EXHIBIT (k)(7)
FORM
OF
BROKER-DEALER AGREEMENT
between
DEUTSCHE BANK TRUST COMPANY AMERICAS
and
[BROKER-DEALER NAME]
Dated as of [ ], 2004
Relating to
AUCTION PREFERRED SHARES
SERIES A, SERIES B, SERIES C, SERIES D & SERIES E
of
XXXXX XXXXX FLOATING-RATE INCOME TRUST
BROKER-DEALER AGREEMENT dated as of [ ], 2004, between DEUTSCHE
BANK TRUST COMPANY AMERICAS, a New York banking corporation (the "Auction
Agent") (not in its individual capacity, but solely as agent of Xxxxx Xxxxx
Floating-Rate Income Trust, a Massachusetts business trust (the "Trust"),
pursuant to authority granted to it in the Auction Agency Agreement dated as of
[ ], 2004, between the Trust and the Auction Agent (the "Auction Agency
Agreement")) and [BROKER-DEALER NAME] (together with its successors and assigns,
"BD").
The Trust proposes to issue [ ] preferred shares of beneficial
interest, par value $0.01 per share, liquidation preference $25,000 per share,
designated Series A Auction Preferred Shares, [ ] preferred shares of
beneficial interest, par value $0.01 per share, liquidation preference $25,000
per share, designated Series B Auction Preferred Shares, [ ] preferred
shares of beneficial interest, par value $0.01 per share, liquidation preference
$25,000 per share, designated Series C Auction Preferred Shares, [ ]
preferred shares of beneficial interest, par value $0.01 per share, liquidation
preference $25,000 per share, designated Series D Auction Preferred Shares, and
[ ] preferred shares of beneficial interest, par value $0.01 per share,
liquidation preference $25,000 per share, designated Series E Auction Preferred
Shares (collectively, the "APS"), pursuant to the Trust's Amended By-laws (as
defined below).
The Trust's Amended By-laws provide that the dividend rate on the APS for
each Dividend Period therefor after the Initial Dividend Period shall be the
Applicable Rate therefor, which in each case, in general shall be the rate per
annum that a commercial bank, trust company or other financial institution
appointed by the Trust advises resulting from implementation of the Auction
Procedures (as defined below). The Board of Trustees of the Trust has adopted a
resolution appointing Deutsche Bank Trust Company Americas as Auction Agent for
purposes of the Auction Procedures, and pursuant to Section 2.5 of the Auction
Agency Agreement, the Trust has requested and directed the Auction Agent to
execute and deliver this Agreement.
The Auction Procedures require the participation of one or more
Broker-Dealers.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the Auction Agent and BD agree as follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. Terms Defined by Reference to the Amended By-laws. Capitalized terms
not defined herein shall have the respective meanings specified in the Amended
By-laws of the Trust.
1.2. Terms Defined Herein. As used herein and in the Settlement Procedures
(as defined below), the following terms shall have the following meanings,
unless the context otherwise requires:
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(a) "Amended By-laws" shall mean the By-laws of the Trust, as
amended through the date hereof, establishing the powers, preferences and
rights of the APS.
(b) "Auction" shall have the meaning specified in Section 3.1
hereof.
(c) "Auction Procedures" shall mean the Auction Procedures that are
set forth in Section 9 of Article VII of the Amended By-laws.
(d) "Authorized Officer" shall mean each Director, Vice President,
Assistant Vice President, and Associate of the Auction Agent, and every
other officer or employee of the Auction Agent designated as an
"Authorized Officer" for purposes of this Agreement in a communication to
BD.
(e) "BD Officer" shall mean each officer or employee of BD
designated as a "BD Officer" for purposes of this Agreement in a
communication to the Auction Agent.
(f) "Broker-Dealer Agreement" shall mean this Agreement and any
substantially similar agreement between the Auction Agent and a
Broker-Dealer.
(g) "Settlement Procedures" shall mean the Settlement Procedures
attached hereto as Exhibit A.
1.3. Rules of Construction. Unless the context or use indicates another or
different meaning or intent, the following rules shall apply to the construction
of this Agreement:
(a) Words importing the singular number shall include the plural
number and vice versa.
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of this Agreement, nor shall
they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of
similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to
New York City time.
II. NOTIFICATION OF DIVIDEND PERIOD
2.1. The provisions contained in paragraph 2 of Article VII of the Amended
By-laws concerning the notification of a Special Dividend Period will be
followed by the Auction Agent and BD, and the provisions contained therein are
incorporated herein by reference in their entirety and shall be deemed to be a
part of this Agreement to the same extent as if such provisions were set forth
fully herein.
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III. THE AUCTION.
3.1. Purpose; Incorporation by Reference of Auction Procedures and
Settlement Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will be
followed by the Auction Agent for the purpose of determining the Applicable Rate
for the of APS, for the next Dividend Period therefor. Each periodic operation
of such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their entirety and
shall be deemed to be a part of this Agreement to the same extent as if such
provisions were set forth fully herein.
(c) BD agrees to act as, and assumes the obligations of and limitations
and restrictions placed upon, a Broker-Dealer under this Agreement. BD
understands that other Persons meeting the requirements specified in the
definition of "Broker-Dealer" contained in Paragraph 9 of Article VII of the
Amended By-laws may execute a Broker-Dealer Agreement and participate as
Broker-Dealers in Auctions.
(d) BD and other Broker-Dealers may participate in Auctions for their own
accounts. However, the Trust, by notice to BD and all other Broker Dealers, may
prohibit all Broker-Dealers from submitting Bids in Auctions for their own
accounts, provided that Broker-Dealers may continue to submit Hold Orders and
Sell Orders.
3.2. Preparation for Each Auction.
(a) Not later than 9:30 A.M. on each Auction Date for the APS, the Auction
Agent shall advise BD by telephone of the Reference Rate and the Maximum
Applicable Rate in effect on such Auction Date.
(b) In the event that the Auction Date for any Auction shall be changed
after the Auction Agent has given the notice referred to in paragraph (a) of the
Settlement Procedures, the Auction Agent, by such means as the Auction Agent
deems practicable, shall give notice of such change to BD not later than the
earlier of 9:15 A.M. on the new Auction Date or 9:15 A.M. on the old Auction
Date. Thereafter, BD promptly shall notify customers of BD that BD believes are
Beneficial Owners of shares of APS of such change in the Auction Date.
(c) The Auction Agent from time to time may request BD to provide it with
a list of the respective customers BD believes are Beneficial Owners of shares
of APS. BD shall comply with any such request, and the Auction Agent shall keep
confidential any such information, including information received as to the
identity of Bidders in any Auction, and shall not disclose any such information
so provided to any Person other than the Trust; and such information shall not
be used by the Auction Agent or its officers, employees, agents or
representatives for any purpose other than such purposes as are described
herein. The Auction Agent shall transmit any
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list of customers BD believes are Beneficial Owners of shares of APS and
information related thereto only to its officers, employees, agents or
representatives who need to know such information for the purposes of acting in
accordance with this Agreement, and the Auction Agent shall prevent the
transmission of such information to others and shall cause its officers,
employees, agents and representatives to abide by the foregoing confidentiality
restrictions; provided, however, that the Auction Agent shall have no
responsibility or liability for the actions of any of its officers, employees,
agents or representatives after they have left the employ of the Auction Agent.
3.3. Auction Schedule; Method of Submission of Orders.
(a) The Trust and the Auction Agent shall conduct Auctions for APS in
accordance with the schedule set forth below. Such schedule may be changed at
any time by the Auction Agent with the consent of the Trust, which consent shall
not be withheld unreasonably. The Auction Agent shall give notice of any such
change to BD. Such notice shall be received prior to the first Auction Date on
which any such change shall be effective.
Time Event
---- -----
By: 9:30 A.M. Auction Agent advises the Trust and
Broker-Dealers of the Reference Rate
and the Maximum Applicable Rate
9:30 A.M. - 1:30 P.M. Applicable Rate as set forth in
Section 3.2(a) hereof
Auction Agent assembles information
communicated to it by Broker-Dealers
as provided in Section 9(d)(i) of
Article VII of the Amended By-laws.
Submission Deadline is 1:30 P.M.
Not earlier than 1:30 P.M. Auction Agent makes
determinations pursuant to
Section 9(d)(i) of Article VII of the
Amended By-laws.
By approximately 3:00 P.M. Auction Agent advises the Trust of the
results of the Auction as provided in
Section 9(d)(ii) of Article VII of the
Amended By-laws. Submitted Bids and
Submitted Sell Orders are accepted
and rejected in whole or in part and
shares of APS are allocated as
provided in Section
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9(e) of Article VII of the Amended
By-laws. Auction Agent gives notice
of the Auction results as set forth
in Section 3.4(a) hereof.
(b) BD agrees to maintain a list of Potential Beneficial Owners and to
contact the Potential Beneficial Owners on such list on or prior to each Auction
Date for the purposes set forth in Section 9 of Article VII of the Amended
By-laws.
(c) BD shall submit Orders to the Auction Agent in writing in
substantially the form attached hereto as Exhibit B. BD shall submit separate
Orders to the Auction Agent for each Potential Beneficial Owner or Beneficial
Owner on whose behalf BD is submitting an Order and shall not net or aggregate
the Orders of Potential Beneficial Owners or Beneficial Owners on whose behalf
BD is submitting Orders.
(d) BD shall deliver to the Auction Agent (i) a written notice,
substantially in the form attached hereto as Exhibit C, of transfers of shares
of APS, made through BD by an Existing Holder to another Person other than
pursuant to an Auction, and (ii) a written notice, substantially in the form
attached hereto as Exhibit D, of the failure of shares of APS to be transferred
to or by any Person that purchased or sold shares of APS through BD pursuant to
an Auction. The Auction Agent is not required to accept any notice delivered
pursuant to the terms of the foregoing sentence with respect to an Auction
unless it is received by the Auction Agent by 3:00 P.M. on the Business Day next
preceding the applicable Auction Date.
3.4. Notice of Auction Results.
(a) On each Auction Date, the Auction Agent shall notify BD by telephone
as set forth in paragraph (a) of the Settlement Procedures. On the Business Day
next succeeding such Auction Date, the Auction Agent shall notify BD in writing
of the disposition of all Orders submitted by BD in the Auction held on such
Auction Date.
(b) BD shall notify each Beneficial Owner, Potential Beneficial Owner,
Existing Holder or Potential Holder on whose behalf BD has submitted an Order as
set forth in paragraph (b) of the Settlement Procedures, and take such other
action as is required of BD pursuant to the Settlement Procedures.
If any Beneficial Owner or Existing Holder selling shares of APS in an
Auction fails to deliver such shares, the BD of any Person that was to have
purchased shares of APS in such Auction may deliver to such Person a number of
whole shares of APS that is less than the number of shares that otherwise was to
be purchased by such Person. In such event, the number of shares of APS to be so
delivered shall be determined by such BD. Delivery of such lesser number of
shares shall constitute good delivery. Upon the occurrence of any such failure
to deliver shares, such BD shall deliver to the Auction Agent the notice
required by Section 3.3(d)(ii) hereof. Notwithstanding the foregoing terms of
this Section 3.4(b), any delivery or non-delivery of shares of APS which
represents any departure from the results of an Auction, as
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determined by the Auction Agent, shall be of no effect unless and until the
Auction Agent shall have been notified of such delivery or non-delivery in
accordance with the terms of Section 3.3(d) hereof. The Auction Agent shall have
no duty or liability with respect to enforcement of this Section 3.4(b).
3.5. Service Charge to Be Paid to BD.
On the Business Day next succeeding each Auction Date, the Auction Agent
shall pay to BD from moneys received from the Trust an amount equal to: (a) in
the case of any Auction Date immediately preceding a Dividend Period of 7 days
or less, the product of (i) a fraction the numerator of which is the number of
days in such Dividend Period and the denominator of which is 360, times (ii) 1/4
of 1%, times (iii) $25,000, times (iv) the sum of (A) the aggregate number of
APS placed by BD in the applicable Auction that were (x) the subject of a
Submitted Bid of a Beneficial Owner submitted by BD and continued to be held as
a result of such submission and (y) the subject of a Submitted Bid of a
Potential Beneficial Owner submitted by BD and were purchased as a result of
such submission plus (B) the aggregate number of APS subject to valid Hold
Orders (determined in accordance with Section 9 of Article VII of the Amended
By-laws) submitted to the Auction Agent by BD plus (C) the number of APS deemed
to be subject to Hold Orders by Beneficial Owners pursuant to Section 9 of
Article VII of the Amended By-laws that were acquired by such Beneficial Owners
through BD; and (b) in the case of any Auction Date immediately preceding a
Special Dividend Period, that amount as mutually agreed upon by the Trust and
BD, based on the selling concession that would be applicable to an underwriting
of fixed or variable rate preferred shares with a similar final maturity or
variable rate dividend period, at the commencement of such Special Dividend
Period.
For purposes of sub-clause (a)(iv)(C) of the foregoing sentence, if any
Beneficial Owner who acquired shares of APS through BD transfers those shares to
another Person other than pursuant to an Auction, then the Broker-Dealer for the
shares so transferred shall continue to be BD, provided, however, that if the
transfer was effected by, or if the transferee is, a Broker-Dealer other than
BD, then such Broker-Dealer shall be the Broker-Dealer for such shares.
IV. THE AUCTION AGENT.
4.1. Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Trust hereunder
and owes no fiduciary duties to any other Person by reason of this Agreement.
(b) The Auction Agent undertakes to perform such duties and only such
duties as are set forth specifically in this Agreement, and no implied covenants
or obligations shall be read into this Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction
Agent shall not be liable for any action taken, suffered or omitted by it, or
for any error of judgment made by it in the performance of its duties under this
Agreement. The Auction Agent shall not be liable for
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any error of judgment made in good faith unless the Auction Agent shall have
been negligent in ascertaining (or failing to ascertain) the pertinent facts.
4.2. Rights of the Auction Agent.
(a) The Auction Agent may rely upon, and shall be protected in acting or
refraining from acting upon, any communication authorized by this Agreement and
any written instruction, notice, request, direction, consent, report,
certificate, share certificate or other instrument, paper or document believed
by it to be genuine. The Auction Agent shall not be liable for acting upon any
telephone communication authorized by this Agreement which the Auction Agent
believes in good faith to have been given by the Trust or by BD. The Auction
Agent may record telephone communications with BD.
(b) The Auction Agent may consult with counsel of its own choice, and the
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its
own funds or otherwise incur or become exposed to financial liability in the
performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys.
4.3. Auction Agent's Disclaimer. The Auction Agent makes no representation
as to the validity or adequacy of this Agreement or the APS.
V. MISCELLANEOUS.
5.1. Termination. Any party may terminate this Agreement at any time
upon five days' prior written notice to the other party; provided, however, that
if BD is [ ], [ ], [ ], and [ ], neither BD nor the Auction
Agent may terminate this Agreement without first obtaining the prior written
consent of the Trust to such termination, which consent shall not be withheld
unreasonably.
5.2. Participant in Securities Depository; Payment of Dividends in
Same-Day Funds.
(a) BD is, and shall remain for the term of this Agreement, a member of,
or a participant in, the Securities Depository (or an affiliate of such a member
or participant).
(b) BD represents that it (or if BD does not act as Agent Member, one of
its affiliates) shall make all dividend payments on the APS available in
Same-Day Funds on each Dividend Payment Date to customers that use BD (or its
affiliate) as Agent Member.
5.3. Agent Member. At the date hereof, BD is a participant of the
Securities Depository.
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5.4. Communications. Except for (i) communications authorized to be made
by telephone pursuant to this Agreement or the Auction Procedures and (ii)
communications in connection with the Auctions (other than those expressly
required to be in writing), all notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar writing)
and shall be given to such party at its address or telecopier number set forth
below:
If to BD, [BROKER-DEALER NAME]
addressed to: [ADDRESS]
Attention: [ ]
Telecopier No.: ( ) [ - ]
Telephone No.: ( ) [ - ]
If to the Auction: Deutsche Bank Trust Company Americas
addressed to: Trust and Securities Services
00 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Auction Rate Securities
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
or such other address or telecopier number as such party hereafter may specify
for such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of BD by a BD Officer and on behalf of
the Auction Agent by an Authorized Officer. BD may record telephone
communications with the Auction Agent.
5.5. Entire Agreement. This Agreement contains the entire agreement
between the parties relating to the subject matter hereof, and there are no
other representations, endorsements, promises, agreements or understandings,
oral, written or inferred, between the parties relating to the subject matter
hereof.
5.6. Benefits. Nothing in this Agreement, express or implied, shall give
to any person, other than the Trust, the Auction Agent and BD and their
respective successors and assigns, any benefit of any legal or equitable right,
remedy or claim under this Agreement.
5.7. Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a written
instrument signed by a duly authorized representative of the party to be
charged.
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(b) Failure of either party to this Agreement to exercise any right or
remedy hereunder in the event of a breach of this Agreement by the other party
shall not constitute a waiver of any such right or remedy with respect to any
subsequent breach.
5.8. Successors and Assigns. This Agreement shall be binding upon, inure
to the benefit of, and be enforceable by, the respective successors and
permitted assigns of each of BD and the Auction Agent. This Agreement may not be
assigned by either party hereto absent the prior written consent of the other
party; provided, however, that this Agreement may be assigned by the Auction
Agent to a successor Auction Agent selected by the Trust without the consent of
BD.
5.9. Severability. If any clause, provision or section of this Agreement
shall be ruled invalid or unenforceable by any court of competent jurisdiction,
the invalidity or unenforceability of such clause, provision or section shall
not affect any remaining clause, provision or section hereof.
5.10. Execution in Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
5.11. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed in said state.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
DEUTSCHE BANK TRUST COMPANY AMERICAS
___________________________
By:
Title:
[BROKER-DEALER]
___________________________
By:
Title:
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EXHIBIT A
SETTLEMENT PROCEDURES
9.(a) Certain definitions. As used in this paragraph 9, the following
terms shall have the following meanings, unless the context otherwise requires:
(i) "APS" means the shares of APS being auctioned pursuant to this
paragraph 9.
(ii) "Auction Date" means the first Business Day preceding the first day
of a Dividend Period.
(iii) "Available APS" has the meaning specified in paragraph 9(d)(i)
below.
(iv) "Bid" has the meaning specified in paragraph 9(b)(i) below.
(v) "Bidder" has the meaning specified in paragraph 9(b)(i) below.
(vi) "Hold Order" has the meaning specified in paragraph 9(b)(i) below.
(vii) "Maximum Applicable Rate" for any Dividend Period will be the higher
of the Applicable Percentage of the Reference Rate or the Applicable Spread Over
the Reference Rate which term shall mean the rate equaling the sum of the
Applicable Spread (as more particularly set forth below) plus the Reference
Rate. The Applicable Percentage will be determined based on the credit rating
assigned on such date to such shares by Fitch and Xxxxx'x (or if Fitch or
Xxxxx'x shall not make such rating available, the equivalent of such rating by a
Substitute Rating Agency) as follows:
APPLICABLE PERCENTAGE APPLICABLE SPREAD
XXXXX'X CREDIT RATINGS S&P/FITCH OF REFERENCE RATE OVER REFERENCE RATE
------- -------------- --------- ----------------- -------------------
Aaa AAA 125% 125 bps
Aa3 to Aa1 AA- to AA+ 150% 150 bps
A3 to A1 A- to A+ 200% 200 bps
Baa3 to Baa1 BBB- to BBB+ 250% 250 bps
Ba1 and lower BB+ and lower 300% 300 bps
Assuming the Fund maintains an AAA/Aaa rating on the APS, the practical effect
of the different methods used to calculate the Maximum Applicable Rate is shown
in the table below:
Maximum Applicable Maximum Applicable
Rate Using the Rate Using the Method Used to Determine
Applicable Percentage of Applicable Spread over the Maximum Applicable
Reference Rate the Reference Rate the Reference Rate Rate
-------------- ------------------ ------------------ ----
1% 1.25% 2.25% Spread
2% 2.50% 3.25% Spread
3% 3.75% 4.25% Spread
4% 5.00% 5.25% Spread
5% 6.25% 6.25% Either
6% 7.50% 7.25% Percentage
The Fund shall take all reasonable action necessary to enable Fitch and Xxxxx'x
to provide a rating for each series of APS. If Fitch or Xxxxx'x shall not make
such a rating available, Xxxxx Xxxxx Management or its affiliates and
successors, after consultation with the Trust, shall select a nationally
recognized statistical rating organization to act as a Substitute Rating Agency.
(viii) "Order" has the meaning specified in paragraph 9(b)(i) below.
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(ix) "Sell Order" has the meaning specified in paragraph 9(b)(i) below.
(x) "Submission Deadline" means 1:30 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 obtained by it for the Auction
to be conducted on such Auction Date.
(xi) "Submitted Bid" has the meaning specified in paragraph 9(d)(i) below.
(xii) "Submitted Hold Order" has the meaning specified in paragraph
9(d)(i) below.
(xiii) "Submitted Order" has the meaning specified in paragraph 9(d)(i)
below.
(xiv) "Submitted Sell Order" has the meaning specified in paragraph
9(d)(i) below.
(xv) "Sufficient Clearing Bids" has the meaning specified in paragraph
9(d)(i) below.
(xvi) "Winning Bid Rate" has the meaning specified in paragraph 9(d)(i)
below.
(b) Orders by Beneficial Owners, Potential Beneficial Owners, Existing
Holders and Potential Holders.
(i) Unless otherwise permitted by the Trust, 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 APS 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 APS 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;
(2) the number of Outstanding shares, if any, of APS 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 APS 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 APS 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 9(b)(i) is hereinafter
referred to as an "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
9(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 9(b)(i) is
hereinafter referred to as a "Bid"; and an
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Order containing the information referred to in clause (A)(3) of this paragraph
9(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 APS 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 (1) such number or a lesser
number of Outstanding shares of APS to be determined as set forth in
paragraph 9(e)(i)(D) if the Applicable Rate determined on such Auction
Date shall be equal to the rate per annum specified therein; or
(2) a lesser number of Outstanding shares of APS to be determined as
set forth in paragraph 9(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 APS specified in such
Sell Order; or
(2) such number or a lesser number of Outstanding shares of
APS to be determined as set forth in paragraph 9(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 APS 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
APS to be determined as set forth in paragraph 9(e)(i)(E) if the
Applicable Rate determined on such Auction Date shall be equal to
the rate per annum specified therein.
(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 Trust) 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 Trust);
(B) the aggregate number of Outstanding shares of APS 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 APS
subject to any Hold Order placed by such Existing
Holder;
(2) the number of Outstanding shares, if any, of APS
subject to any Bid placed by such Existing Holder
and the rate per annum specified in such Bid; and
(3) the number of Outstanding shares, if any, of APS
subject to any Sell Order placed by such Existing
Holder; and
13
(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 APS
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 APS 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 APS 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 including the number of Outstanding shares
of APS 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 APS subject to such Hold Orders exceeds the number of
Outstanding shares of APS held by such Existing Holder, the number of
shares of APS 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 APS 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 APS
held by such Existing Holder over the number of shares of APS subject to
any Hold Order referred to in paragraph 9(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 9(c)(iv)(A) above and of the foregoing portion of this paragraph
9(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 exactly such remaining
number of shares); and the number of shares, if any, subject to Bids not
valid under this paragraph 9(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 APS held by such Existing
Holder over the number of shares of APS subject to Hold Orders referred to
in paragraph 9(c)(iv)(A) and Bids referred to in paragraph 9(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 APS subject to such Sell
Orders is greater than such excess, the number of shares of APS 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 APS 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 APS 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.
