Exhibit 99.(k)(v)(1)
AUCTION AGENCY AGREEMENT
This Auction Agency Agreement (this "Agreement"), dated as of November 2,
2000, is between Pilgrim Prime Rate Trust (the "Trust") and Bankers Trust
Company, a New York banking corporation.
The Trust proposes to issue three series of preferred shares of beneficial
interest (3,600 shares of Series M, 3,600 shares of Series W and 3,600 shares of
Series F), par value $.01 per share, liquidation preference $25,000 per share,
designated as Series M, W and F Auction Rate Cumulative Preferred Shares
(cumulatively, the "Preferred Shares"), pursuant to the Trust's Certificate (as
defined below).
The Trust desires that Bankers Trust Company perform certain duties as
agent in connection with each Auction of Preferred Shares (in such capacity, the
"Auction Agent"), and as the transfer agent, registrar, dividend paying agent
and redemption agent with respect to the Preferred Shares (in such capacity, the
"Paying Agent"), upon the terms and conditions of this Agreement, and the Trust
hereby appoints Bankers Trust Company as said Auction Agent and Paying Agent in
accordance with those terms and conditions (hereinafter generally referred to as
the "Auction Agent," except in Sections 3 and 4 below).
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the Trust and the Auction Agent agree as follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. TERMS DEFINED BY REFERENCE TO THE CERTIFICATE.
Capitalized terms not defined herein shall have the respective
meanings specified in the Certificate.
1.2. TERMS DEFINED HEREIN.
As used herein, the following terms shall have the following
meanings, unless the context otherwise requires:
(a) "Agent Member" of any Person shall mean such Person's agent
member of the Securities Depository that will act on behalf of a Bidder.
(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 Part II of the Certificate.
(d) "Authorized Officer" shall mean each Managing Director,
Director, Vice President, Assistant Vice President and Associate of the Auction
Agent and every other officer or employee of its Corporate Trust and Agency
Group designated as an "Authorized Officer" for purposes hereof in a written
communication from the Auction Agent to the Trust.
PILGRIM PRIME RATE TRUST
AUCTION AGENCY AGREEMENT
(e) "Broker-Dealer Agreement" shall mean each agreement between
the Auction Agent and a Broker-Dealer substantially in the form attached hereto
as Exhibit A.
(f) "Certificate" shall mean the Certificate of Designation for
Preferred Shares of the Trust dated October 20, 2000 specifying the powers,
preferences and rights of the Preferred Shares.
(g) "Holder" shall be a holder of record of one or more Preferred
Shares, listed as such in the share register maintained by the Paying Agent
pursuant to Section 4.6 hereof.
(h) "Interest Equivalent" means a yield on a 360-day basis of a
discount basis security which is equal to the yield on an equivalent
interest-bearing security.
(i) "Trust Officer" shall mean the Chairman, 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 Trust and every other
officer or employee of the Trust designated as a "Trust Officer" for purposes
hereof in a notice from the Trust to the Auction Agent.
1.3. RULES OF CONSTRUCTION.
Unless the context or use indicates another or different meaning or
intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural
number and vice versa.
(b) The captions and headings herein are solely for convenience
of reference and shall not constitute a part of this Agreement nor shall they
affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of
similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to
New York City time.
II. THE AUCTION.
2.1. PURPOSE; INCORPORATION BY REFERENCE OF AUCTION PROCEDURES.
(a) The Certificate provides that the Applicable Rate on shares
of each series of Preferred Shares, as the case may be, for each Dividend Period
therefor after the initial Dividend Period shall be the rate per annum that a
commercial bank, trust company or other financial institution appointed by the
Trust advises results from the implementation of the Auction Procedures. The
Board of Trustees of the Trust has adopted a resolution appointing Bankers Trust
Company as Auction Agent for purposes of the Auction Procedures. The Auction
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Agent hereby accepts such appointment and agrees that, on each Auction Date, it
shall follow the procedures set forth in this Section 2 and the Auction
Procedures for the purpose of determining the Applicable Rate for the Preferred
Shares for the next Dividend Period. Each periodic operation of such procedures
is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction 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 set forth fully
herein.
2.2. PREPARATION FOR EACH AUCTION; MAINTENANCE OF REGISTRY OF EXISTING
HOLDERS.
(a) As of the date hereof, the Trust shall provide the Auction
Agent with a list of the Broker-Dealers previously approved by the Auction Agent
and shall cause to be delivered to the Auction Agent for execution by the
Auction Agent a Broker-Dealer Agreement signed by each such Broker-Dealer. The
Auction Agent shall keep such list current and accurate and shall indicate
thereon, or on a separate list, the identity of each Existing Holder, if any,
whose most recent Order was submitted by a Broker-Dealer on such list and
resulted in such Existing Holder continuing to hold or purchase Preferred
Shares. Not later than five Business Days prior to any Auction Date for which
any change in such list of Broker-Dealers is to be effective, the Trust shall
notify the Auction Agent in writing of such change and, if any such change is
the addition of a Broker-Dealer to such list, the Trust shall cause to be
delivered to the Auction Agent for execution by the Auction Agent a
Broker-Dealer Agreement signed by such Broker-Dealer. The Auction Agent 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 Auction Agent shall have given the notice, the Auction Agent,
by such means as the Auction Agent 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 or 9:15 A.M. on the old Auction Date.
(c) The provisions contained in Section 4 of Part I of the
Certificate concerning Special Rate Periods and the notification of a Special
Rate Period will be followed by the Trust and, to the extent applicable, the
Auction Agent, 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.
(d) (i) On each Auction Date, the Auction Agent shall
determine the initial dividend rate and the Maximum Rate. If the initial
dividend rate is not quoted on an interest basis but is quoted on a discount
basis, the Auction Agent shall convert the quoted rate to an Interest
Equivalent; or, if the rate obtained by the Auction Agent is not quoted on an
interest or discount basis, the Auction Agent shall convert the quoted rate to
an interest rate after consultation with the Trust as to the method of such
conversion. Not later than 9:30 A.M. on each Auction Date, the Auction Agent
shall notify the Trust and the Broker-Dealers of the initial dividend rate so
determined and of the Maximum Rate.
(ii) If the initial dividend rate is the applicable "AA"
Financial Composite Commercial Paper Rate and such rate is to be based on rates
supplied by Commercial
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Paper Dealers and one or more of the Commercial Paper Dealers shall not provide
a quotation for the determination of the applicable "AA" Financial Composite
Commercial Paper Rate, the Auction Agent immediately shall notify the Trust so
that the Trust can determine whether to select a substitute Commercial Paper
Dealer or substitute Commercial Paper Dealers to provide the quotation or
quotations not being supplied by any Commercial Paper Dealer or Commercial Paper
Dealers. The Trust promptly shall advise the Auction Agent of any such
selection. If the Trust does not select any such substitute Commercial Paper
Dealer or substitute Commercial Paper Dealers, then the rates shall be supplied
by the remaining Commercial Paper Dealer or Commercial Paper Dealers.
(e) (i) The Auction Agent shall maintain a current registry of
the Existing Holders of the Preferred Shares for purposes of each individual
Auction. The Trust shall use commercially reasonable efforts to provide or cause
to be provided to the Auction Agent within ten Business Days following the date
of the Closing a list of the initial Existing Holders of Preferred Shares, and
the Broker-Dealer of each such Existing Holder through which such Existing
Holder purchased such shares. The Auction Agent may rely upon, as evidence of
the identities of the Existing Holders, such list, the results of each Auction
and notices from any Existing Holder, the Agent Member of any Existing Holder or
the Broker-Dealer of any Existing Holder with respect to such Existing or
Holder's transfer of any Preferred Shares to another Person.
(ii) In the event of any partial redemption of Preferred
Shares, upon notice by the Trust to the Auction Agent of such partial
redemption, the Auction Agent promptly shall request the Securities Depository
to notify the Auction Agent of the identities of the Agent Members (and the
respective numbers of shares) from the accounts of which shares have been called
for redemption and the person or department at such Agent Member to contact
regarding such redemption. At least two Business Days prior to the Auction
preceding the date of redemption, the Auction Agent shall request each Agent
Member so identified to disclose to the Auction Agent (upon selection by such
Agent Member of the Existing Holders whose shares are to be redeemed) the number
of Preferred Shares of each such Existing Holder, if any, to be redeemed by the
Trust, provided that the Auction Agent has been furnished with the name and
telephone number of a person or department at such Agent Member from which it is
to request such information. In the absence of receiving any such information
with respect to an Existing Holder, from such Existing Holder's Agent Member or
otherwise, the Auction Agent may continue to treat such Existing Holder as
having ownership of the number of Preferred Shares shown in the Auction Agent's
registry of Existing Holders.
(iii) The Auction Agent shall register a transfer of the
ownership of Preferred Shares from an Existing Holder to another Existing
Holder, or to another Person if permitted by the Trust, only if (A) such
transfer is made pursuant to an Auction or (B) if such transfer is made other
than pursuant to an Auction, the Auction Agent has been notified of such
transfer in writing, in a notice substantially in the form of Exhibit B to the
Broker-Dealer Agreements, by such Existing Holder or by the Agent Member of such
Existing Holder. The Auction Agent is not required to accept any notice of
transfer delivered for 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. The
Auction Agent shall rescind a transfer made on the registry of the
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Existing Holders of any Preferred Shares if the Auction Agent has been notified
in writing, in a notice substantially in the form of Exhibit C to the
Broker-Dealer Agreement, by the Agent Member or the Broker-Dealer of any Person
that (i) purchased any Preferred Shares and the seller failed to deliver such
shares or (ii) sold any Preferred Shares and the purchaser failed to make
payment to such Person upon delivery to the purchaser of such shares.
(f) The Auction Agent may request that the Broker Dealers, as set
forth in Section 3.2(b) of the Broker-Dealer Agreements, provide the Auction
Agent with a list of their respective customers that such Broker-Dealers believe
are Beneficial Owners of Preferred Shares. The Auction Agent shall keep
confidential any such information and shall not disclose any such information so
provided to any Person other than the relevant Broker-Dealer and the Trust,
provided that the Auction Agent reserves the right to disclose any such
information if it is advised by its counsel that its failure to do so would be
unlawful.
