BROKER-DEALER AGREEMENT
between
DEUTSCHE BANK TRUST COMPANY
and
[NAME OF BROKER-DEALER]
Dated as of October , 2002
Relating to
AUCTION PREFERRED SHARES
SERIES A AND SERIES B
of
XXXXX XXXXX INSURED NEW YORK MUNICIPAL BOND FUND
BROKER-DEALER AGREEMENT dated as of October , 2002, between DEUTSCHE BANK
TRUST COMPANY, a New York banking corporation (the "Auction Agent") (not in its
individual capacity, but solely as agent of Xxxxx Xxxxx Insured New York
Municipal Bond Fund, a Massachusetts business trust (the "Trust"), pursuant to
authority granted to it in the Auction Agency Agreement dated as of October ,
2002, between the Trust and the Auction Agent (the "Auction Agency Agreement"))
and [Name of Broker-Dealer] (together with its successors and assigns, "BD").
The Trust proposes to issue preferred shares of beneficial interest,
par value $0.01 per share, liquidation preference $25,000 per share, designated
Series A Auction Preferred Shares, and preferred shares of beneficial
interest, par value $0.01 per share, designated Series B Auction Preferred
Shares (collectively, the "APS"), pursuant to the Trust's Amended By-laws (as
defined below).
The Trust's Amended By-laws provide that the dividend rate on the APS for
each Dividend Period therefor after the Initial Dividend Period shall be the
Applicable Rate therefor, which in each case, in general shall be the rate per
annum that a commercial bank, trust company or other financial institution
appointed by the Trust advises resulting from implementation of the Auction
Procedures (as defined below). The Board of Trustees of the Trust has adopted a
resolution appointing Deutsche Bank Trust Company 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, and Associate of the
Auction Agent and every other officer or employee of the Auction Agent
designated as an "Authorized Officer" for purposes of this Agreement in a
communication to BD.
(e) "BD Officer" shall mean each officer or employee of BD
designated as a "BD Officer" for purposes of this Agreement in a
communication to the Auction Agent.
(f) "Broker-Dealer Agreement" shall mean this Agreement and any
substantially similar agreement between the Auction Agent and a
Broker-Dealer.
(g) "Settlement Procedures" shall mean the Settlement Procedures
attached hereto as Exhibit A.
1.3. Rules of Construction. Unless the context or use indicates
another or different meaning or intent, the following rules shall
apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural
number and vice versa.
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of this Agreement, nor shall
they affect its meaning, construction or effect.
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(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
By-laws concerning the notification of a Special Dividend Period will be
followed by the Auction Agent and BD, and the provisions contained therein are
incorporated herein by reference in their entirety and shall be deemed to be a
part of this Agreement to the same extent as if such provisions were set forth
fully herein.
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 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.
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(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.
(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
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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
9:30 A.M. - 1:30 P.M. Applicable Rate as set forth in
Section 3.2(a) hereof
Auction Agent assembles information
communicated to it by Broker-Dealers
as provided in Section 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
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shall not net or aggregate the Orders of Potential Beneficial Owners or
Beneficial Owners on whose behalf BD is submitting Orders.
(d) BD shall deliver to the Auction Agent (i) a written notice,
substantially in the form attached hereto as Exhibit C, of transfers of
shares of APS, made through BD by an Existing Holder to another Person
other than pursuant to an Auction, and (ii) a written notice,
substantially in the form attached hereto as Exhibit D, of the failure of
shares of APS to be transferred to or by any Person that purchased or sold
shares of APS through BD pursuant to an Auction. The Auction Agent is not
required to accept any notice delivered pursuant to the terms of the
foregoing sentence with respect to an Auction unless it is received by the
Auction Agent by 3:00 P.M. on the Business Day next preceding the
applicable Auction Date.
