FINANCIAL WARRANTY AGREEMENT
among
XXXXXXXXXXX PRINCIPAL PROTECTED TRUST II
on behalf of its series, Xxxxxxxxxxx Principal Protected Main Street Fund II
OPPENHEIMERFUNDS, INC.,
as investment adviser
and
MAIN PLACE FUNDING, LLC,
as warranty provider
Dated as of October 31, 2003
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS...................................................1
Section 1.1. General Definitions.................................. 1
Section 1.2. Generic Terms.................................. 10
ARTICLE II AMOUNT AND TERMS OF THE FINANCIAL WARRANTY...................10
Section 2.1. The Financial Warranty........................ 10
Section 2.2. Procedure for Issuance and cancellation of remaining
Financial Warranty Limit.............................. 10
Section 2.3. Conditions Precedent to Effectiveness....................10
Section 2.4. Fnancial Warranty Fee....................................13
Section 2.5. Aggregate Shortfall Amount; Adjustment to Protected Amount
Per Share............................................. 13
Section 2.6. Certain Defined Terms....................................14
ARTICLE III MANAGEMENT OF THE FUND.......................................15
Section 3.1. General................................................. 15
Section 3.2. Restrictions on Investments..............................15
Section 3.3. Allocation and Reallocation of Fund's Assets.............17
Section 3.4. Reports; Access to Information...........................19
Section 3.5. Intent...................................................19
ARTICLE IV TRIGGER EVENTS...............................................20
Section 4.1. Trigger Events...........................................20
Section 4.2. Defeasance Portfolio.....................................23
ARTICLE V INDEMNIFICATION..............................................24
Section 5.1. Survival.................................................24
Section 5.2. Indemnification........................................ 24
Section 5.3. Indemnification Procedure ............................. 25
ARTICLE VI REPRESENTATIONS AND WARRANTIES...............................26
Section 6.1. Representations and Warranties of the Adviser......... 26
Section 6.2. Representations and Warranties of the Trust on behalf of
the Fund............................................. 28
Section 6.3. Representations and Warranties of the Warranty Provider 29
ARTICLE VII COVENANTS....................................................30
Section 7.1. Covenants of the Adviser.................................30
Section 7.2. Covenants of the Trust on behalf of the Fund.............32
Section 7.3. Covenants of the Warranty Provider.......................34
ARTICLE VIII FURTHER AGREEMENTS...........................................34
Section 8.1. Obligations Absolute.....................................34
Section 8.2. Participations and Assignments...........................35
Section 8.3. Fund Liability...........................................35
Section 8.4. Limitation of Liability of the Warranty Provider.........35
Section 8.5. Adviser Liability for Actions of Subadviser..............35
Section 8.6. Auditor's Consents.......................................35
Section 8.7. Alternative Delivery.....................................35
ARTICLE IX CONFIDENTIALITY..............................................36
Section 9.1. Confidentiality Obligations of the Warranty Provider 36
Section 9.2. Trading Information and Other Information................36
Section 9.3. Confidentiality Obligations of the Adviser and the Fund 37
Section 9.4. Copies of Fund Confidential Information..................37
ARTICLE X TERMINATION..................................................37
Section 10.1. Termination.............................................37
ARTICLE XI MISCELLANEOUS................................................38
Section 11.1. Amendments and Waivers..................................38
Section 11.2. Notices............................................... 39
Section 11.3. No Waiver, Remedies and Severability.................. 40
Section 11.4. Payments.............................................. 40
Section 11.5. Governing Law...........................................41
Section 11.6. Submission to Jurisdiction, Waiver of Jury Trial........41
Section 11.7. Counterparts........................................ 41
Section 11.8. Paragraph Headings......................................41
Section 11.9. Reliance on Information.................................41
Section 11.10. Time of the Essence....................................41
Section 11.11. No Third-Party Rights..................................42
Section 11.12. Further Assurances ....................................42
Section 11.13. Entire Agreement.......................................42
Section 11.14. Disclosure of Shareholder Liability....................42
Exhibit A...........................................Form of Financial Warranty
Exhibit B........................Form of Bank of America Corporation Guarantee
Schedule 1................................................Form of Daily Report
Schedule 2...........................................Cushion/Volatility Matrix
Annex A-1..............................Form of opinion of Xxxxxx X. Xxxx, Esq.
Annex A-2....................Form of opinion of Xxxxx Xxxxx Xxxx & Maw LLP
Annex A-3.......................................Form of opinion of Dechert LLP
Annex B.........................Form of opinion of Xxxxxxxx & Xxxxxxxx LLP
FINANCIAL WARRANTY AGREEMENT
FINANCIAL WARRANTY AGREEMENT, dated as of October 31, 2003 (the
"Agreement"), among XXXXXXXXXXX PRINCIPAL PROTECTED TRUST II, an open-end
management investment company organized as a business trust under the laws of
the Commonwealth of Massachusetts (the "Trust"), on behalf of its series
XXXXXXXXXXX PRINCIPAL PROTECTED MAIN STREET FUND II (the "Fund"),
OPPENHEIMERFUNDS, INC., a corporation organized under the laws of the State
of Colorado (the "Adviser"), and MAIN PLACE FUNDING, LLC (the "Warranty
Provider"), a limited liability company formed under the laws of the State of
Delaware and an indirect, wholly-owned subsidiary of Bank of America
Corporation.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Trust is an open-end, diversified, management investment
company registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act");
WHEREAS, the Trust on behalf of the Fund has requested the Warranty
Provider, and the Warranty Provider has agreed, subject to the terms and
conditions herein, to issue a financial warranty in substantially the form of
Exhibit A (such financial warranty being the "Financial Warranty") in the
amount of up to $500 million in order to ensure that the Fund is able to
redeem all of its outstanding shares on the Maturity Date (as defined herein)
for an amount equal to the Aggregate Protected Amount;
WHEREAS, Bank of America Corporation has agreed to guarantee the
obligations of the Warranty Provider under the Financial Warranty subject to
the terms and conditions set forth in this Agreement pursuant to a guarantee
in substantially the form of Exhibit B (the "BAC Guaranty"); and
WHEREAS, the parties hereto, among other things, desire to specify the
conditions precedent to the issuance by the Warranty Provider of the
Financial Warranty and the drawdown of the Aggregate Shortfall Amount (as
defined herein), the payment of the Financial Warranty Fee (as defined
herein) in respect of the Financial Warranty, and to provide for certain
other matters related thereto.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I.
DEFINITIONS
-----------
Section 1.1. GENERAL DEFINITIONS. The terms defined in this Article I
shall have the meanings provided herein for all purposes of this Agreement,
in both singular and plural form, as appropriate.
"Act of Insolvency" means, with respect to any party, (i) the
commencement by such party as debtor of any case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar
law, or such party seeking the appointment of a receiver, trustee, custodian
or similar official for such party or any substantial part of its property;
(ii) the appointment of a receiver, conservator, or manager for such party by
any government agency or authority having the jurisdiction to do so;
(iii) the commencement of any case or proceeding referred to in (i) above
against such party, which (a) is consented to or not timely contested by such
party, (b) results in the entry of an order for relief, such an appointment,
the issuance of such a protective decree or the entry of an order having a
similar effect, or (c) is not dismissed within 72 hours; (iv) the making or
offering by such party of a composition with its creditors or a general
assignment for the benefit of creditors; (v) the admission by such party of
such party's inability to pay its debts or discharge its obligations as they
become due or mature; or (vi) any governmental authority or agency or any
person, agency or entity acting under governmental authority shall have taken
any action to condemn, seize or appropriate, or to assume custody or control
of, all or any substantial part of the property of such party.
"Acts" means the Investment Company Act and the Securities Act.
"Adjusted Discount Factor" has the meaning provided in Section 3.3(a).
"Adverse Effect" means, (i) in respect of the Adviser, a material
adverse effect upon (a) the ability of the Adviser to perform its obligations
under this Agreement or any other Transaction Document to which it is a
party, or (b) the rights of the Warranty Provider under the Transaction
Documents, (ii) in respect of the Trust or the Fund, a material adverse
effect upon (a) the ability of the Trust or the Fund to perform its
obligations under this Agreement or any other Transaction Document to which
it is a party or (b) the rights of the Warranty Provider under the
Transaction Documents and (iii) in respect of the Warranty Provider, a
material adverse effect upon the ability of the Warranty Provider to perform
its obligations under this Agreement or any other Transaction Document to
which it is a party or a material adverse affect upon the ability of Bank of
America Corporation to perform its obligations under the BAC Guaranty. An
adverse effect on the binding nature, validity or enforceability of this
Agreement shall constitute an Adverse Effect. The determination of whether a
particular set of circumstances would reasonably be expected to have an
Adverse Effect includes a determination of both the likelihood of the
occurrence and the likelihood that such set of circumstances, if it were to
occur, would result in an Adverse Effect.
"Adviser" has the meaning provided in the preamble.
"Adviser Conduct" has the meaning provided in Section 4.1(d).
"Affiliate" means any Person directly or indirectly controlling or
controlled by or under common control with such Person or any Subsidiary;
provided that, for purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
voting securities or by contract or otherwise.
"Aggregate Excess" means the sum of the Excess Allocations with respect
to all Eligible Equity Investments and Sectors.
"Aggregate Market Value of the Equity Portfolio" means, at any time of
determination, the sum of the Market Value of all securities, as reported by
the Custodian to the Warranty Provider (or the Calculation Agent, as the case
may be) in accordance with Sections 3.4(c) and 8.7, included in the Equity
Portfolio as of the close of business on the immediately preceding Exchange
Business Day.
"Aggregate Protected Amount" has the meaning provided in Section 2.6(a).
"Aggregate Shortfall Amount" has the meaning provided in Section 2.6(b).
"Agreement" has the meaning provided in the preamble.
"BAC Guaranty" has the meaning provided in the preamble.
"Bank Deposits" means any of the following having a maturity of not more
than 180 days: demand and time deposits in, certificates of deposit of, and
bankers' acceptances issued by any depository institution or trust company
incorporated under the laws of the United States of America or any state thereof
and subject to supervision and examination by federal and/or state banking
authorities so long as the commercial paper or debt obligations of such
depository institution or trust company (or, in the case of the principal
depository institution in a holding company system, the commercial paper or debt
obligations of such holding company) have a credit rating of at least "P-1" by
Moody's and at least "A-1" by S&P (or equivalent credit ratings if different
rating categories are used), in the case of commercial paper and short-term
obligations; provided that the issuer thereof must also have at the time of such
investment a long-term credit rating of at least "Aa3" by Moody's or at least
"AA" by S&P (or equivalent credit ratings if different rating categories are
used).
"Benchmark Yield Curve" means either USD LIBOR and USD Swap rates or
U.S. dollar Treasury rates, any of such as determined by the Calculation
Agent.
"Business Day" means any day other than a day on which banks located in
the City of New York, New York are required or authorized by law to close or
on which the New York Stock Exchange and the NASDAQ National Market are
closed for business.
"Calculation Agent" means Banc of America Securities LLC.
"Cash" means legal tender of the United States.
"Cash Equivalents" means Bank Deposits, Commercial Paper, Repurchase
Agreements, and U.S. Government Securities (excluding U.S. Zeroes), having a
remaining maturity of 180 days or less.
"Class of Shares" means each class of shares of beneficial interest of
the Fund designated pursuant to the Declaration of Trust.
"Commercial Paper" means commercial paper having a credit rating of at
least "P-1" by Moody's and at least "A-1" by S&P (or equivalent credit
ratings if different rating categories are used), either bearing interest or
sold at a discount from the face amount thereof, having a maturity of not more
than 180 days from the date of issuance, and issued by either (x) a corporation
incorporated under the laws of the United States of America or any state
thereof, or (y) any depository institution or trust company incorporated under
the laws of the United States of America or any state thereof and subject to
supervision and examination by federal and/or state banking authorities;
provided that the issuer thereof must also have at the time of such investment a
long-term credit rating of at least "Aa3" by Moody's or at least "AA-" by
S&P (or equivalent credit ratings if different rating categories are used).
"Commission" means the United States Securities and Exchange Commission.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Corporate Bonds" means non-callable debt obligations of a corporation
having a rating of at least "A-" by S&P or "A3" by Moody's (or equivalent
credit ratings if different rating categories are used); provided that if both
Moody's and S&P have issued a rating thereon, such rating shall be no less
than "A-"/"A3" (or equivalent credit ratings if different rating categories are
used).
"Curative Steps" has the meaning provided in Section 4.1(b).
"Cushion" has the meaning provided in Section 3.3(a).
"Cushion/Volatility Matrix" has the meaning provided in Section 3.3(a).
"Custodian" means JPMorgan Chase Bank as Custodian pursuant to the
Custodian Agreement or any successor custodian of the Fund's assets appointed
by the Trust's Board of Trustees.
"Custodian Agreement" means the Custodian Agreement, dated August 16,
2002, as amended with respect to the Trust on October 2, 2003, between the
Custodian and the Adviser, as such contract may be amended from time to time
or any agreement providing for the custody of the Fund's assets.
"Daily Report" means a report in the form of the sample attached as
Schedule 1 hereto.
"Declaration of Trust" means the Trust's Declaration of Trust, dated as
of August 12, 2003, as amended and in effect from time to time.
"Defeasance Portfolio" has the meaning provided in Section 4.2(a).
"Determination Notice" has the meaning provided in Section 4.1(d).
"Early Close Exchange Business Day" has the meaning provided in
Section 4.1(a).
"Effective Date" means the date on which the conditions set forth in
Section 2.3(b) are satisfied.
"Eligible Equity Investments" means Class Y shares of the Underlying
Fund.
"Eligible Fixed-Income Investments" means U.S. Government Securities,
Cash, Cash Equivalents and Corporate Bonds.
"Equity Portfolio" means the portion of the Fund's assets invested in
Eligible Equity Investments at any time during the Protected Period,
including Cash and Cash Equivalents deemed allocated to the Equity Portfolio
pursuant to Section 3.2(a)(iii).
"Equity Portfolio Sector Weighting" means, with respect to any Sector,
the amount, expressed as a percentage of the Market Value of the Equity
Portfolio, invested in such Sector by the Fund indirectly through its
investment in Class Y shares of the Underlying Fund.
"Equity Portfolio Value" has the meaning provided in Section 3.3(b).
"Equity Portfolio Weighting" means, with respect to any Eligible Equity
Investment, the amount, expressed as a percentage of the Market Value of the
Equity Portfolio, invested in such Eligible Equity Investment by the Fund
indirectly through its investment in Class Y shares of the Underlying Fund.
"Equity Weighting Limit" means 6.5%.
"Excess Allocation" means (i) with respect to any Eligible Equity
Investment, the amount (if any) by which the Equity Portfolio Weighting of
such Eligible Equity Investment exceeds the Equity Weighting Limit and (ii)
with respect to any Sector, one-half of the amount (if any) by which the
Equity Portfolio Sector Weighting of such Sector exceeds the Sector Weighting
Limit.
"Excess Fees" has the meaning provided in Section 2.6(c).
"Exchange Business Day" means any day other than a day on which both
the New York Stock Exchange and the NASDAQ National Market are closed for
business.
"Extended Cure Time" has the meaning provided in Section 4.1(a).
"Extraordinary Expenses" means all Fund Fees and Expenses that are
incurred or accrued by the Fund other than in its ordinary course of
business, including by way of example only and not intended as an exhaustive
list, (i) all costs of defending or prosecuting any claim or litigation to
which the Fund is a party, (ii) any amount in judgement or settlement or
indemnification expenses incurred by the Fund, and (iii) any other
non-recurring or non-operating expenses.
"Fee Payment Date" has the meaning provided in Section 2.4.
"Financial Warranty" has the meaning provided in the recitals.
"Financial Warranty Amount Limit" has the meaning provided in
Section 2.1.
"Financial Warranty Fee" has the meaning provided in Section 2.4.
"Fixed-Income Portfolio" means the portion of the Fund's assets
invested in Eligible Fixed-Income Investments at any time during the
Protected Period, but excluding any Cash and Cash Equivalents deemed
allocated to the Equity Portfolio pursuant to Section 3.2(a)(iii).
"Force Majeure Event" means any act of God (such as an earthquake,
flood, fire, storm, epidemic and any other natural physical disaster), war
(declared or undeclared), act of war, conditions due to war (such as an
invasion, acts of hostilities, embargo, blockage or other enemy action,
revolution or rebellion), civil commotion, riot, insurrection, explosion,
terrorist acts, seizure or act of sabotage or expropriation or compulsory
acquisition by any Government Authority or any Person.
"Fund" has the meaning provided in the preamble.
"Fund Beta" means, at any time, the amount, as determined by the
Calculation Agent, equal to (i) the covariance between the daily percentage
change in the SPX and the daily percentage change in the Underlying Fund NAV
Per Share (adjusted for distributions), divided by (ii) the variance of the
daily percentage change in the SPX, both computed using the most recent sixty
such percentage changes at such time.
"Fund Confidential Information" has the meaning provided in
Section 9.1(a).
"Fund Fees and Expenses" means all fees, costs, charges and expenses
incurred or accrued by the Fund, including, without limitation, management
fees, distribution fees, service fees, the Financial Warranty Fees, Income
Taxes, and any other expense whether or not incurred in the ordinary course
of the Fund's business (including, without limitation, the cost of defending
or prosecuting any claim or litigation to which the Fund is a party, together
with any amount in judgment or settlement or indemnification expenses
incurred by the Fund and any other non-recurring or non-operating expenses),
but in all cases excluding any Investment Related Expenses.
"Fund Parties" has the meaning provided in Section 5.2(c).
"Fund Portfolio" has the meaning provided in Section 3.1.
"Government Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions or pertaining
to government, including any self-regulatory organization.
"Inception Date" means the third Business Day after the end of the
Offering Period.
"Income Taxes" means U.S. income or excise taxes that are calculated on
the net income or undistributed net income of the Fund.
"Ineligible Investments" means a security that is neither an Eligible
Equity Investment nor an Eligible Fixed-Income Investment.
"Indemnified Party" has the meaning provided in Section 5.3(a).
"Indemnifying Party" has the meaning provided in Section 5.3(a).
"Investment Advisers Act" means the Investment Advisers Act of 1940, as
amended.
"Investment Company Act" has the meaning provided in the recitals.
"Investment Management Agreement" means the Management Agreement, dated
as of October 9, 2003, between the Trust on behalf of the Fund and the
Adviser.
"Investment Related Expenses" means interest, stamp, transfer or other
similar taxes, brokerage commissions, transaction fees and other investment
related costs.
"Issued Financial Warranty Amount" has the meaning provided in
Section 2.2.
"JPM VIEWS System" means the X.X. Xxxxxx VIEWS System or any equivalent
successor system acceptable to the Warranty Provider in its reasonable
discretion.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, charge, lien or security interest (statutory or
otherwise) of any kind or nature whatsoever.
"Litigation Event" means, with respect to the Adviser or the Fund, as
applicable, the submission of any claim or the commencement of any
proceedings by or against such party, and the proper service of process of
such party, in any Federal, state or local court or before any governmental
body or agency, or before any arbitrator, or the overt threat of any such
proceedings, which, if adversely determined (or, in the case of an overt
threat, if any claim arising from such threat were adversely determined),
would reasonably be expected to have an Adverse Effect in respect of such
party.
"Loans for Temporary or Emergency Purposes" means loans that are
outstanding for not more than 60 days (and are not extended or renewed) in an
aggregate amount not exceeding five percent of the value of the total assets
of the Fund at the time the loans are borrowed, in conformity with
Section 18(g) of the Investment Company Act.
"Losses" has the meaning provided in Section 5.2(a).
"Market Value" means the value of any security determined in accordance
with the Fund's valuation procedures used to determine the value of its Net
Assets; provided, however, that in the case of intraday valuation, Market
Value shall be determined by the Calculation Agent based on current market
prices, to the extent available (or if not available, based on the last
quoted market price).
"Maturity Date" means the date that is the seventh year anniversary of
the Inception Date, but if that date is not an Exchange Business Day or is an
Early Close Exchange Business Day, the Maturity Date shall be the first
Exchange Business Day thereafter that is not an Early Close Exchange Business
Day.
"Maximum Equity Component" has the meaning given in Section 3.3(a).
"Modified Duration" means, with respect to any Corporate Bond or U.S.
Government Security, the quotient of (a) the weighted average term to
maturity of the cash flows generated by such security divided by (b) the sum
of (i) one plus (ii) the quotient of (A) the yield to maturity of such
security divided by (B) the number of interest payments on such security per
year. For the purposes of this calculation, the number of interest payments
on any non-interest bearing Corporate Bonds or U.S. Zeroes is assumed to be
two per year. With respect to a portfolio of Eligible Fixed-Income
Investments, Modified Duration means an amount equal to the average of the
Modified Duration of each such Eligible Fixed-Income Investment, weighted on
the basis of the Market Values thereof.
"Moody's" means Xxxxx'x Investors Service, Inc.
"NAV Per Share" has the meaning provided in Section 2.6(d).
"Net Assets" means the Market Value of the total assets of the Fund
minus its liabilities at the time of determination.
"Notice" has the meaning provided in Section 5.3(a).
"Objection Notice" has the meaning provided in Section 4.1(d).
"Offering Period" means the initial period during which the Shares of
the Fund will be offered for sale to investors as described in the
Prospectus. The Offering Period may not be extended beyond February 27, 2004
without the prior written consent of the Warranty Provider.
"Other Information" has the meaning provided in Section 9.1.
"Permanent Defeasance Date" is the date on which a Permanent Defeasance
Event occurs in accordance with Section 4.1(c).
"Permanent Defeasance Event" has the meaning provided in Section 4.1(c).
"Permitted Recipients" has the meaning provided in Section 9.2(a).
"Person" means a natural person, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, limited
liability company, joint venture, Government Authority or other entity of
whatever nature.
"Portfolio Requirements" has the meaning provided in Section 3.1.
"Potential Trigger Event" means an event or circumstance which could,
with the giving of notice, lapse of time, the issuing of a certificate and/or
fulfillment of any other requirement provided for in the definition of
"Trigger Event" become a Trigger Event.
"Prospectus" means for any Class of Shares, the prospectus and
statement of additional information pursuant to which the shares of such
Class of Shares were offered for sale, as the same may be amended,
supplemented or modified and in effect from time to time.
"Protected Amount Per Share" has the meaning provided in Section 2.6(e).
"Protected Period" means the period commencing on and including the
Inception Date to and including the Maturity Date.
"PV" has the meaning provided in Section 3.3(a).
"PV Shortfall" with respect to each Class of Shares, means the Shares
Outstanding for such Class of Shares multiplied by the difference of the NAV
Per Share minus PV, if a negative number.
"Registration Statement" has the meaning provided in Section 2.3(b)(v).
"Regulatory Change" means with respect to the Adviser or the Fund, as
the case may be, any change in any law, regulation or rule, or interpretation
thereof, by a Governmental Authority with respect to any statute to which
such party is subject (including, as applicable, the Investment Company Act
and the Investment Advisers Act) which has resulted in or would be reasonably
expected to result in an Adverse Effect in respect of such party.
"Regulatory Event" means with respect to the Adviser or the Fund, as
the case may be, any governmental or regulatory action that limits, suspends,
or terminates the rights, privileges or operation of such party, which has
resulted in or would be reasonably expected to result in an Adverse Effect in
respect of such party.
"Representatives" has the meaning specified in Section 9.2(b).
"Repurchase Agreements" means unleveraged repurchase obligations, with
maturities of not more than seven (7) days, with respect to any U.S.
Government Security entered into with a depository institution or trust
company (acting as principal) that satisfies the criteria set forth in the
definition of Bank Deposits or entered into with a broker-dealer (acting as
principal) incorporated under the laws of the United States of America or any
state thereof whose obligations are rated at least "P-1" by Moody's and at
least "A-1" by S&P (or equivalent credit ratings if different rating
categories are used), in the case of short-term obligations or, in the case
of long-term obligations, at least "Aa2" by Moody's and at least "AA" by S&P
(or equivalent credit ratings if different rating categories are used).
"Requirements of Law" means, as to any Person, the charter and by-laws
or other organizational or governing document of such Person, and any law,
treaty, rule, or regulation or determination of an arbitrator or a court or
other Government Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property
is subject.
"Sector" means industry sectors determined using a third-party source
for identifying sectors mutually agreed upon by the Warranty Provider,
Adviser and Trust on behalf of the Fund.
"Sector Weighting Limit" means 33%.
"Securities Act" means the Securities Act of 1933, as amended.
"Service Agreement" means the Service Agreement, dated as of October
31, 2003, among the Custodian, the Adviser, the Trust on behalf of the Fund,
and the Warranty Provider, as such agreement may be amended from time to time.
"Shareholders" means the shareholders of the Fund.
"Shares" means shares of beneficial interest of any class of the Fund.
"Shares Outstanding" means on any day of determination, the number of
issued and outstanding shares with respect to a Class of Shares, excluding
any Shares issued in violation of Section 3.1.
"Shortfall Amount" has the meaning provided in Section 2.6(f).
"S&P" means Standard & Poor's Ratings Services, a Division
of The XxXxxx-Xxxx Companies, Inc.
"SPX" means the S&P 500 Index or other successor Index as determined
by the Calculation Agent.
"Subsidiary" means with respect to any Person, any corporation,
business trust, association or other business entity of which securities
representing 50% or more of the combined voting power of the total capital
stock (or in the case of an association or other business entity which is not
a corporation, 50% or more of the equity interest) is at the time owned or
controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof.
"Termination Date" has the meaning provided in Section 10.1(a).
"Total NAV" has the meaning provided in Section 2.6(g).
"Tracking Error" means, at any time, the amount, as determined by the
Calculation Agent, equal to the product of (i) the square root of 252 and
(ii) the standard deviation of the daily difference between the daily
percentage change in the SPX times the Fund Beta and the daily percentage
change in the Underlying Fund NAV Per Share (adjusted for distributions),
computed using the most recent sixty such percentage changes at such time.
"Trade Date" has the meaning provided in Section 3.4(c).
"Trading Information" has the meaning provided in Section 9.1.
"Transaction Documents" means this Agreement, the Financial Warranty,
the Investment Management Agreement, the Custodian Agreement, the Service
Agreement, the Prospectus and the Registration Statement relating to each
Class of Shares, as each may be amended, supplemented or otherwise modified
from time to time.
"Transition Date" means the Business Day after the end of the Offering
Period.
"Trigger Event" means each event set forth in Section 4.1(a).
"Trust" has the meaning provided in the preamble.
"Underlying Fund" means the Xxxxxxxxxxx Main Street Fund (Bloomberg
Ticker "MIGYX"), a series of Xxxxxxxxxxx Main Street Funds, Inc.
"Underlying Fund NAV Per Share" means, on a per share basis at the
time of determination, the last published net asset value per share of the
Class Y shares of the Underlying Fund.
"U.S. Government Securities" means non-callable general obligations of
(i) the United States Treasury backed by the full faith and credit of the
United States of America or (ii) of any one of the following agencies of the
Federal Government of the United States of America: Federal National
Mortgage Association, Federal Home Loan Mortgage Corporation, Federal Home
Loan Bank, Resolution Funding Corporation, Financing Corporation and
Tennessee Valley Authority, excluding in the case of clause (ii) any such
obligations that are rated less than "AAA" by S&P or less than "Aaa" by
Xxxxx'x. U.S. Government Securities shall include Separate Trading of
Registered Interest and Principal of Securities (STRIPS), Certificates of
Accrual on Treasury Securities (CATS), Treasury Investment Growth Receipts
(TIGRs), and Generic Treasury Receipts (TRs).
"U.S. Zeroes" means U.S. Government Securities that are non-interest
bearing.
"Volatility" means, at any time, the amount, as determined by the
Calculation Agent, equal to the product of (i) the square root of 252 and
(ii) the standard deviation of the daily percentage change in the Underlying
Fund NAV Per Share (adjusted for distributions), computed using the most
recent sixty such percentage changes at such time.
"Warranty Provider" has the meaning provided in the preamble.
"Warranty Provider Confidential Information" has the meaning provided
in Section 9.3(a).
"Warranty Provider Parties" has the meaning provided in Section 5.2(a).
Section 1.2. GENERIC TERMS. All words used herein shall be construed to
be of such gender or number as the circumstances require. The words
"herein," "hereby," "hereof" and "hereto," and words of similar import, refer
to this Agreement in its entirety and not to any particular paragraph, clause
or other subdivision, unless otherwise specified, and Section and Exhibit
references are to this Agreement unless otherwise specified.
ARTICLE II.
AMOUNT AND TERMS OF THE FINANCIAL WARRANTY
Section 2.1. THE FINANCIAL WARRANTY. The Warranty Provider agrees to
issue the Financial Warranty, subject to the conditions set forth herein, on
the Inception Date, in an amount not to exceed $500 million (the "Financial
Warranty Amount Limit"), which amount may be adjusted pursuant to Section 2.2
and Section 2.3(c)(vii) hereof.
Section 2.2. PROCEDURE FOR ISSUANCE AND CANCELLATION OF REMAINING
FINANCIAL WARRANTY LIMIT. Not later than three Business Days prior to the
last day of the Offering Period, the Trust on behalf of the Fund shall
deliver to the Warranty Provider a notice specifying the expected Inception
Date and the projected amount of the Financial Warranty (which shall be in
the amount of the Aggregate Protected Amount as of the close of business on
the Transition Date and shall not exceed the Financial Warranty Amount
Limit). Prior to 11:00 a.m. (Eastern time) on the Inception Date, the Trust
on behalf of the Fund shall deliver to the Warranty Provider a notice showing
the following, in each case as of the close of business on the Transition
Date: (i) the NAV Per Share for each Class of Shares, and (ii) the Shares
Outstanding of each Class of Shares. The notice also shall certify that the
conditions precedent in Sections 2.3(b)(i) through and including (vi) and
2.3(c) have been satisfied. Upon receipt of such notice and the fulfillment
of the applicable conditions set forth in Section 2.3 hereof, the Warranty
Provider will issue the Financial Warranty to the Trust on behalf of the Fund
in the amount specified in the parenthetical in the first sentence of this
Section 2.2 (the "Issued Financial Warranty Amount"). The Warranty Provider
shall not incur any obligation or liability hereunder or under any
transaction contemplated by any other Transaction Document during the
Offering Period. Effective as of the date of the issuance of the Financial
Warranty by the Warranty Provider in an amount equal to the Issued Financial
Warranty Amount, the Financial Warranty Amount Limit available for the
Protection Period shall be reduced to an amount equal to the Issued Financial
Warranty Amount.
Section 2.3. CONDITIONS PRECEDENT TO EFFECTIVENESS. (a) Section 9.1,
Section 9.3 and Article V shall be effective immediately upon the execution
of this Agreement.
(b) Subject to Section 2.3(c), the effectiveness of all provisions of this
Agreement (other than this Section 2.3(b), Section 9.1, Section 9.3 and
Article V hereof) is subject to the satisfaction of the following conditions:
(i) Each Transaction Document (other than the Prospectus and Registration
Statement) shall be duly authorized, executed and delivered by each of the
parties thereto and be in full force and effect and executed counterparts of
each such Transaction Document shall have been delivered to the Warranty
Provider.
(ii) The Service Agreement shall provide that the Custodian will agree to
(A) receive and comply with instructions from the Warranty Provider in
accordance with Sections 4.1(c) and 4.2(a) and (B) provide to the Warranty
Provider electronically in a format reasonably acceptable to the Warranty
Provider the records and access to the JPM VIEWS System required by Sections
3.4(c) and (d), respectively.
(iii) The Warranty Provider shall have received (A) a certificate of the
Secretary or Assistant Secretary of the Adviser, dated as of the Effective
Date, as to the incumbency and signature of the officers or other employees
of the Adviser authorized to sign this Agreement and all other Transaction
Documents to which the Adviser is a party, in each case on behalf of the
Adviser and certifying that attached thereto are true, complete and correct
copies of its constituent documents and resolutions duly adopted by the
Adviser authorizing the execution and delivery of this Agreement and such
other Transaction Documents, which resolutions have not been modified,
amended or rescinded in any respect, are in full force and effect on the
Effective Date and constitute the most recent resolutions of the Board of
Directors of the Adviser relating to the transactions contemplated hereby and
thereby, and (B) a good standing certificate from the Secretary of State of
the State of Colorado regarding the Adviser.
(iv) The Warranty Provider shall have received (A) a certificate of the
Secretary or Assistant Secretary of the Trust, dated as of the Effective
Date, as to the incumbency and signature of the officers or other employees
of the Trust authorized to sign this Agreement and the other Transaction
Documents to which the Trust is a party, in each case on behalf of the Trust,
and certifying that attached thereto are true, complete and correct copies in
draft form of resolutions duly adopted by the Board of Trustees of the Trust
authorizing the execution and delivery of this Agreement and such other
Transaction Documents, which resolutions have not been modified, amended or
rescinded in any respect, are in full force and effect on the Effective Date
and constitute the most recent resolutions of the Board of Trustees of the
Trust relating to the transactions contemplated hereby and thereby, and (B) a
copy of the Declaration of Trust (including all amendments thereto) in effect
on the Effective Date certified as of a recent date by the Secretary or
Assistant Secretary of the Trust and certified as of a recent date by the
Secretary of the Commonwealth of Massachusetts.
(v) The Warranty Provider shall have received a certificate of the
Secretary, Assistant Secretary, Treasurer or Assistant Treasurer of the
Trust, dated as of the Effective Date, certifying that (A) the Trust's
registration statement on Form N-1A with respect to each Class of Shares of
the Fund (1) has been prepared by the Trust in material conformity with the
requirements of the Acts and the rules and regulations of the Commission
thereunder, and (2) has been filed with the Commission under the Acts,
(B) true and complete copies of such Registration Statement on Form N-1A as
amended are attached thereto (such registration statement, as it may be
amended from time to time, the "Registration Statement"), excluding any
exhibits thereto, (C) the Commission has not issued any order preventing or
suspending the use of any prospectus relating to any Class of Shares and the
Fund has not received any notice from the Commission pursuant to Section 8(e)
of the Investment Company Act with respect to the Registration Statement,
(D) the Registration Statement and the Prospectus with respect to each Class
of Shares of the Fund do not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading (provided, that such certification shall not
be required to address any information regarding the Warranty Provider that
has been provided by the Warranty Provider in writing for inclusion in or to
be incorporated by reference into the Registration Statement), and (E) the
shares of each Class of Shares of the Fund conform in all material respects
to the description thereof contained in the Registration Statement and
Prospectus with respect to such Class of Shares.
(vi) The Warranty Provider shall have received (A) the opinion of Xxxxxx X.
Xxxx, Esq., general counsel to the Adviser, in the form attached hereto as
Annex A-1 and (B) the opinion of Xxxxx Xxxxx Xxxx & Maw LLP, counsel to
the Trust, in the form attached hereto as Annex A-2.
(vii) All Transaction Documents and proceedings, documents, instruments and
other legal matters in connection with the transactions contemplated by this
Agreement shall be reasonably satisfactory in form and substance to the
Warranty Provider, and the Warranty Provider shall have received such other
documents in respect of any aspect or consequence of the transactions
contemplated hereby or thereby as it shall reasonably request.
(viii) The Adviser and the Trust shall have received the opinion of
Xxxxxxxx & Xxxxxxxx LLP, counsel to the Warranty Provider, in the form
attached hereto as Annex B.
(ix) The Adviser and the Fund shall have received (A) a certificate of the
Secretary or Assistant Secretary of the Warranty Provider, dated as of the
Effective Date, as to the incumbency and signature of the officers or
employees of the Warranty Provider authorized to sign this Agreement and all
other Transaction Documents to which the Warranty Provider is a party, in
each case on behalf of the Warranty Provider, and certifying that attached
thereto are true, complete and correct copies of its certificate of formation
and operating agreement duly adopted by the Warranty Provider, authorizing
the execution and delivery of this Agreement and such other Transaction
Documents, which certificate of formation and operating agreement have not
been modified, amended or rescinded in any respect, are in full force and
effect on the Effective Date, and (B) a good standing certificate from the
Secretary of State of the State of Delaware regarding the Warranty Provider.
(x) The Adviser and the Fund shall have received a certificate of the
Secretary or Assistant Secretary of Bank of America Corporation, dated as of
the Effective Date, certifying that attached thereto are true, complete and
correct copies of resolutions duly adopted by Bank of America Corporation
authorizing the execution and delivery of the BAC Guaranty.
(xi) The Warranty Provider shall have delivered to the Trust (with a copy to
the Adviser) the guarantee of Bank of America Corporation in the form
attached hereto as Exhibit B.
(xii) The Warranty Provider shall have delivered to the Trust on behalf of
the Fund a letter setting forth the information regarding the Warranty
Provider and Bank of America Corporation that the Warranty Provider and Bank
of America Corporation have provided for inclusion or to be incorporated by
reference into the Registration Statement.
(c) The obligation of the Warranty Provider to issue the Financial Warranty
is subject to the satisfaction of the following conditions on the Inception
Date:
(i) Each of the representations and warranties made by the Adviser and the
Trust on behalf of the Fund in this Agreement shall be true and correct in
all material respects on and as of such date, and the Warranty Provider shall
have received a certification from each of the Adviser and the Trust on
behalf of the Fund to such effect as to the representations and warranties
made by it.
(ii) The Warranty Provider shall have received "bringdowns" of the
certificates and other matters referenced in Sections 2.3(b)(iii), (iv) and
(v) and of the opinion referenced in Section 2.3(b)(vi) through the Inception
Date.
(iii) No Trigger Event shall have occurred.
(iv) No statute, rule, regulation or order shall have been enacted, entered
or deemed applicable by any Government Authority which would make the
transactions contemplated by any of the Transaction Documents illegal or
otherwise prevent the consummation thereof.
(v) No suit, action or other proceeding, investigation, or injunction or
final judgment relating thereto, shall be pending or, to the best knowledge
of the Adviser or the Trust, threatened before any court or governmental
agency in which it is sought to restrain or prohibit or to obtain damages or
other relief in connection with any of the Transaction Documents.
(vi) There shall not have been an Adverse Effect in respect of the Adviser,
the Trust, or the Fund since the date of this Agreement.
(vii) On the Inception Date, the Aggregate Protected Amount shall not exceed
the Financial Warranty Amount Limit. If, during the Offering Period, the
Fund expects to receive subscriptions for its Shares which could result in
the Aggregate Protected Amount exceeding the Financial Warranty Amount Limit
as of the close of business on the Transition Date, then the Fund shall
consult with the Warranty Provider. If the Warranty Provider agrees to
increase the Financial Warranty Amount Limit in its sole discretion, this
Agreement will be amended accordingly.
(viii) A copy of the Prospectus with respect to each Class of Shares of
the Fund shall have been delivered to the Warranty Provider.
(ix) The Warranty Provider shall have received a certificate of the
Secretary or Assistant Secretary of the Trust, dated as of the Inception
Date, certifying that attached thereto are true, complete and correct copies
of its resolutions duly adopted by the Board of Trustees of the Trust
authorizing the issuance of each Class of Shares of the Fund in respect of
which the Warranty Provider is providing the Financial Warranty, which
resolutions have not been modified, amended or rescinded in any respect, are
in full force and effect on the Effective Date and constitute the most recent
resolutions of the Board of Trustees of the Trust relating to the
transactions contemplated hereby and thereby.
(x) The Warranty Provider shall have received a certificate of the
Secretary or Assistant Secretary of the Adviser, dated as of the Inception
Date, certifying that the Fund Portfolio as of the Inception Date is in
compliance with the Portfolio Requirements.
(xi) The parties shall have provided the notice procedures contemplated by
Section 11.2(b), if applicable.
(xii) The Registration Statement (or the most recent amendment thereto) has
been declared effective by the Commission.
(xiii) Within 10 days after the Effective Date, the Warranty Provider
shall have received the opinion of Dechert LLP, special New York counsel to
the Adviser, in the form attached hereto as Annex A-3.
Section 2.4. FINANCIAL WARRANTY FEE. In consideration of the issuance
by the Warranty Provider of the Financial Warranty, the Fund shall pay to the
Warranty Provider a fee in an amount equal to (a) prior to the occurrence of
a Permanent Defeasance Event, 0.475% per annum of the average daily Net
Assets of the Fund during each calendar month in the Protected Period or (b)
following the occurrence of a Permanent Defeasance Event, 0.35% per annum of
the average daily Net Assets of the Fund during each calendar month in the
Protected Period (collectively, the "Financial Warranty Fee"), in each case,
payable monthly in arrears on the tenth Business Day of the following
calendar month (each a "Fee Payment Date"). The Financial Warranty Fee
payable on each Fee Payment Date will be calculated based on a 360 day year
for the actual number of days elapsed. The obligation to pay the Financial
Warranty Fee that has accrued hereunder shall survive termination of this
Agreement to the extent not paid in full prior to such termination.
Section 2.5. AGGREGATE SHORTFALL AMOUNT; ADJUSTMENT TO PROTECTED AMOUNT
PER SHARE.
(a) Unless this Agreement shall have terminated in accordance with Article
X, for ten Business Days commencing on the third Business Day after the
Maturity Date, the Fund shall be entitled to draw upon the Financial Warranty
in an amount equal to the Aggregate Shortfall Amount, if any. The
calculation and accuracy of the Aggregate Shortfall Amount determined
hereunder shall be certified by the Calculation Agent on the first Business
Day following the Maturity Date. The Calculation Agent shall determine such
Aggregate Shortfall Amount in a good faith commercially reasonable manner and
provide such certification to the Adviser or the Trust within three Business
Days following the Maturity Date.
(b) The Protected Amount Per Share with respect to each Class of Shares
shall be reduced as follows:
(i) Dividends and distributions attributable to each Share of a Class of
Shares will reduce the Protected Amount Per Share of such Class of Shares to
an amount equal to the Protected Amount Per Share for such Class of Shares on
the immediately preceding Exchange Business Day divided by the sum of one
plus the quotient of (a) the amount of any Distribution Per Share with
respect to such Class of Shares effective since the immediately preceding
Exchange Business Day and (b) the NAV for such Class of Shares at the close
of business on the Exchange Business Day that such Distribution Per Share was
effective;
(ii) Excess Fees attributable to each Share of a Class of Shares shall
reduce the Protected Amount Per Share to an amount equal to the product of
(a) the Protected Amount Per Share for such Class immediately prior to the
time that such Excess Fees are accrued with respect to such Class and (b) a
fraction, the numerator of which shall be the NAV Per Share for such Class
immediately after such Excess Fees are accrued and the denominator of which
shall be the NAV Per Share for such Class immediately prior to the time that
such Excess Fees are accrued;
(iii) The Shares of a Class that are issued during the Protected Period in
violation of Section 3.1 shall not be included in the Shares Outstanding of
such Class; and
(iv) In the event of changes in accounting practices for the Fund from those
used on the Transition Date or corporate actions or other events that
otherwise would result in an increase in the Protected Amount Per Share with
respect to a Class of Shares, appropriate adjustments shall be made by the
Warranty Provider to the Protected Amount Per Share for such Class or the way
such Protected Amount Per Share is calculated to the extent deemed necessary
by the Warranty Provider to preserve the economic equivalent of this
Agreement and the Financial Warranty. The Warranty Provider shall promptly
notify the Trust and the Adviser of any such adjustments. The Fund agrees
that no such changes, actions or events may be made or taken by the Fund or
Adviser without the prior written consent of the Warranty Provider, which
consent shall not be unreasonably withheld if, in the reasonable discretion
of the Warranty Provider, any such change, action or event does not increase
the Warranty Provider's liabilities or risks or decrease the Warranty
Provider's economic bargain under any Transaction Document.
Section 2.6. CERTAIN DEFINED TERMS.
(a) "Aggregate Protected Amount" means the sum of the products, for each of
the Class A Shares, Class B Shares and Class C Shares, of the Protected
Amount Per Share of each Class of Shares and the Shares Outstanding of such
Class.
(b) "Aggregate Shortfall Amount" means the sum of the Shortfall Amount, if
any, of each of the Class A Shares, Class B Shares and Class C Shares, which
shall never exceed the Aggregate Protected Amount as of the close of business
on the Maturity Date.
(c) "Excess Fees" means (i) on or prior to the occurrence of a Permanent
Defeasance Event, any Extraordinary Expenses incurred or accrued by the Fund
which would give rise, directly or indirectly, to a PV Shortfall or increase,
directly or indirectly, an existing PV Shortfall, but for the adjustment
required under Section 2.5(b)(ii), and (ii) following the occurrence of a
Permanent Defeasance Event, any Fund Fees and Expenses incurred or accrued by
the Fund that exceed 1.30% per annum of the average daily Net Assets of the
Fund for the Class A Shares, 2.05% per annum of the average daily Net Assets
of the Fund for the Class B Shares and 2.05% per annum of the average daily
Net Assets of the Fund for the Class C Shares.
(d) "NAV Per Share" means with respect to each Class of Shares on a per
share basis at the time of determination, the last published net asset value
per Share for such Class.
(e) "Protected Amount Per Share" at any time on any day and with respect to
each Class of Shares on a per share basis means the NAV Per Share of such
Class of Shares as of the close of business on the Transition Date.
(f) "Shortfall Amount" with respect to each Class of Shares is deemed to be
the Shares Outstanding of such Class of Shares multiplied by the difference,
if positive, between the Protected Amount Per Share as determined as of the
close of business on the Maturity Date for such Class in accordance with
Section 2.6(e) and the NAV Per Share as of the close of business on the
Maturity Date for such Class.
(g) "Total NAV" means the sum of the products, for each of Class A Shares,
Class B Shares and Class C Shares at the time of determination, of the NAV
Per Share for each Class and the Shares Outstanding of such Class at such
time.
ARTICLE III.
MANAGEMENT OF THE FUND
Section 3.1. GENERAL. During the Protected Period, the Fund shall not
issue additional Shares (including through an exchange of Shares or in
connection with any merger, reorganization, acquisition or other similar
transaction), except in connection with the reinvestment of dividends and
distributions by the Fund to its Shareholders in respect of the Shares or the
transfer of Shares that does not result in an increase in the Shares that are
issued and outstanding. Except as set forth in Section 4.2 hereof,
commencing on the Inception Date, all of the Fund's assets shall be allocated
between the Equity Portfolio and Fixed-Income Portfolio (collectively, the
"Fund Portfolio") and such assets shall be invested and reinvested in
accordance with the provisions set forth in this Article III (collectively,
the "Portfolio Requirements"). The Adviser shall fairly and objectively
interpret the Portfolio Requirements, consistent with the intent thereof.
The Adviser shall consult with the Warranty Provider as to any requirement
contained herein which, in the Adviser's reasonable opinion, is not clear,
including without limitation the permissibility or classification of any
investment (including any types of investment that may be used in the market
during the term of this Agreement that were not widely used as of the date
hereof), the valuation methodology applicable thereto, and the methodology
used to calculate and report to the Warranty Provider compliance with the
Portfolio Requirements.
Section 3.2. RESTRICTIONS ON INVESTMENTS.
(a) During the Protected Period, the Fund Portfolio shall be subject to the
following Portfolio Requirements, the compliance with which shall be
determined as of the close of business on each Exchange Business Day on a
trade date basis and with respect to subsection (i) below, as of any time on
any Exchange Business Day:
(i) subject to this Article III and Section 4.2, the Fund's assets may be
invested only in Eligible Equity Investments and Eligible Fixed-Income
Investments;
(ii) the Market Value of the portion of the Fund's assets allocated to the
Equity Portfolio, calculated as a percentage of the Total NAV of the Fund,
shall not exceed the Maximum Equity Component as of the close of business on
any Exchange Business Day and shall be zero in the event of a Permanent
Defeasance Event; provided that, for purposes of determining whether the
Fund's assets allocated to the Equity Portfolio are in excess of the Maximum
Equity Component, any Fund assets that are Ineligible Investments shall be
deemed to be allocated to the Equity Portfolio;
(iii) any Cash and Cash Equivalents held by the Fund during the Protected
Period (in the absence of a Permanent Defeasance Event), shall be considered
allocated to the Fixed-Income Portfolio to the extent that such investments
constitute up to 5% of the Fund's assets on any Exchange Business Day and any
portion, if any, in excess of such 5% threshold shall be considered allocated
to the Equity Portfolio; provided, that during the period commencing on the
date that is 120 days prior to the Maturity Date and ending on the Maturity
Date, all Cash and Cash Equivalents held by the Fund shall be considered
allocated to the Fixed Income Portfolio;
(iv) the portion of the Fixed-Income Portfolio invested in U.S. Government
Securities, calculated as a percentage, shall be 100% (exclusive of any Cash
and Cash Equivalents); provided, that the Warranty Provider may in its sole
discretion at any time, and upon notice to the Adviser, impose a different
percentage or percentage range limitation on the investment in U.S.
Government Securities under this Section 3.2(a)(iv);
(v) the portion of U.S. Government Securities included as part of the
Fixed-Income Portfolio that is invested in U.S. Zeroes, calculated as a
percentage, shall be at least 50%; provided, that the Warranty Provider may
in its sole discretion at any time, and upon notice to the Adviser, impose a
different percentage or percentage range limitation on the investment in U.S.
Zeroes under this Section 3.2(a)(v);
(vi) all Cash Equivalents and U.S. Zeroes shall mature no later than one
month after the Maturity Date;
(vii) all U.S. Government Securities shall mature no earlier than six months
prior to the Maturity Date;
(viii) the Fixed-Income Portfolio (excluding Cash and Cash Equivalents),
in the aggregate, shall have a Modified Duration equal to the period from the
date of determination to the Maturity Date plus or minus three months;
(ix) the weighted average rating by S&P (determined at the time of
acquisition) of any portion of the Fixed-Income Portfolio allocated to Corporate
Bonds, if any, shall be at least A+ (or equivalent credit rating if different
rating categories are used); and
(x) to the extent that any portion of the Fixed-Income Portfolio is
allocated to Corporate Bonds, such investments shall be limited so that the
Corporate Bonds of a single issuer do not represent more than 5% of the
assets of the Fund allocated to Corporate Bonds.
Section 3.3. ALLOCATION AND REALLOCATION OF FUND'S ASSETS.
(a) The "Maximum Equity Component" on any Exchange Business Day, as a
percentage of the Fund's Total NAV, means the smallest Equity Limit for a
Class of Shares, determined in accordance with the formula set forth below:
Equity Limit
for a Class
of Shares = ((NAV Per Share - PV)/NAV Per Share)/Cushion, in each case with
respect to that Class (or zero in the event that the Equity Limit
for a Class of Shares is less than 0.025; provided, that the
Equity Limit for a Class of Shares shall not exceed 100% at any
time);
where,
NAV Per Share has the meaning set forth in Section 2.6(d);
PV = the product of (i) the Adjusted Discount Factor and (ii) the
Protected Amount Per Share, in each case with respect to the
relevant Class;
where,
Adjusted
Discount
Factor = with respect to each Class of Shares, means the following
quotient as determined by the Calculation Agent in a commercially
reasonable manner and communicated to the Adviser prior to 4:00
p.m. (Eastern time) on each Exchange Business Day (and if not so
communicated, the Adjusted Discount Factor last communicated to
the Adviser by the Calculation Agent): (i) the present value
discount factor representing the theoretical price, expressed as
a percentage of par, of a theoretical zero coupon bond maturing
on the Maturity Date, the yield of which is consistent with the
Benchmark Yield Curve as of the date of determination and (ii) an
amount, based on the Fee Factor of the relevant Class and the
time (in years) remaining to the Maturity Date, determined by the
Calculation Agent as follows:
Fee Factor = 0.0130 for the Class A Shares, 0.0205 for the Class B Shares
and 0.0205 for the Class C Shares;
Cushion = the percentage set forth opposite the applicable Volatility in
the table attached hereto as Schedule 2 (the "Cushion/Volatility
Matrix"), as adjusted pursuant to Sections 3.3(c), 3.4(d) and
4.1(c), or a lower number as may be chosen by the Warranty
Provider at its sole discretion. In no case shall the Cushion
exceed 100%;
t = the time, in years, remaining until the Maturity Date.
(b) The Adviser shall cause the net asset value attributable to the Equity
Portfolio to be calculated as of the close of business on each Exchange
Business Day in the manner described in the Prospectus and in accordance with
the Investment Company Act (the "Equity Portfolio Value") and the Maximum
Equity Component as of the close of business on each Exchange Business Day;
provided that such determination of the Maximum Equity Component shall be
subject to review and confirmation by the Warranty Provider in its sole
discretion. If the Equity Portfolio, as a percentage of Total NAV, exceeds
the Maximum Equity Component determined in accordance with Section 3.3(a) as
of the close of business on any Exchange Business Day, then during the
immediately succeeding Exchange Business Day the Adviser must sell assets and
reallocate a portion of the Fund's assets from the Equity Portfolio to the
Fixed-Income Portfolio such that the allocation to the Equity Portfolio is
less than or equal to the Maximum Equity Component. In the event of a
violation of Section 3.2(a)(i), then within the cure period provided in
Section 4.1(a)(ii), the Adviser must sell assets and reallocate the Fund's
assets to the extent necessary so that the Fund Portfolio does not include
investments other than Eligible Equity Investments and Eligible Fixed-Income
Investments and the Equity Portfolio is less than or equal to the Maximum
Equity Component. It is the intention of the parties that the formula in
Section 3.3(a) results in the Fund's Net Assets being allocated such that the
Equity Portfolio may withstand a percentage decline equal to the Cushion and
still provide for payment in full of the Aggregate Protected Amount on the
Maturity Date; provided, however, that the obligation of the Fund and the
Adviser shall be to manage the Fund Portfolio in accordance with the terms of
this Agreement.
(c) Notwithstanding any of the foregoing, if as determined by the
Calculation Agent in its sole discretion at any time on any Exchange Business
Day, (i) either the SPX or the Aggregate Market Value of the Equity Portfolio
declines 10% or more from the level or value thereof as of the close of
business on the prior Exchange Business Day, (ii) the Tracking Error exceeds
12%, or (iii) the Underlying Fund has made, or announced that it shall make,
any redemptions-in-kind, then the Warranty Provider may, upon notice to the
Adviser and in its sole discretion, adjust the Cushion. Such notification
shall be provided by the Warranty Provider or, at the Warranty Provider's
direction, the Calculation Agent and shall specify the adjusted Cushion and
the Maximum Equity Component recalculated using such adjusted Cushion as
determined by the Calculation Agent in its sole discretion. The Adviser
shall, upon receipt of such notification and as soon as practicable, sell
assets and reallocate the Fund Portfolio to the extent necessary so that the
Equity Portfolio, as a percentage of the Total NAV, is less than or equal to
the Maximum Equity Component provided by the Calculation Agent in such
notification, it being agreed that such rebalancing shall be completed by the
close of business on the Exchange Business Day on which such notification is
given if the notification is received by the Adviser at or before 1:00 p.m.
(Eastern time) (provided, that should the Adviser fail to complete such
rebalancing within such time, it shall have taken steps, including being
actively engaged in the sale of portfolio securities, to achieve such
rebalancing within such time) or by the end of the next succeeding Exchange
Business Day if the Adviser receives such notification after 1:00 p.m.
(Eastern time). The Cushion shall remain as so adjusted (and as further
adjusted to such smaller percentage as determined by the Warranty Provider in
its sole discretion) until (x) in the case of any adjustment resulting from
clause (i) above, until there have been ten consecutive Exchange Business
Days without an intraday increase or decrease of 4% or more of the SPX, after
which the Cushion shall be adjusted to no more than 1.2 times the percentage
set forth opposite the applicable Volatility in the Cushion/Volatility
Matrix, which percentage shall be adjusted back to the percentage set forth
opposite the applicable Volatility in the Cushion/Volatility Matrix after
sixty calendar days, or such lower Cushion as determined by the Warranty
Provider in its sole discretion, (y) in the case of any adjustment resulting
from clause (ii) above, there have been sixty consecutive calendar days on
which the Tracking Error does not exceed 8%, or (z) in the case of clause
(iii) above, the Warranty Provider otherwise determines in its sole
discretion.
(d) If at any time during the Protected Period the allocation to the Equity
Portfolio exceeds the Maximum Equity Component, the Adviser shall cause the
Fund to not acquire any additional Eligible Equity Investments until after
the allocation to the Equity Portfolio has been reduced to below the Maximum
Equity Component.
(e) Notwithstanding any other provision hereof, if the Warranty Provider
determines in its reasonable discretion that the Fund is not complying with
any Portfolio Requirement, the Warranty Provider shall have the right to
notify the Adviser of such violation and direct the Adviser to promptly take
such action as the Warranty Provider shall determine in its reasonable
discretion to be necessary to cause the Fund to comply with the Portfolio
Requirements (it being understood that the Warranty Provider shall not be
entitled to direct the Adviser to sell any specific equity security unless
such equity security is not an Eligible Equity Investment).
(f) On each Exchange Business Day, the Calculation Agent shall calculate
the Aggregate Excess as of the close of business on the prior Exchange
Business Day based on the report received from the Custodian and shall report
such calculation to the Adviser by 1:00 p.m. on such Exchange Business Day.
Notwithstanding any of the provisions herein relating to adjustment of the
Cushion, if, as of the close of business on any Exchange Business Day, the
Aggregate Excess is greater than zero, then the Warranty Provider may, upon
notice to the Adviser and in its sole discretion, further adjust the Cushion
in effect for such day such that the Cushion, after giving effect to such
adjustment, equals the sum of (i) the Aggregate Excess and (ii) the product
of (A) the Cushion in effect prior to any adjustment under this Section
3.3(f) and (B) 1 minus the Aggregate Excess.
Section 3.4. REPORTS; ACCESS TO INFORMATION.
(a) (1) No later than 9:30 a.m. (Eastern time) on each Exchange Business
Day, the Adviser shall transmit to the Warranty Provider the Daily Report for
such date reflecting the calculations performed by the Adviser for the prior
Exchange Business Day in accordance with Section 3.3(b). Such Daily Report
shall specify whether any portion of the Total NAV has been determined
pursuant to fair value pricing, identifying the particular portfolio security
or securities that were valued using fair value pricing and the procedures
used to make such determination, and which shall also include the information
described below in each case as of the close of business on such Exchange
Business Day:
(i) the Market Value of the Equity Portfolio and the percentage that the
Market Value of the Equity Portfolio represents of Total NAV;
(ii) the number of Class Y shares of the Underlying Fund held by the Fund;
(iii) the percentage of the Total NAV of the Fund allocated to Cash and Cash
Equivalents;
(iv) the Market Value of the Fixed-Income Portfolio;
(v) a list of all of the Eligible Fixed-Income Investments held by the
Fund, including the Market Value of each such security and the percentage
each such security represents of the Total NAV of the Fund;
(vi) the Total NAV of the Fund and whether any portion of the Total NAV of
the Fund has been determined pursuant to fair value pricing, identifying the
particular portfolio security or securities that were valued using fair value
pricing and the procedures used to make such determination;
(vii) the Shares Outstanding for each Class of Shares;
(viii) the NAV per Share for each Class of Shares;
(ix) the Protected Amount Per Share for each Class of Shares; and
(x) a list of all Ineligible Investments held by the Fund, if any.
(2) On the second to last Exchange Business Day of each
week, the Daily Report shall also include as of the close of business on the
last Exchange Business Day of the prior week, the Equity Portfolio Sector
Weighting and the Equity Portfolio Weighting with respect to the prior week;
provided, however, that if at any time after the delivery of such Daily
Report the Adviser becomes aware of a change in any item reported in such
Daily Report that would cause a change in the calculation of the Equity
Portfolio Sector Weighting or the Equity Portfolio Weighting, the Adviser
shall immediately notify the Warranty Provider of such change.
(3) On the last Exchange Business Day of each month, the
Adviser shall transmit to the Warranty Provider a report identifying the Fund
Portfolio as of the last Exchange Business Day of the month ended three
months prior to such month.
(b) If on any Exchange Business Day the Adviser shall fail to reallocate
the Fund Portfolio in accordance with Section 3.3(b), the Adviser shall
provide the Warranty Provider with written notice of such failure prior to
9:00 a.m. (Eastern time) on the following Exchange Business Day and, if
applicable, written notice of the cure of such failure.
(c) The Adviser shall cause the Custodian to provide to the Warranty
Provider electronically in a format reasonably acceptable to the Warranty
Provider not later than 9:00 a.m. (Eastern time) on each Exchange Business
Day (i) a copy of the records it maintains with respect to the assets of the
Fund as of the close of business on the prior Exchange Business Day and
(ii) a list of all of the Fund's trades during such prior Exchange Business
Day (such Exchange Business Day, a "Trade Date").
(d) The Adviser shall arrange for the Warranty Provider to be able to
continuously view and monitor the Fund Portfolio by causing the Custodian to
give the Warranty Provider access to the JPM VIEWS System. If the Warranty
Provider is denied such access at any time, the Warranty Provider may, in its
sole discretion, adjust the Cushion until such time as such access is
restored; provided, that the Cushion shall not be reduced if the Adviser
provides the Warranty Provider with an alternative source of the information
provided by the JPM VIEWS System that is acceptable to the Warranty Provider
in its reasonable discretion. The Warranty Provider shall notify the Adviser
and the Fund of the Warranty Provider's exercise of remedies pursuant to this
Section 3.4(d).
Section 3.5. INTENT. The economic intent of the Portfolio Requirements
is to ensure that the Fund's Net Assets are at least equal to the Aggregate
Protected Amount on the Maturity Date. The Fund will not use leverage
(excepting from the scope of the term "leverage," Loans for Temporary or
Emergency Purposes); provided, that the foregoing restriction shall not be
deemed to apply to the Underlying Fund. To the extent that the instruments
which the Fund is permitted to invest in have implicit, embedded or synthetic
leverage, the Portfolio Requirements are intended to prevent the Adviser from
using such implicit, embedded or synthetic leverage to materially increase
the loss that the Fund would experience in the event of a decline in the
Fund's Net Assets, compared to a fully invested portfolio that did not
include such investments.
ARTICLE IV.
TRIGGER EVENTS
Section 4.1. TRIGGER EVENTS.
(a) The following events shall constitute Trigger Events hereunder;
provided, however, that in the event the New York Stock Exchange closes early
on any Exchange Business Day due to extraordinary or other circumstances (an
"Early Close Exchange Business Day"), the cure periods specified in this
Section 4.1(a) will be automatically extended such that on the next Exchange
Business Day following the Early Close Exchange Business Day, the cure
periods will continue for the amount of time lost on such Early Close
Exchange Business Day due to such early close (the "Extended Cure Time") (for
the avoidance of doubt, should the next Exchange Business Day following the
Early Close Exchange Business Day also be an Early Close Exchange Business
Day, the cure period will continue for as long as Extended Cure Time remains):
(i) Any failure at any time to comply with the covenant set forth in the
first sentence of Section 3.1;
(ii) Any failure at any time to comply with the provisions of
Section 3.2(a)(i), if such failure is not cured (A) on the Exchange Business
Day on which the Adviser becomes aware of such violation if the Adviser
becomes aware of such violation prior to 1:00 p.m. on such Exchange Business
Day, and (B) by 12:00 p.m. on the Exchange Business Day following the
Exchange Business Day on which the Adviser becomes aware of such violation,
if the Adviser becomes aware of such violation subsequent to 1:00 p.m. on
such first Exchange Business Day; provided, that the Adviser shall be deemed
to be aware of such violation if such violation has been in existence for
three Exchange Business Days;
(iii) Any failure at any time to comply with Section 3.3(c);
(iv) Any failure at any time to comply with Section 3.2(a)(ii) or
Section 3.3 (other than Section 3.3(c)), unless cured by the end of the
Exchange Business Day following the Exchange Business Day on which such
violation occurred;
(v) Any violation of Article III (other than a violation of Section 3.4(d)
arising because the Warranty Provider was denied access to the JPM VIEWS
System during a Force Majeure Event that affected such access) that is not
provided for in clause (i), (ii), (iii) or (iv) above unless cured by the end
of the Exchange Business Day following the Exchange Business Day on which the
Adviser becomes aware of such violation; provided, that the Adviser shall be
deemed to be aware of such violation if such violation has been in existence
for three Exchange Business Days;
(vi) Any violation of Section 3.4(d) arising because the Warranty Provider
was denied access to the JPM VIEWS System during a Force Majeure Event that
affected such access and the Adviser is aware of such violation, unless (A)
cured by the end of the third Exchange Business Day following the Exchange
Business Day on which such violation occurred or (B) another arrangement that
is acceptable to the Warranty Provider is established by the end of the third
Exchange Business Day following the Exchange Business Day on which such
violation occurred;
(vii) The Fund shall fail to pay the Financial Warranty Fee when due as
provided in Section 2.4 and such failure shall continue unremedied for a
period of two Business Days after notice of such failure from the Warranty
Provider to the Trust or the Adviser;
(viii) The Adviser resigns, the Fund elects to terminate the Investment
Management Agreement with the Adviser or the Investment Management Agreement
terminates in accordance with its terms and any successor adviser that agrees
to be bound by the terms of this Agreement is not acceptable to the Warranty
Provider in its reasonable discretion after considering the reputation of the
successor adviser, its experience in managing equity portfolios and fixed
income portfolios, its size, its financial condition, its ability to manage
the Fund Portfolio in accordance with the Registration Statement and its
ability to comply with the Adviser's obligations under this Agreement and the
Transaction Documents to which it is a party; provided, that if the successor
adviser is the Adviser or an Affiliate of the Adviser, such successor adviser
shall be deemed acceptable by the Warranty Provider;
(ix) The Adviser resigns, the Fund elects to terminate the Investment
Management Agreement with the Adviser or the Investment Management Agreement
terminates in accordance with its terms and either (i) the Adviser is no
longer obligated to manage the Fund pursuant to the terms of the Investment
Management Agreement and none of (A) a successor investment adviser
acceptable to the Warranty Provider, (B) the Adviser or (C) an Affiliate of
the Adviser has entered into an investment management agreement with the
Trust on behalf of the Fund or (ii) the termination of the Investment
Management Agreement is not yet effective but the Board of Trustees of the
Trust on behalf of the Fund has indicated its intention to the Warranty
Provider, or taken any further action, to appoint a successor investment
adviser other than the Adviser or an Affiliate of the Adviser notwithstanding
the fact that the Warranty Provider has advised the Board of Trustees that
such successor investment adviser would not be acceptable to the Warranty
Provider based upon the standards included in Section 4.1(a)(viii), then in
either such case a Trigger Event shall be deemed to have occurred
notwithstanding the fact that a successor investment adviser has not yet been
appointed;
(x) The Adviser does not, in all material respects, manage the assets of
the Fund in accordance with the investment objective, policies and strategies
set forth in the then-current Registration Statement;
(xi) Any representation or warranty made by the Adviser or the Fund, in any
Transaction Document or in any document or certification provided in
connection with any Transaction Document, shall have been incorrect or
misleading when made or when deemed made, except where such incorrect or
misleading representation or warranty would not have an Adverse Effect in
respect of the Adviser or Fund;
(xii) The Equity Limit for a Class of Shares is less than 0.025;
(xiii) The Adviser, the Fund or the Custodian shall fail to perform any
obligation, or shall breach any covenant, under this Agreement or the
Transaction Documents that is not expressly provided for in clauses (i),
(ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) or (xi) above, which
failure could reasonably be expected to have an Adverse Effect in respect of
the Adviser or Fund and such violation, if capable of being remedied, shall
continue unremedied for a period of three Business Days after the Adviser or
the Custodian, as the case may be, becomes aware of the occurrence of such
failure; provided, that the Adviser or the Custodian, as the case may be,
shall be deemed to be aware of such violation if such violation has been in
existence for three Exchange Business Days; or
(xiv) The occurrence of any of the following: (A) a Regulatory Event, (B)
the Adviser becomes aware of a Litigation Event (other than a Litigation
Event commenced against the Adviser or the Fund arising out of a claim under
this Agreement between the Adviser and/or the Trust on behalf of the Fund on
one side and the Warranty Provider on the other side); provided, that the
Adviser shall be deemed to be aware of a Litigation Event if such Litigation
Event has been in existence for three Exchange Business Days or (C) an Act of
Insolvency occurs with respect to the Adviser or the Fund.
(b) Notwithstanding any other provision hereof, if an event has occurred
and is continuing, which, if not cured or waived would give rise to a Trigger
Event, then the Adviser may not cause the Fund to acquire any additional
Eligible Equity Investments until such event is cured and shall upon becoming
aware of such event immediately notify the Warranty Provider of such event,
which notice shall include a description of the manner in which the Adviser
intends to cure such event ("Curative Steps"), the Adviser's assessment of
the likelihood of success, the time the Adviser expects to elapse before such
event is cured, and such other information as the Warranty Provider may
reasonably request. Upon sending such notice to the Warranty Provider, the
Adviser shall immediately take the Curative Steps set forth in such notice
unless and until such time as the Warranty Provider notifies the Adviser that
it objects to such Curative Steps, in which case the Adviser shall
immediately cease the implementation of such Curative Steps. The Warranty
Provider shall only object to such Curative Steps if in the Warranty
Provider's reasonable discretion, they are not consistent with this Agreement
or are not likely to be an effective cure of the Potential Trigger Event
within the cure period set forth in Section 4.1(a), if any. If the Adviser
violates this Section 4.1(b), then a Trigger Event shall be deemed to have
occurred.
(c) If a Trigger Event occurs and is continuing past the cure period
specified therein (if applicable), then, at the election of the Warranty
Provider in its sole discretion, the Warranty Provider shall have the right
to (i) direct the Adviser or the Custodian, as selected by the Warranty
Provider, to invest all of the Fund's assets in accordance with
Section 4.2(a) (a "Permanent Defeasance Event") or (ii) adjust the Cushion.
Any such adjustment shall be permanent, unless and until further adjusted by
the Warranty Provider in its sole discretion. The Warranty Provider shall
notify the Adviser and the Fund of the Warranty Provider's exercise of
remedies pursuant to this Section 4.1(c) prior to such exercise.
(d) In the event of (i) an act or omission on the part of the Adviser which
constitutes negligence, recklessness, bad faith or willful misconduct,
including by way of example only and not intended as an exhaustive list, if
(A) the Adviser causes the Fund to purchase additional Eligible Equity
Investments in violation of Sections 3.3(d) and 4.1(b), (B) there is a
violation of Section 3.2(a)(i) or (ii), or (C) the Adviser causes the Fund to
purchase investments other than those permitted to be invested in the event
of a Permanent Defeasance Event in violation of Sections 4.1(c)(i) and 4.2(a)
(such conduct referenced in subsection (i) of this Section 4.1(d), the
"Adviser Conduct"), and (ii) the existence of a PV Shortfall, the Adviser
agrees to pay to the Warranty Provider an amount equal to the amount of such
PV Shortfall determined as provided in this Section 4.1(d) to have been
directly or indirectly attributable to such Adviser Conduct. The amount of
such PV Shortfall directly or indirectly attributable to the Adviser Conduct
shall be equal to the sum of the differences with respect to each Class of
Shares, if negative, between (a) the actual NAV Per Share as of the date of
determination and (b) the hypothetical NAV Per Share of a hypothetical
portfolio comprised of the actual portfolio assets as of the date of
determination adjusted to eliminate the effect of the Adviser Conduct to the
extent necessary to eliminate any PV Shortfall directly or indirectly
attributable to such Adviser Conduct. In making the determination of the PV
Shortfall, the hypothetical portfolio will be based on the actual portfolio
of assets as of the date of determination adjusted to bring the portfolio
into compliance with all of the restrictions of Section 3.2 hereof, by
decreasing and increasing positions in the Equity Portfolio and the Fixed
Income Portfolio, as the case may be, on a pro rata basis, or re-allocating
positions within the Fixed Income Portfolio. The Warranty Provider shall
notify (the "Determination Notice") the Adviser in writing of its
determination of such PV Shortfall directly or indirectly attributable to the
Adviser Conduct. If the Adviser disagrees with the Warranty Provider's
determination of the PV Shortfall directly or indirectly attributable to the
Adviser Conduct contained in the Determination Notice, then (i) the Adviser
shall notify (the "Objection Notice") the Warranty Provider in writing of
such disagreement within three Business Days after the delivery by the
Warranty Provider of the Determination Notice and (ii) unless the Adviser and
the Warranty Provider otherwise agree on the amount of such PV Shortfall
directly or indirectly attributable to the Adviser Conduct, the amount
thereof shall be determined by arbitration in accordance with the procedures
set forth in Section 4.1(e). If the Adviser does not provide the Warranty
Provider with the Objection Notice within such three Business Day period,
then the Adviser shall be deemed to have agreed to the Warranty Provider's
determination of the PV Shortfall directly or indirectly attributable to the
Adviser Conduct contained in the Determination Notice. Any amount payable by
the Adviser under this Section 4.1(d) with respect to certain Adviser Conduct
(i) shall be paid to the Fund or alternatively to the Warranty Provider
within three Business Days of the delivery of the Determination Notice or, if
such PV Shortfall is determined pursuant to an arbitration proceeding, within
three Business Days after such final arbitration decision, and shall increase
the Total NAV and decrease the PV Shortfall in the amount of any such
payments made to the Fund; provided that should the parties otherwise agree
on such PV Shortfall, such PV Shortfall shall be paid to the Fund or
alternatively to the Warranty Provider within three Business Days of such
agreement; and (ii) shall be reduced by any amounts paid by the Adviser to
the Fund as a result of the same Adviser Conduct to the extent that the Total
NAV is increased and the PV Shortfall is in fact decreased by such amount.
In the event that the Adviser fails to pay to the Fund or the Warranty
Provider any amounts payable under this Section 4.1(d) within the time period
specified herein, the Shortfall Amount shall be decreased on a pro rata basis
by the percentage of the PV Shortfall directly or indirectly attributable to
the Adviser Conduct. Notwithstanding anything contained in this
Section 4.1(d) to the contrary, solely for purposes of this Section 4.1(d),
the Adviser shall not be deemed to have committed Adviser Conduct and
consequently shall not be liable for any payment under this Section 4.1(d) if
(a) a Potential Trigger Event occurs and (b) such Potential Trigger Event is
cured or waived within the cure period specified in Section 4.1(a) for the
cure of such Potential Trigger Event. The payment of the PV Shortfall amount
by the Adviser to the Warranty Provider pursuant to this Section 4.1(d) is in
addition to, and not in lieu of, any obligations of the Adviser or Fund to
indemnify the Warranty Provider under this Agreement.
(e) In the event that the terms of Section 4.1(d) provide for arbitration,
each of the Warranty Provider and the Adviser shall select one arbitrator
within seven Business Days after the delivery by the Adviser of the Objection
Notice; provided, however, that if either of such parties shall fail to
select an arbitrator within such period, such arbitrator shall be appointed
by the American Arbitration Association. The two arbitrators selected shall
select a third arbitrator within five Business Days after each of such
arbitrators have been selected or, if they shall be unable to agree on a
third arbitrator within such time, such third arbitrator shall be appointed
by the American Arbitration Association. Each arbitrator shall be of
exemplary qualifications and stature, and no person affiliated with any party
hereto shall be eligible to be an arbitrator. The arbitration shall be held
in New York, New York and be governed by the Commercial Arbitration Rules of
the American Arbitration Association and the decision of a majority of the
arbitrators shall be final, binding and subject to judicial enforcement and
with respect to the specific Adviser Conduct that is the subject of such
arbitration decision, shall be the exclusive remedy of the Warranty Provider;
provided, however, that, notwithstanding the foregoing, the Warranty Provider
shall not be limited from seeking indemnification under Section 5.2(a)(iii)
and (a)(v) hereof. Fees and expenses of the arbitration (including fees and
expenses of the arbitrators) shall be shared by the parties to the
arbitration equally.
Section 4.2. DEFEASANCE PORTFOLIO. (a) If the Warranty Provider
exercises the remedy provided by Section 4.1(c)(i) upon a Permanent
Defeasance Event, the Warranty Provider shall have the right to cause the
Adviser to immediately allocate all of the assets of the Fund to the
Fixed-Income Portfolio (the "Defeasance Portfolio"). In addition to or in
lieu of the remedy provided in the immediately preceding sentence, at any
time after the occurrence of a Permanent Defeasance Event, the Warranty
Provider may, at its election in its sole discretion, cause the Custodian to
invest all of the assets of the Fund in U.S. Zeroes (other than in connection
with sales of portfolio investments for Cash and/or Cash Equivalents after
receipt by the Fund of redemption requests in order to meet such requests or
in connection with the payment of Fund fees). The Financial Warranty Fee
shall remain due and payable in accordance with Section 2.4 notwithstanding
the occurrence of a Permanent Defeasance Event. The Adviser shall provide
the Warranty Provider upon the issuance of the Financial Warranty with an
irrevocable instruction, in the form of Annex A to the Service Agreement,
executed by the Adviser which shall constitute the Warranty Provider's
direction to the Custodian pursuant to this Section 4.2(a) and the Service
Agreement. The irrevocable instruction shall also constitute a limitation of
the further authority of the Adviser (including any subadviser of the Fund)
to manage the Fund's assets other than in accordance with the irrevocable
instruction. If the Warranty Provider elects to provide instructions to the
Custodian pursuant to this Section 4.2(a) following a Permanent Defeasance
Event, the Warranty Provider shall do so by delivering the irrevocable
instruction to the Custodian. The Warranty Provider shall only deliver such
instruction to the Custodian following a Permanent Defeasance Event and after
notice thereof to the Adviser.
(b) If a Permanent Defeasance Event shall have occurred, the Adviser shall
immediately cause maximum Fund Fees and Expenses (excluding Extraordinary
Expenses) to be reduced to 1.30% per annum of the average daily Net Assets of
the Fund for the Class A Shares, 2.05% per annum of the average daily Net
Assets of the Fund for the Class B Shares and 2.05% per annum of the average
daily Net Assets of the Fund for the Class C Shares.
ARTICLE V.
INDEMNIFICATION
Section 5.1. SURVIVAL. Except as otherwise specifically provided in
this Agreement, all representations, warranties, covenants and other
agreements contained herein, including, without limitation, the
indemnification obligations in Section 5.2, shall survive the execution and
delivery of this Agreement and the Financial Warranty, and the Termination
Date.
Section 5.2. INDEMNIFICATION. (a) The Adviser agrees to indemnify and
hold harmless the Warranty Provider, its Affiliates, and their respective
employees, officers, directors and agents (collectively, the "Warranty
Provider Parties") from and against any and all losses, claims, damages,
liabilities, judgments, costs (including reasonable attorneys' fees),
expenses (including expenses of investigation and enforcement) and
disbursements (collectively, "Losses") incurred or suffered by any of them in
connection with or arising out of (i) any material breach or alleged breach
of any warranty, or the inaccuracy of any representation, as the case may be,
made by either of the Adviser or the Fund under this Agreement or any of the
other Transaction Documents to which it is a party, (ii) the failure of
either of the Adviser (including any subadviser of the Fund) or the Fund to
fulfill any agreement or covenant contained in this Agreement or any of the
other Transaction Documents to which it is a party, including the failure to
pay to the Warranty Provider any amounts pursuant to Section 4.1(d) but
excluding any Portfolio Requirement as to which a cure period is provided in
Section 4.1(a) if such Portfolio Requirement is satisfied within such cure
period, (iii) the enforcement or preservation of any of the Warranty
Provider's rights under this Agreement and the other Transaction Documents,
(iv) the improper payment of the Aggregate Shortfall Amount, including by
reason of mistake, fraud or error in calculation; provided, however, that the
Warranty Provider Parties shall not be entitled to indemnification for any
such improper payment to the extent that (A) such improper payment was a
result of the fault of a Warranty Provider Party and (B) due to either
shareholder redemptions or market fluctuations, such improper payment (or any
portion thereof) allocable to such shareholder redemptions or market
fluctuations on a pro rata basis, no longer constitute assets of the Fund,
(v) the improper calculation of Total NAV of the Fund or each Class of Shares
of the Fund by reason of mistake, fraud or error in calculation thereof, and
(vi) any claim, suit or demand involving (A) the transactions contemplated by
the Transaction Documents, (B) any investigation or defense of, or
participation in, any legal proceeding relating to the execution, delivery,
enforcement, performance or administration of the Transaction Documents, or
(C) an allegation or other claim that the Registration Statement or any
Prospectus included any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading other than with respect to any information relating to
the Warranty Provider included in the Registration Statement, which has been
provided by the Warranty Provider in writing for inclusion therein; provided,
however, that the Adviser shall not be liable for that portion of Losses
resulting directly or indirectly from any action or omission on the part of
any of the Warranty Provider Parties which constitutes gross negligence,
recklessness, bad faith or willful misconduct by such Warranty Provider
Party; provided, further, that in the case of subsections (vi)(A) and (B) of
this Section 5.2(a), the Adviser shall not be liable for any Losses incurred
by the Warranty Provider in connection with any claim, suit or demand
initiated by the Warranty Provider or any of its Affiliates to the extent
such claim, suit or demand is finally adjudicated by a final non-appealable
judgment of a court of competent jurisdiction or settled in the Adviser's
favor. The Adviser agrees to promptly reimburse any of the Warranty Provider
Parties for all Losses in respect of which indemnification may be sought by
such Warranty Provider Party hereunder as they are incurred or suffered by
such Warranty Provider Party. For the avoidance of doubt, and not by way of
limitation, the parties hereby acknowledge and agree that the indemnification
obligations of the Adviser for any breach of any warranty, any inaccuracy of
any representation and any failure to fulfill any agreement or covenant under
subsections (i) and (ii) above shall not apply in the case of disputes
between the Adviser and one or more Warranty Provider Parties unless such
dispute has been determined substantially in favor of the Warranty Provider
Party or Parties by a court of competent jurisdiction.
(b) The Trust agrees to indemnify and hold harmless the Warranty Provider
Parties from and against any and all Losses incurred or suffered by any of
them in connection with or arising out of (i) any material breach or alleged
breach of any warranty, or the inaccuracy of any representation, as the case
may be, made by the Trust on behalf of the Fund under this Agreement or any
of the other Transaction Documents to which it is a party, (ii) the failure
of the Fund to fulfill any agreement or covenant of the Fund (or the Trust on
behalf of the Fund) contained in this Agreement or any of the other
Transaction Documents to which it is a party, excluding any Portfolio
Requirement as to which a cure period is provided in Section 4.1(a) if such
Portfolio Requirement is satisfied within such cure period, (iii) the
enforcement or preservation of any of the Warranty Provider's rights under
this Agreement and the other Transaction Documents, (iv) the improper payment
of the Aggregate Shortfall Amount, including by reason of mistake, fraud or
error in calculation; provided, however, that the Warranty Provider Parties
shall not be entitled to indemnification for any such improper payment to the
extent that (A) such improper payment was a result of the fault of a Warranty
Provider Party and (B) due to either shareholder redemptions or market
fluctuations, such improper payment (or any portion thereof) allocable to
such shareholder redemptions or market fluctuations on a pro rata basis no
longer constitute assets of the Fund, (v) the improper calculation of Total
NAV of the Fund or each Class of Shares of the Fund by reason of mistake,
fraud or error in calculation thereof and (vi) any claim, suit or demand
involving (A) the transactions contemplated by the Transaction Documents,
(B) any investigation or defense of, or participation in, any legal
proceeding relating to the execution, delivery, enforcement, performance or
administration of the Transaction Documents, or (C) an allegation or other
claim that the Registration Statement or any Prospectus included any untrue
statement of a material fact or omitted to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading other than with
respect to any information relating to the Warranty Provider included in the
Registration Statement, which has been provided by the Warranty Provider in
writing for inclusion therein; provided, however, that the Fund shall not be
liable for that portion of Losses resulting directly or indirectly from any
action or omission on the part of any of the Warranty Provider Parties which
constitutes gross negligence, recklessness, bad faith or willful misconduct
by such Warranty Provider Party; provided, further, that in the case of
subsections (vi)(A) and (B) of this Section 5.2(b), the Fund shall not be
liable for any Losses incurred by the Warranty Provider in connection with
any claim, suit or demand initiated by the Warranty Provider or any of its
Affiliates to the extent such claim, suit or demand is finally adjudicated by
a final non-appealable judgment of a court of competent jurisdiction or
settled in the Fund's favor. The Fund agrees to promptly reimburse any of
the Warranty Provider Parties for all Losses in respect of which
indemnification may be sought by such Warranty Provider Party hereunder as
they are incurred or suffered by such Warranty Provider Party. For the
avoidance of doubt, and not by way of limitation, the parties hereby
acknowledge and agree that the indemnification obligations of the Trust for
any breach of any warranty, any inaccuracy of any representation and any
failure to fulfill any agreement or covenant under subsections (i) and (ii)
above shall not apply in the case of disputes between the Trust and one or
more Warranty Provider Parties unless such dispute has been determined
substantially in favor of the Warranty Provider Party or Parties by a court
of competent jurisdiction.
(c) The Warranty Provider agrees to indemnify and hold harmless the
Adviser and the Trust, their Affiliates, and their respective employees,
officers, directors, trustees and agents (collectively, the "Fund Parties")
from and against any and all Losses incurred or suffered by any of them in
connection with or arising out of (i) any material breach of any warranty, or
the inaccuracy of any representation made by the Warranty Provider under this
Agreement or any other Transaction Document to which it is a party, (ii) the
failure of the Warranty Provider to fulfill any agreement or covenant
contained in this Agreement or any other Transaction Document to which it is
a party, or (iii) the Warranty Provider's failure to pay the Aggregate
Shortfall Amount, if any, required to be paid by it under the Financial
Warranty in accordance with the terms of this Agreement or any other
Transaction Document to which it is a party, including by reason of the
Calculation Agent failing to provide to the Adviser or the Fund a certificate
certifying the calculation of the Aggregate Shortfall Amount within three
Business Days following the Maturity Date or if the Aggregate Shortfall
Amount determined by the Calculation Agent and included in such certificate
is wrong; provided, that the Warranty Provider shall not be liable for that
portion of Losses resulting, directly or indirectly, from any action or
omission on the part of any of the Fund Parties which constitutes negligence,
recklessness, bad faith or willful misconduct by such Fund Party. The
Warranty Provider agrees to promptly reimburse any of the Fund Parties for
all Losses in respect of which indemnification may be sought by such Fund
Party hereunder as they are incurred or suffered by such Fund Party. For the
avoidance of doubt, and not by way of limitation, the parties hereby
acknowledge and agree that the indemnification obligations of the Warranty
Provider for any breach of any warranty, any inaccuracy of any representation
and any failure to fulfill any agreement or covenant under subsections (i)
and (ii) above shall not apply in the case of disputes between the Warranty
Provider and one or more Fund Parties unless such dispute has been determined
substantially in favor of the Fund/Adviser Party or Parties by a court of
competent jurisdiction.
Section 5.3. INDEMNIFICATION PROCEDURE. (a) The party or parties being
indemnified are referred to herein as the "Indemnified Party" and the
indemnifying party is referred to herein as the "Indemnifying Party." In the
event that any party shall incur or suffer any Losses in respect of which
indemnification may be sought by such party hereunder, the Indemnified Party
shall assert a claim for indemnification by written notice ("Notice") to the
Indemnifying Party stating the nature and basis of such claim. In the case
of Losses arising by reason of any third party claim, the Notice shall be
given within thirty (30) days of the filing or other written assertion of any
such claim against the Indemnified Party, but the failure of the Indemnified
Party to give the Notice within such time period shall not relieve the
Indemnifying Party of any liability that the Indemnifying Party may have to
the Indemnified Party, except to the extent that the Indemnifying Party
demonstrates that the defense of such action has been prejudiced by the
Indemnified Party's failure to give such notice.
(b) In the case of third party claims for which indemnification is sought,
the Indemnifying Party shall have the option (i) to conduct any proceedings
or negotiations in connection therewith, (ii) to take all other steps to
settle or defend any such claim (provided that the Indemnifying Party shall
not settle any such claim without the consent of the Indemnified Party (which
consent shall not be unreasonably withheld or delayed)), and (iii) to employ
counsel to contest any such claim or liability in the name of the Indemnified
Party or otherwise. In any event, the Indemnified Party shall be entitled to
participate at its own expense and by its own counsel in any proceedings
relating to any third party claim. The Indemnifying Party shall, within
twenty (20) days of receipt of the Notice, notify the Indemnified Party of
its intention to assume the defense of such claim. If (i) the Indemnifying
Party shall decline to assume the defense of any such claim, (ii) the
Indemnifying Party shall fail to notify the Indemnified Party within twenty
(20) days after receipt of the Notice of the Indemnifying Party's election to
defend such claim or (iii) the Indemnified Party shall have reasonably
concluded that there may be defenses available to it which are different from
or in addition to those available to the Indemnifying Party or a conflict
exists between the Indemnifying Party and the Indemnified Party (in which
case the Indemnifying Party shall not have the right to direct the defense of
such action on behalf of the Indemnified Party), the Indemnified Party shall
defend against such claim and the Indemnified Party may settle such claim
without the consent of the Indemnifying Party, and the Indemnifying Party may
not challenge the reasonableness of any such settlement. The expenses of all
proceedings, contests or lawsuits in respect of such claims shall be borne
and paid by the Indemnifying Party (up to a limit of one counsel in the case
of attorneys' fees) and the Indemnifying Party shall pay the Indemnified
Party, in immediately available funds, as such Losses are incurred upon
receipt of supporting documentation thereof. Regardless of which party shall
assume the defense of the claim, the parties agree to cooperate fully with
one another in connection therewith. In the event that any Losses incurred
by the Indemnified Party do not involve payment by the Indemnified Party of a
third party claim, then, the Indemnifying Party shall pay, within ten (10)
days after agreement on the amount of Losses or the occurrence of a final
non-appealable determination of such amount payable, to the Indemnified
Party, in immediately available funds, the amount of such Losses. Anything
in this Section 5.3 to the contrary notwithstanding, the Indemnifying Party
shall not, without the Indemnified Party's prior written consent, settle or
compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the Indemnified Party or which does
not include, as an unconditional term thereof, the giving by the claimant or
plaintiff to the Indemnified Party, a release from all liability in respect
of such claim.
(c) The remedies provided for in this Article V shall not be exclusive of
any other rights or remedies available to one party against the other, either
at law or in equity.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES
Section 6.1. REPRESENTATIONS AND WARRANTIES OF THE ADVISER. To induce
the Warranty Provider to enter into this Agreement and to issue the Financial
Warranty, the Adviser hereby represents and warrants to the Warranty Provider
as follows, on and as of the effective date hereof:
(a) The Adviser (i) is a corporation duly organized, validly existing and
in good standing under the laws of the State of Colorado, (ii) has the power
and authority to own its assets and to transact the business in which it is
engaged, (iii) is duly qualified to do business and is in good standing under
the laws of each jurisdiction where its ownership or lease of property or the
conduct of its business requires such qualification, except where the failure
to so qualify would not have an Adverse Effect in respect of the Adviser and
(iv) is in compliance with all Requirements of Law, except where
non-compliance would not have an Adverse Effect in respect of the Adviser.
(b) The Adviser has the power and authority to execute, deliver and perform
the Transaction Documents to which it is a party and has taken all necessary
action required by applicable Requirements of Law to authorize the execution,
delivery and performance of the Transaction Documents to which it is a
party. Except as has been obtained, no consent or authorization of, filing
with, or other act by or in respect of, any Government Authority is required
in connection with the execution, delivery, performance, validity or
enforceability by or against the Adviser of the Transaction Documents to
which it is a party, except for such consents, authorizations, filings or
acts the absence of which would not have an Adverse Effect in respect of the
Adviser. This Agreement has been, and each other Transaction Document to
which the Adviser is a party will be, duly executed and delivered on behalf
of the Adviser. This Agreement constitutes, and each other Transaction
Document to which the Adviser is a party, when executed and delivered, will
constitute, a legal, valid and binding obligation of the Adviser enforceable
against it in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
(c) The execution, delivery and performance by the Adviser of the
Transaction Documents to which it is a party do not and will not violate any
Requirement of Law or Contractual Obligation of the Adviser and will not
result in, or require, the creation or imposition of any Lien on any of its
property, assets or revenues, except where such violation or Lien would not
reasonably be expected to have an Adverse Effect in respect of the Adviser.
The Adviser is not in violation of any Contractual Obligation, except where
such violation would not reasonably be expected to have an Adverse Effect in
respect of the Adviser.
(d) No litigation, proceeding or investigation of or before any arbitrator
or Governmental Authority is pending or, to the Adviser's knowledge,
threatened (i) asserting the invalidity or unenforceability of any of the
Transaction Documents, (ii) seeking to prevent the consummation of any of the
transactions contemplated by the Transaction Documents or (iii) seeking any
determination or ruling that would reasonably be expected to have an Adverse
Effect in respect of the Adviser.
(e) The Adviser is duly registered with the Commission as an investment
adviser under the Investment Advisers Act; and to the best of the Adviser's
knowledge, there does not exist any proceeding or any facts or circumstances
the existence of which could adversely affect the registration of the Adviser
with the Commission; the Adviser is not prohibited by any provision of the
Investment Advisers Act or the Investment Company Act, or the respective
rules and regulations thereunder, from acting as an investment adviser of the
Fund as contemplated hereunder.
(f) All factual information prepared and furnished by or on behalf of the
Adviser to the Warranty Provider (whether prepared by the Adviser or any
other Person) for purposes of or in connection with this Agreement, any
Transaction Document or any transaction contemplated hereby or thereby is
true and accurate in all material respects on the date as of which such
information is dated or certified and such information taken as a whole does
not omit to state any material fact necessary to make such information in the
context in which it is furnished not misleading.
(g) To the best of the Adviser's knowledge, no statute, rule, regulation or
order, in each case applicable to the Adviser, has been enacted or deemed
applicable by any Government Authority which would make the transactions
contemplated by the Transaction Documents illegal or otherwise prevent the
consummation thereof.
Section 6.2. REPRESENTATIONS AND WARRANTIES OF THE TRUST ON BEHALF OF
THE FUND. The Trust on behalf of the Fund hereby represents and warrants to
the Warranty Provider as follows, on and as of the effective date hereof:
(a) The Trust (i) is a business trust duly formed, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts; (ii) has
the power and authority to own its assets and to transact the business in
which it is engaged; (iii) is duly qualified to do business and is in good
standing under the laws of each jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification, except
where the failure to so qualify would not have an Adverse Effect in respect
of the Fund; and (iv) is in compliance with all Requirements of Law, except
where non-compliance would not have an Adverse Effect in respect of the Fund.
(b) The Trust has the power and authority to execute, deliver and perform
the Transaction Documents to which it is a party and has taken all necessary
action required by applicable Requirements of Law to authorize the execution,
delivery and performance of the Transaction Documents to which it is a
party. No consent or authorization of, filing with, or other act by or in
respect of, any Government Authority is required in connection with the
execution, delivery, performance, validity or enforceability by or against
the Fund of the Transaction Documents to which it is a party, other than the
filing under the Acts of the Registration Statement and the Prospectus,
filings in accordance with Blue Sky laws and the requisite approval of the
Trust's Board of Trustees, except for such consents, authorizations, filings
or acts the absence of which would not have an Adverse Effect in respect of
the Trust or the Fund. This Agreement has been, and each other Transaction
Document to which the Trust is a party will be, duly executed and delivered
on behalf of the Fund. This Agreement constitutes, and each other
Transaction Document to which the Trust is a party, when executed and
delivered, will constitute, a legal, valid and binding obligation of the Fund
enforceable against the Fund in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
(c) The execution, delivery and performance by the Fund of the Transaction
Documents to which it is a party does not and will not violate any
Requirement of Law or Contractual Obligation of the Fund and will not result
in, or require, the creation or imposition of any Lien on any of its
property, assets or revenues, except where such violation or Lien would not
have an Adverse Effect in respect of the Fund.
(d) No litigation, proceeding or investigation of, or before any arbitrator
or Governmental Authority is pending or, to the Fund's knowledge, threatened
by or against the Fund or against any of its properties or revenues
(i) asserting the invalidity or unenforceability of this Agreement,
(ii) seeking to prevent the consummation of any of the transactions
contemplated by the Transaction Documents to which it is a party or
(iii) seeking any determination or ruling that would reasonably be expected
to have an Adverse Effect in respect of the Fund.
(e) The Trust is duly registered with the Commission as an open-end
management investment company under the Investment Company Act and has been
operated in compliance in all material respects with the Investment Company
Act and the rules and regulations thereunder.
(f) The Fund is a "diversified" fund within the meaning of the Investment
Company Act.
(g) Shares of each Class of Shares of the Fund in respect of which the
Warranty Provider is providing the Financial Warranty are duly authorized
and, when issued and paid for as contemplated by the Trust's Registration
Statement, will be validly issued, fully paid and nonassessable by the Trust.
(h) All factual information prepared and furnished by or on behalf of the
Fund to the Warranty Provider (whether prepared by the Fund or any other
Person) for purposes of or in connection with this Agreement, any Transaction
Document or any transaction contemplated hereby or thereby is true and
accurate in all material respects on the date as of which such information is
dated or certified and such information taken as a whole does not omit to
state any material fact necessary to make such information in the context in
which it is furnished not misleading.
Section 6.3. REPRESENTATIONS AND WARRANTIES OF THE WARRANTY PROVIDER.
The Warranty Provider hereby represents and warrants to the Adviser and the
Fund as follows, on and as of the effective date hereof:
(a) The Warranty Provider is a limited liability company, duly formed,
validly existing and in good standing under the laws of the State of
Delaware; (i) is duly qualified to do business and is in good standing under
the laws of each jurisdiction where its ownership or lease of property or the
conduct of its business requires such qualification, except where the failure
to so qualify would not have an Adverse Effect in respect of the Warranty
Provider; and (ii) is in compliance with all Requirements of Law, except
where non-compliance would not have an Adverse Effect in respect of the
Warranty Provider.
(b) The Warranty Provider has the power and authority to execute, deliver
and perform its obligations under this Agreement and any other Transaction
Document to which it is a party and has taken all necessary action required
by applicable Requirements of Law to authorize the execution, delivery and
performance of this Agreement and any other Transaction Document to which it
is a party. Except as has been obtained, no consent or authorization of,
filing with, or other act by or in respect of, any Government Authority or
any other Person is required in connection with the execution, delivery,
performance, validity or enforceability by or against the Warranty Provider
of this Agreement or any other Transaction Document to which it is a party.
This Agreement has been, and each other Transaction Document to which it is a
party will be, duly executed and delivered on behalf of the Warranty
Provider. This Agreement constitutes, and each other Transaction Document to
which the Warranty Provider is a party, when executed and delivered, will
constitute, a legal, valid and binding obligation of the Warranty Provider
enforceable against it in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (whether enforcement is sought
by proceedings in equity or at law).
(c) The execution, delivery and performance by the Warranty Provider of
each of this Agreement and any other Transaction Document to which it is a
party does not and will not violate any Requirement of Law or Contractual
Obligation of the Warranty Provider and will not result in, or require, the
creation or imposition of any Lien on any of its property, assets or
revenues, except where such violation or Lien would not reasonably be
expected to have an Adverse Effect in respect of the Warranty Provider. The
Warranty Provider is not in violation of any Contractual Obligation, except
where such violation would not reasonably be expected to have an Adverse
Effect in respect of the Warranty Provider.
(d) No litigation, proceeding or investigation of or before any arbitrator
or Governmental Authority is pending or, to the Warranty Provider's
knowledge, threatened by or against the Warranty Provider (i) asserting the
invalidity or unenforceability of any of this Agreement or any other
Transaction Document to which it is a party, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or any
other Transaction Document to which it is a party or (iii) seeking any
determination or ruling that would reasonably be expected to have an Adverse
Effect in respect of the Warranty Provider.
(e) To the best of the Warranty Provider's knowledge, no statute, rule,
regulation or order has been enacted or deemed applicable by any Government
Authority that would make the transactions contemplated by this Agreement or
any other Transaction Document to which it is a party illegal or otherwise
prevent the consummation thereof.
(f) The financial statements of the Warranty Provider and Bank of America
Corporation and the information provided pursuant to Section 2.3(b)(xii)
herein included in the Fund's Registration Statement when such Registration
Statement was declared effective and any financial statements subsequently
made available to the Fund pursuant to Section 7.3 do not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not misleading,
in each case as of the dates and for the periods referred to in such
statements. Such financial statements fairly present or will fairly present
in all material respects the financial position of the Warranty Provider and
Bank of America Corporation as of the dates and for the periods referred to
therein and in conformity with generally accepted accounting principles
applied on a consistent basis.
ARTICLE VII.
COVENANTS
Section 7.1. COVENANTS OF THE ADVISER. The Adviser hereby covenants and
agrees that through the Termination Date and so long as a drawing is
available under the Financial Warranty:
(a) it shall not amend, supplement, modify, terminate, or agree to any
waiver of any rights with respect to, any of the Transaction Documents (other
than amendments or supplements to the Prospectus pursuant to Rules 485
(excluding certain filings pursuant to Rule 485(a) that are not routine in
nature or that affect the Fund's investment objectives) or 497 under the
Securities Act that do not relate to portfolio investments), without the
prior written consent of the Warranty Provider; provided, that (i) such
consent shall not be withheld if any such amendment, supplement,
modification, termination or agreement does not increase the Warranty
Provider's liabilities or risks or decrease the Warranty Provider's economic
bargain under this Agreement and the Financial Warranty and (ii) such consent
shall be given in a reasonable period of time, taking into consideration
among other things filing deadlines, if any;
(b) other than in connection with the reinvestment of dividends or other
distributions or the transfer of Shares that does not result in an increase
in the Shares that are issued and outstanding, it shall not allow the
offering or sale of the Shares of the Fund after the Offering Period but
prior to the Maturity Date;
(c) it shall notify the Warranty Provider promptly of (i) any request by
the Commission for an amendment to the Registration Statement with respect to
any Class of Shares of the Fund or a supplement to the Prospectus with
respect to any Class of Shares of the Fund, (ii) the issuance by the
Commission of any stop-order suspending the effectiveness of the Registration
Statement with respect to any Class of Shares of the Fund or the initiation
or threat of any such stop-order proceeding, or (iii) receipt by the Fund of
a notice from or order of the Commission pursuant to Section 8(e) of the
Investment Company Act with respect to any Registration Statement with
respect to the Fund;
(d) it shall provide to the Warranty Provider such additional information
with respect to the Fund as the Warranty Provider may from time to time
reasonably request;
(e) prior to or simultaneously upon filing with the Commission any
amendment to the Registration Statement with respect to any Class of Shares
of the Fund or supplement to the Prospectus with respect to any Class of
Shares of the Fund, it shall furnish a copy thereof to the Warranty Provider;
provided, however, that the Adviser shall obtain the prior written consent of
the Warranty Provider before filing any such amendment or supplement that
modifies references to or affects the Warranty Provider, this Agreement or
the Financial Warranty; provided, further, that any such consent of the
Warranty Provider (i) shall not be withheld if any such amendment or
supplement does not increase the Warranty Provider's liabilities or risks or
decrease the Warranty Provider's economic bargain under this Agreement and
the Financial Warranty and (ii) shall be given in a reasonable period of
time, taking into consideration among other things filing deadlines, if any;
(f) it shall not, without the prior written consent of the Warranty
Provider, elect to terminate any Transaction Document; provided, that the
termination of the Investment Management Agreement (i) as a result of its
assignment (as such term is defined under the Investment Company Act) to an
Affiliate of the Adviser or (ii) as a result of a change of control of an
Affiliate of the Adviser shall not be deemed to be a violation of this
Section 7.1(f);
(g) it shall comply in all material respects with the terms and provisions
of all Requirements of Law, including the Acts and the Investment Advisers
Act, with respect to the Fund and it shall obtain and maintain all licenses,
permits, charters and registrations which are necessary to the conduct of its
business or where the failure to obtain and maintain the same would
reasonably be expected to have an Adverse Effect in respect of the Adviser;
(h) it shall promptly inform the Warranty Provider in writing of any
information or event that, to the knowledge of the Adviser, would be
reasonably likely to result, through the passage of time or otherwise, in the
occurrence of a Trigger Event;
(i) it shall promptly inform the Warranty Provider in writing of the
occurrence of any of the following events of which it has knowledge: any
Litigation Event, Regulatory Change, Regulatory Event or other event in each
case that would reasonably be expected to have an Adverse Effect in respect
of the Adviser;
(j) it shall promptly and fully perform all of its obligations (i) under
each Transaction Document to which it is a party, and (ii) under each other
agreement, instrument or contract delivered in connection with a Transaction
Document and by which it is bound, except to the extent that such
non-performance would not reasonably be expected to have an Adverse Effect in
respect of the Adviser and shall provide the Warranty Provider with written
notice promptly upon becoming aware of any material breach by it of the
provisions of any such agreements. The Adviser and each Affiliate of the
Adviser which may in the future serve as investment adviser to the Fund shall
take all action necessary to preserve its existence and ensure that the
Transaction Documents remain in full force and effect;
(k) it shall keep or cause to be kept in reasonable detail books and
records of account of its business in relation to the Fund, including without
limitation electronic information with respect thereto, in form and detail
customary in the industry and sufficient to satisfy the Adviser's obligation
to provide to the Warranty Provider the information referred to herein;
(l) it shall implement compliance procedures reasonably designed to monitor
the Fund Portfolio's compliance with the Portfolio Requirements on an ongoing
basis;
(m) it shall not include any material relating to the Warranty Provider or
Bank of America Corporation or describing the terms of the Financial Warranty
or this Agreement in any marketing materials used by or on behalf of the
Adviser or the Fund unless such material has been approved in writing by the
Warranty Provider prior to its inclusion in such marketing materials, such
approval not to be unreasonably withheld or delayed;
(n) it shall promptly inform the Warranty Provider in writing if it
delegates any of its management responsibilities under the Investment
Management Agreement to a subadviser or subsequent thereto terminates such
delegation to any subadviser or materially modifies any then existing
subadvisory agreement with any subadviser to which it has delegated any of
its management responsibilities under the Investment Management Agreement;
(o) it shall provide to the Warranty Provider such additional information
with respect to the Fund as the Warranty Provider may from time to time
reasonably request and, after the occurrence of a Trigger Event, at the
expense of the Adviser, during normal business hours with reasonable prior
notice allow the Warranty Provider to inspect, audit and make copies of and
abstracts from the Fund's records and to visit the offices of the Adviser for
the purpose of examining such records, internal controls and procedures
maintained by the Adviser as the Warranty Provider may reasonably request; and
(p) all factual information prepared and furnished by or on behalf of the
Adviser to the Warranty Provider (whether prepared by the Adviser or any
other Person) for purposes of or in connection with this Agreement, any
Transaction Document or any transaction contemplated hereby or thereby will
be true and accurate in all material respects on the date as of which such
information is dated or certified and such information taken as a whole will
not omit to state any material fact necessary to make such information in the
context in which it is furnished not misleading.
Section 7.2. COVENANTS OF THE TRUST ON BEHALF OF THE FUND. The Trust
hereby covenants and agrees that through the Termination Date and so long as
a drawing is available under the Financial Warranty:
(a) within 65 days after the end of each fiscal year, it shall provide the
Warranty Provider with accurate, correct and complete audited statements of
assets and liabilities of the Fund with values determined in accordance with
the procedures described in the Registration Statement and in accordance with
the Investment Company Act, and an audited schedule of investments of the
Fund, each as of such fiscal year end. Such audited financial statements
will fairly present in all material respects the financial position of the
Fund as of the dates and for the periods referred to therein and in
conformity with generally accepted accounting principles applied on a
consistent basis;
(b) it shall provide the Warranty Provider with accurate, correct and
complete semi-annual unaudited statements of assets and liabilities of the
Fund with values determined in accordance with the procedures described in
the Registration Statement and in accordance with the Investment Company Act,
and a semi-annual unaudited schedule of investments of the Fund, in each case
within 65 days after the end of such period. Such unaudited financial
statements will fairly present in all material respects the financial
position of the Fund as of the dates and for the periods referred to therein
and in conformity with generally accepted accounting principles applied on a
consistent basis;
(c) after the Offering Period but prior to the Maturity Date, other than in
connection with the redemption of Shares by a Shareholder, the reinvestment
of dividends and distributions or the transfer of Shares that does not result
in an increase in the Shares that are issued and outstanding, it shall not
change the number of outstanding Shares of the Fund;
(d) it shall promptly and fully perform all of its obligations (i) under
each Transaction Document to which it is a party, and (ii) under each other
agreement, instrument or contract delivered in connection with a Transaction
Document and by which it is bound, except to the extent that such
non-performance would not reasonably be expected to have an Adverse Effect in
respect of the Fund and shall provide the Warranty Provider with written
notice promptly upon becoming aware of any material breach by it of the
provisions of any such agreements;
(e) it shall not amend, supplement, modify, terminate, or agree to any
waiver of any rights with respect to, any of the Transaction Documents (other
than amendments or supplements to the Prospectus pursuant to Rules 485
(excluding certain filings pursuant to Rule 485(a) that are not routine in
nature or that affect the Fund's investment objectives) or 497 under the
Securities Act that do not relate to portfolio investments) without the prior
written consent of the Warranty Provider, which consent shall not be
unreasonably withheld or delayed; provided, that (i) such consent shall not
be withheld if any such amendment, supplement, modification, termination or
agreement does not increase the Warranty Provider's liabilities or risks or
decrease the Warranty Provider's economic bargain under this Agreement and
the Financial Warranty and (ii) such consent shall be given in a reasonable
period of time, taking into consideration among other things filing
deadlines, if any;
(f) it shall not amend, supplement, modify, terminate, or agree to any
waiver with respect to any provision of any Transaction Document or the
Declaration of Trust if such amendment, supplement or modification would be
reasonably likely in the Warranty Provider's reasonable discretion to have a
material impact on the Warranty Provider, without the prior written consent
of the Warranty Provider;
(g) it shall not include any material relating to the Warranty Provider or
Bank of America Corporation or describing the terms of the Financial Warranty
or this Agreement in any marketing materials used by or on behalf of the Fund
unless such material has been approved in writing by the Warranty Provider
prior to its inclusion in such marketing material, such approval not to be
unreasonably withheld or delayed;
(h) it shall not change in any material respect the manner in which the
assets or liabilities of the Fund are allocated to any Class of Shares of the
Fund without the prior written consent of the Warranty Provider, which
consent shall not be unreasonably withheld or delayed;
(i) prior to taking any action to terminate the Custodian, the Fund shall
notify the Warranty Provider and, in the event that the Custodian shall
terminate the Custodian Agreement with respect to the Fund, the Fund shall
notify the Warranty Provider and engage a successor Custodian; provided,
however, that the Fund shall not engage as successor Custodian one which does
not agree to be bound by the Services Agreement and by the provisions of
Sections 3.4(c) and (d), 4.1(c) and 4.2(a) to the extent they are relevant to
duties of the Custodian, which does not have a system in place that is
equivalent to the JPM VIEWS System acceptable to the Warranty Provider in its
reasonable discretion or which is not reasonably acceptable to the Warranty
Provider;
(j) in the event that the Adviser resigns, the Fund elects to terminate the
Investment Management Agreement with the Adviser or the Investment Management
Agreement terminates in accordance with its terms, the Fund shall immediately
notify the Warranty Provider and cause any successor adviser (including the
Adviser) to agree to be bound by the terms of this Agreement, subject to
applicable law, and the Service Agreement, in each case prior to the
effective date of such termination;
(k) it shall comply in all material respects with the terms and provisions
of the Acts with respect to the Fund;
(l) it promptly shall provide the Warranty Provider with a copy of any
amendment or waiver of any provision of the Investment Management Agreement
or the filing of any amendment to the Declaration of Trust;
(m) it shall provide to the Warranty Provider such additional information
with respect to the Fund as the Warranty Provider may from time to time
reasonably request and, after the occurrence of a Trigger Event, during
normal business hours with reasonable prior notice allow the Warranty
Provider to inspect, audit and make copies of and abstracts from the Fund's
records as the Warranty Provider may reasonably request;
(n) all factual information prepared and furnished by or on behalf of the
Fund to the Warranty Provider (whether prepared by the Fund or any other
Person) for purposes of or in connection with this Agreement, any Transaction
Document or any transaction contemplated hereby or thereby will be true and
accurate in all material respects on the date as of which such information is
dated or certified and such information taken as a whole will not omit to
state any material fact necessary to make such information in the context in
which it is furnished not misleading; and
(o) it shall maintain a fidelity bond with respect to its officers,
trustees, employees and agents of the type and in the amounts as is required
by law under Rule 17g-1 of the Investment Company Act for funds similar to
the Fund.
Section 7.3. COVENANTS OF THE WARRANTY PROVIDER. The Warranty Provider
hereby covenants and agrees that through the Termination Date:
(a) it will make its audited annual financial statements and the audited
annual financial statements of Bank of America Corporation, together with the
relevant auditor's consents, available to the Trust on behalf of the Fund for
inclusion in the Registration Statement. Such financial statements shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case as of the dates and for the periods
referred to in such financial statements. The Warranty Provider agrees to
provide, and, with respect to Bank of America Corporation, agrees to use
reasonable efforts to provide, to the Trust on behalf of the Fund any
additional information reasonably requested by the Trust on behalf of the
Fund from the Warranty Provider and Bank of America Corporation.
(b) it shall comply in all material respects with the terms and provisions
of all Requirements of Law with respect to the Warranty Provider and it shall
obtain and maintain all licenses, permits, charters and registrations which
are necessary to the conduct of its business or where the failure to obtain
and maintain the same would not reasonably be expected to have an Adverse
Effect with respect to the Warranty Provider; and
(c) it shall promptly and fully perform all of, and comply in all respects
with, its obligations (i) under each Transaction Document to which it is a
party, and (ii) under each other agreement, instrument or contract delivered
in connection with a Transaction Document and by which it is bound, except in
each case to the extent that such non-performance would not reasonably be
expected to have an Adverse Effect with respect to the Warranty Provider and
shall provide the Adviser and the Trust with written notice promptly upon
becoming aware of any material breach by it of the provisions of any such
agreements. The Warranty Provider shall take all action reasonably necessary
to preserve its existence and ensure that the Transaction Documents remain in
full force and effect.
ARTICLE VIII.
FURTHER AGREEMENTS
Section 8.1. OBLIGATIONS ABSOLUTE. The obligations of the Adviser and
the Fund pursuant to this Agreement are absolute and unconditional and will
be paid or performed strictly in accordance with the respective terms hereof,
irrespective of:
(a) (i) Any lack of validity or enforceability of any of the Transaction
Documents (other than the Financial Warranty), unless such lack of validity
or enforceability is finally determined by a final non-appealable judgment of
a court of competent jurisdiction, or (ii) any amendment or other
modification of, or waiver with respect to, or consent to departure from, any
of the Transaction Documents (other than amendments to this Agreement in
accordance with Section 11.1);
(b) The existence of any claim, set-off, defense or other right either may
have at any time against the other, any beneficiary or any transferee of the
Financial Warranty (or any persons or entities for whom any such beneficiary
or any such transferee may be acting), the Warranty Provider or any other
Person or entity whether in connection with this Agreement, any of the
Transaction Documents or any unrelated transactions;
(c) Any statement or any other document presented by any Person other than
a Warranty Provider Party in connection herewith proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect whatsoever;
(d) The inaccuracy or alleged inaccuracy upon which any drawing under the
Financial Warranty is based;
(e) Payment by the Warranty Provider under the Financial Warranty which
does not comply with the terms hereof; provided, that such payment shall not
have constituted willful misconduct on the part of the Warranty Provider;
(f) Any default or alleged default of the Warranty Provider under this
Agreement, other than a default with respect to payment of the Aggregate
Shortfall Amount; or
(g) Any other circumstance or happening whatsoever; provided, that the same
shall not have constituted willful misconduct of the Warranty Provider and to
the extent that such circumstance or happening does not result in a default
by the Warranty Provider with respect to the payment of the Aggregate
Shortfall Amount.
Section 8.2. PARTICIPATIONS AND ASSIGNMENTS. Subject to the prior
written consent of the Trust and the Adviser (which consent shall not be
unreasonably withheld or delayed), the Warranty Provider may assign its
obligations under this Agreement to an Affiliate; provided, that such
Affiliate provides the Fund with audited financial statements covering a
period of at least three years and, provided, further, that Bank of America
Corporation provides the Trust on behalf of the Fund with an unconditional
guarantee of the assignee's obligations under this Agreement in substantially
the same form as the BAC Guaranty. The Warranty Provider shall have the
right to give participations in its rights under this Agreement and to enter
into hedging contracts with respect to the Financial Warranty; provided that
the Warranty Provider agrees that any such disposition will not alter or
affect in any way whatsoever the Warranty Provider's direct obligations
hereunder and under the Financial Warranty.
Section 8.3. FUND LIABILITY. Any other provision to the contrary
notwithstanding, any liability of the Fund under this Agreement or in
connection with the transactions contemplated herein shall be discharged only
out of the assets of the Fund.
Section 8.4. LIMITATION OF LIABILITY OF THE WARRANTY PROVIDER. The
Adviser and the Trust on behalf of the Fund agree that neither the Warranty
Provider, its Affiliates, nor any of their respective officers,
trustees/directors or employees shall be liable or responsible for (a) the
use which may be made of the Financial Warranty by any Person or for any acts
or omissions of another Person in connection therewith or (b) the validity,
sufficiency, accuracy or genuineness of any documents delivered to the
Warranty Provider, or of any endorsement(s) thereon, even if such documents
should in fact prove to be in any or all respects invalid, insufficient,
fraudulent or forged. In furtherance and not in limitation of the foregoing,
the Warranty Provider may accept documents that appear on their face to be in
order, without responsibility for further investigation.
Section 8.5. ADVISER LIABILITY FOR ACTIONS OF SUBADVISER. For the
avoidance of doubt, the parties hereby agree that (a) the Adviser shall be
solely responsible for the management of the Fund Portfolio regardless of
whether the Adviser delegates any of its management responsibilities under
the Investment Management Agreement to a subadviser, (b) the Adviser shall be
liable under this Agreement and the other Transaction Documents to which it
is a party for any actions taken by any subadviser with regard to the Fund
Portfolio, and (c) for purposes of this Agreement and any other Transaction
Document to which it is a party, any action or omission by a subadviser with
respect to the Fund Portfolio shall be deemed to be the action or omission of
the Adviser.
Section 8.6. AUDITOR'S CONSENTS. The Adviser hereby agrees to pay all
of the costs and expenses incurred in connection with the preparation of the
auditor's consents to be delivered pursuant to Section 7.3 of this Agreement.
Section 8.7. ALTERNATIVE DELIVERY. Upon written notice from the
Warranty Provider to the Adviser or the Trust on behalf of the Fund, the
Warranty Provider may request the Adviser and the Trust on behalf of the Fund
to provide, and the Adviser to cause the Custodian to provide, all
information and reports to be delivered to the Warranty Provider under any
Transaction Document to the Calculation Agent on behalf of the Warranty
Provider. The Adviser and the Trust on behalf of the Fund hereby agree that
any information required to be provided by the Warranty Provider under any
Transaction Document may be provided by an Affiliate of the Warranty
Provider, including, without limitation, the Calculation Agent.
ARTICLE IX.
CONFIDENTIALITY
Section 9.1. CONFIDENTIALITY OBLIGATIONS OF THE WARRANTY PROVIDER.
Subject to Section 9.2, the Warranty Provider agrees, on behalf of itself and
its agents, not to disclose or use for any purpose other than the approval or
administration of this Agreement, the exercise of its rights hereunder or
legitimate corporate purposes relating to this Agreement (including any
corporate purposes relating to the characterization or treatment of the
rights and obligations hereunder for accounting, insurance, rating agency or
other similar purposes) (x) any information regarding the specific
investments of the Fund or the Underlying Fund whether provided to the
Warranty Provider by the Adviser, the Fund or the Custodian ("Trading
Information") or (y) other confidential information (including without
limitation proprietary information as to systems, software and trading
methods) (collectively, "Other Information" and, together with Trading
Information, "Fund Confidential Information") provided by the Adviser or the
Fund to the Warranty Provider hereunder unless (i) such information was or
becomes generally available to the public other than as a result of the
Warranty Provider's breach of this Article IX; or (ii) such information is
required to be disclosed pursuant to applicable law or in connection with any
legal proceedings or to the extent required by a subpoena, order of any court
or Government Authority having jurisdiction over the Warranty Provider. The
Warranty Provider shall promptly provide the Fund and the Adviser with prior
written notice of any request or requirement to the extent permissible and
practicable under the circumstances, so the Fund or the Adviser may seek a
protective order or other appropriate remedy prior to the release of such
information by the Warranty Provider. Notwithstanding anything herein to the
contrary, "Fund Confidential Information" shall not include, and the Warranty
Provider, on behalf of itself and its agents, may disclose to any and all
Persons, without limitation of any kind, any information with respect to the
U.S. federal income tax treatment and U.S. federal income tax structure of
the transactions contemplated hereby and all materials of any kind (including
opinions or other tax analyses) that are provided to the Warranty Provider
relating to such tax treatment and tax structure.
Section 9.2. TRADING INFORMATION AND OTHER INFORMATION. (a)
Notwithstanding Section 9.1, the Warranty Provider may to the extent
necessary in the Warranty Provider's sole discretion disclose Fund
Confidential Information in connection with the Warranty Provider's hedging
arrangements to recipients ("Permitted Recipients") if such Permitted
Recipients represent and warrant to the Warranty Provider that such Permitted
Recipients will treat such information as Fund Confidential Information and
comply with Section 9.1 of this Agreement. The Adviser and the Fund agree
that the Warranty Provider and any Permitted Recipient will satisfy their
obligation to treat such information as Fund Confidential Information and
comply with Section 9.1 of the Agreement by (i) restricting access to such
information to the investment officers and compliance officers who require
access to such information for monitoring, hedging, administration and
compliance purposes, (ii) obtaining the agreement of such investment officers
and compliance officers to keep such information confidential on the terms of
this Section 9.2, and (iii) complying with the other requirements of an
institutional compliance procedure in form and detail customary in the
industry and reasonably designed to be sufficient to satisfy the Warranty
Provider's obligation under this Article IX and to achieve compliance with
applicable law.
(b) Notwithstanding Section 9.1, the Warranty Provider may disclose Fund
Confidential Information to those of its officers, employees, directors,
representatives, agents, outside counsel, and independent auditors
(collectively, "Representatives") who need to see such information in
connection with administration of the Agreement, the exercise of the Warranty
Provider's rights hereunder, or legitimate corporate purposes so long as such
persons agree to keep such information confidential on the terms contained in
Section 9.1. The Warranty Provider agrees to remain responsible for any
breach of Article IX by its Representatives and or Permitted Recipients.
Section 9.3. CONFIDENTIALITY OBLIGATIONS OF THE ADVISER AND THE FUND.
(a) Subject to subsection (b) below, the Adviser and the Fund each agrees,
on behalf of itself and its agents, not to disclose or use for any purpose
other than the administration of this Agreement and the exercise of its
rights and obligations hereunder any confidential information (including,
without limitation, proprietary information as to systems, software and
trading methods) (collectively, "Warranty Provider Confidential Information")
provided by the Warranty Provider to the Adviser or the Fund hereunder unless
(i) such information was or becomes generally available to the public other
than as a result of the Adviser's or the Fund's breach of this Article IX; or
(ii) such information is required to be disclosed pursuant to applicable law
or in connection with any legal proceedings or to the extent required by a
subpoena, order of any court or Government Authority. Notwithstanding
anything herein to the contrary, "Warranty Provider Confidential Information"
shall not include, and the Adviser and the Fund may disclose to any and all
Persons, without limitation of any kind, any information with respect to the
U.S. federal income tax treatment and U.S. federal income tax structure of
the transactions contemplated hereby and all materials of any kind (including
opinions or other tax analyses) that are provided to the Adviser or the Fund
relating to such tax treatment and tax structure.
(b) Notwithstanding subsection (a) above, each of the Adviser and the Fund
may disclose Warranty Provider Confidential Information to those of its
officers, employees, directors, representatives, agents, outside counsel, and
independent auditors who need to see such information in connection with
administration of the Agreement or the exercise of the Adviser's and Fund's
rights or obligations hereunder or thereunder, so long as such persons agree
to keep such information confidential on the terms contained in this
Section 9.3.
Section 9.4. COPIES OF FUND CONFIDENTIAL INFORMATION. Upon the request
of the Fund or the Adviser, all copies of Fund Confidential Information,
except for that portion of the Fund Confidential Information that consists of
notes, analyses, compilations, studies, interpretations or other documents
prepared by the Warranty Provider, its Representatives and Permitted
Recipients, will be promptly returned to the Fund or the Adviser or
destroyed; provided, however, that any Fund Confidential Information retained
by the Warranty Provider, its Representatives and Permitted Recipients, shall
be maintained by the Warranty Provider, its Representatives and Permitted
Recipients, subject to the confidentiality terms of this Agreement.
ARTICLE X.
TERMINATION
Section 10.1. TERMINATION. (a) Unless this Agreement and the Financial
Warranty are sooner terminated pursuant to Section 10.1(b) hereof, this
Agreement, the Financial Warranty and the BAC Guaranty shall terminate (i) on
the Maturity Date if no amounts are payable under the Financial Warranty, or
(ii) thereafter, upon payment by the Warranty Provider (or Bank of America
Corporation under the BAC Guaranty) of all amounts due by the Warranty
Provider under the Financial Warranty to the Custodian on behalf of the Fund
(any such date of termination pursuant to this Article X is referred to in
this Agreement as the "Termination Date").
(b) (i) This Agreement may be terminated by the Trust (on behalf of the
Fund) and the Adviser by written notice to the Warranty Provider at any time
(A) upon the occurrence of an Act of Insolvency with respect to the Warranty
Provider, or (B) if the credit rating of Bank of America Corporation is
suspended, withdrawn or downgraded below "BBB+" by S&P or "Baa1" by Xxxxx'x
(or equivalent credit rating if different rating categories are used).
(ii) This Agreement may be terminated (and in the case of clause (B) in this
subparagraph the Financial Warranty may also be terminated) by the Warranty
Provider in its sole discretion by written notice to the Fund and the Adviser
(A) prior to the Inception Date and the issuance of the Financial Warranty if
the Fund's Total NAV on the last day of the Offering Period is less than $75
million or (B) subsequent to the Inception Date and the issuance of the
Financial Warranty and prior to the Maturity Date if (1) the Adviser resigns,
the Fund elects to terminate the Investment Management Agreement with the
Adviser or the Investment Management Agreement terminates in accordance with
its terms and a successor adviser (other than the Adviser or an Affiliate of
the Adviser) is not elected prior to the date of such termination or the
Trust's Board of Trustees elects a successor adviser (other than the Adviser
or an Affiliate of the Adviser) which agrees to be bound by the terms of this
Agreement without first (a) consulting with the Warranty Provider, and (b)
subject to its fiduciary obligations and obligations under the Investment
Company Act, considering the reputation of the successor adviser, its
experience in managing equity value funds and fixed income portfolios, its
size, its financial condition, its ability to manage the Fund Portfolio in
accordance with the Registration Statement and its ability to comply with the
Adviser's obligations under this Agreement and the Transaction Documents to
which it is a party; provided, however, that if such successor adviser is a
Person that is not an Affiliate of the Adviser and such Person agrees to be
bound by the terms of this Agreement prior to such termination, the Adviser
shall not be liable for any actions of such unaffiliated successor adviser
under this Agreement, (2) the Fund terminates the Custodian Agreement with
JPMorgan Chase Bank and engages a successor custodian that does not agree to
be bound by the Service Agreement and by the provisions of Sections 3.4(c)
and (d), 4.1(c) and 4.2(a) to the extent they are relevant to duties of the
Custodian, or the Fund amends the Custodian Agreement so that the Custodian
is no longer bound by such provisions, in each case without the prior written
consent of the Warranty Provider or (3) the Fund's assets are not invested
entirely in accordance with Section 4.2(a) at all times commencing on the
second Exchange Business Day following the Permanent Defeasance Date. The
written notice required to be provided by the Warranty Provider under this
Section 10.1(b)(ii) shall be delivered to the Fund and the Adviser within 30
days after the occurrence of the relevant termination event.
(iii) Notwithstanding any of the foregoing, this Agreement shall
automatically terminate, and if such termination occurs after the Inception
Date the Financial Warranty shall automatically terminate, (A) prior to the
Inception Date if the Trust's Board has determined to liquidate the Fund or
subsequent to the Inception Date and prior to the Maturity Date if the Fund
is liquidated during that time, (B) if the Adviser resigns, the Fund elects
to terminate the Investment Management Agreement with the Adviser or the
Investment Management Agreement terminates in accordance with its terms and
any successor adviser (other than the Adviser or any Affiliate of the
Adviser) does not agree to be bound by the terms of this Agreement prior to
the effective date of such termination or (C) if the Fund is involved in a
merger, reorganization or sale of all or substantially all of its assets.
(iv) If this Agreement is terminated in accordance with this
Section 10.1(b), the Fund shall notify its Shareholders of such termination
and such notice shall state that the Fund has released the Warranty Provider
from all liability under the Financial Warranty. The Fund shall provide a
copy of such notice to the Warranty Provider. From and after the effective
date of such termination, the Fund shall have no obligation to pay the
Financial Warranty Fee (except as to amounts thereof accrued on a daily
interpolated basis prior to such termination), and the Warranty Provider
shall have no liability under the Financial Warranty.
ARTICLE XI.
MISCELLANEOUS
Section 11.1. AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Agreement nor consent to any departure therefrom, shall in
any event be effective unless in writing and signed by all of the parties
hereto; provided that any waiver so granted shall extend only to the specific
event or occurrence so waived and not to any other similar event or
occurrence which occurs subsequent to the date of such waiver.
Section 11.2. NOTICES. (a) Except to the extent otherwise expressly
provided herein, all notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (and if, sent by mail,
certified or registered, return receipt requested) or confirmed facsimile
transmission and, unless otherwise expressly provided herein, shall be deemed
to have been duly given or made when delivered by hand, or three Business
Days after being deposited in the mail, postage prepaid, or, in the case of
facsimile transmission, when sent, addressed as follows:
If to the Adviser:
OppenheimerFunds, Inc.
Two World Financial Center
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx, General Counsel
Telephone No: (000) 000-0000
Facsimile No: (000) 000-0000
If to the Fund:
c/o OppenheimerFunds, Inc.
Two World Financial Center
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx, General Counsel
Telephone No: (000) 000-0000
Facsimile No: (000) 000-0000
with a copy to:
Myer, Swanson, Xxxxx & Xxxx
The Colorado State Bank Building
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx Xxxxxxxx 00000-0000
Attention: Xxxxx Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Warranty Provider:
Main Place Funding, LLC
c/o Banc of America Securities LLC
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxxxxx, Managing Director
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Banc of America Securities LLC
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxxxxx, Managing Director
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Calculation Agent:
Banc of America Securities LLC
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxxxxx, Managing Director
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or such other address and/or addresses (and with copies to such persons) as
shall be specified in writing by any such party to the others.
(b) Prior to the Inception Date, the parties shall provide to each other
detailed notice procedures with respect to the notifications contemplated
herein to the extent they are different from those set forth above.
Section 11.3. NO WAIVER, REMEDIES AND SEVERABILITY. No failure on the
part of any party to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or
the exercise of any other right. Except as otherwise provided in
Section 4.1(e), the remedies herein provided are cumulative and not exclusive
of any remedies provided by law. The parties further agree that the holding
by any court of competent jurisdiction that any remedy pursued by any party
hereunder is unavailable or unenforceable shall not affect in any way the
ability of such party to pursue any other remedy available to it. In the
event any provision of this Agreement shall be held invalid or unenforceable
by any court of competent jurisdiction, the parties hereto agree that such
holding shall not invalidate or render unenforceable any other provision
hereof.
Section 11.4. PAYMENTS. All payments to the Warranty Provider hereunder
shall be made in lawful currency of the United States in immediately
available funds and shall be made prior to 2:00 p.m. (New York City time) on
the date such payment is due by wire transfer to the account designated by
the Warranty Provider by notice to the Fund and the Adviser. Any payments to
the Fund under the Financial Warranty shall be made in accordance with the
terms thereof in lawful currency of the United States in immediately
available funds by wire transfer to the account designated by the Fund by
notice to the Warranty Provider.
Whenever any payment under this Agreement shall be stated to be due on
a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such cases be
included in computing interest or fees, if any, in connection with such
payment.
Section 11.5. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York (including
Section 5-1401 of the New York General Obligations Law but excluding all
other choice of law and conflicts of law rules).
Section 11.6. SUBMISSION TO JURISDICTION, WAIVER OF JURY TRIAL. EXCEPT
AS OTHERWISE SET FORTH IN SECTIONS 4.1(d) AND (e), THE WARRANTY PROVIDER, THE
ADVISER AND THE TRUST ON BEHALF OF THE FUND HEREBY IRREVOCABLY SUBMIT TO THE
NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE WARRANTY PROVIDER, THE
ADVISER AND THE TRUST ON BEHALF OF THE FUND HEREBY IRREVOCABLY AGREE THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
SUCH NEW YORK STATE OR FEDERAL COURT. THE WARRANTY PROVIDER, THE ADVISER AND
THE TRUST ON BEHALF OF THE FUND HEREBY IRREVOCABLY WAIVE, TO THE FULLEST
EXTENT THAT THEY MAY LEGALLY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH ACTION OR PROCEEDING. THE WARRANTY PROVIDER, THE
ADVISER AND THE TRUST ON BEHALF OF THE FUND AGREE THAT A FINAL JUDGMENT IN
ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED
BY LAW.
THE WARRANTY PROVIDER, THE ADVISER AND THE TRUST ON BEHALF OF THE FUND
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING
OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS
OF THE PARTIES HERETO. EACH OF THE WARRANTY PROVIDER, THE ADVISER AND THE
TRUST ON BEHALF OF THE FUND ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL
AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A
MATERIAL INDUCEMENT FOR SUCH PARTIES ENTERING INTO THIS AGREEMENT.
Section 11.7. COUNTERPARTS. This Agreement may be executed in
counterparts of the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.
Section 11.8. PARAGRAPH HEADINGS. The headings of paragraphs contained
in this Agreement are provided for convenience only. They form no part of
this Agreement and shall not affect its construction or interpretation.
Section 11.9. RELIANCE ON INFORMATION. In making a determination as to
whether a Trigger Event has occurred, the Warranty Provider shall be entitled
to rely on reports published or broadcast by media sources believed by the
Warranty Provider to be generally reliable and on information provided to the
Warranty Provider by any other source believed by the Warranty Provider to be
generally reliable; provided that the Warranty Provider reasonably and in
good faith believes such information to be accurate and has taken such steps
as may be reasonable in the circumstances to attempt to verify such
information.
Section 11.10. TIME OF THE ESSENCE. Time is of the essence under this
Agreement.
Section 11.11. NO THIRD-PARTY RIGHTS. Nothing in this Agreement, express
or implied, shall or is intended to confer any rights upon any Person other
than the parties hereto or their respective successors or assigns, including,
without limitation, any Shareholder.
Section 11.12. FURTHER ASSURANCES. The parties hereto shall, upon the
request of the Warranty Provider, the Adviser or the Fund, from time to time,
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, within a reasonable period following such request, such amendments
or supplements hereto and such further instruments and take such further
action as may be reasonably necessary to effectuate the intention,
performance and provisions of the Transaction Documents.
Section 11.13. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and understanding of the parties with respect to its subject matter
and supercedes all prior discussions and agreements among the parties with
respect to the subject matter hereof.
Section 11.14. DISCLOSURE OF SHAREHOLDER LIABILITY. The Warranty Provider
understands and agrees that the obligations of the Trust on behalf of the
Fund under this Agreement are not binding upon any trustee of the Trust or
shareholder personally, but bind only the Fund's assets and property. The
Warranty Provider represents that it has notice of the provisions of the
Declaration of Trust of the Trust disclaiming shareholder and trustee
liability for acts or obligations of the Fund other than in the case of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of such Trustee.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
all as of the day and year first above mentioned.
OPPENHEIMERFUNDS, INC., as Adviser
By: /s/ Xxxxxx Xxxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Senior Vice President
XXXXXXXXXXX PRINCIPAL PROTECTED TRUST II,
as Trust, on behalf of the Fund
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Assistant Secretary
MAIN PLACE FUNDING, LLC, as Warranty
Provider
By: /s/ Xxxx X'Xxxxxxx
------------------------------------
Name: Xxxx X'Xxxxxxx
Title: Principal
EXHIBIT A TO FINANCIAL WARRANTY AGREEMENT
FINANCIAL WARRANTY
No. _____________
[Date]
Oppenheimer Principal Protected Trust II, on behalf of
Oppenheimer Principal Protected Main Street Fund II
c/o OppenheimerFunds, Inc.
Two World Financial Center
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
We hereby establish, in your favor, our Financial Warranty No. ____ (the
"Financial Warranty") in the amount of $_________ (as more fully described
below), effective immediately and expiring at the close of banking business
at our Charlotte, North Carolina office on the tenth (10th) Business Day
after the Maturity Date. All terms used herein but not defined herein have
the meanings given to such terms in the Financial Warranty Agreement (the
"Financial Warranty Agreement") dated as of October 31, 2003 among
OppenheimerFunds, Inc., Xxxxxxxxxxx Principal Protected Trust II, on behalf
of its series Xxxxxxxxxxx Principal Protected Main Street Fund II, and Main
Place Funding, LLC.
If at any time on or prior to the Maturity Date, the Calculation Agent
provides the Warranty Provider with a written certificate certifying that the
Financial Warranty has been terminated pursuant to Section 10.1 of the
Financial Warranty Agreement (a "Termination Certificate"), the Financial
Warranty amount shall automatically reduce to zero and the Financial Warranty
shall terminate on such date and the Aggregate Shortfall Amount shall be
deemed to be zero.
Unless the Warranty Provider has received a Termination Certificate, funds
under this Financial Warranty are available to you against on sight draft
drawn on our Charlotte, North Carolina office, referring thereon to the
number of this Financial Warranty, accompanied by your written certificate
signed by you with an authenticated signature and certifying as to (a), (b)
and (c) below, and a written certificate from the Calculation Agent
certifying the determination of the Aggregate Shortfall Amount and its
accuracy. Your written certificate shall state that:
(a) The Maturity Date under the Financial Warranty Agreement has occurred.
(b) The amount of your draft does not exceed the lesser of (i) the amount
of the drawing available under this Financial Warranty and (ii) Aggregate
Shortfall Amount, as reasonably determined by the Calculation Agent.
(c) You and the Adviser have complied with all applicable covenants set
forth in the Financial Warranty Agreement, including without limitation
Article III thereof.
Presentation of such draft and certificate shall be made by facsimile at
(000) 000-0000 at our office located in Charlotte, North Carolina, Attention:
Xxxxx Xxxx, or at any other office which may be designated by us by written
notice delivered to you.
Upon the earliest of (i) the termination of this Financial Warranty in
accordance with the Financial Warranty Agreement, (ii) our honoring your
draft presented hereunder, (iii) the surrender to us by you of this Financial
Warranty for cancellation and (iv) the expiration date stated in the initial
paragraph hereof, this Financial Warranty shall automatically terminate. A
termination of this Financial Warranty in accordance with the Financial
Warranty Agreement will be notified to you in writing upon which you will
immediately surrender this Financial Warranty to us for cancellation;
provided that the failure to so notify or surrender shall not affect the
validity of such termination.
The obligations of the Financial Warranty Provider pursuant to this Financial
Warranty will be paid strictly in accordance the terms hereof, irrespective
of:
(a) Any lack of validity or enforceability of any of the Transaction
Documents other than this Financial Warranty, unless such lack of validity or
enforceability is finally determined by a final non-appealable judgment of a
court of competent jurisdiction;
(b) Any amendment, modification or waiver of, or consent to departure from
any Transaction Document other than this Financial Warranty;
(c) The existence of any claim, set-off, defense or other right the
Warranty Provider may have at any time against the Fund or any other Person
or entity whether in connection with the Transaction Documents or any
unrelated transactions;
(d) Any statement or any other document presented in connection herewith
proving to be forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect whatsoever;
(e) The performance by the Fund or the Adviser of their respective
obligations under the Transaction Documents in a manner that does not comply
with the terms thereof; provided, that such performance shall not have
constituted willful misconduct on the part of the Fund or the Adviser;
(f) Any default or alleged default of the Fund or the Adviser under the
Transaction Documents (other than this Financial Warranty); or
(g) Any other circumstance or happening whatsoever; provided, that the same
shall not have constituted willful misconduct of the Fund or the Adviser.
This Financial Warranty is subject to the International Standby Practices,
International Chamber of Commerce Publication No. 590 (the "ISP"), which is
incorporated into the text of this Financial Warranty by this reference.
Communications with respect to this Financial Warranty shall be addressed to
us at our Charlotte, North Carolina office, 000 Xxxxx Xxxxx Xxxxxx,
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000, Attention: Xxxxx Xxxx, Facsimile: (704)
386-1175, specifically referring to the number of this Financial Warranty.
This Financial Warranty is not transferable.
As to matters not governed by the ISP, this Financial Warranty shall be
governed by, and construed in accordance with, the laws of the State of New
York, including the Uniform Commercial Code as in effect in the State of New
York (without regard to choice of law principles).
This Financial Warranty sets forth in full our undertaking, and such
undertaking shall not in any way be modified, amended, amplified or limited
by reference to any document, instrument or agreement referred to herein,
except only the certificates and draft referred to herein; and any such
reference shall not be deemed to incorporate herein by reference any
document, instrument or agreement except for such certificates and draft.
The Warranty Provider hereby agrees that any drawing available under this
Financial Warranty will be paid to you in U.S. Dollars.
Subject to the seventh preceding paragraph herein, we hereby agree to
forthwith honor and pay your draft drawn under and in compliance with the
terms of this Financial Warranty if presented to us on or before the tenth
(10th) Business Day after the Maturity Date, accompanied by the written
certificates specified above.
Very truly yours,
MAIN PLACE FUNDING, LLC
By: ___________________
EXHIBIT B TO FINANCIAL WARRANTY AGREEMENT
BANK OF AMERICA CORPORATION GUARANTEE
GUARANTEE dated as of October 31, 2003 by Bank of America Corporation
(the "Guarantor"), in favor of Xxxxxxxxxxx Principal Protected Trust II on
behalf of its series Xxxxxxxxxxx Principal Protected Main Street Fund II (the
"Guaranteed Party").
To induce the Guaranteed Party to enter into the Financial Warranty
Agreement (the "Financial Warranty Agreement"), dated as of October 31, 2003,
among the Guaranteed Party, OppenheimerFunds, Inc., as investment adviser,
and Main Place Funding, LLC, as financial warrantor ("Warranty Provider") and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, the Guarantor hereby irrevocably and unconditionally guarantees
to the Guaranteed Party, with effect from the date of the Financial Warranty
to be issued by Warranty Provider under the Financial Warranty Agreement (the
"Financial Warranty"), all present and future obligations of Warranty
Provider to the Guaranteed Party arising out of the Financial Warranty
Agreement and the Financial Warranty; provided, that the Guarantor does not
guarantee hereunder any obligations of Warranty Provider arising out of other
transactions not governed by the Financial Warranty Agreement or the
Financial Warranty. Upon failure of Warranty Provider punctually to fulfill
any such obligation, and upon written demand by the Guaranteed Party to the
Guarantor, the Guarantor agrees to fulfill, or cause to be fulfilled, to the
extent such obligation is not performed, the performance of such obligation;
provided, that delay by the Guaranteed Party in giving such demand shall in
no event affect the Guarantor's obligations under this Guarantee; provided
further, that any single or partial exercise by the Guaranteed Party of any
right, remedy or power granted hereunder to the Guaranteed Party shall not
impair or waive any such right, remedy or power of the Guaranteed Party.
Each and every right, remedy and power hereby granted to the Guaranteed Party
or allowed it by law or by another agreement shall be cumulative and not
exclusive of any other, and may be exercised by the Guaranteed Party at any
time or from time to time.
The Guarantor hereby agrees that its obligations hereunder shall be
continuing and unconditional and will not be discharged except by full and
complete satisfaction of all present and future obligations of Warranty
Provider to the Guaranteed Party arising out of the Financial Warranty
Agreement and the Financial Warranty, irrespective of any claim as to the
validity, regularity or enforceability of the Financial Warranty Agreement or
the Financial Warranty, or the lack of authority of Warranty Provider to
execute the Financial Warranty Agreement or the Financial Warranty; or any
change in or amendment to the Financial Warranty Agreement or the Financial
Warranty; or any waiver or consent by the Guaranteed Party with respect to
any provisions thereof; or the absence of any action to enforce the terms of
the Financial Warranty Agreement or the Financial Warranty, or the recovery
of any judgment against Warranty Provider or of any action to enforce a
judgment against Warranty Provider under the terms of the Financial Warranty
Agreement or the Financial Warranty or any other circumstance relating to the
Guarantor's obligations hereunder that might otherwise constitute a legal or
equitable discharge or defense of this Guarantee.
The Guarantor hereby waives diligence, presentment, demand on Warranty
Provider for delivery or otherwise, filing of claims, requirement of a prior
proceeding against Warranty Provider and protest or notice. This Guarantee
is a guarantee of performance and not of collection. If at any time any
delivery or payment by Warranty Provider under the Financial Warranty
Agreement or the Financial Warranty is rescinded or must be otherwise
restored or returned by the Guaranteed Party upon the receivership,
insolvency, bankruptcy or reorganization of Warranty Provider or the
Guarantor or otherwise, the Guarantor's obligations hereunder with respect to
such delivery or payment shall be reinstated upon such restoration or return
being made by the Guaranteed Party.
The Guarantor agrees to pay on demand all fees and out of pocket
expenses (including the reasonable fees and expenses of any Guaranteed
Party's counsel) in any way relating to the enforcement or protection of the
rights of the Guaranteed Party hereunder; provided, that the Guarantor shall
not be liable for any expenses of the Guaranteed Party if no delivery or
payment under this Guarantee is due. The Guarantor reserves the right to
assert defenses that Warranty Provider may have to any delivery or payment to
the Guaranteed Party under the Financial Warranty Agreement or the Financial
Warranty other than defenses arising from the bankruptcy or insolvency of
Warranty Provider and other defenses expressly waived hereby.
The Guarantor represents to the Guaranteed Party as of the date hereof
that:
1. It is duly organized and validly existing under the laws of the
jurisdiction of its incorporation and has full power and legal right to
execute and deliver this Guarantee and to perform the provisions of this
Guarantee on its part to be performed.
2. Its execution, delivery and performance of this Guarantee have been and
remain duly authorized by all necessary corporate action and do not
contravene any provision of its certificate of incorporation or by-laws, as
amended, or any law, regulation or contractual restriction binding on it or
its assets.
3. All consents, licenses, authorizations, approvals and clearances
(including, without limitation, any necessary exchange control approval) and
notifications, reports and registrations requisite for its due execution,
delivery and performance of this Guarantee have been obtained from or, as the
case may be, filed with the relevant governmental authorities having
jurisdiction and remain in full force and effect and all conditions thereof
have been duly complied with and no other action by, and no notice to or
filing with, any governmental authority having jurisdiction is required for
such execution, delivery or performance.
4. This Guarantee is its legal, valid and binding obligation enforceable
against it in accordance with its terms, except as enforcement hereof may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights or by general equity
principles.
5. By accepting this Guarantee, the Guaranteed Party agrees that the
Guarantor shall be subrogated to all rights of the Guaranteed Party against
Warranty Provider in respect of any delivery or payment made by the Guarantor
pursuant to this Guarantee; provided, however, that the Guarantor shall not
exercise or be entitled to receive any payments arising out of, or based upon
such right of subrogation until all obligations under the Financial Warranty
Agreement and the Financial Warranty shall have been paid in full to the
Guaranteed Party.
Neither the Guarantor nor the Guaranteed Party may assign its rights,
interests or obligations hereunder to any other person (except by operation
of law) without the prior written consent of the Guarantor or the Guaranteed
Party, as the case may be.
All notices or demands on the Guarantor shall be deemed effective when
received, shall be in writing and shall be delivered by hand or by registered
mail, or by facsimile transmission promptly confirmed by registered mail,
addressed to the Guarantor at:
Bank of America Corporation
c/o Banc of America Securities LLC
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxx
Facsimile: (000) 000-0000
or to such other address or facsimile number as the Guarantor shall have
notified the Guaranteed Party in a written notice delivered to the Guaranteed
Party in accordance with the Financial Warranty Agreement.
This Guarantee shall be governed by and construed in accordance with
the laws of the State of New York (including Section 5-1401 of the New York
General Obligations Laws but excluding all other choice of law and conflicts
of law rules). All capitalized terms not otherwise defined herein shall have
the respective meanings assigned to them in the Financial Warranty Agreement.
BANK OF AMERICA CORPORATION
By: /s/ Xxxxx Xxxxxxx
-----------------------------
Name: Xxxxx Xxxxxxx
Title: Senior Vice President
SCHEDULE 1 TO FINANCIAL WARRANTY AGREEMENT
FORM OF DAILY REPORT
SCHEDULE 2 TO FINANCIAL WARRANTY AGREEMENT
CUSHION/VOLATILITY MATRIX
The "Cushion/Volatility Matrix" means
-------------------------
-----------------------------------------------------
Volatility Cushion
---------- -------
-----------------------------------------------------
-----------------------------------------------------
= 40 25.0%
-----------------------------------------------------
-----------------------------------------------------
40 = 45 27.5%
-----------------------------------------------------
-----------------------------------------------------
45 = 50 30.0%
-----------------------------------------------------
-----------------------------------------------------
50 = 55 32.5%
-----------------------------------------------------
-----------------------------------------------------
55 = 60 35.0%
-----------------------------------------------------
-----------------------------------------------------
60 = 65 40.0%
-----------------------------------------------------
-----------------------------------------------------
65 = 70 50.0%
-----------------------------------------------------
-----------------------------------------------------
70 100.0%
-----------------------------------------------------
provided, that on any Exchange Business Day on which (a) the Tracking Error
exceeds 8% or (b) the Fund's percentage ownership of the Underlying Fund
exceeds 10% and for sixty calendar days thereafter, the "Cushion/Volatility
Matrix" shall be:
-----------------------------------------------------
Volatility Cushion
---------- -------
-----------------------------------------------------
-----------------------------------------------------
= 40 35.0%
-----------------------------------------------------
-----------------------------------------------------
40 = 45 35.0%
-----------------------------------------------------
-----------------------------------------------------
45 = 50 35.0%
-----------------------------------------------------
-----------------------------------------------------
50 = 55 35.0%
-----------------------------------------------------
-----------------------------------------------------
55 = 60 35.0%
-----------------------------------------------------
-----------------------------------------------------
60 = 65 40.0%
-----------------------------------------------------
-----------------------------------------------------
65 = 70 50.0%
-----------------------------------------------------
-----------------------------------------------------
70 100.0%
-----------------------------------------------------