2.3. AUCTION SCHEDULE.
The Auction Agent shall conduct Auctions every Monday, Wednesday,
and Friday in accordance with the schedule set forth below. Such schedule may be
changed by the Auction Agent with the consent of the Trust, which consent shall
not be withheld unreasonably. The Auction Agent shall give notice of any such
change to each Broker-Dealer. 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 shall advise the Trust and the
Broker-Dealers of the initial dividend rate and
the Maximum Rate as set forth in Section
2.2(e)(i) hereof.
9:30 A.M. - 1:30 P.M. Auction Agent shall assemble information
communicated to it by Broker-Dealers as provided
in Section 3(a) of Part II of the Certificate.
Submission deadline is 1:00 P.M.
Not earlier than 1:30 P.M. Auction Agent shall make determinations pursuant
to Section 4(a) of Part II of the Certificate.
By approximately 3:00 P.M. Auction Agent shall advise the Trust of the
results of the Auction as provided in Section
4(b) of Part II of the Certificate.
Submitted Bids and Submitted Sell Orders will be
accepted and rejected in whole or in part and
Preferred Shares will be allocated as provided in
Section 5 of Part II of the Certificate. Auction
Agent shall give notice of the Auction results as
set forth in Section 2.4 hereof.
2.4. NOTICE OF AUCTION RESULTS.
On each Auction Date, the Auction Agent shall notify Broker-Dealers
of the results of the Auction held on such date by telephone or through the
Auction Agent's Auction Processing System.
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2.5. BROKER-DEALERS.
(a) Not later than 12:00 noon on each Auction Date, the Trust
shall pay to the Auction Agent in Federal Funds or similar same-day funds an
amount in cash equal to (i) in the case of any Auction Date immediately
preceding a 7-day Dividend Period, the product of (A) 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 (B) 1/4 of 1%, times (C) $25,000 times
(D) the sum of the aggregate number of outstanding Preferred Shares for which
the Auction is conducted and (ii) in the case of any Special Rate Period, the
amount determined by mutual consent of the Trust and the Broker-Dealers pursuant
to Section 3.5 of the Broker-Dealer Agreements. The Auction Agent shall apply
such moneys as set forth in Section 3.5 of the Broker-Dealer Agreements and
shall thereafter remit to the Trust any remaining funds paid to the Auction
Agent pursuant to this Section 2.5(a).
(b) The Trust shall not designate any Person to act as a
Broker-Dealer, or permit an Existing Holder or a Potential Beneficial Owner to
participate in Auctions through any Person other than a Broker-Dealer, without
the prior written approval of the Auction Agent, which approval shall not be
withheld unreasonably. The Trust may designate an Affiliate or Xxxxxxx Xxxxx
Xxxxxx Inc. to act as a Broker-Dealer.
(c) The Auction Agent shall terminate any Broker-Dealer Agreement
as set forth therein if so directed by the Trust.
(d) Subject to Section 2.5(b) hereof, the Auction Agent from time
to time shall enter into such Broker-Dealer Agreements as the Trust shall
request.
(e) The Auction Agent shall maintain a list of Broker-Dealers.
2.6. OWNERSHIP OF PREFERRED SHARES AND SUBMISSION OF BIDS BY THE TRUST
AND ITS AFFILIATES.
Neither the Trust nor any Affiliate of the Trust may submit any
Sell Order or Bid, directly or indirectly, in any Auction, except that an
Affiliate of the Trust that is a Broker-Dealer may submit a Sell Order or Bid on
behalf of a Beneficial Owner or a Potential Beneficial Owner. The Trust shall
notify the Auction Agent if the Trust or, to the best of the Trust's knowledge,
any Affiliate of the Trust becomes a Beneficial Owner of any Preferred Shares.
Any Preferred Shares redeemed, purchased or otherwise acquired (i) by the Trust
shall not be reissued, except in accordance with the requirements of the
Securities Act of 1933, as amended, or (ii) by its Affiliates shall not be
transferred (other than to the Trust). The Auction Agent shall have no duty or
liability with respect to enforcement of this Section 2.6.
2.7. ACCESS TO AND MAINTENANCE OF AUCTION RECORDS.
The Auction Agent shall afford to the Trust, its agents,
independent public accountants and counsel, access at reasonable times during
normal business hours to review and make extracts or copies (at the Trust's sole
cost and expense) of all books, records, documents
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and other information concerning the conduct and results of Auctions, provided
that any such agent, accountant or counsel shall furnish the Auction Agent with
a letter from the Trust requesting that the Auction Agent afford such person
access. The Auction Agent shall maintain records relating to any Auction for a
period of at least two years after such Auction (unless requested by the Trust
to maintain such records for such longer period not in excess of four years,
then for such longer period), and such records, in reasonable detail, shall
accurately and fairly reflect the actions taken by the Auction Agent hereunder.
The Trust agrees to keep confidential any information regarding the customers of
any Broker-Dealer received from the Auction Agent in connection with this
Agreement or any Auction, and shall not disclose such information or permit the
disclosure of such information without the prior written consent of the
applicable Broker-Dealer to anyone except such agent, accountant or counsel
engaged to audit or review the results of Auctions as permitted by this Section
2.7. The Trust reserves the right to disclose any such information if it is
advised by its counsel that its failure to do so would (i) be unlawful or (ii)
expose it to liability, unless the Broker-Dealer shall have offered
indemnification satisfactory to the Trust. Any such agent, accountant or
counsel, before having access to such information, shall agree to keep such
information confidential and not to disclose such information or permit
disclosure of such information without the prior written consent of the
applicable Broker-Dealer, provided that such agent, accountant or counsel may
reserve the right to disclose any such information if it is advised by its
counsel that its failure to do so would (i) be unlawful or (ii) expose it to
liability, unless the Broker-Dealer shall have offered indemnification
satisfactory to such agent, accountant or counsel.
III. THE AUCTION AGENT AS PAYING AGENT.
3.1. THE PAYING AGENT.
The Board of Trustees of the Trust has adopted another resolution
appointing Bankers Trust Company as auction agent, transfer agent, dividend
paying agent and registrar for the Trust in connection with any Preferred Shares
(in such capacity, the "Paying Agent"). The Paying Agent hereby accepts such
appointment and agrees to act in accordance with its standard procedures and the
provisions of the Certificate which are specified herein with respect to the
Preferred Shares and as set forth in this Section 3.
3.2. THE TRUST'S NOTICES TO THE PAYING AGENT.
Whenever any Preferred Shares are to be redeemed, the Trust
promptly shall deliver to the Paying Agent a Notice of Redemption, which will be
mailed by the Paying Agent to each Holder at least five Business Days prior to
the date such Notice of Redemption is required to be mailed pursuant to the
Certificate. The Paying Agent shall have no responsibility to confirm or verify
the accuracy of any such Notice.
3.3. THE TRUST TO PROVIDE FUNDS FOR DIVIDENDS AND REDEMPTIONS.
(a) Not later than noon on each Dividend Payment Date, the Trust
shall deposit with the Paying Agent an aggregate amount of Federal Funds or
similar same-day funds equal to the declared dividends to be paid to Holders on
such Dividend Payment Date, and shall
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give the Paying Agent irrevocable instructions to apply such funds to the
payment of such dividends on such Dividend Payment Date.
(b) If the Trust shall give a Notice of Redemption, then by noon
of the date fixed for redemption, the Trust shall deposit in trust with the
Paying Agent an aggregate amount of Federal Funds or similar same-day funds
sufficient to redeem such Preferred Shares called for redemption and shall give
the Paying Agent irrevocable instructions and authority to pay the redemption
price to the Holders of Preferred Shares called for redemption upon surrender of
the certificate or certificates therefor.
3.4. DISBURSING DIVIDENDS AND REDEMPTION PRICE.
After receipt of the Federal Funds or similar same-day funds and
instructions from the Trust described in Section 3.3 above, the Paying Agent
shall pay to the Holders (or former Holders) entitled thereto (i) on each
corresponding Dividend Payment Date, dividends on the Preferred Shares, and (ii)
on any date fixed for redemption, the redemption price of any Preferred Shares
called for redemption. The amount of dividends for any Dividend Period to be
paid by the Paying Agent to Holders will be determined by the Trust as set forth
in Section 2 of Part I of the Certificate. The redemption price to be paid by
the Paying Agent to the Holders of any Preferred Shares called for redemption
will be determined as set forth in Section 3 of Part I of the Certificate. The
Paying Agent shall have no duty to determine the redemption price and may rely
on the amount thereof set forth in a Notice of Redemption.
IV. THE PAYING AGENT AS TRANSFER AGENT AND REGISTRAR.
4.1. ORIGINAL ISSUE OF STOCK CERTIFICATES.
On the Date of Original Issue for any share of Preferred Shares,
one certificate for each series of Preferred Shares shall be issued by the Trust
and registered in the name of Cede & Co., as nominee of the Securities
Depository, and countersigned by the Paying Agent.
4.2. REGISTRATION OF TRANSFER OR EXCHANGE OF SHARES.
Except as provided in this Section 4.2, the shares of each series
of Preferred Shares 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 Trust shall not have selected a
substitute Securities Depository acceptable to the Paying Agent prior to such
resignation, then upon such resignation the shares of each Series of Preferred
Shares, at the Trust's request, may be registered for transfer or exchange, and
new certificates thereupon shall be issued in the name of the designated
transferee or transferees, upon surrender of the old certificate in form deemed
by the Paying Agent to be properly endorsed for transfer with (a) all necessary
endorsers' signatures guaranteed in such manner and form and by such guarantor
as the Paying Agent may reasonably require, (b) such assurances as the Paying
Agent shall deem necessary or appropriate to evidence the genuineness and
effectiveness of each necessary endorsement and (c) satisfactory evidence of
compliance with all applicable laws relating to the collection of taxes in
connection with any registration of transfer or exchange or funds necessary for
the payment of such taxes. If the certificate or certificates for Preferred
Shares are not held by
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the Securities Depository or its nominee, payments upon transfer of shares in an
Auction shall be made in Federal Funds or similar same-day funds to the Auction
Agent against delivery of certificates therefor.
4.3. REMOVAL OF LEGEND.
Any request for removal of a legend indicating a restriction on
transfer from a certificate evidencing Preferred Shares shall be accompanied by
an opinion of counsel stating that such legend may be removed and such shares
may be transferred free of the restriction described in such legend, said
opinion to be delivered under cover of a letter from a Trust Officer authorizing
the Paying Agent to remove the legend on the basis of said opinion.
4.4. LOST, STOLEN OR DESTROYED STOCK CERTIFICATES.
The Paying Agent 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 Trust and
by the Paying Agent, subject at all times to provisions of law, the Certificate
governing such matters and resolutions adopted by the Trust with respect to
lost, stolen or destroyed securities. The Paying Agent may issue new
certificates in exchange for and upon the cancellation of mutilated
certificates. Any request by the Trust to the Paying Agent to issue a
replacement or new certificate pursuant to this Section 4.4 shall be deemed to
be a representation and warranty by the Trust to the Paying Agent that such
issuance will comply with provisions of applicable law and the Certificate and
resolutions of the Trust.
4.5. DISPOSITION OF CANCELED CERTIFICATES; RECORD RETENTION.
The Paying Agent shall retain stock certificates which have been
canceled in transfer or in exchange and accompanying documentation in accordance
with applicable rules and regulations of the Securities and Exchange Commission
(the "SEC") for at least two calendar years from the date of such cancellation.
The Paying Agent, upon written request by the Trust, shall afford to the Trust,
its agents and counsel access at reasonable times during normal business hours
to review and make extracts or copies (at the Trust's sole cost and expense) of
such certificates and accompanying documentation. Upon request by the Trust at
any time after the expiration of this two-year period, the Paying Agent shall
deliver to the Trust the canceled certificates and accompanying documentation.
The Trust, at its expense, shall retain such records for a minimum additional
period of at least four calendar years from the date of delivery of the records
to the Trust 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 SEC. The Trust also shall undertake to
furnish to the SEC, upon demand, either at its 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 Trust without
the approval of the Paying Agent, which approval shall not be withheld
unreasonably, but will be safely stored for possible future reference.
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4.6. STOCK REGISTER.
The Paying Agent shall maintain the stock register, which shall
contain a list of the Holders, the number of shares held by each Holder and the
address of each Holder. The Paying Agent shall record in the stock register any
change of address of a Holder upon notice by such Holder. In case of any written
request or demand for the inspection of the stock register or any other books of
the Trust in the possession of the Paying Agent, the Paying Agent will notify
the Trust and secure instructions as to permitting or refusing such inspection.
The Paying Agent reserves the right, however, to exhibit the stock register or
other records to any person in case it is advised by its counsel that its
failure to do so would (i) be unlawful or (ii) expose it to liability, unless
the Trust shall have offered indemnification satisfactory to the Paying Agent.
4.7. RETURN OF FUNDS.
Any funds deposited with the Paying Agent by the Trust for any
reason under this Agreement, including for the payment of dividends or the
redemption of Preferred Shares, that remain with the Paying Agent after 12
months shall be repaid to the Trust upon written request by the Trust.
V. REPRESENTATIONS AND WARRANTIES.
5.1. REPRESENTATIONS AND WARRANTIES OF THE TRUST.
The Trust represents and warrants to the Auction Agent that:
(i) the Trust is duly organized and is validly existing as
a business trust under the laws of the Commonwealth of Massachusetts, and has
full power to execute and deliver this Agreement and to authorize, create and
issue the Preferred Shares;
(ii) the Trust is registered with the SEC under the
Investment Company Act of 1940, as amended, as a closed-end, diversified,
management investment company;
(iii) this Agreement has been duly and validly authorized,
executed and delivered by the Trust and constitutes the legal, valid and binding
obligation of the Trust, enforceable against the Trust in accordance with its
terms, subject as to such enforceability to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights and to general equitable principles;
(iv) the form of the certificates evidencing the Preferred
Shares comply with all applicable laws of the Commonwealth of Massachusetts;
(v) the Preferred Shares have been duly and validly
authorized by the Trust and, upon completion of the initial sale of the
Preferred Shares and receipt of payment therefor, will be validly issued by the
Trust, fully paid and nonassessable;
(vi) at the time of the offering of the Preferred Shares,
the shares offered will be registered under the Securities Act of 1933, as
amended, and no further action by
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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 will be required in connection with the issuance of the Preferred
Shares, except such action as required by applicable state securities laws;
(vii) the execution and delivery of this Agreement and the
issuance and delivery of the Preferred Shares 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 Trust's Declaration of Trust, as amended, or the
Certificate, any order or decree of any court or public authority having
jurisdiction over the Trust, or any mortgage, indenture, contract, agreement or
undertaking to which the Trust is a party or by which it is bound; and
(viii) no taxes are payable upon or in respect of the
execution of this Agreement or will be payable upon or in respect of the
issuance of the Preferred Shares.
5.2. REPRESENTATIONS AND WARRANTIES OF THE AUCTION AGENT.
The Auction Agent represents and warrants to the Trust that:
(i) the Auction Agent is duly organized and is validly
existing as a banking corporation in good standing under the laws of the State
of
New York, and has the corporate power to enter into and perform its
obligations under this Agreement; and
(ii) this Agreement has been duly and validly authorized,
executed and delivered by the Auction Agent and constitutes the legal, valid and
binding obligation of the Auction Agent, enforceable against the Auction Agent
in accordance with its terms, subject as to such enforceability to bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors' rights and to general equitable principles.
VI. THE AUCTION AGENT.
6.1. DUTIES AND RESPONSIBILITIES.
(a) The Auction Agent is acting solely as agent for the Trust
hereunder and owes no fiduciary duties to any Person except as provided by 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.
6.2. 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 hereby and
any written instruction,
11
notice, request, direction, consent, report, certificate, share certificate or
other instrument, paper or document reasonably believed by it to be genuine. The
Auction Agent shall not be liable for acting upon any telephone communication
authorized hereby which the Auction Agent reasonably believes in good faith to
have been given by the Trust or by a Broker-Dealer. The Auction Agent may record
telephone communications with the Trust or with the Broker-Dealers or with both.
(b) The Auction Agent may consult with counsel of its choice, and
the written 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 reasonable 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. The Auction Agent shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed in writing with the Trust.
(d) The Auction Agent may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys.
6.3. COMPENSATION. EXPENSES AND INDEMNIFICATION.
(a) The Trust shall pay to the Auction Agent from time to time
reasonable compensation for all services rendered by it under this Agreement and
under the Broker-Dealer Agreements as shall be set forth in a separate writing
signed by the Trust and the Auction Agent, subject to adjustments if the
Preferred Shares no longer are held of record by the Securities Depository or
its nominee or if there shall be such other change as shall increase or decrease
materially the Auction Agent's obligations hereunder or under the Broker-Dealer
Agreements.
(b) The Trust shall reimburse the Auction Agent upon its request
for all reasonable expenses, disbursements and advances incurred or made by the
Auction Agent in accordance with any provision of this Agreement and of the
Broker-Dealer Agreements (including the reasonable compensation, expenses and
disbursements of its agents and counsel), except any expense, disbursement or
advance attributable to its negligence or bad faith.
(c) The Trust shall indemnify the Auction Agent for, and hold it
harmless against, any loss, liability or expense incurred without negligence or
bad faith on the part of the Auction Agent arising out of or in connection with
its agency under this Agreement and under the Broker-Dealer Agreements,
including the costs and expenses of defending itself against any claim of
liability in connection with its exercise or performance of any of its duties
hereunder and thereunder, except such as may result from its negligence or bad
faith.
VII. MISCELLANEOUS.
7.1. TERM OF AGREEMENT.
(a) The term of this Agreement is unlimited unless it shall be
terminated as provided in this Section 7.1. The Trust may terminate this
Agreement at any time by so notifying
12
the Auction Agent, provided that, if any Preferred Shares remain outstanding,
the Trust shall have entered into an agreement with a successor auction agent.
The Auction Agent may terminate this Agreement upon prior notice to the Trust on
the date specified in such notice, which date shall be no earlier than 60 days
after delivery of such notice. If the Auction Agent terminates this Agreement
while any Preferred Shares remain outstanding, the Trust shall use commercially
reasonable efforts to enter into an agreement with a successor auction agent.
(b) Except as otherwise provided in this Section 7.1(b), the
respective rights and duties of the Trust and the Auction Agent under this
Agreement shall cease upon termination of this Agreement. The Trust's
representations, warranties, covenants and obligations to the Auction Agent
under Sections 5 and 6.3 hereof shall survive the termination hereof. Upon
termination of this Agreement, the Auction Agent shall (i) resign as Auction
Agent under the Broker-Dealer Agreements, (ii) at the Trust's request, deliver
promptly to the Trust copies of all books and records maintained by it in
connection with its duties hereunder, and (iii) at the request of the Trust,
transfer promptly to the Trust or to any successor auction agent any funds
deposited by the Trust with the Auction Agent (whether in its capacity as
Auction Agent or as Paying Agent) pursuant to this Agreement which have not been
distributed previously by the Auction Agent in accordance with this Agreement.
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
party at its address or telecopier number set forth below:
If to the Trust, Pilgrim Prime Rate Trust
addressed to: 0000 X. Xxxxxxxxxx Xxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
If to the Auction Agent, Bankers Trust Company
addressed to: Corporate Trust and Agency Group
0 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Auction Rate Securities
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
or such other address or telecopier number as such party hereafter may specify
for such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of the Trust by a Trust Officer and on
behalf of the Auction Agent by an Authorized Officer.
13
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 implied,
between the parties relating to the subject matter hereof, except for agreements
relating to the compensation of the Auction Agent.
7.4. BENEFITS.
Nothing herein, express or implied, shall give to any Person, other
than the Trust, the Auction Agent 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, 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. The Trust shall notify the Auction Agent of any change in the
Certificate prior to the effective date of any such change. If any such change
in the Certificate materially increases the Auction Agent's obligations
hereunder, the Trust shall obtain the written consent of the Auction Agent prior
to the effective date of such change.
(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 permitted assigns of each of
the Trust and the Auction Agent. This Agreement may not be assigned by either
party hereto absent the prior written consent of the other party, which consent
shall not be withheld unreasonably.
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.
14
7.9. 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.
7.10. LIMITATION OF LIABILITY.
The name Pilgrim Prime Rate Trust refers to the Trust and the
Trustees of the Trust, as trustees but not individually or personally, acting
from time to time under the Trust's Agreement and Declaration of Trust dated
December 2, 1987, as amended, which is hereby referred to and a copy of which is
on file at the office of the Secretary of the Commonwealth of Massachusetts and
the principal office of the Trust. The obligations of the Trust entered into in
the name or on behalf thereof by any of the Trustees, representatives or agents
of the Trust are made not individually, but in such capacities, and are not
binding upon any of the Trustees, officers, holders of shares of beneficial
interest of the Trust or representatives of the Trustees personally, but bind
only the Trust assets, and all persons dealing with the Trust must look solely
to the Trust property for the enforcement of any claims against the Trust.
15
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.
PILGRIM PRIME RATE TRUST
/s/ Xxxxxx X. Xxxxxx
------------------------------
By: Xxxxxx. X. Xxxxxx
Title: Senior Vice President
BANKERS TRUST COMPANY
------------------------------
By:
Title:
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.
PILGRIM PRIME RATE TRUST
------------------------------
By: Xxxxxx X. Xxxxxx
Title: Senior Vice President
BANKERS TRUST COMPANY
/s/ Xxxx Xxxxxxx
------------------------------
By: Xxxx Xxxxxxx
Title: Associate
BROKER-DEALER AGREEMENT
This Broker-Dealer Agreement dated as of November 2, 2000, is between
Bankers Trust Company, a
New York banking corporation (the "Auction Agent") (not
in its individual capacity, but solely as agent of Pilgrim Prime Rate Trust (the
"Trust"), pursuant to authority granted to it in the
Auction Agency Agreement
dated as of November 2, 2000, between the Trust and the Auction Agent (the
"
Auction Agency Agreement")) and ________________________ (together with its
successors and assigns, "BD").
The Trust proposes to issue three series of preferred shares of beneficial
interest (3,600 shares of Series M, 3,600 shares of Series W and 3,600 shares of
Series F), par value $.01 per share, liquidation preference $25,000 per share,
designated Series M, W and F Auction Rate Cumulative Preferred Shares
(cumulatively, the "Preferred Shares"), pursuant to the Trust's Certificate of
Designation for Preferred Shares (as defined below).
The Trust's Certificate provides that the Applicable Rate on shares of
each series of Preferred Shares for each Dividend Period after the initial
Dividend Period shall be equal to the rate per annum that results from an
Auction for Outstanding shares of each Series on the respective Auction Date
therefor next preceding the period from and after the Date of Original Issue to
and including the last day of the initial Dividend Period. The Board of Trustees
of the Trust has adopted a resolution appointing Bankers Trust Company as
Auction Agent for purposes of the Auction Procedures, and pursuant to Section
2.5 of the
Auction Agency Agreement, the Trust has requested and directed the
Auction Agent to execute and deliver this Agreement.
The Auction Procedures require the participation of one or more
Broker-Dealers.
NOW, THEREFORE, in consideration of the premises and 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 CERTIFICATE.
Capitalized terms not defined herein shall have the respective meanings
specified in the Certificate.
1.2. TERMS DEFINED HEREIN.
As used herein, the following terms shall have the following meanings,
unless the context otherwise requires:
(a) "Auction" shall have the meaning specified in Section 2.1 of
the
Auction Agency Agreement.
(b) "Auction Procedures" shall mean the Auction Procedures that
are set forth in Part II of the Certificate.
(c) "Authorized Officer" shall mean each Managing Director,
Director, Vice President, Assistant Vice President and Associate of the Auction
Agent and every other officer
or employee of its Corporate Trust and Agency Group designated as an "Authorized
Officer" for purposes of this Agreement in a communication to BD.
(d) "BD Officer" shall mean each officer or employee of BD
designated as a "BD Officer" for purposes of this Agreement in a communication
to the Auction Agent.
(e) "Broker-Dealer Agreement" shall mean this Agreement and any
substantially similar agreement between the Auction Agent and a Broker-Dealer.
(f) "Certificate" shall mean the Certificate of Designation for
Preferred Shares of the Trust dated October 20, 2000 specifying the powers,
preferences and rights of the Preferred Shares.
1.3. RULES OF CONSTRUCTION.
Unless the context or use indicates another or different meaning or
intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural
number and vice versa.
(b) The captions and headings herein are solely for convenience
of reference and shall not constitute a part of this Agreement, nor shall they
affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of
similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to
New York City time.
II. NOTIFICATION OF DIVIDEND.
The provisions contained in Section 4 of Part I of the Certificate
concerning the notification of a Special Rate 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.
III. THE AUCTION.
3.1 Purpose; Incorporation by Reference of Auction 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 Preferred Shares, for each Dividend Period. Each
periodic operation of such procedures is hereinafter referred to as an
"Auction."
2
(b) All of the provisions contained in the Auction 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 Section 19 of Part I of the
Certificate 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
Preferred Shares, the Auction Agent shall advise BD by telephone of the
Reference Rate and the Maximum Rate in effect on such Auction Date.
(b) 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
Preferred Shares. 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 Preferred Shares 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
Preferred Shares in accordance with the schedule set forth below. Such schedule
may be changed at any time by the Auction Agent with the consent of the Trust,
which consent shall not be withheld unreasonably. The Auction Agent shall give
notice of any such change to BD. Such notice shall be received prior to the
first Auction Date on which any such change shall be effective.
