BROKER-DEALER AGREEMENT
Between
BANKERS TRUST COMPANY
and
X.X. XXXXXX
Dated as of June 26, 2001
Relating to
DUTCH AUCTION RATE TRANSFERABLE SECURITIES
PREFERRED STOCK.
SERIES A & B
PATRIOT PREMIUM DIVIDEND FUND II
BROKER.-DEALER AGREEMENT Dated as of June 26, 2001 between Bankers Trust
Company, a New York corporation (not in its individual capacity but solely as
agent of the Company pursuant to authority granted to it in the "Trust Company
Agreement) (together with its successors and assigns, the "Trust Company"), and
X.X. Xxxxxx, a Delaware corporation (together with its successors and assigns,
"BD").
The company has issued 500 shares of Dutch Auction Rate Transferable
Securities Preferred Stock Series A (the Series A "DARTS") and 500 Shares of
Dutch Auction Rate Transferable Securities Preferred Stock Series B (the Series
B "DARTS" and, together with the Series A DARTS, the "DARTS") pursuant to its
Amended and Restated Agreement and Declaration of Trust ("Declaration of Trust")
and its Amended and Restated By-Laws (the "By-Laws").
The By-Laws provide that the dividend rate on the shares of each series of
the DARTS for each Dividend Period with respect to such series after the initial
Dividend Period with respect to such series shall be the Applicable Rate, which
shall, except under certain circumstances, be the rate per annum that a bank or
trust company appointed by the Company advises results from implementation of
the Auction Procedures with respect to the DARTS of such series. The Board of
Trustees of the Company has adopted a resolution appointing Bankers Trust
Company for purposes of implementing the Auction Procedures and related matters.
Pursuant to Section 2.5 (d) of the Trust Company Agreement, the Company has
requested and directed the Trust Company 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 Trust Company and BD agree as follows:
1. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1 TERMS DEFINED BY REFERENCES TO DECLARATION OF TRUST AND BY-LAWS.
Capitalized terms not defined herein shall have the respective meanings
specified in the Company's Declaration of Trust and By-Laws.
1.2 TERMS DEFINED HEREIN. As used herein in the Settlement Procedures,
the following terms shall have the following meanings, unless the context
otherwise requires:
(a) "Auction" shall have the meaning specified in Section
2.1 hereof.
(b) "Auction Procedures" shall mean the auction procedures
as set forth in Section 9 of Article VI of the By-Laws.
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(c) "Authorized Officer" shall mean each Senior Vice
President, Vice president, Assistant Vice President, Assistant Manager and
Trust Officer of the Trust Company assigned to its Corporate Trust
Department and every other officer or employee of the Trust Company
designated as an "Authorized Officer" for purposes of this Agreement in a
communication to BD.
(d) "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 Trust Company.
(e) "Broker-Dealer Agreement" shall mean this Agreement
and any substantially similar agreement between the Trust Company and a
Broker-Dealer.
(f) "By-Laws" shall mean the Company's Amended and
Restated By-Laws as adopted by the Company's Board of Trustees on
September 6, 1990, a copy of which is attached hereto as Exhibit A, as the
same may be amended from time to time.
(g) "Company shall mean Patriot Premium Dividend Fund II,
a Massachusetts business trust, and its successors and assigns.
(h) "Declaration of Trust" shall mean the Agreement and
Declaration of Trust of the Company as filed by the Company in the office
of the Secretary of State of the Commonwealth of Massachusetts on December
14, 1989, and as amended and restated on December 12, 1989, a copy of
which is attached hereto as Exhibit B.
(i) "Prospectus" shall mean the prospectus dated December
14, 1989 relating to the issuance and offering of the shares of the DARTS.
(j) "Purchaser's Letter" shall mean a Master Purchaser's
Letter substantially in the form attached hereto as Exhibit C.
(k) "Settlement Procedures" shall mean the Settlement
Procedures attached hereto as Exhibit D.
(l) "Summary" shall mean a summary description of the
DARTS and the Auction Procedures and Settlement Procedures with respect
thereto.
(m) "Trust Company Agreement" shall mean the Trust Company
Agreement, dated as of December 21, 1989, between the Company and the
Trust Company relating to the DARTS.
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:
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(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 the meaning, construction or effect of any provision
hereof.
(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.
2. THE AUCTION. Separate Auctions will be held for the Series A DARTS and
the Series B DARTS. Unless the context otherwise requires, references to the
DARTS in this Section shall be deemed references to the Series A DARTS or the
Series B DARTS, as the case may be.
2.1 PURPOSE; INCORPORATION BY REFERENCE OF AUCTION PROCEDURES AND
SETTLEMENT PROCEDURES.
(a) The provisions of the Auction Procedures will be
followed by the Trust Company for the purpose of determining the
Applicable Rates for the DARTS. Each periodic operation of such Auction
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 fully set forth
herein.
(c) Unless BD has heretofore done so, BD is delivering
herewith a Purchaser's Letter executed by BD. BD agrees to act as, to
assume the obligations of, and to be subject to the 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 6.9 (a) (vii) of
Article VI of the By-Laws may execute Broker-Dealer Agreements and
Purchaser's Letters and participate as Broker-Dealers in Auctions. BD
agrees to handle customer orders in accordance with its respective duties
under applicable securities laws and rules.
(d) BD and other Broker-Dealers may participate in
Auctions for their own accounts, provided that BD or such other Broker-
Dealers, as the case may be, have executed and deposited with the Trust
Company a Purchaser's Letter. However, the Company may, by notice to BD
and all other Broker-Dealers, prohibit all Broker-Dealers from submitting
Bids in Auctions for their own account, but the Broker-Dealers may
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continue to submit Hold and Sell Orders. The Trust Company shall have no
duty or responsibility to monitor the provisions of this Section 2.1 (d).
2.2 PREPARATION FOR EACH AUCTION.
(a) Not later than 9:30 on each Auction Date, the Trust
Company shall advise the Broker-Dealers by telephone of the 60-day "AA"
Composite Commercial Paper Rate, The Minimum Applicable Rate and the
Maximum Applicable Rate.
(b) In the event that the Auction Date for any Auction
shall be changed after the Trust Company has given notice referred to in
clause (vii) of paragraph (a) of the Settlement Procedures, the Trust
Company, by such means as the Trust Company 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 on the old Auction Date. Thereafter, BD shall
promptly notify its customers whom BD believes are Existing Holders of
shares of the DARTS of such change in Auction Date.
(c) For each Auction Date for which BD submits an Order
for any Bidder which is accepted, BD shall maintain, for a period of at
least fifteen months, a list of such Holder or Holders and the number of
shares of DARTS held by each such Holder ("Holder Lists"). The Trust
Company or the Company from time to time may request BD and each other
Broker-Dealer to provide the Trust Company or the Company with any such
Holder Lists and/or with a list of their respective customers that BD and
such Broker-Dealers believe are Existing Holders of shares of the DARTS.
BD shall comply with any such request, and the Trust Company and the
Company shall not disclose any such information so provided to any Person
except as provided and in accordance with Sections 2.2 (f), 2.7 and 4.7 of
the Trust Company Agreement.
(d) The Trust Company is not required to accept the
Purchaser's Letter of any Potential Holder who wishes to submit a Bid for
the first time in an Auction or any amendment to a Purchaser's Letter of
any Potential Holder or Existing Holder who wishes to amend its
Purchaser's Letter intending that such amendment is to take effect with
respect to an Auction, unless such Purchaser's Letter or such amendment is
received by the Trust Company by 3:00 P.M. on the Business Day preceding
such Auction Date.
2.3 AUCTION SCHEDULE: METHOD OF SUBMISSION OF ORDERS.
(a) The Trust Company shall conduct Auctions in accordance
with the schedule set forth below. Such schedule may be changed by the
Trust Company with the consent of the Company, which consent shall not be
unreasonably withheld. The Trust Company shall give written 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.
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Time on Auction Date Event
-------------------- -----
By 9:30 A.M. Trust Company advises Company and
Broker-Dealers of 60-day "AA"
Composite Commercial Paper Rate, the
Minimum Applicable Rate and the
Maximum Applicable Rate as set forth
in Section 2.2 (a) hereof.
