EXHIBIT (K)(3)
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BROKER-DEALER AGREEMENT
between
IBJ WHITEHALL BANK & TRUST COMPANY
and
[NAME OF BROKER-DEALER]
Dated as of , 1999
Relating to
AUCTION MARKET PREFERRED STOCK(R)
("AMPS"(R)),
Series A
of
MUNIHOLDINGS INSURED FUND III, INC.
(R) Registered trademark of Xxxxxxx Xxxxx & Co., Inc.
BROKER-DEALER AGREEMENT dated as of , 1999, between IBJ
WHITEHALL BANK & TRUST COMPANY, a New York banking corporation (the "Auction
Agent") (not in its individual capacity, but solely as agent of MuniHoldings
Insured Fund III, Inc., a Maryland corporation (the "Company"), pursuant to
authority granted to it in the Auction Agent Agreement dated as of ,
1999, between the Company and the Auction Agent (the "Auction Agent
Agreement")) and [NAME OF BROKER-DEALER] (together with its successors and
assigns, "BD").
The Company proposes to duly authorize and issue shares of
Auction Market Preferred Stock(R), Series A ("Series A AMPS"), and
shares of Auction Market Preferred Stock(R), each with a par value of $.10 per
share and a liquidation preference of $25,000 per share plus accumulated but
unpaid dividends (whether or not earned or declared), each pursuant to the
Company's Articles Supplementary (as defined below). The Series A AMPS are
sometimes herein referred to as the "AMPS".
The Company's Articles Supplementary provide that the dividend rate on
AMPS for each Dividend Period therefor after the Initial Dividend Period shall
be the Applicable Rate therefor, which in each case, in general shall be the
rate per annum that a commercial bank, trust company or other financial
institution appointed by the Company advises results from implementation of the
Auction Procedures (as defined below). The Board of Directors of the Company
has adopted a resolution appointing IBJ Whitehall Bank & Trust Company as
Auction Agent for purposes of the Auction Procedures, and pursuant to Section
2.5(d) of the Auction Agent Agreement, the Company has requested and directed
the Auction Agent to execute and deliver this Agreement.
The Auction Procedures require the participation of one or more
Broker-Dealers.
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(R) Registered trademark of Xxxxxxx Xxxxx & Co., Inc.
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NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the Auction Agent and BD agree as follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
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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 of the Company.
1.2. Terms Defined Herein. As used herein and in the Settlement
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Procedures (as defined below), the following terms shall have the following
meanings, unless the context otherwise requires:
(a) "Articles Supplementary" shall mean the Articles
Supplementary, as amended, of the Company, establishing the powers, preferences
and rights of the AMPS filed on , 1999 with the State Department of
Assessments and Taxation of Maryland.
(b) "Auction" shall have the meaning specified in Section 3.1
hereof.
(c) "Auction Procedures" shall mean the Auction Procedures that
are set forth in Paragraph 10 of the Articles Supplementary.
(d) "Authorized Officer" shall mean each Senior Vice President,
Vice President, Assistant Vice President, Trust Officer, Assistant Secretary and
Assistant Treasurer of the Auction Agent assigned to its Corporate Trust and
Agency Group and every other officer or employee of the Auction Agent designated
as an "Authorized Officer" for purposes of this Agreement in a communication to
BD.
(e) "BD Officer" shall mean each officer or employee of BD
designated as a "BD Officer" for purposes of this Agreement in a communication
to the Auction Agent.
(f) "Broker-Dealer Agreement" shall mean this Agreement and any
substantially similar agreement between the Auction Agent and a Broker-Dealer.
(g) "Settlement Procedures" shall mean the Settlement
Procedures attached hereto as Exhibit A.
1.3. Rules of Construction. Unless the context or use indicates
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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.
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(c) The words "hereof," "herein," "hereto," and other words of
similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be
to New York City time.
II. NOTIFICATION OF DIVIDEND PERIOD AND ADVANCE NOTICE OF
ALLOCATION OF TAXABLE INCOME.
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2.1. The provisions contained in paragraph 2 of the Articles
Supplementary concerning the notification of a Special Dividend Period will be
followed by the Auction Agent and BD, and the provisions contained therein are
incorporated herein by reference in their entirety and shall be deemed to be a
part of this Agreement to the same extent as if such provisions were set forth
fully herein.