3
TIME EVENT
---- -----
By 9:30 A.M. Auction Agent shall advise the Trust and the
Broker-Dealers of the Reference Rate and the
Maximum Rate as set forth in Section 3.2(a)
hereof.
9:30 A.M. - 1:30 P.M. Auction Agent shall assemble information
communicated to it by Broker-Dealers as provided
in Section 2(a) of Part II of the Certificate.
Submission Deadline is 1:00 P.M.
Not earlier than 1:30 P.M. Auction Agent shall make determinations pursuant
to Section 4(a) of Part II of the Certificate.
By approximately 3:00 P.M. Auction Agent shall advise the Trust of the
results of the Auction as provided in Section
4(b) of Part II of the Certificate.
Submitted Bids and Submitted Sell Orders will be
accepted and rejected in whole or in part and
Preferred Shares will be allocated as provided in
Section 5 of Part II of the Certificate.
Auction Agent shall give 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 2 of Part II of the
Certificate.
(c) BD shall submit Orders to the Auction Agent in writing in
substantially the form attached hereto as Exhibit A. 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 B, of transfers of
Preferred Shares, 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 C, of the failure of Preferred Shares to be
transferred to or by any Person that purchased or sold Preferred Shares 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 succeeding the applicable Auction Date.
4
3.4. NOTICE OF AUCTION RESULTS.
(a) On each Auction Date, the Auction Agent shall notify BD by
telephone. 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, and take such other action as is required of BD.
If any Beneficial Owner or Existing Holder selling Preferred Shares in an
Auction fails to deliver such shares, the Broker-Dealer of any Person that was
to have purchased Preferred Shares in such Auction may deliver to such Person a
number of whole shares of Preferred Shares that is less than the number of
shares that otherwise was to be purchased by such Person. In such event, the
number of Preferred Shares to be so delivered shall be determined by such
Broker-Dealer. Delivery of such lesser number of shares shall constitute good
delivery. Upon the occurrence of any such failure to deliver shares, such
Broker-Dealer 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 Preferred Shares 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 less
than one year, 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 Preferred Shares 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 Preferred Shares subject to valid Hold Orders (determined in accordance with
Section 2 of Part II of the Certificate) submitted to the Auction Agent by BD
plus (C) the number of Preferred Shares deemed to be subject to Hold Orders by
Beneficial Owners pursuant to Section 2 of Part II of the Certificate that were
acquired by BD for its own account or were acquired by such Beneficial Owners
through BD; and (b) in the case of any Auction Date immediately preceding a
Special Rate Period of one year or longer, 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
Rate Period.
5
For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any
Beneficial Owner who acquired Preferred Shares 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
reasonably 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 reasonably believes in good faith to have been given by the
Trust or by BD. The Auction Agent may record telephone communications with BD.
(b) The Auction Agent may consult with counsel of its own choice,
and the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.
(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.
6
4.3. AUCTION AGENT'S DISCLAIMER.
The Auction Agent makes no representation as to the validity or adequacy
of this Agreement or the Preferred Shares.
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 the Broker-Dealer
is Xxxxxxx Xxxxx Xxxxxx Inc. neither Xxxxxxx Xxxxx Barney Inc. 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 Preferred Shares
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 the Auction Agent,
addressed to: Bankers Trust Company
Corporate Trust and Agency Group
Four Xxxxxx Xxxxxx
Xxx, Xxxx, XX 00000
Attention: Auction Rate Securities
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
7
If to the BD,
addressed to: _________________
_________________
_________________
Attention:___________________
Telecopier No.: (212)___-____
Telephone No.: (212)___-____
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 implied,
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.
(a) 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.
8
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.
9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
BANKERS TRUST COMPANY
------------------------------
By:
Title:
------------------------------
------------------------------
By:
Title:
EXHIBIT A
BANKERS TRUST COMPANY
AUCTION BID FORM
SUBMIT TO: ISSUE:
Bankers Trust Company Pilgrim Prime Rate Trust
Corporate Trust and Agency Group Auction Rate Cumulative Preferred Shares
Four Albany Street ("Preferred Shares")
Xxx Xxxx, XX 00000
Attention: Auction Rate Securities
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
The undersigned Broker-Dealer submits the following Order on behalf of the
Bidder listed below:
Name of Bidder: ___________________
BENEFICIAL OWNER
Shares of Series ___ now held HOLD ____________________________
BID at rate of _________________
SELL ____________________________
POTENTIAL BENEFICIAL OWNER
# of shares of Series ___
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 B
(Note: To be used only for transfers made other than pursuant to an Auction)
TRANSFER FORM
Re: Pilgrim Prime Rate Trust
Auction Rate Cumulative Preferred Shares ("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 shares of
Series _______ Preferred Shares to _________________________.
-------------------------
(Name of Existing Holder)
-------------------------
(Name of Broker-Dealer)
-------------------------
(Name of Agent Member)
By:
----------------------
Printed Name:
Title:
EXHIBIT C
(Note: To be used only for failures to deliver or to pay for
Preferred Shares sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
We are a Broker-Dealer for ________________ (the "Purchaser"), which
purchased ___________ shares of Series ___ Preferred Shares of Pilgrim Prime
Rate Trust in the Auction held on _________________ from the seller 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:
