FINANCIAL WARRANTY AGREEMENT
among
PIONEER INVESTMENT MANAGEMENT, INC.
PIONEER PROTECTED PRINCIPAL PLUS FUND
and
BANK OF AMERICA, N.A.
Dated as of September [30], 2002
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS..........................................................1
Section 1.1 General Definitions..........................................1
Section 1.2 Generic Terms................................................9
ARTICLE II AMOUNT AND TERMS OF THE FINANCIAL WARRANTY.........................10
Section 2.1 The Financial Warranty......................................10
Section 2.2 Procedure for Issuance......................................10
Section 2.3 Conditions Precedent to Effectiveness.......................10
Section 2.4 Warranty Fee................................................13
Section 2.5 Shortfall Amount; Adjustment to Protected Amount............13
Section 2.6 Certain Defined Terms.......................................14
ARTICLE III MANAGEMENT OF THE FUND............................................16
Section 3.1 General.....................................................16
Section 3.2 Restrictions on Investments.................................16
Section 3.3 Allocation and Reallocation of Fund's Assets................17
Section 3.4 Reports; Access to Information..............................20
Section 3.5 Intent......................................................20
ARTICLE IV TRIGGER EVENTS.....................................................20
Section 4.1 Trigger Events..............................................20
Section 4.2 Defeasance Portfolio; PV Shortfall..........................24
ARTICLE V INDEMNIFICATION.....................................................25
Section 5.1 Survival....................................................25
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Section 5.2 Indemnification.............................................25
Section 5.3 Indemnification Procedure...................................27
ARTICLE VI REPRESENTATIONS AND WARRANTIES.....................................28
Section 6.1 Representations and Warranties of the Adviser...............28
Section 6.2 Representations and Warranties of the Fund..................29
Section 6.3 Representations and Warranties of the Bank..................31
ARTICLE VII COVENANTS.........................................................32
Section 7.1 Covenants of the Adviser....................................32
Section 7.2 Covenants of the Fund.......................................34
Section 7.3 [Covenants of the Bank].....................................36
ARTICLE VIII FURTHER AGREEMENTS...............................................36
Section 8.1 Obligations Absolute........................................36
Section 8.2 Participations and Assignments..............................37
Section 8.3 Fund Liability..............................................37
Section 8.4 Limitation of Liability of the Bank.........................37
Section 8.5 Adviser Liability for Actions of Subadviser.................37
Section 8.6 Fees and Expenses...........................................38
ARTICLE IX CONFIDENTIALITY....................................................38
Section 9.1 Confidentiality Obligations of the Bank.....................38
Section 9.2 Trading Information and Other Information...................38
Section 9.3 Confidentiality Obligations of the Adviser and the Fund.....39
Section 9.4 Independent Verifier........................................39
ARTICLE X THE INDEPENDENT VERIFIER............................................39
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Section 10.1 Retention of Independent Verifier...........................39
Section 10.2 Responsibilities of Independent Verifier....................39
Section 10.3 Adviser Cooperation.........................................39
ARTICLE XI TERMINATION........................................................40
Section 11.1 Termination.................................................40
ARTICLE XII MISCELLANEOUS.....................................................41
Section 12.1 Amendments and Waivers......................................41
Section 12.2 Notices 41
Section 12.3 No Waiver, Remedies and Severability........................42
Section 12.4 Payments 42
Section 12.5 Governing Law...............................................43
Section 12.6 Submission to Jurisdiction, Waiver of Jury Trial............43
Section 12.7 Counterparts................................................43
Section 12.8 Paragraph Headings..........................................43
Section 12.9 Reliance on Information.....................................44
Section 12.10 Time of the Essence.........................................44
Section 12.11 No Third-Party Rights.......................................44
Section 12.12 Further Assurances..........................................44
Exhibit A Form of Financial Warranty
Schedule 1 Form of Daily Report
Schedule 2 Independent Verifier Procedures
Annex A Form of opinion of Xxxx and Xxxx LLP
Annex B Form of opinion of Shearman & Sterling
Annex C Form of Irrevocable Instructions
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FINANCIAL WARRANTY AGREEMENT
FINANCIAL WARRANTY AGREEMENT, dated as of September [30], 2002
(the "AGREEMENT"), among PIONEER INVESTMENT MANAGEMENT, INC., a corporation
organized under the laws of the State of Delaware (the "ADVISER"), PIONEER
PROTECTED PRINCIPAL PLUS FUND, an open-end management investment company
organized as a business trust under the laws of the State of Delaware (the
"FUND"), and BANK OF AMERICA, N.A., a national banking association formed under
the federal laws of the United States (the "BANK").
W I T N E S S E T H:
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WHEREAS, the Fund is an open-end diversified, management
investment company registered under the Investment Company Act of 1940, as
amended (the "INVESTMENT COMPANY ACT");
WHEREAS, the Fund has requested the Bank, and the Bank has
agreed, 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
[$_______________] 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 Protected Amount (as defined herein); and
WHEREAS, the parties hereto, among other things, desire to
specify the conditions precedent to the issuance by the Bank of the Financial
Warranty and the drawdown of the Aggregate Shortfall Amount (as defined herein),
the payment of the 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 such case or proceeding 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 Bank under the Transaction Documents, (ii)
in respect of the Fund, a material adverse effect upon (a) the ability of 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 Bank under the
Transaction Documents and (iii) in respect of the Bank, a material adverse
effect upon the ability of the Bank to perform its obligations under this
Agreement or any other Transaction Document to which it is a party. 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 of such set of
circumstances 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 SHORTFALL AMOUNT" has the meaning provided in
SECTION 2.6(A).
"BANK" has the meaning provided in the preamble.
"BANK CONFIDENTIAL INFORMATION" has the meaning provided in
SECTION 9.3(A).
"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)
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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).
"BANK PARTIES" has the meaning provided in SECTION 5.2(A).
"BBID SYSTEM" means the Xxxxx Brothers Information Display
System or any equivalent successor system acceptable to the Bank in its
reasonable discretion.
"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 is 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).
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"CURATIVE STEPS" has the meaning provided in SECTION 4.1(B).
"CUSHION" has the meaning provided in SECTION 3.3(A).
"CUSTODIAN" means Xxxxx Brothers Xxxxxxxx & Co., as Custodian
pursuant to the Custodian Agreement or any successor custodian of the Fund's
assets appointed by the Fund's Board of Trustees.
"CUSTODIAN AGREEMENT" means the Custodian Contract, dated as
of July 1, 2001, between the Custodian and the Pioneer Funds, as supplemented as
of September 3, 2002, to add the Fund as a party, 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 Fund's Declaration of Trust,
dated as of October 2, 2001, 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(A) are satisfied.
"ELIGIBLE EQUITY INVESTMENTS" means equity securities of the
type described under the heading "principal investment strategies during the
Guarantee Period - equity securities" in the Fund's prospectus, dated September
[30], 2002.
"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 VALUE" has the meaning provided in SECTION
3.3(B).
"EXCESS FEES" has the meaning provided in SECTION 2.6(B).
"EXCHANGE BUSINESS DAY" means any day other than a day on
which the New York Stock Exchange is closed for business.
"EXPENSE LIMITATION AGREEMENT" means the Expense Limitation
Agreement, dated as of the date hereof, between the Adviser and the Fund,
pursuant to which the Adviser has
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agreed to limit Fund fees and expenses until the Maturity Date to a maximum
of 2.10% per annum for Class A Shares and 2.85% per annum for each of Class B
and Class C Shares (1.65% per annum for Class A Shares and 2.40% per annum for
each of Class B and Class C Shares if a Permanent Defeasance Event shall have
occurred) (excluding any extraordinary expenses (as defined in the Expense
Limitation Agreement)).
"EXTENDED CURE TIME" has the meaning provided in SECTION
4.1(A).
"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.
"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).
"FUND" has the meaning provided in the preamble.
"FUND CONFIDENTIAL INFORMATION" has the meaning provided in
SECTION 9.1(A).
"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 second 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.
"INDEMNIFIED PARTY" has the meaning provided in SECTION
5.3(A).
"INDEMNIFYING PARTY" has the meaning provided in SECTION
5.3(A).
"INDEPENDENT VERIFICATION REPORT" has the meaning provided in
SECTION 10.2.
"INDEPENDENT VERIFIER" means Ernst & Young LLP, the Fund's
auditors, or subject to the Bank's prior consent (which consent shall not be
unreasonably withheld or delayed) another accounting firm of nationally
recognized standing selected in accordance with SECTION 10.1.
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"INDEPENDENT VERIFIER AGREEMENT" means the agreement between
the Fund and the Independent Verifier on terms reasonably satisfactory to the
Bank, pursuant to which the Independent Verifier performs the services
contemplated by SECTION 10.2.
"INDEPENDENT VERIFIER EVENT" has the meaning provided in
SECTION 2.5(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 the date hereof, between 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.
"LIEN" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, charge, lien or security interest (statutory
or other) 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 in any Federal, state or local court or
before any governmental body or agency, or before any arbitrator, or the
explicit threat of any such proceedings, which, if adversely determined, would
reasonably be expected to have an Adverse Effect with respect to 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.
"MATURITY DATE" means the date that is seven years after the
Inception Date, but if that date is not an Exchange Business Day, the Maturity
Date shall be the first Exchange Business Day thereafter.
"MAXIMUM EQUITY COMPONENT" has the meaning given in SECTION
3.3(A).
"MINIMUM RETURN FACTOR" has the meaning provided in SECTION
2.6(C).
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"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.
"NET ASSETS" means the total assets of the Fund minus its
liabilities at the time of determination.
"NOTICE" has the meaning provided in SECTION 5.3(A).
"NYSE" means the New York Stock Exchange, Inc.
"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 December 31, 2002
without the prior written consent of the Bank.
"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.
"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 updated and in effect from
time to time.
"PROTECTED AMOUNT" has the meaning provided in SECTION 2.6(D).
"PROTECTED PERIOD" means the period commencing on and
including the Inception Date to and including the Maturity Date.
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"PV" has the meaning provided in SECTION 3.3(A).
"PV SHORTFALL," with respect to each Class of Shares, means
the difference of Total NAV minus PV, if a negative number.
"REGISTRATION STATEMENT" has the meaning provided in SECTION
2.3(A)(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 and federal banking laws) which has resulted
in or would be reasonably expected to result in an Adverse Effect with respect
to 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
with respect to such party.
"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.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERVICE AGREEMENT" means the Service Agreement, dated as of
September [30], 2002, among the Custodian, the Adviser, the Fund and the Bank,
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.
"SHORTFALL AMOUNT" has the meaning provided in SECTION 2.6(E).
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"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, 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
11.1(A).
"TOTAL NAV" has the meaning provided in SECTION 2.6(F).
"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 Independent Verifier Agreement (from and after its
execution and delivery), the Expense Limitation Agreement and the Prospectus
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).
"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 Moody's.
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.
"WARRANTY FEE" has the meaning provided in SECTION 2.4.
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
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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 Bank agrees to issue the Financial
Warranty, subject to the conditions set forth herein, on the Inception Date, in
an amount not to exceed [$_________________] million (the "FINANCIAL WARRANTY
AMOUNT LIMIT").
Section 2.2 PROCEDURE FOR ISSUANCE. Not later than three Business Days prior to
the last day of the Offering Period, the Fund shall deliver to the Bank a notice
specifying the expected Inception Date and the projected amount of the Financial
Warranty (which shall be in the amount of the 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
Fund shall deliver to the Bank a notice showing the following, in each case as
of the close of business on the Transition Date: (i) the Total NAV for each
Class of Shares, and (ii) the number of issued and outstanding shares of each
Class of Shares. The notice also shall certify that the conditions precedent in
SECTIONS 2.3(A)(I) through and including (VI) and 2.3(B) have been satisfied.
Upon receipt of such notice and the fulfillment of the applicable conditions set
forth in SECTION 2.3 hereof, the Bank will issue the Financial Warranty to the
Fund in the amount specified in the parenthetical in the first sentence of this
SECTION 2.2 (the "ISSUED FINANCIAL WARRANTY AMOUNT"). The Bank shall not incur
any obligation or liability hereunder or under any transaction contemplated by
any other Transaction Document during the Offering Period.
Section 2.3 CONDITIONS PRECEDENT TO EFFECTIVENESS. (a) SECTION 8.6 shall be
effective immediately upon the execution of this Agreement. Subject to SECTION
2.3(B), the effectiveness of all other provisions of this Agreement (other than
SECTION 8.6) is subject to the satisfaction of the following conditions:
(i) Each Transaction Document (other than the Prospectus and the
Independent Verifier Agreement) 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 Bank.
(ii) The Service Agreement shall provide that the Custodian will agree to
(A) receive and comply with instructions from the Bank in accordance
with SECTIONS 4.1(C) and 4.2(A) and (B) provide to the Bank
electronically in a format reasonably acceptable to the Bank the
records and access to the BBID System required by SECTIONS 3.4(C) and
(D), respectively.
(iii) The Bank 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
-10-
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 Delaware
regarding the Adviser.
(iv) The Bank shall have received (A) a certificate of the Secretary or
Assistant Secretary of the Fund, dated as of the Effective Date, as to
the incumbency and signature of the officers or other employees of the
Fund authorized to sign this Agreement and the other Transaction
Documents to which the Fund is a party, in each case on behalf of the
Fund, and certifying that attached thereto are true, complete and
correct copies of its resolutions duly adopted by the Board of Trustees
of the Fund 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 Fund relating to the transactions
contemplated hereby and thereby, (B) a copy of the Declaration of Trust
as amended and in effect on the Effective Date certified as of a
recent date by the Secretary or Assistant Secretary of the Fund, and
(C) a copy of the Certificate of Trust (including all amendments
thereto) certified as of a recent date by the Secretary of State of the
State of Delaware.
(v) The Bank shall have received a certificate of the Secretary or
Assistant Secretary of the Fund, dated as of the Effective Date,
certifying that (A) the Fund's registration statement on Form N-1A with
respect to each Class of Shares of the Fund (1) has been prepared by
the Fund in 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) the registration statement (or
the most recent amendment thereto) has been declared effective by the
Commission, (C) true and complete copies of such registration statement
on Form N-1A as amended and in effect on the Effective Date are
attached thereto (such registration statement, as it may be amended
from time to time, the "REGISTRATION STATEMENT"), excluding any
exhibits thereto, (D) 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, (E) the Registration Statement
and the Prospectus with respect to each Class of Shares of the Fund
contain all statements which are required by the Acts and the rules and
regulations thereunder, (F) 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 Bank that has been
provided by the Bank in writing for inclusion in or to be incorporated
by reference into the Registration Statement), and (G) the shares of
each Class of Shares of the Fund conform in all
-11-
material respects to the description thereof contained in the
Registration Statement and Prospectus with respect to such Class of
Shares.
(vi) The Bank shall have received the opinion of Xxxx and Xxxx LLP, counsel
to the Fund and the Adviser, in the form attached hereto as ANNEX A.
(vii) All Transaction Documents and proceedings, documents, instruments and
other legal matters in connection with the transactions contemplated by
this Agreement and the other Transaction Documents shall be
satisfactory in form and substance to the Bank, and the Bank 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 Fund shall have received the opinion of Shearman &
Sterling, counsel to the Bank in the form attached hereto as ANNEX B.
(ix) The Adviser and the Fund shall have received a certificate of the
Secretary or Assistant Secretary of the Bank, dated as of the Effective
Date, as to the incumbency and signature of the officers or employees
of the Bank authorized to sign this Agreement on behalf of the Bank.
(x) The Bank shall have delivered the guarantee of Bank of America
Corporation in the form attached hereto as Annex C.
(b) The obligation of the Bank 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
Fund in this Agreement shall be true and correct in all material
respects on and as of such date, and the Bank shall have received a
certification from each of the Adviser and the Fund to such effect as
to the representations and warranties made by it.
(ii) The Bank shall have received "bringdowns" of the certificates and other
matters referenced in SECTIONS 2.3(A)(III), (IV) and (V) and of the
opinion referenced in SECTION 2.3(A)(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 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.
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(vi) There shall not have been an Adverse Effect with respect to the Adviser
or the Fund since the date of this Agreement.
(vii) The Fund shall have (a) retained an Independent Verifier as
contemplated by SECTION 10.1, (b) prepared a form of Independent
Verification Report covering such matters as the Adviser, the Fund and
the Bank have agreed as contemplated by SECTION 10.2, (c) delivered to
the Bank a fully-executed copy of the Independent Verifier Agreement,
and (d) delivered to the Bank a certificate of an officer of the Fund
attesting to the due authorization, execution and delivery of the
Independent Verifier Agreement by the Fund.
(viii) The adoption by the Fund of valuation procedures regarding the
valuation of portfolio securities on an intraday basis, which
procedures shall be [to the extent practicable, consistent with the
Fund's current valuation procedures and] acceptable to the Bank in its
reasonable discretion.
(ix) On the Inception Date, the 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 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 Bank. If the Bank agrees to increase the
Financial Warranty Amount Limit in its sole discretion, this Agreement
will be amended accordingly.
(x) A copy of the Prospectus with respect to each Class of Shares of the
Fund shall have been delivered to the Bank.
(xi) The parties shall have provided the notice procedures contemplated by
SECTION 12.2(B), if applicable.
Section 2.4 WARRANTY FEE. In consideration of the issuance by the Bank of the
Financial Warranty, the Fund shall pay to the Bank a fee in an amount equal to
0.85% per annum of the average daily net assets of the Fund during each calendar
month in the Protected Period (the "WARRANTY FEE"), payable monthly in arrears
on the last Business Day of the following calendar month (each a "FEE PAYMENT
DATE"). The Warranty Fee payable on each Fee Payment Date will be calculated
based on a 365 or 366 day year for the actual number of days elapsed. The
obligation to pay the 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 SHORTFALL AMOUNT; ADJUSTMENT TO PROTECTED AMOUNT
(a) For ten Business Days commencing on the second 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. If the Calculation Agent does not determine such Aggregate
Shortfall Amount in a good faith commercially reasonable manner and provide such
certification within three Business Days following the Maturity Date (an
"INDEPENDENT VERIFIER
-13-
EVENT"), the Adviser and the Fund may require that the Independent
Verifier provide such certification.
(b) The Protected Amount with respect to each Class of Shares shall be
reduced as follows:
(i) If Shares of a Class are redeemed prior to the Maturity Date, the
Protected Amount for such Class shall be reduced to an amount equal to
the product of (a) the Protected Amount for such Class immediately
prior to such redemption and (b) a fraction, the numerator of which
shall be the Total NAV for such Class immediately after such redemption
and the denominator of which shall be the Total NAV for such Class
immediately prior to such redemption;
(ii) Dividends and distributions attributable to each Class of Shares that
are not reinvested in Shares of such Class will be considered
redemptions of the Shares that would otherwise have been issued upon
reinvestment and will reduce the Protected Amount of such Class on a
pro rata basis as determined in (i) above;
(iii) Excess Fees attributable to each Class of Shares shall reduce the
Protected Amount to an amount equal to the product of (a) the Protected
Amount for such Class immediately prior to the time that such Excess
Fees are assessed with respect to such Class and (b) a fraction, the
numerator of which shall be the Total NAV for such Class immediately
after such Excess Fees are assessed and the denominator of which shall
be the Total NAV for such Class immediately prior to the time that such
Excess Fees are assessed;
(iv) The net asset value attributable to any Shares issued during the
Protected Period in violation of SECTION 3.1 shall not be included in
the Protected Amount; and
(v) In the event of changes in accounting practices for the Fund from those
used on the Transition Date, corporate actions or other events that
otherwise would result in an increase in the Protected Amount with
respect to a Class of Shares, appropriate adjustments shall be made by
the Bank to the Protected Amount for such Class or the way such
Protected Amount is calculated to the extent necessary to preserve the
economic equivalent of this Agreement and the Financial Warranty. 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
Bank.
Section 2.6 CERTAIN DEFINED TERMS
(a) "AGGREGATE SHORTFALL AMOUNT" means the sum of the Shortfall Amount, if any,
of each of Class A, Class B and Class C Shares, which shall never exceed the sum
of the Protected Amount for each Class of Shares as of the close of business on
the Transition Date.
(b) "EXCESS FEES" means Fund fees and expenses (other than Investment Related
Expenses) in excess of the limitations provided in the Expense Limitation
Agreement, including any extraordinary expenses (as defined in the Expense
Limitation Agreement).
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(c) "MINIMUM RETURN FACTOR" means 1.1487 with respect to Class A Shares of the
Fund and 1.0909 with respect to each of Class B and Class C Shares of the Fund.
(d) "PROTECTED AMOUNT" at any time on any Business Day and with respect to each
Class of Shares means the product of (i) the Total NAV of such Class of Shares
as of the close of business on the Transition Date and (ii) the Minimum Return
Factor for such Class, as such product is adjusted pursuant to SECTION 2.5 as of
such time; PROVIDED, HOWEVER, in the case of any Class B Shares that are issued
and outstanding on the Transition Date which shall convert during the Protected
Period into Class A Shares pursuant to the terms of the Class B Shares, the
Protected Amount of the Class A Shares shall be increased by an amount equal to
the product of the Total NAV of the Shares so converted on the Transition Date
and a Minimum Return Factor that reflects the Minimum Return Factor for Class B
Shares for the period from the Transition Date to but excluding the date of
conversion and the Minimum Return Factor for Class A Shares for the period from
the date of conversion until the Maturity Date; and PROVIDED, FURTHER, that the
Protected Amount for the Class B Shares shall be reduced by the Total NAV of the
Shares so converted on the Transition Date and a Minimum Return Factor that
reflects the Minimum Return Factor for Class B Shares for the period from the
Inception Date until the Maturity Date.
(e) "SHORTFALL AMOUNT" with respect to each Class of Shares is deemed to be the
difference, if positive, between the Protected Amount as determined as of the
close of business on the Maturity Date for such Class in accordance with SECTION
2.6(D) and the Total NAV as of the Maturity Date for such Class.
(f) "TOTAL NAV" means with respect to each Class of Shares at the time of
determination, (i) the product of the published net asset value per Share for
such Class and the number of Shares of such Class outstanding at such time if
the determination is made as of the close of business on any Business Day and
(ii) if the determination is made at any time other than the close of business
on any Business Day, Total NAV shall mean the Total NAV (as determined in
accordance with subsection (i) above) as of the close of business on the
immediately preceding Business Day, adjusted to reflect any difference in the
Market Value of the Fund's portfolio securities at the time of such
determination compared to the Market Value of such securities at the close of
business on such prior Business Day and taking into account any purchases and
sales of portfolio securities effected as of the time that the determination is
made. The assets, income, gain, loss, expenses and liabilities (other than those
expenses and liabilities relating specifically to a Class of Shares which shall
be allocated solely to such Class) of the Fund shall be allocated to each Class
of Shares of the Fund at each time of determination on a pro rata basis based on
the Total NAV of such Class of Shares as determined as of the close of business
on the preceding Business Day. "TOTAL NAV" means, when used with respect to the
Fund rather than a particular Class of Shares, the sum of the Total NAV for all
Classes of Shares at the time in question.
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
-15-
reinvestment of dividends and distributions by the Fund to its Shareholders
in respect of the Shares, the transfer of Shares that does not result in an
increase in the Shares that are issued and outstanding or upon conversion of
Class B Shares that are issued and outstanding on the Transition Date into Class
A Shares in accordance with the terms of the Class B Shares. 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 Bank 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 Bank 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, as determined as of the close of business on
each Exchange Business Day and with respect to subsection (i) below, as of any
time on any Exchange Business Day:
(i) subject to this ARTICLE III, the Fund's assets may be invested only in
Eligible Equity Investments and Eligible Fixed-Income Investments;
(ii) the portion of the Fund's assets allocated to the Equity Portfolio,
calculated as a percentage, 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;
(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%
shall be considered allocated to the Equity 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 Bank 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 100%; PROVIDED, that the Bank may in its sole
discretion at any time, and upon notice to
-16-
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) the Equity Portfolio will be managed in a manner substantially similar
to the manner in which the equity securities of Pioneer Fund are
managed at the time the Registration Statement is declared effective;
no more than 5% of the Equity Portfolio will be invested in the
securities of a single issuer and no more than 25% of the Equity
Portfolio will be invested in equity securities of issuers in the same
industry (using an independent third party source for identifying
industries).
(vii) all Cash Equivalents and U.S. Government Securities shall mature no
later than one month after the Maturity Date;
(viii) all U.S. Government Securities shall mature no earlier than six months
prior to the Maturity Date;
(ix) 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 one month;
(x) 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
(xi) 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 = ((Total NAV - PV)/Total NAV)/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 0.05;
PROVIDED, that the Equity Limit for a Class of Shares shall
not exceed 100% at any time);
where,
Total NAV has the meaning set forth in SECTION 2.6(F);
PV = the product of (i) the Adjusted Discount Factor and (ii)
the Protected Amount, in each case with respect to the
relevant Class;
-17-
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 USD LIBOR and USD swap rates as of the date
of determination and (ii) an amount, based on the Total Fees
of the relevant Class and the time (in years) remaining to
the Maturity Date, determined by the Calculation Agent as
follows:
/ Total Fees /^365 x 1
/1 - ---------- /
/ 365 /
Total Fees = maximum expense ratio of that Class of Shares on an
annual basis permitted by the Expense Limitation Agreement
assuming a Permanent Defeasance Event has occurred
(excluding extraordinary Fund expenses (as defined in the
Expense Limitation Agreement));
Cushion = 0.225, as adjusted pursuant to SECTIONS 3.3(C), 3.4(D) AND
4.1(C);
t = the time, in years, remaining until the Maturity Date.
(b) The Adviser shall calculate the net asset value attributable to the Equity
Portfolio 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 Bank 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 during the immediately
succeeding Exchange Business Day 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
-18-
withstand a percentage decline equal to the Cushion and still provide for
payment in full of the Protected Amount on the Maturity Date, net of Total Fees;
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 at any time on any Exchange
Business Day either the SPX or the 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, then the Bank may, upon notice to the Adviser and
in its sole discretion, adjust the Cushion (and the Cushion shall remain as so
adjusted 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 0.30, or such lower number as determined by the Bank in its
sole discretion). The Adviser shall recalculate the Total NAV 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,
determined using the adjusted Cushion and recalculated Total NAV in accordance
with this SECTION 3.3(C), 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 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).