2.2. Except as otherwise provided in paragraph 2(f) of the Articles
Supplementary, whenever the Company intends to include any net capital gains or
other income subject to regular Federal income tax in any dividend on shares of
AMPS, the Company will notify the Auction Agent of the amount to be so included
at least five Business Days prior to the Auction Date on which the Applicable
Rate for such dividend is to be established. Whenever the Auction Agent
receives such notice from the Company, in turn it will notify BD, who, on or
prior to such Auction Date, will notify its Beneficial Owners and Potential
Beneficial Owners believed to be interested in submitting an Order in the
Auction to be held on such Auction Date. Whenever the Company intends to
include any additional amounts in a dividend as provided in paragraph 2(f) of
the Articles Supplementary, the Company will notify the Auction Agent of such
additional amounts to be so included in such dividend at least five Business
Days prior to the applicable Dividend Payment Date. Whenever the Auction Agent
receives such notice from the Company, in turn it will notify the Securities
Depository and BD, who, on or prior to the applicable Dividend Payment Date,
will notify its Beneficial Owners.
III. THE AUCTION.
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3.1. Purpose; Incorporation by Reference of Auction
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Procedures and Settlement Procedures.
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(a) On each Auction Date, the provisions of the Auction
Procedures will be followed by the Auction Agent for the purpose of determining
the Applicable Rate for the AMPS, for the next Dividend Period therefor. Each
periodic operation 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 of this Agreement to the same extent
as if such provisions were set forth fully herein.
(c) BD agrees to act as, and assumes the obligations of and
limitations and restrictions placed upon, a Broker-Dealer under this Agreement.
BD understands that other Persons meeting the requirements specified in the
definition of "Broker-Dealer" contained in
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Paragraph 1 of the Articles Supplementary may execute a Broker-Dealer Agreement
and participate as Broker-Dealers in Auctions.
(d) BD and other Broker-Dealers may participate in Auctions for
their own accounts. However, the Company, by notice to BD and all other Broker
Dealers, may prohibit all Broker-Dealers from submitting Bids in Auctions for
their own accounts, provided that Broker-Dealers may continue to submit Hold
Orders and Sell Orders.
3.2. Preparation for Each Auction.
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(a) Not later than 9:30 A.M. on each Auction Date for the AMPS,
the Auction Agent shall advise BD by telephone of the Reference Rate and the
Maximum Applicable Rate in effect on such Auction Date.
(b) In the event that the Auction Date for any Auction shall be
changed after the Auction Agent has given the notice referred to in clause (vii)
of paragraph (a) of the Settlement Procedures, the Auction Agent, by such means
as the Auction Agent deems practicable, shall give notice of such change to BD
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. Thereafter, BD promptly shall notify customers of BD that
BD believes are Beneficial Owners of shares of AMPS of such change in the
Auction Date.
(c) The Auction Agent from time to time may request BD to
provide it with a list of the respective customers BD believes are Beneficial
Owners of shares of AMPS. BD shall comply with any such request, and the Auction
Agent shall keep confidential any such information, including information
received as to the identity of Bidders in any Auction, and shall not disclose
any such information so provided to any Person other than the Company; and such
information shall not be used by the Auction Agent or its officers, employees,
agents or representatives for any purpose other than such purposes as are
described herein. The Auction Agent shall transmit any list of customers BD
believes are Beneficial Owners of shares of AMPS and information related thereto
only to its officers, employees, agents or representatives in the Corporate
Trust and Agency Group who need to know such information for the purposes of
acting in accordance with this Agreement, and the Auction Agent shall prevent
the transmission of such information to others and shall cause its officers,
employees, agents and representatives to abide by the foregoing confidentiality
restrictions; provided, however, that the Auction Agent shall have no
responsibility or liability for the actions of any of its officers, employees,
agents or representatives after they have left the employ of the Auction Agent.
3.3. Auction Schedule; Method of Submission of Orders.
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(a) The Company and the Auction Agent shall conduct Auctions for
the AMPS in accordance with the schedule set forth below. Such schedule may be
changed at any time by the Auction Agent with the consent of the Company, which
consent shall not be withheld unreasonably. The Auction Agent shall give notice
of any such change to BD. Such notice shall be received prior to the first
Auction Date on which any such change shall be effective.
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Time Event
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By 9:30 A.M. Auction Agent advises the Company and Broker-
Dealers of the Reference Rate and the Maximum
Applicable Rate as set forth in Section 3.2(a)
hereof.
9:30 A.M. - 1:00 P.M. Auction Agent assembles information communicated
to it by Broker- Dealers as provided in Paragraph
10(c)(i) of the Articles Supplementary. Submission
Deadline is 1:00 P.M.
Not earlier than Auction Agent makes determinations pursuant to
1:00 P.M. Paragraph 10(d)(i) of the Articles Supplementary.
By approximately Auction Agent advises the Company of the results
3:00 P.M. of the Auction as provided in Paragraph 10(d)(ii)
of the Articles Supplementary.
Submitted Bids and Submitted Sell Orders are
accepted and rejected in whole or in part and
shares of AMPS are allocated as provided in
Paragraph 10(e) of the Articles Supplementary.
Auction Agent gives notice of
the Auction results as set forth
in Section 3.4(a) hereof.
(b) BD agrees to maintain a list of Potential Beneficial Owners
and to contact the Potential Beneficial Owners on such list on or prior to each
Auction Date for the purposes set forth in Paragraph 10 of the Articles
Supplementary.
(c) BD shall submit Orders to the Auction Agent in writing in
substantially the form attached hereto as Exhibit B. BD shall submit separate
Orders to the Auction Agent for each Potential Beneficial Owner or Beneficial
Owner on whose behalf BD is submitting an Order and shall not net or aggregate
the Orders of Potential Beneficial Owners or Beneficial Owners on whose behalf
BD is submitting Orders.
(d) BD shall deliver to the Auction Agent (i) a written notice,
substantially in the form attached hereto as Exhibit C, of transfers of shares
of AMPS, made through BD by an Existing Holder to another Person other than
pursuant to an Auction, and (ii) a written notice, substantially in the form
attached hereto as Exhibit D, of the failure of shares of AMPS to be transferred
to or by any Person that purchased or sold shares of AMPS through BD pursuant to
an Auction. The Auction Agent is not required to accept any notice delivered
pursuant to the terms of the foregoing sentence with respect to an Auction
unless it is received by the Auction Agent by 3:00 P.M. on the Business Day next
preceding the applicable Auction Date.
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3.4. Notice of Auction Results.
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(a) On each Auction Date, the Auction Agent shall notify BD by
telephone as set forth in paragraph (a) of the Settlement Procedures. On the
Business Day next succeeding such Auction Date, the Auction Agent shall notify
BD in writing of the disposition of all Orders submitted by BD in the Auction
held on such Auction Date.
(b) BD shall notify each Beneficial Owner, Potential Beneficial
Owner, Existing Holder or Potential Holder on whose behalf BD has submitted an
Order as set forth in paragraph (b) of the Settlement Procedures, and take such
other action as is required of BD pursuant to the Settlement Procedures.
If any Beneficial Owner or Existing Holder selling shares of AMPS in
an Auction fails to deliver such shares, the BD of any Person that was to have
purchased shares of AMPS in such Auction may deliver to such Person a number of
whole shares of AMPS that is less than the number of shares that otherwise was
to be purchased by such Person. In such event, the number of shares of AMPS to
be so delivered shall be determined by such BD. Delivery of such lesser number
of shares shall constitute good delivery. Upon the occurrence of any such
failure to deliver shares, such BD shall deliver to the Auction Agent the notice
required by Section 3.3(d)(ii) hereof. Notwithstanding the foregoing terms of
this Section 3.4(b), any delivery or non-delivery of shares of AMPS which
represents any departure from the results of an Auction, as determined by the
Auction Agent, shall be of no effect unless and until the Auction Agent shall
have been notified of such delivery or non-delivery in accordance with the terms
of Section 3.3(d) hereof. The Auction Agent shall have no duty or liability with
respect to enforcement of this Section 3.4(b).
3.5. Service Charge to Be Paid to BD. On the Business Day next
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succeeding each Auction Date, the Auction Agent shall pay to BD from moneys
received from the Company an amount equal to: (a) in the case of any Auction
Date immediately preceding a 7-Day Dividend Period or 28-Day Dividend Period,
the product of (i) a fraction the numerator of which is the number of days in
such Dividend Period (calculated by counting the first day of such Dividend
Period but excluding the last day thereof) and the denominator of which is 360,
times (ii) 1/4 of 1%, times (iii) $25,000, times (iv) the sum of (A) the
aggregate number of AMPS placed by BD in the applicable Auction that were (x)
the subject of a Submitted Bid of a Beneficial Owner submitted by BD and
continued to be held as a result of such submission and (y) the subject of a
Submitted Bid of a Potential Beneficial Owner submitted by BD and were purchased
as a result of such submission plus (B) the aggregate number of AMPS subject to
valid Hold Orders (determined in accordance with Paragraph 10 of the Articles
Supplementary) submitted to the Auction Agent by BD plus (C) the number of AMPS
deemed to be subject to Hold Orders by Beneficial Owners pursuant to Paragraph
10 of the Articles Supplementary that were acquired by such Beneficial Owners
through BD; and (b) in the case of any Auction Date immediately preceding a
Special Dividend Period, that amount as mutually agreed upon by the Company and
BD, based on the selling concession that would be applicable to an underwriting
of fixed or variable rate preferred shares with a similar final maturity or
variable rate dividend period, at the commencement of such Special Dividend
Period.
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For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any
Beneficial Owner who acquired shares of AMPS through BD transfers those shares
to another Person other than pursuant to an Auction, then the Broker-Dealer for
the shares so transferred shall continue to be BD, provided, however, that if
the transfer was effected by, or if the transferee is, a Broker-Dealer other
than BD, then such Broker-Dealer shall be the Broker-Dealer for such shares.
IV. THE AUCTION AGENT.
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4.1. Duties and Responsibilities.
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(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 set forth specifically in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the Auction
Agent.
(c) In the absence of bad faith or negligence on its part, the
Auction Agent shall not be liable for any action taken, suffered or omitted by
it, or for any error of judgment made by it in the performance of its duties
under this Agreement. The Auction Agent shall not be liable for any error of
judgment made in good faith unless the Auction Agent shall have been negligent
in ascertaining (or failing to ascertain) the pertinent facts.
4.2. Rights of the Auction Agent.
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(a) The Auction Agent may rely upon, and shall be protected in
acting or refraining from acting upon, any communication authorized by this
Agreement and any written instruction, notice, request, direction, consent,
report, certificate, share certificate or other instrument, paper or document
believed by it to be genuine. The Auction Agent shall not be liable for acting
upon any telephone communication authorized by this Agreement which the Auction
Agent believes in good faith to have been given by the Company or by BD. The
Auction Agent may record telephone communications with BD.
(b) The Auction Agent may consult with counsel of its own
choice, and the advice of such counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend
or risk its own funds or otherwise incur or become exposed to financial
liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys.
4.3. Auction Agent's Disclaimer. The Auction Agent makes no
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representation as to the validity or adequacy of this Agreement or the AMPS.
V. MISCELLANEOUS.
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5.1. Termination. Any party may terminate this Agreement at any
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time upon five days' prior written notice to the other party; provided, however,
that if BD is Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated, neither BD nor
the Auction Agent may terminate this Agreement without first obtaining the prior
written consent of the Company to such termination, which consent shall not be
withheld unreasonably.
5.2. Participant in Securities Depository; Payment of
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Dividends in Same-Day Funds.
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(a) BD is, and shall remain for the term of this Agreement, a
member of, or a participant in, the Securities Depository (or an affiliate of
such a member or participant).
(b) BD represents that it (or if BD does not act as Agent
Member, one of its affiliates) shall make all dividend payments on the AMPS
available in same-day funds on each Dividend Payment Date to customers that use
BD (or its affiliate) as Agent Member.
5.3. Agent Member. At the date hereof, BD is a participant of the
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Securities Depository.
5.4. Communications. Except for (i) communications authorized to be
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made by telephone pursuant to this Agreement or the Auction Procedures and (ii)
communications in connection with the Auctions (other than those expressly
required to be in writing), all notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar writing)
and shall be given to such party at its address or telecopier number set forth
below:
If to BD, -----------------------------------
addressed to:
-----------------------------------
-----------------------------------
Attention:
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Telecopier No.:
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Telephone No.:
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If to the Auction IBJ Whitehall Bank & Trust Company
Agent, addressed to: Xxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Auction Window
Subcellar 1
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
or such other address or telecopier number as such party hereafter may specify
for such purpose by notice to the other party. Each such notice, request or
communication shall be effective when
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delivered at the address specified herein. Communications shall be given on
behalf of BD by a BD Officer and on behalf of the Auction Agent by an Authorized
Officer. BD may record telephone communications with the Auction Agent.
5.5. Entire Agreement. This Agreement contains the entire agreement
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between the parties relating to the subject matter hereof, and there are no
other representations, endorsements, promises, agreements or understandings,
oral, written or inferred, between the parties relating to the subject matter
hereof.
5.6. Benefits. Nothing in this Agreement, express or implied,
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shall give to any person, other than the Company, the Auction Agent and BD and
their respective successors and assigns, any benefit of any legal or equitable
right, remedy or claim under this Agreement.
5.7. Amendment; Waiver.
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(a) This Agreement shall not be deemed or construed to be
modified, amended, rescinded, canceled or waived, in whole or in part, except by
a written instrument signed by a duly authorized representative of the party to
be charged.
(b) Failure of either party to this Agreement to exercise any
right or remedy hereunder in the event of a breach of this Agreement by the
other party shall not constitute a waiver of any such right or remedy with
respect to any subsequent breach.
5.8. Successors and Assigns. This Agreement shall be binding upon,
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inure to the benefit of, and be enforceable by, the respective successors and
permitted assigns of each of BD and the Auction Agent. This Agreement may not
be assigned by either party hereto absent the prior written consent of the other
party; provided, however, that this Agreement may be assigned by the Auction
Agent to a successor Auction Agent selected by the Company without the consent
of BD.
5.9. Severability. If any clause, provision or section of this
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Agreement shall be ruled invalid or unenforceable by any court of competent
jurisdiction, the invalidity or unenforceability of such clause, provision or
section shall not affect any remaining clause, provision or section hereof.
5.10. Execution in Counterparts. This Agreement may be executed in
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several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
5.11. Governing Law. This Agreement shall be governed by and
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construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed in said State.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
IBJ WHITEHALL BANK & TRUST COMPANY
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By:
Title:
XXXXXXX XXXXX & CO., XXXXXXX LYNCH, PIERCE, XXXXXX &
XXXXX INCORPORATED
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By:
Title:
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EXHIBIT A
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SETTLEMENT PROCEDURES
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[From Prospectus]
EXHIBIT B
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IBJ WHITEHALL BANK & TRUST COMPANY
AUCTION BID FORM
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Submit To: IBJ Whitehall Bank & Trust Co. Issue: MuniHoldings Insured
Securities Transfer Department Fund III, Inc.
Xxx Xxxxx Xxxxxx Xxxxxx:
Xxx Xxxx, Xxx Xxxx 00000 ----------------------
Attention: Auction Window Auction Date:
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Telephone: (000) 000-0000
Facsimile: (000) 000-0000
The undersigned Broker-Dealer submits the following Order on behalf of the
Bidder listed below:
Name of Bidder:
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BENEFICIAL OWNER Shares now held
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HOLD
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BID at rate of
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SELL
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POTENTIAL BENEFICIAL OWNER
# of shares bid
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BID at rate of
-------
Notes:
(1) If submitting more than one Bid for one Bidder, use additional Auction Bid
Forms.
(2) If one or more Bids covering in the aggregate more than the number of
outstanding shares held by any Beneficial Owner are submitted, such bid
shall be considered valid in the order of priority set forth in the Auction
Procedures on the above issue.
(3) A Hold or Sell Order may be placed only by a Beneficial Owner covering a
number of shares not greater than the number of shares currently held.
(4) Potential Beneficial Owners may make only Bids, each of which must specify
a rate. If more than one Bid is submitted on behalf of any Potential
Beneficial Owner, each Bid submitted shall be a separate Bid with the rate
specified.
(5) Bids may contain no more than three figures to the right of the decimal
point (.001 of 1%). Fractions will not be accepted.
NAME OF BROKER-DEALER
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Authorized Signature
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EXHIBIT C
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(Note: To be used only for transfers made
other than pursuant to an Auction)
TRANSFER FORM
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Re: MuniHoldings Insured Fund III, Inc.
Auction Market Preferred Stock(R),
Series [A] ("AMPS"(R))
We are (check one):
[_] the Existing Holder named below;
[_] the Broker-Dealer for such Existing Holder; or
[_] the Agent Member for such Existing Holder.
We hereby notify you that such Beneficial Owner has transferred
shares of AMPS to .
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(Name of Existing Holder)
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(Name of Broker-Dealer)
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(Name of Agent Member)
By:
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Printed Name:
Title:
EXHIBIT D
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(Note: To be used only for failures to deliver
AMPS sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
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Complete either I or II
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I. We are a Broker-Dealer for (the "Purchaser"),
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which purchased shares of AMPS, Series [A], of MuniHoldings
-----
Insured Fund III, Inc. in the Auction held on
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from the seller of such shares.
II. We are a Broker-Dealer for (the "Seller"),
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which sold shares of AMPS, Series [A], of MuniHoldings Insured
----
Fund III, Inc. in the Auction held on to the Purchaser
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of such shares.
We hereby notify you that (check one):
the Seller failed to deliver such shares to the Purchaser
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the Purchaser failed to make payment to the Seller upon
-------
delivery of such shares
Name:
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(Name of Broker-Dealer)
By:
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Printed Name:
Title:
