Trigger Events. (a) The following events shall constitute Trigger Events hereunder; provided, however, that in the event the New York Stock Exchange closes early on any Exchange Business Day due to extraordinary circumstances (an "Early Close Exchange Business Day"), the cure periods specified in this Section 4.1(a) will be automatically extended such that on the next Exchange Business Day following the Early Close Exchange Business Day, the cure periods will continue for the amount of time lost on such Early Close Exchange Business Day due to such early close (the "Extended Cure Time") (for the avoidance of doubt, should the next Exchange Business Day following the Early Close Exchange Business Day also be an Early Close Exchange Business Day, the cure period will continue for as long as Extended Cure Time remains): (i) Any failure at any time to comply with the covenant set forth in the first sentence of Section 3.1; (ii) Any failure at any time to comply with the provisions of Section 3.2(a)(i), if such violation is not cured on the Exchange Business Day on which the Adviser becomes aware of such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days; (iii) Any failure at any time to comply with Section 3.3(c); (iv) Any failure at any time to comply with Section 3.2(a)(ii) or Section 3.3 (other than Section 3.3(c)), unless cured by the end of the Exchange Business Day following the Exchange Business Day on which such violation occurred; (v) The termination of, or failure to comply with, the Expense Limitation Agreement; (vi) Any violation of Article III (other than Sections 3.2(a)(vi) and (xi)) that is not provided for in clause (i), (ii), (iii) or (iv) above unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days; (vii) Any violation of Section 3.2(a)(vi) or (xi) above, unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation; (viii) The Fund shall fail to pay the Financial Warranty Fee when due as provided in Section 2.4 and such failure shall continue unremedied for a period of two Business Days after notice of such failure from the Warranty Provider; (ix) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and any successor adviser that agrees to be bound by the terms of this Agreement is not acceptable to the Warranty Provider in its reasonable discretion after considering the reputation of the successor adviser, its experience in managing large cap equity and fixed income portfolios, its size, its financial condition, its ability to manage the Fund Portfolio in accordance with the Registration Statement and its ability to comply with the Adviser's obligations under this Agreement and the Transaction Documents to which it is a party; provided, that if the successor adviser is the Adviser or an Affiliate of the Adviser, such successor adviser shall be deemed acceptable by the Warranty Provider; (x) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and either (i) the Adviser is no longer obligated to manage the Fund pursuant to the terms of the Investment Management Agreement and none of (A) a successor investment adviser acceptable to the Warranty Provider, (B) the Adviser or (C) an Affiliate of the Adviser has entered into an investment management agreement with the Fund or (ii) the termination of the Investment Management Agreement is not yet effective but the Board of Trustees of the Fund has indicated its intention to the Warranty Provider, or taken any further action, to appoint a successor investment adviser other than the Adviser or an Affiliate of the Adviser notwithstanding the fact that the Warranty Provider has advised the Board of Trustees that such successor investment adviser would not be acceptable to the Warranty Provider based upon the standards included in Section 4.1(a)(ix), then in either such case a Trigger Event shall be deemed to have occurred notwithstanding the fact that a successor investment adviser has not yet been appointed; (xi) The Adviser does not, in all material respects, manage the assets of the Fund in accordance with the investment objective, policies and strategies currently set forth in the Registration Statement or in accordance with the Investment Management Agreement; (xii) Any representation or warranty made by the Adviser or the Fund, in any Transaction Document or in any document or certification provided in connection with any Transaction Document, shall have been incorrect or misleading when made or when deemed made, except where such incorrect or misleading representation or warranty would not have an Adverse Effect in respect of the Adviser or Fund; (xiii) The Equity Limit for a Class of Shares is less than 0.025; (xiv) The Adviser, the Fund or the Custodian shall fail to perform any obligation, or shall breach any covenant, under this Agreement or the Transaction Documents that is not expressly provided for in clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) or (xi) above, which failure could reasonably be expected to have an Adverse Effect in respect of the Adviser or Fund and such violation, if capable of being remedied, shall continue unremedied for a period of three Business Days after the Adviser or the Custodian, as the case may be, becomes aware of the occurrence of such failure; provided, that the Adviser or the Custodian, as the case may be, shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days; or (xv) The occurrence of any of the following: (A) a Regulatory Event or Litigation Event or (B) an Act of Insolvency occurs with respect to the Adviser or the Fund. (b) Notwithstanding any other provision hereof, if an event has occurred and is continuing, which, if not cured or waived would give rise to a Trigger Event, then the Adviser may not cause the Fund to acquire any additional Eligible Equity Investments until such event is cured and shall upon becoming aware of such event immediately notify the Warranty Provider of such event, which notice shall include a description of the manner in which the Adviser intends to cure such event ("Curative Steps"), the Adviser's assessment of the likelihood of success, the time the Adviser expects to elapse before such event is cured, and such other information as the Warranty Provider may reasonably request. Upon sending such notice to the Warranty Provider, the Adviser shall immediately take the Curative Steps set forth in such notice unless and until such time as the Warranty Provider notifies the Adviser that it objects to such Curative Steps, in which case the Adviser shall immediately cease the implementation of such Curative Steps. The Warranty Provider shall only object to such Curative Steps if in the Warranty Provider's reasonable discretion, they are not consistent with this Agreement or are not likely to be an effective cure of the Potential Trigger Event within the cure period set forth in Section 4.1(a), if any. If the Adviser violates this Section 4.1(b), then a Trigger Event shall be deemed to have occurred. (c) If a Trigger Event occurs and is continuing past the cure period specified therein (if applicable), then, at the election of the Warranty Provider in its sole discretion, the Warranty Provider shall have the right to (i) direct the Adviser or the Custodian, as selected by the Warranty Provider, to invest all of the Fund's assets in accordance with Section 4.2(a) (a "Permanent Defeasance Event") or (ii) adjust the Cushion. Any such adjustment shall be permanent, unless and until further adjusted by the Warranty Provider in its sole discretion. The Warranty Provider shall notify the Adviser and the Fund of the Warranty Provider's exercise of remedies pursuant to this Section 4.1(c). (d) In the event of (i) an act or omission on the part of the Adviser which constitutes negligence, recklessness, bad faith or willful misconduct, including by way of example only and not intended as an exhaustive list, if (A) the Adviser causes the Fund to purchase additional Eligible Equity Investments in violation of Sections 3.3(d) and 4.1(b), (B) there is a violation of Section 3.2(a)(i) or (ii), or (C) the Adviser causes the Fund to purchase investments other than those permitted to be invested in the event of a Permanent Defeasance Event in violation of Sections 4.1(c)(i) and 4.2(a) (such conduct referenced in subsection (i) of this Section 4.1(d), the "Adviser Conduct"), and (ii) the existence of a PV Shortfall, the Adviser agrees to pay to the Warranty Provider an amount equal to the amount of such PV Shortfall determined as provided in this Section 4.1(d) to have been directly or indirectly attributable to such Adviser Conduct. The amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct shall be equal to the sum of the differences with respect to each Class of Shares, if negative, between (a) the actual NAV Per Share as of the date of determination and (b) the hypothetical NAV Per Share of a hypothetical portfolio comprised of the actual portfolio assets as of the date of determination adjusted to eliminate the effect of the Adviser Conduct. In making the determination of the PV Shortfall, the hypothetical portfolio will be based on the actual portfolio of assets as of the date of determination adjusted to bring the portfolio into compliance with all of the restrictions of Section 3.2 hereof, by decreasing and increasing positions in asset classes or sectors, as the case may be, on a pro rata basis. The Warranty Provider shall notify (the "Determination Notice") the Adviser in writing of its determination of such PV Shortfall directly or indirectly attributable to the Adviser Conduct. If the Adviser disagrees with the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice, then (i) the Adviser shall notify (the "Objection Notice") the Warranty Provider in writing of such disagreement within three Business Days after the delivery by the Warranty Provider of the Determination Notice and (ii) unless the Adviser and the Warranty Provider otherwise agree on the amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct, the amount thereof shall be determined by arbitration in accordance with the procedures set forth in Section 4.1(e). If the Adviser does not provide the Warranty Provider with the Objection Notice within such three Business Day period, then the Adviser shall be deemed to have agreed to the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice. Any amount payable by the Adviser under this Section 4.1(d) with respect to certain Adviser Conduct (i) shall be paid to the Warranty Provider within three Business Days of the delivery of the Determination Notice or if such PV Shortfall is determined pursuant to an arbitration proceeding, within three Business Days after such final arbitration decision; provided that should the parties otherwise agree on such PV Shortfall, such PV Shortfall shall be paid to the Warranty Provider within three Business Days of such agreement; and (ii) shall be reduced by any amounts paid by the Adviser to the Fund as a result of the same Adviser Conduct to the extent that the Total NAV is increased and the PV Shortfall is in fact decreased by such amount. In the event that the Adviser fails to pay to the Warranty Provider any amounts payable under this Section 4.1(d) within the time period specified herein, the Shortfall Amount shall be decreased on a pro rata basis by the percentage of the PV Shortfall directly or indirectly attributable to the Adviser Conduct. Notwithstanding anything contained in this Section 4.1(d) to the contrary, solely for purposes of this Section 4.1(d), the Adviser shall not be deemed to have committed Adviser Conduct and consequently shall not be liable for any payment under this Section 4.1(d) if (a) a Potential Trigger Event occurs and (b) such Potential Trigger Event is cured or waived within the cure period specified in Section 4.1(a) for the cure of such Potential Trigger Event. The payment of the PV Shortfall amount by the Adviser to the Warranty Provider pursuant to this Section 4.1(d) is in addition to, and not in lieu of, any obligations of the Adviser or Fund to indemnify the Warranty Provider under this Agreement. (e) In the event that the terms of Section 4.1(d) provide for arbitration, each of the Warranty Provider and the Adviser shall select one arbitrator within seven Business Days after the delivery by the Adviser of the Objection Notice; provided, however, that if either of such parties shall fail to select an arbitrator within such period, such arbitrator shall be appointed by the American Arbitration Association. The two arbitrators selected shall select a third arbitrator within five Business Days after each of such arbitrators have been selected or, if they shall be unable to agree on a third arbitrator within such time, such third arbitrator shall be appointed by the American Arbitration Association. Each arbitrator shall be of exemplary qualifications and stature, and no person affiliated with any party hereto shall be eligible to be an arbitrator. The arbitration shall be held in New York, New York and be governed by the Commercial Arbitration Rules of the American Arbitration Association and the decision of a majority of the arbitrators shall be final, binding and subject to judicial enforcement and with respect to the specific Adviser Conduct that is the subject of such arbitration decision, shall be the exclusive remedy of the Warranty Provider; provided, however, that, notwithstanding the foregoing, the Warranty Provider shall not be limited from seeking indemnification under Section 5.2(a)(iii) and (a)(v) hereof. Fees and expenses of the arbitration (including fees and expenses of the arbitrators) shall be shared by the parties to the arbitration equally.
Appears in 2 contracts
Sources: Financial Warranty Agreement (Merrill Lynch Principal Protected Trust), Financial Warranty Agreement (Merrill Lynch Principal Protected Trust)
Trigger Events. (a) The following events shall constitute Trigger Events hereunder; provided, however, that in the event the New York Stock Exchange closes more than two hours early or does not open on any Exchange Business Day due to extraordinary circumstances any Force Majeure Event, other than due to the effect of exchange “circuit-breaker” induced closings (an "“Early Close Exchange Business Day"”), the cure periods specified in this Section 4.1(a) will be automatically extended such that on until the next Exchange Business Day following the Early Close Exchange Business Day, the cure periods will continue for the amount of time lost on such ; provided that if three or more Early Close Exchange Business Day due Days occur consecutively, the Warranty Provider may declare an immediate end to the cure period at 9 a.m. (Eastern time) on the third such early close (the "Extended Cure Time") (for the avoidance of doubt, should the next Exchange Business Day following the Early Close Exchange Business Day also be an subsequent Early Close Exchange Business Day, the cure period will continue for as long as Extended Cure Time remains):.
(i) Any failure at any time to comply with the covenant set forth in the first sentence provisions of Section 3.1;
(ii) Any failure to comply with the provisions of Section 3.2, Section 3.3, Section 3.4(d) or 3.6;
(iii) Any failure at any time to comply with the provisions of Section 3.2(a)(i)3.4(a) unless such failure is attributable solely to a Force Majeure Event; provided, however, that if such violation failure to comply with Section 3.4(a) is not cured the result of a Force Majeure Event that causes a failure to comply for five consecutive calendar days, such failure to comply will be considered a Trigger Event notwithstanding the exception in this Section 4.1(a)(iii) for a Force Majeure Event; provided further that the Adviser shall have a cure period for its first three failures to meet the 9 p.m. reporting obligation of Section 3.4(a) as follows: the Warranty Provider shall be required to make a good faith effort to notify (by e-mail or otherwise) the Adviser of its intention to declare a Trigger Event and the Adviser shall have until 8:00 a.m. (Eastern time) on the Exchange Business Day immediately succeeding the day on which the Adviser becomes aware violation occurred to transmit the Daily Report required by Section 3.4(a). For the avoidance of such violation; provideddoubt, it is acknowledged and agreed that the failure of the Warranty Provider, due to its own act or omission, to receive information otherwise transmitted by the Adviser in accordance with Section 3.4(a), shall not be deemed considered to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(iii) Any a failure at any time to comply with Section 3.3(c3.4(a), provided that once the Adviser is advised by the Warranty Provider of its failure to receive a properly transmitted report, the Adviser shall re-transmit the information as soon as reasonably practicable;
(iv) Any failure at any time to comply with Section 3.2(a)(ii) or Section 3.3 (other than Section 3.3(c)), unless cured by the end of the Exchange Business Day following the Exchange Business Day on which such violation occurred;
(v) The termination of, or failure to comply with, the Expense Limitation Agreement;
(vi) Any violation of Article III (other than Sections 3.2(a)(vi) and (xi)) that is not provided for in clause (i), (ii), or (iii) or (iv) above unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(vii) Any violation of Section 3.2(a)(vi) or (xi) abovecould have an Adverse Effect, unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violationviolation occurred;
(viiiv) The Fund shall fail to pay the Financial Warranty Fee when due as provided in Section 2.4 and such failure shall continue unremedied for a period of two ten Business Days after following notice of such failure from by the Warranty ProviderProvider to the Fund;
(ixvi) (A) The Adviser resigns, ; (B) the Fund elects to terminate the Investment Management Agreement with the Adviser or Adviser; (C) the Fund appoints a successor adviser (including a subadviser) without the prior written consent of the Warranty Provider in its sole discretion; (D) the Investment Management Agreement terminates in accordance with its terms terms; or (E) the Adviser becomes prohibited from serving as an investment adviser to the Fund by Section 9 of the Investment Company Act; and in each of the cases of (A) through (E) above, any successor adviser (including the Adviser) that agrees to be bound by the terms of this Agreement is not acceptable to appointed by the Board of the Trust or the Shareholders, in each case without the prior written consent of the Warranty Provider in its reasonable discretion after considering discretion; provided that the reputation Warranty Provider’s failure to consent to a successor adviser shall be deemed to be reasonable if, among other possible reasons, the successor adviser (1) fails to agree to all of the successor adviser, its experience in managing large cap equity and fixed income portfolios, its size, its financial condition, its ability to manage the Fund Portfolio in accordance with the Registration Statement and its ability to comply with the Adviser's obligations under this Agreement and terms of the Transaction Documents to which it the Adviser is a party, (2) fails to meet the credit approval procedures then in place for business transactions with the Warranty Provider; provided(3) is subject to any litigation, regulatory action or other proceeding that if the successor adviser is the Adviser or an Affiliate may affect its ability to perform any of the Adviser, such successor adviser shall be deemed acceptable Transaction Documents; (4) may in any reasonable manner adversely affect the Warranty Provider’s economic bargain under this Agreement; or (5) is not reasonably believed by the Warranty ProviderProvider to be capable of managing the Fund;
(xvii) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and either (iA) the Adviser is no longer obligated to manage the Fund pursuant to the terms of the Investment Management Agreement and none of (A) a successor investment adviser acceptable to the Warranty Provider, (B) the Adviser or (C) an Affiliate of the Adviser Provider has not entered into an investment management agreement with the Fund or (iiB) the termination of the Investment Management Agreement is not yet effective but the Board of Trustees the Trust, on behalf of the Fund Fund, has indicated its intention to the Warranty Provider, or taken any further action, to appoint a successor investment adviser other than the Adviser or an Affiliate of the Adviser notwithstanding the fact that the Warranty Provider has advised the Board of Trustees that such successor investment adviser would not be acceptable to the Warranty Provider based upon the standards included Provider, in Section 4.1(a)(ix)its sole discretion, then in either such case a Trigger Event shall be deemed to have occurred notwithstanding the fact that a successor investment adviser has not yet been appointed;
(xiviii) The Subject to the foregoing provisions of this Section 4.1(a), the Adviser does not, nototherwise manage in all material respects, manage respects the assets of the Fund in accordance with the investment objective, policies and strategies currently set forth in the Registration Statement or and/or in accordance with the Investment Management Agreement;
(xiiix) Any representation or warranty made by the Adviser Adviser, the Trust or the Fund, Trust on behalf of the Fund in any Transaction Document or in any document or certification provided in connection with any Transaction Document, shall have been incorrect or misleading when made or when deemed made, except where such incorrect or misleading representation or warranty would could not reasonably be expected to have an Adverse Effect in respect of the Adviser or FundEffect;
(xiii) The Equity Limit for a Class of Shares is less than 0.025;
(xivx) The Adviser, the Trust, the Fund or the Custodian shall fail to perform any obligation, or shall breach any covenant, under this Agreement or the Transaction Documents that is not expressly provided for in clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) or (xiix) above, which failure could reasonably be expected to have an Adverse Effect in respect of the Adviser or Fund and Effectand such violation, if capable of being remedied, shall continue unremedied for a period of three Business Days after the Adviser or the Custodian, as the case may be, becomes aware of the occurrence of such breach or failure; provided, that the Adviser or the Custodian, as the case may be, shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days; or;
(xvxi) The occurrence of any of the following: (A) a Regulatory Event or Litigation Event or (other than a Litigation Event arising out of a claim under this Agreement between the Adviser and/or the Trust on behalf of the Fund on one side and the Warranty Provider on the other side), (B) an Act of Insolvency occurs with respect to the Adviser or the Fund; (C) the Trust, with respect to the Fund, ceases to be (1) duly registered with the Commission as an open-end management investment company under the Investment Company Act, (2) an investment company for purposes of the Commodity Exchange Act, or (3) a regulated investment company eligible to receive pass through tax treatment under Subchapter M of the Code; or (D) the adoption by the Fund of a new share class without the express written consent of the Warranty Provider.
(xii) Any change in circumstances occurs with respect to an Underlying Fund or Eligible Money Market Fund, that could have an Adverse Effect on the Fund, the Adviser or the Warranty Provider, and the Fund fails to liquidate all of its shares of the Underlying Fund or Eligible Money Market Fund, as applicable, within 2 Exchange Business Days; provided thata decrease in net asset value occurring due to market fluctuations in the case of an Underlying Fund shall not be considered to be such an Adverse Effect; and further provided that with respect to an Eligible Money Market Fund and for purposes of this subsection (xii) a material adverse effect shall include having a net asset value other than $1.00 per share;
(xiii) If the Adviser at any time fails to have at least $_______ of assets under management; provided that if the Adviser’s assets under management fall under $_______, the Adviser shall have ___ Business Days to arrange for an entity under common control with the Adviser to unconditionally guarantee the Adviser’s obligations under this Agreement, as such guarantee may be approved in writing by the Warranty Provider in its sole discretion; or
(xiv) (A) Any failure at any time of any Eligible Money Market Fund in which the Fund is then invested to be managed pursuant to the requirements of Rule 2a-7 under the Investment Company Act; unless such failure is remedied within two Exchange Business Days; (B) Any failure at any time of any Eligible Money Market Fund in which the Fund is then invested that is not registered under the Investment Company Act to be managed pursuant to the requirements of Rule 12d1-1(b) under the Investment Company Act; unless such failure is remedied within two Exchange Business Days.
(b) Notwithstanding any other provision hereof, if an in the event has occurred and is continuing, which, if not cured or waived would give rise to of a Potential Trigger Event, then the Adviser may shall not cause permit the Fund to acquire any additional Eligible Equity Investments until such event Potential Trigger Event is cured and shall upon becoming aware of such event Potential Trigger Event immediately notify the Warranty Provider of such eventPotential Trigger Event, which notice shall include a description of the manner in which the Adviser intends to cure such event Potential Trigger Event ("“Curative Steps"”), the Adviser's ’s assessment of the likelihood of success, the time the Adviser expects to elapse before such event Potential Trigger Event is cured, and such other information as the Warranty Provider may reasonably request. Upon sending such notice to the Warranty Provider, the Adviser shall immediately take the Curative Steps set forth in such notice unless and until such time as the Warranty Provider notifies the Adviser that it objects to such Curative Steps, in which case the Adviser shall immediately cease the implementation of such Curative Steps. The Warranty Provider shall only object to such Curative Steps if if, in the Warranty Provider's ’s reasonable discretion, they are not consistent with this Agreement or are not likely to be an effective cure of the Potential Trigger Event within the cure period set forth in Section 4.1(a), if any. If the Adviser violates this Section 4.1(b), then a Trigger Event shall be deemed to have occurred.
(c) If a Trigger Event occurs and is continuing past the cure period specified therein (if applicable)occurs, then, at the election of the Warranty Provider in its sole discretion, the Warranty Provider shall have the right at any time after such Trigger Event to either (i) direct (A) instruct the Adviser or the Custodian, as selected by the Warranty Provider, to invest all of the Fund's ’s assets in accordance with Section 4.2(a) for the remainder of the Warranty Period or (B) to deliver the Irrevocable Instructions to the Custodian to invest all of the Fund’s assets in accordance with Section 4.2(a) for the remainder of the Warranty Period (in each case, a "Permanent “Trigger Initiated Defeasance Event"”) or (ii) adjust the CushionMultiple. Any such adjustment to the Multiple shall be permanent, unless and until further adjusted by the Warranty Provider in its sole discretion. For the avoidance of doubt, the parties hereto agree that (i) the Warranty Provider may at its election, in its sole discretion, exercise the remedy provided in Section 4.1(c)(i)(B) after it has exercised the remedy provided in Section 4.1(c)(i)(A) and (ii) if the Warranty Provider exercises its rights to adjust the Multiple, the Warranty Provider shall not be precluded subsequent thereto from exercising its rights under Sections 4.1(c)(i)(A) and/or 4.1(c)(i)(B). The Warranty Provider shall notify the Adviser and the Fund of the Warranty Provider's ’s decision to exercise of the remedies pursuant to this Section 4.1(c) prior to such exercise. The Adviser shall invest all of the Fund’s assets in accordance with Section 4.2(a) within one Exchange Business Day following its receipt of a written instruction by the Warranty Provider under Section 4.1(c)(i)(A).
(d) In the event of (i) an act or omission on the part of the Adviser with respect to the Trust or the Fund which constitutes a breach of this Agreement, negligence, recklessness, bad faith faith, willful misconduct or willful misconductfraud, including by way of example only and not intended as an exhaustive list, if (A) the Adviser causes fails to comply with the Fund Portfolio Requirements prior to purchase additional Eligible Equity Investments in violation of Sections 3.3(d) and 4.1(b)a Trigger Initiated Defeasance Event or Market Initiated Defeasance Event, (B) there is a any violation of reporting in accordance with Section 3.2(a)(i3.4(a), including material inaccuracies or late transmission of information, (C) the Adviser fails to deliver an amendment to Schedule 1 to the Irrevocable Instructions or (ii)fails to amend such Schedule 1 in accordance with the Bond Ladder pursuant to Section 4.2, or (CD) the Adviser causes the Fund to purchase investments other than those permitted to be invested in hereunder after the event occurrence of a Permanent Trigger Initiated Defeasance Event or a Market Initiated Defeasance Event resulting in a violation of Sections 4.1(c)(iSection 4.1(c) and or Section 4.2(a) (such conduct referenced in subsection (i) of this Section 4.1(d), the "“Adviser Conduct"), ”) and (ii) the existence of a PV Floor Shortfall, the Adviser agrees to pay to the Warranty Provider an amount equal to the amount of such PV Floor Shortfall determined as provided in this Section 4.1(d) to have been directly or indirectly attributable to such Adviser Conduct. The amount of such PV Floor Shortfall directly or indirectly attributable to the Adviser Conduct shall be equal to the sum of the differences with respect to each Class of Shares, if negative, between (a) the actual NAV Per Share as of the date of determination and (b) the hypothetical NAV Per Share of a hypothetical portfolio comprised of the actual portfolio assets as of the date of determination adjusted to eliminate the effect of the Adviser Conduct to the extent necessary to eliminate any Floor Shortfall directly or indirectly attributable to such Adviser Conduct. In making the determination of the PV Floor Shortfall, the hypothetical portfolio will be based on the actual portfolio of assets as of the date of determination adjusted to bring the portfolio into compliance with all of the restrictions of Section 3.2 hereof, by decreasing and increasing positions in asset classes or sectorsclasses, as the case may be, on a pro rata basis. In addition, if all of the Fund’s assets are required to be invested in a Defeasance Portfolio pursuant to Sections 4.1(c)(i) and 4.2 and the Fund’s assets are not so invested on the Exchange Business Day immediately following the Defeasance Date and for the remainder of the Warranty Period, then if (and only if) a Floor Shortfall or an additional Floor Shortfall (collectively “Additional Floor Shortfall”) arises due to the Fund’s assets not being so invested within such period and/or for the remainder of the Warranty Period, then the Adviser agrees to pay to the Warranty Provider such Additional Floor Shortfall (if any). The Fund’s assets shall be deemed to be invested in the Defeasance Portfolio if at the time of determination the Fund has executed orders to sell all Eligible Equity Investments and Ineligible Investments, if any, and subsequent thereto has executed orders to invest all of the proceeds thereof in the Defeasance Portfolio. The Warranty Provider shall notify (the "“Determination Notice"”) the Adviser in writing of its determination of such PV that Adviser Conduct has occurred and any Floor Shortfall directly or indirectly attributable to the such Adviser ConductConduct and any Additional Floor Shortfall. If the Adviser disagrees with the Warranty Provider's ’s determination that there has been Adviser Conduct and/or the amount of the PV Floor Shortfall directly or indirectly attributable to the such Adviser Conduct and/or the amount of the Additional Floor Shortfall contained in the Determination Notice, then (i) the Adviser shall notify (the "“Objection Notice"”) the Warranty Provider in writing of such disagreement within three Business Days after the delivery by the Warranty Provider of the Determination Notice and (ii) unless the Adviser and the Warranty Provider otherwise agree on the amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct, the amount thereof shall be determined by arbitration in accordance with the procedures set forth in Section 4.1(e). If the Adviser does not provide the Warranty Provider with the Objection Notice within such three Business Day period, then the Adviser shall be deemed to have agreed to the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice. Any amount payable by the Adviser under this Section 4.1(d) with respect to certain Adviser Conduct (i) shall be paid to the Warranty Provider within three Business Days of the delivery of the Determination Notice or if such PV Shortfall is determined pursuant to an arbitration proceeding, within three Business Days after such final arbitration decision; provided that should the parties otherwise agree on such PV Shortfall, such PV Shortfall shall be paid to the Warranty Provider within three Business Days of such agreement; and (ii) shall be reduced by any amounts paid by the Adviser to the Fund as a result of the same Adviser Conduct to the extent that the Total NAV is increased and the PV Shortfall is in fact decreased by such amount. In the event that the Adviser fails to pay to the Warranty Provider any amounts payable under this Section 4.1(d) within the time period specified herein, the Shortfall Amount shall be decreased on a pro rata basis by the percentage of the PV Shortfall directly or indirectly attributable to the Adviser Conduct. Notwithstanding anything contained in this Section 4.1(d) to the contrary, solely for purposes of this Section 4.1(d), the Adviser shall not be deemed to have committed Adviser Conduct and consequently shall not be liable for any payment under this Section 4.1(d) if (a) a Potential Trigger Event occurs and (b) such Potential Trigger Event is cured or waived within the cure period specified in Section 4.1(a) for the cure of such Potential Trigger Event. The payment of the PV Shortfall amount by the Adviser to the Warranty Provider pursuant to this Section 4.1(d) is in addition to, and not in lieu of, any obligations of the Adviser or Fund to indemnify the Warranty Provider under this Agreement.