(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 Bank determines in its
sole discretion that the Fund is not complying with any Portfolio Requirement,
the Bank shall have the right to notify the Adviser of such violation and direct
the Adviser to promptly take such action as the Bank shall determine in its sole
discretion to be necessary to cause the Fund to comply with the Portfolio
Requirements (it being understood that the Bank shall not be entitled to direct
the Adviser to sell any specific equity security unless such equity security is
not an Eligible Equity Investment).
Section 3.4 REPORTS; ACCESS TO INFORMATION
(a) No later than 9:00 a.m. (Eastern time) on each Exchange Business Day, the
Adviser shall transmit to the Bank 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.
-19-
(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
Bank 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 Bank electronically
in a format reasonably acceptable to the Bank 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 Bank to be able to continuously view and
monitor the Fund Portfolio by causing the Custodian to give the Bank access to
the BBID System. If the Bank is denied such access at any time, the Bank 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 Bank with an alternative source of the information provided by the
BBID System that is acceptable to the Bank in its sole discretion. The Bank
shall notify the Adviser and the Fund of the Bank'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 for all Classes of Shares on the Maturity Date. The Fund will not use
leverage (excepting from the scope of the term "leverage," Loans for Temporary
or Emergency Purposes). 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 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):
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(i) Any failure at any time to comply with 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 violation is not cured on 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;
(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) The termination of, or failure to comply with, the Expense Limitation
Agreement;
(vi) Any violation of ARTICLE III (other than SECTIONS 3.2(A)(VI) and (XI))
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;
(vii) Any violation of SECTION 3.2(A)(VI) or (XI) 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;
(viii) The Fund shall fail to pay the 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 Bank;
(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 any successor
adviser (including the Adviser) that agrees to be bound by the terms of
this Agreement is not acceptable to the Bank in its reasonable
discretion after considering the reputation of the successor adviser,
its experience in managing large cap equity 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;
(x) 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 a successor investment
adviser acceptable to the Bank has not entered into an investment
management agreement with the Fund or (ii) the termination of the
Investment Management
-21-
Agreement is not yet effective but the Board of Trustees of the Fund
has indicated its intention to the Bank, or taken any further action,
to appoint a successor investment adviser notwithstanding the fact that
the Bank has advised the Board of Trustees that such successor
investment adviser would not be acceptable to the Bank based upon the
standards included in SECTION 4.1(A)(IX), 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;
(xi) The Adviser does not, in all material respects, manage the assets of
the Fund in accordance with the investment objective, policies and
strategies currently set forth in the Registration Statement;
(xii) 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 in any material respect when made or when deemed made;
(xiii) The Equity Limit for a Class of Shares is less than 0.05;
(xiv) The Adviser or the Fund 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 and such violation, if
capable of being remedied, shall continue unremedied for a period of
three Business Days after the Adviser becomes aware of the occurrence
of such failure; 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; or
(xv) The occurrence of any of the following: (A) a Regulatory Event or
Litigation Event or (B) an Act of Insolvency occurs with respect to the
Adviser.
(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 Bank 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 Bank may reasonably request. Upon sending such notice to the
Bank, the Adviser shall immediately take the Curative Steps set forth in such
notice unless and until such time as the Bank 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 Bank shall only object to
such Curative Steps if in the Bank'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.
-22-
(c) If a Trigger Event occurs and is continuing past the cure period specified
therein (if applicable), then, at the election of the Bank in its sole
discretion, the Bank shall have the right to (i) direct the Adviser or the
Custodian 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 Bank in its sole
discretion. The Bank shall notify the Adviser and the Fund of the Bank's
exercise of remedies pursuant to this SECTION 4.1(C).
(d) In the event of (i) an act or omission on the part of the Adviser which
constitutes negligence, gross 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 Bank 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 difference, if
negative, between (a) the actual Total NAV as of the date of determination and
(b) the hypothetical Total NAV 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. 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 asset classes or sectors, as the case may be, on a pro
rata basis. The Bank 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 Bank'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 Bank in writing of such disagreement
within three Business Days after the delivery by the Bank of the Determination
Notice and (ii) unless the Adviser and the Bank 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 Bank
with the Objection Notice within such three Business Day period, then the
Adviser shall be deemed to have agreed to the Bank'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
Bank 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; PROVIDED that should
the parties otherwise agree on such PV Shortfall, such PV Shortfall shall be
paid to the Bank within three Business Days of such agreement; and (ii) shall be
reduced by any amounts paid by the Adviser to the Fund under the Investment
Management Agreement 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 Bank any amounts
payable under this
-23-
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 an event occurs which if not cured or
waived would give rise to a Trigger Event; PROVIDED, that such event is cured
within the time period specified in SECTION 4.1(A).
(e) In the event that the terms of SECTION 4.1(D) provide for arbitration, each
of the Bank 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 National
Association of Securities Dealers, Inc. 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
National Association of Securities Dealers, Inc. 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 Constitution and Rules of the Board of
Governors of the New York Stock Exchange, Inc. or the Code of Arbitration
Procedure of the National Association of Securities Dealers, Inc. 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
Bank; PROVIDED, HOWEVER, that, notwithstanding the foregoing, the Bank 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; PV SHORTFALL. (a) If the Bank exercises the
remedy provided by SECTION 4.1(C)(I) upon a Permanent Defeasance Event, the Bank
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
Bank 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). The 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
Bank upon the issuance of the Financial Warranty with an irrevocable
instruction, in the form attached hereto as ANNEX C, executed by the Adviser
which shall constitute the Bank'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 Bank elects to provide instructions to
the Custodian pursuant to this SECTION 4.2(A) following a Permanent Defeasance
Event, the Bank shall do so by delivering the irrevocable instruction to the
Custodian. The Bank shall only deliver such instruction to the Custodian
following a Permanent Defeasance Event and after notice thereof to the Adviser.
-24-
(b) In accordance with the Expense Limitation Agreement, if a Permanent
Defeasance Event shall have occurred, the Adviser shall cause maximum Fund fees
and expenses to be reduced on an annual basis to 1.65% for Class A Shares and
2.40% for each of Class B and Class C Shares. In addition, upon the occurrence
of a Permanent Defeasance Event, the advisory fee paid by the Fund to the
Adviser under the Investment Management Agreement shall be reduced to an annual
rate of 0.20% of the average daily Net Assets of the Fund.
ARTICLE V
INDEMNIFICATION
Section 5.1 SURVIVAL. 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 Bank, its Affiliates, and their respective employees, officers,
directors and agents (collectively, the "BANK 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 or
threatened 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 or threatened failure to pay to the Bank 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 Bank'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 and error in calculation, and (v) 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 Bank included in the Registration Statement,
which has been provided by the Bank in writing for inclusion therein; PROVIDED,
HOWEVER, that the Adviser shall not be liable for any Losses resulting directly
or indirectly from any action or omission on the part of any of the Bank Parties
prior to the occurrence of a Permanent Defeasance Event which constitutes gross
negligence, recklessness, bad faith or willful misconduct by such Bank Party;
PROVIDED, FURTHER, that in the case of subsections (v)(A) and (B), the Adviser
shall not be liable for any Losses incurred by the Bank in connection with any
claim, suit or demand initiated by the Bank or any of its Affiliates to the
extent such claim, suit or demand is finally adjudicated or settled in the
Adviser's favor. The Adviser agrees to
-25-
promptly reimburse any of the Bank Parties for all Losses in respect of
which indemnification may be sought by such Bank Party hereunder as they are
incurred or suffered by such Bank Party.
(b) The Fund agrees to indemnify and hold harmless the Bank 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 Fund under this Agreement or any of the other Transaction Documents to which
it is a party, (ii) the failure or threatened failure of 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, 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 Bank'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 and error in
calculation, and (v) 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 Bank
included in the Registration Statement, which has been provided by the Bank in
writing for inclusion therein; PROVIDED, HOWEVER, that the Fund shall not be
liable for any Losses resulting directly or indirectly from any action or
omission on the part of any of the Bank Parties prior to the occurrence of a
Permanent Defeasance Event which constitutes gross negligence, recklessness, bad
faith or willful misconduct by such Bank Party; PROVIDED, FURTHER, that in the
case of subsections (v)(A) and (B), the Fund shall not be liable for any Losses
incurred by the Bank in connection with any claim, suit or demand initiated by
the Bank or any of its Affiliates to the extent such claim, suit or demand is
finally adjudicated or settled in the Fund's favor. The Fund agrees to promptly
reimburse any of the Bank Parties for all Losses in respect of which
indemnification may be sought by such Bank Party hereunder as they are incurred
or suffered by such Bank Party.
(c) The Bank agrees to indemnify and hold harmless the Adviser and the Fund,
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 Bank under this Agreement, (ii) the failure of the Bank to fulfill
any covenant contained in this Agreement, or (iii) the Bank'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; PROVIDED,
that the Bank shall not be liable for any Losses resulting, directly or
indirectly, from any action or omission on the part of any of the Fund Parties
which constitutes gross negligence, recklessness, bad faith or willful
misconduct by such Fund Party. The Bank 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.
-26-
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.
-27-
(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 Bank to
enter into this Agreement and to issue the Financial Warranty, the Adviser
hereby represents and warrants to the Bank 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 Delaware, (ii) has the power and
authority, and the legal right, 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 and (iv) is in
compliance with all Requirements of Law, except where non-compliance would not
have an Adverse Effect.
(b) The Adviser has the power and authority, and the legal right, 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 or
any other Person 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. 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 does 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. The Adviser is not in violation of any
Contractual Obligation, except where such violation would not reasonably be
expected to have an Adverse Effect.
(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
-28-
(iii) seeking any determination or ruling that would reasonably be expected
to have an Adverse Effect.
(e) The Adviser is duly registered with the Commission as an investment adviser
under the Investment Advisers Act; and 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 Bank (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 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 FUND. The Fund hereby
represents and warrants to the Bank as follows, on and as of the effective date
hereof:
(a) The Fund (i) is a business trust duly formed, validly existing and in good
standing under the laws of the State of Delaware; (ii) has the power and
authority, and the legal right, 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; and (iv) is in
compliance with all Requirements of Law, except where non-compliance would not
have an Adverse Effect.
(b) The Fund has the power and authority, and the legal right, 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 or any other Person 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 Fund's Board of Trustees. This Agreement has been, and each
other Transaction Document to which the Fund 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 Adviser 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
-29-
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.
(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 could reasonably be expected to have an Adverse Effect.
(e) The Fund 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) All factual information prepared and furnished by or on behalf of the Fund
to the Bank (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 BANK. The Bank hereby
represents and warrants to the Adviser and the Fund as follows, on and as of the
effective date hereof:
(a) The Bank is a national banking association formed under the Federal laws of
the United States and is authorized under such laws to transact the business of
banking.
(b) The Bank has the power and authority, and the legal right, 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 Bank of this Agreement or any other
Transaction Document to
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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 Bank. This Agreement constitutes, and each other Transaction Document to
which the Bank is a party, when executed and delivered, will constitute, a
legal, valid and binding obligation of the Bank 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 Bank 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 Bank
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 with respect to the
Bank.
(d) No litigation, proceeding or investigation of or before any arbitrator or
Governmental Authority is pending or, to the Bank's knowledge, threatened by or
against the Bank (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 with respect to the Bank.
(e) To the best of the Bank'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.
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 to the Prospectus pursuant to Rule 485(b) under the Securities Act
that do not relate to portfolio investments), without the prior written consent
of the Bank;
(b) other than in connection with the reinvestment of dividends or other
distributions, the transfer of Shares that does not result in an increase in the
Shares that are issued and outstanding or the conversion of Class B Shares that
are issued and outstanding on the Transition Date into Class A Shares in
accordance with the terms of the Class B Shares, it shall not allow the offering
or sale of the Shares of the Fund after the Offering Period;
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(c) it shall notify the Bank 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 Bank such additional information with respect to the
Fund as the Bank 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 Bank; PROVIDED, HOWEVER, that the Adviser
shall obtain the prior written consent of the Bank before filing any such
amendment or supplement that modifies references to or affects the Bank, this
Agreement or the Financial Warranty;
(f) it shall comply in all material respects with the terms and conditions of
the Transaction Documents to which it is a party and shall provide the Bank with
written notice immediately upon becoming aware of any material breach by it of
the provisions of any such agreements;
(g) it shall not, without the prior written consent of the Bank, elect to
terminate any Transaction Document;
(h) 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;
(i) it shall promptly inform the Bank 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;
(j) it shall promptly inform the Bank 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 that would reasonably be
expected to have an Adverse Effect;
(k) 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 by which it is bound, except to the extent
that such non-performance would not reasonably be expected to have an Adverse
Effect and shall provide the Bank with written notice promptly upon becoming
aware of any material breach by it of the provisions of any such agreements. The
Adviser shall take all action necessary to preserve its existence and ensure
that the Transaction Documents remain in full force and effect;
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(l) 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
Bank the information referred to herein;
(m) it shall implement compliance procedures reasonably designed to monitor the
Fund Portfolio's compliance with the Portfolio Requirements on an ongoing basis;
(n) it shall not include any material relating to the Bank 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 Bank prior to its inclusion in such marketing
materials, such approval not to be unreasonably withheld or delayed;
(o) it shall promptly inform the Bank 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;
(p) it shall provide to the Bank such additional information with respect to the
Fund as the Bank 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 Bank 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; and
(q) all factual information prepared and furnished by or on behalf of the
Adviser to the Bank (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 FUND. The Fund 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 Bank
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
principals applied on a consistent basis;
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(b) it shall provide the Bank 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 principals applied on a consistent basis;
(c) after the Offering Period, other than in connection with the redemption of
Shares by a Shareholder, the reinvestment of dividends and distributions, the
transfer of Shares that does not result in an increase in the Shares that are
issued and outstanding or the conversion of Class B Shares that are issued and
outstanding on the Transition Date into Class A Shares in accordance with the
terms of the Class B Shares, 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 by which it is bound, except to the extent
that such non-performance would not reasonably be expected to have an Adverse
Effect and shall provide the Bank 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
to the Prospectus pursuant to Rule 485(b) under the Securities Act that do not
relate to portfolio investments) without the prior written consent of the Bank,
which consent shall not be unreasonably withheld or delayed;
(f) it shall not amend, supplement, modify, terminate, or agree to any waiver
with respect to any provision of any agreement, obligation, undertaking or
filing with respect to the Fund, including the Declaration of Trust, if such
amendment, supplement or modification would be reasonably likely in the Bank's
reasonable discretion to have a material impact on the Bank or any Shareholder,
without the prior written consent of the Bank;
(g) it shall not include any material relating to the Bank 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 Bank 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 Bank, which consent shall not be
unreasonably withheld or delayed;
(i) prior to taking any action to terminate the Custodian, the Fund shall notify
the Bank and, in the event that the Custodian shall terminate the Custodian
Agreement with respect to the Fund, the Fund shall notify the Bank and engage a
successor Custodian; PROVIDED,
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HOWEVER, that the Fund shall not engage as successor Custodian any
Custodian who 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 and who does not have a system in place that
is equivalent to the BBID System acceptable to the Bank in its sole discretion;
(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 Bank 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 Bank 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 Bank such additional information with respect to the
Fund as the Bank 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 Bank to inspect, audit and make copies of and abstracts
from the Fund's records;
(n) all factual information prepared and furnished by or on behalf of the Fund
to the Bank (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;
(o) it shall not change the conversion period of Class B Shares or approve or
implement conversion rights for any other Class without the prior written
consent of the Bank; and
(p) it shall maintain insurance policies covering its liabilities to its
officers, trustees, employees and agents of the type and in the amounts as is
customary for funds similar to the Fund.
Section 7.3 [COVENANTS OF THE BANK. The Bank hereby covenants and agrees that
through the Termination Date it will make audited annual financial statements of
Bank of America Corporation, together with the relevant auditor's consent,
available to the Fund for inclusion on an annual basis in the Registration
Statement.]
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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) Any lack of validity or enforceability of, or any amendment or other
modification of, or waiver with respect to, any of the Transaction Documents;
(b) Any amendment or waiver of, or consent to departure from any Transaction
Document;
(c) 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 Bank or any other Person or entity
whether in connection with this Agreement, any of 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 inaccuracy or alleged inaccuracy upon which any drawing under the
Financial Warranty is based;
(f) Payment by the Bank 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 Bank;
(g) Any default or alleged default of the Bank under this Agreement, other than
a default with respect to payment of the Aggregate Shortfall Amount; or
(h) Any other circumstance or happening whatsoever; PROVIDED, that the same
shall not have constituted willful misconduct of the Bank and to the extent that
such circumstance or happening does not result in a default by the Bank with
respect to the payment of the Aggregate Shortfall Amount.
Section 8.2 PARTICIPATIONS AND ASSIGNMENTS. Subject to the prior written consent
of the Fund (which consent shall not be unreasonably withheld or delayed), the
Bank may assign its obligations under this Agreement to an Affiliate. The Bank
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 Bank agrees that any such disposition will not alter or affect
in any way whatsoever the Bank'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.
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Section 8.4 LIMITATION OF LIABILITY OF THE BANK. The Adviser and the Fund agree
that neither the Bank, 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 Bank, 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 Bank 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 FEES AND EXPENSES. In the event the Fund is liquidated or otherwise
does not commence operations prior to January 3, 2003, the Adviser hereby agrees
to pay all of the Bank's legal fees and expenses in connection with the
preparation and negotiation of this Agreement and any of the other Transaction
Documents; PROVIDED, HOWEVER, that the Adviser shall not be responsible for
paying such fees if the reason that the Fund does not commence operations is due
solely to the Bank's bad faith or willful misconduct.
ARTICLE IX
CONFIDENTIALITY
Section 9.1 CONFIDENTIALITY OBLIGATIONS OF THE BANK. Subject to SECTION 9.2, the
Bank agrees, on behalf of itself and its agents, not to disclose or use for any
purpose other than the 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 whether provided to the Bank 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 Bank hereunder unless (i) such information was or becomes
generally available to the public other than as a result of the Bank'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.
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Section 9.2 TRADING INFORMATION AND OTHER INFORMATION. (a) Notwithstanding
SECTION 9.1, the Bank may disclose Fund Confidential Information in connection
with the Bank's hedging arrangements to recipients ("PERMITTED RECIPIENTS") if
such Permitted Recipients represent and warrant to the Bank 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 Bank 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 Bank's obligation under this ARTICLE IX and to achieve compliance
with applicable law.
(b) Notwithstanding SECTION 9.1, the Bank may disclose Fund 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, the exercise of
the Bank'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.
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, "BANK CONFIDENTIAL INFORMATION") provided by the Bank 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.
(b) Notwithstanding subsection (a) above, each of the Adviser and the Fund may
disclose Bank 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 INDEPENDENT VERIFIER. This ARTICLE IX shall not apply to the
Independent Verifier. The confidentiality arrangements among the Adviser, the
Fund and the Independent Verifier shall be set forth in the Independent
Verification Agreement.
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ARTICLE X
THE INDEPENDENT VERIFIER
Section 10.1 RETENTION OF INDEPENDENT VERIFIER. The Fund shall, no later than
the Inception Date, retain, at the Fund's expense, the Independent Verifier. If
the Independent Verifier selected in accordance with this SECTION 10.1 fails to
perform its duties to the Bank's reasonable satisfaction, then, upon the Bank's
request, the Adviser and the Fund shall select another accounting firm of
nationally recognized standing to act as Independent Verifier and provide the
Independent Verification Report.
Section 10.2 RESPONSIBILITIES OF INDEPENDENT VERIFIER. The Independent Verifier
shall, on a periodic basis, perform such procedures specified on SCHEDULE 2
hereto with respect to the information provided to the Bank pursuant to ARTICLE
III and report its finding to the Bank (the "INDEPENDENT VERIFICATION REPORT").
Section 10.3 ADVISER COOPERATION. The Adviser shall cooperate fully with the
Independent Verifier to facilitate the fulfillment of the Independent Verifier's
responsibilities.
ARTICLE XI
TERMINATION
Section 11.1 TERMINATION. (a) Unless this Agreement and the Financial Warranty
are sooner terminated pursuant to SECTION 11.1(B) hereof, this Agreement and the
Financial Warranty shall terminate (i) on the Maturity Date if no amounts are
payable under the Financial Warranty, or (ii) thereafter, upon payment by the
Bank of all amounts due under the Financial Warranty to the Custodian on behalf
of the Fund (any such date of termination pursuant to this ARTICLE XI is
referred to in this Agreement as the "TERMINATION DATE").
(b) (i) This Agreement may be terminated by the Fund by written notice to the
Bank at any time (A) upon the occurrence of an Act of Insolvency with respect to
the Bank, or (B) if the credit rating of the Bank is suspended, withdrawn or
downgraded below BBB+ by S&P (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 Bank
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 $70 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 (including the Adviser) is not elected prior to the date of
such termination or the Fund's Board of Trustees elects a successor
adviser (including the Adviser) which agrees to be bound by the terms
of this Agreement without first consulting with the Bank and, subject
to its fiduciary obligations and obligations under the Investment
Company Act, considering the reputation of the successor adviser, its
experience in managing large cap equity 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,
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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 Xxxxx
Brothers Xxxxxxxx & Co. and engages a successor custodian that does not
agree to be bound by the Service Agreement, 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 Bank
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.
(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 Fund'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
(including 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 substantially
all of its assets.
(iv) If this Agreement is terminated in accordance with this SECTION
11.1(B), the Fund shall notify its Shareholders of such termination and
such notice shall state that the Fund has released the Bank from all
liability under the Financial Warranty. The Fund shall provide a copy
of such notice to the Bank. From and after the effective date of such
termination, the Fund shall have no obligation to pay the Warranty Fee
(except as to amounts thereof accrued on a daily interpolated basis
prior to such termination), and the Bank shall have no liability under
the Financial Warranty.
ARTICLE XII
MISCELLANEOUS
Section 12.1 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 12.2 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,
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addressed as follows:
If to the Adviser:
Pioneer Investment Management, Inc.
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Fund:
c/o Pioneer Investment Management, Inc.
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Bank:
c/o Banc of America Securities LLC
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 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 12.3 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 12.4 PAYMENTS. All payments to the Bank 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 Bank by notice to the Fund and
the Adviser. Any payments to the Fund under
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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 Bank.
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 12.5 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 12.6 SUBMISSION TO JURISDICTION, WAIVER OF JURY TRIAL. EXCEPT AS
OTHERWISE SET FORTH IN SECTIONS 4.1(D) AND (E), THE BANK, THE ADVISER AND 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 BANK, THE ADVISER AND 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 BANK, THE ADVISER AND 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 BANK, THE ADVISER AND 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 BANK, THE ADVISER AND 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 BANK, THE ADVISER
AND 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 12.7 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.
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Section 12.8 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 12.9 RELIANCE ON INFORMATION. In making a determination as to whether a
Trigger Event has occurred, the Bank shall be entitled to rely on reports
published or broadcast by media sources believed by the Bank to be generally
reliable and on information provided to the Bank by any other source believed by
the Bank to be generally reliable; PROVIDED that the Bank 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 12.10 TIME OF THE ESSENCE. Time is of the essence under this Agreement.
Section 12.11 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 12.12 FURTHER ASSURANCES. The parties hereto shall, upon the request of
the Bank, 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.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, all as of the day and year first above mentioned.
PIONEER INVESTMENT MANAGEMENT, INC.,
as Adviser
By:
Name:
Title:
PIONEER PROTECTED PRINCIPAL PLUS FUND,
as Fund
By:
Name:
Title:
BANK OF AMERICA, N.A., as Bank
By:
Name:
Title:
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EXHIBIT A TO FINANCIAL WARRANTY AGREEMENT
FINANCIAL WARRANTY
No. _____________
[Date of issuance of Financial Warranty]
Pioneer Protected Principal Plus Fund
Attn: _________________________
_______________________________
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 ____________________ office on [_____]. 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 __, 2002 among Pioneer
Investment Management, Inc., Pioneer Protected Principal Plus Fund and Bank of
America, N.A.
If at any time on or prior to the Maturity Date the Calculation Agent provides
the Bank with a written certificate certifying that the Financial Warranty has
been terminated pursuant to Section 11.1 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 Bank has received a Termination Certificate, funds under this
Financial Warranty are available to you against one sight draft drawn on our
_____________________ 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 (or as described in Section
2.5(a) of the Financial Warranty Agreement, the Independent Verifier) certifying
the determination of the Aggregate Shortfall Amount and its accuracy. If the
Independent Verifier provides the certificate certifying the determination of
the Aggregate Shortfall Amount and its accuracy, the Independent Verifier shall
also certify that it is the Independent Verifier and that an Independent
Verifier Event has occurred, and such certificate shall be substantially in the
form attached hereto as SCHEDULE I. 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 or the Independent
Verifier, as applicable.
(c) You and the Adviser have complied with all applicable covenants set forth in
the Financial Warranty Agreement, including without limitation ARTICLE III
thereof.
If the Person providing the certificate certifying the determination of the
Aggregate Shortfall Amount and its accuracy is the Independent Verifier, your
written certificate shall also state that such Person is the Independent
Verifier and that an Independent Verifier Event has occurred.
Presentation of such draft and certificate shall be made at our office located
at _____________________, Attention: ____________, or at any other office in the
City and State of New York 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.
This Financial Warranty shall be governed by the laws of the State of New York,
including the Uniform Commercial Code as currently in effect in the State of New
York, as such Uniform Commercial Code may be amended from time to time. This
Financial Warranty is subject to the Uniform Customs and Practice for
Documentary Credits, 1993 Revision, International Chamber of Commerce
Publication No. 500, 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 __________________, Attention: __________
specifically referring to the number of this Financial Warranty.
This Financial Warranty is not transferable.
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.
Subject to the fourth preceding paragraph herein, we hereby agree to forthwith
honor your draft drawn under and in compliance with the terms of this Financial
Warranty if presented to us on or before [_____], accompanied by the written
certificates specified above.
Very truly yours,
BANK OF AMERICA, N.A.
By: _______________
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