-------------------------------------------------------------------------------
TRUST COMPANY AGREEMENT
between
PATRIOT PREMIUM DIVIDEND FUND II
and
MANUFACTURERS HANOVER TRUST COMPANY
Dated as of December 21, 1989
Relating to
DUTCH AUCTION RATE TRANSFERABLE SECURITIES
PREFERRED STOCK SERIES A AND SERIES B
of
PATRIOT PREMIUM DIVIDEND FUND II
-------------------------------------------------------------------------------
TRUST COMPANY AGREEMENT dated as of December 21, 1989 between Patriot
Premium Dividend Fund II, a Massachusetts Business Trust (the "Company"), and
Manufacturers Hanover Trust Company, a New York corporation, acting through its
Corporate Trust Department (the "Trust Company").
The Company proposes to issue 598 shares of Dutch Auction Rate
Transferable Securities Preferred Stock Series A (the "Series A DARTS") and 598
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 Agreement and Declaration of Trust and its By-Laws. The Company
desires that the Trust Company perform certain duties in connection with the
DARTS upon the terms and conditions of this Agreement, and hereby appoints the
Trust Company to act in the capacities set forth in this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the Company and the Trust Company agree as follows:
1. Definitions and Rules of Construction.
-------------------------------------
1.1 Terms Defined by Reference to Restated Agreement and Declaration of
Trust and the By-Laws.
---------------------
Capitalized terms not defined herein shall have the respective meanings
specified in the Declaration of Trust and the By-Laws.
1.2 Terms Defined Herein.
--------------------
As used herein and in the Settlement Procedures, the following terms shall
have the following meanings, unless the context otherwise requires:
(a) "Agent Member" of any Person shall mean a member of, or
participant in, the Securities Depository that will act on behalf of a
Person and is identified as such in such Person's Purchaser's Letter.
(b) "Auction" shall mean each periodic operation of the
Auction Procedures that are set forth in Section 6.9 of Article VI of the
By-Laws.
(c) "Auction Procedures" shall mean the Auction Procedures
that are set forth in Section 6.9 of Article VI of the By-Laws.
(d) "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 hereof in a
communication to the Company.
(e) "Broker-Dealer Agreement" shall mean each agreement
between the Trust Company and a Broker-Dealer substantially in the form
attached hereto as Exhibit A.
(f) "By-Laws" shall mean the By-Laws of the Company, as
adopted by the Company's Board of Trustees on November 6, 1989, and as
amended on December 14, 1989, a copy of which is attached hereto as
Exhibit B, as the same may be further amended from time to time.
(g) "Company officer" shall mean the Chairman of the Board
of Directors, the President, each Vice President (whether or not
designated by a number or word or words added before or after the title
"Vice President"), the Secretary, the Treasurer, each Assistant Secretary
and each Assistant Treasurer of the Company and every other officer or
employee of the Company designated as a "Company Officer" for purposes
hereof in a notice to the Trust Company.
(h) DARTS shall mean the Series A DARTS and the Series B
DARTS.
(i) "Declaration of Trust" shall mean the Agreement and
Declaration of Trust of the Company, as filed by the Company on September
26, 1989 in the office of the Secretary of the Commonwealth of
Massachusetts as amended on December 14, 1989 and filed in the office of
the Secretary of the Commonwealth of Massachusetts on December 14, 1989, a
copy of which is attached hereto as Exhibit C.
(j) "Fiscal Year-End Dividend Period" with respect to each
series of the DARTS shall mean the Dividend Period for which the Dividend
Payment Date is the first Dividend Payment Date for such series occurring
in the fiscal year following the fiscal year in respect of which the
Company is obligated to pay Additional Dividends to the Holders.
(k) "Purchaser's Letter" shall mean a master purchaser's
letter substantially in the form attached hereto as Exhibit D.
(l) "Series A DARTS" shall mean the Dutch Auction Rate
Transferable Securities Preferred Stock Series A, liquidation preference
$100,000 per share, to be issued by the Company.
(m) "Series B DARTS" shall mean the Dutch Auction Rate
Transferable Securities Preferred Stock Series B, liquidation preference
$100,000 per share, to be issued by the Company.
(n) "Settlement Procedures" shall mean the Settlement
Procedures attached hereto as Exhibit E.
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 shallinclude the
plural number and vice versa.
3
(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
of this Agreement.
(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.
-----------
2.1 Purpose; Incorporation by Reference of Auction Procedures and
Settlement Procedures.
---------------------
(a) The By-Laws provide that the Applicable Rate on the
shares of each series of the DARTS for each Dividend Period after the
initial Dividend Period for such series shall, except under certain
circumstances, be the rate per annum that a bank or trust company
appointed by the Company advises results from the implementation of the
Auction Procedures for such series of the DARTS. The Board of Directors of
the Company has adopted a resolution appointing Manufacturers Hanover
Trust Company as Trust Company for purposes of implementing the Auction
Procedures for each series of the DARTS. The Trust Company accepts such
appointment and agrees to follow the procedures set forth in this Section
2 and the Auction Procedures for the purpose of determining the Applicable
Rate for the DARTS. Separate Auctions will be conducted with respect to
each series of the DARTS.
(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 hereof to the
same extent as if such provisions were fully set forth herein.
2.2 Preparation for Each Auction; Maintenance of Registry of Beneficial
Owners.
------
(a) Not later than the Date of original Issue, the Company
will provide the Trust Company with a list of the Broker-Dealers and a
manually signed copy of each Broker-Dealer Agreement. Not later than seven
days prior to any Auction Date for which any change in such list of
Broker-Dealers is to be effective, the Company will notify the Trust
Company in writing of such change and, if any such change is the addition
of a Broker-Dealer to such list, shall cause to be delivered to the Trust
Company for execution by the Trust Company a Broker-Dealer Agreement
manually signed by such Broker-Dealer. The Trust Company shall have
entered into a Broker-Dealer Agreement with each Broker-Dealer prior to
the participation of any such Broker-Dealer in any Auction.
(b) In the event that the Auction Date for any Auction
shall be changed after the Trust Company has given the notice pursuant to
clause (vii) of paragraph (a) of the Settlement Procedures, the Trust
4
Company, by such means as the Trust Company deems practicable, shall give
notice of such change to the Broker-Dealers not later than the earlier of
9:15 A.M. on the new Auction Date and 9:15 A.M. on the old Auction Date.
(c) (i) If the number of Dividend Period Days for both
series of DARTS is adjusted as provided in Section 6.4 (b) (i) of Article
VI of the By-Laws, not later than 21 days prior to the first day of the
first Dividend Period for such series of the DARTS for which such change
is first to be effective, the Company shall provide the Trust Company with
a form of notice of such change to be sent to Existing Holders by Broker-
Dealers pursuant to Section 2.4(c) of the Broker-Dealer Agreements. The
Trust Company shall provide each Broker-Dealer with such form of notice
not later than five days after receipt thereof from the Company.
(ii) If (a) there is any change in the credit rating of
either series of the DARTS referred to in the definition of the Maximum
Applicable Rate by either rating agency (or any substitute or successor rating
agency) that results in any change in the Prevailing Rating for either series of
DARTS after the date of this Agreement or (b) if the most recent Auction for
either series of DARTS resulted in an Applicable Rate equal to or higher than
the percentage of the 60-day "AA" Composite Commercial Paper Rate specified in
column I or column II of the table in the definition of Maximum Applicable Rate,
the Company shall notify the Trust Company in writing of such change in the
Prevailing Rating or that the Applicable Rate exceeded such percentage and, in
each case, shall notify the Trust Company of the corresponding percentage (the
"Applicable Percentage") to be used by the Trust Company to calculate the
Maximum Applicable Rate prior to 9:00 a.m. on the Auction Date for such series
of DARTS. The Applicable Percentage in effect on the date of this Agreement for
the Series A DARTS and the Series B DARTS is 110%. The Trust Company shall be
entitled to rely on the last Applicable Percentage of which it has received
notice from the Company (or, in the absence of such notice, the Applicable
Percentage set forth in the preceding sentence) in determining the Maximum
Applicable Rate as set forth in Section 2.2(d) (i) hereof.
(d) (i) On each Auction Date for either series of the
DARTS, the Trust Company shall determine the 60-day "AA" Composite
Commercial Paper Rate, the Minimum Applicable Rate and the Maximum
Applicable Rate. If the 60-day "AA" Composite Commercial Paper Rate is not
quoted on an interest basis, the Trust Company shall convert the quoted
rate to its interest equivalent thereof as set forth in Section 6.2(eee)
of Article VI of the By-Laws if the rate obtained by the Trust Company is
quoted on a discount basis or, if the rate obtained by the Trust Company
is quoted on another basis, the Trust Company shall convert such quoted
rate to its interest equivalent after consultation with the Company as to
the method of such conversion. Not later than 9:30 A.M. on each Auction
Date for either series of the DARTS, the Trust Company shall notify the
Company and the Broker-Dealers of the 60-day "AA" Composite Commercial
Paper Rate and the Maximum Applicable Rate so determined.
(ii) If the 60-day "AA" Composite Commercial Paper Rate is
to be based on rates supplied by the Commercial Paper Dealers, and one or more
of the Commercial Paper Dealers shall fail to provide a quotation or quotations
for the determination of the 60-day "AA" Composite Commercial Paper Rate, the
Trust Company shall immediately notify the Company so that the Company can
determine whether to select a Substitute Commercial Paper Dealer or Substitute
Commercial Paper Dealers to provide the quotation or quotations not being
5
supplied by such Commercial Paper Dealer or Commercial Paper Dealers. The
Company shall promptly advise the Trust Company of any such selection.
(e) (i) The Trust Company shall maintain a registry of the
beneficial owners of the shares of each series of the DARTS, who shall
constitute Existing Holders of shares of such series for purposes of
Auctions, and shall indicate therein the identity of each Existing Holder,
if any, on whose behalf each Broker-Dealer submitted the most recent Order
in any Auction that resulted in such Existing Holder continuing to hold or
purchasing shares of such series of the DARTS. The Trust Company shall
keep such registry current and accurate. The Company shall provide or
cause the Broker-Dealers to provide on its behalf to the Trust Company on
the Date of Original Issue a list of the initial Existing Holders of the
shares of each series of the DARTS and the respective Broker-Dealer of
each such Existing Holder through which such Existing Holder purchased
such shares of each series of the DARTS. The Trust Company may rely upon,
as evidence of the identities of the Existing Holders, such list, the
results of Auctions and notices from the Broker-Dealer of each such
Existing Holder with respect to such Existing Holder's transfer of shares
of such series of the DARTS to another Person. Except as permitted by
Sections 2.2(f), 2.7 and 4.7 hereof, the Trust Company shall not disclose
this information to any other Person.
(ii) In the event of any partial redemption of shares of
either series of the DARTS, the Trust Company shall, at least two Business Days
prior to the next Auction for shares of such series, request the Agent Member of
each Existing Holder of shares of such series to disclose to the Trust Company
(upon selection by such Agent Member of the Existing Holders whose shares are to
be redeemed) the number of shares of DARTS of such series, if any, of each such
Existing Holder, if any, which are subject to such redemption, provided that the
Trust Company has been furnished, at least three Business Days prior to such
Auction, with the name and telephone number of a person or department at such
Agent Member from which it shall request such information. Upon the refusal of
the Agent Member to release such information, the Trust Company shall deliver to
such Agent Member a facsimile copy of such Existing Holder's Purchaser's Letter,
which authorizes and instructs such Agent Member to release such information to
the Trust Company. In the absence of receiving any such information with respect
to an Existing Holder, the Trust Company may continue to treat such Existing
Holder as the beneficial owner of the number of shares of such series of the
DARTS shown in the Trust Company's registry.
(iii) The Trust Company shall be required to register a
transfer of shares of the DARTS from an Existing Holder to another Person only
if such transfer is made to a Person that has delivered or caused to be
delivered a signed Purchaser's Letter to the Trust Company and if (A) such
transfer is pursuant to an Auction or (B) the Trust Company has been notified in
writing (I) in a notice substantially in the form of Exhibit E to the Broker-
Dealer Agreements, by an Existing Holder or the Broker-Dealer or the Agent
Member of such Existing Holder of such transfer or (II) in a notice
substantially in the form of Exhibit G to the Broker-Dealer Agreements, by the
Broker-Dealer of any Person that purchased or sold such shares of the DARTS in
an Auction of the failure of such shares of the DARTS to be transferred as a
6
result of such Auction. The Trust Company is not required to accept any such
notice for an Auction unless it is received by the Trust Company by 3:00 P.M. on
the Business Day preceding such Auction Date.
(f) The Trust Company may request the Broker-Dealers, as
set forth in the Broker-Dealer Agreements, to provide the Trust Company
with a list of their respective customers that such Broker-Dealers believe
are Existing Holders of shares of either series of the DARTS. The Trust
Company shall keep confidential such registry of Existing Holders and
shall not disclose the identities of the Existing Holders to any Person
other than the Company and the Broker-Dealer that provided such
information.
(g) 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 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.
----------------
The Trust Company shall conduct Auctions for each series of the DARTS 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 each Broker-Dealer. Such notice shall be given prior to the close of
business on the Business Day next preceding the first Auction Date on which any
such change shall be effective.
Time on Auction Date Event
-------------------- -----
Between 9:30 A.M. Trust Company advises the Company and
Broker-Dealers of 60-day "AA" Composite
Commercial Paper Rate, the Minimum
Applicable Rate and Maximum Applicable
Rate as set forth in Section 2.2(d)(i)
hereof.
Between 9:30 A.M. and Trust Company assembles information
12:30 P.M. communicated to it by Broker-Dealers as
provided in Section 6.9(c) of Article VI
of the By-Laws. Submission Deadline is
1:00 P.M. or such other time on any
Auction Date as the Trust Company
specifies.
Not earlier than 12:30 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
7
the DARTS allocated as provided in
Section 6.9(e) of Article VI of the
By-Laws.
Trust Company gives notice of Auction
results as set forth in the Settlement
Procedures.
2.4 Notice of Auction Results.
-------------------------
The Trust Company shall follow the notification procedures set forth in
paragraph (a) of the Settlement Procedures.
2.5 Broker-Dealers.
--------------
(a) Not later than 12:00 noon on each Dividend Payment Date
for either series of the DARTS, the Company shall pay to the Trust Company
an amount in cash equal to the product of (i) a fraction, the numerator of
which is the number of days in the Dividend Period beginning on the
relevant Dividend Payment Date (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) $100,000
times (iv) the aggregate number of shares of such series of the DARTS then
outstanding. The Trust Company shall advise the Company of the amount
referred to in the preceding sentence in respect of such Auction not later
than 4:00 P.M. on the Business Day preceding such Dividend Payment Date.
The Trust Company shall apply such monies as set forth in Section 2.5 of
the Broker-Dealer Agreements. To the extent that any such moneys are not
payable to a Broker-Dealer because Sufficient Clearing Bids did not exist
in the relevant Auction and shares of the DARTS therefore continued to be
held despite being subject to a Submitted Sell Order, the Trust Company
shall repay such money to the Company.
(b) The Company shall obtain the consent of the Trust
Company prior to selecting any Person to act as a Broker-Dealer, which
consent shall not be unreasonably withheld.
(c) The Trust Company shall terminate any Broker-Dealer
Agreement as set forth therein if so directed by the Company.
(d) Subject to Section 2.5(b) hereof, the Trust Company
shall from time to time enter into such Broker-Dealer Agreements as the
Company shall request.
(e) The Trust Company shall maintain a list of Broker-
Dealers.
2.6 Ownership of Shares of the DARTS and Submission of Bids by the
Company and Affiliates.
----------------------
The Company shall notify the Trust Company if the Company or any affiliate
(as such term is defined under the Investment Company Act of 1940) of the
Company acquires any shares of the DARTS. Neither the Company nor any affiliate
of the Company shall submit any order in any Auction. The Trust Company shall
have no duty or liability with respect to the enforcement of this Section 2.6.
8
2.7 Access to and Maintenance of Auction Records.
--------------------------------------------
The Trust Company, upon the written request of the Company, shall afford
to the Company and its agents, independent public accountants and legal counsel
access at reasonable times during normal business hours to all books, records,
documents and other information concerning the conduct and results of Auctions.
For purposes of the preceding sentence, the parties hereto acknowledge that
Broker-Dealers shall not be deemed agents of the Company. The Trust Company
shall maintain records relating to any Auction for a period of two years after
such Auction (unless requested by the Company to maintain such records for a
longer period not in excess of six years, then for such longer period), and such
records shall, in reasonable detail, accurately and fairly reflect the actions
taken by the Trust Company hereunder.
3. The Trust Company as Paying Agent.
---------------------------------
3.1 Company to Provide for Dividends and Redemptions.
------------------------------------------------
(a) Not later than 12:00 noon on the Business Day
immediately preceding each Dividend Payment Date with respect to which
dividends (or Additional Dividends with respect to the Fiscal Year-End
Dividend Period) on the shares of the DARTS have been declared, the
Company shall deposit or cause to be deposited with the Trust Company
sufficient funds (available on such Dividend Payment Date in New York
City) for the payment of such dividends or Additional Dividends; provided,
however, that the Company shall not be required to make any deposit with
the Trust company in respect of Additional Dividends other than Additional
Dividends payable with respect to the Fiscal Year-End Dividend Period. The
Company shall give the Trust Company irrevocable instructions to apply
such funds deposited with the Trust Company and, if applicable, the income
and proceeds therefrom, to the payment of such dividends or Additional
Dividends on such Dividend Payment Date. The Company may direct the Trust
Company to invest any available funds in Short-Term Money Market
Instruments; provided that the proceeds of any such investments will be
available in New York City at the opening of business on such Dividend
Payment Date.
(b) If the Company shall give a Notice of Redemption, then,
not later than 12:00 noon of the Business Day immediately preceding the
date fixed for redemption, the Company shall deposit with the Trust
Company sufficient funds (available on such redemption date in New York
City) to redeem the shares of DARTS called for redemption in such Notice
of Redemption and shall give the Trust Company irrevocable instructions to
apply such funds and, if applicable, the income and proceeds therefrom, to
the payment of the redemption price for such shares of the DARTS upon
surrender of the certificate or certificates therefor. The Company may
direct the Trust Company to invest any available funds in Short-Term Money
Market Instruments; provided that the proceeds of any such investments
will be available in New York City at the opening of business on the
redemption date.
(c) The Trust Company shall not be liable or responsible
for any loss, in whole or in part, incurred or resulting from any
investments made pursuant to paragraph (a) or (b) of this Section 3.1,
9
such investments being solely for the account of and at the risk of the
Company. The Trust Company shall also not be liable to the extent that
investments made by the Trust Company at the direction of the Company
pursuant to clause (a) or (b) of this Section 3.1 do not constitute Short-
Term Money Market Instruments.
(d) If pursuant to paragraph (a) or (b) of this Section 3.1
the Company directs the Trust Company to invest in Short-Term Money Market
Instruments and the Trust Company receives income on such investments,
then the Trust Company shall (to the extent that such income is not
required to pay dividends, Additional Dividends or the redemption price of
shares to be redeemed, as the case may be), upon the request of the
Company, transmit such income to the Company.
3.2 Disbursing Dividend and Redemption Price.
----------------------------------------
Subject to receipt of the requisite funds and instructions by the Company
as provided in Section 3.1 hereof, the Trust Company shall pay to the Holders of
shares of each series of the DARTS (i) on each Dividend Payment Date for such
series of the DARTS, dividends and, if applicable, Additional Dividends (to the
extent that the company has deposited with the Trust Company, pursuant to
Section 3.1(a) hereof, funds for the payment thereof) on such series of the
shares of the DARTS, and (ii) on any date fixed for redemption of shares of such
series of the DARTS, the redemption price for any shares of such series of the
DARTS called for redemption upon presentation and surrender of the certificate
or certificates evidencing shares of such series of the DARTS held by such
Holders and called for redemption. The amount of dividends for any Dividend
Period or portion thereof to be paid by the Trust Company to the Holders will be
determined by the Company' as set forth in Section 6.4(c) of Article VI of the
By-Laws.
The amount of Additional Dividends payable for any Fiscal Year-End
Dividend Period for any taxable year to be paid by the Trust Company to the
Holders will be determined by the Company as set forth in Sections 6.4(d) (iii)
and (iv) of Article VI of the By-Laws. The redemption price to be paid by the
Trust Company to the Holders will be determined by the Company as set forth in
Sections 6.6(a) and 6.6(b) of Article VI of the By-Laws. The Company shall
deliver to the Trust Company any Notice of Redemption required by Section
6.6(c)(ii) of Article VI of the By-Laws when mailed to the Holders of the shares
to be redeemed. Such notice shall contain the information required by such
Section 6.6(c) (ii) to be stated in the Notice of Redemption. The Trust Company
shall have no duty to determine the redemption price and may rely on the amount
thereof set forth in such notice.
3.3 Certificates of Eligible Asset Coverage and Dividend Coverage
-------------------------------------------------------------
(a) (i) The Company shall, no later than the close of
business on the second Business Day immediately following each Eligible
Asset Evaluation Date, deliver to the Trust Company a fully completed
Certificate of Eligible Asset Coverage, substantially in the form of
Exhibit F hereto (a "Certificate of Eligible Asset Coverage"), dated as of
such Eligible Asset Evaluation Date.
(ii) The Company shall, no later than the close of business
on the second Business Day immediately following each Dividend Coverage
10
Evaluation Date, deliver to the Trust Company a fully completed Certificate of
Dividend Coverage, substantially in the form of Exhibit G hereto (a "Certificate
of Dividend Coverage"), dated as of such Dividend Coverage Evaluation Date.
(b) If Item 9 of the Certificate of Eligible Asset Coverage
indicates that the Eligible Asset Coverage was not met as of any Eligible
Asset Evaluation Date, or if the Certificate of Eligible Asset Coverage is
not delivered when required, then the Company, no later than the close of
business on the second Business Day following the Eligible Asset Cure Date
related to such Eligible Asset Evaluation Date, shall deliver to the Trust
Company a Certificate of Eligible Asset Coverage, dated as of such
Eligible Asset Cure Date, indicating that the Eligible Asset Coverage was
met as of such Eligible Asset Cure Date.
(c) If Item 2.F of the Certificate of Dividend coverage
indicates that the Dividend Coverage was not met as of any Dividend
Coverage Evaluation Date, or if the Certificate of Dividend Coverage is
not delivered when required, then the Company, no later than the close of
business on the second Business Day following the Dividend Coverage Cure
Date with respect to such Dividend Coverage Evaluation Date, shall deliver
to the Trust Company a Certificate of Dividend Coverage, dated as of such
Dividend Coverage Cure Date, indicating that the Dividend Coverage is met
as of such Dividend Coverage Cure Date.
3.4 Accountants' Certificates.
-------------------------
(a) With respect to the Certificate of Eligible Asset
Coverage relating to the Eligible Asset Evaluation Date on the Date of
original Issue and, thereafter, with respect to the Certificate of
Eligible Asset Coverage relating to every succeeding seventh Evaluation
Date (or, if the Eligible Asset Coverage is not met as of any such
Eligible Asset Evaluation Date, the Eligible Asset Cure Date with respect
to any such Eligible Asset Evaluation Date), the Company shall cause the
Independent Accountants to deliver an Accountants' Certificate,
substantially in the form of Exhibit H hereto, to the Trust Company no
later than the close of business on the sixth Business Day following each
such Eligible Asset Evaluation Date (such sixth Business Day being
referred to herein as the "Confirmation Date").
(b) With respect to the Certificate of Dividend Coverage
relating to any Dividend Coverage Cure Date, the Company shall cause the
Independent Accountants to deliver an Accountants' Certificate,
substantially in the form of Exhibit I hereto, to the Trust Company no
later than the close of business on the second Business Day following such
Dividend Coverage Cure Date.
(c) With respect to the Certificate of 1940 Act Asset
Coverage relating to any 1940 Act Cure Date, the Company shall cause the
Independent Accountants to deliver an Accountants' Certificate,
substantially in the form of Exhibit J hereto, to the Trust Company no
later than the close of business on such 1940 Act Cure Date.
11
(d) If an Accountants' Certificate is not delivered to the
Trust Company by the close of business on any Confirmation Date confirming
that the Eligible Asset Coverage was met as of the related Eligible Asset
Evaluation Date or Eligible Asset Cure Date, as the case may be, then the
Company, no later than the close of business on the fourth Business Day
following such Confirmation Date, shall deliver to the Trust Company a
Certificate of Eligible Asset Coverage, dated as of the second Business
Day following such Confirmation Date, indicating that the Eligible Asset
Coverage was met as of such second Business Day, together with, if so
required by the Amended and Restated By-Laws, an Accountants' Certificate
confirming such Certificate of Eligible Asset Cure Asset Coverage.
3.5 Notice of Special Meeting of Holders of the DARTS of the Company.
----------------------------------------------------------------
(a) If an event described in Section 6.7 of Article VI of
the By-Laws occurs, then the Trust Company shall, upon receipt from the
Company of a notice of a special meeting of the holders of shares of the
DARTS (a "Special Meeting") in substantially the form set forth in Exhibit
K hereto with appropriate insertions (the "Notice"), mail such notice to
all Holders of shares of the DARTS who were Holders of record at the close
of business on the fifth Business Day preceding the date of mailing of the
Notice (the "Record Date"). The Trust Company shall insert the Record
Date, the date of the Special Meeting and the time of day of such meeting,
as specified by the Company, in the Notice.
(b) If at any time after the Trust Company shall have
mailed the Notice but before the Special Meeting shall have been held, all
accumulated and unpaid dividends (including Additional Dividends, if any)
on all then-outstanding shares of the Series A DARTS and the Series B
DARTS including the accumulated and unpaid dividends for the current
Dividend Period for the DARTS, of either series, shall have been paid or
declared and a sum sufficient for the payment of such dividends deposited
with the Trust Company, the Trust Company shall, upon receipt from the
Company of a notice of cancellation of such Special Meeting in
substantially the form set forth in Exhibit L hereto, mail such notice as
soon as practicable to all Holders of shares of the DARTS who were Holders
of record at the close of business on the fifth Business Day preceding the
date the Notice was mailed.
(c) The Company shall provide a temporary chairman for any
Special Meeting. The Trust Company shall have no obligations in connection
with such meeting, except with respect to the mailing of the Notice
pursuant to this Agreement.
3.6 Dividends on Common Stock; Notice to Holders.
--------------------------------------------
So long as any shares of the DARTS are outstanding, the Company shall not
declare, pay or set apart for payment any dividend or other distribution in
respect of the Common Stock or any other stock of the Company ranking junior to
the shares of the DARTS as to dividends or upon liquidation, or call for
redemption, redeem, purchase or otherwise acquire for consideration any shares
of the Common Stock or any other stock of the Company ranking junior to the
shares of the DARTS as to dividends or upon liquidation, unless, in each case,
12
the Company has prior to such transaction provided the Trust Company with a
certificate, substantially in the form of Exhibit M hereto.
4. The Trust Company as Transfer Agent and Registrar.
-------------------------------------------------
4.1 Original Issue of Stock Certificates.
------------------------------------
With respect to each series of the DARTS, on the Date of Original Issue,
one certificate representing all of the shares of the Series A DARTS and one
certificate representing all of the shares of the Series B DARTS shall be issued
by the Company and, at the request of the Company, registered in the name of
Cede & Co. and countersigned by the Trust Company.
4.2 Registration of Transfer or Exchange of Shares.
----------------------------------------------
Except as otherwise provided in this Section 4.2, shares of the DARTS
shall be registered solely in the name of the Securities Depository or its
nominee. If the Securities Depository shall give notice of its intention to
resign as such, and if the Company shall not have selected a substitute
Securities Depository acceptable to the Trust Company prior to such resignation,
then upon such resignation, the shares of each series of the DARTS shall be
registered for transfer or exchange, and new certificates shall be issued, in
the name or names of the designated transferee or transferees, upon surrender of
the old certificates in form deemed by the Trust Company properly endorsed for
transfer with all necessary endorsers' signatures guaranteed, in such manner and
form as the Trust Company may require, by a guarantor reasonably believed by the
Trust Company to be responsible, accompanied by such assurances as the Trust
Company shall deem necessary or appropriate to evidence the genuineness and
effectiveness of each necessary endorsement and satisfactory evidence of
compliance with all applicable laws relating to the collection of taxes or funds
necessary for the payment of such taxes.
4.3 Removal of Legend.
-----------------
All requests for removal of legends on certificates representing shares of
the DARTS indicating restrictions on transfer shall be accompanied by an opinion
of counsel stating that such legends may be removed and the shares represented
by such certificate may be freely transferred. Such opinion shall be delivered
under cover of a letter from a Company Officer authorizing the Trust Company to
remove the legend on the basis of said opinion.
4.4 Lost Stock Certificates.
-----------------------
The Trust company shall issue and register replacement certificates for
certificates represented to have been lost, stolen or destroyed, upon the
fulfillment of such requirements as shall be deemed appropriate by the Company
and the Trust Company, subject at all times to provisions of law, the By-Laws of
the Company governing such matters and resolutions adopted by the Board of
Directors of the Company with respect to such matters. The Trust Company may
issue new certificates in exchange for and upon the cancellation of mutilated
certificates. Any request by the Company to the Trust Company to issue a
replacement or new certificate pursuant to this Section 4.4 shall be deemed to
be a representation and warranty by the Company to the Trust Company that such
issuance will comply with such provisions of law and By-Laws and resolutions of
the Board of Directors of the Company.
13
4.5 Disposition of Cancelled Certificates; Record Retention.
-------------------------------------------------------
In accordance with applicable rules and regulations of the Securities and
Exchange Commission, the Trust Company shall retain stock certificates which
have been cancelled in transfer or in exchange and the accompanying
documentation for two calendar years. Upon the expiration of the two-year
period, the Trust Company shall deliver to the Company such cancelled
certificates and the accompanying documentation. The Company shall, at its
expense, retain such records for a minimum additional period of four calendar
years from the date of delivery of the records to the Company and shall make
such records available during this period at any time, or from time to time, for
reasonable periodic, special, or other examinations by representatives of the
Securities and Exchange Commission and the Board of Governors of the Federal
Reserve System. The Company shall also undertake to furnish to the Securities
and Exchange Commission and to the Board of Governors of the Federal Reserve
System, upon demand, at either the principal office or at any regional office,
complete, correct and current hard copies of any and all such records.
Thereafter, such records shall not be destroyed by the Company without
concurrence of the Trust Company but shall be safely stored for possible future
reference.
4.6 Stock Books.
-----------
For so long as the Trust Company is acting as transfer agent for either
series of the DARTS, the Trust Company shall maintain the Stock Books listing
the Holders of the shares of the Series A DARTS and the Series B DARTS, the
number of shares of Series A DARTS and the Series B DARTS held by each Holder
and the address of each Holder. In case of any request or demand for the
inspection of the Stock Books of the Company or any other books in the
possession of the Trust Company, the Trust Company shall notify the Company and
secure instructions as to permitting or refusing such inspection. The Trust
Company reserves the right, however, to exhibit the Stock Books or other books
to any Person if it is advised by its counsel that its failure to do so would be
unlawful.
4.7 List of Holders.
---------------
If the Company is obligated to pay Additional Dividends in respect of any
dividends paid to the Holders, other than Additional Dividends payable with
respect to the Fiscal Year-End Dividend Period, the Trust Company shall, within
10 days of its receipt from the Company of a notice of its intent to pay
Additional Dividends in substantially the form set forth in Exhibit N hereto
with appropriate insertions and signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the Company,
furnish the Company with a list of the Existing Holders as of the record date
for the corresponding Dividend Payment Date for each Dividend Period specified
in such certificate.
4.8 Return of Funds.
---------------
Any funds deposited with the Trust Company hereunder .by the Company for
any reason, including but not limited to redemption of shares of the DARTS, that
remain unpaid after two years shall be repaid to the Company upon written
request of the Company.
5. Representations and Warranties of the Company.
---------------------------------------------
14
The Company represents and warrants to the Trust Company that:
(a) the Company has been duly organized and is validly
existing as a business trust in good standing under the laws of the State
of Massachusetts and has full power to execute and deliver this Agreement
and to authorize, create and issue the shares of the DARTS, and the shares
of the DARTS have been duly authorized, validly issued and are fully paid
and non-assessable;
(b) this Agreement has been duly and validly authorized,
executed and delivered by the Company and, assuming due authorization,
execution and delivery by the Trust Company, constitutes the legal, valid,
binding and enforceable obligation of the Company, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors rights and to
general equitable principles;
(c) the form of the certificates evidencing the shares of
the Series A DARTS and the Series B DARTS complies with all applicable
laws of the State of Massachusetts;
(d) the shares of the DARTS have been duly registered under
the Securities Act of 1933, as amended, and no action by or before any
governmental body or authority of the United States. or of any state
thereof is required in connection with the execution and delivery of this
Agreement or the issuance of the shares of the DARTS, except as required
by applicable state securities laws;
(e) the execution and delivery of this Agreement, the
performance by the Company of its obligations hereunder and the issuance
and delivery of the shares of the DARTS do not and will not conflict with,
violate, or result in a breach of, the terms, conditions or provisions of,
or constitute a default under, the Declaration of Trust or the By-Laws of
the Company, any law or regulation, any order or decree of any court or
public authority having jurisdiction, or any mortgage, indenture,
contract, agreement or undertaking to which the Company is a party or by
which it is bound; and
(f) no taxes are payable upon or in respect of the
execution of this Agreement or the issuance of the shares of the DARTS.
6. The Trust Company.
----------------
6.1 Duties and Responsibilities.
---------------------------
(a) The Trust Company is acting solely as agent of the
Company hereunder and owes no fiduciary duty 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 his Agreement, and no
implied covenants or obligations shall be read into this Agreement
against the Trust Company.
