EXHIBIT 99.2K2
================================================================================
ZENIX INCOME FUND INC.
_____________________
AUCTION AGENCY AGREEMENT
dated as of April __, 2000
Relating to
Auction Rate Cumulative Preferred Stock
of
Zenix Income Fund Inc.
_____________________
BANKERS TRUST COMPANY,
as Auction Agent
================================================================================
AUCTION AGENCY AGREEMENT dated as of April __, 2000 between
ZENIX INCOME FUND INC., a Maryland corporation (the "Company"), and BANKERS
TRUST COMPANY, a New York corporation (the "Auction Agent").
WHEREAS, the Company proposes to offer, issue and sell shares
of Auction Rate Cumulative Preferred Stock ("Preferred Shares") pursuant to its
Articles of Incorporation, as amended by the Articles Supplementary (as defined
below). The Company desires that the Auction Agent perform certain duties in
connection with the Preferred Shares upon the terms and subject to the
conditions of this Agreement, and hereby appoints the Auction Agent to act in
the capacities set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the Company and the Auction Agent agree as
follows:
1. Definitions and Rules of-Construction.
-------------------------------------
1.1. Terms Defined By Reference to Articles Supplementary.
----------------------------------------------------
Capitalized terms not defined herein shall have the respective
meanings specified in Parts I and II of the Articles Supplementary.
1.2. Terms Defined Herein.
--------------------
As used herein and in the Settlement Procedures, the following
terms shall have the following meanings, unless the context otherwise requires:
(a) "Agent Member" of any Person shall mean the member of, or
participant in, the Securities Depository that will act on behalf of a Person
and is identified as such in such Person's Master Purchaser's Letter.
(b) "Articles Supplementary" shall mean the Articles
Supplementary Establishing and Fixing the Rights Of Auction Rate Cumulative
Preferred Stock filed by the Company in the office of the State Department of
Assessments and Taxation of the State of Maryland, substantially in the form
attached hereto as Exhibit A.
(c) "Auction" shall have the meaning specified in Section 2.1
hereof.
(d) "Auction Procedures" shall mean the auction procedures
constituting Part II of the form of Articles Supplementary as of the filing
thereof.
(e) "Authorized Officer" shall mean each Senior Vice
President, Vice President, Assistant Vice President, Trust Officer and Assistant
Manager of the Auction Agent assigned to its Corporate & Institutional Trust
Group and every other officer or employee of the Auction Agent designated as an
"Authorized Officer" for purposes hereof in a communication to the Company.
(f) "Broker-Dealer Agreement" shall mean each agreement among
the Company, the Auction Agent and a Broker-Dealer substantially in the form
attached hereto as Exhibit B.
(g) "Company Officer" shall mean the Chairman of the Board of
Directors, each Vice Chairman of the Board of Directors (whether or not
designated by a number or word or words added before or after the title "Vice
Chairman of the Board of Directors"), 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 Company and every other officer or
employee of the Company designated as a "Company Officer" for purposes hereof in
a notice to the Auction Agent.
(h) "Master Purchaser's Letter" shall mean a letter addressed
to the Company, the Auction Agent, a Broker-Dealer and an Agent Member,
substantially in the form attached hereto as Exhibit C.
(i) "Preferred Shares" shall mean the preferred stock, par
value $.01 per share, of the Company designated as its "Auction Rate Cumulative
Preferred Stock".
(j) "Settlement Procedures" shall mean the Settlement
Procedures attached hereto as Exhibit D.
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.
2. The Auction.
-----------
2.1. Purpose; Incorporation by Reference of
Auction Procedures and Settlement Procedures.
--------------------------------------------
(a) The Articles Supplementary provide that the Applicable
Rate for Preferred Shares for each subsequent Dividend Period after the Initial
Dividend Period thereof shall, except
-2-
under certain conditions, be the rate per annum that a bank or trust company
appointed by the Company advises results from implementation of the Auction
Procedures for Preferred Shares. The Board of Directors has adopted a resolution
appointing Bankers Trust Company as Auction Agent for purposes of the Auction
Procedures for Preferred Shares. The Auction Agent accepts such appointment and
agrees to follow the procedures set forth in this Section 2 and the Auction
Procedures for the purpose of determining the Applicable Rate for Preferred
Shares for each Subsequent Rate Period thereof for which the Applicable Rate is
to be determined by an Auction. Each periodic implementation of such procedures
is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures
and the Settlement Procedures are incorporated herein by reference in their
entirety and shall be deemed to be a part hereof to the same extent as if such
provisions were fully set forth herein.
2.2. Preparation for Each Auction; Maintenance
of Registry of Beneficial Owners.
--------------------------------
(a) Not later than the Date of Original Issue, the company
shall provide the Auction Agent with a list of the Broker-Dealers, and a
manually signed copy of each Broker/Dealer Agreement. Not later than seven days
prior to any Auction Date for Preferred Shares for which any change in such list
of Broker-Dealers is to be effective, the Company will notify the Auction Agent
in writing of such change and, if any such change involves the addition of a
Broker-Dealer to such list, shall cause to be delivered to the Auction Agent for
execution by the Auction Agent a Broker-Dealer Agreement manually signed by such
Broker-Dealer; provided, however, that if the Company proposes to designate any
Special Rate Period of Preferred Shares pursuant to Section [4] of Part I of the
Articles Supplementary, not later than 11:00 A.M. on the Business Day next
preceding the Auction next preceding the first day of such Rate Period, the
Company shall provide the Auction Agent with a list of the Broker-Dealers and a
manually signed copy of each Broker-Dealer Agreement or a new Schedule A to a
Broker-Dealer Agreement (which Schedule A shall replace and supersede any
previous Schedule A to such Broker-Dealer Agreement) with each Broker-Dealer.
The Auction Agent and the Company shall have entered into a Broker-Dealer
Agreement with each Broker-Dealer prior to the participation of any such
Broker-Dealer in any Auction.
(b) In the event that any Auction Date shall be changed after
the Auction Agent shall have given the notice referred to in [clause (vi) of
paragraph (a) of the Settlement Procedures], or, after the notice referred to in
Section 2.5(a) hereof, if applicable, the Auction Agent, by such means as the
Auction Agent deems practicable, shall give notice of such change to the
Broker-Dealers not later than the earlier of 9:15 A.M. on the new Auction Date
or 9:15 A.M. on the old Auction Date.
(c) If the Dividend Payment Date for the Preferred Shares is
adjusted as provided in Section 2(b)(ii) of Part I of the Articles
Supplementary, not later than __ days prior to the first day of the Dividend
Payment Date for the Preferred Shares for which such change is first to be
effective, the Company shall provide the Auction Agent with a form of notice
of-such change to be sent to Existing Holders by Broker-
-3-
Dealers pursuant to Section 2.4 of the Broker-Dealer Agreements. The Auction
Agent shall provide each Broker-Dealer with such form of notice not later than
____ days after receipt thereof from the Company.
(d)(i) The Auction Agent shall maintain a registry of the
beneficial owners of the shares of Preferred Shares, who shall constitute
Existing Holders of shares for purposes of Auctions and shall indicate thereon
the identity of the respective Broker-Dealer of each Existing Holder, if any, on
whose behalf such Broker-Dealer submitted the most recent order in any Auction
which resulted in such Existing Holder continuing to hold or purchasing shares
of Preferred Shares. The Auction Agent shall keep such registry current and
accurate. The Company shall provide or cause to be provided to the Auction Agent
at or prior to the Date of Original Issue a list of the initial Existing Holders
of the shares of Preferred Shares, the number of shares purchased by each such
Existing Holder and the respective Broker-Dealer of each such Existing Holder or
the affiliate thereof through which each such Existing Holder purchased such
shares. The Auction Agent shall advise the Company in writing whenever the
number of Existing Holders is 500 or more. The Auction Agent may rely upon, as
conclusive evidence of the identities of the Existing Holders of shares of
Preferred Shares (A) such list, (B) the results of Auctions and (C) notices from
any Existing Holder, the Agent Member of any Existing Holder or the
Broker-Dealer of any Existing Holder as described in the first sentence of
Section 2.2 (d) (iii) hereof
(ii) In the event of any partial redemption of Preferred
Shares, the Auction Agent shall, at least two Business Days prior to the next
Auction for Preferred Shares, request the Agent Member of each Existing Holder
of shares of Preferred Shares 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 shares of Preferred Shares, if any, of such Existing Holder which
are subject to such redemption, provided the Auction Agent has been furnished,
at least three Business Days prior to such Auction, with the name and telephone
number of a person or department at such Agent Member from which it shall
request such information. Upon any refusal of an Agent Member to release such
information, the Auction Agent shall deliver to such Agent Member a facsimile
copy of the Existing Holder's Master Purchaser's Letter, which authorizes and
instructs such Agent Member to release such information to the Auction Agent. 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 the beneficial owner of the number
of shares of Preferred Shares shown in the Auction Agent's registry.
(iii) The Auction Agent shall be required to register a
transfer of shares of Preferred Shares from an Existing Holder to another Person
only if such transfer is made to a Person that has delivered or on whose behalf
has been delivered a signed Master Purchaser's Letter to the Auction Agent and
if (A) such transfer is pursuant to an Auction or (B) the Auction Agent has been
notified in writing (I) in a notice substantially in the form of Exhibit E to
the Broker-Dealer Agreements by such Existing Holder, the Agent Member of such
Existing Holder or the Broker-Dealer of such Existing Holder of such transfer or
(II) in a notice substantially in the form of Exhibit F to the Broker-Dealer
Agreements by the Broker-Dealer of any Person that purchased or sold such shares
of Preferred Shares in an Auction of the failure of such shares of Preferred
Shares to be transferred as a result of such Auction. The Auction Agent is not
required
-4-
to accept any such notice for an Auction unless it is received by the Auction
Agent by 3:00 P.M. on the Business Day preceding such Auction.
(iv) The Auction Agent is not required to accept the Master
Purchaser's Letter of any Potential Holder who wishes to submit a Bid for the
first time in an Auction or any Potential Holder or Existing Holder who wishes
to amend its Master Purchaser's Letter intending that such amendment is to take
effect with respect to an Auction unless such letter or amendment is received by
the Auction Agent by 3:00 P.M. on the Business Day preceding such Auction.
(e) The Auction Agent may request the Broker-Dealers, as set
forth in the Broker-Dealer Agreements, to provide the Auction Agent with a list
of their respective customers that such Broker-Dealers believe are Existing
Holders of shares of Preferred Shares. The Auction Agent shall keep confidential
such registry of Existing Holders and shall not disclose the identities of the
Existing Holders of such shares of Preferred Shares to any Person other than the
Company and the Broker-Dealer that provided such information; 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 that
Broker-Dealers believe are Existing Holders 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 shall use its reasonable efforts to prevent 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.
2.3. Information Concerning Rates.
----------------------------
(a) The Rate Multiple on the date of this Agreement for
Preferred Shares is 150%. If there is any change in the credit rating of
Preferred Shares by ▇▇▇▇▇'▇ (or any substitute or successor rating agency)
referred to in the definition of "Rate Multiple" resulting in any change in the
Rate Multiple for Preferred Shares after the date of this Agreement, the Company
shall notify the Auction Agent in writing of such change in the Rate Multiple
prior to 9:00 A.M. on the Auction Date succeeding such change '. If the Company
designates all or a portion of any dividend on shares of Preferred Shares to
consist of an amount ineligible for the Dividends Received Deduction, it will
indicate, in its notice in the form of Exhibit K hereto to the Auction Agent
pursuant to Section 2.7 hereof, the Rate Multiple to be in effect for the
Auction Date on which the dividend rate for such dividend is to be fixed. In
determining the Maximum Rate for Preferred Shares on any Auction Date as set
forth in Section 2.3(b)(i) hereof, the Auction Agent shall be entitled to rely
on the last Rate Multiple for Preferred Shares of which it has most recently
received notice from the Company (or, in the absence of such notice, the
percentage set forth in the first sentence of this paragraph (a)), except that
if the Company shall have notified the Auction Agent of a Rate Multiple to be in
effect for an Auction Date in accordance with the preceding sentence, the Rate
Multiple in effect for the next succeeding Auction Date shall be, unless the
Company notifies the Auction Agent of a change in the Rate Multiple for such
succeeding Auction Date pursuant to this Section 2. 3 (a) , the Rate Multiple
-5-
that was in effect on the first preceding Auction Date for Preferred Shares with
respect to which the dividend, the rate for which was fixed on such Auction
Date, did not include any amount ineligible for the Dividends Received
Deduction.
(b)(i) On each Auction Date for Preferred Shares, the Auction
Agent shall determine the Maximum Rate. The Maximum Rate for Preferred Shares on
any Auction Date shall be:
(A) in the case of any Auction Date which is not the Auction
Date immediately prior to the first day of any proposed Special Rate
Period designated by the Company pursuant to Section 4 of Part I of the
Articles Supplementary, the product of (1) the "AA" Financial Composite
Commercial Paper Rate on such Auction Date for the next Rate Period of
Preferred Shares and (2) the Rate Multiple on such Auction Date, unless
the Preferred Shares has or had a Special Rate Period and an Auction at
which Sufficient Clearing Bids existed has not yet occurred for a
Minimum Rate Period of Preferred Shares after such Special Rate Period,
in which case the higher of:
(1) the dividend rate on shares of Preferred Shares
for the then-ending Rate Period, and
(2) the product of (x) the higher of (I) the "AA"
Financial Composite Commercial Paper Rate on such Auction Date
for the then-ending Rate Period of Preferred Shares, if such
Rate Period consists of less than four Dividend Periods, or
the Treasury Rate on such Auction Date for such Rate Period,
if such Rate Period consists of four or more Dividend Periods,
and (II) the "AA" Financial Composite Commercial Paper Rate on
such Auction Date for such Special Rate Period of Preferred
Shares, if such Special Rate Period consists of less than four
Dividend Periods, or the Treasury Rate on such Auction Date
for such Special Rate Period, if such Special Rate Period
consists of four or more Dividend Periods and (y) the Rate
Multiple on such Auction Date; or
(B) in the case of any Auction Date which is the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the company pursuant to Section 4 of Part I of the
Articles the Supplementary, the product of (1) the highest of (x) "AA"
Financial Composite Commercial Paper Rate on such Auction Date for the
then-ending Rate Period of Preferred Shares, if such Rate Period
consists of less than four Dividend Periods, or the Treasury Rate on
such Auction Date for such Rate Period, if such Rate Period consists of
four or more Dividend Periods, (y) the "AA" Financial Composite
commercial Paper Rate on such Auction Date for the Special Rate Period
for which the Auction is being held if such Special Rate Period
consists of less than four Dividend periods or the Treasury Rate on
such Auction Date for the Special Rate Period for which the Auction is
being held if such Special Rate Period consists of four or more
Dividend Periods, and (z) the "AA" Financial Composite commercial Rate
on such Auction Date for Minimum Rate Periods and (2) the Rate Multiple
on such Auction Date.
-6-
Not later than 9:30 A.M. on each Auction Date, the Auction Agent shall notify
the Company and the Broker-Dealers of the Maximum Rate so determined and the
"AA" Financial Composite Commercial Paper Rate (s) and Treasury Rate (s) , as
the case may be, used to make such determination.
(ii) From and after a Failure to Deposit by the company during
any Rate Period of Preferred Shares, until such failure is cured and a late
charge, if applicable, is paid, in accordance with subparagraph (c) (i) of
Section 2 of Part I of the Articles Supplementary, on the first day of each Rate
Period of Preferred Shares the Auction Agent shall determine the Treasury Rate
for such Rate Period if such Rate Period consists of four or more Dividend
Periods and the "AA" Financial Composite commercial Paper Rate for such Rate
Period if such Rate Period consists of less than four Dividend Periods. Not
later than 9:30 A.M. on each such first day, the Auction Agent shall notify the
Company of the applicable "AA" Financial Composite Commercial Paper Rate and
Treasury Rate.
(iii) If any "AA" Financial Composite Commercial Paper Rate or
Treasury Rate, as the case may be, is not quoted on an interest 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 or discount basis the Auction
Agent shall convert the quoted rate to an interest rate after consultation with
the Company as to the method of such conversion.
(iv) 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
immediately notify the Company so that the Company 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 Company shall promptly
advise the Auction Agent of any such selection.
(v) If any Treasury Rate is to be based on rates supplied by
U.S. Government Securities Dealers and one or more U.S. Government Securities
Dealers shall not provide a quotation for the determination of such Treasury
Rate, the Auction Agent shall immediately notify the Company so that the Company
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 Company shall promptly advise the Auction
Agent of any such selection.
2.4. Auction Schedule.
----------------
The Auction Agent shall conduct Auctions in accordance with
the schedule set forth below. Such schedule may be changed by the Auction Agent
with the consent of the Company, which consent shall not be unreasonably
withheld or delayed. The Auction Agent shall give written notice of any such
change to each Broker-Dealer. Such notice shall be given prior to
-7-
the close of business on the Business Day next preceding the first Auction Date
on which any such change shall be effective.
Time Event
By 9:30 A.M. Auction Agent advises the Company and Broker-
Dealers of the applicable Maximum Rate and the "AA"
Financial Composite Commercial Paper Rate(s) and
Treasury Rate(s), as the case may be, used in
determining such Maximum Rate as set forth in
Section 2.3(b)(i) hereof.
9:30 A.M. - 1:00 P.M. Auction Agent assembles information communicated to it by
Broker-Dealers as provided in Section 3(a) of the Auction
Procedures. Submission Deadline is 1:00 P.M.
Not earlier than 1:00 P.M. Auction Agent makes
determinations pursuant to
Section 4(a) of the Auction
Procedures.
By approximately 3:00 P.M. Auction Agent advises Company of results of Auction as
provided in Section 4(b) of the Auction Procedures.
Submitted Bids and Submitted Sell orders are accepted and
rejected and shares of Preferred Shares allocated as
provided in Section 5 of the Auction Procedures. Auction
Agent gives notice of Auction results as set forth in
paragraph(a) of the Settlement Procedures.
The Auction Agent shall follow the notification procedures set forth in
paragraph (a) of the Settlement Procedures.
2.5. Designation of Special Rate Period.
----------------------------------
(a) The Articles Supplementary provide that, subject to the
Company's option to designate a Special Rate Period as referred to in paragraph
(b) of this Section 2.5, each Rate Period of Preferred Shares will be a Minimum
Rate Period (a duration of 49 days, subject to certain exceptions). Not less
than 10 nor more than 20 days prior to the last day of any such Rate Period that
is not a Minimum Rate Period, (i) the company shall deliver to the Auction Agent
a notice of the Auction Date of the next succeeding Auction for Preferred Shares
in the form of Exhibit E hereto and (ii) the Auction Agent shall deliver such
notice by first-class mail, postage prepaid, to each Existing Holder of shares
of Preferred Shares at the address specified in such Existing Holder's Master
Purchaser's Letter and to the Broker-Dealers for Preferred Shares as promptly as
practicable after its receipt of such notice from the Company.
-8-
(b) Pursuant to the Articles Supplementary, the Company may,
at its option, designate a Special Rate Period for Preferred Shares in the
manner described in Section 4 of Part I of the Articles Supplementary.
(i) If the Board of Directors proposes to designate any
succeeding Subsequent Rate Period of Preferred Shares as a Special Rate
Period, (A) the-Company shall deliver to the Auction Agent a notice of
such proposed Special Rate Period in the form of Exhibit F hereto not
less than 20 nor more than 30 days prior to the first day of such
proposed Special Rate Period and (B) the Auction Agent on behalf of the
Company shall deliver such notice by first-class mail, postage prepaid,
to each Existing Holder of shares of Preferred Shares at the address
specified in such Existing Holder's Master Purchaser's Letter and to
the Broker-Dealers for Preferred Shares as promptly as practicable
after its receipt of such notice from the Company.
(ii) If the Board of Directors determines to designate such
succeeding Subsequent Rate Period as a Special Rate Period, (A) the
Company shall deliver to the Auction Agent a notice of such
determination in the form of Exhibit G hereto not later than 11:00 A.M.
on the second Business Day next preceding the first day of such
proposed Special Rate Period and (B) the Auction Agent shall deliver
such notice to the Broker-Dealers for Preferred Shares not later than
3:00 P.M. on such second Business Day.
(iii) If the Company shall deliver to the Auction Agent a
notice stating that the Company has determined not to exercise its
option to designate such succeeding Subsequent Rate Period as a Special
Rate Period with respect to which it has delivered a notice in the form
of Exhibit F hereto not later than 11:00 A.M. on the second Business
Day next preceding the first day of such proposed Special Rate Period,
or shall fail to timely deliver either such notice or a notice in the
form of Exhibit G hereto, the Auction Agent shall deliver a notice in
the form of Exhibit H hereto to the Broker-Dealers for Preferred Shares
not later than 3:00 P.M. on such second Business Day.
Such change in the length of any Rate Period shall not occur if, among other
things, (a) on the Auction Date next preceding the first day of such Rate Period
Sufficient Clearing Bids shall not exist or (b) a Failure to Deposit shall have
occurred prior to such change with respect to shares of Preferred Shares.
2.6. Failure to Deposit.
------------------
(a) If:
(i) any Failure to Deposit shall have occurred with respect to
shares of Preferred Shares during any Rate Period thereof (other than
any Special Rate Period consisting of four or more Dividend Periods or
any Rate Period succeeding any Special Rate Period consisting of four
or more Dividend Periods during which a Failure to Deposit occurred
that has not been cured); and
-9-
(ii) prior to 12:00 Noon on the third Business Day next
succeeding the date on which such Failure to Deposit occurred, such
Failure to Deposit shall have been cured in accordance with the next
succeeding sentence and the Company shall have paid to the Auction
Agent a late charge equal to the sum of (A) if such Failure to Deposit
consisted of the failure timely to pay to the Auction Agent the full
amount of dividends with respect to any Dividend Period on the shares
of Preferred Shares, an amount computed by multiplying (1) 225% of the
"AA" Financial Composite Commercial Paper Rate for the Rate Period
during which such Failure to Deposit occurs on the Dividend Payment
Date for such Dividend Period by (2) a fraction, the numerator of which
shall be the number of days for which such Failure to Deposit has not
been cured in accordance with the next sentence (including the day such
Failure to Deposit occurs and excluding the day such Failure to Deposit
is cured) and the denominator of which shall be 360, and applying the
rate obtained against the aggregate liquidation preference of the
outstanding shares of Preferred Shares and (B) if such Failure to
Deposit consisted of the failure timely t ' o pay to the Auction Agent
the cash Redemption Price of the shares of Preferred Shares, if any,
for which Notice of Redemption has been given by the Company pursuant
to paragraph (b) of Section 3 of Part I of the Articles Supplementary,
an amount computed by multiplying (x) 225% of the "AA" Financial
Composite Commercial Paper Rate for the Rate Period during which such
Failure to Deposit occurs on the redemption date by (y) a fraction, the
numerator of which shall be the number of days for which such Failure
to Deposit is not cured in accordance with the next succeeding sentence
(including the day such Failure to Deposit occurs and excluding the day
such Failure to Deposit is cured) and the denominator of which shall be
360, and applying the rate obtained against the aggregate liquidation
preference of the outstanding shares of Preferred Shares to be
redeemed,
then the Auction Agent shall deliver a notice in the form of Exhibit I hereto by
first-class mail, postage prepaid, to the Broker-Dealers for Preferred Shares
not later than one Business Day after its receipt of the payment from the
Company curing such Failure to Deposit and such late charge. A Failure to
Deposit with respect to Preferred Shares shall have been cured (if such Failure
to Deposit is not solely due to the willful failure of the Company to make the
required payment to the Auction Agent) with respect to any Rate Period thereof
if, not later than 12:00 Noon on the fourth Business Day preceding any Auction
Date therefor the Company shall have paid to the Auction Agent (A) all
accumulated and unpaid dividends on the shares of Preferred Shares and (B)
without duplication, the Redemption Price for the shares of Preferred Shares, if
any, for which Notice of Redemption has been given by the Company pursuant to
paragraph (b) of Section 3 of Part I of the Articles Supplementary.
(b) If:
(i) any Failure to Deposit shall have occurred with respect to
shares of Preferred Shares during a Rate Period thereof (other than any
Special Rate Period consisting of four or more Dividend Periods or any
Rate Period succeeding any Special Rate Period consisting of four or
more Dividend Periods during which a Failure to Deposit occurred that
has not been cured), and, prior to 12:00 Noon on the third Business Day
next succeeding the date on which such Failure to Deposit occurred,
such Failure to
-10-
Deposit shall not have been cured within the meaning of the last
sentence of Section 2.6(a) hereof and the Company shall not have paid
to the Auction Agent the late charge described in such Section 2.6(a),
but such Failure to Deposit shall subsequently be so cured; or
(ii) any Failure to Deposit shall have occurred with respect
to shares of Preferred Shares during a Special Rate Period consisting
of four or more Dividend Periods, or during any Rate Period succeeding
any Special Rate Period consisting of four or more Dividend Periods
during which a Failure to Deposit occurred that has not been cured, and
such Failure to Deposit shall subsequently have been cured within the
meaning of the last sentence of Section 2.6(a) hereof,
then the Auction Agent shall deliver a notice in the form of Exhibit J hereto to
the Broker-Dealers for Preferred Shares not later than one Business Day after
the receipt of the payment from the company curing such Failure to Deposit.
2.7. Notice of Income Ineligible for
the Dividends Received Deduction.
--------------------------------
The Company may, at its option, designate all or a portion of any
dividend on shares of Preferred Shares to consist of an amount ineligible for
the Dividends Received Deduction by delivering to the Auction Agent a notice in
the form of Exhibit K hereto of such designation not later than six (6) Business
Days prior to the Auction Date on which the dividend rate for such dividend is
to be fixed. The Auction Agent will deliver such notice to the Broker-Dealers
not later than the Business Day following its receipt of such notice from the
Company.
2.8. Broker-Dealers.
--------------
(a) Not later than 12:00 Noon on each Dividend Payment Date
for Preferred Shares, the Company shall pay to the Auction Agent an amount in
cash equal to the aggregate fees payable to the Broker-Dealers for Preferred
Shares pursuant to Section 2.8 of the Broker-Dealer Agreements for Preferred
Shares. The Auction Agent shall advise the Company of the amount referred to in
the preceding sentence in respect of such Auction not later than 4:00 PM on the
Business Day preceding such Dividend Payment Date. The Auction Agent shall apply
such moneys as set forth in Section 2.8 of each such Broker-Dealer Agreement. To
the extent that any such moneys are not payable to a Broker-Dealer because
Sufficient Clearing Bids did not exist in the relevant Auction and the Preferred
Shares therefore continue to be held despite being subject to a Submitted Sell
Order, the Auction Agent shall repay such money to the Company.
(b) The Auction Agent shall terminate any Broker-Dealer
Agreement as set forth therein if so directed by the Company, provided that at
least one Broker-Dealer Agreement would be in effect after such termination.
(c) The Auction Agent shall from time to time enter into such
Broker-Dealer Agreements with one or more Broker-Dealers as the Company shall
request, and shall enter into such schedules to any such Broker-Dealer
Agreements as the company shall request.
-11-
(d) The Auction Agent shall maintain and update from time to
time a list of Broker-Dealers.
2.9. Ownership of Shares of Preferred Shares.
---------------------------------------
The Company shall notify the Auction Agent if the Company or any
affiliate (as such term is defined in the Investment Company Act of 1940, as
amended) of the Company acquires any shares of Preferred Shares. Neither the
Company nor any affiliate of the Company shall submit any order in any Auction
for Preferred Shares. The Auction Agent shall have no duty or liability with
respect to enforcement of this Section 2.9.
2.10. Access to and Maintenance of Auction Records.
--------------------------------------------
The Auction Agent shall, upon the written request of the Company,
afford to the Company and its agents, independent accountants and legal counsel
access at reasonable times during normal business hours to all books, records,
documents and other information concerning the Auction Agent's services
hereunder. The Auction Agent shall maintain such records for a period of six
years (for two years in an easily accessible place), at which time the Auction
Agent shall return to the Company such records, no more frequently than once
each calendar quarter, and such records shall, in reasonable detail, accurately
and fairly reflect the actions taken by the Auction Agent hereunder.
3. The Auction Agent as Preferred Shares Paying Agent.
--------------------------------------------------
3.1. Company to Provide for Dividends and Redemptions.
------------------------------------------------
(a) Not later than 12:00 Noon on the Business Day immediately
preceding each Dividend Payment Date with respect to which dividends on the
Preferred Shares have been declared (or each payment date with respect to the
declaration of Additional Distributions (an "Additional Distribution Payment
Date")), the Company shall deposit or cause to be deposited with the Auction
Agent sufficient funds (available on such Dividend Payment Date or Additional
Distribution Payment Date in New York City) for the payment of such dividends
and any Additional Distributions. The Company hereby irrevocably instructs the
Auction Agent to apply such funds deposited with the Auction Agent to the
payment of such dividends and any Additional Distributions on such Dividend
Payment Date or Additional Distribution Payment Date. The Company may direct, in
writing, the Auction Agent to invest any available funds in Short-Term Money
Market Instruments; provided that the proceeds of any such investments will be
available in New York City at the opening of business on such Dividend Payment
Date or Additional Distribution Payment Date.
(b) If the Company shall give a Notice of Redemption, then,
not later than 12:00 Noon of the Business Day immediately preceding the date
fixed for redemption, the Company shall deposit with the Auction Agent
sufficient funds (available on such redemption date in New York City) to redeem
the Preferred Shares called for redemption in such Notice of Redemption and
hereby irrevocably instructs the Auction Agent to apply such funds and, if
applicable, the income and proceeds received therefrom, to the payment of the
redemption price
-12-
for such Preferred Shares upon surrender of the certificate or certificates
therefor. The Company may direct, in writing, the Auction Agent to invest any
available funds in Short-Term Money Market Instruments; provided that the
proceeds of any such investments will be available in New York City at the
opening of business on the redemption date.
(c) The Auction Agent shall not be liable or responsible for
any loss, in whole or in part, incurred or resulting from any investments made
pursuant to paragraph (a) or (b) of this Section 3.1, such investments being
solely for the account of and at the risk of the Company. The Auction Agent
shall also not be liable to the extent that investments made by the Auction
Agent at the direction of the Company pursuant to clause (a) or (b) of this
Section 3.1 do not constitute Short-Term Money Market Instruments.
(d) If pursuant to paragraph (a) or (b) of this Section 3.1
the Company directs the Auction Agent to invest in Short-Term Money Market
Instruments and the Auction Agent receives income on such investments, then the
Auction Agent shall (to the extent that such income is not required to pay
dividends, Additional Distributions or the redemption price of shares to be
redeemed, as the case may be), upon the request of the Company, transmit such
income to the Company.
3.2. Disbursing Dividend and Redemption Price.
----------------------------------------
Subject to receipt of the requisite funds, the Auction Agent shall pay
to the Holders of the Preferred Shares M on each Dividend Payment Date for the
Preferred Shares, dividends and, if applicable, on each Additional Distribution
Payment Date, Additional Distributions (to the extent that the Company has
deposited with the Auction Agent, pursuant to Section 3.1(a) hereof, funds for
the payment thereof), on such Preferred Shares, and (ii) on any date fixed for
redemption of Preferred Shares, the redemption price for any Preferred Shares
called for redemption upon presentation and surrender of the certificate or
certificates evidencing Preferred Shares held by such Holders and called for
redemption. The amount of dividends for any Rate Period or portion thereof to be
paid by the Auction Agent to the Holders will be determined by the Company as
set forth in Section 2(c) of Part I of the Articles Supplementary. The amount of
Additional Distributions to be paid by the Auction Agent to the Holders will be
determined by the Company as set forth in Section 11(c) of Part I of the
Articles Supplementary. The redemption price to be paid by the Auction Agent to
the Holders will be determined by the Company as set forth in Section 3(a) of
Part I of the Articles Supplementary. The company shall deliver to the Auction
Agent any Notice of Redemption required by Section 3(b) of Part I of the
Articles Supplementary when mailed by the Company to the Holders of the shares
to be redeemed. Such notice shall contain the information required by such
Section 3(b) to be stated in the Notice of Redemption. The Auction Agent shall
have no duty or responsibility in connection with any Notice of Redemption and
shall have no duty or responsibility to determine the redemption price and may
rely on the amount thereof set forth in such notice.
3.3. Certificates of Eligible Asset Coverage and Dividend Coverage.
-------------------------------------------------------------
(a)(i) The Company shall, no later than the close of business
on the third Business Day immediately following each Eligible Asset Evaluation
Date, deliver or cause to be
-13-
delivered to the Auction Agent a fully completed Certificate of Eligible Asset
Coverage (a "Certificate of Eligible Asset coverage"), dated as of such Eligible
Asset Evaluation Date.
(ii) The Company shall, no later than the close of business on
the third Business Day immediately following each Dividend Coverage Evaluation
Date, deliver or cause to be delivered to the Auction Agent a fully completed
Certificate of Dividend Coverage (a "Certificate of Dividend Coverage"), dated
as of such Dividend Coverage Evaluation Date.
(b) If the Certificate of Eligible Asset Coverage indicates
that the Eligible Asset Coverage was not met as of any Eligible Asset Evaluation
Date, or if the Certificate of Eligible Asset Coverage is not delivered when
required, then the Company, no later than the close of business on the third
Business Day following the Eligible Asset Cure Date related to such Eligible
Asset Cure Date, shall deliver to the Auction Agent a Certificate of Eligible
Asset Coverage, dated as of such Eligible Asset Cure Date, indicating that the
Eligible Asset Coverage was met as of such Eligible Asset Cure Date.
(c) If the Certificate of Dividend Coverage indicates that the
Dividend Coverage was not met as of any Dividend Coverage Evaluation Date, or if
the Certificate of Dividend Coverage is not delivered when required, then the
Company, no later than the close of business on the third Business Day following
the Dividend Coverage Cure Date with respect to such Dividend Coverage
Evaluation Date, shall deliver to the Auction Agent a Certificate of Dividend
Coverage, dated as of such Dividend Coverage Cure Date, indicating that the
Dividend Coverage is met as of such Dividend Coverage Cure Date.
3.4. Accountants' Certificates.
-------------------------
(a) With respect to the Certificate of Eligible Asset Coverage
relating to the Eligible Asset Evaluation Date on the Date of Original Issue
and, thereafter, with respect to the Certificate of Eligible Asset Coverage
relating to every seventh Eligible Asset Evaluation Date (or, if the Eligible
Asset Coverage requirement is not met as of any such Eligible Asset Evaluation
Date, the Eligible Asset Cure Date with respect to any such Eligible Asset
Evaluation Date), the Company shall cause the Independent Accountants to deliver
an Accountants' Certificate, containing the information set forth in Section
7(b) of Part I of the Articles Supplementary, to the Auction Agent no later than
the close of business on the seventh Business Day following each such Eligible
Asset Evaluation Date (such seventh Business Day being referred to herein as the
"Confirmation Date"), and shall cause each Accountants' Certificate relating to
any Eligible Asset Cure Date to be delivered to the Auction Agent no later than
the close of business on the third Business Day following such Eligible Asset
Cure Date.
(b) With respect to the Certificate of Dividend Coverage
relating to any Dividend Coverage Cure Date, the Company shall cause the
Independent Accountants to deliver an Accountants' Certificate, containing the
information set forth in Section 7(b) of Part I of the Articles Supplementary,
to the Auction Agent no later than the close of business on the third Business
Day following such Dividend Coverage Cure Date.
-14-
3.5. Notice of Special Meeting of Holders of the Preferred Shares
------------------------------------------------------------
of the Company.
---------------
(a) If an event described in Section 5(c) of part I of the
Articles Supplementary occurs resulting in the commencement of a Voting Period,
then the Auction Agent shall, upon receipt from the Company of a notice (the P
"Notice") of a special meeting of the Holders of the MM p who "Special
Meeting"), mail the Notice to all Holders of Preferred Shares who were Holders
of record at the close of business on the fifth Business Day preceding the date
of mailing of the Notice to such Holders (the "Record Date"). The Auction Agent
shall insert the Record Date, the date of the Special Meeting and the time of
day of such meeting, as specified by the Company, in the Notice.
(b) If at any time after the Auction Agent shall have mailed
the Notice but before the Special Meeting shall have been held, all accumulated
and unpaid dividends (including Additional Distributions, if any) on all then
outstanding Preferred Shares including the accumulated and unpaid dividends for
the current Rate Period for the Preferred Shares shall have been paid or
declared and a sum sufficient for the payment of such dividends deposited with
the Auction Agent, the Auction Agent shall, upon receipt from the Company of a
notice of cancellation of such Special Meeting, mail such notice as soon as
practicable to all Holders of Preferred Shares who were Holders of record at the
close of business on the Record Date.
(c) The Company shall provide a temporary chairman for any
Special Meeting. The Auction Agent shall have no obligations in connection with
such meeting, except with respect to the mailing of the Notice pursuant to this
Agreement.
4. The Auction Agent as Transfer Agent and Registrar.
-------------------------------------------------
4.1. Original Issue of Stock Certificates.
------------------------------------
Upon the Date of Original Issue of Preferred Shares, one certificate
representing all of the shares of Preferred Shares issued on such date shall be
issued by the Company and, at the request of the Company, registered in the name
of Cede & Co. and countersigned by the Auction Agent.
4.2. Registration of Transfer of Shares.
----------------------------------
Shares of Preferred Shares shall be registered solely in the name of the
Securities Depository or its nominee. If the Securities Depository shall give
notice of its intention to resign as such and if the Company shall not have
selected a substitute Securities Depository, then upon such resignation, the
Preferred Shares shall be registered for transfer or exchange, and a new
certificate or certificates shall be issued in the name or names of the
designated transferee or transferees upon surrender of the old certificate or
certificates in form deemed by the Auction Agent properly endorsed for transfer
with all necessary endorsers' signatures guaranteed, in such manner and form as
the Auction Agent may require, by a guarantor reasonably believed by the Auction
Agent to be responsible, accompanied by such assurances as the Auction Agent
shall deem necessary or appropriate to evidence the genuineness and
effectiveness of each necessary endorsement and satisfactory evidence of
compliance with all applicable laws relating to the collection of taxes or funds
necessary for the payment of such taxes.
-15-
4.3. Removal of Legend on Restricted Shares.
--------------------------------------
All requests for removal of legends on certificates representing shares
of Preferred Shares indicating restrictions on transfer shall be accompanied by
an opinion of counsel stating that such legends may be removed and such shares
freely transferred, such opinion to be delivered under cover of a letter from a
Company Officer authorizing the Auction Agent to remove the legend on the basis
of said opinion.
4.4. Lost Stock Certificates.
-----------------------
The Auction 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 Company
and the Auction Agent, subject at all times to provisions of 'law, the By-Laws
of the company governing such matters and resolutions adopted by the Company
with respect to lost securities. The Auction Agent may issue new certificates in
exchange for and upon the cancellation of mutilated certificates. Any request by
the Company to the Auction 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 Company to the Auction Agent that such issuance will comply with such
provisions of law and the By-Laws and resolutions of the Company.
4.5. Disposition of Canceled Certificates; Record-Retention.
------------------------------------------------------
The Auction Agent shall retain all stock certificates which have been
canceled in transfer or exchange and all accompanying documentation in
accordance with applicable rules and regulations of the Securities and Exchange
commission for two calendar years. Upon the expiration of this two-year period,
the Auction Agent shall deliver to the Company the canceled certificates and
accompanying documentation. The Company shall also undertake to furnish to the
Securities and Exchange Commission and to the Board of Governors of the Federal
Reserve System, upon demand, at either the principal office or at any regional
office, complete, correct and current hard copies of any and all such records.
4.6. Stock Books.
-----------
For so long as the Auction Agent is acting as the transfer agent for
Preferred Shares pursuant to this Agreement, it shall maintain a stock book
containing a list of the Holders of the shares of Preferred Shares. In case of
any request or demand for the inspection of the stock books of the Company or
any other books in the possession of the Auction Agent, the Auction Agent will
notify the Company and secure instructions as to permitting or refusing such
inspection. The Auction Agent reserves the right, however, to exhibit the stock
books or other books to any Person in case it is advised by its counsel that its
failure to do so would be unlawful.
4.7. List of Holders.
---------------
If the Company is obligated to pay Additional Distributions in respect
of any dividends paid to the Holders, the Auction Agent shall, within ten (10)
days of its receipt from the Company of a notice of its intent to pay Additional
Distributions in substantially the form set forth in Exhibit
-16-
L hereto with appropriate insertions and signed by the President and the
principal financial or accounting officer of the Company, furnish the Company
with a list of the Agent Members, disclosure of which list has been requested
from the Securities Depository by the Company as of the record date for the
corresponding Dividend Payment Date for each Rate Period specified in such
notice.
4.8. Return of Funds.
---------------
Any funds deposited with the Auction Agent hereunder by the Company for
any reason (except for the redemption of shares of Preferred Shares) that remain
unpaid after twelve (12) months shall be repaid to the Company upon the written
request of the Company, together with interest, if any, received thereon. Any
funds deposited with the Auction Agent hereunder by the Company for the
redemption of shares of Preferred Shares that remain unpaid after twenty-four
(24) months shall be repaid to the Company upon the written request of the
Company, together with interest, if any, received thereon.
5. Representations and Warranties of the Company.
---------------------------------------------
The Company represents and warrants to the Auction Agent that:
(a) the company is a duly incorporated and validly existing
corporation in good standing under the laws of the State of Maryland and has
full corporate power to execute and deliver this Agreement and to authorize,
create and issue the shares of Preferred Shares and the shares of Preferred
Shares when issued, will be duly authorized, validly issued, fully paid and
nonassessable;
(b) this Agreement has been duly and validly authorized,
executed and delivered by the Company and constitutes the legal, valid, binding
and enforceable obligation of the Company, subject, as to enforceability, to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equitable principles;
(c) the form of the certificate evidencing the shares of
Preferred Shares complies with all applicable laws of the State of Maryland;
(d) when issued, the shares of Preferred Shares will have been
duly registered under the Securities Act of 1933, as amended, 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 Agreement or will have been required in connection with the issuance of
the shares of Preferred Shares;
(e) the execution and delivery of this Agreement, the
performance by the Company of its obligations hereunder and the issuance and
delivery of the shares of 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 (as amended by one or
more Articles Supplementary) or the By-Laws of the Company, any law or
regulation, any order
-17-
or decree of any court or public authority having jurisdiction, or any mortgage,
indenture, contract, agreement or undertaking to which the Company is a party or
by which it is bound; and
(f) no taxes are payable upon or in respect of the execution
of this Agreement or the issuance of the shares of Preferred Shares.
6. The Auction Agent.
-----------------
6.1. Duties and Responsibilities.
---------------------------
(a) The Auction Agent is acting solely as agent for the
Company hereunder and owes no fiduciary duties to any other Person by reason of
this Agreement.
(b) The Auction Agent undertakes to perform such duties and
only such duties as are specifically set forth in this Agreement, and no implied
covenants or obligations shall to read into this Agreement against the Auction
Agent.
(c) The Auction Agent shall have no duty or responsibility to
verify or determine the accuracy of any document delivered to it in accordance
with the terms hereof. The Auction Agent shall have no duty or responsibility to
enforce the obligations of the Company to provide the Auction Agent with any
notice or document.
(d) 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 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
the pertinent facts.
6.2. Rights of the Auction Agent.
---------------------------
(a) The Auction Agent may rely and shall be protected in
acting or refraining from acting upon any communication authorized hereby and
upon any written instruction, notice, request, direction, consent, report,
certificate, share certificate or other instrument, paper or document believed
in good faith by it to be genuine. The Auction Agent shall not be liable for
acting upon any telephone communication authorized hereby which the Auction
Agent believes in good faith to have been given by the Company or by a
Broker-Dealer. The Auction Agent may record telephone communications with the
Company or with the Broker-Dealers or 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 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.
-18-
(d) The Auction Agent may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys.
6.3. Auction Agent's Disclaimer.
--------------------------
The Auction Agent makes no representation as to the validity or
adequacy of this Agreement, the Broker-Dealer Agreements or the shares of
Preferred Shares.
6.4. Compensation, Expenses and Indemnification.
------------------------------------------
(a) The Company shall pay the Auction Agent from time to time
reasonable compensation for all services rendered by it under this Agreement and
the Broker-Dealer Agreements.
(b) The Company shall reimburse the Auction Agent upon its
request for all reasonable out-of-pocket expenses, disbursements and advances
incurred or made by the Auction Agent in accordance with any provision of this
Agreement and the Broker-Dealer Agreements (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any expense or disbursement attributable to its negligence or bad faith.
(c) The Company shall indemnify the Auction Agent for and hold
it harmless against any loss, liability or expense incurred without negligence
or bad faith on its part, arising out of or in connection with its agency under
this Agreement and the Broker-Dealer Agreements, including the costs and
expenses of defending itself against any such claim or liability in connection
with its exercise or performance of any of its duties hereunder and thereunder
for which it is entitled to indemnification hereunder or thereunder.
7. 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 Company may terminate this
Agreement at any time by so notifying the Auction Agent; provided that the
Company has entered into an agreement in substantially the form of this
Agreement with a successor Auction Agent or no shares of Preferred Shares remain
outstanding. The Auction Agent may terminate this Agreement upon written notice
to the Company on the date specified in such notice, which termination may be no
earlier than the Business Day after the second Dividend Payment Date for the
Preferred Shares following delivery of such notice.
(b) Except as otherwise provided in this paragraph (b), t ' he
respective rights and duties of the Company and the Auction Agent under this
Agreement with respect to Preferred Shares shall cease upon termination of this
Agreement. The Company's representations, warranties, covenants and obligations
to the Auction Agent under Sections 5 and 6.4 hereof shall survive the
termination of this Agreement. Upon termination of this Agreement, the
Broker-Dealer Agreements shall automatically terminate and the duties of the
Auction Agent under each of the Broker-Dealer Agreements shall cease and at the
Company's request, the Auction Agent
-19-
shall promptly deliver to the company copies of all books and records maintained
by it with respect to Preferred Shares in connection with its duties hereunder.
7.2. Communications.
--------------
Except for (i) communications authorized to be 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, addressed to it, at its address or telecopy number set forth below:
If to the Company, Zenix Income Fund Inc.
addressed: c/o SSB Citi Fund Management Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
Attention:
Telecopier No.:
Telephone No.:
If to the Auction Bankers Trust Company,
Agent, addressed: as Auction Agent
[Address
Attention:,
Telecopier No.:
Telephone No.:
or such other address or telecopy number as such party may hereafter 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 Company by a Company 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 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 Company, the Auction Agent and their respective successors and
assigns, any benefit of any legal or equitable right, remedy or claim hereunder.
-20-
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 the parties hereto.
(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. Successor and Assigns.
---------------------
This Agreement shall be binding upon, inure to the benefit of,
and be enforceable by, the respective successors and assigns of each of the
Company and the Auction Agent.
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 in New York without giving effect to the choice of law
provisions thereof.
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.
ZENIX INCOME FUND
INC.
By:___________________________
Title: President
ZENIX INCOME FUND
INC.
-21-
By:____________________________
Title:
-22-
EXHIBIT D
SETTLEMENT PROCEDURES
Capitalized terms used herein have the respective meanings
specified in the forepart of this Prospectus or the Glossary, as the case may
be.
(a) On each Auction Date, the Auction Agent shall notify by
telephone the Broker-Dealers that participated in the Auction held on such
Auction Date and submitted an Order on behalf of an Existing Holder or Potential
Holder of:
(i) the Applicable Rate fixed for the next succeeding Rate
Period;
(ii) whether Sufficient Clearing Bids existed for the
determination of the Applicable Rate;
(iii) if such Broker-Dealer submitted a Bid or a Sell order on
behalf of an Existing Holder, whether such Bid or Sell Order was
accepted or rejected, in whole or in part, and the number of shares, if
any, of Preferred Shares then outstanding to be sold by such Existing
Holder;
(iv) if such Broker-Dealer submitted a Bid on behalf of a
Potential Holder, whether such Bid was accepted or rejected, in whole
or in part, and the number of shares, if any, of Preferred Shares to be
purchased by such Potential Holder;
(v) if the aggregate number of shares of Preferred Shares to
be sold by all Existing Holders on whose behalf such Broker-Dealer
submitted Bids or Sell orders exceeds the aggregate number of shares of
Preferred Shares to be purchased by all Potential Holders on whose
behalf such Broker-Dealer submitted a Bid, the name or names of one or
more other Broker-Dealers (and the Agent member, if any, of each such
other Broker-Dealer) and the number of shares of Preferred Shares to be
(x) purchased from one or more Existing Holders on whose behalf such
other Broker-Dealers submitted Bids or Sell Orders or (y) sold to one
or more Potential Holders on whose behalf such other Broker-Dealers
submitted Bids; and
(vi) the scheduled Auction Date of the next succeeding
Auction.
(b) On each Auction Date, each Broker-Dealer that submitted an
Order on behalf of any Existing Holder or Potential Holder shall:
(i) advise each Existing Holder and Potential Holder on whose
behalf such Broker-Dealer submitted a Bid or Sell Order whether such
Bid or Sell Order was accepted or rejected, in whole or in part;
(ii) instruct each Potential Holder on whose behalf such
Broker-Dealer submitted a Bid that was accepted, in whole or in part,
to instruct such Bidder's Agent Member to pay to such Broker-Dealer (or
its Agent Member) through the Securities
Depository the amount necessary to purchase the number of shares of
Preferred Shares to be purchased pursuant to such Bid against receipt
of such shares;
(iii) instruct each Existing Holder on whose behalf such
Broker-Dealer submitted a Bid that was accepted, in whole or in part,
or a Sell Order that was accepted, in whole or in part, to instruct
such Bidder's Agent Member to deliver to such Broker-Dealer (or its
Agent Member) through the Securities Depository the number of shares of
Preferred Shares to be sold pursuant to such Bid or Sell Order against
payment therefor;
(iv) advise each Existing Holder on whose behalf such
Broker-Dealer submitted an Order and each Potential Holder on whose
behalf such Broker-Dealer submitted a Bid of the Applicable Rate for
the next succeeding Rate Period;
(v) advise each Existing Holder on whose behalf such
Broker-Dealer submitted an Order of the Auction Date of the next
succeeding Auction; and
(vi) advise each Potential Holder on whose behalf such
Broker-Dealer submitted a Bid that was accepted, in whole or in part,
of the Auction Date of the next succeeding Auction.
(c) on the basis of the information provided to it pursuant to
paragraph (a) above, each Broker-Dealer that submitted a Bid or Sell order shall
allocate any funds received by it pursuant to paragraph (b)(ii) above, and any
shares of Preferred Shares received by it pursuant to paragraph (b)(iii) above,
among the Potential Holders, if any, on whose behalf such Broker-Dealer
submitted Bids, the Existing Holders, if any, on whose behalf such Broker-Dealer
submitted Bids or Sell orders, and any Broker-Dealers identified to it by the
Auction Agent pursuant to paragraph WM above.
(d) On the Business Day after the Auction Date, the securities
Depository shall execute the transactions described above, debiting and
crediting the accounts of the respective Agent Members as necessary to effect
the purchases and sale of shares of Preferred Shares as determined in the
Auction for such series.
(e) Any delivery or nondelivery of shares which shall
represent 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 nondelivery in accordance with the
provisions of the Auction Agency Agreement and the Broker-Dealer Agreement.
-2-
EXHIBIT E
---------
ZENIX INCOME FUND INC.
NOTICE OF AUCTION DATE FOR
AUCTION RATE CUMULATIVE PREFERRED STOCK
("Preferred Shares")
NOTICE IS HEREBY GIVEN that the Auction Date of the next
Auction for the Company's Preferred Shares is scheduled to be ___________, 20__
and the next Dividend Payment Date for the Company's Preferred Shares will be
__________, 20__.
[A Failure to Deposit in respect of the-Preferred Shares
currently exists. If such Failure to Deposit is not cured prior to 12 Noon on
the fourth Business Day prior to the next scheduled Auction Date of the
Preferred Shares, the next Auction will not be held. Notice of the next Auction
for the Preferred Shares will be delivered when such Failure to Deposit is
cured./1/]
ZENIX INCOME FUND INC.
--------
/1/ Include this language if a Failure to Deposit exists.
EXHIBIT F
---------
ZENIX INCOME FUND INC.
NOTICE OF PROPOSED CHANGE OF
LENGTH OF RATE PERIOD OF
AUCTION RATE CUMULATIVE PREFERRED STOCK
("Preferred Shares")
NOTICE IS HEREBY GIVEN that ZENIX INCOME FUND INC. (the
"Company") may exercise its option to designate the Rate Period of its Preferred
Shares commencing [the first day of the Special Rate Period] as a Special Rate
Period.
By 11:00 A.M. on the second Business Day preceding the first
day of such proposed Special Rate Period, the Company will notify [the Auction
Agent] of either (a) its determination to exercise such option, designating the
length of such Special Rate Period for Preferred Shares or (b) its determination
not to exercise such option.
ZENIX INCOME FUND INC.
Dated: ___________,20__
EXHIBIT G
---------
ZENIX INCOME FUND INC.
NOTICE OF CHANGE OF LENGTH OF RATE PERIOD OF
AUCTION RATE CUMULATIVE PREFERRED STOCK
("Preferred Shares")
NOTICE IS HEREBY GIVEN that ZENIX INCOME FUND INC. (the
"Company") has determined to designate the Rate Period of its Preferred Shares
commencing on [the first day of the Special Rate Period] as a Special Rate
Period.
The Special Rate Period will be ______________ [days]
[year(s]]-
The Auction Date for the Special Rate Period is (the Business
Day next preceding the first day of such Special Rate Period).
As a result of the Special Rate Period designation, the amount
of dividends payable on Preferred Shares during the special Rate Period will be
based on a 360-day year.
The Special - Rate Period shall not commence if (a) on such
Auction Date Sufficient Clearing Bids shall not exist or (b) if a Failure to
Deposit shall have occurred prior to the first day thereof with respect to
shares of Preferred Shares-
The scheduled Dividend Payment Dates for Preferred Shares
during such Special Rate Period will be _____________________.
ZENIX INCOME FUND INC.
Dated: ___________,20__
EXHIBIT H
---------
ZENIX INCOME FUND INC.
NOTICE OF DETERMINATION NOT TO CHANGE
LENGTH OF RATE PERIOD OF
AUCTION RATE CUMULATIVE PREFERRED STOCK
("Preferred Shares")
NOTICE IS HEREBY GIVEN that ZENIX INCOME FUND INC. (the
"Company") has determined not to exercise its option to designate a Special Rate
Period of its Preferred Shares and the next succeeding Rate Period of Preferred
Shares will be a Minimum Rate period of [7] days.
ZENIX INCOME FUND INC.
Dated: __________, 20__
EXHIBIT H
---------
ZENIX INCOME FUND INC.
NOTICE OF CURE OF
FAILURE TO DEPOSIT ON
AUCTION RATE CUMULATIVE PREFERRED STOCK
("Preferred Shares")
NOTICE IS HEREBY GIVEN that ZENIX INCOME FUND INC. (the "Company") has cured its
Failure to Deposit with respect to its Preferred Shares. The dividend rate on
the shares of Preferred Shares for the current Dividend Period is _ % per annum,
the Dividend Payment Date for the current Dividend Period is scheduled to be
__________ 20_ and the next Auction Date is scheduled to be __________ 20__.
ZENIX INCOME FUND INC.
Dated: ___________,20
EXHIBIT J
---------
ZENIX INCOME FUND INC.
NOTICE OF CURE OF
FAILURE TO DEPOSIT ON
AUCTION RATE CUMULATIVE PREFERRED STOCK
("Preferred Shares")
NOTICE IS HEREBY GIVEN that ZENIX INCOME FUND INC. (the
"Company") has cured its Failure to Deposit with respect to its Preferred
Shares. The next Auction Date for the Preferred Shares is scheduled to be on
______________ 20__.
ZENIX INCOME FUND INC.
Dated: ________________,20__
EXHIBIT K
---------
ZENIX INCOME FUND INC.
NOTICE OF
AMOUNT OF DIVIDEND INELIGIBLE
FOR DIVIDEND RECEIVED DEDUCTION
FOR
AUCTION RATE CUMULATIVE PREFERRED STOCK
("Preferred Shares")
NOTICE IS HEREBY GIVEN that the amount of the dividend payable
on ________________, 20__ for ZENIX INCOME FUND INC.'s Preferred Shares will be
determined by the Auction to be held on ________________, 20__. Up to
[$________]/1/ per share of the dividend payable on such date as determined by
such Auction will consist of an amount not eligible for the Dividends Received
Deduction (as defined in the Articles Supplementary establishing the Preferred
Shares). If the dividend amount payable on such date as determined by such
Auction is less than [$_______]/1/ per share, the entire amount of the dividend
will be ineligible for the Dividends Received Deduction. Accordingly, the
aforementioned composition of the dividend payable on ____________, 20__ should
be considered in determining Orders to be submitted with respect to the Auction
to be held on ____________, 20__. The Rate Multiple in effect for such Auction
will be ___%.
ZENIX INCOME FUND INC.
--------------------
/1/ The maximum amount ineligible for Dividends Received Deduction to be
included in such dividend, divided by the number of shares of Preferred
Shares.
EXHIBIT L
---------
ZENIX INCOME FUND INC.
NOTICE OF
INTENTION TO PAY ADDITIONAL DISTRIBUTIONS
ON
AUCTION RATE CUMULATIVE PREFERRED STOCK
("Preferred Shares")
NOTICE IS HEREBY GIVEN that an Additional Distribution (as
defined in the Articles Supplementary establishing the Preferred Shares) in the
amount of $__________ [and $________] per share shall be payable on
_____________, 20___ to the holders of ZENIX INCOME FUND INC.'s Preferred Shares
as of the record date[s] for the Dividend Payment Date[s] for the Rate Period[s]
(each as defined in the Articles Supplementary establishing the Preferred
Shares) from ____________,20____ to ___________, 20__ [and ___________, 20__ to
____________, 20__, respectively]. Please provide to the Secretary of the
Company a list of the DTC Participants as of the record date for the
corresponding Dividend Payment Date for [each] [the] Rate Period specified
above.
ZENIX INCOME FUND INC.