authorized officers
as of the date first above written.
THE NEW AMERICA HIGH INCOME FUND,
INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: AT
17
EXHIBIT A
FORM OF BROKER-DEALER AGREEMENT
BROKER-DEALER AGREEMENT dated as of May 6, 1997 between BANKERS TRUST
COMPANY (the "Auction Agent"), a New York banking corporation (not in its
individual capacity but solely as agent of The New America High Income Fund,
Inc. (the "Fund") pursuant to authority granted it in the Auction Agent
Agreement, and ▇▇▇▇▇▇ BROTHERS INC. (together with its successors and assigns,
the "BD") .
The Fund has currently issued two series of shares of Auction Term
Preferred Stock, par value $1.00 per share, liquidation preference $50,000 per
share, and proposes to designate a third series of shares of Auction Term
Preferred Stock, par value $1.00 per share, liquidation preference $25,000 per
share, pursuant to its Articles of Incorporation, as amended, and the Articles
Supplementary establishing each such series. In the event that the Fund
establishes one or more additional series of Auction Term Preferred Stock to
which it desires that this Agreement be applicable, the Fund shall so notify the
BD in writing. If the BD is willing to render such services on the terms
provided for herein, it shall notify the Fund in writing, whereupon such series
of Auction Term Preferred Stock (such series, together with the Auction Term
Preferred Stock then subject to this Agreement, the "ATP") shall become subject
to this Agreement.
The Articles Supplementary will provide that, for each Dividend Period
of any series of ATP then outstanding, the Applicable Rate for such series for
such Dividend Period shall, under certain conditions, be the rate per annum that
a bank or trust company appointed by the Fund advises results from
implementation of the Auction Procedures for such series. The Board of Directors
has adopted a resolution appointing Bankers Trust Company as Auction Agent for
purposes of the Auction Procedures for each series of ATP
The Auction Procedures contemplate the participation of one or more
Broker-Dealers for each series of ATP.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein the Auction Agent and BD agree as follows:
1. Definitions and Rules of Construction.
1.1 Terms Defined by Reference to Articles Supplementary.
Capitalized terms not defined herein shall have the respective meanings
specified in the Articles Supplementary.
1.2 Terms Defined Herein. As used herein and in the Settlement
Procedures, the following terms shall have the following meanings, unless the
context otherwise requires:
(a) "Articles Supplementary" shall mean the Articles
Supplementary authorizing the issuance of the relevant series of ATP filed by
the Fund with the office of the secretary of the State of Maryland.
(b) "Auction" shall have the meaning specified in
Section 2.1 hereof.
(c) "Auction Agent Agreement" shall mean any Auction Agent
Agreement between the Fund and the Auction Agent relating to the ATP.
(d) "Auction Procedures" shall mean the auction
procedures constituting Part II of the Articles Supplementary.
(e) "Authorized Officer" shall mean each Senior Vice
President, Vice President, Assistant Vice President, Trust officer, Assistant
Treasurer and Assistant Secretary of the Auction Agent assigned to its Corporate
Trust and Agency Group and every other officer or employee of the Auction Agent
designated as an "Authorized Officer" for purposes of this Agreement in a
communication to the BD.
(f) "BD Officer" shall mean each officer or employee of BD
designated as a "BD Officer" for purposes of this Agreement in a communication
to the Auction Agent.
(g) "Broker-Dealer Agreement" shall mean this Agreement and
any substantially similar agreement between the Auction Agent and a
Broker-Dealer.
(h) "Existing Holder" shall have the meaning set forth in the
Articles Supplementary, and for purposes of this Broker-Dealer Agreement and
with respect to the Auction Procedures as referred to in this Agreement, shall
also include, as the circumstances may require, a Person who is listed as the
beneficial owner of ATP in the records of a Broker-Dealer.
(i) "Master Purchaser's Letter" means a letter substantially
in the form of or containing provisions similar to those in the form attached
hereto as Exhibit A, which is required to be executed by (1) each prospective
purchaser of shares of ATP or (2) the Broker-Dealer through whom such shares
will be held.
(j) "Potential Holder" shall have the meaning set forth in the
Articles Supplementary, and for purposes of this Broker-Dealer Agreement and
with respect to the Auction Procedures as referred to in this Agreement, shall
also include, as the circumstances may require, any other Person, including any
Existing Holder of shares of ATP, who may be interested in acquiring shares of
ATP (or, in the case of an Existing Holder, additional shares of ATP).
(k) "Settlement Procedures" shall mean the Settlement
Procedures attached hereto as Exhibit B.
2
1.3 Rules of Construction. Unless the context or use indicates another
or different meaning or intent, the following rules shall apply to the
construction of this Agreement:
(a) Words importing the singular number shall include
the plural number and vice versa.
(b) The captions and headings herein are solely for the
convenience of reference and shall not constitute a part of this Agreement nor
shall they affect its meaning, construction or effect.
(c) The words "hereof", "herein", "hereto", and other words of
similar import refer to this agreement as a whole.
(d) All references herein to a particular time of day
shall be to New York City time.
2. The Auction.
2.1 Purposes; Incorporation by Reference of Auction Procedures
and Settlement Procedures.
(a) The provisions of the Auction Procedures will be followed
by the Auction Agent for the purposes of determining the Applicable Rate for any
Dividend Period of any series of ATP for which the Applicable Rate is to be
determined by an Auction. Each periodic operation of such procedures is
hereinafter referred to as an "Auction".
(b) All of the provisions contained in the Auction Procedures
and the Settlement Procedures are incorporated herein by reference in their
entirety and shall be deemed to be a part hereof to the same extent as if such
provisions were fully set forth herein.
(c) Before any series of the ATP becomes subject to this
Broker-Dealer Agreement, the BD shall have delivered a Master Purchaser's Letter
executed by the BD. The BD agrees to act as, and assumes the obligations of, and
limitations and restrictions placed upon, a Broker-Dealer under this Agreement
for each series of ATP. The BD shall act as the exclusive Broker-Dealer for the
Fund until the later of (i) January 30, 1998 and (ii) such date on which the
Fund appoints one or more additional Broker-Dealers. The BD understands that,
subject to the preceding sentence, other Persons meeting the requirements
specified in the definition of "Broker-Dealer" contained in the Auction
Procedures may execute Broker-Dealer Agreements and Master Purchaser's Letters
and participate as Broker-Dealers in Auctions.
2.2 Preparation of Each Auction.
(a) Not later than 9:30 A.M. on each Auction Date for
the ATP, the Auction Agent shall advise the Broker-Dealers for such series by
telephone of the Maximum
3
Applicable Rate therefor and the AA Composite Commercial Paper Rate(s) and the
Treasury Index Rate(s), as the case may be, used in determining the Maximum
Applicable Rate.
(b) In the event that any Auction Date for the ATP shall be
changed after the Auction Agent has given the notice referred to in clause (vi)
of paragraph (a) of the Settlement Procedures, or after the notice referred to
in Section 2.5(a) hereof, if applicable, the Auction Agent, by such means as the
Auction Agent deems practicable shall give notice of such change to the BD not
later than the earlier of 9:15 A.M. on the new Auction Date or 9:15 A.M. on the
old Auction Date. Thereafter, the BD shall notify customers of the BD who the BD
believes are Existing Holders of shares of ATP of such change in the Auction
Date.
(c) The Auction Agent from time to time may request the
Broker-Dealers to provide the Auction Agent with a list of their respective
customers that such Broker-Dealers believe are Existing Holders of shares of
ATP. BD shall comply with any such request, and the Auction Agent shall keep
confidential any such information so provided by BD and shall not disclose any
information so provided by BD to any Person other than the Fund and BD.
(d) The Auction Agent is not required to accept the Master
Purchaser's Letter of any Potential Holder who wishes to submit an Order for the
first time in an Auction or of any Potential Holder or Existing Holder who
wishes to amend its Master Purchaser's Letter unless such letter or amendment is
received by the Auction Agent by 3:00 P.M. on the Business Day preceding such
Auction.
2.3 Auction Schedule; Method of Submission of Order.
(a) The Fund and the Auction Agent shall conduct Auctions for
ATP in accordance with the schedule set forth below. Such schedule may be
changed by the Auction Agent with the consent of the Fund, which consent shall
not be unreasonably withheld or delayed. The Auction Agent shall give written
notice of any such change to each Broker-Dealer. Such notice shall be given
prior to the close of business on the Business Day preceding the first Auction
Date on which such change shall be effective.
Time Event
By 9:30 A.M. Auction Agent advises Fund and the
Broker-Dealers of the Maximum Applicable Rate
and the AA Composite Commercial Paper Rate(s)
and the Treasury Index Rate(s), as the case may
be, used in determining such Maximum Applicable
Rate as set forth in Section 2.2(a) hereof, with
respect to the relevant series of ATP.
9:30 A.M. - 1:00 P.M. Auction Agent assembles information
communicated to it by Broker-Dealers as provided
4
in Section 4(a) of the Auction Procedures.
Submission Deadline is 1:00 P.M.
Not earlier than 1:00 P.M. Auction Agent makes
determination pursuant to
Section 5(a) of the Auction
Procedures.
By approximately 3:00 P.M. Auction Agent advises the Fund of results of
Auction as provided in Section 5(b) of the Auction
Procedures. Submitted Orders are accepted and
rejected and shares of ATP of the respective series
allocated as provided in Section 6 of the Auction
Procedures. Auction Agent gives notice of
Auction results as set forth in Section 2.4(a)
hereof.
(b) BD agrees to maintain a list of Potential Holders and to
contact the Potential Holders on such list whom the BD believes may be
interested in participating in the Auction on such Auction Date on or prior to
such Auction Date for the purposes set forth in the Auction Procedures. To the
extent required under the Securities Act of 1933, as amended, or the rules and
regulations promulgated thereunder, BD shall deliver a Prospectus to each such
Potential Holder. BD agrees, upon the request of a Potential Holder, to deliver
to such Potential Holder either (i) a Prospectus with such legends or stamps
regarding non-reliance by Potential Holders of certain information therein
(other than with respect to information concerning the ATP and Settlement and
Auction Procedures) as ▇▇ ▇▇▇▇▇ appropriate or (ii) the Fund's summary
description of the ATP and the Settlement Procedure and Auction Procedures.
(c) BD shall submit Orders to the Auction Agent in writing
substantially in the form attached hereto as Exhibit C. BD shall submit a
separate Order to the Auction Agent for each Potential Holder or Existing Holder
on whose behalf BD is submitting an Order and shall not net or aggregate the
Orders of different Potential Holders or Existing Holders on whose behalf BD is
submitting Orders.
(d) BD shall deliver to the Auction Agent (i) a written
notice, substantially in the form attached hereto as Exhibit D, of transfers of
shares of ATP made by or through BD by an Existing Holder to another Person
other than pursuant to an Auction and shall deliver or cause to be delivered the
related Master Purchaser's Letter executed by such Person if such Person will be
listed as the holder of such shares on the books of the Auction Agent and such
Person has not previously so delivered a Master Purchaser's Letter and (ii) a
written notice, substantially in the form attached hereto as Exhibit E, of the
failure of any shares of ATP to be transferred to or by any Person that
purchased or sold shares of ATP through BD pursuant to an Auction if such
Person's shares were to be or were listed in the Person's name on the books of
the Auction Agent. The Auction Agent is not required to accept any such
5
notice for an Auction unless it is received by the Auction Agent by 3:00 p.m. on
the Business Day preceding such Auction.
(e) BD and other Broker-Dealers which have delivered duly
executed Master Purchaser's Letters may submit Orders in Auctions for their own
accounts unless the Fund shall have notified BD and all other Broker-Dealers
that they may no longer do so, in which case Broker-Dealers may continue to
submit Hold Orders and Sell Orders for their own accounts.
(f) BD agrees to handle its customers' Orders in accordance
with its duties under applicable securities laws and rules.
(g) To the extent that pursuant to Section 6 of the Auction
Procedures, BD continues to hold, sells, or purchases a number of shares that is
fewer than the number of shares in an Order submitted by BD to the Auction Agent
on behalf of Existing or Potential Holders whose shares are or will be held in
BD's name, BD shall make appropriate pro rata allocations among such Existing or
Potential Holders. If as a result of such allocations, any Potential 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 ATP on any Auction Date, BD
shall, in such manner as it shall determine in its sole discretion, round up or
down the number of shares of ATP to be purchased or sold on such Auction Date by
any Existing Holder or Potential Holder on whose behalf BD submitted an Order so
that the number of shares so purchased or sold by each such Existing Holder or
Potential Holder on such Auction Date shall be whole shares of ATP.
2.4 Notices of Auction Results.
(a) On each Auction Date for ATP, the Auction Agent shall
notify BD by telephone of he results of the Auction as set forth in paragraph
(a) of the Settlement Procedures. As soon as reasonably practicable, the Auction
Agent shall confirm to BD in writing the disposition of all Orders submitted by
BD in such Auction.
(b) BD shall notify each Existing Holder or Potential Holder
on whose behalf BD has submitted an Order as set forth in paragraph (a) of the
Settlement Procedures and take such other action as is required of BD pursuant
to the Settlement Procedures.
2.5 Designation of Alternate Term Period.
(a) If the Fund delivers to the Auction Agent a notice of the
Auction Date for any series of ATP for a Dividend Period thereof that next
succeeds a Dividend Period that is not a Standard Term Period in the form of
Exhibit E to the Auction Agent Agreement, the Auction Agent shall deliver such
notice to BD as promptly as practicable after its receipt of such notice from
the Fund.
6
(b) If the Board of Directors proposes to designate any
succeeding Dividend Period of any series of ATP as an Alternate Term Period and
the Fund delivers to the Auction Agent a notice of such proposed Alternate Term
Period in the form of Exhibit F to the Auction Agent Agreement, the Auction
Agent shall deliver such notice to BD as promptly as practicable after its
receipt of such notice from the Fund.
(c) If the Board of Directors determines to designate such
succeeding Dividend Period as an Alternate Term Period and the Fund delivers to
the Auction Agent a notice of such Period in the form of Exhibit G to the
Auction Agent Agreement not later than 3:00 p.m. on the second Business Day next
preceding the first day of such proposed Alternate Term Period, the Auction
Agent shall deliver such notice to BD not later than 3:00 p.m. on such Business
Day.
(d) If the Fund shall deliver to the Auction Agent a notice
not later than 3:00 p.m. on the second Business Day next preceding the first day
of any Dividend Period stating that the Fund has determined not to exercise its
option to designate such succeeding Dividend Period as an Alternate Term Period,
in the form of Exhibit H to the Auction Agent Agreement, or shall fail to timely
deliver either such notice or a notice in the form of Exhibit G to the Auction
Agent Agreement, the Auction Agent shall deliver a notice in the form of Exhibit
H to the Auction Agent Agreement to BD not later than 3:00 p.m. on such Business
Day.
2.6 Service Charge to be Paid to BD.
On the Business Day next succeeding each Auction Date for any
series of ATP, the Auction Agent shall pay to BD from moneys received from the
Fund an amount equal to (a)(i) in the case of any Auction Date for any series of
ATP immediately preceding a Dividend Period of such series consisting of less
than one year, 1/4 of 1% unless otherwise advised by the Fund in writing or (ii)
in the case of any Auction Date immediately preceding a Dividend Period of such
series consisting of one year or more, a percentage agreed upon in writing by
the Fund and the Broker-Dealers times (b) a fraction, the numerator of which is
the number of days in the Dividend Period for such series beginning on such
Business Day and the denominator of which is 360, times (c) the liquidation
preference per share for such series times (d) the aggregate number of
Outstanding shares of such series placed by BD in such Auction (for this purpose
shares will be deemed placed by BD if such shares were (i) the subject of Hold
Orders deemed to have been made by Existing Holders and were acquired by such
Existing Holders through BD or (ii) the subject of an Order submitted by BD that
is (A) a Submitted Order of an Existing Holder that resulted in such Existing
Holder continuing to hold such shares as a result of the Auction or (B) a
Submitted Order of a Potential Holder that resulted in such Potential Holder
purchasing such shares as a result of the Auction or (C) a valid Hold Order;
provided that in the event an Auction scheduled to occur on an Auction Date
fails to occur for any reason while the ATP remains Outstanding, BD will be
entitled to service charges as if the Auction had occurred and all Holders of
shares placed by them submitted valid Hold Orders).
7
For purposes of subclause (d)(i) of the foregoing paragraph, if any
Existing Holder who acquired shares of any series of ATP through BD transfers
those shares to another Person other than pursuant to an Auction, then such
Existing Holder shall be deemed to have acquired such shares through BD unless
the transfer was affected by, or transferee is, a Broker-Dealer other than BD.
2.7 Settlement.
(a) If any Existing Holder on whose behalf the BD submitted a
Hold/Sell Order that was accepted as a Sell Order or a Sell Order that was
accepted, in either case, in whole or in part, fails to instruct its Agent
Member to deliver the shares of ATP with respect to which such Order was
accepted against payment therefor, the BD shall instruct such Agent Member to
deliver such shares against payment therefor. If (i) any Existing Holder on
whose behalf a Broker-Dealer other than the BD has submitted a Hold/Sell Order
that was accepted as a Sell Order or a Sell Order that was accepted, in either
case, in whole or in part, fails to instruct its Agent Member to so deliver the
shares of ATP with respect to which such Order was accepted against payment
therefor, (ii) such other Broker-Dealer fails to instruct such Existing Holder's
Agent Member to deliver such shares and (iii) such Existing Holder is identified
to BD by the Auction Agent as provided in Section (a) (v) of the Settlement
Procedures as an Existing Holder from whom a Potential Holder on whose behalf BD
submitted a Buy Order is to purchase such shares, BD may deliver to such
Potential Holder a number of shares of ATP that is less than the number of
shares of ATP to be purchased by such Potential Holder by the number of shares
to be purchased from such Existing Holder. Notwithstanding the foregoing terms
of this Section 2.7, any delivery or non-delivery of shares of ATP which
represents any departure from the results of an Auction for such series, as
determined by the Auction Agent, shall be of no effect unless and until the
Auction Agent shall have been notified of such delivery or non-delivery in
accordance with the terms of Section 2.3(d)(ii) hereof. The Auction Agent shall
have no duty or liability with respect to enforcement of this Section 2.7.
(b) Neither the Auction Agent nor the Fund shall have any
responsibility of liability with respect to the failure of an Existing Holder or
a Potential Holder or its Agent Member to deliver shares of ATP of any series or
to pay for shares of ATP of any series sold or purchased pursuant to the Auction
Procedures or otherwise.
3. The Auction Agent.
3.1 Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Fund
hereunder and owes no fiduciary duties to any other Person, other than the Fund
by reason of this Agreement.
8
(b) The Auction Agent undertakes to perform such duties and
only such duties as are specifically set forth in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the Auction
Agent.
(c) In the absence of bad faith or negligence on its part, the
Auction Agent shall not be liable for any action taken, suffered, or omitted or
for any error of judgment made by it in the performance of its duties under this
Agreement. The Auction Agent shall not be liable for any error or judgment made
in good faith unless the Auction Agent shall have been negligent in ascertaining
the pertinent facts.
3.2 Rights of the Auction Agent.
(a) The Auction Agent may rely and shall be protected in
acting or refraining from acting upon any communication authorized hereby and
upon any written instruction, notice, request, direction, consent, report,
certificate, share certificate or other instrument, paper or document believed
in good faith by it to be genuine. The Auction Agent shall not be liable for
acting upon any telephone communication authorized by this Agreement which the
Auction Agent believes in good faith to have been given by the Fund or by a
Broker-Dealer. The Auction Agent may record telephone communications with the
Broker-Dealers.
(b) The Auction Agent may consult with counsel of its choice
and the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend
or risk its own funds or otherwise incur or become exposed to financial
liability in the performance of its duties hereunder.
3.3 Auction Agent's Disclaimer. The Auction Agent makes no
representation as to the validity of adequacy of this Agreement, the Auction
Agent Agreement or the shares of ATP of any series.
4. Miscellaneous.
4.1 Termination. Either party may terminate this Agreement at any time
on five (5) days notice to the other party, provided that neither BD nor the
Auction Agent may terminate this Agreement without first obtaining prior written
consent of the Fund to such termination, which consent shall not be unreasonably
withheld. This Agreement shall automatically terminate upon the termination of
the Auction Agent Agreement.
4.2 Participant in Securities Depository. BD is, and shall
remain for the term of this Agreement, a member of, or participant in, the
Securities Depository (or an affiliate of such a member participant).
9
4.3 Communications. Except (i) communications authorized to be by
telephone by this Agreement or the Auction Procedures and (ii) communications in
connection with Auctions (other than those expressly required to be in writing),
all notices, requests and other communications to any party hereunder shall be
in writing (including telecopy or similar writing) and shall be given to such
party, addressed to it, at its addressed or telecopy number set forth below:
If to BD, addressed: ▇▇▇▇▇▇ Brothers Inc.
3 World Financial Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
If to the Auction Agent,
addressed: Bankers Trust Company
Four ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Auction Rate/Remarketed Securities
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address or telecopy number as such party may hereafter specify for
such purpose by notice to the other parties. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of BD by a BD Officer and on behalf of
the Auction Agent by an Authorized Officer. BD may record telephone
communications with the Auction Agent.
4.4 Entire Agreement. This Agreement contains the entire agreement
among the parties hereto relating to the subject matter hereof, and there are no
other representations, endorsements, promises, agreements or understandings,
oral, written or implied, among the parties hereto relating to the subject
matter hereof. This Agreement supersedes and terminates all prior Broker-Dealer
Agreements between the parties.
4.5 Benefits. Nothing in this Agreement, express or implied, shall give
to any person, other than the Fund, the Auction Agent, BD and their respective
successors and assigns, any benefit of any legal or equitable right, remedy or
claim hereunder.
4.6 Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be
modified, amended, rescinded, canceled or waived, in whole or in part, except by
a written instrument signed by a duly authorized representative of the party to
be charged.
10
(b) Failure of any party hereto to exercise any right or
remedy hereunder in the event of a breach hereof by any other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
4.7 Successors and Assigns. This Agreement shall be binding upon, inure
to the benefit of, and be enforceable by, the respective successors and assigns
of each of the Auction Agent and BD. This Agreement may not be assigned by
either party hereto absent the prior written consent of the other party;
provided, however, that this Agreement may be assigned by the Auction Agent to a
successor Auction Agent selected by the Fund without the consent of BD.
4.8 Severability. If any clause, provision or section hereof shall be
ruled invalid or unenforceable by any court of competent jurisdiction, the
invalidity or unenforceability of such clause, provision or section shall not
affect any of the remaining clauses, provisions or sections thereof.
4.9 Execution in Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
4.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed in said State.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
BANKERS TRUST COMPANY
By: _______________________
Name:
Title:
▇▇▇▇▇▇ BROTHERS INC.
By: _______________________
Name:
Title:
11
EXHIBIT A
MASTER PURCHASER'S LETTER
Relating to
Securities Involving Rate Settings
Through Auctions or Remarketings
THE COMPANY
A REMARKETING AGENT
THE AUCTION AGENT
A BROKER-DEALER
AN AGENT MEMBER
OTHER PERSONS
Dear Sirs:
1. This letter is designed to apply to publicly or privately offered
debt or equity securities ("Securities") of any issuer ("Company") which are
described in any final prospectus or other offering materials relating to such
Securities as the same may be amended or supplemented (collectively, with
respect to the particular Securities concerned, the "Prospectus") and which
involve periodic rate settings through auctions ("Auctions") or procedures
("Remarketings"). This letter shall be for the benefit of any Company and of any
auction agent, paying agent (collectively, "auction agent"), remarketing agent,
broker-dealer, agent member, securities depository or other interested person in
connection with any Securities and related Auctions or Remarketings (it being
understood that such persons may be required to execute specified agreements and
nothing herein shall alter such requirements). The terminology used herein is
intended to be general in its application and not to exclude any Securities in
respect of which (in the Prospectus or otherwise) alternative terminology is
used.
2. We may from time to time offer to purchase, purchase, offer to sell
and/or sell Securities of any Company as described in the Prospectus relating
thereto. We agree that this letter shall apply to all such purchases, sales and
offers and to Securities owned by us. We understand that the dividend/interest
rate on Securities may be based from time to time on the results of Auctions or
Remarketings as set forth in the Prospectus.
3. We agree that any bid or sell order placed by us in an Auction or a
Remarketing shall constitute an irrevocable offer (except as otherwise described
in the Prospectus) by us to purchase or sell Securities subject to such bid or
sell order, or such lesser amount of Securities as we shall be required to sell
or purchase as a result of such Auction or Remarketing, at the applicable price,
all as set forth in the Prospectus, and that if we fail to place a bid or sell
order with respect to Securities owned by us with a broker-dealer on any Auction
or Date, or a broker-dealer to which we communicate a bid or sell order fails to
submit such bid or sell order to the auction agent or remarketing agent
concerned, we shall be deemed to have placed a hold or a sell order with respect
to such Securities as described in the Prospectus. We authorize any
broker-dealer that submits a bid or sell order as our agent in Auctions or
Remarketings to execute contracts for the sale of Securities by such bid or sell
order. We
recognize that the payment of such broker-dealer for Securities purchased on our
behalf shall not relieve us of any liability to such broker-dealer for payment
for such Securities.
4. We understand that in a Remarketing, the dividend or interest rate
or rates on the Securities and the allocation of Securities tendered for sale
between dividend or interest periods of different lengths will be based from
time to time on the determinations of one or more remarketing agent(s), and we
agree to be conclusively bound by such determinations. We further agree to the
payment of different dividend or interest rates to different holders of
Securities depending on the length of the dividend or interest period elected by
such holders. We agree that any notice given by us to a remarketing agent (or a
broker-dealer for transmission to a remarketing agent) of our desire to tender
Securities in a Remarketing shall constitute an irrevocable (except to the
limited extent set forth in the Prospectus) offer by us to sell the securities
specified in such Notice, or such lesser number of Securities as we shall be
required to sell as a result of such Remarketing, in accordance with the terms
set forth in the Prospectus, and we authorize the remarketing agent to sell,
transfer or otherwise dispose of such Securities as set forth in the Prospectus.
5. We agree that, during the applicable period as described in the
Prospectus, dispositions of Securities can be made only in the denominations set
forth in the Prospectus and we will sell, transfer or otherwise dispose of any
Securities held by us from time to time only pursuant to a bid or sell order
placed in an Auction, in a Remarketing, to or through a broker-dealer or, when
permitted in the Prospectus, to a person that has signed and delivered to the
applicable auction agent or a remarketing agent a letter substantially in the
form of this letter (or other applicable purchaser's letter), provided that in
the case of all transfers other than pursuant to Auctions or Remarketings we or
our broker-dealer or our agent member shall advise such auction agent or a
remarketing agent of such transfer. We understand that a restrictive legend will
be placed on certificates representing the Securities and stop-transfer
instructions will be issued to the transfer agent and/or registrar, all as set
forth in the Prospectus.
6. We agree that, during the applicable period as described in the
Prospectus, ownership of Securities shall be represented by one or more global
certificates registered in the name of the applicable securities depository or
its nominee, that we will not be entitled to receive any certificate
representing the Securities and that our ownership of any Securities will be
maintained in book-entry form by the securities depository for the account of
our agent member, which in turn will maintain records of our beneficial
ownership. We authorize and instruct our agent member to disclose to the
applicable auction agent or remarketing agent such information concerning our
beneficial ownership of Securities as such auction agent or remarketing agent
shall request.
7. We acknowledge that partial deliveries of Securities purchased in
Auctions or Remarketings may be made to us and such deliveries shall constitute
good delivery as set forth in the Prospectus.
2
8. This letter is not a commitment by us to purchase any
Securities.
9. This letter supersedes any prior-dated version of this master
purchaser's letter, and supplements any prior to post-dated purchaser's letter
specific to any particular Securities, and this letter may only be revoked by a
signed writing delivered to the original recipients hereof.
10. The descriptions of Auction or Remarketing procedures set forth in
each applicable Prospectus are incorporated by reference herein and in case of
any conflict between this letter, any purchaser's letter specific to particular
Securities and any such description, such description shall control.
11. Any xerographic or other copy of this letter shall be deemed
of equal effect as a signed original.
12. Our agent member of The Depository Trust company currently
is __________.
13. Our personnel authorized to place orders with broker-dealers for
the purposes set forth in the Prospectus in Auctions or Remarketings currently
is/are __________, telephone number (___) ________.
14. Our taxpayer identification number is __________.
15. In the case of each offer to purchase, purchase, offer to sell or
sale by us of Securities not registered under the Securities Act of 1933, as
amended (the "Act"), we represent and agree as follows:
(a) We understand and expressly acknowledge that the
Securities have not been and will not be registered under the Act and,
accordingly, that the Securities may not be reoffered, resold or
otherwise pledged, hypothecated or transferred unless an applicable
exemption from the registration requirements of the Act is available.
(b) We hereby confirm that any purchase of Securities made by
us will be for our own account, or for the account of one or more
parties for which we are acting as trustee or agent with complete
investment discretion and with authority to bind such parties, and not
with a view to any public resale or distribution thereof. We and each
other party for which we are acting which will acquire Securities will
be "accredited investors" within the meaning of Regulation D under the
Act with respect to the Securities to be purchased by us or such party,
as the case may be, will have previously invested in similar types of
instructions and will be able and prepared to bear the economic risk of
investing in and holding such Securities.
(c) We acknowledge that prior to purchasing any
Securities we shall have received a Prospectus (or private placement
memorandum) with respect thereto and
3
acknowledge that we will have had access to such financial and other
information, and have been afforded the opportunity to ask such
questions or representatives of the Company and receive answers
thereto, as we deem necessary in connection with our decision to
purchase Securities.
(d) We recognize that the Company and broker-dealers will rely
upon the truth and accuracy of the foregoing investment representations
and agreements, and we agree that each of our purchases of Securities
now or in the future shall be deemed to constitute our concurrence in
all of the foregoing which shall be binding on us and each party for
which we are acting as set forth in Subparagraph B above.
Dated:__________________________ ___________________________
(Name of Purchaser)
Mailing Address of Purchaser
________________________________ By: _______________________
________________________________ Printed Name:
________________________________ Title:
4
EXHIBIT B
SETTLEMENT PROCEDURES
Capitalized terms used herein shall have the respective meanings
specified in the Articles Supplementary or herein, as the case may be.
(a) On each Auction Date for any series of ATP, the Auction Agent shall
notify by telephone or telecopy the Broker-Dealers that participated in the
Auction held for such series on such Auction Date and submitted an Order on
behalf of any Existing Holder or Potential Holder of:
(i) the Applicable Rate fixed for the subsequent
Dividend Period and the Dividend Payment Date therefor;
(ii) whether Sufficient Clearing Orders existed for the
determination of the Applicable Rate;
(iii) if such Broker-Dealer submitted a Hold/Sell Order or a
Sell Order for such series on behalf of an Existing Holder, whether such
Hold/Sell Order or Sell Order was accepted or rejected, in whole or in part, and
the number of shares, if any, of such series of ATP then outstanding to be sold
by such Existing Holder;
(iv) if such Broker-Dealer submitted a Buy Order on behalf of
a Potential Holder, whether such Buy Order was accepted or rejected, in whole or
in part, and the number of shares, if any, of such series of ATP to be purchased
by such Potential Holder;
(v) if the aggregate number of shares of such series of ATP to
be sold by all Existing Holders on whose behalf such Broker-Dealer submitted
Hold/Sell Orders or Sell Orders for such series is different than the aggregate
number of shares of such series of ATP to be purchased by all Potential Holders
on whose behalf such Broker-Dealer submitted Buy Orders, the name or names of
one or more other Broker-Dealers (and the name of the Agent Member, if any, of
each such other Broker-Dealer) and the number of shares of such series of ATP to
be (x) purchased from one or more Existing Holders on whose behalf such other
Broker-Dealer submitted Hold/Sell Orders or Sell Orders for such series, or (y)
sold to one or more Potential Holders on whose behalf such other Broker-Dealers
submitted Buy Orders for such series; and
(vi) the scheduled Auction Date of the next succeeding
Auction with respect to such series of ATP.
(b) On each Auction Date for any series of ATP, each Broker-Dealer that
submitted an Order for such series on behalf of any Existing Holder or Potential
Holder shall:
(i) as soon as practicable, advise each Existing Holder and
Potential Holder on whose behalf such Broker-Dealer submitted a Buy Order,
Hold/Sell Order or Sell Order for such series whether such Buy Order, Hold/Sell
Order or Sell Order was accepted or rejected, in whole or in part;
(ii) instruct each Potential Holder on whose behalf such
Broker-Dealer submitted a Buy Order for such series that was accepted, in whole
or in part, to instruct such Potential Holder's Agent Member to pay to such
Broker-Dealer (or its Agent Member) through the Securities Depository the amount
necessary to purchase the number of shares of such series of ATP to be purchased
pursuant to such Buy Order against receipt of such shares;
(iii) instruct each Existing Holder on whose behalf such
Broker-Dealer submitted a Hold/Sell Order for such series that was accepted, in
whole or in part, as a Sell Order or a Sell Order for such series that was
accepted, in whole or in part, to instruct such Existing Holder's Agent Member
to deliver to such Broker-Dealer (or its Agent Member) through the Securities
Depository the number of shares of such series of ATP to be sold pursuant to
such Order against payment therefor;
(iv) advise each Existing Holder on whose behalf such
Broker-Dealer submitted an Order for such series that will continue to hold
shares of ATP of such series and each Potential Holder on whose behalf such
Broker-Dealer submitted a Buy Order for such series that was accepted, in whole
or in part, of the Applicable Rate for such series for the next succeeding
Dividend Period for such series;
(v) advise each Existing Holder on whose behalf such
Broker-Dealer submitted an Order for such series of the Auction Date of the next
succeeding Auction for such series; and
(vi) advise each Potential Holder on whose behalf such
Broker-Dealer submitted a Buy Order for such series that was accepted, in whole
or in part, of the Auction Date of the next succeeding Auction for such series.
(c) On the basis of the information provided to it pursuant to (a)
above, each Broker-Dealer that submitted a Buy Order, a Hold/Sell Order or a
Sell Order for any series of ATP shall allocate any funds received by it in
respect of such series pursuant to (b)(ii) above, and any shares of such series
of ATP received by it pursuant to (b)(iii) above, among the Potential Holders,
if any, on whose behalf such Broker-Dealer submitted Buy Orders for such series,
the Existing Holders, if any, on whose behalf such Broker-Dealer submitted Buy
Orders, Hold/Sell Orders or Sell Orders for such series, and any Broker-Dealers
identified to it by the Auction Agent pursuant to (a)(v) above.
(d) On the Business Day after the Auction Date, the Securities
Depository shall execute the transactions described above, debiting and
crediting the accounts of the respective
2
Agent Members as necessary to effect the purchases and sales of shares of any
series of ATP as determined in the Auction for such series.
3
EXHIBIT C
(Submit only one Order on this Order Form)
THE NEW AMERICA HIGH INCOME FUND, INC.
AUCTION TERM PREFERRED STOCK, SERIES ____ ("ATP")
ORDER FORM
To: ___________________ Date of Auction
___________________
___________________
New York, New York
The undersigned Broker-Dealer submits the following Order covering the
number of shares indicated (complete only one blank):
__________ shares now held by Bidder (an Existing Holder), and the
Order is a (check one):
____ Hold Order; or
____ Hold/Sell Order at a rate of ________%; or
____ Sell Order;
-or-
____ shares not now held by Bidder (a Potential Holder), and the
Order is a Buy Order at a rate of _____%.
Notes:
(1) If submitting more than one Order for one Bidder, use
additional Order forms.
(2) If one or more Orders covering in the aggregate more than the
number of outstanding shares of ATP held by an Existing Holder are submitted,
such Orders shall be considered valid in the order of priority set forth in the
Auction Procedures.
EXHIBIT D
(To be used only for transfers made
other than pursuant to in Auction)
THE NEW AMERICA HIGH INCOME FUND, INC.
AUCTION TERM PREFERRED STOCK,
SERIES ____ ("ATP") TRANSFER FORM
We are (check one):
____ The Existing Holder named below;
____ The Broker-Dealer for such Existing Holding; or
____ The Agent Member for such Existing Holder.
We hereby notify you that such Existing Holder has transferred _______
shares of the above series of ATP to ______________.
_____________________________________
(Name of Existing Holder)
_____________________________________
(Name of Broker-Dealer
_____________________________________
(Name of Agent Member)
By: _________________________________
Printed Name:
Title:
EXHIBIT E
(To be used only for failures to
deliver shares of Auction Term Preferred
Stock sold pursuant to an Auction)
THE NEW AMERICA HIGH INCOME FUND, INC.
AUCTION TERM PREFERRED STOCK, SERIES ____ ("ATP")
NOTICE OF A FAILURE TO DELIVER
Complete either I or II
I. We are a Broker-Dealer for ___________ (the "Purchaser"), which
purchased ____ shares of the above series of ATP in the Auction held on
_________ from the seller of such shares. We hereby notify you that the Seller
failed to deliver such shares of Auction Term Preferred Stock to the Purchaser.
II. We are a Broker-Dealer for ___________ (the "Seller"), which sold
_____ shares of the above series of ATP in the Auction held on________ to the
purchaser of such shares. We hereby notify you that the Purchaser failed to make
payment to the Seller upon delivery of such shares of Auction Term Preferred
Stock.
Name: _________________________________
(Name of Broker-Dealer)
By: _________________________________
Printed Name:
Title:
EXHIBIT B
FORM OF MASTER PURCHASER'S LETTER
MASTER PURCHASER'S LETTER
Relating to
Securities Involving Rate Settings
Through Auctions or Remarketings
THE COMPANY
A REMARKETING AGENT
THE AUCTION AGENT
A BROKER-DEALER
AN AGENT MEMBER
OTHER PERSONS
Dear Sirs:
1. This letter is designed to apply to publicly or privately offered
debt or equity securities ("Securities") of any issuer ("Company") which are
described in any final prospectus or other offering materials relating to such
Securities as the same may be amended or supplemented (collectively, with
respect to the particular Securities concerned, the "Prospectus") and which
involve periodic rate settings through auctions ("Auctions") or procedures
("Remarketings"). This letter shall be for the benefit of any Company and of any
auction agent, paying agent (collectively, "auction agent"), remarketing agent,
broker-dealer, agent member, securities depository or other interested person in
connection with any Securities and related Auctions or Remarketings (it being
understood that such persons may be required to execute specified agreements and
nothing herein shall alter such requirements). The terminology used herein is
intended to be general in its application and not to exclude any Securities in
respect of which (in the Prospectus or otherwise) alternative terminology is
used.
2. We may from time to time offer to purchase, purchase, offer to sell
and/or sell Securities of any Company as described in the Prospectus relating
thereto. We agree that this letter shall apply to all such purchases, sales and
offers and to Securities owned by us. We understand that the dividend/interest
rate on Securities may be based from time to time on the results of Auctions or
Remarketings as set forth in the Prospectus.
3. We agree that any bid or sell order placed by us in an Auction or a
Remarketing shall constitute an irrevocable offer (except as otherwise described
in the Prospectus) by us to purchase or sell Securities subject to such bid or
sell order, or such lesser amount of Securities as we shall be required to sell
or purchase as a result of such Auction or Remarketing, at the applicable price,
all as set forth in the Prospectus, and that if we fail to place a bid or sell
order with respect to Securities owned by us with a broker-dealer on any Auction
or Date, or a broker-dealer to which we communicate a bid or sell order fails to
submit such bid or sell
order to the auction agent or remarketing agent concerned, we shall be deemed to
have placed a hold or a sell order with respect to such Securities as described
in the Prospectus. We authorize any broker-dealer that submits a bid or sell
order as our agent in Auctions or Remarketings to execute contracts for the sale
of Securities by such bid or sell order. We recognize that the payment of such
broker-dealer for Securities purchased on our behalf shall not relieve us of any
liability to such broker-dealer for payment for such Securities.
4. We understand that in a Remarketing, the dividend or interest rate
or rates on the Securities and the allocation of Securities tendered for sale
between dividend or interest periods of different lengths will be based from
time to time on the determinations of one or more remarketing agent(s), and we
agree to be conclusively bound by such determinations. We further agree to the
payment of different dividend or interest rates to different holders of
Securities depending on the length of the dividend or interest period elected by
such holders. We agree that any notice given by us to a remarketing agent (or a
broker-dealer for transmission to a remarketing agent) of our desire to tender
Securities in a Remarketing shall constitute an irrevocable (except to the
limited extent set forth in the Prospectus) offer by us to sell the securities
specified in such Notice, or such lesser number of Securities as we shall be
required to sell as a result of such Remarketing, in accordance with the terms
set forth in the Prospectus, and we authorize the remarketing agent to sell,
transfer or otherwise dispose of such Securities as set forth in the Prospectus.
5. We agree that, during the applicable period as described in the
Prospectus, dispositions of Securities can be made only in the denominations set
forth in the Prospectus and we will sell, transfer or otherwise dispose of any
Securities held by us from time to time only pursuant to a bid or sell order
placed in an Auction, in a Remarketing, to or through a broker-dealer or, when
permitted in the Prospectus, to a person that has signed and delivered to the
applicable auction agent or a remarketing agent a letter substantially in the
form of this letter (or other applicable purchaser's letter), provided that in
the case of all transfers other than pursuant to Auctions or Remarketings we or
our broker-dealer or our agent member shall advise such auction agent or a
remarketing agent of such transfer. We understand that a restrictive legend will
be placed on certificates representing the Securities and stop-transfer
instructions will be issued to the transfer agent and/or registrar, all as set
forth in the Prospectus.
