Exhibit 13(c)
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BROKER-DEALER AGREEMENT
between
IBJ XXXXXXXX BANK & TRUST COMPANY
and
Dated as of
Relating to
AUCTION MARKET PREFERRED STOCK(R)
("AMPS"(R))
Series A and Series B
of
MUNIYIELD CALIFORNIA INSURED FUND II, INC.
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(R) Registered trademark of Xxxxxxx Xxxxx & Co., Inc.
BROKER-DEALER AGREEMENT dated as of _________________ between IBJ Xxxxxxxx
Bank & Trust Company, a New York banking corporation (the "Auction Agent") (not
in its individual capacity but solely as agent of MuniYield California Insured
Fund II, Inc., a Maryland corporation (the "Company"), pursuant to authority
granted to it in the Auction Agent Agreement dated as of _________________,
between the Company and the Auction Agent (the "Auction Agent Agreement")) and
____________________ (together with its successors and hereinafter referred to
as "BD").
The Company has duly authorized and issued ______ shares of Auction Market
Preferred Stock(R), Series A ("Series A AMPS") and ______ shares of Auction
Market Preferred Stock(R), Series B ("Series B AMPS") each with a par value $.l0
per share, liquidation preference $50,000 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 and Series B AMPS
are sometimes referred to together herein as "AMPS."
The Company's Articles Supplementary provide that the dividend rate on
each series of 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 Xxxxxxxx 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.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the Auction Agent and BD agree as follows:
1. Definitions and Rules of Construction.
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1.1 Terms Defined by Reference to the Articles Supplementary. Capitalized
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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 Procedures
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(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 November 17, 1992 in the office of the State Department of
Assessments and Taxation of the State of Maryland.
(b) "Auction" shall have the meaning specified in Section 2.1 hereof.
(c) "Auction Procedures" shall mean the Auction Procedures that are set
forth in Paragraph 11 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) "Purchaser's Letter" shall mean a letter addressed to the Company, the
Auction Agent and a Broker-Dealer, substantially in the form attached hereto as
Exhibit A.
(h) "Settlement Procedures" shall mean the Settlement Procedures attached
hereto as Exhibit B.
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1.3 Rules of Construction. Unless the context or use indicates another or
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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. Notification of Dividend Period and Advance Notice of Allocation of
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Taxable Income.
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(a) 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 fully set forth herein.
(b) 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
any series 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, it will in turn notify BD, who, on
or prior to such Auction Date, will notify its Existing Holders and Potential
Holders 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 it will in turn notify the Securities Depository and BD,
who, on or prior to the applicable Dividend Payment Date, will notify its
Existing Holders.
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3. The Auction.
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3.1 Purpose; Incorporation bv Reference of Auction Procedures and
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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 each series of 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 fully set forth herein.
(c) BD is delivering herewith a Purchaser's Letter executed by BD and, in
the case of Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated, a list of
persons to whom BD will initially sell the shares of each series of AMPS, the
number of shares of each series of AMPS BD will sell to each such person and the
number of shares of each series of AMPS BD will hold for its own account. 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 Paragraph 1 of the Articles Supplementary may
execute a Broker-Dealer Agreement and a Purchaser's Letter and participate as
Broker-Dealers in Auctions.
(d) BD and other Broker-Dealers may participate in Auctions for their own
accounts, provided that BD or such other Broker-Dealers, as the case may be, has
executed a Purchaser's Letter. However, the Company may by notice to BD and all
other Broker-Dealers 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
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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 shall promptly notify customers of BD that BD believes are
Existing Holders 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 Existing Holders of shares of
each series 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 Existing Holders of shares of each series 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 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.
(d) The Auction Agent is not required to accept the Purchaser's Letter for
any Potential Holder for an Auction unless it is received by the Auction Agent
by 3:00 P.M. on the Business Day next preceding such Auction.
3.3 Auction Schedule; Method of Submission of Orders.
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(a) The Company and the Auction Agent shall conduct Auctions for each
series of 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 unreasonably withheld. 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 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
11(c)(i) of the Articles Supplementary. Submission
Deadline is 1:00 P.M.
Not earlier than 1:00 P.M. Auction Agent makes determinations pursuant to
Paragraph 11(d)(i) of the Articles Supplementary.
By approximately 3:00 P.M. Auction Agent advises Company of results of
Auction as provided in Paragraph ll(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 11(e) of the Articles Supplementary.
By approximately 1O:OO A.M. Auction Agent gives notice of Auction results as
on the next succeeding set forth in Section 3.4(a) hereof.
Business Day
(b) BD agrees to maintain a list of Potential Holders and to contact the
Potential Holders on such list on or prior to each Auction Date for the purposes
set forth in Paragraph 11 of the Articles Supplementary.
(c) BD agrees not to sell, assign or dispose of any shares of any series
of AMPS to any Person who has not delivered a signed Purchaser's Letter to the
Auction Agent, unless BD submits Orders for such Person listing BD as the
Existing Holder or the Potential Holder.
(d) BD shall submit Orders to the Auction Agent in writing in
substantially the form attached hereto as Exhibit C. BD shall submit separate
Orders to the Auction Agent for each Potential Holder or Existing Holder on
whose behalf BD is submitting an
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Order and shall not net or aggregate the Orders of Potential Holders or Existing
Holders on whose behalf BD is submitting Orders.
(e) BD shall deliver to the Auction Agent (i) a written notice,
substantially in the form attached hereto as Exhibit D, of transfers of shares
of any series 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 E, of the failure of shares of any series of
AMPS to be transferred to or by any Person that purchased or sold shares of any
series of AMPS or through BD pursuant to an Auction. The Auction Agent is not
required to accept any notice delivered pursuant to the terms of the foregoing
sentence with respect to an Auction unless it is received by the Auction Agent
by 3:00 P.M. on the Business Day next preceding the applicable Auction Date.
3.4 Notice of Auction Results.
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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 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 Existing Holder selling shares of any series of AMPS in an Auction
fails to deliver such shares, the BD of any Person that was to have purchased
shares of such series of AMPS in such Auction may deliver to such Person a
number of whole shares of such series 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 such series 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(e)(ii)
hereof. Notwithstanding the foregoing terms of this Section 3.4(b), any delivery
or non-delivery of shares of any series 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(e)
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hereof. The Auction Agent shall have no duty or liability with respect to
enforcement of this Section 3.4(b).
3.5 Service Charge to Be Paid to BD. On the Business Day next succeeding
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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 a 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)
l/4 of l%, times (iii) $50,000, 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 an Existing Holder 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 Holder 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 11 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 Existing Holders pursuant to Paragraph 11 of the
Articles Supplementary that were acquired by such Existing Holders 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.
For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any
Existing Holder who acquired shares of any series 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.
4. 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 specifically set forth in this Agreement,
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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 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 and shall be protected in acting or
refraining from acting upon any communication authorized by this Agreement and
upon 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 a Broker-Dealer.
The Auction Agent may record telephone communications with the Broker-Dealers.
(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 representation
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as to the validity or adequacy of this Agreement or the AMPS.
5. Miscellaneous.
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5.1 Termination. Any party may terminate this Agreement at any time upon
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five days' prior 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 prior written
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consent of the Company of such termination, which consent shall not be
unreasonably withheld.
5.2 Participant in Securities Depository; Payment of Dividends in Same-Day
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Funds.
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(a) BD is, and shall remain for the term of this Agreement, a member of,
or participant in, the Securities Depository (or an affiliate of such a member
or participant).
(b) BD represents that it (or if such 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 such BD or
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 made by
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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, addressed to it, at its address or telecopy number
set forth below:
If to BD -----------------------------------
addressed: -----------------------------------
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Attention:
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Telephone No.:
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Telephone No.:
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If to the Auction IBJ Xxxxxxxx Bank & Trust Company
Agent, addressed: 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 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 BD by a BD Officer and on behalf of
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the Auction Agent by an Authorized Officer. BD may record telephone
communications with the Auction Agent.
5.5 Entire Agreement. This Agreement contains the entire agreement between
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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, shall give to
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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, cancelled 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, inure to
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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 Agreement
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shall be ruled invalid or unenforceable by any court of competent jurisdiction,
the invalidity or unenforceability of such clause, provision or section shall
not affect any remaining clause, provision or section hereof.
5.10 Execution in Counterparts. This Agreement may be executed in several
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counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
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6. Governing Law. This Agreement shall be governed by and construed in
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accordance with the laws of the State of New York applicable to agreements made
and to be performed in said State.
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 XXXXXXXX BANK & TRUST COMPANY
By:
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Title:
[BD]
By:
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Title:
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EXHIBIT A
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Master Purchaser's Letter
[To Come]
EXHIBIT B
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Settlement Procedures
[To Come]
