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Exhibit (k)(2)
BROKER-DEALER AGREEMENT
between
BANKERS TRUST COMPANY
and
[NAME OF BROKER-DEALER]
Dated as of March 4, 1999
Relating to
AUCTION PREFERRED SHARES
of
XXXXX XXXXX CALIFORNIA MUNICIPAL INCOME TRUST
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BROKER-DEALER AGREEMENT dated as of March 4, 1999, between BANKERS
TRUST COMPANY, a New York banking corporation (the "Auction Agent") (not in its
individual capacity, but solely as agent of Xxxxx Xxxxx California Municipal
Income Trust, a Massachusetts business trust (the "Trust"), pursuant to
authority granted to it in the Auction Agency Agreement dated as of March 4,
1999, between the Trust and the Auction Agent (the "Auction Agency Agreement"))
and [NAME OF BROKER-DEALER] (together with its successors and assigns, "BD").
The Trust proposes to issue 2,360 preferred shares of beneficial
interest, par value $.01 per share, liquidation preference $25,000 per share,
designated 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 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 Company advises results from implementation of the Auction
Procedures (as defined below). The Board of Trustees of the Trust has adopted a
resolution appointing Bankers Trust Company 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.
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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 10 of Article VII of the Amended By-laws.
(d) "Authorized Officer" shall mean each Senior Vice President, Vice
President, Assistant Vice President, Trust Officer, Assistant Secretary and
Assistant Treasurer 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.
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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 AND ADVANCE NOTICE OF ALLOCATION OF TAXABLE
INCOME.
2.1. The provisions contained in paragraph 2 of Article VII of the Amended
Bylaws 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.
2.2. Except as otherwise provided in paragraph 2 of Article VII of the
Amended By-laws, whenever the Trust intends to include any net capital gains or
other income subject to regular Federal income tax in any dividend on shares of
APS, the Trust 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. Whenever the Auction Agent receives such
notice from the Trust, in turn it will notify BD, who, on or prior to such
Auction Date, will notify its Beneficial Owners and Potential Beneficial Owners
believed to be interested in submitting an Order in the Auction to be held on
such Auction Date. Whenever the Trust intends to include any additional amounts
in a dividend as provided in paragraph 2 of Article VII of the Amended By-laws,
the Trust will notify the Auction Agent of such additional amounts to be so
included in such dividend at least five Business Days
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prior to the applicable Dividend Payment Date. Whenever the Auction Agent
receives such notice from the Trust, in turn it will notify the Securities
Depository and BD, who, on or prior to the applicable Dividend Payment Date,
will notify its Beneficial Owners.
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 10 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.
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(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 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 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
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Applicable Rate as set forth in
Section 3.2(a) hereof.
9:30 A.M. - 1:30 P.M. Auction Agent assembles information
communicated to it by Broker-Dealers
as provided in Section 10(d)(i) of
Article VII of the Amended By-laws.
Submission Deadline is 1:00 P.M.
Not earlier than 1:30 P.M. Auction Agent makes determinations
pursuant to Section 10(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 10(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 10(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 10 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
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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 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-
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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 submission 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 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 subclause (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.
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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 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 PaineWebber Incorporated, Prudential Securities Incorporated, Xxxxxxx
Xxxxx Xxxxxx Inc. or X.X. Xxxxxxx & Sons, 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)
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
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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, ___________________________________
addressed to:
___________________________________
___________________________________
Attention: ____________________
Telecopier No.: ___________________
Telephone No.: ___________________
If to the Auction Bankers Trust Company
Agent, addressed to: Corporate Trust and Agency Group
Four Xxxxxx Xxxxxx
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.
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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.
(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.
BANKERS TRUST COMPANY
_____________________
By:
Title:
[NAME OF BROKER-DEALER]
_____________________
By:
Title:
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EXHIBIT A
SETTLEMENT PROCEDURES
[Included as Appendix C to the Statement of
Additional Information of the Trust]
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EXHIBIT B
BANKERS TRUST COMPANY
AUCTION BID FORM
Submit To: Bankers Trust Company Issue: Xxxxx Xxxxx California
Corporate Trust and Agency Group Municipal Income Trust
Four Xxxxxx Xxxxxx
Xxx Xxxx, XX 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.
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(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.
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: Xxxxx Xxxxx California Municipal 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)
__________________________
(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 of Xxxxx Xxxxx California Municipal 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 California Municipal 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: _______________________
(Name of Broker-Dealer)
By: _______________________
Printed Name:
Title:
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