XXXXXXXXX XXXXXX INCOME OPPORTUNITY FUND INC.
THE BANK OF NEW YORK,
as Auction Agent
-----------------------
BROKER-DEALER AGREEMENT
dated as of ______, 2003
Relating to
Auction Preferred Shares ("Preferred Shares")
Series A, Series B and Series C
of
XXXXXXXXX XXXXXX INCOME OPPORTUNITY FUND INC.
---------------------------
CITIGROUP GLOBAL MARKETS INC.
BROKER-DEALER AGREEMENT
This Broker-Dealer Agreement dated as of _______, 2003, is between The Bank
of New York, a New York banking corporation (the "Auction Agent") (not in its
individual capacity, but solely as agent of XXXXXXXXX XXXXXX INCOME FUND INC.
(the "Fund"), pursuant to authority granted to it in the Auction Agency
Agreement dated as of _______, 2003, between the Fund and the Auction Agent (the
"Auction Agency Agreement") and CITIGROUP GLOBAL MARKETS INC. (together with its
successors and assigns, "BD").
The Fund proposes to issue three series of auction preferred shares, par
value $.0001 per share, designated Series A Preferred Shares, Series B Preferred
Shares and Series C Preferred Shares, liquidation preference $25,000 per share
("Preferred Shares"), pursuant to the Fund's Articles Supplementary (as defined
below).
The Fund's Articles Supplementary provide that for each subsequent Dividend
Period of Preferred Shares then outstanding, the Applicable Rate for Preferred
Shares for each subsequent Dividend Period shall be equal to the rate per annum
that results from an Auction for Outstanding Preferred Shares 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 Directors of the Fund has adopted a resolution appointing The Bank of
New York as Auction Agent for purposes of the Auction Procedures, and pursuant
to Section 2.5 of the Auction Agency Agreement, the Fund 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 Articles Supplementary.
--------------------------------------------------------
Capitalized terms not defined herein shall have the respective meanings
specified in the Articles Supplementary.
1.2 Terms Defined Herein.
--------------------
As used herein, the following terms shall have the following meanings,
unless the context otherwise requires:
(a) "Articles Supplementary" shall mean the Articles
Supplementary for Preferred Shares of the Fund dated as of _______, 2003,
specifying the powers, preferences and rights of the Preferred Shares.
(b) "Auction" shall have the meaning specified in Section 2.1
of the Auction Agency Agreement.
(c) "Auction Procedures" shall mean the Auction Procedures that
are set forth in Part II of the Articles Supplementary.
(d) "Authorized Officer" of the Auction Agent shall mean each
Vice President, Assistant Vice President and Assistant Treasurer of the Dealing
and Trading Group of the Corporate Trust Department of the Auction Agent and
every other officer or employee of the Auction Agent designated as an
"Authorized Officer" for purposes of this Agreement in a written communication
to BD.
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(e) "BD Officer" shall mean each officer or employee of BD
designated as a "BD Officer" for purposes of this Agreement in a written
communication to the Auction Agent.
(f) "Broker-Dealer Agreement" shall mean this Agreement and any
substantially similar agreement between the Auction Agent and a Broker-Dealer.
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 Articles
Supplementary 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. In the case of any conflict between the terms of any document
incorporated herein by reference and the terms hereof, the Auction Agent shall
not be liable for its actions or inaction in accordance with the terms of this
Agreement, provided it shall have complied with the standards of conduct in the
Auction Agency Agreement.
III. THE AUCTION.
3.1 Purpose; Incorporation by Reference of Auction Procedures.
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(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."
(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. In the case of any conflict between the terms of any document
incorporated herein by reference and the terms hereof, the Auction Agent shall
not be liable for its actions or inaction in accordance with the terms of this
Agreement, provided it shall have complied with the standards of conduct in the
Auction Agency Agreement.
(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 "Definitions" in the Articles
Supplementary may execute a Broker-Dealer Agreement and participate as
Broker-Dealers in Auctions.
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(d) BD and other Broker-Dealers may participate in Auctions for
their own accounts. However, the Fund, 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. At the request of the Fund, the Auction Agent will seek
written certification from the Broker-Dealer that none of its orders are for its
own account, other than Hold Orders or Sell Orders and will provide to the Fund
such written certifications as it receives. The Auction Agent shall have no
other responsibility for and shall have no liability with respect to the
enforcement of this Section 3.1(d).
