Exhibit 4.09
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FEDERATED INVESTORS PROGRAM
MASTER AGREEMENT
Dated as of October 24, 1997
among
FEDERATED INVESTORS,
as Parent,
FEDERATED FUNDING 1997-1, INC.,
as Seller,
FEDERATED INVESTORS MANAGEMENT COMPANY,
as Transferor,
FEDERATED SECURITIES CORP.,
as Distributor,
Principal Shareholder Servicer and
Program Servicer Agent,
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee of the
PLT FINANCE TRUST 1997-1,
as Initial Purchaser,
PLT FINANCE, L.P.,
as Revolving Purchaser,
PUTNAM, LOVELL & THORNTON INC.,
as Program Administrator, and
BANKERS TRUST COMPANY,
not in its individual capacity
but solely as Funding and Collection Agent,
except as otherwise expressly provided
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TABLE OF CONTENTS
Page
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ARTICLE I RULES OF CONSTRUCTION; DEFINITIONS
1.01 Rules of Construction......................................... 2
1.02 Definitions................................................... 2
ARTICLE II EXECUTION AND DELIVERY OF
PROGRAM DOCUMENTS
2.01 Program Documents; Purchase Date.............................. 2
2.02 Execution and Delivery of Transfer
Agreement..................................................... 2
2.03 Execution and Delivery of
Purchase Agreement............................................ 3
2.04 Execution and Delivery of Program
Collection Agency Agreement................................... 3
2.05 Execution and Delivery of the Program
Servicer Agent Agreement...................................... 3
ARTICLE III CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF THE PARTIES PURSUANT TO THE PROGRAM
DOCUMENTS
3.01 Conditions to Obligations of the
Parties Under the Program Documents........................... 3
3.02 Conditions Precedent on the Initial
Purchase Date................................................. 4
3.03 Conditions Precedent on Each
Revolving Purchase Date....................................... 8
ARTICLE IV REPRESENTATIONS AND WARRANTIES
4.01 Representations and Warranties of
the Seller, the Transferor, the Parent and
the Distributor............................................... 8
4.02 Additional Representations and
Warranties of the Seller...................................... 12
4.03 Additional Representations and
Warranties of the Parent...................................... 14
4.04 Additional Representations and
Warranties of the Distributor................................. 15
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4.05. Additional Representations and Warranties
of the Transferor............................................. 16
4.06 Representations and Warranties of the
Purchasers.................................................... 18
ARTICLE V COVENANTS
5.01 Covenants of the Seller, the Transferor,
the Parent and the Distributor................................ 19
5.02 Additional Covenants of the Seller............................ 23
5.03 Additional Covenants of the Parent............................ 23
5.04 Additional Covenants of the Distributor....................... 28
5.05 Additional Covenants of the Transferor........................ 29
ARTICLE VI EVENTS OF TERMINATION
6.01 Events of Termination......................................... 29
ARTICLE VII THE PROGRAM ADMINISTRATOR
7.01 Authorization and Action...................................... 33
7.02 Program Administrator's Reliance, Etc......................... 33
7.03 Rights of the Program Administrator........................... 33
ARTICLE VIII PARENT'S UNDERTAKINGS
8.01. Undertakings; Payment of Damages.............................. 34
8.02. Agreement Not Affected........................................ 34
8.03. Waiver of Notice; No Offset;
No Subrogation................................................ 35
ARTICLE IX MISCELLANEOUS
9.01. No Waiver; Modifications in Writing........................... 35
9.02. Payment....................................................... 35
9.03. Notices, Etc.................................................. 36
9.04. Costs and Expenses; Indemnification........................... 37
9.05. Taxes......................................................... 40
9.06. Execution in Counterparts..................................... 42
9.07. Binding Effect; Assignment.................................... 42
9.08. Governing Law; Submission to
Jurisdiction.................................................. 42
9.09. Severability of Provisions.................................... 43
9.10. Confidentiality............................................... 43
9.11. Intent of Agreement........................................... 43
9.12. Continuing Obligations........................................ 44
9.13. Limited Liability............................................. 44
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9.14. Merger........................................................ 45
9.15. Further Acts.................................................. 45
9.16. Specific Performance; Other Rights
and Remedies.................................................. 45
9.17. No Proceedings................................................ 46
9.18. Additional Funds.............................................. 46
9.19. Trust Capacity................................................ 47
SCHEDULES
SCHEDULE I COMPANIES, FUNDS, SHARES AND RELATED MATTERS
SCHEDULE II ALLOCATION PROCEDURES
SCHEDULE III BANKRUPTCY REMOTE COVENANTS
SCHEDULE IV CONTINGENT DEFERRED SALES CHARGES
SCHEDULE V SCHEDULE OF TRANSFERABLE NASD CAP
SCHEDULE X RULES OF CONSTRUCTION; DEFINITIONS
EXHIBITS
EXHIBIT A FORM OF SELLER'S TRANSFER AGREEMENT
EXHIBIT B FORM OF INITIAL PURCHASE AGREEMENT
EXHIBIT C FORM OF TRANSFEROR'S TRANSFER AGREEMENT
EXHIBIT D FORM OF PROGRAM SERVICER AGENT AGREEMENT
EXHIBIT E FORM OF PROGRAM FUNDING AND COLLECTION
AGENCY AGREEMENT
EXHIBIT F FORM OF DISTRIBUTION PLAN
EXHIBIT G FORM OF DISTRIBUTOR'S CONTRACT
EXHIBIT H FORM OF PRINCIPAL SHAREHOLDER SERVICER'S
AGREEMENT
EXHIBIT I FORM OF SHAREHOLDER SERVICER'S AGREEMENT
EXHIBIT J FORM OF IRREVOCABLE PAYMENT INSTRUCTION
EXHIBIT K FORMS OF OPINIONS
EXHIBIT L FORM OF INVESTOR REPORT
EXHIBIT M FORM OF ADDITIONAL ELIGIBLE FUND ADDENDUM
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FEDERATED INVESTORS PROGRAM
MASTER AGREEMENT
THIS FEDERATED INVESTORS PROGRAM MASTER AGREEMENT (this "Agreement"),
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dated as of October 24, 1997, among FEDERATED INVESTORS, a Delaware business
trust (together with its permitted successors and assigns, the "Parent"),
FEDERATED FUNDING 1997-1, INC., a Delaware corporation (together with its
permitted successors and assigns, in its capacity as seller hereunder and as
beneficial owner of the Initial Purchaser, the "Seller"), FEDERATED INVESTORS
MANAGEMENT COMPANY, a Pennsylvania corporation (together with its permitted
successors and assigns, the "Transferor"), FEDERATED SECURITIES CORP., a
Pennsylvania corporation (together with its permitted successors and assigns,
the "Distributor"), WILMINGTON TRUST COMPANY, not in its individual capacity but
solely as Owner Trustee of the PLT FINANCE TRUST 1997-1 (together with its
permitted successors and assigns, the "Initial Purchaser"), PLT FINANCE, L.P.
(together with its permitted successors and assigns, the "Revolving Purchaser"
and together with the Initial Purchaser, the "Purchasers"), PUTNAM, LOVELL &
THORNTON INC., a Delaware corporation (together with its permitted successors
and assigns, the "Program Administrator") and BANKERS TRUST COMPANY, not in its
individual capacity but solely as Funding and Collection Agent except as
otherwise expressly provided (together with its permitted successors and assigns
in such capacity, the "Funding and Collection Agent").
W I T N E S S E T H :
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WHEREAS, the Parent directly or indirectly owns all of the capital
stock of the Distributor, the Transferor and the Seller;
WHEREAS, the Distributor is the originator of certain "Portfolio
Assets" as hereinafter defined;
WHEREAS, the Parent, the Distributor, the Seller, the Transferor and
the Purchasers wish to establish a program pursuant to which the Purchasers will
acquire certain of the Portfolio Assets in accordance with the terms and
conditions set forth herein and in the other "Program Documents," as hereinafter
defined;
WHEREAS, the Purchasers have appointed the Program Administrator to
administer the Program;
WHEREAS, the Purchasers and the Program Administrator have appointed
the Funding and Collection Agent to serve as Funding and Collection Agent; and
WHEREAS, the Purchasers and the Program Administrator wish to appoint
the Distributor as Program Servicer Agent in accordance with the terms and
conditions set forth herein and in the other Program Documents;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties hereto hereby agree as follows:
ARTICLE I
RULES OF CONSTRUCTION;
DEFINITIONS
Section 1.01. Rules of Construction. The rules of construction set
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forth in Schedule X hereto shall be applied to this Agreement.
Section 1.02. Definitions. Capitalized terms used herein and not
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otherwise defined herein shall have the meanings ascribed thereto in Schedule X
attached hereto and by this reference made a part hereof.
ARTICLE II
EXECUTION AND DELIVERY OF PROGRAM DOCUMENTS
Section 2.01. Program Documents; Purchase Date. Subject to the terms
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and conditions of this Agreement and the other Program Documents, on or before
the first scheduled Purchase Date, each of the Parties severally agrees to
execute and deliver the other Program Documents to which it is to be a Party.
The Parties also agree that the events which are to occur on a Purchase Date
shall be deemed to occur simultaneously.
Section 2.02. Execution and Delivery of Transfer Agreements.
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(a) On the date hereof, the Distributor and the Transferor shall have
executed and delivered the Transferor's Transfer Agreement, and the
Transferor and the Seller shall have executed and delivered the Seller's
Transfer Agreement.
(b) Pursuant to the Transferor's Transfer Agreement, the Transferor
has acquired all right, title and interest in and to the Portfolio Assets
from the Distributor. Pursuant to the Seller's Transfer Agreement, the
Seller has acquired all right, title and interest in and to the Portfolio
Assets from the Transferor.
Section 2.03. Execution and Delivery of Purchase Agreements.
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(a) On the date hereof, the Seller and the Initial Purchaser shall
have executed and delivered the Initial Purchase Agreement. It is
contemplated that the Seller and the Revolving Purchaser will execute and
deliver the Revolving Purchase Agreement promptly hereafter.
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(b) Subject to the terms and conditions set forth herein and pursuant
to the Purchase Agreements, the Purchasers shall acquire all right, title
and interest in and to the Purchased Portfolio Assets from the Seller.
Section 2.04. Execution and Delivery of Program Funding and
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Collection Agency Agreement. On the date hereof, the Purchasers, the Program
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Administrator, the Seller, the Distributor, the Transferor and the Funding and
Collection Agent shall have executed and delivered the Program Funding and
Collection Agency Agreement pursuant to which, among other things, the Funding
and Collection Agent shall receive Program Collections on the Portfolio Assets
and make distributions in respect thereof.
Section 2.05. Execution and Delivery of Program Servicer Agent
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Agreement. On the date hereof, the Distributor, the Purchasers and the Program
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Administrator shall have executed and delivered the Program Servicer Agent
Agreement pursuant to which the Distributor is appointed Program Servicer Agent.
ARTICLE III
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF THE PARTIES PURSUANT TO THE PROGRAM DOCUMENTS
Section 3.01. Conditions to Obligations of the Parties Under the
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Program Documents. The obligation of each Party to take the actions to be taken
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by it under the Program Documents on any Purchase Date shall be subject to the
fulfillment or waiver on such Purchase Date of the following specified
conditions precedent set forth in Section 3.02 or Section 3.03 as applicable
(except that the obligation of any Party shall not be subject to such Party's
own performance or compliance):
(a) in the case of the Parent, the Distributor, the Program Servicer
Agent, the Transferor and the Seller, the fulfillment to their
satisfaction, or waiver by them, of the conditions precedent set forth in
clauses (a), (c), (f), (k) and (l) of Section 3.02 or in Section 3.03, as
applicable;
(b) in the case of the Program Administrator, the fulfillment to its
satisfaction, or waiver by it, of the conditions precedent set forth in all
clauses of Section 3.02 or in Section 3.03, as applicable;
(c) in the case of each Purchaser, the fulfillment to its
satisfaction, or waiver by it, of the conditions precedent set forth in all
clauses of Section 3.02 or in Section 3.03, as applicable; and
(d) in the case of the Funding and Collection Agent, the fulfillment
to its satisfaction or waiver by it, of the conditions precedent set forth
in clauses (a), (c) through (h), (k), (l) and (r) of Section 3.02 or in
Section 3.03, as applicable.
Section 3.02. Conditions Precedent on the Initial Purchase Date. The
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conditions precedent for each Party as specified in Section 3.01 hereof for the
Initial Purchase Date are as follows:
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(a) Program Documents. The Program Documents shall have been duly
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authorized, executed and delivered by the other Parties thereto, and shall
be in full force and effect on such Purchase Date.
(b) Due Diligence. The Initial Purchaser and the Program
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Administrator shall have completed and be reasonably satisfied with their
due diligence review of each Federated Entity, Company and Fund. Such due
diligence review may include, without limitation, discussions with rating
agencies, review of systems and procedures, review of UCC search reports,
and review of books and records.
(c) Representations and Warranties. All representations and
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warranties of each Party contained in this Agreement and the other Program
Documents shall be true and accurate on and as of such Purchase Date as
though made on and as of such Purchase Date, except to the extent that such
representations and warranties relate solely to an earlier date (in which
case such representations and warranties shall be true and accurate on and
as of such earlier date).
(d) Security Documents. Copies of UCC financing statements and UCC
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search reports, in form and substance acceptable to the Initial Purchaser
and the Program Administrator, covering the interests in the Portfolio
Assets conveyed by the Distributor to the Transferor pursuant to the
Transferor's Transfer Agreement and by the Transferor to the Seller
pursuant to the Seller's Transfer Agreement and in the Purchased Portfolio
Assets conveyed from the Seller to the Initial Purchaser pursuant to the
Initial Purchase Agreement as of such Purchase Date shall have been
delivered by the Distributor and the Seller to the Initial Purchaser and
evidencing to the satisfaction of the Program Administrator and the Initial
Purchaser the conveyance to the Initial Purchaser of an ownership interest
therein free and clear of Adverse Claims. Such financing statements shall
have been duly filed in all places where, and all other actions shall have
been taken which are, in the opinion of counsel for the Program
Administrator, necessary or advisable to perfect the interests reflected
thereon.
(e) Approvals. All Governmental Authorizations, Private
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Authorizations and Governmental Filings, if any, on the part of the Parent,
the Distributor, the Advisors, the Shareholder Servicer, the Transferor,
the Seller, the Funding and Collection Agent, the Companies, the Funds and
the Initial Purchaser that are required to be obtained or done in order to
permit the execution, delivery and performance by the Parent, the
Distributor, the Transferor, the Seller, the Funding and Collection Agent,
or the Initial Purchaser, as the case may be, of the Program Documents to
which it is a party shall have been duly obtained or delivered.
(f) Trust Documents. The other Parties shall have received certified
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copies of (i) evidence that the execution, delivery and performance by the
Initial Purchaser of this Agreement and the other Program Documents to
which it is a party and any other documents to be executed by or on behalf
of the Initial Purchaser in connection with the transactions contemplated
hereby or thereby have
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been duly authorized, (ii) an incumbency certificate of Wilmington Trust
Company, as trustee of the Initial Purchaser as to the person or persons
authorized to execute and deliver all Program Documents to which the
Initial Purchaser is a party with specimen signatures of such persons
acting on behalf of the Initial Purchaser and (iii) a copy of the Trust
Agreement in respect of the Initial Purchaser.
(g) Corporate Documents. The other Parties shall have received (i) a
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copy of the certificate of incorporation or similar organizational document
of each of the Seller, the Transferor, the Parent and the Distributor
certified by the Secretary of State of the state of organization of such
Federated Entity, (ii) the by-laws or similar organizational document of
each of the Seller, the Transferor, the Parent and the Distributor and the
resolutions of the Board of Directors or governing body of each such
Federated Entity duly authorizing the execution, delivery and performance
by such Federated Entity of the Program Documents to which it is a party,
each certified by a Responsible Officer, (iii) an incumbency certificate of
each as to the person or persons authorized to execute and deliver all
Program Documents to which each such Federated Entity is a party with
specimen signatures of such persons acting on behalf thereof, and (iv) a
certificate of good standing of each of the Seller, the Transferor, the
Parent and the Distributor issued by the Secretary of State of the state of
organization of each such Federated Entity.
(h) Closing Certificates. On such Purchase Date, the following
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statements shall be true and each of the Initial Purchaser and the Program
Administrator shall have received a certificate of each of the Seller, the
Transferor, the Parent and the Distributor certifying as to the accuracy of
the following statements as to itself:
(i) the representations and warranties by it contained in
this Agreement and the other Program Documents to which
it is a party are true and accurate on and as of such
Purchase Date as though made on and as of the Purchase
Date, except to the extent that such representations
and warranties relate solely to an earlier date (in
which case such representations and warranties shall be
true and accurate on and as of such earlier date);
(ii) it has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied on
or prior to such Purchase Date; and
(iii) no event has occurred and is continuing, or will
result from the closing of the transactions on such
Purchase Date that constitutes an Event of Termination
or an event which, with the passage of time or notice
or both would constitute an Event of Termination.
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(i) Distribution Plans, Distributor's Contracts, Principal
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Shareholder Servicer's Agreement and Shareholder Servicer's Agreement. The
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Program Administrator and the Initial Purchaser shall have received a copy
of a certificate of the President or any Vice President of the Parent
certifying that a true and complete copy of each of the following documents
is attached thereto and has been duly authorized, executed and delivered by
each of the parties thereto, and in the case of each Fund, has been
approved in the manner required by the Investment Company Act and the rules
and regulations adopted thereunder:
(i) the Distribution Plan of each Fund relating to the
Purchased Portfolio Assets, which shall be
substantially in the form of Exhibit F hereto;
(ii) the Distributor's Contracts relating to the Portfolio
Assets, which shall be substantially in the form of
Exhibit G hereto;
(iii) the Principal Shareholder Servicer's Agreement
relating to the Portfolio Assets, which shall be
substantially in the form of Exhibit H hereto; and
(iv) the Shareholder Servicer's Agreement relating to the
Portfolio Assets, which shall be substantially in the
form of Exhibit I hereto.
(j) Prospectus. The Program Administrator and the Initial Purchaser
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shall have received a copy of a certificate of the President or any Vice
President of the Parent certifying that a true and complete copy of the
current Prospectus for each Fund is attached and that no change therein has
been proposed which if in effect on the Initial Purchase Date would cause
the representation of the Parent set forth in Section 4.03(a) to be
incorrect.
(k) Illegality. No change shall have occurred after the date of
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execution and delivery of this Agreement in Applicable Law or regulations
thereunder or interpretations thereof by appropriate regulatory authorities
or any court that would make it illegal for any Party to execute, deliver
and perform the Program Documents to which it is a party and no action or
proceeding shall have been instituted nor shall any action or proceeding be
threatened before any court or governmental agency, nor shall any order,
judgment or decree have been issued by any court or governmental agency
prior to the Purchase Date, to set aside, restrain, enjoin or prevent the
completion and consummation of this Agreement or any other Program Document
or the transactions contemplated hereby or thereby.
(l) Obligations. Each obligation to be performed in favor of such
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Party by any other Party on or before such Purchase Date pursuant to any
Program Document shall have been performed.
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(m) Opinions of Counsel. Each of the Initial Purchaser and the
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Program Administrator shall have received each of the following opinions
addressed to it and dated the Initial Purchase Date (and on which the
Investors are entitled to rely):
(i) & Worcester LLP, special New York and Sullivan
Investment Company Act counsel to the Parent, the
Distributor, the Transferor and the Seller,
substantially in the form of Exhibit K-1; and
(ii) Dickstein, Shapiro, Morin & Oshinsky LLP, special
counsel to each Company, substantially in the form of
Exhibit K-2.
(n) Certain Fees and Expenses. The Parent or the Distributor shall
-------------------------
have paid all reasonable fees and expenses of the Initial Purchaser and the
Program Administrator (including the reasonable accrued fees and expenses
of counsel to the Purchaser and the Program Administrator) then due and
payable in accordance herewith.
(o) Investor Reports. The Distributor shall have delivered to the
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Initial Purchaser and the Program Administrator any Investor Reports due on
or prior to such Purchase Date, which shall be substantially in the form of
Exhibit L hereto and otherwise in form and substance reasonably
satisfactory to the Initial Purchaser and the Program Administrator.
(p) Program Collections. No Company shall be prevented by any
-------------------
Authority or by any Applicable Law from paying Program Collections and
Related Collections to the Program Collection Account in accordance with
the applicable Irrevocable Payment Instruction and no Company shall have so
asserted in writing.
(q) Closing Placement. The Placement of Placement Securities by the
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Initial Purchaser shall have closed, the net proceeds of which are
sufficient pay the Initial Purchase Price for the Purchased Portfolio
Assets.
(r) Other Documents. The Initial Purchaser and the Program
---------------
Administrator shall have received such other instruments, documents,
certificates and opinions as the Initial Purchaser and the Program
Administrator may have reasonably requested in order to establish the
taking of all appropriate corporate or partnership and other proceedings in
connection herewith, the consummation of the transactions contemplated
hereby, and compliance with the conditions herein set forth, in connection
with the Portfolio Assets relating to any Fund and the Purchase Price
payable on the Purchase Date, each such instrument, document, certificate
and opinion to be in form and substance reasonably satisfactory to such
Party.
Section 3.03. Conditions Precedent on Each Revolving Purchase Date.
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The conditions precedent for each Party as specified in Section 3.01 hereof for
each Revolving Purchase Date shall be as specified in the Revolving Purchase
Agreement.
ARTICLE IV
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REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of the Seller, the
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Transferor, the Parent and the Distributor. Each of the Seller, the Transferor,
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the Parent and the Distributor represents and warrants on and as of the date
hereof, on and as of each Purchase Date and, as to clause (k) hereof, on the
date such information is provided, as to itself and, in the case of the Parent,
as to each Federated Entity (other than the Seller, the Transferor and the
Distributor), as follows:
(a) it is duly organized and is validly existing and in good standing
under the laws of the jurisdiction of its organization, with full power and
authority to own and operate its property, conduct the business in which it
is now engaged and to execute and deliver and perform its obligations under
this Agreement and the other Program Documents to which it is a party, and
it is in compliance with all Applicable Law and duly qualified to do
business as a foreign corporation or business trust and is in good standing
in each jurisdiction in which the nature of its business or the performance
of its obligations under this Agreement and the other Program Documents to
which it is a party requires such qualification, where the failure to so
comply or to be so qualified could reasonably be expected to give rise to
an Adverse Effect;
(b) the execution, delivery and performance by it of this Agreement,
the other Program Documents to which it is a party and the other
instruments and agreements contemplated hereby or thereby have been duly
authorized by all requisite corporate action by it and have been duly
executed and delivered by it and constitute its legal, valid and binding
obligations, enforceable against it in accordance with their respective
terms, except as such enforceability may be limited by applicable
bankruptcy laws and any other similar laws affecting the rights and
remedies of creditors generally and by equitable principles;
(c) neither the execution and delivery of this Agreement, the other
Program Documents to which it is a party, or any instrument or agreement
referred to herein or therein, or contemplated hereby or thereby, nor the
consummation of any of the transactions herein or therein contemplated, nor
compliance with the terms, conditions and provisions hereof or thereof by
it (i) will conflict with, or result in a breach or violation of, or
constitute a default under, the certificate of its incorporation or by-
laws, (ii) will conflict with, or result in a breach or violation of, or
constitute a default under, or permit the acceleration of any obligation or
liability in, or but for any requirement of the giving of notice or the
passage of time (or both) would constitute such a conflict with, breach or
violation of, or default under, or permit any such acceleration in, any
contractual obligation or any agreement or document to which it is a party
or by which it or any of its properties is bound (or to which any such
obligation, agreement or document relates, including any Distributor's
Contract, any Principal Shareholder Servicer's Agreement, any Shareholder
Servicer's Agreement and any Distribution Plan) where such conflict, breach
or violation could reasonably be expected to give rise to an Adverse
Effect, (iii) will violate any Applicable Law, the violation of which could
reasonably be expected to give rise to an Adverse Effect, (iv) could
reasonably be expected to give
8
rise to or permit the creation or imposition of any Adverse Claim upon any
Portfolio Assets or any Program Collections or any Related Collections
relating to any Fund, or (v) could, in and of themselves, reasonably be
expected to give rise to the termination of any Distributor's Contract, any
Principal Shareholder Servicer's Agreement, any Shareholder Servicer's
Agreement or any Distribution Plan;
(d) it has obtained all Governmental Authorizations and Private
Authorizations, and made all Governmental Filings, necessary for the
execution, delivery and performance by it of this Agreement, the other
Program Documents to which it is a party and the agreements and instruments
contemplated hereby or thereby and no consents which have not been obtained
or waivers under any instruments to which it is a party or by which it or
any of its properties is bound are required by it to be obtained in
connection with the execution, delivery or performance of this Agreement
and the other Program Documents, except to the extent the failure to so
obtain or make the same could not reasonably be expected to give rise to an
Adverse Effect;
(e) the principal place of business and principal executive office of
the Seller, the Transferor and the Distributor, and the place where any and
all records concerning the Purchased Portfolio Assets are kept is at their
address specified in Section 9.03 (except as otherwise permitted by Section
5.01(o));
(f) each of its representations and warranties made or deemed made
pursuant to the Program Documents is true and accurate (except to the
extent that such representations and warranties related solely to an
earlier date (in which case such representations and warranties shall be
true and accurate as of such earlier date)), and each of the applicable
conditions precedent set forth in Article III has been satisfied or waived
in writing;
(g) it is not in default in any of its obligations under this
Agreement or any other Program Document to which it is a party which
default could reasonably be expected to give rise to an Adverse Effect;
(h) there are no proceedings or investigations pending, or, to the
best of its knowledge, threatened, against it before any Authority (i)
asserting the invalidity of this Agreement, any other Program Document to
which it is a party or any certificate, document or agreement executed by
it in connection herewith or therewith, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or
any other Program Document, or (iii) seeking any determination or ruling
which, if granted, could reasonably be expected to adversely affect the
performance by it of its obligations under, or the validity or
enforceability of, this Agreement, any other Program Document to which it
is a party or any agreement, certificate or document executed by it in
connection herewith or therewith, which in each case, if adversely
determined, could otherwise reasonably be expected to give rise to an
Adverse Effect;
(i) it is not an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act;
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(j) it is not engaged principally or as one of its important
activities in the business of extending, or arranging for the extension of,
credit for the purpose of purchasing or carrying (x) any margin stock
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System or (y) any margin security within the meaning of Regulation
G of the Board of Governors of the Federal Reserve System and no part of
the proceeds of the Purchase Price or Transfer Price paid to it, if any,
under the Transfer Agreements or the Purchase Agreements will be used to
purchase or carry any margin stock or any margin securities, respectively,
within the meaning of said regulations (except investments in funds managed
by an Affiliate of the Parent in accordance with ordinary business
operations) or to extend credit to others for such purpose in a manner
which is inconsistent with or a violation of the provisions of said
regulations, and it will not hold margin stock or margin securities
(including shares in such funds) such that the aggregate current market
value (as defined in said regulations) of all thereof shall exceed 25% of
the value (as determined by any reasonable method) of its consolidated
assets;
(k) all written information provided by it or by DST Systems, Inc. at
its request to the Purchasers, the Program Administrator or any other
Person in writing for purposes of or in connection with this Agreement, the
other Program Documents to which it is a party or the transactions
contemplated hereby or thereby is, and all such information hereafter
provided by any such Person to the Purchaser, the Program Administrator or
any other Person in writing will be, when taken as a whole, true, correct
and complete in all material respects and not misleading;
(l) Neither it nor any ERISA Affiliate has engaged in a "prohibited
transaction," as such term is defined in Section 4975 of the Code or in a
transaction subject to the prohibitions of Section 406 of ERISA, which
would subject it or any ERISA Affiliate (after giving effect to any
exemption) to the tax or penalty on prohibited transactions imposed by
Section 4975 of the Code, Section 502 of ERISA or any other liability under
ERISA which tax, penalty or other liability would have an Adverse Effect.
Neither the transactions contemplated hereby nor the exercise of any of the
Purchaser's or the Program Administrator's rights and remedies under any of
the Program Documents constitutes a prohibited transaction under ERISA or
the Code or otherwise results or will result in the Purchaser or the
Program Administrator being a fiduciary or party in interest under ERISA
with respect to an ERISA plan or its assets or the Purchased Portfolio
Assets or being deemed in violation of Section 404 or Section 406 of ERISA;
(m) it has filed or caused to be filed all federal, state and local
tax returns which are required to be filed (except where such nonfiling
could not reasonably be expected to have an Adverse Effect), and paid or
caused to be paid all taxes as shown on said returns or any other taxes or
assessments payable by it to the extent that such taxes have become due
unless the same are being contested in good faith by appropriate
proceedings, and in respect of which appropriate reserves have been
established and the nonpayment of which could not reasonably be expected to
have an Adverse Effect;
10
(n) the Purchased Portfolio Assets relating to each Fund constitute
Eligible Portfolio Assets;
(o) no Share of a Fund to which a Purchased Portfolio Asset relates
contains any Conversion Feature other than a Permitted Conversion Feature;
(p) no Share of a Fund taken into account in computing the Purchase
Price paid pursuant to the Purchase Agreements entitles the holder thereof
to redeem the same in a Free Redemption except in the specific situations
set forth in the Prospectus of such Fund as in effect on the date hereof or
pursuant to the Systematic Withdrawal Program;
(q) it is not contemplating the filing of a petition by it under any
state or federal bankruptcy or insolvency laws, and it has no Actual
Knowledge of any Person contemplating the filing of any such petition
against it;
(r) all financial statements of it and its consolidated subsidiaries
delivered to the other Parties fairly present its assets, liabilities and
financial condition and income as of the dates thereof and have been
prepared in accordance with generally accepted accounting principles
consistently applied; as of the date hereof, there exists no equity or
long-term investments in, or outstanding advances to, or guaranties of, any
Person except such equity, investment, advances, or guaranties reflected in
the financial statements or in the footnotes thereto;
(s) all action necessary or advisable to protect, preserve and perfect
the applicable Purchaser's first priority ownership interest in the
Purchased Portfolio Assets free and clear of all Adverse Claims has been
duly and effectively taken and no security agreement, financing statement,
equivalent security or lien instrument or continuation statement covering
all or any part of such Purchased Portfolio Assets is required to be on
file or on record in any jurisdiction, except such as may have been filed,
recorded or made as contemplated by this Agreement and the other Program
Documents; and
(t) the factual assumptions set forth in the opinion of Sullivan &
Worcester dated as of the Initial Purchase Date on certain bankruptcy
matters including "true sale" and "substantive consolidation" issues are
true and correct as of such date.
Section 4.02. Additional Representations and Warranties of the
------------------------------------------------
Seller. The Seller represents and warrants, on and as of the date hereof and on
- ------
and as of each Purchase Date, as follows:
(a) the Seller was founded solely for the purpose of performing its
obligations under the Program Documents and activities incidental thereto,
and it has the requisite corporate power and authority and legal right to
sell Portfolio Assets relating to each Fund sold on such Purchase Date, and
the Program Collections and the Ancillary Rights with respect thereto, to
the applicable Purchaser in accordance with the terms of this Agreement and
the applicable
11
Purchase Agreement and the Seller has duly authorized each such sale to the
applicable Purchaser by all necessary action;
(b) the transfer of Portfolio Assets to the Seller under the Seller's
Transfer Agreement and the transfer of Portfolio Assets to the applicable
Purchaser under the applicable Purchase Agreement on such Purchase Date
each constitutes a valid and complete True Sale of all right, title and
interest in and to such Portfolio Assets, as the case may be, free and
clear of any Adverse Claim; such transfers have not been made with an
intent to hinder, delay or defraud any present or future creditor; each of
the Purchase Price and the Transfer Price is fair consideration and of
reasonably equivalent value to the Portfolio Assets so transferred; and
immediately after the purchase pursuant to the applicable Purchase
Agreement the Distributor, the Transferor and the Seller will remain
solvent and will have adequate capital for the conduct of its business;
(c) immediately after the transfer of the Portfolio Assets to the
Seller under the Seller's Transfer Agreement and immediately prior to each
purchase of the Purchased Portfolio Assets by the applicable Purchaser
under the Purchase Agreement on such Purchase Date, (i) no party claiming
through the Seller has any right, title or interest in such Portfolio
Assets, the Ancillary Rights with respect thereto or the Program
Collections in respect thereto, including any payments or proceeds in
respect thereto, (ii) the Seller owns such Portfolio Assets, the Ancillary
Rights with respect thereto and the Program Collections in respect thereto
free and clear of all Adverse Claims or other such restrictions on transfer
created by or arising out of the acts or omissions of any Federated Entity,
and (iii) such Portfolio Assets, the Ancillary Rights with respect thereto
and the right to Program Collections in respect thereto have not been sold,
transferred or assigned by the Seller to any other Person;
(d) this Agreement and the Purchase Agreements and the actions of the
Seller required to be taken pursuant to the terms hereof and thereof are
and at all times shall be effective to transfer to the applicable Purchaser
all of the Seller's right, title and interest in, to and under the
Purchased Portfolio Assets free and clear of any Adverse Claim;
(e) the Seller is not prevented by any Applicable Law from paying the
Program Collections directly to the Program Collection Account in
accordance with the applicable Irrevocable Payment Instruction;
(f) the Seller is in full compliance with the Bankruptcy Remote
Covenants;
(g) the Seller has clearly and unambiguously marked all of its books,
records and electronic, computer files and master data processing records
relating to the Portfolio Assets to indicate the interests of the
applicable Purchaser in the Purchased Portfolio Assets;
(h) giving effect to the transactions contemplated by the Program
Documents, the sum of the Seller's assets exceeds and will, immediately
following
12
the transactions contemplated hereby, exceed the Seller's total liabilities
(including subordinated, unliquidated, disputed and contingent
liabilities). The Seller's assets do not and, immediately following the
transactions contemplated hereby will not, constitute unreasonably small
capital to carry out its business as conducted or as proposed to be
conducted. The Seller does not intend to, and does not believe that it
will, incur debts and liabilities (including contingent liabilities and
other commitments) beyond its ability to pay such debts as they mature
(taking into account the timing and amounts to be payable on or in respect
of obligations of the Seller); and
(i) the Seller has not used and will not use any tradenames or assumed
names other than Federated Funding 1997-1, Inc.
Section 4.03. Additional Representations and Warranties of the
------------------------------------------------
Parent. The Parent represents and warrants on and as of the date hereof and on
- ------
and as of each Purchase Date, as follows:
(a) the Parent has delivered to the Purchasers and the Program
Administrator a true, correct and complete copy of each Distribution Plan,
Distributor's Contract, Principal Shareholder Servicer's Agreement,
Shareholder Servicer's Agreement, Advisory Agreement and each Prospectus in
effect on the date of this Agreement, each of which is in full force and
effect and has not been amended in any manner from the form delivered
except: (i) in respects which could not reasonably be expected to give
rise to an Adverse Effect or (ii) with the prior written consent of the
Program Administrator; and the Fundamental Investment Objectives and
Policies relating to each Fund have not been changed in any respect from
those set forth in the Prospectus so delivered, except as approved by (1)
the board of directors or trustees of such Fund and (2) the shareholders of
such Fund;
(b) each of the Companies and each Advisor is in compliance with the
Fundamental Investment Objectives and Policies relating to each Fund;
(c) each of the Distributor, the Principal Shareholder Servicer, the
Program Servicer Agent, the Seller, the Transferor, each Advisor, the
Shareholder Servicer, each Company and the Advisory Agreement, Distribution
Plan, the Distributor's Contract, the Principal Shareholder Servicer's
Agreement, the Shareholder Servicer's Agreement, the Prospectus and the
Contingent Deferred Sales Charge arrangements, in each case relating to
each Fund, is in compliance in all material respects with Applicable Law,
including Rule 12b-1 of the Investment Company Act and the Conduct Rules;
(d) the Asset Based Sales Charge and Contingent Deferred Sales Charge
and Shareholder Servicing Fee arrangements relating to the Shares of each
Fund and the payments provided for in, and actually being made pursuant to,
the Distribution Plan and the Prospectus for each such Fund are fairly and
accurately described in the Distribution Plan and Prospectus relating to
such Fund;
13
(e) the Parent is the indirect record and beneficial owner of all of
the outstanding shares of capital stock of the Seller, the Transferor, the
Shareholder Servicer and the Distributor;
(f) the Distributor is a registered broker-dealer under the Exchange
Act, and is a member of the NASD;
(g) each Advisor is a registered investment adviser under the
Investment Advisers Act;
(h) each Company is registered as an investment company under the
Investment Company Act; and
(i) neither the Seller, the Transferor, the Distributor, any Company
nor any Transfer Agent is prevented by any Applicable Law from paying the
Program Collections directly to the Program Collection Account in
accordance with the applicable Irrevocable Payment Instruction.
Section 4.04. Additional Representations and Warranties of the
------------------------------------------------
Distributor. The Distributor represents and warrants, on and as of the date
- -----------
hereof and on and as of each Purchase Date, in its capacities as Distributor,
Principal Shareholder Servicer and Program Servicer Agent, as follows:
(a) The Distributor has the requisite corporate power and authority
and legal right to sell Portfolio Assets relating to each Fund, and the
Program Collections and the Ancillary Rights with respect thereto, to the
Transferor in accordance with the terms of the Transferor's Transfer
Agreement and the Distributor has duly authorized each such sale to the
Transferor by all necessary action;
(b) the transfer of Portfolio Assets to the Transferor under the
Transferor's Transfer Agreement constitutes a valid and complete True Sale
to the Transferor of all right, title and interest in and to such Portfolio
Assets free and clear of any Adverse Claim; such transfer has not been made
with an intent to hinder, delay or defraud any present or future creditor;
the Transfer Price for such Portfolio Assets is fair consideration and of
reasonably equivalent value to the Portfolio Assets so transferred; and
immediately after the purchase pursuant to the Transferor's Transfer
Agreement the Distributor will remain solvent and will have adequate
capital for the conduct of its business;
(c) immediately after each transfer of Portfolio Assets to the
Transferor under the Transferor's Transfer Agreement and by the Transferor
to the Seller under the Seller's Transfer Agreement, and immediately prior
to each purchase of Purchased Portfolio Assets by the applicable Purchaser
under the applicable Purchase Agreement on such Purchase Date, (i) no party
claiming through the Distributor has any right, title or interest in such
Portfolio Assets, the Ancillary Rights with respect thereto or the Program
Collections in respect thereto, including any payments or proceeds in
respect thereto, and (ii) the Seller owns such Portfolio Assets, the
Ancillary Rights with respect thereto and the Program Collections in
14
respect thereto free and clear of all Adverse Claims or other such
restrictions on transfer created by or arising out of the acts or omissions
of the Distributor;
(d) neither the Distributor (as Distributor, Principal Shareholder
Servicer or Program Servicer Agent) nor any Company or Transfer Agent is
prevented by any Applicable Law from paying the Program Collections
directly to the Program Collection Account in accordance with the
applicable Irrevocable Payment Instruction;
(e) the Distributor is a registered broker-dealer under the Exchange
Act, and is a member of the NASD;
(f) the Distributor has clearly and unambiguously marked its books,
records and electronic, computer files and master data processing records
relating to the Portfolio Assets to indicate the interests of the
Transferor, the Seller and the applicable Purchaser in the Portfolio
Assets;
(g) giving effect to the transactions contemplated by the Program
Documents, the sum of the Distributor's assets exceeds and will,
immediately following the transactions contemplated hereby, exceed the
Distributor's total liabilities (including subordinated, unliquidated,
disputed and contingent liabilities). The Distributor's assets do not and,
immediately following the transactions contemplated hereby will not,
constitute unreasonably small capital to carry out its business as
conducted or as proposed to be conducted. The Distributor does not intend
to, and does not believe that it will, incur debts and liabilities
(including contingent liabilities and other commitments) beyond its ability
to pay such debts as they mature (taking into account the timing and
amounts to be payable on or in respect of obligations of the Distributor);
and
(h) the Distributor has not used and will not use any trade names or
assumed names other than Federated Securities Corp.
Section 4.05. Additional Representations and Warranties of the
------------------------------------------------
Transferor. The Transferor represents and warrants, on and as of the date
- ----------
hereof and on and as of each Purchase Date, as follows:
(a) the Transferor has the requisite corporate power and authority and
legal right to sell Portfolio Assets relating to each Fund, and the Program
Collections and the Ancillary Rights with respect thereto, to the Seller in
accordance with the terms of the Seller's Transfer Agreement and the
Transferor has duly authorized each such sale to the Seller by all
necessary action;
(b) the transfer of Portfolio Assets to the Seller under the Seller's
Transfer Agreement and the transfer of Portfolio Assets to the applicable
Purchaser under the applicable Purchase Agreement on such Purchase Date
each constitutes a valid and complete True Sale of all right, title and
interest in and to such Portfolio Assets, as the case may be, free and
clear of any Adverse Claim; such transfers have not been made with an
intent to hinder, delay or defraud any present or future creditor; each of
the Purchase Price and the Transfer Price is fair consideration and
15
of reasonably equivalent value to the Portfolio Assets so transferred; and
immediately after the purchase pursuant to the applicable Purchase
Agreement the Distributor, the Transferor and the Seller will remain
solvent and will have adequate capital for the conduct of its business;
(c) immediately after the transfer of the Portfolio Assets to the
Seller under the Seller's Transfer Agreement and immediately prior to each
purchase of the Purchased Portfolio Assets by the applicable Purchaser
under the Purchase Agreement on such Purchase Date, (i) no party claiming
through the Transferor has any right, title or interest in such Portfolio
Assets, the Ancillary Rights with respect thereto or the Program
Collections in respect thereto, including any payments or proceeds in
respect thereto, (ii) the Seller owns such Portfolio Assets, the Ancillary
Rights with respect thereto and the Program Collections in respect thereto
free and clear of all Adverse Claims or other such restrictions on transfer
created by or arising out of the acts or omissions of any Federated Entity,
and (iii) such Portfolio Assets, the Ancillary Rights with respect thereto
and the right to Program Collections in respect thereto have not been sold,
transferred or assigned by the Transferor to any other Person;
(d) the Transferor is not prevented by any Applicable Law from paying
the Program Collections directly to the Program Collection Account in
accordance with the applicable Irrevocable Payment Instruction;
(e) the Transferor has clearly and unambiguously marked all of its
books, records and electronic, computer files and master data processing
records relating to the Portfolio Assets to indicate the interests of the
applicable Purchaser in the Purchased Portfolio Assets;
(f) giving effect to the transactions contemplated by the Program
Documents, the sum of the Transferor's assets exceeds and will, immediately
following the transactions contemplated hereby, exceed the Transferor's
total liabilities (including subordinated, unliquidated, disputed and
contingent liabilities). The Transferor's assets do not and, immediately
following the transactions contemplated hereby will not, constitute
unreasonably small capital to carry out its business as conducted or as
proposed to be conducted. The Transferor does not intend to, and does not
believe that it will, incur debts and liabilities (including contingent
liabilities and other commitments) beyond its ability to pay such debts as
they mature (taking into account the timing and amounts to be payable on or
in respect of obligations of the Transferor); and
(g) the Transferor has not used and will not use any tradenames or
assumed names other than Federated Investors Management Company and
Federated Disbursing Corp.
Section 4.06. Representations and Warranties of the Purchasers. Each
------------------------------------------------
of the Initial Purchaser and the Revolving Purchaser represents and warrants on
and as of the date hereof, and on and as of each Purchase Date on which it
purchases Purchased Portfolio Assets, as to itself, as follows:
16
(a) it is duly organized and is validly existing and in good standing
under the laws of the jurisdiction of its organization, with full power and
authority to execute and deliver and perform its obligations under this
Agreement and the other Program Documents to which it is a party, and it
is duly qualified to do business as a foreign corporation or business trust
and is in good standing in each jurisdiction in which the performance of
its obligations under this Agreement and the other Program Documents to
which it is a party requires such qualification, where the failure to be so
qualified could reasonably be expected to give rise to an Adverse Effect;
(b) the execution, delivery and performance by it of this Agreement,
the other Program Documents to which it is a party and the other
instruments and agreements contemplated hereby or thereby have been duly
authorized by all requisite trust or partnership, as the case may be,
action by it and have been duly executed and delivered by it and constitute
its legal, valid and binding obligations, enforceable against it in
accordance with their respective terms, except as such enforceability may
be limited by applicable bankruptcy laws and any other similar laws
affecting the rights and remedies of creditors generally and by equitable
principles;
(c) neither the execution and delivery of this Agreement, the other
Program Documents to which it is a party, or any instrument or agreement
referred to herein or therein, or contemplated hereby or thereby, nor the
consummation of any of the transactions herein or therein contemplated, nor
compliance with the terms, conditions and provisions hereof or thereof by
it (i) will conflict with, or result in a breach or violation of, or
constitute a default under, its trust document or partnership agreement, as
the case may be, or (ii) will violate any Applicable Law, the violation of
which could reasonably be expected to give rise to an Adverse Effect; and
(d) it has sufficient resources, including its rights under certain
funding arrangements and its ability to access the capital markets, to meet
its obligations under the Program Documents.
ARTICLE V
COVENANTS
Section 5.01. Covenants of the Seller, the Transferor, the Parent and
-------------------------------------------------------
the Distributor. Each of the Seller, the Transferor, the Parent and the
- ---------------
Distributor covenants and agrees that it shall and, in the case of the Parent,
that it shall cause each Federated Entity other than the Seller, the Transferor
and the Distributor to:
(a) (i) preserve and maintain its legal existence and all of its
material rights, privileges and franchises, and duly observe and conform to
all requirements of Applicable Law relative to it, the conduct of its
business or to its properties or assets, (ii) preserve and keep in full
force and effect its corporate existence, rights, privileges and
franchises, and maintain records of its resolutions or similar actions
17
regarding the transactions contemplated by the Program Documents and (iii)
obtain, maintain and keep in full force and effect all Governmental
Authorizations and Private Authorizations which are necessary or
appropriate to properly carry out the transactions contemplated to be
performed by it under this Agreement and the other Program Documents,
except in such case where the failure to so observe, conform to, preserve,
obtain, maintain or keep in full force and effect could not reasonably be
expected to give rise to an Adverse Effect;
(b) duly fulfill all obligations on its part to be performed under or
in connection with this Agreement and the other Program Documents and the
agreements and instruments entered into in connection herewith or
therewith;
(c) keep proper books of record and account in accordance with its
normal business practice in which full and appropriate entries shall be
made of all dealings or transactions in relation to its business and
activities and shall (in the case of the Seller, the Transferor and the
Distributor) mark its data processing or other records, if any, so as to
clearly indicate that the Purchased Portfolio Assets have been sold to the
applicable Purchaser;
(d) promptly deliver to the Program Administrator copies of any
amendments or modifications to its certificate of incorporation or by-laws,
certified by an authorized officer;
(e) (i) promptly give written notice to the Program Administrator of
the occurrence of any Event of Termination (or event which, with the
passage of time or notice, or both, would constitute an Event of
Termination), the failure of any conditions precedent set forth in Section
3.02 or Section 3.03 to be fully satisfied on or immediately prior to the
applicable Purchase Date, or any breach of any term or condition of any
Program Document, which in each case relates to or is caused by it or any
of its Affiliates or the performance of any such Persons under any Program
Document, (ii) give written notice to the Program Administrator, promptly
after it becomes aware thereof, of any other Event of Termination (or event
which with the passage of time, notice or both would constitute such an
Event of Termination), or the failure of any other conditions precedent set
forth in Section 3.02 or Section 3.03 or any other breach of any terms or
conditions of any Program Documents, and (iii) promptly give written notice
to the Program Administrator of any litigation or proceedings with respect
to it or any of its Affiliates or affecting it, any of its Affiliates or
any of their respective assets or properties, which if adversely
determined, could reasonably be expected to give rise to an Adverse Effect;
(f) cause to be paid and discharged all taxes, assessments and other
charges or levies of any Authority imposed upon it, or upon any of its
income or assets, unless and to the extent that the same shall be contested
in good faith by appropriate proceedings which could not reasonably be
expected to give rise to an Adverse Effect;
(g) to the extent obtained or received by it, furnish or cause to be
furnished to the Program Administrator a copy of all Private Authorizations
and all
18
Governmental Authorizations obtained or required to be obtained by it in
connection with the transactions contemplated by this Agreement, the
Transfer Agreements, the Purchase Agreements and any other Program
Documents to which it is a party;
(h) annually, or more frequently as the Program Administrator may
request upon the occurrence and during the continuance of an Event of
Termination (or an event which upon the passage of time or notice, or both,
would constitute an Event of Termination), (i) cause an independent
nationally recognized accounting firm selected by it and reasonably
satisfactory to the Program Administrator and the Parent to enter its
premises (and each other Person to whom it delegates any of its duties
under the Program Documents) and examine and audit the books, records and
accounts relating to the Portfolio Assets, the Program Collections in
respect thereof and its or such other Person's performance under the
Program Documents, (ii) permit such accounting firm to discuss its or such
other Person's affairs, finances, accounts and performance under the
Program Documents with the officers, partners, employees and accountants of
it or such other Person, (iii) cause such accounting firm to provide the
Purchasers and the Program Administrator with a certified report in respect
of the foregoing, which shall be in form and scope reasonably satisfactory
to the Program Administrator and the Purchasers, and (iv) authorize such
accounting firm to discuss such affairs, finances, records and accounts
with representatives of the Program Administrator or the Purchaser and any
Permitted Designee;
(i) permit and cause each Person to which it delegates any of its
duties under the Program Documents to permit the Purchasers, the Program
Administrator or any Permitted Designee to, upon reasonable advance notice
and during normal business hours, visit and inspect its and such Person's
books, records and accounts relating to the Purchased Portfolio Assets, the
Program Collections in respect thereto and its performance under the
Program Documents and to discuss the foregoing with the officers, partners,
employees and accountants of it and such Person, all as often as the
Purchasers, the Program Administrator or any such Permitted Designee may
reasonably request, all at the cost and expense of the requesting party;
(j) promptly, at its expense, execute and deliver to the Program
Administrator and the Purchasers such further instruments and documents,
and take such further action as the Program Administrator or the Purchasers
may from time to time reasonably request in order to further carry out the
intent and purpose of this Agreement and the other Program Documents and to
establish and protect the rights, interests and remedies created, or
intended to be created, hereby and thereby, and the protection and
perfection of each Purchaser's first priority ownership interest in the
Purchased Portfolio Assets free and clear of all Adverse Claims, including,
without limitation, the execution, delivery, recordation and filing of
financing statements and continuation statements under the UCC of any
applicable jurisdiction;
19
(k) promptly deliver to the Program Administrator copies of all
notices, requests, agreements, amendments, supplements, waivers and other
documents received or delivered by it under or with respect to any of the
Program Documents;
(l) in the event that, notwithstanding the Irrevocable Payment
Instructions, it shall receive any Program Collections from any Company or
Transfer Agent or other Person, promptly upon its receipt of any such
Program Collections remit the same to the Funding and Collection Agent for
deposit into the Program Collection Account and, until such funds are so
deposited into the Program Collection Account, ensure that such amounts are
not commingled with any other funds;
(m) promptly notify the Program Administrator and the Purchasers of
any material adverse change with respect to the business, properties (in
respect of properties, other than in the ordinary course of its and each
Fund's business, as conducted on the date hereof), financial condition or
results of operations of it, or, to its knowledge, any Company or Fund
since December 31, 1996;
(n) not permit to exist any Adverse Claims on, or otherwise attempt to
transfer any interest in, any Portfolio Assets, any Ancillary Rights in
respect thereto, the Program Collections or any interest in any of the
foregoing; provided, however, that in the event that the Purchasers shall
-------- -------
not purchase certain Portfolio Assets relating to Shares of any Fund, the
Seller may transfer all or a portion of its interest in such Portfolio
Assets and the Ancillary Rights with respect thereto to another Person
provided each of the following conditions are met: (1) that such Person
and the Program Administrator, the Funding and Collection Agent and the
Purchasers shall have entered into a mutually satisfactory intercreditor
agreement and amendment to the Program Funding and Collection Agency
Agreement as contemplated by Section 8.06 thereof, and (2) the Program
Administrator, the Funding and Collection Agent and the Purchasers shall
have received such certificates and opinions as they may reasonably
request in connection therewith all in form, scope and substance
reasonably satisfactory to them;
(o) not (in the case of the Seller, the Transferor and the
Distributor) move its principal executive office or the place where it
keeps its records concerning the Purchased Portfolio Assets from the
offices specified in Section 4.01(e), unless (a) it shall have given to
the Program Administrator not less than twenty (20) days prior written
notice of its intention to do so, clearly describing the new location and
(b) it shall have taken such action, satisfactory to the Program
Administrator and the Purchasers, to maintain the title or ownership of
the Purchasers in the Purchased Portfolio Assets at all times fully
perfected and in full force and effect;
(p) not amend, waive, terminate or otherwise modify the terms of any
Irrevocable Payment Instruction or take any action inconsistent with any
Irrevocable Payment Instruction;
(q) not act affirmatively to change its operations in any material
manner if at the time of such action, based upon all of the facts and
circumstances, it is
20
clear that such change would materially impair the ability of the Seller,
the Distributor or the Parent to perform their obligations under the
Program Documents;
(r) not reflect the Purchased Portfolio Assets as being owned by the
Seller or any Affiliate of the Seller (except to the extent such treatment
is required by a change in GAAP after the date hereof and all appropriate
financial statements are footnoted to reflect the sale thereof to the
Purchasers); provided that Shareholder Servicing Fees may be reflected as
--------
an asset of the Distributor, the Transferor or the Seller if such
treatment is required by GAAP and if all appropriate financial statements
are footnoted to reflect the sale thereof to the Purchasers;
(s) not take any action to cancel, terminate, amend, supplement,
modify or waive any of the provisions of the Distributor's Contract, the
Principal Shareholder Servicer's Agreement, the Shareholder Servicer's
Agreement, the Distribution Plan, the Conversion Features or the
Contingent Deferred Sales Charge arrangements applicable to the holders of
any Shares of any Fund affecting its rights thereunder (including by way
of allowing Free Redemptions in respect of Shares of any Fund under
circumstances not required by the Prospectus of such Fund in effect on the
date of this Agreement or by the Systematic Withdrawal Program or by
allowing Free Redemptions which are not Permitted Free Exchanges), or
request, consent or agree to any such cancellation, termination,
amendment, supplement, modification or waiver, except with the prior
written consent of the Program Administrator, except that it may from time
to time waive a Contingent Deferred Sales Charge that becomes payable
provided it pays in accordance with the Program Servicing Procedures an
amount to the applicable Purchaser equal to the Contingent Deferred Sales
Charge to which such Purchaser would have been entitled;
(t) cause or ensure that all written information provided to the
Seller, the Purchasers or the Program Administrator for purposes of or in
connection with this Agreement or any other Program Document or the
transactions contemplated hereby or thereby by the Parent, Seller,
Transferor, Distributor or DST Systems, Inc. at the request of any of the
foregoing is, and all such information hereafter provided in writing by
any such Person to the Seller, the Purchasers or the Program Administrator
will be, when taken as a whole, true, correct, complete in all material
respects and not misleading on the date such information is stated or
certified; and
(u) cause and ensure that all actions, which the opinion of Sullivan &
Worcester dated as of the Initial Purchase Date on certain bankruptcy
matters including "true sale" and "substantive consolidation" assumes will
be taken or omitted by it, will be taken or omitted as so assumed.
Section 5.02. Additional Covenants of the Seller. The Seller
----------------------------------
covenants and agrees that it shall:
21
(a) use the Purchase Price paid to it on the Purchase Date solely for
the purpose of purchasing Portfolio Assets or for reimbursing itself for
the purchase price of the Portfolio Assets purchased under the Seller's
Transfer Agreement pursuant to and in accordance with the terms of the
Seller's Transfer Agreement; and
(b) comply in all respects with the Bankruptcy Remote Covenants at all
times.
Section 5.03. Additional Covenants of the Parent. The Parent
----------------------------------
covenants and agrees that it shall:
(a) cause the Seller to use the Purchase Price paid to it on any
Purchase Date solely for the purpose of purchasing Portfolio Assets or for
reimbursing itself for the purchase price of the Portfolio Assets
purchased under the Seller's Transfer Agreement pursuant to and in
accordance with the terms of the Seller's Transfer Agreement; and cause
the Transferor to use the Transfer Price paid to it on any date solely for
the purpose of purchasing Portfolio Assets or for reimbursing itself for
the purchase price of the Portfolio Assets purchased under the
Transferor's Transfer Agreement pursuant to and in accordance with the
terms of the Transferor's Transfer Agreement;
(b) cause each Advisor to manage each applicable Fund in accordance
with the Fundamental Investment Objectives and Policies in respect of such
Fund as in effect from time to time;
(c) (consistent with the fiduciary obligations of the Federated
Entities to the Funds) use its best efforts, which are commercially
reasonable in relation to the consequence to the Purchasers if they are
not successful, to maintain the Fundamental Investment Objectives and
Policies in respect of any Fund as reflected in the Prospectus of such
Fund, except for changes approved by: (i) the board of directors or
trustees and (ii) shareholders of each Fund; and, in the event that as a
consequence of fiduciary obligations of the Federated Entities to the
Funds it cannot resist a proposed change in the Fundamental Investment
Objectives and Policies in respect of the Fund, or in the event that
despite its best efforts such change will be made, it shall, prior to
taking any action inconsistent with the maintenance of such Fundamental
Investment Objectives and Policies, or failing to take the action it could
otherwise take, or to the effectiveness of such change, as the case may
be: (i) notify the Purchasers and the Program Administrator in writing of
the nature of such change, and (ii) if applicable, provide certification
by a responsible officer that such change is necessary in order to comply
with such fiduciary obligations;
(d) (consistent with the fiduciary obligations of the Federated
Entities to the Funds) use its best efforts, which are commercially
reasonable in relation to the consequences to the Purchasers if they are
not successful, to obtain the approval of the Board of Trustees of each
Company in respect of each Fund to: (a) annually re-approve the
Distribution Plan, the Distributor's Contract, the Principal Shareholder
Servicer's Agreement, and the Shareholder Servicer's
22
Agreement relating to each such Fund, if necessary in order to continue
payments in respect of the Purchased Portfolio Assets relating to such
Fund, and (b) in the event any of the foregoing shall be terminated with
respect to any such Fund, to approve a new distribution plan and
distributor's contract, principal shareholder servicer's agreement, and
the shareholder servicer's agreement in respect of such Fund so as to
permit the continued payments in respect of the Purchased Portfolio Assets
relating to such Fund as though no such termination had occurred. In the
event that as a consequence of fiduciary obligations of the Federated
Entities to the Funds, it cannot endeavor to obtain the approval of the
Board of Trustees of a Fund to take the actions described in clauses (a)
and (b) above, or in the event that despite its efforts such action will
not be taken, it shall, prior to taking any action inconsistent with the
actions described in clauses (a) and (b) above, or failing to take any
action it could otherwise take, or to any termination referred to in
clause (b) above: (i) notify the Purchasers and the Program Administrator
in writing of the nature of such failure or inability or termination, and
(ii) provide certification by a Responsible Officer that such failure or
inability is required in order to comply with such fiduciary obligations;
(e) provide prompt written notice to the Purchasers and the Program
Administrator of any action by the Board of Directors of any Advisor or
the Shareholder Servicer or the Board of Trustees of any Company in
respect of any Fund to make any modification, amendment or supplement to,
or any waiver of any provisions of, or any termination, of any
Distribution Plan, any Distributor's Contract, any Principal Shareholder
Servicer's Agreement, any Shareholder Servicer's Agreement, any Advisory
Agreement, any Conversion Feature, any Contingent Deferred Sales Charge
arrangement, any Fundamental Investment Objectives and Policies of any
Company in respect of any Fund, or any modification, amendment, supplement
or waiver in the amounts payable or actually being paid thereunder, each
as in effect on the date of that agreement, to the extent that any such
modification, amendment, supplement or waiver could reasonably be expected
to give rise to an Adverse Effect;
(f) cause each of the Seller, the Transferor and the Distributor, to
comply in all respects with their covenants under the Program Documents at
all times;
(g) furnish to the Program Administrator:
(A) annually within 120 days after the end of each fiscal year
audited consolidated financial statements of the Parent and its
consolidated subsidiaries prepared in accordance with GAAP for
such fiscal year;
(B) quarterly within 45 days after the end of the first three fiscal
quarters of any fiscal year unaudited consolidated financial
statements of the Parent and its consolidated subsidiaries
prepared in accordance with GAAP for such fiscal quarter;
23
(C) such other information as the Program Administrator or the
Purchasers may reasonably request and which is reasonably
available;
(h) (consistent with the fiduciary obligations of the Federated
Entities to the Funds) not initiate or propose the adoption by any Fund of
a plan of liquidation, a plan to dispose of a substantial portion of its
assets out of the ordinary course of business (except in connection with a
merger expressly authorized by this Agreement) or any other plan of action
with similar effect (a "Liquidation Plan"), and use its best efforts,
which are commercially reasonable in relation to the consequences to the
Purchasers if they are not successful, to cause the board of directors or
board of trustees and shareholders of each Fund to avoid adopting any
Liquidation Plan, and in any event the Parent shall promptly notify the
Program Administrator of any proposed Liquidation Plan by any Fund;
(i) the Parent will not permit to occur any change in Control of the
Parent, the Distributor, the Principal Shareholder Servicer, the
Shareholder Servicer or any Advisor unless either:
(1) in connection with such change in Control:
(i) either (A) such Distributor, Principal Shareholder Servicer,
Shareholder Servicer, Advisor or the Parent shall remain distributor,
principal shareholder servicer, shareholder servicer or advisor, as
the case may be, for the Funds and the Parent shall remain the
ultimate parent of each of the foregoing or (B) if another Person
shall be retained to replace any of the foregoing to act as
distributor, principal shareholder servicer, shareholder servicer or
investment advisor, as the case may be, for the Funds, or as parent,
such Person shall (x) meet the requirements of (iii) below with
reference to the expertise, experience and capacity applicable to the
function it undertakes to perform and (y) have agreed, in respect of
periods from and after its retention, to be bound by the undertakings
of the Distributor, the Principal Shareholder Servicer, the
Shareholder Servicer, the Advisor or the Parent, as the case may be,
under the Program Documents and shall have confirmed as of a current
date the representations and warranties of the Distributor, the
Principal Shareholder Servicer, the Shareholder Servicer, the Advisor
or the Parent, as the case may be, except such representations and
warranties as expressly relate solely to an earlier date (in which
case such representations and warranties shall be true and correct as
of such earlier date);
(ii) in the case where another Person is retained to replace the
Distributor, Principal Shareholder Servicer, Shareholder Servicer or
the Advisor to act as distributor, principal shareholder servicer,
shareholder servicer or investment advisor, as the case may be, for
the Funds, ownership of at least 51% of the voting securities of each
of the Persons serving as the distributor, the principal shareholder
24
servicer, the shareholder servicer or investment advisor to the Funds
is retained by, or transferred to, a single Person (the "Immediate
Parent");
(iii) in the case where another Person is retained to replace the
Distributor, Principal Shareholder Servicer, Shareholder Servicer,
Advisor or the Parent to act as distributor, principal shareholder
servicer, shareholder servicer, investment advisor or parent, as the
case may be, for the Funds, in the reasonable opinion of the Parent,
the Immediate Parent, together with its affiliated subsidiaries
(including the Immediate Parent and the Persons then serving as
distributor, principal shareholder servicer, shareholder servicer and
investment advisor to the Funds) in the aggregate, have financial
resources and mutual fund management, distribution and investment
advisory expertise, experience and capacity immediately after the
change in Control sufficient to satisfy the obligations of their
counterparts under the Program Documents; and
(iv) in the case where another Person is retained to replace the
Distributor, Principal Shareholder Servicer, Shareholder Servicer or
the Advisor to act as distributor, principal shareholder servicer,
shareholder servicer or investment advisor, as the case may be, for
the Funds, a majority of the Board of Trustees or Board of Directors
of the Funds, including a majority who are not "Interested Persons"
(as defined by Section 2(a)(19) of the Investment Company Act) shall
have either (i) reapproved the Distributor's Contracts, the Principal
Shareholder Servicer's Agreements, the Shareholder Servicer's
Agreements and any advisory contracts, or (ii) approved substitute
agreements substantially identical thereto so that no Adverse Effect
could reasonably be expected to result from such substitute
agreements; or
(2) the Program Administrator shall have consented to such change in
Control, such consent not to be unreasonably withheld;
provided, however, that nothing in this Section 5.03(i) shall be
-------- -------
deemed to restrict the ability of the Parent directly or indirectly to engage in
any offering of its capital stock so long as no Person or group of Persons
acting in concert (other than Persons who are currently in control of the Parent
and any employee benefit plan or related trust of the Parent or any of its
Subsidiaries) shall obtain Control of the Parent as a result thereof; and
(j) ensure that each Transfer Agent's tracking capabilities and/or the
Seller's tracking capabilities for each Fund is sufficient to: (i) track the
Portfolio Assets and provide the information specified to be in the Investor
Reports and (ii) identify and remit Program Collections and Related Collections
to the Funding and Collection Agent, and the Parent shall use its best efforts
to replace any Transfer Agent which does not maintain such capabilities or in
respect of which an event similar to those described in Section 6.01(e) occurs
(whether or not the Transfer Agent is a Federated Entity to which Section
6.01(e) applies) within 60 days after becoming aware of such event.