6. We agree that, during the applicable period as described in the
Prospectus, ownership of Securities shall be represented by one or more global
certificates registered in the name of the applicable securities depository or
its nominee, that we will not be entitled to receive any certificate
representing the Securities and that our ownership of any Securities will be
maintained in book-entry form by the securities depository for the account of
our agent member, which in turn will maintain records of our beneficial
ownership. We authorize and instruct our agent member to disclose to the
applicable auction agent or remarketing agent such information concerning our
beneficial ownership of Securities as such auction agent or remarketing agent
shall request.
2
7. We acknowledge that partial deliveries of Securities purchased in
Auctions or Remarketings may be made to us and such deliveries shall constitute
good delivery as set forth in the Prospectus.
8. This letter is not a commitment by us to purchase any
Securities.
9. This letter supersedes any prior-dated version of this master
purchaser's letter, and supplements any prior to post-dated purchaser's letter
specific to any particular Securities, and this letter may only be revoked by a
signed writing delivered to the original recipients hereof.
10. The descriptions of Auction or Remarketing procedures set forth in
each applicable Prospectus are incorporated by reference herein and in case of
any conflict between this letter, any purchaser's letter specific to particular
Securities and any such description, such description shall control.
11. Any xerographic or other copy of this letter shall be deemed
of equal effect as a signed original.
12. Our agent member of The Depository Trust company currently
is __________.
13. Our personnel authorized to place orders with broker-dealers for
the purposes set forth in the Prospectus in Auctions or Remarketings currently
is/are __________, telephone number (___) ________.
14. Our taxpayer identification number is __________.
15. In the case of each offer to purchase, purchase, offer to sell or
sale by us of Securities not registered under the Securities Act of 1933, as
amended (the "Act"), we represent and agree as follows:
(e) We understand and expressly acknowledge that the
Securities have not been and will not be registered under the Act and,
accordingly, that the Securities may not be reoffered, resold or
otherwise pledged, hypothecated or transferred unless an applicable
exemption from the registration requirements of the Act is available.
(f) We hereby confirm that any purchase of Securities made by
us will be for our own account, or for the account of one or more
parties for which we are acting as trustee or agent with complete
investment discretion and with authority to bind such parties, and not
with a view to any public resale or distribution thereof. We and each
other party for which we are acting which will acquire Securities will
be "accredited investors" within the meaning of Regulation D under the
Act with respect to the Securities to be purchased by us or such party,
as the case may be, will have previously
3
invested in similar types of instructions and will be able and prepared
to bear the economic risk of investing in and holding such Securities.
(g) We acknowledge that prior to purchasing any Securities we
shall have received a Prospectus (or private placement memorandum) with
respect thereto and acknowledge that we will have had access to such
financial and other information, and have been afforded the opportunity
to ask such questions or representatives of the Company and receive
answers thereto, as we deem necessary in connection with our decision
to purchase Securities.
(h) We recognize that the Company and broker-dealers will rely
upon the truth and accuracy of the foregoing investment representations
and agreements, and we agree that each of our purchases of Securities
now or in the future shall be deemed to constitute our concurrence in
all of the foregoing which shall be binding on us and each party for
which we are acting as set forth in Subparagraph B above.
Dated:__________________________ ___________________________
(Name of Purchaser)
Mailing Address of Purchaser
________________________________ By: _______________________
________________________________ Printed Name:
________________________________ Title:
4
EXHIBIT C
SETTLEMENT PROCEDURES
The following summary of Settlement Procedures sets forth the
procedures expected to be followed in connection with the settlement of each
Auction and will be incorporated by reference in the Auction Agent Agreement and
each Broker-Dealer Agreement. Nothing contained herein constitutes a
representation by the Fund that in each Auction each party referred to herein
will actually perform the procedures described herein to be performed by such
party. Capitalized terms used herein shall have the respective meanings
specified in the ATP Provisions or herein, as the case may be.
(a) On each Auction Date for any series of ATP, the Auction Agent shall
notify by telephone or telecopy the Broker-Dealers that participated in the
Auction held for such series on such Auction Date and submitted an Order on
behalf of any Existing Holder or Potential Holder of:
(i) the Applicable Rate fixed for the subsequent
Dividend Period and the Dividend Payment Date therefor;
(ii) whether Sufficient Clearing Orders existed for the
determination of the Applicable Rate;
(iii) if such Broker-Dealer submitted a Hold/Sell Order or a
Sell Order for such series on behalf of an Existing Holder, whether such
Hold/Sell Order or Sell Order was accepted or rejected, in whole or in part, and
the number of shares, if any, of such series of ATP then outstanding to be sold
by such Existing Holder;
(iv) if such Broker-Dealer submitted a Buy Order on behalf of
a Potential Holder, whether such Buy Order was accepted or rejected, in whole or
in part, and the number of shares, if any, of such series of ATP to be purchased
by such Potential Holder;
(v) if the aggregate number of shares of such series of ATP to
be sold by all Existing Holders on whose behalf such Broker-Dealer submitted
Hold/Sell Orders or Sell Orders for such series is different than the aggregate
number of shares of such series of ATP to be purchased by all Potential Holders
on whose behalf such Broker-Dealer submitted Buy Orders, the name or names of
one or more other Broker-Dealers (and the name of the Agent Member, if any, of
each such other Broker-Dealer) and the number of shares of such series of ATP to
be (x) purchased from one or more Existing Holders on whose behalf such other
Broker-Dealer submitted Hold/Sell Orders or Sell Orders for such series, or (y)
sold to one or more Potential Holders on whose behalf such other Broker-Dealers
submitted Buy Orders for such series; and
(vi) the scheduled Auction Date of the next succeeding
Auction with respect to such series of ATP.
(b) On each Auction Date for any series of ATP, each Broker-Dealer that
submitted an Order for such series on behalf of any Existing Holder or Potential
Holder shall:
(i) as soon as practicable, advise each Existing Holder and
Potential Holder on whose behalf such Broker-Dealer submitted a Buy Order,
Hold/Sell Order or Sell Order for such series whether such Buy Order, Hold/Sell
Order or Sell Order was accepted or rejected, in whole or in part;
(ii) instruct each Potential Holder on whose behalf such
Broker-Dealer submitted a Buy Order for such series that was accepted, in whole
or in part, to instruct such Potential Holder's Agent Member to pay to such
Broker-Dealer (or its Agent Member) through the Securities Depository the amount
necessary to purchase the number of shares of such series of ATP to be purchased
pursuant to such Buy Order against receipt of such shares;
(iii) instruct each Existing Holder on whose behalf such
Broker-Dealer submitted a Hold/Sell Order for such series that was accepted, in
whole or in part, as a Sell Order or a Sell Order for such series that was
accepted, in whole or in part, to instruct such Existing Holder's Agent Member
to deliver to such Broker-Dealer (or its Agent Member) through the Securities
Depository the number of shares of such series of ATP to be sold pursuant to
such Order against payment therefor;
(iv) advise each Existing Holder on whose behalf such
Broker-Dealer submitted an Order for such series that will continue to hold
shares of ATP of such series and each Potential Holder on whose behalf such
Broker-Dealer submitted a Buy Order for such series that was accepted, in whole
or in part, of the Applicable Rate for such series for the next succeeding
Dividend Period for such series;
(v) advise each Existing Holder on whose behalf such
Broker-Dealer submitted an Order for such series of the Auction Date of the next
succeeding Auction for such series; and
(vi) advise each Potential Holder on whose behalf such
Broker-Dealer submitted a Buy Order for such series that was accepted, in whole
or in part, of the Auction Date of the next succeeding Auction for such series.
(c) On the basis of the information provided to it pursuant to (a)
above, each Broker-Dealer that submitted a Buy Order, a Hold/Sell Order or a
Sell Order for any series of ATP shall allocate any funds received by it in
respect of such series pursuant to (b)(ii) above, and any shares of such series
of ATP received by it pursuant to (b)(iii) above, among the Potential Holders,
if any, on whose behalf such Broker-Dealer submitted Buy Orders for such series,
the Existing Holders, if any, on whose behalf such Broker-Dealer submitted Buy
2
Orders, Hold/Sell Orders or Sell Orders for such series, and any Broker-Dealers
identified to it by the Auction Agent pursuant to (a)(v) above.
(d) On the Business Day after the Auction Date, the Securities
Depository shall execute the transactions described above, debiting and
crediting the accounts of the respective Agent Members as necessary to effect
the purchases and sales of shares of any series of ATP as determined in the
Auction for such series.
3
EXHIBIT D
FORM OF ATP PROVISIONS
THE NEW AMERICA HIGH INCOME FUND, INC.
ARTICLES SUPPLEMENTARY
ESTABLISHING AND FIXING THE RIGHTS AND
PREFERENCES OF TWO SERIES OF SHARES OF PREFERRED STOCK
The New America High Income Fund, Inc., a Maryland corporation (the
"Corporation"), certifies to the Secretary of State of Maryland that:
FIRST: Pursuant to the authority expressly vested in the Board of
Directors of the Corporation by Article IV of its Articles of Amendment and
Restatement, as heretofore amended (which, as hereafter restated or amended
from time to time, are together with these Articles Supplementary herein
called the "Articles"), the Board of Directors has, by resolution,
authorized the issuance of 2,000 shares of its Preferred Stock, par value
$1.00 per share, liquidation preference $50,000 per share, classified into
two series designated respectively: Series A Auction Term Preferred Stock
and Series B Auction Term Preferred Stock (collectively the "ATP").
SECOND: The preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption of the shares of such series of ATP are as follows:
DESIGNATION
Series A: A series of 1,200 shares of Preferred Stock, par value $1.00 per
share, liquidation preference $50,000 per share, is hereby designated "Series A
Auction Term Preferred Stock" ("ATP Series A"). Each share of ATP Series A shall
have an Applicable Rate for its initial dividend Period equal to 3.43% per annum
and an initial Dividend Payment Date of February 1, 1994; and each share of ATP
Series A shall have such other preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption, in addition to those required by applicable law or set forth in the
Articles applicable to preferred stock of the Corporation, as are set forth in
Part I and Part II of these Articles Supplementary. The ATP Series A shall
constitute a separate series of Preferred Stock of the Corporation.
Series B: A series of 800 shares of Preferred Stock, par value $1.00 per
share, liquidation preference $50,000 per share, is hereby designated "Series B
Auction Term Preferred Stock" ("ATP Series B"). Each share of ATP Series B shall
have an Applicable Rate for its initial Dividend Period equal to 3.46% per annum
and have an initial Dividend Payment Date of February 15, 1994; and each share
of ATP Series B shall have such other
preferences, limitations and relative voting rights, in addition to those
required by applicable law or set forth in the Articles applicable to preferred
stock of the Corporation, as are set forth in Part I and Part II of these
Articles Supplementary. The ATP Series B shall constitute a separate series of
Preferred Stock of the Corporation.
Subject to the provisions of Section 12(c) of Part I hereof, the Board of
Directors of the Corporation may, in the future, reclassify additional shares of
the Corporation's Preferred Stock as Series A or Series B ATP, with the same
preferences, rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption and other terms of the
respective series herein described, except that the Applicable Rate for its
initial Dividend Period, its initial Dividend Payment Date and any other changes
in the l terms herein set forth shall be as set forth in the Articles
Supplementary reclassifying such shares as ATP.
As used in Part I and Part II of these Articles Supplementary, capitalized
terms shall have the meanings provided in Section 18 of Part I and Section 1 of
Part II.
PART I
1. Number of Shares: Ranking.
(a) The initial number of authorized shares constituting each series of ATP
is 1,200 shares for ATP Series A and 800 shares for ATP Series B. No fractional
shares of ATP shall be issued.
(b) Any shares of ATP which at any time have been redeemed or purchased by
the Corporation shall, after such redemption or purchase, have the status of
authorized but unissued shares of Preferred Stock.
(c) The shares of ATP shall rank on a parity with shares of any other
series of Preferred Stock (including any other shares of ATP) as to the payment
of dividends to which such shares are entitled and the distribution of assets
upon dissolution, liquidation or winding up of the affairs of the Corporation.
(d) No holder of shares of any series of ATP shall have, solely by reason
of being such a holder of any series, any preemptive or other right to acquire,
purchase or subscribe for any shares of ATP, shares of Common Stock of the
Corporation or other securities of the Corporation which it may hereafter issue
or sell.
2
2. Dividends.
(a) The Holders of shares of any series of ATP shall be entitled to
receive, when, as and if declared by the Board of Directors, out of funds
legally available therefor, cumulative cash dividends on their shares at the
Applicable Rate, determined as set forth in paragraph (c) of this Section 2, and
no more, payable on the respective dates determined as set forth in paragraph
(b) of this Section 2. Dividends on the Outstanding shares of any series of ATP
issued on the Date of Original Issue shall accumulate from the Date of Original
Issue.
(b) (i) Dividends shall be payable when, as and if declared by the Board
of Directors following the initial Dividend Payment Date, subject to
subparagraph (b)(ii) of this Section 2, on the shares of each series of ATP as
follows:
(A) with respect to any Dividend Period of one year or less, on
the Business Day next succeeding the last day thereof and, if any, on
the 91st, 181st and 271st days thereof; and
(B) with respect to any Dividend Period of more than one year, on
a quarterly basis on each January 1, April 1, July 1 and October 1
within such Dividend Period and on the Business Day following the last
day of such Dividend Period.
(ii) If a day for payment of dividends resulting from the application
of subparagraph (b)(i) above is not a Business Day then the Dividend Payment
Date shall be the day next succeeding such day, or if the day next succeeding
such day for payment of dividends is not a Business Day, then the Dividend
Payment Date shall be the first Business Day prior to such day for payment of
dividends that is next succeeded by a Business Day; provided, however, that if
the Securities Depository pays dividends in same-day funds, and such day for
payment is not a Business Day, the Dividend Payment Date shall be the first
Business Day following such day for payment of dividends.
(iii) The Corporation shall pay to the Paying Agent not later than
3:00 p.m., New York City time, on the Business Day next preceding each Dividend
Payment Date for the shares of the relevant series of ATP, an aggregate amount
of funds available on the next Business Day in the City of New York, New York,
equal to the dividends to be paid to all Holders of such shares on such Dividend
Payment Date. The Corporation shall not be required to establish any reserves
for the payment of dividends.
(iv) All moneys paid to the Paying Agent for the payment of dividends
shall be held in trust for the payment of such dividends by the Paying Agent for
the benefit of the Holders specified in subparagraph (b)(v) of this Section 2.
Any
3
moneys paid to the Paying Agent in accordance with the foregoing but not applied
by the Paying Agent to the payment of dividends, including interest earned on
such moneys, will, to the extent permitted by law, be repaid to the Corporation
at the end of 90 days from the date on which such moneys were to have been so
applied.
(v) Each dividend on the ATP shall be paid on the Dividend Payment
Date therefor to the Holders of the relevant series as their names appear on the
stock ledger or stock records of the Corporation on the Business Day next
preceding such Dividend Payment Date. Dividends in arrears for any past Dividend
Period may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to the Holders as their names appear on the stock ledger
or stock records of the Corporation on such date, not exceeding 15 days
preceding the payment date thereof, as may be fixed by the Board of Directors.
(c) (i) The dividend rate on Outstanding shares of each series of ATP
during the period from and after the Date of Original Issue to and including the
last day of the initial Dividend Period therefor shall be equal to the rate per
annum set forth under "Designation" above. For each subsequent Dividend Period
with respect to the Outstanding shares of any series of ATP outstanding
thereafter, the dividend rate shall be equal to the rate per annum that results
from an Auction for Outstanding shares of the relevant series of ATP on the
respective Auction Date therefor next preceding such subsequent Dividend Period;
provided, however, that if an Auction for any subsequent Dividend Period of such
series of ATP is not held for any reason or if Sufficient Clearing Orders have
not been made in an Auction (other than as a result of all shares of such series
of ATP being the subject of Submitted Hold Orders or Submitted Hold/Sell
Orders), then the dividend rate on the shares of such series of ATP for any such
Dividend Period shall be the Maximum Applicable Rate for such shares on the
Auction Date for such Dividend Period (except during a Default Period when the
dividend rate shall be the Default Rate, as set forth in Section 2(c)(ii)
below). The Minimum Applicable Rate, if any, will apply automatically following
an Auction in which all of the Outstanding shares of the relevant series of ATP
are subject (or are deemed to be subject) to Hold Orders or Hold/Sell Orders.
The rate per annum at which dividends are payable on shares of any series of ATP
as determined pursuant to this Section 2(c)(i) shall be the "Applicable Rate."
(ii) A "Default Period" will commence on the applicable date set forth
below if the Corporation fails to (A) declare prior to the close of business on
the second Business Day preceding any Dividend Payment Date, for payment on or
(to the extent permitted as described below) within two Business Days after such
Dividend Payment Date to the persons who held shares as of 12:00 noon, New York
City time, on the Business Day preceding such Dividend Payment Date, the full
amount of any dividend payable on such Dividend Payment Date, (B) deposit,
irrevocably in trust, in same-day funds, with the Paying Agent by 12:00 noon,
New York City time, (I) on or
4
(to the extent permitted as described below) within two Business Days after any
Dividend Payment Date the full amount of any declared dividend on the relevant
series of ATP payable on such Dividend Payment Date (together with the failure
to timely declare dividends described in (A) above, hereinafter referred to as a
"Dividend Default") or (II) on or (to the extent permitted as described below)
within two Business Days after any date fixed for redemption of shares of ATP
called for redemption, the applicable redemption price (a "Redemption Default")
or (C) maintain the "aaa"/AAA Credit Rating unless the "aaa"/AAA Credit Rating
is restored by the Dividend Payment Date next following the date on which the
Corporation fails to maintain the "aaa"/AAA Credit Rating (a "Rating Default"
and, together with a Dividend Default and a Redemption Default, hereinafter
referred to as a "Default"). A Default Period with respect to a Dividend
Default or a Redemption Default will consist of the period commencing on and
including the aforementioned Dividend Payment Date or redemption date, as the
case may be, and ending on and including the Business Day on which, by 12:00
noon, New York city time, all unpaid dividends and unpaid redemption price shall
have been so deposited or shall have otherwise been made available to the
applicable holders in same-day funds. A Default Period with respect to a Rating
Default shall commence as of the date on which the Corporation fails to maintain
the "aaa"/AAA Credit Rating (provided that such Rating Default shall be deemed
not to have occurred and such Default Period shall not commence if such Rating
Default is cured by the next succeeding Dividend Payment Date) and shall end on
the earlier of the date on which such default is cured as provided herein or the
date on which the ATP is mandatorily redeemed as provided herein. The Applicable
Rate for each Default Period, including each Dividend Period commencing during a
Default Period, will be equal to the Default Rate; and each subsequent Dividend
Period commencing after the beginning of a Default Period shall be a Standard
Term Period; provided, however, that the commencement of a Default Period will
not by itself cause the commencement of a new Dividend Period. Any dividend due
on any Dividend Payment Date (if, prior to 12:00 noon, New York City time, on
such Dividend Payment Date, the Corporation has declared such dividend payable
on or within two Business Days after such Dividend Payment Date to the persons
who held such shares as of 12:00 noon, New York City time, on the Business Day
preceding such Dividend Payment Date) or redemption price with respect to such
shares not paid to such Persons when due may (if such default is not solely due
to the willful failure of the Corporation) be paid to such persons in the same
form of funds by 12:00 noon, New York City time, on any of the first two
Business Days after such Dividend Payment Date or due date, as the case may be,
provided that such amount is accompanied by an additional amount for such period
of non-payment at the Default Rate applied to the amount of such non-payment
based on the actual number of days comprising such period divided by 360. For
the purposes of the foregoing, payment to a person in same-day funds made on or
before 12:00 noon New York City time on any Business Day at any time will be
considered equivalent to payment to that person in New York Clearing House
(next-day) funds at the same time on the preceding Business Day, and
5
any payment made after 12:00 noon, New York city time, on any Business Day shall
be considered to have been made instead in the same form of funds and to the
same person before 12:00 noon, New York City time, on the next Business Day. The
Default Rate is equal to the Reference Rate multiplied by three (3).
(iii) The amount of dividends per share payable (if declared) on each
Dividend Payment Date of each Dividend Period of less than one (1) year shall be
computed by multiplying the Applicable Rate (or the Default Rate) for such
Dividend Period by a fraction, the numerator of which will be the number of days
in such Dividend Period such share was Outstanding and for which the Applicable
Rate or the Default Rate was applicable and the denominator of which will be
360, multiplying the amount so obtained by S50,000, and rounding the amount so
obtained to the nearest cent. During any Dividend Period of one (1) year or
more, the amount of dividends per share payable on any Dividend Payment Date
shall be computed as described in the preceding sentence, except that it will be
determined on the basis of a year consisting of twelve 30-day months.
(d) Any dividend payment made on shares of any series of ATP shall first be
credited against the earliest accumulated but unpaid dividends due with respect
to such series of ATP.
(e) For so long as the shares of ATP are Outstanding, except as
contemplated by Sections 3(j) and 7(e) or in connection with the redemption or
repurchase of the Corporation's Taxable Auction Rate Preferred Stock in
connection with the issuance of the ATP, the Corporation will not declare, pay
or set apart for payment any dividend or other distribution (other than a
dividend or distribution paid in shares of, or options, warrants or rights to
subscribe for or purchase, Common Stock or other shares, if any, ranking junior
to the ATP as to dividends or upon liquidation) in respect to Common Stock or
any other shares of the Corporation ranking junior to or on a parity with the
ATP as to dividends or upon liquidation, or call for redemption, redeem,
purchase or otherwise acquire for consideration any Common Stock or any other
such junior shares (except by conversion into or exchange for shares of the
Corporation ranking junior to the ATP as to dividends and upon liquidation) or
any such parity shares (except by conversion into or exchange for shares of the
Corporation ranking junior to or on a parity with the ATP as to dividends and
upon liquidation), unless (i) immediately after such transaction, the
Corporation would have Eligible Assets with an aggregate Discounted Value at
least equal to the ATP Basic Maintenance Amount and the 1940 Act ATP Asset
Coverage would be achieved, (ii) full cumulative dividends on the ATP due on or
prior to the date of the transaction have been declared and paid and (iii) the
Corporation has redeemed the full number of shares of ATP required to be
redeemed by any provision for mandatory redemption contained in Section
3(a)(ii).
6
3. Redemption.
(a) (i) After the initial Dividend Period, subject to the provisions
of this Section 3 and to the extent permitted under the 1940 Act and Maryland
law, the Corporation may, at its option, redeem in whole or in part out of funds
legally available therefor shares of any series of ATP herein designated as (A)
having a Dividend Period of one year or less, on the Business Day after the last
day of such Dividend Period by delivering a notice of redemption not less than
15 days and not more than 40 days prior to such redemption, at a redemption
price per share equal to $50,000, plus an amount equal to accumulated but unpaid
dividends thereon (whether or not earned or declared) to the date fixed for
redemption, or (B) having a Dividend Period of more than one year, on any
Business Day prior to the end of the relevant Dividend Period by delivering a
notice of redemption not less than 15 days and not more than 40 days prior to
the date fixed for such redemption, at a redemption price per share equal to
$50,000, plus an amount equal to accumulated but unpaid dividends thereon
(whether or not earned or declared) to the date fixed for redemption, plus a
redemption premium, if any, determined by the Board of Directors after
consultation with the Broker-Dealers and set forth in any applicable Specific
Redemption Provisions at the time of the designation of such Dividend Period as
set forth in Section 4 of these Articles Supplementary; provided, however, that
during a Dividend Period of more than one year no shares of ATP will be subject
to optional redemption except in accordance with any Specific Redemption
Provisions approved by the Board of Directors after consultation with the
Broker-Dealers at the time of the designation of such Dividend Period.
Notwithstanding the foregoing, the Corporation shall not give a notice of or
effect any redemption pursuant to this Section 3(a)(i) unless, on the date on
which the Corporation intends to give such notice and on the date of redemption
(a) the Corporation has available certain Deposit Securities with maturity or
tender dates not later than the day preceding the applicable redemption date and
having a value not less than the amount (including any applicable premium) due
to Holders of ATP by reason of the redemption of such ATP on such date fixed for
the redemption and (b) the Corporation would have Eligible Assets with an
aggregate Discounted Value at least equal the ATP Basic Maintenance Amount
immediately subsequent to such redemption, if such redemption were to occur on
such date, it being understood that the provisions of paragraph (d) of this
Section 3 shall be applicable in such circumstances in the event the Corporation
makes the deposit and takes the other action required thereby.
(ii) If the Corporation fails to maintain, as of any Valuation Date,
Eligible Assets with an aggregate Discounted Value at least equal to the ATP
Basic Maintenance Amount or, as of the last Business Day of any month, the 1940
Act ATP Asset Coverage, and such failure is not cured within two Business Days
following the relevant Valuation Date in the case of a failure to maintain the
ATP Basic Maintenance Amount or the last Business Day of the following month in
the case of a failure to maintain 1940 Act Asset Coverage as of such last
Business Day (respectively, the
7
"Asset Coverage Cure Date"), the ATP will be subject to mandatory redemption out
of funds legally available therefor. The number of shares of ATP to be redeemed
in such circumstances will be equal to the lesser of (A) the minimum number of
shares of ATP the redemption of which, if deemed to have occurred immediately
prior to the opening of business on the relevant Asset Coverage Cure Date, would
result in the Corporation having Eligible Assets with an aggregate Discounted
Value at least equal to the ATP Basic Maintenance Amount, or sufficient to
satisfy 1940 Act ATP Asset Coverage, as the case may be, in either case as of
the relevant Asset Coverage Cure Date (provided that, if there is no such
minimum number of shares the redemption of which would have such result, all
shares of ATP then outstanding will be redeemed), and (B) the maximum number of
shares of ATP that can be redeemed out of funds expected to be available
therefor on the mandatory redemption date at the Mandatory Redemption Price set
forth in subparagraph (a)(iv) of this Section 3.
(iii) If the Corporation at any time fails to maintain the "aaa"/AAA
Credit Rating and the Corporation is unable to restore the "aaa"/AAA Credit
Rating within 90 calendar days thereafter (the "Rating Default Cure Date"), all
shares of ATP will be subject to mandatory redemption out of funds legally
available therefor, on the Mandatory Redemption Date at the Mandatory Redemption
Price set forth in subparagraph (a)(iv) of this Section 3.
(iv) In determining the shares of ATP required to be redeemed in
accordance with the foregoing Section 3(a)(ii), the Corporation shall allocate
the number of shares required to be redeemed to satisfy the ATP Basic
Maintenance Amount or the 1940 Act ATP Asset Coverage, as the case may be, pro
rata among the Holders of shares of ATP in proportion to the number of shares
they hold and shares of other Preferred Stock subject to mandatory redemption
provisions similar to those contained in this Section 3, subject to the further
provisions of this subparagraph (iv). The Corporation shall effect any required
mandatory redemption pursuant to subparagraph (a)(ii) or (a)(iii) of this
Section 3 no later than 30 days after the Asset Coverage Cure or the Rating
Default Cure Date, as the case may be (the "Mandatory Redemption Date"), except
that if the Corporation does not have funds legally available for the redemption
of, or is not otherwise legally permitted to redeem, the number of shares of ATP
which would be required to be redeemed by the Corporation under clause (A) of
subparagraph (a)(ii) or subparagraph (a)(iii) of this Section 3 if sufficient
funds were available, together with shares of other Preferred Stock which are
subject to mandatory redemption under provisions similar to those contained in
this Section 3, or the Corporation otherwise is unable to effect such redemption
on or prior to such Mandatory Redemption Date, the Corporation shall redeem
those shares of ATP, and shares of other Preferred Stock which it was unable to
redeem, on the earliest practicable date on which the Corporation will have such
funds available, upon notice pursuant to Section 3(b) to record owners of shares
of ATP to be redeemed and the Paying Agent. The Corporation will deposit with
the Paying Agent funds sufficient to
8
redeem the specified number of shares of ATP with respect to a redemption
required under subparagraph (a)(ii) or subparagraph (a)(iii) of this Section 3,
by 1:00 p.m., New York City time, of the Business Day immediately preceding the
Mandatory Redemption Date. If fewer than all of the Outstanding shares of ATP
are to be redeemed pursuant to this Section 3(a)(iv), the number of shares to be
redeemed shall be redeemed pro rata from the Holders of such shares in
proportion to the number of such shares held by such Holders, by lot or by such
other method as the Corporation shall deem fair and equitable, subject, however,
to the terms of any applicable Specific Redemption Provisions. "Mandatory
Redemption Price" means $50,000 per share, plus an amount equal to accumulated
but unpaid dividends thereon (whether or not earned or declared) to the date
fixed for redemption, plus (in the case of a Dividend Period of one year or more
only) a redemption premium, if any, determined by the Board of Directors after
consultation with the Broker-Dealers and set forth in any applicable Specific
Redemption Provisions.
(b) In the event of a redemption pursuant to Section 3(a), the
Corporation will file a notice of its intention to redeem with the Securities
and Exchange Commission so as to provide at least the minimum notice required
under Rule 23c-2 under the 1940 Act or any successor provision. In addition, the
Corporation shall deliver a notice of redemption to the Auction Agent (the
"Notice of Redemption") containing the information set forth below (i) in the
case of an optional redemption pursuant to subparagraph (a)(i) above, one
Business Day prior to the giving of notice to the Holders, (ii) in the case of a
mandatory redemption pursuant to subparagraph (a)(ii) or subparagraph (a)(iii)
above, on or prior to the 30th day preceding the Mandatory Redemption Date. The
Auction Agent will use its reasonable efforts to provide telephonic notice to
each Holder of shares of ATP called for redemption not later than the close of
business on the Business Day immediately following the day on which the Auction
Agent determines the shares to be redeemed (or, during a Default Period with
respect to such shares, not later than the close of business on the Business
Day immediately following the day on which the Auction Agent receives Notice of
Redemption from the Corporation). The Auction Agent shall confirm such
telephonic notice in writing not later than the close of business on the third
Business Day preceding the date fixed for redemption by providing the Notice of
Redemption to each Holder of shares called for redemption, the Paying Agent (if
different from the Auction Agent) and the Securities Depository. Notice of
Redemption will be addressed to the registered owners of the ATP at their
addresses appearing on the share records of the Corporation. Such Notice of
Redemption will set forth (i) the date fixed for redemption, (ii) the number and
identity of shares of ATP to be redeemed, (iii) the redemption price (specifying
the amount of accumulated dividends to be included therein), (iv) that dividends
on the shares to be redeemed will cease to accumulate on such date fixed for
redemption, and (v) the provision under which redemption shall be made. No
defect in the Notice of Redemption or in the transmittal or mailing thereof will
affect the validity of the redemption proceedings, except as required by
applicable law. If fewer than all shares held by any Holder are to be redeemed,
the Notice of Redemption mailed to such Holder shall also specify the number of
shares to be redeemed from such Holder.
9
(c) Notwithstanding the provisions of paragraph (a) of this Section 3, but
subject to Section 7(e), no shares of ATP may be redeemed unless all dividends
in arrears on the Outstanding shares of ATP and all capital stock of the
Corporation ranking on a parity with the ATP with respect to payment of
dividends or upon liquidation, have been or are being contemporaneously paid or
set aside for payment; provided, however, that the foregoing shall not prevent
a purchase or acquisition of all Outstanding shares of ATP pursuant to the
successful completion of an otherwise lawful purchase or exchange offer made on
the same terms to, and accepted by, Holders of all Outstanding shares of ATP.
(d) Upon the deposit of funds sufficient to redeem shares of ATP with the
Paying Agent and the giving of the Notice of Redemption to the Auction Agent
under paragraph (b) of this Section 3, dividends on such shares shall cease to
accumulate and such shares shall no longer be deemed to be Outstanding for any
purpose (including, without limitation, for purposes of calculating whether the
Corporation has maintained the requisite ATP Basic Maintenance Amount or the
1940 Act ATP Asset Coverage), and all rights of the holder of the shares so
called for redemption shall cease and terminate, except the right of such holder
to receive the redemption price specified herein, but without any interest or
other additional amount. Such redemption price shall be paid by the Paying Agent
to the nominee of the Securities Depository. The Corporation shall be entitled
to receive from the Paying Agent, promptly after the date fixed for redemption,
any cash deposited with the Paying Agent in excess of (i) the aggregate
redemption price of the shares of ATP called for redemption on such date and
(ii) such other amounts, if any, to which Holders of shares of ATP called for
redemption may be entitled. Any funds so deposited that are unclaimed at the end
of two years from such redemption date shall, to the extent permitted by law, be
paid to the Corporation, after which time the Holders of shares of ATP so called
for redemption may look only to the Corporation for payment of the redemption
price and all other amounts, if any, to which they may be entitled. The
Corporation shall be entitled to receive, from time to time after the date fixed
for redemption, any interest earned on the funds so deposited.
(e) To the extent that any redemption for which Notice of Redemption has
been given is not made by reason of the absence of legally available funds
therefor, or is otherwise prohibited, such redemption shall be made as soon as
practicable to the extent such funds become legally available or such redemption
is no longer otherwise prohibited. Failure to redeem shares of ATP shall be
deemed to exist at any time after the date specified for redemption in a Notice
of Redemption when the Corporation shall have failed, for any reason whatsoever,
to deposit in trust with the Paying Agent the redemption price with respect to
any shares for which such Notice of Redemption has been given. Notwithstanding
the fact that the Corporation may not have redeemed shares of ATP for which a
Notice of Redemption has been given, dividends may be declared and paid on
shares of ATP and shall include those shares of ATP for which Notice of
Redemption has been given but for which deposit of funds has not been made.
10
(f) All moneys paid to the Paying Agent for payment of the redemption price
of shares of ATP called for redemption shall be held in trust by the Paying
Agent for the benefit of holders of shares so to be redeemed.
(g) So long as any shares of ATP are held of record by the nominee of the
Securities Depository, the redemption price for such shares will be paid on the
date fixed for redemption to the nominee of the Securities Depository for
distribution to Agent Members for distribution to the persons for whom they are
acting as agent.
(h) Except for the provisions described above, nothing contained in these
Articles Supplementary limits any right of the Corporation to purchase or
otherwise acquire any shares of ATP outside of an Auction at any price, whether
higher or lower than the price that would be paid in connection with an optional
or mandatory redemption, so long as, at the time of any such purchase, there is
no arrearage in the payment of dividends on, or the mandatory or optional
redemption price with respect to, any shares of ATP for which Notice of
Redemption has been given and the Corporation is in compliance with the 1940 Act
ATP Asset Coverage and has Eligible Assets with an aggregate Discounted Value at
least equal to the ATP Basic Maintenance Amount after giving effect to such
purchase or acquisition on the date thereof. Any shares which are purchased,
redeemed or otherwise acquired by the Corporation shall have no voting rights.
If fewer than all the Outstanding shares of ATP are redeemed or otherwise
acquired by the Corporation, the Corporation shall give notice of such
transaction to the Auction Agent, in accordance with the procedures agreed upon
by the Board of Directors.
(i) In the case of any redemption pursuant to this Section 3, only whole
shares of ATP shall be redeemed, and in the event that any provision of the
Articles would require redemption of a fractional share, the Auction Agent shall
be authorized to round up so that only whole shares are redeemed.
(j) Notwithstanding anything herein to the contrary, including, without
limitation, Sections 2(e), 6(g) and 12 of Part I hereof, the Board of Directors
may authorize, create or issue any class or series of stock ranking prior to or
on a parity with the ATP with respect to the payment of dividends or the
distribution of assets upon dissolution, liquidation or winding up of the
affairs of the Corporation, to the extent permitted by the 1940 Act, as amended,
if, upon issuance, the net proceeds from the sale of such stock (or such portion
thereof needed to redeem or repurchase the Outstanding ATP) are deposited with
the Auction Agent in accordance with Section 3(d) of Part I hereof, Notice of
Redemption as contemplated by Section 3(b) of Part I hereof has been delivered
prior thereto or is sent promptly thereafter, and such proceeds are used to
redeem all Outstanding ATP.
11
4. Designation of Dividend Period.
(a) The initial Dividend Period for each series of the ATP is as set forth
under "Designation" above. The Corporation will designate the duration of
subsequent Dividend Periods of each series of ATP; provided, however, that no
such designation is necessary for a Standard Term Period and, provided further,
that any designation of an Alternate Term Period shall be effective only if (i)
notice thereof shall have been given as provided herein, (ii) any failure to pay
in a timely manner to the Auction Agent the full amount of any dividend on, or
the redemption price of, the ATP shall have been cured as provided above, (iii)
Sufficient Clearing Orders shall have existed in an Auction held on the Auction
Date immediately preceding the first day of such proposed Alternate Term Period,
(iv) if the Corporation shall have mailed a Notice of Redemption with respect to
any shares, the redemption price with respect to such shares shall have been
deposited with the Paying Agent, and (v) in the case of the designation of an
Alternate Term Period, the Corporation has confirmed that as of the Auction Date
next preceding the first day of such Alternate Term Period, it has Eligible
Assets with an aggregate Discounted Value at least equal to the ATP Basic
Maintenance Amount, and the Corporation has consulted with the Broker-Dealers
and has provided notice of such designation and an ATP Basic Maintenance Report
to Fitch (if Fitch is then rating the ATP), Moody's (if ▇▇▇▇▇'▇ is than rating
the ATP) and any Other Rating Agency which is then rating the ATP and so
requires.
(b) If the Corporation proposes to designate any Alternate Term Period, not
fewer than 15 (or two Business Days in the event the duration of the Dividend
Period prior to such Alternate Term Period is fewer than 15 days) nor more than
30 days prior to the first day of such Alternate Term Period, notice shall be
(i) made by press release and (ii) communicated by the Corporation by telephonic
or other means to the Auction Agent and confirmed in writing promptly
thereafter. Each such notice shall state (A) that the Corporation proposes to
exercise its option to designate a succeeding Alternate Term Period, specifying
the first and last days thereof and (B) that the Corporation will by 3:00 p.m.,
New York City time, on the second Business Day next preceding the first day of
such Alternate Term Period, notify the Auction Agent, who will promptly notify
the Broker-Dealers, of either (x) its determination, subject to certain
conditions, to proceed with such Alternate Term Period, subject to the terms of
any Specific Redemption Provisions, or (y) its determination not to proceed with
such Alternate Term Period, in which latter event the succeeding Dividend Period
shall be a Standard Term Period.
No later than 3:00 p.m., New York City time, on the second Business Day
next preceding the first day of any proposed Alternate Term Period, the
Corporation shall deliver to the Auction Agent, who will promptly deliver to the
Broker-Dealers and Existing Holders, either:
(i) a notice stating (A) that the Corporation has determined to
designate the next succeeding Dividend Period as an Alternate Term Period,
specifying
12
the first and last days thereof and (B) the terms of any Specific
Redemption Provisions; or
(ii) a notice stating that the Corporation has determined not to
exercise its option to designate an Alternate Term Period.
If the Corporation fails to deliver either such notice with respect to any
designation of any proposed Alternative Term Period to the Auction Agent or is
unable to make the confirmation provided in clause (v) of Paragraph (a) of this
Section 4 by 3:00 p.m., New York City time, on the second Business Day next
preceding the first day of such proposed Alternate Term Period, the Corporation
shall be deemed to have delivered a notice to the Auction Agent with respect to
such Dividend Period to the effect set forth in clause (ii) above, thereby
resulting in a Standard Term Period.
5. Restrictions on Transfer. Shares of ATP may be transferred only (a)
pursuant to an Order placed in an Auction, (b) to or through a Broker-Dealer,
(c) to a Person that has delivered a signed Master Purchaser's Letter to the
Auction Agent or (d) to the Corporation or any Affiliate. Notwithstanding the
foregoing, no transfers other than those transfers made pursuant to Auctions
will be effective unless the selling Existing Holder or the Broker-Dealer or
Agent Member of such Existing Holder advises the Auction Agent of such transfer.
The certificates representing the shares of ATP issued to the Securities
Depository will bear legends with respect to the restrictions described above
and stop-transfer instructions will be issued to the Transfer Agent and/or
Registrar.
6. Voting Rights. (a) Except as otherwise provided in the Articles or as
otherwise required by applicable law, (i) each Holder of shares of ATP shall be
entitled to one vote for each share of ATP held on each matter submitted to a
vote of shareholders of the Corporation, and (ii) the holders of outstanding
shares of Preferred Stock, including the ATP, and shares of Common Stock shall
vote together as a single class; provided, however, that, at any meeting of the
stockholders of the Corporation held for the election of directors, the holders
of outstanding shares of Preferred Stock, including the ATP, represented in
person or by proxy at said meeting, shall be entitled, as a class, to the
exclusion of the holders of all other securities and classes of capital stock of
the Corporation, to elect two directors of the Corporation, each share of
Preferred Stock, including the ATP, entitling the holder thereof to one vote.
Subject to paragraph (b) of this Section 6, the holders of outstanding shares of
Common Stock and Preferred Stock, including the ATP, voting together as a single
class, shall elect the balance of the directors.
(b) During any period in which any one or more of the conditions
described below shall exist (such period being referred to herein as a "Voting
Period"), the number of directors constituting the Board of Directors shall be
automatically increased by the smallest number that, when added to the two
directors elected exclusively by the holders of shares of Preferred Stock,
including the ATP, would constitute a majority of the Board of Directors as
13
so increased by such smallest number; and the holders of shares of Preferred
Stock, including the ATP, shall be entitled, voting as a class on a
one-vote-per-share basis (to the exclusion of the holders of all other
securities and classes of capital stock of the Corporation), to elect such
smallest number of additional directors, together with the two directors that
such holders are in any event entitled to elect. A Voting Period shall commence:
(i) if at the close of business on any Dividend Payment Date
accumulated dividends (whether or not earned or declared) on shares of the
Preferred Stock, including the ATP, equal to at least two full years'
dividends shall be due and unpaid; or
(ii) if at any time holders of any other shares of Preferred Stock are
entitled under the 1940 Act to elect a majority of the directors of the
Corporation.
Upon the termination of a Voting Period, the voting rights described in this
paragraph (b) of Section 6 shall cease, subject always, however, to the
revesting of such voting rights in the Holders of shares of Preferred Stock,
including the ATP, upon the further occurrence of any of the events described in
this paragraph (b) of Section 6.
(c) As soon as practicable after the accrual of any right of the
holders of shares of Preferred Stock, including the ATP, to elect additional
directors as described in paragraph (b) of this Section 6, the Corporation shall
notify the Auction Agent, and the Auction Agent shall call a special meeting of
such holders, by mailing a notice of such special meeting to such holders, such
meeting to be held not less than 10 nor more than 30 days after the date of
mailing of such notice. If the Corporation fails to send such notice to the
Auction Agent or if the Auction Agent does not call such a special meeting, it
may be called by any such holder on like notice. The record date for determining
the holders entitled to notice of and to vote at such special meeting shall be
the close of business on the fifth Business Day preceding the day on which such
notice is mailed. At any such special meeting and at each meeting of holders of
shares of Preferred Stock, including the ATP, held during a Voting Period at
which directors are to be elected, such holders, voting together as a class (to
the exclusion of the holders of all other securities and classes of capital
stock of the Corporation), shall be entitled to elect the number of directors
prescribed in paragraph (b) of this Section 6 on a one-vote-per-share basis.
(d) For purposes of determining any rights of the Holders to vote on
any matter, whether such right is created by the Articles, by statute or
otherwise, no Holder shall be entitled to vote and no share of ATP shall be
deemed to be "Outstanding" for the purpose of voting or determining the number
of shares required to constitute a quorum if, prior to or concurrently with the
time of determination of shares entitled to vote or shares deemed Outstanding
for quorum purposes, as the case may be, the redemption price for the redemption
of such shares has been deposited in trust with the Paying Agent for that
purpose and the requisite Notice of Redemption with respect to such shares shall
have been given as provided
14
in Section 3. No share of ATP held by the Corporation or any Affiliate of the
Corporation shall have any voting rights or be deemed to be Outstanding for
voting or other purposes, except that shares of ATP held by any Affiliate of the
Corporation are deemed Outstanding for purposes of determining the ATP Basic
Maintenance Amount.
(e) The terms of office of all persons who are directors of the
Corporation at the time of a special meeting of holders of the ATP and holders
of other Preferred Stock to elect directors shall continue, notwithstanding the
election at such meeting by the holders and such other holders of the number of
directors that they are entitled to elect, and the persons so elected by such
holders, together with the two incumbent directors elected by such holders and
the remaining incumbent directors elected by the holders of the Common Stock and
Preferred Stock, shall constitute the duly elected directors of the Corporation.
(f) Simultaneously with the termination of a Voting Period, the terms
of office of the additional directors elected by the Holders of the ATP and
holders of other Preferred Stock pursuant to paragraph (b) of this Section 6
shall terminate, the remaining directors shall constitute the directors of the
Corporation and the voting rights of such holders to elect additional directors
pursuant to paragraph (b) of this Section 6 shall cease, subject to the
provisions of the last sentence of paragraph (b) of this Section 6.
(g) So long as any of the shares of Preferred Stock, including the
ATP, are Outstanding, the Corporation will not, without the affirmative vote of
the holders of a majority of the Outstanding shares of Preferred Stock
determined with reference to a "majority of outstanding voting securities" as
that term is defined in Section 2(a)(42) of the 1940 Act, voting as a separate
class, (i) amend, alter or repeal any of the preferences, rights or powers of
such class so as to affect materially and adversely such preferences, rights or
powers; (ii) increase the authorized number of shares of Preferred Stock; (iii)
create, authorize or issue shares of any class of capital stock ranking senior
to or on a parity with the 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, such shares
of capital stock ranking senior to or on a parity with the Preferred Stock or
reclassify any authorized shares of capital stock of the Corporation into any
shares ranking senior to or on a parity with the Preferred Stock (except that,
notwithstanding the foregoing, but subject to the provisions of Sections 3(j)
and 12, the Board of Directors, without the vote or consent of the holders of
the Preferred Stock, may from time to time authorize, create and classify, and
the Corporation may from time to time issue, shares or series of Preferred Stock
ranking on a parity with the ATP with respect to the payment of dividends and
the distribution of assets upon dissolution, liquidation or winding up to the
affairs of the Corporation, and may reclassify and/or issue any shares of ATP
previously purchased or redeemed by the Corporation subject to continuing
compliance by the Corporation with 1940 Act ATP Asset Coverage and ATP Basic
Maintenance Amount requirements); (iv) institute any proceedings to be
adjudicated bankrupt or insolvent, or consent to the institution of bankruptcy
or insolvency proceedings against it, or file a petition seeking or consenting
to reorganization or relief under
15
any applicable federal or state law relating to bankruptcy or insolvency, or
consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Corporation or a substantial
part of its property, or make any assignment for the benefit of creditors, or,
except as may be required by 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; (v) 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 the Corporation's assets as a whole, 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 (vi) below and (D) liens to secure
payment for services rendered including, without limitation, services rendered
by the Corporation's custodian and the Auction Agent; or (vi) create, authorize,
issue, incur or suffer to exist any indebtedness for borrowed money or any
direct or indirect guarantee of such indebtedness for borrowed money or any
direct or indirect guarantee of such indebtedness, except the Corporation may
borrow for temporary or emergency purposes as may be permitted by the
Corporation's investment restrictions or as permitted under the proviso to
Section 12(b) hereof; provided, however, that transfers of assets by the
Corporation subject to an obligation to repurchase shall not be deemed to be
indebtedness for purposes of this provision to the extent that after any such
transaction the Corporation has Eligible Assets with an aggregate Discounted
Value at least equal to the ATP Basic Maintenance Amount as of the immediately
preceding Valuation Date.
(h) The affirmative vote of the holders of a majority of the
outstanding shares of Preferred Stock, including the ATP, voting as a separate
class, shall be required to approve any plan of reorganization (as such term is
used in the 1940 Act) adversely affecting such shares or any action requiring a
vote of security holders of the Corporation under Section 13(a) of the 1940 Act.
In the event a vote of holders of shares of Preferred Stock is required pursuant
to the provisions of Section 13(a) of the 1940 Act, the Corporation shall, not
later than ten Business Days prior to the date on which such vote is to be
taken, notify Moody's (if ▇▇▇▇▇'▇ is then rating the ATP), Fitch (if Fitch is
then rating the ATP) and any Other Rating Agency which is then rating the ATP
and which so requires that such vote is to be taken and the nature of the action
with respect to which such vote is to be taken and shall, not later than ten
Business Days after the date on which such vote is taken, notify Moody's, Fitch
and any such Other Rating Agency, as applicable, of the results of such vote.
(i) The affirmative vote of the holders of a majority of the
Outstanding shares of each series of ATP, voting separately from any other
series, shall be required with respect to any matter that materially and
adversely affects the rights, preferences, or powers of such series in a manner
different from that of other series of classes of the Corporation's
16
shares of capital stock. For purposes of the foregoing, no matter shall be
deemed to adversely affect any right, preference or power unless such matter (i)
alters or abolishes any preferential right of such series; (ii) creates, alters
or abolishes any right in respect of redemption of such series; or (iii) creates
or alters (other than to abolish) any restriction on transfer applicable to such
series. The vote of holders of ATP described in this Section 6(i) will in each
case be in addition to a separate vote of the requisite percentage of Common
Stock and/or ATP necessary to authorize the action in question.
(j) The Board of Directors, without the vote or consent of any holder
of the Preferred Stock, including the ATP, or any other stockholder of the
Corporation, may from time to time amend, alter or repeal any or all of the
definitions of the terms or provisions listed below in connection with obtaining
or maintaining one or more ratings with respect to the ATP, and any such
amendment, alteration or repeal will not be deemed to affect the preferences,
rights or powers of shares of ATP or the Holders thereof, provided that the
Board of Directors receives written confirmation from Moody's (if ▇▇▇▇▇'▇ is
then rating the ATP) and Fitch (if Fitch is then rating the ATP) (with such
confirmation in no event being required to be obtained from a particular rating
agency in the case of the definitions relevant only to and adopted in connection
with the rating of the ATP, if any, by any other rating agency) that such
amendment, alteration or repeal would not impair the rating then assigned by
Moody's or Fitch, respectively. In addition, the Board of Directors, without the
vote or consent of any Holder of the Preferred Stock, including the ATP, or any
other stockholder of the Corporation, may from time to time adopt, amend, alter
or repeal any or all of any additional or other definitions or add covenants and
other obligations of the Corporation (e.g., maintenance of minimum liquidity
level) or confirm the applicability of covenants and other obligations set forth
herein in connection with obtaining or maintaining the rating of Moody's, Fitch
or any Other Rating Agency with respect to the ATP, and any such amendment,
alteration or repeal will not be deemed to affect the preferences, rights or
powers of the ATP or the Holders thereof, provided the Board of Directors
receives written confirmation from the relevant rating agency (such confirmation
in no event being required to be obtained from a particular rating agency with
respect to definitions or other provisions relevant only to another rating
agency's rating) that any such amendment, alteration or repeal would not
adversely affect the rating then assigned by such rating agency.
17
Definitions and Provisions Subject to Change by Director Action:
ATP Basic Maintenance Amount Minimum Applicable Rate
ATP Basic Maintenance Moody's Discount Factor
Certificate Moody's Eligible Assets
Asset Coverage Cure Date Moody's Industry Classification
Deposit Securities 1940 Act Asset Coverage Cure
Discounted Value Date
Exposure Period 1940 Act ATP Asset Coverage
Fitch Discount Factor Volatility Factor
Fitch Eligible Assets Short Term Money Market
Fitch Industry Classification Instruments
Market Value
Maximum Applicable Rate
Last Paragraph of Section 12
In addition, the Board of Directors may amend the definition of Maximum
Applicable Rate to increase the percentage amount by which the Reference Rate is
multiplied to determine the Maximum Applicable Rate shown therein without the
vote or consent of the holders of the shares of the Preferred Stock, including
the ATP, or any other stockholder of the Corporation, and without receiving any
confirmation from any rating agency after consultation with the Broker-Dealers,
provided that immediately following any such increase the Corporation would be
in compliance with the ATP Basic Maintenance Amount.
(k) Unless otherwise required by law, holders of shares of ATP shall
not have any relative rights or preferences or other special rights other than
those specifically set forth herein. The holders of shares of ATP shall have no
rights to cumulative voting. In the event that the Corporation fails to pay any
dividends on the shares of ATP, the exclusive remedy of the holders shall be the
right to vote for directors pursuant to the provisions of this Section 6.
(l) The foregoing voting provisions will not apply with respect to the
ATP if, at or prior to the time when a vote is required, such shares have been
(i) redeemed or (ii) called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
7. Liquidation Rights. (a) Upon the dissolution, liquidation or winding up
of the affairs of the Corporation, whether voluntary or involuntary, the holders
of ATP then Outstanding, together with holders of shares of any class of stock
ranking on a parity with the ATP upon dissolution, liquidation or winding up,
shall be entitled to receive and to be paid out of the assets of the Corporation
available for distribution to its stockholders after satisfaction of claims of
creditors of the Corporation an amount equal to the liquidation preference with
18
respect to such shares. The liquidation preference for shares of ATP shall be
$50,000 per share, plus an amount equal to all accumulated dividends thereon
(whether or not earned or declared) to the date payment of such distribution is
made in full or a sum sufficient for the payment thereof is set apart with the
Paying Agent. No redemption premium shall be paid upon any liquidation even if
such redemption premium would be paid upon optional or mandatory redemption of
the relevant shares.
(b) Upon the dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, until payment in full is made to
the holders of ATP of the liquidation distribution to which they are entitled,
no dividend or other distribution shall be made to the holders of shares of
Common Stock or any other class of stock of the Corporation ranking junior to
the ATP upon dissolution, liquidation or winding up and no purchase, redemption
or other acquisition for any consideration by the Corporation shall be made in
respect of the shares of Common Stock or any other class of stock of the
Corporation ranking junior to the ATP upon dissolution, liquidation or winding
up.
(c) A consolidation or merger of the Corporation with or into any
other company or companies, or a sale, lease or exchange of all or substantially
all of the assets of the Corporation in consideration for the issuance of equity
securities of another company shall not be deemed to be a liquidation,
dissolution or winding up, whether voluntary or involuntary, for the purposes of
this Section 7; provided, however, that the consolidation, merger, sale, lease
or exchange does not materially adversely affect any designation, right,
preference or limitation of the ATP or any shares issuable in exchange for
shares of the ATP in any such consolidation or merger.
(d) After the payment to the Holders of ATP of the full preferential
amounts provided for in this Section 7, the holders of ATP as such shall have no
right or claim to any of the remaining assets of the Corporation.
(e) In the event the assets of the Corporation or proceeds thereof
available for distribution to the Holders of ATP, upon any dissolution,
liquidation or winding up of the affairs of the Corporation, whether voluntary
or involuntary, shall be insufficient to pay in full all amounts to which such
holders are entitled pursuant to paragraph (a) of this Section 7, no such
distribution shall be made on account of any shares of any other class or series
of Preferred Stock ranking on a parity with the ATP with respect to the
distribution of assets upon such dissolution, liquidation or winding up unless
proportionate distributive amounts shall be paid on account of the shares of
ATP, ratably, in proportion to the full distributable amounts to which holders
of all such parity shares are respectively entitled upon such dissolution,
liquidation or winding up.
(f) Subject to the rights of the holders of shares of any series or
class or classes of stock ranking on a parity with the ATP with respect to the
distribution of assets upon dissolution, liquidation or winding up of the
affairs of the Corporation, after payment
19
shall have been made in full to the holders of the shares of ATP as provided in
paragraph (a) of this Section 7, but not prior thereto, any other series or
class or classes of stock ranking junior to the ATP with respect to the
distribution of assets upon dissolution, liquidation or winding up of the
affairs of the Corporation shall, subject to any respective terms and provisions
(if any) applying thereto, be entitled to receive any and all assets remaining
to be paid or distributed, and the holders of the shares of ATP shall not be
entitled to share therein.
8. Auction Agent. For so long as any shares of ATP are Outstanding, the
Auction Agent, duly appointed by the Corporation to so act, shall be in each
case a commercial bank, trust company or other financial institution independent
of the Corporation and its Affiliates (which, however, may engage or have
engaged in business transactions with the Corporation or its Affiliates) and at
no time shall the Corporation or any of its Affiliates act as the Auction Agent
in connection with the Auction Procedures. If the Auction Agent resigns or for
any reason its appointment is terminated during any period that any shares of
ATP are Outstanding, the Corporation shall use its best efforts promptly
thereafter to appoint another qualified commercial bank, trust company or
financial institution to act as the Auction Agent.
9. 1940 Act ATP Asset Coverage. The Corporation shall maintain, as of each
Valuation Date on which any share of ATP is Outstanding, asset coverage with
respect to the ATP which is equal to or greater than the 1940 Act ATP Asset
Coverage; provided, however, that Section 3(a)(ii) shall be the sole remedy in
the event the Corporation fails to do so.
10. ATP Basic Maintenance Amount. So long as shares of ATP are Outstanding
and Moody's, Fitch or any Other Rating Agency which so requires is then rating
the shares of ATP, the Corporation shall maintain, as of each Valuation Date,
Moody's Eligible Assets (if ▇▇▇▇▇'▇ is then rating the ATP), Fitch Eligible
Assets (if Fitch is then rating the ATP) and (if applicable) Other Rating Agency
Eligible Assets having an aggregate Discounted Value equal to or greater than
the ATP Basic Maintenance Amount; provided, however, that Section 3(a)(ii) shall
be the sole remedy in the event the Corporation fails to do so.
11. [Reserved]
12. Certain Other Restrictions. For so long as any shares of ATP are
Outstanding and Moody's, Fitch or any Other Rating Agency which so requires is
then rating such shares, the Corporation will not, unless it has received
written confirmation from Moody's (if ▇▇▇▇▇'▇ is then rating the ATP), Fitch (if
Fitch is then rating the ATP) and (if applicable) such Other Rating Agency that
any such action would not impair the rating then assigned by such rating agency
to the ATP, engage in any one or more of the following transactions:
(a) purchase or sell futures contracts or options thereon with respect
to portfolio securities or write unsecured put or uncovered call options on
portfolio securities, engage in options transactions involving cross-hedging, or
enter into any swap transaction;
20
(b) borrow money, except that the Corporation may, without obtaining
the written confirmation described above, borrow money for the purpose of
clearing securities transactions; provided that the ATP Basic Maintenance Amount
would continue to be satisfied after giving effect to such borrowing and if the
borrowing matures in not more than 60 days and is non-redeemable;
(c) issue any class or series of stock ranking prior to or on a parity
with the ATP with respect to the payment of dividends or the distribution of
assets upon dissolution, liquidation or winding up of the Corporation, or
reissue any shares of ATP previously purchased or redeemed by the Corporation;
(d) engage in any short sales of securities;
(e) lend portfolio securities; or
(f) merge or consolidate into or with any other corporation.
For purposes of valuation of Moody's Eligible Assets and Fitch Eligible
Assets: (A) if the Corporation writes a call option, the underlying asset will
be valued as follows: (1) if the option is exchange-traded and may be offset,
readily or if the option expires before the earliest possible redemption of the
ATP, at the lower of the Discounted Value of the underlying security of the
option and the exercise price of the option or (2) otherwise, it has no value;
(B) if the Corporation writes a put option, the underlying asset will be valued
as follows: the lesser of (1) exercise price and (2) the Discounted Value of the
underlying security; and (C) call or put option contracts which the Corporation
buys have no value. For so long as ATP are rated by Moody's or Fitch: (A) the
Corporation will not engage in options transactions for leveraging or
speculative purposes; (B) the Corporation will not write or sell any
anticipatory contracts pursuant to which the Corporation ▇▇▇▇▇▇ the anticipated
purchase of an asset prior to completion of such purchase; (C) the Corporation
will not enter into an option transaction with respect to portfolio securities
unless, after giving effect thereto, the Corporation would continue to have
Eligible Assets with an aggregate Discounted Value equal to or greater than the
ATP Basic Maintenance Amount; (D) the Corporation will not enter into an option
transaction with respect to portfolio securities unless after giving effect to
such transaction the Corporation would continue to be in compliance with the
provisions relating to the ATP Basic Maintenance Amount; (E) for purposes of the
ATP Basic Maintenance Amount assets in margin accounts are not Eligible Assets;
(F) the Corporation shall write only exchange-traded options on exchanges
approved by Moody's (if ▇▇▇▇▇'▇ is then rating the ATP) and Fitch (if Fitch is
then rating the ATP); (G) where delivery may be made to the Corporation with any
of a class of securities, the Corporation shall assume for purposes of the ATP
Basic Maintenance Amount that it takes delivery of that security which yields it
the least
21
value; (H) the Corporation will not engage in forward contracts; and (I) there
shall be a quarterly audit made of the Corporation's options
22
transactions by the Corporation's independent accountants to confirm that the
Corporation is in compliance with these standards.
13. Compliance Procedures for Asset Maintenance Tests. For so long as any
shares of ATP are Outstanding and ▇▇▇▇▇'▇, Fitch or any Other Rating Agency
which so requires is then rating such shares:
(a) As of each Valuation Date, the Corporation shall determine in
accordance with the procedures specified herein (i) the Market Value of each
Eligible Asset owned by the Corporation on that date, (ii) the Discounted Value
of each such Eligible Asset using the Discount Factors, (iii) whether the ATP
Basic Maintenance Amount is met as of that date, (iv) the value of the total
assets of the Corporation, less all liabilities, and (v) whether the 1940 Act
ATP Asset Coverage is met as of that date.
(b) Upon any failure to maintain the required ATP Basic Maintenance
Amount or 1940 Act ATP Asset Coverage on any Valuation Date, the Corporation may
use reasonable commercial efforts (including, without limitation, altering the
composition of its portfolio, purchasing shares of ATP outside of an Auction or
in the event of a failure to file a certificate on a timely basis, submitting
the requisite certificate), subject to the fiduciary obligations of the Board of
Directors, to reattain (or certify in the case of a failure to file on a timely
basis, as the case may be) the required ATP Basic Maintenance Amount or 1940 Act
ATP Asset Coverage on or prior to the ATP Basic Maintenance Cure Date or 1940
Act ATP Cure Date, as the case may be.
(c) Compliance with the ATP Basic Maintenance Amount and 1940 Act
Asset Coverage Tests shall be determined with reference to those shares of ATP
which are deemed to be Outstanding hereunder.
(d) The Corporation shall deliver a certificate which sets forth a
determination of items (i) - (iii) of paragraph (a) of this Section 13 (an "ATP
Basic Maintenance Certificate") (i) to the Auction Agent, Moody's (if ▇▇▇▇▇'▇ is
then rating the ATP), Fitch (if Fitch is then rating the ATP) and any Other
Rating Agency which is then rating the ATP and which so requires as of (A) the
Business Day preceding the Date of Original Issue and (B) any Valuation Date on
which the Corporation fails to have Eligible Assets with an aggregate Discounted
Value at least equal to 125% of the ATP Basic Maintenance Amount, (ii) to the
Auction Agent, Fitch (if Fitch is then rating the ATP) and any Other Rating
Agency which is then rating the ATP and which so requires (A) as of every fourth
Valuation Date after the Date of Original Issue for the first year following the
Date of Original Issue, (B) if the Corporation fails to have Eligible Assets
with an aggregate Discounted Value at least equal to the ATP Basic Maintenance
Amount, and (C) on request by Fitch or such Other Rating Agency, as applicable,
(iii) to the Auction Agent, Moody's (if ▇▇▇▇▇'▇ is then rating the ATP), Fitch
(if Fitch is then rating the ATP) and any Other Rating Agency which is then
rating the ATP and which so requires as of (A) the Valuation Date next
23
following the date of redemption by the Corporation of shares of Common Stock
which, together with all other shares of Common Stock purchased during the six
months preceding such date, equal in excess of 1,000,000 shares of Common Stock,
and (B) the last Valuation Date of each fiscal quarter and a Valuation Date
during such fiscal quarter randomly selected by the Corporation's independent
accountants as provided in Section 10(g), and (iv) to the Auction Agent, Moody's
(if ▇▇▇▇▇'▇ is then rating the ATP), Fitch (if Fitch is then rating the ATP) and
any Other Rating Agency which is then rating the ATP and which so requires as of
a Business Day on or before any Asset Coverage Cure Date relating to the
Corporation's cure of a failure to have Eligible Assets with an aggregate
Discounted Value at least equal to the ATP Basic Maintenance Amount. Such ATP
Basic Maintenance Certificate shall be delivered in the case of clause (i)(A) on
the Date of Original Issue and in the case of clauses (i)(B), (ii), (iii) and
(iv) above on or before the third Business Day after the relevant Valuation Date
or Asset Coverage Cure Date.
(e) The Corporation shall deliver to the Auction Agent, Moody's (if
▇▇▇▇▇'▇ is then rating the ATP), Fitch (if Fitch is then rating the ATP), and
any Other Rating Agency which is then rating the ATP and which so requires a
certificate with respect to the calculation of the 1940 Act ATP Asset Coverage
and the value of the portfolio holdings of the Corporation (a "1940 Act ATP
Asset Coverage Certificate") (i) as of the Business Day preceding the Date of
Original Issue, and (ii) as of (A) the last Valuation Date of each quarter
thereafter, and (B) as of the Business Day on or before the Asset Coverage Cure
Date relating to the failure to satisfy the 1940 Act Asset Coverage. Such 1940
Act ATP Asset Coverage Certificate shall be delivered in the case of clause
(i) on the Date of Original Issue and in the case of clause (ii) on or before
the third Business Day after the relevant Valuation Date or the Asset Coverage
Cure Date.
(f) [Reserved]
(g) On the Date of Original Issue, the Corporation shall deliver to
the Auction Agent, Moody's (if ▇▇▇▇▇'▇ is then rating the ATP), Fitch (if Fitch
is then rating the ATP) and any Other Rating Agency which is then rating the ATP
and which so requires a letter prepared by the Corporation's independent
accountants (an "Accountant's Certificate") regarding the accuracy of the
calculations made by the Corporation in the ATP Basic Maintenance Certificate
and the 1940 Act ATP Asset Coverage Certificate required to be delivered by the
Corporation as of the Date of Original Issue. Within eight Business Days after
the last Valuation Date of each fiscal quarter of the Corporation on which an
ATP Basic Maintenance Certificate is required to be delivered, the Corporation
(x) will deliver to the Auction Agent, Moody's (if ▇▇▇▇▇'▇ is then rating the
ATP), Fitch (if Fitch is then rating the ATP) and any Other Rating Agency which
is then rating the ATP and which so requires an Accountant's Certificate
regarding the accuracy of the calculations made by the Corporation in such ATP
Basic Maintenance Certificate and in any other ATP Basic Maintenance Certificate
randomly selected by the Corporation's independent accountants during such
fiscal quarter. Within eight Business Days after the last Valuation Date of each
fiscal quarter of the
24
Corporation on which a 1940 Act ATP Asset Coverage Certificate is required to be
delivered, the Corporation will deliver to the Auction Agent, Moody's (if
▇▇▇▇▇'▇ is then rating the ATP), Fitch (if Fitch is then rating the ATP) and any
Other Rating Agency which is then rating the ATP and which so requires an
Accountant's Certificate regarding the accuracy of the calculations made by the
Corporation in such 1940 Act ATP Asset Coverage Certificate. In addition, the
Corporation will deliver to the relevant persons specified in the preceding
sentence an Accountant's Certificate regarding the accuracy of the calculations
made by the Corporation on each ATP Basic Maintenance Certificate and 1940 Act
ATP Asset Coverage Certificate delivered pursuant to clause (iv) of paragraph
(d) or clause (ii)(B) of paragraph (e) of this Section 13, as the case may be,
within five days after the relevant Asset Coverage Cure Date. If an Accountant's
Certificate delivered with respect to an Asset Coverage Cure Date shows an error
was made in the Corporation's report with respect to such Asset Coverage Cure
Date, the calculation or determination made by the Corporation's independent
accountants will be conclusive and binding on the Corporation with respect to
such reports. If any other Accountant's Certificate shows that an error was made
in any such report, the calculation or determination made by the Corporation's
independent accountants will be conclusive and binding on the Corporation;
provided, however, any errors shown in the Accountant's Certificate filed on a
quarterly basis shall not be deemed to be a failure to maintain the ATP Basic
Maintenance Amount on any prior Valuation Dates.
(h) The Accountant's Certificates referred to in paragraph (g) will
confirm, based upon the independent accountant's review, (i) the mathematical
accuracy of the calculations reflected in the related ATP Basic Maintenance
Amount and 1940 Act ATP Asset Coverage Certificates, as the case may be, and
(ii) that the Corporation determined whether the Corporation had, at such
Valuation Date, Eligible Assets with an aggregate Discounted Value at least
equal to the Basic Maintenance Amount in accordance with the Articles
Supplementary.
(i) In the event that an ATP Basic Maintenance Certificate or 1940 Act
ATP Asset Coverage Certificate with respect to an applicable Valuation Date is
not delivered within the time periods specified in this Section 13, the
Corporation shall be deemed to have failed to maintain the ATP Basic Maintenance
Amount or the 1940 Act ATP Asset Coverage, as the case may be, on such Valuation
Date for purposes of Section 13(b). In the event that an ATP Basic Maintenance
Certificate or 1940 Act ATP Asset Coverage Certificate or the applicable
Accountant's Certificates with respect to an applicable Asset Coverage Cure Date
are not delivered within the time periods specified herein, the Corporation
shall be deemed to have failed to have Eligible Assets with an aggregate
Discounted Value at least equal to the ATP Basic Maintenance Amount or the 1940
ATP Asset Coverage, as the case may be, as of the related Valuation Date, and
such failure shall be deemed not to have been cured as of such Asset Coverage
Cure Date for purposes of the mandatory redemption provisions.
14. [Reserved]
25
15. Notice. All notices or communications hereunder, unless otherwise
specified in these Articles Supplementary, shall be sufficiently given if in
writing and delivered in person, by telecopier or mailed by first-class mail,
postage prepaid. Notices delivered pursuant to this Section 15 shall be deemed
given on the earlier of the date received or the date five days after which such
notice is mailed.
16. Waiver. Holders of at least two-thirds of the shares of ATP then
Outstanding may waive any provision hereof intended for the benefit of the
Holders of the ATP in accordance with such procedures as may from time to time
be established by the Board of Directors.
17. Termination. In the event that no shares of either series of ATP are
Outstanding, all rights and preferences of such shares established and
designated hereunder shall cease and terminate, and all obligations of the
Corporation under these Articles Supplementary shall terminate.
18. Definitions. As used in Part I and Part II of these Articles
Supplementary, the following terms shall have the following meanings (with terms
defined in the singular having comparable meanings when used in the plural and
vice versa), unless the context otherwise requires:
(a) " "aaa"/AAA Credit Rating" means a credit rating in the highest
category of any two nationally recognized statistical rating organizations (as
used in the Securities Exchange Act of 1934), one of which shall be Moody's or
S&P.
(b) "AA Composite Commercial Paper Rate" on any date means (i) the
interest equivalent of the 30-day rate, in the case of a Dividend Period which
is a Standard Term Period or shorter, or the 180-day rate, in the case of all
other Dividend Periods, on commercial paper on behalf of issuers whose corporate
bonds are rated AA by S&P, or Aa2 by Moody's, or the equivalent of such rating
by another nationally recognized rating agency, as announced by the Federal
Reserve Bank of New York for the close of business on the Business Day
immediately preceding such date; or (ii) if the Federal Reserve Bank of New York
does not make available such a rate, then the arithmetic average of the interest
equivalent of such rates on commercial paper placed on behalf of such issuers,
as quoted on a discount basis or otherwise by the Commercial Paper Dealers to
the Auction Agent for the close of business on the Business Day immediately
preceding such date (rounded to the next highest .001 of 1%). If any Commercial
Paper Dealer does not quote a rate required to determine the AA Composite
Commercial Paper Rate, such rate shall be determined on the basis of the
quotations (or quotation) furnished by the remaining Commercial Paper Dealers
(or Dealer), if any, or, if there are no such Commercial Paper Dealers, by the
Auction Agent. For purposes of this definition, (A) "Commercial Paper Dealers"
shall mean (1) ▇.▇. ▇▇▇▇▇▇ Securities, Inc., ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ &
▇▇▇▇▇ Incorporated and ▇▇▇▇▇ ▇▇▇▇▇▇ Shearson Inc.; (2) in lieu of any thereof,
its respective affiliate or successor, and (3) in the event that any of
26
the foregoing shall cease to quote rates for commercial paper of issuers of the
sort described above, in substitution therefor, a nationally recognized dealer
in commercial paper of such issuers then making such quotations selected by the
Corporation, and (B) "interest equivalent" of a rate stated on a discount basis
for commercial paper of a given number of days' maturity shall mean a number
equal to the quotient (rounded upward to the next higher one-thousandth of 1%)
of (1) such rate expressed as a decimal, divided by (2) the difference between
(x) 1.00 and (y) a fraction, the numerator of which shall be the product of such
rate expressed as a decimal, multiplied by the number of days in which such
commercial paper shall mature and the denominator of which shall be 360.
(c) "Accountant's Certificate" has the meaning set forth in Section
13(g).
(d) "Affiliate" means any person known to the Auction Agent to be
controlled by, in control of or under common control with the Corporation;
provided that no Broker-Dealer controlled by, in control of or under common
control with the Corporation shall be deemed to be an Affiliate nor shall any
corporation or any person controlled by, in control of or under common control
with such corporation one of the directors or executive officers of which is
also a director of the Corporation be deemed to be an Affiliate solely because
such director or executive officer is also a director of the Corporation.
(e) "Alternate Term Period" means a Dividend Period that is not a
Standard Term Period.
(f) "Applicable Rate" means, with respect to each series of ATP, for
each Dividend Period (i) if Sufficient Clearing Orders exist for the Auction in
respect thereof, the Winning Rate, (ii) if Sufficient Clearing Orders do not
exist for the Auction in respect thereof, the Maximum Applicable Rate and (iii)
in the case of any Dividend Period of 93 days or fewer if all the shares of ATP
are the subject of Submitted Hold Orders for the Auction in respect thereof, the
Minimum Applicable Rate.
(g) "Articles" means the Articles of Amendment and Restatement, as
amended including any Articles Supplementary, of the Corporation.
(h) "Asset Coverage Cure Date" has the meaning set forth in Section
3(a)(ii).
(i) "ATP" means the Auction Term Preferred Stock, S1.00 par value per
share and liquidation preference $50,000 per share, Series A and Series B of the
Corporation or any other series of Preferred Stock hereinafter designated "ATP"
by Articles Supplementary or Articles of Amendment.
(j) "ATP Basic Maintenance Amount" as of any Valuation Date means the
dollar amount equal to the sum of
27
(i) (A) the product of the number of Outstanding shares of ATP on
such date multiplied by $50,000; (B) the aggregate amount of dividends that
will have accumulated at the Applicable Rate (whether or not earned or
declared) to and including the first following Dividend Payment Date for
each share of ATP Outstanding that follows such Valuation Date (or to the
42nd day after such Valuation Date, if such 42nd day occurs before the
first following Dividend Payment Date); (C) the aggregate amount of
dividends that would accumulate at the then current Maximum Applicable Rate
for a Standard Term Period multiplied by the Volatility Factor on any
shares of ATP Outstanding from the first day following the Dividend Payment
Date referred to in (B) above through the 42nd day after such Valuation
Date, only if such 42nd day occurs after the first day following the
Dividend Payment Date, except that if such Valuation Date occurs during a
Default Period, the dividend for purposes of the calculation would
accumulate at the Default Rate; (D) the amount of anticipated Corporation
expenses for the 90 days subsequent to such Valuation Date; (E) any current
liabilities, including, without limitation, indebtedness due within one
year and any redemption premium due with respect to shares of ATP for which
a Notice of Redemption has been given, as of such Valuation Date to the
extent not reflected in any of (i)(A) through (i)(D); and (F) without
duplication, 10% of the exercise price of any call option written by the
Corporation and the exercise price of any put option written by the
Corporation; less
(ii) the sum of any cash or the value of any Corporation assets
irrevocably deposited by the Corporation for the payment of any of (i)(B)
through (i)(F) ("value" for purposes of this clause (ii) shall mean the
Discounted Value of the security, except that if the security matures prior
to the relevant redemption payment date and is either fully guaranteed by
the U.S. Government or is rated P1 by Moody's and A1 + by S&P, it will be
valued at its face value).
(k) "ATP Basic Maintenance Certificate" has the meaning set forth in
Section 13(d).
(1) "ATP Series A" means the shares of Series A of the ATP or any
other series of Preferred Stock hereinafter designated as shares of Series A of
the ATP by Articles Supplementary or Articles of Amendment.
(m) "ATP Series B" means the shares of Series B of the ATP or any
other series of Preferred Stock hereinafter designated as shares of Series B of
the ATP by Articles Supplementary or Articles of Amendment.
(n) "Auction" means each periodic operation of the procedures set
forth under "Auction Procedures."
28
(o) "Auction Agent" means Bankers Trust Company unless and until
another commercial bank, trust company, or other financial institution appointed
by a resolution of the Board of Directors enters into an agreement with the
Corporation to follow the Auction Procedures for the purpose of determining the
Applicable Rate.
(p) "Auction Date" means the first Business Day next preceding the
first day of a Dividend Period for the relevant series of ATP.
(q) "Auction Procedures" means the procedures for conducting Auctions
set forth in Part II hereof.
(r) "Board of Directors" means the Board of Directors of the
Corporation or any duly authorized committee thereof as permitted by applicable
law.
(s) "Broker-Dealer" or "Broker-Dealers" means any broker-dealer or
broker-dealers, or other entity permitted by law to perform the functions
required of a Broker-Dealer by the Auction Procedures, that has been selected by
the Corporation and has entered into a Broker-Dealer Agreement with the Auction
Agent that remains effective.
(t) "Broker-Dealer Agreement" means an agreement entered into by the
Auction Agent and a Broker-Dealer, pursuant to which such Broker-Dealer agrees
to follow the Auction Procedures.
(u) "Business Day" means a day on which the New York Stock Exchange is
open for trading and which is not a Saturday, Sunday or other day on which banks
in the city of New York, New York are authorized or obligated by law to close.
(v) "Code" means the Internal Revenue Code of 1986, as amended.
(w) "Commercial Paper Dealers" has the meaning set forth in the
definition of AA Composite Commercial Paper Rate.
(x) "Commission" means the Securities and Exchange Commission.
(y) "Common Stock" means the common stock, par value $.01 per share,
of the Corporation.
(z) "Corporate Bonds" means corporate debt securities having the
characteristics set forth in paragraph (iv) of the definition of Fitch Eligible
Assets.
(aa) "Date of Original Issue" means with respect to each of the ATP
Series A and the ATP Series B the date on which such ATP are originally issued
by the Corporation.
29
(bb) "Default Period" has the meaning set forth in Section 2(c)(ii).
(cc) "Default Rate" means the Reference Rate multiplied by three (3).
(dd) "Depository" means Bankers Trust Company or a successor
organization which has agreed to perform the duties of the depository as
described herein.
(ee) "Deposit Securities" means cash and any obligations or
securities, including Short Term Money Market Instruments that are Eligible
Assets, rated at least AAA, A-1 + or SP-l + by S&P, except that, for purposes of
section 3(a)(i) of this Part I, such obligations or securities shall be
considered "Deposit Securities" only if they are also rated at least P-1 by
▇▇▇▇▇ 's.
(ff) "Discount Factor" means the Moody's Discount Factor (if ▇▇▇▇▇'▇
is then rating the ATP), the Fitch Discount Factor (if Fitch is then rating the
ATP) or the discount factor established by any Other Rating Agency which is then
rating the ATP and which so requires, whichever is applicable.
(gg) "Discounted Value" means the quotient of the Market Value of an
Eligible Asset divided by the applicable Discount Factor provided that with
respect to an Eligible Asset that is currently callable, Discounted Value shall
be equal to the quotient as calculated above or the call price, whichever is
lower, and that with respect to an Eligible Asset that is prepayable, Discounted
Value shall be equal to the quotient as calculated above or the par value,
whichever is lower.
(hh) "Dividend Default" has the meaning set forth in Section
2(c)(iii).
(ii) "Dividend Payment Date" for either series of ATP, means (i) with
respect to any Dividend Period of one year or less, the Business Day next
succeeding the last day thereof and, if any, the 91st, 181st and 271st days
thereof, and (ii) with respect to any Dividend Period of more than one year, on
a quarterly basis on each January 1, April 1, July 1 and October 1 and on the
Business Day following the last day of such Dividend Period.
(jj) "Dividend Period" means, with respect to the relevant series of
ATP, the period commencing on the Date of Original Issue thereof and ending on
the date specified for such series on the Date of Original Issue thereof and
thereafter, as to such series, the period commencing on the day following each
Dividend Period for such series and ending on the day established for such
series by the Corporation.
(kk) "Eligible Assets" means Moody's Eligible Assets (if ▇▇▇▇▇'▇ is
then rating the ATP), Fitch Eligible Assets (if Fitch is then rating the ATP)
and/or Other Rating Agency Eligible Assets if any Other Rating Agency is then
rating the ATP, whichever is applicable.
30
(11) "Exposure Period" means the period commencing on (and including)
a given Valuation Date and ending 41 days thereafter.
(mm) "Fitch" means Fitch Investors Service, Inc. and its successors at
law.
(nn) "Fitch Discount Factor" means, for purposes of determining the
Discounted Value of any Fitch Eligible Asset, the percentage determined as
follows. The Fitch Discount Factor for any Fitch Eligible Asset other than the
securities set forth below will be the percentage provided in writing by Fitch.
(i) Corporate Bonds: The percentage determined by reference to
the type of corporate bond in accordance with the table set forth below.
Type I Corporate Bonds with remaining maturities of:
less than or equal to 2 years 1.16
greater than 2 years, but less than or equal to 4 years 1.26
greater than 4 years, but less than or equal to 7 years 1.40
greater than 7 years, but less than or equal to 12 years 1.44
greater than 12 years, but less than or equal to 25 years 1.48
greater than 25 years, but less than or equal to 30 years 1.52
Type II Corporate Bonds with remaining maturities of:
less than or equal to 2 years 1.25
greater than 2 years, but less than or equal to 4 years 1.26
greater than 4 years, but less than or equal to 7 years 1.43
greater than 7 years, but less than or equal to 12 years 1.44
greater than 12 years, but less than or equal to 25 years 1.51
greater than 25 years, but less than or equal to 30 years 1.56
Type III Corporate Bonds with remaining maturities of:
less than or equal to 2 years 1.25
greater than 2 years, but less than or equal to 4 years 1.29
greater than 4 years, but less than or equal to 7 years 1.46
greater than 7 years, but less than or equal to 12 years 1.50
greater than 12 years, but less than or equal to 25 years 1.55
greater than 25 years, but less than or equal to 30 years 1.60
31
Type IV Corporate Bonds with remaining maturities of:
less than or equal to 2 years 1.22
greater than 2 years, but less than or equal to 4 years 1.32
greater than 4 years, but less than or equal to 7 years 1.52
greater than 7 years, but less than or equal to 12 years 1.57
greater than 12 years, but less than or equal to 25 years 1.63
greater than 25 years, but less than or equal to 30 years 1.69
Type V Corporate Bonds with remaining maturities of:
less than or equal to 2 years 1.32
greater than 2 years, but less than or equal to 4 years 1.36
greater than 4 years, but less than or equal to 7 years 1.59
greater than 7 years, but less than or equal to 12 years 1.65
greater than 12 years, but less than or equal to 25 years 1.72
greater than 25 years, but less than or equal to 30 years 1.80
Type VI Corporate Bonds with remaining maturities of:
less than or equal to 2 years 1.37
greater than 2 years, but less than or equal to 4 years 1.40
greater than 4 years, but less than or equal to 7 years 1.67
greater than 7 years, but less than or equal to 12 years 1.74
greater than 12 years, but less than or equal to 25 years 1.82
greater than 25 years, but less than or equal to 30 years 1.91
Type VII Corporate Bonds with remaining maturities of:
less than or equal to 2 years 1.37
greater than 2 years, but less than or equal to 4 years 1.64
greater than 4 years, but less than or equal to 7 years 2.28
greater than 7 years, but less than or equal to 12 years 2.49
greater than 12 years, but less than or equal to 25 years 2.74
greater than 25 years, but less than or equal to 30 years 3.06
(ii) Short Term Money Market Instruments: The Fitch Discount
Factor applied to short-term portfolio securities will be (A) 100%, so long
as such portfolio securities mature or have a demand feature at par
exercisable within the Exposure Period and, (B) 125%, so long as such
portfolio securities neither mature nor have a demand feature at par
exercisable within the Exposure Period. A Fitch Discount Factor of 100%
will be applied to cash.
32
(iii) U.S. Treasury Securities with remaining maturities of:
less than or equal to 1 year 1.06
greater than 1 year, but less than or equal to 2 years 1.11
greater than 2 years, but less than or equal to 5 years 1.16
greater than 5 years, but less than or equal to 15 years 1 24
greater than 25 years, but less than or equal to 30 years 1.26
(oo) "Fitch Eligible Assets" means
(i) cash (including, for this purpose, interest and dividends due
on assets rated (A) Baa3 or higher by Moody's, BBB or higher by S&P or BBB
or higher by Fitch if the payment date is within five Business Days of the
Valuation Date. (B) A2 or higher by Moody's and either A or higher by S&P
or A or higher by Fitch if the payment date is within thirty days of the
Valuation Date, and (C) A1 or higher by Moody's and either A+ or higher by
S&P or A+ or higher by Fitch if the payment date is within the Exposure
Period) and receivables for Fitch Eligible Assets sold if the receivable is
due within five Business Days of the Valuation Date, and if the trades
which generated such receivables are (A) settled through clearing house
firms with respect to which the Corporation has received prior written
authorization from Fitch or (B) (1) with counterparties having a Fitch
long-term debt rating of at least BBB- by Fitch, if rated by Fitch or, if
not rated by Fitch, then rated at least BBB- by S&P and rated at least Baa3
by Moody's or (2) with counterparties having a Fitch Short-Term Money
Market Instrument rating of at least F-1+ by Fitch, if rated by Fitch or,
if not rated by Fitch, then rated at least A-1 by S&P and rated at least
P-1 by Moody's;
(ii) Short-Term Money Market Instruments so long as (A) such
securities are rated at least P-1 by Moody's and either at least A-1+ by
S&P or F1+ by Fitch, (B) in the case of demand deposits, time deposits and
overnight funds, the supporting entity is rated at least A2 by Moody's and
either at least A by S&P or A by Fitch, or (C) in all other cases, the
supporting entity (1) is rated at least A2 by Moody's and at least A by S&P
and the security matures within one month, (2) is rated at least A1 by
Moody's and either at least A+ by S&P or at least A by Fitch and the
security matures within three months or (3) is rated at least Aa3 by
Moody's and either at least AA by S&P or at least AA by Fitch and the
security matures within six months;
(iii) U.S. Treasury Securities;
(iv) debt securities constituting Corporate Bonds if (A) such
securities are rated either CCC or higher by Fitch or Caa or higher by
Moody's and CCC or higher by S&P; (B) such securities provide for the
periodic payment of interest in cash in U.S. dollars; (C) such securities
do not provide for conversion or exchange into equity capital at any time
over their lives; (D) such securities have been registered
33
under the Securities Act of 1933, as amended; and (E) such securities are
issued by a U.S. corporation. In addition, bonds which are issued in
connection with a reorganization under U.S. federal bankruptcy law will be
considered Corporate Bonds constituting Fitch Eligible Assets, so long as
such bonds are rated by Fitch.
(v) In addition, portfolio holdings as described below must be
within the following diversification and issue size requirements in order
to be included in Fitch Eligible Assets:
Maximum Maximum Minimum
Single Single Issue Size
Issuer Industry ($ in
Type of Corporate Bond (%)(1,2) (%)(2,3) millions)
---------------------- -------- -------- ----------
Type I ..................... 100% 100% $100
Type II .................... 20 75 100
Type III (4) ............... 10 50 100
Type IV .................... 6 25 100
Type V ..................... 4 16 50(5)
Type VI .................... 3 12 50(5)
Type VII ................... 2 8 50(5)
See accompanying notes
----------
(1) Companies subject to common ownership of 25% or more are considered as one
name.
(2) Percentages represent a portion of the aggregate Market Value of corporate
securities.
(3) Industries are determined according to Fitch Industry Classifications.
(4) Includes Short Term Money Market Instruments which do not constitute Type I
or Type II Corporate Bonds and which have a maturity greater than the
Exposure Period.
(5) Collateral bonds from issues ranging from $50 million to $100 million are
limited to 20% of the collateral pool.
Where the Corporation sells an asset and agrees to repurchase such asset in
the future, the Discounted Value of such asset will constitute a Fitch Eligible
Asset and the amount the Corporation is required to pay upon repurchase of such
asset will count as a liability for the purposes of the ATP Basic Maintenance
Amount. Where the Corporation purchases an asset and agrees to sell it to a
third party in the future, cash receivable by the Corporation thereby will
constitute a Fitch Eligible Asset if the long-term debt of such other party is
rated at least
34
A2 by Moody's and at least A by S&P and such agreement has a term of 30 days or
less; otherwise the Discounted Value of such asset will constitute a Fitch
Eligible Asset.
Notwithstanding the foregoing, an asset will not be considered a Fitch
Eligible Asset to the extent that it has been irrevocably deposited for the
payment of (i)(A) through (i)(F) under the definition of ATP Basic Maintenance
Amount or it is subject to any material lien, mortgage, pledge, security
interest or security agreement of any kind (collectively, "Liens"), except for
(A) Liens which are being contested in good faith by appropriate proceedings and
which Fitch has indicated to the Corporation will not affect the status of such
asset as a Fitch Eligible Asset, (B) Liens for taxes that are not then due and
payable or that can be paid thereafter without penalty, (C) Liens to secure
payment for services rendered or cash advanced to the Corporation by its
investment adviser, the Corporation's custodian, transfer agent or registrar or
the Auction Agent and (D) Liens by virtue of any repurchase agreement. See also
Section 12 for certain information with respect to Fitch Eligible Assets.
(pp) "Fitch Industry Classifications" means, for the purposes of
determining Fitch Eligible Assets, each of the following industry
classifications:
Aerospace & Defense
Automobiles
Banking, Finance & Insurance
Building & Materials
Chemicals
Computers & Electronics
Consumer Products
Energy
Environmental Services
Farming & Agriculture
Food, Beverage & Tobacco
Healthcare & Pharmaceuticals
Industrial Machinery
Media, Leisure & Entertainment
Metals & Mining
Miscellaneous
Paper & Forest Products
Retail
Sovereigns
Textiles & Furniture
Transportation
Utilities
The Corporation shall use its discretion in determining which industry
classification is applicable to a particular investment.
35
(qq) "Holder" means, with respect to any series of ATP, the registered
holder of shares of such series of ATP as the same appears on the stock ledger
or stock records of the Corporation.
(rr) "Mandatory Redemption Date" has the meaning set forth in Section
3(a)(iv).
(ss) "Market Value" shall mean the fair market value of an asset of
the Corporation (excluding interest and dividends due on such assets) as
computed based upon (i) pricing services to be provided pursuant to a pricing
services agreement entered into between the Corporation and ▇▇▇▇▇▇▇ ▇▇▇▇▇
Capital Markets Securities Pricing Service, ▇▇▇▇▇ S&P Evaluation Services or
such other pricing service determined from time to time by the Board of
Directors, provided that Moody's (if ▇▇▇▇▇'▇ is then rating the ATP), Fitch (if
Fitch is then rating the ATP) and any Other Rating Agency which is then rating
the ATP and so requires have informed the Corporation in writing that use of
such pricing service will not adversely affect such rating agency's then current
rating of the shares of ATP or (ii) the lower of the value set forth in bids
from two independent dealers that are members or affiliates of members of the
National Association of Securities Dealers, Inc. and that make markets in such
security, one of which bids shall be in writing.
(tt) "Maximum Applicable Rate" means, on any date on which the
Applicable Rate is determined, the rate equal to 150% of the applicable
Reference Rate, subject to upward but not downward adjustment in the discretion
of the Board of Directors after consultation with the Broker-Dealers, provided
that immediately following any such increase the Corporation would be in
compliance with the ATP Basic Maintenance Amount.
(uu) "Minimum Applicable Rate" means, on any Auction Date with respect
to a Dividend Period of 93 days or fewer, 99% of the AA Composite Commercial
Paper Rate at the close of business on the Business Day next preceding such
Auction Date. There shall be no Minimum Applicable Rate on any Auction Date with
respect to a Dividend Period of more than 93 days.
(vv) "Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc. and its
successors at law.
(ww) "Moody's Discount Factor" means, for purposes of determining the
Discounted Value of any Moody's Eligible Asset, the percentage determined as
follows. The Moody's Discount Factor for any Moody's Eligible Asset other than
the securities set forth below will be the percentage provided in writing by
Moody's.
(i) Corporate Debt Securities: The percentage determined by
reference to the rating on such asset (which percentage is based upon the
Exposure
36
Period) with reference to the remaining term to maturity of such assets, in
accordance with the table set forth below.
Moody's Discount Factors --
Corporate Debt Securities
Rating Category
Maturity ------------------------------------------------------------------------------------
of Collateral Aaa Aa A Baa Ba B* Caa
------------- --- -- - --- -- -- ---
1 Year ........ 112% 118% 123% 128% 139% 150% 260%
2 Years ....... 118 124 130 135 147 158 260
3 Years ....... 123 129 135 141 153 165 260
4 Years ....... 129 135 141 148 160 172 260
5 Years ....... 134 141 147 154 166 179 260
7 Years ....... 142 149 155 162 176 189 260
10 Years ....... 148 156 163 170 184 198 260
15 Years ....... 153 161 168 175 190 205 260
20 Years ....... 161 169 177 184 200 215 260
30 Years ....... 162 170 178 185 201 216 260
----------
* Senior debt securities of an issuer rated B3 shall be deemed to be Caa rated
securities for purposes of determining the applicable Moody's Discount Factor.
(ii) Preferred Stock: For (A) utility preferred stocks, 152%, (B)
industrial/financial preferred stocks, 197%, and (C) auction rate preferred
stocks, 350%.
(iii) Short Term Money Market Instruments: The Moody's Discount
Factor applied to short-term portfolio securities will be (A) 100%, so long
as such portfolio securities mature or have a demand feature at par
exercisable within the Exposure Period, (B) 115%, so long as such portfolio
securities mature or have a demand feature at par not exercisable within
the Exposure Period, and (C) 125%, if such securities are not rated by
Moody's, so long as such portfolio securities are rated at least A-1+/AA
or SP-1+/AA by S&P and mature or have a demand feature at par exercisable
within the Exposure Period. A Moody's Discount Factor of 100% will be
applied to cash.
37
(iv) U.S. Treasury Securities and Treasury Strips:
U.S. Treasury Securities:
Discount
Remaining Term to Maturity Factor
-------------------------- --------
1 year or less ........................................ 107%
2 years or less (but longer than 1 year) .............. 113
3 years or less (but longer than 2 years) ............. 118
4 years or less (but longer than 3 years) ............. 123
5 years or less (but longer than 4 years) ............. 128
7 years or less (but longer than 5 years) ............. 135
10 years or less (but longer than 7 years) ............ 141
15 years or less (but longer than 10 years) ........... 146
20 years or less (but longer than 15 years) ........... 154
30 years or less (but longer than 20 years) ........... 154
U.S. Treasury Strips:
Discount
Remaining Term to Maturity Factor
-------------------------- --------
1 year or less ........................................ 107%
2 years or less (but longer than 1 year) .............. 114
3 years or less (but longer than 2 years) ............. 120
4 years or less (but longer than 3 years) ............. 127
5 years or less (but longer than 4 years) ............. 133
7 years or less (but longer than 5 years) ............. 145
10 years or less (but longer than 7 years) ............ 159
15 years or less (but longer than 10 years) ........... 184
20 years or less (but longer than 15 years) ........... 211
30 years or less (but longer than 20 years) ........... 236
(xx) "Moody's Eligible Assets" means
(i) cash (including, for this purpose, interest and dividends due
on assets rated (A) Baa3 or higher by Moody's if the payment date is within
five Business Days of the Valuation Date, (B) A2 or higher if the payment
date is within thirty days of the Valuation Date, and (C) A1 or higher if
the payment date is within the Moody's Exposure Period) and receivables for
Moody's Eligible Assets sold if the receivable is due within five Business
Days of the Valuation Date, and if the trades which generated such
receivables are (A) settled through clearing house firms with respect to
which the Corporation has received prior written authorization from Moody's
or (B) (1) with counterparties having a Moody's long-term debt rating of at
least Baa3 or (2) with
38
counterparties having a Moody's Short-Term Money Market Instrument rating
of at least P-1;
(ii) Short-Term Money Market Instruments so long as (A) such
securities are rated at least P-1, (B) in the case of demand deposits, time
deposits and overnight funds, the supporting entity is rated at least A2,
or (C) in all other cases, the supporting entity (1) is rated A2 and the
security matures within one month, (2) is rated A1 and the security matures
within three months or (3) is rated at least Aa3 and the security matures
within six months; provided, however, that for purposes of this definition,
such instruments (other than commercial paper rated by S&P and not rated by
Moody's) need not meet any otherwise applicable S&P rating criteria;
(iii) U.S. Treasury Securities and Treasury Strips;
(iv) Corporate debt securities will be included in Moody's
Eligible Assets if (A) such securities are rated Caa or higher by Moody's;
(B) the senior unsecured rating of the issuer's corporate bonds is higher
than B3; (C) such securities provide for the periodic payment of interest
in cash in U.S. dollars; (D) such securities do not provide for conversion
or exchange into equity capital at any time over their lives; (E) for debt
securities rated Ba1 and below, no more than 10% of the original amount of
such issue may constitute Moody's Eligible Assets; and (F) such securities
have been registered under the Securities Act of 1933, as amended. In
addition, debt securities which are issued in connection with a
reorganization under federal bankruptcy law will not be considered Moody's
Eligible Assets.
(v) Portfolio securities that are preferred stocks will be
included in Moody's Eligible Assets if (A) dividends on such preferred
stock are cumulative, (B) such securities provide for the periodic payment
of dividends thereon in cash in U.S. dollars and do not provide for
conversion or exchange into, or have warrants attached entitling the holder
to receive, equity capital at any time over the respective lives of such
securities, (C) the issuer of such a preferred stock has common stock
listed on either the New York Stock Exchange or the American Stock
Exchange, (D) the issuer of such a preferred stock has a senior debt rating
from Moody's of Baa1 or higher or a preferred stock rating from Moody's of
"baa3" or higher and (E) such preferred stock has paid consistent cash
dividends in U.S. dollars over the last three years or has a minimum rating
of "a1" (if the issuer of such preferred stock has other preferred issues
Outstanding that have been paying dividends consistently for the last three
years, then a preferred stock without such a dividend history would also be
eligible). In addition, the preferred stocks must have the following
diversification requirements: (X) the preferred stock issue must be greater
than $50 million and (Y) the minimum holding by the Corporation of each
issue of preferred stock is $500,000 and the maximum holding of preferred
stock of each issue is $5 million. In
39
addition, preferred stocks issued by transportation companies will not be
considered Moody's Eligible Assets.
(vi) In addition, portfolio holdings as described below must be
within the following diversification and issue size requirements in order
to be included in Moody's Eligible Assets:
Maximum Maximum Minimum
Single Single Issue Size
Issuer Industry ($ in
Collateral Ratings(l) (%)(2,3) (%)(3,4) millions)(6)
--------------------- -------- -------- ------------
"aaa", Aaa ................................ 100% 100% $ ▇▇▇
"▇▇", ▇▇ .................................. 20 60 100
"a", A, P-1 ............................... 10 40 100
"baa", Baa ................................ 6 20 100
Ba ....................................... 4 12 50(5)
Bl-B2 .................................... 3 8 50(5)
B3 (Caa subordinate) ..................... 2 5 50(5)
See accompanying notes
----------
(1) Refers to the senior debt rating of collateral.
(2) Companies subject to common ownership of 25% or more are considered as one
name.
(3) Percentages represent a portion of the aggregate Market Value of corporate
securities.
(4) Industries are determined according to Moody's Industry Classifications.
(5) Collateral bonds from issues ranging from $50 million to $100 million are
limited to 20% of the collateral pool.
(6) Except for preferred stock, which has a minimum issue size of $50 million.
Where the Corporation sells an asset and agrees to repurchase such asset in
the future, the Discounted Value of such asset will constitute a Moody's
Eligible Asset and the amount the Corporation is required to pay upon repurchase
of such asset will count as a liability for the purposes of the ATP Basic
Maintenance Amount. Where the Corporation purchases an asset and agrees to sell
it to a third party in the future, cash receivable by the Corporation thereby
will constitute a Moody's Eligible Asset if the long-term debt of such other
party is rated at least A2 by Moody's and such agreement has a term of 30 days
or less; otherwise the
40
Discounted Value of such asset will constitute a Moody's Eligible Asset. For the
purposes of calculation of Moody's Eligible Assets, portfolio securities which
have been called for redemption by the issuer thereof shall be valued at the
lower of Market Value or the call price of such portfolio securities.
Notwithstanding the foregoing, an asset will not be considered a Moody's
Eligible Asset to the extent that it has been irrevocably deposited for the
payment of (i)(A) through (i)(F) under the definition of ATP Basic Maintenance
Amount or it is subject to any material lien, mortgage, pledge, security
interest or security agreement of any kind (collectively, "Liens"), except for
(A) Liens which are being contested in good faith by appropriate proceedings and
which Moody's has indicated to the Corporation will not affect the status of
such asset as a Moody's Eligible Asset, (B) Liens for taxes that are not then
due and payable or that can be paid thereafter without penalty, (C) Liens to
secure payment for services rendered or cash advanced to the Corporation by its
investment adviser, the Corporation's custodian, transfer agent or registrar or
the Auction Agent and (D) Liens by virtue of any repurchase agreement. See also
Section 12 for certain information with respect to Moody's Eligible Assets.
(yy) "Moody's Industry Classification" means, for the purposes of
determining Moody's Eligible Assets, each of the following industry
classifications:
Aerospace and Defense: Major Contractor, Subsystems, Research,
Aircraft Manufacturing, Arms, Ammunition
Automobile: Automotive Equipment, Auto-Manufacturing, Auto Parts
Manufacturing, Personal Use Trailers, Motor Homes, Dealers
Banking: Bank Holding, Savings and Loans, Consumer Credit, Small Loan,
Agency, Factoring, Receivables
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
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
41
Chemicals, Plastics and Rubber: Chemicals (non-agriculture),
Industrial Gases, Sulphur, Plastics, Plastic Products, Abrasives,
Coatings, Paints, Varnish, Fabricating
Containers, Packaging and Glass: Glass, Fiberglass, Containers made
of: Glass, Metal, Paper, Plastic, Wood, or Fiberglass
Personal and Non Durable Consumer Products (Manufacturing Only):
Soaps, Perfumes, Cosmetics, Toiletries, Cleaning Supplies, School
Supplies
Diversified/Conglomerate Manufacturing
Diversified/Conglomerate Service
Diversified Natural Resources, Precious Metals and Minerals:
Fabricating, Distribution
Ecological: Pollution Control, Waste Removal, Waste Treatment, Waste
Disposal
Electronics: Computer Hardware, Electric Equipment, Components,
Controllers, Motors, Household Appliances, Information Service
Communication Systems, Radios, TVs, Tape Machines, Speakers, Printers,
Drivers, Technology
Finance: Investment Brokerage, Leasing, Syndication, Securities
Farming and Agriculture: Livestock, Grains, Produce; Agricultural
Chemicals, Agricultural Equipment, Fertilizers
Grocery: Grocery Stores, Convenience Food Stores
Healthcare, Education and Childcare: Ethical Drugs, Proprietary Drugs,
Research, Health Care Centers, Nursing Homes, HMOs, Hospitals,
Hospital Supplies, Medical Equipment
Home and Office Furnishings, Housewares and Durable Consumer Products:
Carpets, Floor Coverings, Furniture, Cooking, Ranges
Hotels, Motels, Inns and Gaming
Insurance: Life, Property and Casualty, Broker, Agent, Surety
42
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
Machinery (Non-Agriculture, Non-Construction, Non-Electronic):
Industrial, Machine Tools, Steam Generators
Mining, Steel, Iron and Non Precious Metals: Coal, Copper, Lead,
Uranium, Zinc, Aluminum, Stainless Steel Integrated Steel, Ore
Production, Refractories, Steel Mill Machinery, Mini-▇▇▇▇▇,
Fabricating, Distribution and Sales
Oil and Gas: Crude Producer, Retailer, Well Supply, Service and
Drilling
Personal, Food and Miscellaneous Services
Printing, Publishing and Broadcasting: Graphic Arts, Paper, Paper
Products, Business Forms, Magazines, Books, Periodicals, Newspapers,
Textbooks, Radio, T.V., Cable Broadcasting Equipment
Cargo Transport: Rail, Shipping, Railroads, Rail-car builders, Ship
Builders, Containers, Container Builders, Parts, Overnight Mail,
Trucking, Truck Manufacturing, Trailer Manufacturing, Air Cargo,
Transport
Retail Stores: Apparel, Toy, Variety, Drugs, Department, Mail Order
Catalog, Showroom
Telecommunications: Local, Long Distance, Independent, Telephone,
Telegraph, Satellite, Equipment, Research, Cellular
Textiles and Leather: Producer, Synthetic Fiber, Apparel Manufacturer,
Leather Shoes
Personal Transportation: Air, Bus, Rail, Car Rental
Utilities: Electric, Water, Hydro Power, Gas, Diversified
Sovereigns: Semi-sovereigns, Canadian Provinces, Supra-national
Agencies
The Corporation shall use its discretion in determining which industry
classification is applicable to a particular investment.
43
(zz) "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
(aaa) "1940 Act ATP Asset Coverage" means asset coverage, as defined
in Section 18(h) of the 1940 Act, of at least 200% with respect to all
Outstanding senior securities or the Corporation which are stock, including all
Outstanding ATP (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 declaring
dividends on its common stock), determined on the basis of values calculated as
of a time within 48 hours next preceding the time of such determination.
(bbb) "1940 Act ATP Asset Coverage Certificate" means the certificate
required to be delivered by the Corporation pursuant to Section 13(e).
(ccc) "Notice of Redemption" means any notice with respect to the
redemption of shares of ATP pursuant to Section 3.
(ddd) "Other Rating Agency" means any rating agency other than Moody's
or Fitch then providing a rating for the ATP pursuant to the request of the
Corporation.
(eee) "Other Rating Agency Eligible Assets" means assets of the
Corporation designated by any Other Rating Agency as eligible for inclusion in
calculating the discounted value of the Corporation's assets in connection with
such Other Rating Agency's rating of the ATP.
(fff) "Outstanding" means, as of any date, shares of each series of
ATP theretofore issued by the Corporation except, without duplication, (i) any
shares of ATP theretofore cancelled, redeemed or repurchased by the Corporation,
or delivered to the Auction Agent for cancellation or with respect to which the
Corporation has given notice of redemption and irrevocably deposited with the
Paying Agent sufficient funds to redeem such shares of each series of ATP, (ii)
any shares of ATP as to which the Corporation or any Affiliate thereof is an
Existing Holder; provided, however, that for purposes of determining the ATP
Basic Maintenance Amount, shares of ATP held by any Affiliate of the Corporation
will be deemed Outstanding, and (iii) any shares of ATP represented by any
certificate in lieu of which a new certificate has been executed and delivered
by the Corporation.
(ggg) "Paying Agent" means Bankers Trust Company unless and until
another entity appointed by a resolution of the Board of Directors enters into
an agreement with the Corporation to serve as paying agent, which paying agent
may be the same as the Auction Agent.
44
(hhh) "Person" or "person" means and includes an individual, a
partnership, a corporation, a trust, an unincorporated association, a joint
venture or other entity or a government or any agency or political subdivision
thereof.
(iii) "Preferred Stock" means the preferred stock of the Corporation
from time to time.
(jjj) "Proration Procedures" means:
(i) if Sufficient Clearing Orders exist, in the case of a
Submitted Hold/Sell Order specifying a rate equal to the Winning Rate
(A) the number of shares of the relevant series of ATP to be
the subject of an accepted Hold Order will be (1) the number of shares
of such series of ATP subject to such Submitted Hold/Sell Order
multiplied by (2) the total number of shares of such series of ATP
that are neither the subject of a Submitted Buy Order or a Submitted
Hold/Sell Order specifying a rate lower than the Winning Rate nor the
subject of a Submitted Hold Order and divided by (3) the total number
of shares of such series of ATP subject to Submitted Hold/Sell Orders
that specified a rate equal to the Winning Rate, and
(B) the number of shares of the relevant series of ATP to be
the subject of an accepted Sell Order will be the remaining number of
shares of such series of ATP subject to such Submitted Hold/Sell
Order,
(ii) if Sufficient Clearing Orders exist, in the case of a
Submitted Buy Order specifying a rate equal to the Winning Rate
(A) the number of shares of the relevant series of ATP to be
the subject of an accepted Buy Order will be (1) the number of shares
of such series of ATP subject to such Submitted Buy Order multiplied
by (2) the difference between (x) the number of shares of such series
of ATP that are the subject of a Submitted Sell Order or a Submitted
Hold/Sell Order that specified a rate higher than the Winning Rate and
(y) the number of shares of such series of ATP that are the subject of
a Submitted Buy Order that specified a rate lower than the Winning
Rate and divided by (3) the total number of shares of such series of
ATP subject to Submitted Buy Orders that specified a rate equal to the
Winning Rate, and
(B) such Submitted Buy Order will not be accepted as to the
remaining number of shares subject to such Submitted Buy Order, and
45
(iii) if Sufficient Clearing Orders do not exist, in the case of
a Submitted Hold/Sell Order specifying a rate higher than the Maximum
Applicable Rate and in the case of a Submitted Sell Order
(A) the number of shares of the relevant series of ATP to be
the subject of an accepted Sell Order will be (1) the number of shares
of such series of ATP subject to such Submitted Hold/Sell Order or
Submitted Sell Order multiplied by (2) the total number of shares of
such series of ATP that are the subject of a Submitted Buy Order
specifying a rate equal to or lower than the Maximum Rate and dividend
by (3) the total number of shares of such series of ATP subject to all
Submitted Hold/Sell Orders that specified a rate higher than the
Maximum Applicable Rate and Submitted Sell Orders, and
(B) the number of shares of the relevant series of ATP to be
the subject of an accepted Hold Order will be the remaining number of
shares of such series of ATP subject to such Submitted Hold/Sell Order
or Submitted Sell Order.
(kkk) "Rating Default" has the meaning set forth in Section 3(c)(ii).
(lll) "Rating Default Cure Date" has the meaning set forth in Section
3(a)(iii).
(mmm) "Redemption Default" has the meaning set forth in Section
3(c)(ii).
(nnn) "Reference Rate" means, with respect to the determination of the
Maximum Applicable Rate, the applicable AA Composite Commercial Paper Rate (for
a Dividend Period of fewer than 184 days) or the applicable Treasury Index Rate
for a Dividend Period of 184 days or more).
(ooo) "Rounding Procedures" means, if as a result of an Auction
(including the Proration Procedures) any Existing Holder would be entitled to
hold or required to sell, or any Potential Holder would be required to purchase,
a number of shares of the relevant series of ATP not evenly divisible by 1, on
any Auction Date, the Auction Agent will, in such manner as it determines, round
up or down the number of shares of such series of ATP to be held, purchased or
sold by any Existing Holder or Potential Holder on such Auction Date so that the
number of shares held, purchased or sold by each Existing Holder or Potential
Holder on such Auction Date will be a number of shares of such series of ATP
evenly divisible by 1.
(ppp) "S&P" means Standard & Poor's Corporation and its successors at
law.
(qqq) "Securities Depository" means The Depository Trust Company and
its successors and assigns or any successor securities depository selected by
the Corporation that
46
agrees to follow the procedures required to be followed by such securities
depository in connection with the shares of each series of ATP.
(rrr) "Short-Term Money Market Instruments" means the following types
of instruments if, on the date of purchase or other acquisition thereof by the
Corporation, the remaining terms to maturity thereof are not in excess of (a)
180 days for instruments rated at least Aa3 or 270 days for instruments rated at
least Aaa for purposes of determining Moody's Eligible Assets (if ▇▇▇▇▇'▇ is
then rating the ATP), and (b) 180 days for purposes of determining Fitch
Eligible Assets (if Fitch is then rating the ATP):
(i) commercial paper that is rated as of each Valuation Date P-1
by Moody's and either F-1+ by Fitch or A-1+ by S&P, respectively;
(ii) demand or time deposits in, certificates of deposit of (A) a
depository institution or trust company incorporated under the laws of the
United States of America or any state thereof or the District of Columbia
or (B) a United States branch office or agency of a foreign depository
institution (provided that such branch office or agency is subject to
banking regulation under the laws of the United States, any state thereof
or the District of Columbia) if, in each case, the certificates of deposit,
if any, and the long-term unsecured debt obligations (other than such
obligations the ratings of which are based on the credit of a person or
entity other than such depository institution or trust company) of such
depository institution or trust company that have (1) credit ratings on
each Valuation Date of at least P-1 from ▇▇▇▇▇'▇ and either F-1+ from
Fitch or A-1+ from S&P, in the case of commercial paper or certificates of
deposit, and (2) credit ratings on each Valuation Date of at least Aa3 from
▇▇▇▇▇'▇ and either AA- from Fitch or AA- from S&P, in the case of long-term
unsecured debt obligations; provided, however, that in the case of any such
investment that matures in no more than one Business Day from the date of
purchase or other acquisition by the Corporation, all of the foregoing
requirements shall be applicable except that the required long-term
unsecured debt credit rating of such depository institution or trust
company from ▇▇▇▇▇'▇, Fitch and S&P shall be at least A2, A and A,
respectively; and provided further, however, that the foregoing credit
rating requirements shall be deemed to be met with respect to a depository
institution or trust company if (1) such depository institution or trust
company is the principal depository institution in a holding company
system, (2) the certificates of deposit, if any, of such depository
institution or trust company are not rated on any Valuation Date below P-1
by ▇▇▇▇▇'▇, F-1+ by Fitch or A-l+ by S&P and there is no long-term rating,
and (3) the holding company shall meet all of the foregoing credit rating
requirements (including the preceding proviso in the case of investments
that mature in no more than one Business Day from the date of purchase or
other acquisition by the Corporation);
(iii) next-day federal funds; and
47
(iv) Eurodollar demand or time deposits in, or certificates of
deposit of, the head office or the London branch office of a depository
institution or trust company meeting the credit rating requirements of
commercial paper and long-term unsecured debt obligations specified in
clause (ii) above, provided that the interest receivable by the Corporation
shall not be subject to any withholding or similar taxes.
(sss) "Specific Redemption Provisions" means, with respect to any
Alternate Term Period of more than one year, either, or any combination of (i) a
period (a "Non-Call Period") determined by the Board of Directors after
consultation with the Broker-Dealers, during which the shares subject to such
Alternate Term Period are not subject to redemption at the option of the
Corporation pursuant to Section 3(a)(i) and/or Section 3(a)(ii) and/or 3(a)(iii)
and (ii) a period (a "Premium Call Period"), consisting of a number of whole
years as determined by the Board of Directors after consultation with the
Broker-Dealers, during each year of which the shares subject to such Alternate
Term Period shall be redeemable at the Corporation's option pursuant to Section
3(a)(i) and/or in connection with any mandatory redemption pursuant to Section
3(a)(ii) and/or 3(a)(iii) at a price per share equal to $50,000 plus accumulated
but unpaid dividends plus a premium expressed as a percentage or percentages of
$50,000 or expressed as a formula using specified variables as determined by the
Board of Directors after consultation with the Broker-Dealers.
(ttt) "Standard Term Period" means a Dividend Period of 28 days,
unless such 28th day is not a Business Day, then the number of days ending on
the Business Day next preceding such 28th day.
(uuu) "Submission Deadline" means 1:00 p.m., New York City time, on
each Auction Date, or such other time on such Auction Date as may be specified
from time to time by the Auction Agent as the time by which each Broker-Dealer
must submit to the Auction Agent all Orders obtained by it for the Auction to be
conducted on such Auction Date.
(vvv) "Treasury Index Rate" means the average yield to maturity for
actively traded marketable U.S. Treasury fixed interest rate securities having
the same number of 30-day periods to maturity as the length of the applicable
Dividend Period, determined, to the extent necessary, by linear interpolation
based upon the yield for such securities having the next shorter and next longer
number of 30-day periods to maturity treating all Dividend Periods with a length
greater than the longest maturity for such securities as having a length equal
to such longest maturity, in all cases based upon data set forth in the most
recent weekly statistical release published by the Board of Governors of the
Federal Reserve System (currently in H.15(519)); provided, however, if the most
recent such statistical release shall not have been published during the 15 days
preceding the date of computation, the foregoing computations shall be based
upon the average of comparable data as quoted to the Corporation by at least
three recognized dealers in U.S. Government securities selected by the
Corporation.
48
(www) "Type I Corporate Bonds" means Corporate Bonds rated either AAA
by Fitch or, if not rated by Fitch, rated AAA by S&P and Aaa by ▇▇▇▇▇'▇.
(xxx) "Type II Corporate bonds" means Corporate Bonds rated either at
least AA- by Fitch or, if not rated by Fitch, rated at least AA- by S&P and at
least Aa3 by ▇▇▇▇▇'▇ which do not constitute Type I Corporate Bonds.
(yyy) "Type III Corporate Bonds" means Corporate Bonds rated either at
least A- by Fitch or, if not rated by Fitch, rated at least A- by S&P and at
least A3 by ▇▇▇▇▇'▇ which do not constitute Type I or Type II Corporate Bonds.
(zzz) "Type IV Corporate Bonds" means Corporate Bonds rated either at
least BBB- by Fitch or, if not rated by Fitch, rated at least BBB- by S&P and at
least Baa3 by ▇▇▇▇▇'▇ which do not constitute Type I, Type II or Type III
Corporate Bonds.
(aaaa) "Type V Corporate Bonds" means Corporate Bonds rated either at
least BB- by Fitch or, if not rated by Fitch, rated at least BB- by S&P and at
least Ba3 by ▇▇▇▇▇'▇ which do not constitute Type I, Type II, Type III or Type
IV Corporate Bonds.
(bbbb) "Type VI Corporate Bonds" means Corporate Bonds rated either at
least B- by Fitch or, if not rated by Fitch, rated at least B- by S&P and at
least B3 by ▇▇▇▇▇'▇ which do not constitute Type I, Type II, Type III, Type IV
or Type V Corporate Bonds.
(cccc) "Type VII Corporate Bonds" means Corporate Bonds rated either
at least CCC by Fitch or, if not rated by Fitch, rated at least CCC by S&P and
at least Caa by ▇▇▇▇▇'▇ which do not constitute Type I, Type II, Type III, Type
IV, Type V or Type VI Corporate Bonds.
(dddd) "Validity Procedures" means the following procedures and
priorities:
(i) If one or more Hold Orders shall be submitted on behalf of an
Existing Holder as to a number of shares of the relevant series of ATP
greater than the number of shares of such series of ATP held by such
Existing Holder, such Hold Order or Hold Orders shall be considered valid
only as to the number of shares of such series of ATP held by such Existing
Holder. In the case of multiple Hold Orders, each such Hold Order shall be
considered valid pro rata.
(ii) If one or more Hold/Sell Orders shall be submitted on behalf
of an Existing Holder as to a number of shares of the relevant series of
ATP greater than the excess of the number of shares of such series of ATP
held by such Existing Holder over the number of shares of such series of
ATP subject to Hold Orders submitted on behalf of such Existing Holder,
such Hold/Sell Order or Hold/Sell Orders shall be considered valid only as
to the number of shares of such series of ATP equal to such
49
excess. In the case of multiple Hold/Sell Orders specifying different
rates, such Hold/Sell Orders shall be considered valid in increasing order
of such rates. In the case of multiple Hold/Sell Orders specifying the same
rate, each such Hold/Sell Order shall be considered valid pro rata.
(iii) If one or more Sell Orders shall be submitted on behalf of
an Existing Holder as to a number of shares of the relevant series of ATP
greater than the excess of the number of shares of such series of ATP held
by such Existing Holder over the number of shares of such series of ATP
subject to Hold Orders and Hold/Sell Orders submitted on behalf of such
Existing Holder, such Sell Order or Sell Orders shall be considered valid
only as to the number of shares equal to such excess. In the case of
multiple Sell Orders, each such Sell Order shall be considered valid pro
rata.
(eeee) "Valuation Date" means every Friday, or, if such day is not a
Business Day, the next preceding Business Day; provided, however, that the first
Valuation Date may occur on any other date established by the Corporation;
provided, further, however, that such date shall be not more than one week from
the date on which the ATP initially is issued.
(ffff) "Volatility Factor" means 1.89.
19. Interpretation. References to sections, subsections, clauses,
sub-clauses, paragraphs and subparagraphs are to such sections, subsections,
clauses, sub-clauses, paragraphs and subparagraphs contained in this Part I or
Part II hereof, as the case may be, unless specifically identified otherwise. In
addition, capitalized terms not defined in Section 18 of this Part I shall have
the respective meanings specified in Part II hereof.
PART II
1. Certain Definitions. As used in this Part II, the following terms shall
have the following meanings, unless the context otherwise requires and all
section references below are to this Part II except as otherwise indicated.
Capitalized terms not defined in this Section 1 of this Part II shall have the
respective meanings specified in Part I hereof.
(a) "Agent Member" means a member of or participant in the Securities
Depository that will act on behalf of an Existing Holder or person placing an
Order and is identified as such in such Existing Holder's or person's Master
Purchaser's Letter.
(b) "Available ATP" has the meaning specified in Section 5(a)(i).
(c) "Buy Order" has the meaning specified in Section 2(b).
50
(d) "Existing Holder" means a Person who has signed a Master
Purchaser's Letter and is listed as the beneficial owner of shares of either
series of ATP in the records of the Auction Agent.
(e) "Hold Order" has the meaning specified in Section 2(b).
(f) "Hold/Sell Order" has the meaning specified in Section 2(b).
(g) "Master Purchaser's Letter" means a letter addressed to the
Corporation, the Auction Agent, a Broker-Dealer and an Agent Member in which a
Person agrees, among other things, to offer to purchase, to purchase, to offer
to sell and/or to sell shares of ATP as set forth in this Part II.
(h) "Order" has the meaning specified in Section 2(b).
(i) "Potential Holder," when used with respect to shares of ATP, means
any Person, including any Existing Holder of shares of ATP (i) who shall have
executed a Master Purchaser's Letter and (ii) who may be interested in acquiring
shares of ATP (or, in the case of an Existing Holder of shares of ATP,
additional shares of ATP).
(j) "Sell Order" has the meaning specified in Section 2(b).
(k) "Submitted Buy Order" has the meaning specified in Section 5(a).
(l) "Submitted Hold Order" has the meaning specified in Section 5(a).
(m) "Submitted Hold/Sell Order" has the meaning specified in Section
5(a).
(n) "Submitted Order" has the meaning specified in Section 5(a).
(o) "Submitted Sell Order" has the meaning specified in Section 5(a).
(p) "Sufficient Clearing Orders" means that all shares of the relevant
series of ATP are the subject of Submitted Hold Orders or that the number of
shares of such series of ATP that are the subject of Submitted Buy Orders by
Potential Holders specifying one or more rates equal to or less than the Maximum
Applicable Rate exceeds or equals the sum of (A) the number of shares of such
series of ATP that are the subject of Submitted Hold/Sell Orders by Existing
Holders specifying one or more rates higher than the Maximum Applicable Rate and
(B) the number of shares of such series of ATP that are subject to Submitted
Sell Orders.
(q) "Winning Rate" means the lowest rate specified in the Submitted
Orders which, if (i) each Submitted Hold/Sell Order from Existing Holders
specifying such lowest rate and all other Submitted Hold/Sell Orders from
Existing Holders specifying lower rates
51
were accepted and (ii) each Submitted Buy Order from Potential Holders
specifying such lowest rate and all other Submitted Buy Orders from Potential
Holders specifying lower rates were accepted, would result in the Existing
Holders described in clause (i) above continuing to hold an aggregate number of
shares of the relevant series of ATP which, when added to the number of shares
of such series of ATP to be purchased by the Potential Holders described in
Clause (ii) above and the number of shares of such series of ATP subject to
Submitted Hold Orders, would be equal to the number of shares of such series of
ATP.
Section 2. Orders by Existing Holders and Potential Holders.
(a) On or prior to the Submissions Deadline on each Auction Date with
respect to the relevant series of ATP:
(i) each Existing Holder may submit to a Broker-Dealer
information as to:
(A) the number of Outstanding shares of such series of ATP,
if any, held by such Existing Holder which such Existing Holder
desires to continue to hold without regard to the Applicable Rate for
the next succeeding Dividend Period;
(B) the number of Outstanding shares of such series of ATP,
if any, held by such Existing Holder which such Existing Holder
desires to continue to hold, provided that the Applicable Rate for the
next succeeding Dividend Period shall not be less than the rate per
annum specified by such Existing Holder; and/or
(C) the number of Outstanding shares of such series of ATP,
if any, held by such Existing Holder which such Existing Holder offers
to sell without regard to the Applicable Rate for the next succeeding
Dividend Period; and
(ii) each Broker-Dealer, using a list of Potential Holders that
shall be maintained in good faith for the purpose of conducting a
competitive Auction, shall contact Potential Holders, including persons
that are not Existing Holders, on such list to determine the number of
Outstanding shares of ATP, if any, which each such Potential Holder offers
to purchase, provided that the Applicable Rate for the next succeeding
Dividend Period shall not be less than the rate per annum specified by such
Potential Holder.
(b) For the purposes hereof, the communication to a Broker-Dealer of
information referred to in clause (i) or (ii) of Section 2(a) of this Part II is
hereinafter referred to as an "Order"; an Order containing the information
referred to in clause (i)(A) of Section
52
2(a) of this Part II is hereinafter referred to as a "Hold Order"; an Order
containing the information referred to in clause (i)(B) of Section 2(a) of this
Part II is hereinafter referred to as a "Hold/Sell"; an Order containing the
information referred to in clause (i)(C) of Section 2(a) of this Part II is
hereinafter referred to as a "Sell Order"; and an Order containing the
information referred to in clause (ii) of Section 2(a) of this Part II is
hereinafter referred to as a "Buy Order."
(c) (i) A Hold/Sell Order by an Existing Holder shall constitute an
irrevocable offer to sell:
(A) the number of Outstanding shares of the relevant series
of ATP specified in such Order if the Applicable Rate determined on
such Auction Date shall be less than the rate per annum specified in
such Order; or
(B) a lesser number of Outstanding shares of the relevant
series of ATP to be determined as set forth in Section 6(a)(v) if the
Applicable Rate determined on such Auction Date shall be equal to the
rate per annum specified therein; or
(C) a lesser number of Outstanding shares of the relevant
series of ATP to be determined as set forth in Section 6(b)(iv) if
such specified rate per annum shall be higher than the Maximum
Applicable Rate and Sufficient Clearing Orders do not exist.
(ii) A Sell Order by an Existing Holder shall constitute an
irrevocable offer to sell the number of Outstanding shares of the relevant
series of ATP specified in such Sell Order.
(iii) A Buy Order by a Potential Holder shall constitute an
irrevocable offer to purchase:
(A) the number of Outstanding shares of the relevant series
of ATP specified in such Order if the Applicable Rate determined on
such Auction Date shall be higher than the rate per annum specified in
such Order; or
(B) such number or a lesser number of Outstanding shares of
the relevant series of ATP to be determined as set forth in Section
6(a)(vi) if the Applicable Rate determined on such Auction Date shall
be equal to the rate per annum specified therein.
Section 3. [Reserved]
53
Section 4. Submission of Orders by Broker-Dealers to Auction Agent.
(a) Each Broker-Dealer shall submit in writing to the Auction Agent
prior to the Submission Deadline on each Auction Date for the Auction to be
conducted on such Auction Date all Orders obtained by such Broker-Dealer and
specifying with respect to each Order:
(i) the name of the Existing Holder or Potential Holder placing
such Order;
(ii) the aggregate number of shares of the relevant series of ATP
that are the subject of such Order;
(iii) to the extent that such Orders are placed by an Existing
Holder:
(A) the number of shares of the relevant series of ATP, if
any, subject to any Hold Order placed by such Existing Holder;
(B) the number of shares of the relevant series of ATP, if
any, subject to any Hold/Sell Order placed by such Existing Holder;
(C) the number of shares of the relevant series of ATP, if
any, subject to any Sell Order placed by such Existing Holder; and
(iv) the rate per annum specified in such Order.
(b) If any rate per annum specified in any Order contains more than
three figures to the right of the decimal point, the Auction Agent shall round
such rate up to the next highest one-thousandth (.0001) of 1%.
(c) If an Order or Orders covering all shares of the relevant series
of ATP held by any Existing Holder are not submitted to the Auction Agent by the
Submission Deadline, the Auction Agent shall, only in the case of an Auction
preceding a Dividend Period of 93 days or fewer and at the conclusion of a
Dividend Period of 93 days or fewer, deem a Hold Order to have been submitted on
behalf of such Existing Holder covering the number of shares held by such
Existing Holder and not subject to Orders submitted to the Auction Agent. If an
Order or Orders covering all shares of ATP held by any Existing Holder are not
submitted to the Auction Agent by the Submission Deadline, the Auction Agent
will, in the case of all other Auctions, deem a Sell Order to have been
submitted on behalf of such Existing Holder covering the number of shares held
by such Existing Holder and not subject to Orders submitted to the Auction
Agent.
54
(d) If one or more Orders on behalf of an Existing Holder covering in
the aggregate more than the number of shares of the relevant series of ATP held
by such Existing Holder are submitted to the Auction Agent, such Orders shall be
considered valid as follows and in the following order of priority:
(i) If one or more Hold Orders shall be submitted on behalf of an
Existing Holder as to a number of shares of such series of ATP greater than
the number of shares of such series of ATP held by such Existing Holder,
such Hold Order or Hold Orders shall be considered valid only as to the
number of shares of such series of ATP held by such Existing Holder. In the
case of multiple Hold Orders, each such Hold Order shall be considered
valid pro rata.
(ii) If one or more Hold/Sell Orders shall be submitted on behalf
of an Existing Holder as to a number of shares of such series of ATP
greater than the excess of the number of shares of such series of ATP held
by such Existing Holder over the number of shares of such series of ATP
subject to Hold Orders submitted on behalf of such Existing Holder, such
Hold/Sell Order or Hold/Sell Orders shall be considered valid only as to
the number of shares of such series of ATP equal to such excess. In the
case of multiple Hold/Sell Orders specifying different rates, such
Hold/Sell Orders shall be considered valid in increasing order of such
rates. In the case of multiple Hold/Sell Orders specifying the same rate,
each such Hold/Sell Order shall be considered valid pro rata.
(iii) If one or more Sell Orders shall be submitted on behalf of
an Existing Holder as to a number of shares of such series of ATP greater
than the excess of the number of shares of such series of ATP held by such
Existing Holder over the number of shares of such series of ATP subject to
Hold Orders and Hold/Sell Orders submitted on behalf of such Existing
Holder, such Sell Order or Sell Orders shall be considered valid only as to
the number of shares equal to such excess. In the case of multiple Sell
Orders, each such Sell Order shall be considered valid pro rata.
(e) If more than one Order is submitted on behalf of any Potential
Holder, each Order submitted shall be a separate Order with the rate and shares
of the relevant series of ATP therein specified.
(f) In the case of any Dividend Period of 93 days or fewer, if any
rate specified in any Order is lower than the Minimum Applicable Rate for the
Dividend Period with respect to which such Order is made, such Order will be
deemed to be an Order specifying a rate equal to such Minimum Applicable Rate.
(g) In the case of any Dividend Period of more than 93 days, only Buy
Orders, Hold/Sell Orders and Sell Orders may be submitted.
55
Section 5. Determination of Sufficient Clearing Orders, Winning Rate
and Applicable Rate.
(a) Not earlier than the Submission Deadline on each Auction Date, the
Auction Agent shall assemble all Orders submitted or deemed submitted to it by
the Broker-Dealers (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to individually as a "Submitted Hold
Order," a "Submitted Hold/Sell Order", a "Submitted Sell Order" or a "Submitted
Buy Order," as the case may be, or as a "Submitted Order") and shall determine:
(i) the excess of the total number of Outstanding shares of the
relevant series of ATP over the number of Outstanding shares of such series
of ATP that are the subject of Submitted Hold Orders (such excess being
hereinafter referred to as the "Available ATP");
(ii) from the Submitted Orders whether the number of Outstanding
shares of the relevant series of ATP that are the subject of Submitted Buy
Orders by Potential Holders specifying one or more rates per annum equal to
or lower than the Maximum Applicable Rate exceeds or is equal to the sum
of:
(A) the number of shares of such series of ATP that are the
subject of Submitted Hold/Sell Orders by Existing Holders specifying
one or more rates per annum higher than the Maximum Applicable Rate,
and
(B) the number of shares of such series of ATP that are
subject to Submitted Sell Orders (if such excess or such equality
exists (other than because the number of Outstanding shares of such
series of ATP in clauses (A) and (B) above are each zero because all
of the Outstanding shares of such series of ATP are the subject of
Submitted Hold Orders), such Submitted Buy Orders by Potential Holders
being hereinafter referred to collectively as "Sufficient Clearing
Orders"), would result in the number of shares subject to all
Submitted Orders specifying the Winning Rate or a lower rate per annum
being at least equal to the Available ATP.
(b) Promptly after the Auction Agent has made the determinations
pursuant to Section 5(a), the Auction Agent shall advise the Corporation of the
Maximum Applicable Rate and, based on such determinations, the Applicable Rate
for the next succeeding Dividend Period as follows:
(i) If Sufficient Clearing Orders exist, that the Applicable Rate
for the next succeeding Dividend Period shall be equal to the Winning Rate;
56
(ii) If Sufficient Clearing Orders do not exist (other than
because all of the Outstanding shares of the relevant series of ATP are the
subject of Submitted Hold Orders), that the Applicable Rate for the next
succeeding Dividend Period shall be equal to the Maximum Applicable Rate
and the Dividend Period shall be a Standard Term Period; or
(iii) If all Existing Holders submit (or are deemed to have
submitted) Hold Orders in an Auction, the Dividend Period next succeeding
the Auction shall automatically be the same Dividend Period as that
Dividend Period immediately preceding the Auction and the Applicable Rate
will be the Minimum Applicable Rate (or such other rate if there is no
Minimum Applicable Rate) in effect on the date of the Auction with respect
to such Dividend Period.
Section 6. Acceptance and Rejection of Submitted Orders and Submitted Sell
Orders and Allocation of Shares.
Based upon the results of the Auction, the Auction Agent will determine the
aggregate number of shares to be held and sold by Existing Holders and to be
purchased by Potential Holders, and, with respect to each Broker-Dealer,
determine the extent to which such Broker-Dealer will deliver, and from which
other Broker-Dealers such Broker-Dealer will receive, shares.
(a) If Sufficient Clearing Orders exist, subject to the Rounding
Procedures:
(i) all Submitted Hold Orders will be accepted;
(ii) all Submitted Sell Orders will be accepted and all Submitted
Hold/Sell Orders specifying any rate higher than the Winning Rate will be
accepted as Sell Orders;
(iii) all Submitted Hold/Sell Orders specifying a rate lower than
the Winning Rate will be accepted as Hold Orders;
(iv) all Submitted Buy Orders specifying a rate lower than the
Winning Rate will be accepted;
(v) all Submitted Hold/Sell Orders specifying a rate equal to the
Winning Rate will be accepted as Hold Orders unless the number of shares
subject to all such Submitted Hold/Sell Orders is greater than the number
of shares remaining unaccounted for after the acceptances described in
clauses (i), (iii) and (iv) above, in which event each such Submitted
Hold/Sell Order will be accepted as a Hold Order and a Sell Order as to the
respective number of shares determined in accordance with the Proration
Procedures; and
57
(vi) all Submitted Buy Orders specifying a rate equal to the
Winning Rate will be accepted, unless the number of shares subject to all
such Submitted Buy Orders is greater than the number of shares remaining
unaccounted for after the acceptances described in clauses (i), (iii), (iv)
and (v) above, in which event each such Submitted Buy Order will be
accepted only as to the number of shares determined in accordance with the
Proration Procedures.
(b) If Sufficient Clearing Orders do not exist, subject to the
Rounding Procedures:
(i) all Submitted Hold Orders will be accepted;
(ii) all Submitted Hold/Sell Orders specifying a rate equal to or
lower than the Maximum Applicable Rate will be accepted as Hold Orders;
(iii) all Submitted Buy Orders specifying a rate equal to or
lower than the Maximum Applicable Rate will be accepted; and
(iv) all Submitted Hold/Sell Orders specifying a rate higher than
the Maximum Applicable Rate and all Submitted Sell Orders will be accepted
as Hold Orders and as Sell Orders as to the respective number of shares of
ATP determined in accordance with the Proration Procedures.
(c) If as a result of the procedures described in Section 6(a) or 6(b)
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 ATP
in any Auction, the Auction Agent will, in such manner as, in its sole
discretion, it shall determine, round up or down the number of shares of ATP
being sold or purchased on such Auction Date so that each share sold or
purchased by each Existing Holder or Potential Holder will be a whole share of
ATP even if such allocation results in one or more of such Potential Holders not
purchasing any shares of ATP or in one or more Existing Holders no longer
holding any shares of ATP.
(d) If, as a result of the procedures described in Section 6(a), any
Potential Holder would be entitled or required to purchase a fraction of a share
of ATP, as applicable, on any Auction Date, the Auction Agent shall, in such
manner as in its sole discretion it shall determine, allocate shares of ATP for
purchase among Potential Holders so that only whole shares of ATP are purchased
on such Auction Date by any Potential Holder, even if such allocation results in
one or more of such Potential Holders not purchasing any shares of ATP on such
Auction Date or in one or more Existing Holders no longer holding any shares of
ATP.
(e) Based on the results of each Auction, the Auction Agent shall
determine, with respect to each Broker-Dealer that submitted Orders on behalf of
Existing Holders or
58
Potential Holders, the aggregate number of shares of the relevant series of ATP
to be purchased and the aggregate number of shares of such series of ATP to be
sold by such Potential Holders and Existing Holders and, to the extent that such
aggregate number of shares of such series of ATP to be purchased and such
aggregate number of shares of such series of ATP to be sold differ, the Auction
Agent shall determine to which other Broker-Dealer or Broker-Dealers acting for
one or more purchasers such Broker-Dealer shall deliver, or from which other
Broker-Dealer or Broker-Dealers acting for one or more sellers such
Broker-Dealer shall receive, as the case may be, shares of such series of ATP.
Section 7. Notification of Results: Settlements.
(a) The Auction Agent will advise each Broker-Dealer that submitted an
Order whether such Order was accepted and of the Applicable Rate for the next
Dividend Period by telephone by approximately 3:00 p.m., New York City time, on
each Auction Date. Each Broker-Dealer that submitted an Order will as soon as
practicable advise each Existing Holder and Potential Holder whether its Order
was accepted and will confirm in writing purchases and sales with each Existing
Holder and Potential Holder purchasing or selling shares as a result of an
auction as soon as practicable on the Business Day next succeeding the Auction
Date. Each Broker-Dealer that submitted a Hold Order will advise each Existing
Holder on whose behalf such Hold Order was submitted of the Applicable Rate for
the shares of ATP for the next Dividend Period.
(b) In accordance with the Securities Depository's normal procedures,
on the Business Day after the Auction Date, the transactions described above
will be executed through the Securities Depository and the accounts of the
respective Agent Members at the Securities Depository will be debited and
credited and shares delivered as necessary to effect the purchases and sales as
determined in the Auction. Purchasers will make payment through their Agent
Members in same-day funds to the Securities Depository against delivery through
their Agent Members; the Securities Depository will make payment in accordance
with its normal procedures as in effect from time to time.
(c) If any Existing Holder selling shares in an Auction fails to
deliver such shares, the Broker-Dealer of any person that was to have purchased
shares in such Auction may deliver to such person a number of whole shares that
is less than the number of shares that otherwise was to be purchased by such
person. In such event, the number of shares to be so delivered shall be
determined by such Broker-Dealer. Delivery of such lesser number of shares shall
constitute good delivery.
Section 8. Miscellaneous.
The Board of Directors may interpret the provisions of these Auction
Procedures to resolve any inconsistency or ambiguity, remedy any formal defect
or make any other change or modification that does not adversely affect the
rights of Existing Holders of shares of ATP.
59
An Existing Holder (A) may sell, transfer or otherwise dispose of shares of ATP
only pursuant to a Hold/Sell Order or Sell Order in accordance with the
procedures described in this Part II, to or through a Broker-Dealer, to a Person
that has delivered a signed copy of a Master Purchaser's Letter to the Auction
Agent, or as otherwise permitted under Section 5 of Part I, provided that in the
case of all transfers other than pursuant to Auctions such Existing Holder, its
Broker-Dealer or its Agent Member advised the Auction Agent of such transfer and
(B) except as otherwise required by law, shall have the ownership of the shares
of ATP held by it maintained in book entry form by the Securities Depository in
the account of its Agent Member, which in turn will maintain records of such
Existing Holder's beneficial ownership. Neither the Corporation nor any
Affiliate of the Corporation shall submit an Order in any Auction. Any Existing
Holder that is such an Affiliate shall not sell, transfer or otherwise dispose
of shares of ATP to any Person other than the Corporation. All of the shares of
ATP of any series shall be represented by a single certificate registered in the
name of the nominee of the Securities Depository unless otherwise required by
law or unless there is no Securities Depository. If there is no Securities
Depository, at the Corporation's option and upon its receipt of such documents
as it deems appropriate, any shares of ATP may be registered in the share
register for the shares of ATP maintained by the Auction Agent in the name of
the Existing Holder thereof and such Existing Holder thereupon will be entitled
to receive certificates therefor and required to deliver certificates therefor
upon transfer or exchange thereof.
THE NEW AMERICA HIGH INCOME FUND, INC.
ARTICLES OF AMENDMENT
The New America High Income Fund, Inc., a Maryland
corporation having its principal office in Boston, Massachusetts
(hereinafter called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: Part I of the Articles Supplementary to the Fund's
Articles of Amendment and Restatement, as heretofore amended, is
hereby further amended by replacing current Section 18(oo)(iv) with
new Section 18(oo)(iv) as follows:
"(iv) debt securities constituting Corporate Bonds if
(A) such securities are rated CCC or higher by Fitch or, if
unrated by Fitch, rated Caa or higher by Moody's and CCC or
higher by S&P; (B) such securities provide for the periodic
payment of interest in cash in U.S. dollars; (C) such
securities do not provide for conversion or exchange into
equity capital at any time over their lives; (D) such
securities have been registered under the Securities Act of
1933, as amended, (the "Securities Act") or are restricted
as to resale under federal securities laws but are eligible
for resale pursuant to Rule 144A under the Securities Act as
determined by the Fund's adviser acting subject to the
supervision of the Fund's Board of Directors; and (E) such
securities are issued by a U.S. corporation. In addition,
bonds which are issued in connection with a reorganization
under U.S. federal bankruptcy law ("Reorganization Bonds")
will be considered Corporate Bonds constituting Fitch
Eligible Assets if (a) they are rated CCC or higher by Fitch
or, if unrated by Fitch, rated Caa or higher by Moody's and
CCC or higher by S&P; (b) they provide for periodic payment
of interest in cash in U.S. dollars; (c) they do not provide
for conversion or exchange into equity capital at any time
over their lives; (d) they have been registered under the
Securities Act or are restricted as to resale under federal
securities laws but are eligible for trading under Rule 144A
promulgated pursuant to the Securities Act as determined by
the Fund's adviser acting subject to the supervision of the
Fund's Board of Directors; (e) they were issued by a U.S.
corporation; and (f) at the time of purchase at least one
year had elapsed since the issuer's reorganization.
Reorganization Bonds may also be considered Corporate Bonds
constituting Fitch Eligible Assets if they have been
approved by Fitch, which approval shall not be unreasonably
withheld."
SECOND: Part I of the Articles Supplementary to the Fund's
Articles of Amendment and Restatement, as heretofore amended. is
hereby further amended by replacing current Section l8(xx)(iv) with
new Section l8(xx)(iv) as follows:
"(iv) Corporate debt securities will be included in
Moody's Eligible Assets if (A) such securities are rated Caa
or higher by Moody's; (B) the senior unsecured rating of the
issuer's corporate bonds is higher than B3; (C) such
securities provide for the periodic payment of interest in
cash in U.S. dollars; (D) such securities do not provide for
conversion or exchange into equity capital at any time over
their lives; (E) for debt securities rated Ba1 and below, no
more than 10% of the original amount of such issue may
constitute Moody's Eligible Assets; and (F) such securities
have been registered under the Securities Act or are
restricted as to resale under federal securities laws but
are eligible for resale pursuant to Rule 144A under the
Securities Act as determined by the Fund's adviser acting
subject to the supervision of the Fund's Board of
Directors."
THIRD: Part I of the Articles Supplementary to the Fund's
Articles of Amendment and Restatement, as heretofore amended, is
hereby further amended by replacing current Section 18(uu) with new
Section 18(uu) as follows:
"(uu) "Minimum Applicable Rate" means, on any Auction
Date with respect to a Dividend Period of 93 days or fewer,
80% of the AA Composite Commercial Paper Rate at the close
of business on the Business Day next preceding such Auction
Date. There shall be no Minimum Applicable Rate on any
Auction Date with respect to a Dividend Period of more than
93 days."
FOURTH: Part I of the Articles Supplementary to the Fund's
Articles of Amendment and Restatement, as heretofore amended, is
hereby further amended by adding new Section 18 (nn)(iv) as follows:
"(iv) Rule 144A Securities: The Fitch Discount Factor
applied to securities which are restricted as to resale
under federal securities laws but are eligible for resale
pursuant to Rule 144A under the Securities Act as determined
by the Fund's adviser acting subject to the supervision of
the Fund's Board of Directors ("Rule 144A Securities") will
be 110% of the Fitch Discount Factor which would apply were
the securities registered under the 1933 Act."
FIFTH: Part I of the Articles Supplementary to the Fund's
Articles of Amendment and Restatement, as heretofore amended, is
hereby further amended by adding new Section 18(ww)(v) as follows:
"(v) Rule 144A Securities: The Moody's Discount Factor
applied to Rule 144A Securities will be 160% of the Moody's
Discount Factor which would apply were the securities
registered under the 1933 Act."
SIXTH: A majority of the board of directors of the
Corporation has approved the foregoing amendments to the charter.
SEVENTH: No stock entitled to vote on the foregoing
amendments to the charter was outstanding or subscribed for at the
time of the approval of such amendments by the board of directors of
the Corporation.
EIGHTH: These Articles shall be effective at the later of the
date the State Department of Assessments and Taxation of Maryland
accepts the Articles for record or on November 1, 1996.
THE NEW AMERICA HIGH INCOME FUND, INC.
ARTICLES OF AMENDMENT
The New America High Income Fund, Inc., a Maryland
corporation having its principal office in Boston, Massachusetts
(hereinafter called the "Corporation"), hereby certifies to the Stare
Department of Assessments and Taxation of Maryland that:
FIRST: Part I of the Articles Supplementary to the Fund's
Articles of Amendment and Restatement, as heretofore amended, is
hereby further amended by replacing current Section 6(j) with new
Section 6(j) as follows:
"(j) The Board of Directors, without the vote or
consent of any holder of the Preferred Stock, including the
ATP, or any other stockholder of the Corporation, may from
time to time amend, alter or repeal any or all of the
definitions of the terms or provisions listed below, and any
such amendment, alteration or repeal will not be deemed to
affect the preferences. rights or powers of shares of ATP or
the Holders thereof, provided that the Board of Directors
receives written confirmation from Moody's (if ▇▇▇▇▇'▇ is
then rating the ATP) and Fitch (if Fitch is then rating the
ATP) (with such confirmation in no event being required to
be obtained from a particular rating agency in the case of
the definitions relevant only to and adopted in connection
with the rating of the ATP, if any, by any other rating
agency) that such amendment, alteration or repeal would not
impair the rating then assigned by Moody's or Fitch,
respectively. In addition, the Board of Directors, without
the vote or consent of any Holder of the Preferred Stock,
including the ATP, or any other stockholder of the
Corporation, may from time to time adopt, amend, alter or
repeal any or all of any additional or other definitions or
add covenants and other obligations of the Corporation
(e.g., maintenance of minimum liquidity level) or confirm
the applicability of covenants and other obligations set
forth herein in connection with obtaining or maintaining the
rating of Moody's, Fitch or any Other Rating Agency with
respect to the ATP, and any such amendment, alteration or
repeal will not be deemed to affect the preferences, rights
or powers of the ATP or the Holders thereof, provided the
Board of Directors receives written confirmation from the
relevant rating agency (such confirmation in no event being
required to be obtained from a particular rating agency with
respect to definitions or other provisions relevant only to
another rating agency's rating) that any such amendment,
alteration or repeal would not adversely affect the rating
then assigned by such rating agency.
Definitions and Provisions Subject to Change by Director
Action:
--------------------------------------------------------
ATP Basic Maintenance Amount
ATP Basic Maintenance Certificate
Asset Coverage Cure Date
Deposit Securities
Discounted Value
Exposure Period
Fitch Discount Factor
Fitch Eligible Assets
Fitch Industry Classification
Market Value
Maximum Applicable Rate
Minimum Applicable Rate
Moody's Discount Factor
Moody's Eligible Assets
Moody's Industry Classification
1940 Act Asset Coverage Cure Date
1940 Act ATP Asset Coverage
Volatility Factor
Short Term Money Market Instruments
Last Paragraph of Section 12
In addition, the Board of Directors may amend the
definition of Maximum Applicable Rate to increase the
percentage amount by which the Reference Rate is multiplied
to determine the Maximum Applicable Rate shown therein
without the vote or consent of the holders of the shares of
the Preferred Stock, including the ATP, or any other
stockholder of the Corporation, and without receiving any
confirmation from any rating agency after consultation with
the Broker-Dealers, provided that immediately following any
such increase the Corporation would be in compliance with
the ATP Basic Maintenance Amount."
SECOND: The board of directors of the Corporation has adopted
a resolution in which was set forth the foregoing amendment to the
charter declaring that said amendment to the charter was advisable and
directing that it be submitted for action thereon at a meeting of the
stockholders of the Corporation.
THIRD: Notice setting forth the aforesaid amendment of the
charter and stating that a purpose of the meeting of the stockholders
would be to take action thereon, was given as required by law, to all
stockholders of the Corporation entitled to vote thereon. The
amendment of the charter of the Corporation as hereinabove set forth
was approved by the stockholders of the Corporation at said meeting by
the affirmative vote required by law and the Corporation's charter.
FOURTH: These Articles shall be effective at the later of the
date the State Department of Assessments and Taxation of Maryland
accepts the Articles for record or on October 31, 1996.
THE NEW AMERICA HIGH INCOME FUND, INC.
ARTICLES SUPPLEMENTARY
ESTABLISHING AND FIXING THE RIGHTS AND
PREFERENCES OF AN ADDITIONAL SERIES OF SHARES OF PREFERRED STOCK
The New America High Income Fund, Inc., a Maryland corporation (the
"Corporation"), certifies to the State Department of Assessments and Taxation of
Maryland that:
FIRST: Pursuant to the authority expressly vested in the
Board of Directors of the Corporation by Article IV of its Articles of
Amendment and Restatement, as heretofore amended (which, as hereafter
restated or amended from time to time, are together with these
Articles Supplementary herein called the "Articles"), the Board of
Directors has, by resolution, authorized the issuance of 2,000 shares
of its Preferred Stock, par value $1.00 per share, liquidation
preference $25,000 per share, classified as Series C Auction Term
Preferred Stock.
SECOND: The preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions
of redemption of the shares of such series of ATP are as follows:
DESIGNATION
Series C: A series of 2.000 shares of Preferred Stock. par
value S1.00 per share, liquidation preference S25,000 per share, is
hereby designated "Series C Auction Term Preferred Stock" ("ATP Series
C"). Each share of ATP Series C shall have an Applicable Rate for its
initial Dividend Period equal to 5.625 % per annum and an initial
Dividend Payment Date of June 10, 1997; and each share of ATP Series C
shall have such other preferences, rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms
and conditions of redemption, in addition to those required by
applicable law or set forth in the Articles applicable to preferred
stock of the Corporation, as are set forth in Part I and Part II of
these Articles Supplementary. The ATP Series C shall constitute a
separate series of Preferred Stock of the Corporation.
Subject to the provisions of Section 12(c) of Part I hereof,
the Board of Directors of the Corporation may, in the future,
reclassify additional shares of the Corporation's Preferred Stock as
ATP Series C, with the same preferences, rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms
and conditions of redemption and other terms of the respective series
herein described, except that the Applicable Rate for its initial
Dividend Period, its initial Dividend Payment Date and any other
changes in the terms herein
set forth shall be as set forth in the Articles Supplementary
reclassifying such shares as ATP Series C.
As used in Part I and Part II of these Articles
Supplementary, capitalized terms shall have the meanings provided in
Section 18 of Part I and Section 1 of Part II.
PART I
1. Number of Shares: Ranking.
(a) The initial number of authorized shares
constituting ATP Series C is 2,000 shares. No fractional shares of ATP
Series C shall be issued.
(b) Any shares of ATP Series C which at any time have
been redeemed or purchased by the Corporation shall, after such
redemption or purchase, have the status of authorized but unissued
shares of Preferred Stock.
(c) The shares of ATP Series C shall rank on a parity
with shares of any other series of Preferred Stock (including any
other shares of ATP) as to the payment of dividends to which such
shares are entitled and the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Corporation.
(d) No holder of shares of ATP Series C shall have,
solely by reason of being such a holder, any preemptive or other right
to acquire, purchase or subscribe for any shares of ATP Series C,
shares of Common Stock of the Corporation or other securities of the
Corporation which it may hereafter issue or sell.
2. Dividends.
(a) The Holders of shares of ATP Series C shall be
entitled to receive, when, as and if declared by the Board of
Directors, out of funds legally available therefor, cumulative cash
dividends on their shares at the Applicable Rate, determined as set
forth in paragraph (c) of this Section 2, and no more, payable on the
respective dates determined as set forth in paragraph (b) of this
Section 2. Dividends on the Outstanding shares of ATP Series C issued
on the Date of Original Issue shall accumulate from the Date of
Original Issue.
(b) (i) Dividends shall be payable when, as and if
declared by the Board of Directors following the initial Dividend
Payment Date, subject to subparagraph (b)(ii) of this Section 2, on
the shares of ATP Series C as follows:
2
(A) with respect to any Dividend Period of
one year or less on the Business Day next
succeeding the last day thereof and, if any, on the
91st, 181st and 271st days thereof; and
(B) with respect to any Dividend Period of
more than one year, on a quarterly basis on each
January 1, April 1, July 1 and October 1 within such
Dividend Period and on the Business Day following
the last day of such Dividend Period.
(ii) If a day for payment of dividends resulting from the
application of subparagraph (b)(i) above is not a Business Day, then
the Dividend Payment Date shall be the day next succeeding such day,
or if the day next succeeding such day for payment of dividends is not
a Business Day, then the Dividend Payment Date shall be the first
Business Day prior to such day for payment of dividends that is next
succeeded by a Business Day; provided, however, that if the Securities
Depository pays dividends in same-day funds, and such day for payment
is not a Business Day, the Dividend Payment Date shall be the first
Business Day following such day for payment of dividends.
(iii) The Corporation shall pay to the Paying Agent not later
than 3:00 p.m., New York City time on the Business Day next preceding
each Dividend Payment Date for the shares of ATP Series C, an
aggregate amount of funds available on the next Business Day in the
City of New York, New York, equal to the dividends to be paid to all
Holders of such shares on such Dividend Payment Date. The Corporation
shall not be required to establish any reserves for the payment of
dividends.
(iv) All moneys paid to the Paying Agent for the payment of
dividends shall be held in trust for the payment of such dividends by
the Paying Agent for the benefit of the Holders specified in
subparagraph (b)(v) of this Section 2. Any moneys paid to the Paying
Agent in accordance with the foregoing but not applied by the Paying
Agent to the payment of dividends, including interest earned on such
moneys, will, to the extent permitted by law, be repaid to the
Corporation at the end of 90 days from the date on which such moneys
were to have been so applied.
(v) Each dividend on ATP Series C shall be paid on the
Dividend Payment Date therefor to the Holders of the relevant series
as their names appear on the stock ledger or stock records of the
Corporation on the Business Day next preceding such Dividend Payment
Date. Dividends in arrears for any past Dividend Period may be
declared and paid at any time, without reference to any regular
Dividend Payment Date, to the Holders as their names appear on the
stock ledger or stock records of the Corporation on such date, not
exceeding 15 days preceding the payment date thereof, as may be fixed
by the Board of Directors.
3
(c) (i) The dividend rate on Outstanding shares of
ATP Series C during the period from and after the Date of Original
Issue to and including the last day of the initial Dividend Period
therefor shall be equal to the rate per annum set forth under
"Designation" above. For each subsequent Dividend Period with respect
to the shares of ATP Series C Outstanding thereafter, the dividend
rate shall be equal to the rate per annum that results from an Auction
for Outstanding shares of ATP Series C on the respective Auction Date
therefor next preceding such subsequent Dividend Period; provided,
however, that if an Auction for any subsequent Dividend Period of ATP
Series C is not held for any reason or if Sufficient Clearing Orders
have not been made in an Auction (other than as a result of all shares
of ATP Series C being the subject of Submitted Hold Orders), then the
dividend rate on the shares of ATP Series C for any such Dividend
Period shall be the Maximum Applicable Rate for such shares on the
Auction Date for such Dividend Period (except (i) during a Default
Period when the dividend rate shall be the Default Rate, as set forth
in Section 2(c)(ii) below) or (ii) after a Default Period and prior to
the beginning of the next Dividend Period when the dividend rate shall
be the Maximum Applicable Rate at the close of business on the last of
such Default Period). With respect to a Dividend Period of 93 days or
fewer, the Minimum Applicable Rate will apply automatically following
an Auction in which all of the Outstanding shares of ATP Series C are
subject (or are deemed to be subject) to Hold Orders. The rate per
annum at which dividends are payable on shares of ATP Series C as
determined pursuant to this Section 2(c)(i) shall be the "Applicable
Rate."
(ii) A "Default Period" will commence on the
applicable date set forth below if the Corporation fails to (A)
declare prior to the close of business on the second Business Day
preceding any Dividend Payment Date, for payment on or (to the extent
permitted as described below) within two Business Days after such
Dividend Payment Date to the persons who held shares as of 12:00 noon,
New York city time, on the Business Day preceding such Dividend
Payment Date, the full amount of any dividend payable on such Dividend
Payment Date, (B) deposit, irrevocably in trust, in same-day funds,
with the Paying Agent by 12:00 noon, New York City time, (I) on or (to
the extent permitted as described below) within two Business Days
after any Dividend Payment Date the full amount of any declared
dividend on ATP Series C payable on such Dividend Payment Date
(together with the failure to timely declare dividends described in
(A) above, hereinafter referred to as a "Dividend Default") or (II) on
or (to the extent permitted as described below) within two Business
Days after any date fixed for redemption of shares of ATP Series C
called for redemption, the applicable redemption price (a "Redemption
Default") or (C) maintain the "aaa"/AA Credit Rating unless the
"aaa"/AAA Credit Rating is restored by the Dividend Payment Date next
following the date on which the Corporation fails to maintain he
"aaa"/AAA Credit Rating (a "Rating Default" and, together with a
Dividend Default and a Redemption Default, hereinafter referred to as
a "Default"). A Default Period with respect to a Dividend Default or a
Redemption Default will consist of the period commencing on and
including the aforementioned Dividend Payment Date or
4
redemption date, as the case may be and ending on and including the
Business Day on which, by 12:00 noon, New York City time, all unpaid
dividends and unpaid redemption price shall have been so deposited or
shall have otherwise been made available to the applicable holders in
same-day funds. A Default Period with respect to a Rating Default
shall commence as of the date on which the Corporation fails to
maintain the "aaa"/AAA Credit Rating (provided that such Rating
Default shall be deemed not to have occurred and such Default Period
shall not commence if such Rating Default is cured by the next
succeeding Dividend Payment Date) and shall end on the earlier of the
date on which such default is cured as provided herein or the date on
which ATP Series C is mandatorily redeemed as provided herein. The
Applicable Rate for each Default Period, and each Dividend Period
commencing during a Default Period, will be equal to the Default Rate;
and each subsequent Dividend Period commencing after the beginning of
a Default Period shall be a Standard Term Period: provided, however,
that the commencement of a Default Period will not by itself cause the
commencement of a new Dividend Period. No Auction shall be held during
a Default Period. Any dividend due on any Dividend Payment Date (if,
prior to 12:00 noon, New York City time, on such Dividend Payment
Date, the Corporation has declared such dividend payable on or within
two Business Days after such Dividend Payment Date to the persons who
held such shares as of 12:00 noon, New York City time, on the Business
Day preceding such Dividend Payment Date) or redemption price with
respect to such shares not paid to such Persons when due may (if such
default is not solely due to the willful failure of the Corporation)
be paid to such persons in the same form of funds by 12:00 noon New
York City time, on any of the first two Business Days after such
Dividend Payment Date or due date, as the case may be, provided that
such amount is accompanied by an additional amount for such period of
non-payment at the Default Rate applied to the amount of such
non-payment based on the actual number of days comprising such period
divided by 360. For the purposes of the foregoing, payment to a person
in same-day funds made on or before 12:00 noon New York City time on
any Business Day at any time will be considered equivalent to payment
to that person in New York Clearing House (next-day) funds at the same
time on the preceding Business Day, and any payment made after 12:00
noon, New York City time, on any Business Day shall be considered to
have been made instead in the same form of funds and to the same
person before 12:00 noon, New York City time, on the next Business
Day. The Default Rate is equal to the Reference Rate multiplied by
three (3).
(iii) The amount of dividends per share payable (if
declared) on each Dividend Payment Date of each Dividend Period of
less than one (1) year (or in respect of dividends on another date in
connection with a redemption during such Dividend Period) shall be
computed by multiplying the Applicable Rate (or the Default Rate) for
such Dividend Period (or a portion thereof) by a fraction, the
numerator of which will be the number of days in such Dividend Period
(or portion thereof) that such share was Outstanding and for which the
Applicable Rate or the Default Rate was applicable and
5
the denominator of which will be 360, multiplying the amount so
obtained by $25,000, and rounding the amount so obtained to the
nearest cent. During any Dividend Period of one (1) year or more, the
amount of dividends per share payable on any Dividend Payment Date (or
in respect of dividends on another date in connection with a
redemption during such Dividend Period) shall be computed as described
in the preceding sentence, except that it will be determined on the
basis of a year consisting of twelve 30-day months.
(d) Any dividend payment made on shares of ATP Series
C shall first be credited against the earliest accumulated but unpaid
dividends due with respect to ATP Series C.
(e) For so long as the shares of the ATP are
Outstanding, except as contemplated by Sections 3(j) and 7(e), the
Corporation will not declare, pay or set apart for payment any
dividend or other distribution (other than a dividend or distribution
paid in shares of, or options, warrants or rights to subscribe for or
purchase, Common Stock or other shares, if any, ranking junior to the
ATP as to dividends or upon liquidation) in respect to Common Stock or
any other shares of the Corporation ranking junior to or on a parity
with the ATP as to dividends or upon liquidation, or call for
redemption, redeem, purchase or otherwise acquire for consideration
any Common Stock or any other such junior shares (except by conversion
into or exchange for shares of the Corporation ranking junior to the
ATP as to dividends and upon liquidation) or any such parity shares
(except by conversion into or exchange for shares of the Corporation
ranking junior to or on a parity with the ATP as to dividends and upon
liquidation), unless (i) immediately after such transaction, the
Corporation would have Eligible Assets with an aggregate Discounted
Value at least equal to the ATP Basic Maintenance Amount and the 1940
Act ATP Asset Coverage would be achieved, (ii) full cumulative
dividends on the ATP due on or prior to the date of the transaction
have been declared and paid and (iii) the Corporation has redeemed the
full number of shares of the ATP required to be redeemed by any
provision for mandatory redemption contained in Section 3(a)(ii).
3. Redemption.
(a) (i) After the initial Dividend Period, subject to
the provisions of this Section 3 and to the extent permitted under the
1940 Act and Maryland law, the Corporation may, at its option, redeem
in whole or in part out of funds legally available therefor shares of
ATP Series C herein designated as (A) having a Dividend Period of one
year or less, on the Business Day after the last day of such Dividend
Period by delivering a notice of redemption not less than 15 days and
not more than 40 days prior to such redemption, at a redemption price
per share equal to $25,000, plus an amount equal to accumulated but
unpaid dividends thereon (whether or not earned or declared) to the
date fixed for redemption, or (B) having a Dividend Period of more
than one year, on any Business Day prior to the end of the relevant
Dividend Period by
6
delivering a notice of redemption not less than 15 days and not more
than 40 days prior to the date fixed for such redemption, at a
redemption price per share equal to $25,000, plus an amount equal to
accumulated but unpaid dividends thereon (whether or not earned or
declared) to the date fixed for redemption, plus a redemption premium,
if any, determined by the Board of Directors after consultation with
the Broker-Dealers and set forth in any applicable Specific Redemption
Provisions at the time of the designation of such Dividend Period as
set forth in Section 4 of these Articles Supplementary; provided,
however, that during a Dividend Period of more than one year no shares
of ATP Series C will be subject to optional redemption except in
accordance with any Specific Redemption Provisions approved by the
Board of Directors after consultation with the Broker-Dealers at the
time of the designation of such Dividend Period. Notwithstanding the
foregoing, the Corporation shall not give a notice of or effect any
redemption pursuant to this Section 3(a)(i) unless, on the date on
which the Corporation intends to give such notice and on the date of
redemption (a) the Corporation has available certain Deposit
Securities with maturity or tender dates not later than the day
preceding the applicable redemption date and having a value not less
than the amount (including any applicable premium) due to Holders of
ATP Series C by reason of the redemption of ATP Series C on such date
fixed for the redemption and (b) the Corporation would have Eligible
Assets with an aggregate Discounted Value at least equal the ATP Basic
Maintenance Amount immediately subsequent to such redemption, if such
redemption were to occur on such date, it being understood that the
provisions of paragraph (d) of this Section 3 shall be applicable in
such circumstances in the event the Corporation makes the deposit and
takes the other action required thereby.
(ii) If the Corporation fails to maintain, as of any
Valuation Date, Eligible Assets with an aggregate Discounted Value at
least equal to the ATP Basic Maintenance Amount or, as of the last
Business Day of any month, the 1940 Act ATP Asset Coverage, and such
failure is not cured within two Business Days following the relevant
Valuation Date in the case of a failure to maintain the ATP Basic
Maintenance Amount or the last Business Day of the following month in
the case of a failure to maintain 1940 Act Asset Coverage as of such
last Business Day (respectively, the "Asset Coverage Cure Date"), the
ATP will be subject to mandatory redemption out of funds legally
available therefor. The number of shares of ATP to be redeemed in
such circumstances will be equal to the lesser of (A) the minimum
number of shares of ATP the redemption of which, if deemed to have
occurred immediately prior to the opening of business on the relevant
Asset Coverage Cure Date, would result in the Corporation having
Eligible Assets with an aggregate Discounted Value at least equal to
the ATP Basic Maintenance Amount, or sufficient to satisfy 1940 Act
ATP Asset Coverage, as the case may be, in either case as of the
relevant Asset Coverage Cure Date (provided that, if there is no such
minimum number of shares the redemption of which would have such
result, all shares of ATP then Outstanding will be redeemed), and (B)
the maximum number of shares of ATP that can be redeemed out of funds
expected to be
7
available therefor on the mandatory redemption date at the Mandatory
Redemption Price set forth in subparagraph (a)(iv) of this Section 3.
(iii) If the Corporation at any time fails to maintain
the "aaa"/AAA Credit Rating and the Corporation is unable to restore
the "aaa"/AAA Credit Rating within 90 calendar days thereafter (the
"Rating Default Cure Date"), all shares of the ATP will be subject to
mandatory redemption out of funds legally available therefor, on the
Mandatory Redemption Date at the Mandatory Redemption Price set forth
in subparagraph (a)(iv) of this Section 3.
(iv) In determining the shares of the ATP required to
be redeemed in accordance with the foregoing Section 3(a)(ii), the
Corporation shall allocate the number of shares required to be
redeemed to satisfy the ATP Basic Maintenance Amount or the 1940 Act
ATP Asset Coverage, as the case may be, pro rata among the Holders of
shares of the ATP in proportion to the number of shares they hold and
shares of other Preferred Stock subject to mandatory redemption
provisions similar to those contained in this Section 3, subject to
the further provisions of this subparagraph (iv). The Corporation
shall effect any required mandatory redemption pursuant to
subparagraph (a)(ii) or (a) (iii) of this Section 3 no later than 30
days after the Asset Coverage Cure Date or the Rating Default Cure
Date, as the case may be (the "Mandatory Redemption Date"), except
that if the Corporation does not have funds legally available for the
redemption of, or is not otherwise legally permitted to redeem, the
number of shares of the ATP which would be required to be redeemed by
the Corporation under clause (A) of subparagraph (a)(ii) or
subparagraph (a)(iii) of this Section 3 if sufficient funds were
available, together with shares of other Preferred Stock which are
subject to mandatory redemption under provisions similar to those
contained in this Section 3, or the Corporation otherwise is unable to
effect such redemption on or prior to such Mandatory Redemption Date,
the Corporation shall redeem those shares of the ATP, and shares of
other Preferred Stock which it was unable to redeem, on the earliest
practicable date on which the Corporation will have such funds
available, upon notice pursuant to Section 3(b) to record owners of
shares of the ATP to be redeemed and the Paying Agent. The Corporation
will deposit with the Paying Agent funds sufficient to redeem the
specified number of shares of the ATP with respect to a redemption
required under subparagraph (a)(ii) or subparagraph (a)(iii) of this
Section 3, by 1:00 p.m., New York City time, of the Business Day
immediately preceding the Mandatory Redemption Date. If fewer than all
of the Outstanding shares of the ATP are to be redeemed pursuant to
this Section 3(a)(iv), the number of shares to be redeemed shall be
redeemed pro rata from the Holders of such shares in proportion to the
number of such shares held by such Holders, by lot or by such other
method as the Corporation shall deem fair and equitable, subject,
however, to the terms of any applicable Specific Redemption
Provisions. "Mandatory Redemption Price" means $25,000 per share, plus
an amount equal to accumulated but unpaid dividends thereon (whether
or not earned or declared)
8
to the date fixed for redemption. plus (in the case of a Dividend
Period of one year or more only) a redemption premium, if any,
determined by the Board of Directors after consultation with the
Broker-Dealers and set forth in any applicable Specific Redemption
Provisions.
(b) In the event of a redemption pursuant to Section
3(a), the Corporation will file a notice of its intention to redeem
with the Securities and Exchange Commission so as to provide at least
the minimum notice required under Rule 23c-2 under the 1940 Act or any
successor provision. In addition, the Corporation shall deliver a
notice of redemption to the Auction Agent (the "Notice of Redemption")
containing the information set forth below (i) in the case of an
optional redemption pursuant to subparagraph (a)(i) above, one
Business Day prior to the giving of notice to the Holders, (ii) in the
case of a mandatory redemption pursuant to subparagraph (a)(ii) or
subparagraph (a)(iii) above, on or prior to the 30th day preceding the
Mandatory Redemption Date. The Auction Agent will use its reasonable
efforts to provide telephonic notice to each Holder of shares of ATP
Series C called for redemption not later than the close of business on
the Business Day immediately following the day on which the Auction
Agent determines the shares to be redeemed (or, during a Default
Period with respect to such shares. nor later than the close of
business on the Business Day immediately following the day on which
the Auction Agent receives Notice of Redemption from the Corporation).
The Auction Agent shall confirm such telephonic notice in writing not
later than the close of business on the third Business Day preceding
the date fixed for redemption by providing the Notice of Redemption to
each Holder of shares called for redemption, the Paying Agent (if
different from the Auction Agent) and the Securities Depository.
Notice of Redemption will be addressed to the registered owners of ATP
Series C at their addresses appearing on the share records of the
Corporation. Such Notice of Redemption will set forth (i) the date
fixed for redemption, (ii) the number and identity of shares of ATP
Series C to be redeemed, (iii) the redemption price (specifying the
amount of accumulated dividends to be included therein), (iv) that
dividends on the shares to be redeemed will cease to accumulate on
such date fixed for redemption, and (v) the provision under which
redemption shall be made. No defect in the Notice of Redemption or in
the transmittal or mailing thereof will affect the validity of the
redemption proceedings, except as required by applicable law. If fewer
than all shares held by any Holder are to be redeemed, the Notice of
Redemption mailed to such Holder shall also specify the number of
shares to be redeemed from such Holder.
(c) Notwithstanding the provisions of paragraph (a)
of this Section 3, but subject to Section 7(e), no shares of the ATP
may be redeemed unless all dividends in arrears on the Outstanding
shares of the ATP and all capital stock of the Corporation ranking on
a parity with the ATP with respect to payment of dividends or upon
liquidation, have been or are being contemporaneously paid or set
aside for payment; provided, however, that the foregoing shall not
prevent the purchase or acquisition of all Outstanding shares of the
ATP pursuant to the successful completion of an otherwise lawful
purchase or exchange offer made on the same terms to, and accepted by,
Holders of all Outstanding shares of the ATP.
9
(d) Upon the deposit of funds sufficient to redeem
shares of ATP Series C with the Paying Agent and the giving of the
Notice of Redemption to the Auction Agent under paragraph (b) of this
Section 3, dividends on such shares shall cease to accumulate and such
shares shall no longer be deemed to be Outstanding for any purpose
(including, without limitation, for purposes of calculating whether
the Corporation has maintained the requisite ATP Basic Maintenance
Amount or the 1940 Act ATP Asset Coverage), and all rights of the
holder of the shares so called for redemption shall cease and
terminate, except the right of such holder to receive the redemption
price specified herein, but without any interest or other additional
amount. Such redemption price shall be paid by the Paying Agent to the
nominee of the Securities Depository. The Corporation shall be
entitled to receive from the Paying Agent, promptly after the date
fixed for redemption, any cash deposited with the Paying Agent in
excess of (i) the aggregate redemption price of the shares of ATP
Series C called for redemption on such date and (ii) such other
amounts, if any, to which Holders of shares of ATP Series C called for
redemption may be entitled. Any funds so deposited that are unclaimed
at the end of two years from such redemption date shall, to the extent
permitted by law, be paid to the Corporation, after which time the
Holders of shares of ATP Series C so called for redemption may look
only to the Corporation for payment of the redemption price and all
other amounts, if any, to which they may be entitled. The Corporation
shall be entitled to receive, from time to time after the date fixed
for redemption, any interest earned on the funds so deposited.
(e) To the extent that any redemption for which
Notice of Redemption has been given is not made by reason of the
absence of legally available funds therefor, or is otherwise
prohibited, such redemption shall be made as soon as practicable to
the extent such funds become legally available or such redemption is
no longer otherwise prohibited. Failure to redeem shares of ATP Series
C shall be deemed to exist at any time after the date specified for
redemption in a Notice of Redemption when the Corporation shall have
failed, for any reason whatsoever, to deposit in trust with the Paying
Agent the redemption price with respect to any shares for which such
Notice of Redemption has been given. Notwithstanding the fact that the
Corporation may not have redeemed shares of ATP Series C for which a
Notice of Redemption has been given, dividends may be declared and
paid on shares of ATP Series C and shall include those shares of ATP
Series C for which Notice of Redemption has been given but for which
deposit of funds has not been made.
(f) All moneys paid to the Paying Agent for payment
of the redemption price of shares of ATP Series C called for
redemption shall be held in trust by the Paying Agent for the benefit
of holders of shares so to be redeemed.
(g) So long as any shares of ATP Series C are held of
record by the nominee of the Securities Depository, the redemption
price for such shares will be paid on the date fixed for redemption to
the nominee of the Securities Depository for distribution to Agent
Members for distribution to the persons for whom they are acting as
agent.
10
(h) Except for the provisions described above.
nothing contained in these Articles Supplementary limits any right of
the Corporation to purchase or otherwise acquire any shares of ATP
Series C outside of an Auction at any price, whether higher or lower
than the price that would be paid in connection with an optional or
mandatory redemption, so long as, at the time of any such purchase,
there is no arrearage in the payment of dividends on. or the mandatory
or optional redemption price with respect to, any shares of ATP Series
C for which Notice of Redemption has been given and the Corporation is
in compliance with the 1940 Act ATP Asset Coverage and has Eligible
Assets with an aggregate Discounted Value at least equal to the ATP
Basic Maintenance Amount after giving effect to such purchase or
acquisition on the date thereof. Any shares which are purchased,
redeemed or otherwise acquired by the Corporation shall have no voting
rights. If fewer than all the Outstanding shares of ATP Series C are
redeemed or otherwise acquired by the Corporation, the Corporation
shall give notice of such transaction to the Auction Agent, in
accordance with the procedures agreed upon by the Board of Directors.
(i) In the case of any redemption pursuant to this
Section 3 only whole shares of ATP Series C shall be redeemed, and in
the event that any provision of the Articles would require redemption
of a fractional share, the Auction Agent shall be authorized to round
up so that only whole shares are redeemed.
(j) Notwithstanding anything herein to the contrary,
including, without limitation, Sections 2(e), 6(g) and 12 of Part I
hereof, the Board of Directors may authorize. create or issue any
class or series of stock ranking prior to or on a parity with the ATP
with respect to the payment of dividends or the distribution of assets
upon dissolution, liquidation or winding up of the affairs of the
Corporation, to the extent permitted by the 1940 Act, as amended, if,
upon issuance, the net proceeds from the sale of such stock (or such
portion thereof needed to redeem or repurchase the Outstanding ATP)
are deposited with the Auction Agent in accordance with Section 3(d)
of Part I hereof, Notice of Redemption as contemplated by Section 3(b)
of Part I hereof has been delivered prior thereto or is sent promptly
thereafter, and such proceeds are used to redeem all Outstanding ATP.
4. Designation of Dividend Period.
(a) The initial Dividend Period for ATP Series C is
as set forth under 'Designation" above. The Corporation will designate
the duration of subsequent Dividend Periods of ATP Series C; provided,
however, that no such designation is necessary for a Standard Term
Period and, provided further, that any designation of an Alternate
Term Period shall be effective only if (i) notice thereof shall have
been given as provided herein, (ii) any failure to pay in a timely
manner to the Auction Agent the full amount of any dividend on, or the
redemption price of, ATP Series C shall have been cured as provided
above, (iii) Sufficient Clearing Orders shall have existed in an
Auction held on the Auction Date immediately preceding the first day
of such proposed Alternate Term Period, (iv) if the Corporation shall
have mailed a Notice of Redemption with respect to any shares, the
redemption price with
11
respect to such shares shall have been deposited with the Paying
Agent. and (v) in the case of the designation of an Alternate Term
Period, the Corporation has confirmed that as of the Auction Date next
preceding the first day of such Alternate Term Period, it has Eligible
Assets with an aggregate Discounted Value at least equal to the ATP
Basic Maintenance Amount, and the Corporation has consulted with the
Broker-Dealers and has provided notice of such designation and an ATP
Basic Maintenance Report to Fitch (if Fitch is then rating the ATP),
Moody's (if ▇▇▇▇▇'▇ is than rating the ATP) and any Other Rating
Agency which is then rating the ATP and so requires.
(b) If the Corporation proposes to designate any
Alternate Term Period, not fewer than 15 (or two Business Days in the
event the duration of the Dividend Period prior to such Alternate Term
Period is fewer than 15 days) nor more than 30 days prior to the first
day of such Alternate Term Period, notice shall be (i) made by press
release and (ii) communicated by the Corporation by telephonic or
other means to the Auction Agent and confirmed in writing promptly
thereafter. Each such notice shall state (A) that the Corporation
proposes to exercise its option to designate a succeeding Alternate
Term Period, specifying the first and last days thereof and (B) that
the Corporation will by 3:00 p.m., New York City time, on the second
Business Day next preceding the first day of such Alternate Term
Period, notify the Auction Agent, who will promptly notify the
Broker-Dealers, of either (x) its determination, subject to certain
conditions, to proceed with such Alternate Term Period, subject to the
terms of any Specific Redemption Provisions, or (y) its determination
not to proceed with such Alternate Term Period, in which latter event
the succeeding Dividend Period shall be a Standard Term Period.
No later than 3:00 p.m., New York City time, on the
second Business Day next preceding the first day of any proposed
Alternate Term Period, the Corporation shall deliver to the Auction
Agent, who will promptly deliver to the Broker-Dealers and Existing
Holders, either:
(i) a notice stating (A) that the Corporation has
determined to designate the next succeeding Dividend Period as an
Alternate Term Period, specifying the first and last days thereof and
(B) the terms of any Specific Redemption Provisions: or
(ii) a notice stating that the Corporation has
determined not to exercise its option to designate an Alternate Term
Period.
If the Corporation fails to deliver either such notice with respect to
any designation of any proposed Alternative Term Period to the Auction
Agent or is unable to make the confirmation provided in clause (v) of
Paragraph (a) of this Section 4 by 3:00 p.m., New York city time, on
the second Business Day next preceding the first day of such proposed
Alternate Term Period, the Corporation shall be deemed to have
delivered a notice to the Auction Agent with
12
respect to such Dividend Period to the effect set forth in clause (ii)
above, thereby resulting in a Standard Term Period.
5. Restrictions on Transfer. Shares of ATP Series C may be transferred
only (a) pursuant to an Order placed in an Auction, (b) to or through a
Broker-Dealer, (c) to a Person that has delivered a signed Master
Purchaser's Letter to the Auction Agent or (d) to the Corporation or any
Affiliate. Notwithstanding the foregoing, a transfer other than pursuant to
an Auction will not be effective unless the selling Existing Holder or the
Agent Member of such Existing Holder, in the case of an Existing Holder
whose shares are listed in its own name on the books of the Auction Agent,
or the Broker-Dealer or Agent Member of such Broker-Dealer, in the case of
a transfer between persons holding shares of ATP Series C through different
Broker-Dealers, advises the Auction Agent of such transfer. The
certificates representing the shares of ATP Series C issued to the
Securities Depository will bear legends with respect to the restrictions
described above and stop-transfer instructions will be issued to the
Transfer Agent and/or Registrar.
6. Voting Rights. (a) Except as otherwise provided in the Articles or
as otherwise required by applicable law, (i) each Holder of shares of ATP
Series C shall be entitled to one vote for each share of ATP Series C held
on each matter submitted a vote of shareholders of the Corporation, and
(ii) the holders of Outstanding shares of Preferred Stock, including ATP
Series C, and shares of Common Stock shall vote together as a single class;
provided, however, that, at any meeting of the stockholders of the
Corporation held for the election of directors, the holders of Outstanding
shares of Preferred Stock, including ATP Series C, represented in person or
by proxy at said meeting, shall be entitled, as a class, to the exclusion
of the holders of all other securities and classes of capital stock of the
Corporation, to elect two directors of the Corporation, each share of
Preferred Stock, including ATP Series C, entitling the holder thereof to
one vote. Subject to paragraph (b) of this Section 6, the holders of
Outstanding shares of Common Stock and Preferred Stock, including ATP
Series C. voting together. as a single class, shall elect the balance of
the directors.
(b) During any period in which any one or more of the
conditions described below shall exist (such period being referred to
herein as a "Voting Period"), the number of directors constituting the
Board of Directors shall be automatically increased by the smallest
number that, when added to the two directors elected exclusively by
the holders of shares of Preferred Stock, including ATP Series C,
would constitute a majority of the Board of Directors as so increased
by such smallest number; and the holders of shares of Preferred Stock,
including ATP Series C, shall be entitled, voting as a class on a
one-vote-per-share basis (to the exclusion of the holders of all other
securities and classes of capital stock of the Corporation), to elect
such smallest number of additional directors, together with the two
directors that such holders are in any event entitled to elect. A
Voting Period shall commence:
(i) if at the close of business on any Dividend
Payment Date accumulated dividends (whether or not earned or declared)
on shares of the Preferred
13
Stock, including ATP Series C, equal to at least two full years'
dividends shall be due and unpaid; or
(ii) if at any time holders of any other shares of
Preferred Stock are entitled under the 1940 Act to elect a majority of
the directors of the Corporation.
Upon the termination of a Voting Period, the voting rights described
in this paragraph (b) of Section 6 shall cease, subject always,
however, to the revesting of such voting rights in the Holders of
shares of Preferred Stock, including ATP Series C, upon the further
occurrence of any of the events described in this paragraph (b) of
Section 6.
(c) As soon as practicable after the accrual of any
right of the holders of shares of Preferred Stock, including ATP
Series C, to elect additional directors as described in paragraph (b)
of this Section 6, the Corporation shall notify the Auction Agent, and
the Auction Agent shall call a special meeting of such holders, by
mailing a notice of such special meeting to such holders, such meeting
to be held not less than 10 nor more than 30 days after the date of
mailing of such notice. If the Corporation fails to send such notice
to the Auction Agent or if the Auction Agent does not call such a
special meeting, it may be called by any such holder on like notice.
The record date for determining the holders entitled to notice of and
to vote at such special meeting shall be the close of business on the
fifth Business Day preceding the day on which such notice is mailed.
At any such special meeting and at each meeting of holders of shares
of Preferred Stock, including ATP Series C, held during a Voting
Period at which directors are to be elected, such holders, voting
together as a class (to the exclusion of the holders of all other
securities and classes of capital stock of the Corporation), shall be
entitled to elect the number of directors prescribed in paragraph (b)
of this Section 6 on a one-vote-per-share basis.
(d) The terms of office of all persons who are
directors of the Corporation at the time of a special meeting of
holders of the ATP and holders of other Preferred Stock to elect
directors shall continue, notwithstanding the election at such meeting
by the holders and such other holders of the number of directors that
they are entitled to elect, and the persons so elected by such
holders, together with the two incumbent directors elected by such
holders and the remaining incumbent directors elected by the holders
of the Common Stock and Preferred Stock, shall constitute the duly
elected directors of the Corporation.
(e) Simultaneously with the termination of a Voting
Period, the terms of office of the additional directors elected by the
Holders of the ATP and holders of other Preferred Stock pursuant to
paragraph (b) of this Section 6 shall terminate, the remaining
directors shall constitute the directors of the Corporation and the
voting rights of such holders to elect additional directors pursuant
to paragraph (b) of this Section 6 shall cease, subject to the
provisions of the last sentence of paragraph (b) of this Section 6.
14
(f) So long as any of the shares of Preferred Stock.
including ATP Series C, are Outstanding, the Corporation will not,
without the affirmative vote of the holders of a majority of the
Outstanding shares of Preferred Stock determined with reference to a
"majority of outstanding voting securities" as that term is defined in
Section 2(a)(42) of the 1940 Act, voting as a separate class, (i)
amend, alter or repeal any of the preferences, rights or powers of
such class so as to affect materially and adversely such preferences,
rights or powers; (ii) increase the authorized number of shares of
Preferred Stock; (iii) create, authorize or issue shares of any class
of capital stock ranking senior to or on a parity with the 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, such shares of capital
stock ranking senior to or on a parity with the Preferred Stock or
reclassify any authorized shares of capital stock of the Corporation
into any shares ranking senior to or on a parity with the Preferred
Stock (except that, notwithstanding the foregoing, but subject to the
provisions of Sections 3(j) and 12, the Board of Directors, without
the vote or consent of the holders of the Preferred Stock, may from
time to time authorize, create and classify, and the Corporation may
from time to time issue, shares or series of Preferred Stock ranking
on a parity with the ATP with respect to the payment of dividends and
the distribution of assets upon dissolution, liquidation or winding up
to the affairs of the Corporation, and may reclassify and/or issue any
shares of the ATP previously purchased or redeemed by the Corporation
subject to continuing compliance by the Corporation with 1940 Act ATP
Asset Coverage and ATP Basic Maintenance Amount requirements); (iv)
institute any proceedings to be adjudicated bankrupt or insolvent, or
consent to the institution of bankruptcy or insolvency proceedings
against it, or file a petition seeking or consenting to reorganization
or relief under any applicable federal or state law relating to
bankruptcy or insolvency, or consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar
official) of the Corporation or a substantial part of its property, or
make any assignment for the benefit of creditors, or, except as may be
required by 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; (v) 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 the Corporation's assets as a whole, 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
(vi) below and (D) liens to secure payment for services rendered
including, without limitation, services rendered by the Corporation's
custodian and the Auction Agent; or (vi) create, authorize, issue,
incur or suffer to exist any indebtedness for borrowed money or any
direct or indirect guarantee of such indebtedness for borrowed money
or any direct or indirect guarantee of such indebtedness, except the
Corporation may borrow for temporary or emergency purposes as may be
permitted by the Corporation's investment restrictions or as permitted
under the proviso to Section 12(b)
15
hereof; provided, however, that transfers of assets by the Corporation
subject to an obligation to repurchase shall not be deemed to be
indebtedness for purposes of this provision to the extent that after
any such transaction the Corporation has Eligible Assets with an
aggregate Discounted Value at least equal to the ATP Basic Maintenance
Amount as of the immediately preceding Valuation Date.
(g) The affirmative vote of the holders of a majority
of the Outstanding shares of Preferred Stock, including ATP Series C,
voting as a separate class, shall be required to approve any plan of
reorganization (as such term is used in the 1940 Act) adversely
affecting such shares or any action requiring a vote of security
holders of the Corporation under Section 13(a) of the 1940 Act. In the
event a vote of holders of shares of Preferred Stock is required
pursuant to the provisions of Section 13(a) of the 1940 Act, the
Corporation shall, not later than ten Business Days prior to the date
on which such vote is to be taken, notify Moody's (if ▇▇▇▇▇'▇ is then
rating ATP Series C), Fitch (if Fitch is then rating ATP Series C) and
any Other Rating Agency which is then rating ATP Series C and which so
requires that such vote is to be taken and the nature of the action
with respect to which such vote is to be taken and shall, not later
than ten Business Days after the date on which such vote is taken,
notify Moody's, Fitch and any such Other Rating Agency, as applicable,
of the results of such vote.
(h) The affirmative vote of the holders of a majority
of the Outstanding shares of ATP Series C, voting separately from any
other series, shall be required with respect to any matter that
materially and adversely affects the rights, preferences, or powers of
ATP Series C in a manner different from that of other series of
classes of the Corporation's shares of capital stock. For purposes of
the foregoing, no matter shall be deemed to adversely affect any
right, preference or power unless such matter (i) alters or abolishes
any preferential right of such series; (ii) creates, alters or
abolishes any right in respect of redemption of such series; or (iii)
creates or alters (other than to abolish) any restriction on transfer
applicable to such series. The vote of holders of ATP Series C
described in this Section 6(i) will in each case be in addition to a
separate vote of the requisite percentage of Common Stock and/or ATP
necessary to authorize the action in question.
(i) The Board of Directors, without the vote or
consent of any Holder of the Preferred Stock, including ATP Series C,
or any other stockholder of the Corporation, may from time to time
amend, alter or repeal any or all of the definitions of the terms or
provisions listed below, and any such amendment, alteration or repeal
will not be deemed to affect the preferences, rights or powers of
shares of ATP or the Holders thereof, provided that the Board of
Directors receives written confirmation from Moody's (if ▇▇▇▇▇'▇ is
then rating ATP Series C) and Fitch (if Fitch is then rating ATP
Series C) (with such confirmation in no event being required to be
obtained from a particular rating agency in the case of the
definitions relevant only to and adopted in connection with the rating
of ATP Series C, if any, by any other rating agency) that such
amendment, alteration or repeal would not impair the rating then
assigned by Moody's or Fitch, respectively. In addition, the Board of
Directors, without the
16
vote or consent of any Holder of the Preferred Stock, including ATP Series
C, or any other stockholder of the Corporation, may from time to time
adopt, amend, alter or repeal any or all of any additional or other
definitions or add covenants and other obligations of the Corporation
(e.g., maintenance of minimum liquidity level) or confirm the applicability
of covenants and other obligations set forth herein in connection with
obtaining or maintaining the rating of Moody's, Fitch or any Other Rating
Agency with respect to ATP Series C, and any such amendment, alteration or
repeal will not be deemed to affect the preferences, rights or powers of
ATP Series C or the Holders thereof, provided the Board of Directors
receives written confirmation from the relevant rating agency (such
confirmation in no event being required to be obtained from a particular
rating agency with respect to definitions or other provisions relevant only
to another rating agency's rating) that any such amendment, alteration or
repeal would not adversely affect the rating then assigned by such rating
agency.
Definitions and Provisions Subject to Change by Director Action:
----------------------------------------------------------------
ATP Basic Maintenance Amount
ATP Basic Maintenance Certificate
Asset Coverage Cure Date
Deposit Securities
Discounted Value
Exposure Period
Fitch Discount Factor
Fitch Eligible Assets
Fitch Industry Classification
Market Value
Maximum Applicable Rate
Minimum Applicable Rate
Moody's Discount Factor
Moody's Eligible Assets
Moody's Industry Classification
1940 Act Asset Coverage Cure Date
1940 Act ATP Asset Coverage
Volatility Factor
Short Term Money Market Instruments
Last Paragraph of Section 12
In addition, subject to compliance with applicable law, the Board
of Directors may amend the definition of Maximum Applicable Rate to
increase the percentage amount by which the Reference Rate is
multiplied to determine the Maximum Applicable Rate shown therein
without the vote or consent of the holders of the shares of the
Preferred Stock, including ATP Series C, or any other stockholder of
the Corporation, and without receiving any confirmation from any
rating agency after consultation with the Broker-Dealers, provided
that immediately following any such increase the Corporation would be
in compliance with the ATP Basic Maintenance Amount.
(j) Unless otherwise required by law, holders of
shares of ATP Series C shall not have any relative rights or
preferences or other special rights other than those specifically set
forth herein. The holders of shares of ATP Series C shall have no
rights
17
to cumulative voting. In the event that the Corporation fails to pay
any dividends on the shares of ATP Series C, the exclusive remedy of
the holders shall be the right to vote for directors pursuant to the
provisions of this Section 6.
(k) The foregoing voting provisions will not apply
with respect to ATP Series C if, at or prior to the time when a vote
is required, such shares have been (i) redeemed or (ii) called for
redemption and sufficient funds shall have been deposited in trust to
effect such redemption.
7. Liquidation Rights. (a) Upon the dissolution, liquidation or
winding up of the affairs of the Corporation, whether voluntary or
involuntary, the holders of ATP Series C then Outstanding, together with
holders of shares of any class of stock ranking on a parity with ATP Series
C upon dissolution, liquidation or winding up, shall be entitled to receive
and to be paid out of the assets of the Corporation (or the proceeds
thereof) available for distribution to its stockholders after satisfaction
of claims of creditors of the Corporation an amount equal to the
liquidation preference with respect to such shares. The liquidation
preference for shares of ATP Series C shall be $25,000 per share, plus an
amount equal to all accumulated dividends thereon (whether or not earned or
declared but without interest) to the date payment of such distribution is
made in full or a sum sufficient for the payment thereof is set apart with
the Paying Agent. No redemption premium shall be paid upon any liquidation
even if such redemption premium would be paid upon optional or mandatory
redemption of the relevant shares.
(b) Upon the dissolution, liquidation or winding up
of the Corporation, whether voluntary or involuntary, until payment in
full is made to the holders of ATP Series C of the liquidation
distribution to which they are entitled, no dividend or other
distribution shall be made to the holders of shares of Common Stock or
any other class of stock of the Corporation ranking junior to ATP
Series C upon dissolution, liquidation or winding up and no purchase,
redemption or other acquisition for any consideration by the
Corporation shall be made in respect of the shares of Common Stock or
any other class of stock of the Corporation ranking junior to ATP
Series C upon dissolution, liquidation or winding up.
(c) A consolidation or merger of the Corporation with
or into any other company or companies, or a sale, lease or exchange
of all or substantially all of the assets of the Corporation in
consideration for the issuance of equity securities of another company
shall not be deemed to be a liquidation, dissolution or winding up,
whether voluntary or involuntary, for the purposes of this Section 7;
provided, however, that the consolidation, merger, sale, lease or
exchange does not materially adversely affect any designation, right,
preference or limitation of ATP Series C or any shares issuable in
exchange for shares of ATP Series C in any such consolidation or
merger.
18
(d) After the payment to the Holders of ATP Series C
of the full preferential amounts provided for in this Section 7, the
holders of ATP Series C as such shall have no right or claim to any of
the remaining assets of the Corporation.
(e) In the event the assets of the Corporation or
proceeds thereof available for distribution to the Holders of ATP
Series C, upon any dissolution, liquidation or winding up of the
affairs of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are
entitled pursuant to paragraph (a) of this Section 7, no such
distribution shall be made on account of any shares of any other class
or series of Preferred Stock ranking on a parity with ATP Series C
with respect to the distribution of assets upon such dissolution,
liquidation or winding up unless proportionate distributive amounts
shall be paid on account of the shares of ATP Series C, ratably, in
proportion to the full distributable amounts to which holders of all
such parity shares are respectively entitled upon such dissolution,
liquidation or winding up.
(f) Subject to the rights of the holders of shares of
any series or class or classes of stock ranking on a parity with ATP
Series C with respect to the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Corporation, after
payment shall have been made in full to the holders of the shares of
ATP Series C as provided in paragraph (a) of this Section 7, but not
prior thereto, any other series or class or classes of stock ranking
junior to ATP Series C with respect to the distribution of assets upon
dissolution, liquidation or winding up of the affairs of the
Corporation shall, subject to any respective terms and provisions (if
any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed, and the holders of the shares of
ATP Series C shall not be entitled to share therein.
8. Auction Agent. For so long as any shares of ATP Series C are
Outstanding, the Auction Agent, duly appointed by the Corporation to so
act, shall be in each case a commercial bank, trust company or other
financial institution independent of the Corporation and its Affiliates
(which, however, may engage or have engaged in business transactions with
the Corporation or its Affiliates) and at no time shall the Corporation or
any of its Affiliates act as the Auction Agent in connection with the
Auction Procedures. If the Auction Agent resigns or for any reason its
appointment is terminated during any period that any shares of ATP Series C
are Outstanding, the Corporation shall use its best efforts promptly
thereafter to appoint another qualified commercial bank, trust company or
financial institution to act as the Auction Agent.
9. 1940 Act ATP Asset Coverage. The Corporation shall maintain, as of
each Valuation Date on which any share of the ATP is Outstanding, asset
coverage with respect to the ATP which is equal to or greater than the 1940
Act ATP Asset Coverage; provided, however, that Section 3(a)(ii) shall be
the sole remedy in the event the Corporation fails to do so.
19
10. ATP Basic Maintenance Amount. So long as shares of the ATP are
Outstanding and Moody's, Fitch or any Other Rating Agency which so requires
is then rating the shares of the ATP, the Corporation shall maintain, as of
each Valuation Date, Moody's Eligible Assets (if ▇▇▇▇▇'▇ is then rating the
ATP), Fitch Eligible Assets (if Fitch is then rating the ATP) and (if
applicable) Other Rating Agency Eligible Assets having an aggregate
Discounted Value equal to or greater than the ATP Basic Maintenance Amount;
provided, however, that Section 3(a)(ii) shall be the sole remedy in the
event the Corporation fails to do so.
11. [Reserved]
12. Certain Other Restrictions. For so long as any shares of ATP
Series C are Outstanding and Moody's, Fitch or any Other Rating Agency
which so requires is then rating such shares, the Corporation will not,
unless it has received written confirmation from Moody's (if ▇▇▇▇▇'▇ is
then rating ATP Series C), Fitch (if Fitch is then rating ATP Series C) and
(if applicable) such Other Rating Agency that any such action would not
impair the rating then assigned by such rating agency to ATP Series C,
engage in any one or more of the following transactions:
(a) purchase or sell futures contracts or options
thereon with respect to portfolio securities or write unsecured put or
uncovered call options on portfolio securities, engage in options
transactions involving cross-hedging, or enter into any swap
transaction;
(b) borrow money, except that the Corporation may,
without obtaining the written confirmation described above, borrow
money for the purpose of clearing securities transactions; provided
that the ATP Basic Maintenance Amount would continue to be satisfied
after giving effect to such borrowing and if the borrowing matures in
not more than 60 days and is non-redeemable;
(c) except in connection with a refinancing of the
ATP (including the ATP Series C), issue any class or series of stock
ranking prior to or on a parity with ATP Series C with respect to the
payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up of the Corporation, or reissue any shares of
ATP Series C previously purchased or redeemed by the Corporation;
(d) engage in any short sales of securities;
(e) lend portfolio securities; or
(f) merge or consolidate into or with any other
corporation.
For purposes of valuation of Moody's Eligible Assets and Fitch
Eligible Assets: (A) if the Corporation writes a call option, the
underlying asset will be valued as follows: (1) if the
20
option is exchange-traded and may be offset readily or if the option
expires before the earliest possible redemption of ATP Series C, at the
lower of the Discounted Value of the underlying security of the option and
the exercise price of the option or (2) otherwise, it has no value; (B) if
the Corporation writes a put option. the underlying asset Will be valued as
follows: the lesser of (1) exercise price and (2) the Discounted Value of
the underlying security; and (C) call or put option contracts which the
Corporation buys have no value. For so long as ATP Series C is rated by
Moody's or Fitch: (A) the Corporation will not engage in options
transactions for leveraging or speculative purposes; (B) the Corporation
will not write or sell any anticipatory contracts pursuant to which the
Corporation ▇▇▇▇▇▇ the anticipated purchase of an asset prior to completion
of such purchase; (C) the Corporation will not enter into an !option
transaction with respect to portfolio securities unless, after giving
effect thereto, the Corporation would continue to have Eligible Assets with
an aggregate Discounted Value equal to or greater than the ATP Basic
Maintenance Amount; (D) the Corporation will not enter into an option
transaction with respect to portfolio securities unless after giving effect
to such transaction the Corporation would continue to be in compliance with
the provisions relating to the ATP Basic Maintenance Amount; (E) for
purposes of the ATP Basic Maintenance Amount assets in margin accounts are
not Eligible Assets; (F) the Corporation shall write only exchange-traded
options on exchanges approved by Moody's if ▇▇▇▇▇'▇ is then rating ATP
Series C) and Fitch (if Fitch is then rating ATP Series C); (G) where
delivery may be made to the Corporation with any of a class of securities,
the Corporation shall assume for purposes of the ATP Basic Maintenance
Amount that it takes delivery of that security which yields it the least
value; (H) the Corporation will not engage in forward contracts; and (I)
there shall be a quarterly audit made of the Corporation's options
transactions by the Corporation's independent accountants to confirm that
the Corporation is in compliance with these standards.
13. Compliance Procedures for Asset Maintenance Tests. For so long as
any shares of ATP Series C are Outstanding and ▇▇▇▇▇'▇, Fitch or any Other
Rating Agency which so requires is then rating such shares:
(a) As of each Valuation Date, the Corporation shall
determine in accordance with the procedures specified herein (i) the
Market Value of each Eligible Asset owned by the Corporation on that
date, (ii) the Discounted Value of each such Eligible Asset using the
Discount Factors, (iii) whether the ATP Basic Maintenance Amount is
met as of that date, (iv) the value of the total assets of the
Corporation, less all liabilities, and (v) whether the 1940 Act ATP
Asset Coverage is met as of that date.
(b) Upon any failure to maintain the required ATP
Basic Maintenance Amount or 1940 Act ATP Asset Coverage on any
Valuation Date, the Corporation may use reasonable commercial efforts
(including, without limitation, altering the composition of its
portfolio, purchasing shares of the ATP outside of an Auction or in
the event of a failure to file a certificate on a timely basis,
submitting the requisite certificate), subject to the fiduciary
obligations of the Board of Directors, to reattain (or certify in the
case of a failure to file on a timely basis, as the case may be) the
required ATP Basic Maintenance
21
Amount or 1940 Act ATP Asset Coverage on or prior to the ATP Basic
Maintenance Cure Date or 1940 Act ATP Cure Date. as the case may be.
(c) Compliance with the ATP Basic Maintenance Amount
and 1940 Act Asset Coverage Tests shall be determined with reference
to those shares of the ATP which are deemed to be Outstanding
hereunder.
(d) The Corporation shall deliver a certificate which
sets forth a determination of items (i)-(iii) of paragraph (a) of this
Section 13 (an "ATP Basic Maintenance Certificate") (i) to the Auction
Agent, Moody's (if ▇▇▇▇▇'▇ is then rating ATP Series C), Fitch (if
Fitch is then rating ATP Series C) and any Other Rating Agency which
is then rating ATP Series C and which so requires as of (A) the
Business Day preceding the Date of Original Issue and (B) any
Valuation Date on which the Corporation fails to have Eligible Asses
with an aggregate Discounted Value at least equal to 125% of the ATP
Basic Maintenance Amount, (ii) to the Auction Agent, Fitch (if Fitch
is then rating ATP Series C) and any Other Rating Agency which is then
rating ATP Series C and which so requires (A) as of every fourth
Valuation Date after the Date of Original Issue for the first year
following the Date of Original Issue, (B) if the Corporation fails to
have Eligible Assets with an aggregate Discounted Value at least equal
to ATP Basic Maintenance Amount, and (C) on request by Fitch or such
Other Rating Agency, as applicable, (iii) to the Auction Agent,
Moody's (if ▇▇▇▇▇'▇ is then rating ATP Series C), Fitch (if Fitch is
then rating ATP Series C) and any Other Rating Agency which is then
rating ATP Series C and which so requires as of (A) the Valuation Date
next following the date of redemption by the Corporation of shares of
Common Stock which, together with all other shares of Common Stock
purchased during the six months preceding such date, equal in excess
of 1,000,000 shares of Common Stock, and (B) the last Valuation Date
of each fiscal quarter and a Valuation Date during such fiscal quarter
randomly selected by the Corporation's independent accountants as
provided in Section 10(g), and (iv) to the Auction Agent, Moody's (if
▇▇▇▇▇'▇ is then rating ATP Series C), Fitch (if Fitch is then rating
ATP Series C) and any Other Rating Agency which is then rating ATP
Series C and which so requires as of a Business Day on or before any
Asset Coverage Cure Date relating to the Corporation's cure of a
failure to have Eligible Assets with an aggregate Discounted Value at
least equal to the ATP Basic Maintenance Amount. Such ATP Basic
Maintenance Certificate shall be delivered in the case of clause
(i)(A) on the Date of Original Issue and in the case of clauses
(i)(B), (ii), (iii) and (iv) above on or before the third Business Day
after the relevant Valuation Date or Asset Coverage Cure Date.
(e) The Corporation shall deliver to the Auction
Agent, Moody's (if ▇▇▇▇▇'▇ is then rating ATP Series C), Fitch (if
Fitch is then rating ATP Series C), and any Other Rating Agency which
is then rating ATP Series C and which so requires a certificate with
respect to the calculation of the 1940 Act ATP Asset Coverage and the
value of the portfolio holdings of the Corporation (a "1940 Act ATP
Asset Coverage Certificate") (i) as of the Business Day preceding the
Date of Original Issue, and (ii) as of (A) the last Valuation Date of
each quarter thereafter, and (B) as of the Business Day on or before
the Asset
22
Coverage Cure Date relating to the failure to satisfy the 1940 Act
Asset Coverage. Such 1940 Act ATP Asset Coverage Certificate shall be
delivered in the case of clause (i) on the Date of Original Issue and
in the case of clause (ii) on or before the third Business Day after
the relevant Valuation Date or the Asset Coverage Cure Date.
(f) [Reserved]
(g) On the Date of Original Issue, the Corporation
shall deliver to the Auction Agent, Moody's (if ▇▇▇▇▇'▇ is then rating
ATP Series C), Fitch (if Fitch is then rating ATP Series C) and any
Other Rating Agency which is then rating ATP Series C and which so
requires a letter prepared by the Corporation's independent
accountants (an "Accountant's Certificate") regarding the accuracy of
the calculations made by the Corporation in the ATP Basic Maintenance
Certificate and the 1940 Act ATP Asset Coverage Certificate required
to be delivered by the Corporation as of the Date of Original Issue.
Within eight Business Days after the last Valuation Date of each
fiscal quarter of the Corporation on which an ATP Basic Maintenance
Certificate is required to be delivered, the Corporation (x) will
deliver to the Auction Agent, Moody's (if ▇▇▇▇▇'▇ is then rating ATP
Series C), Fitch (if Fitch is then rating ATP Series C) and any Other
Rating Agency which is then rating ATP Series C and which so requires
an Accountant's Certificate regarding the accuracy of the calculations
made by the Corporation in such ATP Basic Maintenance Certificate and
in any other ATP Basic Maintenance Certificate randomly selected by
the Corporation's independent accountants during such fiscal quarter.
Within eight Business Days after the last Valuation Date of each
fiscal quarter of the Corporation on which a 1940 Act ATP Asset
Coverage Certificate is required to be delivered, the Corporation will
deliver to the Auction Agent, Moody's (if ▇▇▇▇▇'▇ is then rating ATP
Series C), Fitch (if Fitch is then rating ATP Series C) and any Other
Rating Agency which is then rating ATP Series C and which so requires
an Accountant's Certificate regarding the accuracy of the calculations
made by the Corporation in such 1940 Act ATP Asset Coverage
Certificate. In addition, the Corporation will deliver to the relevant
persons specified in the preceding sentence an Accountant's
Certificate regarding the accuracy of the calculations made by the
Corporation on each ATP Basic Maintenance Certificate and 1940 Act ATP
Asset Coverage Certificate delivered pursuant to clause (iv) of
paragraph (d) or clause (ii)(B) of paragraph (e) of this Section 13,
as the case may be, within five days after the relevant Asset Coverage
Cure Date. If an Accountant's Certificate delivered with respect to an
Asset Coverage Cure Date shows an error was made in the Corporation's
report with respect to such Asset Coverage Cure Date, the calculation
or determination made by the Corporation's independent accountants
will be conclusive and binding on the Corporation with respect to such
reports. If any other Accountant's Certificate shows that an error was
made in any such report, the calculation or determination made by the
Corporation's independent accountants will be conclusive and binding
on the Corporation; provided, however, any errors shown in the
Accountant's Certificate filed on a quarterly basis shall not be
deemed to be a failure to maintain the ATP Basic Maintenance Amount on
any prior Valuation Dates.
23
(h) The Accountant's Certificates referred to in
paragraph (g) will confirm, based upon the independent accountant's
review, (i) the mathematical accuracy of the calculations reflected in
the related ATP Basic Maintenance Amount and 1940 Act ATP Asset
Coverage Certificates, as the case may be, and (ii) that the
Corporation determined whether the Corporation had, at such Valuation
Date, Eligible Assets with an aggregate Discounted Value at least
equal to the Basic Maintenance Amount in accordance with the Articles
Supplementary.
(i) In the event that an ATP Basic Maintenance
Certificate or 1940 Act ATP Asset Coverage Certificate with respect to
an applicable Valuation Date is not delivered within the time periods
specified in this Section 13, the Corporation shall be deemed to have
failed to maintain the ATP Basic Maintenance Amount or the 1940 Act
ATP Asset Coverage, as the case may be, on such Valuation Date for
purposes of Section 13(b). In the event that an ATP Basic Maintenance
Certificate or 1940 Act ATP Asset Coverage Certificate or the
applicable Accountant's Certificates with respect to an applicable
Asset Coverage Cure Date are not delivered within the time periods
specified herein, the Corporation shall be deemed to have failed to
have Eligible Assets with an aggregate Discounted Value at least equal
to the ATP Basic Maintenance Amount or the 1940 ATP Asset Coverage, as
the case may be, as of the related Valuation Date, and such failure
shall be deemed not to have been cured as of such Asset Coverage Cure
Date for purposes of the mandatory redemption provisions.
14. [Reserved]
15. Notice. All notices or communications hereunder, unless otherwise
specified in these Articles Supplementary, shall be sufficiently given if
in writing and delivered in person, by telecopier or mailed by first-class
mail, postage prepaid. Notices delivered pursuant to this Section 15 shall
be deemed given on the earlier of the date received or the date five days
after which such notice is mailed.
16. Waiver. Holders of at least two-thirds of the Outstanding shares
of ATP, acting collectively, or the ATP Series C, acting as a separate
series, may waive any provision hereof intended for their respective
benefit in accordance with such procedures as may from time to time be
established by the Board of Directors.
17. Termination. In the event that no shares of ATP Series C are
Outstanding, all rights and preferences of such shares established and
designated hereunder shall cease and terminate, and all obligations of the
Corporation under these Articles Supplementary shall terminate.
18. Definitions. As used in Part I and Part II of these Articles
Supplementary, the following terms shall have the following meanings (with
terms defined in
24
the singular having comparable meanings when used in the plural and
vice versa), unless the context otherwise requires:
(a) "aaa"/AA Credit Rating" means a credit rating in
the highest category of any two nationally recognized statistical
rating organizations (as used in the rules and regulations under the
Securities Exchange Act of 1934), one of which shall be Moody's or
S&P.
(b) "AA Composite Commercial Paper Rate" on any date
means (i) the interest equivalent of the 30-day rate, in the case of a
Dividend Period which is a Standard Term Period or shorter, or the
180-day rate, in the case of all other Dividend Periods, on commercial
paper on behalf of issuers whose corporate bonds are rated AA by S&P,
or the equivalent of such rating by another nationally recognized
rating agency, as announced by the Federal Reserve Bank of New York
for the close of business on the Business Day immediately preceding
such date; or (ii) if the Federal Reserve Bank of New York does not
make available such a rate. then the arithmetic average of the
interest equivalent of such rates on commercial paper placed on behalf
of such issuers, as quoted on a discount basis or otherwise by the
Commercial Paper Dealers to the Auction Agent for the close of
business on the Business Day immediately preceding such date (rounded
to the next highest .001 of 1%). If any Commercial Paper Dealer does
not quote a rate required to determine the AA Composite Commercial
Paper Rate. such rate shall be determined on the basis of the
quotations (or quotation) furnished by the remaining Commercial Paper
Dealers (or Dealer) if any, or, if there are no such Commercial Paper
Dealers, by the Auction Agent. For purposes of this definition, (A)
"Commercial Paper Dealers" shall mean (1) ▇▇▇▇▇▇ Brothers Inc.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated and ▇▇▇▇▇▇▇ Sachs &
Co.; (2) in lieu of any thereof, its respective Affiliate or
successor, and (3) in the event that any of the foregoing shall cease
to quote rates for commercial paper of issuers of the sort described
above, in substitution therefor, a nationally recognized dealer in
commercial paper of such issuers then making such quotations selected
by the Corporation, and (B) "interest equivalent" of a rate stated on
a discount basis for commercial paper of a given number of days'
maturity shall mean a number equal to the quotient (rounded upward to
the next higher one-thousandth of 1 %) of (1) such rate expressed as a
decimal, divided by (2) the difference between (x) 1.00 and (y) a
fraction, the numerator of which shall be the product of such rate
expressed as a decimal, multiplied by the number of days in which
such commercial paper shall mature and the denominator of which shall
be 360.
(c) "Accountant's Certificate" has the meaning set
forth in Section 13(g).
(d) "Affiliate" means any person controlled by, in
control of or under common control with the Corporation; provided that
no Broker-Dealer controlled by, in control of or under common control
with the Corporation shall be deemed to be an Affiliate nor shall any
corporation or any person controlled by, in control of or under common
control
25
with such corporation one of the directors or executive officers of
which is also a director of the Corporation be deemed to be an
Affiliate solely because such director or executive officer is also a
director of the Corporation.
(e) "Alternate Term Period" means a Dividend Period
that is not a Standard Term Period.
(f) "Applicable Rate" means, with respect to ATP
Series C for each Dividend Period (i) if Sufficient Clearing Orders
exist for the Auction in respect thereof, the Winning Rate, (ii) if
Sufficient Clearing Orders do not exist for the Auction in respect
thereof, the Maximum Applicable Rate and (iii) in the case of any
Dividend Period of 93 days or fewer if all the shares of ATP Series C
are the subject of Submitted Hold Orders, for the Auction in respect
thereof, the Minimum Applicable Rate.
(g) "Articles. means the Articles of Amendment and
Restatement, as amended including any Articles Supplementary, of the
Corporation.
(h) "Asset Coverage Cure Date" has the meaning set
forth in Section 3(a)(ii).
(i) "ATP" means the Auction Term Preferred Stock.
S1.00 par value per share and liquidation preference $25,000 per
share, Series C of the Corporation or any other series of Preferred
Stock heretofore or hereinafter designated "Auction Term Preferred
Stock" by Articles Supplementary or Articles of Amendment.
(j) "ATP Basic Maintenance Amount" as of any
Valuation Date means the dollar amount equal to the sum of
(i) (A) the sum of the products resulting
from multiplying the number of Outstanding shares of
each series of ATP on such date by the liquidation
preference per share of such series (B) the
aggregate amount of dividends that will have
accumulated at the Applicable Rate (whether or not
earned or declared) to and including the first
following Dividend Payment Date for each share of
ATP Outstanding that follows such Valuation Date (or
to the 42nd day after such Valuation Date, if such
42nd day occurs before the first following Dividend
Payment Date); (C) the aggregate amount of dividends
that would accumulate at the then current Maximum
Applicable Rate for a Standard Term Period
multiplied by the Volatility Factor on any shares of
ATP Outstanding from the first day following the
Dividend Payment Date referred to in (B) above
through the 42nd day after such Valuation Date. Only
if such 42nd day occurs after the first day
following the Dividend Payment Date, except that if
such Valuation Date occurs during a Default Period,
the dividend for purposes of the calculation would
accumulate at the Default Rate; (D) the amount of
anticipated Corporation expenses for the 90 days
subsequent to such Valuation Date;
26
(E) any current liabilities, including, without
limitation, indebtedness due within one year and any
redemption premium due with respect to shares of ATP
for which a Notice of Redemption has been given, as
of such Valuation Date to the extent not reflected
in any of (i)(A) through (i)(D); and (F) without
duplication, 10% of the exercise price of any call
option written by the Corporation and the exercise
price of any put option written by the Corporation;
less
(ii) the sum of any cash or the value of
any Corporation assets irrevocably deposited by the
Corporation for the payment of any of (i)(B) through
(i)(F) ("value" for purposes of this clause (ii)
shall mean the Discounted Value of the security,
except that if the security matures prior to the
relevant redemption payment date and is either fully
guaranteed by the U.S. Government or is rated P1 by
Moody's and A1+ by S&P, it will be valued at its
face value).
(k) ATP Basic Maintenance Certificate" has the
meaning set forth in Section 13(d).
(1) "ATP Series C" means the shares of Series C of
the ATP or any other shares of Preferred Stock hereinafter designated
as shares of Series C of the ATP by Articles Supplementary or Articles
of Amendment.
(m) "Auction" means each periodic operation of the
procedures set forth under "Auction Procedures."
(n) "Auction Agent" means Bankers Trust Company
unless and until another commercial bank, trust company, or other
financial institution appointed by a resolution of the Board of
Directors enters into an agreement with the Corporation to follow the
Auction Procedures for the purpose of determining the Applicable Rate.
(o) "Auction Date" means the first Business Day next
preceding the first day of a Dividend Period for ATP Series C.
(p) "Auction Procedures" means the procedures for
conducting Auctions set forth in Part II hereof.
(q) "Board of Directors" means the Board of Directors
of the Corporation or any duly authorized committee thereof as
permitted by applicable law.
(r) "Broker-Dealer" or "Broker-Dealers" means any
broker-dealer or broker-dealers, or other entity permitted by law to
perform the functions required of a Broker-Dealer by the Auction
Procedures, that has been selected by the Corporation and has entered
into a Broker-Dealer Agreement with the Auction Agent that remains
effective.
27
(s) "Broker-Dealer Agreement" means an agreement
entered into by the Auction Agent and a Broker-Dealer, pursuant to
which such Broker-Dealer agrees to follow the Auction Procedures.
(t) "Business Day" means a day on which the New York
Stock Exchange is open for trading and which is not a Saturday, Sunday
or other day on which banks in the City of New York, New York are
authorized or obligated by law to close.
(u) "Code" means the Internal Revenue Code of 1986,
as amended.
(v) "Commercial Paper Dealers" has the meaning set
forth in the definition of AA Composite Commercial Paper Rate.
(w) "Commission" means the Securities and Exchange
Commission.
(x) Common Stock" means the common stock, par value
$.01 per share, of the Corporation.
(y) Corporate Bonds" means corporate debt securities
having the characteristics set forth in paragraph (iv) of the
definition of Fitch Eligible Assets.
(z) "Date of Original Issue" means the date on which
ATP Series C is originally issued by the Corporation.
(aa) "Default Period" has the meaning set forth in
Section 2(c)(ii).
(bb) "Default Rate" means the Reference Rate
multiplied by three (3).
(cc) "Deposit Securities" means cash and any
obligations or securities, including Short Term Money Market
Instru0ents that are Eligible Assets, rated at least AAA, A-1+ or
SP-1+ by S&P, except that, for purposes of section 3(a)(i) of this
Part I, such obligations or securities shall be considered "Deposit
Securities" only if they are also rated at least P-1 by Moody's.
(dd) "Discount Factor" means the Moody's Discount
Factor (if ▇▇▇▇▇'▇ is then rating the ATP), the Fitch Discount Factor
(if Fitch is then rating the ATP) or the discount factor established
by any Other Rating Agency which is then rating the ATP and which so
requires, whichever is applicable.
(ee) "Discounted Value" means the quotient of the
Market Value of an Eligible Asset divided by the applicable Discount
Factor provided that with respect to an Eligible Asset that is
currency callable, Discounted Value shall be equal to the quotient as
calculated above or the call price, whichever is lower, and that with
respect to an Eligible
28
Asset that is prepayable, Discounted Value shall be equal to the
quotient as calculated above or the par value, whichever is lower.
(ff) "Dividend Default" has the meaning set forth in
Section 2(c)(iii).
(gg) "Dividend Payment Date" for ATP Series C, means
(i) with respect to any Dividend Period of one year or less, the
Business Day next succeeding the last day thereof and, if any, the
91st, 181st and 271st days thereof, and (ii) with respect to any
Dividend Period of more than one year, on a quarterly basis on each
January 1, April 1, July 1 and October 1 and on the Business Day
following the last day of such Dividend Period.
(hh) "Dividend Period" means, with respect to ATP
Series C, the period commencing on the Date of Original Issue thereof
and ending on the date specified for such series on the Date of
Original Issue thereof and thereafter, as to such series, the period
commencing on the day following each Dividend Period for such series
and ending on the day established for such series by the Corporation.
(ii) "Eligible Assets" means Moody's Eligible Assets
(if ▇▇▇▇▇'▇ is then rating the ATP), Fitch Eligible Assets (if Fitch
is then rating the ATP) and/or Other Rating Agency Eligible Assets if
any Other Rating Agency is then rating the ATP, whichever is
applicable.
(jj) "Exposure Period" means the period commencing on
(and including) a given Valuation Date and ending 41 days thereafter.
(kk) "Fitch" means Fitch Investors Service, Inc. and
its successors at law.
(ll) "Fitch Discount Factor" means, for purposes of
determining the Discounted Value of any Fitch Eligible Asset, the
percentage determined as follows. The Fitch Discount Factor for any
Fitch Eligible Asset other than the securities set forth below will be
the percentage provided in writing by Fitch.
(i) Corporate Bonds: The percentage
determined by reference to the type and remaining
term to maturity of each corporate bond in
accordance with the table set forth below.
29
Type I Corporate Bonds with remaining maturities of:
less than or equal to 2 years 1.16
greater than 2 years, but less than or equal to 4 years 1.26
greater than 4 years, but less than or equal to 7 years 1.40
greater than 7 years, but less than or equal to 12 years 1.44
greater than 12 years, but less than or equal to 25 years 1.48
greater than 25 years, but less than or equal to 30 years 1.52
Type II Corporate Bonds with remaining maturities of:
less than or equal to 2 years 1.25
greater than 2 years, but less than or equal to 4 years 1.26
greater than 4 years, but less than or equal to 7 years 1.43
greater than 7 years, but less than or equal to 12 years 1.44
greater than 12 years, but less than or equal to 25 years 1.51
greater than 25 years, but less than or equal to 30 years 1.56
Type III Corporate Bonds with remaining maturities of:
less than or equal to 2 years 1.25
greater than 2 years, but less than or equal to 4 years 1.29
greater than 4 years, but less than or equal to 7 years 1.46
greater than 7 years, but less than or equal to 12 years 1.50
greater than 12 years, but less than or equal to 25 years 1.55
greater than 25 years, but less than or equal to 30 years 1.60
Type IV Corporate Bonds with remaining maturities of:
less than or equal to 2 years 1.27
greater than 2 years, but less than or equal to 4 years 1.32
greater than 4 years, but less than or equal to 7 years 1.52
greater than 7 years, but less than or equal to 12 years 1.57
greater than 12 years, but less than or equal to 25 years 1.63
greater than 25 years, but less than or equal to 30 years 1.69
30
Type V Corporate Bonds with remaining maturities of:
less than or equal to 2 years 1.32
greater than 2 years, but less than or equal to 4 years 1.36
greater than 4 years, but less than or equal to 7 years 1.59
greater than 7 years, but less than or equal to 12 years 1.65
greater than 12 years, but less than or equal to 25 years 1.72
greater than 25 years, but less than or equal to 30 years 1.80
Type VI Corporate Bonds with remaining maturities of:
less than or equal to 2 years 1.37
greater than 2 years, but less than or equal to 4 years 1.40
greater than 4 years, but less than or equal to 7 years 1.67
greater than 7 years, but less than or equal to 12 years 1.74
greater than 12 years, but less than or equal to 25 years 1.82
greater than 25 years, but less than or equal to 30 years 1.91
Type VII Corporate Bonds with remaining maturities of:
less than or equal to 2 years 1.37
greater than 2 years, but less than or equal to 4 years 1.64
greater than 4 years, but less than or equal to 7 years 2.28
greater than 7 years, but less than or equal to 12 years 2.49
greater than 12 years, but less than or equal to 25 years 2.74
greater than 25 years, but less than or equal to 30 years 3.06
(ii) Short Term Money Market Instruments:
The Fitch Discount Factor applied to short-term
portfolio securities will be (A) 100%, so long as
such portfolio securities mature or have a demand
feature at par exercisable within the Exposure
Period and, (B) 125%, so long as such portfolio
securities neither mature nor have a demand feature
at par exercisable within the Exposure Period. A
Fitch Discount Factor of 100% will be applied to
cash.
31
(iii) U.S. Treasury Securities with
remaining maturities of:
less than or equal to 1 year 1.06
greater than 1 year, but less than or equal to 2 years 1.11
greater than 2 years, but less than or equal to 5 years 1.16
greater than 5 years, but less than or equal to 15 years 1.24
greater than 25 years, but less than or equal to 30 years 1.26
(iv) Rule 144A Securities: The Fitch
Discount Factor applied to Rule 144A securities will
be 110% of the Fitch Discount Factor which would
apply were the securities registered under the
Securities Act.
(mm) "Fitch Eligible Assets" means
(i) cash (including, for this purpose,
interest and dividends due on assets rated (A) Baa3
or higher by Moody's. BBB or higher by S&P or BBB
or higher by Fitch if the payment date is within
five Business Days of the Valuation Date, (B) A2 or
higher by Moody's and either A or higher by S&P or A
or higher by Fitch if the payment date is within
thirty days of the Valuation Date, and (C) A1 or
higher by Moody's and either A+ or higher by S&P or
A+ or higher by Fitch if the payment date is within
the Exposure Period) and receivables for Fitch
Eligible Assets sold if the receivable is due within
five Business Days of the Valuation Date, and if the
trades which generated such receivables are (A)
settled through clearing house firms with respect to
which the Corporation has received prior written
authorization from Fitch or (B) (1) with
counterparties having a Fitch long-term debt rating
of at least BBB- by Fitch, if rated by Fitch or, if
not rated by Fitch, then rated at least BBB- by S&P
and rated at least Baa3 by Moody's or (2) with
counterparties having a Fitch Short-Term Money
Market Instrument rating of at least F-1+ by Fitch,
if rated by Fitch or, if not rated by Fitch, then
rated at least A-1 by S&P and rated at least P-1 by
Moody's;
(ii) Short-Term Money Market Instruments so
long as (A) such securities are rated at least P-1
by Moody's and either at least A-1+ by S&P or Fl by
Fitch, (B) in the case of demand deposits, time
deposits and overnight funds, the supporting entity
is rated at least A2 by Moody's and either at least
A by S&P or A by Fitch, or (C) in all other cases,
the supporting entity (1) is rated at least A2 by
Moody's and at least A by S&P and the security
matures within one month, (2) is rated at least A1
by Moody's and either at least A+ by S&P or at least
A by Fitch and the security matures within three
months or (3) is rated at least Aa3 by Moody's and
either at least AA by S&P or at least AA by Fitch
and the security matures within six months;
(iii) U.S. Treasury Securities;
32
(iv) debt securities constituting Corporate
Bonds if (A) such securities are rated CCC or higher
by Fitch or, if unrated by Fitch, rated Caa or
higher by Moody's and CCC or higher by S&P; (B) such
securities provide for the periodic payment of
interest in cash in U.S. dollars; (C) such
securities do not provide for conversion or exchange
into equity capital at any time over their lives;
(D) such securities have been registered under the
Securities Act or are restricted as to resale under
federal securities laws but are eligible for resale
pursuant to Rule 144A under the Securities Act as
determined by the Fund's adviser acting subject to
the supervision of the Fund's Board of Directors;
and (E) such securities are issued by a U.S.
corporation. In addition, bonds which are issued in
connection with a reorganization under U.S. federal
bankruptcy law ("Reorganization Bonds") will be
considered Corporate Bonds constituting Fitch
Eligible Assets if (a) they are rated CCC or higher
by Fitch or, if unrated by Fitch, rated Caa or
higher by Moody's and CCC or higher by S&P; (b) they
provide for periodic payment of interest in cash in
U.S. dollars; (c) they do not provide for conversion
or exchange into equity capital at any time over
their lives; (d) they have been registered under the
Securities Act or are restricted as to resale under
federal securities laws but are eligible for trading
under Rule 144A promulgated pursuant to the
Securities Act as determined by the Fund's adviser
acting subject to the supervision of the Fund's
Board of Directors; (e) they were issued by a U.S.
corporation; and (f) at the time of purchase at
least one year had elapsed since the issuer's
reorganization. Reorganization Bonds may also be
considered Corporate Bonds constituting Fitch
Eligible Assets if they have been approved by Fitch,
which approval shall not be unreasonably withheld.
(v) In addition, portfolio holdings as
described below must be within the following
diversification and issue size requirements in order
to be included in Fitch Eligible Assets:
Maximum Maximum Minimum
Single Single Issue Size
Issuer Industry ($ in
Type of Corporate Bond (%)(1.2) (%)(2.3) millions)
---------------------- -------- -------- ---------
Type I 100% 100% $100
Type II 20 75 100
Type III (4) 10 50 100
Type IV 6 25 100
Type V 4 16 50(5)
Type VI 3 12 50(5)
Type VII 2 8 50(5)
See accompanying notes
_____________
33
(1) Companies subject to common ownership of 25% or more are considered as one
name.
(2) Percentages represent a portion of the aggregate Market Value of corporate
securities.
(3) Industries are determined according to Fitch Industry Classifications.
(4) Includes Short Term Money Market Instruments which do not constitute Type I
or Type II Corporate Bonds and which have a maturity greater than the
Exposure Period.
(5) Collateral bonds from issues ranging from $50 million to $100 million are
limited to 20% of the collateral pool.
Where the Corporation sells an asset and agrees to repurchase such
asset in the future the Discounted Value of such asset will constitute a
Fitch Eligible Asset and the amount the Corporation is required to pay upon
repurchase of such asset will count as a liability for the purposes of the
ATP Basic Maintenance Amount. Where the Corporation purchases an asset and
agrees to sell it to a third party in the future, cash receivable by the
Corporation thereby will constitute a Fitch Eligible Asset if the long-term
debt of such other party is rated at least A2 by Moody's and at least A by
S&P and such agreement has a term of 30 days or less; otherwise the
Discounted Value of such asset will constitute a Fitch Eligible Asset.
Notwithstanding the foregoing, an asset will not be considered a Fitch
Eligible Asset to the extent that it has been irrevocably deposited for the
payment of (i)(A) through (i)(F) under the definition of ATP Basic
Maintenance Amount or it is subject to any material lien mortgage, pledge,
security interest or security agreement of any kind (collectively, Liens").
except for (A) Liens which are being contested in good faith by appropriate
proceedings and which Fitch has indicated to the Corporation will not
affect the status of such asset as a Fitch Eligible Asset, (B) Liens for
taxes that are not then due and payable or that can be paid thereafter
without penalty, (C) Liens to secure payment for services rendered or cash
advanced to the Corporation by its investment adviser, the Corporation's
custodian, transfer agent or registrar or the Auction Agent and (D) Liens
by virtue of any repurchase agreement. See also Section 12 for certain
information with respect to Fitch Eligible Assets.
(nn) "Fitch Industry Classifications" means, for the
purposes of determining Fitch Eligible Assets, each of the following
industry classifications:
Aerospace & Defense
Automobiles
Banking, Finance & Insurance
Building & Materials
Chemicals
Computers & Electronics
Consumer Products
34
Energy
Environmental Services
Farming & Agriculture
Food, Beverage & Tobacco
Healthcare & Pharmaceuticals
Industrial Machinery
Media, Leisure & Entertainment
Metals & Mining
Miscellaneous
Paper & Forest Products
Retail
Sovereigns
Textiles & Furniture
Transportation
Utilities
The Corporation shall use its discretion in determining which industry
classification is applicable to a particular investment.
(oo) "Holder" means, with respect to ATP Series C,
the registered holder of shares of ATP Series C as the same appears
on the stock ledger or stock records of the Corporation.
(pp) "Mandatory Redemption Date" has the meaning set
forth in Section 3(a)(iv).
(qq) "Market Value" shall mean the fair market value
of an asset of the Corporation (excluding interest and dividends due
on such assets) as computed based upon (i) pricing services to be
provided by ▇▇▇▇▇▇▇ ▇▇▇▇▇ Capital Markets Securities Pricing Service,
▇▇▇▇▇ S&P Evaluation Services or such other pricing service determined
from time to time by the Board of Directors, provided that Moody's (if
▇▇▇▇▇'▇ is then rating the ATP Series C), Fitch (if Fitch is then
rating the ATP Series C) and any Other Rating Agency which is then
rating the ATP Series C and so requires have informed the Corporation
in writing that use of such pricing service will not adversely affect
such rating agency's then current rating of the shares of ATP Series C
or (ii) the lower of the value set forth in bids from two independent
dealers that are members or Affiliates of members of the National
Association of Securities Dealers, Inc. and that make markets in such
security, one of which bids shall be in writing.
(rr) "Maximum Applicable Rate" means, on any date on
which the Applicable Rate is determined, the rate equal to 150% of the
applicable Reference Rate, subject to upward but not downward
adjustment in the discretion of the Board of Directors
35
after consultation with the Broker-Dealers, provided that immediately
following any such increase the Corporation would be in compliance
with the ATP Basic Maintenance Amount.
(ss) "Minimum Applicable Rate" means, on any Auction
Date with respect to a Dividend Period of 93 days or fewer, 80% of the
AA Composite Commercial Paper Rate at the close of business on the
Business Day next preceding such Auction Date. There shall be no
Minimum Applicable Rate on any Auction Date with respect to a Dividend
Period of more than 93 days.
(tt) "Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc.
and its successors at law.
(uu) "Moody's Discount Factor" means, for purposes of
determining the Discounted Value of any Moody's Eligible Asset the
percentage determined as follows. The Moody's Discount Factor for
any Moody's Eligible Asset other than the securities set forth below
will be the percentage provided in writing by Moody's.
(i) Corporate Debt Securities: The
percentage determined by reference to the rating on
such asset (which percentage is based upon the
Exposure Period) with reference to the remaining
term to maturity of such assets, in accordance with
the table set forth below.
Moody's Discount Factors --
Corporate Debt Securities
Rating Category
Maturity --------------------------------------------------------------------------------
of Collateral Aaa Aa A Baa Ba B* Caa
------------- --- -- - --- -- -- ---
1 Year 112% 118% 123% 128% 139% 150% 260%
2 Years 118 124 130 135 147 158 260
3 Years 123 129 135 141 153 165 260
4 Years 129 135 141 148 160 172 260
5 Years 134 141 147 154 166 179 260
7 Years 142 149 155 162 176 189 260
10 Years 148 156 163 170 184 198 260
15 Years 153 161 168 175 190 205 250
20 Years 161 169 177 184 200 215 260
30 Years 162 170 178 185 201 216 260
* Senior debt securities of an issuer rated B3 shall be deemed to be
Caa rated securities for purposes of determining the applicable
Moody's Discount Factor
(ii) Preferred Stock: For (A) utility
preferred stocks, 152%, (B) industrial/financial
preferred stocks, 197%, and (C) auction rate
preferred stocks. 350%.
36
(iii) Short Term, Money Market Instruments:
The Moody's Discount Factor applied to short-term
portfolio securities will be (A) 100%, so long as
such portfolio securities mature or have a demand
feature at par exercisable within the Exposure
Period, (B) 115%, so long as such portfolio
securities mature or have a demand feature at par
not exercisable within the Exposure Period, and (C)
125%, if such securities are not rated by Moody's,
so long as such portfolio securities are rated at
least A-1+/AA or SP-1+/AA by S&P and mature or have
a demand feature at par exercisable within the
Exposure Period. A Moody's Discount Factor of 100%
will be applied to cash.
(iv) U.S. Treasury Securities, and Treasury
Strips (as defined by Moody's):
U.S. Treasury Securities:
-------------------------
Discount
Remaining Term to Maturity Factor
-------------------------- ------
1 year or less ...........................................107%
2 years or less (but longer than 1 year) .................113
3 years or less (but longer than 2 years) ................118
4 years or less (but longer than 3 years) ................123
5 years or less (but longer than 4 years) ................128
7 years or less (but longer than 5 years) ................135
10 years or less (but longer than 7 years) ...............141
15 years or less (but longer than 10 years) ..............146
20 years or less (but longer than 15 years) ..............154
30 years or less (but longer than 20 years) ..............154
U.S. Treasury Strips:
---------------------
Discount
Remaining Term to Maturity Factor
-------------------------- ------
1 year or less ...........................................107%
2 years or less (but longer than 1 year) .................114
3 years or less (but longer than 2 years) ................120
4 years or less (but longer than 3 years) ................127
5 years or less (but longer than 4 years) ................133
7 years or less (but longer than 5 years) ................145
10 years or less (but longer than 7 years) ...............159
15 years or less (but longer than 10 years) ..............184
20 years or less (but longer than 15 years) ..............211
30 years or less (but longer than 20 years) ..............236
37
(v) Rule 144A Securities: The Moody's
Discount Factor applied to Rule 144A Securities will
be 160% of the Moody's Discount Factor which would
apply were the securities registered under the
Securities Act.
(vv) "Moody's Eligible Assets" means
(i) cash (including, for this purpose,
interest and dividends due on assets rated (A) Baa3
or higher by Moody's if the payment date is within
five Business Days of the Valuation Date, (B) A2 or
higher if the payment date is within thirty days of
the Valuation Date, and (C) A1 or higher if the
payment date is within the Moody's Exposure Period)
and receivables for Moody's Eligible Assets sold if
the receivable is due within five Business Days of
the Valuation Date, and if the trades which
generated such receivables are (A) settled through
clearing house firms with respect to which the
Corporation has received prior written authorization
from Moody's or (B) (1) with counterparties having a
Moody's long-term debt rating of at least Baa3 or
(2) with counterparties having a Moody's Short-Term
Money Market Instrument rating of at least P-1;
(ii) Short-Term Money Market Instruments so
long as (A) such securities are rated at least P-1,
(B) in the case of demand deposits, time deposits
and overnight funds, the supporting entity is rated
at least A2, or (C) in all other cases, the
supporting entity (1) is rated A2 and the security
matures within one month, (2) is rated A1 and the
security matures within three months or (3) is rated
at least Aa3 and the security matures within six
months; provided, however, that for purposes of this
definition, such instruments (other than commercial
paper rated by S&P and not rated by Moody's) need
not meet any otherwise applicable S&P rating
criteria:
(iii) U.S. Treasury Securities and Treasury
Strips (as defined by Moody's);
(iv) Corporate debt securities will be
included in ▇▇▇▇▇ s Eligible Assets if (A) such
securities are rated Caa or higher by Moody's; (B)
the senior unsecured rating of the issuer's
corporate bonds is higher than B3; (C) such
securities provide for the periodic payment of
interest in cash in U.S. dollars; (D) such
securities do not provide for conversion or exchange
into equity capital at any time over their lives;
(E) for debt securities rated Bal and below. no more
than 10% of the original amount of such issue may
constitute Moody's Eligible Assets; and (F) such
securities have been registered under the Securities
Act or are restricted as to resale under federal
securities laws but are eligible for resale pursuant
to Rule 144A under the Securities Act as determined
by the Fund's adviser acting subject to the
supervision of the Fund's Board of Directors.
(v) Portfolio securities that are preferred
stocks will be included in Moody's Eligible Assets
if (A) dividends on such preferred stock are
cumulative,
38
(B) such securities provide for the periodic payment
of dividends thereon in cash in U.S. dollars and do
not provide for conversion or exchange into, or have
warrants attached entitling the holder to receive,
equity capital at any time over the respective lives
of such securities, (C) the issuer of such a
preferred stock has common stock listed on either
the New York Stock Exchange or the American Stack
Exchange, (D) the issuer of such a preferred stock
has a senior debt rating from Moody's of Baa1 or
higher or a preferred stock rating from Moody's of
"baa3" or higher and (E) such preferred stock has
paid consistent cash dividends in U.S. dollars over
the last three years or has a minimum rating of "a1"
(if the issuer of such preferred stock has other
preferred issues Outstanding that have been paying
dividends consistently for the last three years,
then a preferred stock without such a dividend
history would also be eligible). In addition, the
preferred stocks must have the following
diversification requirements: (X) the preferred
stock issue must be greater than $50 million and (Y)
the minimum holding by the Corporation of each issue
of preferred stock is $500,000 and the maximum
holding of preferred stock of each issue is $5
million. In addition, preferred stocks issued by
transportation companies will not be considered
Moody's Eligible Assets.
(vi) In addition. portfolio holdings as
described below must be within the following
diversification and issue size requirements in order
to be included in Moody's Eligible Assets:
Maximum Maximum Minimum
Single Single Issue Size
Issuer Industry ($ in
Collateral Ratings(1) (%)(2.3) (%)(3.4) millions)(6)
--------------------- -------- -------- ------------
"aaa",Aaa 100% 100% $100
"aa", Aa 20 60 100
"a", A, P-1 10 40 100
"baa", Baa 6 20 100
Ba 4 12 50(5)
B1-B2 3 8 50(5)
B3 (Caa subordinate) 2 5 50(5)
See accompanying notes
(1) Refers to the senior debt rating of collateral.
(2) Companies subject to common ownership of 25% or more are considered as one
name.
(3) Percentages represent a portion of the aggregate Market Value of corporate
securities.
39
(4) Industries are determined according to Moody's Industry Classifications.
(5) Collateral bonds from issues ranging from $50 million to $100 million are
limited to 20% of the collateral pool.
(6) Except for preferred stock, which has a minimum issue size of $50 million.
Where the Corporation sells an asset and agrees to
repurchase such asset in the future, the Discounted Value of such
asset will constitute a Moody's Eligible Asset and the amount the
Corporation is required to pay upon repurchase of such asset will
count as a liability for the purposes of ATP Basic Maintenance
Amount. Where the Corporation purchases an asset and agrees to sell
it to a third party in the future, cash receivable by the Corporation
thereby will constitute a Moody's Eligible Asset if the long-term
debt of such other party is rated at least A2 by Moody's and such
agreement has a term of 30 days or less; otherwise the Discounted
Value of such asset will constitute a Moody's Eligible Asset. For the
purposes of calculation of Moody's Eligible Assets, portfolio
securities which have been called for redemption by the issuer
thereof shall be valued at the lower of Market Value or the call
price of such portfolio securities.
Notwithstanding the foregoing, an asset will not be
considered a Moody's Eligible Asset to the extent that it has been
irrevocably deposited for the payment of (i)(A) through (i)(F) under
the definition of ATP Basic Maintenance Amount or it is subject to any
material lien, mortgage, pledge, security interest or security
agreement of any kind (collectively. "Liens"), except for (A) Liens
which are being contested in good faith by appropriate proceedings and
which Moody's has indicated to the Corporation will not affect the
status of such asset as a ▇▇▇▇▇ s Eligible Asset, (B) Liens for taxes
that are not then due and payable or that can be paid thereafter
without penalty, (C) Liens to secure payment for services rendered or
cash advanced to the Corporation by its investment adviser, the
Corporation's custodian, transfer agent or registrar or the Auction
Agent and (D) Liens by virtue of any repurchase agreement. See also
Section 12 for certain information with respect to ▇▇▇▇▇ s Eligible
Assets.
