XXXXXXXXX XXXXXX INCOME OPPORTUNITY FUND INC.
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AUCTION AGENCY 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.
----------------------------
THE BANK OF NEW YORK
as Auction Agent
This Auction Agency Agreement (this "Agreement"), dated as of _____, 2003,
is between XXXXXXXXX XXXXXX INCOME OPPORTUNITY FUND INC. (the "Fund") and The
Bank of New York, a New York banking corporation.
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 desires that The Bank of New York perform certain duties as agent
in connection with each Auction (as defined below) 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 Fund hereby appoints The Bank of New York 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 Fund and the Auction Agent agree as follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1 Terms Defined by Reference to the Articles Supplementary.
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Capitalized terms not defined herein shall have the respective meanings
specified in the Articles Supplementary.
1.2 Certain Defined Terms.
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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 a participant in the Securities Depository that will act on behalf of
a Bidder.
(b) "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 attached hereto as
EXHIBIT B.
(c) "Auction" shall have the meaning specified in Section 2.1 hereof.
(d) "Auction Procedures" shall mean the Auction Procedures that are
set forth in Part II of the Articles Supplementary.
(e) "Authorized Officer" shall mean each Vice President, Assistant
Vice President and Assistant Treasurer of the Auction Agent assigned to the
Dealing and Trading Group of its Corporate Trust Department, and every other
officer or employee of the Auction Agent designated as an "Authorized Officer"
for purposes hereof in a written communication from the Auction Agent to the
Fund.
(f) "Broker-Dealer Agreement" shall mean each agreement between the
Auction Agent and a broker-dealer substantially in the form attached hereto as
EXHIBIT A.
(g) "Closing" with respect to the Preferred Shares, shall mean the
date the Fund consummates the transactions for the initial issuance and sale of
the Preferred Shares.
(h) "Fund 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 Fund and every other
officer or employee of the Fund designated as a "Fund Officer" for purposes
hereof in a written notice from the Fund to the Auction Agent.
(i) "Holder" shall be a holder of record of one or more Preferred
Shares, listed as such in the stock register maintained by the Paying Agent
pursuant to Section 4.6 hereof.
(j) "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.
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.
(e) Regardless of the capacity in which The Bank of New York is
acting under this Agreement, the provisions of this Agreement that are of
general applicability (e.g. Sections I, V, VI and VII) shall apply to The Bank
of New York, in spite of referring to The Bank of New York as "Auction Agent."
II. THE AUCTION.
2.1 Purpose; Incorporation by Reference of Auction Procedures.
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(a) The Articles Supplementary provide that the Applicable Rate on
Preferred Shares 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 Fund advises results from the
implementation of the Auction Procedures. 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. The Auction 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
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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.
2.2 Preparation for Each Auction; Maintenance of Registry of Existing
Holders.
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(a) As of the date hereof, the Fund shall provide the Auction Agent
with a list of the Broker-Dealers 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 based upon information provided to it by Broker-Dealers 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 Fund 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 Fund 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) The provisions contained in Section 4 of Part I of the Articles
Supplementary concerning Special Rate Periods and the notification of a Special
Rate Period will be followed by the Fund 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. 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.
(c) The current Applicable Percentage is 150%. In the event that the
credit rating of the Preferred Shares changes in a way that results in a change
in the Applicable Percentage, the Fund shall send prompt notice of such change
to the Auction Agent. In the absence of its actual receipt of any such notice,
the Auction Agent is authorized to apply, and shall be fully protected in
applying, the Applicable Percentage last communicated to it by the Fund in a
notice or set forth above in this paragraph.
(d) (i) On each Auction Date, the Auction Agent shall determine the
dividend rate and the Maximum Rate. If any "AA" Financial Composite Commercial
Paper Rate, Treasury Index Rate, Treasury Note Rate or Reference Rate, as the
case may be, is not quoted on an interest equivalent, as the case may be, basis,
the Auction Agent shall convert the quoted rate to the interest equivalent
thereof as set forth in the definition of such rate in the Articles
Supplementary if the rate obtained by the Auction Agent is quoted on a discount
basis, or if such rate is quoted on a basis other than an interest equivalent or
discount basis the Auction Agent shall convert the quoted rate to an interest
equivalent rate after consultation with the Fund as to the method of such
conversion.
(ii) If any "AA" Financial Composite Commercial Paper Rate is to
be based on rates supplied by Commercial Paper Dealers and one or more of the
Commercial Paper Dealers shall not provide a quotation for the determination of
such "AA" Financial Composite Commercial Paper Rate, the Auction Agent shall
promptly notify the Fund so that the Fund 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 Fund shall promptly advise the Auction
Agent of any such selection.
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(iii) If any Treasury Index Rate or Treasury Note Rate is to be
based on rates supplied by U.S. Government Securities Dealers and one or more of
the U.S. Government Securities Dealers shall not provide a quotation for the
determination of such Treasury Rate, the Auction Agent shall promptly notify the
Fund so that the Fund can determine whether to select a substitute U.S.
Government Securities Dealer or substitute U.S. Government Securities Dealers to
provide the quotation or quotations not being supplied by any U.S. Government
Securities Dealer or U.S. Government Securities Dealers. The Fund shall promptly
advise the Auction Agent of any such selection.
(e) (i) The Auction Agent shall maintain a current registry of the
Existing Holders of the Preferred Shares based upon information provided to it
by Broker-Dealers for purposes of each individual Auction. The Fund 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 conclusively rely upon, as evidence of the
identities of the Existing Holders, such list, the results of each Auction and
written 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
Holder's transfer of any Preferred Shares to another Person.
(ii) In the event of any partial redemption of Preferred Shares,
upon notice in writing by the Fund to the Auction Agent of such partial
redemption, the Auction Agent promptly shall request the Securities Depository
to notify the Auction Agent in writing 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 Fund, 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 Fund, 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
Agreement, 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 Auction Date. The Auction Agent shall
rescind a transfer made on the registry of the 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, but shall not be obligated to, 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
4
Broker-Dealer and the Fund; 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.
2.3 Auction Schedule.
----------------
The Auction Agent shall normally conduct Auctions every seven days after
the first Auction, in accordance with the schedule set forth below. Such
schedule may be changed 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 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 am.
Auction Agent shall advise the Fund and
the Broker-Dealers of Maximum Rate as
set forth in Section 2.2(d)(i) hereof.
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 1:00p.m. Auction Agent shall make determinations
pursuant to Section 3(a) of Part II of
the Articles Supplementary.
By approximately 3:30 p.m. Auction Agent shall advise the Fund of
(and not later than the the results of the Auction as provided
close of business) in Section 3(b) of Part II of the
Articles Supplementary.
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 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 (i.e., the resulting rate and those bids accepted and
rejected) by telephone or other electronic means acceptable to the parties.
2.5 Broker-Dealers.
--------------
(a) Not later than 12:00 noon on each Auction Date, the Fund 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
seven-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 Fund 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
5
thereafter remit to the Fund any remaining funds paid to the Auction Agent
pursuant to this Section 2.5(a).
(b) The Auction Agent shall terminate any Broker-Dealer Agreement as
set forth therein if so directed in writing by the Fund.
(c) The Auction Agent from time to time shall enter into such
Broker-Dealer Agreements as the Fund shall request in writing.
2.6 Ownership of Preferred Shares and Submission of Bids by the Fund and
Its Affiliates.
----------------------------------------------------------------------
Neither the Fund nor any Affiliate of the Fund may submit any Sell Order
or Bid, directly or indirectly, in any Auction, except that an Affiliate of the
Fund that is a Broker-Dealer may submit a Sell Order or Bid on behalf of a
Beneficial Owner or a Potential Beneficial Owner. The Fund shall notify the
Auction Agent in writing if the Fund or, to the best of the Fund's knowledge,
any Affiliate of the Fund becomes a Beneficial Owner of any Preferred Shares.
Any Preferred Shares redeemed, purchased or otherwise acquired (i) by the Fund
shall not be reissued, except in accordance with the requirements of the
Securities Act of 1933, as amended ("Securities Act") or (ii) by its Affiliates
shall not be transferred (other than to the Fund). 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 Fund, its agents, independent public
accountants and counsel, access at reasonable times during normal business hours
to review and make extracts or copies (at the Fund's sole cost and expense) of
all books, records, documents 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 Fund requesting that the
Auction Agent afford such person access at least one Business Day prior to the
date of such access. The Auction Agent shall maintain records relating to any
Auction for a period of at least two years after such Auction (unless requested
in writing by the Fund to maintain such records for such longer period not in
excess of six 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 Fund 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 Fund reserves the right to disclose any such
information if it is ordered to do so by a court of competent jurisdiction or a
regulatory body, judicial or quasi-judicial agency or authority having authority
to compel such disclosure, or 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 Fund. 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 ordered
to do so by a court of competent jurisdiction or a regulatory body, judicial or
quasi judicial agency or authority having authority to compel such disclosure,
or 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. The
Auction Agent shall have no responsibility for, and shall have no liability in
connection with, the Fund's performance of its duties under this Section 2.7.
6
III. THE AUCTION AGENT AS PAYING AGENT.
3.1 The Paying Agent.
----------------
The Board of Directors of the Fund has adopted a resolution appointing The
Bank of New York as Auction Agent and Paying Agent. The Paying Agent hereby
accepts such appointment and agrees to act in accordance with its standard
procedures and the provisions of the Articles Supplementary which are specified
herein with respect to the Preferred Shares and as set forth in this Section 3.
If there is any conflict between its standard procedures and this Agreement, the
terms of this Agreement will govern.
3.2 The Fund's Notices to the Paying Agent.
--------------------------------------
Whenever any Preferred Shares are to be redeemed, the Fund 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 Articles
Supplementary. Subject to the standards of Section 6.1 of this Agreement, the
Paying Agent shall have no responsibility to confirm or verify the accuracy of
any such Notice.
3.3 The Fund to Provide Funds for Dividends and Redemptions.
-------------------------------------------------------
(a) Not later than 12:00 noon on each Dividend Payment Date, the Fund
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 give the Paying Agent irrevocable written
instructions to apply such funds to the payment of such dividends on such
Dividend Payment Date.
(b) If the Fund shall give a Notice of Redemption, then by noon of
the date fixed for redemption, the Fund 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 written 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 Fund 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 shares of
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 Fund
as set forth in Section 2 of Part I of the Articles Supplementary. The
redemption price to be paid by the Paying Agent to the Holders of any shares of
Preferred Shares called for redemption will be determined by the Fund as set
forth in Section 11 of Part I of the Articles Supplementary. The Paying Agent
shall have no duty to determine the redemption price and may rely on the amount
thereof set forth in the Notice of Redemption.
IV. THE PAYING AGENT AS TRANSFER AGENT AND REGISTRAR.
4.1 Original Issue of Share Certificates.
------------------------------------
On the Date of Original Issue for any Preferred Shares, one certificate
for the Preferred Shares shall be issued by the Fund and registered in the name
of Cede & Co., as nominee of the Securities Depository, and countersigned by the
Paying Agent.
7
4.2 Registration of Transfer or Exchange of Shares.
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Except as provided in this Section 4.2, the 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 Fund shall not have selected a substitute Securities Depository
acceptable to the Paying Agent prior to such resignation, then, upon such
resignation of the Securities Depository, the Preferred Shares, at the Fund'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. During any period when the certificate or
certificates for Preferred Shares are not held by a Securities Depository or its
nominee in book-entry form, no Auctions shall be held and this Agreement may be
terminated at the instance of either party as soon as practicable.
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 Fund Officer authorizing the Paying
Agent to remove the legend on the basis of said opinion.
4.4 Lost, Stolen or Destroyed Shares 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 Fund. The
Paying Agent may issue new certificates in exchange for and upon the
cancellation of mutilated certificates. Any request by the Fund 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 Fund to the Paying
Agent that such issuance will comply with provisions of applicable law and the
Articles Supplementary and resolutions of the Fund.
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
"Commission") for at least two calendar years from the date of such
cancellation. The Paying Agent, upon written request by the Fund, shall afford
to the Fund, its agents and counsel access at reasonable times during normal
business hours to review and make extracts or copies (at the Fund's sole cost
and expense) of such certificates and accompanying documentation. Upon written
request by the Fund at any time within the six month period commencing
immediately after the expiration of this two-year period, the Paying Agent shall
deliver to the Fund the canceled certificates and accompanying documentation.
The Fund, 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 Fund 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 Commission. The Fund also shall undertake
to furnish to the Commission, 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 Fund
8
without the approval of the Paying Agent, which approval shall not be withheld
unreasonably, but will be safely stored for possible future reference.
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 written 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 Fund in the possession of the Paying Agent, the Paying Agent will notify the
Fund 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 (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.
4.7 Return of Funds.
---------------
Any funds deposited with the Paying Agent by the Fund for any reason
(other than for the payment of amounts due to the Paying Agent) 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
Fund upon written request by the Fund.
V. REPRESENTATIONS AND WARRANTIES.
5.1 Representations and Warranties of the Fund.
------------------------------------------
The Fund represents and warrants to the Auction Agent that:
(i) the Fund is duly organized and is validly existing as a
corporation under the laws of the State of Maryland, and has full power to
execute and deliver this Agreement and to authorize, create and issue the
Preferred Shares;
(ii) the Fund is registered with the Commission under the 1940
Act as a closed-end, non-diversified, management investment company;
(iii) this Agreement has been duly and validly authorized,
executed and delivered by the Fund and constitutes the legal, valid and binding
obligation of the Fund, enforceable against the Fund in accordance with its
terms, subject 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 State of Maryland;
(v) the Preferred Shares have been duly and validly authorized
by the Fund and, upon completion of the initial sale of the Preferred Shares and
receipt of payment therefor, will be validly issued by the Fund, 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 and no further action
by 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
9
Agreement or will be required in connection with the issuance of shares 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 Articles of Incorporation, any order or decree
of any court or public authority having jurisdiction over the Fund, or any
mortgage, indenture, contract, agreement or undertaking to which the Fund 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 Fund 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 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 Fund
hereunder, owes no fiduciary duties to any Person by reason of this Agreement,
and owes no duties, fiduciary or otherwise, 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 willful misconduct or gross 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.
(d) In no event shall the Auction Agent be liable for special,
punitive, indirect or consequential loss or damage of any kind whatsoever
(including, but not limited to, lost profits), even if the Auction Agent has
been advised of the likelihood of such loss or damage and regardless of the form
of action.
6.2 Rights of the Auction Agent.
---------------------------
(a) The Auction Agent may conclusively rely upon, and shall be fully
protected in acting or refraining from acting upon, any communication authorized
hereby and any written instruction, notice, request, direction, consent, report,
certificate, share certificate or other instrument, paper or document reasonably
10
believed by it to be genuine. The Auction Agent shall not be liable for acting
or refraining from acting upon any telephone communication authorized hereby
which the Auction Agent reasonably believes in good faith to have been given by
the Fund or by a Broker-Dealer. The Auction Agent may record telephone
communications with the Fund or with the Broker-Dealers or with both.
(b) The Auction Agent may consult with counsel of its 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 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 Fund.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys (other than its
officers and employees) and shall not be responsible for the negligence or
misconduct of any such agent or attorney selected and appointed by it with due
care.
(e) The Auction Agent shall not be liable for any error of judgment
made in good faith unless the Auction Agent shall have been grossly negligent in
ascertaining the pertinent facts necessary to make such judgment.
(f) The Auction Agent shall not be required to and shall make no
representations and have no responsibilities as to the validity, accuracy, value
or genuineness of any signatures or endorsements, other than its own and those
of its Authorized Officers, employees, agents, and attorneys. The Auction Agent
makes no representations as to and shall have no liability with respect to the
correctness of the recitals in, or the validity, accuracy or adequacy of this
Agreement, any Broker-Dealer Agreement, any offering material used in connection
with the offer and sale of the Preferred Shares or any other agreement or
instrument executed in connection with the transactions contemplated herein or
in any thereof. The Auction Agent shall have no obligation or liability in
respect of the registration or exemption therefrom of the Preferred Shares under
federal or state securities laws in respect of the sufficiency or the conformity
of any transfer of the Preferred Shares pursuant to the terms of the Auction
Agency Agreement, any Broker Dealer Agreement, or any other document
contemplated thereby or related thereto.
(g) Whenever in the administration of the provisions of this
Agreement the Auction Agent shall deem it necessary or desirable that a matter
be proved or established prior to taking or suffering any action to be taken
hereunder, such matter may, in the absence of gross negligence or willful
misconduct on the part of the Auction Agent, be deemed to be conclusively proved
and established by a certificate signed by the Fund or the Broker-Dealer, and
delivered to the Auction Agent and such certificate, in the absence of gross
negligence or willful misconduct on the part of the Auction Agent, shall be full
warrant to the Auction Agent for any action taken or omitted by it under the
provisions of this Agreement upon the faith thereof. Upon receipt of any such
certificate signed by the Fund or a Broker-Dealer, the Auction Agent shall
promptly provide a copy of said certificate to the Broker-Dealer or the Fund,
respectively.
(h) The Auction Agent shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, entitlement order,
approval or other paper or document furnished by Fund or the Broker-Dealer,
except to the extent that such failure to investigate would be deemed grossly
negligent.
11
(i) Any corporation into which the Auction Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Auction Agent shall be
a party, or any corporation succeeding to the Dealing and Trading business of
the Auction Agent shall be the successor of the Auction Agent hereunder, with
the consent of the Fund but without the execution or filing of any paper with
any party hereto or any further act on the part of any of the parties hereto,
except where any instrument of transfer or assignment may be required by law to
effect such succession, anything herein to the contrary notwithstanding.
6.3 Compensation, Expenses and Indemnification.
------------------------------------------
(a) The Fund shall pay to the Auction Agent from time to time such
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 Fund 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 Fund 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 gross negligence or willful misconduct, or that of
its officers, directors or employees.
(c) The Fund shall indemnify the Auction Agent and its officers,
directors, employees and agents for, and hold it harmless against, any loss,
liability or expense incurred without gross negligence or willful misconduct 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 gross negligence or willful misconduct, or
that its officers, directors or employees.
6.4 Force Majeure
-------------
The Auction Agent shall not be responsible for 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 of 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 Auction Agent shall use reasonable efforts
which are consistent with accepted practices in the banking industry to resume
performance as soon as practicable under the circumstances.
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 Fund may terminate this
Agreement at any time by so notifying the Auction Agent in writing, provided
12
that, if any Preferred Shares remain outstanding, the Fund shall have entered
into an agreement with a successor auction agent. The Auction Agent may
terminate this Agreement upon prior notice to the Fund on the date specified in
such notice, which date shall be no earlier than 60 days after delivery of such
notice. The Auction Agent may resign after 30 days following the delivery of
notice to the Fund that the Auction Agent has not been paid amounts due to it.
If the Auction Agent terminates this Agreement while any Preferred Shares
remains outstanding, the Fund shall use its best efforts to enter into an
agreement with a successor auction agent containing substantially the same terms
and conditions as this Agreement.
(b) Except as otherwise provided in this Section 7.1(b), the
respective rights and duties of the Fund and the Auction Agent under this
Agreement shall cease upon termination of this Agreement. The Fund's
representations, warranties, covenants and obligations to the Auction Agent
under Sections 5.1 and 6.3 hereof, and the Auction Agent's representations and
warranties under Section 5.2 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 Fund's written request,
deliver promptly to the Fund copies of all books and records maintained by it in
connection with its duties hereunder, and (iii) at the written request of the
Fund, transfer promptly to the Fund's custodian or to any successor auction
agent any funds deposited by the Fund 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 Fund, Xxxxxxxxx Xxxxxx Management Inc.
addressed to: Attn: Xxxxx X. Xxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
cc: Art Delibert
Xxxxxxxxxxx & Xxxxxxxx
0000 Xxxxxxxxxxxxx Xxxxxx XX
Xxxxxxxxxx, XX 00000
If to the Auction Agent, The Bank of New York
addressed to: 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
13
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 Fund by a Fund Officer and on
behalf of the Auction Agent by an Authorized Officer.
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 written
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 Fund, 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 Fund shall notify the Auction Agent in writing of any change in the
Articles Supplementary prior to the effective date of any such change. If any
such change in the Articles Supplementary materially increases the Auction
Agent's obligations hereunder, the Fund 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
Fund 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.
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
wholly in said state.
14
7.10 Jurisdiction.
------------
The parties agree that all actions and proceedings arising out of this
Auction Agency 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]
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.
XXXXXXXXX XXXXXX INCOME
OPPORTUNITY FUND INC.
By:
--------------------------------------
Name:
Title:
THE BANK OF NEW YORK, As Auction
Agent
By:
--------------------------------------
Name:
Title:
16
EXHIBIT A
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.
----------------------------
[BROKER DEALER]
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:
------------------------
(Name of Broker-Dealer)
By:
------------------------
Printed Name:
Title:
C-1