3.4. Notice of Auction Results.
(a) On each Auction Date, the Auction Agent shall notify BD by
telephone as set forth in paragraph (a) of the Settlement Procedures. On
the Business Day next succeeding such Auction Date, the Auction Agent
shall notify BD in writing of the disposition of all Orders submitted by
BD in the Auction held on such Auction Date.
(b) BD shall notify each Beneficial Owner, Potential Beneficial
Owner, Existing Holder or Potential Holder on whose behalf BD has
submitted an Order as set forth in paragraph (b) of the Settlement
Procedures, and take such other action as is required of BD pursuant to
the Settlement Procedures.
If any Beneficial Owner or Existing Holder selling shares of APS in an
Auction fails to deliver such shares, the BD of any Person that was to have
purchased shares of APS in such Auction may deliver to such Person a number of
whole shares of APS that is less than the number of shares that otherwise was to
be purchased by such Person. In such event, the number of shares of APS to be so
delivered shall be determined by such BD. Delivery of such lesser number of
shares shall constitute good delivery. Upon the occurrence of any such failure
to deliver shares, such BD shall deliver to the Auction Agent the notice
required by Section 3.3(d)(ii) hereof. Notwithstanding the foregoing terms of
this Section 3.4(b), any delivery or non-delivery of shares of APS which
represents any departure from the results of an Auction, as determined by the
Auction Agent, shall be of no effect unless and until the Auction Agent shall
have been notified of such delivery or non-delivery in accordance with the terms
of Section 3.3(d) hereof. The Auction Agent shall have no duty or liability with
respect to enforcement of this Section 3.4(b).
3.5. Service Charge to Be Paid to BD.
On the Business Day next succeeding each Auction Date, the Auction Agent
shall pay to BD from moneys received from the Trust an amount equal to: (a) in
the case of any Auction Date immediately preceding a Dividend Period of 7 days
or less, the product of (i) a fraction the numerator of which is the number of
days in such Dividend Period (calculated by counting the first day of such
Dividend Period but excluding the last day thereof) and the denominator of which
is 365, times (ii) 1/4 of 1%, times (iii) $25,000, times (iv) the sum of (A) the
aggregate
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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 sub-clause (a)(iv)(C) of the foregoing sentence, if any
Beneficial Owner who acquired shares of APS through BD transfers those shares to
another Person other than pursuant to an Auction, then the Broker-Dealer for the
shares so transferred shall continue to be BD, provided, however, that if the
transfer was effected by, or if the transferee is, a Broker-Dealer other than
BD, then such Broker-Dealer shall be the Broker-Dealer for such shares.
IV. THE AUCTION AGENT.
4.1. Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Trust
hereunder and owes no fiduciary duties to any other Person by reason of
this Agreement.
(b) The Auction Agent undertakes to perform such duties and only
such duties as are set forth specifically in this Agreement, and no
implied covenants or obligations shall be read into this Agreement against
the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the
Auction Agent shall not be liable for any action taken, suffered or
omitted by it, or for any error of judgment made by it in the performance
of its duties under this Agreement. The Auction Agent shall not be liable
for 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.
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(b) The Auction Agent may consult with counsel of its own choice,
and the advice of such counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or
risk its own funds or otherwise incur or become exposed to financial
liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys.
4.3. Auction Agent's Disclaimer. The Auction Agent makes no representation
as to the validity or adequacy of this Agreement or the APS.
V. MISCELLANEOUS.
5.1. Termination. Any party may terminate this Agreement at any time upon
five days' prior written notice to the other party; provided, however, that if
BD is [ ], 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 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, [Name of Broker-Dealer]
addressed to:
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Attention:
Telecopier No.:
Telephone No.:
If to the Auction: Deutsche Bank Trust Company Agent,
addressed to: Corporate Trust and Agency Group
[Four Albany Street]
[New York, NY 10006]
Attention: Auction Rate Securities
Telecopier No.: [212) 250-6215]
Telephone No.: [212) 000-0000]
or such other address or telecopier number as such party hereafter may specify
for such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of BD by a BD Officer and on behalf of
the Auction Agent by an Authorized Officer. BD may record telephone
communications with the Auction Agent.
