Exhibit (k)(5)
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BROKER-DEALER AGREEMENT
between
THE BANK OF NEW YORK
and
XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX INCORPORATED
Dated as of ___________, 2003
Relating to
AUCTION MARKET PREFERRED STOCK
("AMPS"),
Series M[ ], Series T[ ], Series W[ ], Series TH[ ] and Series F[ ]
of
PREFERRED AND CORPORATE INCOME STRATEGIES FUND, INC.
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BROKER-DEALER AGREEMENT dated as of ____________, 2003, between THE BANK
OF NEW YORK, a New York banking corporation (the "Auction Agent") (not in its
individual capacity, but solely as agent of Preferred and Corporate Income
Strategies Fund, Inc., a Maryland corporation (the "Company"), pursuant to
authority granted to it in the Auction Agent Agreement dated as of ___________,
2003, between the Company and the Auction Agent (the "Auction Agent
Agreement")), and XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX INCORPORATED (together
with its successors and assigns, "BD").
The Company proposes to duly authorize and issue ________ shares of
Auction Market Preferred Stock, Series M[ ] ("Series M[ ] AMPS"), ____ shares of
Auction Market Preferred Stock, Series T[ ] ("Series T[ ] AMPS"), ____ shares of
Auction Market Preferred Stock, Series W[ ] ("Series W[ ] AMPS"), ___ shares of
Auction Market Preferred Stock, Series TH[ ] ("Series TH[ ] AMPS") and ____
shares of Auction Market Preferred Stock, Series F[ ] ("Series F[ ] AMPS") all
with a par value of $.10 per share and a liquidation preference of $25,000 per
share plus accumulated but unpaid dividends (whether or not earned or declared),
each pursuant to the Company's Articles Supplementary (as defined below). The
Series M[ ] AMPS, Series T[ ] AMPS, Series W[ ] AMPS, Series TH[ ] AMPS and
Series F[ ] AMPS are sometimes referred to together herein as the "AMPS."
The Company's Articles Supplementary provide that the dividend rate on
each series of AMPS for each Dividend Period therefor after the Initial Dividend
Period shall be the Applicable Rate therefor, which in each case, in general
shall be the rate per annum that a commercial bank, trust company or other
financial institution appointed by the Company advises results from
implementation of the Auction Procedures (as defined below). The Board of
Directors of the Company has adopted a resolution appointing The Bank of New
York as Auction Agent for purposes of the Auction Procedures, and pursuant to
Section 2.5(d) of the Auction Agent Agreement, the Company 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.
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 Articles Supplementary. Capitalized
terms not defined herein shall have the respective meanings specified in the
Articles Supplementary of the Company.
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) "Articles Supplementary" shall mean the Articles Supplementary,
as amended, of the Company, establishing the powers, preferences and rights of
the AMPS filed on _____________, 2003 with the State Department of Assessments
and Taxation of Maryland.
(b) "Auction" shall have the meaning specified in Section 2.1
hereof.
(c) "Auction Procedures" shall mean the Auction Procedures that are
set forth in Paragraph 10 of the Articles Supplementary.
(d) "Authorized Officer" shall mean each Senior Vice President, Vice
President, Assistant Vice President, Trust Officer, Assistant Secretary and
Assistant Treasurer of the Auction Agent assigned to its Corporate Trust and
Agency Group 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. THE AUCTION.
2.1. Purpose; Incorporation by Reference of Auction Procedures and
Settlement Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures
will be followed by the Auction Agent for the purpose of determining the
Applicable Rate for each series of AMPS, for the next Dividend Period therefor.
Each periodic operation of such procedures is hereinafter referred to as an
"Auction."
(b) All of the provisions contained in the Auction Procedures and
the Settlement Procedures are incorporated herein by reference in their entirety
and shall be deemed to be a part of this Agreement to the same extent as if such
provisions were set forth fully herein.
(c) BD agrees to act as, and assumes the obligations of and
limitations and restrictions placed upon, a Broker-Dealer under this Agreement.