15
(c) The Trust Company shall have no duty or responsibility
to verify or determine the accuracy of any document delivered to it in
accordance with the terms hereunder. The Trust Company shall have no duty
or responsibility to enforce the obligations of the Company to provide the
Trust Company with any notice or document.
(d) 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.
6.2 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 hereby
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 hereby 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 Company or any of the Broker-Dealers or
both.
(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.
6.3 Trust Company's Disclaimer.
--------------------------
The Trust Company makes no representation as to the correctness of the
recitals in or the validity or adequacy of this Agreement, the Broker-Dealer
Agreements or the shares of the DARTS.
6.4 Compensation Expenses and Indemnification.
-----------------------------------------
(a) The Company shall pay the Trust Company from time to
time reasonable compensation for all services rendered by it hereunder and
under the Broker-Dealer Agreements.
(b) The Company shall reimburse the Trust Company upon its
request for all reasonable out-of-pocket expenses, disbursements and
advances incurred or made by the Trust Company in accordance with any
16
provision hereof or the Broker-Dealer Agreements (including the reasonable
compensation and the expenses and disbursements of its agents and
counsel), except any expense or disbursement attributable to its
negligence or bad faith.
(c) The Company shall indemnify the Trust Company against,
and hold it harmless from, any loss, liability or expense, incurred
without negligence or bad faith on its part, arising out of or in
connection with its agency hereunder or under the Broker-Dealer
Agreements, including the costs and expenses of defending itself against
any claim or liability in connection with its exercise or performance of
any of its duties hereunder and thereunder for which it is entitled to
indemnification hereunder or thereunder.
7. Miscellaneous.
-------------
7.1 Term of Agreement.
-----------------
(a) The term of this Agreement shall continue indefinitely
until this Agreement shall be terminated as provided in this Section 7.1.
The Company may terminate this Agreement at any time by so notifying the
Trust Company; provided that the Company has entered into an agreement in
substantially the form of this Agreement with a successor Trust Company or
no shares of the DARTS remain outstanding. The Trust Company may terminate
this Agreement upon notice to the Company on the date specified in such
notice which date shall be no earlier than the 98th day after the delivery
of such notice.
(b) Except as otherwise provided in this paragraph (b), the
respective rights and duties of the Company and the Trust Company under
this Agreement shall cease upon termination of this Agreement. The
Company's representations, warranties, covenants and obligations to the
Trust Company under Sections 5 and 6.4 hereof shall survive the
termination hereof. Upon termination of this Agreement, the duties of the
Trust Company under each of the Broker-Dealer Agreements shall cease and
at the Company's request, the Trust Company shall promptly deliver to the
Company copies of all books and records maintained by it in connection
with its duties hereunder.
7.2 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 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
person addressed to it, at its address or telecopier number set forth below:
If to the Company, Patriot Premium Dividend
addressed: Fund II
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
17
Attention: Xxxx Xxxxxxxx
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
If to the Trust Manufacturers Hanover Trust
Company, addressed: Company
Corporate Trust Department
00 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Corporate Trust
Department
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
18
with a copy, except Manufacturers Hanover Trust
communications in Company
connection with 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Auctions, to: Xxx Xxxx, Xxx Xxxx 00000
Attention: Agency
Administration
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
or to 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 when delivered at the
address specified herein. Communications shall be given on behalf of the Company
by a Company Officer and on behalf of the Trust Company by an Authorized
officer.
7.3 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 except for agreements
relating to the compensation of the Trust Company.
7.4 Benefits.
--------
Nothing herein, express or implied, shall give to any Person, other than
the Company, the Trust Company and their respective successors and assigns, any
benefit of any legal or equitable right, remedy or claim hereunder.
7.5 Amendment; Waiver.
-----------------
(a) This Agreement shall not be deemed or construed to be
modified, amended, rescinded, cancelled or waived, in whole or in part,
except by a written instrument signed by the parties hereto. The Company
shall notify the Trust Company of any change in the Declaration of Trust
or the By-Laws prior to the effective date of any such change; provided,
however, that any change in the By-Laws that would have a material effect
on the Trust Company's duties under the Auction Procedures must be
approved by the Trust Company, which approval shall not be unreasonably
withheld.
(b) Failure of either party hereto to exercise any right or
remedy hereunder in the event of a breach hereof by the other party shall
not constitute a waiver of any such right or remedy with respect to any
subsequent breach.
7.6 Successors and Assigns.
----------------------
This Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors and assigns of each of the Company and
the Trust Company.
19
7.7 Severability.
------------
If any clause, provision or section hereof 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 or sections hereof.
7.8 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.
7.9 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.
PATRIOT PREMIUM.DIVIDEND FUND II
By: /s/ Xxxxxx X. Xxxxx, Xx.
_________________________________________
Name: Xxxxxx X. Xxxxx, Xx.
Title: President
MANUFACTURERS HANOVER TRUST COMPANY
By: _________________________________________
Name
Title:
20
