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AUCTION AGENT AGREEMENT
between
MUNIYIELD PENNSYLVANIA FUND
and
IBJ SCHRODER BANK & TRUST COMPANY
Dated as of November 30, 1992
Relating to
Auction Market Preferred Shares(R)
("AMPS"(R))
of
MUNIYIELD PENNSYLVANIA FUND
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(R) Registered trademark of Merrill Lynch & Co., Inc.
THIS AUCTION AGENT AGREEMENT dated as of November 30, 1992, between
MUNIYIELD PENNSYLVANIA FUND, a Massachusetts business trust (the "Trust"), and
IBJ SCHRODER BANK & TRUST COMPANY, a New York banking corporation.
The Trust proposes to duly authorize and issue 800 shares of Auction Market
Preferred Shares(R), (with a par value of $.10 per share and a liquidation
preference of $50,000 per share plus an amount equal to accumulated but unpaid
dividends (whether or not earned or declared)) pursuant to the Trust's
Certificate of Designation (as defined below). The shares are sometimes referred
to together herein as "AMPS." An Auction (as defined below) will be conducted
for the AMPS. The Trust desires that IBJ Schroder Bank & Trust Company perform
certain duties as agent in connection with each Auction of shares of AMPS (the
"Auction Agent") and as the transfer agent, registrar, dividend disbursing agent
and redemption agent with respect to the shares of AMPS (the "Paying Agent")
upon the terms and conditions of this Agreement, and hereby appoints IBJ
Schroder Bank & Trust Company as said Auction Agent and Paying Agent in
accordance with those terms and conditions (hereinafter generally referred to as
the "Auction Agent" except in Sections 3 and 4 below).
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the Trust and the Auction Agent agree as follows:
1. Definitions and Rules of Construction.
--------------------------------------
1.1 Terms Defined by Reference to
Certificate of Designation.
---------------------------
Capitalized terms not defined herein shall have the respective meanings
specified in the Certificate of Designation.
1.2 Terms Defined Herein.
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As used herein and in the Settlement Procedures (as defined below), the
following terms shall have the following meanings, unless the context otherwise
requires:
(a) "Affiliate" shall mean any Person, other than Merrill Lynch, Pierce, Fenner
& Smith Incorporated, made known to the Auction Agent to be controlled by,
in control of or under common control with, the Trust, or its successors.
(b) "Agent Member" of any Person shall mean such Person's agent member of the
Securities Depository who is identified as such in such Person's
Purchaser's Letter.
(c) "Auction" shall have the meaning specified in Section 2.1 hereof.
(d) "Auction Procedures" shall mean the Auction Procedures that are set forth
in Paragraph 11 of the Certificate of Designation.
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(R) Registered trademark of Merrill Lynch & Co., Inc.
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(e) "Authorized Officer" shall mean each Senior Vice President, Vice President,
Assistant Vice President, Trust Officer, and 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 hereof in a
communication to the Trust.
(f) "Broker-Dealer Agreement" shall mean each agreement between the Auction
Agent and a Broker-Dealer substantially in the form attached hereto as
Exhibit A.
(g) "Certificate of Designation" shall mean the Certificate of Designation of
the Trust, establishing the powers, preferences and rights of the AMPS,
filed on November 24, 1992, in the Office of the Secretary of State of The
Commonwealth of Massachusetts.
(h) "Holder" shall be a holder of record of one or more shares of AMPS, listed
as such in the stock register maintained by the Paying Agent pursuant to
Section 4.6.
(i) "Purchaser's Letter" shall mean a letter addressed to the Trust, the
Auction Agent and a Broker-Dealer, substantially in the form attached to
the Broker-Dealer Agreement as Exhibit A.
(j) "Settlement Procedures" shall mean the Settlement Procedures attached to
the Broker-Dealer Agreement as Exhibit B.
(k) "Trust Officer" shall mean the Chairman and Chief Executive Officer, 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 Trust and every other officer or employee of the Trust
designated as a "Trust Officer" for purposes hereof in a notice from the
Trust to the Auction Agent.
1.3 Rules of Construction.
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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.
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(d) All references herein to a particular time of day shall be to New York City
time.
2. The Auction.
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2.1 Purpose; Incorporation by Reference of Auction
Procedures and Settlement Procedures.
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(a) The Certificate of Designation provides that the Applicable Rate on shares
of AMPS, for each Dividend Period therefor after the Initial Dividend
Period shall be the rate per annum that a commercial bank, trust company,
or other financial institution appointed by the Trust advises results from
implementation of the Auction Procedures. The Board of Trustees of the
Trust has adopted a resolution appointing IBJ Schroder Bank & Trust Company
as Auction Agent for purposes of the Auction Procedures. The Auction Agent
hereby accepts such appointment and agrees that, on each Auction Date, it
shall follow the procedures set forth in this Section 2 and the Auction
Procedures for the purpose of determining the Applicable Rate for the 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 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.
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(a) Pursuant to Section 2.5 hereof, the Trust shall not designate any Person to
act as a Broker-Dealer without prior written approval of the Auction Agent
(which approval shall not be withheld unreasonably). At the time of
closing of the initial issuance and sale of the AMPS (the "Closing"), the
Trust shall provide the Auction Agent with a list of the Broker-Dealers
previously approved by the Auction Agent and shall cause to be delivered to
the Auction Agent for execution by the Auction Agent a Broker-Dealer
Agreement signed by each such Broker-Dealer. The Auction Agent shall keep
such list current and accurate and shall indicate thereon, or on a separate
list, the identity of each Existing Holder, if any, whose most recent Order
was submitted by a Broker-Dealer on such list and resulted in such Existing
Holder continuing to hold or purchasing shares of AMPS. Not later than five
days prior to any Auction Date for which any change in such list of Broker-
Dealers is to be effective, the Trust shall notify the Auction Agent in
writing of such change and, if any such change is the addition of a Broker-
Dealer to such list, the Trust shall cause to be delivered to the Auction
Agent for execution by the Auction Agent a Broker-Dealer Agreement signed
by such Broker-Dealer. The Auction Agent shall have entered into a Broker-
Dealer Agreement with each Broker-Dealer prior to the participation of any
such Broker-Dealer in any Auction.
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(b) In the event that the Auction Date for any Auction shall be changed after
the Auction Agent shall have 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 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) With respect to each Dividend Period that is a Special Dividend Period, the
Trust may, at its sole option and to the extent permitted by law, by
telephonic and written notice (a "Request for Special Dividend Period") to
the Auction Agent and to each Broker-Dealer, request that the next
succeeding Dividend Period for the AMPS will be a number of days (other
than seven), evenly divisible by seven, and not fewer than seven nor more
than 364 in the case of a Short Term Dividend Period or a number of whole
years not greater than five years in the case of a Long Term Dividend
Period, specified in such notice, provided that, the Trust may not give a
Request for Special Dividend Period of greater than 28 days (and any such
request shall be null and void) unless the Trust has given written notice
thereof to S&P and received written confirmation from Moody's that such
action would not impair the rating then assigned to the AMPS by Moody's and
unless, for any Auction occurring after the Initial Auction, sufficient
Clearing Bids were made in the last occurring Auction and unless full
cumulative dividends, any amounts due with respect to mandatory redemptions
and any Additional Dividends payable prior to such date have been paid in
full. Such Request for Special Dividend Period, in the case of a Short Term
Dividend Period, shall be given on or prior to the fourth Business Day but
not more than seven Business Days prior to an Auction Date for the AMPS
and, in the case of a Long Term Dividend Period, shall be given on or prior
to the 14th day but not more than 28 days prior to the Auction Date for the
AMPS. Upon receiving such Request for Special Dividend Period, the Broker-
Dealers shall jointly determine whether given the factors set forth in
paragraph 2(c)(iii) of the Certificate of Designation it is advisable that
the Trust issue a Notice of Special Dividend Period for the AMPS as
contemplated by such Request for Special Dividend Period and the Optional
Redemption Price of the AMPS during such Special Dividend Period and the
Specific Redemption Provisions and shall give the Trust and the Auction
Agent written notice (a "Response") of such determination by no later than
the third Business Day prior to such Auction Date. If the Broker-Dealers
shall not give the Trust and the Auction Agent a Response by such third
Business Day or if the Response states that given the factors referred to
above it is not advisable that the Trust give a Notice of Special Dividend
Period (as defined below) for the AMPS, the Trust may not give a Notice of
Special Dividend Period in respect of such Request for Special Dividend
Period. In the event the Response indicates that it is advisable that the
Trust give a Notice of Special Dividend Period for the AMPS, the Trust may
by no later than the second Business Day prior to such Auction Date give a
notice (a "Notice of Special Dividend Period") to the Auction Agent, the
Securities Depository and each Broker-Dealer, which notice will specify (i)
the duration of the Special Dividend Period, (ii) the Optional Redemption
Price as specified in the related Response and (iii) the Specific
Redemption Provisions, if any, as specified in the related Response. The
Trust shall not give a Notice of Special Dividend Period, or, if such
Notice of Special Dividend Period shall have already been given, shall give
telephonic and written notice of its revocation (a "Notice of Revocation")
to the Auction Agent, each Broker-Dealer, and the Securities Depository
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on or prior to the Business Day prior to the relevant Auction Date if (x)
either the 1940 Act AMPS Coverage is not satisfied or the Trust shall fail
to maintain S&P Eligible Assets and Moody's Eligible Assets each with an
aggregate Discounted Value at least equal to the AMPS Basic Maintenance
Amount in each case on each of the two Valuation Dates immediately
preceding the Business Day prior to the relevant Auction Date on an actual
basis and on a pro forma basis giving effect to the proposed Special
Dividend Period (using as a pro forma dividend rate with respect to such
Special Dividend Period the dividend rate which the Broker-Dealers shall
advise the Trust is an approximately equal rate for securities similar to
the AMPS with an equal dividend period), provided that in calculating the
aggregate Discounted Value of Moody's Eligible Assets for this purpose, the
Moody's Exposure Period shall be deemed to be one week longer, (y)
sufficient funds for the payment of dividends payable on the immediately
succeeding Dividend Payment Date have not been irrevocably deposited with
the Auction Agent by the close of business on the third Business Day
preceding the related Auction Date or (z) the Broker-Dealer(s) jointly
advise the Trust that after consideration of the factors referred to above
they have concluded that it is advisable to give a Notice of Revocation. If
the Trust is prohibited from giving a Notice of Special Dividend Period as
a result of the factors enumerated in clause (x), (y) or (z) of the
preceding sentence or if the Trust gives a Notice of Revocation with
respect to a Notice of Special Dividend Period, the next succeeding
Dividend Period will be a 7-day Dividend Period. In addition, in the event
sufficient Clearing Bids are not made in any Auction or an Auction is not
held for any reason, the next succeeding Dividend Period will be a 7-day
Dividend Period, and the Trust may not again give a Notice of Special
Dividend Period (and any such attempted notice shall be null and void)
until sufficient Clearing Bids have been made in an Auction with respect to
a 7-day Dividend Period.
