Exhibit 99.(k)(vi)(3)
BROKER-DEALER AGREEMENT
This Broker-Dealer Agreement dated as of November 16, 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 16, 2000, between the Trust and the Auction Agent (the
"Auction Agency Agreement")) and Gruntal & Co., L.L.C. (together with its
successors and assigns, "BD").
The Trust proposes to issue two series of preferred shares of beneficial
interest (3,600 shares of Series T and 3,600 shares of Series Th), par value
$.01 per share, liquidation preference $25,000 per share, designated Series T
and Th 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
PILGRIM PRIME RATE TRUST
BROKER-DEALER AGREEMENT
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
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Preferred Shares, for each 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 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
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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 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.
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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
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fixed or variable rate preferred shares with a similar final maturity or
variable rate dividend period, at the commencement of such Special Rate Period.
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.
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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
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If to the BD,
addressed to: Gruntal & Co., L.L.C.
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx XxXxxxx
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.
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.
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5.9. SEVERABILITY.
If any clause, provision or section of this Agreement shall be ruled
invalid or unenforceable by any court of competent jurisdiction, the invalidity
or unenforceability of such clause, provision or section shall not affect any
remaining clause, provision or section hereof.
5.10. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which shall
be an original and all of which shall constitute but one and the same
instrument.
5.11. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of
New York applicable to agreements made and to be performed
in said state.
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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.
BANKERS TRUST COMPANY
/s/ Xxxx Xxxxxxx
--------------------------
By: Xxxx Xxxxxxx
Title: Associate
------------------------------
------------------------------
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.
BANKERS TRUST COMPANY
--------------------------
By:
Title:
/s/ Xxxxxxx XxXxxxx
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Gruntal & Co LLC
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By: Xxxxxxx XxXxxxx
Title: Managing Director
EXHIBIT A
BANKERS TRUST COMPANY
AUCTION BID FORM
SUBMIT TO: ISSUE:
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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:
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Printed Name:
Title:
