AMENDED AND RESTATED DISTRIBUTION AGREEMENT
THIS AGREEMENT made as of the 31st day of December, 1998.
A M O N G:
XXXXXXXXX EMERGING MARKETS FUND ("TEMF"),
TEMPLETON CANADIAN BOND FUND ("TCBF"),
TEMPLETON INTERNATIONAL STOCK FUND ("TISF"),
TEMPLETON CANADIAN STOCK FUND ("TCSF"),
XXXXXXXXX GLOBAL SMALLER COMPANIES FUND ("TGSCF"),
TEMPLETON GLOBAL BOND FUND ("TGBF"),
TEMPLETON TREASURY XXXX FUND ("TTBF"),
XXXXXXXXX GLOBAL BALANCED FUND ("TGBAF"),
XXXXXXXXX INTERNATIONAL BALANCED FUND ("TIBF"),
TEMPLETON CANADIAN ASSET ALLOCATION FUND ("TCAAF"),
MUTUAL BEACON FUND ("MBF"),
FRANKLIN U.S. SMALL CAP GROWTH FUND ("FSCF") AND
XXXXXXXXX BALANCED FUND ("TBF"), by their manager/trustee Templeton
Management Limited, a corporation incorporated under the laws of the
Province of Ontario with its registered office at Xxxxx 0000,
0 Xxxxxxxx Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx
(hereinafter referred to as the "Trustee")
OF THE FIRST PART;
-and-
XXXXXXXXX GROWTH FUND, LTD., a corporation incorporated under the
laws of Canada with its registered office at Xxxxx 0000, 0 Xxxxxxxx
Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx
(hereinafter referred to as the "TGF" or the "Corporate Fund")
OF THE SECOND PART;
-and-
XXXXXXXXX MANAGEMENT LIMITED, a corporation incorporated under the
laws of the Province of Ontario with its registered office at Xxxxx
0000, 0 Xxxxxxxx Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx
(hereinafter referred to as the "Manager"),
OF THE THIRD PART;
-and-
FEP CAPITAL, L.P., a limited partnership formed under the laws of
the State of Texas, and having an office at 000 Xxxx Xxxxxx, Xxxx
Xxxxx, Xxxxx 00000
(hereinafter referred to as "FEP"),
OF THE FOURTH PART.
RECITALS:
(1) Each of the Trust Funds (as hereinafter defined) are open-end mutual fund
trusts established under the laws of Ontario by the Declarations (as
hereinafter defined).
(2) Pursuant to the Declarations and the Management Agreements, the Manager is
the manager-trustee and principal distribution agent of each of the Trust
Funds and, accordingly, may from time to time in its discretion appoint or
remove distribution agents for each of the Trust Funds.
(3) The Corporate Fund is an open-end mutual fund corporation incorporated by
letters patent under the laws of Canada. TML acts as the principal
distributor of the shares of the Corporate Fund pursuant to the TGF
Distribution Agreement (as hereinafter defined) and may from time to time
in its discretion delegate its functions to other distribution agents.
(4) The Trustee, on behalf of each of the Trust Funds (as hereinafter
defined), the Corporate Fund, the Manager and FEP entered into a
distribution agreement dated as of the 31st day of December, 1997 whereby
the Manager, as principal distributor for the Trust Funds and the
Corporate Fund, retained FEP to arrange for the distribution of the
Deferred Charge Securities (as hereinafter defined) on the terms and
conditions set out therein.
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(5) The parties wish to amend and restate the Distribution Agreement dated
December 31, 1997 to reflect certain agreed amendments to the terms and
conditions thereof.
AGREEMENT:
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. Whenever used in this Agreement and the schedules, unless there
is something inconsistent in the subject matter or context, the following words
and terms shall have the following meaning:
"Account Rate" means the lesser of: (i) the senior debt rate of FEP; and
(ii) LIBOR plus 1.50%.
"Additional Fund" means any other open-end mutual fund created or
reorganized by, or the management and distribution rights of which are
acquired by the Manager, from time to time, which distributes its
Securities generally on the same basis (including fee structure) as the
Funds and the Securities of which the Manager, at its option, permits
investors to purchase immediately with the proceeds of redemption of
Deferred Charge Securities without payment of a redemption fee in respect
of such redemptions added to this Agreement, or any closed-end fund added
to this Agreement, in accordance with the provisions of section 10.1
hereof.
"Adjustment Account" in respect of a Quarterly Pool, means the amount of
the Monthly Fees paid or payable to FEP in respect of the period beginning
on the first day of the Quarterly Pool and ending on the Sales Cutoff Date
accrued daily at the Account Rate from the Sales Cutoff Date to the
Anniversary of the Sales Cutoff.
"Adverse Effect" when used alone or in conjunction with other terms means
the occurrence or existence of any act, circumstance, condition, event,
fact, or combination of the foregoing which, in the reasonable judgement
of FEP, creates a significant probability of any material adverse effect
upon (i) the timing or amount of any payment of any Fees; or (ii) the
timely receipt by FEP of any Fees; or (iii) the Manager or any of the
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Funds' ability to pay or perform their obligations under this Agreement in
a timely manner; or (iv) the remedies and other rights of FEP under this
Agreement.
"Advisory Agreements" means the investment management agreements between
each of the Funds and the applicable portfolio manager as described in
Schedule "A" hereto as supplemented or amended from time to time.
"Affiliate" has the meaning provided to that term under the Securities Act
(Ontario).
"Agreement" means this Agreement, as the same may from time to time be
amended, supplemented, waived or modified.
"Anniversary of the Sale Cutoff Date" means, in respect of any particular
Quarterly Pool, the date which is 7 years following the Sale Cutoff Date
in respect of that Quarterly Pool or, in respect of any particular
Quarterly Pool which is subject to a DCA Takeout Transaction, the date
determined by FEP which is 7 years or less following the Sale Cutoff Date
in respect of that Quarterly Pool.
"Base Amount" means, on an annualized basis, in respect of each Quarterly
Pool, .96% for each month in each of the first six years and .92% for each
month in the remaining seventh year, except in respect of securities of
TTBF forming part of such Quarterly Pool for which the base amount shall
be .50% for each month in each of the seven years.
"Business Day" means any day, other than a Saturday, Sunday or any
statutory holiday in the province of Ontario, on which banks are generally
open for business in Xxxxxxx, Xxxxxxx.
"Calculated Percentage" means in respect of any Quarterly Pool in any
month, the Base Amount plus, in the case of all Funds other than TTBF, the
Free Redemption Adjustment provided that the maximum Calculated Percentage
shall be 1.10%.
"Closing" means the completion of the transactions contemplated by this
Agreement, the assignment of the Fees to FEP and the delivery of
additional documentation required by this Agreement.
"Closing Date" means such date as the parties agree is the date upon which
Closing shall take place.
"Closing Time" means 10:00 a.m. on the Closing Date or such other time on
the Closing Date as the parties may agree as the time at which the Closing
shall take place.
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"Collection Account" means a bank account of FEP maintained at
Toronto-Dominion Bank, with respect to which the Manager shall have no
access or control.
"Collections" means (a) all amounts paid or payable under the Program
Documents in respect of the Fees including, without limitation, amounts
payable in respect of Purchase Events, and (b) all proceeds of the
foregoing, except that "Collections" shall not include amounts paid or
payable pursuant to sections 9.1 and 11.9.
"Constating Documents" means collectively the Declarations and/or the
letters patent of the Corporate Fund and the Management Agreements.
"Conversion Feature" means, with respect to a Security, a mandatory or
elective provision (including, without limitation, a provision which
permits or requires such Security to be converted into a Security of a
different class, but excluding the free redemption amount or privilege
offered by a Fund) which may result in a reduction or termination of any
amount owing from any Fund or any securityholder in respect of the Fees
relating to such Security at some time in the future prior to the
redemption thereof.
"Corporate Fund" or "TGF" means Xxxxxxxxx Growth Fund, Ltd.
"DCA Takeout Transaction" shall mean any transaction whereby the economic
value, or any portion thereof, of all fees payable to FEP hereunder shall
be transferred, assigned, sold or removed from the balance sheet of FEP,
to another entity as consideration for payment thereof.
"Declarations" means collectively the declarations of trust for each of
the Trust Funds as supplemented, amended or restated from time to time and
"Declaration" means any one of them.
"Deferred Charge" means, with respect to any Fund, the deferred charge
payable, either directly or by withholding from the proceeds of the
redemption of the Securities of such Fund, by the securityholders of such
Fund on any redemption of Securities of such Fund in accordance with the
applicable Constating Documents and the Prospectus Documents relating to
such Fund.
"Deferred Charge Security" means each Security in respect of which Fund
investors do not pay a sales charge at the time of purchase, but rather
are required to pay a Deferred Charge in certain circumstances.
"Distributed Securities" has the meaning given to that term in section
4.1.
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"Eligible Fee" means a Fee which (a) constitutes an "account" as such term
is defined in the personal property security legislation of all
jurisdictions the laws of which are applicable for determining whether the
interests created by the Program Documents are perfected; (b) (i)
constitutes a legal, valid and binding obligation of the obligor thereof
which is not subject to any dispute, offset, counterclaim or defence
whatsoever (it being understood that the mere fact that a Purchase Event
may occur in the future with respect to any such Fee shall not in itself
cause such Fee to not constitute an Eligible Fee prior to the time such
Purchase Event occurs), and (ii) which is not subject to any adverse
claim; and (c) does not contravene any applicable law.
"Factor" shall mean the number corresponding to the current Quarterly Pool
as set out in Schedule D.
"Fees" means all fees payable to FEP under any Program Document.
"FEP Balance Sheet Carrying Value" means, with respect to a Quarterly Pool
as of any date, the value of all Fees receivable by FEP in respect of such
Quarterly Pool as reflected on the balance sheet of FEP determined in
accordance with GAAP.
"FEP Event of Termination" means each of the following events:
(a) any Fund shall fail to make or cause to be made in the manner and
when due any payment to be made or to be caused to be made by it
under any Program Document and the failure of such payment has an
Adverse Effect;
(b) the Manager or any Fund shall fail to perform or observe any other
material term, covenant or agreement on its part to be performed or
observed under any Program Document;
(c) any representation or warranty made or deemed made by the Manager or
a Fund or any of their respective officers or directors under or in
connection with any Program Document shall have been false,
incorrect or misleading in any material respect when made or deemed
made and which gives rise to an Adverse Effect;
(d) any provision of any Program Document to which the Manager or any
Fund is a party shall cease to be a legal, valid and binding
obligation of any such Person enforceable in accordance with its
terms or any such Person shall so assert in writing;
(e) there shall have occurred an Insolvency Event;
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(f) FRI shall cease to own, directly or indirectly, at least 80% of the
issued and outstanding equity securities of the Manager;
(g) there shall have occurred any change in accounting, governmental or
other legislation, regulation or policy which will have an Adverse
Effect; and
(h) the occurrence of a Purchase Event;
(i) the termination of the joint venture agreement respecting Lightning
among FEP Capital II LLC and TGH Holdings Limited and Lightning
pursuant to section 14 of that agreement.
"Free Redemption Adjustment" means, in respect of all Quarterly Pools in
any particular quarter, the amount calculated by:
(a) multiplying the total dollar value of redemptions, other than
redemptions of TTBF, made without the payment of a Deferred Charge
(other than a redemption where the redemption proceeds are invested
immediately in Distributed Securities of one or more other Funds) in
the previous quarter in respect of the first Quarterly Pool by 4 and
then by the Factor;
(b) adding to the amount determined in (a) above, the additional
separate amounts determined by applying the formula in (a) above to
each of the successive Quarterly Pools in respect of that previous
quarter; and
(c) dividing the sum determined in (b) above by the average daily net
asset value of all Quarterly Pools for that previous quarter.
"free redemption entitlement" has the meaning given to that term in
section 4.4.
"FRI" means Franklin Resources, Inc., the indirect parent company of the
Manager.
"Funds" means collectively the Trust Funds, the Corporate Fund and any
Additional Fund which becomes a party to this Agreement and "Fund" means
any one of them.
"GAAP" means generally accepted accounting principles in Canada (in the
case of the Funds and the Manager) or the United States of America (in the
case of FEP), as in effect from time to time, consistently applied.
"Insolvency Event" means any of the following occurrences:
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(a) the Manager or a Fund shall generally not pay its obligations as
such obligations become due or shall admit in writing its inability
to pay its obligations generally or shall make a general assignment
for the benefit of creditors; or
(b) any proceeding shall be instituted by or against the Manager or a
Fund seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding-up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its obligations or
proposal to its creditors under any laws relating to bankruptcy,
insolvency or reorganization or relief of debtors or seeking the
entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for it or for any
substantial part of its property and, in the case of any such
proceedings instituted against it (but not instituted by it), such
proceedings shall remain undismissed or unstayed for a period of 60
days; or
(c) a court or other governmental authority or agency having
jurisdiction in the premises shall enter a decree or order (i) for
the appointment of a receiver, liquidator, assignee, trustee or
sequestrator (or other similar official) of the Manager or a Fund of
any material part of its property or for the winding up or
liquidation of its affairs and such decree shall remain in force
undischarged and unstayed for a period of 60 days; or (ii) for the
sequestration or attachment of any material part of the property of
the Manager or a Fund without its unconditional return to the
possession of the Manager or a Fund or its unconditional release
from such sequestration or attachment within 60 days thereafter; or
(d) the Manager or a Fund shall take any action to authorize any of the
actions set forth above.
"Joint Venture" means the joint venture between FEP and FRI and/or their
respective Affiliates or associates which may be created for the purposes
of funding the payment of sales commissions in respect of deferred charge
securities sold globally.
"Joint Venture Assumption Date" means, the date that the Joint Venture
assumes the obligations of FEP under this Agreement;
"LIBOR" means, at any date, a rate per annum equal to the rate of interest
per annum at which deposits in Canadian dollars for a period of 30 days
are offered to leading banks in the London interbank market at 11:00 a.m.
(London time) and determined on the basis of the provisions set forth
below:
(a) On the applicable date, FEP will determine the interest rate for
deposits in Canadian dollars for a 30 day period on the British
Bankers' Association Official BBA LIBOR Fixings page on Bloomberg
9
("BBAM") as of 11:00 a.m. (London time) on such date or if such page
on such service ceases to display such information, such other page
as may replace it on that service for the purpose of display of such
information. If such rate does not appear on the BBAM page, then the
rate will be determined in accordance with clause (b) below.
(b) If the BBAM page shall be unavailable, LIBOR shall be determined on
the basis of the rate of interest per annum at which deposits in
Canadian dollars are offered by The Chase Manhattan Bank to leading
banks in London.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien or security interest (statutory or other)
or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever or other charge or
encumbrance, including the retained security title of a conditional vendor
or lessor.
"Management Agreements" means the management and distribution agreements
between each of MBF and FSCF and the Manager, as supplemented or amended
from time to time.
"Manager Event of Termination" means each of the following events:
(a) any change in accounting, governmental or other legislation,
regulation or policy which will materially and adversely affect the
accounting or tax treatment of the distribution arrangement under
the Program Documents to the Manager; and
(b) any failure by FEP to pay the Selling Commissions when due under
this Agreement.
"Manager Report" has the meaning given to that term in section 3.7.
"Master Trust" means any trust or other special purpose entity or Person
to which any interest in any of the Fees relating to any Fund or the right
to receive any Collections with respect thereto has been transferred in
connection with a Takeout Transaction.
"Master Trust Transfer Agreement" means any agreement pursuant to which
any interest in the Fees is transferred to a Master Trust.
"Material Contracts" has the meaning given to that term in section 5.1(p).
"Monthly Fee" has the meaning given to that term in section 4.1.
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"Multiple Material Errors" means errors in the calculation of amounts due
to and adverse to FEP in excess of 5% of any amounts payable, which errors
occur in excess of three times during the term of this Agreement excluding
any and all errors (other than those caused by bad faith or fraud on the
part of the Manager) occurring prior to the first year anniversary date of
this Agreement.
"Net Asset Value" means, with respect to any Fund or any Security, as of
the date any determination thereof is made, the meaning given that term in
the Constating Documents or Program Documents of such Fund.
"Original Charge Securities" has the meaning given that term in the
definition of "Quarterly Pool".
"Person" means any individual, partnership, limited partnership, joint
venture, syndicate, sole proprietorship, company or corporation, with or
without share capital, unincorporated association, trust, trustee,
executor, administrator or other legal personal representative, regulatory
body or governmental agency, authority or entity, however designated or
constituted.
"Permitted Designee" means (a) any Person designated by FEP or any Master
Trust, as the case may be, which may be The Chase Manhattan Bank or
Constellation Financial Management Company, L.L.C. or any Affiliate of the
foregoing, and (b) any other Person designated by FEP or any Master Trust,
as the case may be, (i) which is not actively engaged in the sponsorship
or management of any other mutual fund in Canada, and (ii) which has
agreed to be bound by confidentiality undertakings in substance comparable
to those contained in this Agreement.
"Program Documents" means this Agreement, the Constating Documents, the
TGF Distribution Agreement, the Advisory Agreements, the Prospectus
Documents, the Material Contracts, any Master Trust Transfer Agreement and
the other agreements, documents, certificates and instruments entered into
or delivered in connection herewith and therewith, as the same may from
time to time be amended, supplemented, waived or modified.
"Prospectus Documents" means, with respect to a Fund, the most recent
simplified prospectus and annual information form for such Fund as more
particularly described in Schedule A hereto as amended or supplemented
from time to time.
"Purchase Event" means any of the following events:
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(a) any Fund shall fail to make or cause to be made in the manner and
when due any payment to FEP or deposit required to be made or to be
caused to be made by it under any Program Document and such failure
shall have an Adverse Effect;
(b) the Manager or any Fund shall fail to perform or observe in any
respect any other covenant on its part required to be performed or
observed under any Program Document and such failure shall have an
Adverse Effect;
(c) any representation or warranty made by the Manager or a Fund under
or in connection with any Program Document shall have been false,
incorrect or misleading in any respect when made and such inaccuracy
shall have an Adverse Effect;
(d) there shall have occurred an change in the financial condition of
the Manager which would prevent the Manager from performing its
obligations under this Agreement which has an Adverse Effect; or
(e) if, as a result of any action or inaction by the Manager or a Fund,
any provision of this Agreement ceases to be a legal, valid and
binding obligation of the Manager or a Fund and causes an Adverse
Effect.
"Quarterly Pool" means, in respect of any calendar quarter, (i) each
Deferred Charge Security issued in that quarter for which FEP has arranged
distribution and has paid the Selling Commission ("Original Charge
Security"), (ii) each Deferred Charge Security of a Fund issued upon the
immediate investment of proceeds realized on the redemption of an Original
Charge Security or Transfer Security (as hereinafter defined) or
Reinvested Security (as hereinafter defined) in a Deferred Charge Security
of another Fund ("Transfer Security"), and (iii) each Deferred Charge
Security issued upon the automatic reinvestment of income and capital
gains distributions upon an Original Charge Security, Transfer Security or
another Reinvested Security (as hereinafter defined) or any Security of a
Fund issued upon the immediate reinvestment of proceeds realized on the
redemption of a Reinvested Security in a Security of another Fund (a
"Reinvested Security").
"Reinvested Security" has the meaning given to that term in the definition
of "Quarterly Pool" as modified by section 4.1.
"Sale Cutoff Date" means, with respect to any particular Quarterly Pool,
the last Business Day of the calendar quarter during which FEP arranged
for the distribution of Original Charge Securities forming part of the
Quarterly Pool and paid the Selling Commissions in respect of such
Quarterly Pool.
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"Securities" means collectively the units of the Trust Funds and the
shares of the Corporate Fund and "Security" means any one of them.
"Selling Commission" has the meaning given to that term in section 3.6(b).
"Subscription Price" means with respect to any Deferred Charge Security at
any particular time, the gross purchase price of such Deferred Charge
Security established by the Constating Documents or Program Documents of
the applicable Fund.
"Takeout Transaction" means any transaction including a DCA Takeout
Transaction (excluding any transaction transferring the parties interest
under this Agreement to the Joint Venture) pursuant to which FEP, or any
Master Trust which obtains such interest directly or indirectly from FEP,
sells or otherwise transfers, participates or causes to be sold,
transferred or participated interests in the Fees relating to any Fund
(including, without limitation, the right to receive any portion of any
Collections) to any Person, including a Master Trust which publicly or
privately sells debt instruments and/or certificates or other instruments
representing ownership interests in such Master Trust or interest in any
Fees relating to any Fund (including, without limitation, any right to
receive any portion of any Collections).
"Termination Date" means December 31, 2001, subject to suspension or
termination as set forth in section 3.1, or such later date as shall be
agreed to in writing by the parties hereto, except that the Termination
Date may be deemed to have occurred on an earlier date pursuant to section
8.
"TGF Distribution Agreement" means the distribution agreement between TGF
and the Manager, as supplemented, amended or restated from time to time.
"Transfer Securities" has the meaning given to that term in the definition
of "Quarterly Pool".
"Trust Funds" means, collectively TEMF, TCBF, TISF, TCSF, TGSCF, TGBF,
TTBF, TGBAF, TIBF, TCAAF, MBF, FSCF and TBF, and "Trust Fund" means any
one of them.
"TTBF Account" in respect of a Quarterly Pool, means an amount equal to
the Monthly Fee paid or payable to FEP in respect of Distributed
Securities and Reinvested Securities of TTBF that form part of such
Quarterly Pool accrued daily at the Account Rate from the Sales Cutoff
Date to the Anniversary of the Sales Cutoff Date.
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ARTICLE 2
CLOSING ARRANGEMENTS
2.1 THE CLOSING. The transactions contemplated by this Agreement shall be
completed at the Closing Time at the offices of the counsel to FEP or at such
other location as may be agreed to by the parties.
ARTICLE 3
DISTRIBUTION RIGHTS
3.1 APPOINTMENT OF FEP. Upon and subject to the terms and conditions hereof the
Manager, with the knowledge and consent of each of the Funds as evidenced by
their signatures hereto, hereby grants FEP the right to arrange for the
distribution of Deferred Charge Securities in each of the provinces and
territories of Canada in return for the compensation described in this
Agreement, and FEP hereby accepts such grant. The right of FEP to arrange for
the distribution of Deferred Charge Securities shall commence on trade date
January 12, 1998, or such other date as is mutually agreeable to the parties,
and shall continue until December 31, 2000, subject to suspension and
termination at any time in the circumstances described in this Agreement. Until
terminated in accordance with the terms of this Agreement, FEP's distribution
right is exclusive during the distribution period described above, other than
during a suspension period, during which the Manager may arrange for the
distribution of Deferred Charge Securities through any other Person, including
the Manager. It is acknowledged and agreed by the parties hereto that FEP's
distribution right does not extend to sales of Securities which are not Deferred
Charge Securities and that FEP shall not receive any remuneration of any kind in
respect of such Securities.
3.2 DISTRIBUTION THROUGH REGISTERED DEALERS. FEP will arrange for the
distribution of Deferred Charge Securities only through registered dealers
approved by the Manager, and FEP will not itself directly or indirectly sell any
Securities of the Funds. All Deferred Charge Securities will be sold at a price
equal to the Net Asset Value per Security at the time of purchase, without a
sales charge to investors. The Manager will advise FEP upon the execution hereof
and regularly as required thereafter so long as FEP is entitled hereunder to
arrange for the distribution of Deferred Charge Securities, of the names of all
registered dealers approved by the Manager as dealers through whom the Deferred
Charge Securities may be sold.
The Manager, as transfer agent for the Funds, agrees not to knowingly
accept purchase orders from Persons with respect to the sale of Deferred Charge
Securities in any jurisdiction in which the Deferred Charge Securities are not
registered, qualified for sale or otherwise exempt from the need to qualify for
sale under applicable securities legislation. In respect of these Deferred
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Charge Securities which are unknowingly accepted by the Manager, as transfer
agent for the Funds, such Deferred Charge Securities will be subject to this
Agreement unless the trade in such Securities is subsequently reversed, in which
case such Deferred Charge Securities shall not be subject to this Agreement and
the Manager, as transfer agent for the Funds, will forthwith, following the
trade reversal and out of the proceeds of the trade reversal, refund to FEP the
amount of the Selling Commissions paid by it in respect of such Securities.
3.3 REJECTION OF PURCHASE ORDERS. The Manager may reject purchase orders for
Deferred Charge Securities received from a registered dealer during the term of
this Agreement only in accordance with the terms stated in the Constating
Documents of the Funds and/or the TGF Distribution Agreement.
3.4 REGISTRATION OF PURCHASES. After receipt and acceptance of a purchase order
together with an amount equal to the purchase price for each Deferred Charge
Security purchased, the Manager will promptly forward the purchase order to the
registrar of the appropriate Fund (if the Manager is not itself the registrar of
the Fund) for registration of the purchaser as a holder of a Security or
Securities of that Fund and shall deposit the purchase price to the credit of
that Fund.
3.5 AUTHORITY OF THE MANAGER. The Manager shall have the exclusive right to
approve or disapprove of the registered dealers through which the Deferred
Charge Securities will be distributed, to determine the Funds' distribution and
marketing policies and procedures and, pursuant to section 10.2 of this
Agreement, to suspend or terminate the offering of Securities of one or more of
the Funds at any time.
3.6 SERVICES OF FEP. The primary purpose of this Agreement is to ensure that
satisfactory arrangements exist for the distribution of the Deferred Charge
Securities and to provide a mechanism for the payment of Selling Commissions to
registered dealers who distribute Deferred Charge Securities. Subject to its
rights of termination as provided herein, FEP will provide the following
services to the Manager and the Funds during the period in which FEP has the
right to arrange for distribution of Deferred Charge Securities:
(a) making all necessary arrangements for the distribution of the
Deferred Charge Securities through registered dealers approved by
the Manager;
(b) paying the selling commission (equal to 5% of the Subscription
Price of the Deferred Charge Securities and if any non-Canadian
jurisdiction imposes a withholding on the payment of the selling
commission, the amount of the payment shall be increased by the
amount necessary so that the payment net of withholding tax
equals 5% of the Subscription Price of the Deferred Charge Security)
(the "Selling Commission") due to registered dealers upon receipt
of notice from the Manager of accepted purchase orders for
Original Charge Securities. The parties agree that FEP's
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obligation to pay the Selling Commission in respect of a Deferred
Charge Security shall arise on the trade date, notwithstanding that
FEP is only required to make actual payment of the Selling
Commission in respect of such purchase on the settlement date;
(c) maintaining proper and adequate business records of its operations
in order to properly monitor the Deferred Charge Securities for
which it arranged distribution and the amount of the Selling
Commissions paid;
(d) providing confirmation to the Manager and the Funds when requested
as to the due and timely payment of Selling Commissions; and
(e) providing an annual review of the Funds' operations which shall
include annual redemption analysis, portfolio risk analysis, income
and balance sheet risk analysis together with annual meetings of FEP
clients to exchange distribution, product development and other
related information.
FEP, the Manager and the Funds acknowledge that the Manager shall continue
to arrange for the distribution of Deferred Charge Securities pursuant to the
Constating Documents and the TGF Distribution Agreement, in the case of the
Corporate Fund, and that, except as expressly provided by this Agreement, FEP
shall have no obligation to perform any duties or functions or make any
payments, carried out or made by the Manager under the Constating Documents or
the TGF Distribution Agreement.
3.7 MANAGER REPORT. On or before 10 Business Days after the end of each month,
the Manager shall provide FEP or a Permitted Designee with a report (a "Manager
Report") as of the last day of such month which shall set forth, among other
things, the Manager's determination of (a) the Selling Commissions paid or
payable by FEP in respect of Deferred Charge Securities distributed during such
month, (b) the amount of Fees paid or payable in respect of such month and the
Deferred Charge Securities attributable to such Fees, (c) the computation of the
amount of such Fees in reasonable detail, and (d) the amount of the Adjustment
Accounts and the TTBF Accounts in reasonable detail. The parties agree to use
their commercially reasonable best efforts to finalize as soon as possible and
in any event not later than March 31, 1998 the form of the Manager Report which
is acceptable to both parties.
3.8 MATERIAL ERRORS. If Multiple Material Errors occur, FEP shall provide the
Manager with written notice of such occurrence, following which the Manager
shall have 15 days to cure such errors. In the event all such errors are not
cured within such period, FEP may terminate its obligations to pay Selling
Commissions at any time thereafter upon 60 days prior written notice to the
Manager.
16
ARTICLE 4
PAYMENT AND ASSIGNMENT OF FEES
4.1 MONTHLY FEE. For its services in arranging for the distribution of Deferred
Charge Securities which form a Quarterly Pool, FEP shall receive a monthly fee
(the "Monthly Fee") in each calendar month in respect of each Quarterly Pool
equal to the Calculated Percentage in respect of that Quarterly Pool for that
quarter multiplied by the daily average Net Asset Value of all Distributed and
Reinvested Securities forming part of such Quarterly Pool multiplied by 30 and
divided by 360.
The Monthly Fee will be accrued daily on each Valuation Date (as defined
in the Constating Document of each Fund) of each Fund. The Monthly Fee will be
paid to FEP net of any taxes required to be withheld, at the same time as the
Manager is paid a management fee by a Fund and, in any event, within ten days
after the end of each calendar month.
The Monthly Fee shall continue to be payable to FEP in respect of each
Deferred Charge Security forming part of a Quarterly Pool for the lesser of: (i)
the period that such Deferred Charge Security remains outstanding, and (ii) the
Anniversary of the Sale Cutoff Date, subject to extension pursuant to section
4.8, notwithstanding that FEP's appointment as exclusive distributor has expired
or has been suspended or terminated.
Each Fund and the Manager hereby agrees with FEP that they will not, at
any time while FEP is entitled to receive payment of any fee under this Article,
consent to or agree to a reduction in the management fee payable by any Fund to
the Manager or any alteration in the manner or as to the time of calculation of
such management fee or effect any action, amendment or change of any nature
whatsoever if such reduction, alteration, action, amendment or change could have
the effect of preventing FEP from receiving the full amount of the Monthly Fee
to which it is entitled under this section, or materially adversely affect the
timing of the receipt of such payment.
All Original Charge Securities and Transfer Securities are collectively
referred to in this Agreement as "Distributed Securities". Distributed
Securities and Reinvested Securities shall include any Securities that are
issued upon the consolidation or subdivision of any Distributed Securities or
Reinvested Securities, respectively. For greater certainty, Transfer Securities
and Reinvested Securities shall be deemed to be issued on the same date as the
Original Charge Securities to which they relate. In the case of the TTBF,
Distributed Securities and Reinvested Securities will be deemed to include any
net income (including any net realized capital gains) which has accrued in
respect of such Securities for the purpose of calculating the Monthly Fee
payable pursuant to this section. Distributed Securities of the TTBF Fund will
be deemed to include such accrued amounts for the purpose of calculating any
Deferred Charges as described in this Article 4.
17
4.2 ASSIGNMENT OF MANAGEMENT FEES.
(a) To provide for the payment to FEP of the Monthly Fee payable
pursuant to section 4.1, the Manager hereby:
(i) irrevocably and unconditionally and absolutely assigns to
FEP its right to receive payment from, and all moneys paid
or payable by, each Fund of that portion of the management
fee payable by such Fund to the Manager under the Fund's
Constating Document and the TGF Distribution Agreement (in
the case of TGF) which shall be equal to the Monthly Fee,
for the lesser of: (i) the period that such Distributed
Securities and Reinvested Securities remain outstanding, and
(ii) the Anniversary of the Sale Cutoff Date and, if such
period is extended pursuant to section 4.8, during such
period of extension; and
(ii) irrevocably and unconditionally authorizes and directs each
Fund to pay to FEP that portion of the management fee
payable under that Constating Document and the TGF
Distribution Agreement (in the case of TGF) which has been
assigned to FEP pursuant to subparagraph (i) above (net of
any taxes required to be withheld) at the same time as the
Manager is paid the balance of the management fee by such
Fund pursuant to the applicable Constating Document for the
Fund and the TGF Distribution Agreement (in the case of TGF)
and in any event within ten days after the end of each
calendar month.
(b) Each of the Funds hereby:
(i) consents to and accepts notice of the assignment and
direction pursuant to paragraph (a) above and irrevocably
agrees to make payments to FEP in accordance with the
foregoing assignment and direction without regard to any
equities which may exist or any claims or rights which a
Fund may assert against the Manager or any other Person from
time to time, provided however that any goods and services
tax payable by the Funds in respect of that portion of the
management fee which is paid to FEP shall be paid to the
Manager or remitted directly to Revenue Canada, as
applicable; and
(ii) waives any right of set-off, counterclaim or deduction of
any kind which it may have against the Manager in respect of
that portion of the applicable management fee assigned to
FEP pursuant to paragraph (a) above provided that this
waiver shall not constitute a release of any claim which a
Fund may have against the Manager from time to time.
18
(c) FEP agrees and acknowledges that its only recourse in the event of
non-payment by a Fund of the Monthly Fee shall be against such Fund
and the assets of such Fund and FEP further agrees and acknowledges
that FEP shall have no recourse against the assets of the Manager
for such non-payment of the Monthly Fee.
4.3 [intentionally deleted]
4.4 DEFERRED CHARGES. The Manager and each Fund represents and warrants to FEP
that a Deferred Charge applies to all Distributed Securities of the Fund which
are redeemed within six years of their date of issue, or deemed date of issue,
except (i) on redemptions where the redemption proceeds realized are immediately
invested in Distributed Securities of one or more of the other Funds (excluding
any Distributed Securities redeemed to pay to the investor's dealer a transfer
fee in respect of such transaction); and (ii) on redemptions pursuant to the
free redemption amount privilege described below. The Manager and each Fund
further represents that the Deferred Charge, expressed as a percentage of the
Subscription Price per Distributed Security of the Fund being redeemed, declines
over time from the date of issue, or deemed date of issue, of the Distributed
Security as follows:
If Redeemed During the Following Deferred
Periods After the Date of Charge
ISSUE OR DEEMED DATE OF ISSUE PERCENTAGE
During the 1st year 6.0%
During the 2nd year 5.5%
During the 3rd year 5.0%
During the 4th year 4.5%
During the 5th year 4.0%
During the 6th year 3.0%
Thereafter Nil
An investor in a Fund will be permitted to redeem in each calendar year
without the redemption charge described above, Deferred Charge Securities of a
Fund having a Net Asset Value of up to the aggregate of (i) 10% of the Net Asset
Value as at December 31 of the prior calendar year of Deferred Charge Securities
purchased by such investor in such Fund after February 28, 1993 and before the
current calendar year, plus (ii) 10% of the cost of Deferred Charge Securities
purchased by the investor in such Fund in the then current calendar year (the
"free redemption entitlement"). The free redemption entitlement is not
cumulative and any unexercised entitlement cannot be carried forward to future
years. An investor in a Fund may request that distributions of a Fund's net
income or capital gains be paid to the investor in cash rather than the receipt
of Reinvested Units of that Fund. The amount of any distributions paid in cash
and the value of Reinvested Units of a Fund redeemed by the investor in the
19
calendar year shall be deducted from the investor's free redemption amount. If
an investor transfers all or part of his investment in a Fund to another Fund,
any unexercised free redemption amount attributable to the Deferred Charge
Securities redeemed to effect the transfer will also be transferred on a
proportionate basis.
The Funds and the Manager represent and warrant to FEP that, for the
purpose of calculating the Deferred Charge payable to FEP, Deferred Charge
Securities will be redeemed in the following order:
(a) Reinvested Securities will be redeemed first;
(b) Distributed Securities redeemed pursuant to the free redemption
amount will be redeemed second;
(c) Deferred Charge Securities of a Fund issued first, or deemed to be
issued first, will be redeemed third; and
(d) Where an investor holds both Deferred Charge Securities and
securities of the Funds acquired on a front-load basis, the investor
is required to elect which category of security the investor is
redeeming upon redemption.
Each Fund and the Manager hereby agrees with FEP that they will not, at
any time while FEP is entitled to receive payment of any amount under this
Agreement, consent to or agree to a reduction in the Deferred Charge for
Distributed Securities or any alteration in the manner or as to the time of
calculation of the Deferred Charge or effect any action, amendment or change of
any nature whatsoever if the effect of such reduction, alteration, action,
amendment or change would be to reduce the amounts payable to FEP or materially
adversely affect the timing of the receipt of such amounts payable pursuant to
this Article 4. In the event of the termination of a Fund, FEP shall be entitled
to receive any applicable Deferred Charges in respect of the outstanding
Distributed Securities of that Fund.
4.5 DEFERRED CHARGE PAYMENTS. In addition to the Monthly Fee payable to FEP
pursuant to section 4.1 and in consideration for its services hereunder, FEP
shall also be entitled to receive any Deferred Charge paid by securityholders on
the redemption of their Distributed Securities (net of any taxes required to be
withheld). The Deferred Charges will be calculated and collected by the Manager,
in its capacity as transfer agent for the Funds, on each Valuation Date and will
be payable to FEP monthly within ten days after the end of the calendar month or
in the event of termination of a Fund, immediately prior to the termination of
the Fund. Such amount shall continue to be payable to FEP on the redemption of
each Distributed Security notwithstanding that FEP's appointment as exclusive
distributor been suspended, has expired or has been terminated.
20
4.6 ASSIGNMENT OF DEFERRED CHARGES.
(a) To provide for the payment to FEP of the Deferred Charges payable
pursuant to section 4.5, the Manager hereby:
(i) irrevocably and unconditionally and absolutely assigns to
FEP its right to receive payment from, and all moneys paid
or payable by, each securityholder of Distributed Securities
and Reinvested Securities of that portion of the redemption
proceeds payable to the Manager in respect of the redemption
of such Securities under the Funds' Constating Documents and
TGF Distribution Agreement; and
(ii) irrevocably and unconditionally authorizes and directs each
Fund to pay to FEP that portion of the redemption proceeds
payable under the applicable Constating Document or TGF
Distribution Agreement which has been assigned to FEP
pursuant to subparagraph (i) above (net of any taxes
required to be withheld) at the same time as the Manager is
paid the management fee pursuant to the applicable
Constating Document or TGF Distribution Agreement for the
Fund and in any event within ten days after the calendar
month.
(b) Each of the Funds hereby:
(i) consents to and accepts notice of the assignment and
direction pursuant to paragraph (a) above and irrevocably
agrees to make payments to FEP in accordance with the
foregoing assignment and direction without regard to any
equities which may exist or any claims or rights which a
Fund may assert against the Manager or any other Person from
time to time; and
(ii) waives any right of set-off, counterclaim or deduction of
any kind which it may have against the Manager or any other
Person in respect of the applicable redemption proceeds
assigned to FEP pursuant to paragraph (a) above provided
that this waiver shall not constitute a release of any claim
which a Fund may have against the Manager or any other
Person from time to time.
(c) FEP agrees and acknowledges that its only recourse in the event of
non-payment of the Deferred Charges shall be against the applicable
Fund and the assets of such Fund and FEP further agrees and
acknowledges that FEP shall have no recourse against the assets of
the Manager for such non-payment of the Deferred Charges.
21
4.7 COLLECTION ACCOUNT. The Manager shall cause all Collections payable by each
Fund to be deposited directly by each Fund into the Collection Account without
any intermediate commingling of such amounts with the assets of the Manager or
any Affiliate. No amounts other than the Collections shall be deposited to the
Collection Account.
4.8 CONTINUATION OF MONTHLY FEES. On the Anniversary of the Sale Cutoff Date in
respect of each Quarterly Pool, if the TTBF Account in respect of such Quarterly
Pool is greater than the Adjustment Account in respect of such Quarterly Pool,
then the Monthly Fee payable in respect of such Quarterly Pool shall continue to
be payable to FEP until such date as such Monthly Fees paid to FEP during such
extension period equal the difference in such TTBF Account and such Adjustment
Account as at such Anniversary of the Sale Cutoff Date.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 MANAGER'S AND FUNDS' REPRESENTATIONS AND WARRANTIES. The Manager and each of
the Funds represent and warrant (but only as to itself) to FEP:
(a) ORGANIZATION AND GOOD STANDING - The Manager and each of the Funds
have been duly incorporated or created, as the case may be, are
organized, validly existing and up-to-date in all material filings
and registrations required under the laws of Canada and each
province and territory thereof where such filings or registrations
are necessary for the conduct of its business, and have all
necessary power, authority and capacity to own their respective
properties and assets and to carry on the business in which they are
now engaged.
(b) DISTRIBUTION OF FUND SECURITIES - The Securities of each of the
Funds are offered for sale to the public on a continuous basis in
each of the provinces and territories of Canada pursuant to the
Prospectus Documents. All material information and statements
contained in the Prospectus Documents of each of the Funds are true
and correct and contain no misrepresentation (as defined in the
Securities Act (Ontario)).
(c) COMPLIANCE WITH LAWS - The Manager and each of the Funds are in
compliance in all material respects with all applicable laws,
including but not limited to, applicable securities laws.
(d) LICENSES AND REGISTRATIONS - The Manager and each of the Funds have
received all approvals, licences, registrations and authorizations
necessary for the conduct of their respective businesses as they are
now conducted, all of which are in full force and effect; no
22
violations thereof have been recorded; and no proceeding is pending
or threatened which could result in the revocation or limitation
thereof and neither the Funds nor the Manager is aware of any basis
upon which the same may be revoked.
(e) COMPLIANCE WITH CONSTATING DOCUMENTS - The Manager and, to the best
of the Manager's knowledge after due inquiry, each of the portfolio
managers appointed by the Manager in respect of the portfolios of
each of the Funds have complied with the investment objectives,
policies and restrictions of each of the Funds as provided in their
respective Constating Documents, the Advisory Agreements and the
Prospectus Documents.
(f) CONSENTS AND APPROVALS - There are no consents, approvals, orders
or authorizations of any Person or registrations, declarations,
notices, filings or recordings with any Person required to be
obtained or made by the Manager or any of the Funds in connection
with the transactions contemplated by this Agreement, the execution
and delivery of this Agreement or the performance of any of the
terms and conditions of this Agreement other than the consent of
the board of directors of the Corporate Fund and the Manager, in its
own capacity and in its capacity as the manager of each of the Funds
and the trustee of each of the Trust Funds.
(g) RIGHT TO ASSIGN - The Manager has good and marketable title to the
Fees assigned and transferred to FEP under this Agreement free and
clear of any Lien (other than the rights of FEP under this
Agreement) and has the right to assign such Fees to FEP. Each of the
Fees is an Eligible Fee.
(h) FINANCIAL STATEMENTS - (i) The financial statements of each of the
Funds and the balance sheet of the Manager have been prepared in
accordance with GAAP; and (ii) the financial statements of the
Funds present fairly the financial position and investment
portfolios of each of the Funds as of the respective dates thereof
and the changes in each Fund's net assets for the period covered by
those statements and the treatment of management fees, legal,
audit, custodian, safekeeping fees, interest, operating and
administrative costs payable by each of the Funds.
(i) ABSENCE OF UNDISCLOSED LIABILITIES - Except to the extent reflected
or reserved against in the financial statements of the Funds or
otherwise disclosed herein or except as incurred in the ordinary and
normal course of the business of each of the Funds, none of the
Funds has any outstanding indebtedness or any liabilities or
obligations (whether direct or indirect, current or long-term,
accrued, absolute, contingent or otherwise).
23
(j) TAX MATTERS - None of the Funds is in default in filing any tax
returns or reports required to be filed as of the date of this
Agreement covering any Canadian federal, provincial, municipal
or local taxes, assessments or other imposts in respect of its
respective capital, income, business or property. Each of the
Trust Funds has qualified and continues to qualify as a mutual fund
trust under the Income Tax Act (Canada). The Corporate Fund has
qualified and continues to qualify as a mutual fund corporation
under the Income Tax Act (Canada).
(k) LITIGATION - There is no suit, action, litigation, inquiry,
investigation, arbitration or proceeding, including appeals and
applications to review, in progress or, to the knowledge of the
Manager, threatened or pending against or relating to the Funds or
the Manager or affecting their respective properties or businesses
which might materially adversely affect properties, businesses,
future prospects or financial condition of the Funds or the
Manager or which might prevent or restrict the distribution to the
public of the Securities in each jurisdiction in which the
Securities are qualified for distribution or which may seek to
prevent the consummation of the transactions contemplated by this
Agreement or seek any determination or ruling which may materially
and adversely affect the performance of the Manager or any of the
Funds under the Agreement or could give rise to an Adverse Effect.
There is not presently outstanding against any of the Funds any
judgement, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality
or arbitrator.
(l) ACCURACY OF BOOKS AND RECORDS - The books and records, financial and
otherwise, of each of the Funds and the balance sheet and books and
records of the Manager (only in respect of the Fees) fairly and
correctly set out and disclose in all material respects the
financial position of each of the Funds and the Manager as of the
date of this Agreement and all material transactions (subject to the
qualifications as to the Manager's books and records) have been
accurately recorded in those books and records.
(m) ACCURACY OF INFORMATION PROVIDED - All information provided by or on
behalf of the Manager and the Funds on or prior to the date hereof
to FEP or any agent thereof for purposes of or in connection with
this Agreement or the transactions contemplated by this Agreement
are true, correct and complete in all material respects and no such
information contains any material misrepresentation or material
omission to state therein matters necessary to make the statements
made therein not misleading in any material respect in light of the
circumstances in which were made.
24
(n) DUE AUTHORIZATION, EXECUTION AND DELIVERY - This Agreement has been
duly authorized, executed and delivered by the Manager and each of
the Funds and is a valid and binding obligation of the Manager and
each of the Funds enforceable in accordance with its terms, subject,
however, to limitations with respect to enforcement imposed by law
in connection with bankruptcy or similar proceedings and to the
extent that equitable remedies, such as specific performance and
injunction, are in the discretion of the court from which they are
sought.
(o) ABSENCE OF CONFLICTING AGREEMENTS - Neither the Manager nor any of
the Funds is a party to, bound or affected by or subject to any
indenture, mortgage, lease, agreement, instrument, charter or by-law
provision, statute, regulation order, judgement, decree or law which
would be violated, contravened or breached by or under which any
default would occur as a result of the execution and delivery of
this Agreement or the performance of any of the terms of this
Agreement or which could have an Adverse Effect.
(p) MATERIAL CONTRACTS - Except for the contracts and agreements (the
"Material Contracts") listed in Schedule A, none of the Funds nor
the Manager is a party to or bound by any presently existing oral
or written contracts or a commitment which is material in respect
of this Agreement and the transactions contemplated herein. The
Material Contracts are in compliance in all material respects
with applicable law, are in full force and effect, unamended, and
no material default exists in respect of any of them on the part
of any of the parties and there exists no set of facts which,
after notice or lapse of time or both, would constitute such
material default. Each of the Funds and the Manager has the
capacity to perform all their respective obligations in the
Material Contracts. Each of the Material Contracts has been duly
executed by the signatories thereto and constitutes a valid and
binding obligation of each of such signatories enforceable
against them in accordance with its respective terms, free and
clear of any mortgage, pledge, lien, charge, security interest or
encumbrance or rights of others.
(q) NO SECURITY AGREEMENT - No security agreement, equivalent security
or lien instrument or, to the Manager's or any of the Funds'
knowledge, any financing statement, other than the financing
statements covering all or any part of the fees payable by the Funds
to the Manager or the Fees payable to FEP under this Agreement, has
been entered into or is on file or on record in any jurisdiction,
except such as may be filed, recorded or made or contemplated by
this Agreement or as provided in Schedule B hereto.
(r) PRINCIPAL PLACE OF BUSINESS, NAME - The Manager and the Funds'
principal place of business and chief executive office and the place
where its records are kept is at the address first written above or
25
such other address of which FEP has received notice pursuant to
section 11.7. The full legal name of the Manager and of each Fund
(including any French form, any combined English/French form and any
other form) is set forth on Schedule C.
(s) SECURITY ATTRIBUTES - The Securities of each of the Funds have the
attributes described in the Prospectus Documents and, other than the
ability to transfer and redeem Securities free of any Deferred
Charge as described in the Prospectus Documents, no Security of any
Fund has the benefit of any Conversion Feature.
(t) INSOLVENCY - Since December 31, 1996, there has not occurred a
Insolvency Event with respect to the Manager or any of the Funds.
(u) DEFERRED CHARGES PAYABLE UPON TERMINATION - In the event of a
termination of a Fund, a Deferred Charge as provided in this
Agreement shall be payable in respect of each Distributed Security
of such Fund outstanding for a period of 6 years or less from its
date of issue or deemed date of issue.
(v) INFORMATION CORRECT - All information in respect of the payment of
Selling Commissions relating to each Fund to be set forth in each
Manager Report will be true and correct in all material respects.
5.2 FEP'S REPRESENTATIONS AND WARRANTIES. FEP hereby represents and warrants to
the Manager and each of the Funds that:
(a) ORGANIZATION AND GOOD STANDING - FEP has been duly formed and
organized as a limited partnership under the laws of the State of
Texas and is validly existing, is up-to-date in all material filings
and registrations required under the laws of the United States and
has all necessary power, authority and capacity to own its property
and assets and to carry on the business in which it is now engaged.
(b) RESIDENCE - FEP and all of the partners of FEP are resident in the
United States for purposes of the Internal Revenue Code of 1986 and
the Canada-United States Income Tax Convention, 1980 and are
non-residents of Canada for the purposes of the Income Tax Act
(Canada).
(c) G.S.T. - FEP is not a registrant under the Excise Tax Act (Canada)
for the purposes of the goods and services tax.
(d) DUE AUTHORIZATION, EXECUTION AND DELIVERY - This Agreement has been
duly authorized, executed and delivered by FEP and is a valid and
binding obligation of FEP enforceable in accordance with its terms,
26
subject, however, to limitations with respect to enforcement imposed
by law in connection with bankruptcy or similar proceedings and, to
the extent that equitable remedies such as specific performance and
injunction are in the discretion of the court from which they are
sought.
(e) ABSENCE OF CONFLICTING AGREEMENTS - FEP is not a party to, bound or
affected by or subject to any indenture, mortgage, lease, agreement,
instrument, charter or by-law, provision, statute, regulation,
order, judgement, decree or law which would be violated, contravened
or breached by, or under which any default would occur as a result
of, the execution and delivery by it of this Agreement or the
performance by it of any of the terms of this Agreement.
(f) LITIGATION - There is no suit, action, litigation, inquiry,
investigation, arbitration or proceeding, including appeals and
applications to review in progress, pending or threatened against
or relating to FEP or affecting its property or business which
may materially adversely affect its property, business, future
prospects or financial condition or which could materially
adversely affect the performance or obligations of FEP under, or
the validity or enforceability of this Agreement or which could
give rise to any adverse effect on FEP's ability to pay or
perform any of its material obligations under this Agreement.
(g) FINANCIAL CAPACITY - FEP has the financial capability and resources
to perform its obligations under this Agreement, including the
payment of all Selling Commissions due to registered dealers
pursuant to Article 4 of this Agreement.
5.3 NON-WAIVER. No investigation made by or on behalf of any party at any time
shall have the effect of waiving, diminishing the scope of or otherwise
affecting any representation or warranty made by any other party in or pursuant
to this Agreement. No waiver by any party of any condition, in whole or in part,
shall operate as a waiver of any other condition.
5.4 NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All statements
contained in any certificate or other document delivered by or on behalf of a
party pursuant to or in connection with the transactions contemplated by this
Agreement shall be deemed to be made by that party under this Agreement.
All representations and warranties, covenants and agreements on the part
of each of the parties contained in this Agreement or in any certificate or
other document delivered pursuant to this Agreement shall survive the Closing
and shall survive for the duration of this Agreement.
27
ARTICLE 6
CONDITIONS PRECEDENT
6.1 FEP'S CONDITIONS TO CLOSING. The obligation of FEP to complete the
transactions contemplated by this Agreement shall be subject to the satisfaction
of, or compliance with, at or before the Closing Time, each of the following
conditions precedent (each of which is acknowledged to be inserted for the
exclusive benefit of FEP and may be waived by it in whole or in part by notice
in writing to the Manager):
(a) TRUTH AND ACCURACY OF REPRESENTATIONS AND WARRANTIES OF THE
MANAGER AND THE FUNDS AT CLOSING TIME - All the representations
and warranties of the Manager and the Funds made in or pursuant
to this Agreement shall be true and correct in all material
respects as at the Closing Time and with the same effect as if
made at and as at the Closing Time. FEP shall receive a
certificate from the Manager and each of the Funds confirming the
truth and correctness in all material respects of the
representations and warranties of the Manager and the Funds.
(b) RECEIPT OF CLOSING DOCUMENTATION - All documentation relating to
the assignment of Fees payable to FEP and the transactions
contemplated by this Agreement, including a legal opinion from
counsel to the Manager and the Funds, shall be satisfactory to
FEP and its counsel. FEP shall receive copies of all
documentation or other evidences it may reasonably request in
order to establish the consummation of the transactions
contemplated by this Agreement and the taking of all corporate
proceedings in connection with this Agreement in compliance with
these conditions in form (as to certification and otherwise) and
substance satisfactory to FEP and its counsel.
(c) MATERIAL ADVERSE CHANGE - No material adverse change in the
condition or operations of the business, assets or financial
condition of the Funds or the Manager shall have occurred including
any change in the fundamental investment objective of a Fund, and no
Adverse Effect shall have occurred.
(d) PERFORMANCE OF OBLIGATIONS - The Manager and each of the Funds shall
have performed or complied with, in all respects, all obligations,
covenants and agreements in this Agreement to be performed or
complied with by the Closing Time.
(e) CONSENTS, AUTHORIZATIONS AND REGISTRATIONS - All consents,
approvals, orders and authorizations of any Person in Canada or
elsewhere including, without limitation, the approval of the
board of directors of the Corporate Fund and the Manager, in its
own capacity and in its capacity as the manager, of each of the
28
Funds and trustee of each of the Trust Funds, required in
connection with the completion of any of the transactions
contemplated by this Agreement, the execution of this Agreement,
the Closing or the performance of any of the terms and conditions
of this Agreement shall have been obtained at or before the
Closing Time.
(f) MANAGER AND TRUSTEE OF THE FUNDS - The Manager shall, at the date of
this Agreement and at the Closing Time, be the manager of each of
the Funds and the trustee of each of the Trust Funds.
(g) PPSA SEARCH REPORTS - FEP shall have received certified copies of
search reports under applicable personal property security
legislation dated reasonably near the Closing Date listing all
effective financing statements which name the Manager (under its
respective present name or any previous names) or any Fund as
debtor and which are filed in the jurisdictions in which filings
are required to be made pursuant to section 6.1(i) together with
copies of such financing statements, none of which (other than
those in favour of FEP) will cover any of the Fees due to FEP
under this Agreement.
(h) RELEASE OF EXISTING SECURITY INTERESTS - The Manager shall have
caused FEP to receive duly executed copies of proper discharge
statements, if any, necessary to release all security interests and
other rights of any Person in the Fees due to FEP under this
Agreement.
(i) DULY REGISTERED FINANCING STATEMENTS - FEP shall have received
confirmation of the registration of financing statements under the
personal property security legislation of all jurisdictions FEP may
deem reasonably necessary or desirable in order to perfect its
interest in the Fees payable to it as contemplated by this
Agreement, each of which shall be in form, scope and substance
satisfactory to FEP.
(j) FINANCIAL STATEMENTS - FEP or its Permitted Designee shall have
received copies of the Manager's audited balance sheet as at
September 30, 1997 together with the auditors' report thereon.
(k) EVENT OF TERMINATION - The Manager and the Funds are in compliance
with section 6.2(c).
6.2 FEP'S CONDITIONS TO PAYMENT OF SELLING COMMISSIONS FROM TIME TO TIME. The
obligation of FEP to arrange for the distribution of Deferred Charge Securities
and to pay Selling Commissions under this Agreement from time to time shall be
subject to the satisfaction of, or compliance with, each of the following
conditions precedent (each of which is acknowledged to be inserted for the
29
exclusive benefit of FEP and may be waived by it in whole or in part by notice
in writing to the Manager) at each such time:
(a) TRUTH AND ACCURACY OF REPRESENTATIONS AND WARRANTIES OF THE MANAGER
AND THE FUNDS - The representations and warranties of the Manager
and the Funds made in or pursuant to sections 5.1 (a), (b), (c),
(d), (e), (g), (h), (i), (j), (k), (l), (m), (o), (p), (q), (t) and
(v) shall be true and correct in all material respects as of the
time of arranging for the distribution of Deferred Charge Securities
and payment of such Selling Commissions and with the same effect as
if made at the time of payment of Selling Commissions.
(b) MANAGER AND TRUSTEE OF THE FUNDS - The Manager or an Affiliate of
the Manager shall, at the time of payment of such Selling
Commissions, be the manager of each of the Funds and trustee of each
of the Trust Funds.
(c) EVENT OF TERMINATION - Both immediately before and immediately
after giving effect to the payment of a Selling Commission on
such date by FEP, no FEP Event of Termination (or event which,
with the passage of time or the giving of notice, or both, would
constitute an Event of Termination) in respect of the Manager or
any of the Funds shall have occurred and be continuing provided
that, for purposes of this section, FEP Event of Termination (g)
shall not be deemed to have occurred until the 60 day notice
period provided for in section 8.1 has expired.
(d) DISTRIBUTION RIGHTS - The Manager shall have delivered all Manager's
Reports required to be delivered on or prior to such date pursuant
to this Agreement, which shall be in form and substance reasonably
satisfactory to FEP or its Permitted Designee.
(e) PERFORMANCE OF OBLIGATIONS - The Manager and each of the Funds shall
have performed or complied with, in all material respects, all
obligations, covenants and agreements in this Agreement to be
performed or complied with.
The delivery of the Manager Report from time to time shall constitute a
representation and warranty by the Manager that, on the date of such delivery,
the conditions set forth in section 6.2 have been fulfilled, except as
specifically agreed to in writing by FEP.
6.3 MANAGER AND FUNDS' CONDITIONS. The obligations of the Manager and each of
the Funds to complete the transactions contemplated by this Agreement shall be
subject to the satisfaction of, or compliance with, at or before the Closing
Time, each of the following conditions precedent (each of which is acknowledged
to be inserted for the exclusive benefit of the Manager and the Funds and may be
waived by them in whole or in part by notice in writing to FEP):
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(a) TRUTH AND ACCURACY OF REPRESENTATIONS OF FEP AT CLOSING TIME - All
the representations and warranties of FEP made in or pursuant to
this Agreement shall be true and correct in all material respects as
at the Closing Time with the same effect as if made at and as at the
Closing Time.
(b) PERFORMANCE OF OBLIGATIONS - FEP shall have performed or complied
with, in all material respects, all obligations, covenants and
agreements in this Agreement to be performed or complied with by the
Closing Date.
(c) MATERIAL ADVERSE EFFECT - No material adverse change in the
condition or operation of the business, assets or financial
condition of FEP shall have occurred which would adversely affect
its ability to pay or to perform its obligations under this
Agreement.
(d) CONSENTS, AUTHORIZATIONS AND REGISTRATIONS - All consents,
approvals, orders and authorizations of any Person or government
authority in Canada or elsewhere including, without limitation, the
approval of the board of directors of FEP, required in connection
with the contemplation of any of the transactions contemplated by
this Agreement, the execution of this Agreement, the closing or
performance of any of the terms and conditions of this Agreement
shall have been obtained on or before the Closing Time.
ARTICLE 7
COVENANTS
7.1 COVENANTS OF THE MANAGER AND THE FUNDS. Each of the Manager and the Funds
covenant and agree (but only as to itself) with FEP to the extent applicable
that prior to the termination of this Agreement:
(a) COMPLIANCE WITH MATERIAL CONTRACTS - Each of the Manager and the
Funds, and the Manager shall use commercially reasonable efforts
to cause each portfolio manager of each of the Funds to, duly
comply with all applicable laws in the conduct of their
respective businesses, to maintain and keep in full force and
effect all licences, registrations and authorizations necessary
to conduct their respective businesses and to fulfil all
obligations on its part to be performed under or in connection
with this Agreement, the Advisory Agreements and the Material
Contracts to which it is a party unless the failure to do so
would not have an Adverse Effect.
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(b) TERMINATION OF THE FUNDS - The Manager and each of the Funds shall,
subject to the discharge of their respective fiduciary duties, not
take any action, omit to take any action or initiate any proceeding
which may, indirectly or directly, trigger the termination or
wind-up of a Fund pursuant to any of the Material Contracts if such
termination or wind-up has an Adverse Effect upon FEP.
(c) MAINTENANCE OF BOOKS AND RECORDS - Each of the Manager and the Funds
shall keep proper books and records in accordance with normal
business practice in which full and appropriate entries shall be
made of all transactions in relation to its business activity which
relate in any manner to the transactions contemplated by this
Agreement.
The Manager shall cause its auditors to review the Manager's books
and records relating to the payment of the Selling Commissions and
the calculation of Fees and the Manager shall provide and shall
cause its auditors to provide written affirmation as to the accuracy
of those books and records in respect of the matters relating to the
payment of Selling Commissions and the Fees no later than June 30,
1998 and thereafter within 90 days following the end of the
Manager's fiscal year. The standards relating to the review of such
books and records must be acceptable to the Manager's and FEP's
auditors as complying with Canadian and U.S. generally accepted
accounting standards. The Manager shall pay all reasonable expenses
incurred by FEP in reviewing the Manager's books and records and
such written affirmation.
(d) DISCLOSURE OF MATERIAL CHANGES - Each of the Manager and the
Funds shall promptly give written notice to FEP (i) of any FEP
Event of Termination or event which, with the passage of time or
the giving of notice or both, would constitute an FEP Event of
Termination; (ii) any material litigation or proceedings with
respect to the Manager, any portfolio manager of any of the Funds
or the Funds or any of their respective assets or properties
which, if adversely determined, could give rise to an Adverse
Effect; (iii) the failure of any representation or warranty of
the Manager or any of the Funds contained in this Agreement to be
true and correct in all material respects as of the date given;
or (iv) the failure of any of the Manager or the Funds to perform
any obligation which is required to be performed by it under this
Agreement in any material respect on a timely basis; (v) any
material change in the management or structure of the Funds.
(e) FURTHER INSTRUMENTS AND DOCUMENTS - Each of the Manager and the
Funds shall promptly at its expense execute and deliver to FEP
such further instruments and documents and take such further
action as FEP may from time to time reasonably request in order
to further carry out the intent and purpose of this Agreement and
32
to establish and protect the rights, interests and remedies
created or intended to be created hereby and thereby including,
without limitation, the execution and delivery, recording and
filing of financing statements under the personal property
securities legislation of any applicable jurisdiction, provided
however, that the Manager and the Funds shall not be obligated to
execute and deliver such further instruments and documents if
they would thereby incur any material obligations or liabilities
not contemplated by this Agreement.
(f) RIGHTS OF INSPECTION - Each of the Manager and the Fund shall
permit FEP or any Permitted Designee reasonably acceptable to the
Manager and the Funds to visit and inspect the properties, files,
books and records of the Manager relating to the Fees, this
Agreement, the transactions contemplated hereby and the financial
condition, results of operations, cash flows of the Funds and to
discuss the foregoing with the officers, partners, employees and
accountants of the Manager, all at such reasonable times during
reasonable business hours and as often as FEP may reasonably
request.
(g) MAINTENANCE OF PROSPECTUS - Each of the Funds and the Manager shall
maintain the Prospectus Documents in order to qualify the Securities
of the Funds for sale to the public in full force and effect so that
the Deferred Charge Securities may be offered for sale to the public
in all of the provinces and territories of Canada during the period
in which FEP has the right to arrange for the distribution of
Deferred Charge Securities hereunder.
(h) PRESERVATION OF RELATIONSHIPS - The Manager shall, and shall use
commercially reasonable efforts to, and use commercially
reasonable efforts to cause the portfolio managers for the Funds
to, in each case, consistent with past practice, preserve their
relationships with each Fund, including without limitation, those
arrangements relating to distribution, management, investment
management and administration of the Funds; and not to terminate
or take any action or omit to take any action which would,
indirectly or directly, trigger the termination of a Material
Contract. For greater certainty, the foregoing sentence shall not
prevent the Manager from (i) terminating a Material Contract when
the Manager, acting reasonably, considers such action to be in
the best interests of a Fund or the Funds; or (ii) assigning a
Material Contract to an Affiliate, provided that such assignment
does not result in an Adverse Effect.
(i) DELIVERY OF LENDER NOTICES - The Manager and the Funds shall deliver
to FEP a copy of all notices or waivers of default, delivered by any
lenders to the Funds and of all agreements and amendments entered
into with such lenders.
33
(j) CHANGE TO INVESTMENT OBJECTIVE OF A FUND - In the event, the
investment objective of a Fund is amended and such amendment has a
material impact upon the Fees received by FEP, then the Manager and
such Fund agree to amend the Monthly Fee payable to FEP under this
Agreement in light of such material impact.
(k) PAYMENT OF FUNDS - If the Manager or any designee or agent thereof
shall receive any of the Fees from a Fund, the Manager or such
designee or agent shall hold such Fees in trust for FEP
(acknowledging that such Fees do not constitute property of the
Manager) and immediately following receipt of any such Fees, the
Manager shall, or shall cause such Person to, remit the same to FEP
in the form received and ensure that such amounts are not commingled
with other funds.
(l) PROVISION OF INFORMATION - All information provided by or on
behalf of the Manager or the Funds after the date hereof to FEP
or any Permitted Designee for purposes of or in connection with
this Agreement, or the transactions contemplated hereby, will be
true, correct and complete in all respects material to the Fees
and the transactions contemplated by this Agreement and no such
information will contain any material misrepresentation or
material omission to state therein matters necessary to make
statements therein not misleading in any respect material to the
Fees and the transactions contemplated by this Agreement in light
of the circumstances in which they are made, provided that this
covenant shall apply only to such misrepresentations or omissions
as would give rise to an Adverse Effect.
(m) STATUS OF FEES - Except to the extent expressly permitted by this
Agreement, neither the Manager or the Funds shall permit to exist
any Lien on or attempt to transfer or grant a security interest in
any interest in any Fees.
(n) NOTICE RESPECTING PRINCIPAL OFFICE, NAME - The Manager shall not
move its chief executive office, principal place of business or
the place where it keeps its records concerning the Fees from the
office specified in section 5.1(r) or change its name (including
any French form, any combined English/French form and any other
form) or the name under or by which it conducts its business
unless the Manager shall have given to FEP not less than 15
Business Days' prior written notice of its intention to do so,
and of any new location or new name.
The Manager and the Funds shall not take any action or omit to take
any action that will have an Adverse Effect upon FEP's interest in
the Fees under personal property security legislation and each of
such parties agrees that it will do all such things as are
reasonably necessary to permit FEP to maintain the priority
registration of its financing statements respecting its interest in
the Fees under the personal property security legislation.
34
(o) PROVISION OF BALANCE SHEET - The Manager shall furnish to FEP:
(i) its balance sheet as soon as available and no later than 90
days after the end of its fiscal year. An opinion of the
independent auditors of the Manager will accompany its
balance sheet confirming that such balance sheet has been
prepared in accordance with GAAP and fairly presents the
financial condition;
(ii) as soon as available, and in no event later than 90 days
after the end of each semi-annual period of its fiscal year,
the balance sheet referred to in clause (i) above for the
semi-annual period which shall be prepared in accordance
with GAAP but need not be audited;
(iii)together with each delivery of the balance sheet pursuant
to clause (i) above a certificate signed by any of its
senior financial officers certifying in their official
capacity only and not personally as to the absence of an FEP
Event of Termination as of the date thereof; and
(iv) promptly such other information as FEP may from time to time
reasonably request.
(p) FEE PAYMENT BY A FUND - If at any time after the date of this
Agreement an Insolvency Event occurs, the Manager or an Affiliate
of the Manager is no longer the manager of a Fund or is no longer
the trustee of a Trust Fund, such Fund agrees that from and after
such date such Fund shall continue to be responsible for and
shall continue to pay to FEP the amounts required to be paid to
FEP under this Agreement and such Fund, and the Manager shall use
its best efforts to cause any successor manager, trustee,
receiver-manager or such other Person, as the case may be, to
enter into any necessary agreement to provide for the continuing
provision of the service of FEP and the uninterrupted payment of
the Fees to FEP as provided for in this Agreement.
(q) MAINTENANCE OF FEES - Each Fund and the Manager hereby agrees
with FEP that they will not, at any time while FEP is entitled to
receive payment of any amount hereunder, consent to or agree to a
reduction in the Deferred Charge for Distributed Securities or
any alteration in the manner or as to the time of calculation of
the Deferred Charge or effect any action, amendment or change of
any nature whatsoever if the effect of such reduction,
alteration, action, amendment or change would be to reduce the
amounts payable to FEP or materially adversely affect the timing
of the receipt of such amounts payable pursuant to Article 4.
35
(r) MANAGER AND TRUSTEE OF THE FUNDS - The Manager shall, at the date of
this Agreement and at the Closing Time, be the manager of each of
the Funds and the trustee of each of the Trust Funds.
(s) PAYMENT OF TAXES - Each of the Manager and the Funds shall cause to
be paid and discharged all taxes, assessments and other charges or
levies of any authority imposed upon it or upon any of its income or
assets, prior to the day on which penalties are attached thereto, if
the failure to pay and discharge such tax assessment or other
charges or levies could give rise to an Adverse Effect.
(t) PROTECTION OF FEP'S RIGHTS - Each of the Manager and the Funds shall
use commercially reasonable efforts consistent with past practice to
protect the interests of FEP under this Agreement for so long as FEP
is entitled to any Fees under this Agreement.
(u) CORPORATE RESTRUCTURING - Neither the Manager or any of the Funds
shall (i) sell or otherwise dispose of all or substantially all
of its assets; (ii) consolidate or merge with or enter into any
agreement to do so with another Person; (iii) acquire all or
substantially all the assets of another Person; or (iv) permit a
majority of the interest in the capital distribution or profits
of it to be acquired by any Person; unless, in all cases, the
Manager provides to FEP reasonable written notice consistent with
the disclosure obligations it would have if it were a public
company and provided that (i) immediately after giving effect to
such consolidation, merger, sale, disposition or other
transaction, the corporation or other entity formed by or
surviving any such consolidation, merger or other transaction or
to which such sale or disposition shall have been made, whether
the Manager or the Funds, as the case may be, or such other
entity (the "Surviving Entity") shall not be in default in
performance or observation of any of the terms, covenants and
conditions of any Program Document to be kept or performed by it
or any indebtedness or financing transaction for itself that
would have an Adverse Effect; (ii) the Surviving Entity shall
expressly assume the due and punctual performance and observation
of all covenants and conditions of the Program Documents to be
performed or observed by the predecessor entity, if any, by
agreement reasonably satisfactory in form and substance to FEP;
and (iii) FEP shall have satisfied itself as to the continued
perfection and priority of its security interest in the Fees.
(v) BOARD OF DIRECTORS FOR THE FUNDS - The Manager and each of the Funds
shall provide 60 days' prior written notice to FEP of any proposed
introduction of a board of directors for any of the Funds.
36
(w) CLIENT AND PORTFOLIO REPORTING - The Manager shall provide client
and portfolio reporting to FEP. Client reporting will consist of
the administration package of reports on monthly securityholder
activity derived from the Funds' transfer agent's system.
Portfolio reporting will consist of a monthly balance sheet
(statement of condition) inclusive of price and securities (with
CUSIP numbers) reported to FEP in respect of each Fund
separately. The portfolio reports shall be in substantially the
same form as those currently generated by the Manager's
accountants daily.
7.2 COVENANTS OF FEP. FEP covenants and agrees with each of the Manager and the
Funds to the extent applicable that prior to the termination of this Agreement:
(a) SERVICES RENDERED OUTSIDE CANADA - FEP shall not and shall not
permit any of its employees to render in Canada the services of
arranging for the distribution of Deferred Charge Securities or any
other service for which it receives a fee under the Program
Documents.
(b) PROVISION OF FEP BALANCE SHEET - FEP shall furnish to the Manager:
(i) its balance sheet as soon as available and no later than 90
days after the end of its fiscal year. An opinion of the
independent auditors of FEP will accompany its balance sheet
confirming that such balance sheet has been prepared in
accordance with GAAP and fairly presents the financial
condition;
(ii) as soon as available, and in no event later than 90 days
after the end of each semi-annual period of its fiscal year
prior to the Termination Date, the balance sheet referred to
in clause (i) above for the semi-annual period which shall
be prepared in accordance with GAAP but need not be audited;
(iii)together with each delivery of the balance sheet pursuant
to clause (i) above, a certificate signed by any of its
senior financial officers certifying in their official
capacity only and not personally as to the absence of a
Manager's Event of Termination as of the date thereof.
37
ARTICLE 8
TERMINATION EVENTS AND PURCHASE EVENTS
8.1 FEP TERMINATION EVENTS. The obligation of FEP to arrange for the
distribution of Deferred Charge Securities and to pay the Selling Commissions
pursuant to Article 3.6 may be terminated by FEP if a FEP Event of Termination
shall occur and be continuing. Such termination shall be effected by the giving
of written notice to the Manager giving the Manager 15 Business Days (60 days in
the case of FEP Event of Termination (g)) to cure such breach during which
period FEP shall not have the right to suspend its obligation to arrange for the
distribution of Deferred Charge Securities and to pay Selling Commissions. If
such breach continues uncured, at the expiration of such notice period, FEP may
give a second written notice to the Manager declaring that the Termination Date
has occurred (in which case the Termination Date shall be deemed to have
occurred on the date such second notice is given). The parties agree that in
respect of FEP Event of Termination (g), the parties shall use their respective
commercially reasonable efforts during such 60 day notice period to restructure
the distribution arrangement contemplated by the Program Documents to attempt to
accommodate and facilitate the continued arrangement notwithstanding such
change.
8.2 PURCHASE EVENTS.
(a) If any Purchase Event shall occur and be continuing, FEP may,
without prejudice to any other rights and remedies which FEP may
have under or in connection with this Agreement or any other Program
Document or under applicable law, waive the Purchase Event.
(b) FEP may by written notice to the Manager require that the Manager or
the Funds use their respective commercially reasonable efforts to
cure the Purchase Event within 15 Business Days after receipt of
such notice, and, if the Manager or the Funds do not so cure such
Purchase Event within such cure period, FEP may elect any one of the
following courses of action:
(i) waive the breach;
(ii) xxx the Manager or the Funds for damages; or
(iii)grant the Manager or a Person acceptable to the Manager and
FEP, acting reasonably, the option to purchase FEP's right
to Fees for an amount equal to 110% of the FEP Balance Sheet
Carrying Value as of the expiration of the cure period set
forth above.
(c) Upon receipt of any payment under section 8.2(b) (iii), FEP shall
execute and deliver to the replacement party(s) such instruments
relating to the Fees as the replacement party(s) or its counsel
may reasonably request to convey to the replacement party(s),
without representation or warranty of any kind (other than a
38
warranty that FEP is conveying such interest in the Fees as was
conveyed to it by the Manager free and clear of any Liens), such
interest, if any, as FEP shall then have in the Fees, except that
FEP shall not be obligated to execute and deliver any instrument
if it would, as a result, incur any material obligation or
liability not contemplated by this Agreement. Upon receipt of
such payment, FEP shall not be entitled to indemnification under
section 9.1 other than with respect to Liabilities alleged by a
Person other than the Funds and the Manager.
(d) If the Manager elects not to purchase the Fees and FEP pursues such
remedies as it may have related to the circumstances that gave rise
to such Purchase Event, the parties hereto acknowledge that, due to
the difficulty that FEP may have proving the amount of monetary
damage that it will have suffered or may in the future suffer as a
result of such circumstances, an equitable remedy for such injury
may be appropriate.
8.3 MANAGER SUSPENSION AND TERMINATION RIGHTS.
(a) MANAGER'S TERMINATION RIGHT. Provided that a FEP Event of
Termination has not occurred and is continuing, the right of FEP
to arrange for the distribution of Deferred Charge Securities of
the Funds under this Agreement may be terminated by the Manager
if FEP fails to pay Selling Commissions pursuant to Article 3 and
such failure is continuing. Such termination shall be effective
by the giving of written notice to FEP by the Manager giving FEP
15 Business Days to cure such breach during which period the
Manager shall not have any right to terminate FEP's distribution
right. If such breach continues uncured, at the expiration of
such notice period, the Manager may give a second written notice
to FEP declaring that the Termination Date has occurred (in which
case a Termination Date shall be deemed to have occurred on the
date such second notice is given).
(b) MANAGER'S PURCHASE EVENT. If a Manager Event of Termination shall
occur and be continuing, the Manager or its designee may, with or
without the consent of FEP, upon 60 days' notice, purchase all of
FEP's right, title and interest in and to all the Fees for a
price equal to the FEP Balance Sheet Carrying Value in respect of
each Quarterly Pool. Upon receipt of any such payment, FEP shall
execute and deliver to the Manager or its designee such
instruments relating to the Fees as the Manager or its counsel
may reasonably request to convey to the Manager without
representation or warranty of any kind (other than a warranty
that it owns such interest in the Fees as was conveyed to it by
the Manager free and clear of all Liens), such interest, if any,
as FEP shall then have in the Fees, except that FEP shall not be
obligated to execute and deliver any instrument if it would, as a
result, incur any material obligation or liability not
contemplated by the Program Documents to which it is a party. The
39
parties agree that, in respect of the Manager Event of
Termination (a), the parties shall use their respective
commercially reasonable efforts during such 60 day notice period
to restructure the distribution arrangement contemplated by the
Program Documents to attempt to accommodate and facilitate the
continued arrangement notwithstanding such change.
(c) MANAGER'S SUSPENSION RIGHTS. The Manager may at any time and from
time to time suspend FEP's right to arrange for the distribution of
Deferred Charge Securities, for a maximum period of 12 calendar
months per suspension, provided that, in respect of each suspension:
(i) it provides to FEP not less than 60 days prior written
notice of the suspension; and
(ii) the suspension period may only commence on the first
business day of a calendar month following the expiry of the
notice period;
and provided that in respect of the termination of an existing
suspension period and the recommencement of FEP's distribution right
under the Agreement:
(i) not less than 60 days written notice is provided by the
Manager to FEP prior to the expiry of the applicable
suspension period; and
(ii) following the termination of an existing suspension period,
FEP's distribution right shall be for a minimum of three
months.
The parties acknowledge and agree that FEP shall be entitled to
terminate this Agreement at any time following the end of a 12
calendar month suspension period if the Manager has not provided
written notice to FEP of the Manager's intent to recommence FEP's
distribution right 60 days prior to the end of the suspension
period.
In addition to its rights of suspension as provided above, the
Manager, may, at any time, terminate FEP's right to arrange for the
distribution of Deferred Charge Securities in respect of any future
Quarterly Pool by providing 90 days prior written notice to FEP.
8.4 COSTS AND EXPENSES OF FEP. All costs and expenses incurred by FEP in
connection with the enforcement of this Agreement against the Manager or the
Funds resulting from an FEP Event of Termination or a Purchase Event shall be
paid by the Manager or the Funds forthwith on demand therefor by FEP. The
40
payment obligations of the Manager and the Funds under this section shall be
several.
8.5 COSTS AND EXPENSES OF MANAGER. All costs and expenses incurred by the
Manager in connection with the enforcement of this Agreement against FEP
resulting from a Manager Event of Termination shall be paid by FEP forthwith on
demand therefor by the Manager.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION OF FEP. The Manager and each of the Funds severally agree to
indemnify and hold harmless FEP, each of its partners and each of their
respective Affiliates and their respective officers, directors, employees,
agents and advisers (an "Indemnified Party") from and against any and all
claims, damages, losses, liabilities, expenses, obligations, penalties, actions,
suits, judgements and disbursements or any kind or nature whatsoever (including
without limitation the reasonable fees and disbursements of counsel and expert
witnesses (collectively but without duplication the "Liabilities")) that may be
incurred by, asserted or awarded against any Indemnified Party, in each case
arising out of or relating to or by reason of any one or more of the following:
(a) preparation for, or defence of, any investigation, litigation or
proceeding arising out of or relating to any of the Prospectus
Documents, this Agreement or the transactions contemplated hereby;
(b) any failure or alleged failure by the Manager or a Fund to
perform any of its obligations contained in this Agreement
promptly and fully;
(c) any failure or alleged failure of any representation or warranty
made or deemed made by the Manager or a Fund contained in this
Agreement which has an Adverse Effect;
(d) any failure or alleged failure to provide to FEP good and marketable
title under applicable personal property securities legislation to
the Fees;
(e) the failure of this Agreement or the Program Documents to comply
with law; and
(f) any non-fulfilment of any condition precedent or covenant on the
part of the Manager or any of the Funds under this Agreement whether
before or after the Closing,
41
provided that the Manager and the Funds shall not be required to indemnify any
Indemnified Party in respect of any Liability if and to the extent that such
Liability results from one or more of the following:
(g) the negligence or wilful misconduct of an Indemnified Party or
any other Person for whom an Indemnified Party acts; or
(h) the failure of the Indemnified Party to perform any of its covenants
set forth in this Agreement or any failure of any of the
representations and warranties of the Indemnified Party to be true
and correct.
The parties acknowledge and agree the Manager shall only be responsible pursuant
to this section to the extent of its obligations under the Agreement and its
sole liability under this section shall be limited to any liability resulting
from the Manager's failure to perform its obligations under this Agreement.
9.2 INDEMNIFICATION OF MANAGER AND THE FUNDS. FEP agrees to indemnify and hold
harmless the Manager and the Funds, each of its partners and each of their
respective affiliates and their respective officers, directors, employees,
agents, advisers of any Person controlling any of the foregoing (an "Indemnified
Party") from and against any and all claims, damages, losses, liabilities,
expenses, obligations, penalties, actions, judgements and disbursements of any
kind or nature whatsoever (including without limitation the reasonable fees and
disbursements of counsel and expert witnesses (collectively but without
duplication the "Liabilities")) that may be incurred by, asserted or awarded
against any Indemnified Party, in each case arising out of or relating to or by
reason of any one or more of the following:
(a) failure or alleged failure by FEP to perform any of its
obligations contained in this Agreement promptly and fully;
(b) the imposition of withholding tax under Canadian tax laws on the
payment of Fees to FEP or under U.S. tax laws on the payment of
Selling Commissions or any other payment made by FEP under the
Program Documents;
provided that FEP shall not be required to indemnify any Indemnified Party in
respect of any Liability if and to the extent that such Liability resulted from
one of the following:
(c) the negligence or wilful misconduct of an Indemnified Party or any
other Person for whom an Indemnified Party acts other than any
negligence or wilful misconduct relating to the failure to withhold
or remit tax under Canadian tax laws; or
42
(d) the failure of the Indemnified Party to perform any of its covenants
set forth in this Agreement or any failure of any of the
representations and warranties of the Indemnified Party to be true
and correct.
ARTICLE 10
ADDITIONAL FUNDS
10.1 ADDITIONAL FUNDS.
(a) The Manager shall add Additional Funds to the Funds in respect of
which FEP's distribution right extends. The Manager shall cause
each Additional Fund to become a party to this Agreement as fully
and effectually as if it had been an original signatory hereto.
Each of the remaining parties hereto shall execute and deliver
such amendments to this Agreement as shall be necessary to give
effect to this section. Subject to compliance with the foregoing,
each such Additional Fund shall be deemed to be a "Fund" within
the meaning hereof and the mutual fund securities of such
Additional Funds which are sold on a deferred-charge basis shall
be deemed to be "Deferred Charge Securities" within the meaning
hereof and the terms and conditions of this Agreement shall be
applicable to such Additional Funds.
The Manager agrees not to permit any Distributed Security to become
a Transfer Security of an Additional Fund, until such Additional
Fund becomes a party to this Agreement.
(b) The Manager may add to the Funds in respect of which FEP's
distribution right extends, any open-end mutual fund, the
management and distribution rights of which are acquired from a
third party from time to time. The Manager shall add such
open-end fund to FEP's distribution right if the Manager provides
for an exchange privilege to investors allowing the transfer from
such open-end funds to the Funds. If the Manager elects or is
required to add such open-end fund to FEP's distribution right,
such Fund shall be considered an Additional Fund and shall be
treated and subject to the conditions noted above in paragraph
(a).
(c) The Manager may add to the Funds in respect of which FEP's
distribution right extends, any closed-end fund created or
reorganized by the Manager if FEP and the Manager agree as to an
appropriate fee structure in respect of such Fund. If an agreement
as to an appropriate fee structure is reached, such Fund shall be
43
considered an "Additional Fund" and shall be treated and subject to
the conditions noted above in paragraph (a).
(d) The Manager shall provide notice to FEP of any Additional Fund on or
about the time when the Manager files the preliminary prospectus for
the Additional Fund.
10.2 CHANGE IN MARKET CONDITIONS. During any period or periods when, in the
reasonable opinion of the Manager, the state of the financial markets becomes
such that it would be impracticable or unprofitable to offer or to continue to
offer the Deferred Charge Securities for sale to the public, or if any event has
occurred or situation developed which renders it inexpedient or unprofitable to
offer or to continue to offer the Deferred Charge Securities for sale to the
public, the Funds and the Manager shall be under no obligation to offer or to
continue to offer the Deferred Charge Securities for sale to the public. Any
such discontinuation in the offering of Deferred Charge Securities will not have
any effect on the obligation of the Manager and the Funds to pay FEP the
remuneration to which it is entitled under Article 4 or to continue to qualify
outstanding Distributed Securities under applicable securities legislation, to
the extent necessary to give effect to the provisions of this Agreement.
ARTICLE 11
GENERAL
11.1 AMENDMENT OF AGREEMENT. This Agreement may be amended from time to time
only by written consent of the Funds, the Manager and FEP.
11.2 TERMINATION OF FEP AS EXCLUSIVE DISTRIBUTOR. If FEP is unable to carry out
its obligations hereunder (which may occur if FEP is unable to pay Selling
Commissions for all of the Original Charge Securities sold during the period of
its appointment as distributor under this Agreement), the Manager may terminate
FEP's exclusive right to arrange for distribution of Deferred Charge Securities
and may: (i) pay Selling Commissions directly; (ii) enter into agreements with
other parties to pay Selling Commissions; or (iii) limit, by allotment or
otherwise, sales of Deferred Charge Securities.
11.3 RESIGNATION BY FEP. FEP may resign as distributor on not less than 365
days' prior notice to the Funds and the Manager provided such notice may not be
provided prior to the date which is six months from the date of this Agreement.
In such event, FEP shall thereafter have no entitlement to arrange for the
distribution of Deferred Charge Securities but shall be entitled to continue to
receive payment of the Fees payable pursuant to Article 4.
44
11.4 ASSIGNMENT
(a) This Agreement shall be binding upon, and inure to the benefit
of, the parties hereto and their respective permitted successors
and permitted assigns; provided, however, that, except as
permitted under paragraph 11.4(c), section 7.1(u) or to an
Affiliate of the Manager, the Manager may not assign its rights
or obligations hereunder or in connection herewith or any
interest herein or under any other Program Document or with
respect to any Fees or the proceeds thereof without FEP's prior
written consent, such consent not to be unreasonably withheld;
and provided further that, except as provided in sections 11.4(b)
and 11.4(c), FEP shall not assign its rights or obligations
hereunder or under any other Program Document or in respect of
any Fees or the proceeds thereof, without the prior written
consent of the Manager, such consent not to be unreasonably
withheld.
(b) The rights and obligations of FEP under this Agreement shall be
assignable in connection with any merger, consolidation or sale
or disposition of all or substantially all of the assets of or
the general and limited partnership or corporate interests in FEP
with or to another entity, provided that the surviving entity
shall (i) be a corporation or other entity organized under the
laws of any country in Europe, the United States of America or
any State thereof or of Canada or any province thereof, (ii)
expressly assume the due and punctual performance and observance
of all covenants and conditions of this Agreement and all other
Program Documents to be performed or observed by FEP, by
agreement reasonably satisfactory in form and substance to the
Manager and (iii) prior to the Termination Date, have a net worth
prior to the Termination Date at least equal to that of FEP, and
access to funding sources for purposes of making payments of
Selling Commissions hereunder equivalent in an amount to those to
which FEP had access, immediately prior to such merger,
consolidation or sale or disposition of assets or interests. FEP
shall have the right, subject to section 11.4(d) and (e), to
assign to any Person, as a part of and in connection with a
Takeout Transaction, its right, title and interest in the Fees
and the proceeds thereof; provided that FEP shall not assign to
any Person any other right, title or interest of FEP hereunder or
under any other Program Document (including, without limitation,
the benefit of the representations and warranties of, or
indemnification agreed to, by the Manager contained in this
Agreement or any other Program Document). Notwithstanding the
foregoing, FEP may (i) pledge all of its rights under this
Agreement or any other Program Document to a major financial
institution as security for money borrowed, or (ii) make
representations or warranties and grant indemnities to another
Person, as a part of and in connection with a Takeout
Transaction, which are similar to the representations, warranties
and indemnities agreed to by the Manager in this Agreement or any
other Program Document.
45
(c) The parties agree and consent to the assignment of their respective
rights and obligations under this Agreement to the Joint Venture.
(d) In the event that a Takeout Transaction is proposed which would
involve the offering by prospectus of securities in Canada then:
(i) FEP shall give the Manager notice of such proposed Takeout
Transaction;
(ii) the Manager shall then have 30 days from the receipt of such
notice to give FEP notice of the intent of the Manager or
one of its Affiliates to file a preliminary prospectus
within 30 days of the date of the Manager's notice with
respect to an offering relating to the funding of the
payment of Selling Commissions in respect of Deferred Charge
Securities;
(iii)if the Manager does not give notice within the 30 day
period described in (ii) above, or if the Manager or its
Affiliate does not file a preliminary prospectus within 30
days of giving its notice, then the proposed Takeout
Transaction may proceed;
(iv) in any other case, the proposed Takeout Transaction will not
proceed until the earlier of: (A) the first closing of the
offering described in (ii) above, and (B) 12 months from the
date of the Manager's notice.
(e) FEP shall not have the right to assign any of its rights under this
Agreement to any of the top five mutual fund management companies in
Canada and the U.S., as measured by the net asset value of funds
under management published as at the end of each calendar year by
the Investment Funds Institute of Canada and the Investment
Companies Institute, as applicable. This exclusion shall not apply
to Affiliates or associates of such fund companies that are not
involved in the management and distribution of retail investment
funds.
11.5 LIABILITY. FEP shall not be liable for any error of judgment or for any
loss suffered by any Fund or the Manager in connection with the matters to which
this Agreement relates, except a loss resulting from misfeasance, bad faith or
negligence on its part in the performance of, or reckless disregard by it of,
its obligations hereunder.
11.6 CONFIDENTIALITY. Unless otherwise required by applicable law, the Manager,
the Funds and FEP agree to maintain the confidentiality of this Agreement (and
all drafts thereof), the transactions contemplated hereby and all confidential,
material, non-public information concerning the other parties to this Agreement,
which information has been provided by such party by another party and was not
also available to such party through other means (collectively, "Confidential
46
Information"); provided that nothing in this section shall prohibit disclosure
of Confidential Information by any such Person as follows:
(a) pursuant to an order under applicable law or pursuant to a
subpoena or other legal process;
(b) to the officers, directors, partners, employees, legal counsel or
auditors of, or lenders to, such Person, who shall also be
instructed to maintain it as confidential;
(c) in the case of any Fund, to any then current directors or trustees
of such Fund, Fund counsel, independent accountants or officers, who
shall also be instructed to maintain it as confidential;
(d) to any permitted assignee or permitted pledgee of all or any portion
of such Person's right, title or interest in this Agreement or the
Fees, provided that such permitted assignee or pledgee agrees in
writing delivered to and for the benefit of all parties to this
Agreement to be bound by the terms of this section; or
(e) to any proposed permitted assignee or permitted pledgee of all or
any portion of such Person's right, title and interest in this
Agreement or the Fees, provided that such Person advises such
proposed permitted assignee or pledgee in writing that such
Confidential Information is confidential, non-public information
and requests that such proposed permitted assignee or pledgee
keep it confidential and use it only for purposes of evaluating
the proposed assignment or pledge and such proposed permitted
assignee or pledgee agrees in a writing delivered to and for the
benefit of all parties to this Agreement to be bound by the
provisions of this section and provided, further that FEP shall
not disclose such Confidential Information to any assignee or
pledgee pursuant to clause (d) above or this clause (e) which is
or is an affiliate of an investment adviser, principal
underwriter, administrator or subadvisor to any registered,
open-end management investment company.
Notwithstanding anything to the contrary contained herein, FEP shall keep,
and shall use its commercially reasonable efforts to cause its officers,
directors, partners, employees, advisers, legal counsel, auditors, lenders and
affiliates to keep, confidential all Confidential Information concerning the
Funds delivered or made available by the Manager or the Funds to FEP or such
other Persons, including without limitation the Fund Documents (to the extent
not publicly available), shareholder records, shareholder transaction records
and information concerning the composition of their respective portfolios, and
information concerning the financial condition of the Manager of its parent (and
FEP shall not, and shall cause each of the foregoing other Persons not to, use
such information to sell securities to or purchase securities from any such Fund
47
or other investment company or recommend such trading to any other Person on the
basis of such information).
11.7 NOTICE. Any notice which is required or permitted to be given under this
Agreement may be given in writing by delivery in person or by ordinary prepaid
mail by addressing the same to the party to whom it is to be given at the
address first written above or at such other address as such party may designate
by notice in the foregoing manner. Any notice so given shall be deemed to have
been given on the day it is personally delivered or on the day which is five
days after it is mailed, as the case may be.
11.8 DISPUTE RESOLUTION. Any dispute relating to the Program Documents,
including the method or the calculation of the payments, shall be negotiated in
good faith by the parties. If any dispute cannot be resolved, any party may give
written notice to the other parties that the arbitration proceedings described
below shall apply to all or a specified part of the issues in dispute.
Upon receipt of the notice referred to in the preceding paragraph, the
parties shall attempt to agree on an arbitrator and, if they are unable to agree
within 10 Business Days, FEP shall name an arbitrator who is a partner of
PricewaterhouseCoopers or such other accounting firm retained by the Manager, or
who is a partner of any nationally recognized accounting firm in Canada agreed
to by the Manager. The arbitrator shall be given access to all materials and
information reasonably requested by him for such purpose. The rules and
procedures to be followed in the arbitration proceedings shall be determined by
the arbitrator in his discretion. To the extent not inconsistent with this
Agreement, the arbitration shall be governed by the International Commercial
Arbitrations Act (Ontario). The arbitrator's determination of all matters in
dispute shall be final and binding on all parties and shall not be subject to
appeal by any party. The fees and expenses of the arbitrator shall be determined
by the arbitrator.
Any amount determined to be payable by one party to another shall be
payable with interest calculated at an annual rate on interest reported by Chase
Bank Canada as its "prime rate", for the period commencing from the date such
payment was originally due to the date payment actually is made.
11.9 TAXES. The Manager or the Funds, as applicable, shall pay any present or
future sales or excise taxes, excluding FEP's income taxes, imposed under
Canadian legislation upon the supply of services by FEP under this Agreement
(hereinafter referred to as "Sales Taxes"). In addition, the Manager or the
Funds, as applicable, shall pay any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies which arise
under Canadian legislation from any payment made by or on behalf of the Funds,
hereunder or from the execution or delivery of, or otherwise with respect to,
this Agreement or any other Program Document to which the Manager, the Funds or
any of their respective Affiliates is a party (hereinafter referred to as "Other
Taxes"). FEP shall be entitled to indemnification under section 9.1 for the full
48
amount of Sales Taxes or Other Taxes (including, without limitation, any Sales
Taxes or Other Taxes imposed by any Canadian jurisdiction on amounts payable
under this section 11.9) paid by the Manager or the Funds and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Sales Taxes or Other Taxes were correctly or
legally asserted.
11.10 SEPARATE LIABILITY OF FUNDS. The liability and obligations of each Fund to
the Manager and FEP hereunder shall be separate and distinct from the liability
and obligations of each of the other Funds with the result that no Fund shall be
liable or responsible for the action or inaction of any other Fund.
Notwithstanding the foregoing and notwithstanding that the Manager may cease to
be the manager of any Fund, each of the Funds agrees that it shall provide to
FEP and the Manager such information as may be required from time to time to
determine the amount of the Fees payable pursuant to Article 4.
11.11 HEADINGS. In this Agreement, the headings are for convenience of reference
only, do not form a part of this Agreement and are not to be considered in the
interpretation of this Agreement. References to Articles, sections, paragraphs,
subparagraphs and clauses are to Articles, sections, paragraphs, subparagraphs
and clauses of this Agreement.
11.12 GENDER AND NUMBER. In this Agreement, words importing the masculine gender
include the feminine and neuter genders, words importing persons include all
Persons, and words in the singular include the plural, and vice versa, wherever
the context requires.
11.13 SEVERABILITY. Every provision of this Agreement is intended to be
severable. If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality shall not affect the validity of the remainder of
this Agreement.
11.14 FURTHER ACTS. The parties hereto agree to execute and deliver any such
further and other documents and perform and cause to be performed such further
and other acts and things as may be necessary or desirable in order to give full
effect to this Agreement and every part thereof. Without limiting the generality
of the foregoing, each of the Funds agrees that it will provide to the other
Funds, the Manager and FEP such information as to date of issue and issue price
of its Deferred Charge Securities and such other information as shall be
required to facilitate the calculating of any amounts which are payable
hereunder.
11.15 CURRENCY. All dollar amounts referred to in this Agreement or required to
be paid hereunder, are in Canadian funds.
11.16 INTEREST RATE EQUIVALENCE. For the purposes of the Interest Act (Canada),
where in this Agreement a rate of interest is to be calculated on the basis of a
year of 360 or 365 days, the yearly rate of interest to which the said rate is
equivalent is the said rate multiplied by the number of days in the calendar
49
year commencing on the first day of the period for which such calculation is
made and divided by 360 or 365 (as applicable).
11.17 COUNTERPARTS, FACSIMILE EXECUTION. This Agreement may be executed in
several counterparts, each of which when so executed shall be deemed to be an
original and such counterparts together shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart. This Agreement may be executed and delivered by facsimile and will
be considered duly executed and delivered by the parties so executing delivery
on the day of its transmission by facsimile in executed form to the other
parties. A party so executing by way of facsimile shall promptly deliver to each
other party an originally signed counterpart.
11.18 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among
the parties pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and the parties.
11.19 APPLICABLE LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein and the courts of the Province of Ontario shall have
exclusive jurisdiction with respect to this Agreement.
11.20 ENUREMENT. This Agreement is binding upon and enures to the benefit of the
parties hereto and their respective successors and permitted assigns.
The remainder of this page has been left blank intentionally.
IN WITNESS WHEREOF the parties have duly executed this Agreement.
XXXXXXXXX EMERGING MARKETS FUND, TEMPLETON CANADIAN BOND FUND,
XXXXXXXXX INTERNATIONAL STOCK FUND, TEMPLETON CANADIAN STOCK
FUND, XXXXXXXXX GLOBAL SMALLER COMPANIES FUND, TEMPLETON
GLOBAL BOND FUND, TEMPLETON TREASURY XXXX FUND, XXXXXXXXX
GLOBAL BALANCED FUND, XXXXXXXXX INTERNATIONAL BALANCED FUND,
TEMPLETON CANADIAN ASSET ALLOCATION FUND, MUTUAL BEACON FUND,
FRANKLIN U.S. SMALL CAP GROWTH FUND AND XXXXXXXXX BALANCED
FUND, by its manager and trustee, Xxxxxxxxx Management Limited
Per: /s/ Xxxxxxx Xxxxx
-----------------
Vice-President and General Counsel
/s/ Xxxxx Xxxx
Vice President and Chief Financial Officer
XXXXXXXXX GROWTH FUND, LTD.
Per: /s/ Xxxxxxx Xxxxx
-----------------
Assistant Secretary
/s/ Xxxxx Xxxx
Treasurer
XXXXXXXXX MANAGEMENT LIMITED
Per: /s/ Xxxxxxx Xxxxx
-----------------
Vice-President and General Counsel
/s/ Xxxxx Xxxx
Vice President and Chief Financial Officer
FEP Capital, L.P.
By: FEP Holdings, L.P.,
its General Partner
By: FEP Genpar, L.P.,
General Partner of
FEP Holdings, L.P.
By: FW Group Genpar, Inc.
General Partner of
FEP Genpar, L.P.
By: /s/ Xxxxx X. Xxxxx
------------------
Xxxxx X. Xxxxx
President of FW Group
Genpar, Inc.
