BROKER-DEALER AGREEMENT
between
DEUTSCHE BANK TRUST COMPANY AMERICAS
and
UBS WARBURG LLC
Dated as of October ___, 2002
Relating to
AUCTION PREFERRED SHARES
Series M, Series T, Series W, Series TH and Series F
of
XXXX XXXXXXX PREFERRED INCOME FUND
BROKER-DEALER AGREEMENT dated as of October ___, 2002, between DEUTSCHE
BANK TRUST COMPANY AMERICAS, a New York banking corporation (the "Auction
Agent") (not in its individual capacity, but solely as agent of Xxxx Xxxxxxx
Preferred Income Fund, a Massachusetts business trust (the "Trust"), pursuant to
authority granted to it in the Auction Agency Agreement dated as of October __,
2002, between the Trust and the Auction Agent (the "Auction Agency Agreement"))
and UBS Warburg LLC (together with its successors and assigns, "BD").
The Trust proposes to issue 2,080 preferred shares of beneficial
interest, no par value, liquidation preference $25,000 per share, designated
Series M Auction Preferred Shares, 2,080 preferred shares of beneficial
interest, no par value, liquida tion preference $25,000 per share, designated
Series T Auction Preferred Shares, 2,080 preferred shares of beneficial
interest, no par value, liquidation preference $25,000 per share, designated
Series W Auction Preferred Shares, 2,080 preferred shares of beneficial
interest, no par value, liquidation preference $25,000 per share, designated
Series TH Auction Preferred Shares, and 2,080 preferred shares of beneficial
interest, no par value, liquidation preference $25,000 per share, designated
Series F Auction Preferred Shares (collectively with the Series M Auction
Preferred Shares, the Series T Auction Preferred Shares, the Series W Auction
Preferred Shares, the Series TH Auction Preferred Shares, and the Series F
Auction Preferred Shares, 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 each
series of 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 Company advises results 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 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.
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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:
(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 8.9 of Article VIII of the Amended By-laws.
(d) "Authorized Officer" shall mean each Managing Director, Vice
President, Assistant Vice President, Assistant Treasurer and Assistant Secretary
of the Auction Agent and every other officer or employee of the Auction Agent
designated as an "Authorized Officer" for purposes 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 substan
tially similar agreement between the Auction Agent and a Broker-Dealer.
(g) "Settlement Procedures" shall mean the Settlement Procedures
attached hereto as Exhibit A.
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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 8.4 of Article VIII 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 Agree ment to the same extent as if such provisions were set forth
fully herein.
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 each series of APS, for the next Dividend Period therefor. Each
periodic opera tion of such procedures is hereinafter referred to as an
"Auction."
(b) All of the provisions contained in the Auction Procedures and the
Settle ment Procedures are incorporated herein by reference in their entirety
and shall be
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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 Section 8.2 of Article VIII 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) 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 each series 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 list of customers BD
believes are Beneficial Owners of shares of each series 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 transmis sion 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.
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(a) The Trust and the Auction Agent shall conduct Auctions for each
series of 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 Refer ence
Rate and the
Maximum Applicable
Rate as set forth
in Section 3.2(a)
hereof.
9:30 A.M. - 1:30 P.M. Auction Agent assembles infor
mation communicated to it by
Broker-Dealers as provided in
Section 8.9(b) of Article VIII of
the Amended By-laws. Submis
sion Deadline is 1:00 P.M.
Not earlier than 1:30
P.M. Auction Agent
makes determi
nations pursuant
to Section 8.9(c)
of Article VIII of
the Amended
By-laws.
By approximately 3:00 P.M. Auction Agent advises the Trust
of the results of the Auction.
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 8.9(d) of
Article VIII of the Amended By-
laws. Auction Agent gives no
xxxx of the Auction results as set
forth in Section 3.4(a) hereof.
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(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 8.9 of Article VIII 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 any series 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 any series of
any series of APS to be transferred to or by any Person that purchased or sold
shares of any series 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 Benefi cial 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 such series of APS in such Auction may deliver to such
Person a
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number of whole shares of such series 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 such series 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 forego ing terms of this Section 3.4(b), any
delivery or non-delivery of shares of any series of APS which represents any
departure from the results of an Auction, as determined by the Auction Agent,
shall be of no effect unless and until the Auction Agent shall have been
notified of such delivery or non-delivery in accordance with the terms of
Section 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 (calculated by counting the first day of such
Dividend Period but excluding the last day thereof) 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 submis sion plus (B) the aggregate number of APS subject to valid Hold
Orders (determined in accordance with Section 10 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 10 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 conces sion 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 com mencement of such Special Dividend
Period.
For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any
Benefi cial Owner who acquired shares of any series of APS through BD transfers
those shares to another Person other than pursuant to an Auction, then the
Broker-Dealer
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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 Agree ment.
(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 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.
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(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 UBS Warburg LLC or Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Inc., 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.
5.4. Communications. Except for (i) communications authorized to be
made by telephone pursuant to this Agreement or the Auction Procedures and (ii)
commu nications in connection with the Auctions (other than those expressly
required to be in writing), all notices, requests and other communications to
any party hereunder
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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, UBS Warburg LLC
addressed to: 000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
If to the Auction Deutsche Bank Trust Company Americas
Agent, addressed to: Auction Rate Securities
000 Xxxxx Xxx
Xxxxxx Xxxx, XX 00000
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
communica tion shall be effective when delivered at the address specified
herein. Communica tions 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
representa tions, 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
succes sors 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
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written instrument signed by a duly authorized representative of the party to be
charged.
(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.
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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:
UBS WARBURG LLC
---------------------------------
By:
Title:
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EXHIBIT A
SETTLEMENT PROCEDURES
[Included as Appendix to Auction Agency Agreement]
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EXHIBIT B
DEUTSCHE BANK TRUST COMPANY AMERICAS
AUCTION BID FORM
Submit To: Deutsche Bank Trust Issue: Xxxx Xxxxxxx Preferred
Company Americas Income Fund
000 Xxxxx Xxx
Xxxxxx Xxxx, XX 00000
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
outstand ing 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.
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(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.
NAME OF BROKER-DEALER ________________________
Authorized Signature ________________________
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EXHIBIT C
(Note: To be used only for transfers made
other than pursuant to an Auction)
TRANSFER FORM
Re: Xxxx Xxxxxxx Preferred Income Fund
Auction Preferred Shares,
Series [M, T, W, TH or F]
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)
--------------------------
(Name of Broker-Dealer)
--------------------------
(Name of Agent Member)
By: _________________________
Printed Name:
Title:
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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, Series [M, T, W, TH or F], of Xxxx Xxxxxxx
Preferred Income Fund 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, Series [M, T, W, TH or F], of Xxxx Xxxxxxx
Preferred Income Fund, 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: _______________________
(Name of Broker-Dealer)
By: _______________________
Printed Name:
Title:
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