(d) (i) Except as otherwise provided in paragraph 2(f) of the Certificate of
Designation, whenever the Trust intends to include any net capital gains or
other income subject to regular Federal income tax in any dividend on
shares of AMPS, the Trust 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 Trust, it will in turn notify
each Broker-Dealer, who, on or prior to such Auction Date, in accordance
with its Broker-Dealer Agreement, 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 Trust includes any
additional amounts in a dividend as provided in paragraph 2(f) of the
Certificate of Designation, the Trust 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 Trust it will in turn notify
the Securities Depository and each Broker-Dealer, who, on or prior to the
applicable Dividend Payment Date, in accordance with its Broker-Dealer
Agreement, will notify its Existing Holders.
(ii) If the Trust makes a Retroactive Taxable allocation, the Trust will, within
90 days (and generally within 60 days) after the end of its fiscal year for
which a Retroactive Taxable Allocation is made provide notice thereof to
the Auction Agent and to each holder of shares (initially the Securities
Depository) during such fiscal year at
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such holder's address as the same appears or last appeared on the share
books of the Trust. The Trust will, within 30 days after such notice is
given to the Auction Agent, pay to the Auction Agent (who will then
distribute to such holders of shares of AMPS), out of funds legally
available therefor, a cash amount equal to the aggregate Additional
Dividend with respect to all Retroactive Taxable Allocations made to such
holders during the fiscal year in question.
(e) (i) On each Auction Date, the Auction Agent shall determine the Reference
Rate and the Maximum Applicable Rate. If the Reference Rate is not quoted
on an interest basis but is quoted on a discount basis, the Auction Agent
shall convert the quoted rate to an Interest Equivalent, as set forth in
paragraph 1 of the Certificate of Designation; or, if the rate obtained by
the Auction Agent is not quoted on an interest or discount basis, the
Auction Agent shall convert the quoted rate to an interest rate after
consultation with the Trust as to the method of such conversion. Not later
than 9:30 A.M. on each Auction Date, the Auction Agent shall notify the
Trust and the Broker-Dealers of the Reference Rate so determined and the
Maximum Applicable Rate.
(ii) If the Reference Rate is the applicable "AA" Composite Commercial Paper
Rate and such 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 the applicable "AA" Composite Commercial
Paper Rate, the Auction Agent shall immediately notify the Trust so that
the Trust 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 Trust shall promptly advise the Auction Agent of any
such selection. If the Trust does not select any such Substitute Commercial
Paper Dealer or Substitute Commercial Paper Dealers, then the rates shall
be supplied by the remaining Commercial Paper Dealer or Commercial Paper
Dealers.
(iii) If, after the date of this Agreement, there is any change in the
prevailing rating of AMPS by either of the rating agencies (or substitute
or successor rating agencies) referred to in the definition of the Maximum
Applicable Rate, thereby resulting in any change in the corresponding
applicable percentage for the AMPS, as set forth in said definition (the
"Percentage"), the Trust shall notify the Auction Agent in writing of such
change in the Percentage prior to 9:00 A.M. on the Auction Date for AMPS
next succeeding such change. The Percentage for the AMPS on the date of
this Agreement is as specified in paragraph 11(a)(vii) of the Certificate
of Designation. The Auction Agent shall be entitled to rely on the last
Percentage of which it has received notice from the Trust (or, in the
absence of such notice, the Percentage set forth in the preceding sentence)
in determining the Maximum Applicable Rate as set forth in Section
2.2(e)(i) hereof.
(f) (i) The Auction Agent shall maintain a current registry of the beneficial
owners of the shares of the AMPS who shall constitute the Existing Holders
for purposes of each Auction. The Trust shall use its best efforts to
provide or cause to be provided to the Auction Agent within ten days
following the date of Closing a list of the initial Existing Holders of the
AMPS, and the Broker-Dealer of each such Existing
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Holder through which such Existing Holder purchased such shares. The
Auction Agent may rely upon, as evidence of the identities of the Existing
Holders, such list, the results of each Auction and notices from any
Existing Holder, the Agent Member of any Existing Holder or the Broker-
Dealer of any Existing Holder with respect to such Existing Holder's
transfer of any shares of AMPS to another Person.
(ii) In the event of any partial redemption of any shares of AMPS, upon notice
by the Trust to the Auction Agent of such partial redemption, the Auction
Agent shall promptly request the Securities Depository to notify the
Auction Agent of the identities of the Agent Members (and the respective
numbers of shares) from the accounts of which shares have been called for
redemption and the person or department at such Agent Member to contact
regarding such redemption, and at least two Business Days prior to the .
Auction preceding the date of redemption with respect to the shares being
partially redeemed, the Auction Agent shall request each Agent Member so
identified to disclose to the Auction Agent (upon selection by such Agent
Member of the Existing Holders whose shares are to be redeemed) the number
of shares of the AMPS of each such Existing Holder, if any, to be redeemed
by the Trust; provided the Auction Agent has been furnished with the name
and telephone number of a person or department at such Agent Member from
which it is to request such information. If necessary to procure such
information, the Auction Agent shall deliver to each Agent Member a
facsimile copy of the Purchaser's Letter of each Existing Holder
represented by such Agent Member, 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 the AMPS shown in the Auction Agent's registry of
beneficial owners.
(iii) The Auction Agent shall register a transfer of the beneficial ownership of
shares of the AMPS from an Existing Holder to another Person only if such
transfer is made to a Person that has delivered a signed Purchaser's Letter
to the Auction Agent and only if (A) such transfer is pursuant to an
Auction or (B) if such transfer is made other than pursuant to an Auction,
the Auction Agent has been notified in writing in a notice substantially in
the form of Exhibit D to the Broker-Dealer Agreement, by such Existing
Holder, the Agent Member of such Existing Holder, or the Broker-Dealer of
such Existing Holder of such transfer. The Auction Agent is not required to
accept any notice of transfer delivered for an Auction unless it is
received by the Auction Agent by 3:00 P.M. on the Business Day next
preceding the applicable Auction Date. The Auction Agent shall rescind a
transfer made on the registry of the beneficial owners of any shares of
AMPS if the Auction Agent has been notified in writing in a notice
substantially in the form of Exhibit E to the Broker-Dealer Agreement by
the Agent Member or the Broker-Dealer of any Person that (i) purchased any
shares of AMPS and the seller failed to deliver such shares or (ii) sold
any shares of AMPS and the purchaser failed to make payment to such Person
upon delivery to the purchaser of such shares.
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(g) The Auction Agent may request that the Broker-Dealers, as set forth in
Section 3.2(c) of the Broker-Dealer Agreements, provide the Auction Agent
with a list of their respective customers that such Broker-Dealers believe
are Existing Holders of shares of AMPS. The Auction Agent shall keep
confidential any such information and shall not disclose any such
information so provided to any Person other than the relevant Broker-Dealer
and the Trust, provided that the Auction Agent reserves the right to
disclose any such information if it is advised by its counsel that its
failure to do so would be unlawful.
2.3 Auction Schedule.
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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 Trust, which consent shall not be unreasonably withheld. The
Auction Agent shall give notice of any such change to each Broker-Dealer. Such
notice shall be received prior to the first Auction Date on which any such
change shall be effective.
Time Event
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By 9:30 A.M. Auction Agent advises the Trust and the
Broker-Dealers of the Reference Rate and the
Maximum Applicable Rate as set forth in
Section 2.2(e)(i) 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
Certificate of Designation. Submission
deadline is 1:00 P.M.
Not earlier than Auction Agent makes determinations pursuant to
1:00 P.M. Paragraph 11(d)(i) of the Certificate of
Designation.
By approximately Auction Agent makes determinations pursuant to
3:00 P.M. Paragraph 11(d)(i) of the Certificate of
Designation.
Submitted Bids and Submitted Sell Orders are
accepted and rejected in whole or in part and
shares of AMPS allocated as provided in
Paragraph 11(e) of the Certificate of
Designation.
By approximately 10:00 Auction Agent gives notice of Auction results
A.M. on the next as set forth in Section 2.4 hereof.
succeeding Business Day
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2.4 Notice of Auction Results.
-------------------------
On each Auction Date, the Auction Agent shall notify Broker-Dealers of the
results of the Auction held on such date by telephone or through the Auction
Agent's Auction Processing System as set forth in Paragraph (a) of the
Settlement Procedures.
2.5 Broker-Dealers.
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(a) Not later than 12:00 noon on each Auction Date, the Trust shall pay to the
Auction Agent in New York Clearing House or similar next-day funds an
amount in cash equal to (i) in the case of any Auction Date immediately
preceding a 7-day Dividend Period, the product of (A) a fraction the
numerator of which is the number of days in such Dividend Period
(calculated by counting the first day of such Dividend Period but excluding
the last day thereof) and the denominator of which is 360, times (B) 1/4 of
1%, times (C) $50,000, times (D) the sum of the aggregate number of
Outstanding shares of AMPS for which the Auction is conducted and (ii) in
the case of any Special Dividend Period, the amount determined by mutual
consent of the Trust and the Broker-Dealers pursuant to Section 3.5 of the
Broker-Dealer Agreements. In lieu of making such payment in New York
Clearing House or similar next-day funds, the Trust may make such payment
by noon on the Business Day immediately following the Auction Date in the
form of Federal funds or similar same-day funds. The Auction Agent shall
apply such moneys as set forth in Section 3.5 of the Broker-Dealer
Agreements and shall thereafter remit to the Trust any remaining funds paid
to the Auction Agent pursuant to this Section 2.5(a).
(b) The Trust shall not designate any Person to act as a Broker-Dealer without
the prior written approval of the Auction Agent, which written approval
shall not be unreasonably withheld. The Trust may designate an Affiliate
and Merrill Lynch, Pierce, Fenner & Smith Incorporated to act as a Broker-
Dealer.
(c) The Auction Agent shall terminate any Broker-Dealer Agreement as set forth
therein if so directed by the Trust.
(d) Subject to Section 2.5(b) hereof, the Auction Agent shall from time to time
enter into such Broker-Dealer Agreements as the Trust shall request.
(e) The Auction Agent shall maintain a list of Broker-Dealers.
2.6 Ownership of Shares of AMPS and Submission of Bids
by Trust and Affiliates.
------------------------
Neither the Trust nor any Affiliate of the Trust may submit any Sell Order
or Bid, directly or indirectly, in any Auction, except that an Affiliate of the
Trust that is a Broker-Dealer may submit a Sell Order or Bid on behalf of an
Existing Holder or Potential Holder. The Trust shall notify the Auction Agent if
the Trust or, to the best of the Trust's knowledge, any Affiliate of the Trust
becomes an Existing Holder of any shares of AMPS. Any shares of AMPS redeemed,
purchased or otherwise acquired (i) by the Trust shall not be reissued or (ii)
by its Affiliates shall not be transferred (other than to the Trust).
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The Auction Agent shall have no duty or liability with respect to
enforcement of this Section 2.6.
2.7 Access to and Maintenance of Auction Records.
--------------------------------------------
The Auction Agent shall afford to the Trust, its agents, independent public
accountants and counsel, access at reasonable times during normal business hours
to review and make extracts or copies (at the Trust's sole cost and expense) of
all books, records, documents and other information concerning the conduct and
results of Auctions, provided that any such agent, accountant, or counsel shall
furnish the Auction Agent with a letter from the Trust requesting that the
Auction Agent afford such person access. The Auction Agent shall maintain
records relating to any Auction for a period of two years after such Auction
(unless requested by the Trust to maintain such records for such longer period
not in excess of four years, then for such longer period), and such records
shall, in reasonable detail, accurately and fairly reflect the actions taken by
the Auction Agent hereunder. The Trust agrees to keep any information regarding
the customers of any Broker-Dealer received from the Auction Agent in connection
with this Agreement or any Auction confidential and shall not disclose such
information or permit the disclosure of such information without the prior
written consent of the applicable Broker-Dealer to anyone except such agent,
accountant or counsel engaged to audit or review the results of Auctions as
permitted by this Section 2.7; provided that the Trust reserves the right to
disclose any such information if it is advised by its counsel that its failure
to do so would (i) be unlawful or (ii) expose it to liability, unless the
Broker-Dealer shall have offered indemnification satisfactory to the Trust. Any
such agent, accountant or counsel, before having access to such information,
shall agree to keep such information confidential and not to disclose such
information or permit disclosure of such information without the prior written
consent of the applicable Broker-Dealer; provided that such agent, accountant or
counsel may reserve the right to disclose any such information if it is advised
by its counsel that its failure to do so would (i) be unlawful or (ii) expose it
to liability, unless the Broker-Dealer shall have offered indemnification
satisfactory to such agent, accountant or counsel.
3. The Auction Agent as Paying Agent.
----------------------------------
3.1 Paying Agent.
------------
The Board of Trustees of the Trust has adopted a resolution appointing IBJ
Schroder Bank & Trust Company as transfer agent, registrar, dividend disbursing
agent and redemption agent for the Trust in connection with any shares of AMPS
(the "Paying Agent"). The Paying Agent hereby accepts such appointment and
agrees to act in accordance with its standard procedures and the provisions of
the Certificate of Designation which are specified herein with respect to the
shares of AMPS and as set forth in this section 3.
3.2 The Trust's Notices to Paying Agent.
-----------------------------------
Whenever any shares of AMPS are to be redeemed, the Trust shall promptly
deliver to the Paying Agent the Notice of Redemption, which will be mailed by
the Trust to each Holder, at least five days prior to the date such Notice of
Redemption is required to be mailed by the
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Certificate of Designation. The Paying Agent shall have no responsibility to
confirm or verify the accuracy of any such notice.
3.3 Trust to Provide Funds for Dividends,
Redemptions and Additional Dividends.
------------------------------------
(a) Not later than noon, on the Business Day immediately preceding each
Dividend Payment Date, the Trust shall deposit with the Paying Agent an
aggregate amount of New York Clearing House or similar next-day funds equal
to the declared dividends to be paid to Holders on such Dividend Payment
Date and shall give the Paying Agent irrevocable instructions to apply such
funds to the payment of such dividends on such Dividend. Payment Date. In
lieu of making such deposit in New York Clearing House or similar next-day
funds, the Trust may make such deposit by noon on each Dividend Payment
Date in the form of Federal funds or similar same-day funds.
(b) If the Trust shall give the Notice of Redemption then, by noon of the
Business Day immediately preceding the date fixed for redemption, the Trust
shall deposit in trust with the Paying Agent an aggregate amount of New
York Clearing House or similar next-day funds sufficient to redeem such
shares of AMPS called for redemption and shall give the Paying Agent
irrevocable instructions and authority to pay the redemption price to the
Holders of shares of AMPS called for redemption upon surrender of the
certificate or certificates therefor. In lieu of making such deposit in New
York Clearing House or similar next-day funds, the Trust may make such
deposit by noon on the date fixed for redemption in the form of Federal
funds or similar same-day funds.
(c) If the Trust provides notice to the Auction Agent of a Retroactive Taxable
Allocation, the Trust shall, within 30 days after such notice is given and
by noon of the Business Day immediately preceding the date fixed for
payment of an Additional Dividend, deposit in trust with the Paying Agent
an aggregate amount of New York Clearing House or similar next-day funds
equal to such Additional Dividend and shall give the Paying Agent
irrevocable instructions and authority to pay the Additional Dividends to
Holders (or former Holders) of AMPS entitled thereto. In lieu of making
such deposit in New York Clearing House or similar next-day funds, the
Trust may make such deposit by noon on the date fixed for payment of an
Additional Dividend in the form of Federal funds or similar same-day funds.
3.4 Disbursing Dividends, Redemption Price
and Additional Dividends.
-------------------------
After receipt of the New York Clearing House or similar next-day funds (or
Federal funds or similar same-day funds) and instructions from the Trust
described in sections 3.3(a), (b) and (c) above, the Paying Agent shall pay to
the Holders (or former Holders) entitled thereto (i) on each corresponding
Dividend Payment Date, dividends on the AMPS, (ii) on any date fixed for
redemption, the redemption price of any shares of AMPS called for redemption and
(iii) on the date fixed for payment of an Additional Dividend, such Additional
Dividend. The amount of dividends for any Dividend Period to be paid by the
Paying Agent to Holders will be
12
determined by the Trust as set forth in Paragraph 2 of the Certificate of
Designation. The redemption price to be paid by the Paying Agent to the Holders
of any shares of AMPS called for redemption will be determined as set forth in
Paragraph 4 of the Certificate of Designation. The amount of Additional
Dividends to be paid by the Paying Agent in the event of a Retroactive Taxable
Allocation to Holders will be determined by the Trust pursuant to paragraph 2(e)
of the Certificate of Designation. The Trust shall notify the Paying Agent in
writing of a decision to redeem any shares of AMPS on or prior to the date
specified in Section 3.2 above, and such notice by the Trust to the Paying Agent
shall contain the information required to be stated in the Notice of Redemption
required to be mailed by the Trust to such Holders. The Paying Agent shall have
no duty to determine the redemption price and may rely on the amount thereof set
forth in the Notice of Redemption.
4. The Paying Agent as Transfer Agent and Registrar.
-------------------------------------------------
4.1 Original Issue of Share Certificate.
-----------------------------------
On the Date of Original Issue, one certificate for the AMPS shall be issued
by the Trust and registered in the name of Cede & Co., as nominee of the
Securities Depository, and countersigned by the Paying Agent.
4.2 Registration of Transfer or Exchange of Shares.
----------------------------------------------
Except as provided in this Section 4.2, the shares of the AMPS 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 Trust shall not have selected a substitute Securities Depository
acceptable to the Paying Agent prior to such resignation, then upon such
resignation, the shares of AMPS may, at the Trust's request, be registered for
transfer or exchange, and new certificates thereupon shall be issued in the name
of the designated transferee or transferees, upon surrender of the old
certificate in form deemed by the Paying Agent properly endorsed for transfer
with (a) all necessary endorsers' signatures guaranteed in such manner and form
as the Paying Agent may require by a guarantor reasonably believed by the Paying
Agent to be responsible, (b) such assurances as the Paying Agent shall deem
necessary or appropriate to evidence the genuineness and effectiveness of each
necessary endorsement and (c) satisfactory evidence of compliance with all
applicable laws relating to the collection of taxes in connection with any
registration of transfer and exchange or funds necessary for the payment of such
taxes. If the certificate or certificates for shares of AMPS are not held by the
Securities Depository or its nominee, payments upon transfer of shares in an
Auction shall be made in same day funds to the Auction Agent against delivery of
certificates therefor.
4.3 Removal of Legend.
-----------------
Any request for removal of a legend indicating a restriction on transfer
from a certificate evidencing shares of AMPS shall be accompanied by an opinion
of counsel stating that such legend may be removed and such shares transferred
free of the restriction described in such legend, said opinion to be delivered
under cover of a letter from a Trust Officer authorizing the Paying Agent to
remove the legend on the basis of said opinion.
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4.4 Lost Share Certificates.
-----------------------
The Paying Agent shall issue and register replacement certificates for
certificates represented to have been lost, stolen or destroyed, upon the
fulfillment of such requirements as shall be deemed appropriate by the Trust and
the Paying Agent, subject at all times to provisions of law, the By-Laws of the
Trust governing such matters and resolutions adopted by the Trust with respect
to lost securities. The Paying Agent may issue new certificates in exchange for
and upon the cancellation of mutilated certificates. Any request by the Trust to
the Paying Agent to issue a replacement or new certificate pursuant to this
Section 4.4 shall be deemed to be a representation and warranty by the Trust to
the Paying Agent that such issuance will comply with such provisions of
applicable law and the By-Laws and resolutions of the Trust.
4.5 Disposition of Cancelled Certificates;
Record Retention.
-----------------
The Paying Agent shall retain share certificates which have been cancelled
in transfer or in exchange and accompanying documentation in accordance with
applicable rules and regulations of the Securities and Exchange Commission for
two calendar years from the date of such cancellation. The Paying Agent shall,
upon written request from the Trust, afford to the Trust, its agents and counsel
access at reasonable times during normal business hours to review and make
extracts or copies (at the Trust's sole cost and expense) of such certificates
and accompanying documentation. Upon request by the Trust at any time after the
expiration of this two-year period, the Paying Agent shall deliver to the Trust
the cancelled certificates and accompanying documentation. The Trust shall, at
its expense, retain such records for a minimum additional period of four
calendar years from the date of delivery of the records to the Trust and shall
make such records available during this period at any time, or from time to
time, for reasonable periodic, special, or other examinations by representatives
of the Securities and Exchange Commission. The Trust shall also undertake to
furnish to the Securities and Exchange commission, upon demand, at either the
principal office or at any regional office, complete, correct and current hard
copies of any and all such records. Thereafter such records shall not be
destroyed by the Trust without the approval of the Paying Agent, which shall not
be unreasonably withheld, but will be safely stored for possible future
reference.
4.6 Share Register.
--------------
The Paying Agent shall maintain the share register, which shall contain a
list of the Holders, the number of shares held by each Holder and the address of
each Holder. The Paying Agent shall record in the share register any change of
address of a Holder upon notice by such Holder. In case of any written request
or demand for the inspection of the share register or any other books of the
Trust in the possession of the Paying Agent, the Paying Agent will notify the
Trust and secure instructions as to permitting or refusing such inspection. The
Paying Agent reserves the right, however, to exhibit the share register or other
records to any person in case it is advised by its counsel that its failure to
do so would (i) be unlawful or (ii) expose it to liability, unless the Trust
shall have offered indemnification satisfactory to the Paying Agent.
14
4.7 Return of Funds.
---------------
Any funds deposited with the Paying Agent by the Trust for any reason under
this Agreement, including for the payment of dividends or the redemption of
shares of AMPS, that remain with the Paying Agent after 12 months shall be
repaid to the Trust upon the written request of the Trust.
5. Representations and Warranties.
------------------------------
(a) The Trust represents and warrants to the Auction Agent that:
(i) the Trust is a duly incorporated and validly existing trust in good
standing under the laws of The Commonwealth of Massachusetts and has full
power to execute and deliver this Agreement and to authorize, create and
issue the shares of AMPS,
(ii) the Trust is registered with the Securities and Exchange Commission under
the Investment Company Act of 1940, as amended, as a closed-end non-
diversified management investment company;
(iii) this Agreement has been duly and validly Authorized, executed and
delivered by the Trust and constitutes the legal, valid and binding
obligation of the Trust, enforceable against the Trust in accordance with
its terms, subject as to such enforceability to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equitable principles;
(iv) the form of certificate evidencing the shares of AMPS complies with all
applicable laws of The Commonwealth of Massachusetts;
(v) the shares of AMPS have been duly and validly authorized by the Trust and,
upon completion of the initial sale of the shares of such AMPS and receipt
of payment therefor, will be validly issued, fully paid and nonassessable;
(vi) the offering of the shares of AMPS has been 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 the issuance of the shares of AMPS except as required by applicable
state securities or insurance laws, all of which have been taken;
(vii) the execution and delivery of this Agreement and the issuance and delivery
of the shares of AMPS 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 Declaration of Trust or the By-Laws of the Trust, any
law or regulation applicable to the Trust, any order or decree of any court
or public authority having jurisdiction over the Trust, or any mortgage,
indenture, contract, agreement or undertaking to which the Trust is a party
or by which it is bound; and
15
(viii) no taxes are payable upon or in respect of the execution of this
Agreement or the issuance of the shares of AMPS.
(b) The Auction Agent represents and warrants to the Trust that the Auction
Agent is duly organized and is validly existing as a banking corporation in
good standing under the laws of the State of New York and has the corporate
power to enter into and perform its obligations under this Agreement.
6. The Auction Agent.
-----------------
6.1 Duties and Responsibilities.
---------------------------
(a) The Auction Agent is acting solely as agent for the Trust hereunder and
owes no fiduciary duties to any Person except as provided by 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 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.
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 reasonably
believed 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 Trust or by a
Broker-Dealer. The Auction Agent may record telephone communications with
the Trust or with the Broker-Dealers or both.
(b) The Auction Agent may consult with counsel of its choice, and the written
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. The Auction Agent shall be under no
liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Trust.
(d) The Auction Agent may perform its duties and exercise its rights hereunder
either directly or by or through agents or attorneys.
16
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 AMPS.
6.4 Compensation, Expenses and Indemnification.
------------------------------------------
(a) The Trust 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 as shall be set forth in a separate writing signed
by the Trust and the Auction Agent, subject to adjustments if the AMPS are
no longer held of record by the Securities Depository or its nominee or if
there shall be such other change as shall materially increase the Auction
Agent's obligations hereunder or under the Broker-Dealer Agreements.
(b) The Trust shall reimburse the Auction Agent upon its request for all
reasonable expenses, disbursements and advances incurred or made by the
Auction Agent in accordance with any provision of this Agreement and the
Broker-Dealer Agreements (including the reasonable compensation, expenses
and disbursements of its agents and counsel), except any expense,
disbursement and advances attributable to its negligence or bad faith.
(c) The Trust 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 claim or liability in connection
with its exercise or performance of any of its duties hereunder and
thereunder, except such as may result from its negligence or bad faith.
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 Trust may terminate this Agreement at any
time by so notifying the Auction, Agent, provided that if any AMPS remain
outstanding the Trust has entered into an agreement in substantially the
form of this Agreement with a successor auction agent. The Auction Agent
may terminate this Agreement upon prior notice to the Trust on the date
specified in such notice, which shall be no earlier than 60 days after
delivery of such notice. If the Auction Agent resigns while any shares of
AMPS remain outstanding, the Trust shall use its best efforts to enter into
an agreement with a successor auction agent containing substantially the
same terms and conditions as this Agreement.
(b) Except as otherwise provided in this Section 7.1(b), the respective rights
and duties of the Trust and the Auction Agent under this Agreement shall
cease upon termination of this Agreement. The Trust's representations,
warranties, covenants and obligations to the Auction Agent under Sections 5
and 6.4 hereof shall survive the
17
termination hereof. Upon termination of this Agreement, the Auction Agent
shall (i) resign as Auction Agent under the Broker-Dealer Agreements, (ii)
at the Trust's request, promptly deliver to the Trust copies of all books
and records maintained by it in connection with its duties hereunder, and
(iii) at the request of the Trust, promptly transfer to the Trust or any
successor auction agent any funds deposited by the Trust with the Auction
Agent (whether in its capacity as Auction Agent or Paying Agent) pursuant
to this Agreement which have not previously been distributed by the Auction
Agent in accordance with this Agreement.
7.2 Communications.
--------------
Except for (i) communications authorized to be made by telephone pursuant
to this Agreement or the Auction Procedures and (ii) communications in
connection with Auctions (other than those expressly required to be in writing),
all notices, requests and other communications to any party hereunder shall be
in writing (including telecopy or similar writing) and shall be given to such
party addressed to it at its address or telecopy number set forth below:
- -------------------------------------------------------------------------------
If to the Trust, MuniYield Pennsylvania Fund
addressed: 800 Scudders Mill Road
Plainsboro, New Jersey 08536
Attention: Treasurer
Telephone No.: (609) 282-2800
Telecopier No.: (609) 282-3472
- -------------------------------------------------------------------------------
If to the Auction IBJ Schroder Bank & Trust Company
Agent, addressed: One State Street
New York, New York 10004
Attention: Auction Window
Subcellar 1
Telephone No.: (212) 858-2272
Telecopier No.: (212) 797-1148
- -------------------------------------------------------------------------------
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 Trust by a Trust 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 inferred
between the parties relating to the subject matter hereof except for agreements
relating to the compensation of the Auction Agent.
18
7.4 Benefits.
--------
Nothing herein, express or implied, shall give to any Person, other than
the Trust, the Auction Agent and their respective successors and assigns, any
benefit of any legal or equitable right, remedy or claim hereunder.
7.5 Amendment; Waiver.
-----------------
(a) This Agreement shall not be deemed or construed to be modified, amended,
rescinded, 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. The Trust shall notify the Auction Agent of any change in the
Certificate of Designation prior to the effective date of any such change.
If any such change in the Certificate of Designation materially increases
the Auction Agent's obligations hereunder, the Trust shall obtain the
written consent to the Auction Agent prior to the effective date of such
change.
(b) Failure of either party hereto to exercise any right or remedy hereunder in
the event of a breach hereof by the other party shall not constitute a
waiver of any such right or remedy with respect to any subsequent breach.
7.6 Successors and Assigns.
----------------------
This Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors and permitted assigns of each of the
Trust and the Auction Agent. This Agreement may not be assigned by either party
hereto absent the prior written consent of the other party, which consent shall
not be unreasonably withheld.
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.
7.8(A) Liability of Shareholders, Trustees and Officers.
------------------------------------------------
A copy of the Agreement and Declaration of Trust of the Trust is on file
with the Secretary of State of The Commonwealth of Massachusetts and notice is
hereby given that this Agreement has been executed on behalf of the Trust by an
officer of the Trust as an officer and not individually and the obligations of
the Trust arising out of this Agreement are not binding upon any of the
trustees, officers or shareholders of the Trust individually but are binding
only upon the assets and property of the Trust.
19
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 said state.
20
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.
MUNIYIELD PENNSYLVANIA FUND
By: _________________________________
Title:
IBJ SCHRODER BANK & TRUST COMPANY
By: _________________________________
Title: Assistant Vice President
21