25
Section 5.04. Additional Covenants of the Distributor. The
---------------------------------------
Distributor covenants and agrees that it shall:
(a) not reflect the Portfolio Assets or Program Collections in respect
thereof as being owned by the Distributor or any Affiliate of the
Distributor (except to the extent such treatment is required by a change
in GAAP after the date hereof and all appropriate financial statements are
footnoted to reflect the sale thereof to the Purchasers); provided that
--------
Shareholder Servicing Fees may be reflected as an asset of the
Distributor, the Transferor or the Seller if such treatment is required by
GAAP and if all appropriate financial statements are footnoted to reflect
the sale thereof to the Purchasers;
(b) promptly upon preparation, deliver to the Program Administrator,
copies of the semi-annual unaudited reports and annual audited reports of
each Company;
(c) (consistent with the fiduciary obligations of the Federated
Entities to the Funds) use its best efforts, which are commercially
reasonable in relation to the consequences to the Purchasers if they are
not successful, to obtain the approval of the Board of Trustees of each
Company in respect of each Fund to: (a) annually re-approve the
Distribution Plan, the Distributor's Contract, the Principal Shareholder
Servicer's Agreement, and the Shareholder Servicer's Agreement relating to
each such Fund, if necessary in order to continue payments in respect of
the Purchased Portfolio Assets relating to such Fund, and (b) in the event
any of the foregoing shall be terminated with respect to any such Fund, to
approve a new distribution plan and distributor's contract, principal
shareholder servicer's agreement, and the shareholder servicer's agreement
in respect of such Fund so as to permit the continued payments in respect
of the Purchased Portfolio Assets relating to such Fund as though no such
termination had occurred. In the event that as a consequence of fiduciary
obligations of the Federated Entities to the Funds it cannot endeavor to
obtain the approval of the Board of Trustees of a Fund to take the actions
described in clauses (a) and (b) above, or in the event that despite its
efforts such action will not be taken, it shall, prior to taking any
action inconsistent with the actions described in clauses (a) and (b)
above, or failing to take any action it could otherwise take, or to any
termination referred to in clause (b) above: (i) notify the Purchasers
and the Program Administrator in writing of the nature of such failure or
inability or termination, and (ii) provide certification by a Responsible
Officer that such failure or inability is required in order to comply with
such fiduciary obligations;
(d) provide prompt written notice to the Program Administrator of any
action by its Board of Directors or the Board of Directors of any Advisor
or the Shareholder Servicer or the Board of Trustees of any Company in
respect of any Fund to make any modification, amendment or supplement to,
or any waiver of any provisions of, or any termination, of any
Distribution Plan, any Distributor's Contract, any Principal Shareholder
Servicer's Agreement, any Shareholder Servicer's Agreement any Advisory
Agreement, any Conversion Feature, any Contingent Deferred Sales Charge
arrangement, or any Fundamental Investment
26
Objectives and Policies of any Company in respect of any Fund, or any
modification, amendment, supplement or waiver in the amounts payable or
actually being paid thereunder, each as in effect on the date of that
agreement, to the extent that any such modification, amendment, supplement
or waiver could reasonably be expected to give rise to an Adverse Effect;
(e) deliver to the Program Administrator, promptly after the filing
thereof with the SEC, any report on Form N-SAR (or successor form), any
Prospectus (including any Form N-1A (or successor form) and any statement
of additional information) or any amendment or supplement to any of the
foregoing, any proxy statements and all other notices (out of the ordinary
course) to shareholders of each Fund, annual reports of each Company and
any other filings (out of the ordinary course), made by any Company in
respect of each Fund;
(f) promptly notify the Program Administrator of any material adverse
change with respect to the business, properties (in respect of properties,
other than in the ordinary course of the Distributor's and each Fund's
business, as conducted on the date hereof) or the financial condition or
results of operations of the Distributor, or to the Distributor's
knowledge, any Company or Fund, since December 31, 1996, including any
material change in the sales commission structure relating to any Fund or
arrangements, distribution fees, contingent deferred sales charges or
exchange privileges for shareholders; and
(g) keep each Irrevocable Payment Instruction in full force and
effect.
Section 5.05. Additional Covenants of the Transferor. The Transferor
--------------------------------------
covenants and agrees that it shall:
(a) use the Transfer Price paid to it on the Purchase Date solely for
the purpose of purchasing Portfolio Assets or for reimbursing itself for
the purchase price of the Portfolio Assets purchased under the Transferor's
Transfer Agreement pursuant to and in accordance with the terms of the
Transferor's Transfer Agreement.
ARTICLE VI
EVENTS OF TERMINATION
Section 6.01. Events of Termination. If any of the following events
---------------------
(each an "Event of Termination") shall occur:
(a) the Parent, the Distributor (as Distributor, Principal
Shareholder Servicer or as Program Servicer Agent), the Seller, the
Transferor, the Shareholder Servicer, any Advisor, any Transfer Agent or
any Company or Fund shall fail to make or cause to be made in the manner
and when due any payment or deposit to be made or to be caused to be made
by it under this Agreement or any of the other Program Documents and such
failure shall continue for three (3) Business Days; or
27
(b) the Parent, the Distributor (as Distributor, Principal Shareholder
Servicer or as Program Servicer Agent), the Seller, the Transferor, the
Shareholder Servicer, any Advisor, any Transfer Agent or any Selling Agent,
or any Company shall fail to perform or observe any covenant or agreement
on its part to be performed or observed under any Program Document (other
than those described in clause (a) of this Section 6.01) and such failure
could have an Adverse Effect; or
(c) (i) any representation or warranty made or deemed made by the
Parent, the Distributor (as Distributor, Principal Shareholder Servicer or
as Program Servicer Agent), the Transferor, the Seller, the Shareholder
Servicer (or any of their respective officers) under or in connection with
any Program Document (except where such incorrect or misleading
representation or warranty could not reasonably be expected to give rise to
an Adverse Effect) shall have been incorrect when made or deemed made, or
(ii) any Investor Report or any other statement, certificate or report
delivered by or on behalf of the Parent, the Distributor, the Seller or the
Shareholder Servicer in connection with this Agreement, or any other
Program Document (except where such incorrect or misleading document or
statement could not reasonably be expected to give rise to an Adverse
Effect), shall have been false, incorrect or misleading when delivered; or
(d) the applicable Purchaser shall fail to acquire in a True Sale, or
shall cease to have, a 100% undivided ownership interest in any Purchased
Portfolio Asset, free and clear of any Adverse Claim; or
(e) (i) the Seller, the Transferor, the Distributor, the Parent, the
Shareholder Servicer, any Advisor, any Transfer Agent which is a Federated
Entity, any Company or any Fund or any Significant Affiliate thereof shall
generally not pay its Debts as such Debts become due, or shall admit in
writing its inability to pay its Debts generally, or shall make a general
assignment for the benefit of creditors or in the case of the Distributor
the Distributor shall otherwise become "insolvent" within the meaning of
SIPA; or (ii) any proceeding shall be instituted by or against the Seller,
the Transferor, the Distributor, the Parent, the Shareholder Servicer, any
Advisor, any Transfer Agent which is a Federated Entity, any Company, any
Fund or any Significant Affiliate thereof seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up reorganization,
arrangement, adjustment, protection, relief, or composition of it or its
Debts under any Applicable Law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property and, in
the case of any such proceeding instituted against it (but not instituted
by it), either such proceeding shall remain undismissed or unstayed for a
period of sixty (60) days; or (iii) any of the actions sought in any
proceeding described in (ii) above (including an order for relief against,
or the appointment of a receiver, trustee, custodian or other similar
official for, it or for any substantial part of its property) shall occur;
or (iv) the Seller, the Transferor, the Distributor, the Parent, the
Shareholder Servicer, any Advisor, any Transfer Agent which is a Federated
Entity, any Company, any Fund or any Significant Affiliate
28
thereof shall take any action to authorize any of the actions set forth
above in this Section 6.01(e); or
(f) there shall have occurred any material adverse change in (i) the
financial condition or results of operations of the Parent and its
consolidated subsidiaries taken as a whole since December 31, 1996; or (ii)
the Seller, the Transferor the Shareholder Servicer, the Parent, the
Distributor, any Advisor or any Transfer Agent which is a Federated Entity
shall fail to make payments when due in respect of Debt aggregating in
excess of $5,000,000, provided that the determination of default on such
Debt is not being diligently contested in good faith through appropriate
proceedings;
(g) any Distribution Plan, Distributor's Contract, Principal
Shareholder Servicer's Agreement, Shareholder Servicer's Agreement,
Prospectus, the Conduct Rules, or the Contingent Deferred Sales Charge
arrangements applicable to holders of Shares of any Fund or the terms of
any Conversion Feature in respect of any Share of any Fund, each as in
effect on the date of this Agreement, shall be amended, waived,
supplemented or modified, in any manner or by any means (including a change
in Applicable Law), which could reasonably be expected to have an Adverse
Effect, unless waived by the Program Administrator;
(h) the Securities Investor Protection Corporation, established under
SIPA, shall have applied for a protective decree against the Distributor;
or
(i) the Distributor shall have failed to meet the minimum capital
requirements prescribed from time to time by Rule 15c3-1 under the Exchange
Act and such failure continues uncured for 10 days after the Distributor
obtains knowledge thereof; or
(j) the SEC shall have modified or terminated Rule 12b-1 of the
Investment Company Act or the NASD shall have modified or terminated the
Conduct Rules in a manner which could reasonably be expected to give rise
to an Adverse Effect; or
(k) the Distributor shall cease to be registered as a broker/dealer
under the Exchange Act and with the NASD or the NASD suspends the
Distributor's membership or registration; or
(l) any Company or any Transfer Agent shall, without the written
consent of the Program Administrator, fail to withhold from redemption
proceeds paid to any holder of a Share any Contingent Deferred Sales
Charges required to be withheld and remit such funds to the Program
Collection Account in accordance with any Irrevocable Payment Instruction,
or shall be prevented by any Authority or by any Applicable Law from doing
so or any Company or any Transfer Agent shall so assert in writing; or
(m) any Company shall be required by any Authority or any Applicable
Law to cease or suspend the sale of Shares of any Fund under circumstances
that could reasonably be expected to result in an Adverse Effect; or
29
(n) any Company in respect of itself or any Fund shall propose or
effect a merger or other combination with another Person not constituting a
Fund if, in the reasonable judgment of the Program Administrator, the
amount of the potential unrealized Program Collections from such Fund is
material; or
(o) as of any Calculation Date the NAV Decline Ratio (adjusted for
stock splits, capital gains and annual and quarterly income distributions)
from the end of the immediately preceding calendar month shall be twenty-
five percent (25%) or more; or
(p) the applicable Advisor shall cease to act as the investment
advisor of any Fund under the applicable Advisory Agreement; or
(q) aggregate Free Redemptions result in the occurrence of the
Redemption Threshold Date;
then in respect of any occurrence of any such event, the Program Administrator
may in respect of each such occurrence, by notice to the Seller declare the
Revolving Purchase Termination Date to have occurred (in which case the
Revolving Purchase Termination Date shall be deemed to have occurred); provided,
--------
that, upon the occurrence of any event (without any requirement for the giving
of notice) described in subsection (e) or (h) of this Section 6.01, the
Revolving Purchase Termination Date shall be deemed to have automatically
occurred.
ARTICLE VII
THE PROGRAM ADMINISTRATOR
Section 7.01. Authorization and Action. (A) Each Purchaser hereby
------------------------
irrevocably appoints and authorizes the Program Administrator to take such
action as agent on its behalf and to exercise such powers under this Agreement,
and the other Program Documents as are delegated to the Program Administrator by
the terms hereof and thereof, together with such powers as are reasonably
incidental thereto. As to any matters not expressly provided for by this
Agreement or the other Program Documents, the Program Administrator shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of such Purchaser; provided,
--------
however, that the Program Administrator shall not be required to take any action
- -------
which exposes the Program Administrator to personal liability or which is
contrary to this Agreement, the other Program Documents or Applicable Law.
Section 7.02. Program Administrator Reliance, Etc. Neither the
-----------------------------------
Program Administrator nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement or any of the other Program Documents,
except for its or their own gross negligence or willful misconduct. Without
limiting the generality of the foregoing, the Program Administrator: (i) may
consult with legal counsel (including counsel for the
30
Seller, the Parent, the Distributor, the Servicer or any Advisor or Transfer
Agent), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts; (ii)
makes no warranty or representation to any of the other parties to this
Agreement and shall not be responsible to any of the other parties to this
Agreement for any statements, warranties or representations (whether written or
oral) made in or in connection with this Agreement or the other Program
Documents; (iii) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or the other Program Documents on the part of any of the other parties
to this Agreement or to inspect the property (including the books and records)
of any of the other parties to this Agreement; (iv) shall not be responsible for
the due execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement, the other Program Documents or any other instrument
or document furnished pursuant hereto or thereto in respect of any Person other
than the Program Administrator; and (v) shall incur no liability under or in
respect of this Agreement or any other Program Document by acting upon any
notice, consent, certificate or other instrument or writing (which may be by
telecopier, telegram, cable or telex) believed by it to be genuine and signed or
sent by the proper party or parties.
Section 7.03. Rights of the Program Administrator. Each Federated
-----------------------------------
Entity hereby agrees that the Program Administrator is hereby authorized to (i)
upon the occurrence of any Event of Termination (or event which with the passage
of time or notice, or both, would constitute an Event of Termination) which
relates to the Seller, the Shareholder Servicer, the Parent, the Distributor, or
any other Federated Entity, or (ii) at any time that the Program Administrator
in its sole discretion believes that the event contemplated in Section 6.01(e),
(f) or (h) could occur in respect of the Seller, the Shareholder Servicer, the
Parent, the Distributor or any other Federated Entity, deliver an Allocation
Notice to the Funding and Collection Agent.
ARTICLE VIII
PARENT'S UNDERTAKINGS
Section 8.01. Undertakings; Payment of Damages. The Parent hereby
--------------------------------
irrevocably and unconditionally agrees and guarantees for the benefit of each
Purchaser, the Program Administrator, the Indenture Trustee and each Indemnified
Party to cause the Seller, the Transferor, the Shareholder Servicer, the
Distributor (as Distributor, Principal Shareholder Servicer and Program Servicer
Agent) and each other Federated Entity to perform and punctually and completely
carry out each and every agreement, covenant or undertaking of the Seller, the
Transferor, the Shareholder Servicer, the Distributor (as Distributor, Principal
Shareholder Servicer and Program Servicer Agent) and each other Federated Entity
under this Agreement and each other Program Document in accordance with the
terms thereof, notwithstanding that the Seller, the Transferor, the Shareholder
Servicer, the Distributor (as Distributor, Principal Shareholder Servicer or
Program Servicer Agent), or other Federated Entity fails to fully perform any
such agreements, covenants and undertakings for any reason, including
liquidation, insolvency, dissolution, receivership, bankruptcy, assignment for
the benefit of creditors, reorganization, composition, adjustment, legal
limitations, court order, disability, incapacity, invalidity,
31
unenforceability, defense, offset or counterclaim. Each of the Parent, the
Distributor and the Transferor further covenants and agrees that it shall, and
the Parent shall cause Federated Investors Inc., a Pennsylvania corporation, and
FII Holdings Inc., a Delaware corporation, to, (i) comply at all times with
items 1, 2, 4 through 7, 11, 12, 14 and 15 of the Bankruptcy Remote Covenants in
all respects, (ii) not commingle assets with Seller and (iii) maintain an arm's-
length relationship with Seller, (iv) note the separate legal existence and
financial condition of the Seller in any consolidated financial statements which
include the Seller and (v) maintain adequate capital in light of its
contemplated business operation.
Section 8.02. Agreement Not Affected. The Purchasers and the Program
----------------------
Administrator may proceed to exercise any right or remedy which it might have
pursuant to this Article VIII or Applicable Law without regard to any actions or
omissions of the Purchasers, the Program Administrator or any other Person. The
validity of this Article VIII shall not be affected by any action or inaction
which may be taken under or in respect of any Program Document. The Purchasers
and the Program Administrator at its option may proceed in the first instance
against the Parent to obtain a remedy under any Program Document in the amount
and in the manner set forth in such Program Document, without being obliged to
resort first to any claim or action against the Seller, the Transferor, the
Shareholder Servicer, the Distributor (as Distributor, Principal Shareholder
Servicer or Program Servicer Agent) or any other Federated Entity.
Section 8.03. Waiver of Notice; No Offset; No Subrogation. The
-------------------------------------------
Parent hereby waives any and all notices or demands to which it may otherwise be
entitled in connection with the pursuit of any remedy hereunder, under any other
Program Document or, to the extent permitted under Applicable Law; provided,
--------
that this sentence shall not constitute a waiver on behalf of the Seller, the
Transferor, the Shareholder Servicer, the Distributor (as Distributor,
Principal Shareholder Servicer or Program Servicer Agent) or any other Federated
Entity of any notice or demand to which the Seller, the Transferor, the
Shareholder Servicer, the Distributor (as Distributor, Principal Shareholder
Servicer or Program Servicer Agent), or any other Federated Entity is entitled
under the Program Documents. The obligations of the Parent under this Article
VIII shall not be subject to any defense, counterclaim or right of offset which
the Parent, the Seller, the Transferor, the Shareholder Servicer, the
Distributor (as Distributor, Principal Shareholder Servicer or Program Servicer
Agent), or any other Person has or may have against any Purchaser, the Program
Administrator, any Indemnified Party or any other Person, whether in respect of
this Agreement, any other Program Document, any Purchased Portfolio Assets or
otherwise, but nothing herein shall limit the right of the Parent to pursue any
claim in a separate action.
ARTICLE IX
MISCELLANEOUS
Section 9.01. No Waiver; Modifications in Writing. No failure or
-----------------------------------
delay on the part of the Program Administrator or any Purchaser or any
Indemnified Party exercising any right, power or remedy hereunder or under any
other Program Document shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other
32
right, power or remedy. The remedies provided for herein are cumulative and are
not exclusive of any remedies that may be available to the Program Administrator
and the Purchasers, at law or in equity. No amendment, modification, supplement,
termination or waiver of this Agreement or any other Program Document shall be
effective unless the same shall be in writing and signed by the parties thereto.
Any waiver of any provision of this Agreement, and any consent to any departure
by any party to this Agreement or any other Program Document from the terms of
any provision of this Agreement or any other Program Document, shall be
effective only in the specific instance and for the specific purpose for which
given. No notice to or demand on any party to this Agreement or any other
Program Document in any case shall entitle a Federated Entity to any other or
further notice or demand in similar or other circumstances.
Section 9.02. Payment. Unless otherwise provided herein, whenever
-------
any payment to be made hereunder or under any other Program Document shall be
due on a non-Business Day, such payment shall be made on the next succeeding
Business Day. All amounts owing and payable to the Purchaser, the Program
Administrator or any Indemnified Party under this Agreement or under any other
Program Document shall be paid in immediately available funds without
counterclaim, setoff, deduction, defense, abatement, suspension or deferment,
but nothing herein shall limit the right of the Seller, the Parent or the
Distributor to pursue any claim in a separate action. Each of the Seller, the
Parent and the Distributor hereby agrees to pay interest on any amounts payable
by it under this Agreement or under any other Program Document, which shall not
be paid in full when due, for the period commencing on the due date thereof
until, but not including, the date the same is paid in full at the Post-Default
Rate. For purposes of calculating the Post-Default Rate interest, any amount
received by or on behalf of the Purchasers, the Program Administrator or any
Indemnified Party after the close of the Fedwire shall be deemed to have been
received on the next succeeding Business Day.
Section 9.03. Notices, Etc. (a) All notices, demands, instructions
------------
and other communications required or permitted to be given to or made upon any
party hereto or to any other Program Document shall be in writing and shall be
personally delivered or sent by first-class, registered, certified or express
mail, postage prepaid, or by prepaid telegram (with messenger delivery specified
in the case of a telegram), or by telecopier, or by prepaid courier service.
Unless otherwise specified in a notice sent or delivered in accordance with the
foregoing provisions of this Section 9.03, notices, demands, instructions and
other communications in writing shall be given to or made upon the respective
parties hereto or to the other Program Documents at their respective addresses
(or to their respective telecopier numbers) indicated below:
If to the Initial Purchaser:
PLT Finance Trust 1997-1
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust
Administration
Facsimile No.: (302) 651-8882
33
If to the Revolving Purchaser:
PLT Finance, L.P.
19 Fulton Street, 5th Floor
South Street Seaport
New York, New York 10038
Attention: Vice President
Facsimile No.: (212) 233-0829
If to the Program Administrator:
Putnam, Lovell & Thornton Inc.
19 Fulton Street, 5th Floor
South Street Seaport
New York, New York 10038
Attention: Vice President
Facsimile No.: (212) 233-0829
If to the Parent, the Seller, the Transferor or the Distributor:
Federated Investors
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attention: Raymond J. Hanley
Facsimile No.: (412) 288-7046
If to the Funding and Collection Agent:
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and
Agency Group-Structured Finance
Facsimile No.: 212-250-6439
(b) All notices, demands, consents, requests and other communications
to be sent or delivered hereunder or under any other Program Document shall be
deemed to be given or become effective for all purposes of this Agreement or of
such Program Document as follows: (a) when delivered in person, when given; (b)
when sent by mail, when received by the Person to whom it is given, unless it is
mailed by registered, certified or express mail, in which case it shall be
deemed given or effective on the earlier of the date of receipt or refusal; and
(c) when sent by telegram, telecopy or other form of rapid transmission shall be
deemed to be given or effective when receipt of such transmission is
acknowledged, electronically or otherwise.
Section 9.04. Costs and Expenses; Indemnification. (a) Regardless of
-----------------------------------
whether or not any of the transactions contemplated hereby are actually
consummated, the
34
Parent agrees to pay promptly on demand to the other Parties hereto (other than
any other Federated Entity) (i) all reasonable costs and expenses in connection
with the preparation, review, negotiation, reproduction, execution, delivery,
administration and any modification, amendment and waiver of this Agreement and
the other Program Documents, (ii) all costs and expenses incurred in connection
with the enforcement of, or preservation of, any rights under this Agreement and
the other Program Documents, (iii) all actuarial fees, UCC filing fees and
periodic auditing expenses in connection with the transactions contemplated by
this Agreement and the other Program Documents, and (iv) all reasonable fees and
disbursements of counsel in connection with the foregoing.
(b) Indemnification. The Parent agrees to indemnify and hold harmless
---------------
the Purchasers, the Program Administrator, the Funding and Collection Agent, the
Placement Agent, and each of their respective Investors, Affiliates and the
respective officers, directors, employees, trustees, agents, advisors, and any
Person controlling any of the foregoing (each, an "Indemnified Party") from and
against any and all damages, losses, liabilities, expenses, obligations,
penalties, actions, suits, judgments and disbursements of any kind or nature
whatsoever (including the reasonable fees and disbursements of counsel)
(collectively the "Liabilities") that are incurred by or asserted or awarded
against any Indemnified Party, in each case arising out of or in connection with
or by reason of (and regardless of whether or not any such transactions are
consummated) any of the transactions contemplated by the Program Documents,
including without limitation, any one or more of following:
(i) any failure or alleged (by Persons other than the
Indemnified Party) failure by any Federated Entity to perform any of
its obligations, covenants, or agreement contained in any Program
Document to which it is a party promptly and fully;
(ii) any representation or warranty made or deemed made by any
Federated Entity contained in any Program Document or in any
certificate, written statement or report delivered by or on behalf of
any such Person in connection herewith or therewith is, or is alleged
(by Persons other than the Indemnified Party) to have been false or
misleading in any respect when made;
(iii) any failure by any Federated Entity to comply promptly
and fully with any Applicable Law or any contractual obligation
binding upon it;
(iv) any proceeding by or against any Federated Entity seeking
to adjudicate such Person, bankrupt or insolvent, or seeking
liquidation, winding up, administration, reorganization, arrangement,
adjustment, protection, relief, or composition of such Person or the
debts of such Person under any law relating to bankruptcy, insolvency,
liquidation, administrative, reorganization or relief of debtors or
seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian, administrator, liquidator, or other
similar official for such Person or for a substantial part of such
Person's property; and
35
(v) preparation for a defense of, any investigation, litigation
or proceeding arising out of any of the transactions, events or
circumstances described above.
provided, however, that the Parent shall not be required to indemnify any
- -------- -------
Indemnified Party in respect of any Liability to the extent such Liability (A)
is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted directly and primarily from such Indemnified
Party's gross negligence or willful misconduct, or (B) arises out of the
Purchased Portfolio Assets proving to be uncollectible, except to the extent
that such uncollectibility is attributable to what would not have occurred but
for any one or more of the events described in clauses (i) through (v) above, or
(C) arises out of a subsequent sale or assignment of any Purchased Portfolio
Assets by any Purchaser and is not attributable to, or would not have accrued
but for, one or more of the events or circumstances described in clauses (i)
through (v) above; and provided, further that the Parent shall be required to
-------- -------
indemnify Wilmington Trust Company only if and to the extent that the Seller, as
Beneficial Owner, is required to indemnify Wilmington Trust Company under the
Trust Agreement.
(c) Unless the Parent shall have assumed responsibility for contesting
a Liability as provided in the next sentence, the Program Administrator and the
Purchasers may, but shall have no obligation to, contest, settle or compromise
such Liability. The Parent may pursue, at its sole cost and expense, such
lawful rights as are available at law to contest any Liability asserted against
the Purchasers or the Program Administrator provided: (i) the Parent has assumed
responsibility for such contest and conceded in writing its responsibility to
indemnify the Indemnified Party, in accordance with this Section, for the full
amount of such Liability; (ii) such contest is conducted in a manner which does
not result in a Lien on the Portfolio Assets and, if the manner of contest does
not defer the obligation to pay the Liability, the Parent shall pay such
Liability when due, subject to the right to recover such Liability if the
contest is successful, (iii) the Parent shall have provided to the Indemnified
Party such undertakings as the Indemnified Party shall request, in form and
substance satisfactory to the Indemnified Party whereby the Parent agrees to
hold the Indemnified Party harmless from any and all liabilities, costs and
expenses which may arise as a consequence of such contest; (iv) the Parent shall
have furnished the Indemnified Party with an opinion, in form and scope
reasonably satisfactory to the Indemnified Party that there is a meritorious
basis for such contest; (v) the contest of such Liability may be conducted in a
manner which does not affect the liability of the Indemnified Party, for any
liability not indemnified by the Parent; (vi) the contest of such Liability can
be separated from any contest of any other liability in respect of which the
Parent has not indemnified the Indemnified Party, without prejudicing the
Indemnified Party's ability to deal with or otherwise contest such other
liability; and (vii) the Indemnified Party has not waived its right to
indemnification by the Parent in respect of such Liability. The Parent shall
keep the Indemnified Party fully advised on a current basis concerning any such
contest, and, without limiting the foregoing: (a) the Parent shall give the
Indemnified Party reasonable notice of and a reasonable opportunity to be
present in person or by counsel at any proceeding in connection therewith; (b)
the Parent shall give the Indemnified Party notice of any proposed filings or
papers to be served or filed by the Parent in connection with any such
proceedings and a reasonable opportunity to comment upon them; and (c) the
Parent shall promptly supply the Indemnified Party with copies of
36
any filings or papers served upon the Parent in connection with such
proceedings; it being understood that the Indemnified Party shall bear its own
costs incurred in connection with any participation by the Indemnified Party or
its counsel in the contest as contemplated by this sentence.
(d) Without prejudice to the survival of any other agreement of the
Parent, hereunder, the agreement and obligations of the Parent contained in this
Section 9.04 and of the Parent in Article VIII shall survive the termination of
this Agreement.
Section 9.05. Taxes. (a) Any and all payments by any Federated
-----
Entity, any Transfer Agent, any Company or any Fund under this Agreement, any
Irrevocable Payment Instrument or any other Program Document shall be made free
and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, taxes imposed on the recipient's income, and
---------
franchise taxes imposed on the recipient, by (i) the United States federal
government, (ii) the jurisdiction under the laws of which the recipient is
organized or any political subdivision thereof, (iii) the jurisdiction in which
is located the principal executive office of the recipient or any political
subdivision thereof or (iv) any other jurisdiction which asserts the authority
to impose such tax on the basis of contacts the recipient maintains with such
jurisdiction other than the contacts arising out of the transactions
contemplated hereby (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If any Federated Entity, any Transfer Agent, any Company or any Fund shall be
required by Applicable Law to deduct any Taxes from or in respect of any sum
payable hereunder or under any other Program Document, (i) the sum payable
hereunder or thereunder shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 9.05) the recipient receives an amount equal to
the sum it would have received had no such deductions been made, (ii) such
Federated Entity, Transfer Agent, Company or Fund shall make such deductions and
(iii) such Federated Entity, Transfer Agent, Company or Fund shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with Applicable Law.
(b) In addition, the Parent agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any transfer of Portfolio Assets in connection herewith
or from the execution, delivery or registration of, or otherwise with respect
to, this Agreement or any other Program Document (hereinafter referred to as
"Other Taxes").
(c) The Parent will indemnify the Program Administrator and the
Purchasers for the full amount of Taxes or Other Taxes (including any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
9.05) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted, so long as there is a reasonable basis for the
assertion of such Taxes or Other Taxes. This indemnification shall be made
within 30 days from the date the Program Administrator or the Purchaser makes
written demand therefor to the Parent. The Purchasers and the Program
Administrator shall endeavor to avoid or reduce any Taxes or Other Taxes subject
37
to the foregoing indemnity; provided that they shall not be required to take any
--------
action which, in their sole judgment, may subject them to any adverse effect.
(d) Within thirty (30) days after the date of any payment of Taxes,
the Parent will furnish to the Purchasers and the Program Administrator the
original or a certified copy of a receipt evidencing payment thereof.
(e) In the event the Parent, shall pay a Tax or Other Tax pursuant to
this Section 9.05 and all or a portion of such Tax or Other Tax previously paid
by the Parent is later refunded by the applicable taxing Authority the recipient
of such refund shall pay to the Parent, the portion of such refund which relates
to the amount previously paid by the Parent.
(f) Unless the Parent shall have assumed responsibility for contesting
a Tax or Other Tax described in paragraph (c) of this Section 9.05 as provided
in the next sentence, the Program Administrator and the Purchasers may, but
shall have no obligation to, contest, settle or compromise such Tax or Other
Tax. The Parent may pursue, at its sole cost and expense, such lawful rights as
are available at law to contest any Tax or Other Tax asserted against the
Purchasers or the Program Administrator provided: (i) the Parent has assumed
responsibility for such contest and conceded in writing its responsibility to
indemnify such Purchaser or the Program Administrator, as the case may be, in
accordance with this Section, for the full amount of such Tax or Other Tax; (ii)
such contest is conducted in a manner which does not result in a Lien on the
Portfolio Assets and, if the manner of contest does not defer the obligation to
pay the Tax or Other Tax, the Parent shall pay such Tax or Other Tax when due,
subject to the right to recover such Tax or Other Tax if the contest is
successful, (iii) to the extent not covered by Section 9.04(b), the Parent shall
have provided to such Purchaser or the Program Administrator, as the case may
be, such undertakings as such Purchaser or the Program Administrator, as the
case may be, shall request, in form and substance satisfactory to such
Purchaser, or the Program Administrator, as the case may be, whereby the Parent
agrees to hold such Purchaser or the Program Administrator, as the case may be,
harmless from any and all liabilities, costs and expenses which may arise as a
consequence of such contest; (iv) the Parent shall have furnished such Purchaser
or the Program Administrator, as the case may be, with an opinion, in form and
scope reasonably satisfactory to such Purchaser or the Program Administrator, as
the case may be, of counsel reasonably satisfactory to such Purchaser or the
Program Administrator, as the case may be, that there is a meritorious basis for
such contest; (v) the contest of such Tax or Other Tax may be conducted in a
manner which does not affect the liability of such Purchaser or the Program
Administrator, as the case may be, for any tax not indemnified by Parent; (vi)
the contest of such Tax or Other Tax can be separated from any contest of any
other tax in respect of which the Parent has not indemnified such Purchaser or
the Program Administrator, as the case may be, without prejudicing such
Purchaser's or the Program Administrator's, as the case may be, ability to deal
with or otherwise contest such other liability; and (vii) such Purchaser or the
Program Administrator, as the case may be, has not waived its right to
indemnification by the Parent in respect of such Tax or Other Tax. The Parent
shall keep such Purchaser or the Program Administrator, as the case may be,
fully advised on a current basis concerning any such contest, and, without
limiting the foregoing: (a) the Parent shall give such Purchaser or the Program
Administrator, as the case may be, reasonable notice of and a reasonable
opportunity to be present in person or by counsel at any proceeding in
38
connection therewith; (b) the Parent shall give such Purchaser or the Program
Administrator, as the case may be, notice of any proposed filings or papers to
be served or filed by the Parent in connection with any such proceedings and a
reasonable opportunity to comment upon them; and (c) the Parent shall promptly
supply such Purchaser or the Program Administrator, as the case may be, with
copies of any filings or papers served upon the Parent in connection with such
proceedings; it being understood that such Purchaser or the Program
Administrator, as the case may be, shall bear its own costs incurred in
connection with any participation by such Purchaser or the Program
Administrator, as the case may be, or its counsel in the contest as contemplated
by this sentence.
(g) Without prejudice to the survival of any other agreement of the
Parent, hereunder, the agreements and obligations of the Parent contained in
this Section 9.05 shall survive the termination of this Agreement.
Section 9.06. Execution in Counterparts. This Agreement and each
-------------------------
other Program Document may be executed in any number of counterparts and by
different parties hereto on separate counterparts, each of which counterparts,
when so executed and delivered, shall be deemed to be an original and all of
which counterparts, taken together, shall constitute but one and the same
agreement.
Section 9.07. Binding Effect; Assignment. This Agreement and the
--------------------------
various representation and covenants set forth herein shall be binding upon the
parties hereto and their respective successors and assigns, and inure to the
benefit of the parties hereto and their respective Investors, successors and
assigns. No Federated Entity shall assign its rights or obligations hereunder
or under any other Program Document or in connection herewith or therewith or
any interest herein or therein (voluntarily, or by operation of law or
otherwise) without the Program Administrator's and the Purchasers' prior written
consent. This Agreement and the Program Administrator's and the Purchasers'
rights herein, and in the Purchased Portfolio Assets, the Program Collections
and the Ancillary Rights with respect thereto shall be assignable, in whole or
in part, by the Purchasers and the Program Administrator and their respective
successors and assigns.
Section 9.08. Governing Law; Submission to Jurisdiction. (a) THIS
-----------------------------------------
AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF
NEW YORK AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF SAID STATE WITHOUT REGARD TO ITS CONFLICTS OF LAWS PROVISIONS.
(b) Each of the Seller, the Transferor, the Parent and the Distributor
hereby irrevocably submits itself to the non-exclusive jurisdiction of the
courts of the State of New York and to the non-exclusive jurisdiction of any
Federal Court of the United States located in the southern district of New York,
for the purposes of any suit, action or other proceeding arising out of this
Agreement or any other Program Document or any of the transactions contemplated
hereby or thereby.
Section 9.09. Severability of Provisions. Any provision of this
--------------------------
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be
39
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 9.10. Confidentiality. Unless otherwise required by
---------------
Applicable Law, the parties hereto agree to maintain the confidentiality of the
Program Documents (and all drafts hereof and thereof) other than the Transfer
Agreement, the Distributor's Contracts, the Shareholder Servicer's Agreements,
the Advisory Agreements, the Distribution Plans and the Prospectuses and the
transactions contemplated thereby, and all information disclosed by the parties
pursuant to or in connection with the Program Documents, in communications with
third parties and otherwise; provided, that such documents and information may
--------
be disclosed (i) to assignees, participants and potential assignees and
participants of the Purchasers and the Program Administrator provided that
confidentiality commitments similar hereto from such third parties are obtained
by the appropriate Purchaser or the Program Administrator, (ii) to third parties
to the extent such disclosure is consented to in writing by all parties to this
Agreement (which consent shall not be unreasonably withheld) and such disclosure
is made pursuant to a written confidentiality agreement in form and substance
substantially identical to this Section 9.10, (iii) the officers, partners,
directors and employees, legal counsel and internal and external auditors of the
parties hereto, (iv) as the Program Administrator or the Purchaser may deem
necessary or appropriate in connection with any Placement or its warehouse
financing arrangements and (v) in connection with any litigation or the
protection or enforcement of a party's rights and remedies under or relating to
the Program Documents; provided, further, that any disclosure of financial
-------- -------
statements of the Parent or the Distributor pursuant to clause (iv) to Investors
or rating agencies will be (a) limited to statements of financial position, or
(b) available for review at the Program Administrator's office, or (c) subject
to the consent of the Parent, such consent not to be unreasonably withheld.
Section 9.11. Intent of Agreement. It is the intention of this
-------------------
Agreement and the Purchase Agreements that each purchase of Purchased Portfolio
Assets hereunder shall convey to the applicable Purchaser an undivided 100%
ownership interest in such Purchased Portfolio Assets on the Purchase Date
therefor and that such transactions shall constitute a True Sale and not a
secured loan. If, notwithstanding such intention, any conveyance of Purchased
Portfolio Assets from the Seller to a Purchaser shall ever be recharacterized as
a secured loan and not a sale, it is the intention of this Agreement and the
Purchase Agreements that such agreements shall constitute collectively a
security agreement under Applicable Law, and that the Seller shall be deemed to
have granted to such Purchaser, and hereby does so grant, a duly perfected first
priority security interest in all of the Seller's right, title and interest in,
to and under such Purchased Portfolio Assets free and clear of any Adverse
Claim. Each party hereto represents and warrants that it has executed and
delivered the Program Documents and agreed to participate in the transactions
contemplated thereby in reliance on the formation and treatment of the Seller as
a legal entity separate from any other Federated Entity or other Person.
Section 9.12. Continuing Obligations. Notwithstanding any other
----------------------
provision of this Agreement or the other Program Documents, to the extent that
any obligation of the Federated Entities under, pursuant to and in connection
with the Purchased Portfolio Assets remains unperformed or executory, the
Federated Entities shall be obligated to perform such obligation to the same
extent as if the purchase and sale
40
contemplated hereby had not taken place, and the Purchasers and the Program
Administrator shall not be required or obligated in any manner to perform or
fulfill any of the obligations of the Federated Entities under, pursuant to or
in connection with any Purchased Portfolio Assets.
Section 9.13. Limited Liability. (a) The parties to this Agreement
-----------------
are expressly put on notice of and hereby expressly agree to the limitation of
liability as set forth in the Declaration of Trust of the Parent and agree that
the obligations assumed by the Parent pursuant to this Agreement and the other
Program Documents be limited in any case to the trust and its assets. The
parties to this Agreement shall not seek satisfaction of any obligation of the
Parent under this Agreement or any other Program Document from any of the
shareholders of the trust, the trustees, officers or agents of those entities,
or any of them, except as contemplated under the Declaration of Trust of the
Parent.
(b) The Parties to this Agreement are expressly put on notice of and
hereby expressly agree to the limitation of liability as set forth in the Trust
Agreement of the Initial Purchaser and agree that the obligations assumed by the
Initial Purchaser pursuant to this Agreement and the other Program Documents be
limited in any case to the trust and its assets. Nothing herein shall be
construed as creating any liability of the entity serving as Trustee of the
trust, individually or personally, to perform any covenant either expressed or
implied contained in any of the Program Documents all such liability, if any,
being expressly waived by the parties hereto and by any Person claiming by,
through or under such parties. The parties to this Agreement shall not seek
satisfaction of any obligation of the Initial Purchaser under this Agreement or
any other Program Document from any of the shareholders of the trust, the
trustees, directors, officers, employees or agents of those entities, or any of
them, except as contemplated under the Trust Agreement of the Initial Purchaser,
as the case may be.
(c) None of the Federated Entities (other than the Parent), nor any
shareholder, officers or agents of any thereof, shall be liable hereunder or
under the other Program Documents for the obligations of the Seller, and the
other parties hereto and thereto shall look solely to the assets of the Seller
for the payment of any claim hereunder or thereunder for the performance of the
obligations of the Seller, except to the extent expressly set forth herein or in
any other Program Document.
Section 9.14. Merger. The Program Documents taken as a whole
------
incorporate the entire agreement between the parties thereto concerning the
subject matter thereof. The Program Documents supersede any prior agreements
among the parties relating to the subject matter thereof.
Section 9.15. Further Acts. Each party agrees that at any time, and
------------
from time to time, it will do all such things and execute and deliver all such
instruments, assignments, other documents and assurances, as such other party or
its counsel reasonably deems necessary or desirable in order to carry out the
express intent, purpose and conditions of this Agreement and the other Program
Documents and the transactions contemplated hereby and thereby, and without
limiting the generality of the foregoing, to the extent permitted by Applicable
Law, upon the Program Administrator's written request from time to time, the
Parent, the Distributor and the Seller shall make, execute, acknowledge and
deliver and file and record in the proper filing and recording places all
41
such instruments, and take all such actions, as the Program Administrator may
reasonably deem necessary or advisable for assuring or confirming to each
Purchaser its rights and interest in and to, and remedies in respect of, the
Purchased Portfolio Assets. In addition, the Seller, the Transferor, the
Distributor and the Parent, agree to do all things and execute and deliver all
instruments, assignments, other documents and assurances, as the Program
Administrator or its counsel reasonably deems necessary to permit each Purchaser
to convey any portion of its right, title and interest in the Purchased
Portfolio Assets and the Program Documents in connection with any assignment by
such Purchaser permitted by this Agreement and the other Program Documents.
Section 9.16. Specific Performance; Other Rights and Remedies. The
-----------------------------------------------
parties hereto recognize that certain of their rights under this Agreement and
the other Program Documents are unique and, accordingly, the parties hereto
shall, in addition to such other remedies as may be available to any of them at
law or in equity or under this Agreement and the other Program Documents, have
the right to enforce their rights hereunder and thereunder by actions for
injunctive permitted relief and specific performance to the extent permitted by
Applicable Law. The rights and remedies of the Program Administrator and the
Purchasers under this Agreement and the other Program Documents are cumulative
and are not in lieu of, but are in addition to, any other rights and remedies
which the Program Administrator and the Purchasers may have under or by virtue
of any Applicable Law, or in equity, or any other agreement or obligations to
which the Program Administrator and such Purchaser is a party. The rights and
remedies of the Program Administrator and the Purchasers under this Agreement
and the other Program Documents may be exercised from time to time and as often
as such exercise is deemed expedient. Without limiting the generality of the
foregoing, the Seller acknowledges and agrees that it will be impossible to
measure in money the damage to the Program Administrator or the Purchasers in
the event of a breach of any of the terms and provisions of this Agreement or
any other Program Document, and that, in the event of any such breach, the
Program Administrator and the Purchasers may not have an adequate remedy at law,
although the foregoing shall not constitute a waiver of any of the Program
Administrator's or the Purchasers' rights, powers, privileges and remedies
against or in respect of a breaching party, any collateral or any other Person
or thing under this Agreement, any other Program Document or Applicable Law. It
is therefore agreed that each of the Program Administrator and the Purchasers,
in addition to all other such rights, powers, privileges and remedies that it
may have, shall be entitled to injunctive relief, specific performance or such
other equitable relief as it may request to exercise or otherwise enforce any of
the terms of those provisions and to enjoin or otherwise restrain any act
prohibited thereby, and the Seller shall not argue and hereby waives any defense
that there is an adequate remedy available at law.
Section 9.17. No Proceedings. Each Party agrees that it will not
--------------
institute against the Seller or the Purchasers, or join any other Person in
instituting against Seller or Purchasers, any insolvency proceeding (including
any proceeding of the type described in Section 6.01(e)). The foregoing shall
not limit the right of any Party to file any claim in or otherwise take any
action in any insolvency proceeding that was instituted against Seller or
Purchasers by any other Person.
Section 9.18. Additional Funds. Unless an Event of Termination (or
----------------
an event which, with the passage of time or notice, or both, would constitute an
Event of
42
Termination) shall have occurred and be continuing, the Seller may request that
an Additional Eligible Fund become a "Fund" under this Agreement on the Addition
Effective Date for such Additional Eligible Fund. On and as of such Addition
Effective Date, (i) each Additional Eligible Fund shall become a Fund hereunder,
(ii) the Program Documents (including Schedule I to the Master Agreement) shall
be deemed to be supplemented to reflect such addition, and (iii) any reference
in this Agreement to any change or modification since the date of this Agreement
to the distributor's contract, distribution plan, principal shareholder
servicer's agreement, advisory agreement, prospectus or contingent deferred
sales charge arrangement in respect of such Additional Eligible Fund shall be
deemed to refer to any change or modification thereof since such Addition
Effective Date.
The term "Addition Effective Date" shall mean with respect to any
Additional Eligible Fund, the first date on which all of the following
conditions shall have been satisfied:
(i) the Program Administrator shall have received a fully executed
Additional Eligible Fund Addendum, together with such signed opinions of
counsel to the applicable Company, the Distributor, the Transferor, the
Seller and the Parent, each dated a date reasonably near the Addition
Effective Date, as the Program Administrator shall have reasonably
requested, all in form, scope and substance satisfactory to the Program
Administrator;
(ii) the Program Administrator shall have received such instruments,
certificates and documents regarding the addition of such Additional
Eligible Fund from the Distributor, the Transferor, the Parent, the Seller
and the applicable Company as the Program Administrator shall reasonably
request; and
(iii) the Program Administrator shall have received evidence
satisfactory to it that (a) the conditions in respect of such Additional
Eligible Fund set forth in Section 3.02 of this Agreement immediately after
the Addition Effective Date shall be satisfied, and (b) that on such
Addition Effective Date the Portfolio Assets relating to such Additional
Eligible Fund shall constitute Eligible Portfolio Assets.
Section 9.19. Trust Capacity. In executing and delivering this
--------------
Agreement and any other Program Document, Wilmington Trust Company acts solely
as Owner Trust of PLT Finance Trust 1997-1 and not in any individual capacity,
and all persons having any claim against Wilmington Trust Company by reason of
the transactions contemplated hereby shall not have any recourse to Wilmington
Trust Company in its individual capacity.
43
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
FEDERATED INVESTORS
By: /s/ Thomas R. Donahue
-------------------------
Name: Thomas R. Donahue
Title: Vice President
FEDERATED FUNDING 1997-1, INC.
By: /s/ Thomas R. Donahue
---------------------------
Name: Thomas R. Donahue
Title: Vice President
FEDERATED INVESTORS MANAGEMENT
COMPANY
By: /s/ Thomas R. Donahue
---------------------------
Name: Thomas R. Donahue
Title: Vice President
FEDERATED SECURITIES CORP.
By: /s/ Byron F. Bowman
---------------------------
Name: Byron F. Bowman
Title: Vice President
44
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee of the
PLT FINANCE TRUST 1997-1 as Initial
Purchaser
By: /s/ Debra Eberly
----------------
Name: Debra Eberly
Title: Administrative Account Manager
PLT FINANCE, L.P.
By: PLT Finance, Inc.,
General Partner
By: /s/ William P. Henson
---------------------
Name: William P. Henson
Title: Vice President and Treasurer
PUTNAM, LOVELL & THORNTON INC.,
as Program Administrator
By: /s/ Robert T. Fleisher
----------------------
Name: Robert T. Fleisher
Title: Vice President
BANKERS TRUST COMPANY, not in its individual capacity
but solely as
Funding and Collection Agent
By: /s/ Louis Bodi
--------------
Name: Louis Bodi
Title: Vice President
45
01740009.AQ4
918
46
Schedule I
To
Master Agreement
COMPANIES, FUNDS SHARES AND RELATED MATTERS
-------------------------------------------
COMPANY:
- -------
SHARES
------
Federated American Leaders Fund, Inc. Class B
Federated Equity Funds
FUNDS SHARES
----- ------
1. Federated Aggressive Growth Fund Class B
2. Federated Growth Strategies Fund Class B
3. Federated Small Cap Strategies Fund Class B
4. Federated Capital Appreciation Fund Class B
COMPANY:
- -------
Federated Equity Income Fund, Inc. Class B
Federated Fund for U.S Government
Securities, Inc. Class B
Federated Government Income
Securities, Inc. Class B
Federated High Income Bond Fund, Inc. Class B
Federated Municipal Opportunities
Fund, Inc. Class B
Federated Municipal Securities Fund, Inc. Class B
Federated Stock and Bond Fund, Inc. Class B
Federated Utility Fund, Inc. Class B
I-1
Fixed Income Securities, Inc.
FUNDS SHARES
----- ------
1. Federated Strategic Income Fund Class B
COMPANY:
- -------
International Series, Inc.
FUNDS SHARES
----- ------
1. Federated International Equity Fund Class B
2. Federated International Income Fund Class B
COMPANY:
- -------
Investment Series Funds, Inc.
FUNDS SHARES
----- ------
1. Federated Bond Fund Class B
COMPANY:
- -------
Liberty U.S. Government Money Market Trust Class B
Municipal Securities Income Trust
FUNDS SHARES
----- ------
1. Federated Pennsylvania Municipal
Income Fund Class B
COMPANY:
- -------
World Investment Series, Inc.
FUNDS SHARES
----- ------
1. Federated World Utility Fund Class B
2. Federated Asia Pacific Growth Fund Class B
I-2
3. Federated Emerging Markets Fund Class B
4. Federated European Growth Fund Class B
5. Federated International Small
Company Fund Class B
6. Federated Latin American Growth Fund Class B
7. Federated International High Income
Fund Class B
8. Federated International Growth Fund Class B
I-3
SCHEDULE II
to
the Federated Investors
Program Master Agreement
PROGRAM ALLOCATION PROCEDURES
Program Collections in respect of Portfolio Assets which constitute
Contingent Deferred Sales Charges, Asset Based Sales Charges and Shareholder
Servicing Fees related to Shares of each Fund shall be allocated by the Program
Administrator among the Initial Purchaser, the Revolving Purchaser and the
Seller in accordance with this Schedule II.
Defined terms used in this Schedule II and not otherwise defined
herein shall have the meaning assigned to them in Schedule X to the Master
Agreement. As used herein the following terms shall have the meanings
indicated:
"Commission Share", means in respect of any Fund, each Share of such
----------------
Fund, other than an Omnibus Share, which is issued under circumstances which
would normally give rise to an obligation of the holder of such Share to pay a
Contingent Deferred Sales Charge upon redemption of such Share (including,
without limitation, any Share of such Fund issued in connection with a Permitted
Free Exchange) and any such Share shall continue to be a Commission Share of
such Fund prior to the redemption (including a redemption in connection with a
Permitted Free Exchange) or conversion of such Share, even though the obligation
to pay the Contingent Deferred Sales Charge may have expired or conditions for
waivers thereof may exist.
"Date of Original Issuance" means in respect of any Commission Share,
-------------------------
the date with reference to which the amount of the Contingent Deferred Sales
Charge payable on redemption thereof, if any, is computed.
"4% Commission Assets" means, in respect of all Funds, as of any date,
--------------------
the sum of: (a) in respect of all Shares of all Funds sold by Selling Agents
listed on Exhibit II which have always sold Shares only on a 4% sales commission
basis, the aggregate Net Asset Value as of such date of all outstanding Shares
of all Funds sold by such Selling Agents or derived from such Shares by dividend
reinvestment, free exchanges or otherwise and (b) in respect of all Shares of
all Funds sold by all other Selling Agents listed on Exhibit II, the aggregate
Net Asset Values (as of the respective Dates of Original Issuance) of all
Commission Shares and Omnibus Shares sold by such Selling Agents on a 4% sales
commission basis which were issued on or prior to such date and which have not
been converted to Class A Shares pursuant to a Permitted Conversion Feature.
"Free Share" means, in respect of any Fund, each Share of such Fund,
----------
other than a Commission Share or Omnibus Share (including, without limitation,
any Share issued in connection with the reinvestment of dividends or capital
gains).
"Inception Date" means in respect of any Fund, the first date on which
--------------
such Fund issued Shares.
"Net Asset Value" means, (i) with respect to any Fund, as of the date
---------------
any determination thereof is made, the net asset value of such Fund computed in
the manner such value is required to be computed by such Fund in its reports to
its shareholders, and (ii) with respect to any Share of such Fund as of any
date, the quotient obtained by dividing: (A) the net asset value of such Fund
(as computed in accordance with clause (i) above) allocated to Shares of such
Fund (in accordance with the constituent documents for such Fund) as of such
date, by (B) the number of Shares of such Fund outstanding on such date.
"Omnibus Share" means, in respect of any Fund, a commission share sold
-------------
by one of the Selling Agents listed on Exhibit I. If, subsequent to closing of
the Program, the Program Administrator reasonably determines that the Seller's
Transfer Agent is able to track all commission shares sold by any of the Selling
Agents listed on Exhibit I in the same manner as Commission Shares are currently
tracked in respect of Selling Agents not listed on Exhibit I, then Exhibit I
shall be amended to delete such Selling Agent from Exhibit I so that commission
shares sold by such Selling Agent will thereafter be treated as Commission
Shares.
PART I: ATTRIBUTION OF SHARES
- ------------------------------
Shares of each Fund, which are outstanding from time to time, shall be
attributed to the Initial Purchaser, the Revolving Purchaser and the Seller in
accordance with the following rules;
(1) Commission Shares:
-----------------
(a) Commission Shares attributed to the Initial Purchaser shall be
Commission Shares related to Portfolio Assets acquired by the Initial Purchaser,
the Date of Original Issuance of which occurred on or after the Inception Date
of such Fund and on or prior to the Initial Purchase Cut-Off Date.
(b) Commission Shares attributed to the Revolving Purchaser shall be
Commission Shares related to Portfolio Assets acquired by the Revolving
Purchaser, the Date of Original Issuance of which occurs after the Initial
Purchase Cut-Off Date and on or prior to the last Purchase Cut-Off Date.
(c) Commission Shares attributable to the Seller shall be Commission
Shares, the Date of Original Issuance of which occurs after the last Purchase
Cut-Off Date.
(d) A Commission Share of a particular Fund (the "Issuing Fund")
------------
issued in consideration of the investment of proceeds of the redemption of a
Commission Share of another Fund (the "Redeeming Fund") in connection with a
--------------
Permitted Free Exchange, is deemed to have a Date of Original Issuance identical
to the Date of Original Issuance of the Commission Share of the Redeeming Fund
and any such Commission Share will be attributed to the Initial Purchaser, the
Revolving Purchaser or the Seller based upon such Date of Original Issuance in
accordance with rules (a), (b) and (c) above.
(e) A Commission Share redeemed other than in connection with a
Permitted Free Exchange or converted to a Class A share is attributable to the
Initial Purchaser, Revolving Purchaser or Seller based upon the Date of Original
Issuance in accordance with rule (a), (b), (c) and (d) above.
2
(2) Omnibus Shares:
--------------
Omnibus Shares of a Fund outstanding on any date shall be attributed
to the Initial Purchaser, Revolving Purchaser or Seller, as the case may be, in
the same proportion that outstanding Commission Shares of such Fund are
attributed to it on such date.
(3) Free Shares:
-----------
Free Shares of a Fund outstanding on any date shall be attributed to
the Initial Purchaser, Revolving Purchaser or Seller, as the case may be, in the
same proportion that the Commission Shares of such Fund outstanding on such date
are attributed to it on such date.
PART II: ALLOCATION OF CONTINGENT DEFERRED SALES CHARGES ("CDSCS")
- -------------------------------------------------------------------
(1) CDSCs Related to the Redemption of Commission Shares:
----------------------------------------------------
CDSCs in respect of the redemption of Commission Shares shall be
allocated to the Initial Purchaser, Revolving Purchaser or Seller depending upon
whether the related redeemed Commission Share is attributable to the Initial
Purchaser, Revolving Purchaser or Seller, as the case may be, in accordance with
Part I above.
(2) CDSCs Related to the Redemption of Omnibus Shares:
-------------------------------------------------
Aggregate CDSCs in respect of the redemption of Omnibus Shares of all
Funds during any period shall be allocated to the Initial Purchaser, Revolving
Purchaser or Seller in the same proportion that aggregate CDSCs related to
Commission Shares of all Funds during such period were allocated to each
thereof.
PART III: ALLOCATION OF ASSET BASED SALES CHARGES
- --------------------------------------------------
Assuming that the Asset Based Sales Charge remains constant over time
and among Funds so that Part VI hereof does not become operative:
(1) The portion of the aggregate Asset Based Sales Charges accrued in
respect of all Shares of all Funds during any calendar month allocable to the
Initial Purchaser, Revolving Purchaser or Seller is determined by multiplying
the total of such Asset Based Sales Charges by the following fraction:
(A + C)/2
_________
(B + D)/2
where:
3
A = The aggregate Net Asset Value of all Shares of all Funds attributed to
the Initial Purchaser, the Revolving Purchaser or the Seller, as the
case may be, and outstanding at the beginning of such calendar month
B = The aggregate Net Asset Value of all Shares of all Funds at the
beginning of such calendar month
C = The aggregate Net Asset Value of all Shares of all Funds attributed to
the Initial Purchaser, the Revolving Purchaser or the Seller, as the
case may be, and outstanding at the end of such calendar month
D = The aggregate Net Asset Value of all Shares of all Funds at the end of
such calendar month
(2) If the Program Administrator reasonably determines that the
Transfer Agent is able to produce automated monthly reports which allocate the
average Net Asset Value of the Commission Shares (or all Shares if available) of
all Funds among the Initial Purchaser, Revolving Purchaser and Seller in a
manner consistent with the methodology detailed in Part I and Part III(1) above,
the portion of the Asset Based Sales Charges accrued in respect of all Shares of
all Funds during a particular calendar month will be allocated to the Initial
Purchaser, the Revolving Purchaser or the Seller by multiplying the total of
such Asset Based Sales Charges by the following fraction:
(A)/(B)
where:
A = Average Net Asset Value of all the Commission Shares (or all Shares if
available) of all Funds for such calendar month attributed to the
Initial Purchaser, the Revolving Purchaser or the Seller, as the case
may be
B = Total average Net Asset Value of all Commission Shares (or all Shares
if available) of all Funds for such calendar month
PART IV: ALLOCATION OF SHAREHOLDER SERVICING FEES
- --------------------------------------------------
The portion of the Shareholder Servicing Fees accrued in respect of
all Shares of all of the Funds during a particular calendar month and allocable
to the Initial Purchaser and the Revolving Purchaser is determined by the
following formula:
(A - (E x ((C + D)/2))) x B
where:
A = Shareholder Servicing Fees accrued in respect of all Shares of all of
the Funds during a particular calendar month
B = fraction referred to in Part III (1) for such calendar month, in
respect of the Initial Purchaser or the Revolving Purchaser, as the
case may be
4
C = 4% Commission Assets of all Funds as of the beginning of such calendar
month
D = 4% Commission Assets of all Funds as of the end of such calendar month
E = .25% times a fraction the numerator of which is the number of days in
such calendar month and the denominator of which is 365
The remainder of such Shareholder Servicing Fees accrued in respect of
a Fund during a particular calendar month and not allocated to the Initial
Purchaser or Revolving Purchaser shall be allocated to the Seller.
PART V: ALLOCATION OF OTHER AMOUNTS (IF ANY)
- ---------------------------------------------
The allocation of amounts such as expense and indemnity payments shall
be accomplished in the following manner:
1. The Program Administrator will determine whether any such amounts
are intended to (i) be distributed in a manner similar to Program Collections
("Receivable Reimbursement Payment"), or (ii) reimburse a particular Person for
--------------------------------
specific losses, cost, damages or other expenses other than losses for which a
Receivable Reimbursement Payment is being made ("Expense Payments").
----------------
2. Receivable Reimbursement Payments shall be allocated as nearly as
possible in the same manner as the Collections in respect of the Shares to which
they related would be allocated as provided in Parts I through IV of this
Schedule II; provided, that, if any such payment by a particular payor is not
-------- ----
sufficient to replace the full amount required to be replaced by such payment,
such payment shall be allocated to each person to which the amount replaced
would have been allocated as nearly as practicable in the proportion that the
full amount of indemnification required to be made to such indemnitee from such
payor bears to the total amount of indemnification required to be made to all
such indemnitees from such payor.
PART VI: ADJUSTMENT OF THE INITIAL PURCHASER'S
- -----------------------------------------------
PORTION, THE REVOLVING PURCHASER'S PORTION
- ------------------------------------------
AND THE SELLER'S PORTION
- ------------------------
The Parties to the Program Documents recognize that, if the terms of
any Distributor's Contract, any Principal Shareholder Servicer's Agreement, any
Distribution Plan, any Prospectus, the Conduct Rules or any other Applicable Law
change disproportionately reduces, in a manner inconsistent with the intent of
the Program Documents, the amount of the Initial Purchaser's Portion, the
Revolving Purchaser's Portion or the Seller's Portion that would have been
payable on any Monthly Settlement Date had no such change occurred, the
definitions of the Initial Purchaser's Portion, the Revolving Purchaser's
Portion and/or the Seller's Portion in respect of the Shares relating to such
Fund shall be adjusted by agreement among the Initial Purchaser, the Revolving
Purchaser, the Seller, the Program Administrator and the Funding and Collection
Agent; provided, however, if the Initial Purchaser, the Revolving Purchaser, the
-------- -------
Seller, the Program Administrator and the Funding and Collection Agent cannot
agree within thirty (30) days after the date of any such change in Applicable
Laws or in any Distributor's Contract, any Principal Shareholder Servicer's
Agreement, Distribution Plan, Prospectus or the Conduct Rules, the Parties
5
shall submit the question to arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association and the decision
reached by the arbitrator shall be final and binding on the Parties hereto. The
Funding and Collection Agent shall be notified promptly in writing by the
Program Administrator of any adjustment in the Initial Purchaser's Portion, the
Revolving Purchaser's Portion or the Seller's Portion or of any arbitration
award pursuant to this Part VI.
6
EXHIBIT I TO
PROGRAM ALLOCATION PROCEDURES
SELLING AGENTS CURRENTLY OFFERING OMNIBUS SHARES
1. Merrill Lynch, Pierce, Fenner & Smith Incorporated
2. Core-Link
7
EXHIBIT II TO
PROGRAM ALLOCATION PROCEDURES
SELLING AGENTS CURRENTLY SELLING SHARES
UNDER A 4% COMMISSION STRUCTURE
8
Schedule III
To
Master Agreement
BANKRUPTCY REMOTE COVENANTS
---------------------------
The Seller shall, and the Parent shall cause the Seller to:
1. maintain books and records separate from any other Person;
2. maintain its accounts separate from any other Person;
3. not commingle assets with those of any affiliate;
4. conduct its own business in its own name;
5. prepare and maintain separate financial statements;
6. pay its own liabilities out of its own funds;
7. observe all corporate formalities;
8. maintain an arm's-length relationship with its affiliates;
9. not guarantee or become obligated for the debts of any other
entity or hold out its credit as being available to satisfy the obligations of
others;
10. not acquire obligations or securities of its shareholders;
11. allocate fairly and reasonably any overhead for shared office
space, if any;
12. use separate stationery, invoices, and checks;
13. not pledge its assets for the benefit of any other Person or make
any loans or advances to any Person;
14. hold itself out as a separate entity;
15. correct any known misunderstanding regarding its separate
identity;
16. maintain adequate capital in light of its contemplated business
operations, including an initial capital contribution by FII Holdings Inc. of
$25,000;
17. ensure that its certificate of incorporation shall: (a) limit its
corporate purposes to the performance of its obligations under the Program
Documents and activities incidental thereto, including the ownership of the
beneficial interest in the Initial Purchaser; (b) prohibit it from incurring
Debt, other than in connection with the activities described in (a); (c) require
that it
have at least one duly appointed Independent Director; (d) require the
unanimous consent of its directors to: (i) institute bankruptcy or insolvency
proceedings, (ii) dissolve, liquidate, consolidate, merge, or sell all, or
substantially all, of its assets, (iii) engage in any activity other than that
specified in (a) above or (iv) amend its certificate of incorporation; and (e)
require that the directors consider the interests of the Purchasers and
creditors in connection with all corporate actions;
18. not permit the Distributor or the Transferor to have any equity
or other ownership interest, direct or indirect, in it; and
19. not conduct its daily business such that it requires management by
any other Federated Entity or other Person.
(ii)
Schedule IV
To
Master Agreement
CONTINGENT DEFERRED SALES CHARGE SCHEDULE
-----------------------------------------
Years from
Fund Shares Purchase CDSC Rate
- -------------------- ---------
0-1 5.50%
1-2 4.75
2-3 4.0
3-4 3.0
4-5 2.0
5-6 1.0
6+ 0.0
Schedule V
To
Master Agreement
SCHEDULE OF TRANSFERABLE NASD CAP
If the number of calendar months which have passed since the Date of
Original Issuance of the Share of th Redeeming Fund redeemed in connection with
a Permitted Free Exchange falls in a given range of calendar months indicated in
Column I below, the amount by which the Maximum Aggregate Sales Charge Allowable
in respect of the Issuing Fund must be increased as a result of such Free
Exchange is the percentage set forth in Column II below directly opposite such
range of calendar months in Column I of the date of redemption Net Asset Value
of the Share of the Redeeming Fund so redeemed.
I II
CALENDAR MONTHS PERCENTAGE
- --------------- ----------
0 to 12 5.90%
13 to 24 5.25%
25 to 36 4.60%
37 to 48 4.00%
49 to 60 3.40%
61 to 72 2.90%
73 to 84 2.50%
85 to 96 2.00%
97 or more 0%
Schedule X
To
Master Agreement
RULES OF CONSTRUCTION; DEFINITIONS
----------------------------------
[Distributed Separately]