EXHIBIT 1
Amended and Restated Trust Indenture of Steadman Associated Fund and
Declaration of Trust
AMENDED
AND
RESTATED TRUST INDENTURE OF
STEADMAN SECURITY TRUST
(formerly Steadman Associated Fund)
AND DECLARATION OF TRUST
WITH AMENDMENTS THROUGH
JANUARY 28, 1997
TABLE OF CONTENTS
ARTICLE I
The Trust - The Fund . . . . . . . . . . . . . . . . . . . . . . .7
Section 1.1. NAME. . . . . . . . . . . . . . . . . . . . . . . . .7
Section 1.2. LOCATION. . . . . . . . . . . . . . . . . . . . . . .7
Section 1.3. NATURE OF THE FUND. . . . . . . . . . . . . . . . . .7
Section 1.4. DEFINITIONS . . . . . . . . . . . . . . . . . . . . .8
ARTICLE II
Powers of Trustees . . . . . . . . . . . . . . . . . . . . . . . .9
Section 2.1. GENERAL . . . . . . . . . . . . . . . . . . . . . . .9
Section 2.2. INVESTMENTS . . . . . . . . . . . . . . . . . . . . .9
Section 2.3. LEGAL TITLE . . . . . . . . . . . . . . . . . . . . .9
Section 2.4. TAXES . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.5. DELEGATION. . . . . . . . . . . . . . . . . . . . . 10
Section 2.6. EXPENSES. . . . . . . . . . . . . . . . . . . . . . 10
Section 2.7. DEPOSITS. . . . . . . . . . . . . . . . . . . . . . 11
Section 2.8. VALUATION . . . . . . . . . . . . . . . . . . . . . 11
Section 2.9. FISCAL YEAR AND ACCOUNTING METHOD . . . . . . . . . 12
Section 2.10. RESERVES . . . . . . . . . . . . . . . . . . . . . 12
Section 2.11. BUSINESS INTERESTS OF TRUSTEES AND OTHERS. . . . . 12
Section 2.12. POWER TO CONTRACT. . . . . . . . . . . . . . . . . 13
Section 2.13. INSURANCE. . . . . . . . . . . . . . . . . . . . . 13
Section 2.14. PENSION AND OTHER PLANS. . . . . . . . . . . . . . 13
Section 2.15. DIVIDENDS. . . . . . . . . . . . . . . . . . . . . 14
Section 2.16. SEAL . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.17. CHARITABLE CONTRIBUTIONS . . . . . . . . . . . . . 14
Section 2.18. INDEMNIFICATION. . . . . . . . . . . . . . . . . . 14
Section 2.19. REMEDIES . . . . . . . . . . . . . . . . . . . . . 14
Section 2.20. FURTHER POWERS . . . . . . . . . . . . . . . . . . 14
Section 2.21. RESTRICTION ON INVESTMENT . . . . . . . . . . . . 14
Section 2.22. SHAREHOLDERS LISTS. . . . . . . . . . . . . . . . 15
ARTICLE III
Advisor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.1. DESIGNATION . . . . . . . . . . . . . . . . . . . . 15
Section 3.2. TERMS OF AGREEMENT. . . . . . . . . . . . . . . . . 15
Section 3.3. SUBSTITUTION FOR ADVISOR. . . . . . . . . . . . . . 16
Section 3.4. INDEPENDENCE OF TRUSTEES. . . . . . . . . . . . . . 16
Section 3.5. OTHER ACTIVITIES. . . . . . . . . . . . . . . . . . 16
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ARTICLE IV
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.1. STATEMENT OF INVESTMENT POLICY. . . . . . . . . . . 16
Section 4.2 OTHER INVESTMENTS . . . . . . . . . . . . . . . . . 17
Section 4.3 OPTION ACTIVITIES . . . . . . . . . . . . . . . . . 17
Section 4.4 RESTRICTIONS. . . . . . . . . . . . . . . . . . . . 17
Section 4.5. PORTFOLIO TRANSACTIONS. . . . . . . . . . . . . . . 17
ARTICLE V
Limitations of Liability . . . . . . . . . . . . . . . . . . . . 17
Section 5.1. LIABILITY TO THIRD PERSONS. . . . . . . . . . . . . 17
Section 5.2. LIABILITY TO FUND OR TO SHAREHOLDERS. . . . . . . . 17
Section 5.3. INDEMNIFICATION . . . . . . . . . . . . . . . . . . 17
Section 5.4. SURETY BONDS. . . . . . . . . . . . . . . . . . . . 18
Section 5.5. APPARENT AUTHORITY. . . . . . . . . . . . . . . . . 18
Section 5.6. RECITALS REGARDING LIABILITY; INSURANCE . . . . . . 18
ARTICLE VI
Shares and Other Securities. . . . . . . . . . . . . . . . . . . 19
Section 6.1. DESCRIPTION OF SHARES . . . . . . . . . . . . . . . 19
Section 6.2. CERTIFICATES. . . . . . . . . . . . . . . . . . . . 19
Section 6.3. ISSUANCE OF SECURITIES: FUND AS DISTRIBUTOR . . . . 19
Section 6.4. POOLING OF FUNDS. . . . . . . . . . . . . . . . . . 20
Section 6.5 ACQUISITION OF FUND SHARES. . . . . . . . . . . . . 20
Section 6.6 APPROVAL OF CERTAIN BUSINESS COMBINATIONS . . . . . 21
ARTICLE VII
Record and Transfer of Shares. . . . . . . . . . . . . . . . . . 23
Section 7.1. SHARE REGISTER; HOLDERS OF RECORD . . . . . . . . . 23
Section 7.2. TRANSFER AGENT. . . . . . . . . . . . . . . . . . . 23
Section 7.3. BLANK CERTIFICATES. . . . . . . . . . . . . . . . . 24
Section 7.4. CHANGE OF HOLDER OF RECORD. . . . . . . . . . . . . 24
Section 7.5. TRANSFER OF SHARES. . . . . . . . . . . . . . . . . 24
Section 7.6. LIMITATION OF FIDUCIARY RESPONSIBILITY. . . . . . . 25
Section 7.7. NOTICES . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.8. REPLACEMENT OF CERTIFICATES . . . . . . . . . . . . 25
Section 7.9. DESIGNATION OF BENEFICIARY. . . . . . . . . . . . . 25
ARTICLE VIII
Characteristics of Securities. . . . . . . . . . . . . . . . . . 26
Section 8.1. GENERAL . . . . . . . . . . . . . . . . . . . . . . 26
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Section 8.2. DEATH OF SHAREHOLDERS . . . . . . . . . . . . . . . 26
ARTICLE IX
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9. 1 SPECIAL MEETINGS. . . . . . . . . . . . . . . . . . 26
Section 9.2. NOTICE OF MEETINGS. . . . . . . . . . . . . . . . . 27
Section 9.3. VOTING RIGHTS OF SHAREHOLDERS . . . . . . . . . . . 27
Section 9.4. RECORD DATE . . . . . . . . . . . . . . . . . . . . 27
Section 9.5. PROXIES . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.6. REPORTS . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.7 NOTICE FOR NOMINATIONS AND PROPOSALS . . . . . . . . 28
ARTICLE X
Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 10.1. NUMBER AND QUALIFICATION . . . . . . . . . . . . . 29
Section 10.2. TERMS OF OFFICE: ELECTION . . . . . . . . . . . . 29
Section 10.3. REGISTRATION AND REMOVAL. . . . . . . . . . . . . 29
Section 10.4. VACANCIES . . . . . . . . . . . . . . . . . . . . 30
Section 10.5. MEETINGS . . . . . . . . . . . . . . . . . . . . . 30
Section 10.6. OFFICERS . . . . . . . . . . . . . . . . . . . . . 31
Section 10.7. BY-LAWS. . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XI
Distributions to Shareholders. . . . . . . . . . . . . . . . . . 31
Section 11.1. GENERAL. . . . . . . . . . . . . . . . . . . . . . 31
Section 11.2. RETAINED EARNINGS . . . . . . . . . . . . . . . . 32
Section 11.3. SOURCES OF DISTRIBUTIONS . . . . . . . . . . . . . 32
ARTICLE XII
Amendment or Termination of Fund . . . . . . . . . . . . . . . . 32
Section 12.1. AMENDMENT OR TERMINATION . . . . . . . . . . . . 32
Section 12.2. TRANSFER TO SUCCESSOR. . . . . . . . . . . . . . . 33
ARTICLE XIII
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 13.1. GOVERNING LAW . . . . . . . . . . . . . . . . . . 33
Section 13.2. COUNTERPARTS . . . . . . . . . . . . . . . . . . . 33
Section 13.3. RELIANCE BY THIRD PARTIES. . . . . . . . . . . . . 33
Section 13.4. PROVISIONS IN CONFLICT WITH LAWS OR REGULATIONS. . 34
Section 13.5. NOT IN DEROGATION OF EXISTING RIGHTS . . . . . . . 34
Section 13.6. SECTION HEADINGS . . . . . . . . . . . . . . . . . 34
4
ARTICLE XIV
Effective Date and Duration of Trust and Fund. . . . . . . . . . 34
Section 14.1. EFFECTIVE DATE. . . . . . . . . . . . . . . . . . 34
Section 14.2. THIS INSTRUMENT SUPERSEDES . . . . . . . . . . . . 34
Section 14.3. DURATION AND TERMINATION . . . . . . . . . . . . . 34
ARTICLE XV
Shareholders' Acceptance . . . . . . . . . . . . . . . . . . . . 35
Section 15.1. ACCEPTANCE . . . . . . . . . . . . . . . . . . . . 35
5
This Amended and Restated Trust Indenture of Steadman Associated Fund and
Declaration of Trust ("Instrument" herein) constitutes an Amendment of Trust
Indenture of Steadman Associated Fund supplemental to a certain Trust Indenture
dated 23rd February 1939, as amended or supplemented September 21, 1939,
October 31, 1940, April 15, 1941, May 15, 1941, November 10, 1943, November 1,
1944, August 29, 1950, September 1, 1951, March 26, 1954, March 7, 1955, July
1, 1957, June 21, 1960, July 6, 1961, January 10, 1962, December 30, 1964,
August 24, 1965, November 30, 1965, December 8, 1965, April 22, 1966, November
30, 1966, June 13, 1967, August 30, 1967, June 12, 1969, December 31, 1969,
December 31, 1970, April 15, 1971, December 30, 1971, December 29, 1972,
February 15, 1974, June 30, 1974, October 31, 1974, December 24, 1974 and
December 29, 1978 is:
AMENDED AND RESTATED AS OF January 28, 1997 BY AND BETWEEN THE PARTIES,
being,
(a) The Registered Holders ("Shareholders" herein) from time to time of
Shares of Steadman Associated Fund ("Fund" herein) as settlors of express
revocable trusts who became parties hereto by taking and holding their
respective Shares, and
(b) The Trustees being Charles W. Steadman, Paul A. Bowers, John T.
Hayward, and Paul F. Wagner (such persons so long as they shall continue in
office in accordance with the terms of this Instrument, and all other persons
who at the time in question have been duly elected or appointed as Trustees in
accordance with the provisions of this Instrument and are then in office are
collectively called the "Trustees" herein.)
RECITALS
The Fund is a common law trust within the meaning of Section 16(b) of the
Investment Company Act of 1940 and was organized as Associated Fund Trust in
1939. The Fund's name was changed in 1969 to Steadman Associated Fund and is
hereby changed upon the Effective Date of this amendment to the Steadman
Security Trust, which shall for all purposes of this document mean the "Fund".
The original Trust Indenture has been the subject of many amendments, and
the shareholders of the Fund will be requested to ratify and confirm this
Amended and Restated Trust Indenture, including the change of the Fund from an
open-end investment to a closed-end company.
It is in the best interests of the Fund and its Shareholders that the
certain Trust Indenture dated 23rd February 1939, as amended and supplemented,
be amended and restated to reflect the
6
foregoing changes and such other changes as are necessary to operate as a
closed-end investment company.
NOW, THEREFORE, In consideration of the mutual covenants herein contained
and for other good and valuable consideration,
(a) The Parties amend that certain Restated Trust Indenture of Steadman
Associated Fund and Declaration of Trust and herein restate it as the Amended
and Restated Trust Indenture of Steadman Security Trust and Declaration of
Trust;
(b) The Trustees agree to be, bound by this Instrument; and
(c) THE TRUSTEES DO HEREBY DECLARE that they will hold as Trustees the Fund
and all Fund Property of every type and description which they may acquire now
or hereafter as Trustees, together with the proceeds thereof, in trust, to
manage, invest, reinvest, purchase and sell, exchange or otherwise dispose of
the same for the benefit of the Shareholders present and future and in the
manner and subject to the provisions as now shall be set forth in this
Instrument.
ARTICLE I
The Trust - The Fund
Section 1.1. NAME. The name of the trust created by this Instrument shall
be Steadman Security Trust ("Fund" herein). So far as may be practicable, the
Trustees shall conduct the Fund's activities, execute all documents and sue or
be sued under this name. This name (and the word "Fund" or "Trust" wherever
used herein except where the context otherwise requires) shall refer to the
Trustees in their capacity as Trustees, and not individually or personally, and
shall not refer to the officers, agents, employees or Shareholders of the Fund
or of the Trustees. If the Trustees determine that the use of this name is not
practicable, legal or convenient, they may use any other designation or they may
adopt any other name for the Fund that they deem proper, and the Trust may hold
property and conduct its activities under such designation or name.
Section 1.2. LOCATION. The principal office of the Fund shall be in the
District of Columbia, or in any other location the Trustees may select. The
Fund may have such other offices or places of business as the Trustees may from
time to time determine to be necessary or expedient.
Section 1.3. NATURE OF THE FUND.
(a) The Fund shall be of the type commonly termed a common law trust within
the meaning of Section 16(b) of the Investment Company Act of 1940. The Fund is
not intended to be, shall not be deemed to be, and shall not be treated as a
general partnership, limited partnership, joint venture, corporation, joint
stock company or any other form of legal relationship. The
7
Shareholders shall be beneficiaries, and their relationship to the Trustees
shall be solely in that capacity in accordance with the rights conferred upon
them hereunder.
(b) The Advisor shall have discretion with respect to whether the Fund
should qualify, from time to time, as a regulated investment company as that
term is defined in Subchapter M of the Internal Revenue Code of 1986, as
amended.
Section 1.4. DEFINITIONS. As used herein, the following terms have the
following meanings unless the context otherwise requires:
"Act" shall mean the Investment Company Act of 1940, as amended.
"ADVISOR" or "INVESTMENT ADVISOR" shall mean Steadman Security Corporation,
a Delaware corporation having its principal place of business in Washington,
D.C., and where applicable, as in but not limited to Article V, shall include
the directors, officers, employees and agents of the Advisor.
"AFFILIATE" shall have the same meaning as in the Act.
"AMENDED AND RESTATED TRUST INDENTURE OF STEADMAN SECURITY TRUST AND
DECLARATION OF TRUST" shall mean this Instrument as amended, restated or
modified from time to time. References herein to "Amendment of Trust Indenture
of Steadman Associated Fund", "Declaration of Trust", "Instrument", "hereof",
"herein", "hereunder", "Restated Trust Indenture of Steadman Associated Fund",
"Restated Trust Indenture", "Trust Indenture", "Trust" and "Fund" shall be
deemed to refer to this Instrument and shall not be limited to the particular
text, article or section in which such words appear.
"COMMITTEE" shall mean a group of any two or more Trustees which has been
designated as such by the Trustees and to whom duties or powers have been
delegated pursuant to Section 2.5.
"EFFECTIVE DATE" shall be as stated in Section 14.1.
"FISCAL YEAR" shall mean any fiscal period of the Fund for which an income
tax return is submitted to the Internal Revenue Service and which is treated by
the Internal Revenue Service as a reporting period.
"FUND PROPERTY" shall mean as of any particular time any and all property
of whatever nature, tangible or intangible, cash and securities of all kinds,
which are transferred, conveyed or paid to the Fund or the Trustees and all
income, profits and gains there from and which at such time is owned or held by,
or for the account of, the Fund or the Trustees.
8
"PERSON" shall mean and include individuals, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, business trusts or
other organizations, whether or not legal entities, and governments and agencies
and political subdivisions thereof.
"SECURITIES" shall mean any stock, shares, voting trust certificates,
bonds, debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any instruments
commonly known as "securities" or any certificates of interest, shares or
participations in temporary or interim certificates for, or any right to
subscribe to, purchase or acquire any of the foregoing.
"SHAREHOLDERS" shall mean as of any particular time all holders of record
or registered holders of outstanding Shares at such time.
"SHARES" shall mean the shares of beneficial interest of the Fund described
in Section 6.1.
ARTICLE II
Powers of Trustees
Section 2.1. GENERAL. The Trustees shall have, without further
authorization, full, exclusive and absolute power, control and authority over
the Fund Property and, the business of the Fund to the same extent as if the
Trustees were the sole and absolute owners of the Fund Property and business in
their own right, free from any power or control on the part of the Shareholders,
except as may be required by law, with such powers of delegation as may be
permitted by this Instrument. The enumeration of any specific power or
authority herein shall not be construed as limiting the aforesaid powers or
authority in any respect.
Section 2.2. INVESTMENTS. The Trustees shall have power to invest and
reinvest the Fund Property in such securities as they deem appropriate and
compatible for the fulfillment of the objectives of the Fund, and hold or retain
such securities or to sell them at such times and from time to time as they
shall in their absolute discretion determine.
In the exercise of their powers, the Trustees shall not be limited to
investing in obligations maturing before the possible termination of the Trust,
nor shall the Trustees be limited by any law now or hereafter in effect limiting
the investments which may be held or retained by trustees or other fiduciaries,
but they shall have full authority and power to make any and all investments
within the limitations of this Instrument as they, in their absolute discretion,
shall determine, and without liability for loss.
Section 2.3. LEGAL TITLE. Legal title to all the Fund Property shall be
vested in the Trustees, as joint tenants or otherwise, and held by and
transferred to the Trustees, except that the Trustees shall have power to cause
legal title to any Fund Property to be held by or in the name of
9
one or more of the Trustees with suitable reference to their trustee status or
in the name of the Fund, or to the extent the Trustees deem such action to be in
the best interest of the Fund and its Shareholders, in the name of any other
Person as nominee on such terms, in such manner and with such powers as the
Trustees may determine, provided that if any Fund Property is held in the name
of a nominee, such nominee will hold that Fund Property for the exclusive
benefit of the Fund.
Section 2.4. TAXES. The Trustees shall have power to pay all taxes or
assessments, of whatever kind or nature, imposed upon or against the Fund or the
Trustees in connection with the Fund Property or upon or against the Fund
Property or income or any part thereof, to settle and compromise disputed tax
liabilities and for the foregoing purposes to make such returns and do all such
other acts and things as may be deemed by the Trustees necessary or desirable.
Section 2.5. DELEGATION. The Trustees shall have power, consistent with
their continuing exclusive authority over the management of the Fund, the
conduct of its affairs and the management and disposition of Fund Property, to
delegate from time to time to such one or more of their number, to Committees,
to officers, employees and agents of the Fund or to the Advisor the doing of any
such things and the execution of such deeds or other instruments, either in the
name of the Fund or the names of the Trustees or as their attorney or attorneys
or otherwise, as the Trustees may from time to time deem expedient.
Section 2.6. EXPENSES. (a) The Trustees shall have power to incur and pay
any charges or expenses, which, in the opinion of the Trustees, are necessary or
incidental to or proper for carrying out any of the purposes of this Instrument,
to reimburse others for the payment therefor and to pay appropriate compensation
or fees out of the Fund Property to themselves as Trustees and to Persons with
whom the Fund has contracted or transacted business including the Advisor, its
subsidiaries and affiliated Persons. The Trustees shall fix the compensation of
all officers of the Fund and the Trustees. The Trustees shall receive
reasonable compensation for their general services as Trustees and officers
hereunder. The Trustees may also pay themselves on any one or more of
themselves such compensation for special services, including legal services, as
they in good faith deem reasonable and reimbursement for expenses reasonably
incurred by them or any one or more of them on behalf of the Fund.
(b) In addition to but without limitation upon the foregoing or any other
powers or authority of the Trustees, the Trustees shall pay on behalf of the
Fund all of the Fund's ordinary expenses of operation unless specifically
excepted, such expenses of operation including, but not being limited to the
following: (i) the expenses of maintaining its own books of account; (ii) the
expenses of maintaining one or more of its Custodians, Transfer Agents or
Dividend Disbursing Agents; (iii) the expenses of computing the net asset value
of shares of the Fund at any required valuation date; (iv) the fees and expenses
of its Trustees, including those Trustees who also may be Directors of the
Advisor or its subsidiary, corporations or affiliated Persons and the fees and
expenses of the members of any Committee of the Fund including any members who
also may be Directors or officers or employees (or all of these) of the Advisor,
its subsidiaries or affiliated
10
Persons, perform services therefor and be compensated thereby; (v) the expenses
of meetings of its shareholders; (vi) the expenses of printing and mailing of
all shareholder reports and other required reports and documents provided
shareholders including but not being limited to the costs of printing and
mailing prospectuses to shareholders; (vii) taxes of any kind assessed against
the Fund; (viii) interest and commissions; (ix) Securities and Exchange
Commission registration fees; (x) state registration fees; (xi) the expenses of
trust existences; (xii) all or part of the salaries of Fund officers and other
employees who may also be Directors or officers or employees (or all of these)
of the Advisor, its subsidiaries or affiliated Persons, perform services
therefor and be compensated thereby; (xiii) the fees of its auditors; (xiv) the
fees of its legal counsel; and (xv) all other ordinary expenses of operation.
The Trustees also shall pay all extraordinary expenses of whatever kind or
nature, unless such expenses have been specifically assumed by the Advisor or
one of its affiliates.
Section 2.7. DEPOSITS. The Trustees shall have power to select a custodian
for the physical holding of the Fund Property in compliance with the Act under
such terms and conditions as the Trustees in their sole and absolute discretion
shall deem to be appropriate. The Trustees shall also have power to deposit any
moneys or Securities included in the Fund Property with any one or more banks,
trust companies, state and federal savings and loan associations or other
banking or savings institutions, including any affiliate of the Advisor, whether
or not such deposits draw interest provided, however, that any such institution
shall qualify under applicable sections of the Act and all proper regulations
promulgated by the Securities and Exchange Commission. Such deposits shall be
subject to withdrawal in such manner as the Trustees determine, and the Trustees
shall have no responsibility for any loss which may occur by reason of the
failure of the bank, trust company state or federal savings and loan association
or other banking or savings institution with which the moneys or Securities have
been deposited.
Section 2.8. VALUATION. (a) The Trustees shall have power to determine
conclusively, the value of any of the Fund Property and of any services,
Securities, assets or other consideration hereafter acquired or disposed of by
the Fund and to revalue the Fund Property.
(b) The Trustees or Advisor or an officer or officers or agent or agents
of the Fund designated from time to time for this purpose by the Trustees shall,
at any required valuation date, in order to properly administer the Fund,
determine the value of all the assets of the Fund at the close of trading on the
New York Stock Exchange on any day upon which such Exchange is open for
unrestricted trading or at such other times as the Trustees shall designate, and
the value of such assets so determined, less total liabilities of the Fund
(exclusive of capital stock and surplus) divided by the number of shares
outstanding shall be the net asset value of a share until a new net asset value
is determined by the Trustees or Advisor or such officers or agents. In
determinations of net asset value all Securities for which market quotations are
available shall be appraised at a price not less than the bid price and not
greater than the asked price prevailing at the time of valuation, and other
Securities and assets shall be appraised at fair value, all as determined in
good faith by or under authority of the Trustees in accordance with accounting
principles generally accepted at the time. In determinations of net asset
value, treasury stock shall be treated as if it
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were unissued. When net asset value is determined as of a time other than the
close of unrestricted trading on the New York Stock Exchange, the Trustees or
Advisor or such officers or agents may, but need not, determine such net asset
value by adjusting the net asset value determined as of the preceeding close of
such Exchange in such manner (based upon changes in the market prices of
selected securities or changes in market averages or on other standard and
readily ascertainable market data since such close) as the Trustees or Advisor
or such officers or agents deem adequate to reflect a fair approximate estimate
of the probable change in net asset value which has occurred since such close.
In determining the net asset value, the Trustees or Advisor or such officers or
agents may include in liabilities such reserves for taxes, estimated accrued
expenses and contingencies in accordance with accounting principles generally
accepted at the time as the Trustees or Advisor or such officers or agents may
in its or their best judgment deem fair and reasonable under the circumstances.
Section 2.9. FISCAL YEAR AND ACCOUNTING METHOD. The Trustees shall have
power to determine the Fiscal Year for the Fund and the method or form in which
its accounts shall be kept and from time to time to change the Fiscal Year or
the method or form in which its accounts shall be kept.
Section 2.10. RESERVES. The Trustees may set up reserves for taxes or
other contingent liabilities and may allocate thereto such portion of the assets
of the Fund as may be necessary. Any excess reserve so set up shall be returned
to the Fund on termination of the tax or other contingent liabilities. All
reserves shall be held by the Trustees.
Section 2.11. BUSINESS INTERESTS OF TRUSTEES AND OTHERS. (a) Any Trustee,
officer, employee or agent of the Fund may, in his personal capacity, or in a
capacity of trustee, officer, director, stockholder, partner, member, Advisor or
employee of any Person have business interests and engage in business activities
in addition to those relating to the Fund, which interests and activities may
be similar to those of the Fund and may include the acquisition, syndication,
holding, management, operation or disposition, for his own account or for the
account of such Person, of interest in Securities. Each Trustee, officer,
employee and agent of the Fund and each of their respective affiliates shall be
free of any obligation to present to the Fund any investment opportunity which
comes to him in any capacity other than solely as Trustee, officer, employee or
agent of the Fund even if such opportunity is within the investment policies of
the Fund. Subject to the provisions of this Section, any Trustee, officer,
employee or agent of the Fund may be interested as Trustee, officer, director,
stockholder, partner, member, Advisor or employee or deal with or otherwise have
a direct or indirect interest in any Person who may deal with or be engaged to
render advice or services to the Fund and receive compensation from such Person
as well as compensation as Trustee, officer, employee or agent of the Fund or
otherwise hereunder, and none of the activities referred to in this paragraph
shall be deemed to conflict with his duties and power, as Trustee, officer,
employee or agent of the Fund.
(b) OWNERSHIP OF SECURITIES OF THE FUND. Any Trustee, officer, employee
or agent of the Fund may acquire, own, hold and dispose of Securities for his
individual account and may
12
exercise all rights of a holder of such Securities to the same extent and in the
same manner as if he were not a Trustee, officer, employee or agent of the Fund,
subject, however, to such regulations which the Trustees by resolution from time
to time may adopt.
Section 2.12. POWER TO CONTRACT. Subject to Article III and Section 2.5
with respect to delegation of authority by the Trustees, the Trustees shall have
power to appoint, employ or contract with any Person (including one or more of
themselves and any corporation, partnership or trust of which one or more of
them may be an affiliate) as the Trustees may deem necessary or desirable for
the transaction of the business of the Fund, including any Person who, under the
supervision of the Trustees, may among other things: obtain or furnish and
supervise the performance of ministerial functions in connection with the
administration of the Fund; serve as the Fund's investment and financial advisor
and consultant in connection with policy decisions made by the Trustees; furnish
reports to the Trustees and provide research, economic and statistical data in
connection with the Fund's investments and investment policies; act as a
consultant, borrower, lender, accountant, correspondent, technical advisor,
attorney, broker, investor, underwriter, corporate fiduciary, escrow agent,
depositor, custodian or agent for collection, insurer or insurance, agent,
transfer agent or registrar or paying agent in any capacity deemed by the
Trustees necessary or desirable; obtain services as may be required for other
activities relating to any of the Fund Property; investigate, select, and, on
behalf of the Fund, conduct relations with Persons acting in such capacities and
pay appropriate fees to, enter into appropriate contracts with, employ and
retain services performed or to be performed by any of them in connection with
the investments acquired, sold, or otherwise disposed of, or committed,
negotiated, or contemplated to be acquired, sold or otherwise disposed of, by
the Fund; substitute any other Person for any such Person; act as attorney-in-
fact or agent in the purchase or sale or other disposition of investments; and
assist in the performance of such ministerial functions necessary in the
management of the Fund as may be agreed upon with the Trustees or officers of
the Fund.
Section 2.13. INSURANCE. The Trustees shall have the power to purchase and
pay for entirely out of the Fund Property insurance policies insuring the Fund
Property against any and all risks and insuring the Trustees, officers,
employees, agents, investment advisors, including the Advisor, or independent
contractors of the Fund, individually or collectively, against all claims and
liabilities of every nature arising by reason of holding or having held any such
office or position by reason of any action alleged to have been taken or omitted
by the Fund or any such Person as Trustee, officer, employee, agent, investment
advisor, or independent contractor, including any action taken or omitted that
may be determined to constitute negligence whether or not the Fund would have
the power to indemnify, such Person against such liability.
Section 2.14. PENSION AND OTHER PLANS. The Trustees shall have the power
to pay pensions for faithful service, as deemed appropriate by the Trustees, and
to adopt, establish and carry out pension and profit-sharing plans, share bonus,
option and purchase plans and savings, thrift and other retirement, incentive
and benefit plans, trusts and provisions, including the
13
purchasing of life insurance and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the Trustees, officers,
employees and agents of the Fund.
Section 2.15. DIVIDENDS. The Trustees shall have the power to declare and
pay dividends in cash, shares or otherwise, to make other distributions to
Shareholders, whether out of net income, accumulated-undistributed income, paid-
in capital or otherwise, and to establish a dividend and distribution
reinvestment plan or program or any plan or program similar thereto.
Section 2.16. SEAL. The Trustees shall have the power to adopt and use a
seal for the Fund, but, unless otherwise required by the Trustees, the seal need
not be placed on, and its absence shall not impair the validity of any document,
instrument or other paper executed and delivered by or on behalf of the Fund.
Section 2.17. CHARITABLE CONTRIBUTIONS. The Trustees shall have power
to make donations, irrespective of benefit to the Fund, for the public welfare
or for community fund, hospital, charitable, religious education, scientific,
civic or similar purposes.
Section 2.18. INDEMNIFICATION. In addition to the mandatory
indemnification provided for in Section 5.3, the Trustees shall have power to
the extent permitted by law to indemnify or enter into agreements with respect
to indemnification with any Person with whom the Fund has dealings, including
without limitation any investment advisor, including the Advisor, any
underwriter of Securities of the Fund or any independent contractor, to such
extent as the Trustees shall determine.
Section 2.19. REMEDIES. Notwithstanding any provision in this
Instrument, when the Trustees deem that there is a significant risk that an
obligor to the Fund may default or is in default under the terms of any
obligation to the Fund, the Trustees shall have power to pursue any remedies
permitted by law which, in their sole judgment, are in the interests of the
Fund, and the Trustees shall have the power to enter into any investment,
commitment or obligation of the Fund resulting from the pursuit of such remedies
or necessary or desirable to dispose of property acquired in the pursuit of such
remedies.
Section 2.20. FURTHER POWERS. The Trustees shall have power to do all
such other matters and things and execute all such instruments as they deem
necessary, proper or desirable in order to carry out, promote or advance the
interests of the Fund, although such matters or things are not specifically
mentioned herein. Any determination as to what is in the interests of the Fund
made by the Trustees, in good faith shall be conclusive. In construing the
provisions of this Instrument, the presumption shall be in favor of a grant of
power to the Trustees. The Trustees will not be required to obtain any court
order to deal with the Fund Property.
Section 2.21. SHAREHOLDERS LISTS. The Fund's shareholder list shall
not be furnished to any person except upon unanimous vote of the Trustees or
when required by applicable laws or regulations.
14
ARTICLE III
Advisor
Section 3.1. DESIGNATION. The Trustees shall maintain general supervision
over the investment policy of the Fund and the business of the Fund conducted by
officers, agents, employees, the Investment Advisor or independent contractors
of the Fund. The Trustees shall grant or delegate investment authority to the
Advisor, pursuant to the terms of Sections 2.5 and 2.12, or to any other Person
the services of which are obtained by the Advisor as the Trustees may, in their
sole discretion, deem necessary or desirable, without regard to whether such
authority is normally granted or delegated by trustees.
Section 3.2. TERMS OF AGREEMENT. The Trustees have previously entered into
an agreement with the Advisor pursuant to the provisions of Section 3.1 which
shall provide that: (i) the Advisor shall be required to see its best efforts to
present a continuing and suitable investment program to the Fund which is
consistent with the investment policies and objectives of the Fund; (ii) the
Advisor furnish the Fund with investment research and advice and shall manage
and supervise the Fund's portfolio of investments; (iii) the Advisor in
performance of the foregoing shall furnish the Trustees with such information
and reports regarding the Securities in the Fund's portfolio and proposed
additions to the portfolio as the Advisor deems appropriate or as the Trustees
may reasonably request; (iv) the Advisor shall supervise the Fund's relations
with its Custodian, auditors and Governmental regulatory bodies and shall
furnish certain office space and certain secretarial and certain clerical
assistance necessary for the performance of the foregoing functions; (v) the
agreement shall include the provisions of Subsection 2.6(b); (vi) the Advisor
shall be paid a monthly management fee computed at the annual rate of 1% of the
first $35 million, 7/8 of 1% on the next $35 million and 3/4 of 1% on all sums
in excess thereof of the average daily net assets of the Fund on the first
business day of each month of its fiscal year, and "net assets" shall be
determined as in Section 2.8 (vii) the agreement shall have an initial term of
24 months and shall remain in effect thereafter for as long as the agreement is
approved annually by the Trustees, or by the majority vote of the Shareholders
in accordance with Section 15 of the Act; (viii) the agreement shall be
terminable without penalty at and, time upon 60 days' written notice: (a) to the
Advisor during the original term or any renewal or extension thereof if a
majority of the Trustees, including a majority of those Trustees who are not
parties to the agreement or "interested persons", as defined in Section 2(a)(19)
of the Act, or a majority of the outstanding voting securities, shall in good
faith determine that the Advisor is not presenting a continuing and suitable
investment program consistent with the investment objectives and policies of the
Fund; (b) to the Fund by the Advisor; or (c) as otherwise provided in the Act;
and (ix) the agreement may contain such other provisions as the Trustees shall
determine in their discretion are appropriate.
Section 3.3. SUBSTITUTION FOR ADVISOR. If the Advisor ceases to serve
hereunder for whatever reason, the Trustees shall promptly select a Substitute
Advisor to provide such investment advisory services as the Trustees shall
determine in the place and stead of the Advisor and shall present to the
Shareholders as soon as practicable thereafter but not more than 90 days
15
after such selection has been made a proposal to approve such Substitute
Advisor. During the period between the cessation of service by the Advisor and
the approval of the Substitute Advisor by the Shareholders, the Trustees shall
perform the Advisor's duties with such assistance as they may determine to be
appropriate.
Section 3.4. INDEPENDENCE OF TRUSTEES. Not more than 60% of the total
number of Trustees may be affiliates of the Advisor, provided that if at any
time the percentage of all Trustees who are affiliates of the Advisor becomes
more than 60% of the total number of Trustees then in office because of the
death, resignation, removal or change in affiliation of a Trustee who is not
such an affiliate, such requirement shall not be applicable for a period of 60
days during which time a majority of all the Trustees then in office shall
appoint a sufficient number of other individuals as Trustees so that at least
60% of the total number of all Trustees then in office shall again not be
affiliates of the Advisor. The Trustees shall endeavor at all times to comply
with this requirement but the failure so to comply shall not affect the validity
or effectiveness of any action of the Trustees.
Section 3.5. OTHER ACTIVITIES. The Advisor shall not be required to
administer the investment activities of the Fund as its sole and exclusive
function. The Advisor may deal with Persons with whom the Fund may do business
and may have other business interests and may engage in other activities of any
kind in addition to those relating to the activities to be performed by the
Advisor for the Fund, including rendering services and advice to other Persons
(whether or not such Persons are in competition with the Fund or are engaged in,
activities similar to those of the Fund) acting as a trustee and managing other
investments, including investments of the Advisor or any affiliate of the
Advisor. The Trustees may request the Advisor to engage in other activities
which complement the Fund's investments and to provide services for the Fund or
for other Persons who do business with the Fund, and the Advisor may receive
compensation or commissions therefor from the Fund or other Persons. The
Advisor may invest in any such particular investment opportunity for its own
account or offer, make available or recommend any such particular investment
opportunity to any Person.
ARTICLE IV
Investments
Section 4.1. STATEMENT OF INVESTMENT POLICY. The Investment Objective of
the Fund is capital growth through the utilization of a broad range of
investment vehicles and techniques including, but not limited to, the purchase
and sale of put and call options. The realization of current income is
secondary to the Fund's efforts in pursuing its primary goal of capital
appreciation.
Section 4.2 OTHER INVESTMENTS. To the extent that the Fund has assets not
otherwise invested in accordance with Section 4.1, the Advisor may, at any time,
invest such assets in such investment as are determined by the Advisor to be in
the best interests of the Fund.
16
Section 4.3 OPTION ACTIVITIES. The Advisor may, to the maximum extent
permissible under applicable laws and regulations, engage in any and all option
activities as it shall, from time to time determine to be appropriate and in the
best interests of the Fund's shareholders.
Section 4.4 RESTRICTIONS. The Fund may, in the sole discretion of the
Advisor and to the maximum extent permissible by applicable laws and
regulations, engage in all lawful investment activities.
Section 4.5. PORTFOLIO TRANSACTIONS. The Advisor is authorized to execute
portfolio transactions for the Fund through such entities as Advisor determines,
at its discretion, provided such entity renders satisfactory service at
standard and/or negotiated commission rates.
ARTICLE V
Limitations of Liability
Section 5.1. LIABILITY TO THIRD PERSONS. No Shareholder as such shall be
subject to any personal liability whatsoever, in tort contract or otherwise, to
any other Person or Persons in connection with the Fund Property or the affairs
of the Fund and no Trustee, Advisor, officer, employee or agent of the Fund
shall be subject to any personal liability whatsoever, in tort, contract or
otherwise, to any other Person or Persons in connection with the Fund Property
or the affairs of the Fund, nor for any taxes or other governmental charges in
respect to Fund Property or the income or profits therefrom or the transfer
thereof, except that arising from his bad faith, willful misconduct, gross
negligence or reckless disregard of his duties or for his failure to act in good
faith in the reasonable belief that his action was in the best interests of the
Fund; and all such other Persons shall look solely to the Fund Property for
satisfaction of claims of any nature arising in connection with the affairs of
the Fund. If any Shareholder, Trustee, Advisor, officer, employee or agent, as
such, of the Fund is made a party to any suit or proceeding to enforce any such
liability, he shall not on account thereof be held to any personal liability
Section 5.2. LIABILITY TO FUND OR TO SHAREHOLDERS. No Trustee, Advisor,
officer, employee or agent of the Fund shall be liable to the Fund or to any
Shareholder, Trustee, Advisor, officer, employee or agent of the Fund for any
action or failure to act (including, without limitation, the failure to compel
in any way any former or acting Trustee to redress any breach of trust), except
for his own bad faith, willful misconduct, a gross negligence or reckless
disregard of his duties or for his failure to act in good faith in the
reasonable belief that his action was in the best interests of the Fund.
Section 5.3. INDEMNIFICATION. The Fund shall indemnify each of its
Trustees, Advisors, officers, employees and agents (including any Person who
serves at its request as director, officer, partner, trustee or the like of
another organization in which the Fund has any interest as a shareholder,
creditor or otherwise) against all liabilities and expenses, including amounts
paid in satisfaction of judgments, in compromise, as fines or penalties and as
counsel fees, reasonably incurred by him in connection with the defense or
disposition of any action, suit or other
17
proceeding, whether civil or criminal, in which he may be involved or with which
he may be threatened, while acting as a Trustee or Advisor or as an officer,
employee or agent of the Fund or the Trustees, as the case may be, or
thereafter, by reason of his being or having been such a Trustee, Advisor,
officer, employee or agent, except with respect to any matter as to which he
shall have been adjudicated to have acted in bad faith or with willful
misconduct or reckless disregard of his duties or gross negligence or not to
have acted in good faith in the reasonable belief that his action was in the
best interests of the Fund, provided that as to any matter disposed of by a
compromise payment by such Trustee, Advisor, officer, employee or agent,
pursuant to a consent decree or otherwise, no indemnification either for said
payment or for any other expenses shall be provided unless such compromise shall
be approved as in the best interests of the Fund by a majority of the
disinterested Trustees or the Fund shall have received a written opinion of
independent legal counsel to the effect that such Trustee, Advisor, officer,
employee or agent appears to have acted in good faith in the reasonable belief
that his action was in the best interests of the Fund. The rights accruing to
any Trustee, Advisor, officer, employee or agent under these provisions shall
not exclude any other right to which he may be lawfully entitled, provided that
no Trustee, Advisor, officer, employee or agent may satisfy any right of
indemnity or reimbursement granted herein or to which he may be otherwise
entitled except out of Fund Property, and no Shareholder shall be personally
liable to any Person with respect to any claim for indemnity or reimbursement or
otherwise. The Trustees may make advance payments in connection with
indemnification under this Section, provided that the indemnified Trustee,
advisor, officer, employee or agent shall have given a written undertaken to
reimburse the Fund in the event it is subsequently determined that he is not
entitled to such indemnification.