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 or other
electronic means of communication acceptable to the parties of the Maximum Rate
in effect on such Auction Date.
(b) The Auction Agent from time to time may, but shall not be
obligated to, 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 Fund; 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 or in the Auction Agency Agreement;
provided, however, that the Auction Agent reserves the right and is authorized
to disclose any such information if (a) it is ordered to do so by a court of
competent jurisdiction or a regulatory body, judicial or quasi-judicial agency
or authority having the authority to compel such disclosure, (b) it is advised
by its counsel that its failure to do so would be unlawful or (c) failure to do
so would expose the Auction Agent to loss, liability, claim, damage or expense
for which it has not received indemnity or security satisfactory to it. In the
event that the Auction Agent is required to disclose information in accordance
with the foregoing sentence, it shall provide written notice of such requirement
to BD as promptly as practicable. The Auction Agent shall, subject to the terms
of the Auction Agency Agreement, 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 use commercially reasonable efforts to 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.
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(a) The Fund 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 Fund,
which consent shall not be withheld unreasonably. The Auction Agent shall give
notice of any such change to BD. Such notice shall be received prior to the
first Auction Date on which any such change shall be effective.
Time Event
---- -----
By 9:30 A.M. Auction Agent shall advise the Fund and the Broker-
Dealers of the Maximum Rate as set forth in Section
3.2(a) hereof.
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Time Event
---- -----
9:30 A.M. - 1:00 P.M Auction Agent shall assemble information communicated
to it by Broker-Dealers as provided in Section 3(a) of
Part II of the Articles Supplementary. Submission
Deadline is 1:00 P.M.
Not earlier than 1:00 Auction Agent shall make determinations pursuant to
P.M. Section 3(a) of Part II of the Articles Supplementary.
By approximately 3:30 Auction Agent shall advise the Fund of the results of
P.M. (and not later the Auction as provided in Section 3(b) of Part II of
than the close of the Articles Supplementary.
business)
Submitted Bid Orders and Submitted Sell Orders will be
accepted and rejected in whole or in part and Preferred
Shares will be allocated as provided in Section 4 of
Part II of the Articles Supplementary.
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 Articles
Supplementary.
(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 preceding the applicable Auction Date.
3.4 Notice of Auction Results.
-------------------------
(a) On each Auction Date, the Auction Agent shall notify BD by
telephone or other electronic means acceptable to the parties of the Auction
results. 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, of the Auction results 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
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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). Any delivery or non-delivery of Preferred Shares which
represents any departure from the results of an Auction shall not affect the
results of the Auction.
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 Fund 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 Articles Supplementary) 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 Articles
Supplementary 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 Fund 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.
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. MISCELLANEOUS.
4.1 Termination.
-----------
Any party may terminate this Agreement at any time upon five days' prior
written notice to the other party; PROVIDED, HOWEVER, that if the Broker-Dealer
is Citigroup Global Markets Inc. it may not terminate this Agreement without
first obtaining the prior written consent of the Fund to such termination, which
consent shall not be withheld unreasonably. The Auction Agent is without
discretion to terminate this Agreement and will move to terminate it only
pursuant to written direction from the Fund. This Agreement shall automatically
terminate upon the redemption of all outstanding Preferred Shares or upon
termination of the Auction Agent Agreement.
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4.2 Force Majeure.
-------------
Neither party to this Agreement shall be responsible or liable for any
failure or delay in the performance of its obligations under this Agreement
arising out of or caused, directly or indirectly, by circumstances beyond its
reasonable control, including, without limitation, acts of God; earthquakes;
fires; floods; wars; civil or military disturbances; sabotage; acts of
terrorism; epidemics; riots; interruptions, loss or malfunctions or utilities;
computer (hardware or software) or communications services (provided that
Auction Agent has not been grossly negligent with respect to selection,
operation or maintenance of such utilities, computer (hardware or software) or
communications service); accidents; labor disputes; acts of civil or military
authority or governmental actions; it being understood that the parties shall
use reasonable efforts which are consistent with accepted practices in the
banking industry to resume performance as soon as practicable under the
circumstances.
4.3 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.
4.4 Agent Member.
------------
At the date hereof, BD is a participant of the Securities Depository.
4.5 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: The Bank of New York
Corporate Trust Administration
000 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Corporate Trust Dealing and
Trading Group - Auction Desk
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
If to the BD,
addressed to: Citigroup Global Markets Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Manager, Investment Banking
Division
Telephone No.:
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or such other address or telecopier number as such party hereafter may
specify for such purpose by notice to the other party. Each such notice,
request or communication shall be effective when delivered at the address
specified herein. Communications shall be given on behalf of BD by a BD
Officer and on behalf of the Auction Agent by an Authorized Officer. BD may
record telephone communications with the Auction Agent.
4.6 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.
4.7 Benefits.
--------
Nothing in this Agreement, express or implied, shall give to any person,
other than the Fund, the Auction Agent and BD and their respective successors
and permitted assigns, any benefit of any legal or equitable right, remedy or
claim under this Agreement.
4.8 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.
4.9 Successors and Assigns.
----------------------
This Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors and permitted assigns of each of BD
and the Auction Agent. This Agreement may not be assigned by either party hereto
absent the prior written consent of the other party and the Fund.
4.10 Severability.
------------
If any clause, provision or section of this Agreement shall be ruled
invalid or unenforceable by any court of competent jurisdiction, the invalidity
or unenforceability of such clause, provision or section shall not affect any
remaining clause, provision or section hereof.
4.11 Execution in Counterparts.
-------------------------
This Agreement may be executed in several counterparts, each of which shall
be an original and all of which shall constitute but one and the same
instrument.
4.12 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
wholly in said state.
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4.13 Jurisdiction.
------------
The parties agree that all actions and proceedings arising out of this
Broker-Dealer Agreement or any of the transactions contemplated hereby shall be
brought in the County of New York, and, in connection with any such action or
proceeding, submit to the jurisdiction of, and venue in, such County. Each of
the parties hereto also irrevocably waives all right to trial by jury in any
action, proceeding or counterclaim arising out of this Agreement or the
transactions contemplated hereby.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
THE BANK OF NEW YORK, As Auction Agent
By:
---------------------------------------
Name:
Title:
CITIGROUP GLOBAL MARKETS INC.
By:
---------------------------------------
Name:
Title:
10
EXHIBIT A
THE BANK OF NEW YORK
AUCTION BID FORM
Submit To: Issue:
--------- -----
The Bank of New York XXXXXXXXX XXXXXX INCOME OPPORTUNITY
Corporate Trust Administration FUND INC.
000 Xxxxxx Xxxxxx, 0xx Xxxxx Auction Market Preferred Shares,
Xxx Xxxx, Xxx Xxxx 00000 Series ___
Attention: Corporate Trust Dealing ("Preferred Shares")
and Trading Group - Auction Desk
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
The undersigned Broker-Dealer submits the following Order on behalf of the
Bidder listed below:
Name of Bidder:
--------------------------------
BENEFICIAL OWNER
Preferred Shares now held HOLD
----------------------- --------------
BID at rate of
---------
SELL
--------------
POTENTIAL BENEFICIAL OWNER
# of Series __ Preferred Shares ___________
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.
(6) An Order must be submitted in whole shares of Preferred Shares with an
aggregate liquidation preference of $25,000.
CITIGROUP GLOBAL MARKETS INC.
--------------------------------------------------------------
Authorized Signature
------------------------------------------
A-1
EXHIBIT B
(Note: To be used only for transfers made other than pursuant to an Auction)
TRANSFER FORM
Re: XXXXXXXXX XXXXXX INCOME OPPORTUNITY FUND INC.
Auction 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 _________
Series __ Preferred Shares to ________________________
------------------------------------------
(Name of Existing Holder)
------------------------------------------
(Name of Broker-Dealer)
------------------------------------------
(Name of Agent Member)
By:
--------------------------
Printed Name:
Title:
B-1
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 _______ Series __ Preferred Shares of XXXXXXXXX XXXXXX INCOME
OPPORTUNITY FUND INC. 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:
-------------------------------------
CITIGROUP GLOBAL MARKETS INC.
By:
---------------------------------------
Printed Name:
Title:
C-1