(ww) "Moody's Industry Classification" means, for the
purposes of determining Moody's Eligible Assets, each of the following
industry classifications:
Aerospace and Defense: Major Contractor, Subsystems, Research,
Aircraft Manufacturing, Arms, Ammunition
Automobile: Automotive Equipment, Auto-Manufacturing, Auto Parts
Manufacturing, Personal Use Trailers, Motor Homes, Dealers
Banking: Bank Holding, Savings and Loans, Consumer Credit, Small
Loan, Agency, Factoring, Receivables
40
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
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
Chemicals, Plastics and Rubber: Chemicals (non-agriculture),
Industrial Gases, Sulphur, Plastics, Plastic Products, Abrasives,
Coatings, Paints, Varnish, Fabricating
Containers, Packaging and Glass: Glass, Fiberglass, Containers
made of: Glass, Metal, Paper, Plastic, Wood, or Fiberglass
Personal and Non Durable Consumer Products Manufacturing Only):
Soaps, Perfumes, Cosmetics, Toiletries, Cleaning Supplies, School
Supplies
Diversified/Conglomerate Manufacturing
Diversified/Conglomerate Service
Diversified, Natural Resources, Precious Metals and Minerals;
Fabricating, Distribution
Ecological: Pollution Control, Waste Removal, Waste Treatment,
Waste Disposal
Electronics: Computer Hardware, Electric Equipment, Components,
Controllers, Motors, Household Appliances, Information Service
Communication Systems, Radios, TVS, Tape Machines, Speakers,
Printers, Drivers, Technology
Finance: Investment Brokerage, Leasing, Syndication, Securities
Farming and Agriculture: Livestock, Grains, Produce; Agricultural
Chemicals, Agricultural Equipment, Fertilizers
Grocery: Grocery Stores, Convenience Food Stores
41
Healthcare, Education and Childcare: Ethical Drugs, Proprietary
Drugs, Research, Health Care Centers, Nursing Homes, HMOs,
Hospitals, Hospital Supplies, Medical Equipment
Home and Office Furnishings, Housewares and Durable Consumer
Products: Carpets, Floor Coverings, Furniture, Cooking, Ranges
Hotels, Motels, Inns and Gaming
Insurance: Life, Property and Casualty, Broker, Agent, Surety
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
Machinery (Non-Agriculture, Non-Construction, Non-Electronic):
Industrial, Machine Tools, Steam Generators
Mining, Steel, Iron and Non Precious Metals: Coal, Copper, Lead,
Uranium, Zinc, Aluminum, Stainless Steel Integrated Steel, Ore
Production, Refractories, Steel Mill Machinery, Mini-▇▇▇▇▇,
Fabricating, Distribution and Sales of the foregoing
Oil and Gas: Crude Producer, Retailer, Well Supply, Service and
Drilling
Personal, Food and Miscellaneous Services
Printing, Publishing and Broadcasting: Graphic Arts, Paper, Paper
Products, Business Forms, Magazines, Books, Periodicals,
Newspapers, Textbooks, Radio, T.V., Cable Broadcasting Equipment
Cargo Transport: Rail, Shipping, Railroads, Rail-car builders,
Ship Builders, Containers, Container Builders, Parts, Overnight
Mail, Trucking, Truck Manufacturing, Trailer Manufacturing, Air
Cargo, Transport
Retail Stores: Apparel, Toy, Variety, Drugs, Department, Mail
Order Catalog, Showroom
Telecommunications: Local, Long Distance, Independent, Telephone,
Telegraph, Satellite, Equipment, Research, Cellular
42
Textiles and Leather: Producer, Synthetic Fiber, Apparel
Manufacturer, Leather Shoes
Personal Transportation: Air, Bus, Rail, Car Rental
Utilities: Electric, Water, Hydro Power, Gas, Diversified
Sovereigns: Semi-sovereigns, Canadian Provinces, Supra-national
Agencies
The Corporation shall use its discretion in
determining which industry classification is applicable to a
particular investment.
(xx) "1940 Act" means the Investment Company Act of
1940, as amended from time to time.
(yy) "1940 Act ATP Asset Coverage" means asset
coverage, as defined in Section 18(h) of the 1940 Act, of at least
200% with respect to all Outstanding senior securities of the
Corporation which are stock, including all Outstanding ATP (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 declaring
dividends on its common stock), determined on the basis of values
calculated as of a time within 48 hours next preceding the time of
such determination.
(zz) "1940 Act ATP Asset Coverage Certificate" means
the certificate required to be delivered by the Corporation pursuant
to Section 13(e).
(aaa) "Notice of Redemption" means any notice with
respect to the redemption of shares of ATP pursuant to Section 3.
(bbb) "Other Rating Agency" means any rating agency
other than Moody's or Fitch then providing a rating for the ATP
pursuant to the request of the Corporation.
(ccc) "Other Rating Agency Eligible Assets" means
assets of the Corporation designated by any Other Rating Agency as
eligible for inclusion in calculating the discounted value of the
Corporation's assets in connection with such Other Rating Agency's
rating of ATP Series C.
(ddd) "Outstanding" means, as of any date, shares of
ATP theretofore issued by the Corporation except, without duplication,
(i) any shares of ATP theretofore canceled, redeemed or repurchased by
the Corporation, or delivered to the Auction Agent for cancellation or
with respect to which the Corporation has given notice of redemption
and irrevocably deposited with the Paying Agent sufficient funds to
redeem such shares of ATP and (ii) any shares of ATP represented by
any certificate in lieu of which a new certificate has
43
been executed and delivered by the Corporation. Notwithstanding the
foregoing, (A) for purposes of voting rights (including the
determination of the number of shares required to constitute a
quorum), any shares of the ATP to which the Corporation or any
Affiliate of the Corporation shall be the Existing Holder shall be
disregarded and not deemed Outstanding; (B) in connection with any
Auction, any shares of the ATP Series C as to which the Corporation or
any person known to the Auction Agent to be an Affiliate of the
Corporation shall be the Existing Holder thereof shall be disregarded
and deemed not to be Outstanding: and (C) for purposes of determining
the ATP Basic Maintenance Amount, shares of ATP held by the
Corporation shall be disregarded and not deemed Outstanding but shares
held by any Affiliate of the Corporation shall be deemed Outstanding.
(eee) "Paying Agent" means Bankers Trust Company
unless and until another entity appointed by a resolution of the Board
of Directors enters into an agreement with the Corporation to serve as
paying agent, which paying agent may be the same as the Auction Agent.
(fff) "Person" or "person" means and includes an
individual, a partnership, a corporation, a trust, an unincorporated
association, a joint venture or other entity or a government or any
agency or political subdivision thereof.
(ggg) "Preferred Stock" means the preferred stock of
the Corporation from time to time.
(hhh) "Proration Procedures" means:
(i) if Sufficient Clearing Orders exist, in
the case of a Submitted Hold/Sell Order specifying a
rate equal to the Winning Rate
(A) the number of shares of ATP
Series C to be the subject of an accepted
Hold Order will be (1) the number of shares
of ATP Series C subject to such Submitted
Hold/Sell Order multiplied by (2) the total
number of shares of ATP Series C that are
neither the subject of a Submitted Buy
Order or a Submitted Hold/Sell Order
specifying a rate lower than the Winning
Rate nor the subject of a Submitted Hold
Order and divided by (3) the total number
of shares of ATP Series C subject to
Submitted Hold/Sell Orders that specified a
rate equal to the Winning Rate, and
(B) the number of shares of ATP
Series C to be the subject of an accepted
Sell Order will be the remaining number of
shares of ATP Series C subject to such
Submitted Hold/Sell Order,
(ii) if Sufficient Clearing Orders exist,
in the case of a Submitted Buy Order specifying a
rate equal to the Winning Rate
44
(A) the number of shares of ATP
Series C to be the subject of an accepted
Buy Order will be (1) the number of shares
of ATP Series C subject to such Submitted
Buy Order multiplied by (2) the difference
between (x) the number of shares of ATP
Series C that are the subject of a
Submitted Sell Order or a Submitted
Hold/Sell Order that specified a rate
higher than the Winning Rate and (y) the
number of shares of ATP Series C that are
the subject of a Submitted Buy Order that
specified a rate lower than the Winning
Rate and divided by (3) the total number of
shares of ATP Series C subject to Submitted
Buy Orders that specified a rate equal to
the Winning Rate, and
(B) such Submitted Buy Order will
not be accepted as to the remaining number
of shares subject to such Submitted Buy
Order, and
(iii) if Sufficient Clearing Orders do not
exist, in the case of a Submitted Hold/Sell Order
specifying a rate higher than the Maximum Applicable
Rate and in the case of a Submitted Sell Order
(A) the number of shares of ATP
Series C to be the subject of an accepted
Sell Order will be (1) the number of shares
of ATP Series C subject to such Submitted
Hold/Sell Order or Submitted Sell Order
multiplied by (2) the total number of
shares of ATP Series C that are the subject
of a Submitted Buy Order specifying a rate
equal to or lower than the Maximum
Applicable Rate and divided by (3) the
total number of shares of ATP Series C
subject to all Submitted Hold/Sell Orders
that specified a rate higher than the
Maximum Applicable Rate and Submitted Sell
Orders, and
(B) the number of shares of ATP
Series C to be the subject of an accepted
Hold Order will be the remaining number of
shares of ATP Series C subject to such
Submitted Hold/Sell Order or Submitted Sell
Order.
(iii) Rating Default" has the meaning set forth in
Section 3(c)(ii).
(jjj) "Rating Default Cure Date" has the meaning set
forth in Section 3(a)(iii).
(kkk) "Redemption Default" has the meaning set forth
in Section 3(c)(ii).
(111)"Reference Rate" means, with respect to the
determination of the Maximum Applicable Rate, the applicable AA
Composite Commercial Paper Rate (for a Dividend Period of fewer than
184 days) or the applicable Treasury Index Rate for a Dividend Period
of 184 days or more).
45
(mmm) "Rule 144A Securities" means securities which
are restricted as to resale under federal securities laws but are
eligible for resale pursuant to Rule 144A under the Securities Act as
determined by the Fund's adviser acting subject to the supervision of
the Fund's Board of Directors.
(nnn) "S&P" means Standard & Poor's Corporation and
its successors at law.
(ooo) "Securities Act" means the Securities Act of
1933, as amended from time to time.
(ppp) "Securities Depository" means The Depository
Trust Company and its successors and assigns or any successor
securities depository selected by the Corporation that agrees to
follow the procedures required to be followed by such securities
depository in connection with the shares of ATP Series C.
(qqq) "Short-Term Money Market Instruments" means the
following types of instruments if, on the date of purchase or other
acquisition thereof by the Corporation the remaining terms to maturity
thereof are not in excess of (a) 180 days for instruments rated at
least Aa3 or 270 days for instruments rated at least Aaa for purposes
of determining Moody's Eligible Assets (if ▇▇▇▇▇'▇ is then rating ATP
Series C), and (b) 180 days for purposes of determining Fitch Eligible
Assets (if Fitch is then rating ATP Series C):
(i) commercial paper that is rated as of each
Valuation Date P-1 by Moody's and either F-1+ by Fitch or A-1+ by
S&P, respectively;
(ii) demand or time deposits in,
certificates of deposit of (A) a depository
institution or trust company incorporated under the
laws of the United States of America or any state
thereof or the District of Columbia or (B) a United
States branch office or agency of a foreign
depository institution (provided that such branch
office or agency is subject to banking regulation
under the laws of the United States any state
thereof or the District of Columbia) if, in each
case, the certificates of deposit, if any, and the
long-term unsecured debt obligations (other than
such obligations the ratings of which are based on
the credit of a person or entity other than such
depository institution or trust company) of such
depository institution or trust company that have
(1) credit ratings on each Valuation Date of at
least P-1 from Moody's and either F-1+ from Fitch
or A-1+ from S&P, in the case of commercial paper
or certificates of deposit, and (2) credit ratings
on each Valuation Date of at least Aa3 from Moody's
and either AA- from Fitch or AA- from S&P, in the
case of long-term unsecured debt obligations;
provided, however, that in the case of any such
investment that matures in no more than one Business
Day from the date of purchase or other acquisition
by the Corporation, all of the foregoing
requirements shall be applicable except that the
required long-term unsecured debt credit rating of
such depository institution or trust company from
▇▇▇▇▇'▇, Fitch and S&P shall be at least
46
A2, A and A, respectively; and provided further,
however, that the foregoing credit rating
requirements shall be deemed to be met with respect
to a depository institution or trust company if (1)
such depository institution or trust company is the
principal depository institution in a holding
company system, (2) the certificates of deposit, if
any, of such depository institution or trust company
are not rated on any Valuation Date below P-1 by
Moody's, F-1+ by Fitch or A-l+ by S&P and there is
no long-term rating, and (3) the holding company
shall meet all of the foregoing credit rating
requirements (including the preceding proviso in the
case of investments that mature in no more than one
Business Day from the date of purchase or other
acquisition by the Corporation);
(iii) next-day federal funds; and
(iv) Eurodollar demand or time deposits in,
or certificates of deposit of, the head office or
the London branch office of a depository institution
or trust company meeting the credit rating
requirements of commercial paper and long-term
unsecured debt obligations specified in clause (ii)
above, provided that the interest receivable by the
Corporation shall not be subject to any withholding
or similar taxes.
(rrr) "Specific Redemption Provisions" means, with
respect to any Alternate Term Period of more than one year, either, or
any combination of (i) a period (a "Non-Call Period") determined by
the Board of Directors after consultation with the Broker-Dealers,
during which the shares subject to such Alternate Term Period are not
subject to redemption at the option of the Corporation pursuant to
Section 3(a)(i) and/or Section 3(a)(ii) and/or 3(a)(iii) and (ii) a
period (a "Premium Call Period"), consisting of a number of whole
years as determined by the Board of Directors after consultation with
the Broker-Dealers, during each year of which the shares subject to
such Alternate Term Period shall be redeemable at the Corporation's
option pursuant to Section 3(a)(i) and/or in connection with any
mandatory redemption pursuant to Section 3(a)(ii) and/or 3(a,(iii) at
a price per share equal to $25,000 plus accumulated but unpaid
dividends plus a premium expressed as a percentage or percentages of
$25,000 or expressed as a formula using specified variables as
determined by the Board of Directors after consultation with the
Broker-Dealers.
(sss) "Standard Term Period. means a Dividend Period
of 28 days, unless such 28th day is not a Business Day, then the
number of days ending on the Business Day next preceding such 28th
day.
(ttt) "Submission Deadline" means 1:00 p.m., New York
City time, on each Auction Date, or such other time on such Auction
Date as may be specified from time to time by the Auction Agent as the
time by which each Broker-Dealer must submit to the Auction Agent all
Orders obtained by it for the Auction to be conducted on such Auction
Date.
47
(uuu) "Treasury Index Rate" means the average yield
to maturity for actively traded marketable U.S. Treasury fixed
interest rate securities having the same number of 30-day periods to
maturity as the length of the applicable Dividend Period, determined,
to the extent necessary, by linear interpolation based upon the yield
for such securities having the next shorter and next longer number of
30-day periods to maturity treating all Dividend Periods with a length
greater than the longest maturity for such securities as having a
length equal to such longest maturity, in all cases based upon data
set forth in the most recent weekly statistical release published by
the Board of Governors of the Federal Reserve System (currently in H.
15(519)); provided, however, if the most recent such statistical
release shall not have been published during the 15 days preceding the
date of computation, the foregoing computations shall be based upon
the average of comparable data as quoted to the Corporation by at
least three recognized dealers in U.S. Government securities selected
by the Corporation.
(vvv) "Type I Corporate Bonds" means Corporate Bonds
rated either AAA by Fitch or, if not rated by Fitch, rated AAA by S&P
and Aaa by Moody's.
(www) "Type II Corporate bonds" means Corporate Bonds
rated either at least AA- by Fitch or, if not rated by Fitch, rated at
least AA- by S&P and at least Aa3 by Moody's which do not constitute
Type I Corporate Bonds.
(xxx) "Type III Corporate Bonds" means Corporate
Bonds rated either at least A- by Fitch or, if not rated by Fitch,
rated at least A- by S&P and at least A3 by Moody's which do not
constitute Type I or Type II Corporate Bonds.
(yyy) "Type IV Corporate Bonds" means Corporate Bonds
rated either at least BBB- by Fitch or, if not rated by Fitch, rated
at least BBB- by S&P and at least Baa3 by Moody's which do not
constitute Type I, Type II or Type III Corporate Bonds.
(zzz) "Type V Corporate Bonds" means Corporate Bonds
rated either at least BB- by Fitch or, if not rated by Fitch, rated at
least BB- by S&P and at least Ba3 by Moody's which do not constitute
Type I, Type II, Type III or Type IV Corporate Bonds.
(aaaa) "Type VI Corporate Bonds" means Corporate
Bonds rated either at least B- by Fitch or, if not rated by Fitch,
rated at least B- by S&P and at least B3 by Moody's which do not
constitute Type I, Type II, Type III, Type IV or Type V Corporate
Bonds.
(bbbb) "Type VII Corporate Bonds" means Corporate Bonds
rated either at least CCC by Fitch or, if not rated by Fitch, rated
at least CCC by S&P and at least Caa by Moody's which do not
constitute Type I, Type II, Type III, Type IV, Type V or Type VI
Corporate Bonds.
(cccc) "Valuation Date" means every Friday, or, if such
day is not a Business Day, the next preceding Business Day; provided,
however, that the first Valuation Date may
48
occur on any other date established by the Corporation; provided,
further. however. that such date shall be not more than one week from
the date on which ATP Series C initially is issued.
(dddd) "Volatility Factor" means 1.89.
19. Interpretation. References to sections, subsections, clauses,
sub-clauses, paragraphs and subparagraphs are to such sections,
subsections, clauses, sub-clauses, paragraphs and subparagraphs contained
in this Part I or Part II hereof, as the case may be, unless specifically
identified otherwise. In addition, capitalized terms not defined in Section
18 of this Part I shall have the respective meanings specified in Part II
hereof.
PART II
1. Certain Definitions. As used in this Part II, the following terms
shall have the following meanings, unless the context otherwise requires
and all section references below are to this Part II except as otherwise
indicated. Capitalized terms not defined in this Section 1 of this Part II
shall have the respective meanings specified in Part I hereof.
(a) "Agent Member" means a member of or participant
in the Securities Depository that will act on behalf of a person
placing an Order.
(b) "Available ATP" has the meaning specified in
Section 5(a)(i).
(c) "Buy Order" has the meaning specified in Section
2(b).
(d) "Existing Holder" means (a) a person who has
signed a Master Purchaser's Letter and beneficially owns shares of ATP
Series C listed in that person's name in the records of the Auction
Agent or (b) the beneficial owner of shares of ATP Series C which are
listed under such person's Broker-Dealer's name in the records of the
Auction Agent, which Broker-Dealer shall have signed a Master
Purchaser's Letter.
(e) "Hold Order" has the meaning specified in Section
2(b).
(f) "Hold/Sell Order" has the meaning specified in
Section 2(b).
(g) "Master Purchaser's Letter" means a letter
substantially in the form of or containing provisions similar to those
in the form attached to the Corporation's Prospectus with respect to
the initial issuance of ATP Series C, which is required to be executed
by (1) each prospective purchaser of shares of ATP Series C or (2) the
Broker-Dealer through whom such shares will be held.
(h) "Order" has the meaning specified in Section
2(b).
49
(i) "Potential Holder," when used with respect to shares of
ATP Series C. means any person, including any Existing Holder of shares of ATP
Series C, (i) who shall have executed a Master Purchaser's Letter or whose
shares will be listed under such person s Broker-Dealer's name on the records
of the Auction Agent, which Broker-Dealer shall have executed a Master
Purchaser's Letter and (ii) who may be interested in acquiring shares of ATP
Series C (or, in the case of an Existing Holder or such person, additional
shares of ATP Series C).
(j) "Sell Order" has the meaning specified in Section
2(b).
(k) "Submitted Buy Order" has the meaning specified
in Section 5(a).
(1) "Submitted Hold Order" has the meaning specified
in Section 5(a).
(m) "Submitted Hold/Sell Order" has the meaning
specified in Section 5(a).
(n) "Submitted Order" has the meaning specified in
Section 5(a).
(o) "Submitted Sell Order" has the meaning specified
in Section 5(a).
(p) "Sufficient Clearing Orders" means that all
shares of ATP Series C are the subject of Submitted Hold Orders or
that the number of shares of ATP Series C that are the subject of
Submitted Buy Orders by Potential Holders specifying one or more rates
equal to or less than the Maximum Applicable Rate exceeds or equals
the sum of (A) the number of shares of ATP Series C that are the
subject of Submitted Hold/Sell Orders by Existing Holders specifying
one or more. rates higher than the Maximum Applicable Rate and (B) the
number of shares of ATP Series C that are subject to Submitted Sell
Orders.
(q) "Winning Rate" means the lowest rate specified in
the Submitted Orders which, if (i) each Submitted Hold/Sell Order from
Existing Holders specifying such lowest rate and all other Submitted
Hold/Sell Orders from Existing Holders specifying lower rates were
accepted and (ii) each Submitted Buy Order from Potential Holders
specifying such lowest rate and all other Submitted Buy Orders from
Potential Holders specifying lower rates were accepted, would result
in the Existing Holders described in clause (i) above continuing to
hold an aggregate number of shares of ATP Series C which, when added
to the number of shares of ATP Series C to be purchased by the
Potential Holders described in clause (ii) above and the number of
shares of ATP Series C subject to Submitted Hold Orders, would be
equal to the number of shares of ATP Series C.
Section 2. Orders by Existing Holders and Potential Holders.
(a) On or prior to the Submission Deadline on each
Auction Date with respect to ATP Series C:
50
(i) each Existing Holder may submit to a
Broker-Dealer information as to:
(A) the number of Outstanding
shares of ATP Series C, if any, held by
such Existing Holder which such Existing
Holder desires to continue to hold without
regard to the Applicable Rate for the next
succeeding Dividend Period;
(B) the number of Outstanding
shares of ATP Series C, if any, held by
such Existing Holder which such Existing
Holder desires to continue to hold,
provided that the Applicable Rate for the
next succeeding Dividend Period shall not
be less than the rate per annum specified
by such Existing Holder; and/or
(C) the number of Outstanding
shares of ATP Series C, if any. held by
such Existing Holder which such Existing
Holder offers to sell without regard to the
Applicable Rate for the next succeeding
Dividend Period; and
(ii) each Broker-Dealer, using a list of
Potential Holders that shall be maintained in good
faith for the purpose of conducting a competitive
Auction. shall contact Potential Holders, including
persons that are not Existing Holders, on such list
to determine the number of Outstanding shares of ATP
Series C, if any, which each such Potential Holder
offers to purchase, provided that the Applicable
Rate for the next succeeding Dividend Period shall
not be less than the rate per annum specified by
such Potential Holder.
(b) For the purposes hereof, the communication to a
Broker-Dealer of information referred to in clause (i) or (ii) of
Section 2(a) of this Part II is hereinafter referred to as a "Hold
Order"; an Order containing the information referred to in clause
(i)(A) of Section 2(a) of this Part II is hereinafter referred to as
a "Hold Order"; an Order containing the information referred to in
clause (i)(B) of Section 2(a) of this Part II is hereinafter referred
to as a "Hold/Sell"; an Order containing the information referred to
in clause (i)(C) of Section 2(a) of this Part II is hereinafter
referred to as a "Sell Order"; and an Order containing the
information referred to in clause (ii) of Section 2(a) of this Part
II is hereinafter referred to as a "Buy Order."
(c) (i) A Hold/Sell Order by an Existing Holder shall
constitute an irrevocable offer to sell:
(A) the number of Outstanding
shares of ATP Series C specified in such
Order if the Applicable Rate determined on
such Auction Date shall be less than the
rate per annum specified in such Order; or
51
(B) a lesser number of Outstanding
shares of ATP Series C to be determined as
set forth in Section 6(a)(v) if the
Applicable Rate determined on such Auction
Date shall be equal to the rate per annum
specified therein; or
(C) a lesser number of Outstanding
shares of ATP Series C to be determined as
set forth in Section 6(b)(iv) if such
specified rate per annum shall be higher
than the Maximum Applicable Rate and
Sufficient Clearing Orders do not exist.
(ii) A Sell Order by an Existing Holder
shall constitute an irrevocable offer to sell the
number of Outstanding shares of ATP Series C
specified in such Sell Order.
(iii) A Buy Order by a Potential Holder
shall constitute an irrevocable offer to purchase:
(A) the number of Outstanding
shares of ATP Series C specified in such
Order if the Applicable Rate determined on
such Auction Date shall be higher than the
rate per annum specified in such Order; or
(B) such number or a lesser number
of Outstanding shares of ATP Series C to be
determined as set forth in Section 6(a)(vi)
if the Applicable Rate determined on such
Auction Date shall be equal to the rate per
annum specified therein.
Section 3. [Reserved]
Section 4. Submission of Orders by Broker-Dealers to Auction Agent.
(a) Each Broker-Dealer shall submit in writing to the
Auction Agent prior to the Submission Deadline on each Auction Date
for the Auction to be conducted on such Auction Date all Orders
obtained by such Broker-Dealer and specifying with respect to each
Order:
(i) the aggregate number of shares of ATP
Series C that are the subject of such Order;
(ii) to the extent that such Order is
placed by an Existing Holder:
(A) the number of shares of ATP
Series C, if any, subject to any Hold Order
placed by such Existing Holder;
52
(B) the number of shares of ATP
Series C, if any, subject to any Hold/Sell
Order placed by such Existing Holder;
(C) the number of shares of ATP
Series C, if any, subject to any Sell Order
placed by such Existing Holder;
(iii) to the extent that such Order is
placed by an Potential Holder, the number of shares
of ATP Series C subject to such Order; and
(iv) the rate per annum specified in such
Order.
(b) If any rate per annum specified in any Order
contains more than three figures to the right of the decimal point,
the Auction Agent shall round such rate up to the next highest
one-thousandth (.0001) of 1%.
(c) If an Order or Orders covering all shares of ATP
Series C held by any Existing Holder are not submitted to the Auction
Agent by the Submission Deadline, the Auction Agent shall, only in the
case of an Auction preceding a Dividend Period of 93 days or fewer and
at the conclusion of a Dividend Period of 93 days or fewer, deem a
Hold Order to have been submitted on behalf of such Existing Holder
covering the number of shares held by such Existing Holder and not
subject to Orders submitted to the Auction Agent. If an Order or
Orders covering all shares of ATP Series C held by any Existing Holder
are not submitted to the Auction Agent by the Submission Deadline, the
Auction Agent will, in the case of all other Auctions, deem a Sell
Order to have been submitted on behalf of such Existing Holder
covering the number of shares held by such Existing Holder and not
subject to Orders submitted to the Auction Agent.
(d) If one or more Orders on behalf of an Existing
Holder covering in the aggregate more than the number of shares of ATP
Series C held by such Existing Holder are submitted to the Auction
Agent, such Orders shall be considered valid as follows and in the
following order of priority:
(i) If one or more Hold Orders shall be
submitted on behalf of an Existing Holder as to a
number of shares of ATP Series C greater than the
number of shares of ATP Series C held by such
Existing Holder, such Hold Order or Hold Orders
shall be considered valid only as to the number of
shares of ATP Series C held by such Existing Holder.
In the case of multiple Hold Orders, each such Hold
Order shall be considered valid pro rata.
(ii) If one or more Hold/Sell Orders shall
be submitted on behalf of an Existing Holder as to a
number of shares of ATP Series C greater than the
excess of the number of shares of ATP Series C held
by such Existing Holder over the number of shares of
such series of ATP subject to Hold Orders submitted
on behalf of such
53
Existing Holder, such Hold/Sell Order or Hold/Sell
Orders shall be considered valid only as to the
number of shares of such series of ATP Series C
equal to such excess. In the case of multiple
Hold/Sell Orders specifying different rates, such
Hold/Sell Orders shall be considered valid in
increasing order of such rates. In the case of
multiple Hold/Sell Orders specifying the same rate,
each such Hold/Sell Order shall be considered valid
pro rata.
(iii) If one or more Sell Orders shall be
submitted on behalf of an Existing Holder as to a
number of shares of ATP Series C greater than the
excess of the number of shares of ATP Series C held
by such Existing Holder over the number of shares of
ATP Series C subject to Hold Orders and Hold/Sell
Orders submitted on behalf of such Existing Holder,
such Sell Order or Sell Orders shall be considered
valid only as to the number of shares equal to such
excess. In the case of multiple Sell Orders, each
such Sell Order shall be considered valid pro rata.
(e) If more than one Order is submitted on behalf of
any Existing Holder or Potential Holder, each Order submitted shall be
a separate Order with the rate and shares of ATP Series C therein
specified.
(f) In the case of any Dividend Period of 93 days or
fewer. if any rate specified in any Order is lower than the .Minimum
Applicable Rate for the Dividend Period with respect to which such
Order is made, such Order will be deemed to be an Order specifying a
rate equal to such Minimum Applicable Rate.
(g) In the case of any Dividend Period of more than
93 days, only Buy Orders, Hold/Sell Orders and Sell Orders may be
submitted.
Section 5. Determination of Sufficient Clearing Orders. Winning Rate and
Applicable Rate.
(a) Not earlier than the Submission Deadline on each
Auction Date, the Auction Agent shall assemble all Orders submitted or
deemed submitted to it by the Broker-Dealers (each such Order as
submitted or deemed submitted by a Broker-Dealer being hereinafter
referred to individually as a "Submitted Hold Order," a "Submitted
Hold/Sell Order", a "Submitted Sell Order" or a "Submitted Buy Order,"
as the case may be, or as a "Submitted Order") and shall determine:
(i) the excess of the total number of
Outstanding shares of ATP Series C over the number
of Outstanding shares of ATP Series C that are the
subject of Submitted Hold Orders (such excess being
hereinafter referred to as the "Available ATP");
54
(ii) from the Submitted Orders whether the
number of Outstanding shares of ATP Series C that
are the subject of Submitted Buy Orders by Potential
Holders specifying one or more rates per annum equal
to or lower than the Maximum Applicable Rate exceeds
or is equal to the sum of:
(A) the number of shares of ATP
Series C that are the subject of Submitted
Hold/Sell Orders by Existing Holders
specifying one or more rates per annum
higher than the Maximum Applicable Rate,
and
(B) the number of shares of ATP
Series C that are subject to Submitted Sell
Orders (if such excess or such equality
exists (other than because the number of
Outstanding shares of such series of ATP in
clauses (A) and (B) above are each zero
because all of the Outstanding shares of
ATP Series C are the subject of Submitted
Hold Orders), such Submitted Buy Orders by
Potential Holders being hereinafter
referred to collectively as "Sufficient
Clearing Orders"), would result in the
number of shares subject to all Submitted
Orders specifying the Winning Rate or a
lower rate per annum being at least equal
to the Available ATP.
(b) Promptly after the Auction Agent has made the
determinations pursuant to Section 5(a), the Auction Agent shall
advise the Corporation of the Maximum Applicable Rate and, based on
such determinations, the Applicable Rate for the next succeeding
Dividend Period as follows:
(i) If Sufficient Clearing Orders exist,
that the Applicable Rate for the next succeeding
Dividend Period shall be equal to the Winning Rate;
(ii) If Sufficient Clearing Orders do not
exist (other than because all of the Outstanding
shares of ATP Series C are the subject of Submitted
Hold Orders), that the Applicable Rate for the next
succeeding Dividend Period shall be equal to the
Maximum Applicable Rate and the Dividend Period
shall be a Standard Term Period; or
(iii) If all Existing Holders submit (or
are deemed to have submitted) Hold Orders in an
Auction, the Dividend Period next succeeding the
Auction shall automatically be the same Dividend
Period as that Dividend Period immediately preceding
the Auction and the Applicable Rate will be the
Minimum Applicable Rate (or such other rate if there
is no Minimum Applicable Rate) in effect on the date
of the Auction with respect to such Dividend Period.
55
Section 6. Acceptance and Rejection of Submitted Orders and Submitted Sell
Orders and Allocation of Shares.
Based upon the results of the Auction, the Auction Agent will
determine the aggregate number of shares to be held and sold by Existing
Holders and to be purchased by Potential Holders, and, with respect to each
Broker-Dealer, determine the extent to which such Broker-Dealer will
deliver, and from which other Broker-Dealers such Broker-Dealer will
receive, shares.
(a) If Sufficient Clearing Orders exist:
(i) all Submitted Hold Orders will be
accepted;
(ii) all Submitted Sell Orders will be
accepted and all Submitted Hold/Sell Orders
specifying any rate higher than the Winning Rate
will be accepted as Sell Orders;
(iii) all Submitted Hold/Sell Orders
specifying a rate lower than the Winning Rate will
be accepted as Hold Orders;
(iv) all Submitted Buy Orders specifying a
rate lower than the Winning Rate will be accepted;
(v) all Submitted Hold/Sell Orders
specifying a rate equal to the Winning Rate will be
accepted as Hold Orders unless the number of shares
subject to all such Submitted Hold/Sell Orders is
greater than the number of shares remaining
unaccounted for after the acceptances described in
clauses (i), (iii) and (iv) above, in which event
each such Submitted Hold/Sell Order will be accepted
as a Hold Order and a Sell Order as to the
respective number of shares determined in accordance
with the Proration Procedures; and
(vi) all Submitted Buy Orders specifying a
rate equal to the Winning Rate will be accepted,
unless the number of shares subject to all such
Submitted Buy Orders. is greater than the number of
shares remaining unaccounted for after the
acceptances described in clauses (i), (iii), (iv)
and (v) above, in which event each such Submitted
Buy Order will be accepted only as to the number of
shares determined in accordance with the Proration
Procedures.
(b) If Sufficient Clearing Orders do not exist:
(i) all Submitted Hold Orders will be
accepted;
56
(ii) all Submitted Hold/Sell Orders
specifying a rate equal to or lower than the Maximum
Applicable Rate will be accepted as Hold Orders;
(iii) all Submitted Buy Orders specifying a
rate equal to or lower than the Maximum Applicable
Rate will be accepted; and
(iv) all Submitted Hold/Sell Orders
specifying a rate higher than the Maximum Applicable
Rate and all Submitted Sell Orders will be accepted
as Hold Orders and as Sell Orders as to the
respective number of shares of ATP Series C
determined in accordance with the Proration
Procedures.
(c) If as a result of the procedures described in
Section 6(a) or 6(b) 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 ATP Series C in any Auction, the
Auction Agent will, in such manner as, in its sole discretion, it
shall determine, round up or down the number of shares of ATP Series C
being sold or purchased on such Auction Date so that each share sold
or purchased by each Existing Holder or Potential Holder will be a
whole share of ATP Series C even if such allocation results in one or
more of such Potential Holders not purchasing any shares of ATP Series
C or in one or more Existing Holders no longer holding any shares of
ATP Series C.
(d) If, as a result of the procedures described in
Section 6(a), any Potential Holder would be entitled or required to
purchase a fraction of a share of ATP Series C, as applicable, on any
Auction Date, the Auction Agent shall, in such manner as in its sole
discretion it shall determine, allocate shares of ATP Series C for
purchase among Potential Holders so that only whole shares of ATP
Series C are purchased on such Auction Date by any Potential Holder,
even if such allocation results in one or more of such Potential
Holders not purchasing any shares of ATP Series C on such Auction Date
or in one or more Existing Holders no longer holding any shares of ATP
Series C.
(e) Based on the results of each Auction, the Auction
Agent shall determine, with respect to each Broker-Dealer that
submitted Orders on behalf of Existing Holders or Potential Holders,
the aggregate number of shares of ATP Series C to be purchased and the
aggregate number of shares of ATP Series C to be sold by such
Potential Holders and Existing Holders and, to the extent that such
aggregate number of shares of ATP Series C to be purchased and such
aggregate number of shares of such series of ATP to be sold differ,
the Auction Agent shall determine to which other Broker-Dealer or
Broker-Dealers acting for one or more purchasers such Broker-Dealer
shall deliver, or from which other Broker-Dealer or Broker-Dealers
acting for one or more sellers such Broker-Dealer shall receive, as
the case may be, shares of ATP Series C.
57
Section 7. Notification of Results: Settlement.
(a) The Auction Agent will advise each Broker-Dealer
that submitted an Order whether such Order was accepted and of the
Applicable Rate for the next Dividend Period by telephone by
approximately 3:00 p.m., New York City time, on each Auction Date.
Each Broker-Dealer that submitted an Order will as soon as practicable
advise each Existing Holder and Potential Holder whether its Order was
accepted and will confirm in writing purchases and sales with each
Existing Holder and Potential Holder purchasing or selling shares as a
result of an auction as soon as practicable on the Business Day next
succeeding the Auction Date. Each Broker-Dealer that submitted a Hold
Order will advise each Existing Holder on whose behalf such Hold Order
was submitted of the Applicable Rate for the shares of ATP Series C
for the next Dividend Period.
(b) In accordance with the Securities Depository's
normal procedures, on the Business Day after the Auction Date, the
transactions described above will be executed through the Securities
Depository and the accounts of the respective Agent Members at the
Securities Depository will be debited and credited and shares
delivered as necessary to effect the purchases and sales as determined
in the Auction. Purchasers will make payment through their Agent
Members in same-day funds to the Securities Depository against
delivery through their Agent Members; the Securities Depository will
make payment in accordance with its normal procedures as in effect
from time to time.
(c) If any Existing Holder selling shares in an
Auction fails to deliver such shares, the Broker-Dealer of any person
that was to have purchased shares in such Auction may deliver to such
person a number of whole shares that is less than the number of shares
that otherwise was to be purchased by such person. In such event, the
number of shares to be so delivered shall be determined by such
Broker-Dealer. Delivery of such lesser number of shares shall
constitute good delivery.
Section 8. Miscellaneous.
The Board of Directors may interpret the provisions of these Auction
Procedures to resolve any inconsistency or ambiguity, remedy any formal
defect or make any other change or modification that does not adversely
affect the rights of Existing Holders of shares of ATP Series C. Except as
otherwise required by law, an Existing Holder shall have the ownership of
the shares of ATP Series C held by it maintained in book entry form by the
Securities Depository in the account of (a) for an Existing Holder who
holds shares of ATP Series C directly, its Agent Member, which in turn will
maintain records of such Existing Holder's beneficial ownership or (b) for
an Existing Holder holding shares of ATP Series C through a Broker-Dealer,
its Broker-Dealer's Agent Member, in which case its Broker-Dealer shall
maintain records of such Existing Holder's beneficial ownership. Neither
the Corporation nor any Affiliate of the Corporation shall submit an Order
in any Auction. Any Existing Holder that is such an Affiliate shall not
sell, transfer or otherwise dispose of shares of ATP Series C
58
to any Person other than the Corporation. All of the shares of ATP Series C
shall be represented by a single certificate registered in the name of the
nominee of the Securities Depository unless otherwise required by law or
unless there is no Securities Depository. If there is no Securities
Depository, at the Corporation's option and upon its receipt of such
documents as it deems appropriate, any shares of ATP Series C may be
registered in the share register for the shares of ATP Series C maintained
by the Auction Agent in the name of the Existing Holder thereof or in the
name of such Existing holder's Broker-Dealer and such Existing Holder or
such Existing Holder's Broker-Dealer thereupon will be entitled to receive
certificates therefor and required to deliver certificates therefor upon
transfer or exchange thereof.
DOCSC\501780.5
4/28/97
▇▇
▇▇▇▇▇▇▇ ▇
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ HIGH INCOME FUND, INC.
NOTICE OF AUCTION DATE FOR
AUCTION TERM PREFERRED STOCK ("ATP")
NOTICE IS HEREBY GIVEN that the Auction Date of the next Auction for
the ATP Series ___ of THE NEW AMERICA HIGH INCOME FUND, INC. (the "Fund") is
scheduled to be ________ and the next Dividend Payment Date for the Fund's ATP
Series ___ will be ___________.
THE NEW AMERICA HIGH INCOME FUND, INC.
EXHIBIT F
THE NEW AMERICA HIGH INCOME FUND, INC.
NOTICE OF PROPOSED DESIGNATION OF
ALTERNATE TERM PERIOD FOR
AUCTION TERM PREFERRED STOCK
NOTICE IS HEREBY GIVEN that THE NEW AMERICA HIGH INCOME FUND, INC. (the
"Fund") proposes to exercise its option to designate the Dividend Period of its
Series Auction Term Preferred Stock ("ATP") commencing [the first day of the
proposed Alternate Term Period] and ending (the last day of the proposed
Alternate Term Period] as an Alternate Term Period.
By 9:00 A.M., New York City time, on the Business Day next preceding
the first day of such proposed Alternate Term Period, the Fund will notify the
Auction Agent for the ATP of either (a) its determination to exercise such
option, designating the length of such Alternate Term Period and the terms of
the Specific Redemption Provisions, if any, or (b) its determination not to
exercise such option.
THE NEW AMERICA HIGH INCOME FUND, INC.
Dated: ___________
EXHIBIT G
THE NEW AMERICA HIGH INCOME FUND, INC.
NOTICE OF DESIGNATION OF ALTERNATE TERM PERIOD OF
AUCTION TERM PREFERRED STOCK
NOTICE IS HEREBY GIVEN that THE NEW AMERICA HIGH INCOME FUND,
INC. (the "Fund") has determined to designate the Dividend Period of its Series
Auction Term Preferred Stock ("ATP") commencing on (the first day of the
Alternate Term Period] and ending on (the last day of the Alternate Term Period]
as an Alternate Term Period.
The Alternate Term Period will be ___ (days] [year(s]].
The Auction Date for the Alternate Term Period is (the Business Day
next preceding the first day of such Alternate Term Period].
The scheduled Dividend Payment Dates for such series of ATP during such
Alternate Term Period will be __________________.
[Specific Redemption Provisions, if applicable.]
[The Alternate Term Period shall not commence if on such Auction Date
Sufficient Clearing Orders shall not exist.]
THE NEW AMERICA HIGH INCOME FUND, INC.
Dated: ______________
EXHIBIT H
THE NEW AMERICA HIGH INCOME FUND, INC.
NOTICE OF DETERMINATION NOT TO DESIGNATION
ALTERNATE TERM PERIOD OF
AUCTION TERM PREFERRED STOCK
NOTICE IS HEREBY GIVEN that THE NEW AMERICA HIGH INCOME FUND, INC. (the
"Fund") has determined not to exercise its option to designate an Alternate Term
Period of its Series Auction Term Preferred Stock. Accordingly, the next
succeeding Dividend Period of such series will be a Standard Term Period.
THE NEW AMERICA HIGH INCOME FUND, INC.
Dated: ______________
DOCSC\510365.5