Section 5.4. SURETY BONDS. No Trustee shall, as such, be obligated to give
any bond or surety or other security for the performance of any of his duties,
except as may be required by applicable law.
Section 5.5. APPARENT AUTHORITY. No purchaser, lender, transfer agent,
registrar, warrant agent, dividend disbursing agent or other Person dealing with
the Trustees or Advisor or any officer, employee or agent of the Fund shall be
bound to make any inquiry concerning the validity of any transaction purporting
to be made by the Trustees or Advisor or by such officer, employee or agent or
make inquiry concerning or be liable for the application of money or property
paid, loaned or delivered to or on the order of the Trustees or Advisor, or such
officer, employee or agent.
Section 5.6. RECITALS REGARDING LIABILITY; INSURANCE. Any written
instrument creating an obligation of the Fund shall be conclusively taken to
have been executed or done by a Trustee or Advisor or an officer, employee or
agent of the Fund only in his capacity as a Trustee or Advisor or an officer,
employee or agent of the Fund. Any written instrument creating an obligation of
the Fund shall refer to this Instrument and shall contain a recital to the
effect that the obligations thereunder are not personally binding upon, nor
shall resort be had to the private property of any of the Trustees,
Shareholders, Advisor, officers, employees or agents of the Fund, but the Fund
Property or a specific portion thereof only shall be bound, and may contain any
further recital
18
which the Trustees deem appropriate but the omission of such recital shall not
operate to impose personal liability on any of the Trustees, Shareholders,
Advisor, officers, employees or agents of the Fund. The Trustees shall, at all
times, maintain insurance for the protection of the Fund Property, the Trustees,
the Advisor, officers, employees and agents of the Fund in such amount as the
Trustees shall deem adequate to cover all foreseeable tort liability to the
extent such insurance is available at reasonable rates.
ARTICLE VI
Shares and Other Securities
Section 6.1. DESCRIPTION OF SHARES. The interests of the Shareholders
hereunder shall be divided into Shares, all of one class. The number of Shares
authorized hereunder for issuance by the Trustees shall be unlimited. Ownership
of Shares may be evidenced by certificates. All Shares shall have equal non-
cumulative voting, distribution, liquidation and other rights, shall be fully
paid and non-assessable upon issuance and shall have no preference, conversion,
exchange or pre-emptive rights.
Section 6.2. CERTIFICATES. Every Shareholder shall be entitled to receive
a certificate, provided, however, that the physical issuance and delivery of a
certificate to a Shareholder shall not be required except by written request of
the Shareholder. Certificates shall be in such form as the Trustees shall from
time to time approve, specifying the number of Shares held by such Shareholder.
Certificates shall be entitled "Certificate of Steadman Security Trust". No
change shall be made in the certificates which would impair any rights of the
Shareholders in certificates theretofore outstanding. Unless otherwise
determined by the Trustees, such certificates shall be signed by the Chairman of
the Trustees or the President and the Secretary of the Fund. Such signatures
may be facsimile signatures. There shall be filed with the transfer agent a
copy of the form of certificate so approved by the Trustees, certified by the
Chairman, the President or the Secretary, and such form shall continue to be
used unless and until the Trustees approve some other form.
Section 6.3. ISSUANCE OF SECURITIES: The Trustees in their discretion may
from time to time, without vote of the Shareholders, issue Securities of the
Fund in addition to the then issued and outstanding Securities of the Fund and
Securities of the Fund held in the treasury, to such party or parties, for such
payment, property, services or other consideration, at such time or times, and
on such terms as the Trustees may determine and may in such manner acquire other
assets, real, personal or mixed tangible or intangible, and no prior offering
thereof to any of the holders of Securities of the Fund need be made.
Section 6.4. POOLING OF FUNDS. The Shareholders authorize the pooling
and/or commingling of funds and investments in the manner herein provided and
agree that their sole interest shall be in their proportionate share of the Fund
Property. The Fund shall determine the proportionate share of each Shareholder
in the fund as herein provided.
19
Section 6.5 ACQUISITION OF FUND SHARES
(a) Acquisition of Fund Shares Prohibition. From and after the effective
date of the approval by the FundShareholders to convert the Fund from an open-
end investment company to a closed-end investment company, no person shall
directly or indirectly offer to acquire or acquire the beneficial ownership of
more than 5% of the Fund Shares, unless such offer or acquisition shall have
been approved in advance by a two-thirds vote of the Continuing Trustees, as
defined in Section 6.6. In addition, notwithstanding any provision to the
contrary in this Trust Indenture, where any person directly or indirectly
acquires beneficial ownership of more than 5% of the Fund Shares in violation
of this Section 6.5, the securities beneficially owned in excess of 5% shall not
be counted as Shares entitled to vote, shall not be voted by any person or
counted as voting Shares in connection with any matter submitted to the
Shareholders for a vote, and shall not be counted as outstanding for purposes of
determining a quorum or the affirmative vote necessary to approve any matter
submitted to the Shareholders for a vote.
(b) Definitions. The term "person" means an individual, a group acting in
concert, a corporation, a partnership, an association, a joint stock company, a
trust, an unincorporated organization or similar company, a syndicate or any
other group acting in concert formed for the purpose of acquiring, holding,
voting or disposing of securities of the Fund. The term "acquire" includes
every type of acquisition, whether effected by purchase, exchange, operation of
law or otherwise. The term group "acting in concert" includes (a) knowing
participation in a joint activity or conscious parallel action towards a common
goal whether or not pursuant to an express agreement, and (b) a combination or
pooling of voting or other interest in the Fund's outstanding Shares for a
common purpose, pursuant to any contract, understanding, relationship, agreement
or other arrangement, whether written or otherwise. The term "beneficial
ownership" shall have the meaning defined in Rule 13d-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, as in effect
on the date of filing of this Trust Indenture.
(c) Exclusion for Trustees, Officers, Employees and Certain Proxies. The
restrictions contained in this Section 6.5 shall not apply to (i) any
underwriter or member of an underwriting or selling group involving a public
sale or resale of securities of the Fund provided, however, that upon completion
of the sale or resale of such securities, no such underwriter or member of such
selling group is a beneficial owner of more than 5% of the Fund Shares or (ii)
any proxy granted to one or more Continuing Trustees, as defined in Section 6.6,
by a Shareholder of the Fund. In addition, the Continuing Trustees of the Fund,
the officers and employees of the Fund or any entities organized or established
by the Fund acting in such capacity shall not be deemed to be a group with
respect to their beneficial ownership of voting stock of the Fund solely by
virtue of their being trustees, officers or employees of the Fund.
Notwithstanding the foregoing, no trustee, officer or employee of the Fund or
group of any of them shall be exempt from the provisions of this Section 6.5
should any such person or group become a beneficial owner of more than 5% of the
Fund Shares.
20
(d) Determinations. A majority of the Continuing Trustees, as defined in
Section 6.6, shall have the power to construe and apply the provisions of this
Section 6.5 and to make all determinations necessary or desirable to implement
such provisions, including but not limited to matters with respect to (i) the
number of Shares beneficially owned by any person; (ii) whether a person has an
agreement, arrangement or understanding with another as to the matters referred
to in the definition of beneficial ownership; (iii) the application of any other
definition or operative provision of thisu Section 6.5 to the given facts; or
(iv) any other matter relating to the applicability or effect of this Section
6.5. Any constructions, applications or determinations made by the Continuing
Trustees pursuant to this Section 6.5 in good faith and on the basis of such
information and assistance as was then reasonably available for such purpose
shall be conclusive and binding upon the Fund and its Shareholders.
Section 6.6 APPROVAL OF CERTAIN BUSINESS COMBINATIONS. The Shareholder
vote required to approve Business Combinations (as hereinafter defined) shall be
as set forth in this Section 6.6.
(a) (1) Except as otherwise expressly provided in this Section 6.6, the
affirmative vote of the holders of (i) at least 80% of the outstanding Shares
entitled to vote thereon, and (ii) at least a majority of the outstanding Shares
entitled to vote thereon, not including Shares deemed beneficially owned by a
Related Person (as hereinafter defined), shall be required in order to authorize
any of the following:
(a) any merger or consolidation of the Fund with or into a Related
Person (as hereinafter defined);
(b) any sale, lease, exchange, transfer or other disposition,
including without limitation, a mortgage or any other capital device,
of all or any Substantial Part (as hereinafter defined) of the assets
of the Fund to a Related Person:
(c) any merger or consolidation of a Related Person with or into the
Fund;
(d) any sale, lease, exchange, transfer or other disposition of all
or any Substantial Part of the assets of a Related Person to the Fund;
(e) the issuance of any securities of the Fund to a Related Person;
(f) the acquisition by the Fund of any securities of a Related
Person;
(g) any reclassification of the Shares of the Fund, or any
recapitalization involving Shares of the Fund; and
(h) any agreement, contract or other arrangement providing for any of
the transactions described in this Section 6.6.
21
(2) Such affirmative vote shall be required notwithstanding any other
provision of this Trust Indenture, any provision of law, or any agreement with
any regulatory agency or national securities exchange which might otherwise
permit a lesser vote or no vote.
(3) The term "Business Combination" as used in this Section 6.6 shall mean
any transaction which is referred to in any one or more of subparagraphs A(1)(a)
through (h) above.
(b) The provisions of paragraph (a) shall not be applicable to any
particular Business Combination and such Business Combination shall require only
such affirmative vote as is required by any other provision of this Trust
Indenture, any provision of law, or any agreement with any regulatory agency or
national securities exchange, if the Business Combination shall have been
approved by a two-thirds vote of the Continuing Trustees (as hereinafter
defined); provided, however, that such approval shall only be effective if
obtained at a meeting at which a Continuing Trustee (as hereinafter defined) is
present.
(c) For the purposes of this Section 6.6 the following definitions apply:
(1) The term "Related Person" shall mean and include (a) any
individual, corporation, partnership or other person or entity which together
with its "affiliates" (as that term is defined in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as amended),
"beneficially owns" (as that term is defined in Rule 13d-3 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended) in the
aggregate 10% or more of the outstanding Fund Shares; and (b) any "affiliate"
(as that term is defined in Rule 12b-2 under the Securities Exchange Act of
1934, as amended) of any such individual, corporation, partnership or other
person or entity. Without limitation, any Fund Shares which any Related Person
has the right to acquire pursuant to any agreement, or upon exercise of
conversion rights, warrants or options, or otherwise, shall be deemed
"beneficially owned" by such Related Person.
(2) The term "Substantial Part" shall mean more than 25% of the total
assets of the Fund, as of the end of its most recent fiscal year ending prior to
the time the determination is made.
(3) The term "Continuing Trustee" shall mean Trustees of the Fund who
is unaffiliated with the Related Person and was a Trustee prior to the time that
the Related Person became a Related Person, and any successor of a Continuing
Trustee who is unaffiliated with the Related Person and is recommended to
succeed a Continuing Trustee by a majority of Continuing Trustees then on the
board.
(4) The term "Continuing Trustee Quorum" shall mean two-thirds of the
Continuing Trustees capable of exercising the powers conferred on them.
22
ARTICLE VII
Record and Transfer of Shares
Section 7.1. SHARE REGISTER; HOLDERS OF RECORD. A register shall be kept
by or on behalf of the Trustees, under the direction of the Trustees, which
shall contain the names and addresses of the Shareholders and the number of
Shares held by them respectively, and the numbers of the certificates, if any,
representing such Shares and a record of all transfers thereof. Only
Shareholders whose Shares are recorded on such register shall be entitled to
vote or to receive distributions or otherwise to exercise or enjoy the rights of
Shareholders, all subject to the provisions of Section 9.4. No shareholders
shall be entitled to receive any distribution or to have notice given to him as
provided herein until he has given his address to a transfer agent or such other
officer or agent of the Fund as shall keep the register for entry thereon.
Section 7.2. TRANSFER AGENT. The Trustees shall employ Steadman Security
Corporation as transfer and dividend disbursing agent ("Agent") upon such terms
and conditions as the Trustees in their judgment may deem to be suitable and
shall pay to the Agent such fees and expenses for such services as the Trustees
determine to be appropriate in addition to fees and expenses paid to the Advisor
for any other services it performs. The Agent may keep the register and record
therein the original issues and transfers of Shares and countersign certificates
for Shares issued to the persons entitled thereto. The Agent shall perform the
duties usually performed by transfer agents and registrars of certificates of
stock in a corporation except as modified by the Trustees. If SSC declines or
is unable to provide this service, the Trustees shall employ another
organization.
Section 7.3. BLANK CERTIFICATES. In accordance with the usual custom of
corporations having a transfer agent, signed certificates for Shares in blank
may be deposited with any transfer agent of the Fund, to be used by such
transfer agent in accordance with authority, conferred upon it as occasion may
require, and in so doing the signers of such certificates shall not be
responsible for any loss resulting therefrom.
Section 7.4. CHANGE OF HOLDER OF RECORD. Any person becoming entitled to
any Shares in consequence of the death, bankruptcy or insolvency of any
Shareholder or otherwise by operation of law shall be recorded as the holder of
record upon production of such proper evidence of ownership as the Fund or its
transfer agent may prescribe and delivery of any existing certificate to the
Trustees or the transfer agent of the Fund. Until this condition immediately
foregoing is satisfied, the holder of record shall be deemed to be the
Shareholder for all purposes hereof, and the Fund, the Trustees, any officer or
agent of the Fund and any transfer agent or registrar for the Fund shall not be
affected by any notice of such death, bankruptcy, insolvency, or other event
except where a designation of beneficiary has been made and is unrevoked as of
the death of the Shareholder.
Section 7.5. TRANSFER OF SHARES. Shares shall be transferable on the
records of the Fund (other than by operation of law) only by the record holder
thereof or by his agent duly authorized in writing upon delivery to the Fund or
a transfer agent of the Fund (a) of the certificate or
23
certificates therefor, if any, with all transfer tax stamps affixed or duly
provided for, properly endorsed or accompanied by a duly executed instrument or
instruments of transfer, or (b) the production of such other proper evidence of
ownership as the Fund or its transfer agent may prescribe together with such
evidence of the genuineness of each such endorsement, execution and
authorization and of other matters as may reasonably be required by the Fund or
its transfer agent. The Trustees or the transfer agent shall not assume any
responsibility for the validity or propriety of any assignment or direction and
shall be fully protected in relying on any signature believed to be genuine and
to have been made by the proper person. Upon such delivery the transfer shall
be recorded on the register of the Fund provided that the Fund shall not be
required to effect the transfer of fractional interests in Shares. Until such
record is made, the Shareholder of record shall be deemed to be the holder of
such Shares for all purposes hereof, and the Trustees, the Trust, any transfer
agent or registrar or any officer or agent of the Fund shall not be affected by
any notice of the proposed transfer. This Section and Section 7.4 are subject
in all respects to the provisions of Section 9.4.
Section 7.6. LIMITATION OF FIDUCIARY RESPONSIBILITY. The Trustees shall
not, nor shall the Shareholders or any officer, transfer agent or other agent of
the Fund, be bound to see to the execution of any trust, expressed, implied or
constructive, or of any charge, pledge, security interest or equity to which any
of the Shares or any interest therein are subject, or to ascertain or inquire
whether any sale or transfer of any Shares or interest therein by any
Shareholder or his personal representative is authorized by such trust, charge,
pledge, security interest or equity, or to recognize any Person as having any
interest therein except the Persons recorded as such Shareholders. The receipt
of the Person in whose name any Share is recorded or, if such Share is recorded
in the names of more than one Person, the receipt of each such Person or of the
duly authorized agent of each such Person, shall be a sufficient discharge for
all money, Securities and other property payable, issuable or deliverable in
respect of such Share and from all liability to see to the proper application
thereof.
Section 7.7. NOTICES. Any notice to which Shareholders hereunder may be
entitled and any shall be deemed duly served or given if mailed, postage
prepaid, addressed to Shareholders of record at their last known post office
addresses as recorded on the Share register provided for in Section 7.1.
Section 7.8. REPLACEMENT OF CERTIFICATES. In case of the loss, mutilation
or destruction of any for Shares hereunder the Trustees may issue or cause to
be issued a new certificate on such terms as they may deem fit.
Section 7.9. DESIGNATION OF BENEFICIARY. A Shareholder may at any time
designate as beneficiary any person or persons (hereinafter called the
"Beneficiary") whose interest in the Fund shall be contingent upon such
beneficiary or beneficiaries surviving such Shareholder, and whose interests may
at any time be revoked by the Shareholder without the consent of such
Beneficiary by notice in writing to the Trustees.
24
The transfer by a Shareholder of his interest or any part thereof in the
Fund shall operate to revoke any prior designation of any Beneficiary to the
extent of such transfer.
Such designation shall be in form satisfactory to the Trustees and shall
contain the name and address of such Beneficiary, and shall be registered by the
Trustees on the Shareholder's account. The Trustees shall make no charge for
the initial designation, but all subsequent designations shall be registered
upon payment to the Trustees of a fee of One Dollar ($1.00).
The Shareholder agrees for himself, his legal representative, executors,
administrators. heirs, and assigns that upon his death the recognition by the
Trustees of the Beneficiary last designated and unrevoked as the person entitled
to the Shareholder's interest in the Fund shall be a complete discharge to the
Trustees in respect of such interest.
25
ARTICLE VIII
Characteristics of Securities
Section 8.1. GENERAL. The ownership of the Fund Property of every
description and the right to conduct any business described herein are vested
exclusively in the Trustees, and the Shareholders shall have no interests
therein other than the beneficial interest conferred by their Shares, and they
shall have no right to call for any partition or division of any property,
profits, rights or interests of the Fund, nor can they be called upon to share
or assume any losses of the Fund or suffer an assessment of any kind by virtue
of their ownership of Shares. The Shares shall be personal property having only
the rights set forth in this Instrument and in the certificates for the Shares.
Section 8.2. DEATH OF SHAREHOLDERS. The death of a Shareholder during the
continuance of the Fund shall not terminate the Fund or give such Shareholder's
legal representative a right to an accounting, or to take any action in the
courts or otherwise against other Shareholders, the Trustees or the Fund
Property, but shall only entitle the legal representative of the deceased
Shareholder to become the Shareholder upon compliance with Section 7.4.
ARTICLE IX
Shareholders
Section 9. 1 SPECIAL MEETINGS. (a) Special meetings of' the Shareholders
shall be called when required by applicable laws or regulations and may be
called at any time by the Chairman or by a majority of the Trustees with a
casting vote by the Chairman. and shall be called by the Chairman upon written
request of Shareholders holding in the aggregate not less than 90% of the
outstanding Shares having voting rights. As used herein, vote is defined as an
affirmative vote necessary in order for a particular matter to carry. Any such
request shall specify the purpose or purposes for which such meeting is to be
called. No other business not stated in the notice of the meeting shall be
considered at such meeting. Any such meeting shall be held in the District of
Columbia or in such other place within or without the District of Columbia as
the Chairman shall designate.
(b) QUORUM. Special meetings of the Shareholders shall be called when
required by applicable laws or regulations and may be called at any time by the
Chairman or by a majority of Trustees with a casting vote by the Chairman. and
shall be called by the Chairman upon written request of shareholders holding in
the aggregate not less than 90% of the outstanding shares having voting rights.
As used herein 'casting vote' is defined as an affirmative vote necessary in
order for a particular matter to carry. Any such request shall specify the
purpose for which such meeting is to be called. No other business not stated in
the notice shall be considered at such meeting. Any such meeting shall be held
in the District of Columbia or such other place within or without the District
of Columbia as the Chairman shall designate.
26
The holders of 33% of the outstanding shares present in person or by proxy
shall constitute a quorum at any meeting except as may be otherwise required by
the Act or by applicable law.
Section 9.2. NOTICE OF MEETINGS. Notice of all meetings of the
Shareholders, stating the time, place and purposes of the meeting, shall be
given by the Trustees by mail to each Shareholder at his registered address
mailed at least 10 days and not more than 60 days before the meeting. Any
adjourned meeting may be held as adjourned without further notice.
Section 9.3. VOTING RIGHTS OF SHAREHOLDERS. The Shareholders shall be
entitled to vote only upon (a) election of Trustees as provided in Sections 10.1
and 10.2; (b) removal and election of Trustees as provided in Sections 10.3 and
10.4; (c) amendment of this Instrument or termination of the Fund as provided in
Section 12.1; (d) termination as provided in Section 3.2 of any agreement
entered into pursuant to Section 3.1; (e) upon such other matters as may be
required by the Act; and (f) to the same extent as the shareholders of a
business corporation, as to whether or not a court action, proceeding or claim
should be brought or maintained derivatively or as a class action on behalf of
the Fund or its Shareholders. Except with respect to the foregoing matters
specified in this Section, on which the specified Shareholders' vote shall
determine the Trustees' action, no action taken by the Shareholders at any
meeting shall in any way bind the Trustees.
Each Shareholder entitled to vote in accordance with this Instrument shall
be entitled to one vote for each full Share outstanding, and entitled to vote
field by such Shareholder. Fractional Shares shall not be entitled to vote.
When a quorum is present at any meeting of Shareholders, the vote of the
holders of a majority of the Shares entitled to vote present in person or by
proxy at such meeting shall decide any question upon which Shareholders are
entitled to vote present in person or by proxy at such meeting shall decide any
question upon which Shareholders are entitled to vote, except as expressly
provided otherwise in this Instrument.
Section 9.4. RECORD DATE. For the purpose of determining the Shareholders
who are entitled to vote or act at any meeting or any adjournment thereof, or
who are entitled to participate in any dividend or distribution or for the
purpose of any other action, the Trustees may fix a date not less than 10 nor
more than 60 days prior to the date of any meeting of Shareholders or dividend
payment or other action as a record date for the determination of Shareholders
entitled to vote at such meeting or any adjournment thereof or to receive any
dividend or to be treated as Shareholders of record for purposes of such other
action.
Section 9.5. PROXIES. At any meeting of Shareholders, any holder of Shares
entitled to vote there at may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the Secretary
of the Fund or with such other officer or agent of the Fund as the Secretary may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a resolution of a majority of the Trustees, proxies may be solicited
in the name
27
of one or more Trustees or one or more of the officers of the Fund. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed valid
unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger.
Section 9.6. REPORTS. The Trustees shall cause to be prepared after the
end of the first full Fiscal Year and after the end of each succeeding Fiscal
Year a report containing audited financial statements, including a balance sheet
and statements of income and accumulated undistributed income. realized gain or
loss on investments, and changes in financial position of the Fund, prepared in
conformity with generally accepted accounting principles, together with a report
of independent accountants on such financial statements based on an examination
of the books and records of the Fund made in accordance with generally accepted
auditing standards. A signed copy of such reports shall be filed with the
Trustees as soon as practicable after the close of the period covered thereby.
Copies of such reports shall be mailed to all Shareholders.
Section 9.7 NOTICE FOR NOMINATIONS AND PROPOSALS. (a) Nominations for the
election of Trustees and proposals for any new business to be taken up at any
meeting of Shareholders may be made by the Trustees of the Fund or by any
Shareholder of the Fund entitled to vote generally in the election of Trustees.
In order for a Shareholder of the Fund to make any such nominations and/or
proposals, he or she shall give notice thereof in writing, delivered or mailed
by first class United States mail, postage prepaid, to the Secretary of the Fund
not less than thirty days nor more than sixty days prior to the date of any such
meeting; provided, however, that if less than forty days notice of the meeting
is given to Shareholders, such written notice shall be delivered or mailed, as
prescribed, to the Secretary of the Fund not later than the close of business on
the tenth day following the day on which notice of the meeting was mailed to
Shareholders. Each such notice given by a Shareholder with respect to
nominations for the election of Trustees shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed in
such notice; (ii) the principal occupation or employment of each such nominee;
and (iii) the number of the Fund Shares which are beneficially owned by each
such nominee. In addition, the Shareholder making such nomination shall
promptly provide any other information reasonably requested by the Fund.
(b) Each such notice given by a Shareholder to the Secretary with respect
to business proposals to be brought before a meeting shall set forth in writing
as to each matter: (i) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting; (ii) the name and address, as they appear on the Fund's books, of the
Shareholder proposing such business; (iii) the number of Fund Shares which are
beneficially owned by the Shareholder; and (iv) any material interest of the
Shareholder in such business. Notwithstanding anything in this Trust Indenture
to the contrary, no new business shall be conducted at the meeting except in
accordance with the procedures set forth in this Trust Indenture.
28
(c) The Chairman of the meeting of Shareholders may, if the facts warrant,
determine and declare to such meeting that a nomination or proposal was not made
in accordance with the foregoing procedure, and, if he should so determine, he
shall so declare to the meeting and the defective nomination or proposal shall
be disregarded and laid over for action at the next succeeding special or annual
meeting of the Shareholders taking place thirty days or more thereafter. This
provision shall not require the holding of any adjourned or special meeting of
Shareholders for the purpose of considering such defective nomination or
proposal.
ARTICLE X
Trustees
Section 10.1. NUMBER AND QUALIFICATION. The number of Trustees shall not
be less than one (1) nor more than fifteen (15). No reduction in the number of
Trustees shall have the effect of removing any Trustee from office prior to the
expiration of his term. A Trustee shall be an individual at least 21 years of
age who is not under legal disability. Trustees may, but not need, own shares
or other securities of the Fund. The Trustees, in their capacity as Trustees,
shall not be required to devote any specific portion of their time to the
business and affairs of the Fund.
Section 10.2. TERMS OF OFFICE: ELECTION. The Trustees shall be chosen for
a term of unlimited duration. Trustees shall hold office until their successors
shall be elected and qualified, provided that the term of office of a Trustee
shall terminate and a vacancy shall occur in the event of the death,
resignation, bankruptcy, adjudicated incompetence or other incapacity to
exercise the duties of the office or the removal of a trustee. Election of
Trustees at shareholder meetings shall be by the affirmative vote of the holders
of at least a majority of the Shares present in person or by proxy at such
meetings. The election of any Trustee other than an individual who was
servicing as a Trustee immediately prior to such elections pursuant to this
Section shall not become effective unless and until such person shall have in
writing accepted his election and agreed to be bound by the terms of this
Instrument. There shall be no cumulative voting by Shareholders in the election
of Trustees of the Fund.
Section 10.3. REGISTRATION AND REMOVAL. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered or mailed to the Chairman of the Trustees, the
President or the Secretary of the Fund, and such resignation shall be effective
upon such delivery or at a later date according to the terms of such instrument.
Any or all of the Trustees may be removed, with or without cause, by action of
90% of the remaining Trustees at a meeting duly called. No natural person shall
serve as Trustee after the holders of record of not less than two-thirds of the
outstanding shares of the Fund have declared that he be removed from that office
either by declaration, in writing, filed with the custodian of the securities of
the Fund or by votes cast in person or by proxy at meeting called for that
purpose. The Trustees will promptly call meeting of shareholders for the
purpose of voting upon the question of removal of any such Trustee or Trustees
when requested to do so by the record holders of not less than 10% of the
outstanding shares. Upon the resignation or removal of a Trustee, or his
otherwise ceasing to be a Trustee, he shall execute and deliver such
29
documents as the remaining Trustees shall require for the purpose of conveying
to the Fund or the remaining Trustees any Fund Property held in the name of the
resigning or removed Trustee, and by the acceptance of his appointment or
election as Trustee he shall delegate to any other of the Trustees his power of
attorney to execute such documents on his behalf. Upon the incapacity or death
of any Trustee, his legal representative shall execute and deliver on his behalf
such documents as the remaining Trustees shall require as provided in the
preceding sentence.
Section 10.4. VACANCIES. Whenever a vacancy shall occur, until such
vacancy is filled the Trustees or Trustee continuing in office, regardless of
their number, shall have all the powers granted to the Trustees and shall
discharge all the duties imposed upon the Trustees by this Instrument. No such
vacancy shall operate to annul or terminate this Instrument or to revoke any
existing agency created pursuant to the terms of this Instrument, and title to
any Fund Property held in the name of any Trustee alone, jointly with one or
more of the other Trustees or otherwise, shall, in the event of the death,
resignation, bankruptcy, adjudicated incompetence or other incapacity to
exercise the duties of the office or the removal of such Trustee vest in the
continuing or surviving Trustees without necessity of any further act or
conveyance.
In the case of any vacancy occurring other than by reason of increase in
the number of Trustees, the holders of at least a majority of the Shares present
in person or by proxy at a meeting of Shareholders or a majority of the Trustees
continuing in office acting in a meeting of Trustees or by written instrument or
instruments, may elect or appoint an individual having the qualifications
described in Section 10.1 to fill such vacancy. In the case of any vacancy
created by an increase in the number of Trustees, a majority of the Trustees
continuing in office acting in a meeting of Trustees or by written instrument or
instruments may appoint an individual having the qualifications described in
Section 10.1 to fill such vacancy. Upon the effectiveness of any election or
appointment made as provided in this Section, the Fund Property shall vest in
such new Trustee jointly with the continuing or surviving Trustees without the
necessity of any further act or conveyance, provided that no such election or
appointment shall become effective unless or until the new Trustee shall have
accepted, in writing, his election or appointment and agreed to be bound by the
terms of this Instrument.
Section 10.5. MEETINGS. Meetings of the Trustees shall be held from time
to time, either within or without the District of Columbia, upon the call of the
Chairman of the Trustees, the President, the Secretary of the Fund or any two
Trustees. Notice of any meeting shall be mailed or otherwise given not less
than 24 hours before the meeting but may be waived, in writing, by any Trustee
either before or after such meeting. The attendance of a Trustee at a meeting
shall constitute a waiver of notice of such meeting except where a Trustee
attends a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting has not been lawfully called or
convened.
A quorum for all meetings of the Trustees shall be a majority of the
Trustees. Any Trustee present shall be counted for the purpose of determining
whether a quorum exists and shall be entitled to vote on any proposed action of
the Trustees notwithstanding that such Trustee may
30
be a party to or an affiliate of a person (other than the Fund) who is a party
to a transaction to which the Fund is also a party, or may be otherwise
interested in the proposed action.
Unless specifically provided otherwise in this Instrument, any action of
the Trustees may be taken at a meeting by vote of a majority of the Trustees
present (a quorum being present) or without a meeting by written consent of a
majority of the Trustees given before or after such action is taken.
Any Committee may act with or without a meeting. A quorum for all meetings
of any Committee shall be a majority of the members thereof. Unless
specifically provided otherwise in this instrument, any action of any Committee
may be taken at a meeting by vote of a majority of the members present (a quorum
being present) or without a meeting by written consent of a majority of the
members given before or after such action is taken. All or any one or more
Trustees may participate in a meeting, of the Trustees or any Committee thereof
by conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other and participation
in a meeting pursuant to such means of communication shall constitute presence
in person at such meeting. The minutes of any meeting of the Trustees held by
telephone shall be prepared in the same manner as a meeting of the Trustees held
in person.
Any agreement, deed, lease or other instrument or writing executed by one
or more of the Trustees or by any authorized Person shall be valid and binding
upon the Trustees and upon the Fund when it is authorized or ratified by action
of the Trustees as provided in this Instrument.
Section 10.6. OFFICERS. The Trustees shall annually elect from among their
number a Chairman of the Trustees, who shall be the principal executive officer
of the Fund. The Trustees shall elect or appoint or shall authorize the
Chairman of. the Trustees to appoint a President, a Treasurer and a Secretary.
The Trustees may elect or appoint or may authorize the Chairman of the Trustees
to appoint a Vice-Chairman of the Trustees, a Controller, one or more Assistant
Treasurers and Assistant Secretaries and such other officers or agents who shall
have such powers, duties and responsibilities, as the Trustees may deem
advisable. Two or more offices may be held by the same person.
Section 10.7. BY-LAWS. The Trustees may adopt and from time to time amend
or repeal By-laws for the conduct of the business of the Fund and such By-laws
may define the duties of the officers, agents, employees and representatives of
the Fund.
ARTICLE XI
Distributions to Shareholders
Section 11.1. GENERAL. The Trustees may from time to time declare and pay
to the Shareholders, in proportion to their respective ownership of Shares out
of the net income accumulated undistributed income, paid-in capital or otherwise
out of assets in the hands of the
31
Trustees such dividends or other distributions as they may deem proper. The
declaration and payment of such dividends or other distributions and
determination of net income, accumulated undistributed income or paid-in capital
available for dividends or other distributions and other purposes shall lie
wholly in the discretion of the Trustees, and no Shareholder shall be entitled
to receive or be paid any dividends or to receive any distribution except as
determined by the Trustees in the exercise of said discretion. The Trustees may
also distribute to the Shareholders. in proportion to their respective ownership
of Shares, additional Shares in such manner and on such terms as they may deem
proper.
Section 11.2. RETAINED EARNINGS. Except as provided in Section 11.1, the
Trustees may retain from net income such amounts as they may deem necessary to
pay the debts and expenses of the Fund, to meet obligations of the Fund, to
establish reserves, or as they may deem desirable to use in the conduct of its
affairs or to retain for future requirements or extensions of the business of
the Fund.
Section 11.3. SOURCES OF DISTRIBUTIONS. Any distributions to Shareholders
shall be accompanied by a statement in writing advising the Shareholders of the
source of the funds so distributed so that distributions of ordinary income
return of capital and capital gains income will be clearly distinguished. If
the source of funds so distributed has not been determined, the communication
shall so state, in which event the statement of the source of funds shall be
forwarded to Shareholders promptly after the close of the Fiscal Year in which
such distributions were made.
ARTICLE XII
Amendment or Termination of Fund
Section 12.1. AMENDMENT OR TERMINATION. The provision of this Instrument
may be amended or altered (except as to the limitations of personal liability of
the shareholders and Trustees and the prohibition of assessments upon
shareholders) only by the Chairman or upon the affirmative vote of a majority of
the Trustees with a casting vote by the Chairman. As used herein 'casting vote'
is defined as an affirmative vote necessary for a particular matter to carry.
Such amendment or termination shall be effective when a certificate shall have
been signed and acknowledged by the Chairman, Secretary or Trustee, that such
action was taken at a meeting duly called and held in accordance with and by the
affirmative vote required by this Instrument. Upon the termination of the Fund
pursuant to this Section:
(a) the Fund shall carry on no business except for the purpose of winding
up its affairs;
(b) the Trustees shall proceed to wind up the affairs of the Fund and all
of the powers of the Trustees under this Instrument shall continue until the
affairs of the Fund shall have been wound up, including the power to fulfill or
discharge the contracts of the Fund, collect its assets, sell, convey, assign,
exchange, transfer or otherwise dispose of all or any part of the remaining Fund
Property to one or more persons at public or private sale for consideration
which may
32
consist in whole or in part of cash, securities or other property of any kind,
discharge or pay its liabilities, and do all other acts appropriate to liquidate
its business, provided that any plan or program for the sale, conveyance,
assignment, exchange, transfer or other disposition of all or substantially all
of the Fund Property in one or a series of transactions shall require approval
by affirmative vote of not less than a majority of all outstanding Shares
entitled to vote; and
(c) after paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements as their deem necessary for their protection, the Trustees may
distribute the remaining Fund Property, in cash or in kind or partly each, among
the Shareholders according to their respective rights.
Section 12.2. TRANSFER TO SUCCESSOR. Anything contained herein or otherwise
to the contrary notwithstanding, the Chairman, or the Trustees upon affirmative
majority vote with a casting vote by the Chairman as defined in Section 12.1 may
(a) select any entity, be it a corporation, association, trust or other kind of
organization, or organize any such kind of entity to take over the Fund Property
and carry on the affairs of the Fund; (b) merge the Fund into or sell, convey
and transfer the Fund Property to any such entity for such consideration and
upon terms and conditions without limitation as they in their discretion deem
suitable; and, (c) take such other action they may in their discretion deem
either necessary or appropriate to accomplish or implement any action taken
hereunder.
ARTICLE XIII
Miscellaneous
Section 13.1. GOVERNING LAW. This Instrument is delivered by the Trustees
in the District of Columbia and with reference to the laws thereof, and the
rights of all parties and the validity, construction and effect of every
provision hereof shall be subject to and construed according, to the laws of the
District of Columbia.
Section 13.2. COUNTERPARTS. This Instrument may be simultaneously executed
in several counterparts, each of which so executed shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument and shall be sufficiently evidenced by any original counterpart.
Section 13.3. RELIANCE BY THIRD PARTIES. Any certificate executed by the
Chairman or President or Secretary or Assistant Secretary certifying to (a) the
number or identity of the Trustees or Shareholders; (b) the due authorization of
the execution of any instrument or writing; (c) the form of any vote passed at a
meeting of the Trustees or Shareholders; (d) the fact that the number of the
Trustees or Shareholders present at any meeting or executing any written
instrument satisfies the requirements of this Instrument; (e) the form of any
By-law adopted by or the identity of any officers elected or appointed by the
Trustees; or (f) the existence of non-existence of any fact or facts which in
any manner relate to the affairs of the Fund, shall be
33
conclusive evidence as to the matters so certified in favor of any person
dealing with the Trustees or any of them and the successors of such person.
Section 13.4. PROVISIONS IN CONFLICT WITH LAWS OR REGULATIONS. (a) The
provisions of this Instrument are severable and if the Trustees shall determine
that any one or more of such provisions are in conflict with applicable federal
or state laws and regulations, such conflicting provisions shall be deemed never
to have constituted a part of this Instrument, provided that such determination
by the Trustees shall not affect or impair any of the remaining provisions of
this Instrument or render invalid or improper any action taken or omitted
(including, but not limited to, the election of Trustees) prior to such
determination. Such determination shall become effective when a certificate is
signed by the Chairman, President or Secretary setting forth any such
determination and reciting that it was duly adopted by the Trustees. The
Trustees shall not be liable for failure to make any determination under this
Section. Nothing in this Section shall in any way limit or affect the right of
the Trustees or the Shareholders to amend this Instrument.
(b) If any provisions of this Instrument shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect or render invalid or unenforceable such provision in any other
jurisdiction or any other provision of this Instrument in any jurisdiction.
Section 13.5. NOT IN DEROGATION OF EXISTING RIGHTS. Nothing herein shall
operate in derogation of any substantive rights, privileges, duties or
liabilities with respect to the Shares issued and outstanding prior to the
Effective Date of this Instrument.
Section 13.6. SECTION HEADINGS. Section headings have been inserted for
convenience only and are not a part of this Instrument.
ARTICLE XIV
Effective Date and Duration of Trust and Fund
Section 14.1. EFFECTIVE DATE. This Instrument and the Trust herein shall
become effective immediately upon all affirmative vote of not less than two-
thirds of a majority of the Shares then outstanding, and entitled to vote as
required by the Act and upon the signing of a certificate by the Chairman or
Secretary setting forth the fact of such affirmative vote and the date thereof
which date shall be the "Effective Date".
Section 14.2. THIS INSTRUMENT SUPERSEDES. On and after the Effective Date,
this Instrument shall supersede the Trust Indenture dated February 23, 1939 and
all amendments and supplements thereto and the Fund and all matters pertaining
thereto shall be governed by this Instrument.
Section 14.3. DURATION AND TERMINATION. The Fund shall terminate on
February 23, 2034, unless the date of termination shall be extended and changed
to a later date or unless terminated
34
earlier by the Chairman or by an affirmative vote of a majority of Trustees
with a casting vote by the Chairman. As used herein casting vote is defined as
an affirmative vote necessary in order for a particular matter to carry.
ARTICLE XV
Shareholders' Acceptance
Section 15.1. ACCEPTANCE. Shareholders holding shares after the Effective
Date of this Instrument shall be deemed to have accepted this instrument and the
terms and conditions contained herein and shall be bound hereby, nothing herein
contained to the contrary notwithstanding.
IN WITNESS WHEREOF, the Parties have executed this Amended and Restated
Trust Indenture of Steadman Security Trust and Declaration of Trust as of the
day and year first above written.
ATTEST: STEADMAN SECURITY TRUST
By: /s/ Charles W. Steadman
-----------------------------
WITNESS: TRUSTEES:
/s/ Charles W. Steadman
---------------------------------
Charles W. Steadman, TRUSTEE
WITNESS:
/s/ Paul A. Bowers
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Paul A. Bowers, Trustee
WITNESS:
/s/ John T. Hayward
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John T. Hayward, Trustee
WITNESS:
/s/ Paul F. Wagner
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Paul F. Wagner, Trustee
35