Between 9:30 A.M. and 12:30 P.M. Trust Company assembles information
communicated to it by Broker-Dealers
as provided in Section 6.9 (c) of
Article VI of the By-Laws. Submission
Deadline is 12:30 P.M. or such other
time on any Auction Date as the Trust
Company specifies.
After 1:00 P.M. Trust Company makes determinations
pursuant to Section 6.9 (d) (i) of
Article VI of the By-Laws.
By approximately 3:00 P.M. Trust Company advises Company of
results of Auction as provided in
Section 6.9 (d) (ii) of Article VI of
the By-Laws. Submitted Bids and
Submitted Sell Orders are accepted
and rejected and shares of the DARTS
allocated as provided in Section 6.9
(e) of Article VI of the By-Laws. The
Trust Company gives notice of Auction
results as set forth in Section 2.4
(a) hereof.
(b) BD agrees to maintain a list of Potential Holders to
contact the Potential Holders on such list on or prior to each Auction
Date for the purposes set forth in Section 6.9 of Article VI of the By-
Laws, and to deliver to each Potential Holder prior to such Potential
Holder's initial participation in an Auction (i) a Prospectus, if such
delivery is in the 90-day period following the date of the Prospectus, or
(ii) a Summary, if such delivery is thereafter.
(c) BD agrees not to sell, assign or dispose of any shares
of the DARTS to any Person who has not delivered a signed Purchaser's
Letter to the Trust Company.
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(d) BD shall submit Orders to the Trust Company in writing
in substantially the form attached hereto as Exhibit E or by electronic
transmission of a type acceptable to the Trust Company. BD shall submit
separate Orders to the Trust Company for each Potential Holder or Existing
Holder on whose behalf BD is submitting an Order and shall not net or
aggregate the Orders of different Potential Holders or Existing Holders on
whose behalf BD is submitting Orders.
(e) BD shall deliver to Trust Company a written notice,
substantially in the form attached hereto as Exhibit F, of transfers of
shares of the DARTS made through BD by an Existing Holder to another
Person other than pursuant to an Auction and, subject to the terms of
Section 2.2 (d) hereof, shall deliver or cause to be delivered the related
Purchaser's Letter executed by such Person if such Person has not
previously so delivered or caused to be delivered a Purchaser's Letter.
BD shall deliver a written notice, substantially in the form attached
hereto as Exhibit G, of the failure of any shares of the DARTS to be
transferred to or by any Person that purchased or sold shares of the DARTS
through BD pursuant to the Auction. The Trust Company is not required to
accept any notice specified in this section 2.3 (e) intended to take
effect with respect to an Auction unless it is received by the Trust
Company by 3:00 P.M. on the business Day preceding the related Auction
Date.
(f) BD on or prior to the Date of Original Issue shall
provide the Trust Company with a list of the initial Existing Holders of
the shares of the DARTS who purchased such shares through BD, if any. In
order to verify the accuracy and authenticity of the list of Existing
Holders so provided or the Holder Lists provided pursuant to Section 2.2
(c), the Trust Company may confirm those lists by sending confirmation
notices containing lists ("confirmation lists") of the Existing Holders or
prior Holders, as the case may be, to BD within ten Business Days of the
Trust Company's receipt thereof If the lists contained in any confirmation
list received by BD shall not conform to the original list of Existing
Holders or Holders Lists provided by BD to the Trust Company, BD shall
notify the Trust Company of such discrepancy within two Business Days
after its receipt of the Trust Company's confirmation lists. Subject to
any change based on any discrepancy notified to the Trust Company by BD,
the confirmation lists sent by the Trust Company shall, in the absence of
manifest error, be binding and conclusive on the Company and BD.
(g) BD agrees to handle its customer's Orders in
accordance with its duties under applicable securities laws and rules.
2.4 NOTICES.
(a) On each Auction Date, the Trust Company shall notify
BD by telephone as provided in paragraph (a) of the Settlement Procedures.
By approximately 10:30 A.M. on the Business Day next succeeding such
Auction Date, the Trust Company shall notify BD in writing of the
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disposition of all Orders submitted by BD in the Auction held on such
Auction Date.
(b) BD shall notify each Existing Holder or Potential
Holder on whose behalf BD has submitted an Order as provided in paragraph
(b) of the Settlement Procedures and take such other action as is required
of BD pursuant to the Settlement Procedures.
(c) If the number of Dividend Period Days is increased as
provided in Section 6.4 (b) (i) of Article VI of the By-Laws, the Trust
Company shall provide BD with a form of notice of such change not later
than five days after the receipt of such form of notice by the Trust
Company from the Company. BD shall mail a copy of such notice (at the
address specified in such Existing Holder's Purchaser's Letter) to each
Existing Holder which acquired through BD, and, to the knowledge of BD,
has not disposed of its shares of the DARTS, at least 10 days prior to the
first day of the Dividend Period for which such change is to be effective.
2.5 SERVICE CHARGE TO BE PAID TO BD. On each Dividend Payment Date for
the DARTS, the Trust Company shall pay to BD from monies received from the
Company an amount equal to the product of (1) a fraction, the numerator of which
is the number of days in the Dividend Period beginning on such Dividend Payment
Date (calculated by counting the first day but excluding the last day of such
Dividend Period) and the denominator of which is 360, (ii) 1/4 of 1%, (iii)
$100,000 and (iv) the sum of (A) the aggregate number of the shares of the DARTS
placed by BD in such Auction that were (x) the subject of Submitted Bids of
Existing Holders submitted by BD and continued to be held as a result of such
submission and (y) the subject of Submitted Bids of Potential Holders submitted
by BD and were purchased as a result of such submission, (B) the aggregate
number of shares of the DARTS subject to valid Hold Orders submitted to the
Trust Company by BD and (C) the number of shares of the DARTS that were covered
by Hold Orders deemed to have been submitted by Existing Holders and that were
acquired by such Existing Holders through BD. For purposes of subclause (iv)
(C) of the foregoing sentence, if any Existing Holder who acquired shares of the
DARTS through BD transfers those shares to another Person other than pursuant to
an Auction, then BD shall continue to be the Broker-Dealer for the shares so
transferred; PROVIDED, HOWEVER, that if the transfer was effected by, or if the
transferee is, a Broker-Dealer other than BD, then such other Broker-Dealer
shall be the Broker-Dealer for such shares.
2.6 SETTLEMENT.
(a) If any Existing Holder on whose behalf BD has
submitted a Bid or Sell Order that was accepted in whole or in part fails
to instruct its Agent Member to deliver shares of the DARTS against
payment therefor, BD shall instruct such Agent Member to deliver to it
such shares against payment therefor and BD may deliver to the Potential
Holder on whose behalf BD submitted a Bid that was accepted in whole or in
part a number of shares of the DARTS that is less than the number of
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shares of the DARTS specified in such Bid to the purchaser by such
Potential Holder. Notwithstanding the foregoing terms of this Section 2.6
(a), any delivery or non-delivery of shares of DARTS which represents any
departure from the results of an Auction, as determined by the Trust
Company, shall be of no effect unless and until the Trust Company shall
have been notified of such delivery or non-delivery in accordance with
Section 2.3 (e) hereof. The Trust Company shall have no duty or liability
with respect to enforcement of this Section 2.6 (a).
(b) Neither the Trust Company nor the Company shall have
any responsibility or liability with respect to the failure of an Existing
Holder, a Potential Holder or its respective Agent Member to deliver
shares of the DARTS or to pay for shares of the DARTS sold or purchased
pursuant to the Auction Procedures or otherwise.
2.7 DISBURSEMENT OF ADDITIONAL DIVIDENDS. If the Company provides the
Trust Company and BD with a notice of its intent to pay Additional Dividends
substantially in the form set forth in Exhibit H hereto with appropriate
insertions (the "Additional Dividend Notice"), and not later than noon on the
Business day immediately preceding the Additional Dividend Payment Date
specified in such notice, the Trust Company or the Company irrevocably deposits
with BD sufficient funds for the payment of such Additional Dividends, BD shall
disburse such funds to Existing Holders and former Holders in the amounts and in
accordance with instructions specified in the Additional Dividend Notice. BD
shall have no duty or liability with respect to this Section 2.7 other than to
disburse the amounts received by it from the Trust Company or the Company in the
manner specified in the Additional Dividend Notice.
3. THE TRUST COMPANY.
3.1 DUTIES AND RESPONSIBILITIES.
(a) The Trust Company is acting solely as agent of the
Company hereunder and owes no fiduciary duties to any other Person by
reason of this Agreement.
(b) The Trust Company undertakes to perform such duties
and only such duties as are specifically set forth in this Agreement, and
no implied covenants or obligations shall be read into this Agreement
against the Trust Company.
(c) In the absence of bad faith or negligence on its part,
the Trust Company shall not be liable for any action taken, suffered or
omitted or for any error of judgment made by it in the performance of its
duties under this Agreement. The Trust Company shall not be liable for
any error of judgment made in good faith unless the Trust Company shall
have been negligent in ascertaining the pertinent facts.
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3.2 RIGHTS OF THE TRUST COMPANY.
(a) The Trust Company may rely and shall be protected in
acting or refraining from acting upon any communication authorized by this
Agreement and upon any written instruction, notice, request, direction,
consent, report, certificate, share certificate or other instrument,
paper, or document believed by it to be genuine. The Trust Company shall
not be liable for acting upon any telephone communication authorized by
this Agreement which the Trust Company believes in good faith to have been
given by the Company or by a Broker-Dealer. The Trust Company may record
by tape or otherwise telephone communications with the Broker-Dealers.
(b) The Trust Company may consult with counsel 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 Trust Company 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 Trust Company may perform its duties and exercise
its rights hereunder either directly or by or through agents or attorneys.
3.3 TRUST COMPANY'S DISCLAIMER. The Trust Company makes no
representation as to the validity or adequacy of this Agreement or the shares of
the DARTS.
4. MISCELLANEOUS.
4.1 TERMINATION. Either party may terminate this Agreement at any time
on five days' notice to the other party. This Agreement shall terminate
automatically upon termination of the Trust Company Agreement.
4.2 AGENT MEMBER. At the date hereof BD is, and shall remain for the
terms of this Agreement, a participant in, or member of, the Securities
Depository.
4.3 COMMUNICATIONS. Except for (i) communications authorized to be by
telephone by this Agreement or the Auction Procedures or (ii) communications in
connection with the Auctions (other than those expressly required to be in
writing), all notices, requests and other communications to either party
hereunder shall be in writing (including telecopy or similar writing) and shall
be given to such party, addressed to it, at its address or telecopier number set
forth below:
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If to BD: X.X. Xxxxxx
addressed: 00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. X'Xxxxxx
Telecopier No: 000-000-0000
Telephone No: 000-000-0000
If to the Auction Agent: Bankers Trust Company
0 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxx
Telecopier No: (000) 000-0000
Telephone No: (000) 000-0000
or such other address, telephone or telecopier number as such party may
hereafter specify for such purpose by notice to the other party. Each such
notice, request or communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified herein and the
appropriate answer back is received or (ii) if given by any other means, when
delivered at the address specified herein. Communications shall be given on
behalf of BD by a BD Officer and on behalf of the Trust Company by an Authorized
Officer. BD may record telephone communications with the Trust Company.
4.4 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.
4.5 BENEFITS. Nothing in this Agreement, express or implied, shall
give to any person, other than the Company, the Trust Company and BD and their
respective successors and assigns any benefits of any legal or equitable right,
remedy or claim under this Agreement.
4.6 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 duly authorized representatives
of the parties hereto.
(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.
4.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon,
inure to the benefit of, and be enforceable by, the respective successors and
assigns of BD and the Trust Company.
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4.8 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 of the remaining clauses, provisions and sections
hereof.
4.9 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. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
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: /s/ Xxxx Xxxxx
---------------------------
Name: Xxxx Xxxxx
Title: Associate
X.X. Xxxxxx
By: /s/ Xxxxx X'Xxxxxx
---------------------------
Name: Xxxxx X'Xxxxxx
Title: Vice President