BD understands that other Persons meeting the requirements specified in the
definition of "Broker-Dealer" contained in Paragraph 1 of the Articles
Supplementary 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 Company, 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.
2.2. Preparation for Each Auction.
(a) Not later than 9:30 A.M. on each Auction Date for each series of
AMPS, 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 clause (vii)
of paragraph (a) 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 Series M[ ] AMPS, Series T[ ]
AMPS, Series W[ ] AMPS, Series TH[ ] AMPS and Series F[ ] AMPS, as the case may
be, 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 each series of
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AMPS. 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 Company; and such information shall not
be used by the Auction Agent or its officers, employees, agents or
representatives for any purpose other than such purposes as are described
herein. The Auction Agent shall transmit any list of customers BD believes are
Beneficial Owners of shares of each series of AMPS and information related
thereto only to its officers, employees, agents or representatives in the
Corporate Trust and Agency Group 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.
(d) The provisions contained in paragraph 2 of the Articles
Supplementary 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.
2.3. Auction Schedule; Method of Submission of Orders.
(a) The Company and the Auction Agent shall conduct Auctions for
each series of AMPS 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
Company, which consent shall not be withheld unreasonably. The Auction Agent
shall give notice of any such change to BD. Such notice shall be received prior
to the first Auction Date on which any such change shall be effective.
Time Event
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By 9:30 A.M. Auction Agent advises the Company and
Broker-Dealers of the Reference Rate and the
Maximum Applicable Rate as set forth in
Section 2.2(a) hereof.
9:30 A.M. - 1:00 P.M. Auction Agent assembles information
communicated to it by Broker- Dealers as
provided in Paragraph 10(c)(i) of the
Articles Supplementary. Submission Deadline
is 1:00 P.M.
Not earlier than 1:00 P.M. Auction Agent makes determinations pursuant
to Paragraph 10(d)(i) of the Articles
Supplementary.
By approximately 3:00 P.M. Auction Agent advises the Company of the
results of the Auction as provided in
Paragraph 10(d)(ii) of the Articles
Supplementary.
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Submitted Bids and Submitted Sell Orders are
accepted and rejected in whole or in part
and shares of AMPS are allocated as provided
in Paragraph 10(e) of the Articles
Supplementary.
Auction Agent gives notice of the Auction
results as set forth in Section 2.4(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 Paragraph 10 of the Articles
Supplementary.
(c) BD shall submit Orders to the Auction Agent in writing in
substantially the form attached hereto as Exhibit B. BD shall submit separate
Orders to the Auction Agent for each Potential Beneficial Owner or Beneficial
Owner on whose behalf BD is submitting an Order and shall not net or aggregate
the Orders of Potential Beneficial Owners or Beneficial Owners on whose behalf
BD is submitting Orders.
(d) BD shall deliver to the Auction Agent (i) a written notice,
substantially in the form attached hereto as Exhibit C, of transfers of shares
of any series of AMPS, made through BD by an Existing Holder to another Person
other than pursuant to an Auction, and (ii) a written notice, substantially in
the form attached hereto as Exhibit D, of the failure of shares of any series of
AMPS to be transferred to or by any Person that purchased or sold shares of any
series of AMPS 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.
2.4. 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 any series of
AMPS in an Auction fails to deliver such shares, the BD of any Person that was
to have purchased shares of such series of AMPS in such Auction may deliver to
such Person a number of whole shares of such series of AMPS that is less than
the number of shares that otherwise was to be purchased by such Person. In such
event, the number of shares of such series of AMPS 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 2.3(d)(ii)
hereof. Notwithstanding the foregoing
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terms of this Section 2.4(b), any delivery or non-delivery of shares of any
series of AMPS 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 2.3(d) hereof. The Auction Agent shall have
no duty or liability with respect to enforcement of this Section 2.4(b).
2.5. 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 Company an amount equal to: (a) in the case of any Auction Date immediately
preceding a 7-Day Dividend Period or 28-Day Dividend Period, the product of (i)
a fraction the numerator of which is the number of days in such Dividend Period
(calculated by counting the first day of such Dividend Period but excluding the
last day thereof) and the denominator of which is 360, times (ii) 1/4 of 1%,
times (iii) $25,000, times (iv) the sum of (A) the aggregate number of AMPS
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 AMPS subject to valid Hold Orders
(determined in accordance with Paragraph 10 of the Articles Supplementary)
submitted to the Auction Agent by BD plus (C) the number of AMPS deemed to be
subject to Hold Orders by Beneficial Owners pursuant to Paragraph 10 of the
Articles Supplementary 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 Company and BD, based on the
selling concession that would be applicable to an underwriting of fixed or
variable rate preferred shares with a similar final maturity or variable rate
dividend period, at the commencement of such Special Dividend Period.
For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any
Beneficial Owner who acquired shares of any series of AMPS 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.
III. THE AUCTION AGENT.
3.1. Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Company
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
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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.
3.2. 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 Company or by BD. The
Auction Agent may record telephone communications with BD.
(b) The Auction Agent may consult with counsel of its own choice,
and the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.
(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.
3.3. Auction Agent's Disclaimer. The Auction Agent makes no representation
as to the validity or adequacy of this Agreement or the AMPS.
IV. MISCELLANEOUS.
4.1. 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 Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated, neither BD nor the
Auction Agent may terminate this Agreement without first obtaining the prior
written consent of the Company to such termination, which consent shall not be
withheld unreasonably.
4.2. 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 AMPS available in
same-day funds on each Dividend Payment Date to customers that use BD (or its
affiliate) as Agent Member.
4.3. Agent Member. At the date hereof, BD is a participant of the
Securities Depository.
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4.4. 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, addressed to: Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
World Financial Center, Xxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx Xxxxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
If to the Auction Agent, addressed to: The Bank of New York
000 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Auction Desk
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
or such other address or telecopier number as such party hereafter may specify
for such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of BD by a BD Officer and on behalf of
the Auction Agent by an Authorized Officer. BD may record telephone
communications with the Auction Agent.
4.5. 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.
4.6. Benefits. Nothing in this Agreement, express or implied, shall give
to any person, other than the Company, 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.
4.7. 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.
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(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.
4.8. 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 Company without the consent of BD.
4.9. 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.
4.10. 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.
4.11. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed in said State.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
THE BANK OF NEW YORK
_____________________________________
By:
Title:
XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX
INCORPORATED
_____________________________________
By:
Title:
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EXHIBIT A
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SETTLEMENT PROCEDURES
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[From Prospectus]
EXHIBIT B
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THE BANK OF NEW YORK
AUCTION BID FORM
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Submit To: The Bank of New York Issue: Preferred and Corporate
Securities Transfer Department Income Strategies Fund, Inc.
000 Xxxxxx Xxxxxx, 0xx Xxxxx Series: ____________________________
Xxx Xxxx, Xxx Xxxx 00000 Auction Date:_______________________
Attention: Auction Desk
Telephone: (000) 000-0000
Facsimile: (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 ______________________
EXHIBIT C
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(Note: To be used only for transfers made
other than pursuant to an Auction)
TRANSFER FORM
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Re: Preferred and Corporate Income Strategies Fund, Inc.
Auction Market Preferred Stock,
Series ___ ("AMPS")
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 ____________
shares of Series ___ AMPS to _______________________.
_____________________________________
(Name of Existing Holder)
_____________________________________
(Name of Broker-Dealer)
_____________________________________
(Name of Agent Member)
By __________________________________
Printed Name:
Title:
EXHIBIT D
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(Note: To be used only for failures to deliver
AMPS sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
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Complete either I or II
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I. We are a Broker-Dealer for (the "Purchaser"), which purchased ___________
shares of Auction Market Preferred Stock ("AMPS"), Series _____, of
Preferred and Corporate Income Strategies Fund, Inc. in the Auction held
on ________________________________ from the seller of such shares.
II. We are a Broker-Dealer for (the "Seller"), which sold _______ shares of
AMPS, Series ____, of Preferred and Corporate Income Strategies Fund, Inc.
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:
