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Exhibit 1(C)
MUNIYIELD NEW YORK INSURED FUND II, INC.
Articles Supplementary creating two series of
Auction Market Preferred Stock(Registered Trademark)
MUNIYIELD NEW YORK INSURED FUND II, INC., a Maryland corporation
having its principal Maryland office in the City of Baltimore (the
"Corporation"), certifies to the State Department of Assessments and Taxation
of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by article fifth of its Charter, the Board of
Directors has reclassified 2,960 authorized and unissued shares of common stock
of the Corporation as preferred stock of the Corporation and has authorized the
issuance of two series of preferred stock, par value $.10 per share,
liquidation preference $25,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon, to be
designated respectively: Auction Market Preferred Stock, Series B; and Auction
Market Preferred Stock, Series C.
SECOND: The preferences, voting powers, restrictions, limitations as
to dividends, qualifications, and terms and conditions of redemption, of the
shares of such series of preferred stock are as follows:
_____________________
(Registered Trademark) Registered trademark of Merrill Lynch & Co., Inc.
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DESIGNATION
Series B: A series of 1,960 shares of preferred stock, par value $.10
per share, liquidation preference $25,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) thereon,
is hereby designated "Auction Market Preferred Stock, Series B." Each share of
Auction Market Preferred Stock, Series B (sometimes referred to herein as
"Series B AMPS") shall be issued on a date to be determined by the Board of
Directors of the Corporation or pursuant to their delegated authority; have an
Initial Dividend Rate and an Initial Dividend Payment Date as shall be
determined in advance of the issuance thereof by the Board of Directors of the
Corporation or pursuant to their delegated authority; and have such other
preferences, voting powers, limitations as to dividends, qualifications and
terms and conditions of redemption as are set forth in these Articles
Supplementary. The Auction Market Preferred Stock, Series B shall constitute a
separate series of preferred stock of the Corporation, and each share of
Auction Market Preferred Stock, Series B shall be identical.
Series C: A series of 1,000 shares of preferred stock, par value $.10
per share, liquidation preference $25,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or declared) thereon,
is hereby designated "Auction Market Preferred Stock, Series C." Each share of
Auction Market Preferred Stock, Series C (sometimes referred to herein as
"Series C AMPS") shall be issued on a date to be determined by
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the Board of Directors of the Corporation or pursuant to their delegated
authority; have an Initial Dividend Rate and an Initial Dividend Payment Date
as shall be determined in advance of the issuance thereof by the Board of
Directors of the Corporation or pursuant to their delegated authority; and have
such other preferences, voting powers, limitations as to dividends,
qualifications and terms and conditions of redemption as are set forth in these
Articles Supplementary. The Auction Market Preferred Stock, Series C shall
constitute a separate series of preferred stock of the Corporation, and each
share of Auction Market Preferred Stock, Series C shall be identical.
1. Definitions. (a) Unless the context or use indicates
another or different meaning or intent, in these Articles Supplementary the
following terms have the following meanings, whether used in the singular or
plural:
"'AA' Composite Commercial Paper Rate," on any date of
determination, means (i) the Interest Equivalent of the rate on commercial
paper placed on behalf of issuers whose corporate bonds are rated "AA" by S&P
or "Aa" by Moody's or the equivalent of such rating by another nationally
recognized rating agency, as such rate is made available on a discount basis or
otherwise by the Federal Reserve Bank of New York for the Business Day
immediately preceding such date, or (ii) in the event that the Federal Reserve
Bank of New York does not make available such a rate, then the arithmetic
average of the Interest Equivalent of the rate on commercial paper placed on
behalf of such issuers, as
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quoted on a discount basis or otherwise by Merrill Lynch, Pierce, Fenner &
Smith Incorporated or its successors that are Commercial Paper Dealers, to the
Auction Agent for the close of business on the Business Day immediately
preceding such date. If one of the Commercial Paper Dealers does not quote a
rate required to determine the "AA" Composite Commercial Paper Rate, the "AA"
Composite Commercial Paper Rate will be determined on the basis of the
quotation or quotations furnished by any Substitute Commercial Paper Dealer or
Substitute Commercial Paper Dealers selected by the Corporation to provide such
rate or rates not being supplied by the Commercial Paper Dealer. If the number
of Dividend Period days shall be (i) 7 or more but fewer than 49 days, such
rate shall be the Interest Equivalent of the 30-day rate on such commercial
paper; (ii) 49 or more but fewer than 70 days, such rate shall be the Interest
Equivalent of the 60-day rate on such commercial paper; (iii) 70 or more days
but fewer than 85 days, such rate shall be the arithmetic average of the
Interest Equivalent on the 60-day and 90-day rates on such commercial paper;
(iv) 85 or more days but fewer than 99 days, such rate shall be the Interest
Equivalent of the 90-day rate on such commercial paper; (v) 99 or more days but
fewer than 120 days, such rate shall be the arithmetic average of the Interest
Equivalent of the 90-day and 120-day rates on such commercial paper; (vi) 120
or more days but fewer than 141 days, such rate shall be the Interest
Equivalent of the 120-day rate on such commercial paper; (vii) 141 or more days
but fewer than 162 days,
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such rate shall be the arithmetic average of the Interest Equivalent of the
120-day and 180-day rates on such commercial paper; and (viii) 162 or more days
but fewer than 183 days, such rate shall be the Interest Equivalent of the
180-day rate on such commercial paper.
"Accountant's Confirmation" has the meaning set forth in paragraph
7(c) of these Articles Supplementary.
"Additional Dividend" has the meaning set forth in paragraph 2(e) of
these Articles Supplementary.
"Adviser" means the Corporation's investment adviser which initially
shall be Fund Asset Management, L.P.
"Affiliate" shall mean any Person, other than Merrill Lynch, Pierce,
Fenner & Smith Incorporated or its successors, known to the Auction Agent to be
controlled by, in control of, or under common control with, the Corporation.
"Agent Member" means a member of the Securities Depository that will
act on behalf of a Beneficial Owner of one or more shares of AMPS or a
Potential Beneficial Owner.
"AMPS" means, as the case may be, the Auction Market Preferred Stock,
Series B; or the Auction Market Preferred Stock, Series C.
"AMPS Basic Maintenance Amount," as of any Valuation Date, means the
dollar amount equal to (i) the sum of (A) the product of the number of shares
of AMPS and Other AMPS Outstanding on such Valuation Date multiplied by the sum
of (a) $25,000 and (b) any applicable redemption premium attributable to the
designation
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of a Premium Call Period; (B) the aggregate amount of cash dividends (whether
or not earned or declared) that will have accumulated for each share of AMPS
and Other AMPS Outstanding, in each case, to (but not including) the end of the
current Dividend Period that follows such Valuation Date in the event the then
current Dividend Period will end within 49 calendar days of such Valuation Date
or through the 49th day after such Valuation Date in the event the then current
Dividend Period will not end within 49 calendar days of such Valuation Date;
(C) in the event the then current Dividend Period will end within 49 calendar
days of such Valuation Date, the aggregate amount of cash dividends that would
accumulate at the Maximum Applicable Rate applicable to a Dividend Period of 28
or fewer days on any shares of AMPS and Other AMPS Outstanding from the end of
such Dividend Period through the 49th day after such Valuation Date, multiplied
by the larger of the Moody's Volatility Factor and the S&P Volatility Factor,
determined from time to time by Moody's and S&P, respectively (except that if
such Valuation Date occurs during a Non-Payment Period, the cash dividend for
purposes of calculation would accumulate at the then current Non-Payment Period
Rate); (D) the amount of anticipated expenses of the Corporation for the 90
days subsequent to such Valuation Date (including any premiums payable with
respect to a Policy); (E) the amount of the Corporation's Maximum Potential
Additional Dividend Liability as of such Valuation Date; and (F) any current
liabilities as of such Valuation Date to the extent not reflected in any of
(i)(A)
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through (i)(E) (including, without limitation, and immediately upon
determination, any amounts due and payable by the Corporation pursuant to
repurchase agreements and any payables for New York Municipal Bonds or
Municipal Bonds purchased as of such Valuation Date) less (ii) either (A) the
Discounted Value of any of the Corporation's assets, or (B) the face value of
any of the Corporation's assets if such assets mature prior to or on the date
of redemption of AMPS or payment of a liability and are either securities
issued or guaranteed by the United States Government or Deposit Securities, in
both cases irrevocably deposited by the Corporation for the payment of the
amount needed to redeem shares of AMPS subject to redemption or any of (i)(B)
through (i)(F). For Moody's, the Corporation shall include as a liability an
amount calculated semi-annually equal to 150% of the estimated cost of
obtaining other insurance guaranteeing the timely payment of interest on a
Moody's Eligible Asset and principal thereof to maturity with respect to
Moody's Eligible Assets that (i) are covered by a Policy which provides the
Corporation with the option to obtain such other insurance and (ii) are
discounted by a Moody's Discount Factor determined by reference to the
insurance claims-paying ability rating of the issuer of such Policy.
"AMPS Basic Maintenance Cure Date," with respect to the failure by the
Corporation to satisfy the AMPS Basic Maintenance Amount (as required by
paragraph 7(a) of these Articles Supple-
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mentary) as of a given Valuation Date, means the sixth Business Day following
such Valuation Date.
"AMPS Basic Maintenance Report" means a report signed by any of the
President, Treasurer, any Senior Vice President or any Vice President of the
Corporation which sets forth, as of the related Valuation Date, the assets of
the Corporation, the Market Value and the Discounted Value thereof (seriatim
and in aggregate), and the AMPS Basic Maintenance Amount.
"Anticipation Notes" shall mean the following New York Municipal
Bonds: revenue anticipation notes, tax anticipation notes, tax and revenue
anticipation notes, grant anticipation notes and bond anticipation notes.
"Applicable Percentage" has the meaning set forth in paragraph
10(a)(vii) of these Articles Supplementary.
"Applicable Rate" means the rate per annum at which cash dividends are
payable on the AMPS or Other AMPS, as the case may be, for any Dividend Period.
"Auction" means a periodic operation of the Auction Procedures.
"Auction Agent" means IBJ Schroder Bank & Trust Company unless and
until another commercial bank, trust company or other financial institution
appointed by a resolution of the Board of Directors of the Corporation or a
duly authorized committee thereof enters into an agreement with the Corporation
to follow the Auction Procedures for the purpose of determining the Applicable
Rate and to act as transfer agent, registrar, dividend
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disbursing agent and redemption agent for the AMPS and Other AMPS.
"Auction Procedures" means the procedures for conducting Auctions set
forth in paragraph 10 of these Articles Supplementary.
"Beneficial Owner" means a customer of a Broker-Dealer who is listed
on the records of that Broker-Dealer (or, if applicable, the Auction Agent) as
a holder of shares of AMPS or a Broker-Dealer that holds AMPS for its own
account.
"Broker-Dealer" shall mean any broker-dealer, or other entity
permitted by law to perform the functions required of a Broker-Dealer in
paragraph 10 of these Articles Supplementary, that has been selected by the
Corporation and has entered into a Broker-Dealer Agreement with the Auction
Agent that remains effective.
"Broker-Dealer Agreement" shall mean an agreement between the Auction
Agent and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow
the procedures specified in paragraph 10 of these Articles Supplementary.
"Business Day" means a day on which the New York Stock Exchange, Inc.
is open for trading and which is not a Saturday, Sunday or other day on which
banks in The City of New York are authorized or obligated by law to close.
"Charter" means the Articles of Incorporation, as amended and
supplemented (including these Articles Supplementary), of the
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Corporation on file in the State Department of Assessments and Taxation of
Maryland.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Paper Dealers" means Merrill Lynch, Pierce,
Fenner & Smith Incorporated and such other commercial paper dealer or dealers
as the Corporation may from time to time appoint, or, in lieu of any thereof,
their respective affiliates or successors.
"Common Stock" means the common stock, par value $.10 per share, of
the Corporation.
"Corporation" means MuniYield New York Insured Fund II, Inc., a
Maryland corporation.
"Date of Original Issue" means, with respect to any share of AMPS or
Other AMPS, the date on which the Corporation originally issues such share.
"Deposit Securities" means cash and New York Municipal Bonds and
Municipal Bonds rated at least A, P-1, VMIG-1 or MIG-1 by Moody's or A, A-1+ or
SP-1+ by S&P.
"Discounted Value" means (i) with respect to an S&P Eligible Asset,
the quotient of the Market Value thereof divided by the applicable S&P Discount
Factor and (ii) with respect to a Moody's Eligible Asset, the lower of par and
the quotient of the Market Value thereof divided by the applicable Moody's
Discount Factor.
"Dividend Payment Date," with respect to AMPS, has the meaning set
forth in paragraph 2(b)(i) of these Articles Supplementary and, with respect to
Other AMPS, has the equivalent meaning.
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"Dividend Period" means the Initial Dividend Period, any 7Day Dividend
Period, any 28-Day Dividend Period and any Special Dividend Period.
"Existing Holder" means a Broker-Dealer or any such other Person as
may be permitted by the Corporation that is listed as the holder of record of
shares of AMPS in the Stock Books.
"Forward Commitment" has the meaning set forth in paragraph 8(c) of
these Articles Supplementary.
"Holder" means a Person identified as a holder of record of shares of
AMPS in the Stock Register.
"Independent Accountant" means a nationally recognized accountant, or
firm of accountants, that is, with respect to the Corporation, an independent
public accountant or firm of independent public accountants under the
Securities Act of 1933, as amended.
"Initial Dividend Payment Date" means the Initial Dividend Payment
Date as determined by the Board of Directors of the Corporation with respect to
each series of AMPS or Other AMPS, as the case may be.
"Initial Dividend Period," with respect to the AMPS, has the meaning
set forth in paragraph 2(c)(i) of these Articles Supplementary and, with
respect to Other AMPS, has the equivalent meaning.
"Initial Dividend Rate," with respect to each series of AMPS, means
the rate per annum applicable to the Initial Dividend
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Period for such series of AMPS and, with respect to Other AMPS, has the
equivalent meaning.
"Initial Margin" means the amount of cash or securities deposited with
a broker as a margin payment at the time of purchase or sale of a futures
contract.
"Interest Equivalent" means a yield on a 360-day basis of a discount
basis security which is equal to the yield on an equivalent interest-bearing
security.
"Long Term Dividend Period" means a Special Dividend Period consisting
of a specified period of one whole year or more but not greater than five
years.
"Mandatory Redemption Price" means $25,000 per share of AMPS plus an
amount equal to accumulated but unpaid dividends (whether or not earned or
declared) to the date fixed for redemption and excluding Additional Dividends.
"Marginal Tax Rate" means the maximum marginal regular Federal
individual income tax rate applicable to ordinary income or the maximum
marginal regular Federal corporate income tax rate, whichever is greater.
"Market Value" of any asset of the Corporation shall be the market
value thereof determined by the Pricing Service. Market Value of any asset
shall include any interest accrued thereon. The Pricing Service shall value
portfolio securities at the quoted bid prices or the mean between the quoted
bid and asked price or the yield equivalent when quotations are not readily
available. Securities for which quotations are not readily
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available shall be valued at fair value as determined by the Pricing Service
using methods which include consideration of:
yields or prices of municipal bonds of comparable quality, type of issue,
coupon, maturity and rating; indications as to value from dealers; and general
market conditions. The Pricing Service may employ electronic data processing
techniques and/or a matrix system to determine valuations. In the event the
Pricing Service is unable to value a security, the security shall be valued at
the lower of two dealer bids obtained by the Corporation from dealers who are
members of the National Association of Securities Dealers, Inc. and make a
market in the security, at least one of which shall be in writing. Futures
contracts and options are valued at closing prices for such instruments
established by the exchange or board of trade on which they are traded, or if
market quotations are not readily available, are valued at fair value on a
consistent basis using methods determined in good faith by the Board of
Directors.
"Maximum Applicable Rate," with respect to AMPS, has the meaning set
forth in paragraph 10(a)(vii) of these Articles Supplementary and, with respect
to Other AMPS, has the equivalent meaning.
"Maximum Potential Additional Dividend Liability," as of any Valuation
Date, means the aggregate amount of Additional Dividends that would be due if
the Corporation were to make Retroactive Taxable Allocations, with respect to
any fiscal year, estimated based upon dividends paid and the amount of
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undistributed realized net capital gains and other taxable income earned by the
Corporation, as of the end of the calendar month immediately preceding such
Valuation Date and assuming such Additional Dividends are fully taxable.
"Moody's" means Moody's Investors Service, Inc. or its successors.
"Moody's Discount Factor" means, for purposes of determining the
Discounted Value of any New York Municipal Bond or Municipal Bond which
constitutes a Moody's Eligible Asset, the percentage determined by reference to
(a)(i) the rating by Moody's or S&P on such Bond or (ii) in the event the
Moody's Eligible Asset is insured under a Policy and the terms of the Policy
permit the Corporation, at its option, to obtain other insurance guaranteeing
the timely payment of interest on such Moody's Eligible Asset and principal
thereof to maturity, the Moody's insurance claims-paying ability rating of the
issuer of the Policy or (iii) in the event the Moody's Eligible Asset is
insured under an insurance policy which guarantees the timely payment of
interest on such Moody's Eligible Asset and principal thereof to maturity, the
Moody's insurance claims-paying ability rating of the issuer of the insurance
policy (provided that for purposes of clauses (ii) and (iii) if the insurance
claims-paying ability of an issuer of a Policy or insurance policy is not rated
by Moody's but is rated by S&P, such issuer shall be deemed to have a Moody's
insurance claims-paying ability rating which is two full categories lower than
the S&P insurance claims-paying
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ability rating) and (b) the Moody's Exposure Period, in accordance with the
table set forth below:
Rating Category
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Moody's Exposure Period Aaa* Aa* A* Baa* Other** VMIG-1*** SP-1+***
----------------------- ---- --- ---- ---- ------- ---------- --------
7 weeks or less............ 151% 159% 168% 202% 229% 136% 148%
8 weeks or less but
greater than seven weeks... 154 164 173 205 235 137 149
9 weeks or less but
greater than eight weeks... 158 169 179 209 242 138 150
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* Moody's rating.
** New York Municipal Bonds and Municipal Bonds not rated by Moody's but
rated BBB or BBB+ by S&P.
*** New York Municipal Bonds and Municipal Bonds rated MIG-1, VMIG-1 or
P-1 or, if not rated by Moody's, rated SP-1+ or A-1+ by S&P which do
not mature or have a demand feature at par exercisable within the
Moody's Exposure Period and which do not have a long-term rating. For
the purposes of the definition of Moody's Eligible Assets, these
securities will have an assumed rating of "A" by Moody's.
; provided, however, in the event a Moody's Discount Factor applicable to a
Moody's Eligible Asset is determined by reference to an insurance claims-paying
ability rating in accordance with clause (a)(ii) or (a)(iii), such Moody's
Discount Factor shall be increased by an amount equal to 50% of the difference
between (a) the percentage set forth in the foregoing table under the
applicable rating category and (b) the percentage set forth in the foregoing
table under the rating category which is one category lower than the applicable
rating category.
Notwithstanding the foregoing, (i) no Moody's Discount Factor will be
applied to short-term New York Municipal Bonds and short-term Municipal Bonds,
so long as such New York Municipal Bonds and Municipal Bonds are rated at least
MIG-1, VMIG-1 or P-1 by Moody's and mature or have a demand feature at par
exercisable within the Moody's Exposure Period, and the Moody's Discount Factor
for such Bonds will be 125% if such Bonds are not rated by
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Moody's but are rated A-1+ or SP-1+ or AA by S&P and mature or have a demand
feature at par exercisable within the Moody's Exposure Period, and (ii) no
Moody's Discount Factor will be applied to cash or to Receivables for New York
Municipal Bonds or Municipal Bonds Sold. "Receivables for New York Municipal
Bonds or Municipal Bonds Sold," for purposes of calculating Moody's Eligible
Assets as of any Valuation Date, means no more than the aggregate of the
following: (i) the book value of receivables for New York Municipal Bonds or
Municipal Bonds sold as of or prior to such Valuation Date if such receivables
are due within five Business Days of such Valuation Date, and if the trades
which generated such receivables are (x) settled through clearing house firms
with respect to which the Corporation has received prior written authorization
from Moody's or (y) with counterparties having a Moody's long-term debt rating
of at least Baa3; and (ii) the Moody's Discounted Value of New York Municipal
Bonds or Municipal Bonds sold as of or prior to such Valuation Date which
generated receivables, if such receivables are due within five Business Days of
such Valuation Date but do not comply with either of conditions (x) or (y) of
the preceding clause (i).
"Moody's Eligible Asset" means cash, Receivables for New York
Municipal Bonds or Municipal Bonds Sold, a New York Municipal Bond or a
Municipal Bond that (i) pays interest in cash, (ii) is publicly rated Baa or
higher by Moody's or, if not rated by Moody's but rated by S&P, is rated at
least BBB by S&P
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(provided that, for purposes of determining the Moody's Discount Factor
applicable to any such S&P-rated New York Municipal Bond or S&P-rated Municipal
Bond, such New York Municipal Bond or Municipal Bond (excluding any short-term
New York Municipal Bond or Municipal Bond) will be deemed to have a Moody's
rating which is one full rating category lower than its S&P rating), (iii) does
not have its Moody's rating suspended by Moody's; and (iv) is part of an issue
of New York Municipal Bonds or Municipal Bonds of at least $10,000,000. In
addition, New York Municipal Bonds and Municipal Bonds in the Corporation's
portfolio must be within the following diversification requirements in order to
be included within Moody's Eligible Assets:
Minimum Maximum Maximum Maximum Maximum
Issue Size Underlying Issue Type County State or Territory
Rating ($ Millions) Obligor (%)(1) Concentration(%)(1)(3) Concentration(%)(1)(4) Concentration (1)(5)
- ------ ------------ -------------- ---------------------- ---------------------- --------------------
Aaa . . . . . . . . . . 10 100 100 100 100
Aa . . . . . . . . . . 10 20 60 60 60
A . . . . . . . . . . . 10 10 40 40 40
Baa . . . . . . . . . . 10 6 20 20 20
Other(2) . . . . . . . 10 4 12 12 12
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(1) The referenced percentages represent maximum cumulative totals
for the related rating category and each lower rating category.
(2) New York Municipal Bonds and Municipal Bonds not rated by Moody's
but rated BBB or BBB+ by S&P.
(3) Does not apply to general obligation bonds.
(4) Applicable to general obligation bonds only.
(5) Does not apply to New York Municipal Bonds. Territorial bonds
(other than those issued by Puerto Rico and counted collectively)
are each limited to 10% of Moody's Eligible Assets. For
diversification purposes, Puerto Rico will be treated as a state.
For purposes of the maximum underlying obligor requirement described above, any
such Bond backed by the guaranty, letter of credit or insurance issued by a
third party will be deemed to be issued by such third party if the issuance of
such third party credit is the sole determinant of the rating on such Bond.
For purposes of the issue type concentration requirement described above, New
York Municipal Bonds and Municipal Bonds will be
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classified within one of the following categories: health care issues
(teaching and non-teaching hospitals, public and private), housing issues
(single- and multi-family), educational facilities issues (public and private
schools), student loan issues, resource recovery issues, transportation issues
(mass transit, airport and highway bonds), industrial revenue/pollution control
bond issues, utility issues (including water, sewer and electricity), general
obligation issues, lease obligations/certificates of participation, escrowed
bonds and other issues ("Other Issues") not falling within one of the
aforementioned categories (includes special obligations to crossover, excise
and sales tax revenue, recreation revenue, special assessment and telephone
revenue bonds). In no event shall (a) more than 10% of Moody's Eligible Assets
consist of student loan issues, (b) more than 10% of Moody's Eligible Assets
consist of resource recovery issues or (c) more than 10% of Moody's Eligible
Assets consist of Other Issues.
When the Corporation sells a New York Municipal Bond or Municipal Bond
and agrees to repurchase it at a future date, the Discounted Value of such Bond
will constitute a Moody's Eligible Asset and the amount the Corporation is
required to pay upon repurchase of such Bond will count as a liability for
purposes of calculating the AMPS Basic Maintenance Amount. When the
Corporation purchases a New York Municipal Bond or Municipal Bond and agrees to
sell it at a future date to another party, cash receivable by the Corporation
thereby will constitute a Moody's
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Eligible Asset if the long-term debt of such other party is rated at least A2
by Moody's and such agreement has a term of 30 days or less; otherwise the
Discounted Value of such Bond will constitute a Moody's Eligible Asset.
Notwithstanding the foregoing, an asset will not be considered a
Moody's Eligible Asset if it is (i) held in a margin account, (ii) subject to
any material lien, mortgage, pledge, security interest or security agreement of
any kind, (iii) held for the purchase of a security pursuant to a Forward
Commitment or (iv) irrevocably deposited by the Corporation for the payment of
dividends or redemption.
"Moody's Exposure Period" means a period that is the same length or
longer than the number of days used in calculating the cash dividend component
of the AMPS Basic Maintenance Amount and shall initially be the period
commencing on and including a given Valuation Date and ending 48 days
thereafter.
"Moody's Hedging Transactions" has the meaning set forth in paragraph
8(b) of these Articles Supplementary.
"Moody's Volatility Factor" means 272% as long as there has been no
increase enacted to the Marginal Tax Rate. If such an increase is enacted but
not yet implemented, the Moody's Volatility Factor shall be as follows:
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% Change in
Marginal Tax Moody's Volatility
Rate Factor
------------ ----------------------
#5% 292%
>5% but #10% 313%
>10% but #15% 338%
>15% but #20% 364%
>20% but #25% 396%
>25% but #30% 432%
>30% but #35% 472%
>35% but #40% 520%
Notwithstanding the foregoing, the Moody's Volatility Factor may mean such
other potential dividend rate increase factor as Moody's advises the
Corporation in writing is applicable.
"Municipal Bonds" means "Municipal Bonds" as defined in the
Corporation's Registration Statement on Form N-14 (File No. 33-_____) on file
with the Securities and Exchange Commission, as such Registration Statement may
be amended from time to time, as well as short-term municipal obligations.
"Municipal Index" has the meaning set forth in paragraph 8(a) of these
Articles Supplementary.
"1940 Act" means the Investment Company Act of 1940, as amended from
time to time.
"1940 Act AMPS Asset Coverage" means asset coverage, as defined in
section 18(h) of the 1940 Act, of at least 200% with respect to all outstanding
senior securities of the Corporation which are stock, including all outstanding
shares of AMPS and Other AMPS (or such other asset coverage as may in the
future be specified in or under the 1940 Act as the minimum asset coverage
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for senior securities which are stock of a closed-end investment company as a
condition of paying dividends on its common stock).
"1940 Act Cure Date," with respect to the failure by the Corporation
to maintain the 1940 Act AMPS Asset Coverage (as required by paragraph 6 of
these Articles Supplementary) as of the last Business Day of each month, means
the last Business Day of the following month.
"New York Municipal Bonds" means municipal obligations issued by or on
behalf of the State of New York, its political subdivisions, agencies and
instrumentalities and by other qualifying issuers that pay interest which, in
the opinion of bond counsel to the issuer, is exempt from Federal and New York
income taxes.
"Non-Call Period" has the meaning set forth under the definition of
"Specific Redemption Provisions".
"Non-Payment Period" means, with respect to the AMPS, any period
commencing on and including the day on which the Corporation shall fail to (i)
declare, prior to the close of business on the second Business Day preceding
any Dividend Payment Date, for payment on or (to the extent permitted by
paragraph 2(c)(i) of these Articles Supplementary) within three Business Days
after such Dividend Payment Date to the Holders as of 12:00 noon, New York City
time, on the Business Day preceding such Dividend Payment Date, the full amount
of any dividend on shares of AMPS payable on such Dividend Payment Date or (ii)
deposit, irrevocably in trust, in same-day funds, with the
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Auction Agent by 12:00 noon, New York City time, (A) on such Dividend Payment
Date the full amount of any cash dividend on such shares payable (if declared)
on such Dividend Payment Date or (B) on any redemption date for any shares of
AMPS called for redemption, the Mandatory Redemption Price per share of such
AMPS or, in the case of an optional redemption, the Optional Redemption Price
per share, and ending on and including the Business Day on which, by 12:00
noon, New York City time, all unpaid cash dividends and unpaid redemption
prices shall have been so deposited or shall have otherwise been made available
to Holders in same-day funds; provided that, a Non-Payment Period shall not end
unless the Corporation shall have given at least five days' but no more than 30
days' written notice of such deposit or availability to the Auction Agent, all
Existing Holders (at their addresses appearing in the Stock Books) and the
Securities Depository. Notwithstanding the foregoing, the failure by the
Corporation to deposit funds as provided for by clauses (ii)(A) or (ii)(B)
above within three Business Days after any Dividend Payment Date or redemption
date, as the case may be, in each case to the extent contemplated by paragraph
2(c)(i) of these Articles Supplementary, shall not constitute a "Non-Payment
Period."
"Non-Payment Period Rate" means, initially, 200% of the applicable
Reference Rate (or 275% of such rate if the Corporation has provided
notification to the Auction Agent prior to the Auction establishing the
Applicable Rate for any dividend
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pursuant to paragraph 2(f) hereof that net capital gains or other taxable
income will be included in such dividend on shares of AMPS), provided that the
Board of Directors of the Corporation shall have the authority to adjust,
modify, alter or change from time to time the initial Non-Payment Period Rate
if the Board of Directors of the Corporation determines and Moody's and S&P (or
any Substitute Rating Agency in lieu of Moody's or S&P in the event either of
such parties shall not rate the AMPS) advise the Corporation in writing that
such adjustment, modification, alteration or change will not adversely affect
their then-current ratings on the AMPS.
"Normal Dividend Payment Date" has the meaning set forth in paragraph
2(b)(i) of these Articles Supplementary.
"Notice of Redemption" means any notice with respect to the redemption
of shares of AMPS pursuant to paragraph 4 of these Articles Supplementary.
"Notice of Revocation" has the meaning set forth in paragraph
2(c)(iii) of these Articles Supplementary.
"Notice of Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of these Articles Supplementary.
"Optional Redemption Price" shall mean $25,000 per share plus an
amount equal to accumulated but unpaid dividends (whether or not earned or
declared) to the date fixed for redemption and excluding Additional Dividends
plus any applicable redemption premium attributable to the designation of a
Premium Call Period.
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"Other AMPS" means the auction rate preferred stock of the
Corporation, other than the AMPS.
"Outstanding" means, as of any date (i) with respect to AMPS, shares
of AMPS theretofore issued by the Corporation except, without duplication, (A)
any shares of AMPS theretofore cancelled or delivered to the Auction Agent for
cancellation, or redeemed by the Corporation, or as to which a Notice of
Redemption shall have been given and Deposit Securities shall have been
deposited in trust or aggregated by the Corporation pursuant to paragraph 4(c)
and (B) any shares of AMPS as to which the Corporation or any Affiliate thereof
shall be a Beneficial Owner, provided that shares of AMPS held by an Affiliate
shall be deemed outstanding for purposes of calculating the AMPS Basic
Maintenance Amount and (ii) with respect to shares of other Preferred Stock,
has the equivalent meaning.
"Parity Stock" means the AMPS and each other outstanding series of
Preferred Stock the holders of which, together with the holders of the AMPS,
shall be entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in proportion to
the full respective preferential amounts to which they are entitled, without
preference or priority one over the other.
"Person" means and includes an individual, a partnership, a
corporation, a trust, an unincorporated association, a joint venture or other
entity or a government or any agency or political subdivision thereof.
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"Policy" means an insurance policy purchased by the Corporation which
guarantees the payment of principal and interest on specified New York
Municipal Bonds or Municipal Bonds during the period in which such New York
Municipal Bonds or Municipal Bonds are owned by the Corporation; provided,
however, that, as long as the AMPS are rated by Moody's and S&P, the
Corporation will not obtain any Policy unless Moody's and S&P advise the
Corporation in writing that the purchase of such Policy will not adversely
affect their then-current rating on the AMPS.
"Potential Beneficial Owner" means a customer of a Broker-Dealer or a
Broker-Dealer that is not a Beneficial Owner of shares of AMPS but that wishes
to purchase such shares, or that is a Beneficial Owner that wishes to purchase
additional shares of AMPS.
"Potential Holder" means any Broker-Dealer or any such other Person as
may be permitted by the Corporation, including any Existing Holder, who may be
interested in acquiring shares of AMPS (or, in the case of an Existing Holder,
additional shares of AMPS).
"Preferred Stock" means the preferred stock of the Corporation, and
includes AMPS and Other AMPS.
"Premium Call Period" has the meaning set forth under the definition
of "Specific Redemption Provisions".
"Pricing Service" shall mean J.J. Kenny or any pricing service
designated by the Board of Directors of the Corporation
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provided the Corporation obtains written assurance from S&P and Moody's that
such designation will not impair the rating then assigned by S&P and Moody's to
the AMPS.
"Quarterly Valuation Date" means the last Business Day of the last
month of each fiscal quarter of the Corporation in each fiscal year of the
Corporation, commencing October 31, 1996.
"Receivables for New York Municipal Bonds Sold" has the meaning set
forth under the definition of S&P Discount Factor.
"Receivables for New York Municipal Bonds or Municipal Bonds Sold"
has the meaning set forth under the definition of Moody's Discount Factor.
"Reference Rate" means: (i) with respect to a Dividend Period or a
Short Term Dividend Period having 28 or fewer days, the higher of the
applicable "AA" Composite Commercial Paper Rate and the Taxable Equivalent of
the Short-Term Municipal Bond Rate, (ii) with respect to any Short Term
Dividend Period having more than 28 but fewer than 183 days, the applicable
"AA" Composite Commercial Paper Rate, (iii) with respect to any Short Term
Dividend Period having 183 or more but fewer than 364 days, the applicable U.S.
Treasury Bill Rate and (iv) with respect to any Long Term Dividend Period, the
applicable U.S. Treasury Note Rate.
"Request for Special Dividend Period" has the meaning set forth in
paragraph 2(c)(iii) of these Articles Supplementary.
"Response" has the meaning set forth in paragraph 2(c)(iii) of these
Articles Supplementary.
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"Retroactive Taxable Allocation" has the meaning set forth in
paragraph 2(e) of these Articles Supplementary.
"Right," with respect to the AMPS, has the meaning set forth in
paragraph 2(e) of these Articles Supplementary and, with respect to Other AMPS,
has the equivalent meaning.
"S&P" means Standard & Poor's Ratings Group or its successors.
"S&P Discount Factor" means, for purposes of determining the
Discounted Value of any New York Municipal Bond which constitutes an S&P
Eligible Asset, the percentage determined by reference to (a)(i) the rating by
S&P or Moody's on such Bond or (ii) in the event the New York Municipal Bond is
insured under a Policy and the terms of the Policy permit the Corporation, at
its option, to obtain other permanent insurance guaranteeing the timely payment
of interest on such New York Municipal Bond and principal thereof to maturity,
the S&P insurance claims-paying ability rating of the issuer of the Policy or
(iii) in the event the New York Municipal Bond is insured under an insurance
policy which guarantees the timely payment of interest on such New York
Municipal Bond and principal thereof to maturity, the S&P insurance
claims-paying ability rating of the issuer of the insurance policy and (b) the
S&P Exposure Period, in accordance with the tables set forth below:
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For New York Municipal Bonds:
Rating Category
------------------------------------------------
S&P Exposure Period AAA* AA* A* BBB*
- ------------------- ------------------------------------------------
40 Business Days . . . . . . . . . . . . . . . . 210% 215% 230% 270%
22 Business Days . . . . . . . . . . . . . . . . 190 195 210 250
10 Business Days . . . . . . . . . . . . . . . . 175 180 195 235
7 Business Days . . . . . . . . . . . . . . . . 170 175 190 230
3 Business Days . . . . . . . . . . . . . . . . 150 155 170 210
___________________
* S&P rating.
Notwithstanding the foregoing, (i) the S&P Discount Factor for
short-term New York Municipal Bonds will be 115%, so long as such New York
Municipal Bonds are rated A-1+ or SP-1+ by S&P and mature or have a demand
feature exercisable in 30 days or less, or 125% if such New York Municipal
Bonds are not rated by S&P but are rated VMIG-1, P-1 or MIG-1 by Moody's;
provided, however, such short-term New York Municipal Bonds rated by Moody's
but not rated by S&P having a demand feature exercisable in 30 days or less
must be backed by a letter of credit, liquidity facility or guarantee from a
bank or other financial institution having a short-term rating of at least A-1+
from S&P; and further provided that such short-term New York Municipal Bonds
rated by Moody's but not rated by S&P may comprise no more than 50% of
short-term New York Municipal Bonds that qualify as S&P Eligible Assets and
(ii) no S&P Discount Factor will be applied to cash or to Receivables for New
York Municipal Bonds Sold. "Receivables for New York Municipal Bonds Sold,"
for purposes of calculating S&P Eligible Assets as of any Valuation Date, means
the book value of receivables for New York Municipal Bonds sold as of or prior
to
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such Valuation Date if such receivables are due within five Business Days of
such Valuation Date. The Corporation may adopt S&P Discount Factors for
Municipal Bonds other than New York Municipal Bonds provided that S&P advises
the Corporation in writing that such action will not adversely affect its then
current rating on the AMPS. For purposes of the foregoing, Anticipation Notes
rated SP-1+ or, if not rated by S&P, rated VMIG-1 by Moody's, which do not
mature or have a demand feature exercisable in 30 days and which do not have a
long-term rating, shall be considered to be short-term New York Municipal
Bonds.
"S&P Eligible Asset" means cash, Receivables for New York Municipal
Bonds Sold or a New York Municipal Bond that (i) is interest bearing and pays
interest at least semi-annually; (ii) is payable with respect to principal and
interest in United States Dollars; (iii) is publicly rated BBB or higher by S&P
or, except in the case of Anticipation Notes that are grant anticipation notes
or bond anticipation notes which must be rated by S&P to be included in S&P
Eligible Assets, if not rated by S&P but rated by Moody's, is rated at least A
by Moody's (provided that such Moody's-rated New York Municipal Bonds will be
included in S&P Eligible Assets only to the extent the Market Value of such New
York Municipal Bonds does not exceed 50% of the aggregate Market Value of the
S&P Eligible Assets; and further provided that, for purposes of determining the
S&P Discount Factor applicable to any such Moody's-rated New York Municipal
Bond, such New York Municipal Bond will be deemed to have an S&P
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rating which is one full rating category lower than its Moody's rating); (iv)
is not subject to a covered call or covered put option written by the
Corporation; (v) is not part of a private placement of New York Municipal
Bonds; and (vi) is part of an issue of New York Municipal Bonds with an
original issue size of at least $20 million or, if of an issue with an original
issue size below $20 million (but in no event below $10 million), is issued by
an issuer with a total of at least $50 million of securities outstanding.
Notwithstanding the foregoing:
(1) New York Municipal Bonds of any one issuer or guarantor
(excluding bond insurers) will be considered S&P Eligible Assets only
to the extent the Market Value of such New York Municipal Bonds does
not exceed 10% of the aggregate Market Value of the S&P Eligible
Assets, provided that 2% is added to the applicable S&P Discount
Factor for every 1% by which the Market Value of such New York
Municipal Bonds exceeds 5% of the aggregate Market Value of the S&P
Eligible Assets; and
(2) New York Municipal Bonds of any one issue type category
(as described below) will be considered S&P Eligible Assets only to
the extent the Market Value of such Bonds does not exceed 20% of the
aggregate Market Value of S&P Eligible Assets, except that New York
Municipal Bonds falling within the utility issue type category will be
broken down into three sub-categories (as described below) and such
New York Municipal Bonds will be considered S&P
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Eligible Assets to the extent the Market Value of such Bonds in each
such sub-category does not exceed 20% of the aggregate Market Value of
S&P Eligible Assets. For purposes of the issue type category
requirement described above, New York Municipal Bonds will be
classified within one of the following categories: health care
issues, housing issues, educational facilities issues, student loan
issues, transportation issues, industrial development bond issues,
utility issues, general obligation issues, lease obligations, escrowed
bonds and other issues not falling within one of the aforementioned
categories. For purposes of the issue type category requirement
described above, New York Municipal Bonds in the utility issue type
category will be classified within one of the three following
sub-categories: (i) electric, gas and combination issues (if the
combination issue includes an electric issue), (ii) water and sewer
utilities and combination issues (if the combination issue does not
include an electric issue), and (iii) irrigation, resource recovery,
solid waste and other utilities, provided that New York Municipal
Bonds included in this sub-category (iii) must be rated by S&P in
order to be included in S&P Eligible Assets.
The Corporation may include Municipal Bonds other than New York
Municipal Bonds as S&P Eligible Assets pursuant to guidelines and restrictions
to be established by S&P provided
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that S&P advises the Corporation in writing that such action will not adversely
affect its then current rating on the AMPS.
"S&P Exposure Period" means the maximum period of time following a
Valuation Date, including the Valuation Date and the AMPS Basic Maintenance
Cure Date, that the Corporation has under these Articles Supplementary to cure
any failure to maintain, as of such Valuation Date, the Discounted Value for
its portfolio at least equal to the AMPS Basic Maintenance Amount (as described
in paragraph 7(a) of these Articles Supplementary).
"S&P Hedging Transactions" has the meaning set forth in paragraph 8(a)
of these Articles Supplementary.
"S&P Volatility Factor" means 277% or such other potential dividend
rate increase factor as S&P advises the Corporation in writing is applicable.
"Securities Depository" means The Depository Trust Company or any
successor company or other entities elected by the Corporation as securities
depository for the shares of AMPS that agrees to follow the procedures required
to be followed by such securities depository in connection with the shares of
AMPS.
"Service" means the United States Internal Revenue Service.
"7-Day Dividend Period" means, with respect to Series B AMPS, a
Dividend Period consisting of seven days.
"Short Term Dividend Period" means a Special Dividend Period
consisting of a specified number of days (other than seven in the case of
Series B AMPS and other than 28 in the case of Series C
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AMPS), evenly divisible by seven and not fewer than seven nor more than 364.
"Special Dividend Period" means a Dividend Period consisting of (i) a
specified number of days (other than seven in the case of Series B AMPS and
other than 28 in the case of Series C AMPS), evenly divisible by seven and not
fewer than seven nor more than 364 or (ii) a specified period of one whole year
or more but not greater than five years (in each case subject to adjustment as
provided in paragraph 2(b)(i)).
"Specific Redemption Provisions" means, with respect to a Special
Dividend Period either, or any combination of, (i) a period (a "Non- Call
Period") determined by the Board of Directors of the Corporation, after
consultation with the Auction Agent and the Broker-Dealers, during which the
shares of AMPS subject to such Dividend Period shall not be subject to
redemption at the option of the Corporation and (ii) a period (a "Premium Call
Period"), consisting of a number of whole years and determined by the Board of
Directors of the Corporation, after consultation with the Auction Agent and the
Broker-Dealers, during each year of which the shares of AMPS subject to such
Dividend Period shall be redeemable at the Corporation's option at a price per
share equal to $25,000 plus accumulated but unpaid dividends plus a premium
expressed as a percentage of $25,000, as determined by the Board of Directors
of the Corporation after consultation with the Auction Agent and the
Broker-Dealers.
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"Stock Books" means the books maintained by the Auction Agent setting
forth at all times a current list, as determined by the Auction Agent, of
Existing Holders of the AMPS.
"Stock Register" means the register of Holders maintained on behalf of
the Corporation by the Auction Agent in its capacity as transfer agent and
registrar for the AMPS.
"Subsequent Dividend Period," with respect to AMPS, has the meaning
set forth in paragraph 2(c)(i) of these Articles Supplementary and, with
respect to Other AMPS, has the equivalent meaning.
"Substitute Commercial Paper Dealers" means such Substitute Commercial
Paper Dealer or Dealers as the Corporation may from time to time appoint or, in
lieu of any thereof, their respective affiliates or successors.
"Substitute Rating Agency" and "Substitute Rating Agencies" mean a
nationally recognized statistical rating organization or two nationally
recognized statistical rating organizations, respectively, selected by Merrill
Lynch, Pierce, Fenner & Smith Incorporated or its affiliates and successors,
after consultation with the Corporation, to act as the substitute rating agency
or substitute rating agencies, as the case may be, to determine the credit
ratings of the shares of AMPS.
"Taxable Equivalent of the Short-Term Municipal Bond Rate" on any date
means 90% of the quotient of (A) the per annum rate expressed on an interest
equivalent basis equal to the Kenny S&P 30 day High Grade Index (the "Kenny
Index") or any successor
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index, made available for the Business Day immediately preceding such date but
in any event not later than 8:30 A.M., New York City time, on such date by
Kenny Information Systems Inc. or any successor thereto, based upon 30-day
yield evaluations at par of bonds the interest on which is excludable for
regular Federal income tax purposes under the Code of "high grade" component
issuers selected by Kenny Information Systems Inc. or any such successor from
time to time in its discretion, which component issuers shall include, without
limitation, issuers of general obligation bonds but shall exclude any bonds the
interest on which constitutes an item of tax preference under Section 57(a)(5)
of the Code, or successor provisions, for purposes of the "alternative minimum
tax," divided by (B) 1.00 minus the Marginal Tax Rate (expressed as a decimal);
provided, however, that if the Kenny Index is not made so available by 8:30
A.M., New York City time, on such date by Kenny Information Systems Inc. or any
successor, the Taxable Equivalent of the Short-Term Municipal Bond Rate shall
mean the quotient of (A) the per annum rate expressed on an interest equivalent
basis equal to the most recent Kenny Index so made available for any preceding
Business Day, divided by (B) 1.00 minus the Marginal Tax Rate (expressed as a
decimal). The Corporation may not utilize a successor index to the Kenny Index
unless Moody's and S&P provide the Corporation with written confirmation that
the use of such successor index will not adversely affect the then-current
respective Moody's and S&P ratings of the AMPS.
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"Treasury Bonds" shall have the meaning set forth in paragraph 8(a) of
these Articles Supplementary.
"28-Day Dividend Period" means, with respect to Series C AMPS, a
Dividend Period consisting of 28 days.
"U.S. Treasury Bill Rate" on any date means (i) the Interest
Equivalent of the rate on the actively traded Treasury Bill with a maturity
most nearly comparable to the length of the related Dividend Period, as such
rate is made available on a discount basis or otherwise by the Federal Reserve
Bank of New York in its Composite 3:30 P.M. Quotations for U.S. Government
Securities report for such Business Day, or (ii) if such yield as so calculated
is not available, the Alternate Treasury Bill Rate on such date. "Alternate
Treasury Bill Rate" on any date means the Interest Equivalent of the yield as
calculated by reference to the arithmetic average of the bid price quotations
of the actively traded Treasury Bill with a maturity most nearly comparable to
the length of the related Dividend Period, as determined by bid price
quotations as of any time on the Business Day immediately preceding such date,
obtained from at least three recognized primary U.S. Government securities
dealers selected by the Auction Agent.
"U.S. Treasury Note Rate" on any date means (i) the yield as
calculated by reference to the bid price quotation of the actively traded,
current coupon Treasury Note with a maturity most nearly comparable to the
length of the related Dividend Period, as such bid price quotation is published
on the Business
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Day immediately preceding such date by the Federal Reserve Bank of New York in
its Composite 3:30 P.M. Quotations for U.S. Government Securities report for
such Business Day, or (ii) if such yield as so calculated is not available, the
Alternate Treasury Note Rate on such date. "Alternate Treasury Note Rate" on
any date means the yield as calculated by reference to the arithmetic average
of the bid price quotations of the actively traded, current coupon Treasury
Note with a maturity most nearly comparable to the length of the related
Dividend Period, as determined by the bid price quotations as of any time on
the Business Day immediately preceding such date, obtained from at least three
recognized primary U.S. Government securities dealers selected by the Auction
Agent.
"Valuation Date" means, for purposes of determining whether the
Corporation is maintaining the AMPS Basic Maintenance Amount, each Business Day
commencing with the Date of Original Issue.
"Variation Margin" means, in connection with an outstanding futures
contract owned or sold by the Corporation, the amount of cash or securities
paid to or received from a broker (subsequent to the Initial Margin payment)
from time to time as the price of such futures contract fluctuates.
(b) The foregoing definitions of Accountant's Confirmation, AMPS
Basic Maintenance Amount, AMPS Basic Maintenance Cure Date, AMPS Basic
Maintenance Report, Deposit Securities, Discounted Value, Independent
Accountant, Initial Margin, Market Value, Maximum Potential Additional Dividend
Liability, Moody's Eligible
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Asset, Moody's Exposure Period, Moody's Hedging Transactions, Moody's
Volatility Factor, S&P Discount Factor, S&P Eligible Asset, S&P Exposure
Period, S&P Hedging Transactions, S&P Volatility Factor, Valuation Date and
Variation Margin have been determined by the Board of Directors of the
Corporation in order to obtain a "aaa" rating from Moody's and a AAA rating
from S&P on the AMPS on their Date of Original Issue; and the Board of
Directors of the Corporation shall have the authority, without shareholder
approval, to amend, alter or repeal from time to time the foregoing definitions
and the restrictions and guidelines set forth thereunder if Moody's and S&P or
any Substitute Rating Agency advises the Corporation in writing that such
amendment, alteration or repeal will not adversely affect their then-current
ratings on the AMPS.
2. Dividends. (a) The Holders shall be entitled to receive,
when, as and if declared by the Board of Directors of the Corporation, out of
funds legally available therefor, cumulative dividends each consisting of (i)
cash at the Applicable Rate, (ii) a Right to receive cash as set forth in
paragraph 2(e) below, and (iii) any additional amounts as set forth in
paragraph 2(f) below, and no more, payable on the respective dates set forth
below. Dividends on the shares of AMPS so declared and payable shall be paid
(i) in preference to and in priority over any dividends declared and payable on
the Common Stock, and (ii) to the extent permitted under the Code and to the
extent available, out of net tax-exempt income earned on
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the Corporation's investments. To the extent permitted under the Code,
dividends on shares of AMPS will be designated as exempt-interest dividends.
For the purposes of this section, the term "net tax-exempt income" shall
exclude capital gains of the Corporation.
(b) (i) Cash dividends on shares of AMPS shall accumulate
from the Date of Original Issue and shall be payable, when, as and if declared
by the Board of Directors, out of funds legally available therefor, commencing
on the Initial Dividend Payment Date with respect to each series of AMPS.
Following the Initial Dividend Payment Date for each series of AMPS, dividends
on such series of AMPS will be payable, at the option of the Corporation,
either (i) with respect to any 7-Day Dividend Period, any 28-Day Dividend
Period and any Short Term Dividend Period of 35 or fewer days, on the day next
succeeding the last day thereof or (ii) with respect to any Short Term Dividend
Period of more than 35 days and with respect to any Long Term Dividend Period,
monthly on the first Business Day of each calendar month during such Short Term
Dividend Period or Long Term Dividend Period and on the day next succeeding the
last day thereof (each such date referred to in clause (i) or (ii) being herein
referred to as a "Normal Dividend Payment Date"), except that if such Normal
Dividend Payment Date is not a Business Day, then (i) the Dividend Payment Date
shall be the first Business Day next succeeding such Normal Dividend Payment
Date if such Normal Dividend Payment Date is a Monday, Tuesday, Wednesday or
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40
Thursday, or (ii) the Dividend Payment Date shall be the first Business Day
next preceding such Normal Dividend Payment Date if such Normal Dividend
Payment Date is a Friday. Although any particular Dividend Payment Date may
not occur on the originally scheduled date because of the exceptions discussed
above, the next succeeding Dividend Payment Date, subject to such exceptions,
will occur on the next following originally scheduled date. If for any reason
a Dividend Payment Date cannot be fixed as described above, then the Board of
Directors shall fix the Dividend Payment Date. The Board of Directors by
resolution may change a Dividend Payment Date if such change does not adversely
affect the contract rights of Holders of shares of AMPS set forth in the
Charter. The Initial Dividend Period, 7-Day Dividend Periods, 28-Day Dividend
Periods and Special Dividend Periods are hereinafter sometimes referred to as
Dividend Periods. Each dividend payment date determined as provided above is
hereinafter referred to as a "Dividend Payment Date."
(ii) Each dividend shall be paid to the Holders as they appear in
the Stock Register as of 12:00 noon, New York City time, on the Business Day
preceding the Dividend Payment Date. Dividends in arrears for any past
Dividend Period may be declared and paid at any time, without reference to any
regular Dividend Payment Date, to the Holders as they appear on the Stock
Register on a date, not exceeding 15 days prior to the payment date therefor,
as may be fixed by the Board of Directors of the Corporation.
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(c) (i) During the period from and including the Date of
Original Issue to but excluding the Initial Dividend Payment Date for each
series of AMPS (the "Initial Dividend Period"), the Applicable Rate shall be
the Initial Dividend Rate. Commencing on the Initial Dividend Payment Date for
each series of AMPS, the Applicable Rate for each subsequent dividend period
(hereinafter referred to as a "Subsequent Dividend Period"), which Subsequent
Dividend Period shall commence on and include a Dividend Payment Date and shall
end on and include the calendar day prior to the next Dividend Payment Date (or
last Dividend Payment Date in a Dividend Period if there is more than one
Dividend Payment Date), shall be equal to the rate per annum that results from
implementation of the Auction Procedures.
The Applicable Rate for each Dividend Period commencing during a
Non-Payment Period shall be equal to the Non-Payment Period Rate; and each
Dividend Period, commencing after the first day of, and during, a Non-Payment
Period shall be a 7-Day Dividend Period in the case of Series B AMPS and a
28-Day Dividend Period in the case of Series C AMPS, provided that if the
preceding Dividend Period for Series C AMPS is a Special Dividend Period of
less than 28 days, the Dividend Period commencing during a Non-Payment Period
will be the same length as such preceding Dividend Period. Except in the case
of the willful failure of the Corporation to pay a dividend on a Dividend
Payment Date or to redeem any shares of AMPS on the date set for such
redemption, any amount of any dividend due on any
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Dividend Payment Date (if, prior to the close of business on the second
Business Day preceding such Dividend Payment Date, the Corporation has declared
such dividend payable on such Dividend Payment Date to the Holders of such
shares of AMPS as of 12:00 noon, New York City time, on the Business Day
preceding such Dividend Payment Date) or redemption price with respect to any
shares of AMPS not paid to such Holders when due may be paid to such Holders in
the same form of funds by 12:00 noon, New York City time, on any of the first
three Business Days after such Dividend Payment Date or due date, as the case
may be, provided that, such amount is accompanied by a late charge calculated
for such period of non-payment at the Non-Payment Period Rate applied to the
amount of such non-payment based on the actual number of days comprising such
period divided by 365. In the case of a willful failure of the Corporation to
pay a dividend on a Dividend Payment Date or to redeem any shares of AMPS on
the date set for such redemption, the preceding sentence shall not apply and
the Applicable Dividend Rate for the Dividend Period commencing during the
Non-Payment Period resulting from such failure shall be the Non-Payment Period
Rate. For the purposes of the foregoing, payment to a person in same-day funds
on any Business Day at any time shall be considered equivalent to payment to
such person in New York Clearing House (next-day) funds at the same time on the
preceding Business Day, and any payment made after 12:00 noon, New York City
time, on any Business Day shall be considered to have been made instead in the
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same form of funds and to the same person before 12:00 noon, New York City
time, on the next Business Day.
(ii) The amount of cash dividends per share of any series of AMPS payable
(if declared) on the Initial Dividend Payment Date and on each Dividend Payment
Date of each 28-Day Dividend Period, each 7-Day Dividend Period and each Short
Term Dividend Period shall be computed by multiplying the Applicable Rate for
such Dividend Period by a fraction, the numerator of which will be the number
of days in such Dividend Period or part thereof that such share was outstanding
and the denominator of which will be 365, multiplying the amount so obtained by
$25,000, and rounding the amount so obtained to the nearest cent. During any
Long Term Dividend Period, the amount of dividends per share of AMPS payable
(if declared) on any Dividend Payment Date shall be computed by multiplying the
Applicable Rate for such Dividend Period by a fraction, the numerator of which
will be such number of days in such part of such Dividend Period that such
share was outstanding and for which dividends are payable on such Dividend
Payment Date and the denominator of which will be 360, multiplying the amount
so obtained by $25,000, and rounding the amount so obtained to the nearest
cent.
(iii) With respect to each Dividend Period that is a Special Dividend
Period, the Corporation may, at its sole option and to the extent permitted by
law, by telephonic and written notice (a "Request for Special Dividend Period")
to the Auction Agent and to each Broker-Dealer, request that the next
succeeding Dividend
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Period for the AMPS be the number of days (other than seven in the case of
Series B AMPS and other than 28 in the case of Series C AMPS), evenly divisible
by seven, and not fewer than seven nor more than 364 in the case of a Short
Term Dividend Period or one whole year or more but not greater than five years
in the case of a Long Term Dividend Period, specified in such notice, provided
that the Corporation may not give a Request for Special Dividend Period (and
any such request shall be null and void) unless, for any Auction occurring
after the initial Auction, Sufficient Clearing Bids were made in the last
occurring Auction and unless full cumulative dividends, any amounts due with
respect to redemptions, and any Additional Dividends payable prior to such date
have been paid in full. Such Request for Special Dividend Period, in the case
of a Short Term Dividend Period, shall be given on or prior to the second
Business Day but not more than seven Business Days prior to an Auction Date for
AMPS and, in the case of a Long Term Dividend Period, shall be given on or
prior to the second Business Day but not more than 28 days prior to an Auction
Date for the AMPS. Upon receiving such Request for Special Dividend Period,
the Broker-Dealer(s) shall jointly determine whether, given the factors set
forth below, it is advisable that the Corporation issue a Notice of Special
Dividend Period for the series of AMPS as contemplated by such Request for
Special Dividend Period and the Optional Redemption Price of the AMPS during
such Special Dividend Period and the Specific Redemption Provisions and shall
give the Corporation and the
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Auction Agent written notice (a "Response") of such determination by no later
than the second Business Day prior to such Auction Date. In making such
determination the Broker-Dealer(s) will consider (1) existing short-term and
long-term market rates and indices of such short-term and long-term rates, (2)
existing market supply and demand for short-term and long-term securities, (3)
existing yield curves for short-term and long-term securities comparable to the
AMPS, (4) industry and financial conditions which may affect the AMPS, (5) the
investment objective of the Corporation, and (6) the Dividend Periods and
dividend rates at which current and potential beneficial holders of the AMPS
would remain or become beneficial holders. If the Broker-Dealer(s) shall not
give the Corporation and the Auction Agent a Response by such second Business
Day or if the Response states that given the factors set forth above it is not
advisable that the Corporation give a Notice of Special Dividend Period for the
AMPS, the Corporation may not give a Notice of Special Dividend Period in
respect of such Request for Special Dividend Period. In the event the Response
indicates that it is advisable that the Corporation give a Notice of Special
Dividend Period for the AMPS, the Corporation may by no later than the second
Business Day prior to such Auction Date give a notice (a "Notice of Special
Dividend Period") to the Auction Agent, the Securities Depository and each
Broker-Dealer which notice will specify (i) the duration of the Special
Dividend Period, (ii) the Optional Redemption Price as specified in the related
Response
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and (iii) the Specific Redemption Provisions, if any, as specified in the
related Response. The Corporation also shall provide a copy of such Notice of
Special Dividend Period to Moody's and S&P. The Corporation shall not give a
Notice of Special Dividend Period and, if the Corporation has given a Notice of
Special Dividend Period, the Corporation is required to give telephonic and
written notice of its revocation (a "Notice of Revocation") to the Auction
Agent, each Broker-Dealer, and the Securities Depository on or prior to the
Business Day prior to the relevant Auction Date if (x) either the 1940 Act AMPS
Asset Coverage is not satisfied or the Corporation shall fail to maintain S&P
Eligible Assets and Moody's Eligible Assets each with an aggregate Discounted
Value at least equal to the AMPS Basic Maintenance Amount, in each case on each
of the two Valuation Dates immediately preceding the Business Day prior to the
relevant Auction Date on an actual basis and on a pro forma basis giving effect
to the proposed Special Dividend Period (using as a pro forma dividend rate
with respect to such Special Dividend Period the dividend rate which the
Broker-Dealers shall advise the Corporation is an approximately equal rate for
securities similar to the AMPS with an equal dividend period), provided that,
in calculating the aggregate Discounted Value of Moody's Eligible Assets for
this purpose, the Moody's Exposure Period shall be deemed to be one week
longer, (y) sufficient funds for the payment of dividends payable on the
immediately succeeding Dividend Payment Date have not been irrevocably
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deposited with the Auction Agent by the close of business on the third Business
Day preceding the related Auction Date or (z) the Broker-Dealer(s) jointly
advise the Corporation that after consideration of the factors listed above
they have concluded that it is advisable to give a Notice of Revocation. The
Corporation also shall provide a copy of such Notice of Revocation to Moody's
and S&P. If the Corporation is prohibited from giving a Notice of Special
Dividend Period as a result of any of the factors enumerated in clause (x), (y)
or (z) above or if the Corporation gives a Notice of Revocation with respect to
a Notice of Special Dividend Period for any series of AMPS, the next succeeding
Dividend Period will be a 7-Day Dividend Period in the case of Series B AMPS
and a 28-Day Dividend Period in the case of Series C AMPS, provided that if the
then current Dividend Period for Series C AMPS in a Special Dividend Period of
less than 28 days, the next succeeding Dividend Period for such series of AMPS
will be the same length as such current Dividend Period. In addition, in the
event Sufficient Clearing Bids are not made in the applicable Auction or such
Auction is not held for any reason, such next succeeding Dividend Period will
be a 7-Day Dividend Period (in the case of Series B AMPS) or a 28-Day Dividend
Period (in the case of Series C AMPS) and the Corporation may not again give a
Notice of Special Dividend Period for the AMPS (and any such attempted notice
shall be null and void) until Sufficient Clearing Bids have been made in an
Auction with respect to a 7-Day Dividend Period (in the case of
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Series B AMPS) or a 28-Day Dividend Period (in the case of Series C AMPS).
(d) (i) Holders shall not be entitled to any dividends,
whether payable in cash, property or stock, in excess of full cumulative
dividends and applicable late charges, as herein provided, on the shares of
AMPS (except for Additional Dividends as provided in paragraph 2(e) hereof and
additional payments as provided in paragraph 2(f) hereof). Except for the late
charge payable pursuant to paragraph 2(c)(i) hereof, no interest, or sum of
money in lieu of interest, shall be payable in respect of any dividend payment
on the shares of AMPS that may be in arrears.
(ii) For so long as any share of AMPS is Outstanding, the
Corporation shall not declare, pay or set apart for payment any dividend or
other distribution (other than a dividend or distribution paid in shares of, or
options, warrants or rights to subscribe for or purchase, Common Stock or other
stock, if any, ranking junior to the shares of AMPS as to dividends or upon
liquidation) in respect of the Common Stock or any other stock of the
Corporation ranking junior to or on a parity with the shares of AMPS as to
dividends or upon liquidation, or call for redemption, redeem, purchase or
otherwise acquire for consideration any shares of the Common Stock or any other
such junior stock (except by conversion into or exchange for stock of the
Corporation ranking junior to the shares of AMPS as to dividends and upon
liquidation) or any other such Parity Stock (except by conversion into or
exchange for stock of the
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Corporation ranking junior to or on a parity with the shares of AMPS as to
dividends and upon liquidation), unless (A) immediately after such transaction,
the Corporation shall have S&P Eligible Assets and Moody's Eligible Assets each
with an aggregate Discounted Value equal to or greater than the AMPS Basic
Maintenance Amount and the Corporation shall maintain the 1940 Act AMPS Asset
Coverage, (B) full cumulative dividends on shares of AMPS and shares of Other
AMPS due on or prior to the date of the transaction have been declared and paid
or shall have been declared and sufficient funds for the payment thereof
deposited with the Auction Agent, (C) any Additional Dividend required to be
paid under paragraph 2(e) below on or before the date of such declaration or
payment has been paid and (D) the Corporation has redeemed the full number of
shares of AMPS required to be redeemed by any provision for mandatory
redemption contained herein.
(e) Each dividend shall consist of (i) cash at the Applicable
Rate, (ii) an uncertificated right (a "Right") to receive an Additional
Dividend (as defined below), and (iii) any additional amounts as set forth in
paragraph 2(f) below. Each Right shall thereafter be independent of the share
or shares of AMPS on which the dividend was paid. The Corporation shall cause
to be maintained a record of each Right received by the respective Holders. A
Right may not be transferred other than by operation of law. If the
Corporation retroactively allocates any net capital gains or other income
subject to regular Federal
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income taxes to shares of AMPS without having given advance notice thereof to
the Auction Agent as described in paragraph 2(f) hereof solely by reason of the
fact that such allocation is made as a result of the redemption of all or a
portion of the outstanding shares of AMPS or the liquidation of the Corporation
(the amount of such allocation referred to herein as a "Retroactive Taxable
Allocation"), the Corporation will, within 90 days (and generally within 60
days) after the end of the Corporation's fiscal year for which a Retroactive
Taxable Allocation is made, provide notice thereof to the Auction Agent and to
each holder of a Right applicable to such shares of AMPS (initially Cede & Co.
as nominee of The Depository Trust Company) during such fiscal year at such
holder's address as the same appears or last appeared on the Stock Books of the
Corporation. The Corporation will, within 30 days after such notice is given
to the Auction Agent, pay to the Auction Agent (who will then distribute to
such holders of Rights), out of funds legally available therefor, an amount
equal to the aggregate Additional Dividend with respect to all Retroactive
Taxable Allocations made to such holders during the fiscal year in question.
An "Additional Dividend" means payment to a present or former holder
of shares of AMPS of an amount which, when taken together with the aggregate
amount of Retroactive Taxable Allocations made to such holder with respect to
the fiscal year in question, would cause such holder's dividends in dollars
(after Federal, New York State and New York City income tax
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consequences) from the aggregate of both the Retroactive Taxable Allocations
and the Additional Dividend to be equal to the dollar amount of the dividends
which would have been received by such holder if the amount of the aggregate
Retroactive Taxable Allocations had been excludable from the gross income of
such holder. Such Additional Dividend shall be calculated (i) without
consideration being given to the time value of money; (ii) assuming that no
holder of shares of AMPS is subject to the Federal alternative minimum tax with
respect to dividends received from the Corporation; and (iii) assuming that
each Retroactive Taxable Allocation would be taxable in the hands of each
holder of shares of AMPS at the greater of: (x) the maximum combined marginal
regular Federal, New York State and New York City individual income tax rate
applicable to ordinary income or capital gains depending on the taxable
character of the distribution (including any surtax); or (y) the maximum
combined marginal regular Federal, New York State and New York City corporate
income tax rate applicable to ordinary income or capital gains depending on the
taxable character of the distribution (taking into account in both (x) and (y)
the Federal income tax deductibility of state taxes paid or incurred but not
any phase out of, or provision limiting, personal exemptions, itemized
deductions, or the benefit of lower tax brackets and assuming the taxability of
Federally tax-exempt dividends for corporations for New York State and New York
City income tax purposes).
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(f) Except as provided below, whenever the Corporation intends to
include any net capital gains or other income subject to regular Federal income
taxes in any dividend on shares of AMPS, the Corporation will notify the
Auction Agent of the amount to be so included at least five Business Days prior
to the Auction Date on which the Applicable Rate for such dividend is to be
established. The Corporation may also include such income in a dividend on
shares of AMPS without giving advance notice thereof if it increases the
dividend by an additional amount calculated as if such income was a Retroactive
Taxable Allocation and the additional amount was an Additional Dividend,
provided that the Corporation will notify the Auction Agent of the additional
amounts to be included in such dividend at least five Business Days prior to
the applicable Dividend Payment Date.
(g) No fractional shares of AMPS shall be issued.
3. Liquidation Rights. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the Holders
shall be entitled to receive, out of the assets of the Corporation available
for distribution to shareholders, before any distribution or payment is made
upon any Common Stock or any other capital stock ranking junior in right of
payment upon liquidation to the AMPS, the sum of $25,000 per share plus
accumulated but unpaid dividends (whether or not earned or declared) thereon to
the date of distribution, and after such payment the Holders will be entitled
to no other payments other than Additional Dividends as provided in paragraph
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2(e) hereof. If upon any liquidation, dissolution or winding up of the
Corporation, the amounts payable with respect to the AMPS and any other
Outstanding class or series of Preferred Stock of the Corporation ranking on a
parity with the AMPS as to payment upon liquidation are not paid in full, the
Holders and the holders of such other class or series will share ratably in any
such distribution of assets in proportion to the respective preferential
amounts to which they are entitled. After payment of the full amount of the
liquidating distribution to which they are entitled, the Holders will not be
entitled to any further participation in any distribution of assets by the
Corporation except for any Additional Dividends. A consolidation, merger or
statutory share exchange of the Corporation with or into any other corporation
or entity or a sale, whether for cash, shares of stock, securities or
properties, of all or substantially all or any part of the assets of the
Corporation shall not be deemed or construed to be a liquidation, dissolution
or winding up of the Corporation.
4. Redemption. (a) Shares of AMPS shall be redeemable by the
Corporation as provided below:
(i) To the extent permitted under the 1940 Act and
Maryland law, upon giving a Notice of Redemption, the Corporation at
its option may redeem shares of AMPS, in whole or in part, out of
funds legally available therefor, at the Optional Redemption Price per
share, on any Dividend Payment Date; provided that no share of AMPS
may be redeemed at the
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option of the Corporation during (A) the Initial Dividend Period with
respect to a series of shares, or (B) a Non-Call Period to which such
share is subject. In addition, holders of AMPS which are redeemed
shall be entitled to receive Additional Dividends to the extent
provided herein. The Corporation may not give a Notice of Redemption
relating to an optional redemption as described in this paragraph
4(a)(i) unless, at the time of giving such Notice of Redemption, the
Corporation has available Deposit Securities with maturity or tender
dates not later than the day preceding the applicable redemption date
and having a value not less than the amount due to Holders by reason
of the redemption of their shares of AMPS on such redemption date.
(ii) The Corporation shall redeem, out of funds legally
available therefor, at the Mandatory Redemption Price per share,
shares of AMPS to the extent permitted under the 1940 Act and Maryland
law, on a date fixed by the Board of Directors, if the Corporation
fails to maintain S&P Eligible Assets and Moody's Eligible Assets each
with an aggregate Discounted Value equal to or greater than the AMPS
Basic Maintenance Amount as provided in paragraph 7(a) or to satisfy
the 1940 Act AMPS Asset Coverage as provided in paragraph 6 and such
failure is not cured on or before the AMPS Basic Maintenance Cure Date
or the 1940 Act Cure Date (herein collectively referred to as a "Cure
Date"), as the case may be. In addition, holders of AMPS so redeemed
shall
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be entitled to receive Additional Dividends to the extent provided
herein. The number of shares of AMPS to be redeemed shall be equal to
the lesser of (i) the minimum number of shares of AMPS the redemption
of which, if deemed to have occurred immediately prior to the opening
of business on the Cure Date, together with all shares of other
Preferred Stock subject to redemption or retirement, would result in
the Corporation having S&P Eligible Assets and Moody's Eligible Assets
each with an aggregate Discounted Value equal to or greater than the
AMPS Basic Maintenance Amount or satisfaction of the 1940 Act AMPS
Asset Coverage, as the case may be, on such Cure Date (provided that,
if there is no such minimum number of shares of AMPS and shares of
other Preferred Stock the redemption of which would have such result,
all shares of AMPS and shares of other Preferred Stock then
Outstanding shall be redeemed), and (ii) the maximum number of shares
of AMPS, together with all shares of other Preferred Stock subject to
redemption or retirement, that can be redeemed out of funds expected
to be legally available therefor on such redemption date. In
determining the number of shares of AMPS required to be redeemed in
accordance with the foregoing, the Corporation shall allocate the
number required to be redeemed which would result in the Corporation
having S&P Eligible Assets and Moody's Eligible Assets each with an
aggregate Discounted Value equal to or greater than the AMPS Basic
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Maintenance Amount or satisfaction of the 1940 Act AMPS Asset Coverage, as the
case may be, pro rata among shares of AMPS, Other AMPS and other Preferred
Stock subject to redemption pursuant to provisions similar to those contained
in this paragraph 4(a)(ii); provided that, shares of AMPS which may not be
redeemed at the option of the Corporation due to the designation of a Non-Call
Period applicable to such shares (A) will be subject to mandatory redemption
only to the extent that other shares are not available to satisfy the number of
shares required to be redeemed and (B) will be selected for redemption in an
ascending order of outstanding number of days in the Non-Call Period (with
shares with the lowest number of days to be redeemed first) and by lot in the
event of shares having an equal number of days in such Non-Call Period. The
Corporation shall effect such redemption on a Business Day which is not later
than 35 days after such Cure Date, except that if the Corporation does not have
funds legally available for the redemption of all of the required number of
shares of AMPS and shares of other Preferred Stock which are subject to
mandatory redemption or the Corporation otherwise is unable to effect such
redemption on or prior to 35 days after such Cure Date, the Corporation shall
redeem those shares of AMPS which it is unable to redeem on the earliest
practicable date on which it is able to effect such redemption out of funds
legally available therefor.
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(b) Notwithstanding any other provision of this paragraph 4, no
shares of AMPS may be redeemed pursuant to paragraph 4(a)(i) of these Articles
Supplementary (i) unless all dividends in arrears on all remaining outstanding
shares of Parity Stock shall have been or are being contemporaneously paid or
declared and set apart for payment and (ii) if redemption thereof would result
in the Corporation's failure to maintain Moody's Eligible Assets or S&P
Eligible Assets with an aggregate Discounted Value equal to or greater than the
AMPS Basic Maintenance Amount. In the event that less than all the outstanding
shares of a series of AMPS are to be redeemed and there is more than one
Holder, the shares of that series of AMPS to be redeemed shall be selected by
lot or such other method as the Corporation shall deem fair and equitable.
(c) Whenever shares of AMPS are to be redeemed, the Corporation,
not less than 20 nor more than 30 days prior to the date fixed for redemption,
shall mail a notice ("Notice of Redemption") by first-class mail, postage
prepaid, to each Holder of shares of AMPS to be redeemed and to the Auction
Agent. The Corporation shall cause the Notice of Redemption to also be
published in the eastern and national editions of The Wall Street Journal. The
Notice of Redemption shall set forth (i) the redemption date, (ii) the amount
of the redemption price, (iii) the aggregate number of shares of AMPS to be
redeemed, (iv) the place or places where shares of AMPS are to be surrendered
for payment of the redemption price, (v) a statement that dividends
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on the shares to be redeemed shall cease to accumulate on such redemption date
(except that holders may be entitled to Additional Dividends) and (vi) the
provision of these Articles Supplementary pursuant to which such shares are
being redeemed. No defect in the Notice of Redemption or in the mailing or
publication thereof shall affect the validity of the redemption proceedings,
except as required by applicable law.
If the Notice of Redemption shall have been given as aforesaid and,
concurrently or thereafter, the Corporation shall have deposited in trust with
the Auction Agent, or segregated in an account at the Corporation's custodian
bank for the benefit of the Auction Agent, Deposit Securities (with a right of
substitution) having an aggregate Discounted Value (utilizing in the case of
S&P an S&P Exposure Period of 22 Business Days) equal to the redemption payment
for the shares of AMPS as to which such Notice of Redemption has been given
with irrevocable instructions and authority to pay the redemption price to the
Holders of such shares, then upon the date of such deposit or, if no such
deposit is made, then upon such date fixed for redemption (unless the
Corporation shall default in making the redemption payment), all rights of the
Holders of such shares as shareholders of the Corporation by reason of the
ownership of such shares will cease and terminate (except their right to
receive the redemption price in respect thereof and any Additional Dividends,
but without interest), and such shares shall no longer be deemed outstanding.
The Corporation shall be entitled to receive, from time to time,
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from the Auction Agent the interest, if any, on such Deposit Securities
deposited with it and the Holders of any shares so redeemed shall have no claim
to any of such interest. In case the Holder of any shares so called for
redemption shall not claim the redemption payment for his shares within one
year after the date of redemption, the Auction Agent shall, upon demand, pay
over to the Corporation such amount remaining on deposit and the Auction Agent
shall thereupon be relieved of all responsibility to the Holder of such shares
called for redemption and such Holder thereafter shall look only to the
Corporation for the redemption payment.
5. Voting Rights. (a) General. Except as otherwise provided in
the Charter or By-Laws, each Holder of shares of AMPS shall be entitled to one
vote for each share held on each matter submitted to a vote of shareholders of
the Corporation, and the holders of outstanding shares of Preferred Stock,
including AMPS, and of shares of Common Stock shall vote together as a single
class; provided that, at any meeting of the shareholders of the Corporation
held for the election of directors, the holders of outstanding shares of
Preferred Stock, including AMPS, shall be entitled, as a class, to the
exclusion of the holders of all other securities and classes of capital stock
of the Corporation, to elect two directors of the Corporation. Subject to
paragraph 5(b) hereof, the holders of outstanding shares of capital stock of
the Corporation, including the holders of outstanding shares
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of Preferred Stock, including AMPS, voting as a single class, shall elect the
balance of the directors.
(b) Right to Elect Majority of Board of Directors. During any
period in which any one or more of the conditions described below shall exist
(such period being referred to herein as a "Voting Period"), the number of
directors constituting the Board of Directors shall be automatically increased
by the smallest number that, when added to the two directors elected
exclusively by the holders of shares of Preferred Stock, would constitute a
majority of the Board of Directors as so increased by such smallest number; and
the holders of shares of Preferred Stock shall be entitled, voting separately
as one class (to the exclusion of the holders of all other securities and
classes of capital stock of the Corporation), to elect such smallest number of
additional directors, together with the two directors that such holders are in
any event entitled to elect. A Voting Period shall commence:
(i) if at any time accumulated dividends (whether or not
earned or declared, and whether or not funds are then legally
available in an amount sufficient therefor) on the outstanding shares
of AMPS equal to at least two full years' dividends shall be due and
unpaid and sufficient cash or specified securities shall not have been
deposited with the Auction Agent for the payment of such accumulated
dividends; or
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(ii) if at any time holders of any other shares of
Preferred Stock are entitled to elect a majority of the directors of
the Corporation under the 1940 Act.
Upon the termination of a Voting Period, the voting rights described
in this paragraph 5(b) shall cease, subject always, however, to the reverting
of such voting rights in the Holders upon the further occurrence of any of the
events described in this paragraph 5(b).
(c) Right to Vote with Respect to Certain Other Matters. So long
as any shares of AMPS are outstanding, the Corporation shall not, without the
affirmative vote of the holders of a majority of the shares of Preferred Stock
Outstanding at the time, voting separately as one class: (i) authorize, create
or issue (other than with respect to the issuance of AMPS authorized hereby),
or increase the authorized or issued aggregate stated capital amount of (other
than with respect to the issuance of AMPS authorized hereby), any class or
series of stock ranking prior to or on a parity with any series of Preferred
Stock with respect to payment of dividends or the distribution of assets on
liquidation, or increase the authorized aggregate stated capital amount of AMPS
or any other Preferred Stock, or (ii) amend, alter or repeal the provisions of
the Charter, whether by merger, consolidation or otherwise, so as to adversely
affect any of the contract rights expressly set forth in the Charter of holders
of shares of AMPS or any other Preferred Stock. To the extent permitted under
the 1940 Act, in the event shares of more than
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one series of AMPS are outstanding, the Corporation shall not approve any of
the actions set forth in clause (i) or (ii) which adversely affects the
contract rights expressly set forth in the Charter of a Holder of shares of a
series of AMPS differently than those of a Holder of shares of any other series
of AMPS without the affirmative vote of the holders of at least a majority of
the shares of AMPS of each series adversely affected and outstanding at such
time (each such adversely affected series voting separately as a class). The
Corporation shall notify Moody's and S&P ten Business Days prior to any such
vote described in clause (i) or (ii). Unless a higher percentage is provided
for under the Charter, the affirmative vote of the holders of a majority of the
outstanding shares of Preferred Stock, including AMPS, voting together as a
single class, will be required to approve any plan of reorganization (including
bankruptcy proceedings) adversely affecting such shares or any action requiring
a vote of security holders under Section 13(a) of the 1940 Act. The class vote
of holders of shares of Preferred Stock, including AMPS, described above will
in each case be in addition to a separate vote of the requisite percentage of
shares of Common Stock and shares of Preferred Stock, including AMPS, voting
together as a single class necessary to authorize the action in question.
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(d) Voting Procedures.
(i) As soon as practicable after the accrual of any right
of the holders of shares of Preferred Stock to elect additional
directors as described in paragraph 5(b) above, the Corporation shall
call a special meeting of such holders and instruct the Auction Agent
to mail a notice of such special meeting to such holders, such meeting
to be held not less than 10 nor more than 20 days after the date of
mailing of such notice. If the Corporation fails to send such notice
to the Auction Agent or if the Corporation does not call such a
special meeting, it may be called by any such holder on like notice.
The record date for determining the holders entitled to notice of and
to vote at such special meeting shall be the close of business on the
fifth Business Day preceding the day on which such notice is mailed.
At any such special meeting and at each meeting held during a Voting
Period, such Holders, voting together as a class (to the exclusion of
the holders of all other securities and classes of capital stock of
the Corporation), shall be entitled to elect the number of directors
prescribed in paragraph 5(b) above. At any such meeting or
adjournment thereof in the absence of a quorum, a majority of such
holders present in person or by proxy shall have the power to adjourn
the meeting without notice, other than by an announcement at the
meeting, to a date not more than 120 days after the original record
date.
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(ii) For purposes of determining any rights of the Holders to
vote on any matter or the number of shares required to constitute a
quorum, whether such right is created by these Articles Supplementary,
by the other provisions of the Charter, by statute or otherwise, a
share of AMPS which is not Outstanding shall not be counted.
(iii) The terms of office of all persons who are directors of the
Corporation at the time of a special meeting of Holders and holders of
other Preferred Stock to elect directors shall continue,
notwithstanding the election at such meeting by the Holders and such
other holders of the number of directors that they are entitled to
elect, and the persons so elected by the Holders and such other
holders, together with the two incumbent directors elected by the
Holders and such other holders of Preferred Stock and the remaining
incumbent directors elected by the holders of the Common Stock and
Preferred Stock, shall constitute the duly elected directors of the
Corporation.
(iv) Simultaneously with the expiration of a Voting Period, the
terms of office of the additional directors elected by the Holders and
holders of other Preferred Stock pursuant to paragraph 5(b) above
shall terminate, the remaining directors shall constitute the
directors of the Corporation and the voting rights of the Holders and
such other holders to elect additional directors pursuant to
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paragraph 5(b) above shall cease, subject to the provisions of the
last sentence of paragraph 5(b).
(e) Exclusive Remedy. Unless otherwise required by law, the
Holders of shares of AMPS shall not have any rights or preferences other than
those specifically set forth herein. The Holders of shares of AMPS shall have
no preemptive rights or rights to cumulative voting. In the event that the
Corporation fails to pay any dividends on the shares of AMPS, the exclusive
remedy of the Holders shall be the right to vote for directors pursuant to the
provisions of this paragraph 5.
(f) Notification to S&P and Moody's. In the event a vote of Holders
of AMPS is required pursuant to the provisions of Section 13(a) of the 1940
Act, the Corporation shall, not later than ten Business Days prior to the date
on which such vote is to be taken, notify S&P and Moody's that such vote is to
be taken and the nature of the action with respect to which such vote is to be
taken and, not later than ten Business Days after the date on which such vote
is taken, notify S&P and Moody's of the result of such vote.
6. 1940 Act AMPS Asset Coverage. The Corporation shall maintain,
as of the last Business Day of each month in which any share of AMPS is
outstanding, the 1940 Act AMPS Asset Coverage.
7. AMPS Basic Maintenance Amount. (a) The Corporation shall
maintain, on each Valuation Date, and shall verify to its satisfaction that it
is maintaining on such Valuation Date, (i) S&P Eligible Assets having an
aggregate Discounted Value equal to
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or greater than the AMPS Basic Maintenance Amount and (ii) Moody's Eligible
Assets having an aggregate Discounted Value equal to or greater than the AMPS
Basic Maintenance Amount. Upon any failure to maintain the required Discounted
Value, the Corporation will use its best efforts to alter the composition of
its portfolio to reattain a Discounted Value at least equal to the AMPS Basic
Maintenance Amount on or prior to the AMPS Basic Maintenance Cure Date.
(b) On or before 5:00 p.m., New York City time, on the third Business
Day after a Valuation Date on which the Corporation fails to satisfy the AMPS
Basic Maintenance Amount, the Corporation shall complete and deliver to the
Auction Agent, and Moody's and S&P, as the case may be, a complete AMPS Basic
Maintenance Report as of the date of such failure, which will be deemed to have
been delivered to the Auction Agent if the Auction Agent receives a copy or
telecopy, telex or other electronic transcription thereof and on the same day
the Corporation mails to the Auction Agent for delivery on the next Business
Day the complete AMPS Basic Maintenance Report. The Corporation will deliver
an AMPS Basic Maintenance Report to the Auction Agent and Moody's and S&P, as
the case may be, on or before 5:00 p.m., New York City time, on the third
Business Day after a Valuation Date on which the Corporation cures its failure
to maintain Moody's Eligible Assets or S&P Eligible Assets, as the case may be,
with an aggregate Discounted Value equal to or greater than the AMPS Basic
Maintenance Amount or on which the Corporation fails to
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maintain Moody's Eligible Assets or S&P Eligible Assets, as the case may be,
with an aggregate Discounted Value which exceeds the AMPS Basic Maintenance
Amount by 5% or more. The Corporation will also deliver an AMPS Basic
Maintenance Report to the Auction Agent, Moody's and S&P as of each Quarterly
Valuation Date on or before the third Business Day after such date.
Additionally, on or before 5:00 p.m., New York City time, on the third Business
Day after the first day of a Special Dividend Period, the Corporation will
deliver an AMPS Basic Maintenance Report to S&P and the Auction Agent. The
Corporation shall also provide Moody's and S&P with an AMPS Basic Maintenance
Report when specifically requested by either Moody's or S&P. A failure by the
Corporation to deliver an AMPS Basic Maintenance Report under this paragraph
7(b) shall be deemed to be delivery of an AMPS Basic Maintenance Report
indicating the Discounted Value for S&P Eligible Assets and Moody's Eligible
Assets of the Corporation is less than the AMPS Basic Maintenance Amount, as of
the relevant Valuation Date.
(c) Within ten Business Days after the date of delivery of an AMPS
Basic Maintenance Report in accordance with paragraph 7(b) above relating to a
Quarterly Valuation Date, the Independent Accountant will confirm in writing to
the Auction Agent, S&P and Moody's (i) the mathematical accuracy of the
calculations reflected in such Report (and in any other AMPS Basic Maintenance
Report, randomly selected by the Independent Accountant, that was delivered by
the Corporation during the
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quarter ending on such Quarterly Valuation Date), (ii) that, in such Report
(and in such randomly selected Report), the Corporation correctly determined
the assets of the Corporation which constitute S&P Eligible Assets or Moody's
Eligible Assets, as the case may be, at such Quarterly Valuation Date in
accordance with these Articles Supplementary, (iii) that, in such Report (and
in such randomly selected Report), the Corporation determined whether the
Corporation had, at such Quarterly Valuation Date (and at the Valuation Date
addressed in such randomly selected Report) in accordance with these Articles
Supplementary, S&P Eligible Assets of an aggregate Discounted Value at least
equal to the AMPS Basic Maintenance Amount and Moody's Eligible Assets of an
aggregate Discounted Value at least equal to the AMPS Basic Maintenance Amount,
(iv) with respect to the S&P ratings on New York Municipal Bonds or Municipal
Bonds, the issuer name, issue size and coupon rate listed in such Report, that
the Independent Accountant has requested that S&P verify such information and
the Independent Accountant shall provide a listing in its letter of any
differences, (v) with respect to the Moody's ratings on New York Municipal
Bonds or Municipal Bonds, the issuer name, issue size and coupon rate listed in
such Report, that such information has been verified by Moody's (in the event
such information is not verified by Moody's, the Independent Accountant will
inquire of Moody's what such information is, and provide a listing in its
letter of any differences), (vi) with respect to the bid or mean price (or such
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alternative permissible factor used in calculating the Market Value) provided
by the custodian of the Corporation's assets to the Corporation for purposes of
valuing securities in the Corporation's portfolio, the Independent Accountant
has traced the price used in such Report to the bid or mean price listed in
such Report as provided to the Corporation and verified that such information
agrees (in the event such information does not agree, the Independent
Accountant will provide a listing in its letter of such differences) and (vii)
with respect to such confirmation to Moody's, that the Corporation has
satisfied the requirements of paragraph 8(b) of these Articles Supplementary
(such confirmation is herein called the "Accountant's Confirmation").
(d) Within ten Business Days after the date of delivery to the
Auction Agent, S&P and Moody's of an AMPS Basic Maintenance Report in
accordance with paragraph 7(b) above relating to any Valuation Date on which
the Corporation failed to maintain S&P Eligible Assets with an aggregate
Discounted Value and Moody's Eligible Assets with an aggregate Discounted Value
equal to or greater than the AMPS Basic Maintenance Amount, and relating to the
AMPS Basic Maintenance Cure Date with respect to such failure, the Independent
Accountant will provide to the Auction Agent, S&P and Moody's an Accountant's
Confirmation as to such AMPS Basic Maintenance Report.
(e) If any Accountant's Confirmation delivered pursuant to
subparagraph (c) or (d) of this paragraph 7 shows that an error was made in the
AMPS Basic Maintenance Report for a particular
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Valuation Date for which such Accountant's Confirmation as required to be
delivered, or shows that a lower aggregate Discounted Value for the aggregate
of all S&P Eligible Assets or Moody's Eligible Assets, as the case may be, of
the Corporation was determined by the Independent Accountant, the calculation
or determination made by such Independent Accountant shall be final and
conclusive and shall be binding on the Corporation, and the Corporation shall
accordingly amend and deliver the AMPS Basic Maintenance Report to the Auction
Agent, S&P and Moody's promptly following receipt by the Corporation of such
Accountant's Confirmation.
(f) On or before 5:00 p.m., New York City time, on the first
Business Day after the Date of Original Issue of the shares of AMPS, the
Corporation will complete and deliver to S&P and Moody's an AMPS Basic
Maintenance Report as of the close of business on such Date of Original Issue.
Within five Business Days of such Date of Original Issue, the Independent
Accountant will confirm in writing to S&P and Moody's (i) the mathematical
accuracy of the calculations reflected in such Report and (ii) that the
aggregate Discounted Value of S&P Eligible Assets and the aggregate Discounted
Value of Moody's Eligible Assets reflected thereon equals or exceeds the AMPS
Basic Maintenance Amount reflected thereon. Also, on or before 5:00 p.m., New
York City time, on the first Business Day after shares of Common Stock are
repurchased by the Corporation, the Corporation will complete and deliver to
S&P and Moody's an AMPS Basic Maintenance Report
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as of the close of business on such date that Common Stock is repurchased.
(g) For so long as shares of AMPS are rated by Moody's, in
managing the Corporation's portfolio, the Adviser will not alter the
composition of the Corporation's portfolio if, in the reasonable belief of the
Adviser, the effect of any such alteration would be to cause the Corporation to
have Moody's Eligible Assets with an aggregate Discounted Value, as of the
immediately preceding Valuation Date, less than the AMPS Basic Maintenance
Amount as of such Valuation Date; provided, however, that in the event that, as
of the immediately preceding Valuation Date, the aggregate Discounted Value of
Moody's Eligible Assets exceeded the AMPS Basic Maintenance Amount by five
percent or less, the Adviser will not alter the composition of the
Corporation's portfolio in a manner reasonably expected to reduce the aggregate
Discounted Value of Moody's Eligible Assets unless the Corporation shall have
confirmed that, after giving effect to such alteration, the aggregate
Discounted Value of Moody's Eligible Assets would exceed the AMPS Basic
Maintenance Amount.
8. Certain Other Restrictions.
(a) For so long as any shares of AMPS are rated by S&P, the
Corporation will not purchase or sell futures contracts, write, purchase or
sell options on futures contracts or write put options (except covered put
options) or call options (except covered call options) on portfolio securities
unless it receives written confirmation from S&P that engaging in such
transactions
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will not impair the ratings then assigned to the shares of AMPS by S&P, except
that the Corporation may purchase or sell futures contracts based on the Bond
Buyer Municipal Bond Index (the "Municipal Index") or United States Treasury
Bonds or Notes ("Treasury Bonds") and write, purchase or sell put and call
options on such contracts (collectively, "S&P Hedging Transactions"), subject
to the following limitations:
(i) the Corporation will not engage in any S&P Hedging
Transaction based on the Municipal Index (other than transactions
which terminate a futures contract or option held by the Corporation
by the Corporation's taking an opposite position thereto ("Closing
Transactions")), which would cause the Corporation at the time of such
transaction to own or have sold the least of (A) more than 1,000
outstanding futures contracts based on the Municipal Index, (B)
outstanding futures contracts based on the Municipal Index exceeding
in number 25% of the quotient of the Market Value of the Corporation's
total assets divided by $100,000 or (C) outstanding futures contracts
based on the Municipal Index exceeding in number 10% of the average
number of daily traded futures contracts based on the Municipal Index
in the 30 days preceding the time of effecting such transaction as
reported by The Wall Street Journal;
(ii) the Corporation will not engage in any S&P Hedging
Transaction based on Treasury Bonds (other than Closing Transactions)
which would cause the Corporation at the time
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of such transaction to own or have sold the lesser of (A) outstanding
futures contracts based on Treasury Bonds and on the Municipal Index
exceeding in number 25% of the quotient of the Market Value of the
Corporation's total assets divided by $100,000 or (B) outstanding
futures contracts based on Treasury Bonds exceeding in number 10% of
the average number of daily traded futures contracts based on Treasury
Bonds in the 30 days preceding the time of effecting such transaction
as reported by The Wall Street Journal;
(iii) the Corporation will engage in Closing Transactions
to close out any outstanding futures contract which the Corporation
owns or has sold or any outstanding option thereon owned by the
Corporation in the event (A) the Corporation does not have S&P
Eligible Assets with an aggregate Discounted Value equal to or greater
than the AMPS Basic Maintenance Amount on two consecutive Valuation
Dates and (B) the Corporation is required to pay Variation Margin on
the second such Valuation Date;
(iv) the Corporation will engage in a Closing Transaction
to close out any outstanding futures contract or option thereon in the
month prior to the delivery month under the terms of such futures
contract or option thereon unless the Corporation holds the securities
deliverable under such terms; and
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(v) when the Corporation writes a futures contract or
option thereon, it will either maintain an amount of cash, cash
equivalents or short-term, fixed-income securities in a segregated
account with the Corporation's custodian, so that the amount so
segregated plus the amount of Initial Margin and Variation Margin held
in the account of or on behalf of the Corporation's broker with
respect to such futures contract or option equals the Market Value of
the futures contract or option, or, in the event the Corporation
writes a futures contract or option thereon which requires delivery of
an underlying security, it shall hold such underlying security in its
portfolio.
For purposes of determining whether the Corporation has S&P Eligible
Assets with a Discounted Value that equals or exceeds the AMPS Basic
Maintenance Amount, the Discounted Value of cash or securities held for the
payment of Initial Margin or Variation Margin shall be zero and the aggregate
Discounted Value of S&P Eligible Assets shall be reduced by an amount equal to
(i) 30% of the aggregate settlement value, as marked to market, of any
outstanding futures contracts based on the Municipal Index which are owned by
the Corporation plus (ii) 25% of the aggregate settlement value, as marked to
market, of any outstanding futures contracts based on Treasury Bonds which
contracts are owned by the Corporation.
(b) For so long as any shares of AMPS are rated by Moody's, the
Corporation will not buy or sell futures contracts, write,
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purchase or sell call options on futures contracts or purchase put options on
futures contracts or write call options (except covered call options) on
portfolio securities unless it receives written confirmation from Moody's that
engaging in such transactions would not impair the ratings then assigned to the
shares of AMPS by Moody's, except that the Corporation may purchase or sell
exchange-traded futures contracts based on the Municipal Index or Treasury
Bonds and purchase, write or sell exchange-traded put options on such futures
contracts and purchase, write or sell exchange-traded call options on such
futures contracts (collectively, "Moody's Hedging Transactions"), subject to
the following limitations:
(i) the Corporation will not engage in any Moody's
Hedging Transaction based on the Municipal Index (other than Closing
Transactions) which would cause the Corporation at the time of such
transaction to own or have sold (A) outstanding futures contracts
based on the Municipal Index exceeding in number 10% of the average
number of daily traded futures contracts based on the Municipal Index
in the 30 days preceding the time of effecting such transaction as
reported by The Wall Street Journal or (B) outstanding futures
contracts based on the Municipal Index having a Market Value exceeding
50% of the Market Value of all Municipal Bonds constituting Moody's
Eligible Assets owned by the Corporation (other than Moody's Eligible
Assets already subject to a Moody's Hedging Transaction);
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(ii) the Corporation will not engage in any Moody's
Hedging Transaction based on Treasury Bonds (other than Closing
Transactions) which would cause the Corporation at the time of such
transaction to own or have sold (A) outstanding futures contracts
based on Treasury Bonds having an aggregate Market Value exceeding 20%
of the aggregate Market Value of Moody's Eligible Assets owned by the
Corporation and rated Aa by Moody's (or, if not rated by Moody's but
rated by S&P, rated AAA by S&P) or (B) outstanding futures contracts
based on Treasury Bonds having an aggregate Market Value exceeding 40%
of the aggregate Market Value of all Municipal Bonds constituting
Moody's Eligible Assets owned by the Corporation (other than Moody's
Eligible Assets already subject to a Moody's Hedging Transaction) and
rated Baa or A by Moody's (or, if not rated by Moody's but rated by
S&P, rated A or AA by S&P) (for purposes of the foregoing clauses (i)
and (ii), the Corporation shall be deemed to own the number of futures
contracts that underlie any outstanding options written by the
Corporation);
(iii) the Corporation will engage in Closing Transactions
to close out any outstanding futures contract based on the Municipal
Index if the amount of open interest in the Municipal Index as
reported by The Wall Street Journal is less than 5,000;
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(iv) the Corporation will engage in a Closing Transaction
to close out any outstanding futures contract by no later than the
fifth Business Day of the month in which such contract expires and
will engage in a Closing Transaction to close out any outstanding
option on a futures contract by no later than the first Business Day
of the month in which such option expires;
(v) the Corporation will engage in Moody's Hedging
Transactions only with respect to futures contracts or options thereon
having the next settlement date or the settlement date immediately
thereafter;
(vi) the Corporation will not engage in options and
futures transactions for leveraging or speculative purposes and will
not write any call options or sell any futures contracts for the
purpose of hedging the anticipated purchase of an asset prior to
completion of such purchase; and
(vii) the Corporation will not enter into an option or
futures transaction unless, after giving effect thereto, the
Corporation would continue to have Moody's Eligible Assets with an
aggregate Discounted Value equal to or greater than the AMPS Basic
Maintenance Amount.
For purposes of determining whether the Corporation has Moody's
Eligible Assets with an aggregate Discounted Value that equals or exceeds the
AMPS Basic Maintenance Amount, the Discounted Value of Moody's Eligible Assets
which the Corporation
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is obligated to deliver or receive pursuant to an outstanding futures contract
or option shall be as follows: (i) assets subject to call options written by
the Corporation which are either exchange-traded and "readily reversible" or
which expire within 49 days after the date as of which such valuation is made
shall be valued at the lesser of (a) Discounted Value and (b) the exercise
price of the call option written by the Corporation; (ii) assets subject to
call options written by the Corporation not meeting the requirements of clause
(i) of this sentence shall have no value; (iii) assets subject to put options
written by the Corporation shall be valued at the lesser of (A) the exercise
price and (B) the Discounted Value of the subject security; (iv) futures
contracts shall be valued at the lesser of (A) settlement price and (B) the
Discounted Value of the subject security, provided that, if a contract matures
within 49 days after the date as of which such valuation is made, where the
Corporation is the seller the contract may be valued at the settlement price
and where the Corporation is the buyer the contract may be valued at the
Discounted Value of the subject securities; and (v) where delivery may be made
to the Corporation with any security of a class of securities, the Corporation
shall assume that it will take delivery of the security with the lowest
Discounted Value.
For purposes of determining whether the Corporation has Moody's
Eligible Assets with an aggregate Discounted Value that equals or exceeds the
AMPS Basic Maintenance Amount, the following amounts shall be subtracted from
the aggregate
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Discounted Value of the Moody's Eligible Assets held by the Corporation: (i)
10% of the exercise price of a written call option; (ii) the exercise price of
any written put option; (iii) where the Corporation is the seller under a
futures contract, 10% of the settlement price of the futures contract; (iv)
where the Corporation is the purchaser under a futures contract, the settlement
price of assets purchased under such futures contract; (v) the settlement price
of the underlying futures contract if the Corporation writes put options on a
futures contract; and (vi) 105% of the Market Value of the underlying futures
contracts if the Corporation writes call options on a futures contract and does
not own the underlying contract.
(c) For so long as any shares of AMPS are rated by Moody's, the
Corporation will not enter into any contract to purchase securities for a fixed
price at a future date beyond customary settlement time (other than such
contracts that constitute Moody's Hedging Transactions that are permitted under
paragraph 8(b) of these Articles Supplementary), except that the Corporation
may enter into such contracts to purchase newly-issued securities on the date
such securities are issued ("Forward Commitments"), subject to the following
limitations:
(i) the Corporation will maintain in a segregated account
with its custodian cash, cash equivalents or short-term, fixed- income
securities rated P-1, MIG-1 or VMIG-1 by Moody's and maturing prior to
the date of the Forward Commitment with a Market Value that equals or
exceeds the
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amount of the Corporation's obligations under any Forward Commitments
to which it is from time to time a party or long-term fixed income
securities with a Discounted Value that equals or exceeds the amount
of the Corporation's obligations under any Forward Commitment to which
it is from time to time a party; and
(ii) the Corporation will not enter into a Forward
Commitment unless, after giving effect thereto, the Corporation would
continue to have Moody's Eligible Assets with an aggregate Discounted
Value equal to or greater than the AMPS Basic Maintenance Amount.
For purposes of determining whether the Corporation has Moody's
Eligible Assets with an aggregate Discounted Value that equals or exceeds the
AMPS Basic Maintenance Amount, the Discounted Value of all Forward Commitments
to which the Corporation is a party and of all securities deliverable to the
Corporation pursuant to such Forward Commitments shall be zero.
(d) For so long as shares of AMPS are rated by S&P or
Moody's, the Corporation will not, unless it has received written confirmation
from S&P and/or Moody's, as the case may be, that such action would not impair
the ratings then assigned to shares of AMPS by S&P and/or Moody's, as the case
may be, (i) borrow money except for the purpose of clearing transactions in
portfolio securities (which borrowings shall under any circumstances be limited
to the lesser of $10 million and an amount equal to 5% of the Market Value of
the Corporation's
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assets at the time of such borrowings and which borrowings shall be repaid
within 60 days and not be extended or renewed and shall not cause the aggregate
Discounted Value of Moody's Eligible Assets and S&P Eligible Assets to be less
than the AMPS Basic Maintenance Amount), (ii) engage in short sales of
securities, (iii) lend any securities, (iv) issue any class or series of stock
ranking prior to or on a parity with the AMPS with respect to the payment of
dividends or the distribution of assets upon dissolution, liquidation or
winding up of the Corporation, (v) reissue any AMPS previously purchased or
redeemed by the Corporation, (vi) merge or consolidate into or with any other
corporation or entity, (vii) change the Pricing Service or (viii) engage in
reverse repurchase agreements.
9. Notice. All notices or communications, unless otherwise
specified in the By-Laws of the Corporation or these Articles Supplementary,
shall be sufficiently given if in writing and delivered in person or mailed by
first-class mail, postage prepaid. Notice shall be deemed given on the earlier
of the date received or the date seven days after which such notice is mailed.
10. Auction Procedures. (a) Certain definitions. As used in
this paragraph 10, the following terms shall have the following meanings,
unless the context otherwise requires:
(i) "AMPS" shall mean the shares of AMPS being auctioned
pursuant to this paragraph 10.
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(ii) "Auction Date" shall mean the first Business Day
preceding the first day of a Dividend Period.
(iii) "Available AMPS" shall have the meaning specified in
paragraph 10(d)(i) below.
(iv) "Bid" shall have the meaning specified in paragraph
10(b)(i) below.
(v) "Bidder" shall have the meaning specified in paragraph
10(b)(i) below.
(vi) "Hold Order" shall have the meaning specified in paragraph
10(b)(i) below.
(vii) "Maximum Applicable Rate" for any Dividend Period will be
the Applicable Percentage of the Reference Rate. The Applicable
Percentage will be determined based on (i) the lower of the credit
rating or ratings assigned on such date to such shares by Moody's and
S&P (or if Moody's or S&P or both shall not make such rating
available, the equivalent of either or both of such ratings by a
Substitute Rating Agency or two Substitute Rating Agencies or, in the
event that only one such rating shall be available, such rating) and
(ii) whether the Corporation has provided notification to the Auction
Agent prior to the Auction establishing the Applicable Rate for any
dividend pursuant to paragraph 2(f) hereof that net capital gains or
other taxable income will be included in such dividend on shares of
AMPS as follows:
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Applicable Applicable
Percentage of Percentage of
Credit Ratings Reference Reference
- ----------------------------------- Rate - Rate -
Moody's S&P No Notification Notification
- -------------- ---------------- ---------------- -------------
"aa3" or higher AA- or higher 110% 150%
"a3" to "a1" A- to A+ 125% 160%
"baa3" to "baa1" BBB- to BBB+ 150% 250%
Below "baa3" Below BBB- 200% 275%
The Corporation shall take all reasonable action necessary to enable
S&P and Moody's to provide a rating for the AMPS. If either S&P or Moody's
shall not make such a rating available, or neither S&P nor Moody's shall make
such a rating available, Merrill Lynch, Pierce, Fenner & Smith Incorporated or
its affiliates and successors, after consultation with the Corporation, shall
select a nationally recognized statistical rating organization or two
nationally recognized statistical rating organizations to act as a Substitute
Rating Agency or Substitute Rating Agencies, as the case may be.
(viii) "Order" shall have the meaning specified in paragraph 10(b)(i)
below.
(ix) "Sell Order" shall have the meaning specified in paragraph
10(b)(i) below.
(x) "Submission Deadline" shall mean 1:00 P.M., New York City time,
on any Auction Date or such other time on any Auction Date as may be
specified by the Auction Agent from time to time as the time by which each
Broker-Dealer must submit to the Auction Agent in writing all Orders
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obtained by it for the Auction to be conducted on such Auction Date.
(xi) "Submitted Bid" shall have the meaning specified in
paragraph 10(d)(i) below.
(xii) "Submitted Hold Order" shall have the meaning specified in
paragraph 10(d)(i) below.
(xiii) "Submitted Order" shall have the meaning specified in
paragraph 10(d)(i) below.
(xiv) "Submitted Sell Order" shall have the meaning specified in
paragraph 10(d)(i) below.
(xv) "Sufficient Clearing Bids" shall have the meaning specified
in paragraph 10(d)(i) below.
(xvi) "Winning Bid Rate" shall have the meaning specified in
paragraph 10(d)(i) below.
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(b) Orders by Beneficial Owners, Potential Beneficial Owners,
Existing Holders and Potential Holders.
(i) Unless otherwise permitted by the Corporation, Beneficial
Owners and Potential Beneficial Owners may only participate in Auctions through
their Broker-Dealers. Broker-Dealers will submit the Orders of their
respective customers who are Beneficial Owners and Potential Beneficial Owners
to the Auction Agent, designating themselves as Existing Holders in respect of
shares subject to Orders submitted or deemed submitted to them by Beneficial
Owners and as Potential Holders in respect of shares subject to Orders
submitted to them by Potential Beneficial Owners. A Broker-Dealer may also
hold shares of AMPS in its own account as a Beneficial Owner. A Broker-Dealer
may thus submit Orders to the Auction Agent as a Beneficial Owner or a
Potential Beneficial Owner and therefore participate in an Auction as an
Existing Holder or Potential Holder on behalf of both itself and its customers.
On or prior to the Submission Deadline on each Auction Date:
(A) each Beneficial Owner may submit to its Broker-Dealer
information as to:
(1) the number of Outstanding shares, if any, of
AMPS held by such Beneficial Owner which such Beneficial Owner
desires to continue to hold without regard to the Applicable
Rate for the next succeeding Dividend Period;
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(2) the number of Outstanding shares, if any, of
AMPS held by such Beneficial Owner which such Beneficial Owner
desires to continue to hold, provided that the Applicable Rate
for the next succeeding Dividend Period shall not be less than
the rate per annum specified by such Beneficial Owner; and/or
(3) the number of Outstanding shares, if any, of
AMPS held by such Beneficial Owner which such Beneficial Owner
offers to sell without regard to the Applicable Rate for the
next succeeding Dividend Period; and
(B) each Broker-Dealer, using a list of Potential Beneficial
Owners that shall be maintained in good faith for the purpose of
conducting a competitive Auction, shall contact Potential Beneficial
Owners, including Persons that are not Beneficial Owners, on such list
to determine the number of Outstanding shares, if any, of AMPS which
each such Potential Beneficial Owner offers to purchase, provided that
the Applicable Rate for the next succeeding Dividend Period shall not
be less than the rate per annum specified by such Potential Beneficial
Owner.
For the purposes hereof, the communication by a Beneficial Owner or
Potential Beneficial Owner to a Broker-Dealer, or the communication by a
Broker-Dealer acting for its own account to the Auction Agent, of information
referred to in clause (A) or (B) of this paragraph 10(b)(i) is hereinafter
referred to as an
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"Order" and each Beneficial Owner and each Potential Beneficial Owner placing
an Order, including a Broker-Dealer acting in such capacity for its own
account, is hereinafter referred to as a "Bidder"; an Order containing the
information referred to in clause (A)(1) of this paragraph 10(b)(i) is
hereinafter referred to as a "Hold Order"; an Order containing the information
referred to in clause (A)(2) or (B) of this paragraph 10(b)(i) is hereinafter
referred to as a "Bid"; and an Order containing the information referred to in
clause (A)(3) of this paragraph 10(b)(i) is hereinafter referred to as a "Sell
Order". Inasmuch as a Broker-Dealer participates in an Auction as an Existing
Holder or a Potential Holder only to represent the interests of a Beneficial
Owner or Potential Beneficial Owner, whether it be its customers or itself, all
discussion herein relating to the consequences of an Auction for Existing
Holders and Potential Holders also applies to the underlying beneficial
ownership interests represented.
(ii) (A) A Bid by an Existing Holder shall constitute an
irrevocable offer to sell:
(1) the number of Outstanding shares of AMPS specified in
such Bid if the Applicable Rate determined on such Auction Date shall
be less than the rate per annum specified in such Bid; or
(2) such number or a lesser number of Outstanding shares of
AMPS to be determined as set forth in paragraph 10(e)(i)(D) if the
Applicable Rate determined on such
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Auction Date shall be equal to the rate per annum specified therein; or
(3) a lesser number of Outstanding shares of AMPS to be
determined as set forth in paragraph 10(e)(ii)(C) if such specified
rate per annum shall be higher than the Maximum Applicable Rate and
Sufficient Clearing Bids do not exist.
(B) A Sell Order by an Existing Holder shall constitute
an irrevocable offer to sell:
(1) the number of Outstanding shares of AMPS specified in
such Sell Order; or
(2) such number or a lesser number of Outstanding shares
of AMPS to be determined as set forth in paragraph
10(e)(ii)(C) if Sufficient Clearing Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an
irrevocable offer to purchase:
(1) the number of Outstanding shares of AMPS specified in
such Bid if the Applicable Rate determined on such Auction
Date shall be higher than the rate per annum specified in such
Bid; or
(2) such number or a lesser number of Outstanding shares
of AMPS to be determined as set forth in paragraph 10(e)(i)(E)
if the Applicable Rate determined on such Auction Date shall
be equal to the rate per annum specified therein.
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(c) Submission of Orders by Broker-Dealers to Auction Agent.
(i) Each Broker-Dealer shall submit in writing or through the Auction
Agent's Auction Processing System to the Auction Agent prior to the Submission
Deadline on each Auction Date all Orders obtained by such Broker-Dealer,
designating itself (unless otherwise permitted by the Corporation) as an
Existing Holder in respect of shares subject to Orders submitted or deemed
submitted to it by Beneficial Owners and as a Potential Holder in respect of
shares subject to Orders submitted to it by Potential Beneficial Owners, and
specifying with respect to each Order:
(A) the name of the Bidder placing such Order (which shall be
the Broker-Dealer unless otherwise permitted by the Corporation);
(B) the aggregate number of Outstanding shares of AMPS that
are the subject of such Order;
(C) to the extent that such Bidder is an Existing Holder:
(1) the number of Outstanding shares, if any, of
AMPS subject to any Hold Order placed by such Existing
Holder;
(2) the number of Outstanding shares, if any, of
AMPS subject to any Bid placed by such Existing Holder and the
rate per annum specified in such Bid; and
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(3) the number of Outstanding shares, if any, of
AMPS subject to any Sell Order placed by such Existing
Holder; and
(D) to the extent such Bidder is a Potential Holder, the rate
per annum specified in such Potential Holder's Bid.
(ii) If any rate per annum specified in any Bid contains more than
three figures to the right of the decimal point, the Auction Agent shall round
such rate up to the next highest one-thousandth (.001) of 1%.
(iii) If an Order or Orders covering all of the Outstanding shares of
AMPS held by an Existing Holder are not submitted to the Auction Agent prior to
the Submission Deadline, the Auction Agent shall deem a Hold Order (in the case
of an Auction relating to a Dividend Period which is not a Special Dividend
Period) and a Sell Order (in the case of an Auction relating to a Special
Dividend Period) to have been submitted on behalf of such Existing Holder
covering the number of Outstanding shares of AMPS held by such Existing Holder
and not subject to Orders submitted to the Auction Agent.
(iv) If one or more Orders on behalf of an Existing Holder covering in
the aggregate more than the number of Outstanding shares of AMPS held by such
Existing Holder are submitted to the Auction Agent, such Order shall be
considered valid as follows and in the following order of priority:
(A) any Hold Order submitted on behalf of such Existing
Holder shall be considered valid up to and
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including the number of Outstanding shares of AMPS held by such
Existing Holder; provided that if more than one Hold Order is
submitted on behalf of such Existing Holder and the number of shares
of AMPS subject to such Hold Orders exceeds the number of Outstanding
shares of AMPS held by such Existing Holder, the number of shares of
AMPS subject to each of such Hold Orders shall be reduced pro rata so
that such Hold Orders, in the aggregate, will cover exactly the number
of Outstanding shares of AMPS held by such Existing Holder;
(B) any Bids submitted on behalf of such Existing Holder
shall be considered valid, in the ascending order of their respective
rates per annum if more than one Bid is submitted on behalf of such
Existing Holder, up to and including the excess of the number of
Outstanding shares of AMPS held by such Existing Holder over the
number of shares of AMPS subject to any Hold Order referred to in
paragraph 10(c)(iv)(A) above (and if more than one Bid submitted on
behalf of such Existing Holder specifies the same rate per annum and
together they cover more than the remaining number of shares that can
be the subject of valid Bids after application of paragraph
10(c)(iv)(A) above and of the foregoing portion of this paragraph
10(c)(iv)(B) to any Bid or Bids specifying a lower rate or rates per
annum, the number of shares subject to each of such Bids shall be
reduced pro rata so that such Bids, in the aggregate, cover
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exactly such remaining number of shares); and the number of shares, if
any, subject to Bids not valid under this paragraph 10(c)(iv)(B) shall
be treated as the subject of a Bid by a Potential Holder; and
(C) any Sell Order shall be considered valid up to and
including the excess of the number of Outstanding shares of AMPS held
by such Existing Holder over the number of shares of AMPS subject to
Hold Orders referred to in paragraph 10(c)(iv)(A) and Bids referred to
in paragraph 10(c)(iv)(B); provided that if more than one Sell Order
is submitted on behalf of any Existing Holder and the number of shares
of AMPS subject to such Sell Orders is greater than such excess, the
number of shares of AMPS subject to each of such Sell Orders shall be
reduced pro rata so that such Sell Orders, in the aggregate, cover
exactly the number of shares of AMPS equal to such excess.
(v) If more than one Bid is submitted on behalf of any Potential
Holder, each Bid submitted shall be a separate Bid with the rate per annum and
number of shares of AMPS therein specified.
(vi) Any Order submitted by a Beneficial Owner as a Potential
Beneficial Owner to its Broker-Dealer, or by a Broker-Dealer to the Auction
Agent, prior to the Submission Deadline on any Auction Date shall be
irrevocable.
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(d) Determination of Sufficient Clearing Bids, Winning Bid
Rate and Applicable Rate.
(i) Not earlier than the Submission Deadline on each Auction Date,
the Auction Agent shall assemble all Orders submitted or deemed submitted to it
by the Broker-Dealers (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to individually as a "Submitted Hold
Order", a "Submitted Bid" or a "Submitted Sell Order", as the case may be, or
as a "Submitted Order") and shall determine:
(A) the excess of the total number of Outstanding shares of
AMPS over the number of Outstanding shares of AMPS that are the
subject of Submitted Hold Orders (such excess being hereinafter
referred to as the "Available AMPS");
(B) from the Submitted Orders whether the number of
Outstanding shares of AMPS that are the subject of Submitted Bids by
Potential Holders specifying one or more rates per annum equal to or
lower than the Maximum Applicable Rate exceeds or is equal to the sum
of:
(1) the number of Outstanding shares of AMPS that
are the subject of Submitted Bids by Existing Holders
specifying one or more rates per annum higher than the Maximum
Applicable Rate, and
(2) the number of Outstanding shares of AMPS that
are subject to Submitted Sell Orders (if such excess or such
equality exists (other than because the number of Outstanding
shares of AMPS in clause (1) above and this
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clause (2) are each zero because all of the Outstanding shares
of AMPS are the subject of Submitted Hold Orders), such
Submitted Bids by Potential Holders being hereinafter referred
to collectively as "Sufficient Clearing Bids"); and
(C) if Sufficient Clearing Bids exist, the lowest rate per
annum specified in the Submitted Bids (the "Winning Bid Rate") that
if:
(1) each Submitted Bid from Existing Holders
specifying the Winning Bid Rate and all other Submitted Bids
from Existing Holders specifying lower rates per annum were
rejected, thus entitling such Existing Holders to continue to
hold the shares of AMPS that are the subject of such Submitted
Bids, and
(2) each Submitted Bid from Potential Holders
specifying the Winning Bid Rate and all other Submitted Bids
from Potential Holders specifying lower rates per annum were
accepted, thus entitling the Potential Holders to purchase the
shares of AMPS that are the subject of such Submitted Bids,
would result in the number of shares subject to all Submitted Bids specifying
the Winning Bid Rate or a lower rate per annum being at least equal to the
Available AMPS.
(ii) Promptly after the Auction Agent has made the determinations pursuant
to paragraph 10(d)(i), the Auction Agent shall advise the Corporation of the
Maximum Applicable Rate and,
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based on such determinations, the Applicable Rate for the next succeeding
Dividend Period as follows:
(A) if Sufficient Clearing Bids exist, that the Applicable
Rate for the next succeeding Dividend Period shall be equal to the
Winning Bid Rate;
(B) if Sufficient Clearing Bids do not exist (other than
because all of the Outstanding shares of AMPS are the subject of
Submitted Hold Orders), that the Applicable Rate for the next
succeeding Dividend Period shall be equal to the Maximum Applicable
Rate; or
(C) if all of the Outstanding shares of AMPS are the subject
of Submitted Hold Orders, that the Dividend Period next succeeding the
Auction shall automatically be the same length as the immediately
preceding Dividend Period and the Applicable Rate for the next
succeeding Dividend Period shall be equal to 59% of the Reference Rate
(or 90% of such rate if the Corporation has provided notification to
the Auction Agent prior to the Auction establishing the Applicable
Rate for any dividend pursuant to paragraph 2(f) hereof that net
capital gains or other taxable income will be included in such
dividend on shares of AMPS) on the date of the Auction.
(e) Acceptance and Rejection of Submitted Bids and Submitted Sell
Orders and Allocation of Shares. Based on the determinations made pursuant to
paragraph 10(d)(i), the Submitted Bids and Submitted Sell Orders shall be
accepted or rejected and
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the Auction Agent shall take such other action as set forth below:
(i) If Sufficient Clearing Bids have been made, subject to the
provisions of paragraph 10(e)(iii) and paragraph 10(e)(iv), Submitted Bids and
Submitted Sell Orders shall be accepted or rejected in the following order of
priority and all other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing Holders shall be
accepted and the Submitted Bid of each of the Existing Holders
specifying any rate per annum that is higher than the Winning Bid Rate
shall be accepted, thus requiring each such Existing Holder to sell
the Outstanding shares of AMPS that are the subject of such Submitted
Sell Order or Submitted Bid;
(B) the Submitted Bid of each of the Existing Holders
specifying any rate per annum that is lower than the Winning Bid Rate
shall be rejected, thus entitling each such Existing Holder to
continue to hold the Outstanding shares of AMPS that are the subject
of such Submitted Bid;
(C) the Submitted Bid of each of the Potential Holders
specifying any rate per annum that is lower than the Winning Bid Rate
shall be accepted;
(D) the Submitted Bid of each of the Existing Holders
specifying a rate per annum that is equal to the Winning Bid Rate
shall be rejected, thus entitling each such Existing Holder to
continue to hold the Outstanding shares of AMPS
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that are the subject of such Submitted Bid, unless the number of
Outstanding shares of AMPS subject to all such Submitted Bids shall be
greater than the number of Outstanding shares of AMPS ("Remaining
Shares") equal to the excess of the Available AMPS over the number of
Outstanding shares of AMPS subject to Submitted Bids described in
paragraph 10(e)(i)(B) and paragraph 10(e)(i)(C), in which event the
Submitted Bids of each such Existing Holder shall be accepted, and
each such Existing Holder shall be required to sell Outstanding shares
of AMPS, but only in an amount equal to the difference between (1) the
number of Outstanding shares of AMPS then held by such Existing Holder
subject to such Submitted Bid and (2) the number of shares of AMPS
obtained by multiplying (x) the number of Remaining Shares by (y) a
fraction the numerator of which shall be the number of Outstanding
shares of AMPS held by such Existing Holder subject to such Submitted
Bid and the denominator of which shall be the sum of the numbers of
Outstanding shares of AMPS subject to such Submitted Bids made by all
such Existing Holders that specified a rate per annum equal to the
Winning Bid Rate; and
(E) the Submitted Bid of each of the Potential Holders
specifying a rate per annum that is equal to the Winning Bid Rate
shall be accepted but only in an amount equal to the number of
Outstanding shares of AMPS obtained by multiplying (x) the difference
between the Available AMPS and the number
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of Outstanding shares of AMPS subject to Submitted Bids described in
paragraph 10(e)(i)(B), paragraph 10(e)(i)(C) and paragraph 10(e)(i)(D)
by (y) a fraction the numerator of which shall be the number of
Outstanding shares of AMPS subject to such Submitted Bid and the
denominator of which shall be the sum of the number of Outstanding
shares of AMPS subject to such Submitted Bids made by all such
Potential Holders that specified rates per annum equal to the Winning
Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other than
because all of the Outstanding shares of AMPS are subject to Submitted Hold
Orders), subject to the provisions of paragraph 10(e)(iii), Submitted Orders
shall be accepted or rejected as follows in the following order of priority and
all other Submitted Bids shall be rejected:
(A) the Submitted Bid of each Existing Holder specifying
any rate per annum that is equal to or lower than the Maximum
Applicable Rate shall be rejected, thus entitling such Existing Holder
to continue to hold the Outstanding shares of AMPS that are the
subject of such Submitted Bid;
(B) the Submitted Bid of each Potential Holder specifying any
rate per annum that is equal to or lower than the Maximum Applicable
Rate shall be accepted, thus requiring such Potential Holder to
purchase the Outstanding
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shares of AMPS that are the subject of such Submitted Bid; and
(C) the Submitted Bids of each Existing Holder specifying any
rate per annum that is higher than the Maximum Applicable Rate shall
be accepted and the Submitted Sell Orders of each Existing Holder
shall be accepted, in both cases only in an amount equal to the
difference between (1) the number of Outstanding shares of AMPS then
held by such Existing Holder subject to such Submitted Bid or
Submitted Sell Order and (2) the number of shares of AMPS obtained by
multiplying (x) the difference between the Available AMPS and the
aggregate number of Outstanding shares of AMPS subject to Submitted
Bids described in paragraph 10(e)(ii)(A) and paragraph 10(e)(ii)(B) by
(y) a fraction the numerator of which shall be the number of
Outstanding shares of AMPS held by such Existing Holder subject to
such Submitted Bid or Submitted Sell Order and the denominator of
which shall be the number of Outstanding shares of AMPS subject to all
such Submitted Bids and Submitted Sell Orders.
(iii) If, as a result of the procedures described in paragraph 10(e)(i) or
paragraph 10(e)(ii), any Existing Holder would be entitled or required to sell,
or any Potential Holder would be entitled or required to purchase, a fraction
of a share of AMPS on any Auction Date, the Auction Agent shall, in such manner
as in its sole discretion it shall determine, round up or
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down the number of shares of AMPS to be purchased or sold by any Existing
Holder or Potential Holder on such Auction Date so that each Outstanding share
of AMPS purchased or sold by each Existing Holder or Potential Holder on such
Auction Date shall be a whole share of AMPS.
(iv) If, as a result of the procedures described in paragraph
10(e)(i), any Potential Holder would be entitled or required to purchase less
than a whole share of AMPS on any Auction Date, the Auction Agent shall, in
such manner as in its sole discretion it shall determine, allocate shares of
AMPS for purchase among Potential Holders so that only whole shares of AMPS are
purchased on such Auction Date by any Potential Holder, even if such allocation
results in one or more of such Potential Holders not purchasing any shares of
AMPS on such Auction Date.
(v) Based on the results of each Auction, the Auction Agent shall
determine, with respect to each Broker-Dealer that submitted Bids or Sell Orders
on behalf of Existing Holders or Potential Holders, the aggregate number of
Outstanding shares of AMPS to be purchased and the aggregate number of the
Outstanding shares of AMPS to be sold by such Potential Holders and Existing
Holders and, to the extent that such aggregate number of Outstanding shares to
be purchased and such aggregate number of Outstanding shares to be sold differ,
the Auction Agent shall determine to which other Broker-Dealer or Broker-Dealers
acting for one or more purchasers such Broker-Dealer shall deliver, or from
which other Broker-Dealer or Broker-Dealers acting for one
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or more sellers such Broker-Dealer shall receive, as the case may be,
Outstanding shares of AMPS.
(f) Miscellaneous. The Corporation may interpret the provisions of
this paragraph 10 to resolve any inconsistency or ambiguity, remedy any formal
defect or make any other change or modification that does not substantially
adversely affect the rights of Beneficial Owners of AMPS. A Beneficial Owner
or an Existing Holder (A) may sell, transfer or otherwise dispose of shares of
AMPS only pursuant to a Bid or Sell Order in accordance with the procedures
described in this paragraph 10 or to or through a Broker-Dealer, provided that
in the case of all transfers other than pursuant to Auctions such Beneficial
Owner or Existing Holder, its Broker-Dealer, if applicable, or its Agent Member
advises the Auction Agent of such transfer and (B) except as otherwise required
by law, shall have the ownership of the shares of AMPS held by it maintained in
book entry form by the Securities Depository in the account of its Agent
Member, which in turn will maintain records of such Beneficial Owner's
beneficial ownership. Neither the Corporation nor any Affiliate shall submit
an Order in any Auction. Any Beneficial Owner that is an Affiliate shall not
sell, transfer or otherwise dispose of shares of AMPS to any Person other than
the Corporation. All of the Outstanding shares of AMPS shall be represented by
a single certificate registered in the name of the nominee of the Securities
Depository unless otherwise required by law or unless there is no Securities
Depository. If there is no Securities
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Depository, at the Corporation's option and upon its receipt of such documents
as it deems appropriate, any shares of AMPS may be registered in the Stock
Register in the name of the Beneficial Owner thereof and such Beneficial Owner
thereupon will be entitled to receive certificates therefor and required to
deliver certificates therefor upon transfer or exchange thereof.
12. Securities Depository; Stock Certificates. (a) If there is a
Securities Depository, one certificate for all of the shares of AMPS of each
series shall be issued to the Securities Depository and registered in the name
of the Securities Depository or its nominee. Additional certificates may be
issued as necessary to represent shares of AMPS. All such certificates shall
bear a legend to the effect that such certificates are issued subject to the
provisions restricting the transfer of shares of AMPS contained in these
Articles Supplementary. Unless the Corporation shall have elected, during a
Non-Payment Period, to waive this requirement, the Corporation will also issue
stop-transfer instructions to the Auction Agent for the shares of AMPS. Except
as provided in paragraph (b) below, the Securities Depository or its nominee
will be the Holder, and no Beneficial Owner shall receive certificates
representing its ownership interest in such shares.
(b) If the Applicable Rate applicable to all shares of AMPS of a
series shall be the Non-Payment Period Rate or there is no Securities
Depository, the Corporation may at its option issue one or more new
certificates with respect to such shares (without
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the legend referred to in paragraph 11(a)) registered in the names of the
Beneficial Owners or their nominees and rescind the stop-transfer instructions
referred to in paragraph 11(a) with respect to such shares.
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IN WITNESS WHEREOF, MUNIYIELD NEW YORK INSURED FUND II, INC. has
caused these presents to be signed in its name and on its behalf by a duly
authorized officer, and attested by its Secretary, and the said officers of the
Corporation further acknowledge said instrument to be the corporate act of the
Corporation, and state under the penalties of perjury that to the best of their
knowledge, information and belief the matters and facts herein set forth with
respect to approval are true in all material respects, all on , 1996.
MUNIYIELD NEW YORK INSURED
FUND II, INC.
By _______________________
Name:
Title:
Attest:
___________________________
Mark B. Goldfus
Secretary