(e) In the event that the terms of Section 4.1(d) provide for arbitration, each of the Warranty Provider and the Adviser shall select one arbitrator within seven Business Days after the delivery by the Adviser of the Objection Notice; provided, however, that if either of such parties shall fail to select an arbitrator within such period, such arbitrator shall be appointed by the American Arbitration Association. The two arbitrators selected shall select a third arbitrator within five Business Days after each of such arbitrators have been selected or, if they shall be unable to agree on a third arbitrator within such time, such third arbitrator shall be appointed by the American Arbitration Association. Each arbitrator shall be of exemplary qualifications and stature, and no person affiliated with any party hereto shall be eligible to be an arbitrator. The arbitration shall be held in New York, New York and be governed by the Commercial Arbitration Rules of the American Arbitration Association and the decision of a majority of the arbitrators shall be final, binding and subject to judicial enforcement and with respect to the specific Adviser Conduct that is the subject of such arbitration decision, shall be the exclusive remedy of the Warranty Provider; provided, however, that, notwithstanding the foregoing, the Warranty Provider shall not be limited from seeking indemnification under Section 5.2(a)(iii) and (a)(v) hereof. Fees and expenses of the arbitration (including fees and expenses of the arbitrators) shall be shared by the parties to the arbitration equally.Warrant
Appears in 2 contracts
Sources: Financial Warranty Agreement (DWS Target Fund), Financial Warranty Agreement (DWS Target Fund)
Trigger Events. (a) The following events shall constitute Trigger Events hereunder; provided, however, that in the event the New York Stock Exchange closes more than two hours early or does not open on any Exchange Business Day due to extraordinary circumstances any Force Majeure Event, other than due to the effect of exchange “circuit-breaker” induced closings (an "“Early Close Exchange Business Day"”), the cure periods specified in this Section 4.1(a) will be automatically extended such that on until the next Exchange Business Day following the Early Close Exchange Business Day, the cure periods will continue for the amount of time lost on such ; provided that if three or more Early Close Exchange Business Day due Days occur consecutively, the Warranty Provider may declare an immediate end to the cure period at 9 am New York time on the third such early close (the "Extended Cure Time") (for the avoidance of doubt, should the next Exchange Business Day following the Early Close Exchange Business Day also be an subsequent Early Close Exchange Business Day, the cure period will continue for as long as Extended Cure Time remains):.
(i) Any failure at any time to comply with the covenant set forth in the first sentence provisions of Section 3.1;
(ii) Any failure to comply with the provisions of Section 3.2, Section 3.3, Section 3.4(d) or 3.6;
(iii) Any failure at any time to comply with the provisions of Section 3.2(a)(i)3.4(a) unless such failure is attributable solely to a Force Majeure Event; provided, however, that if such violation failure to comply with Section 3.4(a) is not cured the result of a Force Majeure Event that causes a failure to comply for five consecutive calendar days, such failure to comply will be considered a Trigger Event notwithstanding the exception in this Section 4.1(a)(iii) for a Force Majeure Event;provided further that the Adviser shall have a cure period for its first three failures to meet the 9 p.m. reporting obligation of Section 3.4(a) as follows: the Warranty Provider shall be required to make a good faith effort to notify (by e-mail or otherwise) the Adviser of its intention to declare a Trigger Event and the Adviser shall have until 8 a.m. on the Exchange Business Day immediately succeeding the day on which the Adviser becomes aware violation occurred to transmit the Daily Report required by Section 3.4(a). For the avoidance of such violation; provideddoubt, it is acknowledged and agreed that the failure of the Warranty Provider, due to its own act or omission, to receive information otherwise transmitted by the Adviser in accordance with Section 3.4(a), shall not be deemed considered to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(iii) Any a failure at any time to comply with Section 3.3(c3.4(a);, provided that once the Adviser is advised by the Warranty Provider of its failure to receive a properly transmitted report, the Adviser shall re-transmit the information as soon as reasonably practicable.
(iv) Any failure at any time to comply with Section 3.2(a)(ii) or Section 3.3 (other than Section 3.3(c)), unless cured by the end of the Exchange Business Day following the Exchange Business Day on which such violation occurred;
(v) The termination of, or failure to comply with, the Expense Limitation Agreement;
(vi) Any violation of Article III (other than Sections 3.2(a)(vi) and (xi)) that is not provided for in clause (i), (ii), or (iii) or (iv) above unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(vii) Any violation of Section 3.2(a)(vi) or (xi) abovecould have an Adverse Effect, unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violationviolation occurred;
(viiiv) The Fund shall fail to pay the Financial Warranty Fee when due as provided in Section 2.4 and such failure shall continue unremedied for a period of two ten Business Days after following notice of such failure from by the Warranty ProviderProvider to the Fund;
(ixvi) (A) The Adviser resigns, ; (B) the Fund elects to terminate the Investment Management Agreement with the Adviser or Adviser; (C) the Fund appoints a successor adviser (including a subadviser) without the prior written consent of the Warranty Provider in its sole discretion; (D) the Investment Management Agreement terminates in accordance with its terms terms; or (E) the Adviser becomes prohibited from serving as an investment adviser to the Fund by Section 9 of the Investment Company Act; and in each of the cases of (A) through (E) above, any successor adviser (including the Adviser) that agrees to be bound by the terms of this Agreement is not acceptable to appointed by the Board of the Trust or the Shareholders, in each case without the prior written consent of the Warranty Provider in its reasonable discretion after considering discretion; provided that the reputation Warranty Provider’s failure to consent to a successor adviser shall be deemed to be reasonable if, among other possible reasons, the successor adviser (1) fails to agree to all of the successor adviser, its experience in managing large cap equity and fixed income portfolios, its size, its financial condition, its ability to manage the Fund Portfolio in accordance with the Registration Statement and its ability to comply with the Adviser's obligations under this Agreement and terms of the Transaction Documents to which it the Adviser is a party, (2) fails to meet the credit approval procedures then in place for business transactions with the Warranty Provider; provided(3) is subject to any litigation, regulatory action or other proceeding that if the successor adviser is the Adviser or an Affiliate may affect its ability to perform any of the Adviser, such successor adviser shall be deemed acceptable Transaction Documents; (4) may in any reasonable manner adversely affect the Warranty Provider’s economic bargain under this Agreement; or (5) is not reasonably believed by the Warranty ProviderProvider to be capable of managing the Fund;
(xvii) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and either (iA) the Adviser is no longer obligated to manage the Fund pursuant to the terms of the Investment Management Agreement and none of (A) a successor investment adviser acceptable to the Warranty Provider, (B) the Adviser or (C) an Affiliate of the Adviser Provider has not entered into an investment management agreement with the Fund or (iiB) the termination of the Investment Management Agreement is not yet effective but the Board of Trustees the Trust, on behalf of the Fund Fund, has indicated its intention to the Warranty Provider, or taken any further action, to appoint a successor investment adviser other than the Adviser or an Affiliate of the Adviser notwithstanding the fact that the Warranty Provider has advised the Board of Trustees that such successor investment adviser would not be acceptable to the Warranty Provider based upon the standards included Provider, in Section 4.1(a)(ix)its sole discretion, then in either such case a Trigger Event shall be deemed to have occurred notwithstanding the fact that a successor investment adviser has not yet been appointed;
(xiviii) The Subject to the foregoing provisions of this Section 4.1(a), the Adviser does not, nototherwise manage in all material respects, manage respects the assets of the Fund in accordance with the investment objective, policies and strategies currently set forth in the Registration Statement or and/or in accordance with the Investment Management Agreement;
(xiiix) Any representation or warranty made by the Adviser Adviser, the Trust or the Fund, Trust on behalf of the Fund in any Transaction Document or in any document or certification provided in connection with any Transaction Document, shall have been incorrect or misleading when made or when deemed made, except where such incorrect or misleading representation or warranty would could not reasonably be expected to have an Adverse Effect in respect of the Adviser or FundEffect;
(xiii) The Equity Limit for a Class of Shares is less than 0.025;
(xivx) The Adviser, the Trust, the Fund or the Custodian shall fail to perform any obligation, or shall breach any covenant, under this Agreement or the Transaction Documents that is not expressly provided for in clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) or (xiix) above, which failure could reasonably be expected to have an Adverse Effect in respect of the Adviser or Fund and Effectand such violation, if capable of being remedied, shall continue unremedied for a period of three Business Days after the Adviser or the Custodian, as the case may be, becomes aware of the occurrence of such breach or failure; provided, that the Adviser or the Custodian, as the case may be, shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days; or;
(xvxi) The occurrence of any of the following: (A) a Regulatory Event or Litigation Event or (other than a Litigation Event arising out of a claim under this Agreement between the Adviser and/or the Trust on behalf of the Fund on one side and the Warranty Provider on the other side), (B) an Act of Insolvency occurs with respect to the Adviser or the Fund; (C) the Trust, with respect to the Fund, ceases to be (1) duly registered with the Commission as an open-end management investment company under the Investment Company Act, (2) an investment company for purposes of the Commodity Exchange Act, or (3) a regulated investment company eligible to receive pass through tax treatment under Subchapter M of the Code; or (D) the adoption by the Fund of a new share class without the express written consent of the Warranty Provider.
(xii) Any change in circumstances occurs with respect to an Underlying Fund or Eligible Money Market Fund, that could have an Adverse Effect on the Fund, the Adviser or the Warranty Provider, and the Fund fails to liquidate all of its shares of the Underlying Fund or Eligible Money Market Fund, as applicable, within 2 Exchange Business Days; provided thata decrease in net asset value occurring due to market fluctuations in the case of an Underlying Fund shall not be considered to be such an Adverse Effect; and further provided that with respect to an Eligible Money Market Fund and for purposes of this subsection (xii) a material adverse effect shall include having a net asset value other than $1.00 per share;
(xiii) If the Adviser at any time fails to have at least $__ billion of assets under management; provided that if the Adviser’s assets under management fall under $__ billion, the Adviser shall have 30 Business Days to arrange for an entity under common control with the Adviser to unconditionally guarantee the Adviser’s obligations under this Agreement, as such guarantee may be approved in writing by the Warranty Provider in its sole discretion; or
(xiv) (A) Any failure at any time of any Eligible Money Market Fund in which the Fund is then invested to be managed pursuant to the requirements of Rule 2a-7 under the Investment Company Act; unless such failure is remedied within two Exchange Business Days; (B) Any failure at any time of any Eligible Money Market Fund in which the Fund is then invested that is not registered under the Investment Company Act to be managed pursuant to the requirements of Rule 12d1-1(b) under the Investment Company Act; unless such failure is remedied within two Exchange Business Days.
(b) Notwithstanding any other provision hereof, if an in the event has occurred and is continuing, which, if not cured or waived would give rise to of a Potential Trigger Event, then the Adviser may shall not cause permit the Fund to acquire any additional Eligible Equity Investments until such event Potential Trigger Event is cured and shall upon becoming aware of such event Potential Trigger Event immediately notify the Warranty Provider of such eventPotential Trigger Event, which notice shall include a description of the manner in which the Adviser intends to cure such event Potential Trigger Event ("“Curative Steps"”), the Adviser's ’s assessment of the likelihood of success, the time the Adviser expects to elapse before such event Potential Trigger Event is cured, and such other information as the Warranty Provider may reasonably request. Upon sending such notice to the Warranty Provider, the Adviser shall immediately take the Curative Steps set forth in such notice unless and until such time as the Warranty Provider notifies the Adviser that it objects to such Curative Steps, in which case the Adviser shall immediately cease the implementation of such Curative Steps. The Warranty Provider shall only object to such Curative Steps if if, in the Warranty Provider's ’s reasonable discretion, they are not consistent with this Agreement or are not likely to be an effective cure of the Potential Trigger Event within the cure period set forth in Section 4.1(a), if any. If the Adviser violates this Section 4.1(b), then a Trigger Event shall be deemed to have occurred.
(c) If a Trigger Event occurs and is continuing past the cure period specified therein (if applicable)occurs, then, at the election of the Warranty Provider in its sole discretion, the Warranty Provider shall have the right at any time after such Trigger Event to either (i) direct (A) instruct the Adviser or the Custodian, as selected by the Warranty Provider, to invest all of the Fund's ’s assets in accordance with Section 4.2(a) for the remainder of the Warranty Period or (B) to deliver the Irrevocable Instructions to the Custodian to invest all of the Fund’s assets in accordance with Section 4.2(a) for the remainder of the Warranty Period (in each case, a "Permanent “Trigger Initiated Defeasance Event"”) or (ii) adjust the CushionMultiple. Any such adjustment to the Multiple shall be permanent, unless and until further adjusted by the Warranty Provider in its sole discretion. For the avoidance of doubt, the parties hereto agree that (i) the Warranty Provider may at its election, in its sole discretion, exercise the remedy provided in Section 4.1(c)(i)(B) after it has exercised the remedy provided in Section 4.1(c)(i)(A) and (ii) if the Warranty Provider exercises its rights to adjust the Multiple, the Warranty Provider shall not be precluded subsequent thereto from exercising its rights under Sections 4.1(c)(i)(A) and/or 4.1(c)(i)(B). The Warranty Provider shall notify the Adviser and the Fund of the Warranty Provider's ’s decision to exercise of the remedies pursuant to this Section 4.1(c) prior to such exercise. The Adviser shall invest all of the Fund’s assets in accordance with Section 4.2(a) within one Exchange Business Day following its receipt of a written instruction by the Warranty Provider under Section 4.1(c)(i)(A).
(d) In the event of (i) an act or omission on the part of the Adviser with respect to the Trust or the Fund which constitutes a breach of this Agreement, negligence, recklessness, bad faith faith, willful misconduct or willful misconductfraud, including by way of example only and not intended as an exhaustive list, if (A) the Adviser causes fails to comply with the Fund Portfolio Requirements prior to purchase additional Eligible Equity Investments in violation of Sections 3.3(d) and 4.1(b)a Trigger Initiated Defeasance Event or Market Initiated Defeasance Event, (B) there is a any violation of reporting in accordance with Section 3.2(a)(i) 3.4(a), including material inaccuracies or (ii)late transmission of information, or (C) the Adviser causes the Fund to purchase investments other than those permitted to be invested in hereunder after the event occurrence of a Permanent Trigger Initiated Defeasance Event or a Market Initiated Defeasance Event resulting in a violation of Sections 4.1(c)(iSection 4.1(c) and or Section 4.2(a) (such conduct referenced in subsection (i) of this Section 4.1(d), the "“Adviser Conduct"), ”) and (ii) the existence of a PV Floor Shortfall, the Adviser agrees to pay to the Warranty Provider an amount equal to the amount of such PV Floor Shortfall determined as provided in this Section 4.1(d) to have been directly or indirectly attributable to such Adviser Conduct. The amount of such PV Floor Shortfall directly or indirectly attributable to the Adviser Conduct shall be equal to the sum of the differences with respect to each Class of Shares, if negative, between (a) the actual NAV Per Share as of the date of determination and (b) the hypothetical NAV Per Share of a hypothetical portfolio comprised of the actual portfolio assets as of the date of determination adjusted to eliminate the effect of the Adviser Conduct to the extent necessary to eliminate any Floor Shortfall directly or indirectly attributable to such Adviser Conduct. In making the determination of the PV Floor Shortfall, the hypothetical portfolio will be based on the actual portfolio of assets as of the date of determination adjusted to bring the portfolio into compliance with all of the restrictions of Section 3.2 hereof, by decreasing and increasing positions in asset classes or sectorsclasses, as the case may be, on a pro rata basis. In addition, if all of the Fund’s assets are required to be invested in a Defeasance Portfolio pursuant to Sections 4.1(c)(i) and 4.2 and the Fund’s assets are not so invested on the Exchange Business Day immediately following the Defeasance Date and for the remainder of the Warranty Period, then if (and only if) a Floor Shortfall or an additional Floor Shortfall (collectively “Additional Floor Shortfall”) arises due to the Fund’s assets not being so invested within such period and/or for the remainder of the Warranty Period, then the Adviser agrees to pay to the Warranty Provider such Additional Floor Shortfall (if any). The Fund’s assets shall be deemed to be invested in the Defeasance Portfolio if at the time of determination the Fund has executed orders to sell all Eligible Equity Investments and Ineligible Investments, if any, and subsequent thereto has executed orders to invest all of the proceeds thereof in the Defeasance Portfolio. The Warranty Provider shall notify (the "“Determination Notice"”) the Adviser in writing of its determination of such PV that Adviser Conduct has occurred and any Floor Shortfall directly or indirectly attributable to the such Adviser ConductConduct and any Additional Floor Shortfall. If the Adviser disagrees with the Warranty Provider's ’s determination that there has been Adviser Conduct and/or the amount of the PV Floor Shortfall directly or indirectly attributable to the such Adviser Conduct and/or the amount of the Additional Floor Shortfall contained in the Determination Notice, then (i) the Adviser shall notify (the "“Objection Notice"”) the Warranty Provider in writing of such disagreement within three five Business Days after the delivery by the Warranty Provider of the Determination Notice and (ii) unless the Adviser and the Warranty Provider otherwise agree on the amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct, the amount thereof shall be determined by arbitration in accordance with the procedures set forth in Section 4.1(e). If the Adviser does not provide the Warranty Provider with the Objection Notice within such three Business Day period, then the Adviser shall be deemed to have agreed to the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice. Any amount payable by the Adviser under this Section 4.1(d) with respect to certain Adviser Conduct (i) shall be paid to the Warranty Provider within three Business Days of the delivery of the Determination Notice or if such PV Shortfall is determined pursuant to an arbitration proceeding, within three Business Days after such final arbitration decision; provided that should the parties otherwise agree on such PV Shortfall, such PV Shortfall shall be paid to the Warranty Provider within three Business Days of such agreement; and (ii) shall be reduced by any amounts paid by the Adviser to the Fund as a result of the same Adviser Conduct to the extent that the Total NAV is increased and the PV Shortfall is in fact decreased by such amount. In the event that the Adviser fails to pay to the Warranty Provider any amounts payable under this Section 4.1(d) within the time period specified herein, the Shortfall Amount shall be decreased on a pro rata basis by the percentage of the PV Shortfall directly or indirectly attributable to the Adviser Conduct. Notwithstanding anything contained in this Section 4.1(d) to the contrary, solely for purposes of this Section 4.1(d), the Adviser shall not be deemed to have committed Adviser Conduct and consequently shall not be liable for any payment under this Section 4.1(d) if (a) a Potential Trigger Event occurs and (b) such Potential Trigger Event is cured or waived within the cure period specified in Section 4.1(a) for the cure of such Potential Trigger Event. The payment of the PV Shortfall amount by the Adviser to the Warranty Provider pursuant to this Section 4.1(d) is in addition to, and not in lieu of, any obligations of the Adviser or Fund to indemnify the Warranty Provider under this Agreement.
(e) In the event that the terms of Section 4.1(d) provide for arbitration, each of the Warranty Provider and the Adviser shall select one arbitrator within seven Business Days after the delivery by the Adviser of the Objection Notice; provided, however, that if either of such parties shall fail to select an arbitrator within such period, such arbitrator shall be appointed by the American Arbitration Association. The two arbitrators selected shall select a third arbitrator within five Business Days after each of such arbitrators have been selected or, if they shall be unable to agree on a third arbitrator within such time, such third arbitrator shall be appointed by the American Arbitration Association. Each arbitrator shall be of exemplary qualifications and stature, and no person affiliated with any party hereto shall be eligible to be an arbitrator. The arbitration shall be held in New York, New York and be governed by the Commercial Arbitration Rules of the American Arbitration Association and the decision of a majority of the arbitrators shall be final, binding and subject to judicial enforcement and with respect to the specific Adviser Conduct that is the subject of such arbitration decision, shall be the exclusive remedy of the Warranty Provider; provided, however, that, notwithstanding the foregoing, the Warranty Provider shall not be limited from seeking indemnification under Section 5.2(a)(iii) and (a)(v) hereof. Fees and expenses of the arbitration (including fees and expenses of the arbitrators) shall be shared by the parties to the arbitration equally.otherwis
Appears in 2 contracts
Sources: Financial Warranty Agreement (DWS Target Fund), Financial Warranty Agreement (DWS Target Fund)
Trigger Events. (a) The following events shall constitute Trigger Events hereunder; provided, however, that in the event the New York Stock Exchange closes early on any Exchange Business Day due to extraordinary or other circumstances (an "Early Close Exchange Business Day")) and a suspension of redemptions of the ------------------------------------- Underlying Fund has occurred as permitted in accordance with the Investment Company Act, the cure periods specified in this Section 4.1(a) will be -------------- automatically extended such that on until the next Exchange Business Day following the Early Close Exchange Business Day, the cure periods will continue for the amount of time lost on such Early Close Exchange Business Day due to such early close (the "Extended Cure Time") (for the avoidance of doubt, should the next Exchange Business Day following the Early Close Exchange Business Day also be an Early Close Exchange Business Day, the cure period will continue for as long as Extended Cure Time remains):.
(i) Any failure at any time to comply with the covenant covenants set forth in the first sentence two sentences of Section 3.1;; -----------
(ii) Any failure at any time to comply with the provisions of Section 3.2(a)(i-------- 3.2
(a) (i), unless such failure is cured by the Fund executing a sales --------- order with respect to such Ineligible Investment on the Exchange Business Day following the day on which such failure occurs; provided that if such violation is not cured on failure to comply with Section 3.2(a)(i) occurs because ------------------ the Fund has received Ineligible Investments due solely as a result of an in-kind redemption from the Underlying Fund, a Trigger Event shall have occurred unless the Fund executes sales orders with respect to such Ineligible Investments during the next Exchange Business Day on which the Adviser becomes aware of securities exchanges or markets on which such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business DaysIneligible Investments are listed are open;
(iii) Any failure at any time to comply with Section 3.3(c3.2(a)(ii), Section 3.3 or Section ------------------- ----------- -------- 3.4(d), unless in the case of a violation of Section 3.2(a)(ii) as of ------ ------------------- the close of business on any Exchange Business Day, the Market Value of the portion of the Fund's assets allocated to the Equity Portfolio, calculated as a percentage of Total NAV of the Fund, does not exceed the Maximum Equity Component provided to the Adviser by the Warranty Provider in accordance with Section 3.3(b) prior to 9:00 a.m. on the -------------- immediately succeeding Exchange Business Day;
(iv) Any failure at any time to comply with the provisions of Section 3.2(a)(ii3.4(a) or Section 3.3 (other than Section 3.3(c)), -------------- unless cured by such failure is attributable solely to the end conduct of the Exchange Business Day following the Exchange Business Day on which such violation occurredWarranty Provider or a Force Majeure Event;
(v) The termination of, or failure to comply with, the Expense Limitation AgreementAgreement or the amendment of such Agreement in each case without the prior written consent of the Warranty Provider, which consent shall not be unreasonably withheld if, in the sole discretion of the Warranty Provider, any such termination, failure to comply or amendment does not increase the Warranty Provider's liabilities or risks or decrease the Warranty Provider's economic bargain under any Transaction Document;
(vi) Any violation of Article III (other than Sections 3.2(a)(vi) and (xi)) that is not provided for in clause (i), ----------- (ii), (iii) or (iv) above unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(vii) Any violation of Section 3.2(a)(vi) or (xi) abovecould have an Adverse Effect, unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the violation occurred;
(vii) Except as otherwise set forth herein, any failure by the Adviser becomes aware or the Fund to adjust the allocation of such violationthe Fund's assets between the Equity Component and the Fixed Income Component in order to comply with any adjustment to the Multiple made by the Warranty Provider (or Calculation Agent) under this Agreement;
(viii) The Fund shall fail to pay the Financial Warranty Fee when due as provided in Section 2.4 and such failure shall continue unremedied for ----------- a period of two Business Days after following notice of such failure from by the Warranty ProviderProvider to the Fund or the Adviser;
(ixA) The Adviser resigns, ; (B) the Fund elects to terminate the Investment Management Agreement with the Adviser Adviser; (C) the Fund appoints a successor adviser (including a subadviser) without the prior written consent of the Warranty Provider in its sole discretion; or (D) the Investment Management Agreement terminates in accordance with its terms and in each case any successor adviser (including the Adviser) that agrees to be bound by the terms of this Agreement is not acceptable to appointed by the Board of Trustees of the Trust or the Shareholders, in each case without the prior written consent of the Warranty Provider in its reasonable discretion after considering the reputation of the successor adviser, its experience in managing large cap equity and fixed income portfolios, its size, its financial condition, its ability to manage the Fund Portfolio in accordance with the Registration Statement and its ability to comply with the Adviser's obligations under this Agreement and the Transaction Documents to which it is a party; provided, that if the successor adviser is the Adviser or an Affiliate of the Adviser, such successor adviser shall be deemed acceptable by the Warranty Providersole discretion;
(x) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and either (iA) the Adviser is no longer obligated to manage the Fund pursuant to the terms of the Investment Management Agreement and none of (A) a successor investment adviser acceptable to the Warranty Provider, (B) the Adviser or (C) an Affiliate of the Adviser Provider has not entered into an investment management agreement with the Fund or (iiB) the termination of the Investment Management Agreement is not yet effective but the Board of Trustees of the Fund Trust, on behalf of the Fund, has indicated its intention to the Warranty Provider, or taken any further action, to appoint a successor investment adviser other than the Adviser or an Affiliate of the Adviser notwithstanding the fact that the Warranty Provider has advised the Board of Trustees that such successor investment adviser would not be acceptable to the Warranty Provider based upon the standards included Provider, in Section 4.1(a)(ix)its sole discretion, then in either such case a Trigger Event shall be deemed to have occurred notwithstanding the fact that a successor investment adviser has not yet been appointed;
(xi) The Subject to the foregoing provisions of this Section 4.1(a), the Adviser -------------- does not, not otherwise manage in all material respects, manage respects the assets of the Fund in accordance with the investment objective, policies and strategies currently set forth in the Registration Statement or and/or in accordance with the Investment Management Agreement;
(xii) Any representation or warranty made by the Adviser Adviser, the Trust or the Fund, Trust on behalf of the Fund in any Transaction Document or in any document or certification provided in connection with any Transaction Document, shall have been incorrect or misleading when made or when deemed made, except where such incorrect or misleading representation or warranty would not have an Adverse Effect in respect of the Adviser or FundEffect;
(xiii) The Equity Limit for a Class of Shares is less than 0.025;
(xiv) The Adviser, the Trust, the Fund or the Custodian shall fail to perform any obligation, or shall breach any covenant, under this Agreement or the Transaction Documents that is not expressly provided for in clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) or (xi) above, which failure could reasonably be expected to have an Adverse Effect in respect of the Adviser or Fund and such violation, if capable of being remedied, shall continue unremedied for a period of three Business Days after the Adviser or the Custodian, as the case may be, becomes aware of the occurrence of such breach or failure; provided, that the Adviser or the Custodian, as the case may be, shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days; or
(xvxiv) The occurrence of any of the following: (A) a Regulatory Event or Litigation Event (other than a Litigation Event arising out of a claim under this Agreement between the Adviser and/or the Trust on behalf of the Fund on one side and the Warranty Provider on the other side) or (B) an Act of Insolvency occurs with respect to the Adviser or the Fund.
(b) Notwithstanding any other provision hereof, if an in the event has occurred and is continuing, which, if not cured or waived would give rise to of a Potential Trigger Event, then the Adviser may not Adviser, upon becoming aware of such event, shall cause the Fund to not acquire any additional Eligible Equity Investments until such event Potential Trigger Event is cured and shall upon becoming aware of such event Potential Trigger Event immediately notify the Warranty Provider of such eventPotential Trigger Event, which notice shall include a description of the manner in which the Adviser intends to cure such event Potential Trigger Event ("Curative Steps"), the Adviser's assessment of the likelihood of success, ----------------- the time the Adviser expects to elapse before such event Potential Trigger Event is cured, and such other information as the Warranty Provider may reasonably request. Upon sending such notice to the Warranty Provider, the Adviser shall immediately take the Curative Steps set forth in such notice unless and until such time as the Warranty Provider notifies the Adviser that it objects to such Curative Steps, in which case the Adviser shall immediately cease the implementation of such Curative Steps. The Warranty Provider shall only object to such Curative Steps if in the Warranty Provider's reasonable discretion, they are not consistent with this Agreement or are not likely to be an effective cure of the Potential Trigger Event within the cure period set forth in Section 4.1(a), if any. If the Adviser violates this Section 4.1(b), then a Trigger Event shall be deemed to have occurred.--------------
(c) If a Trigger Event occurs and is continuing past the cure period specified therein (if applicable)occurs, then, at the election of the Warranty Provider in its sole discretion, the Warranty Provider shall have the right at any time after such Trigger Event to either (i) direct (A) instruct the Adviser or the Custodian, as selected by the Warranty Provider, to invest all of the Fund's assets in accordance with Section 4.2(a) for the --------------- remainder of the Protection Period or (B) to deliver the Irrevocable Instructions to the Custodian to invest all of the Fund's assets in accordance with Section 4.2(a) for the remainder of the Protection Period (in -------------- each case, a "Permanent Trigger Initiated Defeasance Event") or (ii) adjust the Cushion------------------------------------- Multiple. Any such adjustment to the Multiple shall be permanent, unless and until further adjusted by the Warranty Provider in its sole discretion. For the avoidance of doubt, the parties hereto agree that (i) the Warranty Provider may at its election, in its sole discretion, exercise the remedy provided in Section 4.1(c)(i)(B) after it has exercised the remedy provided --------------------- in Section 4.1(c)(i)(A) and (ii) if the Warranty Provider exercises its --------------------- rights to adjust the Multiple, the Warranty Provider shall not be precluded subsequent thereto from exercising its rights under Sections 4.1(c)(i)(A) ---------------------- and/or 4.1(c)(i)(B). The Warranty Provider shall notify the Adviser and the ------------ Fund of the Warranty Provider's decision to exercise of the remedies pursuant to this Section 4.1(c) prior to such exercise. The Adviser shall invest all of -------------- the Fund's assets in accordance with Section 4.2(a) within one Exchange --------------- Business Day following an instruction by the Warranty Provider under Section -------- 4.1(c)(i)(A).. ------------
(d) In the event of (i) an act or omission on the part of the Adviser with respect to the Trust or the Fund which constitutes negligence, recklessness, bad faith faith, willful misconduct or willful misconductfraud, including by way of example only and not intended as an exhaustive list, if (A) the Adviser causes the Fund to purchase additional Eligible Equity Investments in violation of Sections Section -------- 3.3(d) and Section 4.1(b), (B) there is a violation of Section 3.2(a)(i) or --------------- ------------------ (ii), or (C) the Adviser causes the Fund to purchase investments other than ---- those permitted to be invested in hereunder after the event occurrence of a Permanent Trigger Initiated Defeasance Event or a Market Initiated Defeasance Event resulting in a violation of Sections 4.1(c)(iSection 4.1(c) and or Section 4.2(a) (such conduct referenced --------------- --------------- in subsection (i) of this Section 4.1(d), the "Adviser Conduct"), and -------------- ---------------- (ii) the existence of a PV Floor Shortfall, the Adviser agrees to pay to the Warranty Provider an amount equal to the amount of such PV Floor Shortfall determined as provided in this Section 4.1(d) to have been directly or -------------- indirectly attributable to such Adviser Conduct. The amount of such PV Floor Shortfall directly or indirectly attributable to the Adviser Conduct shall be equal to the sum of the differences with respect to each Class of Shares, if negative, between (a) the actual NAV Per Share as of the date of determination and (b) the hypothetical NAV Per Share of a hypothetical portfolio comprised of the actual portfolio assets as of the date of determination adjusted to eliminate the effect of the Adviser Conduct to the extent necessary to eliminate any Floor Shortfall directly or indirectly attributable to such Adviser Conduct. In making the determination of the PV Floor Shortfall, the hypothetical portfolio will be based on the actual portfolio of assets as of the date of determination adjusted to bring the portfolio into compliance with all of the restrictions of Section 3.2 hereof, ----------- by decreasing and increasing positions in asset classes or sectorsclasses, as the case may be, on a pro rata basis. In addition, if all of the Fund's assets are required to be invested in a Defeasance Portfolio pursuant to Sections 4.1(c)(i) and ------------------- 4.2 and the Fund's assets are not so invested on the Exchange Business Day --- immediately following the Defeasance Date and for the remainder of the Protected Period, then if (and only if) a Floor Shortfall or an additional Floor Shortfall (collectively "Additional Floor Shortfall") that arises due --------------------------- to the Fund's assets not being so invested within such period and/or for the remainder of the Protected Period, then the Adviser agrees to pay to the Warranty Provider such Additional Floor Shortfall (if any). The Fund's assets shall be deemed to be invested in the Defeasance Portfolio if at the time of determination the Fund has executed orders to sell all Eligible Equity Investments and Ineligible Investments, if any (provided that in the case of orders to redeem shares of the Underlying Fund, such orders have been received and accepted by the Underlying Fund at such time of determination prior to the time that the Underlying Fund establishes its net asset value as of the next pricing time in accordance with the Investment Company Act and the rules promulgated thereunder), and subsequent thereto has executed orders to invest all of the proceeds thereof in the Defeasance Portfolio. The Warranty Provider shall notify (the "Determination Notice") the Adviser in --------------------- writing of its determination of such PV that Adviser Conduct has occurred and any Floor Shortfall directly or indirectly attributable to the such Adviser ConductConduct and any Additional Floor Shortfall. If the Adviser disagrees with the Warranty Provider's determination that there has been Adviser Conduct and/or the amount of the PV Floor Shortfall directly or indirectly attributable to the such Adviser Conduct and/or the amount of the Additional Floor Shortfall contained in the Determination Notice, then (i) the Adviser shall notify (the "Objection Notice") the Warranty Provider in writing of such disagreement ------------------ within three five Business Days after the delivery by the Warranty Provider of the Determination Notice and (ii) unless the Adviser and the Warranty Provider otherwise agree on agree, the amount existence, if any, of such PV Adviser Conduct and the amount, if any, of the Floor Shortfall directly or indirectly attributable to the such Adviser Conduct, Conduct and the amount thereof of any Additional Floor Shortfall shall be determined by arbitration in accordance with the procedures set forth in Section 4.1(e) (an "Objection Event"). If the Adviser does not provide the -------------- ---------------- Warranty Provider with the Objection Notice within such three five Business Day period, then the Adviser shall be deemed to have agreed to the Warranty Provider's determination of the PV existence of Adviser Conduct and of the amount of the Floor Shortfall directly or indirectly attributable to the Adviser Conduct and the amount of the Additional Floor Shortfall, in each case as contained in the Determination Notice. Any amount payable by the Adviser under this Section 4.1(d) with respect to certain Adviser Conduct (i) shall -------------- be paid to the Warranty Provider within three five Business Days of the delivery of the Determination Notice or if such PV Shortfall amount is determined pursuant to an arbitration proceeding, within three five Business Days after such final arbitration decision; provided that should the parties otherwise agree on such PV Shortfallany amount payable by the Adviser under this Section 4.1(d), such PV Shortfall amount shall be -------------- paid to the Warranty Provider within three five Business Days of such agreement; and (ii) shall be reduced on a dollar for dollar basis by any amounts paid by the Adviser to the Fund (subject to applicable law) as a result of the same Adviser Conduct to the extent that the Total NAV is increased and the PV Shortfall is in fact decreased by such amount. In the event that the Adviser fails to pay to the Warranty Provider any amounts payable under this Section 4.1(d) within the time period specified herein, the Shortfall Amount shall be decreased on a pro rata basis by the percentage of the PV Shortfall directly or indirectly attributable to the Adviser Conduct. Notwithstanding anything contained in this Section 4.1(d) to the contrary, solely for purposes of this Section 4.1(d), the Adviser shall not be deemed to have committed Adviser Conduct and consequently shall not be liable for any payment under this Section 4.1(d) if (a) a Potential Trigger Event occurs and (b) such Potential Trigger Event is cured or waived within the cure period specified in Section 4.1(a) for the cure of such Potential Trigger Event. The payment of the PV Shortfall amount by the Adviser to the Warranty Provider pursuant to this Section 4.1(d) is in addition to, and not in lieu of, any obligations of the Adviser or Fund to indemnify the Warranty Provider under this Agreement.
(e) In the event that the terms of Section 4.1(d) provide for arbitration, each of the Warranty Provider and the Adviser shall select one arbitrator within seven Business Days after the delivery by the Adviser of the Objection Notice; provided, however, that if either of such parties shall fail to select an arbitrator within such period, such arbitrator shall be appointed by the American Arbitration Association. The two arbitrators selected shall select a third arbitrator within five Business Days after each of such arbitrators have been selected or, if they shall be unable to agree on a third arbitrator within such time, such third arbitrator shall be appointed by the American Arbitration Association. Each arbitrator shall be of exemplary qualifications and stature, and no person affiliated with any party hereto shall be eligible to be an arbitrator. The arbitration shall be held in New York, New York and be governed by the Commercial Arbitration Rules of the American Arbitration Association and the decision of a majority of the arbitrators shall be final, binding and subject to judicial enforcement and with respect to the specific Adviser Conduct that is the subject of such arbitration decision, shall be the exclusive remedy of the Warranty Provider; provided, however, that, notwithstanding the foregoing, the Warranty Provider shall not be limited from seeking indemnification under Section 5.2(a)(iii) and (a)(v) hereof. Fees and expenses of the arbitration (including fees and expenses of the arbitrators) shall be shared by the parties to the arbitration equally.an
Appears in 1 contract
Sources: Financial Warranty Agreement (Oppenheimer Principal Protected Trust Ii)
Trigger Events. (a) The following events shall constitute Trigger Events hereunder; provided, however, that in the event the New York Stock Exchange closes early on any Exchange Business Day due to extraordinary circumstances (an "Early Close Exchange Business Day"), the cure periods specified in this Section 4.1(a) will be automatically extended such that on the next Exchange Business Day following the Early Close Exchange Business Day, the cure periods will continue for the amount of time lost on such Early Close Exchange Business Day due to such early close (the "Extended Cure Time") (for the avoidance of doubt, should the next Exchange Business Day following the Early Close Exchange Business Day also be an Early Close Exchange Business Day, the cure period will continue for as long as Extended Cure Time remains)::
(i) Any failure at any time to comply with maintain Gap Risk of not less than 22.5%, unless the covenant set forth in Adviser notifies the first sentence Insurer upon becoming aware of Section 3.1such failure and is using best efforts to cure such failure (to the reasonable satisfaction of the Insurer) and such failure is cured by the end of the following Business Day;
(ii) Any failure at any time to comply with provide a Daily Report to the provisions of Section 3.2(a)(i), if such violation is not cured on Insurer within two hours following notice by the Exchange Business Day on which Insurer to the Adviser becomes aware of the Insurer's non-receipt thereof, unless the Adviser is using best efforts to cure such failure (as determined by the Insurer in good faith) and such failure is cured by the end of such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business DaysDay;
(iii) Any failure at any time to comply with Section 3.3(c);
violation of Sections 3.01, 3.02, 3.03, 3.04, 3.05 or 3.06 that is not expressly provided for in clause (iv) Any failure at any time to comply with Section 3.2(a)(iii) or Section 3.3 (other than Section 3.3(c)), ii) above unless cured by the end of the Exchange third Business Day following the Exchange Business Day on which such violation occurred;
(iv) Fund Value is less than or equal to 101% of the Bond Floor at any time;
(v) The termination of, or Fund shall fail to pay the Premium Fee as provided in Section 2.04 and such failure shall continue unremedied for a period of two Business Days following notice by the Insurer to comply with, the Expense Limitation AgreementFund and to the Adviser;
(vi) Any violation representation or warranty made by the Adviser or the Trust on behalf of Article III the Fund herein shall have been incorrect or misleading in any material respect when made;
(other than Sections 3.2(a)(vivii) and (xi)) The Adviser or the Trust on behalf of the Fund shall fail to perform any obligation under this Agreement or the Transaction Documents that is not expressly provided for in clause (i), (ii), (iii) or (iv) above unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(vii) Any violation of Section 3.2(a)(vi) or (xi) above, unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation;
(viii) The Fund shall fail to pay the Financial Warranty Fee when due as provided in Section 2.4 and such failure shall continue unremedied for a period of two Business Days after notice of such failure from the Warranty Provider;
(ix) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and any successor adviser that agrees to be bound by the terms of this Agreement is not acceptable to the Warranty Provider in its reasonable discretion after considering the reputation of the successor adviser, its experience in managing large cap equity and fixed income portfolios, its size, its financial condition, its ability to manage the Fund Portfolio in accordance with the Registration Statement and its ability to comply with the Adviser's obligations under this Agreement and the Transaction Documents to which it is a party; provided, that if the successor adviser is the Adviser or an Affiliate of the Adviser, such successor adviser shall be deemed acceptable by the Warranty Provider;
(x) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and either (i) the Adviser is no longer obligated to manage the Fund pursuant to the terms of the Investment Management Agreement and none of (A) a successor investment adviser acceptable to the Warranty Provider, (B) the Adviser or (C) an Affiliate of the Adviser has entered into an investment management agreement with the Fund or (ii) the termination of the Investment Management Agreement is not yet effective but the Board of Trustees of the Fund has indicated its intention to the Warranty Provider, or taken any further action, to appoint a successor investment adviser other than the Adviser or an Affiliate of the Adviser notwithstanding the fact that the Warranty Provider has advised the Board of Trustees that such successor investment adviser would not be acceptable to the Warranty Provider based upon the standards included in Section 4.1(a)(ix), then in either such case a Trigger Event shall be deemed to have occurred notwithstanding the fact that a successor investment adviser has not yet been appointed;
(xi) The Adviser does not, in all material respects, manage the assets of the Fund in accordance with the investment objective, policies and strategies currently set forth in the Registration Statement or in accordance with the Investment Management Agreement;
(xii) Any representation or warranty made by the Adviser or the Fund, in any Transaction Document or in any document or certification provided in connection with any Transaction Document, shall have been incorrect or misleading when made or when deemed made, except where such incorrect or misleading representation or warranty would not have an Adverse Effect in respect of the Adviser or Fund;
(xiii) The Equity Limit for a Class of Shares is less than 0.025;
(xiv) The Adviser, the Fund or the Custodian shall fail to perform any obligation, or shall breach any covenant, under this Agreement or the Transaction Documents that is not expressly provided for in clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) or (xi) above, which failure could reasonably be expected to have an Adverse Effect in respect of the Adviser or Fund and such violation, if capable of being remedied, shall continue unremedied for a period of three Business Days 30 days after notice shall have been given by the Adviser Insurer to such party requiring that such default be cured;
(viii) Either ▇▇▇▇▇'▇ or S&P suspends or withdraws the Custodianshort- or long-term rating of Citigroup Inc., as or downgrades the case may be, becomes aware senior unsecured rating of the occurrence of such failureCitigroup Inc. to or below Baa1 or BBB+; provided, however, that if ▇▇▇▇▇'▇ or S&P revises its rating categories or if a successor rating agency is designated under the following proviso, the Insurer shall determine in good faith the equivalent rating under the revised or successor system and shall notify the Adviser and the Fund of its determination; and provided, further, however that if ▇▇▇▇▇'▇ or S&P ceases its rating operations, the CustodianInsurer may, as by notice to the case may beAdviser and the Fund, shall be deemed replace such rating agency that maintains a rating of senior unsecured debt of Citigroup Inc. or elect to be aware of such violation if such violation has been in existence for three Exchange Business Dayshave only one rating agency specified herein; or
(xvix) The occurrence of any of the following: (Ai) except as otherwise permitted by Section 8.01 hereof, the Adviser takes any action to authorize or effect its resignation or takes or fails to take any action the effect of which is more likely than not to result in the resignation or removal of the Adviser; (ii) a Regulatory Event or Event, Litigation Event or any other event, if it is more likely than not that such event will result in the resignation or removal of the Adviser, as reasonably determined by the Insurer after consultation with the Adviser; or (Biii) an Act of Insolvency occurs with respect to the Adviser or the FundAdviser.
(b) Notwithstanding any other provision hereof, if If an event has occurred and is continuing, which, if not cured or waived would give rise to a Trigger Event, then the Adviser may not cause the Fund to acquire any additional Eligible Equity Investments until such event is cured only enter into Risk Reducing Trades and shall upon becoming aware of such event immediately notify consult with the Warranty Provider of such event, which notice shall include Insurer and provide to the Insurer a description of the manner in which the Adviser intends to cure such event ("Curative Steps")event, the Adviser's assessment of the likelihood of success, the time the Adviser expects to elapse before such event is cured, and such other information as the Warranty Provider Insurer may reasonably request. Upon sending such notice to the Warranty Provider, the Adviser shall immediately take the Curative Steps set forth in such notice unless and until such time as the Warranty Provider notifies the Adviser that it objects to such Curative Steps, in which case the Adviser shall immediately cease the implementation of such Curative Steps. The Warranty Provider shall only object to such Curative Steps if in the Warranty Provider's reasonable discretion, they are not consistent with this Agreement or are not likely to be an effective cure of the Potential Trigger Event within the cure period set forth in Section 4.1(a), if any. If the Adviser violates this Section 4.1(b), then a Trigger Event shall be deemed to have occurred.
(c) If a Trigger Event occurs and is continuing past the cure period specified therein (if applicable), then, at the election of the Warranty Provider in its sole discretionInsurer, the Warranty Provider Insurer shall have the right to (i) direct the Adviser or the Custodian, as selected by the Warranty Provider, Custodian to invest all of the Fund's assets in accordance with Section 4.2(a) (a "Permanent the Defeasance Event") or (ii) adjust Portfolio pursuant to the Cushion. Any such adjustment shall be permanent, unless Direction and until further adjusted by the Warranty Provider in its sole discretionUndertaking Regarding Remedies. The Warranty Provider Insurer shall notify the Adviser and the Fund of the Warranty ProviderInsurer's exercise of remedies pursuant to this Section 4.1(c4.01(c).
(d) In the event of (i) an act or omission occurrence on the part of the Adviser which constitutes negligence, recklessness, bad faith or willful misconduct, including by way of example only and not intended as an exhaustive list, if (A) the Adviser causes the Fund to purchase additional Eligible Equity Investments in violation of Sections 3.3(d) and 4.1(b), (B) there is a violation of Section 3.2(a)(i) or (ii), or (C) the Adviser causes the Fund to purchase investments other than those permitted to be invested in the event any Business Day of a Permanent Defeasance Trigger Event in violation of Sections 4.1(c)(i) and 4.2(a) (such conduct referenced in subsection (i) of this under Section 4.1(d), the "Adviser Conduct"), and (ii) the existence of a PV Shortfall, the Adviser agrees to pay to the Warranty Provider an amount equal to the amount of such PV Shortfall determined as provided in this Section 4.1(d) to have been directly or indirectly attributable to such Adviser Conduct. The amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct shall be equal to the sum of the differences with respect to each Class of Shares, if negative, between (a) the actual NAV Per Share as of the date of determination and (b) the hypothetical NAV Per Share of a hypothetical portfolio comprised of the actual portfolio assets as of the date of determination adjusted to eliminate the effect of the Adviser Conduct. In making the determination of the PV Shortfall, the hypothetical portfolio will be based on the actual portfolio of assets as of the date of determination adjusted to bring the portfolio into compliance with all of the restrictions of Section 3.2 hereof, by decreasing and increasing positions in asset classes or sectors, as the case may be, on a pro rata basis. The Warranty Provider shall notify (the "Determination Notice") the Adviser in writing of its determination of such PV Shortfall directly or indirectly attributable to the Adviser Conduct. If the Adviser disagrees with the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice, then (i) the Adviser shall notify (the "Objection Notice") the Warranty Provider in writing of such disagreement within three Business Days after the delivery by the Warranty Provider of the Determination Notice and (ii) unless the Adviser and the Warranty Provider otherwise agree on the amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct, the amount thereof shall be determined by arbitration in accordance with the procedures set forth in Section 4.1(e). If the Adviser does not provide the Warranty Provider with the Objection Notice within such three Business Day period, then the Adviser shall be deemed to have agreed to the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice. Any amount payable by the Adviser under this Section 4.1(d4.01(a)(i) with respect to certain which the Adviser Conduct (i) shall be paid has failed to give the notice contemplated thereby, then, subject to the Warranty Provider within three Business Days of Daily Report confirming that the delivery of Gap Risk is less than 22.5%, the Determination Notice or if such PV Shortfall is determined Insurer shall direct the Custodian to invest the Fund's assets in the Defeasance Portfolio pursuant to an arbitration proceeding, within three Business Days after such final arbitration decision; provided that should the parties otherwise agree on such PV Shortfall, such PV Shortfall shall be paid to the Warranty Provider within three Business Days of such agreement; Direction and (ii) shall be reduced by any amounts paid by the Adviser to the Fund as a result of the same Adviser Conduct to the extent that the Total NAV is increased and the PV Shortfall is in fact decreased by such amount. In the event that the Adviser fails to pay to the Warranty Provider any amounts payable under this Section 4.1(d) within the time period specified herein, the Shortfall Amount shall be decreased on a pro rata basis by the percentage of the PV Shortfall directly or indirectly attributable to the Adviser Conduct. Notwithstanding anything contained in this Section 4.1(d) to the contrary, solely for purposes of this Section 4.1(d), the Adviser shall not be deemed to have committed Adviser Conduct and consequently shall not be liable for any payment under this Section 4.1(d) if (a) a Potential Trigger Event occurs and (b) such Potential Trigger Event is cured or waived within the cure period specified in Section 4.1(a) for the cure of such Potential Trigger Event. The payment of the PV Shortfall amount by the Adviser to the Warranty Provider pursuant to this Section 4.1(d) is in addition to, and not in lieu of, any obligations of the Adviser or Fund to indemnify the Warranty Provider under this AgreementUndertaking Regarding Remedies.
(e) In the event that the terms of Section 4.1(d) provide for arbitration, each of the Warranty Provider and the Adviser shall select one arbitrator within seven Business Days after the delivery by the Adviser of the Objection Notice; provided, however, that if either of such parties shall fail to select an arbitrator within such period, such arbitrator shall be appointed by the American Arbitration Association. The two arbitrators selected shall select a third arbitrator within five Business Days after each of such arbitrators have been selected or, if they shall be unable to agree on a third arbitrator within such time, such third arbitrator shall be appointed by the American Arbitration Association. Each arbitrator shall be of exemplary qualifications and stature, and no person affiliated with any party hereto shall be eligible to be an arbitrator. The arbitration shall be held in New York, New York and be governed by the Commercial Arbitration Rules of the American Arbitration Association and the decision of a majority of the arbitrators shall be final, binding and subject to judicial enforcement and with respect to the specific Adviser Conduct that is the subject of such arbitration decision, shall be the exclusive remedy of the Warranty Provider; provided, however, that, notwithstanding the foregoing, the Warranty Provider shall not be limited from seeking indemnification under Section 5.2(a)(iii) and (a)(v) hereof. Fees and expenses of the arbitration (including fees and expenses of the arbitrators) shall be shared by the parties to the arbitration equally.
Appears in 1 contract
Sources: Financial Guarantee Agreement (Smith Barney Trust Ii)
Trigger Events. (a) The following events shall constitute Trigger Events hereunder; provided, however, that in the event the New York Stock Exchange closes early on any Exchange Business Day due to extraordinary or other circumstances (an "Early Close Exchange Business Day")) and a suspension of redemptions of the Underlying Fund has occurred as permitted in accordance with the Investment Company Act, the cure periods specified in this Section 4.1(a) will be automatically extended such that on until the next Exchange Business Day following the Early Close Exchange Business Day, the cure periods will continue for the amount of time lost on such Early Close Exchange Business Day due to such early close (the "Extended Cure Time") (for the avoidance of doubt, should the next Exchange Business Day following the Early Close Exchange Business Day also be an Early Close Exchange Business Day, the cure period will continue for as long as Extended Cure Time remains):.
(i) Any failure at any time to comply with the covenant covenants set forth in the first sentence two sentences of Section 3.1;
(ii) Any failure at any time to comply with the provisions of Section 3.2(a)(i), unless such failure is cured by the Fund executing a sales order with respect to such Ineligible Investment on the Exchange Business Day following the day on which such failure occurs; provided, that if such violation is not cured on failure to comply with Section 3.2(a)(i) occurs because the Fund has received Ineligible Investments due solely as a result of an in-kind redemption from the Underlying Fund, a Trigger Event shall have occurred unless the Fund executes sales orders with respect to such Ineligible Investments during the next Exchange Business Day on which the Adviser becomes aware of securities exchanges or markets on which such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business DaysIneligible Investments are listed are open;
(iii) Any failure at any time to comply with Section 3.3(c3.2(a)(ii), Section 3.3 or Section 3.4(d), unless in the case of a violation of Section 3.2(a)(ii) as of the close of business on any Exchange Business Day, the Market Value of the portion of the Fund's assets allocated to the Equity Portfolio, calculated as a percentage of Total NAV of the Fund, does not exceed the Maximum Equity Component provided to the Adviser by the Warranty Provider in accordance with Section 3.3(b) prior to 9:00 a.m. on the immediately succeeding Exchange Business Day;
(iv) Any failure at any time to comply with the provisions of Section 3.2(a)(ii3.4(a) or Section 3.3 (other than Section 3.3(c)), unless cured by such failure is attributable solely to the end conduct of the Exchange Business Day following the Exchange Business Day on which such violation occurredWarranty Provider or a Force Majeure Event;
(v) The termination of, or failure to comply with, the Expense Limitation AgreementAgreement or the amendment of such Agreement in each case without the prior written consent of the Warranty Provider, which consent shall not be unreasonably withheld if, in the sole discretion of the Warranty Provider, any such termination, failure to comply or amendment does not increase the Warranty Provider's liabilities or risks or decrease the Warranty Provider's economic bargain under any Transaction Document;
(vi) Any violation of Article III (other than Sections 3.2(a)(vi) and (xi)) that is not provided for in clause (i), (ii), (iii) or (iv) above unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(vii) Any violation of Section 3.2(a)(vi) or (xi) abovecould have an Adverse Effect, unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the violation occurred;
(vii) Except as otherwise set forth herein, any failure by the Adviser becomes aware or the Fund to adjust the allocation of such violationthe Fund's assets between the Equity Component and the Fixed Income Component in order to comply with any adjustment to the Multiple made by the Warranty Provider (or Calculation Agent) under this Agreement;
(viii) The Fund shall fail to pay the Financial Warranty Fee when due as provided in Section 2.4 and such failure shall continue unremedied for a period of two Business Days after following notice of such failure from by the Warranty ProviderProvider to the Fund or the Adviser;
(ixA) The Adviser resigns, ; (B) the Fund elects to terminate the Investment Management Agreement with the Adviser Adviser; (C) the Fund appoints a successor adviser (including a subadviser) without the prior written consent of the Warranty Provider in its sole discretion; or (D) the Investment Management Agreement terminates in accordance with its terms and in each case any successor adviser (including the Adviser) that agrees to be bound by the terms of this Agreement is not acceptable to appointed by the Board of Trustees of the Trust or the Shareholders, in each case without the prior written consent of the Warranty Provider in its reasonable discretion after considering the reputation of the successor adviser, its experience in managing large cap equity and fixed income portfolios, its size, its financial condition, its ability to manage the Fund Portfolio in accordance with the Registration Statement and its ability to comply with the Adviser's obligations under this Agreement and the Transaction Documents to which it is a party; provided, that if the successor adviser is the Adviser or an Affiliate of the Adviser, such successor adviser shall be deemed acceptable by the Warranty Providersole discretion;
(x) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and either (iA) the Adviser is no longer obligated to manage the Fund pursuant to the terms of the Investment Management Agreement and none of (A) a successor investment adviser acceptable to the Warranty Provider, (B) the Adviser or (C) an Affiliate of the Adviser Provider has not entered into an investment management agreement with the Fund or (iiB) the termination of the Investment Management Agreement is not yet effective but the Board of Trustees of the Fund Trust, on behalf of the Fund, has indicated its intention to the Warranty Provider, or taken any further action, to appoint a successor investment adviser other than the Adviser or an Affiliate of the Adviser notwithstanding the fact that the Warranty Provider has advised the Board of Trustees that such successor investment adviser would not be acceptable to the Warranty Provider based upon the standards included Provider, in Section 4.1(a)(ix)its sole discretion, then in either such case a Trigger Event shall be deemed to have occurred notwithstanding the fact that a successor investment adviser has not yet been appointed;
(xi) The Subject to the foregoing provisions of this Section 4.1(a), the Adviser does not, not otherwise manage in all material respects, manage respects the assets of the Fund in accordance with the investment objective, policies and strategies currently set forth in the Registration Statement or and/or in accordance with the Investment Management Agreement;
(xii) Any representation or warranty made by the Adviser Adviser, the Trust or the Fund, Trust on behalf of the Fund in any Transaction Document or in any document or certification provided in connection with any Transaction Document, shall have been incorrect or misleading when made or when deemed made, except where such incorrect or misleading representation or warranty would not have an Adverse Effect in respect of the Adviser or FundEffect;
(xiii) The Equity Limit for a Class of Shares is less than 0.025;
(xiv) The Adviser, the Trust, the Fund or the Custodian shall fail to perform any obligation, or shall breach any covenant, under this Agreement or the Transaction Documents that is not expressly provided for in clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) or (xi) above, which failure could reasonably be expected to have an Adverse Effect in respect of the Adviser or Fund and such violation, if capable of being remedied, shall continue unremedied for a period of three Business Days after the Adviser or the Custodian, as the case may be, becomes aware of the occurrence of such breach or failure; provided, that the Adviser or the Custodian, as the case may be, shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days; or
(xvxiv) The occurrence of any of the following: (A) a Regulatory Event or Litigation Event (other than a Litigation Event arising out of a claim under this Agreement between the Adviser and/or the Trust on behalf of the Fund on one side and the Warranty Provider on the other side) or (B) an Act of Insolvency occurs with respect to the Adviser or the Fund.
(b) Notwithstanding any other provision hereof, if an in the event has occurred and is continuing, which, if not cured or waived would give rise to of a Potential Trigger Event, then the Adviser may not Adviser, upon becoming aware of such event, shall cause the Fund to not acquire any additional Eligible Equity Investments until such event Potential Trigger Event is cured and shall upon becoming aware of such event Potential Trigger Event immediately notify the Warranty Provider of such eventPotential Trigger Event, which notice shall include a description of the manner in which the Adviser intends to cure such event Potential Trigger Event ("Curative Steps"), the Adviser's assessment of the likelihood of success, the time the Adviser expects to elapse before such event Potential Trigger Event is cured, and such other information as the Warranty Provider may reasonably request. Upon sending such notice to the Warranty Provider, the Adviser shall immediately take the Curative Steps set forth in such notice unless and until such time as the Warranty Provider notifies the Adviser that it objects to such Curative Steps, in which case the Adviser shall immediately cease the implementation of such Curative Steps. The Warranty Provider shall only object to such Curative Steps if in the Warranty Provider's reasonable discretion, they are not consistent with this Agreement or are not likely to be an effective cure of the Potential Trigger Event within the cure period set forth in Section 4.1(a), if any. If the Adviser violates this Section 4.1(b), then a Trigger Event shall be deemed to have occurred.
(c) If a Trigger Event occurs and is continuing past the cure period specified therein (if applicable)occurs, then, at the election of the Warranty Provider in its sole discretion, the Warranty Provider shall have the right at any time after such Trigger Event to either (i) direct (A) instruct the Adviser or the Custodian, as selected by the Warranty Provider, to invest all of the Fund's assets in accordance with Section 4.2(a) for the remainder of the Protection Period or (B) to deliver the Irrevocable Instructions to the Custodian to invest all of the Fund's assets in accordance with Section 4.2(a) for the remainder of the Protection Period (in each case, a "Permanent Trigger Initiated Defeasance Event") or (ii) adjust the CushionMultiple. Any such adjustment to the Multiple shall be permanent, unless and until further adjusted by the Warranty Provider in its sole discretion. For the avoidance of doubt, the parties hereto agree that (i) the Warranty Provider may at its election, in its sole discretion, exercise the remedy provided in Section 4.1(c)(i)(B) after it has exercised the remedy provided in Section 4.1(c)(i)(A) and (ii) if the Warranty Provider exercises its rights to adjust the Multiple, the Warranty Provider shall not be precluded subsequent thereto from exercising its rights under Sections 4.1(c)(i)(A) and/or 4.1(c)(i)(B). The Warranty Provider shall notify the Adviser and the Fund of the Warranty Provider's decision to exercise of the remedies pursuant to this Section 4.1(c) prior to such exercise. The Adviser shall invest all of the Fund's assets in accordance with Section 4.2(a) within one Exchange Business Day following an instruction by the Warranty Provider under Section 4.1(c)(i)(A).
(d) In the event of (i) an act or omission on the part of the Adviser with respect to the Trust or the Fund which constitutes negligence, recklessness, bad faith faith, willful misconduct or willful misconductfraud, including by way of example only and not intended as an exhaustive list, if (A) the Adviser causes the Fund to purchase additional Eligible Equity Investments in violation of Sections Section 3.3(d) and Section 4.1(b), (B) there is a violation of Section 3.2(a)(i) or (ii), or (C) the Adviser causes the Fund to purchase investments other than those permitted to be invested in hereunder after the event occurrence of a Permanent Trigger Initiated Defeasance Event or a Market Initiated Defeasance Event resulting in a violation of Sections 4.1(c)(iSection 4.1(c) and or Section 4.2(a) (such conduct referenced in subsection (i) of this Section 4.1(d), the "Adviser Conduct"), and (ii) the existence of a PV Floor Shortfall, the Adviser agrees to pay to the Warranty Provider an amount equal to the amount of such PV Floor Shortfall determined as provided in this Section 4.1(d) to have been directly or indirectly attributable to such Adviser Conduct. The amount of such PV Floor Shortfall directly or indirectly attributable to the Adviser Conduct shall be equal to the sum of the differences with respect to each Class of Shares, if negative, between (a) the actual NAV Per Share as of the date of determination and (b) the hypothetical NAV Per Share of a hypothetical portfolio comprised of the actual portfolio assets as of the date of determination adjusted to eliminate the effect of the Adviser Conduct to the extent necessary to eliminate any Floor Shortfall directly or indirectly attributable to such Adviser Conduct. In making the determination of the PV Floor Shortfall, the hypothetical portfolio will be based on the actual portfolio of assets as of the date of determination adjusted to bring the portfolio into compliance with all of the restrictions of Section 3.2 hereof, by decreasing and increasing positions in asset classes or sectorsclasses, as the case may be, on a pro rata basis. In addition, if all of the Fund's assets are required to be invested in a Defeasance Portfolio pursuant to Sections 4.1(c)(i) and 4.2 and the Fund's assets are not so invested on the Exchange Business Day immediately following the Defeasance Date and for the remainder of the Protected Period, then if (and only if) a Floor Shortfall or an additional Floor Shortfall (collectively "Additional Floor Shortfall") that arises due to the Fund's assets not being so invested within such period and/or for the remainder of the Protected Period, then the Adviser agrees to pay to the Warranty Provider such Additional Floor Shortfall (if any). The Fund's assets shall be deemed to be invested in the Defeasance Portfolio if the Fund has executed orders to sell all Eligible Equity Investments and Ineligible Investments, if any, and subsequent thereto has executed orders to invest all of the proceeds thereof in the Defeasance Portfolio. The Warranty Provider shall notify (the "Determination Notice") the Adviser in writing of its determination of such PV that Adviser Conduct has occurred and any Floor Shortfall directly or indirectly attributable to the such Adviser ConductConduct and any Additional Floor Shortfall. If the Adviser disagrees with the Warranty Provider's determination that there has been Adviser Conduct and/or the amount of the PV Floor Shortfall directly or indirectly attributable to the such Adviser Conduct and/or the amount of the Additional Floor Shortfall contained in the Determination Notice, then (i) the Adviser shall notify (the "Objection Notice") the Warranty Provider in writing of such disagreement within three five Business Days after the delivery by the Warranty Provider of the Determination Notice and (ii) unless the Adviser and the Warranty Provider otherwise agree on agree, the amount existence, if any, of such PV Adviser Conduct and the amount, if any, of the Floor Shortfall directly or indirectly attributable to the such Adviser Conduct, Conduct and the amount thereof of any Additional Floor Shortfall shall be determined by arbitration in accordance with the procedures set forth in Section 4.1(e), (an "Objection Event"). If the Adviser does not provide the Warranty Provider with the Objection Notice within such three five Business Day period, then the Adviser shall be deemed to have agreed to the Warranty Provider's determination of the PV existence of Adviser Conduct and of the amount of the Floor Shortfall directly or indirectly attributable to the Adviser Conduct and the amount of the Additional Floor Shortfall, in each case as contained in the Determination Notice. Any amount payable by the Adviser under this Section 4.1(d) with respect to certain Adviser Conduct (i) shall be paid to the Warranty Provider within three five Business Days of the delivery of the Determination Notice or if such PV Shortfall amount is determined pursuant to an arbitration proceeding, within three five Business Days after such final arbitration decision; provided provided, that should the parties otherwise agree on such PV Shortfallany amount payable by the Adviser under this Section 4.1(d), such PV Shortfall amount shall be paid to the Warranty Provider within three five Business Days of such agreement; and (ii) shall be reduced on a dollar for dollar basis by any amounts paid by the Adviser to the Fund (subject to applicable law) as a result of the same Adviser Conduct to the extent that the Total NAV is increased and the PV Floor Shortfall or Additional Floor Shortfall, as applicable, is in fact decreased by such amount. In the event that the Adviser fails to pay to the Warranty Provider any amounts payable under this Section 4.1(d) or fails to deposit into the Escrow Account any amounts required to be so deposited in accordance with Section 4.1(f) hereof, in each case within the time period specified herein, the Shortfall Amount shall be decreased (i) in the case of a Floor Shortfall, on a pro rata basis by the percentage of the PV Floor Shortfall directly or indirectly attributable to the Adviser Conduct. Notwithstanding anything contained in this Section 4.1(d) to the contrary, solely for purposes of this Section 4.1(d), the Adviser shall not be deemed to have committed Adviser Conduct and consequently shall not be liable for any payment under this Section 4.1(d) if (a) a Potential Trigger Event occurs and (bii) such Potential Trigger Event is cured or waived within in the cure period specified in Section 4.1(a) for case of an Additional Floor Shortfall, by the cure amount of such Potential Trigger EventAdditional Floor Shortfall on a dollar for dollar basis. The payment of the PV Floor Shortfall amount by the Adviser to the Warranty Provider pursuant to this Section 4.1(d) is in addition to, and not in lieu of, any obligations of the Adviser or Fund to indemnify the Warranty Provider under this Agreement.
(e) In the event that the terms case of Section 4.1(d) provide for arbitrationan Objection Event, each of the Warranty Provider and the Adviser shall select one arbitrator within seven three Business Days after the delivery by the Adviser of the Objection Notice; provided, however, that if either of such parties the Adviser shall fail to select an arbitrator within such period, such arbitrator shall be appointed by file with the American Arbitration Association. The two arbitrators selected shall select a third arbitrator within five Business Days after each of such arbitrators have been selected or, if they shall be unable to agree on a third arbitrator within such time, such third arbitrator shall be appointed by the American Arbitration Association. Each arbitrator shall be of exemplary qualifications and stature, and no person affiliated with any party hereto shall be eligible to be an arbitrator. The arbitration shall be held in New York, New York and be governed by the Commercial Arbitration Rules of the American Arbitration Association and the decision of a majority of the arbitrators shall be final, binding and subject to judicial enforcement and with respect to the specific Adviser Conduct that is the subject of such arbitration decision, shall be the exclusive remedy of the Warranty Provider; provided, however, that, notwithstanding the foregoing, the Warranty Provider shall not be limited from seeking indemnification under Section 5.2(a)(iii) and (a)(v) hereof. Fees and expenses of the arbitration (including fees and expenses of the arbitrators) shall be shared by the parties to the arbitration equally.A
Appears in 1 contract
Sources: Financial Warranty Agreement (Oppenheimer Principal Protected Trust)
Trigger Events. (a) The following events shall constitute Trigger Events hereunder; provided, however, that in the event the New York Stock Exchange closes early on any Exchange Business Day due to extraordinary circumstances (an "Early Close Exchange Business Day"), the cure periods specified in this Section 4.1(a) will be automatically extended such that on the next Exchange Business Day following the Early Close Exchange Business Day, the cure periods will continue for the amount of time lost on such Early Close Exchange Business Day due to such early close (the "Extended Cure Time") (for the avoidance of doubt, should the next Exchange Business Day following the Early Close Exchange Business Day also be an Early Close Exchange Business Day, the cure period will continue for as long as Extended Cure Time remains)::
(i) Any failure at any time to comply with maintain Gap Risk of not less than 23%, unless the covenant set forth in Adviser notifies the first sentence Insurer upon becoming aware of Section 3.1such failure and is using best efforts to cure such failure (to the reasonable satisfaction of the Insurer) and such failure is cured by the end of the following Business Day;
(ii) Any failure at any time to comply with provide a Daily Report to the provisions of Section 3.2(a)(i), if such violation is not cured on Insurer within two hours following notice by the Exchange Business Day on which Insurer to the Adviser becomes aware of the Insurer's non-receipt thereof, unless the Adviser is using best efforts to cure such failure (as determined by the Insurer in good faith) and such failure is cured by the end of such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business DaysDay;
(iii) Any failure at any time to comply with Section 3.3(c);
violation of Sections 3.01, 3.02, 3.03, 3.04, 3.05 or 3.06 that is not expressly provided for in clause (iv) Any failure at any time to comply with Section 3.2(a)(iii) or Section 3.3 (other than Section 3.3(c)), ii) above unless cured by the end of the Exchange third Business Day following the Exchange Business Day on which such violation occurred;
(iv) Fund Value is less than or equal to 101% of the Bond Floor;
(v) The termination of, or Fund shall fail to pay the Premium Fee as provided in Section 2.04 and such failure shall continue unremedied for a period of two Business Days following notice by the Insurer to comply with, the Expense Limitation AgreementFund and to the Adviser;
(vi) Any violation representation or warranty made by the Adviser or the Trust on behalf of Article III the Fund herein shall have been incorrect or misleading in any material respect when made;
(other than Sections 3.2(a)(vivii) and (xi)) The Adviser or the Trust on behalf of the Fund shall fail to perform any obligation under this Agreement or the Transaction Documents that is not expressly provided for in clause (i), (ii), (iii) or (iv) above unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(vii) Any violation of Section 3.2(a)(vi) or (xi) above, unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation;
(viii) The Fund shall fail to pay the Financial Warranty Fee when due as provided in Section 2.4 and such failure shall continue unremedied for a period of two Business Days after notice of such failure from the Warranty Provider;
(ix) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and any successor adviser that agrees to be bound by the terms of this Agreement is not acceptable to the Warranty Provider in its reasonable discretion after considering the reputation of the successor adviser, its experience in managing large cap equity and fixed income portfolios, its size, its financial condition, its ability to manage the Fund Portfolio in accordance with the Registration Statement and its ability to comply with the Adviser's obligations under this Agreement and the Transaction Documents to which it is a party; provided, that if the successor adviser is the Adviser or an Affiliate of the Adviser, such successor adviser shall be deemed acceptable by the Warranty Provider;
(x) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and either (i) the Adviser is no longer obligated to manage the Fund pursuant to the terms of the Investment Management Agreement and none of (A) a successor investment adviser acceptable to the Warranty Provider, (B) the Adviser or (C) an Affiliate of the Adviser has entered into an investment management agreement with the Fund or (ii) the termination of the Investment Management Agreement is not yet effective but the Board of Trustees of the Fund has indicated its intention to the Warranty Provider, or taken any further action, to appoint a successor investment adviser other than the Adviser or an Affiliate of the Adviser notwithstanding the fact that the Warranty Provider has advised the Board of Trustees that such successor investment adviser would not be acceptable to the Warranty Provider based upon the standards included in Section 4.1(a)(ix), then in either such case a Trigger Event shall be deemed to have occurred notwithstanding the fact that a successor investment adviser has not yet been appointed;
(xi) The Adviser does not, in all material respects, manage the assets of the Fund in accordance with the investment objective, policies and strategies currently set forth in the Registration Statement or in accordance with the Investment Management Agreement;
(xii) Any representation or warranty made by the Adviser or the Fund, in any Transaction Document or in any document or certification provided in connection with any Transaction Document, shall have been incorrect or misleading when made or when deemed made, except where such incorrect or misleading representation or warranty would not have an Adverse Effect in respect of the Adviser or Fund;
(xiii) The Equity Limit for a Class of Shares is less than 0.025;
(xiv) The Adviser, the Fund or the Custodian shall fail to perform any obligation, or shall breach any covenant, under this Agreement or the Transaction Documents that is not expressly provided for in clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) or (xi) above, which failure could reasonably be expected to have an Adverse Effect in respect of the Adviser or Fund and such violation, if capable of being remedied, shall continue unremedied for a period of three Business Days 30 days after notice shall have been given by the Adviser Insurer to such party requiring that such default be cured;
(viii) Either ▇▇▇▇▇'▇ or S&P suspends or withdraws the Custodianshort- or long-term rating of Citigroup Inc., as or downgrades the case may be, becomes aware senior unsecured rating of the occurrence of such failureCitigroup Inc. to or below Baa1 or BBB+; provided, however, that if ▇▇▇▇▇'▇ or S&P revises its rating categories or if a successor rating agency is designated under the following proviso, the Insurer shall determine in good faith the equivalent rating under the revised or successor system and shall notify the Adviser and the Fund of its determination; and provided, further, however that if ▇▇▇▇▇'▇ or S&P ceases its rating operations, the CustodianInsurer may, as by notice to the case may beAdviser and the Fund, shall be deemed replace such rating agency that maintains a rating of senior unsecured debt of Citigroup or elect to be aware of such violation if such violation has been in existence for three Exchange Business Dayshave only one rating agency specified herein; or
(xvix) The occurrence of any of the following: following (Ai) except as otherwise permitted by Section 8.01 hereof, the Adviser takes any action to authorize or effect its resignation or takes or fails to take any action the effect of which is more likely than not to result in the resignation or removal of the Adviser, (ii) a Regulatory Event or Event, Litigation Event or any other event, if it is more likely than not that such event will result in the resignation or removal of the Adviser, as reasonably determined by the Insurer after consultation with the Adviser; or (Biii) an Act of Insolvency occurs with respect to the Adviser or the FundAdviser.
(b) Notwithstanding any other provision hereof, if If an event has occurred and is continuing, which, if not cured or waived would give rise to a Trigger Event, then the Adviser may not cause the Fund to acquire any additional Eligible Equity Investments until such event is cured only enter into Risk Reducing Trades and shall upon becoming aware of such event immediately notify consult with Insurer and provide to the Warranty Provider of such event, which notice shall include Insurer a description of the manner in which the Adviser intends to cure such event ("Curative Steps")event, the Adviser's assessment of the likelihood of success, the time the Adviser expects to elapse before such event is cured, and such other information as the Warranty Provider Insurer may reasonably request. Upon sending such notice to the Warranty Provider, the Adviser shall immediately take the Curative Steps set forth in such notice unless and until such time as the Warranty Provider notifies the Adviser that it objects to such Curative Steps, in which case the Adviser shall immediately cease the implementation of such Curative Steps. The Warranty Provider shall only object to such Curative Steps if in the Warranty Provider's reasonable discretion, they are not consistent with this Agreement or are not likely to be an effective cure of the Potential Trigger Event within the cure period set forth in Section 4.1(a), if any. If the Adviser violates this Section 4.1(b), then a Trigger Event shall be deemed to have occurred.
(c) If a Trigger Event occurs and is continuing past the cure period specified therein (if applicable), then, at the election of the Warranty Provider in its sole discretionInsurer, the Warranty Provider Insurer shall have the right to (i) direct the Adviser or the Custodian, as selected by the Warranty Provider, Custodian to invest all of the Fund's assets in accordance with Section 4.2(a) (a "Permanent the Defeasance Event") or (ii) adjust Portfolio pursuant to the Cushion. Any such adjustment shall be permanent, unless Direction and until further adjusted by the Warranty Provider in its sole discretionUndertaking Regarding Remedies. The Warranty Provider Insurer shall notify the Adviser and the Fund of the Warranty ProviderInsurer's exercise of remedies pursuant to this Section 4.1(c4.01(c).
(d) In the event of (i) an act or omission occurrence on the part of the Adviser which constitutes negligence, recklessness, bad faith or willful misconduct, including by way of example only and not intended as an exhaustive list, if (A) the Adviser causes the Fund to purchase additional Eligible Equity Investments in violation of Sections 3.3(d) and 4.1(b), (B) there is a violation of Section 3.2(a)(i) or (ii), or (C) the Adviser causes the Fund to purchase investments other than those permitted to be invested in the event any Business Day of a Permanent Defeasance Trigger Event in violation of Sections 4.1(c)(i) and 4.2(a) (such conduct referenced in subsection (i) of this under Section 4.1(d), the "Adviser Conduct"), and (ii) the existence of a PV Shortfall, the Adviser agrees to pay to the Warranty Provider an amount equal to the amount of such PV Shortfall determined as provided in this Section 4.1(d) to have been directly or indirectly attributable to such Adviser Conduct. The amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct shall be equal to the sum of the differences with respect to each Class of Shares, if negative, between (a) the actual NAV Per Share as of the date of determination and (b) the hypothetical NAV Per Share of a hypothetical portfolio comprised of the actual portfolio assets as of the date of determination adjusted to eliminate the effect of the Adviser Conduct. In making the determination of the PV Shortfall, the hypothetical portfolio will be based on the actual portfolio of assets as of the date of determination adjusted to bring the portfolio into compliance with all of the restrictions of Section 3.2 hereof, by decreasing and increasing positions in asset classes or sectors, as the case may be, on a pro rata basis. The Warranty Provider shall notify (the "Determination Notice") the Adviser in writing of its determination of such PV Shortfall directly or indirectly attributable to the Adviser Conduct. If the Adviser disagrees with the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice, then (i) the Adviser shall notify (the "Objection Notice") the Warranty Provider in writing of such disagreement within three Business Days after the delivery by the Warranty Provider of the Determination Notice and (ii) unless the Adviser and the Warranty Provider otherwise agree on the amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct, the amount thereof shall be determined by arbitration in accordance with the procedures set forth in Section 4.1(e). If the Adviser does not provide the Warranty Provider with the Objection Notice within such three Business Day period, then the Adviser shall be deemed to have agreed to the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice. Any amount payable by the Adviser under this Section 4.1(d4.01(a)(i) with respect to certain which the Adviser Conduct (i) shall be paid has failed to give the notice contemplated thereby, then, subject to the Warranty Provider within three Business Days of Daily Report confirming that the delivery of Gap Risk is less than 23%, the Determination Notice or if such PV Shortfall is determined Insurer shall direct the Custodian to invest the Fund's assets in the Defeasance Portfolio pursuant to an arbitration proceeding, within three Business Days after such final arbitration decision; provided that should the parties otherwise agree on such PV Shortfall, such PV Shortfall shall be paid to the Warranty Provider within three Business Days of such agreement; Direction and (ii) shall be reduced by any amounts paid by the Adviser to the Fund as a result of the same Adviser Conduct to the extent that the Total NAV is increased and the PV Shortfall is in fact decreased by such amount. In the event that the Adviser fails to pay to the Warranty Provider any amounts payable under this Section 4.1(d) within the time period specified herein, the Shortfall Amount shall be decreased on a pro rata basis by the percentage of the PV Shortfall directly or indirectly attributable to the Adviser Conduct. Notwithstanding anything contained in this Section 4.1(d) to the contrary, solely for purposes of this Section 4.1(d), the Adviser shall not be deemed to have committed Adviser Conduct and consequently shall not be liable for any payment under this Section 4.1(d) if (a) a Potential Trigger Event occurs and (b) such Potential Trigger Event is cured or waived within the cure period specified in Section 4.1(a) for the cure of such Potential Trigger Event. The payment of the PV Shortfall amount by the Adviser to the Warranty Provider pursuant to this Section 4.1(d) is in addition to, and not in lieu of, any obligations of the Adviser or Fund to indemnify the Warranty Provider under this AgreementUndertaking Regarding Remedies.
(e) In the event that the terms of Section 4.1(d) provide for arbitration, each of the Warranty Provider and the Adviser shall select one arbitrator within seven Business Days after the delivery by the Adviser of the Objection Notice; provided, however, that if either of such parties shall fail to select an arbitrator within such period, such arbitrator shall be appointed by the American Arbitration Association. The two arbitrators selected shall select a third arbitrator within five Business Days after each of such arbitrators have been selected or, if they shall be unable to agree on a third arbitrator within such time, such third arbitrator shall be appointed by the American Arbitration Association. Each arbitrator shall be of exemplary qualifications and stature, and no person affiliated with any party hereto shall be eligible to be an arbitrator. The arbitration shall be held in New York, New York and be governed by the Commercial Arbitration Rules of the American Arbitration Association and the decision of a majority of the arbitrators shall be final, binding and subject to judicial enforcement and with respect to the specific Adviser Conduct that is the subject of such arbitration decision, shall be the exclusive remedy of the Warranty Provider; provided, however, that, notwithstanding the foregoing, the Warranty Provider shall not be limited from seeking indemnification under Section 5.2(a)(iii) and (a)(v) hereof. Fees and expenses of the arbitration (including fees and expenses of the arbitrators) shall be shared by the parties to the arbitration equally.
Appears in 1 contract
Sources: Financial Guarantee Agreement (Smith Barney Trust Ii)
Trigger Events. (a) The following events shall constitute Trigger Events hereunder; provided, however, that in the event the New York Stock Exchange closes more than two hours early or does not open on any Exchange Business Day due to extraordinary circumstances any Force Majeure Event, other than due to the effect of exchange “circuit-breaker” induced closings (an "“Early Close Exchange Business Day"”), the cure periods specified in this Section 4.1(a) will be automatically extended such that on until the next Exchange Business Day following the Early Close Exchange Business Day, the cure periods will continue for the amount of time lost on such ; provided that if three or more Early Close Exchange Business Day due Days occur consecutively, the Warranty Provider may declare an immediate end to the cure period at 9 am New York time on the third such early close (the "Extended Cure Time") (for the avoidance of doubt, should the next Exchange Business Day following the Early Close Exchange Business Day also be an subsequent Early Close Exchange Business Day, the cure period will continue for as long as Extended Cure Time remains):.
(i) Any failure at any time to comply with the covenant set forth in the first sentence provisions of Section 3.1;
(ii) Any failure to comply with the provisions of Section 3.2, Section 3.3, Section 3.4(d) or 3.6;
(iii) Any failure at any time to comply with the provisions of Section 3.2(a)(i), if such violation is not cured on the Exchange Business Day on which the Adviser becomes aware of such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(iii3.4(a) Any failure at any time to comply with Section 3.3(c);
(iv) Any failure at any time to comply with Section 3.2(a)(ii) or Section 3.3 (other than Section 3.3(c)), unless cured by the end of the Exchange Business Day following the Exchange Business Day on which such violation occurred;
(v) The termination of, or failure to comply with, the Expense Limitation Agreement;
(vi) Any violation of Article III (other than Sections 3.2(a)(vi) and (xi)) that is not provided for in clause (i), (ii), (iii) or (iv) above unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(vii) Any violation of Section 3.2(a)(vi) or (xi) above, unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation;
(viii) The Fund shall fail to pay the Financial Warranty Fee when due as provided in Section 2.4 and such failure shall continue unremedied for a period of two Business Days after notice of such failure from the Warranty Provider;
(ix) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and any successor adviser that agrees to be bound by the terms of this Agreement is not acceptable to the Warranty Provider in its reasonable discretion after considering the reputation of the successor adviser, its experience in managing large cap equity and fixed income portfolios, its size, its financial condition, its ability to manage the Fund Portfolio in accordance with the Registration Statement and its ability to comply with the Adviser's obligations under this Agreement and the Transaction Documents to which it is a party; provided, that if the successor adviser is the Adviser or an Affiliate of the Adviser, such successor adviser shall be deemed acceptable by the Warranty Provider;
(x) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and either (i) the Adviser is no longer obligated to manage the Fund pursuant to the terms of the Investment Management Agreement and none of (A) a successor investment adviser acceptable to the Warranty Provider, (B) the Adviser or (C) an Affiliate of the Adviser has entered into an investment management agreement with the Fund or (ii) the termination of the Investment Management Agreement is not yet effective but the Board of Trustees of the Fund has indicated its intention to the Warranty Provider, or taken any further action, to appoint a successor investment adviser other than the Adviser or an Affiliate of the Adviser notwithstanding the fact that the Warranty Provider has advised the Board of Trustees that such successor investment adviser would not be acceptable to the Warranty Provider based upon the standards included in Section 4.1(a)(ix), then in either such case a Trigger Event shall be deemed to have occurred notwithstanding the fact that a successor investment adviser has not yet been appointed;
(xi) The Adviser does not, in all material respects, manage the assets of the Fund in accordance with the investment objective, policies and strategies currently set forth in the Registration Statement or in accordance with the Investment Management Agreement;
(xii) Any representation or warranty made by the Adviser or the Fund, in any Transaction Document or in any document or certification provided in connection with any Transaction Document, shall have been incorrect or misleading when made or when deemed made, except where such incorrect or misleading representation or warranty would not have an Adverse Effect in respect of the Adviser or Fund;
(xiii) The Equity Limit for a Class of Shares is less than 0.025;
(xiv) The Adviser, the Fund or the Custodian shall fail to perform any obligation, or shall breach any covenant, under this Agreement or the Transaction Documents that is not expressly provided for in clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) or (xi) above, which failure could reasonably be expected to have an Adverse Effect in respect of the Adviser or Fund and such violation, if capable of being remedied, shall continue unremedied for a period of three Business Days after the Adviser or the Custodian, as the case may be, becomes aware of the occurrence of such failure; provided, that the Adviser or the Custodian, as the case may be, shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days; or
(xv) The occurrence of any of the following: (A) a Regulatory Event or Litigation Event or (B) an Act of Insolvency occurs with respect to the Adviser or the Fund.
(b) Notwithstanding any other provision hereof, if an event has occurred and is continuing, which, if not cured or waived would give rise attributable solely to a Trigger Force Majeure Event, then the Adviser may not cause the Fund to acquire any additional Eligible Equity Investments until such event is cured and shall upon becoming aware of such event immediately notify the Warranty Provider of such event, which notice shall include a description of the manner in which the Adviser intends to cure such event ("Curative Steps"), the Adviser's assessment of the likelihood of success, the time the Adviser expects to elapse before such event is cured, and such other information as the Warranty Provider may reasonably request. Upon sending such notice to the Warranty Provider, the Adviser shall immediately take the Curative Steps set forth in such notice unless and until such time as the Warranty Provider notifies the Adviser that it objects to such Curative Steps, in which case the Adviser shall immediately cease the implementation of such Curative Steps. The Warranty Provider shall only object to such Curative Steps if in the Warranty Provider's reasonable discretion, they are not consistent with this Agreement or are not likely to be an effective cure of the Potential Trigger Event within the cure period set forth in Section 4.1(a), if any. If the Adviser violates this Section 4.1(b), then a Trigger Event shall be deemed to have occurred.
(c) If a Trigger Event occurs and is continuing past the cure period specified therein (if applicable), then, at the election of the Warranty Provider in its sole discretion, the Warranty Provider shall have the right to (i) direct the Adviser or the Custodian, as selected by the Warranty Provider, to invest all of the Fund's assets in accordance with Section 4.2(a) (a "Permanent Defeasance Event") or (ii) adjust the Cushion. Any such adjustment shall be permanent, unless and until further adjusted by the Warranty Provider in its sole discretion. The Warranty Provider shall notify the Adviser and the Fund of the Warranty Provider's exercise of remedies pursuant to this Section 4.1(c).
(d) In the event of (i) an act or omission on the part of the Adviser which constitutes negligence, recklessness, bad faith or willful misconduct, including by way of example only and not intended as an exhaustive list, if (A) the Adviser causes the Fund to purchase additional Eligible Equity Investments in violation of Sections 3.3(d) and 4.1(b), (B) there is a violation of Section 3.2(a)(i) or (ii), or (C) the Adviser causes the Fund to purchase investments other than those permitted to be invested in the event of a Permanent Defeasance Event in violation of Sections 4.1(c)(i) and 4.2(a) (such conduct referenced in subsection (i) of this Section 4.1(d), the "Adviser Conduct"), and (ii) the existence of a PV Shortfall, the Adviser agrees to pay to the Warranty Provider an amount equal to the amount of such PV Shortfall determined as provided in this Section 4.1(d) to have been directly or indirectly attributable to such Adviser Conduct. The amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct shall be equal to the sum of the differences with respect to each Class of Shares, if negative, between (a) the actual NAV Per Share as of the date of determination and (b) the hypothetical NAV Per Share of a hypothetical portfolio comprised of the actual portfolio assets as of the date of determination adjusted to eliminate the effect of the Adviser Conduct. In making the determination of the PV Shortfall, the hypothetical portfolio will be based on the actual portfolio of assets as of the date of determination adjusted to bring the portfolio into compliance with all of the restrictions of Section 3.2 hereof, by decreasing and increasing positions in asset classes or sectors, as the case may be, on a pro rata basis. The Warranty Provider shall notify (the "Determination Notice") the Adviser in writing of its determination of such PV Shortfall directly or indirectly attributable to the Adviser Conduct. If the Adviser disagrees with the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice, then (i) the Adviser shall notify (the "Objection Notice") the Warranty Provider in writing of such disagreement within three Business Days after the delivery by the Warranty Provider of the Determination Notice and (ii) unless the Adviser and the Warranty Provider otherwise agree on the amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct, the amount thereof shall be determined by arbitration in accordance with the procedures set forth in Section 4.1(e). If the Adviser does not provide the Warranty Provider with the Objection Notice within such three Business Day period, then the Adviser shall be deemed to have agreed to the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice. Any amount payable by the Adviser under this Section 4.1(d) with respect to certain Adviser Conduct (i) shall be paid to the Warranty Provider within three Business Days of the delivery of the Determination Notice or if such PV Shortfall is determined pursuant to an arbitration proceeding, within three Business Days after such final arbitration decision; provided that should the parties otherwise agree on such PV Shortfall, such PV Shortfall shall be paid to the Warranty Provider within three Business Days of such agreement; and (ii) shall be reduced by any amounts paid by the Adviser to the Fund as a result of the same Adviser Conduct to the extent that the Total NAV is increased and the PV Shortfall is in fact decreased by such amount. In the event that the Adviser fails to pay to the Warranty Provider any amounts payable under this Section 4.1(d) within the time period specified herein, the Shortfall Amount shall be decreased on a pro rata basis by the percentage of the PV Shortfall directly or indirectly attributable to the Adviser Conduct. Notwithstanding anything contained in this Section 4.1(d) to the contrary, solely for purposes of this Section 4.1(d), the Adviser shall not be deemed to have committed Adviser Conduct and consequently shall not be liable for any payment under this Section 4.1(d) if (a) a Potential Trigger Event occurs and (b) such Potential Trigger Event is cured or waived within the cure period specified in Section 4.1(a) for the cure of such Potential Trigger Event. The payment of the PV Shortfall amount by the Adviser to the Warranty Provider pursuant to this Section 4.1(d) is in addition to, and not in lieu of, any obligations of the Adviser or Fund to indemnify the Warranty Provider under this Agreement.
(e) In the event that the terms of Section 4.1(d) provide for arbitration, each of the Warranty Provider and the Adviser shall select one arbitrator within seven Business Days after the delivery by the Adviser of the Objection Notice; provided, however, that if either such failure to comply with Section 3.4(a) is the result of such parties shall fail a Force Majeure Event that causes a failure to select an arbitrator within such periodcomply for five consecutive calendar days, such arbitrator shall failure to comply will be appointed by the American Arbitration Association. The two arbitrators selected shall select considered a third arbitrator within five Business Days after each of such arbitrators have been selected or, if they shall be unable to agree on a third arbitrator within such time, such third arbitrator shall be appointed by the American Arbitration Association. Each arbitrator shall be of exemplary qualifications and stature, and no person affiliated with any party hereto shall be eligible to be an arbitrator. The arbitration shall be held in New York, New York and be governed by the Commercial Arbitration Rules of the American Arbitration Association and the decision of a majority of the arbitrators shall be final, binding and subject to judicial enforcement and with respect to the specific Adviser Conduct that is the subject of such arbitration decision, shall be the exclusive remedy of the Warranty Provider; provided, however, that, Trigger Event notwithstanding the foregoing, exception in this Section 4.1(a)(iii) for a Force Majeure Event;provided further that the Adviser shall have a cure period for its first three failures to meet the 9 p.m. reporting obligation of Section 3.4(a) as follows: the Warranty Provider shall not be limited from seeking indemnification under Section 5.2(a)(iiirequired to make a good faith effort to notify (by e-mail or otherwise) the Adviser of its intention to declare a Trigger Event and (a)(v) hereof. Fees and expenses of the arbitration (including fees and expenses of Adviser shall have until 8 a.m. on the arbitrators) shall be shared by Exchange Business Day immediately succeeding the parties day on which the violation occurred to transmit the arbitration equally.Daily Report required by
Appears in 1 contract
Sources: Assignment, Consent and Amendment Agreement (DWS Target Fund)
Trigger Events. (a) The following events shall constitute Trigger Events hereunder; provided, however, that in the event the New York Stock Exchange closes early on any Exchange Business Day due to extraordinary circumstances (an "Early Close Exchange Business Day"), the cure periods specified in this Section 4.1(a) will be automatically extended such that on the next Exchange Business Day following the Early Close Exchange Business Day, the cure periods will continue for the amount of time lost on such Early Close Exchange Business Day due to such early close (the "Extended Cure Time") (for the avoidance of doubt, should the next Exchange Business Day following the Early Close Exchange Business Day also be an Early Close Exchange Business Day, the cure period will continue for as long as Extended Cure Time remains):
(i) Any failure at any time to comply with the covenant set forth in the first sentence of Section 3.1;
(ii) Any failure at any time to comply with the provisions of Section 3.2(a)(i), if such violation is not cured on the Exchange Business Day on which the Adviser becomes aware of such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(iii) Any failure at any time to comply with Section 3.3(c);
(iv) Any failure at any time to comply with Section 3.2(a)(ii) or Section 3.3 (other than Section 3.3(c)), unless cured by the end of the Exchange Business Day following the Exchange Business Day on which such violation occurred;
(v) The termination of, or failure to comply with, the Expense Limitation Agreement;
(vi) Any violation of Article III (other than Sections 3.2(a)(vi) and (xi)) that is not provided for in clause (i), (ii), (iii) or (iv) above unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(vii) Any violation of Section 3.2(a)(vi) or (xi) above, unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation;
(viii) The Fund shall fail to pay the Financial Warranty Fee when due as provided in Section 2.4 and such failure shall continue unremedied for a period of two Business Days after notice of such failure from the Warranty Provider;
(ix) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and any successor adviser that agrees to be bound by the terms of this Agreement is not acceptable to the Warranty Provider in its reasonable discretion after considering the reputation of the successor adviser, its experience in managing large cap equity value funds and fixed income portfolios, its size, its financial condition, its ability to manage the Fund Portfolio in accordance with the Registration Statement and its ability to comply with the Adviser's obligations under this Agreement and the Transaction Documents to which it is a party; provided, that if the successor adviser is the Adviser or an Affiliate of the Adviser, such successor adviser shall be deemed acceptable by the Warranty Provider;
(x) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and either (i) the Adviser is no longer obligated to manage the Fund pursuant to the terms of the Investment Management Agreement and none of (A) a successor investment adviser acceptable to the Warranty Provider, (B) the Adviser or (C) an Affiliate of the Adviser has entered into an investment management agreement with the Fund or (ii) the termination of the Investment Management Agreement is not yet effective but the Board of Trustees of the Fund has indicated its intention to the Warranty Provider, or taken any further action, to appoint a successor investment adviser other than the Adviser or an Affiliate of the Adviser notwithstanding the fact that the Warranty Provider has advised the Board of Trustees that such successor investment adviser would not be acceptable to the Warranty Provider based upon the standards included in Section 4.1(a)(ix), then in either such case a Trigger Event shall be deemed to have occurred notwithstanding the fact that a successor investment adviser has not yet been appointed;
(xi) The Adviser does not, in all material respects, manage the assets of the Fund in accordance with the investment objective, policies and strategies currently set forth in the Registration Statement or in accordance with the Investment Management Agreement;
(xii) Any representation or warranty made by the Adviser or the Fund, in any Transaction Document or in any document or certification provided in connection with any Transaction Document, shall have been incorrect or misleading when made or when deemed made, except where such incorrect or misleading representation or warranty would not have an Adverse Effect in respect of the Adviser or Fund;
(xiii) The Equity Limit for a Class of Shares is less than 0.025;
(xiv) The Adviser, the Fund or the Custodian shall fail to perform any obligation, or shall breach any covenant, under this Agreement or the Transaction Documents that is not expressly provided for in clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) or (xi) above, which failure could reasonably be expected to have an Adverse Effect in respect of the Adviser or Fund and such violation, if capable of being remedied, shall continue unremedied for a period of three Business Days after the Adviser or the Custodian, as the case may be, becomes aware of the occurrence of such failure; provided, that the Adviser or the Custodian, as the case may be, shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days; or
(xv) The occurrence of any of the following: (A) a Regulatory Event or Litigation Event or (B) an Act of Insolvency occurs with respect to the Adviser or the Fund.
(b) Notwithstanding any other provision hereof, if an event has occurred and is continuing, which, if not cured or waived would give rise to a Trigger Event, then the Adviser may not cause the Fund to acquire any additional Eligible Equity Investments until such event is cured and shall upon becoming aware of such event immediately notify the Warranty Provider of such event, which notice shall include a description of the manner in which the Adviser intends to cure such event ("Curative Steps"), the Adviser's assessment of the likelihood of success, the time the Adviser expects to elapse before such event is cured, and such other information as the Warranty Provider may reasonably request. Upon sending such notice to the Warranty Provider, the Adviser shall immediately take the Curative Steps set forth in such notice unless and until such time as the Warranty Provider notifies the Adviser that it objects to such Curative Steps, in which case the Adviser shall immediately cease the implementation of such Curative Steps. The Warranty Provider shall only object to such Curative Steps if in the Warranty Provider's reasonable discretion, they are not consistent with this Agreement or are not likely to be an effective cure of the Potential Trigger Event within the cure period set forth in Section 4.1(a), if any. If the Adviser violates this Section 4.1(b), then a Trigger Event shall be deemed to have occurred.
(c) If a Trigger Event occurs and is continuing past the cure period specified therein (if applicable), then, at the election of the Warranty Provider in its sole discretion, the Warranty Provider shall have the right to (i) direct the Adviser or the Custodian, as selected by the Warranty Provider, to invest all of the Fund's assets in accordance with Section 4.2(a) (a "Permanent Defeasance Event") or (ii) adjust the Cushion. Any such adjustment shall be permanent, unless and until further adjusted by the Warranty Provider in its sole discretion. The Warranty Provider shall notify the Adviser and the Fund of the Warranty Provider's exercise of remedies pursuant to this Section 4.1(c).
(d) In the event of (i) an act or omission on the part of the Adviser which constitutes negligence, recklessness, bad faith or willful misconduct, including by way of example only and not intended as an exhaustive list, if (A) the Adviser causes the Fund to purchase additional Eligible Equity Investments in violation of Sections 3.3(d) and 4.1(b), (B) there is a violation of Section 3.2(a)(i) or (ii), or (C) the Adviser causes the Fund to purchase investments other than those permitted to be invested in the event of a Permanent Defeasance Event in violation of Sections 4.1(c)(i) and 4.2(a) (such conduct referenced in subsection (i) of this Section 4.1(d), the "Adviser Conduct"), and (ii) the existence of a PV Shortfall, the Adviser agrees to pay to the Warranty Provider an amount equal to the amount of such PV Shortfall determined as provided in this Section 4.1(d) to have been directly or indirectly attributable to such Adviser Conduct. The amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct shall be equal to the sum of the differences with respect to each Class of Shares, if negative, between (a) the actual NAV Per Share as of the date of determination and (b) the hypothetical NAV Per Share of a hypothetical portfolio comprised of the actual portfolio assets as of the date of determination adjusted to eliminate the effect of the Adviser Conduct. In making the determination of the PV Shortfall, the hypothetical portfolio will be based on the actual portfolio of assets as of the date of determination adjusted to bring the portfolio into compliance with all of the restrictions of Section 3.2 hereof, by decreasing and increasing positions in asset classes or sectors, as the case may be, on a pro rata basis. The Warranty Provider shall notify (the "Determination Notice") the Adviser in writing of its determination of such PV Shortfall directly or indirectly attributable to the Adviser Conduct. If the Adviser disagrees with the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice, then (i) the Adviser shall notify (the "Objection Notice") the Warranty Provider in writing of such disagreement within three Business Days after the delivery by the Warranty Provider of the Determination Notice and (ii) unless the Adviser and the Warranty Provider otherwise agree on the amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct, the amount thereof shall be determined by arbitration in accordance with the procedures set forth in Section 4.1(e). If the Adviser does not provide the Warranty Provider with the Objection Notice within such three Business Day period, then the Adviser shall be deemed to have agreed to the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice. Any amount payable by the Adviser under this Section 4.1(d) with respect to certain Adviser Conduct (i) shall be paid to the Warranty Provider within three Business Days of the delivery of the Determination Notice or if such PV Shortfall is determined pursuant to an arbitration proceeding, within three Business Days after such final arbitration decision; provided that should the parties otherwise agree on such PV Shortfall, such PV Shortfall shall be paid to the Warranty Provider within three Business Days of such agreement; and (ii) shall be reduced by any amounts paid by the Adviser to the Fund as a result of the same Adviser Conduct to the extent that the Total NAV is increased and the PV Shortfall is in fact decreased by such amount. In the event that the Adviser fails to pay to the Warranty Provider any amounts payable under this Section 4.1(d) within the time period specified herein, the Shortfall Amount shall be decreased on a pro rata basis by the percentage of the PV Shortfall directly or indirectly attributable to the Adviser Conduct. Notwithstanding anything contained in this Section 4.1(d) to the contrary, solely for purposes of this Section 4.1(d), the Adviser shall not be deemed to have committed Adviser Conduct and consequently shall not be liable for any payment under this Section 4.1(d) if (a) a Potential Trigger Event occurs and (b) such Potential Trigger Event is cured or waived within the cure period specified in Section 4.1(a) for the cure of such Potential Trigger Event. The payment of the PV Shortfall amount by the Adviser to the Warranty Provider pursuant to this Section 4.1(d) is in addition to, and not in lieu of, any obligations of the Adviser or Fund to indemnify the Warranty Provider under this Agreement.
(e) In the event that the terms of Section 4.1(d) provide for arbitration, each of the Warranty Provider and the Adviser shall select one arbitrator within seven Business Days after the delivery by the Adviser of the Objection Notice; provided, however, that if either of such parties shall fail to select an arbitrator within such period, such arbitrator shall be appointed by the American Arbitration Association. The two arbitrators selected shall select a third arbitrator within five Business Days after each of such arbitrators have been selected or, if they shall be unable to agree on a third arbitrator within such time, such third arbitrator shall be appointed by the American Arbitration Association. Each arbitrator shall be of exemplary qualifications and stature, and no person affiliated with any party hereto shall be eligible to be an arbitrator. The arbitration shall be held in New York, New York and be governed by the Commercial Arbitration Rules of the American Arbitration Association and the decision of a majority of the arbitrators shall be final, binding and subject to judicial enforcement and with respect to the specific Adviser Conduct that is the subject of such arbitration decision, shall be the exclusive remedy of the Warranty Provider; provided, however, that, notwithstanding the foregoing, the Warranty Provider shall not be limited from seeking indemnification under Section 5.2(a)(iii) and (a)(v) hereof. Fees and expenses of the arbitration (including fees and expenses of the arbitrators) shall be shared by the parties to the arbitration equally.reasonably
Appears in 1 contract
Sources: Financial Warranty Agreement (Merrill Lynch Principal Protected Trust)
Trigger Events. (a) The following events shall constitute Trigger Events hereunder; providedPROVIDED, howeverHOWEVER, that in the event the New York Stock Exchange closes early on any Exchange Business Day due to extraordinary circumstances (an "Early Close Exchange Business DayEARLY CLOSE EXCHANGE BUSINESS DAY"), the cure periods specified in this Section 4.1(aSECTION 4.1(A) will be automatically extended such that on the next Exchange Business Day following the Early Close Exchange Business Day, the cure periods will continue for the amount of time lost on such Early Close Exchange Business Day due to such early close (the "Extended Cure TimeEXTENDED CURE TIME") (for the avoidance of doubt, should the next Exchange Business Day following the Early Close Exchange Business Day also be an Early Close Exchange Business Day, the cure period will continue for as long as Extended Cure Time remains):
(i) Any failure at any time to comply with the covenant set forth in the first sentence of Section SECTION 3.1;
(ii) Any failure at any time to comply with the provisions of Section 3.2(a)(iSECTION 3.2(A)(I), if such violation is not cured on the Exchange Business Day on which the Adviser becomes aware of such violation; providedPROVIDED, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(iii) Any failure at any time to comply with Section 3.3(cSECTION 3.3(C);
(iv) Any failure at any time to comply with Section 3.2(a)(iiSECTION 3.2(A)(II) or Section SECTION 3.3 (other than Section 3.3(cSECTION 3.3(C)), unless cured by the end of the Exchange Business Day following the Exchange Business Day on which such violation occurred;
(v) The termination of, or failure to comply with, the Expense Limitation Agreement;
(vi) Any violation of Article ARTICLE III (other than Sections 3.2(a)(viSECTIONS 3.2(A)(VI) and (xiXI)) that is not provided for in clause (i), (ii), (iii) or (iv) above unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation; providedPROVIDED, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(vii) Any violation of Section 3.2(a)(viSECTION 3.2(A)(VI) or (xiXI) above, unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation;
(viii) The Fund shall fail to pay the Financial Warranty Fee when due as provided in Section SECTION 2.4 and such failure shall continue unremedied for a period of two Business Days after notice of such failure from the Warranty ProviderBank;
(ix) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and any successor adviser (including the Adviser) that agrees to be bound by the terms of this Agreement is not acceptable to the Warranty Provider Bank in its reasonable discretion after considering the reputation of the successor adviser, its experience in managing large cap equity and fixed income portfolios, its size, its financial condition, its ability to manage the Fund Portfolio in accordance with the Registration Statement and its ability to comply with the Adviser's obligations under this Agreement and the Transaction Documents to which it is a party; provided, that if the successor adviser is the Adviser or an Affiliate of the Adviser, such successor adviser shall be deemed acceptable by the Warranty Provider;
(x) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and either (i) the Adviser is no longer obligated to manage the Fund pursuant to the terms of the Investment Management Agreement and none of (A) a successor investment adviser acceptable to the Warranty Provider, (B) the Adviser or (C) an Affiliate of the Adviser Bank has not entered into an investment management agreement with the Fund or (ii) the termination of the Investment Management Agreement is not yet effective but the Board of Trustees of the Fund has indicated its intention to the Warranty ProviderBank, or taken any further action, to appoint a successor investment adviser other than the Adviser or an Affiliate of the Adviser notwithstanding the fact that the Warranty Provider Bank has advised the Board of Trustees that such successor investment adviser would not be acceptable to the Warranty Provider Bank based upon the standards included in Section 4.1(a)(ixSECTION 4.1(A)(IX), then in either such case a Trigger Event shall be deemed to have occurred notwithstanding the fact that a successor investment adviser has not yet been appointed;
(xi) The Adviser does not, in all material respects, manage the assets of the Fund in accordance with the investment objective, policies and strategies currently set forth in the Registration Statement or in accordance with the Investment Management AgreementStatement;
(xii) Any representation or warranty made by the Adviser or the Fund, in any Transaction Document or in any document or certification provided in connection with any Transaction Document, shall have been incorrect or misleading in any material respect when made or when deemed made, except where such incorrect or misleading representation or warranty would not have an Adverse Effect in respect of the Adviser or Fund;
(xiii) The Equity Limit for a Class of Shares is less than 0.0250.05;
(xiv) The Adviser, Adviser or the Fund or the Custodian shall fail to perform any obligation, or shall breach any covenant, under this Agreement or the Transaction Documents that is not expressly provided for in clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) or (xi) above, which failure could reasonably be expected to have an Adverse Effect in respect of the Adviser or Fund and such violation, if capable of being remedied, shall continue unremedied for a period of three Business Days after the Adviser or the Custodian, as the case may be, becomes aware of the occurrence of such failure; provided, that the Adviser or the Custodian, as the case may be, shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days; or
(xv) The occurrence of any of the following: (A) a Regulatory Event or Litigation Event or (B) an Act of Insolvency occurs with respect to the Adviser or the FundAdviser.
(b) Notwithstanding any other provision hereof, if an event has occurred and is continuing, which, if not cured or waived would give rise to a Trigger Event, then the Adviser may not cause the Fund to acquire any additional Eligible Equity Investments until such event is cured and shall upon becoming aware of such event immediately notify the Warranty Provider Bank of such event, which notice shall include a description of the manner in which the Adviser intends to cure such event ("Curative StepsCURATIVE STEPS"), the Adviser's assessment of the likelihood of success, the time the Adviser expects to elapse before such event is cured, and such other information as the Warranty Provider Bank may reasonably request. Upon sending such notice to the Warranty ProviderBank, the Adviser shall immediately take the Curative Steps set forth in such notice unless and until such time as the Warranty Provider Bank notifies the Adviser that it objects to such Curative Steps, in which case the Adviser shall immediately cease the implementation of such Curative Steps. The Warranty Provider Bank shall only object to such Curative Steps if in the Warranty ProviderBank's reasonable discretion, they are not consistent with this Agreement or are not likely to be an effective cure of the Potential potential Trigger Event within the cure period set forth in Section 4.1(aSECTION 4.1(A), if any. If the Adviser violates this Section 4.1(bSECTION 4.1(B), then a Trigger Event shall be deemed to have occurred.
(c) If a Trigger Event occurs and is continuing past the cure period specified therein (if applicable), then, at the election of the Warranty Provider Bank in its sole discretion, the Warranty Provider Bank shall have the right to (i) direct the Adviser or the Custodian, as selected by the Warranty Provider, Custodian to invest all of the Fund's assets in accordance with Section 4.2(aSECTION 4.2(A) (a "Permanent Defeasance EventPERMANENT DEFEASANCE EVENT") or (ii) adjust the Cushion. Any such adjustment shall be permanent, unless and until further adjusted by the Warranty Provider Bank in its sole discretion. The Warranty Provider Bank shall notify the Adviser and the Fund of the Warranty ProviderBank's exercise of remedies pursuant to this Section 4.1(cSECTION 4.1(C).
(d) In the event of (i) an act or omission on the part of the Adviser which constitutes negligence, gross negligence, recklessness, bad faith or willful misconduct, including by way of example only and not intended as an exhaustive list, if (A) the Adviser causes the Fund to purchase additional Eligible Equity Investments in violation of Sections 3.3(dSECTIONS 3.3(D) and 4.1(b4.1(B), (B) there is a violation of Section 3.2(a)(iSECTION 3.2(A)(I) or (iiII), or (C) the Adviser causes the Fund to purchase investments other than those permitted to be invested in the event of a Permanent Defeasance Event in violation of Sections 4.1(c)(iSECTIONS 4.1(C)(I) and 4.2(a4.2(A) (such conduct referenced in subsection (iI) of this Section 4.1(dSECTION 4.1(D), the "Adviser ConductADVISER CONDUCT"), and (ii) the existence of a PV Shortfall, the Adviser agrees to pay to the Warranty Provider Bank an amount equal to the amount of such PV Shortfall determined as provided in this Section 4.1(dSECTION 4.1(D) to have been directly or indirectly attributable to such Adviser Conduct. The amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct shall be equal to the sum of the differences with respect to each Class of Sharesdifference, if negative, between (a) the actual Total NAV Per Share as of the date of determination and (b) the hypothetical Total NAV Per Share of a hypothetical portfolio comprised of the actual portfolio assets as of the date of determination adjusted to eliminate the effect of the Adviser Conduct. In making the determination of the PV Shortfall, the hypothetical portfolio will be based on the actual portfolio of assets as of the date of determination adjusted to bring the portfolio into compliance with all of the restrictions of Section SECTION 3.2 hereof, by decreasing and increasing positions in asset classes or sectors, as the case may be, on a pro rata basis. The Warranty Provider Bank shall notify (the "Determination NoticeDETERMINATION NOTICE") the Adviser in writing of its determination of such PV Shortfall directly or indirectly attributable to the Adviser Conduct. If the Adviser disagrees with the Warranty ProviderBank's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice, then (i) the Adviser shall notify (the "Objection NoticeOBJECTION NOTICE") the Warranty Provider Bank in writing of such disagreement within three Business Days after the delivery by the Warranty Provider Bank of the Determination Notice and (ii) unless the Adviser and the Warranty Provider Bank otherwise agree on the amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct, the amount thereof shall be determined by arbitration in accordance with the procedures set forth in Section 4.1(eSECTION 4.1(E). If the Adviser does not provide the Warranty Provider Bank with the Objection Notice within such three Business Day period, then the Adviser shall be deemed to have agreed to the Warranty ProviderBank's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice. Any amount payable by the Adviser under this Section 4.1(dSECTION 4.1(D) with respect to certain Adviser Conduct (i) shall be paid to the Warranty Provider Bank within three Business Days of the delivery of the Determination Notice or if such PV Shortfall is determined pursuant to an arbitration proceeding, within three Business Days after such final arbitration decision; provided PROVIDED that should the parties otherwise agree on such PV Shortfall, such PV Shortfall shall be paid to the Warranty Provider Bank within three Business Days of such agreement; and (ii) shall be reduced by any amounts paid by the Adviser to the Fund under the Investment Management Agreement as a result of the same Adviser Conduct to the extent that the Total NAV is increased and the PV Shortfall is in fact decreased by such amount. In the event that the Adviser fails to pay to the Warranty Provider Bank any amounts payable under this Section 4.1(dthis
SECTION 4.1 (D) within the time period specified herein, the Shortfall Amount shall be decreased on a pro rata basis by the percentage of the PV Shortfall directly or indirectly attributable to the Adviser Conduct. Notwithstanding anything contained in this Section 4.1(dSECTION 4.1(D) to the contrary, solely for purposes of this Section 4.1(dSECTION 4.1(D), the Adviser shall not be deemed to have committed Adviser Conduct and consequently shall not be liable for any payment under this Section 4.1(dSECTION 4.1(D) if (a) a Potential Trigger Event an event occurs and (b) such Potential Trigger Event is which if not cured or waived would give rise to a Trigger Event; PROVIDED, that such event is cured within the cure time period specified in Section 4.1(a) for the cure of such Potential Trigger Event. The payment of the PV Shortfall amount by the Adviser to the Warranty Provider pursuant to this Section 4.1(d) is in addition to, and not in lieu of, any obligations of the Adviser or Fund to indemnify the Warranty Provider under this AgreementSECTION 4.1(A).