(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
14
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 APS over
the number of Outstanding shares of APS that are the subject of Submitted
Hold Orders (such excess being hereinafter referred to as the "Available
APS");
(B) from the Submitted Orders whether the number of Outstanding
shares of APS 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 APS 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 APS that are subject
to Submitted Sell Orders (if such excess or such equality
exists (other than because the number of Outstanding shares of
APS in clause (1) above and this clause (2) are each zero
because all of the Outstanding shares of APS 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 APS 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 APS
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 APS.
(ii) Promptly after the Auction Agent has made the determinations pursuant
to paragraph 9(d)(i), the Auction Agent shall advise the Trust of the Maximum
Applicable Rate and, 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 APS 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 APS 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 90% of the Reference Rate 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 9(d)(i), the Submitted Bids and Submitted Sell Orders shall
be accepted or rejected and 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 9(e)(iii) and paragraph 9(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:
15
(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 APS
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 APS 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 APS that are the subject of such Submitted Bid,
unless the number of Outstanding shares of APS subject to all such
Submitted Bids shall be greater than the number of Outstanding shares of
APS ("Remaining Shares") equal to the excess of the Available APS over the
number of Outstanding shares of APS subject to Submitted Bids described in
paragraph 9(e)(i)(B) and paragraph 9(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 APS,
but only in an amount equal to the difference between (1) the number of
Outstanding shares of APS then held by such Existing Holder subject to
such Submitted Bid and (2) the number of shares of APS 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 APS held
by such Existing Holder subject to such Submitted Bid and the denominator
of which shall be the sum of the number of Outstanding shares of APS
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 APS
obtained by multiplying (x) the difference between the Available APS and
the number of Outstanding shares of APS subject to Submitted Bids
described in paragraph 9(e)(i)(B), paragraph 9(e)(i)(C) and paragraph
9(e)(i)(D) by (y) a fraction the numerator of which shall be the number of
Outstanding shares of APS subject to such Submitted Bid and the
denominator of which shall be the sum of the number of Outstanding shares
of APS subject to such 74 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 APS are subject to Submitted Hold Orders),
subject to the provisions of paragraph 9(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 APS 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 shares of APS 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 APS then held by such Existing
Holder subject to such Submitted Bid or Submitted Sell Order and (2) the
number of shares of APS obtained by multiplying (x) the difference between
the Available APS and the aggregate number of Outstanding shares of APS
subject to Submitted Bids described in paragraph 9(e)(ii)(A) and paragraph
9(e)(ii)(B) by (y) a fraction the numerator of which shall be the number
of Outstanding shares of APS held by such Existing Holder subject to such
Submitted Bid or
16
Submitted Sell Order and the denominator of which shall be the number of
Outstanding shares of APS subject to all such Submitted Bids and Submitted
Sell Orders.
(iii) If, as a result of the procedures described in paragraph 9(e)(i) or
paragraph 9(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 APS on any Auction Date, the Auction Agent shall, in such manner as
in its sole discretion it shall determine, round up or down the number of shares
of APS to be purchased or sold by any Existing Holder or Potential Holder on
such Auction Date so that each Outstanding share of APS purchased or sold by
each Existing Holder or Potential Holder on such Auction Date shall be a whole
share of APS.
(iv) If, as a result of the procedures described in paragraph 9(e)(i), any
Potential Holder would be entitled or required to purchase less than a whole
share of APS on any Auction Date, the Auction Agent shall, in such manner as in
its sole discretion it shall determine, allocate shares of APS for purchase
among Potential Holders so that only whole shares of APS 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 APS 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 APS to be purchased and the aggregate number of the
Outstanding shares of APS 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 or more sellers such
Broker-Dealer shall receive, as the case may be, Outstanding shares of APS
(f) Miscellaneous. The Trust may interpret the provisions of this
paragraph 9 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 APS. A Beneficial Owner or an Existing
Holder (A) may sell, transfer or otherwise dispose of shares of APS only
pursuant to a Bid or Sell Order in accordance with the procedures described in
this paragraph 9 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 APS 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 Trust 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 APS to any Person other than the Trust. All of
the Outstanding shares of APS of a series shall be represented by a single
certificate registered in the name of the nominee of the Securities Depository
unless otherwise required by law or unless there is no Securities Depository. If
there is no Securities Depository, at the Trust's option and upon its receipt of
such documents as it deems appropriate, any shares of APS 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.
17
EXHIBIT B
DEUTSCHE BANK TRUST COMPANY
AUCTION BID FORM
Submit To: Deutsche Bank Trust Company Issue: Xxxxx Xxxxx Floating-
Corporate Trust and Agency Group Rate Income Trust
000 Xxxxx Xxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Auction Rate Securities
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
The undersigned Broker-Dealer submits the following Order on behalf of the
Bidder listed below:
Name of Bidder:________________________
BENEFICIAL OWNER
Shares now held _______________ HOLD _____________
BID at rate of _____________
SELL_____________
POTENTIAL BENEFICIAL OWNER
# of shares bid _____________
BID at rate of _____________ Notes:
(1) If submitting more than one Bid for one Bidder, use additional Auction Bid
Forms.
(2) If one or more Bids covering in the aggregate more than the number of
outstanding shares held by any Beneficial Owner are submitted, such bid shall be
considered valid in the order of priority set forth in the Auction Procedures on
the above issue.
(3) A Hold or Sell Order may be placed only by a Beneficial Owner covering a
number of shares not greater than the number of shares currently held.
(4) Potential Beneficial Owners may make only Bids, each of which must specify a
rate. If more than one Bid is submitted on behalf of any Potential Beneficial
Owner, each Bid submitted shall be a separate Bid with the rate specified.
(5) Bids may contain no more than three figures to the right of the decimal
point (.001 of 1%). Fractions will not be accepted.
[BROKER-DEALER] ______________________
Authorized Signature ________________________
18
EXHIBIT C
(Note: To be used only for transfers made other than pursuant to an
Auction)
TRANSFER FORM
Re: Xxxxx Xxxxx Floating-Rate Income Trust
Auction Preferred Shares
We are (check one):
[ ] the Existing Holder named below;
[ ] the Broker-Dealer for such Existing Holder; or
[ ] the Agent Member for such Existing Holder.
We hereby notify you that such Beneficial Owner has transferred _____ APS
to ____________ .
__________________________
(Name of Existing Holder)
__________________________
[BROKER-DEALER]
__________________________
(Name of Agent Member)
By: _________________________
Printed Name:
Title:
19
EXHIBIT D
(Note: To be used only for failures to deliver APS sold pursuant to an
Auction)
NOTICE OF A FAILURE TO DELIVER
Complete either I or II
I. We are a Broker-Dealer for ____________________ (the "Purchaser"),
which purchased _____ shares of APS of Xxxxx Xxxxx Floating-Rate Income Trust in
the Auction held on ____________________ from the seller of such shares.
II. We are a Broker-Dealer for _____________________ (the "Seller"), which
sold ____ shares of APS of Xxxxx Xxxxx Floating-Rate Income Trust in the Auction
held on ______________ to the Purchaser of such shares.
We hereby notify you that (check one):
_______ the Seller failed to deliver such shares to the Purchaser
_______ the Purchaser failed to make payment to the Seller upon delivery
of such shares
Name: _________________________
[BROKER-DEALER]
By: _______________________
Printed Name:
Title:
20
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
DEUTSCHE BANK TRUST COMPANY AMERICAS
________________________________
By:
Title:
[BROKER-DEALER]
________________________________
By:
Title:
21