5.5. Entire Agreement. This Agreement contains the entire agreement
between the parties relating to the subject matter hereof, and there are no
other representations, endorsements, promises, agreements or understandings,
oral, written or inferred, between the parties relating to the subject matter
hereof.
5.6. Benefits. Nothing in this Agreement, express or implied, shall give
to any person, other than the Trust, the Auction Agent and BD and their
respective successors and assigns, any benefit of any legal or equitable right,
remedy or claim under this Agreement.
5.7. Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a
written instrument signed by a duly authorized representative of the party
to be charged.
(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.
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5.9. Severability. If any clause, provision or section of this Agreement
shall be ruled invalid or unenforceable by any court of competent jurisdiction,
the invalidity or unenforceability of such clause, provision or section shall
not affect any remaining clause, provision or section hereof.
5.10. Execution in Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
5.11. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed in said state.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
DEUTSCHE BANK TRUST COMPANY
--------------------------------
By:
Title:
[NAME OF BROKER-DEALER]
---------------------------------
By:
Title:
11
EXHIBIT A
SETTLEMENT PROCEDURES
[Included in paragraph 10 of Appendix E to the Statement of Additional
Information of the Trust]
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EXHIBIT B
DEUTSCHE BANK TRUST COMPANY
AUCTION BID FORM
Submit To: Deutsche Bank Trust Company Issue: Xxxxx Xxxxx Insured
Corporate Trust and Agency Group New York Municipal Bond Fund
000 Xxxxx Xxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Auction Rate Securities
Telecopier No.: [(000) 000-0000]
Telephone No.: [(000) 000-0000]
The undersigned Broker-Dealer submits the following Order on behalf of the
Bidder listed below:
Name of Bidder:
----------------------------
BENEFICIAL OWNER
Shares now held HOLD
-------------------- -----------------
BID at rate of
-----------------
SELL
-----------------
POTENTIAL BENEFICIAL OWNER
# of shares bid
---------------
BID at rate of Notes:
-------------
(1) If submitting more than one Bid for one Bidder, use additional Auction Bid
Forms.
(2) If one or more Bids covering in the aggregate more than the number of
outstanding shares held by any Beneficial Owner are submitted, such bid shall be
considered valid in the order of priority set forth in the Auction Procedures on
the above issue.
(3) A Hold or Sell Order may be placed only by a Beneficial Owner covering a
number of shares not greater than the number of shares currently held.
(4) Potential Beneficial Owners may make only Bids, each of which must specify a
rate. If more than one Bid is submitted on behalf of any Potential Beneficial
Owner, each Bid submitted shall be a separate Bid with the rate specified.
(5) Bids may contain no more than three figures to the right of the decimal
point (.001 of 1%). Fractions will not be accepted.
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 Insured New York Municipal Bond Fund
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 Insured New York Municipal
Bond Fund in the Auction held on ____________________ from the seller of such
shares.
II. We are a Broker-Dealer for _____________________ (the "Seller"), which
sold ____ shares of APS of Xxxxx Xxxxx Insured New York Municipal Bond Fund, in
the Auction held on ______________ to the Purchaser of such shares.
We hereby notify you that (check one):
the Seller failed to deliver such shares to the Purchaser
-------
the Purchaser failed to make payment to the Seller upon delivery
-------
of such shares
Name:
-----------------------------
(Name of Broker-Dealer)
By:
-------------------------------
Printed Name:
Title:
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
DEUTSCHE BANK TRUST COMPANY
--------------------------------
By:
Title:
[NAME OF BROKER-DEALER]
--------------------------------
By:
Title:
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
DEUTSCHE BANK TRUST COMPANY
--------------------------------
By:
Title:
[NAME OF BROKER-DEALER]
--------------------------------
By:
Title:
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