(e) In the event that the terms of Section 4.1(dSECTION 4.1(D) provide for arbitration, each of the Warranty Provider Bank and the Adviser shall select one arbitrator within seven Business Days after the delivery by the Adviser of the Objection Notice; providedPROVIDED, howeverHOWEVER, that if either of such parties shall fail to select an arbitrator within such period, such arbitrator shall be appointed by the American Arbitration Association. National Association of Securities Dealers, Inc. The two arbitrators selected shall select a third arbitrator within five Business Days after each of such arbitrators have been selected or, if they shall be unable to agree on a third arbitrator within such time, such third arbitrator shall be appointed by the American Arbitration Association. National Association of Securities Dealers, Inc. Each arbitrator shall be of exemplary qualifications and stature, and no person affiliated with any party hereto shall be eligible to be an arbitrator. The arbitration shall be held in New York, New York and be governed by the Commercial Arbitration Constitution and Rules of the American Board of Governors of the New York Stock Exchange, Inc. or the Code of Arbitration Procedure of the National Association of Securities Dealers, Inc. and the decision of a majority of the arbitrators shall be final, binding and subject to judicial enforcement and with respect to the specific Adviser Conduct that is the subject of such arbitration decision, shall be the exclusive remedy of the Warranty ProviderBank; providedPROVIDED, howeverHOWEVER, that, notwithstanding the foregoing, the Warranty Provider Bank shall not be limited from seeking indemnification under Section 5.2(a)(iiiSECTION 5.2(A)(III) and (a)(vA)(V) hereof. Fees and expenses of the arbitration (including fees and expenses of the arbitrators) shall be shared by the parties to the arbitration equally.
Appears in 1 contract
Sources: Financial Warranty Agreement (Pioneer Principal Preservation Fund)
Trigger Events. (a) The following events shall constitute Trigger Events hereunder; provided, however, that in the event the New York Stock Exchange closes early on any Exchange Business Day due to extraordinary circumstances (an "Early Close Exchange Business Day"), the cure periods specified in this Section 4.1(a) will be automatically extended such that on the next Exchange Business Day following the Early Close Exchange Business Day, the cure periods will continue for the amount of time lost on such Early Close Exchange Business Day due to such early close (the "Extended Cure Time") (for the avoidance of doubt, should the next Exchange Business Day following the Early Close Exchange Business Day also be an Early Close Exchange Business Day, the cure period will continue for as long as Extended Cure Time remains)::
(i) Any failure at any time to comply with maintain Gap Risk ofnot less than 22.5%, unless the covenant set forth in Adviser notifies the first sentence Insurer upon becoming aware of Section 3.1such failure and is using best efforts to cure such failure (to the reasonable satisfaction of the Insurer) and such failure is cured by the end of the following Business Day;
(ii) Any failure at any time to comply with provide a Daily Report to the provisions of Section 3.2(a)(i), if such violation is not cured on Insurer within two hours following notice by the Exchange Business Day on which Insurer to the Adviser becomes aware of the Insurer's non-receipt thereof, unless the Adviser is using best efforts to cure such failure (as determined by the Insurer in good faith) and such failure is cured by the end of such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business DaysDay;
(iii) Any failure at any time to comply with Section 3.3(c);
violation of Sections 3.01, 3.02, 3.03, 3.04, 3.05 or 3.06 that is not expressly provided for in clause (iv) Any failure at any time to comply with Section 3.2(a)(iii) or Section 3.3 (other than Section 3.3(c)), ii) above unless cured by the end of the Exchange third Business Day following the Exchange Business Day on which such violation occurred;
(iv) Fund Value is less than or equal to at any time (A) 101% of the Bond Floor during the period from and including the Inception Date to but excluding the date one year from the Inception Date (such date, the "First Anniversary"); (B) 100.75% of the Bond Floor during the period from and including the First Anniversary to but excluding the date one year therefrom (such date, the "Second Anniversary"); (C) 100.50% of the Bond Floor during the period from and including the Second Anniversary to but excluding the date one year therefrom (such date, the "Third Anniversary") ; (D) 100.25% of the Bond Floor during the period from and including the Third Anniversary to but excluding the date one year therefrom (such date, the "Fourth Anniversary"); or (E) 100% of the Bond Floor during the period from and including the Fourth Anniversary to and including the Guarantee Maturity Date;
(v) The termination of, or Fund shall fail to pay the Premium Fee as provided in Section 2.04 and such failure shall continue unremedied for a period of two Business Days following notice by the Insurer to comply with, the Expense Limitation AgreementFund and to the Adviser;
(vi) Any violation representation or warranty made by the Adviser or the Trust on behalf of Article III the Fund herein shall have been incorrect or misleading in any material respect when made;
(other than Sections 3.2(a)(vivii) and (xi)) The Adviser or the Trust on behalf of the Fund shall fail to perform any obligation under this Agreement or the Transaction Documents that is not expressly provided for in clause (i), (ii), (iii) or (iv) above unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(vii) Any violation of Section 3.2(a)(vi) or (xi) above, unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation;
(viii) The Fund shall fail to pay the Financial Warranty Fee when due as provided in Section 2.4 and such failure shall continue unremedied for a period of two Business Days after notice of such failure from the Warranty Provider;
(ix) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and any successor adviser that agrees to be bound by the terms of this Agreement is not acceptable to the Warranty Provider in its reasonable discretion after considering the reputation of the successor adviser, its experience in managing large cap equity and fixed income portfolios, its size, its financial condition, its ability to manage the Fund Portfolio in accordance with the Registration Statement and its ability to comply with the Adviser's obligations under this Agreement and the Transaction Documents to which it is a party; provided, that if the successor adviser is the Adviser or an Affiliate of the Adviser, such successor adviser shall be deemed acceptable by the Warranty Provider;
(x) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and either (i) the Adviser is no longer obligated to manage the Fund pursuant to the terms of the Investment Management Agreement and none of (A) a successor investment adviser acceptable to the Warranty Provider, (B) the Adviser or (C) an Affiliate of the Adviser has entered into an investment management agreement with the Fund or (ii) the termination of the Investment Management Agreement is not yet effective but the Board of Trustees of the Fund has indicated its intention to the Warranty Provider, or taken any further action, to appoint a successor investment adviser other than the Adviser or an Affiliate of the Adviser notwithstanding the fact that the Warranty Provider has advised the Board of Trustees that such successor investment adviser would not be acceptable to the Warranty Provider based upon the standards included in Section 4.1(a)(ix), then in either such case a Trigger Event shall be deemed to have occurred notwithstanding the fact that a successor investment adviser has not yet been appointed;
(xi) The Adviser does not, in all material respects, manage the assets of the Fund in accordance with the investment objective, policies and strategies currently set forth in the Registration Statement or in accordance with the Investment Management Agreement;
(xii) Any representation or warranty made by the Adviser or the Fund, in any Transaction Document or in any document or certification provided in connection with any Transaction Document, shall have been incorrect or misleading when made or when deemed made, except where such incorrect or misleading representation or warranty would not have an Adverse Effect in respect of the Adviser or Fund;
(xiii) The Equity Limit for a Class of Shares is less than 0.025;
(xiv) The Adviser, the Fund or the Custodian shall fail to perform any obligation, or shall breach any covenant, under this Agreement or the Transaction Documents that is not expressly provided for in clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) or (xi) above, which failure could reasonably be expected to have an Adverse Effect in respect of the Adviser or Fund and such violation, if capable of being remedied, shall continue unremedied for a period of three Business Days 30 days after notice shall have been given by the Adviser Insurer to such party requiring that such default be cured;
(viii) Either ▇▇▇▇▇'▇ or S&P suspends or withdraws the Custodianshort- or long-term rating of Citigroup Inc., as or downgrades the case may be, becomes aware senior unsecured rating of the occurrence of such failureCitigroup Inc. to or below Baa1 or BBB+; provided, however, that if ▇▇▇▇▇'▇ or S&P revises its rating categories or if a successor rating agency is designated under the following proviso, the Insurer shall determine in good faith the equivalent rating under the revised or successor system and shall notify the Adviser and the Fund of its determination; and provided, further, however that if ▇▇▇▇▇'▇ or S&P ceases its rating operations, the CustodianInsurer may, as by notice to the case may be, shall be deemed Adviser and the Fund,replace such rating agency that maintains a rating of senior unsecured debt of Citigroup Inc. or elect to be aware of such violation if such violation has been in existence for three Exchange Business Dayshave only one rating agency specified herein; or
(xvix) The occurrence of any of the following: following (Ai) except as otherwise permitted by Section 8.01 hereof, the Adviser takes any action to authorize or effect its resignation or takes or fails to take any action the effect of which is more likely than not to result in the resignation or removal of the Adviser, (ii) a Regulatory Event or Event, Litigation Event or any other event, if it is more likely than not that such event will result in the resignation or removal of the Adviser, as reasonably determined by the Insurer after consultation with the Adviser; or (Biii) an Act of Insolvency occurs with respect to the Adviser or the FundAdviser.
(b) Notwithstanding any other provision hereof, if If an event has occurred and is continuing, which, if not cured or waived would give rise to a Trigger Event, then the Adviser may not cause the Fund to acquire any additional Eligible Equity Investments until such event is cured only enter into Risk Reducing Trades and shall upon becoming aware of such event immediately notify consult with Insurer and provide to the Warranty Provider of such event, which notice shall include Insurer a description of the manner in which the Adviser intends to cure such event ("Curative Steps")event, the Adviser's assessment of the likelihood of success, the time the Adviser expects to elapse before such event is cured, and such other information as the Warranty Provider Insurer may reasonably request. Upon sending such notice to the Warranty Provider, the Adviser shall immediately take the Curative Steps set forth in such notice unless and until such time as the Warranty Provider notifies the Adviser that it objects to such Curative Steps, in which case the Adviser shall immediately cease the implementation of such Curative Steps. The Warranty Provider shall only object to such Curative Steps if in the Warranty Provider's reasonable discretion, they are not consistent with this Agreement or are not likely to be an effective cure of the Potential Trigger Event within the cure period set forth in Section 4.1(a), if any. If the Adviser violates this Section 4.1(b), then a Trigger Event shall be deemed to have occurred.
(c) If a Trigger Event occurs and is continuing past the cure period specified therein (if applicable), then, at the election of the Warranty Provider in its sole discretionInsurer, the Warranty Provider Insurer shall have the right to (i) direct the Adviser or the Custodian, as selected by the Warranty Provider, Custodian to invest all of the Fund's assets in accordance with Section 4.2(a) (a "Permanent the Defeasance Event") or (ii) adjust Portfolio pursuant to the Cushion. Any such adjustment shall be permanent, unless Direction and until further adjusted by the Warranty Provider in its sole discretionUndertaking Regarding Remedies. The Warranty Provider Insurer shall notify the Adviser and the Fund of the Warranty ProviderInsurer's exercise of remedies pursuant to this Section 4.1(c4.01(c).
(d) In the event of (i) an act or omission occurrence on the part of the Adviser which constitutes negligence, recklessness, bad faith or willful misconduct, including by way of example only and not intended as an exhaustive list, if (A) the Adviser causes the Fund to purchase additional Eligible Equity Investments in violation of Sections 3.3(d) and 4.1(b), (B) there is a violation of Section 3.2(a)(i) or (ii), or (C) the Adviser causes the Fund to purchase investments other than those permitted to be invested in the event any Business Day of a Permanent Defeasance Trigger Event in violation of Sections 4.1(c)(i) and 4.2(a) (such conduct referenced in subsection (i) of this under Section 4.1(d), the "Adviser Conduct"), and (ii) the existence of a PV Shortfall, the Adviser agrees to pay to the Warranty Provider an amount equal to the amount of such PV Shortfall determined as provided in this Section 4.1(d) to have been directly or indirectly attributable to such Adviser Conduct. The amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct shall be equal to the sum of the differences with respect to each Class of Shares, if negative, between (a) the actual NAV Per Share as of the date of determination and (b) the hypothetical NAV Per Share of a hypothetical portfolio comprised of the actual portfolio assets as of the date of determination adjusted to eliminate the effect of the Adviser Conduct. In making the determination of the PV Shortfall, the hypothetical portfolio will be based on the actual portfolio of assets as of the date of determination adjusted to bring the portfolio into compliance with all of the restrictions of Section 3.2 hereof, by decreasing and increasing positions in asset classes or sectors, as the case may be, on a pro rata basis. The Warranty Provider shall notify (the "Determination Notice") the Adviser in writing of its determination of such PV Shortfall directly or indirectly attributable to the Adviser Conduct. If the Adviser disagrees with the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice, then (i) the Adviser shall notify (the "Objection Notice") the Warranty Provider in writing of such disagreement within three Business Days after the delivery by the Warranty Provider of the Determination Notice and (ii) unless the Adviser and the Warranty Provider otherwise agree on the amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct, the amount thereof shall be determined by arbitration in accordance with the procedures set forth in Section 4.1(e). If the Adviser does not provide the Warranty Provider with the Objection Notice within such three Business Day period, then the Adviser shall be deemed to have agreed to the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice. Any amount payable by the Adviser under this Section 4.1(d4.01(a)(i) with respect to certain which the Adviser Conduct (i) shall be paid has failed to give the notice contemplated thereby, then, subject to the Warranty Provider within three Business Days of Daily Report confirming that the delivery of Gap Risk is less than 22.5%, the Determination Notice or if such PV Shortfall is determined Insurer shall direct the Custodian to invest the Fund's assets in the Defeasance Portfolio pursuant to an arbitration proceeding, within three Business Days after such final arbitration decision; provided that should the parties otherwise agree on such PV Shortfall, such PV Shortfall shall be paid to the Warranty Provider within three Business Days of such agreement; Direction and (ii) shall be reduced by any amounts paid by the Adviser to the Fund as a result of the same Adviser Conduct to the extent that the Total NAV is increased and the PV Shortfall is in fact decreased by such amount. In the event that the Adviser fails to pay to the Warranty Provider any amounts payable under this Section 4.1(d) within the time period specified herein, the Shortfall Amount shall be decreased on a pro rata basis by the percentage of the PV Shortfall directly or indirectly attributable to the Adviser Conduct. Notwithstanding anything contained in this Section 4.1(d) to the contrary, solely for purposes of this Section 4.1(d), the Adviser shall not be deemed to have committed Adviser Conduct and consequently shall not be liable for any payment under this Section 4.1(d) if (a) a Potential Trigger Event occurs and (b) such Potential Trigger Event is cured or waived within the cure period specified in Section 4.1(a) for the cure of such Potential Trigger Event. The payment of the PV Shortfall amount by the Adviser to the Warranty Provider pursuant to this Section 4.1(d) is in addition to, and not in lieu of, any obligations of the Adviser or Fund to indemnify the Warranty Provider under this AgreementUndertaking Regarding Remedies.
(e) In the event that the terms of Section 4.1(d) provide for arbitration, each of the Warranty Provider and the Adviser shall select one arbitrator within seven Business Days after the delivery by the Adviser of the Objection Notice; provided, however, that if either of such parties shall fail to select an arbitrator within such period, such arbitrator shall be appointed by the American Arbitration Association. The two arbitrators selected shall select a third arbitrator within five Business Days after each of such arbitrators have been selected or, if they shall be unable to agree on a third arbitrator within such time, such third arbitrator shall be appointed by the American Arbitration Association. Each arbitrator shall be of exemplary qualifications and stature, and no person affiliated with any party hereto shall be eligible to be an arbitrator. The arbitration shall be held in New York, New York and be governed by the Commercial Arbitration Rules of the American Arbitration Association and the decision of a majority of the arbitrators shall be final, binding and subject to judicial enforcement and with respect to the specific Adviser Conduct that is the subject of such arbitration decision, shall be the exclusive remedy of the Warranty Provider; provided, however, that, notwithstanding the foregoing, the Warranty Provider shall not be limited from seeking indemnification under Section 5.2(a)(iii) and (a)(v) hereof. Fees and expenses of the arbitration (including fees and expenses of the arbitrators) shall be shared by the parties to the arbitration equally.
Appears in 1 contract
Sources: Financial Guarantee Agreement (Smith Barney Trust Ii)
Trigger Events. (a) The following events shall constitute Trigger Events hereunder; provided, however, that in the event the New York Stock Exchange closes early on any Exchange Business Day due to extraordinary circumstances (an "Early Close Exchange Business Day"), the cure periods specified in this Section 4.1(a) will be automatically extended such that on the next Exchange Business Day following the Early Close Exchange Business Day, the cure periods will continue for the amount of time lost on such Early Close Exchange Business Day due to such early close (the "Extended Cure Time") (for the avoidance of doubt, should the next Exchange Business Day following the Early Close Exchange Business Day also be an Early Close Exchange Business Day, the cure period will continue for as long as Extended Cure Time remains):
(i) Any failure at any time to comply with the covenant set forth in the first sentence of Section 3.1;
(ii) Any failure at any time to comply with the provisions of Section 3.2(a)(i), if such violation is not cured on the Exchange Business Day on which the Adviser becomes aware of such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(iii) Any failure at any time to comply with Section 3.3(c);
(iv) Any failure at any time to comply with Section 3.2(a)(ii) or Section 3.3 (other than Section 3.3(c)), unless cured by the end of the Exchange Business Day following the Exchange Business Day on which such violation occurred;
(v) The termination of, or failure to comply with, the Expense Limitation Agreement;
(vi) Any violation of Article III (other than Sections 3.2(a)(vi) and (xi)) that is not provided for in clause (i), (ii), (iii) or (iv) above unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(vii) Any violation of Section 3.2(a)(vi) or (xi) above, unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation;
(viii) The Fund shall fail to pay the Financial Warranty Fee when due as provided in Section 2.4 and such failure shall continue unremedied for a period of two Business Days after notice of such failure from the Warranty Provider;
(ix) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and any successor adviser that agrees to be bound by the terms of this Agreement is not acceptable to the Warranty Provider in its reasonable discretion after considering the reputation of the successor adviser, its experience in managing large cap equity growth funds and fixed income portfolios, its size, its financial condition, its ability to manage the Fund Portfolio in accordance with the Registration Statement and its ability to comply with the Adviser's obligations under this Agreement and the Transaction Documents to which it is a party; provided, that if the successor adviser is the Adviser or an Affiliate of the Adviser, such successor adviser shall be deemed acceptable by the Warranty Provider;
(x) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and either (i) the Adviser is no longer obligated to manage the Fund pursuant to the terms of the Investment Management Agreement and none of (A) a successor investment adviser acceptable to the Warranty Provider, (B) the Adviser or (C) an Affiliate of the Adviser has entered into an investment management agreement with the Fund or (ii) the termination of the Investment Management Agreement is not yet effective but the Board of Trustees of the Fund has indicated its intention to the Warranty Provider, or taken any further action, to appoint a successor investment adviser other than the Adviser or an Affiliate of the Adviser notwithstanding the fact that the Warranty Provider has advised the Board of Trustees that such successor investment adviser would not be acceptable to the Warranty Provider based upon the standards included in Section 4.1(a)(ix), then in either such case a Trigger Event shall be deemed to have occurred notwithstanding the fact that a successor investment adviser has not yet been appointed;
(xi) The Adviser does not, in all material respects, manage the assets of the Fund in accordance with the investment objective, policies and strategies currently set forth in the Registration Statement or in accordance with the Investment Management Agreement;
(xii) Any representation or warranty made by the Adviser or the Fund, in any Transaction Document or in any document or certification provided in connection with any Transaction Document, shall have been incorrect or misleading when made or when deemed made, except where such incorrect or misleading representation or warranty would not have an Adverse Effect in respect of the Adviser or Fund;
(xiii) The Equity Limit for a Class of Shares is less than 0.025;
(xiv) The Adviser, the Fund or the Custodian shall fail to perform any obligation, or shall breach any covenant, under this Agreement or the Transaction Documents that is not expressly provided for in clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) or (xi) above, which failure could reasonably be expected to have an Adverse Effect in respect of the Adviser or Fund and such violation, if capable of being remedied, shall continue unremedied for a period of three Business Days after the Adviser or the Custodian, as the case may be, becomes aware of the occurrence of such failure; provided, that the Adviser or the Custodian, as the case may be, shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days; or
(xv) The occurrence of any of the following: (A) a Regulatory Event or Litigation Event or (B) an Act of Insolvency occurs with respect to the Adviser or the Fund.
(b) Notwithstanding any other provision hereof, if an event has occurred and is continuing, which, if not cured or waived would give rise to a Trigger Event, then the Adviser may not cause the Fund to acquire any additional Eligible Equity Investments until such event is cured and shall upon becoming aware of such event immediately notify the Warranty Provider of such event, which notice shall include a description of the manner in which the Adviser intends to cure such event ("Curative Steps"), the Adviser's assessment of the likelihood of success, the time the Adviser expects to elapse before such event is cured, and such other information as the Warranty Provider may reasonably request. Upon sending such notice to the Warranty Provider, the Adviser shall immediately take the Curative Steps set forth in such notice unless and until such time as the Warranty Provider notifies the Adviser that it objects to such Curative Steps, in which case the Adviser shall immediately cease the implementation of such Curative Steps. The Warranty Provider shall only object to such Curative Steps if in the Warranty Provider's reasonable discretion, they are not consistent with this Agreement or are not likely to be an effective cure of the Potential Trigger Event within the cure period set forth in Section 4.1(a), if any. If the Adviser violates this Section 4.1(b), then a Trigger Event shall be deemed to have occurred.
(c) If a Trigger Event occurs and is continuing past the cure period specified therein (if applicable), then, at the election of the Warranty Provider in its sole discretion, the Warranty Provider shall have the right to (i) direct the Adviser or the Custodian, as selected by the Warranty Provider, to invest all of the Fund's assets in accordance with Section 4.2(a) (a "Permanent Defeasance Event") or (ii) adjust the Cushion. Any such adjustment shall be permanent, unless and until further adjusted by the Warranty Provider in its sole discretion. The Warranty Provider shall notify the Adviser and the Fund of the Warranty Provider's exercise of remedies pursuant to this Section 4.1(c).
(d) In the event of (i) an act or omission on the part of the Adviser which constitutes negligence, recklessness, bad faith or willful misconduct, including by way of example only and not intended as an exhaustive list, if (A) the Adviser causes the Fund to purchase additional Eligible Equity Investments in violation of Sections 3.3(d) and 4.1(b), (B) there is a violation of Section 3.2(a)(i) or (ii), or (C) the Adviser causes the Fund to purchase investments other than those permitted to be invested in the event of a Permanent Defeasance Event in violation of Sections 4.1(c)(i) and 4.2(a) (such conduct referenced in subsection (i) of this Section 4.1(d), the "Adviser Conduct"), and (ii) the existence of a PV Shortfall, the Adviser agrees to pay to the Warranty Provider an amount equal to the amount of such PV Shortfall determined as provided in this Section 4.1(d) to have been directly or indirectly attributable to such Adviser Conduct. The amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct shall be equal to the sum of the differences with respect to each Class of Shares, if negative, between (a) the actual NAV Per Share as of the date of determination and (b) the hypothetical NAV Per Share of a hypothetical portfolio comprised of the actual portfolio assets as of the date of determination adjusted to eliminate the effect of the Adviser Conduct. In making the determination of the PV Shortfall, the hypothetical portfolio will be based on the actual portfolio of assets as of the date of determination adjusted to bring the portfolio into compliance with all of the restrictions of Section 3.2 hereof, by decreasing and increasing positions in asset classes or sectors, as the case may be, on a pro rata basis. The Warranty Provider shall notify (the "Determination Notice") the Adviser in writing of its determination of such PV Shortfall directly or indirectly attributable to the Adviser Conduct. If the Adviser disagrees with the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice, then (i) the Adviser shall notify (the "Objection Notice") the Warranty Provider in writing of such disagreement within three Business Days after the delivery by the Warranty Provider of the Determination Notice and (ii) unless the Adviser and the Warranty Provider otherwise agree on the amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct, the amount thereof shall be determined by arbitration in accordance with the procedures set forth in Section 4.1(e). If the Adviser does not provide the Warranty Provider with the Objection Notice within such three Business Day period, then the Adviser shall be deemed to have agreed to the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice. Any amount payable by the Adviser under this Section 4.1(d) with respect to certain Adviser Conduct (i) shall be paid to the Warranty Provider within three Business Days of the delivery of the Determination Notice or if such PV Shortfall is determined pursuant to an arbitration proceeding, within three Business Days after such final arbitration decision; provided that should the parties otherwise agree on such PV Shortfall, such PV Shortfall shall be paid to the Warranty Provider within three Business Days of such agreement; and (ii) shall be reduced by any amounts paid by the Adviser to the Fund as a result of the same Adviser Conduct to the extent that the Total NAV is increased and the PV Shortfall is in fact decreased by such amount. In the event that the Adviser fails to pay to the Warranty Provider any amounts payable under this Section 4.1(d) within the time period specified herein, the Shortfall Amount shall be decreased on a pro rata basis by the percentage of the PV Shortfall directly or indirectly attributable to the Adviser Conduct. Notwithstanding anything contained in this Section 4.1(d) to the contrary, solely for purposes of this Section 4.1(d), the Adviser shall not be deemed to have committed Adviser Conduct and consequently shall not be liable for any payment under this Section 4.1(d) if (a) a Potential Trigger Event occurs and (b) such Potential Trigger Event is cured or waived within the cure period specified in Section 4.1(a) for the cure of such Potential Trigger Event. The payment of the PV Shortfall amount by the Adviser to the Warranty Provider pursuant to this Section 4.1(d) is in addition to, and not in lieu of, any obligations of the Adviser or Fund to indemnify the Warranty Provider under this Agreement.
(e) In the event that the terms of Section 4.1(d) provide for arbitration, each of the Warranty Provider and the Adviser shall select one arbitrator within seven Business Days after the delivery by the Adviser of the Objection Notice; provided, however, that if either of such parties shall fail to select an arbitrator within such period, such arbitrator shall be appointed by the American Arbitration Association. The two arbitrators selected shall select a third arbitrator within five Business Days after each of such arbitrators have been selected or, if they shall be unable to agree on a third arbitrator within such time, such third arbitrator shall be appointed by the American Arbitration Association. Each arbitrator shall be of exemplary qualifications and stature, and no person affiliated with any party hereto shall be eligible to be an arbitrator. The arbitration shall be held in New York, New York and be governed by the Commercial Arbitration Rules of the American Arbitration Association and the decision of a majority of the arbitrators shall be final, binding and subject to judicial enforcement and with respect to the specific Adviser Conduct that is the subject of such arbitration decision, shall be the exclusive remedy of the Warranty Provider; provided, however, that, notwithstanding the foregoing, the Warranty Provider shall not be limited from seeking indemnification under Section 5.2(a)(iii) and (a)(v) hereof. Fees and expenses of the arbitration (including fees and expenses of the arbitrators) shall be shared by the parties to the arbitration equally.reasonably
Appears in 1 contract
Sources: Financial Warranty Agreement (Merrill Lynch Principal Protected Trust)
Trigger Events. (a) The following events shall constitute Trigger Events hereunder; provided, however, that in the event the New York Stock Exchange closes early on any Exchange Business Day due to extraordinary circumstances (an "Early Close Exchange Business Day"), the cure periods specified in this Section 4.1(a) will be automatically extended such that on the next Exchange Business Day following the Early Close Exchange Business Day, the cure periods will continue for the amount of time lost on such Early Close Exchange Business Day due to such early close (the "Extended Cure Time") (for the avoidance of doubt, should the next Exchange Business Day following the Early Close Exchange Business Day also be an Early Close Exchange Business Day, the cure period will continue for as long as Extended Cure Time remains)::
(i) Any failure at any time to comply with the covenant set forth maintain Gap Risk of not less than 25%, as indicated in the first sentence Daily Report, unless the Adviser notifies the Insurer upon becoming aware of Section 3.1such failure and the Adviser is using best efforts to cure such failure (to the reasonable satisfaction of the Insurer);
(ii) Any failure at any time to comply with provide a Daily Report to the provisions of Section 3.2(a)(i), if such violation is not cured on Insurer within two hours following notice by the Exchange Business Day on which Insurer to the Adviser becomes aware of the Insurer's non-receipt thereof, unless the Adviser is using best efforts to cure such failure (as determined by the Insurer in good faith) and such failure is cured by the end of such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business DaysDay;
(iii) Any failure at any time to comply with violation of Section 3.3(c);
3.01, 3.02, 3.03, 3.04, 3.05, 3.06, 3.07, 3.08, 3.09 or 3.10 that is not expressly provided for in clause (iv) Any failure at any time to comply with Section 3.2(a)(iii) or Section 3.3 (other than Section 3.3(c)), ii) above unless cured by the end of the Exchange third Business Day following the Exchange Business Day on which such violation occurred;
(iv) Gap Risk is less than or equal to 20%, as indicated in the Daily Report;
(v) The termination of, Fund Value is less than or failure equal to comply with, 101% of the Expense Limitation AgreementBond Floor at any time;
(vi) The Fund shall fail to pay the Premium Fee as provided in Section 2.04 and such failure shall continue unremedied for a period of two Business Days following notice by the Insurer to the Fund and to the Adviser;
(vii) Any violation representation or warranty made by the Adviser or the Trust on behalf of Article III the Fund herein shall have been incorrect or misleading in any material respect when made;
(other than Sections 3.2(a)(viviii) and (xi)) The Adviser or the Trust on behalf of the Fund shall fail to perform any obligation under this Agreement or the Transaction Documents that is not expressly provided for in clause (i), (ii), (iii) or (ivvi) above unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation; providedabove, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(vii) Any violation of Section 3.2(a)(vi) or (xi) above, unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation;
(viii) The Fund shall fail to pay the Financial Warranty Fee when due as provided in Section 2.4 and such failure shall continue unremedied for a period of two Business Days after notice of such failure from the Warranty Provider;
(ix) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and any successor adviser that agrees to be bound by the terms of this Agreement is not acceptable to the Warranty Provider in its reasonable discretion after considering the reputation of the successor adviser, its experience in managing large cap equity and fixed income portfolios, its size, its financial condition, its ability to manage the Fund Portfolio in accordance with the Registration Statement and its ability to comply with the Adviser's obligations under this Agreement and the Transaction Documents to which it is a party; provided, that if the successor adviser is the Adviser or an Affiliate of the Adviser, such successor adviser shall be deemed acceptable by the Warranty Provider;
(x) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and either (i) the Adviser is no longer obligated to manage the Fund pursuant to the terms of the Investment Management Agreement and none of (A) a successor investment adviser acceptable to the Warranty Provider, (B) the Adviser or (C) an Affiliate of the Adviser has entered into an investment management agreement with the Fund or (ii) the termination of the Investment Management Agreement is not yet effective but the Board of Trustees of the Fund has indicated its intention to the Warranty Provider, or taken any further action, to appoint a successor investment adviser other than the Adviser or an Affiliate of the Adviser notwithstanding the fact that the Warranty Provider has advised the Board of Trustees that such successor investment adviser would not be acceptable to the Warranty Provider based upon the standards included in Section 4.1(a)(ix), then in either such case a Trigger Event shall be deemed to have occurred notwithstanding the fact that a successor investment adviser has not yet been appointed;
(xi) The Adviser does not, in all material respects, manage the assets of the Fund in accordance with the investment objective, policies and strategies currently set forth in the Registration Statement or in accordance with the Investment Management Agreement;
(xii) Any representation or warranty made by the Adviser or the Fund, in any Transaction Document or in any document or certification provided in connection with any Transaction Document, shall have been incorrect or misleading when made or when deemed made, except where such incorrect or misleading representation or warranty would not have an Adverse Effect in respect of the Adviser or Fund;
(xiii) The Equity Limit for a Class of Shares is less than 0.025;
(xiv) The Adviser, the Fund or the Custodian shall fail to perform any obligation, or shall breach any covenant, under this Agreement or the Transaction Documents that is not expressly provided for in clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) or (xi) abovebelow, which failure could reasonably be expected to have an Adverse Effect in respect of the Adviser or Fund and such violation, if capable of being remedied, shall continue unremedied for a period of three Business Days 30 days after written notice shall have been given by the Adviser Insurer to such party requiring that such default be cured;
(ix) Either Moody's or S&P suspends or withdraws the Custodianshort- or long-term rating of The Northwestern Mutual Life Insurance Company ("Northwestern Mutual"), as or downgrades the case may be, becomes aware senior unsecured rating of the occurrence of such failureNorthwestern Mutual to or below "Baa1" or "BBB+"; provided, however, that if Moody's or S&P revises its rating categories or if a successor rating agency is designated under the following proviso, the Insurer shall determine in good faith the equivalent rating under the revised or successor system and shall notify the Adviser and the Fund of its determination; and provided, further, however, that if Moody's or S&P ceases its rating operations, the CustodianInsurer may, as by notice to the case may beAdviser and the Fund, shall be deemed replace such rating agency that maintains a rating of senior unsecured debt of Northwestern Mutual or elect to be aware of such violation if such violation has been in existence for three Exchange Business Days; orhave only one rating agency specified herein;
(xvx) The occurrence of any of the following: (Ai) except as otherwise permitted by Section 8.01 hereof, the Adviser takes any action to authorize or effect its resignation or takes or fails to take any action the effect of which is more likely than not to result in the resignation or removal of the Adviser; (ii) a Regulatory Event or Event, Litigation Event or any other event, if it is more likely than not that such event will result in the resignation or removal of the Adviser, as reasonably determined by the Insurer after consultation with the Adviser; (Biii) an Act of Insolvency occurs with respect to the Adviser Adviser; or (iv) any "assignment" of the Advisory Agreement (within the meaning of the Investment Company Act), unless each of the other parties to the Agreement shall have given their prior written consent thereto;
(xi) Notice of termination of the Custodian Agreement is given by the Fund or the FundCustodian, and the Fund is unable to engage a successor Custodian that agrees to be bound by the Direction and Undertaking Regarding Remedies not less than five (5) Business Days prior to the effective date of any such termination;
(xii) The Fund or the Adviser fails to notify the Insurer of the occurrence of a Subadviser Event within three (3) Business Days following the date on which such Subadviser Event occurred; or
(xiii) Notice of termination of the Advisory Agreement is given by the Fund or the Adviser.
(b) Notwithstanding any other provision hereof, if If an event has occurred and is continuing, which, if not cured or waived would give rise to a Trigger Event, then the Adviser may not cause the Fund to acquire any additional Eligible Equity Investments until such event is cured only enter into Risk Reducing Trades and shall upon becoming aware of such event immediately notify consult with the Warranty Provider of such event, which notice shall include Insurer and provide to the Insurer a description of the manner in which the Adviser intends to cure such event ("Curative Steps")event, the Adviser's assessment of the likelihood of success, the time the Adviser expects to elapse before such event is cured, and such other information as the Warranty Provider Insurer may reasonably request. Upon sending such notice to the Warranty Provider, the Adviser shall immediately take the Curative Steps set forth in such notice unless and until such time as the Warranty Provider notifies the Adviser that it objects to such Curative Steps, in which case the Adviser shall immediately cease the implementation of such Curative Steps. The Warranty Provider shall only object to such Curative Steps if in the Warranty Provider's reasonable discretion, they are not consistent with this Agreement or are not likely to be an effective cure of the Potential Trigger Event within the cure period set forth in Section 4.1(a), if any. If the Adviser violates this Section 4.1(b), then a Trigger Event shall be deemed to have occurred.
(c) If a Trigger Event occurs and is continuing past the cure period specified therein (if applicable), then, at the election of the Warranty Provider in its sole discretionInsurer, the Warranty Provider Insurer shall have the right to (i) direct the Adviser or the Custodian, as selected by the Warranty Provider, Custodian to invest all of the Fund's assets in accordance with Section 4.2(a) (a "Permanent the Defeasance Event") or (ii) adjust Portfolio pursuant to the Cushion. Any such adjustment shall be permanent, unless Direction and until further adjusted by the Warranty Provider in its sole discretionUndertaking Regarding Remedies. The Warranty Provider Insurer shall notify the Adviser and the Fund of the Warranty ProviderInsurer's exercise of remedies pursuant to this Section 4.1(c)4.01(c) as promptly as reasonably practicable.
(d) In the event of (i) an act or omission occurrence on the part of the Adviser which constitutes negligence, recklessness, bad faith or willful misconduct, including by way of example only and not intended as an exhaustive list, if (A) the Adviser causes the Fund to purchase additional Eligible Equity Investments in violation of Sections 3.3(d) and 4.1(b), (B) there is a violation of Section 3.2(a)(i) or (ii), or (C) the Adviser causes the Fund to purchase investments other than those permitted to be invested in the event any Business Day of a Permanent Defeasance Trigger Event in violation of Sections 4.1(c)(i) and 4.2(a) (such conduct referenced in subsection (i) of this under Section 4.1(d), the "Adviser Conduct"), and (ii) the existence of a PV Shortfall, the Adviser agrees to pay to the Warranty Provider an amount equal to the amount of such PV Shortfall determined as provided in this Section 4.1(d) to have been directly or indirectly attributable to such Adviser Conduct. The amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct shall be equal to the sum of the differences with respect to each Class of Shares, if negative, between (a) the actual NAV Per Share as of the date of determination and (b) the hypothetical NAV Per Share of a hypothetical portfolio comprised of the actual portfolio assets as of the date of determination adjusted to eliminate the effect of the Adviser Conduct. In making the determination of the PV Shortfall, the hypothetical portfolio will be based on the actual portfolio of assets as of the date of determination adjusted to bring the portfolio into compliance with all of the restrictions of Section 3.2 hereof, by decreasing and increasing positions in asset classes or sectors, as the case may be, on a pro rata basis. The Warranty Provider shall notify (the "Determination Notice") the Adviser in writing of its determination of such PV Shortfall directly or indirectly attributable to the Adviser Conduct. If the Adviser disagrees with the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice, then (i) the Adviser shall notify (the "Objection Notice") the Warranty Provider in writing of such disagreement within three Business Days after the delivery by the Warranty Provider of the Determination Notice and (ii) unless the Adviser and the Warranty Provider otherwise agree on the amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct, the amount thereof shall be determined by arbitration in accordance with the procedures set forth in Section 4.1(e). If the Adviser does not provide the Warranty Provider with the Objection Notice within such three Business Day period, then the Adviser shall be deemed to have agreed to the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice. Any amount payable by the Adviser under this Section 4.1(d4.01(a)(i) with respect to certain which the Adviser Conduct (i) shall be paid has failed to give the notice contemplated thereby, then, subject to the Warranty Provider within three Business Days Daily Report confirming that the Gap Risk is less than 25%, the Insurer shall have the right to direct the Custodian to invest the Fund's assets in the Defeasance Portfolio pursuant to the Direction and Undertaking Regarding Remedies. The Insurer shall notify the Adviser of the delivery Insurer's exercise of the Determination Notice or if such PV Shortfall is determined pursuant to an arbitration proceeding, within three Business Days after such final arbitration decision; provided that should the parties otherwise agree on such PV Shortfall, such PV Shortfall shall be paid to the Warranty Provider within three Business Days of such agreement; and (ii) shall be reduced by any amounts paid by the Adviser to the Fund as a result of the same Adviser Conduct to the extent that the Total NAV is increased and the PV Shortfall is in fact decreased by such amount. In the event that the Adviser fails to pay to the Warranty Provider any amounts payable under this Section 4.1(d) within the time period specified herein, the Shortfall Amount shall be decreased on a pro rata basis by the percentage of the PV Shortfall directly or indirectly attributable to the Adviser Conduct. Notwithstanding anything contained in this Section 4.1(d) to the contrary, solely for purposes of this Section 4.1(d), the Adviser shall not be deemed to have committed Adviser Conduct and consequently shall not be liable for any payment under this Section 4.1(d) if (a) a Potential Trigger Event occurs and (b) such Potential Trigger Event is cured or waived within the cure period specified in Section 4.1(a) for the cure of such Potential Trigger Event. The payment of the PV Shortfall amount by the Adviser to the Warranty Provider remedies pursuant to this Section 4.1(d4.01(d) is in addition to, and not in lieu of, any obligations of the Adviser or Fund to indemnify the Warranty Provider under this Agreementas promptly as reasonably practicable.
(e) In the event that the terms of Section 4.1(d) provide for arbitration, each of the Warranty Provider and the Adviser shall select one arbitrator within seven Business Days after the delivery by the Adviser of the Objection Notice; provided, however, that if either of such parties shall fail to select an arbitrator within such period, such arbitrator shall be appointed by the American Arbitration Association. The two arbitrators selected shall select a third arbitrator within five Business Days after each of such arbitrators have been selected or, if they shall be unable to agree on a third arbitrator within such time, such third arbitrator shall be appointed by the American Arbitration Association. Each arbitrator shall be of exemplary qualifications and stature, and no person affiliated with any party hereto shall be eligible to be an arbitrator. The arbitration shall be held in New York, New York and be governed by the Commercial Arbitration Rules of the American Arbitration Association and the decision of a majority of the arbitrators shall be final, binding and subject to judicial enforcement and with respect to the specific Adviser Conduct that is the subject of such arbitration decision, shall be the exclusive remedy of the Warranty Provider; provided, however, that, notwithstanding the foregoing, the Warranty Provider shall not be limited from seeking indemnification under Section 5.2(a)(iii) and (a)(v) hereof. Fees and expenses of the arbitration (including fees and expenses of the arbitrators) shall be shared by the parties to the arbitration equally.
Appears in 1 contract
Sources: Financial Guarantee Agreement (Russell Frank Investment Co)
Trigger Events. (a) The following events shall constitute Trigger Events hereunder; provided, however, that in the event the New York Stock Exchange closes early on any Exchange Business Day due to extraordinary or other circumstances (an "Early Close Exchange Business Day"), the cure periods specified in this Section 4.1(a) will be automatically extended such that on the next Exchange Business Day following the Early Close Exchange Business Day, the cure periods will continue for the amount of time lost on such Early Close Exchange Business Day due to such early close (the "Extended Cure Time") (for the avoidance of doubt, should the next Exchange Business Day following the Early Close Exchange Business Day also be an Early Close Exchange Business Day, the cure period will continue for as long as Extended Cure Time remains):
(i) Any failure at any time to comply with the covenant set forth in the first sentence of Section 3.1;
(ii) Any failure at any time to comply with the provisions of Section 3.2(a)(i), if such violation failure is not cured (A) on the Exchange Business Day on which the Adviser becomes aware of such violation if the Adviser becomes aware of such violation prior to 1:00 p.m. on such Exchange Business Day, and (B) by 12:00 p.m. on the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation, if the Adviser becomes aware of such violation subsequent to 1:00 p.m. on such first Exchange Business Day; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(iii) Any failure at any time to comply with Section 3.3(c);
(iv) Any failure at any time to comply with Section 3.2(a)(ii) or Section 3.3 (other than Section 3.3(c)), unless cured by the end of the Exchange Business Day following the Exchange Business Day on which such violation occurred;
(v) The termination of, or failure to comply with, the Expense Limitation Agreement;
(vi) Any violation of Article III (other than Sections 3.2(a)(via violation of Section 3.4(d) and (xi)arising because the Warranty Provider was denied access to the JPM VIEWS System during a Force Majeure Event that affected such access) that is not provided for in clause (i), (ii), (iii) or (iv) above unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(viivi) Any violation of Section 3.2(a)(vi3.4(d) or (xi) abovearising because the Warranty Provider was denied access to the JPM VIEWS System during a Force Majeure Event that affected such access and the Adviser is aware of such violation, unless (A) cured by the end of the third Exchange Business Day following the Exchange Business Day on which such violation occurred or (B) another arrangement that is acceptable to the Adviser becomes aware Warranty Provider is established by the end of the third Exchange Business Day following the Exchange Business Day on which such violationviolation occurred;
(viiivii) The Fund shall fail to pay the Financial Warranty Fee when due as provided in Section 2.4 and such failure shall continue unremedied for a period of two Business Days after notice of such failure from the Warranty ProviderProvider to the Trust or the Adviser;
(ixviii) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and any successor adviser that agrees to be bound by the terms of this Agreement is not acceptable to the Warranty Provider in its reasonable discretion after considering the reputation of the successor adviser, its experience in managing large cap equity portfolios and fixed income portfolios, its size, its financial condition, its ability to manage the Fund Portfolio in accordance with the Registration Statement and its ability to comply with the Adviser's obligations under this Agreement and the Transaction Documents to which it is a party; provided, that if the successor adviser is the Adviser or an Affiliate of the Adviser, such successor adviser shall be deemed acceptable by the Warranty Provider;
(xix) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and either (i) the Adviser is no longer obligated to manage the Fund pursuant to the terms of the Investment Management Agreement and none of (A) a successor investment adviser acceptable to the Warranty Provider, (B) the Adviser or (C) an Affiliate of the Adviser has entered into an investment management agreement with the Trust on behalf of the Fund or (ii) the termination of the Investment Management Agreement is not yet effective but the Board of Trustees of the Trust on behalf of the Fund has indicated its intention to the Warranty Provider, or taken any further action, to appoint a successor investment adviser other than the Adviser or an Affiliate of the Adviser notwithstanding the fact that the Warranty Provider has advised the Board of Trustees that such successor investment adviser would not be acceptable to the Warranty Provider based upon the standards included in Section 4.1(a)(ix4.1(a)(viii), then in either such case a Trigger Event shall be deemed to have occurred notwithstanding the fact that a successor investment adviser has not yet been appointed;
(xix) The Adviser does not, in all material respects, manage the assets of the Fund in accordance with the investment objective, policies and strategies currently set forth in the then-current Registration Statement or in accordance with the Investment Management AgreementStatement;
(xiixi) Any representation or warranty made by the Adviser or the Fund, in any Transaction Document or in any document or certification provided in connection with any Transaction Document, shall have been incorrect or misleading when made or when deemed made, except where such incorrect or misleading representation or warranty would not have an Adverse Effect in respect of the Adviser or Fund;
(xiiixii) The Equity Limit for a Class of Shares is less than 0.025;
(xivxiii) The Adviser, the Fund or the Custodian shall fail to perform any obligation, or shall breach any covenant, under this Agreement or the Transaction Documents that is not expressly provided for in clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) or (xi) above, which failure could reasonably be expected to have an Adverse Effect in respect of the Adviser or Fund and such violation, if capable of being remedied, shall continue unremedied for a period of three Business Days after the Adviser or the Custodian, as the case may be, becomes aware of the occurrence of such failure; provided, that the Adviser or the Custodian, as the case may be, shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days; or
(xvxiv) The occurrence of any of the following: (A) a Regulatory Event or Event, (B) the Adviser becomes aware of a Litigation Event (other than a Litigation Event commenced against the Adviser or the Fund arising out of a claim under this Agreement between the Adviser and/or the Trust on behalf of the Fund on one side and the Warranty Provider on the other side); provided, that the Adviser shall be deemed to be aware of a Litigation Event if such Litigation Event has been in existence for three Exchange Business Days or (BC) an Act of Insolvency occurs with respect to the Adviser or the Fund.
(b) Notwithstanding any other provision hereof, if an event has occurred and is continuing, which, if not cured or waived would give rise to a Trigger Event, then the Adviser may not cause the Fund to acquire any additional Eligible Equity Investments until such event is cured and shall upon becoming aware of such event immediately notify the Warranty Provider of such event, which notice shall include a description of the manner in which the Adviser intends to cure such event ("Curative Steps"), the Adviser's assessment of the likelihood of success, the time the Adviser expects to elapse before such event is cured, and such other information as the Warranty Provider may reasonably request. Upon sending such notice to the Warranty Provider, the Adviser shall immediately take the Curative Steps set forth in such notice unless and until such time as the Warranty Provider notifies the Adviser that it objects to such Curative Steps, in which case the Adviser shall immediately cease the implementation of such Curative Steps. The Warranty Provider shall only object to such Curative Steps if in the Warranty Provider's reasonable discretion, they are not consistent with this Agreement or are not likely to be an effective cure of the Potential Trigger Event within the cure period set forth in Section 4.1(a), if any. If the Adviser violates this Section 4.1(b), then a Trigger Event shall be deemed to have occurred.
(c) If a Trigger Event occurs and is continuing past the cure period specified therein (if applicable), then, at the election of the Warranty Provider in its sole discretion, the Warranty Provider shall have the right to (i) direct the Adviser or the Custodian, as selected by the Warranty Provider, to invest all of the Fund's assets in accordance with Section 4.2(a) (a "Permanent Defeasance Event") or (ii) adjust the Cushion. Any such adjustment shall be permanent, unless and until further adjusted by the Warranty Provider in its sole discretion. The Warranty Provider shall notify the Adviser and the Fund of the Warranty Provider's exercise of remedies pursuant to this Section 4.1(c)) prior to such exercise.
(d) In the event of (i) an act or omission on the part of the Adviser which constitutes negligence, recklessness, bad faith or willful misconduct, including by way of example only and not intended as an exhaustive list, if (A) the Adviser causes the Fund to purchase additional Eligible Equity Investments in violation of Sections 3.3(d) and 4.1(b), (B) there is a violation of Section 3.2(a)(i) or (ii), or (C) the Adviser causes the Fund to purchase investments other than those permitted to be invested in the event of a Permanent Defeasance Event in violation of Sections 4.1(c)(i) and 4.2(a) (such conduct referenced in subsection (i) of this Section 4.1(d), the "Adviser Conduct"), and (ii) the existence of a PV Shortfall, the Adviser agrees to pay to the Warranty Provider an amount equal to the amount of such PV Shortfall determined as provided in this Section 4.1(d) to have been directly or indirectly attributable to such Adviser Conduct. The amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct shall be equal to the sum of the differences with respect to each Class of Shares, if negative, between (a) the actual NAV Per Share as of the date of determination and (b) the hypothetical NAV Per Share of a hypothetical portfolio comprised of the actual portfolio assets as of the date of determination adjusted to eliminate the effect of the Adviser Conduct to the extent necessary to eliminate any PV Shortfall directly or indirectly attributable to such Adviser Conduct. In making the determination of the PV Shortfall, the hypothetical portfolio will be based on the actual portfolio of assets as of the date of determination adjusted to bring the portfolio into compliance with all of the restrictions of Section 3.2 hereof, by decreasing and increasing positions in asset classes or sectorsthe Equity Portfolio and the Fixed Income Portfolio, as the case may be, on a pro rata basis, or re-allocating positions within the Fixed Income Portfolio. The Warranty Provider shall notify (the "Determination Notice") the Adviser in writing of its determination of such PV Shortfall directly or indirectly attributable to the Adviser Conduct. If the Adviser disagrees with the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice, then (i) the Adviser shall notify (the "Objection Notice") the Warranty Provider in writing of such disagreement within three Business Days after the delivery by the Warranty Provider of the Determination Notice and (ii) unless the Adviser and the Warranty Provider otherwise agree on the amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct, the amount thereof shall be determined by arbitration in accordance with the procedures set forth in Section 4.1(e). If the Adviser does not provide the Warranty Provider with the Objection Notice within such three Business Day period, then the Adviser shall be deemed to have agreed to the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct contained in the Determination Notice. Any amount payable by the Adviser under this Section 4.1(d) with respect to certain Adviser Conduct (i) shall be paid to the Fund or alternatively to the Warranty Provider within three Business Days of the delivery of the Determination Notice or or, if such PV Shortfall is determined pursuant to an arbitration proceeding, within three Business Days after such final arbitration decision, and shall increase the Total NAV and decrease the PV Shortfall in the amount of any such payments made to the Fund; provided that should the parties otherwise agree on such PV Shortfall, such PV Shortfall shall be paid to the Fund or alternatively to the Warranty Provider within three Business Days of such agreement; and (ii) shall be reduced by any amounts paid by the Adviser to the Fund as a result of the same Adviser Conduct to the extent that the Total NAV is increased and the PV Shortfall is in fact decreased by such amount. In the event that the Adviser fails to pay to the Fund or the Warranty Provider any amounts payable under this Section 4.1(d) within the time period specified herein, the Shortfall Amount shall be decreased on a pro rata basis by the percentage of the PV Shortfall directly or indirectly attributable to the Adviser Conduct. Notwithstanding anything contained in this Section 4.1(d) to the contrary, solely for purposes of this Section 4.1(d), the Adviser shall not be deemed to have committed Adviser Conduct and consequently shall not be liable for any payment under this Section 4.1(d) if (a) a Potential Trigger Event occurs and (b) such Potential Trigger Event is cured or waived within the cure period specified in Section 4.1(a) for the cure of such Potential Trigger Event. The payment of the PV Shortfall amount by the Adviser to the Warranty Provider pursuant to this Section 4.1(d) is in addition to, and not in lieu of, any obligations of the Adviser or Fund to indemnify the Warranty Provider under this Agreement.
(e) In the event that the terms of Section 4.1(d) provide for arbitration, each of the Warranty Provider and the Adviser shall select one arbitrator within seven Business Days after the delivery by the Adviser of the Objection Notice; provided, however, that if either of such parties shall fail to select an arbitrator within such period, such arbitrator shall be appointed by the American Arbitration Association. The two arbitrators selected shall select a third arbitrator within five Business Days after each of such arbitrators have been selected or, if they shall be unable to agree on a third arbitrator within such time, such third arbitrator shall be appointed by the American Arbitration Association. Each arbitrator shall be of exemplary qualifications and stature, and no person affiliated with any party hereto shall be eligible to be an arbitrator. The arbitration shall be held in New York, New York and be governed by the Commercial Arbitration Rules of the American Arbitration Association and the decision of a majority of the arbitrators shall be final, binding and subject to judicial enforcement and with respect to the specific Adviser Conduct that is the subject of such arbitration decision, shall be the exclusive remedy of the Warranty Provider; provided, however, that, notwithstanding the foregoing, the Warranty Provider shall not be limited from seeking indemnification under Section 5.2(a)(iii) and (a)(v) hereof. Fees and expenses of the arbitration (including fees and expenses of the arbitrators) shall be shared by the parties to the arbitration equally.
Appears in 1 contract
Sources: Financial Warranty Agreement (Oppenheimer Principal Protected Trust Ii)
Trigger Events. (a) The following events shall constitute Trigger Events hereunder; providedPROVIDED, howeverHOWEVER, that in the event the New York Stock Exchange closes early on any Exchange Business Day due to extraordinary circumstances (an "Early Close Exchange Business DayEARLY CLOSE EXCHANGE BUSINESS DAY"), the cure periods specified in this Section 4.1(aSECTION 4.1(A) will be automatically extended such that on the next Exchange Business Day following the Early Close Exchange Business Day, the cure periods will continue for the amount of time lost on such Early Close Exchange Business Day due to such early close (the "Extended Cure TimeEXTENDED CURE TIME") (for the avoidance of doubt, should the next Exchange Business Day following the Early Close Exchange Business Day also be an Early Close Exchange Business Day, the cure period will continue for as long as Extended Cure Time remains):
(i) Any failure at any time to comply with the covenant set forth in the first sentence of Section SECTION 3.1;
(ii) Any failure at any time to comply with the provisions of Section 3.2(a)(iSECTION 3.2(A)(I), if such violation is not cured on the Exchange Business Day on which the Adviser becomes aware of such violation; providedPROVIDED, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(iii) Any failure at any time to comply with Section 3.3(cSECTION 3.3(C);
(iv) Any failure at any time to comply with Section 3.2(a)(iiSECTION 3.2(A)(II) or Section SECTION 3.3 (other than Section 3.3(cSECTION 3.3(C)), unless cured by the end of the Exchange Business Day following the Exchange Business Day on which such violation occurred;
(v) The termination of, or failure to comply with, the Expense Limitation Agreement;
(vi) Any violation of Article ARTICLE III (other than Sections 3.2(a)(viSECTIONS 3.2(A)(VI) and (xiXI)) that is not provided for in clause (i), (ii), (iii) or (iv) above above, unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation; providedPROVIDED, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(vii) Any violation of Section 3.2(a)(viSECTION 3.2(A)(VI) or (xiXI) above, unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation;
(viii) The Fund shall fail to pay the Financial Warranty Fee when due as provided in Section SECTION 2.4 and such failure shall continue unremedied for a period of two Business Days after notice of such failure from the Warranty Provider;
(ix) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and any successor adviser (including the Adviser) that agrees to be bound by the terms of this Agreement is not acceptable to the Warranty Provider in its reasonable discretion after considering the reputation of the successor adviser, its experience in managing large cap equity and fixed income portfolios, its size, its financial condition, its ability to manage the Fund Portfolio in accordance with the Registration Statement and its ability to comply with the Adviser's obligations under this Agreement and the Transaction Documents to which it is a party; provided, that if the successor adviser is the Adviser or an Affiliate of the Adviser, such successor adviser shall be deemed acceptable by the Warranty Provider;
(x) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and either (i) the Adviser is no longer obligated to manage the Fund pursuant to the terms of the Investment Management Agreement and none of (A) a successor investment adviser acceptable to the Warranty Provider, (B) the Adviser or (C) an Affiliate of the Adviser Provider has not entered into an investment management agreement with the Fund or (ii) the termination of the Investment Management Agreement is not yet effective but the Board of Trustees of the Fund has indicated its intention to the Warranty Provider, or taken any further action, to appoint a successor investment adviser other than the Adviser or an Affiliate of the Adviser notwithstanding the fact that the Warranty Provider has advised the Board of Trustees that such successor investment adviser would not be acceptable to the Warranty Provider based upon the standards included in Section 4.1(a)(ixSECTION 4.1(A)(IX), then in either such case a Trigger Event shall be deemed to have occurred notwithstanding the fact that a successor investment adviser has not yet been appointed;
(xi) The Adviser does not, in all material respects, manage the assets of the Fund in accordance with the investment objective, policies and strategies currently set forth in the Registration Statement or in accordance with the Investment Management AgreementStatement;
(xii) Any representation or warranty made by the Adviser or the Fund, in any Transaction Document or in any document or certification provided in connection with any Transaction Document, shall have been incorrect or misleading in any material respect when made or when deemed made, except where such incorrect or misleading representation or warranty would not have an Adverse Effect in respect of the Adviser or Fund;
(xiii) The Equity Limit for a Class of Shares is less than 0.0250.05;
(xiv) The Adviser, Adviser or the Fund or the Custodian shall fail to perform any obligation, or shall breach any covenant, under this Agreement or the Transaction Documents that is not expressly provided for in clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) or (xi) above, which failure could reasonably be expected to have an Adverse Effect in respect of the Adviser or Fund and such violation, if capable of being remedied, shall continue unremedied for a period of three Exchange Business Days after the Adviser or the Custodian, as the case may be, becomes aware of the occurrence of such failure; provided, that the Adviser or the Custodian, as the case may be, shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days; or
(xv) The occurrence of any of the following: (A) a Regulatory Event or Litigation Event or (B) an Act of Insolvency occurs with respect to the Adviser or the FundAdviser.
(b) Notwithstanding any other provision hereof, if an event has occurred and is continuing, which, if not cured or waived would give rise to a Trigger Event, then the Adviser may not cause the Fund to acquire any additional Eligible Equity Investments until such event is cured and shall upon becoming aware of such event immediately notify the Warranty Provider of such event, which notice shall include a description of the manner in which the Adviser intends to cure such event ("Curative StepsCURATIVE STEPS"), the Adviser's assessment of the likelihood of success, the time the Adviser expects to elapse before such event is cured, and such other information as the Warranty Provider may reasonably request. Upon sending such notice to the Warranty Provider, the Adviser shall immediately take the Curative Steps set forth in such notice unless and until such time as the Warranty Provider notifies the Adviser that it objects to such Curative Steps, in which case the Adviser shall immediately cease the implementation of such Curative Steps. The Warranty Provider shall only object to such Curative Steps if in the Warranty Provider's reasonable discretion, they are not consistent with this Agreement or are not likely to be an effective cure of the Potential potential Trigger Event within the cure period set forth in Section 4.1(aSECTION 4.1(A), if any. If the Adviser violates this Section 4.1(bSECTION 4.1(B), then a Trigger Event shall be deemed to have occurred.
(c) If a Trigger Event occurs and is continuing past the cure period specified therein (if applicable), then, at the election of the Warranty Provider in its sole discretion, the Warranty Provider shall have the right to (i) direct the Adviser or the Custodian, as selected by the Warranty Provider, to invest all of the Fund's assets in accordance with Section 4.2(aSECTION 4.2(A) (a "Permanent Defeasance EventPERMANENT DEFEASANCE EVENT") or (ii) adjust the Cushion. Any such adjustment shall be permanent, unless and until further adjusted by the Warranty Provider in its sole discretion. The Warranty Provider shall notify the Adviser and the Fund of the Warranty Provider's exercise of remedies pursuant to this Section 4.1(cSECTION 4.1(C).
(d) In the event of (i) an act or omission on the part of the Adviser which constitutes gross negligence, recklessness, bad faith or willful misconduct, including by way of example only and not intended as an exhaustive list, if (A) the Adviser causes the Fund to purchase additional Eligible Equity Investments in violation of Sections 3.3(d) and 4.1(b), (B) there is a violation of Section 3.2(a)(i) or (ii), or (C) the Adviser causes the Fund to purchase investments other than those permitted to be invested in the event of a Permanent Defeasance Event in violation of Sections 4.1(c)(i) and 4.2(a) misconduct (such conduct referenced in subsection (iI) of this Section 4.1(dSECTION 4.1(D), the "Adviser ConductADVISER CONDUCT"), and (ii) the existence of a PV Shortfall, the Adviser agrees to pay to the Warranty Provider an amount equal to the amount of such PV Shortfall determined as provided in this Section 4.1(dSECTION 4.1(D) to have been directly or indirectly attributable to such Adviser Conduct. The amount of such PV Shortfall directly or indirectly attributable to the Adviser Conduct shall be equal to the sum of the differences with respect to each Class of Sharesdifference, if negative, between (a) the actual Total NAV Per Share as of the date of determination and (b) the hypothetical Total NAV Per Share of a hypothetical portfolio comprised of the actual portfolio assets as of the date of determination adjusted to eliminate the effect of the Adviser Conduct. In making the determination of the PV Shortfall, the hypothetical portfolio will be based on the actual portfolio of assets as of the date of determination adjusted to bring eliminate the portfolio into compliance with all effect of the restrictions of Section 3.2 hereof, Adviser Conduct by decreasing and increasing positions in asset classes or sectors, as the case may be, on a pro rata basis. In addition, if the Warranty Provider has directed the Adviser to invest all of the Fund's assets in a Defeasance Portfolio pursuant to SECTIONS 4.1(C) and 4.2 and the Fund's assets are not so invested on the Second Exchange Business Day following the Permanent Defeasance Date and for the remainder of the Protected Period, then if (and only if) a PV Shortfall or an additional PV Shortfall (collectively "ADDITIONAL PV SHORTFALL") that arises due to the Fund's assets not being so invested within such period and/or for the remainder of the Protected Period, then the Adviser agrees to pay to the Warranty Provider such Additional PV Shortfall (if any). The Warranty Provider shall notify (the "Determination NoticeDETERMINATION NOTICE") the Adviser in writing of its determination of such any PV Shortfall directly or indirectly attributable to the Adviser ConductConduct and any Additional PV Shortfall; PROVIDED, that the Warranty Provider shall not be entitled to any payment under this SECTION 4.1(D) unless the Determination Notice is delivered within 30 days of the Warranty Provider becoming aware of such PV Shortfall attributable directly or indirectly to such Adviser Conduct or Additional PV Shortfall, as applicable. If the Adviser disagrees with the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct and/or the Additional PV Shortfall contained in the Determination Notice, then (i) the Adviser shall notify (the "Objection NoticeOBJECTION NOTICE") the Warranty Provider in writing of such disagreement within three Business Days after the delivery by the Warranty Provider of the Determination Notice and (ii) unless the Adviser and the Warranty Provider otherwise agree on the amount of such PV Shortfall directly or indirectly attributable to the Adviser ConductConduct or Additional PV Shortfall, the amount thereof shall be determined by arbitration in accordance with the procedures set forth in Section 4.1(eSECTION 4.1(E). If the Adviser does not provide the Warranty Provider with the Objection Notice within such three Business Day period, then the Adviser shall be deemed to have agreed to the Warranty Provider's determination of the PV Shortfall directly or indirectly attributable to the Adviser Conduct and the Additional PV Shortfall contained in the Determination Notice. Any amount payable by the Adviser under this Section 4.1(dSECTION 4.1(D) with respect to certain Adviser Conduct (i) shall be paid to the Warranty Provider within three Business Days of the delivery of the Determination Notice or if such PV Shortfall or Additional PV Shortfall is determined pursuant to an arbitration proceeding, within three Business Days after such final arbitration decision; provided PROVIDED, that should the parties otherwise agree on such PV Shortfall or Additional PV Shortfall, such PV Shortfall or Additional PV Shortfall shall be paid to the Warranty Provider within three Business Days of such agreement; and (ii) with respect to certain Adviser Conduct, shall be reduced on a dollar for dollar basis by any amounts paid by the Adviser to the Fund under the Investment Management Agreement as a result of the same Adviser Conduct to the extent that the Total NAV is increased and the PV Shortfall is in fact decreased by such amount, in each case on a dollar for dollar basis; and (iii) shall be reduced on a dollar for dollar basis by any amounts paid by the Adviser to the Fund under the Investment Management Agreement as a result of the Fund's assets not being invested in a Defeasance Portfolio on the Second Exchange Business Day following the Permanent Defeasance Date to the extent that the Total NAV is increased and the Additional PV Shortfall is in fact decreased by such amount, in each case on a dollar for dollar basis. In the event that the Adviser fails to pay to the Warranty Provider any amounts payable under this Section 4.1(dSECTION 4.1(D) within the time period specified herein, the Shortfall Amount shall be decreased (i) in the case of a PV Shortfall, on a pro rata basis by the percentage of the PV Shortfall directly or indirectly attributable to the Adviser Conduct, and (ii) in the case of Additional PV Shortfall, by the amount of such Additional PV Shortfall on a dollar for dollar basis. Notwithstanding anything contained in this Section 4.1(dSECTION 4.1(D) to the contrary, solely for purposes of this Section 4.1(dSECTION 4.1(D), the Adviser shall not be deemed to have committed Adviser Conduct and consequently shall not be liable for any payment under this Section 4.1(dSECTION 4.1(D) if (a) an event occurs which if not cured or waived would give rise to a Potential Trigger Event occurs and (b) Event; PROVIDED, that such Potential Trigger Event event is cured or waived within the cure time period specified in Section 4.1(a) for the cure of such Potential Trigger Event. The payment of the PV Shortfall amount by the Adviser to the Warranty Provider pursuant to this Section 4.1(d) is in addition toSECTION 4.1(A), and not in lieu of, any obligations of the Adviser or Fund to indemnify the Warranty Provider under this Agreementif any.
(e) In the event that the terms of Section 4.1(dSECTION 4.1(D) provide for arbitration, each of the Warranty Provider and the Adviser shall select one arbitrator within seven Business Days after the delivery by the Adviser of the Objection Notice; providedPROVIDED, howeverHOWEVER, that if either of such parties shall fail to select an arbitrator within such period, such arbitrator shall be appointed by the American Arbitration Association. The two arbitrators selected shall select a third arbitrator within five Business Days after each of such arbitrators have been selected or, if they shall be unable to agree on a third arbitrator within such time, such third arbitrator shall be appointed by the American Arbitration Association. Each arbitrator shall be of exemplary qualifications and stature, and no person affiliated with any party hereto shall be eligible to be an arbitrator. The arbitration shall be held in New York, New York and be governed by the Commercial Arbitration Rules of the American Arbitration Association and the decision of a majority of the arbitrators shall be final, binding and subject to judicial enforcement and with respect to the specific Adviser Conduct that is the subject of such arbitration decision, shall be the exclusive remedy of the Warranty Provider; providedPROVIDED, howeverHOWEVER, that, notwithstanding the foregoing, the Warranty Provider shall not be limited from seeking indemnification under Section 5.2(a)(iiiSECTION 5.2(A)(III) and (a)(vA)(V) hereof. Fees and expenses of the arbitration (including fees and expenses of the arbitrators) shall be shared by the parties to the arbitration equally.
Appears in 1 contract
Sources: Financial Warranty Agreement (Pioneer Protected Principal Plus Fund)
Trigger Events. (a) The following events shall constitute Trigger Events hereunder; provided, however, that in the event the New York Stock Exchange closes early on any Exchange Business Day due to extraordinary or other circumstances (an "Early Close Exchange Business Day")) and a suspension of redemptions of the Underlying Fund has occurred as permitted in accordance with the Investment Company Act, the cure periods specified in this Section 4.1(a) will be automatically extended such that on until the next Exchange Business Day following the Early Close Exchange Business Day, the cure periods will continue for the amount of time lost on such Early Close Exchange Business Day due to such early close (the "Extended Cure Time") (for the avoidance of doubt, should the next Exchange Business Day following the Early Close Exchange Business Day also be an Early Close Exchange Business Day, the cure period will continue for as long as Extended Cure Time remains):.
(i) Any failure at any time to comply with the covenant covenants set forth in the first sentence two sentences of Section 3.1;
(ii) Any failure at any time to comply with the provisions of Section 3.2(a)(i), unless such failure is cured by the Fund executing a sales order with respect to all Ineligible Investments then held by the Fund on the Exchange Business Day following the day on which such failure occurs; provided that if such violation is not cured on failure to comply with Section 3.2(a)(i) occurs because the Fund has received Ineligible Investments due solely as a result of an in-kind redemption from the Underlying Fund, a Trigger Event shall have occurred unless the Fund executes sales orders with respect to such Ineligible Investments during the next Exchange Business Day on which the Adviser becomes aware of securities exchanges or markets on which such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business DaysIneligible Investments are listed are open;
(iii) Any failure at any time to comply with Section 3.3(c3.2(a)(ii) and (viii), Section 3.3 or Section 3.4(d), unless (A) in the case of a violation of Section 3.2(a)(ii), as of the close of business on any Exchange Business Day, the Market Value of the portion of the Fund's assets allocated to the Equity Portfolio, calculated as a percentage of Total NAV of the Fund, does not exceed the Maximum Equity Component provided to the Adviser by the Warranty Provider in accordance with Section 3.3(b) prior to 9:00 a.m. on the immediately succeeding Exchange Business Day; or (B) in the case of a violation of Section 3.2(a)(viii), (I) the Fund holds at least 80% of the Futures Balance Cash it is required to hold pursuant to the terms of this Agreement at the time of the violation and (II) on the Exchange Business Day following the date on which such violation of Section 3.2(a)(viii) occurred, the Fund holds 100% of the Futures Balance Cash it is required to hold pursuant to the terms of this Agreement, provided, however, that if the Fund is in violation of Section 3.2(a)(viii) more than five (5) times in any one calendar year, the cure period provided in this Section 4.1(a)(iii)(B) shall not be available to the Adviser or the Fund;
(iv) Any failure at any time to comply with the provisions of Section 3.2(a)(ii3.4(a) unless (A) such failure is attributable solely to the conduct of the Warranty Provider or a Force Majeure Event; or (B) the Warranty Provider makes a good faith effort to notify (via email or otherwise) the Adviser of such failure to comply with the provisions of Section 3.3 (other than Section 3.3(c)3.4(a), unless cured and the Adviser fails to cure the violation by the end of 9:00 a.m. on the Exchange Business Day following immediately succeeding the Exchange Business Day day on which such the violation occurred;.
(v) The termination of, or failure to comply with, the Expense Limitation AgreementAgreement or the amendment of such Agreement in each case without the prior written consent of the Warranty Provider, which consent shall not be unreasonably withheld if, in the sole discretion of the Warranty Provider, any such termination, failure to comply or amendment does not increase the Warranty Provider's liabilities or risks or decrease the Warranty Provider's economic bargain under any Transaction Document;
(vi) Any violation of Article III (other than Sections 3.2(a)(vi) and (xi)) that is not provided for in clause (i), (ii), (iii) or (iv) above unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the Adviser becomes aware of such violation; provided, that the Adviser shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days;
(vii) Any violation of Section 3.2(a)(vi) or (xi) abovecould have an Adverse Effect, unless cured by the end of the Exchange Business Day following the Exchange Business Day on which the violation occurred;
(vii) Except as otherwise set forth herein, any failure by the Adviser becomes aware or the Fund to adjust the allocation of such violationthe Fund's assets between the Equity Component and the Fixed Income Component in order to comply with any adjustment to the Multiple made by the Warranty Provider (or Calculation Agent) under this Agreement;
(viii) The Fund shall fail to pay the Financial Warranty Fee when due as provided in Section 2.4 and such failure shall continue unremedied for a period of two Business Days after following notice of such failure from by the Warranty ProviderProvider to the Fund or the Adviser;
(ixA) The Adviser resigns, ; (B) the Fund elects to terminate the Investment Management Agreement with the Adviser Adviser; (C) the Fund appoints a successor adviser (including a subadviser) without the prior written consent of the Warranty Provider in its sole discretion; or (D) the Investment Management Agreement terminates in accordance with its terms and in each case any successor adviser (including the Adviser) that agrees to be bound by the terms of this Agreement is not acceptable to appointed by the Board of Trustees of the Trust or the Shareholders, in each case without the prior written consent of the Warranty Provider in its reasonable discretion after considering the reputation of the successor adviser, its experience in managing large cap equity and fixed income portfolios, its size, its financial condition, its ability to manage the Fund Portfolio in accordance with the Registration Statement and its ability to comply with the Adviser's obligations under this Agreement and the Transaction Documents to which it is a party; provided, that if the successor adviser is the Adviser or an Affiliate of the Adviser, such successor adviser shall be deemed acceptable by the Warranty Providersole discretion;
(x) The Adviser resigns, the Fund elects to terminate the Investment Management Agreement with the Adviser or the Investment Management Agreement terminates in accordance with its terms and either (iA) the Adviser is no longer obligated to manage the Fund pursuant to the terms of the Investment Management Agreement and none of (A) a successor investment adviser acceptable to the Warranty Provider, (B) the Adviser or (C) an Affiliate of the Adviser Provider has not entered into an investment management agreement with the Fund or (iiB) the termination of the Investment Management Agreement is not yet effective but the Board of Trustees of the Fund Trust, on behalf of the Fund, has indicated its intention to the Warranty Provider, or taken any further action, to appoint a successor investment adviser other than the Adviser or an Affiliate of the Adviser notwithstanding the fact that the Warranty Provider has advised the Board of Trustees that such successor investment adviser would not be acceptable to the Warranty Provider based upon the standards included Provider, in Section 4.1(a)(ix)its sole discretion, then in either such case a Trigger Event shall be deemed to have occurred notwithstanding the fact that a successor investment adviser has not yet been appointed;
(xi) The Subject to the foregoing provisions of this Section 4.1(a), the Adviser does not, not otherwise manage in all material respects, manage respects the assets of the Fund in accordance with the investment objective, policies and strategies currently set forth in the Registration Statement or and/or in accordance with the Investment Management Agreement;
(xii) Any representation or warranty made by the Adviser Adviser, the Trust or the Fund, Trust on behalf of the Fund in any Transaction Document or in any document or certification provided in connection with any Transaction Document, shall have been incorrect or misleading when made or when deemed made, except where such incorrect or misleading representation or warranty would not have an Adverse Effect in respect of the Adviser or FundEffect;
(xiii) The Equity Limit for a Class of Shares is less than 0.025;
(xiv) The Adviser, the Trust, the Fund or the Custodian shall fail to perform any obligation, or shall breach any covenant, under this Agreement or the Transaction Documents that is not expressly provided for in clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) or (xi) above, which failure could reasonably be expected to have an Adverse Effect in respect of the Adviser or Fund and such violation, if capable of being remedied, shall continue unremedied for a period of three Business Days after the Adviser or the Custodian, as the case may be, becomes aware of the occurrence of such breach or failure; provided, that the Adviser or the Custodian, as the case may be, shall be deemed to be aware of such violation if such violation has been in existence for three Exchange Business Days; or
(xvxiv) The occurrence of any of the following: (A) a Regulatory Event or Litigation Event (other than a Litigation Event arising out of a claim under this Agreement between the Adviser and/or the Trust on behalf of the Fund on one side and the Warranty Provider on the other side) or (B) an Act of Insolvency occurs with respect to the Adviser or the Fund.
(b) Notwithstanding any other provision hereof, if an in the event has occurred and is continuing, which, if not cured or waived would give rise to of a Potential Trigger Event, then the Adviser may not Adviser, upon becoming aware of such event, shall cause the Fund to not acquire any additional Eligible Equity Investments until such event Potential Trigger Event is cured and shall upon becoming aware of such event Potential Trigger Event immediately notify the Warranty Provider of such eventPotential Trigger Event, which notice shall include a description of the manner in which the Adviser intends to cure such event Potential Trigger Event ("Curative Steps"), the Adviser's assessment of the likelihood of success, the time the Adviser expects to elapse before such event Potential Trigger Event is cured, and such other information as the Warranty Provider may reasonably request. Upon sending such notice to the Warranty Provider, the Adviser shall immediately take the Curative Steps set forth in such notice unless and until such time as the Warranty Provider notifies the Adviser that it objects to such Curative Steps, in which case the Adviser shall immediately cease the implementation of such Curative Steps. The Warranty Provider shall only object to such Curative Steps if in the Warranty Provider's reasonable discretion, they are not consistent with this Agreement or are not likely to be an effective cure of the Potential Trigger Event within the cure period set forth in Section 4.1(a), if any. If the Adviser violates this Section 4.1(b), then a Trigger Event shall be deemed to have occurred.
(c) If a Trigger Event occurs and is continuing past the cure period specified therein (if applicable)occurs, then, at the election of the Warranty Provider in its sole discretion, the Warranty Provider shall have the right at any time after such Trigger Event to either (i) direct (A) instruct the Adviser or the Custodian, as selected by the Warranty Provider, to invest all of the Fund's assets in accordance with Section 4.2(a) for the remainder of the Protection Period or (B) to deliver the Irrevocable Instructions to the Custodian to invest all of the Fund's assets in accordance with Section 4.2(a) for the remainder of the Protection Period (in each case, a "Permanent Trigger Initiated Defeasance Event") or (ii) adjust the CushionMultiple. Any such adjustment to the Multiple shall be permanent, unless and until further adjusted by the Warranty Provider in its sole discretion. For the avoidance of doubt, the parties hereto agree that (i) the Warranty Provider may at its election, in its sole discretion, exercise the remedy provided in Section 4.1(c)(i)(B) after it has exercised the remedy provided in Section 4.1(c)(i)(A) and (ii) if the Warranty Provider exercises its rights to adjust the Multiple, the Warranty Provider shall not be precluded subsequent thereto from exercising its rights under Sections 4.1(c)(i)(A) and/or 4.1(c)(i)(B). The Warranty Provider shall notify the Adviser and the Fund of the Warranty Provider's decision to exercise of the remedies pursuant to this Section 4.1(c) prior to such exercise. The Adviser shall invest all of the Fund's assets in accordance with Section 4.2(a) within one Exchange Business Day following an instruction by the Warranty Provider under Section 4.1(c)(i)(A).
(d) In the event of (i) an act or omission on the part of the Adviser with respect to the Trust or the Fund which constitutes negligence, recklessness, bad faith faith, willful misconduct or willful misconductfraud, including by way of example only and not intended as an exhaustive list, if (A) the Adviser causes the Fund to purchase additional Eligible Equity Investments in violation of Sections Section 3.3(d) and Section 4.1(b), (B) there is a violation of Section 3.2(a)(i) or (ii), or (C) the Adviser causes the Fund to purchase investments other than those permitted to be invested in hereunder after the event occurrence of a Permanent Trigger Initiated Defeasance Event or a Market Initiated Defeasance Event resulting in a violation of Sections 4.1(c)(iSection 4.1(c) and or Section 4.2(a) (such conduct referenced in subsection (i) of this Section 4.1(d), the "Adviser Conduct"), and (ii) the existence of a PV Floor Shortfall, the Adviser agrees to pay to the Warranty Provider an amount equal to the amount of such PV Floor Shortfall determined as provided in this Section 4.1(d) to have been directly or indirectly attributable to such Adviser Conduct. The amount of such PV Floor Shortfall directly or indirectly attributable to the Adviser Conduct shall be equal to the sum of the differences with respect to each Class of Shares, if negative, between (a) the actual NAV Per Share as of the date of determination and (b) the hypothetical NAV Per Share of a hypothetical portfolio comprised of the actual portfolio assets as of the date of determination adjusted to eliminate the effect of the Adviser Conduct to the extent necessary to eliminate any Floor Shortfall directly or indirectly attributable to such Adviser Conduct. In making the determination of the PV Floor Shortfall, the hypothetical portfolio will be based on the actual portfolio of assets as of the date of determination adjusted to bring the portfolio into compliance with all of the restrictions of Section 3.2 hereof, by decreasing and increasing positions in asset classes or sectorsclasses, as the case may be, on a pro rata basis. In addition, if all of the Fund's assets are required to be invested in a Defeasance Portfolio pursuant to Sections 4.1(c)(i) and 4.2 and the Fund's assets are not so invested on the Exchange Business Day immediately following the Defeasance Date and for the remainder of the Protected Period, then if (and only if) a Floor Shortfall or an additional Floor Shortfall (collectively "Additional Floor Shortfall") arises due to the Fund's assets not being so invested within such period and/or for the remainder of the Protected Period, then the Adviser agrees to pay to the Warranty Provider such Additional Floor Shortfall (if any). The Fund's assets shall be deemed to be invested in the Defeasance Portfolio if at the time of determination the Fund has executed orders to sell all Eligible Equity Investments and Ineligible Investments, if any (provided that in the case of orders to redeem shares of the Underlying Fund, such orders have been received and accepted by the Underlying Fund at such time of determination prior to the time that the Underlying Fund establishes its net asset value as of the next pricing time in accordance with the Investment Company Act and the rules promulgated thereunder), and subsequent thereto has executed orders to invest all of the proceeds thereof in the Defeasance Portfolio. The Warranty Provider shall notify (the "Determination Notice") the Adviser in writing of its determination of such PV that Adviser Conduct has occurred and any Floor Shortfall directly or indirectly attributable to the such Adviser ConductConduct and any Additional Floor Shortfall. If the Adviser disagrees with the Warranty Provider's determination that there has been Adviser Conduct and/or the amount of the PV Floor Shortfall directly or indirectly attributable to the such Adviser Conduct and/or the amount of the Additional Floor Shortfall contained in the Determination Notice, then (i) the Adviser shall notify (the "Objection Notice") the Warranty Provider in writing of such disagreement within three five Business Days after the delivery by the Warranty Provider of the Determination Notice and (ii) unless the Adviser and the Warranty Provider otherwise agree on agree, the amount existence, if any, of such PV Adviser Conduct and the amount, if any, of the Floor Shortfall directly or indirectly attributable to the such Adviser Conduct, Conduct and the amount thereof of any Additional Floor Shortfall shall be determined by arbitration in accordance with the procedures set forth in Section 4.1(e) (an "Objection Event"). If the Adviser does not provide the Warranty Provider with the Objection Notice within such three five Business Day period, then the Adviser shall be deemed to have agreed to the Warranty Provider's determination of the PV existence of Adviser Conduct and of the amount of the Floor Shortfall directly or indirectly attributable to the Adviser Conduct and the amount of the Additional Floor Shortfall, in each case as contained in the Determination Notice. Any amount payable by the Adviser under this Section 4.1(d) with respect to certain Adviser Conduct (i) shall be paid to the Warranty Provider within three five Business Days of the delivery of the Determination Notice or if such PV Shortfall amount is determined pursuant to an arbitration proceeding, within three five Business Days after such final arbitration decision; provided that should the parties otherwise agree on such PV Shortfallany amount payable by the Adviser under this Section 4.1(d), such PV Shortfall amount shall be paid to the Warranty Provider within three Business Days of such agreement; and (ii) shall be reduced by any amounts paid by the Adviser to the Fund as a result of the same Adviser Conduct to the extent that the Total NAV is increased and the PV Shortfall is in fact decreased by such amount. In the event that the Adviser fails to pay to the Warranty Provider any amounts payable under this Section 4.1(d) within the time period specified herein, the Shortfall Amount shall be decreased on a pro rata basis by the percentage of the PV Shortfall directly or indirectly attributable to the Adviser Conduct. Notwithstanding anything contained in this Section 4.1(d) to the contrary, solely for purposes of this Section 4.1(d), the Adviser shall not be deemed to have committed Adviser Conduct and consequently shall not be liable for any payment under this Section 4.1(d) if (a) a Potential Trigger Event occurs and (b) such Potential Trigger Event is cured or waived within the cure period specified in Section 4.1(a) for the cure of such Potential Trigger Event. The payment of the PV Shortfall amount by the Adviser to the Warranty Provider pursuant to this Section 4.1(d) is in addition to, and not in lieu of, any obligations of the Adviser or Fund to indemnify the Warranty Provider under this Agreement.
(e) In the event that the terms of Section 4.1(d) provide for arbitration, each of the Warranty Provider and the Adviser shall select one arbitrator within seven Business Days after the delivery by the Adviser of the Objection Notice; provided, however, that if either of such parties shall fail to select an arbitrator within such period, such arbitrator shall be appointed by the American Arbitration Association. The two arbitrators selected shall select a third arbitrator within five Business Days after each of such arbitrators have been selected or, if they shall be unable to agree on a third arbitrator within such time, such third arbitrator shall be appointed by the American Arbitration Association. Each arbitrator shall be of exemplary qualifications and stature, and no person affiliated with any party hereto shall be eligible to be an arbitrator. The arbitration shall be held in New York, New York and be governed by the Commercial Arbitration Rules of the American Arbitration Association and the decision of a majority of the arbitrators shall be final, binding and subject to judicial enforcement and with respect to the specific Adviser Conduct that is the subject of such arbitration decision, shall be the exclusive remedy of the Warranty Provider; provided, however, that, notwithstanding the foregoing, the Warranty Provider shall not be limited from seeking indemnification under Section 5.2(a)(iii) and (a)(v) hereof. Fees and expenses of the arbitration (including fees and expenses of the arbitrators) shall be shared by the parties to the arbitration equally.fi
Appears in 1 contract
Sources: Financial Warranty Agreement (Oppenheimer Principal Protected Trust Iii)