Federated Investors Inc. 10-K 3/23/01

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A2cSkdlKd9PIXK58Ixxgpv8gI7M9Bob8CLSMTK4B12gZI77rxdnP90xzvHK4ICya GTW24qmwOTs5+tU2HXczZQ== 0001056288-01-000009.txt : 20010326 0001056288-01-000009.hdr.sgml : 20010326 ACCESSION NUMBER: 0001056288-01-000009 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010323 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FEDERATED INVESTORS INC /PA/ CENTRAL INDEX KEY: 0001056288 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 251111467 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 812-12462 FILM NUMBER: 1577120 BUSINESS ADDRESS: STREET 1: FEDERATED INVESTORS TOWER STREET 2: 5800 CORPORATE DR CITY: PITTSBURGH STATE: PA ZIP: 15222 BUSINESS PHONE: 4122881900 MAIL ADDRESS: STREET 1: FEDERATED INVESTORS TOWER CITY: PITTSBURGH STATE: PA ZIP: 15222 10-K 1 0001.txt - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO _____________ COMMISSION FILE NUMBER 1-14818 FEDERATED INVESTORS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) - ------------------------------------------------------------------------------- 25-1111467 PENNSYLVANIA - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (I.R.S. EMPLOYER (STATE OR OTHER JURISDICTION OF IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- FEDERATED INVESTORS TOWER PITTSBURGH, PENNSYLVANIA 15222-3779 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CLASS B COMMON STOCK, NO PAR VALUE NEW YORK STOCK EXCHANGE (TITLE OF EACH CLASS) (NAME OF EACH EXCHANGE ON WHICH REGISTERED) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE - ------------------------------------------------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes A No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in the definitive proxy statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. A The aggregate market value of the Class B Common Stock held by non-affiliates of the registrant as of March 19, 2001 was approximately $2,199 million, based on the last reported sales price of $26.76 as reported by the New York Stock Exchange. For purposes of this calculation, the registrant has deemed all of its executive officers and directors to be affiliates, but has made no determination as to whether any other persons are "affiliates" within the meaning of Rule 12b-2 under the Securities Exchange Act of 1934. The number of shares of Class B Common Stock outstanding on March 19, 2001, was 116,466,611 shares. Documents incorporated by reference: Selected portions of the 2000 Annual Report to Shareholders - Part I, Part II and Part IV of this Report. Selected portions of the 2001 Information Statement - Part III of this Report. PART I ITEM 1 - BUSINESS OVERVIEW Federated Investors, Inc. and its consolidated subsidiaries (collectively, "Federated") is a leading provider of investment management and related financial services. Federated sponsors, markets and provides investment advisory, distribution and administrative services primarily to mutual funds in both domestic and international markets. Total assets under management at December 31, 2000, were $139.6 billion, primarily in funds managed, distributed and administered by Federated and in other non-fund products ("Managed Assets"), of which $5.9 billion were in separately managed accounts. Managed Assets at December 31, 2000, increased $14.8 billion over the prior year. Federated provided investment advisory services to 137 funds at December 31, 2000. These funds are offered through banks, broker/dealers and other financial intermediaries who use them to meet the needs of their customers; these customers include retail investors, corporations, and retirement plans. Federated also provides mutual fund administrative services to its managed funds and to funds sponsored by third parties, where Federated also acts as fund distributor. Federated provided these services for $39.7 billion of assets in funds sponsored by third parties, primarily banks, ("Administered Assets") as of December 31, 2000. In addition, Federated provides other services related to mutual funds including trade execution and clearing and retirement plan recordkeeping. Total Managed Assets for each of the past three years are as follows: MANAGED ASSETS Growth Rate ------------------- (DOLLARS IN MILLIONS) As of December 31, 3 Yr. -------------------- --------- 1998 CAGR* 2000 2000 1999 ----------------------------- ------------------- Money Market Funds/ Cash Equivalents $98,797 $83,299 $77,055 16% 19% Equity Funds 20,641 20,941 15,503 21% (1%) Fixed-Income Funds 14,268 15,857 16,437 (2%) (10%) Separate Accounts 5,878 4,723 2,558 40% 24% ----------------------------- Total Managed Assets $139,584 $124,820 $111,553 15% 12% ============================= *Compound Annual Growth Rate Average Managed Assets for the past three years were as follows: AVERAGE MANAGED ASSETS Growth Rate ------------------- (DOLLARS IN MILLIONS) Year ended December 31, 3 Yr. ----------------------------- -------------------- 1998 CAGR* 2000 2000 1999 ----------------------------- ------------------- Money Market Funds/ Cash Equivalent $86,406 $79,253 $69,074 16% 9% Equity Funds 22,107 17,531 13,777 32% 26% Fixed-Income Funds 14,713 16,680 15,851 1% (12%) Separate Accounts 5,168 4,109 2,334 40% 26% ----------------------------- Total Average Managed Assets $128,394 $117,573 $101,036 16% 9% ============================= * Compound Annual Growth Rate Federated's revenues from investment advisory, related administrative and other service fees provided under agreements with the funds and other entities, and other income over the last three years were as follows (Certain amounts previously reported have been reclassified to conform with the current year's presentation.): REVENUE (DOLLARS IN THOUSANDS) Growth Rate ----------------------- Year ended December 31, 3 Yr. ------------------------------- 2000 1999 1998 CAGR* 2000 ------------------------------------------------------ Investment Advisory $380,234 $324,923 $280,046 20% 17% Fees Administrative 109,870 104,381 97,234 9% 5% Service Fees Other Service Fees 166,356 147,700 124,599 24% 13% Other Income 24,308 24,094 20,248 29% 1% ------------------------------- TOTAL REVENUE $680,768 $601,098 $522,127 19% 13% =============================== * Compound Annual Growth Rate BUSINESS STRATEGY Federated pursues a multi-faceted business strategy having three broad objectives: -To be widely recognized as a world-class investment management company that offers highly competitive performance and disciplined risk management across a broad spectrum of products. -To profitably expand market penetration by increasing its assets under management in each market where it chooses to apply its substantial distribution resources. -To profitably expand its customer relationships by providing superior services designed to support the growth of Managed and Administered Assets. Federated offers a wide range of products, including equity, fixed-income and money market investments designed to meet the needs of investors with varying investment objectives. Federated has structured its investment process to meet the requirements of fiduciaries and others who use Federated's products to meet the needs of their customers. Fiduciaries typically have stringent demands related to portfolio composition, risk and investment performance. In recent years, Federated has emphasized growth of its equity business as an important component of its strategy and has broadened its range of equity products. Equity assets are managed across a wide range of styles including large cap value ($6.3 billion), equity income ($4.6 billion), mid-large cap growth ($4.2 billion) and international ($2.9 billion) investments. Federated also manages assets in equity index funds ($3.1 billion), balanced and asset allocation funds ($1.1 billion) and small cap blend ($0.4 billion). These asset allocation funds may include fixed-income assets. Federated's fixed-income assets are managed in a wide range of sectors including high-yield ($4.3 billion), mortgage-backed ($4.3 billion), multi-sector ($3.5 billion), municipal ($1.9 billion), corporate ($1.7 billion), U.S. government ($1.5 billion) and international/global ($1.0 billion). Federated's fixed-income funds offer fiduciaries and others a broad range of highly defined products designed to meet many of their investment needs and requirements. Federated uses a team of portfolio managers led by a senior portfolio manager for each fund. Federated's investment research process combines disciplined quantitative screening along with rigorous fundamental analysis to identify attractive securities. Portfolios are continually reevaluated with respect to valuation, price and earnings estimate momentum, company fundamentals, market factors, economic conditions and risk controls in order to achieve specific investment objectives. Federated is one of the largest U.S. managers of money market fund assets, with $98.8 billion in assets under management at December 31, 2000. Federated has developed expertise in managing cash for institutions, which typically have stringent requirements for regulatory compliance, relative safety, liquidity and competitive yields. Federated has managed money market funds for over 25 years and began selling money market fund products to institutions in 1974. Federated also manages retail money market fund products which are typically distributed through broker/dealers. Federated manages money market fund assets in a variety of asset classes including government ($48.0 billion), prime ($35.5 billion) and tax-free ($15.3 billion). Federated's distribution strategy is to provide products geared to financial intermediaries, primarily banks, broker/dealers and investment advisers, and directly to institutions such as corporations and government entities. Through substantial investments in distribution for more than 20 years, Federated has developed selling relationships with more than 4,000 institutions and sells its products directly to another 500 corporations and government entities. Federated uses its trained sales force of more than 180 representatives and managers across the United States to add new customer relationships and strengthen and expand existing relationships. INVESTMENT PRODUCTS AND MARKETS Federated's investment products are distributed in four principal markets: the bank trust market, the broker/dealer market, the institutional market and the international market. The following chart shows Federated Managed Assets by market for the dates indicated: MANAGED ASSETS BY MARKET Growth Rate ------------------ (DOLLARS IN MILLIONS) As of December 31, 3 Yr. --------- -------------------- 2000 1999 1998 CAGR* 2000 ----------------------------- ------------------ Bank Trust Market $71,955 $63,073 $58,891 13% 14% Broker/Dealer Market 43,462 40,769 35,232 15% 7% Institutional Market 17,808 16,349 13,993 16% 9% International Market 1,356 1,104 0 N/A 23% Other 5,003 3,525 3,437 15% 42% ----------------------------- Total Managed Assets $139,584 $124,820 $111,553 15% 12% ============================= *Compound Annual Growth Rate Note: Certain amounts previously reported have been reclassified to conform with the current year's presentation. BANK TRUST MARKET. Federated pioneered the concept of providing cash management to bank trust departments through mutual funds over 25 years ago. In addition, Federated initiated a strategy to provide a broad range of equity and fixed-income funds, termed MultiTrust(TM), to meet the evolving needs of bank trust departments. Federated's bank trust customers invest the assets subject to their control, or upon direction from their customers, in one or more funds managed by Federated. Federated employs a dedicated sales force backed by a staff of support personnel to offer its products and services in the bank trust market. In addition to bank trust departments, Federated provides services to bank capital markets (institutional brokerages within banks) and to other institutional customers as part of the bank trust market. Money market funds contain the majority of Federated's Managed Assets in the bank trust market. In allocating investments across various asset classes, investors typically maintain a portion of their portfolios in cash or cash equivalents, including money market funds, irrespective of trends in bond or stock prices. Federated also offers an extensive menu of equity and fixed-income mutual funds structured for use in the bank trust market. As of December 31, 2000, Managed Assets in the bank trust market were comprised of $62.4 billion in money market funds and cash equivalents, $5.0 billion in equity funds and $4.6 billion in fixed-income funds. BROKER/DEALER MARKET. Federated distributes its products in this market through a large, diversified group of approximately 2,000 national, regional, independent, and bank broker/dealers. Federated maintains a sales staff dedicated to this market, with a separate group focused on the bank broker/dealers. Broker/dealers use Federated's products to meet the needs of their customers, who are typically retail investors. Federated offers products with a variety of commission structures that enable brokers to offer their customers a choice of pricing options. Federated also offers money market mutual funds as cash management products designed for use in the broker/dealer market. As of December 31, 2000, Managed Assets in the broker/dealer market were comprised of $24.5 billion in money market funds, $12.5 billion in equity funds, $6.3 billion in fixed-income funds and $0.2 billion in separate accounts. INSTITUTIONAL MARKET. Federated maintains a dedicated sales staff to focus on the distribution of its products to a wide variety of users: investment advisors, corporations, corporate and public pension funds, insurance companies, government entities, foundations, endowments, hospitals, and non-Federated investment companies. As of December 31, 2000, Managed Assets in the institutional market were comprised of $10.9 billion in money market funds, $3.0 billion in separate accounts, $2.0 billion in fixed-income funds and $1.9 billion in equity funds. INTERNATIONAL MARKET. Federated continues to broaden distribution to areas outside of the U.S. In 1998, Federated entered into an agreement with LVM-Versicherungen (LVM), a large German insurance company, to create a joint-venture company named Federated Fonds-Service GmbH ("Federated GmbH"), to exclusively manage, distribute and market a family of mutual funds to insurance clients of LVM, as well as pursue institutional separate accounts. In early 2000, Federated GmbH launched six retail funds (Federated Unit Trust) for distribution in German speaking countries in Europe. As of December 31, 2000, Managed Assets in these funds and in separate accounts totaled $0.2 billion and $1.1 billion, respectively. ALTERNATIVE PRODUCTS. Over the last two years, Federated increased assets by entering into advisory agreements for three separate collateralized bond obligation (CBO) products. These products package Federated's investment management expertise into an alternative product structure and offer another source of investment advisory fee revenue. As of December 31, 2000, Managed Assets in Federated's CBOs totaled $1.0 billion. Federated plans to continue to seek opportunities to manage CBOs and other alternative products. Federated continues to look for new alliances and opportunities to enhance shareholder value through acquisitions. In 2000, Federated signed a definitive agreement to acquire the business of New York-based Edgemont Asset Management Corporation, the advisor for the $3.4 billion Kaufmann Fund. Upon closing the transaction, Federated will introduce the Federated Kaufmann Fund through Federated's existing distribution channels, and for the first time, this fund will become available through financial intermediaries. In addition, in 2000, Federated completed the acquisition of the mutual fund assets of Investment Advisers, Inc. (IAI). As a result of this transaction, Federated assumed the investment management, distribution and shareholder servicing responsibilities for 11 former IAI funds totaling $346.0 million as of the transaction date in primarily equity assets. Federated also acquired InvestLink Technologies, Inc. in 2000, a software developer and marketer of applications for recordkeeping, administration and servicing of defined contribution benefit plans. Federated's principal source of revenue is investment advisory fees earned by various subsidiaries and affiliates pursuant to investment advisory contracts with the funds. These subsidiaries and affiliates are registered as investment advisers under the Investment Advisers Act of 1940 (the "Advisers Act"). Investment advisers are compensated for their services in the form of investment advisory fees based upon the average daily net assets of the fund. Federated provided investment advisory services to 137 funds as of December 31, 2000. The funds sponsored by Federated are domiciled in the U.S., with the exception of Federated International Funds PLC and Federated Unit Trust, which are domiciled in Dublin, Ireland. Each of Federated's U.S.-domiciled funds (with the exception of a collective investment trust) is registered under the Investment Company Act of 1940 ("Investment Company Act") and under applicable federal and state laws. Each of the funds enters into an advisory agreement. The advisory agreements are subject to annual approval by the fund directors or trustees, including a majority of the directors who are not "interested persons" of the funds or Federated as defined under the Investment Company Act. Advisory agreements are subject to periodic review by the directors or trustees of the respective funds and amendments to such agreements must be approved by the fund shareholders. A significant portion of Federated's revenue is derived from these advisory agreements which generally are terminable upon 60 days notice. Of these 137 funds, Federated's investment advisory subsidiaries managed 52 money market funds (and cash equivalents) totaling $98.8 billion in assets, 46 fixed-income funds with $14.3 billion in assets and 39 equity funds with $20.6 billion in assets. Appendix "A" hereto lists all of these funds, including asset levels and date of inception. Federated also serves as investment advisor to pension and other employee benefit plans, corporations, trusts, foundations, endowments, mutual funds sponsored by third parties, and other investors. These separate accounts totaled $5.9 billion in assets under management as of December 31, 2000. Fees for separate accounts are typically based on the value of assets under management pursuant to investment advisory agreements that may be terminated at any time. Federated also provides a broad range of services to support the operation, administration, and distribution of Federated-sponsored funds. These services, for which Federated receives fees pursuant to administrative agreements with the funds, include legal support and regulatory compliance, audit, fund financial services, transfer agency services, and shareholder servicing and support. Federated also offers these services to institutions seeking to outsource all or part of their mutual fund service and distribution functions. Through various subsidiaries, Federated provides its experience and expertise in these areas to expand its relationships with key financial intermediaries, primarily banks, who sponsor proprietary mutual funds. Federated receives fees from these bank-sponsored funds for providing fund services. The following chart shows period-end and average Administered Assets for the past three years: ADMINISTERED ASSETS As of and for the year ended Growth (DOLLARS IN MILLIONS) December 31, Rate ----------------------------- ---------- 2000 2000 1999 1998 ----------------------------- ---------- Period End Administered Assets $39,732 $41,234 $28,165 (4%) Average Administered Assets 41,966 35,079 53,136 20% The decrease in 1999 average Administered Assets was due primarily to the termination of certain administration contracts in 1998 due to internalization of these functions by banks who developed the ability to provide mutual fund services through acquisitions. In addition, certain funds sponsored by Federated have adopted distribution plans that, subject to applicable law, provide for payment to Federated for the reimbursement of marketing expenses, including sales commissions paid to broker/dealers. These distribution plans are implemented through a distribution agreement between Federated and the Fund. Although the specific terms of each such agreement vary, the basic terms of the agreements are similar. Pursuant to the agreements, Federated acts as underwriter for the fund and distributes shares of the Fund through unaffiliated dealers. Each distribution plan and agreement is initially approved by the directors or trustees of the respective Fund and is reviewed for approval annually. Federated also provides retirement plan recordkeeping services and trade execution and settlement services through its various subsidiaries. COMPETITION The mutual fund industry is highly competitive. According to the Investment Company Institute, at the end of 2000, there were over 8,100 registered open-end investment companies, of varying sizes and investment policies, whose shares are currently being offered to the public both on a load and no-load basis. In addition to competition from other mutual fund managers and investment advisers, Federated and the mutual fund industry compete with investment alternatives offered by insurance companies, commercial banks, broker/dealers and other financial institutions. Competition for sales of mutual fund shares is influenced by various factors, including investment performance in terms of attaining the stated objectives of the particular funds and in terms of fund yields and total returns; advertising and sales promotional efforts; and type and quality of services. Changes in the mix of customers for mutual fund distribution and administrative services are expected to continue. Competition for fund administration services is extremely high. In addition to competing with other service providers, banks sponsoring mutual funds may choose to internalize certain service functions. Consolidation within the banking industry also impacts the fund administration business as merging bank funds typically choose a single fund administration provider. Due to the relatively lower revenues, changes in the amount of Administered Assets generally have less impact on Federated's results of operations than changes in the amount of Managed Assets. REGULATORY MATTERS Substantially all aspects of Federated's business are subject to federal and state regulation and to the extent operations take place outside the United States they are subject to the regulations of foreign countries. Depending upon the nature of any non-compliance, the results could include the suspension or revocation of licenses or registration, including broker/dealer licenses and registrations and transfer agent registrations, as well as the imposition of civil fines and penalties and in certain limited circumstances prohibition from acting as an adviser to registered investment companies. Federated's advisory companies are registered with the Securities and Exchange Commission (the "Commission") under the Advisers Act and with certain states. All of the mutual funds managed, distributed, and administered by Federated are registered with the Commission under the Investment Company Act. Certain wholly owned subsidiaries of Federated are registered as broker-dealers with the Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and with various states and are members of the National Association of Securities Dealers (the "NASD"). Their activities are regulated by the Commission, the NASD, and the various states in which they are registered. These subsidiaries are required to meet capital requirements established by the Commission pursuant to the Exchange Act. Two other subsidiaries are registered with the Commission as transfer agents. Federated Investors Trust Company is regulated by the State of New Jersey. Federated believes that it and its subsidiaries are in substantial compliance with all applicable laws and regulations. Amendments to current laws and regulations or newly promulgated laws and regulations governing Federated's operations could have a material adverse impact on Federated. The federal, state and foreign laws and regulations applicable to most aspects of Federated's business are primarily intended to benefit or protect Federated's customers and the funds' shareholders and generally grant supervisory agencies and bodies broad administrative powers, including the power to limit or restrict Federated from carrying on its business in the event that it fails to comply with such laws and regulations. In such event, the possible sanctions that may be imposed include the suspension of individual employees, limitations on engaging in certain lines of business for specified periods of time, revocation of broker/dealer licenses and registrations and transfer agent registrations, censure and fines. EMPLOYEES At December 31, 2000, Federated employed 1,899 persons. Federated considers its relationships with its employees to be satisfactory. FORWARD-LOOKING INFORMATION THIS ANNUAL REPORT ON FORM 10-K AND THE 2000 ANNUAL REPORT TO SHAREHOLDERS CONTAIN CERTAIN "FORWARD- LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE STATEMENTS INVOLVE CERTAIN UNKNOWN RISKS AND UNCERTAINTIES, INCLUDING, AMONG OTHERS THOSE DISCUSSED UNDER THE CAPTION "RISK FACTORS AND CAUTIONARY STATEMENTS" BELOW, THAT COULD CAUSE ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE, OR ACHIEVEMENTS OF FEDERATED, OR INDUSTRY RESULTS, TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE, OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD LOOKING STATEMENTS. FEDERATED CAUTIONS READERS NOT TO PLACE UNDUE RELIANCE ON ANY SUCH FORWARD LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE MADE, AND SHOULD BE READ IN CONJUNCTION WITH THE RISK DISCLOSURE BELOW. FEDERATED WILL NOT UNDERTAKE AND SPECIFICALLY DECLINES ANY OBLIGATION TO RELEASE PUBLICLY THE RESULT OF ANY REVISIONS WHICH MAY BE MADE TO ANY FORWARD LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE OF SUCH STATEMENTS OR REFLECT THE OCCURRENCE OF ANTICIPATED OR UNANTICIPATED EVENTS. AS A RESULT OF THE FOREGOING, AND OTHER FACTORS, NO ASSURANCE CAN BE GIVEN AS TO FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE, OR ACHIEVEMENTS OF FEDERATED, AND NEITHER FEDERATED NOR ANY OTHER PERSON ASSUMES RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS OF SUCH STATEMENTS. RISK FACTORS AND CAUTIONARY STATEMENTS POTENTIAL ADVERSE EFFECTS OF INCREASED COMPETITION IN THE INVESTMENT MANAGEMENT BUSINESS. The investment management business is highly competitive. Federated competes in the distribution of mutual funds with other independent fund management companies, national and regional broker/dealers, commercial banks, insurance companies, and other institutions. Many of these competitors have substantially greater resources and brand recognition than Federated. Competition is based on various factors, including business reputation; the investment performance of funds managed or administered by Federated; quality of service; the strength and continuity of management and selling relationships; marketing and distribution services offered; the range of products offered; and fees charged. See "Business--Competition." Many of Federated's fund products are designed for use by institutions such as banks, insurance companies and other corporations. A large portion of Federated's Managed Assets, particularly money market and fixed-income Managed Assets, are held by institutional investors. Because most institutional mutual funds are sold without sales commissions at either the time of purchase or the time of redemption, institutional investors may be more inclined to move their assets among various institutional funds than investors in retail mutual funds. Of Federated's 137 managed funds, 94 are sold without sales commission. Institutions are sensitive to fund investment performance, consistent adherence to investment objectives, quality of service and pricing. Federated believes that competitive pressures in the institutional fund market are increasing as a result of (i) the entry of well known managers from the retail investment industry and of low-fee investment managers, (ii) mergers and consolidation occurring in the banking industry, (iii) increased offering of proprietary funds by institutional investors such as banks, and (iv) regulatory changes affecting banks and other financial service firms. A significant portion of Federated's revenue is derived from providing mutual funds to its bank trust market, comprising over 1,400 banks and other financial institutions. Future profitability of Federated will be affected by its ability to retain its share of this market, and could also be adversely affected by the general consolidation which is occurring in the banking industry as well as recent regulatory changes. In addition, bank consolidation trends could not only cause changes in Federated's customer mix, but could also affect the scope of services provided and fees received by Federated, depending upon the degree to which banks internalize administrative functions attendant to proprietary mutual funds. POTENTIAL ADVERSE EFFECTS OF A DECLINE IN SECURITIES MARKETS. Changes in economic or market conditions may adversely affect the profitability and performance of and demand for Federated's investment products and services. The ability of Federated to compete and grow is dependent, in part, on the relative attractiveness of the types of investment products Federated offers and its investment philosophies and market strategies under prevailing market conditions. A significant portion of Federated's revenue is derived from investment advisory fees, which are based on the value of Managed Assets and vary with the type of asset being managed, with higher fees generally earned on equity and fixed-income funds than on money market funds. Consequently, significant fluctuations in the prices of securities held by, or the level of redemptions from, the funds advised by Federated may affect materially the amount of Managed Assets and thus Federated's revenue, profitability and ability to grow. Substantially all of Federated's Managed Assets are in open-end funds, which permit investors to redeem their investment at any time. POTENTIAL ADVERSE AFFECTS ON MONEY MARKET FUNDS RESULTING FROM INCREASES IN INTEREST RATES. Approximately 33% of Federated's revenue in 2000 was from managed money market funds. Assets in these funds are largely from institutional investors. In a period of rapidly rising interest rates, institutional investors may redeem shares in money market funds to invest directly in market issues offering higher yields. These redemptions would reduce Managed Assets, thereby reducing Federated's advisory fee revenue. Federated has been actively diversifying its products to expand its Managed Assets in equity mutual funds which may be less sensitive to interest rate increases. There can be no assurance that Federated will continue to be successful in these diversification efforts. ADVERSE EFFECTS OF POOR FUND PERFORMANCE. Success in the investment management and mutual fund business is largely dependent on the funds' investment performance relative to market conditions and performance of competing funds. Good performance generally stimulates sales of the funds' shares and tends to keep redemptions low. Sales of funds generate higher revenues (which are largely based on assets of the funds). Good performance also attracts private institutional accounts to Federated. Conversely, relatively poor performance tends to result in decreased sales, increased redemptions of the funds' shares, and the loss of private institutional accounts, with corresponding decreases in revenues to Federated. Failure of the funds to perform well could, therefore, have a material adverse effect on Federated. ADVERSE EFFECTS OF TERMINATION OR FAILURE TO RENEW FUND AGREEMENTS ON FEDERATED'S REVENUES AND PROFITABILITY. A substantial majority of Federated's revenues are derived from investment management agreements with the funds that, as required by law, are terminable on 60 days' notice. In addition, each such investment management agreement must be approved and renewed annually by each fund's board, including disinterested members of the board, or its shareholders, as required by law. Generally, Federated's administrative servicing agreements with bank proprietary fund customers have an initial term of three years with a provision for automatic renewal unless notice is otherwise given and provide for termination for cause. Failure to renew or termination of a significant number of these agreements could have a material adverse impact on Federated. In addition, as required by the Investment Company Act, each investment advisory agreement with a mutual fund automatically terminates upon its "assignment," although new investment advisory agreements may be approved by the mutual fund's directors or trustees and shareholders. A sale of a sufficient number of shares of Federated's voting securities to transfer control of Federated could be deemed an "assignment" in certain circumstances. An assignment, actual or constructive, will trigger these termination provisions and may adversely affect Federated's ability to realize the value of these assets. POTENTIAL ADVERSE EFFECTS OF CHANGES IN LAWS AND REGULATIONS ON FEDERATED'S INVESTMENT MANAGEMENT BUSINESS. Federated's investment management business is subject to extensive regulation in the United States primarily at the Federal level, including regulations by the Commission particularly under the Investment Company Act and the Advisers Act as well as the rules of the NASD and all states. Federated is also affected by the regulations governing banks and other financial institutions and, to the extent operations take place outside the United States, by foreign regulations. Changes in laws or regulations or in governmental policies could materially and adversely affect the business and operations of Federated. NO ASSURANCE OF SUCCESSFUL FUTURE ACQUISITIONS. Federated's business strategy contemplates the acquisition of other investment management companies as well as investment assets. There can be no assurance that Federated will find suitable acquisition candidates at acceptable prices, have sufficient capital resources to realize its acquisition strategy, be successful in entering into definitive agreements for desired acquisitions, or successfully integrate acquired companies into Federated, or that any such acquisitions, if consummated, will prove to be advantageous to Federated. SYSTEMS AND TECHNOLOGY RISKS. Federated utilizes software and related technologies throughout its businesses including both proprietary systems as well as those provided by outside vendors. As the century date change occurred, Federated encountered no significant problems with date-sensitive systems of its own or third party vendors in recognizing the year 2000. Unanticipated issues unrelated to the century date change could occur and it is not possible to predict with certainty all of the adverse effects that could result from a failure of a third party to address computer system problems. Accordingly, there can be no assurance that potential system interruptions or the cost necessary to rectify the problems would not have a material adverse effect on Federated's business, financial condition, results of operations or business prospects. ITEM 2 - PROPERTIES Federated's facilities are concentrated in Pittsburgh, Pennsylvania where it leases space sufficient to meet its operating needs. Federated's headquarters is located in the Federated Investors Tower, where Federated occupies approximately 345,000 square feet. Federated leases approximately 100,000 square feet at the Pittsburgh Office and Research Park and an aggregate of 60,000 square feet at other locations in Pittsburgh. Federated also leases approximately 50,800 square feet of office space for a portion of its servicing business in Rockland, Massachusetts. Federated maintains office space in Dublin, Ireland, and Frankfurt, Germany, where administrative offices for offshore funds and other international initiatives are maintained; in New York, New York, where Federated Global Investment Management Corp. and InvestLink Technologies, Inc. conduct their business; and in Gibbsboro, New Jersey, where Federated Investors Trust Company is located. Additional offices in Wilmington, Delaware are subleased by Federated. ITEM 3 - LEGAL PROCEEDINGS There is currently no pending litigation of a material nature involving Federated. ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS None. PART II ITEM 5 - MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCK HOLDER MATTERS The information required by this Item is contained in Federated's 2000 Annual Report to Shareholders under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Notes to Consolidated Financial Statements" and is incorporated herein by reference. ITEM 6 - SELECTED FINANCIAL DATA The information required by this Item is contained in Federated's 2000 Annual Report to Shareholders under the caption "Selected Consolidated Financial Data" and is incorporated herein by reference. ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this Item is contained in Federated's 2000 Annual Report to Shareholders under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference. ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required by this Item is contained in Federated's 2000 Annual Report to Shareholders under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference. ITEM 8 - FINANCIAL STATEMENT AND SUPPLEMENTARY DATA The information required by this Item is contained in Federated's 2000 Annual Report to Shareholders under the captions "Report of Ernst & Young LLP, Independent Auditors," "Consolidated Balance Sheets," "Consolidated Statements of Income," "Consolidated Statements of Changes in Shareholders' Equity," "Consolidated Statements of Cash Flows," and "Notes to Consolidated Financial Statements" and is incorporated herein by reference. ITEM 9 - CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY The information required by this Item (other than the information set forth below) will be contained in Federated's Information Statement for its 2001 Annual Meeting of Shareholders under the captions "Board of Directors and Election of Directors" and "Security Ownership - Section 16(a) Beneficial Ownership Reporting Compliance," and is incorporated herein by reference. EXECUTIVE OFFICERS The following table sets forth certain information regarding the executive officers of Federated as of March 31, 2001: NAME POSITION AGE - ---- -------- --- John F. Donahue Chairman and Director 76 J. Christopher Donahue President, Chief Executive Officer and Director 51 Arthur L. Cherry President and Chief Executive Officer, 47 Federated Services Company and Director William D. Dawson III Executive Vice President and Chief Investment 52 Officer - U.S. Fixed Income of Federated Advisory Companies* Thomas R. Donahue Vice President, Treasurer, Chief Financial 42 Officer and Director John B. Fisher President - Institutional Sales Division of 44 Federated Securities Corp. and Director Henry A. Frantzen Executive Vice President and Chief Investment 58 Officer - Global Equity and Fixed Income of Federated Advisory Companies* James F. Getz President -- Retail Sales Division of 54 Federated Securities Corp. and Director J. Thomas Madden Executive Vice President and Chief Investment 55 Officer - Domestic Equity, High Yield and Asset Allocation of Federated Advisory Companies* Eugene F. Maloney Vice President and Director 56 John W. McGonigle Executive Vice President, Chief Legal Officer, 62 Secretary and Director Denis McAuley III Vice President and Principal Accounting Officer 54 - ---------------------------- *Federated Advisory Companies include the following subsidiaries of Federated: Federated Global Investment Management Corp., Passport Research Limited, Federated Investment Counseling, and Federated Investment Management Company. Mr. John F. Donahue was a founder of the predecessor of Federated and was Chairman and Chief Executive Officer of Federated and a trustee of Federated Investors, a Delaware business trust (the "Trust"), prior to the May 1998 merger of the Trust into Federated, its wholly-owned subsidiary (the "Merger"). Mr. Donahue has continued to serve as Chairman following the consummation of the Merger. He served as President from 1989 until 1993. Mr. Donahue is Chairman or President and a director or trustee of the investment companies managed by subsidiaries of Federated. Mr. Donahue is the father of J. Christopher Donahue and Thomas R. Donahue, each of whom serves as an executive officer and director of Federated. Mr. J. Christopher Donahue was a trustee of the Trust from 1989 until the consummation of the Merger and has been a director of Federated since the consummation of the Merger. He served as President and Chief Operating Officer from 1993 until April 1998, when he became President and Chief Executive Officer. Prior to 1993, he served as Vice President. He is President or Executive Vice President of the investment companies managed by subsidiaries of Federated and a director, trustee or managing general partner of some of the investment companies. Mr. Donahue is the son of John F. Donahue and the brother of Thomas R. Donahue. Mr. Arthur L. Cherry was a trustee of the Trust from 1997 until the Merger and has been a director of Federated since the consummation of the Merger. He is the President and Chief Executive Officer of Federated Services Company, a wholly-owned subsidiary of Federated. Prior to joining Federated in January 1997, he was a managing partner of AT&T Solutions, former president of Scudder Services Corporation and a managing director of Scudder, Stevens & Clark. Mr. William D. Dawson III serves as Executive Vice President and Chief Investment Officer - U.S. Fixed Income of Federated Advisory Companies. He has served as a portfolio manager and held various other positions in the advisory companies. He is responsible for the investment policy and management of domestic fixed-income funds. Mr. Dawson is a Chartered Financial Analyst. Mr. Thomas R. Donahue was a trustee of the Trust from 1995 until the consummation of the Merger and has been a director of Federated since the consummation of the Merger. He has been Vice President since 1993 and currently serves as Vice President, Treasurer and Chief Financial Officer. Prior to joining Federated, Mr. Donahue was in the venture capital business, and from 1983 to 1987 was employed by PNC Bank in its Investment Banking Division. Mr. Donahue is the son of John F. Donahue and the brother of J. Christopher Donahue. Mr. John B. Fisher has been a director of Federated since the consummation of the Merger. He is President-Institutional Sales Division of Federated Securities Corp., a wholly-owned subsidiary of Federated, and is responsible for the distribution of Federated's products and services to investment advisors, insurance companies, retirement plans and corporations Mr. Henry A. Frantzen serves as Executive Vice President and Chief Investment Officer - Global Equity and Fixed Income of Federated Advisory Companies. Mr. Frantzen is primarily responsible for the management of global equity and fixed-income funds. Prior to joining Federated, Mr. Frantzen was Managing Director of International Equities for Brown Brothers Harriman Investment Management Ltd. and Manager and International Equity Chief Investment Officer for Brown Brothers Harriman and Co. from 1992 to 1995. Prior thereto Mr. Frantzen served in executive capacities for various investment management companies, including Oppenheimer Management Corp., Yamaichi Capital Management and CREF. Mr. James F. Getz has been a director of Federated since the consummation of the Merger. He serves as President - Retail Sales Division of Federated Securities Corp., a wholly-owned subsidiary of Federated, and is responsible for the marketing and sales efforts in the trust and broker/dealer markets. Mr. Getz is a Chartered Financial Analyst. Mr. J. Thomas Madden serves as Executive Vice President and Chief Investment Officer - Domestic Equity, High Yield and Asset Allocation of Federated Advisory Companies. Mr. Madden oversees the portfolio management in the domestic equity, high yield and asset allocation areas. Mr. Madden is a Chartered Financial Analyst. Mr. Eugene F. Maloney was a trustee of the Trust from 1989 until the consummation of the Merger and has continued as a director of Federated since the consummation of the Merger. He serves as a Vice President of Federated and provides certain legal, technical and management expertise to Federated's sales divisions, including regulatory and legal requirements relating to a bank's use of mutual funds in both trust and commercial environments. Mr. John W. McGonigle was a trustee of the Trust from 1989 until the consummation of the Merger and has been a director since the consummation of the Merger. Mr. McGonigle has served as Secretary of Federated since 1989. He served as Vice President of Federated from 1989 until August 1995, when he became Executive Vice President. Mr. McGonigle acted as General Counsel until 1998 when he became the Chief Legal Officer. Mr. McGonigle is Executive Vice President and Secretary of the investment companies managed by subsidiaries of Federated. Mr. Denis McAuley III became Principal Accounting Officer of Federated on March 16, 2001. He also serves as Vice President of Federated and as Senior Vice President, Treasurer or Assistant Treasurer for various subsidiaries of Federated. Mr. McAuley is a Certified Public Accountant. ITEM 11 - EXECUTIVE COMPENSATION The information required by this Item is contained in Federated's Information Statement for the 2001 Annual Meeting of Shareholders under the captions "Board of Directors and Election of Directors" and "Executive Compensation" and is incorporated herein by reference. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is contained in Federated's Information Statement for the 2001 Annual Meeting of Shareholders under the caption "Security Ownership" and is incorporated herein by reference. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A)(1) FINANCIAL STATEMENTS: The information required by this Item is contained in Federated's 2000 Annual Report to Shareholders under the captions "Report of Ernst & Young LLP, Independent Auditors," "Consolidated Balance Sheets," "Consolidated Statements of Income," "Consolidated Statements of Changes in Shareholders' Equity," "Consolidated Statements of Cash Flows," and "Notes to Consolidated Financial Statements" and is incorporated herein by reference. (A)(2) FINANCIAL STATEMENT SCHEDULES: Schedules for which provision are made in the applicable accounting regulations of the United States Securities and Exchange Commission have been omitted because such schedules are not required under the related instructions or are inapplicable or because the information required is included in the Consolidated Financial Statements or notes thereto. (A)(3) EXHIBITS: The following exhibits are filed or incorporated as part of this report: Exhibit NUMBER DESCRIPTION 2.01 Agreement and Plan of Merger, dated as of February 20, 1998, between Federated Investors and Federated (incorporated by reference to Exhibit 2.01 to the Registration Statement on Form S-1 (File No. 333-48405)) 3.01 Restated Articles of Incorporation of Federated (incorporated by reference to Exhibit 3.01 to the Registration Statement on Form S-1 (File No. 333-48405)) 3.02 Restated By-Laws of Federated (incorporated by reference to Exhibit 3.02 to the Registration Statement on Form S-1 (File No. 333-48405)) 4.01 Form of Class A Common Stock certificate (incorporated by reference to Exhibit 4.01 to the Registration Statement on Form S-1 (File No. 333-48405)) 4.02 Form of Class B Common Stock certificate (incorporated by reference to Exhibit 4.02 to the Registration Statement on Form S-1 (File No. 333-48405)) 4.03 Stock Purchase Agreement, dated August 1, 1989, between Federated and Westinghouse Credit Corporation (incorporated by reference to Exhibit 4.04 to the Registration Statement on Form S-1 (File No. 333-48405)) 4.04 Intercompany Subordination Agreement, dated as of June 15, 1996, by and among Federated Investors and its subsidiaries (incorporated by reference to Exhibit 4.05 to the Registration Statement on Form S-1 (File No. 333-48405)) 4.05 Shareholder Rights Agreement, dated August 1, 1989, between Federated and The Standard Fire Insurance Company, as amended January 31, 1996 (incorporated by reference to Exhibit 4.06 to the Registration Statement on Form S-1 (File No. 333-48405)) 4.06 Senior Secured Credit Agreement, dated as of January 31, 1996, by and among Federated and the Banks set forth therein and PNC Bank, National Association (incorporated by reference to Exhibit 4.07 to the Registration Statement on Form S-1 (File No. 333-48405)) 9.01 Voting Shares Irrevocable Trust dated May 31, 1989 (incorporated by reference to Exhibit 9.01 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.01 Amendment No. 4 to Credit Agreement, dated as of May 11, 1998, by and among Federated Investors, Inc., the banks set forth therein and PNC Bank, National Association. (incorporated by reference to Exhibit 10.1 of the June 30, 1998 Quarterly Report on Form 10-Q (File No. 001-14818)) 10.02 Amendment No. 5 to Credit Agreement, dated as of May 11, 1998, by and among Federated Investors, Inc., the banks set forth therein and PNC Bank, National Association. (incorporated by reference to Exhibit 10.2 of the June 30, 1998 Quarterly Report on Form 10-Q (File No. 001-14818)) 10.03 Amendment No. 6 to Credit Agreement, dated as of December 3, 1998, by and among Federated Investors, Inc., the banks set forth therein and PNC Bank, National Association (incorporated by reference to Exhibit 10.03 of the Form 10-K for the fiscal year ended December 31, 1998 (File No. 001-14818)) 10.04 Amendment No. 7 to Credit Agreement, dated as of February 22, 1999, by and among Federated Investors, Inc., the banks set forth therein and PNC Bank, National Association (incorporated by reference to Exhibit 10.1 of the June 30, 1999 Quarterly Report on Form 10-Q (File No. 001-14818)) 10.05 Federated Note Purchase Agreement, dated as of June 15, 1996 (incorporated by reference to Exhibit 4.08 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.06 Federated Program Master Agreement, dated as of October 24, 1997, among Federated, Federated Funding 1997-1, Inc., Federated Management Company, Federated Securities Corp., Wilmington Trust Company, PLT Finance, L.P., Putnam, Lovell & Thornton Inc. and Bankers Trust Company (incorporated by reference to Exhibit 4.09 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.07 Federated Investors, Inc. Employee Stock Purchase Plan, amended as of July 20, 1999 (incorporated by reference to Exhibit 10.2 of the June 30, 1999 Quarterly Report on Form 10-Q (File No. 001-14818)) 10.08 Federated Investors Program Initial Purchase Agreement, dated as of October 24, 1997, between Federated Funding 1997-1, Inc. and Wilmington Trust Company, solely as Trustee of the PLT Finance Trust 1997-1 (incorporated by reference to Exhibit 4.10 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.09 Federated Investors Program Revolving Purchase Agreement, dated as of October 24, 1997, between Federated Funding 1997-1, Inc. and PLT Finance, L.P. (incorporated by reference to Exhibit 4.11 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.10 Federated Investors Program Fee Agreement, dated as October 24, 1997, between Federated Investors and PLT Finance, L.P. (incorporated by reference to Exhibit 4.12 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.11 Schedule X to Federated Program Master Agreement, dated as of October 24, 1997, among Federated, Federated Funding 1997-1, Inc., Federated Investors Management Company, Federated Securities Corp., Wilmington Trust Company, PLT Finance, L.P., Putnam, Lovell & Thornton Inc. and Bankers Trust Company (incorporated by reference to Exhibit 4.13 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.12 Stock Incentive Plan, as amended as of July 20, 1999 (incorporated by reference to Exhibit 10.3 to the June 30, 1999 Quarterly Report on Form 10-Q (File No. 001-14818)) 10.13 Executive Annual Incentive Plan (incorporated by reference to Exhibit 10.02 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.14 Form of Bonus Stock Option Agreement (incorporated by reference to Exhibit 10.13 of the Form 10-K for the fiscal year ended December 31, 1998 (File No. 001-14818)) 10.15 Federated Investors Tower Lease dated January 1, 1993 (incorporated by reference to Exhibit 10.03 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.16 Federated Investors Tower Lease dated February 1, 1994 (incorporated by reference to Exhibit 10.04 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.17 Centre City Tower Lease dated July 23, 1992, as amended (incorporated by reference to Exhibit 10.05 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.18 Employment Agreement, dated January 16, 1997, between Federated Investors and an executive officer (incorporated by reference to Exhibit 10.06 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.19 Employment Agreement, dated December 28, 1990, between Federated Investors and an executive officer (incorporated by reference to Exhibit 10.08 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.20 Employment Agreement, dated December 22, 1993, between Federated Securities Corp. and an executive officer (incorporated by reference to Exhibit 10.09 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.21 Employment Agreement, dated March 17, 1995, between Federated Investors and an executive officer (incorporated by reference to Exhibit 10.07 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.22 Edgewood Services, Inc. Discretionary Line of Credit Demand Note, dated as of March 28, 2000 (incorporated by reference to Exhibit 10.1 to the March 31, 2000 Quarterly Report on Form 10-Q (File No. 001-14818)) 10.23 Federated Investors, Inc. Guaranty and Suretyship Agreement, dated as of March 28, 2000 (incorporated by reference to Exhibit 10.2 to the March 31, 2000 Quarterly Report on Form 10-Q (File No. 001-14818)) 10.24 Federated Investors, Inc. Supplemental Agreement, dated as of April 20, 2000, amending the Note Purchase Agreements dated June 15, 1996 (incorporated by reference to Exhibit 10.1 to the June 30, 2000 Quarterly Report on Form 10-Q (File No. 001-14818)) 10.25 Amendment No. 8 to Credit Agreement, dated April 14, 2000, by and among Federated Investors, Inc. and the Banks set forth therein and PNC Bank, National Association (incorporated by reference to Exhibit 10.2 to the June 30, 2000 Quarterly Report on Form 10-Q (File No. 001-14818)) 10.26 Purchase and Sale Agreement, dated as of December 21, 2000, among Federated Investors Management Company, Federated Securities Corp., Federated Funding 1997-1, Inc., Federated Investors, Inc., Citibank, N.A., and Citicorp North America, Inc. (Filed herewith) 10.27 Amendment No. 2 to the Federated Investors Program Documents dated as of December 21, 2000 among Federated Investors, Inc., Federated Funding 1997-1, Inc., Federated Investors Management Company, Federated Securities Corp., Wilmington Trust Company, Putnam Lovell Finance L.P., Putnam Lovell Securities Inc., and Bankers Trust Company (Filed herewith) 10.28 Amended and Restated Senior Secured Credit Agreement, dated as of January 23, 2001, by and among Federated Investors, Inc., the banks set forth therein, PNC Bank, National Association and The Bank of New York (Filed herewith) 13.01 Selected Portions of 2000 Annual Report to Shareholders (Filed herewith) 21.01 Subsidiaries of the Registrant (Filed herewith) 23.01 Consent of Ernst & Young LLP (Filed herewith) (B) REPORTS ON FORM 8-K: Form 8-K filed on November 8, 2000 (C) EXHIBITS: See (a)(3) above. (D) FINANCIAL STATEMENT SCHEDULES: See (a)(2) above. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. FEDERATED INVESTORS, INC. By: /S/ J. CHRISTOPHER DONAHUE -------------------------------------- J. Christopher Donahue President and Chief Executive Officer Date: March 22, 2001 Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE /s/ John F. Donahue Chairman and Director March 22, 2001 - ------------------------- John F. Donahue /s/ J. Christopher Donahue President, Chief Executive March 22, 2001 Officer - ------------------------- J. Christopher Donahue and Director (Principal Executive Officer) /s/ John W. McGonigle Director March 22, 2001 - ------------------------- John W. McGonigle /s/ Arthur L. Cherry Director March 22, 2001 - ------------------------- Arthur L. Cherry /s/ James F. Getz Director March 22, 2001 - ------------------------- James F. Getz /s/ John B. Fisher Director March 22, 2001 - ------------------------- John B. Fisher SIGNATURE TITLE DATE /s/ Thomas R. Donahue Chief Financial Officer and March 22, 2001 Director - ------------------------- Thomas R. Donahue /s/ Eugene F. Maloney Director March 22, 2001 - ------------------------- Eugene F. Maloney /s/ Michael J. Farrell Director March 22, 2001 - ------------------------- Michael J. Farrell /s/ James L. Murdy Director March 22, 2001 - ------------------------- James L. Murdy /s/ Denis McAuley III Principal Accounting Officer March 22, 2001 - ------------------------- Denis McAuley III EXHIBIT INDEX Exhibit NUMBER DESCRIPTION 10.26 Purchase and Sale Agreement, dated as of December 21, 2000, among Federated Investors Management Company, Federated Securities Corp., Federated Funding 1997-1, Inc., Federated Investors, Inc., Citibank, N.A., and Citicorp North America, Inc. 10.27 Amendment No. 2 to the Federated Investors Program Documents dated as of December 21, 2000 among Federated Investors, Inc., Federated Funding 1997-1, Inc., Federated Investors Management Company, Federated Securities Corp., Wilmington Trust Company, Putnam Lovell Finance L.P., Putnam Lovell Securities Inc., and Bankers Trust Company 10.28 Amended and Restated Senior Secured Credit Agreement, dated as of January 23, 2001, by and among Federated Investors, Inc., the banks set forth therein, PNC Bank, National Association and The Bank of New York 13.01 Selected Portions of 2000 Annual Report to Shareholders 21.01 Subsidiaries of the Registrant 23.01 Consent of Ernst & Young LLP Appendix A FEDERATED FUNDS

Summary: Total Number of Load Funds: 43 Total Number of No-Load Funds: 94 Total Number of Funds: 137 *Other Managed Assets include Separate Account and Repo Assets EX-13.01 2 0002.htm Federated Investors Inc. 10-K 3/23/01

Selected Consolidated Financial Data

DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA

The selected consolidated financial data below should be read in conjunction with Federated Investors, Inc. and its subsidiaries' (Federated) Consolidated Financial Statements and Notes. The selected consolidated financial data (except managed and administered assets) of Federated for the five years ended December 31, 2000, have been derived from the audited consolidated financial statements of Federated. See the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section and the consolidated financial statements which follow.

Years Ended December 31,		2000	1999		1998		1997			1996
STATEMENT OF INCOME DATA
Total revenue	$	680,768	$	601,098	$	522,127	$	403,719		$	321,793
Operating expenses:
Compensation and related		162,284		152,469		146,927		139,373			126,966
Other operating expenses		224,014		201,278		177,845		141,004			134,308
Amortization of intangible assets		7,560		10,405		14,937		13,715			8,886
Total operating expenses		393,858		364,152		339,709		294,092			270,160
Operating income		286,910		236,946		182,418		109,627			51,633
Nonoperating expenses		34,180		31,846		27,614		20,060			20,287
Minority interest		10,208		10,219		8,870		7,584			6,811
Income tax provision		87,162		70,861		53,565		30,957			10,930
Income before extraordinary item		155,360		124,020		92,369		51,026			13,605
Extraordinary item, net of tax		0		0		0		449			986
Net income		155,360		124,020		92,369		50,577			12,619
Dividends on preferred stock		0		0		0		0			3,025
Net income applicable to common stock	$	155,360	$	124,020	$	92,369	$	50,577		$	9,594
Cash dividends per common share¹	$	0.1387	$	0.1093	$	0.0898	$	0.0389		$	0.0278
Earnings per common share--basic:
Income before extraordinary item¹	$	1.32	$	0.99	$	0.73	$	0.41		$	0.08
Earnings per common share--diluted:
Income before extraordinary item¹	$	1.27	$	0.96	$	0.71	$	0.41		$	0.08
Operating margin		42%		39%		35%		27%			16%
BALANCE SHEET DATA AT PERIOD END
Cash and cash equivalents	$	149,920	$	171,490	$	185,581	$	22,912		$	6,561
Securities available for sale		85,305		66,438		13,398		8,945			13,761
Deferred sales commissions, net		315,612		298,978		258,593		164,623			85,905
Intangible assets, net		46,977		42,547		52,953		67,880			69,105
Total assets		704,750		673,193		581,656		338,435			248,231
Long-term debt--recourse		70,174		84,446		98,698		98,950			244,125
Long-term debt--nonrecourse		323,818		309,741		272,850		185,388			0
Total liabilities		556,344		553,785		492,279		379,079			334,339
Shareholders' equity		147,868		118,812		88,706		(41,110	)		(86,922	)
Book value per common share¹	$	1.26	$	0.97	$	0.69	$	(0.33	)	$	(0.69	)
MANAGED AND ADMINISTERED ASSETS AT PERIOD END (in millions)
Money market funds	$	98,797	$	83,299	$	77,055	$	63,622		$	51,163
Equity funds		20,641		20,941		15,503		11,710			7,594
Fixed-income funds		14,268		15,857		16,437		15,067			14,109
Separate accounts		5,878		4,723		2,558		2,141			1,976
Total managed assets	$	139,584	$	124,820	$	111,553	$	92,540		$	74,842
Total administered assets	$	39,732	$	41,234	$	28,165	$	46,999		$	35,574

1 Reflects the two-for-one and three-for-two stock splits paid in 1998 and the three-for-two stock split paid in 2000.

Management's Discussion and Analysis

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

AVERAGE MANAGED AND ADMINISTERED ASSETS

					Percent Change
dollars in millions for the years ended December 31,		2000		1999	Percent Change
Money market funds	$	86,406	$	79,253	9%
Equity funds		22,107		17,531	26%
Fixed-income funds		14,713		16,680	(12%	)
Separate accounts		5,168		4,109	26%
Total average managed assets	$	128,394	$	117,573	9%
Total average administered assets	$	41,966	$	35,079	20%

COMPONENTS OF CHANGES IN EQUITY AND FIXED-INCOME FUND MANAGED ASSETS

							Percent Change
dollars in millions for the years ended December 31,		2000			1999		Percent Change
EQUITY FUNDS
Beginning assets	$	20,941		$	15,503		35%
Sales		10,306			6,536		58%
Redemptions		(7,489	)		(4,549	)	65%
Net sales		2,817			1,987		42%
Net exchanges		34			128		(73%	)
Acquisition related		319			0		100%
Other¹		(3,470	)		3,323		(204%	)
Ending assets	$	20,641		$	20,941		(1%	)

FIXED-INCOME FUNDS
Beginning assets	$	15,857		$	16,437		(4%	)
Sales		4,031			5,799		(30%	)
Redemptions		(5,295	)		(5,891	)	(10%	)
Net redemptions		(1,264	)		(92	)	1,274%
Net exchanges		(470	)		50		(1,040%	)
Acquisition related		11			0		100%
Other¹		134			(538	)	125%
Ending assets	$	14,268		$	15,857		(10%	)

1 Includes primarily reinvested dividends and distributions, net investment income and changes in the market value of securities held by the funds.

Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the "Selected Consolidated Financial Data" section and the consolidated financial statements appearing elsewhere in this report.

RESULTS OF OPERATIONS

General

Federated is a leading provider of investment management products and related financial services. The majority of Federated's revenue is derived from advising, distributing and servicing Federated mutual funds, separately managed accounts and other related products, in both domestic and international markets. Federated also derives revenue through servicing third-party mutual funds.

Investment advisory, distribution and the majority of servicing fees are based on the net asset value of the investment portfolios that are managed or administered by Federated. As such, these revenues are dependent upon factors including market conditions and the ability to attract and maintain assets. Accordingly, revenues will fluctuate with changes in the total value and composition of the assets under management or administration.

Federated grew assets during 2000 through mutual fund sales, the addition of new separate accounts and acquisitions. Money market funds led in asset growth with a 19% increase during 2000. During the fourth quarter 2000, Federated announced the acquisition of the Kaufmann Fund, a $3.4 billion growth fund as of December 31, 2000, with a strong long-term performance record and brand recognition. Upon closing the transaction, Federated will introduce the Federated Kaufmann Fund through Federated's existing distribution channels, and for the first time, this fund will become available through financial intermediaries.

Net Income. The table below presents highlights of Federated's operations for the three years ended December 31.

				2000 vs 1999		1999 vs 1998
	2000	1999	1998	2000 vs 1999		1999 vs 1998
Net income (in millions)	$155.4	$124.0	$92.4	25%		34%
Earnings per share¹
Basic	$1.32	$0.99	$0.73	33%		36%
Diluted	$1.27	$0.96	$0.71	32%		35%
Revenue (in millions)
Revenue from managed assets	$611.3	$534.5	$457.4	14%		17%
Service-related revenue from sources other than managed assets	51.1	46.9	48.5	9%		(3%)
Other	18.4	19.7	16.2	(7%	)	22%
Total revenue	$680.8	$601.1	$522.1	13%		15%
Operating margin	42%	39%	35%	8%		11%

1Per share amounts have been restated to reflect the three-for-two stock split paid in July 2000.

Net income for 2000 and 1999 increased 25% and 34%, respectively, over the prior year's net income. These increases primarily reflect increased revenue from managed assets as a result of continued growth in fees from equity and money market fund assets and improved operating margins. Net income for 1999 included a nonrecurring after-tax gain from the sale of nonearning assets of $2.0 million. Excluding this gain, net income for 2000 increased 27% compared to 1999. Expense growth has been contained at levels substantially below Federated's revenue growth rate of 13% and 15% in 2000 and 1999, respectively. As a result, operating margins have improved to 42% in 2000 compared to 39% in 1999 and 35% in 1998.

Revenue. Total revenue increased $79.7 million in 2000 and $79.0 million in 1999 primarily as a result of increased revenue from managed assets. Average managed assets continued to climb from $101.0 billion for 1998 to $117.6 billion for 1999 and to $128.4 billion for 2000. These increases included significant asset growth in equity funds, separate accounts and money market funds. Revenue from managed assets increased at a rate higher than the rate of average managed asset growth during these periods due to the continued shift over the years in the managed asset mix towards equity products that earn higher-than-average fees per invested dollar.

Service-related revenues from sources other than managed assets increased $4.2 million in 2000 due primarily to the growth in average administered assets.

Operating Expenses. Operating expenses for the three years ended December 31 are set forth in the following table:

in millions	2000	1999	1998
Compensation and related	$162.3	$152.5	$146.9
Advertising and promotional	60.2	55.1	46.0
Amortization of deferred sales commissions	59.0	48.3	32.1
Other	112.4	108.3	114.7
Total operating expenses	$393.9	$364.2	$339.7

Total operating expenses increased $29.7 million in 2000 and $24.5 million in 1999. More than 60% of the change in 2000 and 1999 related to the increase in certain operating expenses that tend to increase with increases in sales and/or managed assets. These expenses include incentive compensation (included in Compensation and related), marketing allowances (included in Advertising and promotional) and the amortization of deferred sales commissions. Each of these expenses increased over the prior year due in large part to increased sales and/or managed assets.

Income Taxes. The income tax provision for 2000, 1999 and 1998 was $87.2 million, $70.9 million and $53.6 million, respectively. The provision increased in 2000 and in 1999 over the prior year primarily as a result of the increases in the level of income before income taxes. The effective tax rate was 35.9%, 36.4% and 36.7% for 2000, 1999 and 1998, respectively.

FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY

Deferred Sales Commissions and Nonrecourse Debt. Deferred sales commissions and nonrecourse debt increased $16.6 million and $14.1 million, respectively, in 2000 largely as a result of new sales of Class B shares of Federated mutual funds ("B shares"). Federated finances up-front commissions paid to broker/dealers on the sale of B shares through the sale of the rights to future revenue streams associated with B-share deferred sales commissions. Under Federated's first B-share financing arrangement which expired September 30, 2000, these sales were accounted for as financings for reporting purposes and nonrecourse debt was recorded. In October 2000, as a result of entering into a new financing arrangement, Federated began accounting for the sale of certain B-share-related future revenue streams as true sales and continues to account for the sale of the rights to future servicing fees on the B shares as financings. The following table demonstrates the effects of the B-share financing programs on the Consolidated Balance Sheets at December 31:

in millions	2000		1999
Assets
Deferred sales commissions, net¹	$	305.5	$	288.8
Receivables--Federated funds		7.5		8.4
Other assets		2.6		2.1

Liabilities
Long-term debt--nonrecourse	$	323.8	$	309.7
Accounts payable		6.1		6.2

1 Excludes deferred sales commissions related to B-share revenue streams which have not been financed as of the end of the period due to the timing of the sale of the revenue streams.

Due to the nonrecourse nature of the financing arrangements, the $14.3 million excess of B-share-related liabilities over the related assets at December 31, 2000, will be recognized in income over the remaining life of certain B-share cash flows.

Shareholders' Equity. Shareholders' equity increased by $29.1 million in 2000 mainly as a result of net income, partially offset by treasury stock purchases and dividends paid. During 2000, Federated repurchased 5,451,108 shares (split adjusted) of Class B common stock for approximately $107.6 million under the stock repurchase programs. As of December 31, 2000, Federated can repurchase an additional 4,392,330 shares through its authorized programs subject to current debt-covenant restrictions which limit cash payments for additional stock repurchases to $63.4 million. On March 7, 2001, the board of directors approved the extension of Federated's current share repurchase program through March 31, 2002.

In June 2000, the board of directors approved a three-for-two stock split on Federated's common stock. The stock split was effected as a dividend and new shares were distributed in July 2000. Earnings and dividends per share, as well as other share data, have been adjusted to reflect the stock distribution.

Cash Flow. At December 31, 2000, cash and cash equivalents and the current portion of securities available for sale totaled $235.2 million as compared to $237.9 million in 1999. Federated also had $150.0 million available for borrowings under its credit facility as of December 31, 2000 (see Note 4 to the consolidated financial statements).

Cash provided by operating activities totaled $169.8 million for 2000 as compared to $132.1 million for 1999. This increase is primarily attributable to higher profitability in 2000. In 2000, net cash used by investing activities included an investment totaling $23.0 million in four new equity funds and one new fixed-income fund (performance seeds), $12.2 million paid for business acquisitions including the purchase of Investment Advisers, Inc.'s mutual fund assets, $11.5 million invested in asset-backed securities, and $12.3 million paid to acquire property and equipment. Other uses of cash flow from operating activities in 2000 included payments on debt, the purchase of treasury stock, dividend payments and distributions to a minority interest partner.

Capital Expenditures. Capital expenditures totaled $12.3 million and $17.5 million for the years ended December 31, 2000 and 1999, respectively.

Dividends Paid. Dividends paid per share in 2000, 1999 and 1998 were $0.1387, $0.1093 and $0.0898, respectively. In January 2001, Federated's board of directors declared a dividend of $0.037 per share that was paid on February 15, 2001. After considering earnings through December 31, 2000, the dividend payment on February 15, 2001, and certain stock repurchases, Federated, given current debt covenants as disclosed in the Common Stock footnote (Note 9 to the consolidated financial statements), has the ability to pay dividends of approximately $59.1 million.

Future Cash Requirements. Management expects that the principal needs for cash will be to fund strategic business acquisitions, including the pending acquisition relating to the Kaufmann Fund, advance sales commissions, repurchase company stock, service recourse debt, fund property and equipment acquisitions, pay shareholder dividends and seed new products. Management believes that Federated's existing liquid assets, together with the expected continuing cash flow from operations, its borrowing capacity under current credit facilities, the B-share financing arrangement and its ability to issue stock will be sufficient to meet its present and reasonably foreseeable cash needs.

Recent Accounting Pronouncements. In the first quarter 2001, Federated adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. The standard requires that all derivatives, including hedges, be recorded at fair value and that all changes in fair value or cash flow of both the hedge and the hedged item be recognized in earnings in the same period. The adoption had no effect on Federated's earnings or financial position due to Federated's marginal use of derivative instruments at January 1, 2001.

In the second quarter 2001, Federated will adopt Emerging Issues Task Force Issue No. 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets" (EITF 99-20). EITF 99-20 states that interest income earned on retained or purchased beneficial interests in securitized financial assets should be recognized over the life of the investment based on an anticipated yield determined by periodically estimating cash flows. Interest income should be revised prospectively for changes in cash flows. Additionally, impairment should be recognized if the fair value of the beneficial interest has declined below its carrying amount and the decline is other than temporary. The impact of adopting this statement on Federated's earnings and financial position will depend on changes in default and interest rates at the time of adoption.

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

Certain statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in Future Cash Requirements and elsewhere in this report, constitute forward-looking statements which involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of Federated or industry results to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. For a discussion of such risk factors, see the section titled Risk Factors and Cautionary Statements in Federated's Annual Report on Form 10-K for the year ended December 31, 2000, and other reports on file with the Securities and Exchange Commission. As a result of the foregoing and other factors, no assurance can be given as to future results, levels of activity, performance or achievements, and neither Federated nor any other person assumes responsibility for the accuracy and completeness of such statements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of its business, Federated is exposed to the risk of securities market and general economic fluctuations. Federated's approach has been to limit the use of derivative instruments to hedging activities. Federated's investments are primarily money market funds and mutual funds with investments which have a duration of two years or less. Occasionally, Federated invests in new mutual funds (performance seeds) sponsored by Federated in order to provide investable cash to the fund allowing the fund to establish a performance history. Federated may use derivative financial instruments to hedge these investments. As of December 31, 2000, the fair value of performance seed investments was $34.3 million. As of December 31, 2000, Federated did not hold any derivative investments to hedge its performance seeds.

In addition, as of December 31, 2000, Federated had investments in high-yield, asset-backed securities and mortgage-backed securities which are included in "Securities available for sale" and "Other long-term assets" on the Consolidated Balance Sheets. These investments expose Federated to credit and interest rate risk. However, Federated does not believe that the effect of reasonably possible near-term changes in default rates or interest rates on its financial position, results of operations or cash flow would be material given the relative size of these investments.

All of Federated's debt instruments carry fixed interest rates.

Management's Report

Federated Investors, Inc.'s (Federated) management takes responsibility for the integrity and fair presentation of the financial statements in this annual report. These financial statements were prepared from accounting records which management believes fairly and accurately reflect Federated's operations and financial position.

The financial statements were prepared in conformity with accounting principles generally accepted in the United States and, as such, include amounts based on management's best estimates and judgements considering currently available information and management's view of current conditions and circumstances. Management also prepared the other information in this report and is responsible for its accuracy and consistency with the financial statements.

Management is responsible for establishing and maintaining effective internal controls designed to provide reasonable assurance that assets are protected from improper use and accounted for in accordance with its policies and that transactions are recorded accurately in Federated's records. The concept of reasonable assurance is based upon a recognition that the cost of the controls should not exceed the benefit derived. Even effective internal control, no matter how well designed, has inherent limitations -- including the possibility of circumvention or overriding of controls -- and therefore can only provide reasonable assurance with respect to financial statement preparation and safeguarding of assets.

The financial statements of Federated have been audited by Ernst & Young LLP, independent auditors. Their accompanying report is based on an audit conducted in accordance with auditing standards generally accepted in the United States.

Federated Investors, Inc.

J. Christopher Donahue

J. Christopher Donahue
President and Chief Executive Officer

Thomas R. Donahue

Thomas R. Donahue
Chief Financial Officer

January 23, 2001

Report of Ernst & Young LLP, Independent Auditors

Board of Directors
Federated Investors, Inc.

We have audited the accompanying consolidated balance sheets of Federated Investors, Inc. and subsidiaries (Federated) as of December 31, 2000 and 1999, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of Federated's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Federated Investors, Inc. and subsidiaries at December 31, 2000 and 1999, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States.

Ernst & Young LLP

Pittsburgh, Pennsylvania
January 23, 2001

Consolidated Balance Sheets

DOLLARS IN THOUSANDS

December 31,	2000			1999
CURRENT ASSETS
Cash and cash equivalents	$	149,920		$	171,490
Securities available for sale		85,305			66,438
Receivables -- Federated funds		31,176			29,750
Receivables -- other, net of reserve of $86 and $184, respectively		5,767			5,413
Accrued revenues		6,594			6,050
Prepaid expenses		3,156			3,305
Current deferred tax asset, net		2,349			1,382
Other current assets		280			319
Total current assets		284,547			284,147
LONG-TERM ASSETS
Goodwill, net of accumulated amortization of $18,949 and $16,013, respectively		32,099			32,856
Other intangible assets, net of accumulated amortization of $17,527 and $12,912, respectively		14,878			9,691
Deferred sales commissions, net of accumulated amortization of $136,409 and $79,365, respectively		315,612			298,978
Property and equipment, net		36,406			31,305
Other long-term assets		21,208			16,216
Total long-term assets		420,203			389,046
Total assets	$	704,750		$	673,193
CURRENT LIABILITIES
Cash overdraft	$	1,090		$	9,111
Current portion of long-term debt -- recourse		14,280			14,259
Accrued expenses		56,806			58,768
Accounts payable		30,161			29,321
Income taxes payable		8,162			2,865
Other current liabilities		5,023			1,148
Total current liabilities		115,522			115,472
LONG-TERM LIABILITIES
Long-term debt -- recourse		70,174			84,446
Long-term debt -- nonrecourse		323,818			309,741
Long-term deferred tax liability, net		40,565			37,177
Other long-term liabilities		6,265			6,949
Total long-term liabilities		440,822			438,313
Total liabilities		556,344			553,785
Minority interest		538			596
SHAREHOLDERS' EQUITY
Common stock:
Class A, no par value, 20,000 shares authorized, 9,000 and 6,000 shares, respectively, issued and outstanding		189			189
Class B, no par value, 900,000,000 shares authorized, 129,505,456 and 86,337,000 shares issued, respectively		75,287			75,087
Retained earnings		263,456			124,653
Treasury stock, at cost, 12,384,647 and 4,622,360 shares Class B common stock, respectively		(187,582	)		(79,976	)
Employee restricted stock plan		(736	)		(1,046	)
Accumulated other comprehensive income		(2,746	)		(95	)
Total shareholders' equity		147,868			118,812
Total liabilities, minority interest, and shareholders' equity	$	704,750		$	673,193

(The accompanying notes are an integral part of these consolidated financial statements.)

Consolidated Statements of Income

DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA

Years Ended December 31,	2000			1999		1998
REVENUE
Investment advisory fees, net -- Federated funds	$	366,599		$	313,725	$	272,686
Investment advisory fees, net -- other		13,635			11,198		7,360
Administrative service fees, net -- Federated funds		87,268			80,993		72,101
Administrative service fees, net -- other		22,602			23,388		25,133
Other service fees, net -- Federated funds		137,916			124,188		101,252
Other service fees, net -- other		28,440			23,512		23,347
Commission income		5,922			4,407		4,008
Interest and dividends		19,042			13,926		8,887
(Loss) gain on sale of securities available for sale		(89	)		820		(295	)
Other income, net		(567	)		4,941		7,648
Total revenue		680,768			601,098		522,127
OPERATING EXPENSES
Compensation and related		162,284			152,469		146,927
Advertising and promotional		60,162			55,132		46,042
Systems and communications		30,163			27,809		27,840
Professional service fees		26,848			24,431		21,171
Office and occupancy		25,331			25,313		27,215
Travel and related		14,684			13,797		13,802
Amortization of deferred sales commissions		59,041			48,275		32,117
Amortization of intangible assets		7,560			10,405		14,937
Other		7,785			6,521		9,658
Total operating expenses		393,858			364,152		339,709
Operating income		286,910			236,946		182,418
NONOPERATING EXPENSES
Debt expense--recourse		8,317			8,867		8,855
Debt expense--nonrecourse		25,863			22,979		18,759
Total nonoperating expenses		34,180			31,846		27,614
Income before minority interest and income taxes		252,730			205,100		154,804
Minority interest		10,208			10,219		8,870
Income before income taxes		242,522			194,881		145,934
Income tax provision		87,162			70,861		53,565
Net income	$	155,360		$	124,020	$	92,369
EARNINGS PER SHARE
Net income per share -- basic	$	1.32		$	0.99	$	0.73
Net income per share -- diluted	$	1.27		$	0.96	$	0.71
Cash dividends per share	$	0.1387		$	0.1093	$	0.0898

Per share amounts have been restated to reflect the three-for-two stock split paid in 2000.

(The accompanying notes are an integral part of these consolidated financial statements.)

Consolidated Statements of Changes in Shareholders' Equity

DOLLARS IN THOUSANDS

Years Ended December 31, 2000, 1999 and 1998
	Shares						Common Stock			Additional Paid-in Capital			Retained Earnings			Treasury Stock			Employee Restricted Stock Plan			Accumu-lated Other Compre-hensive Income			Total Share-holders' Equity
	Class A Class B Treasury						Common Stock			Additional Paid-in Capital			Retained Earnings			Treasury Stock			Employee Restricted Stock Plan			Accumu-lated Other Compre-hensive Income			Total Share-holders' Equity
BALANCE AT JANUARY 1, 1998		2,000	27,809,000		6,666,758		$	909		$	28,574		$	55,137		$	(123,373	)	$	(2,266	)	$	(91	)	$	(41,110	)
Net income		0	0		0			0			0			92,369			0			0			0			92,369
Other comprehensive income, net of tax: Unrealized gain on securities available for sale, net of reclassification adjustment		0	0		0			0			0			0			0			0			502			502
Other		0	0		0			0			0			0			0			0			(5	)		(5	)
Comprehensive income																										92,866
Amortization of employee restricted stock plan and other compensation plans		0	0		0			216			42			0			0			512			0			770
Issuance of stock splits		4,000	55,818,000		13,333,516			0			0			0			0			0			0			0
Dividends declared		0	0		0			0			0			(11,480	)		0			0			0			(11,480	)
Initial public offering of Class B common stock		0	2,610,000		0			46,202			0			0			0			0			0			46,202
Merger of Federated Investors into Federated Investors, Inc.		0	0		(20,000,274	)		27,707			(27,707	)		(121,464	)		121,464			0			0			0
Issuance/exercise of stock options		0	100,000		0			487			(909	)		0			1,909			0			0			1,487
Restricted stock forfeitures		0	0		0			(242	)		0			0			0			242			0			0
Purchase of treasury stock		0	(138,750	)	138,750			0			0			0			(23	)		0			0			(23	)
Other		0	0		0			0			0			(6	)		0			0			0			(6	)
BALANCE AT DECEMBER 31, 1998		6,000	86,198,250		138,750			75,279			0			14,556			(23	)		(1,512	)		406			88,706
Net income		0	0		0			0			0			124,020			0			0			0			124,020
Other comprehensive income, net of tax: Unrealized loss on securities available for sale, net of reclassification adjustment		0	0		0			0			0			0			0			0			(449	)		(449	)
Foreign currency translation		0	0		0			0			0			0			0			0			(63	)		(63	)
Other		0	0		0			0			0			0			0			0			11			11
Comprehensive income																										123,519
Amortization of employee restricted stock plan and other compensation plans		0	0		0			260			0			0			0			203			0			463
Dividends declared		0	0		0			0			0			(13,924	)		0			0			0			(13,924	)
Restricted stock forfeitures		0	0		0			(263	)		0			0			0			263			0			0
Purchase of treasury stock		0	(4,483,610	)	4,483,610			0			0			0			(79,953	)		0			0			(79,953	)
Other		0	0		0			0			0			1			0			0			0			1
BALANCE AT DECEMBER 31, 1999		6,000	81,714,640		4,622,360			75,276			0			124,653			(79,976	)		(1,046	)		(95	)		118,812
Net income		0	0		0			0			0			155,360			0			0			0			155,360
Other comprehensive income, net of tax: Unrealized loss on securities available for sale, net of reclassification adjustment		0	0		0			0			0			0			0			0			(2,596	)		(2,596	)
Foreign currency translation		0	0		0			0			0			0			0			0			(55	)		(55	)
Comprehensive income																										152,709
Amortization of employee restricted stock plan and other compensation plans		0	0		0			200			0			0			0			310			0			510
Issuance of three-for-two stock split		3,000	39,501,774		3,666,682			0			0			0			0			0			0			0
Dividends declared		0	0		0			0			0			(16,557	)		0			0			0			(16,557	)
Purchase of treasury stock		0	(4,095,605	)	4,095,605			0			0			0			(107,606	)		0			0			(107,606	)
BALANCE AT DECEMBER 31, 2000		9,000	117,120,809		12,384,647		$	75,476		$	0		$	263,456		$	(187,582	)	$	(736	)	$	(2,746	)	$	147,868

(The accompanying notes are an integral part of these consolidated financial statements.)

Consolidated Statements of Cash Flows

DOLLARS IN THOUSANDS

Years Ended December 31,	2000			1999			1998
OPERATING ACTIVITIES
Net income	$	155,360		$	124,020		$	92,369
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Amortization of intangible assets		7,560			10,405			14,937
Depreciation and other amortization		8,236			7,712			8,693
Amortization of deferred sales commissions		59,041			48,275			32,117
Minority interest		10,208			10,219			8,870
(Gain) loss on disposal of assets		(757	)		(2,973	)		1,582
Provision for deferred income taxes		2,981			4,540			3,123
Net realized loss (gain) on sale of securities available for sale		89			(820	)		295
Deferred sales commissions paid		(134,115	)		(128,059	)		(149,137	)
Contingent deferred sales charges received		45,564			39,399			23,050
Proceeds from sale of certain future revenues		13,825			0			0
Other changes in assets and liabilities:
Increase in receivables, net		(1,496	)		(4,194	)		(3,491	)
(Increase) decrease in accrued revenues		(485	)		(2,384	)		934
(Increase) decrease in other current assets		(2,100	)		5,276			(4,345	)
Decrease (increase) in other long-term assets		4,740			(501	)		348
(Decrease) increase in accounts payable and accrued expenses		(1,738	)		12,129			22,387
Increase in income taxes payable		5,297			343			10,052
(Decrease) increase in other current liabilities		(4,160	)		2,652			(2,022	)
Increase in other long-term liabilities		1,791			6,106			301
Net cash provided by operating activities		169,841			132,145			60,063
INVESTING ACTIVITIES
Proceeds from disposal of property and equipment		157			4,007			0
Additions to property and equipment		(12,314	)		(17,451	)		(7,526	)
Cash paid for business acquisitions and investment in joint venture		(12,196	)		(2,158	)		(580	)
Purchases of securities available for sale		(35,442	)		(88,950	)		(16,082	)
Proceeds from sales of securities available for sale		2,987			25,828			12,104
Net cash used by investing activities		(56,808	)		(78,724	)		(12,084	)
Financing Activities
Distributions to minority interest		(10,266	)		(10,294	)		(8,665	)
Dividends paid		(16,557	)		(13,924	)		(11,480	)
Proceeds from issuance of common stock/options		0			0			47,689
Purchases of treasury stock		(107,606	)		(79,953	)		(23	)
Proceeds from new borrowings -- nonrecourse		114,831			123,372			142,977
Payments on debt -- recourse		(14,251	)		(232	)		(293	)
Payments on debt -- nonrecourse		(100,754	)		(86,481	)		(55,515	)
Net cash (used) provided by financing activities		(134,603	)		(67,512	)		114,690
Net (decrease) increase in cash and cash equivalents		(21,570	)		(14,091	)		162,669
Cash and cash equivalents, beginning of period		171,490			185,581			22,912
Cash and cash equivalents, end of period	$	149,920		$	171,490		$	185,581
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Interest	$	11,223		$	13,611		$	15,345
Income taxes		77,990			63,957			49,075

(The accompanying notes are an integral part of these consolidated financial statements.)

Notes to Consolidated Financial Statements

(DECEMBER 31, 2000, 1999 AND 1998)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) NATURE OF OPERATIONS

Federated Investors, Inc. and its subsidiaries (Federated) sponsor, market and provide investment advisory, distribution and administrative services primarily to mutual funds. Federated also provides investment advisory and administrative services to corporations, employee benefit plans and private investment advisory accounts. The operations of Federated are organized into three principal functions: investment advisory, distribution and services.

A large portion of Federated's revenue is derived from investment advisory services provided to mutual funds and separately managed accounts through various subsidiaries and affiliates pursuant to investment advisory contracts. These subsidiaries are registered as investment advisers under the Investment Advisers Act of 1940 and with certain states.

Shares of the portfolios or classes of shares under management or administration by Federated are distributed by wholly-owned subsidiaries, which are registered broker/
dealers under the Securities Exchange Act of 1934 and under applicable state laws. Federated's investment products are primarily distributed within the bank trust, broker/dealer and institutional markets.

Federated provides mutual fund services to support the operation and administration of all mutual funds it sponsors.

(B) BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Federated Investors, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. In preparing the financial statements, management is required to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates, and such differences may be material to the consolidated financial statements.

(C) BUSINESS COMBINATIONS

Business combinations have been accounted for under the purchase method of accounting. Results of operations of acquired businesses are included from the dates of acquisition. Acquired assets and assumed liabilities are recorded at their estimated fair value as of the date of acquisition.

(D) CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks and investments, which consist of interest-bearing deposits with banks, overnight federal funds sold, money market accounts, and other investments with an original maturity of less than three months.

(E) SECURITIES AVAILABLE FOR SALE

Securities available for sale, including hedge instruments, are carried at fair value based on quoted market prices or discounted cash flows. These investments are classified as current or long-term assets and are included in "Securities available for sale" or "Other long-term assets," respectively, on the Consolidated Balance Sheets based on management's intention to sell the investment. The unrealized gains or losses on these securities are included in "Accumulated other comprehensive income" on the Consolidated Balance Sheets, net of tax. Realized gains and losses on these securities are computed on a specific identification basis and recognized in the Consolidated Statements of Income.

On a periodic basis, management evaluates the carrying value of securities that have declined in fair value for impairment. If, after considering various criteria, management believes that a decline is other than temporary, or, in the case of purchased beneficial interests in asset-backed and mortgage-backed securities, if the expected rate of return is less than the risk-free rate, the carrying value of the security is written down to fair value. Impairment adjustments are recognized in "Other income, net" on the Consolidated Statements of Income.

(F) PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost, or fair value if acquired in connection with a business combination, and are depreciated using the straight-line method over their estimated useful lives ranging from three to 25 years. Leasehold improvements are depreciated using the straight-line method over their estimated useful lives or their respective lease terms, whichever is shorter. As property and equipment are placed out-of-service, the cost and related accumulated depreciation are removed and any residual net book value is reflected as a loss in "Other income, net" in the Consolidated Statements of Income.

(G) COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE

Certain internal and external costs incurred in connection with developing or obtaining software for internal use are capitalized in accordance with the American Institute of Certified Public Accountants' Statement of Position No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." These capitalized costs are included in "Property and equipment, net" on the Consolidated Balance Sheets and are amortized using the straight-line method over the shorter of the estimated useful life of the software or four years.

(H) INTANGIBLE ASSETS

Goodwill and other intangible assets are amortized on a straight-line basis over the estimated period of benefit, not to exceed 25 years. Customer relationships, included in "Other intangible assets" on the Consolidated Balance Sheets, are amortized using the straight-line method over their estimated period of benefit (five to 14 years). Management continuously evaluates the remaining useful lives and carrying values of the intangible assets to determine whether events and circumstances indicate that a change in the useful life or impairment in value may have occurred. Indicators of impairment monitored by management include a decline in the level of managed assets, changes to contractual provisions underlying certain intangible assets and reductions in operating cash flows. Should there be an indication of a change in the useful life or an impairment in value, Federated compares the carrying value of the asset and its related useful life to the projected undiscounted cash flows expected to be generated from the underlying asset over its remaining useful life to determine whether an impairment has occurred. If the carrying value of the asset exceeds the undiscounted cash flows, the asset is written down to its fair value.

Measuring impairment for customer relationship intangible assets is dependent upon the level of remaining managed assets for those relationships. A decline in the remaining managed asset balance in excess of the estimated attrition rate for those managed assets could have a considerable impact on the underlying value of a customer relationship intangible asset.

(I) EQUITY INVESTMENT

Federated owns a 50% interest in a joint-venture company, Federated Fonds-Service GmbH, which administers separate accounts for institutional investors in Germany. This joint venture is accounted for under the equity method of accounting. The equity investment is carried at Federated's share of net assets and included in "Other long-term assets" on the Consolidated Balance Sheets. The proportionate share of income or loss from this entity is included in "Other income, net" on the Consolidated Statements of Income.

(J) DEFERRED SALES COMMISSIONS

Federated pays commissions to broker/dealers (deferred sales commissions) to promote the sale of certain mutual fund shares. For shares sold under such marketing programs, Federated receives distribution and servicing fees from the mutual fund over the life of such shares. These fees are calculated as a percentage of average managed assets associated with the related classes of shares.

For non-B-share-related sales, Federated capitalizes up-front commissions paid to broker/dealers as deferred sales commissions and amortizes them over the estimated period of benefit not to exceed six years. The distribution and servicing fees are recognized in the Consolidated Statements of Income over the life of the mutual fund share class. Contingent deferred sales charges collected from redeeming shareholders are used to reduce the deferred sales commission asset.

In 1997, Federated began selling its rights to future revenue streams associated with B-share deferred sales commissions (distribution and servicing fees as well as deferred sales charges) to a third party. For accounting purposes, sales of these rights from inception of the program in 1997 through September 2000 are accounted for as financings, and nonrecourse debt is recorded. As a result, "Other service fees, net--Federated funds" in the Consolidated Statements of Income reflect distribution and servicing fees earned on B shares sold through September 2000. In addition, debt expense associated with the nonrecourse debt, amortization of deferred sales commissions and other program-related expenses are also recorded relative to sales of future revenue streams which occurred through September 2000.

Beginning in October 2000, pursuant to the terms of a new sales program with another third party, Federated accounted for the sales of its rights to future distribution fees and deferred sales charges as true sales and the related gains are included in "Other service fees, net--Federated funds" in the Consolidated Statements of Income. Sales of Federated's rights to future servicing fees continue to be accounted for as financings, and nonrecourse debt, interest expense, amortization of deferred sales commissions and revenue earned on services provided are recorded.

(K) FOREIGN CURRENCY TRANSLATION

Federated's equity investment in the joint-venture company is translated at the current exchange rate as of the end of the accounting period and the related share of income or loss is translated at the average exchange rate in effect during the period. Net exchange gains and losses resulting from translation are excluded from income and are recorded in "Accumulated other comprehensive income" on the Consolidated Balance Sheets. Foreign currency transaction gains and losses relating to Federated's foreign subsidiaries are reflected in the Consolidated Statements of Income.

(L) TREASURY STOCK

Federated accounts for acquisitions of treasury stock at cost and reports total treasury stock held as a deduction from total shareholders' equity on the Consolidated Balance Sheets.

(M) REVENUE RECOGNITION

Revenue is recognized during the period in which the services are performed. Federated may waive certain fees for services (primarily investment advisory fees) for competitive reasons, or to meet regulatory requirements. Investment advisory fees, administrative service fees and other service fees are recorded net of subadvisory arrangements and third-party distribution and service costs.

(N) STOCK-BASED COMPENSATION

As allowed under the provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), Federated has elected to apply Accounting Principles Board Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees," and related interpretations in accounting for its stock-based plans.

(O) REPORTING ON ADVERTISING

Federated expenses the cost of all advertising as incurred.

(P) INCOME TAXES

Federated accounts for income taxes under the liability method, which requires the recognition of deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

(Q) EARNINGS PER SHARE

Earnings per share are calculated in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share," which requires that both basic and diluted earnings per share be presented. Basic earnings per share are based on the weighted-average number of common shares outstanding during each period reduced by nonvested restricted stock. Diluted earnings per share are based on basic shares as determined above plus incremental shares that would be issued upon the assumed exercise of in-the-money stock options and nonvested restricted stock using the treasury stock method.

(R) COMPREHENSIVE INCOME

Federated reports all changes in comprehensive income in the Consolidated Statements of Changes in Shareholders' Equity, in accordance with the provisions of Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). Comprehensive income includes net income, unrealized gains and losses on securities available for sale, net of tax, and foreign currency translation adjustments, net of tax.

(S) BUSINESS SEGMENTS

Federated has not presented business segment data in accordance with SFAS No. 131, "Disclosure About Segments of an Enterprise and Related Information," because it operates predominantly in one business segment, the investment advisory and asset management business.

(T) RECLASSIFICATION OF PRIOR PERIODS' STATEMENTS

Certain items previously reported have been reclassified to conform with the current year presentation.

(U) RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). SFAS 133, as amended, requires that all derivatives, including hedges, be recorded at fair value and that all changes in fair value or cash flow of both the hedge and the hedged item be recognized in earnings in the same period. Federated adopted SFAS 133 effective January 1, 2001, as required. The adoption had no effect on Federated's earnings or financial position due to Federated's marginal use of derivative instruments at January 1, 2001.

In July 2000, the FASB issued Emerging Issues Task Force Issue No. 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets" (EITF 99-20). EITF 99-20 states that interest income earned on retained or purchased beneficial interests in securitized financial assets should be recognized over the life of the investment based on an anticipated yield determined by periodically estimating cash flows. Interest income should be revised prospectively for changes in cash flows. Additionally, impairment should be recognized if the fair value of the beneficial interest has declined below its carrying amount and the decline is other than temporary. Federated is required to adopt EITF 99-20 in the second quarter 2001. The impact of adopting the provisions of this statement on Federated's earnings and financial position will depend on changes in default and interest rates at the time of adoption.

(2) SECURITIES AVAILABLE FOR SALE

Current and long-term securities available for sale (see Note 1) were as follows:

in thousands	Cost		Gross Unrealized						Estimated Market Value
			Gains (Losses)
			Gains (Losses)							Fluctuating-value mutual funds	$	88,802	$	68	$	(4,956	)	$	83,914
Asset-backed securities		17,374		844		0			18,218
Total as of December 31, 2000	$	106,176	$	912	$	(4,956	)	$	102,132
Fluctuating-value mutual funds	$	66,487	$	1,032	$	(1,081	)	$	66,438
Asset-backed securities		10,285		0		0			10,285
Total as of December 31, 1999	$	76,772	$	1,032	$	(1,081	)	$	76,723

Gross realized gains and (losses) on the sale of securities available for sale were approximately $850,000 and $(939,000); $1,162,000 and $(342,000); and $395,000 and $(690,000), respectively, for the years ended December 31, 2000, 1999 and 1998.

(3) Property and Equipment

Property and equipment consisted of the following at December 31:

in thousands	2000			1999
Computer equipment	$	22,035		$	28,833
Leasehold improvements		21,209			19,532
Office furniture and equipment		11,972			11,200
Transportation equipment		11,884			11,845
Software development		8,785			4,500
Total cost/fair value		75,885			75,910
Accumulated depreciation		(39,479	)		(44,605	)
Property and equipment, net	$	36,406		$	31,305

Depreciation expense was $7,288,000, $6,663,000 and $6,557,000 for the years ended December 31, 2000, 1999 and 1998, respectively, and included the amortization of assets recorded under capital leases.

(4) Long-Term DebT--Recourse

Federated's long-term debt--recourse consisted of the following at December 31:

in thousands	2000		1999
Senior Secured Note Purchase Agreements (a)	$	84,000	$	98,000
Capitalized leases		454		705
Total debt		84,454		98,705
Less: current portion		14,280		14,259
Total long-term debt -- recourse	$	70,174	$	84,446

(a) The Senior Secured Note Purchase Agreements (the Notes) are due in $14.0 million annual installments and mature in June 2006. The first of these installments was paid in June 2000. The Notes carry a fixed interest rate of 7.96%. Under the terms of the Notes, Federated may prepay the debt at any time; however, a make-whole amount, equal to approximately $5 million at December 31, 2000, is required at the time of prepayment. Borrowings under the agreements are secured by pledges of all the outstanding common stock or shares of beneficial interest of all of the domestic subsidiaries owned by Federated Investors, Inc. The Notes contain various financial and nonfinancial covenants. Federated was in compliance with all such covenants at both December 31, 2000 and 1999.

The aggregate contractual maturities of the recourse debt for the years following December 31, 2000, are:

in thousands
2001	$	14,280
2002		14,174
2003		14,000
2004		14,000
2005		14,000
2006		14,000
Total recourse debt	$	84,454

As of December 31, 2000, Federated was able to borrow up to $150,000,000 under the provisions of the Senior Secured Credit Agreement (the Credit Facility), the term of which was scheduled to expire in January 2001. Under this agreement, Federated paid a commitment fee of 0.25% on the unused portion of the revolving credit facility. At December 31, 2000, the outstanding balance under the Credit Facility was zero. Borrowings under the Credit Facility were secured by pledges of all the outstanding common stock or shares of beneficial interest of all of the domestic subsidiaries owned by Federated Investors, Inc. The Credit Facility contained various financial and nonfinancial covenants. Federated was in compliance with all such covenants at both December 31, 2000 and 1999. On January 23, 2001, Federated extended the original term of the Senior Secured Credit Agreement by signing the Amended and Restated Senior Secured Credit Agreement (see Note 18).

In March 2000, a wholly-owned subsidiary of Federated, entered into a discretionary line of credit agreement with a bank under which it can borrow up to $45,000,000 for the payment of obligations associated with daily net settlements of mutual funds processed through the National Securities Clearing Corporation. Borrowings under this agreement bear interest at a rate defined by the bank at the time of the borrowing and are payable on demand. At December 31, 2000, the outstanding balance under this agreement was zero.

(5) NONRECOURSE DEBT

Federated sells the rights to receive future 12b-1 fees, shareholder service fees and contingent deferred sales charges on Class B shares of various mutual funds it manages. For accounting purposes, certain transactions executed under the sales agreements are reflected as financings, and various tranches of nonrecourse debt have been recorded. The debt is nonrecourse debt for Federated in the event the future cash flows associated with the rights sold do not cover the full obligation of the notes.

Below is the activity of the nonrecourse debt tranches:

in thousands	Interest Rate	Balance Dec. 31, 1999		Additional Financings		Payments		Balance Dec. 31, 2000
1997-1 Class A	7.44%	$	52,976	$	0	$	16,558	$	36,418
Class B	9.80%		9,700		0		0		9,700
Financings 10/97 through 9/00	6.68%- 8.60%		247,065		112,000		84,116		274,949
Financings 10/00 through 12/00	8.60%		0		2,831		80		2,751
		$	309,741	$	114,831	$	100,754	$	323,818

For the 1997-1 Class A and B debt tranches, cash flows of the related B-share assets are applied in the following succession: trustee fees, other program-related expenses, Class A interest, Class B interest, Class A principal and Class B principal (only upon full payment of Class A principal).

For all other financings, cash flows associated with these B-share assets will be applied first to interest and then principal. The nonrecourse debt does not contain a contractual maturity but is amortized dependent upon the cash flows of the related B-share assets. Interest rates are imputed based on current market conditions at the time of issuance.

Pursuant to Federated's sale agreement with a third party, any residual cash flow after full payment of all principal on the 1997-1 Class A and B notes will be paid 90% to Federated and 10% to the holders of the Class B notes. For financings through September 2000, Federated will participate in varying levels of any residual cash flow after full payment of program obligations. For all other financings, Federated is not entitled to any residual cash flows.

(6) EMPLOYEE BENEFIT PLANS

(A) 401(K)/PROFIT SHARING PLAN

Federated offers a 401(k) plan covering substantially all employees. Under the 401(k) plan, employees can make salary deferral contributions at a rate of 1% to 15% of their annual compensation (as defined in the 401(k) plan), subject to Internal Revenue Code limitations. Federated makes a matching contribution in an amount equal to 100% of the first 2% that each participant deferred and 50% of the next 4% of deferral contributions. Forfeitures of nonvested matching contributions are used to offset future matching contributions.

Vesting in Federated's matching contributions commences once a participant in the 401(k) plan has been employed at least three years and worked at least 1,000 hours per year. Upon completion of three years of service, 20% of Federated's contribution included in a participant's account vests and 20% vests for each of the following four years, if the participant works 1,000 hours per year. Employees are immediately vested in their 401(k) salary deferral contributions.

Matching contributions to the 401(k) plan amounted to $3,017,000, $2,241,000 and $2,976,000 for the years ended December 31, 2000, 1999 and 1998, respectively.

A Federated employee becomes eligible to participate in the Profit Sharing Plan upon the first day of employment. The Profit Sharing Plan is a defined contribution plan to which Federated may contribute amounts as authorized by its board of directors. No contributions have been made to the Profit Sharing Plan in 2000, 1999 or 1998.

(B) EMPLOYEE STOCK PURCHASE PLAN

Federated offers an Employee Stock Purchase Plan which allows employees to purchase a maximum of 750,000 shares of Class B common stock. Employees may contribute up to 10% of their salary to purchase shares of Federated's Class B common stock on a quarterly basis at the market price. The shares under the plan may be newly issued shares, treasury shares or shares purchased on the open market. As of December 31, 2000, 36,332 shares were purchased by the plan on the open market since the plan's inception in 1998.

(7) OTHER COMPENSATION PLANS

(A) DEFERRED COMPENSATION PLANS

In 1997, a deferred compensation arrangement was established for a group of key employees for the purpose of providing incentives to certain individuals who contribute to the success of Federated. Each annual award provided under this program is deferred until July 2001, with the vesting period beginning in 1997. Termination of employment for any reason other than death, disability or retirement, prior to the plan's payment date in the third quarter 2001, causes the participant's benefit to be forfeited. The liability at December 31, 2000 and 1999, was $1,644,000 and $863,000, respectively, and is included in "Other current liabilities" and "Other long-term liabilities," respectively, on the Consolidated Balance Sheets. Amounts included in "Compensation and related" expense on the Consolidated Statements of Income were $706,000, $508,000 and $232,000 for the years ended December 31, 2000, 1999 and 1998, respectively.

(B) EMPLOYEE RESTRICTED STOCK PLAN

Under the Employee Restricted Stock Plan and subject to restrictions, Federated has sold shares of Class B common stock to certain key employees. During the restricted period, the recipient receives dividends on the shares. The compensation cost to Federated (the difference between the estimated fair value of the stock and the amount paid by the key employees at issuance) is expensed over the period of employee performance during which the restrictions lapse, not to exceed 10 years. Federated did not sell any shares of Class B common stock under the Employee Restricted Stock Plan in 2000, 1999 or 1998. There were no forfeitures in 2000 and 202,500 and 208,500 shares (split adjusted) were forfeited in 1999 and 1998, respectively. For the years ended December 31, 2000, 1999 and 1998, compensation expense related to the Employee Restricted Stock Plan was $311,000, $203,000 and $512,000, respectively.

(C) STOCK OPTIONS

Option and option-related data have been restated to reflect stock splits.

Stock options are part of the Stock Incentive Plan offered by Federated to reward its employees and independent directors who have contributed to the success of Federated and to provide incentive to increase their efforts on behalf of Federated.

In 1998, the final 72,000 stock appreciation rights under a discontinued Stock Appreciation Rights Plan were converted to stock options, 450,000 employee stock options were granted and 15,000 options were awarded to independent directors. In 1999, 855,000 employee stock options were granted, 300,000 options were awarded to executive officers in lieu of a portion of their 1998 earned bonus awards and 4,500 options were awarded to independent directors. In 2000, 5,476,500 employee stock options were granted, 300,000 options were awarded to executive officers in lieu of a portion of their 1999 earned bonus awards and 4,500 options were awarded to independent directors. In the event the independent appraisals (prior to the public registration of Federated's Class B common stock in May 1998) or market value of the Class B common stock exceeds the exercise price of the options at the time of issuance, the difference is charged to compensation expense over the vesting period. For existing plans, vesting occurs over a 0- to 10-year period and may be accelerated as a result of meeting specific performance criteria. Each vested option may be exercised, during the stated exercise period, for the purchase of one share of Class B common stock at the exercise price.

For the years ended December 31, 2000, 1999 and 1998, compensation expense related to stock options was $200,000, $260,000 and $(57,000), respectively.

The following table summarizes the status of and changes in Federated's stock option plan during the past three years:

	Options		Weighted- Average Exercise Price	Options Exercisable	Weighted- Average Exercise Price
Outstanding at beginning of 1998	6,028,200		$ 2.29	0	$ 0.00
Granted	537,000		$ 5.72
Exercised	(450,000	)	$ 2.22
Forfeited	(374,175	)	$ 2.09
Outstanding at end of 1998	5,741,025		$ 2.63	0	$ 0.00
Granted	1,159,500		$12.38
Forfeited	(197,325	)	$ 3.30
Outstanding at end of 1999	6,703,200		$ 4.29	310,500	$11.76
Granted	5,781,000		$24.55
Forfeited	(317,000	)	$ 5.74
Outstanding at end of 2000	12,167,200		$13.88	1,744,500	$ 6.54

Additional information regarding stock options outstanding at December 31, 2000, follows:

Range of Exercise Prices	Outstanding	Weighted- Average Exercise Price	Weighted- Average Remaining Contractual Life (in Years)	Exercisable	Weighted- Average Exercise Price
$1.28 to $1.29	3,057,300	$ 1.28	3.8	675,000	$ 1.29
$4.00 to $6.20	2,254,275	$ 4.44	6.7	450,000	$ 6.20
$11.00 to $13.29	2,299,875	$12.62	8.3	615,000	$12.47
$17.75 to $24.88	2,315,750	$24.17	10.4	4,500	$17.75
$27.50 to $35.00	2,240,000	$31.25	10.4	0	$ 0.00
	12,167,200	$13.88	7.7	1,744,500	$ 6.54

Information regarding the fair value of options granted in 2000, 1999 and 1998 follows:

	2000	1999	1998
Exercise price equals market price on date of grant:
Weighted-average grant-date fair value	$10.51	$ 4.96	$ 0.00
Weighted-average exercise price	20.32	12.37	0.00
Exercise price is more than market price on date of grant:
Weighted-average grant-date fair value	$11.65	$ 4.79	$ 1.13
Weighted-average exercise price	31.25	12.67	6.41
Exercise price is less than market price on date of grant:
Weighted-average grant-date fair value	$0.00	$ 0.00	$10.44
Weighted-average exercise price	0.00	0.00	1.27

Federated accounts for stock options and employee restricted stock in accordance with APB 25. Had compensation costs for stock options and employee restricted stock been determined based upon fair values at the grant dates in accordance with SFAS 123, Federated would have experienced net income and earnings per share similar to the pro forma amounts indicated below for the years ended December 31. For purposes of pro forma results, the estimated fair values of the options and restricted stock are recognized as expenses over the awards' vesting periods.

	2000		1999		1998
Pro forma net income (in thousands)	$	151,703	$	122,635	$	92,235
Pro forma basic earnings per share	$	1.29	$	0.98	$	0.73
Pro forma diluted earnings per share	$	1.24	$	0.95	$	0.71

For stock options and restricted stock granted prior to Federated's initial public offering, the fair value was estimated at the date of grant using the Minimum Value option-pricing model with the following weighted-average assumptions: a risk-free interest rate of 5.72%; a dividend yield of 1.6%; and an expected life of 9.5 years. For stock options granted after Federated's initial public offering, Federated estimated the grant-date fair value using the Black-Scholes option-pricing model with the following weighted-average assumptions for 2000, 1999 and 1998, respectively: dividend yields of 0.68%, 0.88% and 0.89%; expected volatility factors of 30.6%, 29.2% and 29.6%; risk-free interest rates of 6.35%, 4.96% and 4.63%; and an expected life of 10.1 years, 8.0 years and 5.5 years.

Because options vest over several years and Federated anticipates making additional grants, the effects of applying SFAS 123 on the pro forma disclosures are not likely to be representative of the effects on pro forma disclosures for future years.

(8) MINORITY INTEREST IN SUBSIDIARies

A subsidiary of Federated Investors, Inc. has a majority interest (50.5%) and acts as the general partner in Passport Research, Ltd., a limited partnership. Edward Jones is the limited partner with a 49.5% interest. The partnership acts as investment adviser to two registered investment companies.

Federated also owns a majority interest (90%) in InvestLink Technologies, Inc. (InvestLink), a software developer and marketer of applications for the recordkeeping, administration and servicing of defined contribution plans. The remaining 10% of the subsidiary is owned by certain key employees of InvestLink.

(9) COMMON STOCK

The Class A common stockholder has the entire voting rights of Federated; however, without the consent of the majority of the holders of the Class B common stock, the Class A common stockholder cannot alter Federated's structure, dispose of all or substantially all of Federated's assets, amend the Articles of Incorporation or Bylaws of Federated to adversely affect the Class B common stockholders, or liquidate or dissolve Federated.

Federated's recourse debt agreements contain restrictions on payments of dividends and purchases of treasury stock. The more restrictive of the agreements limits cash payments for these purposes to $5.0 million plus 50% of net income during the period from January 1, 1996, to and including the payment date, less certain payments for dividends and stock repurchases. As of December 31, 2000, approximately $63,444,000 was available to pay dividends or repurchase stock under the more restrictive limitation. Cash dividends of $16,557,000, $13,924,000 and $11,480,000 were paid in 2000, 1999 and 1998, respectively, to holders of shares of common stock.

In 1999 and 2000, the board of directors approved various share repurchase programs authorizing Federated to purchase Federated Class B common stock. Under the programs, shares can be repurchased in open market and private transactions over a period of 12 months from the date of the board resolution. The programs authorize executive management to determine the timing and the amount of shares for each purchase. The repurchased stock will be held in treasury for employee benefit plans, potential acquisitions and other corporate activities. As of December 31, 2000, under these programs, Federated can repurchase an additional 4,392,330 shares subject to current debt-covenant restrictions which limit cash payments for additional stock repurchases to $63,444,000.

(10) LEASES

Federated has various operating lease agreements primarily involving facilities, office and computer equipment, and vehicles. These leases are noncancellable and expire on various dates through the year 2009. Most leases include renewal options and, in certain leases, escalation clauses.

The following is a schedule by year of future minimum rental payments required under the operating leases that have initial or remaining noncancellable lease terms in excess of one year as of December 31, 2000:

in thousands
2001	$	15,261
2002		14,977
2003		13,803
2004		11,774
2005		11,808
2006 and thereafter		26,468
Total minimum lease payments	$	94,091

Rent expense was approximately $17,940,000, $17,723,000 and $18,204,000 for the years ended December 31, 2000, 1999 and 1998, respectively.

(11) Income Taxes

Federated files a consolidated federal income tax return. Financial statement tax expense is determined under the liability method.

Income tax expense consisted of the following for the years ended December 31:

in thousands	2000			1999		1998
Current
Federal	$	83,528	$	65,414	$	49,948
State		653		907		494
		84,181		66,321		50,442
Deferred
Federal		2,981		4,540		3,123
Total	$	87,162	$	70,861	$	53,565

For the years ended December 31, 2000, 1999 and 1998, the foreign subsidiaries had net income of $3,115,000, $2,354,000 and $4,224,000, respectively, for which income tax expense of $1,250,000, $974,000 and $1,478,000, respectively, has been provided.

The reconciliation between the federal statutory income tax rate and Federated's effective income tax rate consisted of the following for the years ended December 31:

	2000		1999		1998
Expected statutory rate	35.0	%	35.0	%	35.0	%
Increase:
State income taxes	0.2		0.3		0.2
Amortization of goodwill	0.3		0.4		0.5
Meals and entertainment limitation	0.5		0.6		0.8
Other	(0.1	)	0.1		0.2
Total	35.9	%	36.4	%	36.7	%

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities consisted of the following as of December 31:

in thousands	2000		1999
Deferred Tax Assets
Intangible assets	$	13,121	$	14,665
Organization costs		1,399		1,399
Unrealized gain on sale of securities		1,711		16
Other		1,210		2,163
Total gross deferred tax asset		17,441		18,243
Deferred Tax Liabilities
Deferred sales commissions		30,065		31,004
Deferred 12b-1 fee income		17,947		17,498
Other		7,645		5,536
Total gross deferred tax liability		55,657		54,038
Net deferred tax liability	$	38,216	$	35,795

(12) Earnings Per Share

Share and per share data have been restated to reflect stock splits. The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31:

in thousands, except per share data	2000			1999		1998
NUMERATOR
Net income	$	155,360	$	124,020	$	92,369
Denominator
Denominator for basic earnings per share -- weighted-average shares less nonvested restricted stock		117,557		125,238		126,257
Effect of dilutive securities:
Dilutive potential shares from stock-based compensation		4,738		3,848		3,618
Denominator for diluted earnings per share -- adjusted weighted-average shares and assumed conversions		122,295		129,086		129,875
Basic earnings per share	$	1.32	$	0.99	$	0.73
Diluted earnings per share	$	1.27	$	0.96	$	0.71

(13) accumulated other comprehensive income

The components of accumulated other comprehensive income, net of tax, are as follows:

in thousands	Unrealized Gain/(Loss) on Securities Available for Sale		Foreign Currency Translation and Other Adjustments		Total
Balance at January 1, 1998	$(85	)	$ (6	)	(91	)
Total change in market value¹	393		0		393
Reclassification adjustment²	109		0		109
Other adjustments	0		(5	)	(5	)
Balance at December 31, 1998	417		(11	)	406
Total change in market value¹	84		0		84
Reclassification adjustment²	(533	)	0		(533	)
Loss on currency conversion³	0		(63	)	(63	)
Other adjustments	0		11		11
Balance at December 31, 1999	(32	)	(63	)	(95	)
Total change in market value¹	(2,654	)	0		(2,654	)
Reclassification adjustment²	58		0		58
Loss on currency conversion³	0		(55	)	(55	)
Balance at December 31, 2000	$(2,628	)	$(118	)	$(2,746	)

1 The tax benefit/(expense) on the change in market value of securities available for sale was $1,429, $(46) and $(211) for 2000, 1999 and 1998, respectively.

2 The tax (expense)/benefit on the reclassification adjustment for securities available for sale was $(31), $287 and $(59) for 2000, 1999 and 1998, respectively.

3 The tax benefit on the foreign currency translation loss was $30 and $34 in 2000 and 1999, respectively.

(14) Disclosures of Fair Value

Estimated fair values of Federated's financial instruments have been determined using available market information and appropriate valuation methodologies, as set forth below. These fair values are not necessarily indicative of the amounts that would be realized upon exchange of these instruments or Federated's intent to dispose of these instruments.

Carrying amounts approximate fair value for the following financial instruments due to their short maturities:

Cash and cash equivalents
Receivables
Accounts payable
Accrued expenses

Securities available for sale, including hedge instruments, are carried at fair value (see Note 1).

The majority of Federated's recourse debt is comprised of the Notes. The fair value of Federated's Notes is estimated based on the current market rates for debt of the same remaining maturities. The estimated fair value of the Notes as of December 31 is as follows:

in thousands	2000			1999
Carrying amount	$	84,000	$	98,000
Fair value	$	85,759	$	97,345

With respect to Federated's nonrecourse debt, based on the nature of the debt and the uncertainty of the amounts and timing of the cash flows, Federated is not able to determine its fair value.

(15) COMMITMENTS AND CONTINGENCIES

Federated has claims asserted against it that result from litigation in the ordinary course of business. Management believes that the ultimate resolution of such matters will not materially affect the financial position or results of operations of Federated.

(16) RELATED PARTY TRANSACTIONS

Federated provides investment advisory, administrative, distribution and shareholder services to the Federated group of funds (Federated funds). All of these services provided for the Federated funds are under contracts that definitively set forth the fees to be charged for these services and are approved by the funds' independent directors/
trustees. Federated may waive certain fees charged for these services (primarily investment advisory fees) in order to make the Federated funds more competitive or to meet regulatory requirements.

(17) Business Combination

In the fourth quarter 2000, Federated signed a definitive agreement to acquire the business of New York-based Edgemont Asset Management Corporation, the advisor for the $3.4 billion Kaufmann Fund (Fund). The offer has been approved by Federated's corporate and fund boards and by the board of directors of the Kaufmann Fund, but is still subject to approval by shareholders of the Fund. The transaction includes an up-front payment due at the transaction closing date, 95% of which is payable in cash and 5% of which is payable with the issuance of Federated Class B common stock. Federated may also make a series of additional cash payments over six years contingent upon revenue growth. The up-front purchase price and the maximum available contingent payments will be set on the closing date based on the level of average assets of the Fund 30 days before closing. Based on assets at December 31, 2000, the up-front purchase price would approximate $200 million, and if revenue targets are met, the contingent payments, consisting of both additional purchase price and incentive compensation, could aggregate to as much as $220 million. This acquisition will be accounted for using the purchase method of accounting.

(18) Subsequent Events

On January 23, 2001, Federated extended its $150,000,000 Senior Secured Credit Agreement, the term of which was originally scheduled to expire in January 2001, by signing the Amended and Restated Senior Secured Credit Agreement (the New Credit Facility). The New Credit Facility has a term of 364 days and can be renewed for additional 364-day terms. Under the New Credit Facility, borrowings bear interest, at the option of Federated, at a spread over a defined prime rate, the Federal Funds rate or the London Interbank Offering Rate. Federated will pay a commitment fee of 0.10% on the unused portion of the revolving credit facility. The New Credit Facility includes various financial and nonfinancial covenants, which are similar in nature to the covenants contained in the original Senior Secured Credit Agreement.

Also on January 23, 2001, the board of directors declared a $0.037 per share dividend which was paid on February 15, 2001, and Federated awarded 220,000 options, primarily to executive officers in lieu of a portion of their 2000 earned bonus awards.

On March 7, 2001, the board of directors agreed to extend Federated's current share repurchase program through March 31, 2002.

(19) SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED)

in thousands, except per share data, for the quarters ended	1st	2nd	3rd	4th
2000
Revenues	$168,873	$168,287	$173,100	$170,508
Operating income	69,922	67,884	73,956	75,147
Net income	37,648	36,630	40,012	41,070
Basic earnings per share¹	0.31	0.31	0.34	0.36
Diluted earnings per share¹	0.30	0.30	0.33	0.34
Cash dividends per share¹	0.0280	0.0367	0.0370	0.0370
Stock price per share^1,² High Low	18.58 12.46	23.75 17.50	27.44 21.38	31.69 22.69
1999
Revenues	$141,267	$150,178	$152,197	$157,455
Operating income	51,993	58,523	59,851	66,577
Net income	26,721	30,517	31,164	35,618
Basic earnings per share¹	0.21	0.24	0.25	0.29
Diluted earnings per share¹	0.20	0.23	0.24	0.28
Cash dividends per share¹	0.0253	0.0280	0.0280	0.0280
Stock price per share^{1, 2} High Low	13.17 10.04	12.42 10.59	13.21 11.09	14.13 10.25

1 Reflects the three-for-two stock split paid in July 2000.

2 Federated's common stock is traded on the New York Stock Exchange under the symbol "FII."

The approximate number of record holders of Federated's Class A and Class B common stock as of March 9, 2001, was 1 and 10,821, respectively.

EX-10.26 3 0003.txt Exhibit 10.26 PURCHASE AND SALE AGREEMENT PURCHASE AND SALE AGREEMENT dated as of December 21, 2000 (as amended and supplemented, this "Agreement") among CITIBANK, N.A. (together with its successors and assigns, the "Purchaser"), CITICORP NORTH AMERICA, INC., as agent for the Purchaser (together with its successors and assigns, the "Program Agent"), FEDERATED FUNDING 1997-1, INC., a Delaware corporation (together with its permitted successors and assigns, the "Seller"), FEDERATED SECURITIES CORP., a Pennsylvania corporation (together with its permitted successors and assigns, the "Distributor"), FEDERATED INVESTORS MANAGEMENT COMPANY, a Pennsylvania corporation (together with its permitted successors and assigns, the "Transferor") and FEDERATED INVESTORS, INC., a Pennsylvania corporation (together with its permitted successors and assigns, the "Parent"). W I T N E S S E T H - - - - - - - - - - WHEREAS, the Distributor and the Transferor are parties to the Distributor's Transfer Agreement (as defined in Appendix A hereto) pursuant to which the Distributor shall from time to time sell and the Transferor shall purchase Receivables (as defined in Appendix A hereto) in accordance with the terms thereof; WHEREAS, the Seller and the Transferor are parties to the Transferor's Transfer Agreement (as defined in Appendix A hereto), pursuant to which the Transferor shall from time to time sell and the Seller shall purchase Receivables and the Ancillary Rights and Collections (as defined in Appendix A hereto) pursuant to and in accordance with the terms thereof; WHEREAS, the Seller and the Purchaser believe that it is in their mutual interest for the Seller to from time to time sell the Receivables and the Ancillary Rights and Collections with respect thereto to the Purchaser and for the Purchaser to purchase such Receivables, Ancillary Rights and Collections pursuant to and in accordance with the terms of this Agreement; WHEREAS, the parties hereto intend that each purchase of Receivables under this Agreement constitutes a True Sale (as defined in Appendix A hereto) of such Receivables providing the Purchaser with the full benefits of ownership of such Receivables; and WHEREAS, the Parent shall realize a substantial economic benefit from the Purchaser's purchase of Receivables pursuant to the Purchase Agreement; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: Article I DEFINITIONS AND RULES OF CONSTRUCTION SECTION 1.01. DEFINITIONS. ----------- Capitalized terms not otherwise defined herein shall have the meanings assigned to such terms in the Definitions List attached hereto as Appendix A. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires (a) each use in this Agreement of a singular version of a pronoun shall be deemed to include references to the plural, and vice versa, (b) Article and Section headings are for convenience of reference only and shall not affect the construction of this Agreement, and (c) references to "this section" or words of similar import shall be deemed to refer to the entire section and not to a particular subsection, and references to "hereunder," "herein" or words of similar import shall be deemed to refer to this entire Agreement and not to the particular section or subsection. References in this Agreement to "including" means including without limiting the generality of any description preceding such term. For the avoidance of doubt (i) references in this Agreement to the Distributor shall be deemed to include the Distributor in its capacities as Distributor, Principal Shareholder Servicer and Servicer, and (ii) references to "it" in Section 4.01 and Section 5.01 shall in respect of the Parent mean the Parent and each other Federated Entity. Article II PURCHASE AND SALE OF RECEIVABLES; ADDITIONAL FUNDS SECTION 2.01. PURCHASE OF RECEIVABLES. ----------------------- On each Purchase Date prior to the Termination Date, and subject to and upon the terms and conditions set forth in this Agreement, the Seller shall sell, transfer, convey and assign to the Purchaser, without recourse, except as expressly provided in the Program Documents, on and as of such Purchase Date, all of the Seller's right, title and interest in, to and under the Receivables and the Collections and Ancillary Rights with respect thereto relating to Shares issued by each Fund for the period from the immediately preceding Sale Cut-off Date in respect of the Receivables of each Fund (which for the initial purchase of Receivables of a Fund hereunder shall be deemed to mean the Other Purchasers' End Date) to and including the Sale Cut-off Date specified in the Purchase Notice with respect thereto, and the Purchaser shall purchase from the Seller such Receivables and the Collections and Ancillary Rights with respect thereto for an amount equal to the aggregate Purchase Prices payable in respect of such Receivables. Such right, title and interest in, to and under such Receivables and the Collections and Ancillary Rights with respect thereto shall automatically vest in the Purchaser upon the Purchaser's payment of the Purchase Price. Each of the Seller, the Distributor and the Transferor acknowledges that the Purchaser shall be entitled to take all actions it considers reasonable to collect from the respective Companies and Funds all payments in respect of the Purchased Receivables as and when the same shall become due. Each of the Seller, the Distributor and the Transferor hereby irrevocably authorizes and empowers the Purchaser to demand, sue for, collect and receive payment of any funds due with respect to the Purchased Receivables in its name, if required in the judgment of the Purchaser. SECTION 2.02. PURCHASE NOTICES. ---------------- With respect to the Receivables to be purchased on any Purchase Date, the Seller shall transmit to the Program Agent (with a copy to the Collection Agent), not later than 10:00 a.m. (New York City time) on such proposed Purchase Date, by facsimile transmission, a Purchase Notice. The Seller agrees that it shall deliver from time to time prior to the Termination Date, but no less frequently than once during each calendar month in which any Commission Share is issued by a Fund, a Purchase Notice, sufficient to initiate the sale of the Receivables for the period from the immediately preceding Sale Cut-off Date to the Sale Cut-off Date specified in such Purchase Notice, which Sale Cut-off Date shall not be more than three (3) Business Days prior to the proposed Purchase Date. SECTION 2.03. ADDITIONAL FUNDS, ETC. ------------------------ Unless an Event of Termination (or an event which, with the passage of time or notice, or both, would constitute an Event of Termination) shall have occurred and be continuing, the Seller may request that an Additional Fund become a "Fund" under this Agreement on the Addition Effective Date with respect thereto. On and as of such Addition Effective Date with respect thereto, (i) each Additional Fund shall become a Fund hereunder, and in respect of any Additional Fund which constitutes a Portfolio, the related Investment Company shall become a "Company" hereunder, (ii) the Servicing Agreement shall be deemed to be amended to add such Additional Fund and if applicable, the additional Investment Company, (iii) Schedules I, II and IV to this Agreement shall be deemed to be supplemented to add the applicable information relating to such Additional Fund set forth in the Addendum relating to such Additional Fund, and (iv) Exhibits C, D, E, F and G hereto shall be deemed to be supplemented by Annexes A, B, C, D and E, respectively, to the Addendum to such Additional Fund, and any reference in this Agreement to any change or modification since the date of this Agreement to the distribution agreements, distribution plans, investment advisory agreements, principal shareholder servicer's agreements, shareholder servicer's agreements, prospectuses or contingent deferred sales charge arrangements in respect of such Additional Fund shall be deemed to refer to any change or modification thereof since such Addition Effective Date with respect thereto. The term "Addition Effective Date" shall mean, with respect to the addition of any Additional Fund, the date on which all of the following conditions shall have been satisfied: (i) the Program Agent shall have received a fully executed and appropriately completed Addendum together with such signed opinions of counsel to the Seller, the Transferor, the Distributor, the Parent and such Additional Fund (or in respect of any Additional Fund which constitutes a Portfolio, the related Investment Company), each dated a date reasonably near the Addition Effective Date, as the Program Agent or the Purchaser shall have reasonably requested, all in form, scope and substance satisfactory to the Program Agent; (ii) the Program Agent shall have received such instruments, certificates and documents regarding the addition of such Additional Fund from the Distributor, the Transferor, the Seller, the Parent and such Additional Fund as the Program Agent shall reasonably request; and (iii) the Program Agent shall have received a fully executed Irrevocable Payment Instruction (or in respect of any Additional Fund which constitutes a Portfolio of an existing Company, a fully executed amendment to the Irrevocable Payment Instruction relating to such Company) with respect to such Additional Fund together with such instruments, certificates and documents regarding such addition, as the Program Agent shall reasonably request, all in form, scope and substance satisfactory to the Program Agent. Article III CONDITIONS PRECEDENT SECTION 3.01. CONDITIONS PRECEDENT TO EFFECTIVENESS. ------------------------------------- The effectiveness of this Agreement shall be subject to the Program Agent's receipt of each of the following: (a) fully executed copies of the Servicing Agreement, the Collection Agency Agreement, the Funding Agreement, the Distributor's Transfer Agreement, the Transferor's Transfer Agreement, each Irrevocable Payment Instruction, each Distribution Agreement, each Advisory Agreement, each Distribution Plan, each Principal Shareholder Servicer's Agreement and each Shareholder Servicer's Agreement which shall each be in full force and effect; (b) the signed opinions of counsel to each of the Seller, the Transferor, the Distributor, the Parent, the Advisors, each Company and each Fund, which shall each be in form, scope and substance reasonably satisfactory to the Program Agent; (c) signed certificates of the Responsible Officers or Assistant Secretary of the Seller, the Distributor, the Parent and the Transferor, in substantially the form of Exhibits B-1, B-2, B-3 and B-4 hereto, respectively; (d) a copy of each Governmental Authorization and Private Authorization, if any, which is required to be obtained by the Seller, the Transferor, the Distributor, the Parent, any Advisor, any Company or any Fund in connection with this Agreement, any other Program Document or the transactions contemplated hereby and thereby, each of which shall be in form, scope and substance reasonably satisfactory to the Program Agent; (e) time stamped receipt copies of proper financing statements duly filed on or before the initial Purchase Date under the UCC of all jurisdictions that the Program Agent or the Purchaser may reasonably deem necessary in order to perfect (i) the ownership interest of the Transferor in the Receivables and Ancillary Rights sold pursuant to the Distributor's Transfer Agreement, (ii) the ownership interest of the Seller in the Receivables and Ancillary Rights sold pursuant to the Transferor's Transfer Agreement, and (iii) the ownership interest of the Purchaser in the Purchased Receivables relating to each Fund as contemplated by this Agreement, each of which shall be in form, scope and substance reasonably satisfactory to the Program Agent; (f) time stamped receipt copies of proper UCC termination statements necessary to release all security interests and other rights, if any, of any Person in the Purchased Receivables relating to each Fund; (g) certified copies of requests for information (Form UCC-11) (or a similar search report certified by a party acceptable to the Program Agent and the Purchaser), dated reasonably near the initial Purchase Date, of the filings made pursuant to Section 3.01(e) and Section 3.01(f), listing all effective financing statements (including those referred to in Section 3.01(e) and Section 3.01(f)) which name the Seller, the Transferor or the Distributor (under its respective present name or any previous name), as debtor and which are filed in the jurisdictions in which filings were required to be made pursuant to Section 3.01(e), together with copies of such financing statements (none of which, except for the financing statements referred to in Section 3.01(e), shall cover any of the Purchased Receivables); and (h) if required in order to avoid the termination of any Distribution Agreement, Distribution Plan, Principal Shareholder Servicer's Agreement or Shareholder Servicer's Agreement, evidence that the Board of Trustees of each Fund (or in respect of each Fund which constitutes a Portfolio, the Board of Trustees of the related Company in respect of each such Fund) has approved such Distribution Plan, Distribution Agreement, Principal Shareholder Servicer's Agreement or Shareholder Servicer's Agreement, relating to the Receivables of such Fund by a vote of the majority of its Trustees who are not interested persons, within the meaning of the Investment Company Act, in recognition of the transactions contemplated by this Agreement and the other Program Documents. SECTION 3.02. CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATION TO PURCHASE -------------------------------------------------------------- RECEIVABLES. - ----------- The obligation of the Purchaser to purchase Receivables relating to a Fund on any Purchase Date shall be subject to the fulfillment at or prior to the time of such Purchase Date of the following conditions: (a) no Event of Termination (or event which, with the passage of time or notice or both, would constitute such an Event of Termination) shall be continuing at or prior to such Purchase Date or shall result therefrom; (b) the Servicer shall have delivered all Investor Reports, Monthly Collection Determination Date Statements and Activity Reports as and when required to be delivered pursuant to the Program Documents, which shall be reasonably satisfactory to the Purchaser and the Program Agent; (c) the Receivables relating to such Fund shall constitute Eligible Receivables; (d) immediately after giving effect to all such purchases on such Purchase Date, the Unamortized Aggregate Purchase Price relating to the Purchased Receivables of all Funds shall not exceed the Purchase Limit; (e) as of any Calculation Date commencing with January 31, 2001, the Weighted Average Percentage Decline in the Net Asset Value of Shares of all Funds (adjusted for stock splits and excluding declines in the Net Asset Value resulting from the payment of Normal Distributions) from the end of the immediately preceding calendar month shall not be twenty percent (20%) or more; PROVIDED, THAT, if on any date of determination the aggregate Net Asset Value of Shares of the Funds relating to all Receivables shall have risen to a level of at least eighty percent (80%) of the aggregate Net Asset Value of Shares of the Funds as of the Calculation Date immediately preceding the Calculation Date that the condition specified in this clause (e) was not satisfied and was not subsequently complied with, this condition shall be deemed to be satisfied as of such determination date; (f) such Fund (or if such Fund constitutes a Portfolio, the Company in respect of such Fund) and the Transfer Agent for such Fund shall have complied in full with the Irrevocable Payment Instruction, neither such Fund nor such Transfer Agent shall be prevented by any Authority or by any Applicable Law from paying Collections in respect of amounts owed with respect to the Purchased Receivables relating to such Fund or Related Collections in respect of such Fund strictly in accordance with the applicable Irrevocable Payment Instruction and neither such Fund (or if such Fund constitutes a Portfolio, the Company in respect of such Fund) nor such Transfer Agent shall have so asserted in writing; and (g) the Parent shall own the majority of the outstanding capital stock of the Seller, the Transferor, the Distributor and each Advisor. Article IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE SELLER, THE DISTRIBUTOR, -------------------------------------------------------------- THE TRANSFEROR AND THE PARENT. - ----------------------------- Each of the Seller, the Distributor, the Transferor and the Parent represents and warrants on and as of the date hereof, and on and as of each Purchase Date and, as to clause (k) hereof, on the date such information is provided, which representations and warranties, in the case of the Parent, are also made as to each Federated Entity, as follows: (a) it is duly organized and is validly existing and in good standing under the laws of the jurisdiction of its organization, with full power and authority to own and operate its property, conduct the business in which it is now engaged and to execute and deliver and perform its obligations under this Agreement and the other Program Documents to which it is a party, and it is in compliance with all Applicable Law and duly qualified to do business as a foreign corporation or business trust, as the case may be, and is in good standing in each jurisdiction in which the nature of its business or the performance of its obligations under this Agreement and the other Program Documents to which it is a party requires such qualification, where the failure to so comply or to be so qualified could reasonably be expected to give rise to a Material Adverse Effect; (b) the execution, delivery and performance by it of this Agreement, the other Program Documents to which it is a party and the other instruments and agreements contemplated hereby or thereby have been duly authorized by all requisite corporate action by it and have been duly executed and delivered by it and constitute its legal, valid and binding obligations, enforceable against it in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy laws and similar laws affecting the rights and remedies of creditors generally and by equitable principles; (c) neither the execution and delivery of this Agreement, the other Program Documents to which it is a party, or any instrument or agreement referred to herein or therein, or contemplated hereby or thereby, nor the consummation of any of the transactions herein or therein contemplated, nor compliance with the terms, conditions and provisions hereof or thereof by it (i) will conflict with, or result in a breach or violation of, or constitute a default under, the certificate of its incorporation or by-laws or other organizational documents, (ii) will conflict with, or result in a breach or violation of, or constitute a default under, or permit the acceleration of any obligation or liability in, or but for any requirement of the giving of notice or the passage of time (or both) would constitute such a conflict with, breach of or violation of, or default under, or permit any such acceleration in, any contractual obligation or any agreement or document to which it is a party or by which it or any of its properties is bound (or to which any such obligation, agreement or document relates, including without limitation any Distribution Agreement, any Principal Shareholder Servicer's Agreement, any Shareholder Servicer's Agreement, any Distribution Plan and any Other Purchasers' Program Document) where such conflict, breach or violation could reasonably be expected to give rise to a Material Adverse Effect, (iii) will violate any Applicable Law, the violation of which could reasonably be expected to give rise to a Material Adverse Effect, (iv) could reasonably be expected to give rise to or permit the creation or imposition of any Adverse Claim upon any Purchased Receivables or any Collections or any Related Collections relating to any Fund, or (v) could reasonably be expected to give rise to the termination of any Distribution Agreement, any Principal Shareholder Servicer's Agreement, any Shareholder Servicer's Agreement or any Distribution Plan; (d) it has obtained all Governmental Authorizations and Private Authorizations, and made all Governmental Filings, necessary for the execution, delivery and performance by it of this Agreement, the other Program Documents to which it is a party and the agreements and instruments contemplated hereby or thereby and no consents which have not been obtained or waivers under any instruments to which it is a party or by which it or any of its properties is bound are required by it to be obtained or made in connection with the execution, delivery or performance of this Agreement and the other Program Documents, except to the extent the failure to so obtain or make the same could not reasonably be expected to give rise to a Material Adverse Effect; (e) the principal place of business and principal executive office of the Seller and the Distributor, and the place where any and all records concerning the Receivables are kept is at their address specified in Section 9.03 (except as otherwise permitted by Section 5.01(o)); (f) each of its representations and warranties made or deemed made pursuant to the Program Documents is true and accurate (except to the extent that such representations and warranties related solely to an earlier date (in which case such representations and warranties shall be true and accurate as of such earlier date)), and each of the applicable conditions precedent set forth in Article III has been satisfied or waived in writing by the Program Agent; (g) it is not in default of any of its obligations under this Agreement, any other Program Document to which it is a party or any Other Purchasers' Program Document, which default could reasonably be expected to give rise to a Material Adverse Effect; (h) there are no proceedings or investigations pending, or, to the best of its knowledge, threatened, against it before any Authority (i) asserting the invalidity of this Agreement, any other Program Document to which it is a party or any certificate, document or agreement executed by it in connection herewith or therewith, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or any other Program Document, (iii) seeking any determination or ruling which, if granted, could reasonably be expected to adversely affect the performance by it of its obligations under, or the validity or enforceability of, this Agreement, any other Program Document to which it is a party or any agreement, certificate or document executed by it in connection herewith or therewith, or (iv) which if adversely determined, could otherwise reasonably be expected to give rise to a Material Adverse Effect; (i) it is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act; (j) it is not engaged principally or as one of its important activities in the business of extending, or arranging for the extension of, credit for the purpose of purchasing or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System and, in respect of the Seller and the Distributor, no part of the purchase price paid to it under the Distributor's Transfer Agreement, the Transferor's Transfer Agreement or the Purchase Agreement, as the case may be, will be used to purchase or carry any margin stock within the meaning of said regulation (except investments in funds managed by an Affiliate of the Parent in accordance with ordinary business operations) or to extend credit to others for such purpose in a manner which is inconsistent with or a violation of the provisions of said regulations, and it will not hold margin stock (including shares in such funds) such that the aggregate current market value (as defined in said regulations) of all such margin stock shall exceed 25% of the value (as determined by any reasonable method) of its consolidated assets; (k) all written information provided by or on behalf of it, DST Systems, Inc. or any Sub-transfer Agent for purposes of or in connection with this Agreement, the other Program Documents (including, without limitation, all Investor Reports, Activity Reports, Monthly Collection Determination Date Statements and E-Mail Investor Reports) to which it is a party or the transactions contemplated hereby or thereby is, and all such information hereafter provided by any such Person to the Purchaser, the Program Agent or any other Person in writing will be, when taken as a whole, true, correct and complete in all material respects and not misleading; it is understood that neither the Parent, the Seller, the Transferor nor the Distributor shall be deemed to be in breach of this clause solely as a result of any Monthly Collection Determination Date Statement failing to properly reflect the methodology set forth in the Allocation Procedures provided that the amounts and information set forth in the related Investor Report and Activity Reports are true, correct and complete and such failure results solely from the Excel Spreadsheet; (l) neither it nor any ERISA Affiliate has engaged in a "prohibited transaction", as such term is defined in Section 4975 of the Code or in a transaction subject to the prohibitions of Section 406 of ERISA, which would subject it or any ERISA Affiliate (after giving effect to any exemption) to the tax or penalty on prohibited transactions imposed by Section 4975 of the Code, Section 502 of ERISA or any other liability under ERISA which tax, penalty or other liability could reasonably be expected to have a Material Adverse Effect and neither the transactions contemplated hereby nor the exercise of the Purchaser's or the Program Agent's rights and remedies under any of the Program Documents constitutes a prohibited transaction under ERISA or the Code or otherwise results or will result in the Purchaser or the Program Agent being a fiduciary or party in interest under ERISA with respect to an ERISA plan or its assets or the Purchased Receivables or being deemed in violation of Section 404 or Section 406 of ERISA; (m) it has filed or caused to be filed all federal, state and local tax returns which are required to be filed (except where such nonfiling could not reasonably be expected to give rise to a Material Adverse Effect), and paid or caused to be paid all taxes as shown on said returns or any other taxes or assessments payable by it to the extent that such taxes have become due unless the same are being contested in good faith by appropriate proceedings, and in respect of which appropriate reserves have been established; (n) the Purchased Receivables relating to each Fund constitute Eligible Receivables; (o) no Share of a Fund to which a Purchased Receivable relates contains any Conversion Feature other than a Permitted Conversion Feature; (p) no Share of a Fund taken into account in computing the Purchase Price paid pursuant to this Agreement entitles the holder thereof to redeem the same in a Free Redemption except in the specific situations set forth in the Prospectus of such Fund as in effect on the date hereof or pursuant to the Systematic Withdrawal Program; (q) it is not contemplating the filing of a petition by it under any state or federal bankruptcy or insolvency laws, and it has no Actual Knowledge of any Person contemplating the filing of any such petition against it; (r) all financial statements of it and its consolidated subsidiaries required to be delivered to the Purchaser or the Program Agent hereunder fairly present its assets, liabilities and financial condition and income as of the dates thereof and have been prepared in accordance with GAAP; there exists no material equity or long-term investments in, or outstanding advances to, or guaranties of, any Person except such equity, investment, advances, or guaranties reflected in the financial statements or in the footnotes thereto; (s) all action necessary or advisable to protect, preserve and perfect the Purchaser's first priority ownership interest in the Purchased Receivables free and clear of all Adverse Claims has been duly and effectively taken and no security agreement, financing statement, equivalent security or lien instrument or continuation statement covering all or any part of such Purchased Receivables is required to be on file or on record in any jurisdiction, except such as may have been filed, recorded or made as contemplated by this Agreement and the other Program Documents; (t) nothing in any Other Purchasers' Program Documents or the UCC financing statements filed in connection therewith conflicts with the terms of this Agreement, the other Program Documents or the UCC financing statements filed in connection herewith; and (u) the factual assumptions set forth in the opinion of Kirkpatrick & Lockhart LLP dated on or about the date hereof on certain bankruptcy matters including True Sale issues are true and correct as of such date. SECTION 4.02. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE PARENT. ------------------------------------------------------- The Parent represents and warrants on and as of the date hereof and on and as of each Purchase Date, as follows: (a) attached hereto as Exhibits C, D, E, F and G, respectively, are true, correct and complete copies of each Distribution Agreement, each Prospectus, each Distribution Plan, each Principal Shareholder Servicer's Agreement and each Shareholder Servicer's Agreement in effect on the date of this Agreement and a true, correct and complete copy of each Advisory Agreement has been delivered to the Program Agent on or before the date hereof, such Program Documents are each in full force and effect and have not been amended or modified in any manner after the date hereof without the written consent of the Program Agent, except (i) in respect of the Prospectuses, for such amendments or modifications which do not affect any Fundamental Investment Objectives set forth in Schedule IV hereto or any CDSC arrangement and which could not reasonably be expected to give rise to a Material Adverse Effect, and (ii) in respect of the Advisory Agreements, for such amendments or modifications which could not reasonably be expected to give rise to a Material Adverse Effect; (b) each of the Companies, each of the Funds and each Advisor is in compliance with the Fundamental Investment Objectives relating to each Fund; (c) each of the Distributor, the Principal Shareholder Servicer, the Shareholder Servicer, the Seller, the Transferor, each Advisor, the Servicer, each Company and each Advisory Agreement, each Distribution Plan, each Distribution Agreement, each Principal Shareholder Servicer's Agreement, each Shareholder Servicer's Agreement, each Prospectus and the CDSC arrangements relating to each Fund, is in compliance in all material respects with Applicable Law, including Rule 12b-1 of the Investment Company Act and the Conduct Rules; (d) the Asset Based Sales Charge, CDSC and Shareholder Servicing Fee arrangements relating to the Shares of each Fund and the payments provided for in, and actually being made pursuant to, the Distribution Plan and the Prospectus for each such Fund are fairly and accurately described in the Distribution Plan, the Distribution Agreement, the Principal Shareholder Servicer's Agreement, the Shareholder Servicer's Agreement and Prospectus relating to such Fund; (e) the Parent is the indirect record and beneficial owner of all of the outstanding shares of capital stock of the Seller, the Transferor, the Shareholder Servicer and the Distributor; (f) the Distributor is a registered broker-dealer under the Exchange Act, and is a member of the NASD; (g) each Advisor is a registered investment adviser under the Investment Advisers Act; (h) no Advisor is in breach of any of its representations, warranties or material covenants or agreements set forth in the Advisory Agreements to which it is a party; (i) each Company is registered as an investment company under the Investment Company Act; and (j) neither the Seller, the Transferor, the Distributor, any Company nor any Transfer Agent is prevented by any Applicable Law from paying the Collections or the Related Collections strictly in accordance with the applicable Irrevocable Payment Instruction. SECTION 4.03. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE DISTRIBUTOR. ------------------------------------------------------------ The Distributor represents and warrants, on and as of the date hereof and on and as of each Purchase Date, in its capacities as Distributor, Principal Shareholder Servicer and Servicer, as follows: (a) it has the requisite corporate power and authority and legal right to sell Receivables relating to each Fund, and the Collections and the Ancillary Rights with respect thereto, to the Transferor in accordance with the terms of the Distributor's Transfer Agreement and it has duly authorized each such sale to the Transferor by all necessary action; (b) each transfer of Receivables and the Ancillary Rights with respect thereto to the Transferor under the Distributor's Transfer Agreement constitutes a valid and complete True Sale to the Transferor of all right, title and interest in and to such Receivables and the Ancillary Rights with respect thereto free and clear of any Adverse Claim; such transfer has not been made with an intent to hinder, delay or defraud any present or future creditor; the purchase price paid for such Receivables is fair consideration and of reasonably equivalent value to the Receivables and the Ancillary Rights with respect thereto so transferred; and immediately after the purchase pursuant to the Transfer Agreement the Distributor will remain solvent and will have adequate capital for the conduct of its business; (c) immediately after each transfer of Receivables and the Ancillary Rights with respect thereto by the Distributor to the Transferor under the Distributor's Transfer Agreement and by the Transferor to the Seller under the Transferor's Transfer Agreement, and immediately prior to each purchase of Receivables and the Ancillary Rights with respect thereto by the Purchaser under this Agreement, (i) no party claiming through the Distributor has any right, title or interest in such Receivables or the Ancillary Rights or Collections in respect thereto, including any payments or proceeds in respect thereto, and (ii) the Seller owns such Receivables and the Ancillary Rights and Collections in respect thereto free and clear of all Adverse Claims or other such restrictions on transfer created by or arising out of the acts or omissions of the Distributor; (d) neither the Distributor (as Distributor, Principal Shareholder Servicer or Program Servicer Agent) nor any Company or Transfer Agent is prevented by any Applicable Law from paying the Collections or Related Collections strictly in accordance with the applicable Irrevocable Payment Instruction; (e) the Distributor is a registered broker-dealer under the Exchange Act, and is a member of the NASD; (f) the Distributor has clearly and unambiguously marked its books, records and electronic, computer files and master data processing records relating to the Receivables to indicate the interests of the Transferor, the Seller and the Purchaser in the Receivables; (g) (i) the sum of the Distributor's assets exceeds and will, immediately following the transactions contemplated hereby, exceed the Distributor's total liabilities (including subordinated, unliquidated, disputed and contingent liabilities); (ii) the Distributor's assets do not and, immediately following the transactions contemplated hereby will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted; and (iii) the Distributor does not intend to, and does not believe that it will, incur debts and liabilities (including contingent liabilities and other commitments) beyond its ability to pay such debts as they mature (taking into account the timing and amounts to be payable on or in respect of obligations of the Distributor); and (h) the Distributor has not used and will not use any trade names or assumed names other than "Federated Securities Corp." SECTION 4.04. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR. ----------------------------------------------------------- The Transferor represents and warrants, on and as of the date hereof and on and as of each Purchase Date, as follows: (a) it has the requisite corporate power and authority and legal right to sell Receivables relating to each Fund, and the Collections and the Ancillary Rights with respect thereto, to the Seller in accordance with the terms of the Transferor's Transfer Agreement and the Transferor has duly authorized each such sale to the Seller by all necessary action; (b) each transfer of Receivables and the Ancillary Rights and Collections with respect thereto to the Seller under the Transferor's Transfer Agreement and each transfer of Receivables and the Ancillary Rights and Collections with respect thereto to the Purchaser under this Agreement constitutes a valid and complete True Sale of all right, title and interest in and to such Receivables and the Ancillary Rights and Collections with respect thereto, free and clear of any Adverse Claim; such transfers have not been made with an intent to hinder, delay or defraud any present or future creditor; the purchase price paid therefore is fair consideration and of reasonably equivalent value to the Receivables and the Ancillary Rights and Collections with respect thereto so transferred; and immediately after the purchase pursuant to this Agreement the Distributor, the Transferor and the Seller will remain solvent and will have adequate capital for the conduct of its business; (c) immediately after each transfer of the Receivables and the Ancillary Rights and Collections with respect thereto to the Seller under the Transferor's Transfer Agreement and immediately prior to each purchase of the Receivables and the Ancillary Rights and Collections with respect thereto by the Purchaser under this Agreement, (i) no party claiming through the Transferor, the Seller or the Distributor has any right, title or interest in such Receivables or the Ancillary Rights or Collections in respect thereto, including any payments or proceeds in respect thereto, (ii) the Seller owns such Receivables and the Ancillary Rights and Collections in respect thereto free and clear of all Adverse Claims or other such restrictions on transfer created by or arising out of the acts or omissions of any Federated Entity, and (iii) such Receivables and the Ancillary Rights and Collections in respect thereto have not been sold, transferred or assigned by the Transferor to any other Person; (d) the Transferor is not prevented by any Applicable Law from paying the Collections and Related Collections strictly in accordance with the applicable Irrevocable Payment Instruction; (e) the Transferor has clearly and unambiguously marked all of its books, records and electronic computer files and master data processing records relating to the Receivables to indicate the interests of the Purchaser in the Purchased Receivables; (f) (i) the sum of the Transferor's assets exceeds and will, immediately following the transactions contemplated hereby, exceed the Transferor's total liabilities (including subordinated, unliquidated, disputed and contingent liabilities); (ii) the Transferor's assets do not and, immediately following the transactions contemplated hereby will not, constitute unreasonably small capital to carry out is business as conducted or as proposed to be conducted; and (iii) the Transferor does not intend to, and does not believe that it will, incur debts and liabilities (including contingent liabilities and other commitments) beyond its ability to pay such debts as they mature (taking into account the timing and amounts to be payable on or in respect of obligations of the Transferor); and (g) the Transferor has not used and will not use any trade names or assumed names other than "Federated Investors Management Company" and "Federated Disbursing Corp." SECTION 4.05. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE SELLER. ------------------------------------------------------- The Seller represents and warrants, on and as of the date hereof and on and as of each Purchase Date, as follows: (a) the Seller was founded solely for the purpose of performing its obligations under the Other Purchasers' Program Documents and the Program Documents and activities incidental thereto, and it has the requisite corporate power and authority and legal right to sell Receivables relating to each Fund sold on such Purchase Date, and the Collections and the Ancillary Rights with respect thereto, to the Purchaser in accordance with the terms of this Agreement and the Seller has duly authorized each such sale to the Purchaser by all necessary action; (b) the transfer of Receivables and the Ancillary Rights and Collections with respect thereto to the Seller under the Transferor's Transfer Agreement and the transfer of Receivables and the Ancillary Rights and Collections with respect thereto to the Purchaser under this Agreement on each Purchase Date each constitutes a valid and complete True Sale of all right, title and interest in and to such Receivables and the Ancillary Rights and Collections with respect thereto, free and clear of any Adverse Claim; such transfers have not been made with an intent to hinder, delay or defraud any present or future creditor; the purchase price paid thereunder is fair consideration and of reasonably equivalent value to the Receivables so transferred; and immediately after the purchase pursuant to this Agreement the Distributor, the Transferor and the Seller will remain solvent and will have adequate capital for the conduct of its business; (c) immediately after the transfer of the Receivables to the Seller under the Transferor's Transfer Agreement and immediately prior to each purchase of the Receivables and the Ancillary Rights and Collections with respect thereto by the Purchaser under this Agreement on such Purchase Date, (i) no party claiming through the Seller has any right, title or interest in such Receivables, the Ancillary Rights with respect thereto or the Collections in respect thereto, including any payments or proceeds in respect thereto, (ii) the Seller owns such Receivables, the Ancillary Rights with respect thereto and the Collections in respect thereto free and clear of all Adverse Claims or other such restrictions on transfer created by or arising out of the acts or omissions of any Federated Entity, and (iii) such Receivables, the Ancillary Rights with respect thereto and the right to Collections in respect thereto have not been sold, transferred or assigned by the Seller to any other Person; (d) this Agreement and the actions of the Seller required to be taken pursuant to the terms hereof and thereof are and at all times shall be effective to transfer to the Purchaser all of the Seller's right, title and interest in, to and under the Purchased Receivables free and clear of any Adverse Claim; (e) the Seller is not prevented by any Applicable Law from paying the Collections or Related Collections strictly in accordance with the applicable Irrevocable Payment Instruction; (f) the Seller is in full compliance with the Bankruptcy Remote Covenants; (g) the Seller has clearly and unambiguously marked all of its books, records and electronic, computer files and master data processing records relating to the Receivables to indicate the interests of the Purchaser in the Purchased Receivables; (h) (i) the sum of the Seller's assets exceeds and will, immediately following the transactions contemplated hereby, exceed the Seller's total liabilities (including subordinated, unliquidated, disputed and contingent liabilities), (ii) the Seller's assets do not and, immediately following the transactions contemplated hereby will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted, and (iii) the Seller does not intend to, and does not believe that it will, incur debts and liabilities (including contingent liabilities and other commitments) beyond its ability to pay such debts as they mature (taking into account the timing and amounts to be payable on or in respect of obligations of the Seller); and (i) the Seller has not used and will not use any trade names or assumed names other than Federated Funding 1997-1, Inc. SECTION 4.06. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE PROGRAM -------------------------------------------------------------- AGENT. - ----- Each of the Purchaser and the Program Agent represents and warrants to the other parties to this Agreement as follows: (a) It is duly organized and existing under the laws of the jurisdiction of its organization with full power and authority to execute and deliver this Agreement and to perform all of the duties and obligations to be performed by it under this Agreement; and (b) This Agreement has been duly authorized, executed and delivered by it, and constitutes its valid, legal and binding obligation enforceable against it in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors' rights in general or by general principles of equity. Article V COVENANTS SECTION 5.01. COVENANTS OF THE SELLER, THE DISTRIBUTOR, THE TRANSFEROR AND ------------------------------------------------------------- THE PARENT. - ---------- Each of the Seller, the Distributor, the Transferor and the Parent covenants and agrees that it shall, and, in the case of the Parent, that it shall itself and that it shall also cause each Federated Entity to from the date hereof until the Program Termination Date: (a) (i) preserve and maintain its legal existence and all of its material rights, privileges and franchises, and duly observe and conform to all requirements of Applicable Law applicable to it, the conduct of its business or to its properties or assets, (ii) preserve and keep in full force and effect its corporate existence, rights, privileges and franchises, and maintain records of its resolutions or similar actions regarding the transactions contemplated by the Program Documents and (iii) obtain, make, maintain and keep in full force and effect all Governmental Authorizations and Private Authorizations which are necessary or appropriate to properly carry out the transactions contemplated to be performed by it under this Agreement and the other Program Documents, except in such case where the failure to so observe, conform to, preserve, obtain, make, maintain or keep in full force and effect could not reasonably be expected to give rise to a Material Adverse Effect; (b) duly fulfill all obligations on its part to be performed under or in connection with this Agreement and the other Program Documents and the agreements and instruments entered into in connection herewith or therewith; (c) keep proper books of record and account in accordance with GAAP and its normal business practice in which full and appropriate entries shall be made of all dealings or transactions in relation to its business and activities and (in the case of the Seller, the Transferor and the Distributor) mark its data processing or other records, if any, so as to clearly indicate that the Purchased Receivables have been sold to the Purchaser; (d) promptly deliver to the Program Agent copies of any amendments or modifications to its certificate of incorporation, by-laws or other organizational documents, certified by a Responsible Officer; (e) (i) promptly give written notice to the Program Agent of the occurrence of any Event of Termination (or event which, with the passage of time or notice, or both, would constitute an Event of Termination), the failure of any conditions precedent set forth in Section 3.02 to be fully satisfied on or immediately prior to the applicable Purchase Date, or any breach of any term or condition of any Program Document, which in each case relates to or is caused by it or any of its Affiliates or the performance of any such Persons under any Program Document, (ii) give written notice to the Program Agent, promptly after it becomes aware thereof, of any other Event of Termination (or event which with the passage of time, notice or both would constitute such an Event of Termination), or the failure of any other conditions precedent set forth in Section 3.02 or any other breach of any terms or conditions of any Program Documents, and (iii) promptly give written notice to the Program Agent of any litigation or proceedings with respect to it or any of its Affiliates or affecting it, any of its Affiliates or any of their respective assets or properties, which if adversely determined, could reasonably be expected to give rise to a Material Adverse Effect; (f) cause to be computed, paid and discharged all taxes, assessments and other charges or levies of any Authority imposed upon it, or upon any of its income or assets, unless and to the extent that the same shall be contested in good faith by appropriate proceedings and with respect to which adequate reserves have been established on its books in accordance with GAAP; (g) to the extent obtained or received by it, furnish or cause to be furnished to the Program Agent a copy of all Private Authorizations and all Governmental Authorizations obtained or required to be obtained by it in connection with the transactions contemplated by this Agreement or any other Program Documents to which it is a party; (h) annually, or more frequently as the Program Agent may request upon the occurrence and during the continuance of an Event of Termination (or an event which upon the passage of time or notice, or both, would constitute an Event of Termination), (i) cause an independent nationally recognized accounting firm selected by it and reasonably satisfactory to the Program Agent to enter its premises (and each other Person to whom it delegates any of its duties under the Program Documents) and examine and audit the books, records and accounts relating to the Purchased Receivables and its or such other Person's performance under the Program Documents (which audit may be coordinated as part of each such Person's regular annual audit and may be coordinated with any similar audit required to be conducted under the Other Purchaser's Program Documents), (ii) permit such accounting firm to discuss its or such other Person's affairs, finances, accounts and performance under the Program Documents with the officers, partners, employees and accountants of it or such other Person, (iii) cause such accounting firm to provide the Program Agent with a certified report in respect of the foregoing, which shall be in form and scope reasonably satisfactory to the Program Agent, and (iv) authorize such accounting firm to discuss such affairs, finances, records and accounts with representatives of the Program Agent, the Purchaser and any Permitted Designee; (i) permit, and cause each Person to which it delegates any of its duties under the Program Documents to permit the Purchaser, the Program Agent or any Permitted Designee to, upon reasonable advance notice and during normal business hours, visit and inspect its and such Person's books, records and accounts relating to the Purchased Receivables and its performance under the Program Documents and to discuss the foregoing with the officers, partners, employees and accountants of it and such Person, all as often as the Program Agent or any such Permitted Designee may reasonably request; PROVIDED, HOWEVER, that so long as no Event of Termination (or event which with the passage of time, notice or both, would constitute an Event of Termination) shall have occurred, such inspections shall be at the expense of the requesting party; (j) promptly, at its expense, execute and deliver to the Program Agent such further instruments and documents, and take such further action as the Program Agent may from time to time reasonably request in order to further carry out the intent and purpose of this Agreement and the other Program Documents and to establish and protect the rights, interests and remedies created, or intended to be created, hereby and thereby, and the protection and perfection of the Purchaser's first priority ownership interest in the Purchased Receivables free and clear of all Adverse Claims, including, without limitation, the execution, delivery, recordation and filing of financing statements and continuation statements under the UCC of any applicable jurisdiction; (k) promptly deliver to the Program Agent copies of all notices, requests, agreements, amendments, supplements, waivers and other documents received or delivered by it under or with respect to any of the Program Documents; (l) in the event that, notwithstanding the Irrevocable Payment Instructions, it shall receive any Collections or Related Collections from any Fund, any Company or any Transfer Agent or other Person (including without limitation FOF Collections) promptly upon its receipt of any such Collections or Related Collections remit the same to the Demand Deposit Account for further credit to the Collection Account, and, until such funds are so deposited into the Demand Deposit Account, ensure that such amounts are not commingled with any other funds; (m) promptly notify the Program Agent of any material adverse change with respect to the business, properties (in respect of properties, other than in the ordinary course of its and each Company's and each Fund's business, as conducted on the date hereof), financial condition or results of operations of it, or, to its knowledge, any Company or Fund since September 30, 2000; (n) not permit to exist any Adverse Claims on, or otherwise attempt to transfer any interest in, any Purchased Receivables or any interest therein or except for the interest of the Other Purchasers under the Other Purchasers' Program Documents, any interest in any other Receivables, the Ancillary Rights with respect thereto or any Related Collections or any interest therein; PROVIDED, HOWEVER, that in the event that the Purchaser shall not purchase certain Receivables relating to Shares of any Fund, the Seller may transfer all or a portion of its interest in such Receivables and the Ancillary Rights with respect thereto to another Person provided each of the following conditions are met: (1) that such Person and the Program Agent, the Collection Agent and the Purchaser shall have entered into a mutually satisfactory intercreditor agreement and amendment to the Collection Agency Agreement as contemplated by Section 8.06 thereof, and (2) the Program Agent, the Collection Agent and the Purchaser shall have received such certificates and opinions as they may reasonably request in connection therewith all in form, scope and substance reasonably satisfactory to them; (o) not (in the case of the Seller, the Transferor and the Distributor) move its principal executive office or the place where it keeps its records concerning the Receivables from the offices specified in Section 4.01(e), unless (a) it shall have given to the Program Agent not less than twenty (20) days prior written notice of its intention to do so, clearly describing the new location and (b) it shall have taken such action, satisfactory to the Program Agent, to maintain the first priority perfected or ownership interest of the Purchaser in the Purchased Receivables at all times fully perfected and in full force and effect; (p) not amend, waive, terminate or otherwise modify the terms of any Irrevocable Payment Instruction or take any action inconsistent with any Irrevocable Payment Instruction; (q) not act affirmatively to change its operations in any material manner if at the time of such action, based upon all of the facts and circumstances, such change could reasonably be expected to give rise to a Material Adverse Effect; (r) not reflect the Purchased Receivables as being owned by the Seller or any Affiliate of the Seller (except to the extent such treatment is required by a change in GAAP after the date hereof and all appropriate financial statements are footnoted to reflect the sale thereof to the Purchaser); PROVIDED that Shareholder Servicing Fees may be reflected as an asset of the Distributor, the Transferor or the Seller if such treatment is required by GAAP and if all appropriate financial statements are footnoted to reflect the sale thereof to the Purchaser; (s) not take any action to cancel, terminate, amend, supplement, modify or waive any of the provisions of any Distribution Agreement, any Principal Shareholder Servicer's Agreement, any Shareholder Servicer's Agreement, any Distribution Plan, the Conversion Features or the CDSC arrangements applicable to the holders of any Shares of any Fund (including by way of allowing Free Redemptions in respect of Shares of any Fund under circumstances not required by the Prospectus of such Fund in effect on the date of this Agreement or by the Systematic Withdrawal Program or by allowing Free Redemptions which are not Permitted Free Exchanges), or request, consent or agree to any such cancellation, termination, amendment, supplement, modification or waiver, except with the prior written consent of the Program Agent, except that it may from time to time waive a CDSC that becomes payable provided it pays in accordance with the Program Servicing Procedures an amount to the Purchaser equal to the CDSC to which such Purchaser would have been entitled; (t) cause or ensure that (i) all written information provided to the Seller, the Purchaser or the Program Agent for purposes of or in connection with this Agreement or any other Program Document or the transactions contemplated hereby or thereby (including without limitation, all Investor Reports, Activity Reports and Monthly Collection Determination Date Statements by or on behalf of any Federated Entity, DST Systems, Inc. or any Sub-transfer Agent is, and all such information hereafter provided by any such Person to the Seller, the Purchaser or the Program Agent will be, when taken as a whole, true, correct, complete in all material respects and not misleading on the date such information is stated or certified; it is understood that neither the Seller, the Transferor nor the Distributor shall be deemed to be in breach of this clause solely as a result of any Monthly Collection Determination Date Statement failing to properly reflect the methodology set forth in the Allocation Procedures provided that the amounts and information set forth in the related Investor Report and Activity Reports are true, correct and complete and such failure results solely from the Excel Spreadsheet, and (ii) each Activity Report continues to include at least the same scope of information as the Activity Reports the form of which have been reviewed by the Program Agent prior to the effective date of this Agreement (or in respect of any Activity Report provided by a Sub-transfer Agent appointed after the date hereof, the same form and scope as the report of such Sub-transfer Agent approved by the Program Agent in accordance with Section 5.01(u)); (u) not permit any Person to become a Sub-transfer Agent for any Fund unless the forms of the reports to be provided by such Person have been approved in writing by the Program Agent. (v) cause and ensure that all actions, which the opinion of Kirkpatrick & Lockhart, LLP dated on or about the date hereof in respect of certain bankruptcy matters including "true sale" and "substantive consolidation" assumes will be taken or omitted by it, will be taken or omitted as so assumed. SECTION 5.02. ADDITIONAL COVENANTS OF THE PARENT. ---------------------------------- The Parent covenants and agrees that it shall from the date hereof until the Program Termination Date: (a) cause the Seller to use the Purchase Price paid to it on any Purchase Date solely for the purpose of purchasing Receivables under the Transferor's Transfer Agreement or for reimbursing itself for the purchase price of the Receivables purchased under the Transferor's Transfer Agreement and cause the Transferor to use the purchase price paid to it for Receivables under the Transferor's Transfer Agreement on any date solely for the purpose of purchasing Receivables or for reimbursing itself for the purchase price of Receivables purchased under the Distributor's Transfer Agreement; (b) cause each Advisor to perform its obligations under the Advisory Agreements to which it is a party and to manage each applicable Fund in accordance with the Fundamental Investment Objectives in respect of such Fund as in effect from time to time; (c) consistent with the fiduciary obligations of the Federated Entities to the Funds use its best efforts, which are commercially reasonable in relation to the consequence to the Purchaser if they are not successful, to maintain the Fundamental Investment Objectives in respect of any Fund as reflected in Schedule IV hereto and, in the event that as a consequence of fiduciary obligations of the Federated Entities to the Funds it cannot resist a proposed change in the Fundamental Investment Objectives in respect of the Fund, and in the event that despite such commercially reasonable best efforts such change will be made, it shall, prior to taking any action inconsistent with the maintenance of such Fundamental Investment Objectives, or failing to take the action it could otherwise take, or to the effectiveness of such change, as the case may be: (i) notify the Program Agent in writing of the nature of such change, and (ii) provide certification by a Responsible Officer that such change is necessary in order to comply with such fiduciary obligations; (d) consistent with the fiduciary obligations of the Federated Entities to the Funds use its best efforts, which are commercially reasonable in relation to the consequences to the Purchaser if they are not successful, to obtain the approval of the Board of Trustees of each Fund to: (i) annually re-approve the Distribution Plan, the Distribution Agreement, the Principal Shareholder Servicer's Agreement, and the Shareholder Servicer's Agreement relating to each such Fund, if necessary in order to continue payments in respect of the Purchased Receivables relating to such Fund, and (ii) in the event any of the foregoing shall be terminated with respect to any such Fund, to approve a new distribution plan, distribution agreement, principal shareholder servicer's agreement, and/or shareholder servicer's agreement in respect of such Fund so as to permit the continued payments in respect of the Purchased Receivables relating to such Fund as though no such termination had occurred, and in the event that as a consequence of fiduciary obligations of the Federated Entities to the Funds, it cannot endeavor to obtain the approval of the Board of Trustees of a Fund to take the actions described in clauses (i) and (ii) above, or in the event that despite its efforts such action will not be taken, it shall, prior to taking any action inconsistent with the actions described in clauses (i) and (ii) above, or failing to take any action it could otherwise take, or to any termination referred to in clause (ii) above: (x) notify the Purchaser and the Program Agent in writing of the nature of such failure or inability or termination, and (y) provide certification by a Responsible Officer that such failure or inability is required in order to comply with such fiduciary obligations; (e) provide prompt written notice to the Program Agent of any action by the Board of Directors of any Advisor or the Shareholder Servicer or the Board of Trustees of any Fund to make any modification, amendment or supplement to, or any waiver of any provisions of, or any termination of, any Distribution Plan, any Distribution Agreement, any Principal Shareholder Servicer's Agreement, any Shareholder Servicer's Agreement, any Advisory Agreement, any Conversion Feature, any CDSC arrangement, any Fundamental Investment Objectives of any Company in respect of any Fund, or any modification, amendment, supplement or waiver in the amounts payable or actually being paid thereunder, each as in effect on the date of that agreement; PROVIDED, HOWEVER, that the Parent shall not be required to provide the Program Agent with written notices of any modification, amendment or supplement to or waivers of any provisions of the Prospectuses under this Section 5.02(e), unless such modifications, amendments, supplements or waivers (i) affect or relate to the CDSC obligations or the Fundamental Investment Objectives, or (ii) otherwise could reasonably be expected to have a Material Adverse Effect; (f) cause each of the Seller, the Transferor and the Distributor to comply in all respects with their covenants and agreements under the Program Documents (including the Bankruptcy Remote Covenants) and use its best efforts to cause each Company to comply with Applicable Law and to duly fulfill and perform its obligations under the Program Documents, where such failure to comply or perform could give rise to a Material Adverse Effect; (g) furnish to the Program Agent: (i) annually within 120 days after the end of each fiscal year audited consolidated financial statements of the Parent and its consolidated subsidiaries prepared in accordance with GAAP for such fiscal year; (ii) quarterly within 45 days after the end of the first three fiscal quarters of any fiscal year unaudited consolidated financial statements of the Parent and its consolidated subsidiaries prepared in accordance with GAAP for such fiscal quarter; (iii) such other information as the Program Agent may reasonably request and which is reasonably available; (h) consistent with the fiduciary obligations of the Federated Entities to the Funds not initiate or propose the adoption by any Fund or any Company, of any Liquidation Plan, and use its best efforts, which are commercially reasonable in relation to the consequences to the Purchaser if they are not successful, to cause the Board of Trustees and shareholders of each Company and each Fund to avoid adopting any Liquidation Plan, and in any event the Parent shall promptly notify the Program Agent of any proposed Liquidation Plan by the Company or any Fund; (i) the Parent will not permit to occur any change in Control of the Parent, the Distributor, the Seller, the Principal Shareholder Servicer, the Shareholder Servicer or any Advisor unless either: (1) in connection with such change in Control: (i) either (A) such Distributor, Principal Shareholder Servicer, Shareholder Servicer, Advisor or the Parent shall remain distributor, principal shareholder servicer, shareholder servicer or advisor, as the case may be, for the Funds and the Parent shall remain the ultimate parent of each of the foregoing or (B) if another Person shall be retained to replace any of the foregoing to act as distributor, principal shareholder servicer, shareholder servicer or investment advisor, as the case may be, for the Funds, or as parent, such Person shall (x) meet the requirements of (iii) below with reference to the expertise, experience and capacity applicable to the function it undertakes to perform and (y) have agreed, in respect of periods from and after its retention, to be bound by the undertakings of the Distributor, the Principal Shareholder Servicer, the Shareholder Servicer, the Advisor or the Parent, as the case may be, under the Program Documents and shall have confirmed as of a current date the representations and warranties of the Distributor, the Principal Shareholder Servicer, the Shareholder Servicer, the Advisor or the Parent, as the case may be, except such representations and warranties as expressly relate solely to an earlier date (in which case such representations and warranties shall be true and correct as of such earlier date); (ii) in the case where another Person is retained to replace the Distributor, Principal Shareholder Servicer, Shareholder Servicer or the Advisor to act as distributor, principal shareholder servicer, shareholder servicer or investment advisor, as the case may be, for the Funds, ownership of at least 51% of the voting securities of each of the Persons serving as the distributor, the principal shareholder servicer, the shareholder servicer or investment advisor to the Funds is retained by, or transferred to, a single Person (the "Immediate Parent"); (iii) in the case where another Person is retained to replace the Distributor, Principal Shareholder Servicer, Shareholder Servicer, Advisor or the Parent to act as distributor, principal shareholder servicer, shareholder servicer, investment advisor or parent, as the case may be, for the Funds, in the reasonable opinion of the Parent, the Immediate Parent, together with its affiliated subsidiaries (including the Immediate Parent and the Persons then serving as distributor, principal shareholder servicer, shareholder servicer and investment advisor to the Funds) in the aggregate, have financial resources and mutual fund management, distribution and investment advisory expertise, experience and capacity immediately after the change in Control sufficient to satisfy the obligations of their counterparts under the Program Documents; and (iv) in the case where another Person is retained to replace the Distributor, Principal Shareholder Servicer, Shareholder Servicer or the Advisor to act as distributor, principal shareholder servicer, shareholder servicer or investment advisor, as the case may be, for the Funds, a majority of the Board of Trustees of the Funds, including a majority who are not "Interested Persons" (as defined by Section 2(a)(19) of the Investment Company Act) shall have either (i) reapproved the Distribution Plans, Distribution Agreements, the Principal Shareholder Servicer's Agreements, the Shareholder Servicer's Agreements and any Advisory Agreements, or (ii) approved substitute agreements substantially identical thereto so that no Material Adverse Effect could reasonably be expected to result from such substitute agreements; or (2) the Program Agent shall have consented to such change in Control, such consent not to be unreasonably withheld; PROVIDED, HOWEVER, that nothing in this Section 5.02(i) shall be deemed to restrict the ability of the Parent directly or indirectly to engage in any offering of its capital stock so long as no Person or group of Persons acting in concert (other than Persons who are currently in control of the Parent and any employee benefit plan or related trust of the Parent or any of its subsidiaries) shall obtain Control of the Parent as a result thereof; (j) ensure that each Transfer Agent's tracking capabilities and/or the Seller's tracking capabilities for each Fund and each Sub-transfer Agent's tracking capabilities are sufficient to: (i) track the Receivables and provide the information specified in the Investor Reports and the Monthly Collection Determination Date Statement, and (ii) identify and remit Collections and Related Collections in accordance with the applicable Irrevocable Payment Instruction, and the Parent shall use its best efforts to replace any Transfer Agent or Sub-transfer Agent which does not maintain such capabilities or in respect of which an event similar to those described in Section 6.01(e) occurs (whether or not such Transfer Agent or Sub-transfer Agent to which Section 6.01(e) applies is a Federated Entity) within sixty (60) days after becoming aware of such event; and (k) cause the Seller to at all times constitute a Bankruptcy Remote Entity. SECTION 5.03. ADDITIONAL COVENANTS OF THE DISTRIBUTOR. --------------------------------------- The Distributor covenants and agrees that it shall from the date hereof until the Program Termination Date: (a) not reflect the Purchased Receivables or Collections in respect thereof as being owned by the Distributor or any Affiliate of the Distributor (except to the extent such treatment is required by a change in GAAP after the date hereof and all appropriate financial statements are footnoted to reflect the sale thereof pursuant to the Distributor's Transfer Agreement, the Transferor's Transfer Agreement and this Agreement); PROVIDED, that Shareholder Servicing Fees may be reflected as an asset of the Distributor, the Transferor or the Seller if such treatment is required by GAAP and if all appropriate financial statements are footnoted to reflect the sale thereof to the Purchaser; (b) promptly upon preparation, deliver to the Program Agent, copies of the semi-annual unaudited reports and annual audited reports of each Company; (c) consistent with the fiduciary obligations of the Federated Entities to the Funds use its best efforts, which are commercially reasonable in relation to the consequences to the Purchaser if they are not successful, to obtain approval of the Board of Trustees of each Company in respect of each Fund to: (i) annually reapprove the Distribution Plan, the Distribution Agreement, the Principal Shareholder Servicer's Agreement and the Shareholder Servicer's Agreement relating to each such Fund, if necessary, in order to continue payments in respect of the Purchased Receivables relating to such Fund, and (ii) in the event any of the foregoing shall be terminated with respect to any such Fund, to approve a new distribution plan, distribution agreement, principal shareholder servicer's agreement, and/or shareholder servicer's agreement in respect of such Fund so as to permit the continued payments in respect of the Purchased Receivables relating to such Fund as though no such termination had occurred, and in the event that as a consequence of fiduciary obligations of the Federated Entities to the Funds it cannot endeavor to obtain the approval of the Board of Trustees of a Fund to take the actions described in clauses (i) and (ii) above, or in the event that despite its efforts such action will not be taken, it shall, prior to taking any action inconsistent with the actions described in clauses (i) and (ii) above, or failing to take any action it could otherwise take, or to any termination referred to in clause (ii) above: (x) notify the Program Agent in writing of the nature of such failure or inability or termination, and (y) provide certification by a Responsible Officer that such failure or inability is required in order to comply with such fiduciary obligations; (d) provide prompt written notice to the Program Agent of any action by its Board of Directors or the Board of Directors of any Advisor or the Shareholder Servicer or the Board of Trustees of any Fund or any Company in respect of any Fund to make any modification, amendment or supplement to, or any waiver of any provisions of, or any termination of, any Distribution Plan, any Distribution Agreement, any Principal Shareholder Servicer's Agreement, any Shareholder Servicer's Agreement, any Advisory Agreement, any Conversion Feature, any CDSC arrangement, or any Fundamental Investment Objectives of any Fund or any Company in respect of any Fund, or any modification, amendment, supplement or waiver in the amounts payable or actually being paid thereunder, each as in effect on the date of that agreement; PROVIDED, HOWEVER, that the Distributor shall not be required to provide the Program Agent with written notices of any modification, amendment or supplement to or waivers of any provisions of the Prospectuses under this Section 5.03(d), unless such modifications, amendments, supplements or waivers (i) affect or relate to the CDSC obligations or the Fundamental Investment Objectives, or (ii) otherwise could reasonably be expected to have a Material Adverse Effect; (e) promptly (i) notify the Program Agent in writing of all filings by any Company or any Fund with the SEC and all material mailings to shareholders of any Company or any Fund, and (ii) to the extent the same are not readily obtainable by the Program Agent through the Securities and Exchange Commission's Electronic Data Gathering, Analysis and Retrieval system or other public on-line sources, deliver to the Program Agent copies of such filings and mailings; and (f) promptly notify the Program Agent of any material adverse change with respect to the business, properties (in respect of properties, other than in the ordinary course of its and each Fund's business, as conducted on the date hereof) or its financial condition or results of operations, or to its knowledge, any Company or Fund, since September 30, 2000, including any material change in the sales commission structure relating to any Fund or arrangements, distribution fees, CDSCs or exchange privileges for shareholders; and (g) keep each Irrevocable Payment Instruction in full force and effect. SECTION 5.04. ADDITIONAL COVENANTS OF THE SELLER. ---------------------------------- The Seller covenants and agrees that it shall from the date hereof until the Program Termination Date: (a) use the purchase price paid to it on each Purchase Date solely for the purpose of purchasing Receivables or for reimbursing itself for the purchase price of the Receivables purchased under the Transferor's Transfer Agreement pursuant to and in accordance with the terms of the Transferor's Transfer Agreement; (b) after the Other Purchaser's End Date, not purchase any Receivables under the PLT Transferor's Transfer Agreement; and (c) comply in all respects with the Bankruptcy Remote Covenants at all times. SECTION 5.05. ADDITIONAL COVENANTS OF THE TRANSFEROR. -------------------------------------- The Transferor covenants and agrees that it shall from the date hereof until the Program Termination Date: (a) use the purchase price paid to it on each Purchase Date under the Transferor's Transfer Agreement solely for the purpose of purchasing Receivables under the Distributor's Transfer Agreement or for reimbursing itself for the purchase price of the Receivables purchased under the Distributor's Transfer Agreement pursuant to and in accordance with the terms of the Distributor's Transfer Agreement; and (b) not after the Other Purchaser's End Date, purchase any Receivables under the PLT Distributor's Transfer Agreement or sell any Receivables under the PLT Transferor's Transfer Agreement. Article VI EVENTS OF TERMINATION SECTION 6.01. EVENTS OF TERMINATION. --------------------- If any of the following events (each an "Event of Termination") shall occur: (a) the Parent, the Distributor (as Distributor, Principal Shareholder Servicer or as Servicer), the Seller, the Transferor, the Shareholder Servicer, any Advisor, any Transfer Agent, any Sub-transfer Agent, any Company or any Fund shall fail to make or cause to be made in the manner and when due any payment or deposit to be made or to be caused to be made by it under this Agreement or any of the other Program Documents and such failure shall continue for three (3) Business Days; or (b) the Parent, the Distributor (as Distributor, Principal Shareholder Servicer or as Servicer), the Seller, the Transferor, the Shareholder Servicer, any Advisor, any Transfer Agent or any Selling Agent, any Company or any Fund shall fail to perform or observe any covenant or agreement on its part to be performed or observed under any Program Document (other than those described in clause (a) of this Section 6.01) and such failure shall continue for ten (10) Business Days after such Person has knowledge of such failure; or (c) (i) any representation or warranty made or deemed made by the Parent, the Distributor (as Distributor, Principal Shareholder Servicer or as Servicer), the Seller, the Transferor, the Shareholder Servicer (or any of their respective officers) under or in connection with any Program Document shall have been incorrect when made or deemed made; PROVIDED, HOWEVER, that if any such incorrect representation or warranty is capable of being cured within ten (10) Business Days and the Person in breach of such representation or warranty is diligently using its best efforts to cure such representation or warranty, such incorrect representation or warranty shall not constitute an Event of Termination if, within such ten (10) Business Day period, such incorrect representation or warranty has been cured and the Parent has certified to the Program Agent that such cure has been effected, or (ii) any Investor Report, any Activity Report or any other statement, certificate or report delivered by or on behalf of the Parent, the Distributor, the Seller, the Transferor or the Shareholder Servicer in connection with this Agreement, or any other Program Document, shall have been false, incorrect or misleading, when taken as a whole, in any material respect when delivered; or (d) the Purchaser shall fail to acquire in a True Sale, or shall cease to have, a 100% undivided ownership interest in any Purchased Receivable, free and clear of any Adverse Claim; or (e) (i) the Seller, the Transferor, the Distributor, the Parent, the Shareholder Servicer, any Advisor, any Transfer Agent, any Sub-transfer Agent, any Company or any Fund or any Significant Affiliate thereof shall generally not pay its Debts as such Debts become due, or shall admit in writing its inability to pay its Debts generally, or shall make a general assignment for the benefit of creditors or, in the case of the Distributor, the Distributor shall otherwise become "insolvent" within the meaning of SIPA; or (ii) any proceeding shall be instituted by or against the Seller, the Transferor, the Distributor, the Parent, the Shareholder Servicer, any Advisor, any Transfer Agent, any Sub-transfer Agent, any Company, any Fund or any Significant Affiliate thereof seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up reorganization, arrangement, adjustment, protection, relief, or composition of it or its Debts under any Applicable Law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of sixty (60) days; or (iii) any of the actions sought in any proceeding described in (ii) above (including an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or (iv) the Seller, the Transferor, the Distributor, the Parent, the Shareholder Servicer, any Advisor, any Transfer Agent, any Sub-transfer Agent, any Company, any Fund or any Significant Affiliate thereof shall take any action to authorize any of the actions set forth above in this Section 6.01(e); or (f) there shall have occurred any material adverse change in (i) the financial condition or results of operations of the Parent and its consolidated subsidiaries taken as a whole since September 30, 2000, or (ii) the Seller, the Transferor, the Shareholder Servicer, the Parent, the Distributor, any Advisor or any Transfer Agent which is an Affiliate of the Parent shall fail to make payments when due in respect of Debt aggregating in excess of $10,000,000, provided that the determination of default on such Debt is not being diligently contested in good faith through appropriate proceedings; or (g) any Distribution Plan, Distribution Agreement, Principal Shareholder Servicer's Agreement, Shareholder Servicer's Agreement, Prospectus, the Conduct Rules or the Investment Company Act, or the CDSC arrangements applicable to holders of Shares of any Fund or the terms of any Conversion Feature in respect of any Share of any Fund, each as in effect on the date of this Agreement, or the Fundamental Investment Objectives in respect of any Fund, shall be amended, waived, supplemented or modified, in any manner or by any means (including a change in Applicable Law), which would reasonably be expected to have a Material Adverse Effect, unless waived by the Program Agent; or (h) the Securities Investor Protection Corporation, established under SIPA, shall have applied for a protective decree against the Distributor; or (i) the Distributor shall have failed to meet the minimum capital requirements prescribed from time to time by Rule 15c3-1 under the Exchange Act and such failure continues uncured for ten (10) days after the Distributor obtains knowledge thereof; or (j) the SEC shall have modified or terminated Rule 12b-1 of the Investment Company Act or the NASD shall have modified or terminated the Conduct Rules in a manner which could reasonably be expected to give rise to a Material Adverse Effect; or (k) the Distributor shall cease to be registered as a broker/dealer under the Exchange Act and with the NASD or the NASD suspends the Distributor's membership or registration; or (l) any Company or any Transfer Agent shall, without the written consent of the Program Agent, fail to withhold from redemption proceeds paid to any holder of a Share any CDSC required to be withheld and remit such funds strictly in accordance with any Irrevocable Payment Instruction, or shall be prevented by any Authority or by any Applicable Law from doing so or any Company or any Transfer Agent shall so assert in writing; or (m) any Fund or any Company shall be required by any Authority or any Applicable Law to cease or suspend the sale of Shares of any Fund under circumstances that could reasonably be expected to result in a Material Adverse Effect; or (n) any Company in respect of itself or any Fund shall propose or effect a merger, consolidation or other combination with another Person or any Liquidation Plan other than a Permitted Merger; or (o) the applicable Advisor shall cease to act as the investment advisor of any Fund under the applicable Advisory Agreement; then in respect of any occurrence of any such event, the Program Agent may in respect of each such occurrence, by notice to the Seller declare the Termination Date to have occurred (in which case the Termination Date shall be deemed to have occurred); PROVIDED, that, upon the occurrence of any event (without any requirement for the giving of notice) described in subsection (e) or (h) of this Section 6.01, the Termination Date shall be deemed to have automatically occurred. Article VII PARENT'S UNDERTAKINGS SECTION 7.01. UNDERTAKINGS; PAYMENT OF DAMAGES. -------------------------------- The Parent hereby irrevocably and unconditionally agrees and guarantees for the benefit of the Purchaser, the Program Agent and each Indemnified Party to cause the Seller, the Transferor, the Shareholder Servicer, the Distributor (as Distributor, Principal Shareholder Servicer and Servicer) and each other Federated Entity to perform and punctually and completely carry out each and every agreement, covenant and undertaking of the Seller, the Transferor, the Shareholder Servicer, the Distributor (as Distributor, Principal Shareholder Servicer and Servicer) and each other Federated Entity under this Agreement and each other Program Document in accordance with the terms hereof and thereof, notwithstanding that the Seller, the Transferor, the Shareholder Servicer, the Distributor (as Distributor, Principal Shareholder Servicer or Servicer), or any other Federated Entity fails to fully perform any such agreements, covenants and undertakings for any reason, including liquidation, insolvency, dissolution, receivership, bankruptcy, assignment for the benefit of creditors, reorganization, composition, adjustment, legal limitations, court order, disability, incapacity, invalidity, unenforceability, defense, offset or counterclaim. SECTION 7.02. AGREEMENT NOT AFFECTED. ---------------------- The Purchaser and the Program Agent may proceed to exercise any right or remedy which it might have pursuant to this Article VII or Applicable Law without regard to any actions or omissions of the Purchaser, the Program Agent or any other Person. The validity of this Article VII shall not be affected by any action or inaction which may be taken under or in respect of any Program Document. The Purchaser and the Program Agent at its option may proceed in the first instance against the Parent to obtain a remedy under any Program Document in the amount and in the manner set forth in such Program Document, without being obliged to resort first to any claim or action against the Seller, the Transferor, the Shareholder Servicer, the Distributor (as Distributor, Principal Shareholder Servicer or Servicer) or any other Federated Entity. SECTION 7.03. WAIVER OF NOTICE; NO OFFSET; NO SUBROGATION. ------------------------------------------- The Parent hereby waives any and all notices or demands to which it may otherwise be entitled in connection with the pursuit of any remedy under any Program Documents and to the extent permitted under Applicable Law; PROVIDED, that this sentence shall not constitute a waiver on behalf of the Seller, the Transferor, the Shareholder Servicer, the Distributor or any other Federated Entity of any notice or demand to which the Seller, the Transferor, the Shareholder Servicer, the Distributor or any other Federated Entity is entitled under the Program Documents. The obligations of the Parent under this Article VII shall not be subject to any defense, counterclaim or right of offset which the Parent, the Seller, the Transferor, the Shareholder Servicer, the Distributor (as Distributor, Principal Shareholder Servicer or Servicer), or any other Person has or may have against the Purchaser, the Program Agent, any Indemnified Party or any other Person, whether in respect of this Agreement, any other Program Document, any Purchased Receivable or any Ancillary Rights with respect thereto or otherwise, but nothing herein shall limit the right of the Parent to pursue any claim in a separate action. Article VIII THE PROGRAM AGENT SECTION 8.01. AUTHORIZATION AND ACTION. ------------------------ The Purchaser hereby irrevocably appoints and authorizes the Program Agent to take such action as agent on its behalf and to exercise such powers under this Agreement, the Servicing Agreement and the other Program Documents to which the Program Agent is a party as are delegated to the Program Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement or the other Program Documents, the Program Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Purchaser; PROVIDED, HOWEVER, that the Program Agent shall not be required to take any action which exposes the Program Agent to personal liability or which is contrary to this Agreement, the other Program Documents or Applicable Law. SECTION 8.02. PROGRAM AGENT'S RELIANCE, ETC. -------------------------------- Neither the Program Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement or any of the other Program Documents, except for its or their own gross negligence or willful misconduct. Without limiting the generality of the foregoing, the Program Agent: (i) may consult with legal counsel (including counsel for any Federated Entity), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) makes no warranty or representation to the Purchaser and shall not be responsible to the Purchaser for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement or the other Program Documents; (iii) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the other Program Documents on the part of any Federated Entity or any Company or Fund or to inspect the property (including the books and records) of any Federated Entity or any Company or Fund; (iv) shall not be responsible to the Purchaser for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, the other Program Documents or any other instrument or document furnished pursuant hereto or thereto; and (v) shall incur no liability under or in respect of this Agreement or any other Program Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopier, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 8.03. INDEMNIFICATION. --------------- The Purchaser agrees to indemnify the Program Agent (to the extent not reimbursed by or on behalf of any Federated Entity) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Program Agent in any way relating to or arising out of this Agreement or any other Program Document or any action taken or omitted by the Program Agent under this Agreement or any other Program Document; PROVIDED, THAT, the Purchaser shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Program Agent. Without limitation of the foregoing, the Purchaser agrees to reimburse the Program Agent promptly upon demand for any out-of-pocket expenses (including counsel fees) incurred by the Program Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) or legal advice in respect of rights or responsibilities under this Agreement or the other Program Documents, to the extent that the Program Agent is not reimbursed for such expenses by or on behalf of any Federated Entity. Article IX MISCELLANEOUS SECTION 9.01. NO WAIVER; RIGHTS AND REMEDIES; MODIFICATIONS IN WRITING. -------------------------------------------------------- No failure or delay on the part of the Program Agent or the Purchaser exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder or under any other Program Document. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the Program Agent and the Purchaser, at law or in equity. Without limiting the generality of the foregoing, each of the Seller, the Transferor, the Distributor and the Parent acknowledges and agrees that it will be impossible to measure in money the damage to the Program Agent, the Purchaser or any other Indemnified Party in the event of a breach of any of the covenants set forth in Article V hereof, and that, in the event of any such breach, the Program Agent, the Purchaser and the other Indemnified Parties may not have an adequate remedy at Law, and each of the Seller, the Distributor and the Parent agrees that it shall not argue, and hereby waives any defense, that there is an adequate remedy available at Law. No amendment, modification, supplement, termination or waiver of this Agreement shall be effective unless the same shall be in writing and signed by the parties to this Agreement. Any waiver of any provision of this Agreement and any consent to any departure by any party to this Agreement from the terms of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand on any party to this Agreement in any case shall entitle a Federated Entity to any other or further notice or demand in similar or other circumstances. SECTION 9.02. PAYMENT. ------- Unless otherwise provided herein, whenever any payment to be made hereunder shall be due on a non-Business Day, such payment shall be made on the next succeeding Business Day. All amounts owing and payable to the Purchaser, the Program Agent or any other Indemnified Party under this Agreement shall be paid in immediately available funds without counterclaim, setoff, deduction, defense, abatement, suspension or deferment. All amounts payable to the Purchaser, the Program Agent or any other Indemnified Party pursuant to Article VII, Section 9.04 and Section 9.05 shall be paid to the Purchaser's Remittance Account. Each of the Seller, the Distributor and the Parent hereby agrees to pay interest on any amounts payable by it under this Agreement, which shall not be paid in full when due, for the period commencing on the due date thereof until, but not including, the date the same is paid in full at the Post-Default Rate. For purposes of calculating interest at the Post-Default Rate, any amount received by or on behalf of the Purchaser, the Program Agent or any other Indemnified Party after 3:00 p.m. (New York City time) shall be deemed to have been received on the next succeeding Business Day. SECTION 9.03. NOTICES, ETC. (a) Except where telephonic instructions are expressly authorized herein to be given, all notices, demands, instructions and other communications required or permitted to be given to or made upon any party hereto shall be in writing and shall be personally delivered or sent by registered, certified or express mail, postage prepaid, or by prepaid telegram (with messenger delivery specified in the case of a telegram), or by telecopier, or by prepaid courier service. Unless otherwise specified in a notice sent or delivered in accordance with the foregoing provisions of this Section 9.03, notices, demands, instructions and other communications in writing shall be given to or made upon the respective parties hereto at their respective addresses (or to their respective telecopier numbers) indicated below: If to the Purchaser: Citibank, N.A. c/o Citicorp North America, Inc. 399 Park Avenue, 6th Floor, Zone 14 New York, New York 10043 Attention: Mr. Joseph Diamente, B Share Servicing Telephone No.: (212) 559-1720 Facsimile No.: (212) 793-5233 If to the Program Agent: Citicorp North America, Inc. U.S. Securitization 399 Park Avenue, 6th Floor, Zone 14 New York, New York 10043 Attention: Mr. Joseph Diamente, B Share Servicing Telephone No.: (212) 559-1720 Facsimile No.: (212) 793-5233 If to the Seller, the Transferor, the Distributor or the Parent: Federated Investors, Inc. Federated Investors Tower 1001 Liberty Avenue Pittsburgh, Pennsylvania 15222-3779 Attention: Mr. Raymond J. Hanley Telephone No.: (412) 288-1920 Facsimile No.: (412) 288-7046 With a copy to: Kirkpatrick & Lockhart, LLP Henry W. Oliver Building 535 Smithfield Street Pittsburgh, Pennsylvania 15222 Attention: Michael C. McLean, Esq. Telephone No.: (412) 355-6500 Facsimile No.: (412) 355-6501 (b) All notices, demands, consents, requests and other communications to be sent or delivered hereunder shall be deemed to be given or become effective for all purposes of this Agreement as follows: (a) when delivered in person, when given; (b) when sent by mail, when received by the Person to whom it is given, unless it is mailed by registered, certified or express mail, in which case it shall be deemed given or effective on the earlier of the date of receipt or refusal; and (c) when sent by telegram, telecopy or other form of rapid transmission, when receipt of such transmission is acknowledged. SECTION 9.04. COSTS AND EXPENSES; INDEMNIFICATION. ----------------------------------- (a) Regardless of whether or not any of the transactions contemplated hereby are actually consummated, the Parent agrees to pay promptly on demand to the other parties hereto (other than any other Federated Entity) (i) all reasonable costs and expenses in connection with the preparation, review, negotiation, reproduction, execution, delivery, administration and any modification, amendment and waiver of this Agreement and the other Program Documents, (ii) all costs and expenses incurred in connection with the enforcement of, or preservation of, any rights under this Agreement and the other Program Documents, (iii) all actuarial fees, UCC filing fees and periodic auditing expenses in connection with the transactions contemplated by this Agreement and the other Program Documents, and (iv) all reasonable fees and disbursements of counsel in connection with the foregoing; PROVIDED, HOWEVER, that if the transactions contemplated hereby are not actually consummated, the Parent's obligations under this Section 9.04(a) shall be subject to the terms of that certain letter from the Purchaser to the Distributor dated October 6, 2000 (the "Mandate Letter"); PROVIDED, FURTHER, that the fees of counsel to the Purchaser and the Program Agent incurred prior to the initial Purchase Date hereunder shall be subject to the limitation set forth in the Mandate Letter. (b) INDEMNIFICATION. The Parent agrees to indemnify and hold harmless the Purchaser, the Program Agent, the Collection Agent, the Master Servicer, the Master Trusts, the Transferees and each of their respective successors and assigns, Affiliates and the respective officers, directors, employees, trustees, agents, advisors, and any Person controlling any of the foregoing (each, an "Indemnified Party") from and against any and all damages, losses, liabilities, expenses, obligations, penalties, actions, suits, judgments and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel) (collectively, the "Liabilities") that are incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (and regardless of whether or not any such transactions are consummated) any of the transactions contemplated by the Program Documents, including without limitation, any one or more of the following: (i) any failure or alleged (by Persons other than the Indemnified Party) failure by any Federated Entity to perform any of its obligations, covenants, or agreements contained in any Program Document to which it is a party promptly and fully; (ii) any representation or warranty made or deemed made by any Federated Entity contained in any Program Document or in any certificate, written statement or report delivered by or on behalf of any such Person in connection therewith is, or is alleged (by Persons other than the Indemnified Party) to have been, false or misleading in any respect when made; (iii) any failure by any Federated Entity to comply promptly and fully with any Applicable Law or any contractual obligation binding upon it; (iv) any proceeding by or against any Federated Entity seeking to adjudicate such Person, bankrupt or insolvent, or seeking liquidation, winding up, administration, reorganization, arrangement, adjustment, protection, relief, or composition of such Person or the debts of such Person under any law relating to bankruptcy, insolvency, liquidation, administrative, reorganization or relief of debtors or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian, administrator, liquidator, or other similar official for such Person or for a substantial part of such Person's property; (v) preparation for a defense of, any investigation, litigation or proceeding arising out of, any of the transactions, events or circumstances described above; (vi) failure of any Sub-transfer Agent to remit CDSCs in respect of the Omnibus Shares to the Transfer Agent or the failure of any Company or any Transfer Agent to comply with any Irrevocable Payment Instruction, except, in respect of any Company and the Transfer Agents, to the extent that such failure results from such Company or such Transfer Agent being prevented by court order from making such payment as a result of a bankruptcy, insolvency or similar proceeding against such Company; (vii) any commingling of Collections on deposit in the Collection Account or the Demand Deposit Account with funds of any other Person (including without limitation, with funds of any Other Purchaser), including without limitation in conjunction with any bankruptcy or insolvency proceeding by or against any Other Purchaser or the Other Agent which affects the Purchaser's timely receipt of any Collections; or (viii)the adoption of any Company or any Fund of a Liquidation Plan other than in connection with any insolvency or similar proceeding against such Company or Fund; PROVIDED, HOWEVER, that the Parent shall not be required to indemnify any Indemnified Party in respect of any Liability to the extent such Liability (A) is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted directly and primarily from such Indemnified Party's gross negligence or willful misconduct, (B) arises out of the Purchased Receivables proving to be uncollectible (including uncollectibility resulting from declines in the NAV of a Fund or as a result of a Complete Termination (as defined in the Distribution Agreement and Principal Shareholder Servicer's Agreement relating to any Fund)), except to the extent that such uncollectibility is attributable to what would not have occurred but for any one or more of the events described in clauses (i) through (viii) above, or (C) arises out of a subsequent sale or assignment of any Purchased Receivables by any Purchaser and is not attributable to, or would not have accrued but for, one or more of the events or circumstances described in clauses (i) through (viii) above. (c) Unless the Parent shall have assumed responsibility for contesting a Liability as provided in the next sentence, the Program Agent and the Purchaser may, but shall have no obligation to, contest, settle or compromise such Liability. The Parent may pursue, at its sole cost and expense, such lawful rights as are available at law to contest any Liability asserted against the Purchaser or the Program Agent provided: (i) the Parent has assumed responsibility for such contest and conceded in writing its responsibility to indemnify the Program Agent and the applicable Indemnified Parties, in accordance with this Section, for the full amount of such Liability; (ii) such contest is conducted in a manner which does not result in a Lien on any Receivables and, if the manner of contest does not defer the obligation to pay the Liability, the Parent shall pay such Liability when due, subject to the right to recover such Liability if the contest is successful, (iii) the Parent shall have provided to the Program Agent such undertakings as the Program Agent shall request, in form and substance satisfactory to the Program Agent whereby the Parent agrees to hold the Program Agent and the applicable Indemnified Parties harmless from any and all liabilities, costs and expenses which may arise as a consequence of such contest; (iv) the Parent shall have furnished the Program Agent with an opinion, in form and scope reasonably satisfactory to the Program Agent that there is a meritorious basis for such contest; (v) the contest of such Liability may be conducted in a manner which does not affect the liability of the applicable Indemnified Parties, for any liability not indemnified by the Parent; (vi) the contest of such Liability can be separated from any contest of any other liability in respect of which the Parent has not indemnified the applicable Indemnified Parties, without prejudicing the Indemnified Party's ability to deal with or otherwise contest such other liability; and (vii) the Program Agent and the applicable Indemnified Parties have not waived their right to indemnification by the Parent in respect of such Liability. The Parent shall keep the Program Agent fully advised on a current basis concerning any such contest, and, without limiting the foregoing: (x) the Parent shall give the Program Agent reasonable notice of and a reasonable opportunity to be present in person or by counsel at any proceeding in connection therewith; (y) the Parent shall give the Program Agent notice of any proposed filings or papers to be served or filed by the Parent in connection with any such proceedings and a reasonable opportunity to comment upon them; and (z) the Parent shall promptly supply the Program Agent with copies of any filings or papers served upon the Parent in connection with such proceedings; it being understood that the applicable Indemnified Parties shall bear their own costs incurred in connection with any participation by such Indemnified Parties or their respective counsel in the contest as contemplated by this sentence. (d) Without prejudice to the survival of any other agreement of the Parent hereunder, the agreement and obligations of the Parent contained in this Section 9.04 and of the Parent in Article VII shall survive the termination of this Agreement. SECTION 9.05. TAXES. ----- (a) Any and all payments by any Federated Entity, any Transfer Agent, any Sub-transfer Agent, any Company or any Fund under this Agreement, any Irrevocable Payment Instruction or any other Program Document shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, EXCLUDING, taxes imposed on the recipient's income, and franchise taxes imposed on the recipient, by (i) the United States federal government, (ii) the jurisdiction under the laws of which the recipient is organized or any political subdivision thereof, (iii) the jurisdiction in which is located the principal executive office of the recipient or any political subdivision thereof or (iv) any other jurisdiction which asserts the authority to impose such tax on the basis of contacts the recipient maintains with such jurisdiction other than the contacts arising out of the transactions contemplated hereby (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If any Federated Entity, any Transfer Agent, any Sub-transfer Agent, any Company or any Fund shall be required by Applicable Law to deduct any Taxes from or in respect of any sum payable hereunder or under any other Program Document, (i) the sum payable hereunder or thereunder shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 9.05) the recipient receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Federated Entity, Transfer Agent, Sub-transfer Agent, Company or Fund shall make such deductions, and (iii) such Federated Entity, Transfer Agent, Sub-transfer Agent, Company or Fund shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with Applicable Law. (b) In addition, the Parent agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any transfer of Receivables in connection with the Program Documents or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Program Document (hereinafter referred to as "Other Taxes"). (c) The Parent will indemnify the Program Agent and the Purchaser for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 9.05) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted, so long as there is a reasonable basis for the assertion of such Taxes or Other Taxes. This indemnification shall be made within thirty (30) days from the date the Program Agent or the Purchaser makes written demand therefor to the Parent. The Purchaser and the Program Agent shall endeavor to avoid or reduce any Taxes or Other Taxes subject to the foregoing indemnity; PROVIDED that they shall not be required to take any action which, in their sole judgment, may subject them to any adverse effect. (d) Within thirty (30) days after the date of any payment of Taxes, the Parent will furnish to the Purchaser and the Program Agent the original or a certified copy of a receipt evidencing payment thereof. (e) In the event the Parent shall pay a Tax or Other Tax pursuant to this Section 9.05 and all or a portion of such Tax or Other Tax previously paid by the Parent is later refunded by the applicable taxing Authority the recipient of such refund shall pay to the Parent, the portion of such refund which relates to the amount previously paid by the Parent. (f) Unless the Parent shall have assumed responsibility for contesting a Tax or Other Tax described in paragraph (c) of this Section 9.05 as provided in the next sentence, the Program Agent and the Purchaser may, but shall have no obligation to, contest, settle or compromise such Tax or Other Tax. The Parent may pursue, at its sole cost and expense, such lawful rights as are available at law to contest any Tax or Other Tax asserted against the Purchaser or the Program Agent provided: (i) the Parent has assumed responsibility for such contest and conceded in writing its responsibility to indemnify the Purchaser or the Program Agent, as the case may be, in accordance with this Section, for the full amount of such Tax or Other Tax; (ii) such contest is conducted in a manner which does not result in a Lien on the Receivables and, if the manner of contest does not defer the obligation to pay the Tax or Other Tax, the Parent shall pay such Tax or Other Tax when due, subject to the right to recover such Tax or Other Tax if the contest is successful, (iii) to the extent not covered by Section 9.04(b), the Parent shall have provided to the Purchaser or the Program Agent, as the case may be, such undertaking as such Purchaser or the Program Agent, as the case may be, shall request, in form and substance satisfactory to the Purchaser, or the Program Agent, as the case may be, whereby the Parent agrees to hold the Purchaser or the Program Agent, as the case may be, harmless from any and all liabilities, costs and expenses which may arise as a consequence of such contest; (iv) the Parent shall have furnished the Purchaser or the Program Agent, as the case may be, with an opinion in form and scope reasonably satisfactory to the Purchaser or the Program Agent, as the case may be, of counsel reasonably satisfactory to the Purchaser or the Program Agent, as the case may be, that there is a meritorious basis for such contest; (v) the contest of such Tax or Other Tax may be conducted in a manner which does not affect the liability of the Purchaser or the Program Agent, as the case may be, for any tax not indemnified by the Parent; (vi) the contest of such Tax or Other Tax can be separated from any contest of any other tax in respect of which the Parent has not indemnified the Purchaser or the Program Agent, as the case may be, without prejudicing the Purchaser's or the Program Agent's, as the case may be, ability to deal with or otherwise contest such other liability; and (vii) the Purchaser or the Program Agent, as the case may be, has not waived its right to indemnification by the Parent in respect of such Tax or Other Tax. The Parent shall keep the Purchaser or the Program Agent, as the case may be, fully advised on a current basis concerning any such contest, and, without limiting the foregoing: (a) the Parent shall give the Purchaser or the Program Agent, as the case may be, reasonable notice of and a reasonable opportunity to be present in person or by counsel at any proceeding in connection therewith; (b) the Parent shall give the Purchaser or the Program Agent, as the case may be, notice of any proposed filings or papers to be served or filed by the Parent in connection with any such proceedings and a reasonable opportunity to comment upon them; and (c) the Parent shall promptly supply the Purchaser or the Program Agent, as the case may be, with copies of any filings or papers served upon the Parent in connection with such proceedings; it being understood that the Purchaser or the Program Agent, as the case may be, shall bear its own costs incurred in connection with any participation by the Purchaser or the Program Agent, as the case may be, or its counsel in the contest as contemplated by this sentence. (g) Without prejudice to the survival of any other agreement of the Parent hereunder, the agreements and obligations of the Parent contained in this Section 9.05 shall survive the termination of this Agreement. Without prejudice to the survival of any other agreement of the Seller hereunder, the agreement and obligations of the Seller contained in this Section 9.05 shall survive the termination of this Agreement. SECTION 9.06. EXECUTION IN COUNTERPARTS. ------------------------- This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement. SECTION 9.07. BINDING EFFECT; ASSIGNMENT. -------------------------- This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. No Federated Entity shall assign its rights or obligations hereunder or in connection herewith or any interest herein or in any other Program Document (including without limitation the Distribution Agreements and Principal Shareholder Servicer's Agreement) (voluntarily, or by operation of law or otherwise) without the Program Agent's and the Purchaser's prior written consent (which consent shall not be unreasonably withheld), PROVIDED, HOWEVER, that its obligations hereunder may be assigned in connection with any transfer permitted by Section 5.02(i). This Agreement and the Program Agent's and the Purchaser's rights herein (including without limitation in respect of the Purchased Receivables and the Ancillary Rights with respect thereto) shall be assignable, in whole or in part, by the Purchaser and the Program Agent and their respective successors and assigns. The Purchaser shall not assign its obligations under Sections 2.01 and 2.02 of this Agreement without the prior written consent of the Seller (which consent shall not be unreasonably withheld or delayed). Each of the Seller, the Transferor, the Distributor and the Parent hereby consents to the Purchaser and the Program Agent entering into the Take-out Transactions; PROVIDED, HOWEVER, that in connection with any proposed Take-out Transaction, prior to distributing to potential offerees any offering materials which contain information concerning the Seller or any of its Affiliates, the Purchaser shall give the Seller a reasonable opportunity to review and comment upon such information for the purpose of preventing the inclusion of Proprietary Information in such offering materials. The Seller agrees to relay the good faith comments, if any, of the Seller or any of its Affiliates as soon as practical after receipt of such information (but in any event within five (5) Business Days of such receipt). Unless the Program Agent reasonably determines that disclosure is required in order to comply with Law applicable to such Take-out Transaction, the Purchaser shall not make any disclosure of Proprietary Information, the release of which would have a material adverse consequence to the Seller or any of its Affiliates. SECTION 9.08. GOVERNING LAW. ------------- THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE. SECTION 9.09. SEVERABILITY OF PROVISIONS. -------------------------- Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 9.10. CONFIDENTIALITY. --------------- (a) Each of the Seller, the Distributor and the Parent agrees that it shall and shall cause each of its respective Affiliates (i) to keep this Agreement, the Servicing Agreement, the Collection Agency Agreement, the Funding Agreement, the Purchase Rate Letter, the Investor Reports, the Monthly Collection Determination Date Statements, the proposal relating to the structure of the facility contemplated by this Agreement (the "Facility"), any analyses, computer models, information or document prepared by the Program Agent, the Purchaser or any of their respective Affiliates in connection with the Facility, the Program Agent's, the Purchaser's and their respective Affiliate's written reports to the Seller, the Distributor, the Parent, any Company, any Fund or any of their respective Affiliates and any related written information (collectively, the "Product Information") confidential and to disclose Product Information (i) only to its officers, employees, agents, accountants, legal counsel and other representatives and the Board of Trustees of the Funds (collectively, the "Federated Representatives") in connection with the negotiation, completion, approval and administration of the Facility; (ii) to use the Product Information only in connection with the Facility and not for any other purpose; and (iii) to cause the Federated Representatives to comply with the provisions of this Section 9.10(a); PROVIDED, HOWEVER, that Product Information may be disclosed by the Seller, the Distributor or the Parent to the extent required by the Applicable Law or by any Authority, it being understood that any such disclosure or filing shall not relieve the Seller, the Distributor or the Parent of any of its obligations under this Section 9.10(a). Each of the Seller, the Distributor and the Parent agree that if any Product Information is required by Applicable Law to be included by it in any filing with the SEC or any other Authority it shall, in consultation with the Program Agent, use its reasonable best efforts to "black-out" all information which is not necessary under Applicable Law to be included in such filing which the Program Agent deems is of a sensitive nature and in no event shall the Purchase Price be disclosed in any such filing. (b) Unless otherwise required by Applicable Law or by any Authority, the Purchaser and the Program Agent agree to maintain the confidentiality of the Proprietary Information; PROVIDED, THAT, such Proprietary Information may be disclosed to: (i) assignees, participants and potential assignees and participants of the Purchaser, the Program Agent and the Master Trusts; (ii) third parties to the extent such disclosure is consented to in writing by all parties to this Agreement (which consent shall not be unreasonably withheld) and such disclosure is made pursuant to a written confidentiality agreement in form and substance substantially identical to this Section 9.10(b); (iii) the officers, partners, directors, employees, legal counsel and auditors of the Purchaser, the Program Agent and the Master Trusts; (iv) any rating agency and as the Program Agent or the Purchaser otherwise may deem necessary or appropriate in connection with any Take-out Transaction. As used herein the term "Proprietary Information" means information provided to the Purchaser and the Program Agent pursuant to this Agreement or the Servicing Agreement regarding the Seller, the Distributor, the Parent or their respective Affiliate's strategic plans, operations, financial condition, history, business or marketing, but only to the extent such information has not become generally known or available to the public. SECTION 9.11. INTENT OF AGREEMENT. ------------------- It is the intention of this Agreement that each purchase of Receivables hereunder shall convey to the Purchaser an undivided 100% ownership interest in such Receivables and the Ancillary Rights and Collections in respect thereto on the Purchase Date therefor and that such transactions shall constitute a True Sale and not a secured loan. If, notwithstanding such intention, any conveyance of Receivables from the Seller to the Purchaser shall ever be recharacterized as a secured loan and not a sale, it is the intention of this Agreement that this Agreement shall constitute a security agreement under Applicable Law, and that the Seller shall be deemed to have granted to the Purchaser a duly perfected first priority security interest in all of the Seller's right, title and interest in, to and under the Purchased Receivables (together with the Proceeds in respect thereof) free and clear of any Adverse Claim in order to secure payment and performance of the obligations of the Federated Entities under the Program Documents. SECTION 9.12. LIABILITIES TO ANY FUND OR ANY COMPANY. -------------------------------------- No obligation or liability to any Fund, any Company, to any shareholder of any Fund or to any Person contracting with any Fund or any Company is intended to be assumed by the Program Agent, the Purchaser or any Indemnified Party under or as a result of this Agreement or the other Program Documents and the transactions contemplated hereby and thereby and, to the maximum extent permitted under provisions of Law, the Program Agent and the Purchaser expressly disclaim any such assumption. SECTION 9.13. ENTIRE AGREEMENT. ---------------- The Program Documents taken as a whole incorporate the entire agreement between the parties thereto concerning the subject matter thereof. The Program Documents supersede any prior agreements among the parties relating to the subject matter thereof. SECTION 9.14. ASSIGNEE RIGHTS; TAKE-OUT TRANSACTIONS; ETC. ---------------------------------------------- (a) Each of the Seller, the Transferor, the Distributor and the Parent acknowledges and agrees that any Person which purchases or otherwise acquires any interest in any Purchased Receivables (or the right to receive any Collections with respect thereto in a Take-out Transaction) (each such Person, a "Transferee"), (and in the case of indemnitees, their respective Affiliates and their officers, directors, employees and agents) shall each, to the extent of such Transferee's interest, be a beneficiary of the representations, warranties, indemnities, covenants, agreements and undertakings of the Seller, the Transferor, the Distributor and the Parent under this Agreement and the other Program Documents; PROVIDED, HOWEVER, that such rights of the Transferees in a Take-out Transaction may be enforced on behalf of such Transferees only by the Master Servicer for the related Master Trust. Each of the Seller, the Transferor, the Distributor and the Parent shall execute and deliver such instruments and documents and shall take all such actions as the Program Agent, the Purchaser or any Master Trust shall reasonably deem necessary in order to confer upon any such Transferee the rights and privileges in and to the Purchased Receivables and the Ancillary Rights and Collections with respect thereto to which such Transferee has an interest and under the Program Documents to the extent of such transfer and assignment. Notwithstanding anything in this Section 9.14 to the contrary, no Transferee shall be deemed to have assumed any of the obligations or liabilities of the Seller, the Transferor, the Distributor or the Parent under this Agreement or any other Program Document. (b) Subject to the other requirements set forth in Section 9.07, the Program Agent agrees that any written offering memorandum or circular used in connection with any Take-out Transaction involving Purchased Receivables which contains information concerning the Seller, the Transferor, the Distributor or the Parent shall (i) incorporate language substantially in the form of Schedule V hereto, and (ii) provide that the securities which are the subject of such Take-out Transaction will be offered only to institutional accredited investors (as defined in Rule 501(a) under the Securities Act), to a qualified institutional buyer within the meaning of Rule 144A under the Securities Act and/or to any Person in a transaction exempt from registration under the Securities Act. SECTION 9.15. SURVIVAL. -------- Each of the representations, warranties, covenants, indemnities and other agreements of the parties contained or reaffirmed in this Agreement: (i) shall survive the execution and delivery of this Agreement and the purchase of and payment for the Purchased Receivables relating to each Fund and (ii) shall remain and continue in full force and effect without regard to any waiver, modification, extension, renewal, consolidation, amendment or restatement of any term or provision. SECTION 9.16. CONTINUING OBLIGATIONS. ---------------------- Notwithstanding any other provision of this Agreement or the other Program Documents, to the extent that any obligation of the Federated Entities under, pursuant to and in connection with the Purchased Receivables remains unperformed or executory, the Federated Entities shall be obligated to perform such obligation to the same extent as if the purchase and sale contemplated hereby had not taken place, and the Purchaser and the Program Agent shall not be required or obligated in any manner to perform or fulfill any of the obligations of the Federated Entities under, pursuant to or in connection with any Purchased Receivables. SECTION 9.17. UNDERTAKINGS OF THE PARTIES. --------------------------- Each of the Program Agent and the Purchaser agree that if the Distributor is replaced as principal distributor for any Fund, any Advisor is replaced as investment advisor for any Fund or the investment advisor for any proposed Additional Fund is not an Advisor hereunder, they shall at the request of the Seller consider in good faith entering into mutually satisfactory amendments to the Program Documents so as to permit Receivables to continue to be purchased hereunder. It being understood that the Purchaser and the Program Agent shall not be obligated to consent to any such amendment and that the decision to consent to any such amendment will be subject to their due diligence review of any such successor or additional party. SECTION 9.18. LIMITED LIABILITY. ----------------- None of the Federated Entities (other than the Parent), nor any shareholder, officers or agents of any thereof, shall be liable hereunder or under the other Program Documents for the obligations of the Seller, and, subject to Article VII hereof with respect to the Parent, the other parties hereto and thereto shall look solely to the assets of the Seller for the payment of any claim hereunder or thereunder for the performance of the obligations of the Seller, except to the extent expressly set forth herein or in any other Program Document. SECTION 9.19. NO PROCEEDINGS. -------------- Each party hereto agrees that it will not institute against the Seller, or join any other Person in instituting against Seller, any insolvency proceeding of the type described in Section 6.01(e) so long as there shall not have elapsed one (1) year and one (1) day since any Share relating to a Purchased Receivable shall be outstanding. The foregoing shall not limit the right of any party hereto to file any claim in or otherwise take any action in any insolvency proceeding that was instituted against Seller by any other Person. SECTION 1.01. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. CITIBANK, N.A., as Purchaser By:_/S/ MANUEL MARTINEZ____________________ ------------------- Name: Manuel Martinez Title: Vice President CITICORP NORTH AMERICA, INC., as Program Agent By:_/S/ MANUEL MARTINEZ_____________________ ------------------- Name: Manuel Martinez Title: Vice President FEDERATED INVESTORS MANAGEMENT COMPANY, as Transferor By:_/S/ DENIS MCAULEY III___________________ --------------------- Name: Denis McAuley III Title: Senior Vice President FEDERATED SECURITIES CORP., as Distributor, Principal Shareholder Servicer and Servicer By:_/S/ RAYMOND J. HANLEY___________________ --------------------- Name: Raymond J. Hanley Title: Vice President FEDERATED FUNDING 1997-1, INC., as Seller By:_/S/ DENIS MCAULEY III____________________ --------------------- Name: Denis McAuley III Title: Vice President FEDERATED INVESTORS, INC., as Parent By:_/S/ J. CHRISTOPHER DONAHUE________________ -------------------------- Name: J. Christopher Donahue Title: President 22 APPENDIX A TO PURCHASE AND SALE AGREEMENT DEFINITIONS LIST The following terms have the respective meanings set forth below for all purposes of the Purchase Agreement, the Servicing Agreement, the Collection Agency Agreement, the Funding Agreement and the exhibits and schedules thereto and the definitions of such terms are equally applicable both to the singular and plural forms of such terms. "ACTIVITY REPORT" shall have the meaning assigned to such term in Section 3.01(a) of the Servicing Agreement. "ACTUAL KNOWLEDGE" means, (i) as it applies to any natural Person, actual knowledge of such Person, (ii) as it applies to any Person which is a corporate entity or business trust, the actual knowledge of a Responsible Officer of such Person, and (iii) as it applies to any Person which is a trust entity, the actual knowledge of such trustee determined with reference to both clauses (i) and (ii) of this definition. "ADDENDUM" means the addendum substantially in the form of Exhibit H to the Purchase Agreement, executed by the Seller, the Distributor, the Parent, the Purchaser and the Program Agent. "ADDITION EFFECTIVE DATE" shall have the meaning assigned to such term in Section 2.03 to the Purchase Agreement. "ADDITIONAL FUND" means any additional Portfolio of an existing Company or of an Investment Company which does not currently constitute a "Company": (i) which shall have in full force and effect a distribution plan, investment advisory agreement, distribution agreement, principal shareholder servicer's agreement and shareholder servicer's agreement, the terms of which are either substantially identical to the Distribution Plans, Advisory Agreements, Distribution Agreements, Principal Shareholder Servicer's Agreements and Shareholder Servicer's Agreements in effect on the date of the Purchase Agreement or are in form, scope and substance reasonably satisfactory to the Program Agent; (ii) with respect to which the Distributor shall act as the principal distributor and principal shareholder servicer, the Shareholder Servicer shall act as shareholder servicer and an Advisor shall act as investment adviser; (iii) the fundamental investment objectives of which shall be in compliance with all Applicable Law and shall be substantially comparable to the Fundamental Investment Objectives in respect of Shares of any Fund listed on Schedule IV hereto, including without limitation in respect of the risks associated with such fundamental investment objectives, and to the extent not substantially comparable, which shall be reasonably satisfactory to the Program Agent; (iv) with respect to which the Distributor shall be entitled to receive Asset Based Sales Charges, Shareholder Servicing Fees and CDSCs on terms which are either identical to the arrangements for the Funds in effect on the date of the Purchase Agreement or are reasonably satisfactory to the Program Agent; (v) as to which there exists no understanding between any Federated Entity on the one hand and such Additional Fund or the board of trustees or directors thereof on the other hand, which if implemented would cause such Additional Fund to fail to meet any of the above requirements or would cause the Receivables relating to such Fund to fail to qualify as Eligible Receivables; and (vi) the Receivables relating thereto will be conveyed to the Transferor by the Distributor under and in accordance with the Distributor's Transfer Agreement and by the Transferor to the Seller under and in accordance with the Transfer Agreement. "ADVERSE CLAIM" means any Lien of any Person, other than any Lien of or any Lien created by the Purchaser, the Program Agent, any Master Trust or any of their respective successors or assigns. "ADVISOR" means each of Passport Research, Ltd., Federated Global ------- Investment Management Corp. and Federated Investment Management Company in their capacities as investment advisors and managers of the companies included in the Program, and any other Federated Entity which is a permitted successor or assignee of any of them in such capacities. "ADVISORY AGREEMENT" means with respect to any Fund, the investment advisory agreement between the applicable Advisor and such Fund (or if such Fund constitutes a Portfolio, the related Company in respect of such Fund) and any replacement agreement as may be adopted in the future, pursuant to which such Advisor may receive advisory or management fees relating to such Fund. "AFFILIATE" of a referenced Person means (a) another Person controlling, controlled by or under common control with such referenced Person, (b) any other Person beneficially owning or controlling ten percent (10%) or more of the outstanding voting securities or rights of or the interest in the capital, distributions or profits of the referenced Person, or (c) any officer (exclusive of a "ministerial officer" with no authority to bind a Person) or director of, or partner in, the referenced Person; PROVIDED, HOWEVER, that with respect to the Seller, the Distributor, the Transferor or the Parent, the term "Affiliate" shall not include any Fund, any Company. The terms "control," "controlling," "controlled" and the like shall mean the direct or indirect possession of the power to direct or cause the direction of the management or policies of a Person or the disposition of its assets or properties, whether through ownership, by contract, arrangement or understanding, or otherwise. "ALLOCATION PROCEDURES" means the procedures set forth as Schedule X to the Collection Agency Agreement. "AMORTIZED MAXIMUM AGGREGATE SALES CHARGE ALLOWABLE" means with respect to the Receivables relating to any Shares of any Fund as of any date of determination, (i) an amount equal to the Maximum Aggregate Sales Charge Allowable payable in respect of such Receivables, minus (ii) the aggregate amounts previously paid by such Fund (or if such Fund constitutes a Portfolio, by the related Company in respect of such Fund) and the holders of such Shares relating thereto. "ANCILLARY RIGHTS" means all of the Seller's, the Transferor's and the Distributor's rights, remedies, title and interests in, to and under (i) the Distributor's Transfer Agreement, the Transferor's Transfer Agreement and the other Program Documents (to the extent of representations, warranties, covenants and other rights and remedies thereunder with respect to the Purchased Receivables), including the right to receive payments pursuant thereto, (ii) all UCC financing statements covering any of the foregoing, (iii) all proceeds thereof, and (iv) all other rights the Seller, the Transferor or the Distributor, as the case may be, may have in respect of the foregoing under Applicable Law, in each case as they relate to the Purchased Receivables. "APPLICABLE LAW" means any Law of any Authority, whether domestic or foreign, including, without limitation, all federal and state banking or securities laws, to which the Person in question is subject or by which it or any of its property is bound. "ASSET BASED SALES CHARGES" means the fees payable by a Fund (or if such Fund constitutes a Portfolio by the related Company in respect of such Fund) pursuant to the related Distribution Plan and Distribution Agreement in consideration of the distribution of its Shares, excluding the Shareholder Servicing Fee. "AUTHORITY" means any governmental or quasi-governmental authority (including the NASD, the stock exchanges and the SEC), whether executive, legislative, judicial, administrative or other, or any combination thereof, including, without limitation, any federal, state, local government or governmental or quasi-governmental agency, arbitrator, board, body, branch, bureau, commission, corporation, court, department, instrumentality or other political unit or subdivision or other entity of any of the foregoing, whether domestic or foreign. "BANKRUPTCY CODE" means the United States Bankruptcy Code of 1978, as amended from time to time or any similar legislation of the United States enacted in substitution or replacement thereof. "BANKRUPTCY REMOTE COVENANTS" means the covenants set forth in Schedule VI hereto. "BANKRUPTCY REMOTE ENTITY" means a special purpose entity formed under the laws of one of the states of the United States or the District of Columbia which is organized and operated in a manner designed to insulate it from the risk of becoming the subject of reorganization or liquidation under the Bankruptcy Code and that satisfies substantially all of the published criteria of S&P relating to special purpose, bankruptcy remote entities. "BASE RATE" means a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times be equal to the higher of: (a) the Prime Rate; and (b) 1/2 of one percent per annum above the Federal Funds Rate. "BOARD OF TRUSTEES" shall mean (i) in respect of any Fund relating to a Company that constitutes a trust, the board of trustees of such Fund, and (ii) in respect of any Fund relating to a Company that constitutes a corporation or limited liability company, the board of directors of such Fund. "BUSINESS DAY" means any day on which banks are not authorized or required to close in New York City or Pittsburgh, Pennsylvania. "CALCULATION DATE" means the last day of each calendar month. "CDSC" means with respect to any Fund, the contingent deferred sales charges, or other similar charges howsoever denominated, payable, either directly or by withholding from the proceeds of the redemption of the Shares of such Fund, by the shareholders of such Fund, on any redemption of Shares relating to such Fund in accordance with the Distribution Agreement and the Prospectus relating to such Fund. "CITIBANK" means Citibank, N.A. "CODE" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and the rulings issued thereunder. "COLLECTION ACCOUNT" shall have the meaning assigned to the term "Program Collection Account" in Section 4.01 of the Collection Agency Agreement. "COLLECTION AGENCY AGREEMENT" means the Amended and Restated Federated Investors Program Funding and Collection Agency Agreement, dated as of December 21, 2000 among the Purchaser, the Program Agent, the Seller, the Transferor, the Distributor, the Collection Agent, the Other Agent and the Other Purchasers, as the same may from time to time be amended, supplemented, waived or modified. "COLLECTION AGENT" means Bankers Trust Company, as collection agent under the Collection Agency Agreement and as funding agent under the Funding Agreement, together with its permitted successors and assigns. "COLLECTIONS" means (i) all amounts paid or payable by each Fund (or in respect of each Fund which constitutes a Portfolio, by each Company in respect of each related Fund) in respect of the Purchased Receivables relating to such Fund and by each shareholder of such Fund in respect of the Purchased Receivables relating to such Fund (including all CDSCs in respect of Purchased Receivables payable by such shareholders and withheld from redemption proceeds payable to such shareholders by such Fund); (ii) all FOF Collections in respect of Purchased Receivables, and (iii) all Proceeds of the foregoing. "COMMISSION SHARE" means, in respect of any Fund, each Share of such Fund which is issued under circumstances which would normally give rise to an obligation of the holder of such Share to pay a CDSC upon redemption of such Share, including any Share of such Fund issued in connection with a Permitted Free Exchange, and any such Share shall not cease to be a Commission Share prior to the redemption (including a redemption in connection with a Permitted Free Exchange) or conversion even though the obligation to pay the CDSC shall have expired or conditions for waivers thereof shall exist. "COMPANY" means each of the Investment Companies specified on Schedule I to the Purchase Agreement under the heading "Companies," which maintain one or more Portfolios which constitute Funds, as the same may be supplemented pursuant to Section 2.03 to the Purchase Agreement. "CONDUCT RULES" means the Conduct Rules of the NASD, as amended, and the rules, regulations and interpretations (including examples and explanations) of the NASD in respect thereto, as the same may from time to time be amended or modified. "CONTROL" shall have the meaning assigned to such term in Section 2(a)(9) of the Investment Company Act. "CONVERSION FEATURE" means with respect to any Share of any Fund, a mandatory or elective provision (including, without limitation, a provision which permits or requires such Share to be converted into a share of a different class) which may result in a reduction or termination of any amount owing from such Fund (or the related Company in respect of such Fund) or the shareholder in respect of the Receivables relating to such Share (or the Share obtained by virtue of the conversion of such Share) at some point in the future. "CORPORATE TRUST OFFICE" shall mean the principal office of Bankers Trust Company at which, at any particular time, its corporate trust business shall be administered, which office at the date of the execution of the Program Documents is located at Four Albany Street, New York, New York 10006, Attention: Corporate Trust and Agency Group-Structured Finance or at any other time at such other address as Bankers Trust Company may designate from time to time. "DATE OF ORIGINAL ISSUANCE" means in respect of any Commission Share, the date with reference to which the amount of the CDSC payable on redemption thereof, if any, is computed. "DEBT" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, (iv) all obligations of such Person as lessee under leases or other agreements which have been or should be included in determining total liabilities in accordance with GAAP, and (v) all Secured or Guaranteed Debt. "DEMAND DEPOSIT ACCOUNT" shall have the meaning assigned to the term Program Demand Deposit Account in Section 4.01 of the Collection Agency Agreement. "DEPOSITED FUNDS" means all funds at any time and from time to time on deposit in or otherwise to the credit of the Collection Account. "DISTRIBUTION AGREEMENT" means with respect to any Shares of any Fund, the agreement between the Distributor and such Fund (or with respect to any Fund which constitutes a Portfolio, the related Company in respect of such Fund) in respect of such Shares of such Fund and any replacement agreement as may be adopted in the future, pursuant to which the Distributor has been appointed the principal underwriter in respect of such Fund. "DISTRIBUTION PLAN" means with respect to any Shares of any Fund, the distribution plan of the related Fund (or with respect to any Fund which constitutes a Portfolio, the related Company in respect of such Fund) in respect thereto, pursuant to which such Shares of such Fund are distributed, and any replacement plan as may be adopted in the future. "DISTRIBUTOR" means Federated Securities Corp., together with its ----------- permitted successors and assigns. "DISTRIBUTOR'S TRANSFER AGREEMENT" means the Distributor's Transfer Agreement dated as of December 21, 2000 between the Distributor and the Transferor, as the same may be amended, supplemented, waived or modified as permitted by this Agreement. "DOLLARS" and "$" mean lawful money of the United States of America. "ELIGIBLE RECEIVABLE" means a Receivable: (a) which represents an obligation of a United States Person which is not an Authority; PROVIDED, THAT, the fact that holder of not more than ten percent (10%) of the outstanding Shares (other than Omnibus Shares) of all Funds does not meet such condition will not in itself cause such Receivables to not constitute an Eligible Receivable; (b) which constitutes an "account" or "general intangible," as such terms are defined in the UCC of all jurisdictions the laws of which are applicable for determining whether the interests created by the Program Documents are perfected; (c) which is denominated and payable in Dollars; (d) which constitutes a legal, valid and binding contractual obligation of the obligor thereof which is fully vested, not executory and is not subject to a dispute, offset, counterclaim, defense or Adverse Claim whatsoever, (e) in respect of the related Shares, each of the conditions set forth in the Principal Shareholder Servicer's Agreement and Shareholder Servicer's Agreement which are necessary so that the Principal Shareholder Servicer's entitlement to the Shareholder Servicing Fee in respect of the related Shares is deemed to be fully earned as of the issuance thereof and to render the applicable Fund's obligation to pay the Shareholder Servicing Fee in respect thereof absolute and unconditional and so that it shall not be subject to dispute, offset, counterclaim or any defense whatsoever (except in connection with a Complete Termination, as defined in the Principal Shareholder Servicer's Agreement) have been met; (f) which does not contravene any Applicable Law; (g) with respect to which the related Share does not have a Conversion Feature other than a Permitted Conversion Feature or a Redemption Feature other than a Permitted Redemption Feature; (h) which, in respect of Asset Based Sales Charges, requires the payment thereof at the Maximum Sales Charge Allowable; (i) which, in respect of CDSCs, requires the payment thereof at the rate set forth on Schedule II to the Purchase Agreement; (j) which, in respect of Shareholder Servicing Fees, requires the payment thereof at the Maximum Service Fee Allowable; and (k) which is freely transferable. "E-MAIL INVESTOR REPORT" shall have the meaning specified in Section 3.01(b) of the Servicing Agreement. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to ERISA are to ERISA, as in effect on the date of this Agreement and, as of the relevant date, any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor. "ERISA AFFILIATE" means any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which a Person is a member and (ii) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in section 414(m) or (o) of the Code of which such Person is a member. "EVENT OF TERMINATION" shall have the meaning specified in Section 6.01 to the Purchase Agreement. "EXCEL SPREADSHEET" shall have the meaning assigned to such term in the Collection Agency Agreement. "EXCHANGE ACT" means the Securities Exchange Act of 1934, and the rules and regulations of the SEC thereunder, all as from time to time in effect, or any successor law, rules or regulations, and any reference to any statutory or regulatory provision shall be deemed to be a reference to any successor statutory or regulatory provision. "EXCHANGE SHARE" means, in respect of any Fund, Shares of such Fund that were issued in a Permitted Free Exchange of Shares of any other Fund. "FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Citibank from three Federal funds brokers of recognized standing selected by it. "FEDERATED ENTITY" means each of the Parent, the Seller, the Transferor, the Distributor (as Distributor, Principal Shareholder Servicer and Servicer), the Shareholder Servicer, each Advisor and each Transfer Agent and each Sub-transfer Agent which is an Affiliate of any thereof. "FOF COLLECTIONS" means in respect of any Fund, all servicing fees received by the Principal Shareholder Servicer which reduce the Shareholder Servicing Fee payable by such Fund in accordance with Section 2 of Exhibit 1 to the Principal Shareholder Servicer's Agreement. "FOF FUNDS" means a Fund acting as a fund-of-funds. "FREE REDEMPTIONS" means a redemption of Shares of any Fund (other than Reinvested Shares of such Fund) by a shareholder of such Fund under any arrangement which relieves or defers, in whole or in part, such shareholder's obligation to pay the maximum CDSC which would have been payable in the absence of such arrangement by any other shareholder of such Fund redeeming a Share of such Fund that had been held by such other shareholder for the same period the Shares of such Fund had been held by the shareholder in question, including (i) arrangements pursuant to which certain Persons are entitled to acquire Shares of such Fund under circumstances in which no CDSC will be payable by them, and (ii) arrangements pursuant to which CDSCs are deferred in connection with the redemption of Shares of such Fund because the redeeming shareholder is reinvesting all or a portion of the proceeds of such redemption in shares of another fund; PROVIDED, HOWEVER, that the term "Free Redemptions" shall not include any Permitted Free Exchanges. "FREE SHARE" means, in respect of any Fund, each Share of such Fund other than a Commission Share, including, without limitation, any Reinvested Share. "FUND" means each Investment Company or Portfolio specified on Schedule I to the Purchase Agreement under the heading "Fund," as the same may be supplemented pursuant to Section 2.03 of the Purchase Agreement. "FUNDAMENTAL INVESTMENT OBJECTIVES" means, with respect to any Fund, the fundamental investment objectives of such Fund specified on Schedule IV to the Purchase Agreement, as the same may be amended, supplemented or replaced with the prior written consent of the Program Agent. "FUNDING AGREEMENT" means the Funding Agreement dated as of December 21, 2000 among the Seller, the Transferor, the Purchaser, the Program Agent and the Collection Agent, as the same may from time to time be amended, supplemented, waived or modified. "GAAP" means generally accepted accounting principles in the United States, in effect from time to time, consistently applied. "GOVERNMENTAL AUTHORIZATIONS" means all franchises, permits, licenses, approvals, consents and other authorizations of any kind of Authorities. "GOVERNMENTAL FILINGS" means all filings, including franchise and similar tax filings, and the payment of all fees, assessments, interests and penalties associated with such filings with all Authorities. "GUARANTEE" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); PROVIDED, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "INDEMNIFIED PARTY" shall have the meaning assigned to such term in Section 9.04(b) of the Purchase Agreement. "INITIAL PURCHASER" means Wilmington Trust Company, as owner trustee of PLT Finance Trust 1997-1. "INVESTMENT ADVISERS ACT" means the Investment Advisers Act of 1940, as amended, and the rules and regulations of the SEC thereunder, all as from time to time in effect, or any successor law, rules or regulations, and any reference to any statutory or regulatory provision shall be deemed to be a reference to any successor statutory or regulatory provision. "INVESTMENT COMPANY" means any entity registered as a separate investment company under the Investment Company Act. "INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as amended, and the rules and regulations of the SEC thereunder, all as from time to time in effect, or any successor law, rules or regulations, and any reference to any statutory or regulatory provision shall be deemed to be a reference to any successor statutory or regulatory provision. "INVESTOR REPORT" means a report in substantially the form of Exhibit B to the Collection Agency Agreement. "IRREVOCABLE PAYMENT INSTRUCTION" means in respect of any Fund, the irrevocable payment instruction in effect in respect of such Fund and its Transfer Agent, in the form of Exhibit A to the Collection Agency Agreement, as the same may be amended or supplemented as contemplated thereby and hereby. "LAW" means any (a) judicial, executive, legislative, administrative or other decree, directive, enactment, finding, guideline, law, injunction, interpretation, judgment, order, ordinance, policy statement, proclamation, promulgation, regulation, requirement, rule, rule of public policy, settlement agreement, statute, or writ, of any Authority, whether domestic or foreign, and whether or not having the force of law, or any particular section, part or provision thereof, (b) common law or other legal or quasi-legal precedent, or (c) arbitrator's, mediator's or referee's decision, finding, award or recommendation. "LIEN" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien or security interest (statutory or other), or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the UCC or comparable law of any jurisdiction), or other charge or encumbrance, including the retained security title of a conditional vendor or lessor. "LIQUIDATION PLAN" means with respect to any Company or any Fund, a plan of liquidation, a plan to dispose of a substantial portion of its assets out of the ordinary course of business (except in connection with a Permitted Merger) or any other plan of action with similar effect. "MASTER SERVICER" means Citicorp North America, Inc., in its capacity --------------- as master servicer for the Master Trusts, together with its successors and assigns. "MASTER TRUST" means any trust or other special purpose entity to which any interest in any of the Purchased Receivables relating to any Fund or the right to receive any Collections with respect thereto has been transferred in connection with a Take-out Transaction. "MATERIAL ADVERSE EFFECT" means (i) any occurrence of, or any increase in, any Adverse Claim on the Purchased Receivables or the Collections, (ii) any adverse effect upon the status of any transfer of any Receivables under the Program Documents as a True Sale, (iii) any material adverse effect upon the Seller's, the Transferor's, the Distributor's, the Parent's, the Shareholder Servicer's, any Advisor's, any Company's, any Fund's, any Selling Agent's or any Transfer Agent's ability to pay or fully perform any of its respective obligations under any Program Document in a timely manner, (iv) any material adverse effect upon the assets, operations, business or financial condition of any Company, any Fund or the Parent and its consolidated subsidiaries, taken as a whole, (v) any adverse effect on the status of the Receivables as Eligible Receivables, (vi) any adverse effect on the amount of or timing of any payment of any Collections or Related Collections, (vii) any adverse effect on the timely receipt by the Collection Agent of any Collections or Related Collections in accordance with the terms of any Irrevocable Payment Instruction or any other Program Document, (viii) any adverse effect on the Purchaser's right, title or interest in the Purchased Receivables, the Collections or Ancillary Rights in respect thereof, the Demand Deposit Account or the Collection Account, (ix) any occurrence of, or any increase in, any claims, damages, losses, liabilities, expenses, obligations, penalties, or disbursements of any kind or nature of the Purchaser or the Program Agent arising out of the transactions contemplated by the Program Documents, or (x) any material adverse effect on any of the other rights or remedies of the Purchaser or the Program Agent under the Program Documents. "MAXIMUM AGGREGATE SALES CHARGE ALLOWABLE" means, at any time with respect to any Fund, the maximum aggregate Asset Based Sales Charges which may be paid by such Fund (or if such Fund constitutes a Portfolio, by the related Company in respect of such Fund) in respect of Shares of such Fund pursuant to the Distribution Agreement, the Distribution Plan and the Prospectus relating to such Fund, together with interest thereon at the Maximum Interest Allowable, relating to such Shares and pursuant to the "maximum sales charge rule" set forth in the Conduct Rules, assuming such Fund pays a separate Service Fee in connection with such Shares, unreduced by payments previously made in respect thereof by such Fund (or if such Fund constitutes a Portfolio, by the related Company in respect of such Fund). "MAXIMUM INTEREST ALLOWABLE" means the maximum interest which may be taken into account under Rule 2830(d) of the Conduct Rules in computing the Maximum Aggregate Sales Charge Allowable. "MAXIMUM SALES CHARGE ALLOWABLE" means with respect to any Fund, the maximum Asset Based Sales Charge which may be paid by the related Fund (or if such Fund constitutes a Portfolio, by the related Company in respect of such Fund) at any time under the Conduct Rules, including the annual limit and the limit on the Maximum Aggregate Sales Charge Allowable. "MAXIMUM SERVICE FEE ALLOWABLE" means with respect to any Fund, the maximum Service Fee which may be paid by such Fund (or if such Fund constitutes a Portfolio, by the related Company in respect of such Fund) in respect of Shares of such Fund under the Conduct Rules. "MONTHLY COLLECTION DETERMINATION DATE" means the twenty ninth (29th) calendar day of each calendar month, or if such day is not a Business Day, the next succeeding Business Day; PROVIDED, HOWEVER, that if there is no such day in such calendar month, the Monthly Collection Determination Date shall occur on the first Business Day of the immediately following calendar month. "MONTHLY COLLECTION DETERMINATION DATE STATEMENT" shall have the meaning assigned to such term in Section 4.03(d) of the Collection Agency Agreement. "MONTHLY SETTLEMENT DATE" means the Business Day next succeeding each Monthly Collection Determination Date. "MOODY'S" means Moody's Investors Service, Inc., together with its ------- successors and assigns. "MULTIEMPLOYER PLAN" means a multiemployer plan defined as such in Section 3(37) or 4001(a)(3) of ERISA to which contributions have been, or were required to have been, made by a Person or any ERISA Affiliate, or under which such Person or any ERISA Affiliate may incur any Liability. "NASD" means both the National Association of Securities Dealers, ---- Inc. and NASD Regulation, Inc., or any successor entity. "NET ASSET VALUE" means, (i) with respect to any Fund, as of the date any determination thereof is made, the net asset value of such Fund computed in the manner such value is required to be computed by such Fund (or if such Fund constitutes a Portfolio, by the related Company in respect of such Fund) in its reports to its shareholders, and (ii) with respect to any Share of such Fund as of any date, the quotient obtained by dividing: (A) the net asset value of such Fund (as computed in accordance with clause (i) above) allocated to Shares of such Fund (in accordance with the Distribution Plan and Prospectus) as of such date, by (B) the number of Shares of such Fund outstanding on such date. "NON-OMNIBUS SHARES" means, in respect of any Fund, all Shares of such Fund other than Omnibus Shares. "NORMAL DISTRIBUTIONS" means, in respect of any Fund, distributions out of (a) "investment company taxable income", (b) "exempt-interest dividends" and (c) "capital gain dividends," of such Fund, in each case, (i) as such terms are used in Section 852 of the Code and (ii) to the extent required to be distributed by such Fund (or if such Fund constitutes a Portfolio, by the related Company in respect of such Fund) in accordance with Section 852 or Section 4982 of the Code in order to avoid taxation at the entity level, and (iii) to the extent the gains giving rise to the distributions requirement described in clause (ii) arose in the ordinary course of such Fund's investment activities (including shifts in the proportion of assets held in cash or cash equivalents) and in accordance with such Fund's Fundamental Investment Objectives as the same may be amended, supplemented or replaced in accordance with the Program Documents (it being understood that this clause (iii) includes gains resulting from sales to raise funds to satisfy shareholder redemption requests made in the ordinary course of business). "OMNIBUS ACCOUNT" means, in respect of any Fund, any account maintained by the Transfer Agent reflecting the record ownership of Shares of such Fund by a Person who maintains sub-transfer records reflecting the actual beneficial ownership of such Shares in other Persons. "OMNIBUS SHARES" means, in respect of any Fund, the Shares of such Fund held in the name of a broker-dealer street account on the records maintained by the Transfer Agent and for which account such broker-dealer provides sub-transfer agency services for such Fund. "OTHER AGENT" means Putnam, Lovell Securities Inc. ----------- "OTHER PURCHASERS" means the Initial Purchaser and the Revolving ---------------- Purchaser. "OTHER PURCHASERS' END DATE" means September 30, 2000. -------------------------- "OTHER PURCHASERS' PROGRAM DOCUMENTS" means the Master Agreement as defined in the Collection Agency Agreement and the agreements and documents entered into in connection therewith. "PARENT" means Federated Investors, Inc., a Pennsylvania corporation, ------ together with its permitted successors and assigns. "PERMITTED CONVERSION FEATURE" means with respect to any Share of any Fund, a Conversion Feature in respect of such Fund which, by its terms, may not become effective prior to the calendar month following the calendar month in which falls the eighth (8th) year anniversary of the issuance of such Share or, if such Share constitutes an Exchange Share, of the Share from which such Exchange Share derives; PROVIDED, that the amount of Free Shares of any holder relating to any Fund shall convert in proportion to the number of Commission Shares of that holder in such Fund being converted on such date. "PERMITTED DESIGNEE" means any Person designated by the Program Agent which may be (a) the Program Agent, or any Affiliate of Citibank or the Program Agent, or (b) any other Person designated by the Program Agent which has agreed to be bound by confidentiality undertakings in substance comparable to Section 9.10 to the Purchase Agreement. "PERMITTED FREE EXCHANGE" means any exchange of Shares of one Fund (the "Redeeming Fund") for Exchange Shares of another Fund (the "Issuing Fund"), where, pursuant to the applicable constituent documents of the Issuing Fund: (i) Exchange Shares of the Issuing Fund are deemed for all purposes (including the computation of the amount of, and timing of payment of the related CDSC) to have been acquired at the time when the exchanged Shares of the Redeeming Fund were acquired (or deemed to have been acquired) by the holder thereof; (ii) the exchanging shareholder becomes obligated to pay to the Issuing Fund the same CDSC in respect of the Exchange Shares of the Issuing Fund and on the same terms as such holder was obligated to pay to the Redeeming Fund in respect of the Shares of the Redeeming Fund so exchanged; (iii) the date upon which such Exchange Shares of the Issuing Fund received in the Exchange are converted pursuant to the Permitted Conversion Feature is the same as the date the exchanged Shares of the Redeeming Fund were to be converted pursuant to the Permitted Conversion Feature of the exchanged Shares; (iv) the Maximum Aggregate Sales Charge Allowable in respect of the Issuing Fund pursuant to the Distribution Agreement, the Distribution Plan and the Prospectus of the Issuing Fund is increased on the effective date of the exchange by a percentage of the Net Asset Value on such exchange date of the Shares of the Redeeming Fund being so exchanged determined in accordance with Schedule III to the Purchase Agreement with reference to the number of calendar months which have passed since the Date of Original Issuance of the Shares of the Redeeming Fund redeemed in connection with such exchange; PROVIDED, that the amount of such increase shall not exceed the Amortized Maximum Aggregate Sales Charge Allowable of the Redeeming Fund immediately prior to the exchange; (v) the Amortized Maximum Aggregate Sales Charge Allowable in respect of the Redeeming Fund is reduced by the same amount as the Maximum Aggregate Sales Charge Allowable in respect of such Issuing Fund is increased; and (vi) both the redemption of the Shares of the Redeeming Fund so exchanged and the issuance of the Shares of the Issuing Fund are effected at the Net Asset Value of such Shares at the date of the exchange without any reduction for fees or expenses attributable to such exchange. "PERMITTED MERGER" means a merger or consolidation of two or more Funds: (i) pursuant to which all of the assets of the participating Funds are transferred to the surviving Fund, (ii) pursuant to which the surviving Fund assumes all obligations of the participating Funds, including the obligations in respect of the Purchased Receivables, (iii) which is carried out in a manner so that the Distribution Plan of each of the participating Funds is continued as part of the Distribution Plan of the surviving Fund without affecting the rights of the Distributor in respect of the Purchased Receivables relating to the participating Funds, and (iv) which could not otherwise give rise to a reasonable possibility of a Material Adverse Effect. "PERMITTED REDEMPTION FEATURE" means with respect to any class of Shares of any Fund, a Redemption Feature which, by its terms, requires that Shares owned of record for any Shareholder's account be redeemed in the following order: FIRST, Free Shares of such class owned of record for such Shareholder account to the extent thereof in the same order as the Date of Original Issuance thereof occurred (it being understood that under no circumstance shall the redemption of a Free Share include the appreciation on Commission Shares above the original Net Asset Value of such Commission Shares at the Date of Original Issuance thereof); and SECOND, each Commission Share of such class owned of record for such Shareholder account in the same order as the Date of Original Issuance thereof occurred (it being understood that the redemption of each individual Commission Share will include all the appreciation on such Commission Share above the original Net Asset Value of such Commission Share at the Date of Original Issuance thereof). "PERSON" means an individual or a corporation (including a business trust), partnership, limited liability company, trust, incorporated or unincorporated association, cooperative, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "PLAN" means an employee benefit plan or other benefit plan as defined in Section 3(3) of ERISA established or maintained by a Person or any ERISA Affiliate during the five-year period ended immediately prior to the Purchase Date or to which such Person or any ERISA Affiliate makes, is obligated to make or has, within the five-year period ended immediately prior to the Purchase Date, been required to make contributions or under which such Person or any ERISA Affiliate may incur any liability or which covers any employee or former employee of such Person or any ERISA Affiliate other than a Multiemployer Plan. "PLT DISTRIBUTOR'S TRANSFER AGREEMENT" means the Federated Investors Program Transferor's Transfer Agreement, dated as of October 24, 1997, between the Seller and the Distributor, as amended, supplemented, waived or modified. "PLT TRANSFEROR'S TRANSFER AGREEMENT" means the Federated Investors Seller's Transfer Agreement dated as of October 24, 1997 between the Seller and Federated Funding 1997-1, Inc., as amended and supplemented. "PORTFOLIO" means a separate investment portfolio or series of an Investment Company which is itself not an Investment Company. "POST-DEFAULT RATE" means in respect of any amount not paid when due, a rate per annum during the period commencing on the due date thereof until such amount is paid in full equal to the Base Rate as in effect from time to time plus two percent (2%). "PRIME RATE" means the rate of interest from time to time announced by Citibank at its Principal Office as its prime commercial lending rate. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. "PRINCIPAL OFFICE" means the principal office of Citibank presently located at 399 Park Avenue, New York, New York. "PRINCIPAL SHAREHOLDER SERVICER" shall mean, in respect of any Fund, the Distributor, in its capacity as principal shareholder servicer in respect of such Fund. "PRINCIPAL SHAREHOLDER SERVICER'S AGREEMENT" means, in respect of any Fund, the agreement between the Principal Shareholder Servicer and such Fund (or if such Fund constitutes a Portfolio, the related Company in respect of such Fund) pursuant to which the Principal Shareholder Servicer agrees to act in such capacity in respect of Shares of such Fund, and any replacement agreement pursuant to which the Principal Shareholder Servicer has been appointed principal shareholder servicer in respect of Shares of such Fund. "PRIVATE AUTHORIZATIONS" means all franchises, permits, licenses, approvals, consents and other authorizations of all Persons (other than Authorities) including, without limitation, those with respect to trademarks, service marks, trade names, copyrights, computer software programs, and technical and other know-how. "PROCEEDS" shall have, with reference to any property or asset, the meaning assigned to such term under the UCC and, in any event, shall include, but not be limited to, whatever is received upon the sale, exchange, collection or other disposition of such property or asset and any and all amounts from time to time paid or payable under or in connection with such property or asset. "PROGRAM AGENT" means Citicorp North America, Inc., as agent for the ------------- Purchaser, together with its successors and assigns. "PROGRAM DOCUMENTS" means the Purchase Agreement, the Servicing Agreement, the Collection Agency Agreement, the Funding Agreement, the Distributor's Transfer Agreement, the Transferor's Transfer Agreement, the Purchase Rate Letter, each Selling Agent's Agreement, each Distribution Agreement, each Prospectus, each Advisory Agreement, each Distribution Plan, each Irrevocable Payment Instruction, each Shareholder Servicer's Agreement, each Principal Shareholder Servicer's Agreement and each Transfer Agent's Agreement, and all exhibits, schedules and annexes thereto. "PROGRAM TERMINATION DATE" means the date upon which the Purchaser shall no longer be entitled to any future Collections in respect of any Purchased Receivables and all amounts owing to the Purchaser and the Program Agent under the Program Documents have been paid in full; PROVIDED, HOWEVEr, that if any amount paid to the Purchaser or the Program Agent under any Program Document is later required to be disgorged in connection with any proceeding under the Bankruptcy Code, the Program Termination Date shall be deemed not to have occurred. "PROPRIETARY INFORMATION" shall have the meaning assigned to such term in Section 9.10(b) of the Purchase Agreement. "PROSPECTUS" means with respect to any Fund the prospectus filed with the SEC as a part of such Fund's registration statement on Form N-1A, as amended (or any successor SEC form), and shall include, without limitation, the related statement of additional information included in such registration statement. "PURCHASE AGREEMENT" means the Purchase and Sale Agreement dated as of December 21, 2000 among the Purchaser, the Program Agent, the Seller, the Transferor, the Distributor and the Parent, as the same may from time to time be amended, supplemented, waived or modified. "PURCHASE DATE" means with respect to the Receivables relating to any Fund, each purchase date set forth in the Purchase Notice. In the event that a Purchase Date shall fall upon a day which is not a Business Day, the Purchase Date shall be the Business Day next following the date on which the Purchase Date would otherwise have occurred. "PURCHASE LIMIT" means $150,000,000, or such other amount as shall be agreed to in writing by the Purchaser, the Program Agent and the Seller; provided, FURTHER, that on and after the Termination Date, the Purchase Limit shall be deemed to be zero for all purposes of this Agreement. "PURCHASE NOTICE" means the notice substantially in the form of Exhibit A to the Purchase Agreement. "PURCHASE PRICE" means with respect to the Receivables relating to any Fund to be purchased on any Purchase Date, an amount equal to the product of (A) the Purchase Price Percentage relating to such Fund, and (B) the total issue price of the Shares of such Fund sold on or prior to the Sale Cut-off Date for the Receivables relating to such Fund set forth in the relevant Purchase Notice and after (i) in respect of the initial Purchase Date for such Receivables, the Other Purchasers' End Date, and (ii) in respect of any Purchase Date after the initial Purchase Date of such Receivables, the immediately preceding Sale Cut-off Date for the Receivables relating to such Fund; PROVIDED, HOWEVER, that in the event that the Seller has received any amount in respect of the Sales Charges relating to any Receivables proposed to be purchased hereunder, the Purchase Price for such Receivables shall be adjusted as agreed to by the Program Agent and the Seller in order to reflect the reduced amount payable to the Purchaser in respect of such Receivables and notwithstanding anything in this Agreement to the contrary the Purchaser shall have no obligation to purchase any such Receivables under this Agreement until such reduced Purchase Price has been so agreed upon. "PURCHASE PRICE PERCENTAGE" means, with respect to the Receivables relating to any Fund, the percentage set forth in the Purchase Rate Letter. "PURCHASE RATE LETTER" means that certain Purchase Rate Letter dated as of December 21, 2000 among the Seller, the Purchaser, and the Program Agent, as the same may from time to time be amended, supplemented or modified. "PURCHASED RECEIVABLES" means, with respect to any Fund, as of any date, the Receivables required to be allocated to the Purchaser in respect of the Shares of such Fund in accordance with the Allocation Procedures, together with the Collections and Ancillary Rights with respect thereto, which is intended to include all Asset Based Sales Charges, CDSCs and Shareholder Servicing Fees payable by or in respect of such Fund arising out of the Shares attributed to the Purchaser and all shareholder servicing fees payable by any fund arising out of Class A shares of such fund acquired by FOF Funds with the proceeds of Shares attributed to the Purchaser. "PURCHASER" means Citibank, together with its successors and assigns. "PURCHASER'S ASSUMED YIELD" means as of the date of any determination, an amount (computed on a daily average basis on the basis of actual days elapsed in a year of 365 days) equal to the Purchaser's Assumed Yield Rate on an amount equal to the aggregate Purchase Prices paid by the Purchaser under the Purchase Agreement in respect of all Purchased Receivables, less the portion of the aggregate amounts of Asset Based Sales Charges and CDSCs relating to Shares of the Fund which have been allocated to the Purchaser in accordance with the Allocation Procedures and distributed to the Purchaser under the Collection Agency Agreement on such date. "PURCHASER'S ASSUMED YIELD RATE" means a rate equal to the Prime Rate plus one percent (1%) per annum. "PURCHASER'S FUNDING ACCOUNT" shall have the meaning assigned to such term in Section 3.01 of the Funding Agreement. "PURCHASER'S REMITTANCE ACCOUNT" means the account of the Purchaser ------------------------------ maintained at Citibank, N.A. entitled the "Citibank Concentration Account", ABA No.: 021000089, Account No.: 38858117 or such other account as the Program Agent shall designate in writing to the Collection Agent. "RECEIVABLES" means with respect to each Fund, all of the rights under the related Distribution Agreement, the related Distribution Plan, the related Principal Shareholder Servicer's Agreement and the related Prospectus to receive amounts paid or payable in respect of Asset Based Sales Charges (including interest at the Maximum Interest Allowable), CDSCs and Shareholder Servicing Fees, in each case in respect of the Shares of such Fund and in respect of Shares of any other Fund acquired in any Permitted Free Exchange of Shares of the Fund in question, including, without limitation, any similar amount paid or payable under any replacement distribution agreement, distribution plan, principal shareholder servicer's agreement or prospectus, and any continuation payments in respect thereof paid or payable by such Fund (or if such Fund constitutes a Portfolio, by the related Company in respect of such Fund) in the event of a termination of the related Distribution Plan, the related Distribution Agreement, Principal Shareholder Servicer's Agreement or Prospectus, and all shareholder servicing fees payable by any fund arising out of Class A shares of such fund acquired by FOF Funds with the proceeds of Shares. "REDEMPTION FEATURE" means with respect to any Share of any Fund, the rules applied to determine the order in which Free Shares and Commission Shares owned of record for any Shareholder account are redeemed. "REINVESTED SHARE" means, in respect of any Fund, a Share which is issued by such Fund as a result of the reinvestment of dividends or other distributions, whether ordinary income, capital gain or exempt-interest dividends or other distributions, of such Fund. "RELATED COLLECTIONS" means (i) all amounts paid or payable by each Fund (or in respect of each Fund which constitutes a Portfolio, by each Company in respect of each related Fund) in respect of receivables relating to such Fund and by each shareholder of each such Fund in respect of Receivables relating to each such Fund (including all CDSCs payable by such shareholders and withheld from redemption proceeds payable to such shareholders by each Fund), (ii) all FOF Collections, and (iii) all Proceeds of the foregoing, excluding, in the case of (i), (ii) and (iii) above, all Collections. "RESPONSIBLE OFFICER" means, (i) with respect to any Person which is a corporate entity or business trust other than Bankers Trust Company, any officer or Person with like authority or employee of such Person with responsibility and authority for the matters relating to such Person's participation in the transactions contemplated by the Program Documents, including the person to whom notices to such Person are to be directed as identified pursuant to the notice provisions of any Program Documents, and (ii) with respect to Bankers Trust Company, any officer assigned to the Corporate Trust Office, including any managing director, vice president, assistant vice president, assistant treasurer, assistant secretary or any other officer of Bankers Trust Company customarily performing functions similar to those performed by any of the above designated officers and having direct responsibility for the administration of the Program Documents, and also, with respect to a particular matter, any other officer to which such matter is referred because of such officer's knowledge of and familiarity with the particular subject. "REVOLVING PURCHASER" means Putnam Lovell Finance, L.P. ------------------- "RULE 12B-1" means Rule 12b-1 adopted under the Investment Company Act, as the same may from time to time be amended, supplemented or modified. "S&P" means Standard & Poor's Corporation, together with its successors and assigns. "SALES CHARGE" shall have the meaning set forth in Section 2830 of the Conduct Rules. "SALE CUT-OFF DATE" means with respect to any Fund, the last date upon which Shares of such Fund were issued in a transaction taken into account in computing the Purchase Price paid by the Purchaser on any Purchase Date in respect of the Receivables of such Fund. "SEC" means the Securities and Exchange Commission or any other governmental authority of the United States of America at the time administering the Securities Act, the Investment Company Act or the Exchange Act. "SECURED OR GUARANTEED DEBT" of any Person means at any date, (i) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, and (ii) all Debt of others in respect of which such Person has issued a Guarantee. "SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder, all as from time to time in effect, or any successor law, rules or regulations, and any reference to any statutory or regulatory provisions shall be deemed to be a reference to any successor statutory or regulatory provision. "SELLER" means Federated Funding 1997-1, Inc., together with its ------ permitted successors and assigns. "SELLER'S REMITTANCE ACCOUNT" means the account of the Seller maintained at PNC Bank, at 2 PNC Plaza, 620 Liberty Avenue, Pittsburgh, Pennsylvania 15265, ABA No.: 043000096, Account No.: 1010937889, "For the benefit of Federated Investors Management Company" or such other account as the Seller shall designate in writing to the Purchaser, the Program Agent and the Collection Agent. "SELLING AGENT" means each Person which acts as the direct or indirect distributor, underwriter, broker, dealer or agent for the Shares of a Fund, pursuant to a Selling Agent's Agreement, together with its successors and assigns. "SELLING AGENT'S AGREEMENTS" means each agreement pursuant to which a Selling Agent undertakes to act as Selling Agent in respect of the Shares of any Fund. "SERVICE FEE" shall have the meaning set forth in Section 2830 of the Conduct Rules. "SERVICER" means Federated Securities Corp., in its capacity as -------- servicer under the Servicing Agreement, together with its permitted successors and assigns. "SERVICING AGREEMENT" means the Amended and Restated Federated Investors Program Servicer Agent Agreement dated as of December 21, 2000 among the Purchaser, the Program Agent, the Other Purchasers, the Other Agent and the Servicer, as the same may from time to time be amended, supplemented, waived or modified. "SERVICING FEE" shall have the meaning assigned to such term in Section 3.03 of the Servicing Agreement. "SERVICING PROCEDURES" means the Servicing Procedures in the form of Exhibit A to the Servicing Agreement, as the same may from time to time be amended or supplemented with the prior written consent of the Program Agent. "SHAREHOLDER" means, in respect of any Fund, a holder of Shares of such Fund. "SHAREHOLDER SERVICER" means Federated Shareholder Services Company, in its capacity as shareholder servicer for the Funds, together with its permitted successors and assigns. "SHAREHOLDER SERVICER'S AGREEMENT" means, in respect of any Fund, the agreement among such Fund (or if such Fund constitutes a Portfolio, the related Company in respect of such Fund), the Distributor and the Shareholder Servicer pursuant to which the Shareholder Servicer undertakes to act as shareholder servicer in respect of the Shares of such Fund. "SHAREHOLDER SERVICING FEE" means the fees payable by a Fund (or if such Fund constitutes a Portfolio, by the related Company in respect of such Fund) with respect to the Shares of a Fund pursuant to the Principal Shareholder Servicer's Agreement in consideration of services to holders of Shares of such Fund. "SHAREHOLDER SERVICING FEE PORTION" means in respect of the Seller, the Purchaser or the Other Purchasers, as of any date, the aggregate portion of the Deposited Funds constituting Shareholder Servicing Fees allocable to it on such date pursuant to the Allocation Procedures. "SHARES" shall mean, in respect of any Fund, the shares specified on Schedule I to the Purchase Agreement under the heading "Shares", as the same may be supplemented pursuant to Section 2.03 of the Purchase Agreement. "SIGNIFICANT AFFILIATES" means (i) any corporation or holding company or similar entity which after the date hereof owns or controls the majority of the outstanding voting securities of the Seller or the Transferor, or (ii) any Affiliate of the Seller or the Transferor which is a subsidiary of the Parent if the Parent's beneficial interest in the total assets of such subsidiary is equal to or greater than ten percent (10%) of the total assets of the Parent, and in any event shall include the Distributor, the Transferor, the Parent, the Shareholder Servicer, the Seller and the Advisors. "SIPA" means the Securities Investor Protection Act of 1970, as amended from time to time and the regulations promulgated and the rulings issued thereunder. "SUB-TRANSFER AGENT" means, in respect of any Fund, the record owner of any Omnibus Account. "SYSTEMATIC WITHDRAWAL PROGRAM" means the program permitted by the Funds whereby shareholders are allowed to withdraw up to 12% of their account balance per year free of the applicable CDSC; PROVIDED, THAT, unless the prior written consent of the Program Agent has been obtained (which consent shall not be unreasonably withheld) (i) to be eligible for such program the account of such shareholder must be at least one year old; (ii) the account of such shareholder must have a balance of at least $10,000 in order to establish a Systematic Withdrawal Program; (iii) withdrawals free of the CDSC will be limited to 12% annually; (iv) all dividends and capital gains must be reinvested; and (v) withdrawals can be scheduled monthly, quarterly or semi-annually. "TAKE-OUT ADJUSTMENT AMOUNT" means in connection with a Take-out Transaction, the amount by which the Purchaser's capacity to purchase Receivables has been increased as a result of such Take-out Transaction, as set forth in the related Take-out Notice. "TAKE-OUT NOTICE" means a notice from the Program Agent to the Seller, substantially in the form attached as Exhibit I to the Purchase Agreement, stating that the Purchaser has completed a Take-out Transaction and specifying the related Take-out Adjustment Amount. "TAKE-OUT TRANSACTION" means any transaction pursuant to which the Purchaser (including, without limitation, any Master Trust which obtains such interest directly or indirectly from the Purchaser) sells or otherwise transfers, participates or causes to be sold, transferred or participated interests in the Purchased Receivables relating to any Fund (including, without limitation, the right to receive any portion of any Collections) to any Person, including a Master Trust which sells debt instruments and/or certificates or other instruments representing ownership interests in such Master Trust or interest in any Purchased Receivables relating to any Fund (including, without limitation, any right to receive any portion of any Collections). "TERMINATION DATE" means the date which is the earlier to occur of (a) December 31, 2003 or such later date as shall be agreed to in writing by the parties hereto, and (b) the date the Purchase Agreement shall terminate pursuant to Section 6.01 thereof. "TERMINATION OF FUNDING NOTICE" means a notice substantially in the form of Exhibit A to the Funding Agreement. "TRANSFER AGENT" means, in respect of the Shares of any Fund at any time, the Person who acts at such time as the transfer agent for such Fund in respect of such Shares or any successor transfer agent for such Fund. "TRANSFER AGENT'S AGREEMENT" means each agreement pursuant to which a Transfer Agent or Sub-transfer Agent undertakes to act as transfer agent or Sub-transfer Agent in respect of a Fund. "TRANSFEREE" shall have the meaning assigned to such term in Section 9.14 of the Purchase Agreement. "TRANSFEROR" means Federated Investors Management Company, together with its permitted successors and assigns. "TRANSFEROR'S TRANSFER AGREEMENT" means the Transferor's Transfer Agreement dated as of December 21, 2000 between the Transferor and the Seller, as the same may be amended, supplemented, waived or modified as permitted by this Agreement. "TRUE SALE" means, with respect to any asset or property, the sale of an ownership interest in such asset or property (not the granting of a security interest therein), within the meaning of all Applicable Law, including, without limitation, the UCC and the Bankruptcy Code and, without limiting the generality of the foregoing, which is enforceable against all creditors of the Person making such transfer and all Affiliates of such Person in accordance with the terms of such transfer, notwithstanding the bankruptcy, insolvency or reorganization of, or similar proceeding with respect to, or the appointment of a receiver or conservator of the Person making such transfer or any Affiliate of such Person, and in connection with any proceeding under the Bankruptcy Code, in respect of which the Person making such transfer or any Affiliate of such Person is the "debtor," as such term is used in the Bankruptcy Code, the Purchased Receivables and the proceeds thereof will not be deemed the property of the debtor. "UCC" means the Uniform Commercial Code, as from time to time in effect in the applicable jurisdictions. "UNAMORTIZED AGGREGATE PURCHASE PRICE" means, in respect of the Purchased Receivables as of any date of determination, an amount equal to the aggregate Purchase Prices paid by the Purchaser under the Purchase Agreement in respect of all Purchased Receivables, less the sum of (i) the portions of the aggregate amounts of Asset Based Sales Charges, CDSCs and Shareholder Servicing Fees remitted to the Collection Account (or after the delivery of an Attachment Notice, the Purchaser's Remittance Account) relating to Purchased Receivables which have not been conveyed by the Purchaser in connection with a Take-out Transaction for which a Take-out Notice has been executed and which have been allocated and distributed to Citibank through such date of determination pursuant to the allocation procedures set forth in the documentation entered into in connection with a Take-out Transaction which exceeds the accrued and unpaid Purchaser's Assumed Yield, and (ii) the sum of each Take-out Adjustment Amount in respect of each Take-out Transaction specified in one or more Take-out Notices which have been acknowledged by the Seller and returned to the Program Agent on or prior to such date of determination. "WEIGHTED AVERAGE PERCENTAGE DECLINE IN THE NET ASSET VALUE OF SHARES OF ALL FUNDS" in reference to a period from one Calculation Date (the "Reference Date") to a later Calculation Date shall be determined by (i) determining the negative or positive percentage change in the Net Asset Value per Share which relate to Purchased Receivables of each Fund from the Reference Date to such later Calculation Date, (ii) computing the arithmetic sum of the products obtained by multiplying the percentage change obtained in clause (i) for Shares relating to Purchased Receivables of each Fund by the Net Asset Value of such Shares of such Fund on such later Calculation Date, and (iii) if the sum obtained in clause (ii) is negative dividing the sum obtained in clause (ii) by the Net Asset Value of all Shares which relate to Purchased Receivables of all Funds on such later Calculation Date and expressing the result as a negative percentage, and if the sum obtained in clause (iii) is positive the "Weighted Average Percentage Decline in the Net Asset Value of Shares of All Funds" shall be zero. 4 Schedule I LIST OF COMPANIES, FUNDS AND SHARES LIST OF INVESTMENT COMPANIES, FUNDS AND SHARES 1. FEDERATED AMERICAN LEADERS FUND, INC. Class B Shares 2. FEDERATED EQUITY FUNDS Federated Aggressive Growth Fund - Class B Shares Federated Capital Appreciation Fund - Class B Shares Federated Communications Technology Fund - Class B Shares Federated Growth Strategies Fund - Class B Shares Federated Large Cap Growth Fund - Class B Shares Federated Large Cap Tech Fund - Class B Shares Federated Market Opportunity Fund - Class B Shares Federated New Economy Fund - Class B Shares Federated Small Cap Strategies Fund - Class B Shares 3. FEDERATED EQUITY INCOME FUND, INC. Class B Shares 4. FEDERATED FIXED INCOME SECURITIES, INC. Federated Strategic Income Fund - Class B Shares 5. FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC. Class B Shares 6. FEDERATED GOVERNMENT INCOME SECURITIES, INC. Class B Shares 7. FEDERATED HIGH INCOME BOND FUND, INC. Class B Shares 8. FEDERATED INTERNATIONAL SERIES, INC. Federated International Equity Fund - Class B Shares Federated International Bond Fund - Class B Shares 9. FEDERATED INVESTMENT SERIES FUNDS, INC. Federated Bond Fund - Class B Shares 10. FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC. Class B Shares 11.FEDERATED MUNICIPAL SECURITIES FUND, INC. Class B Shares 12. FEDERATED MUNICIPAL SECURITIES INCOME TRUST Federated California Municipal Income Fund - Class B Shares Federated Pennsylvania Municipal Income Fund - Class B Shares 13. FEDERATED STOCK AND BOND FUND, INC. Class B Shares 14. FEDERATED UTILITY FUND, INC. Class B Shares 15. FEDERATED WORLD INVESTMENT SERIES, INC. Federated World Utility Fund - Class B Shares Federated Asia Pacific Growth Fund - Class B Shares Federated Emerging Markets Fund - Class B Shares Federated European Growth Fund - Class B Shares Federated Global Equity Income Fund - Class B Shares Federated Global Financial Services Fund - Class B Shares Federated International Growth Fund - Class B Shares Federated International High Income Fund - Class B Shares Federated International Small Company Fund - Class B Shares 16. MONEY MARKET OBLIGATIONS TRUST Liberty U.S. Government Money Market Trust - Class B Shares Schedule II CONTINGENT DEFERRED SALES CHARGE SCHEDULE Years from FUND SHARE PURCHASE CDSC RATE 0-1 5.50% 1-2 4.75 2-3 4.0 3-4 3.0 4-5 2.0 5-6 1.0 6+ 0.0 13620.148 #200982 Schedule III SCHEDULE OF TRANSFERABLE NASD CAP If the number of calendar months which have passed since the Date of Original Issuance of the Share of the Redeeming Fund redeemed in connection with a Permitted Free Exchange falls in a given range of calendar months indicated in Column I below, the amount by which the Maximum Aggregate Sales Charge Allowable in respect of the Issuing Fund must be increased as a result of such Free Exchange is the percentage set forth in Column II below directly opposite such range of calendar months in Column I of the date of redemption Net Asset Value of the Share of the Redeeming Fund so redeemed. I II CALENDAR MONTHS PERCENTAGE 0 to 12 5.90% 13 to 24 5.25% 25 to 36 4.60% 37 to 48 4.00% 49 to 60 3.40% 61 to 72 2.90% 73 to 84 2.50% 85 to 96 2.00% 97 or more 0% 13620.148 #200982 Schedule IV LIST OF INVESTMENT OBJECTIVES FOR CLASS B SHARES Federated American Leaders Fund, Inc. - Class B Shares Investment Objective: The investment objective of the Corporation is to seek growth of capital and of income by concentrating the area of investment decision in the securities of high-quality companies. The Corporation's investment approach is based upon the conviction that over the longer term the economy will continue to expand and develop and that this economic growth will be reflected importantly in the growth of major corporations. Federated Equity Funds Federated Aggressive Growth Fund - Class B Shares Investment Objective: The investment objective is to provide appreciation of capital. Federated Capital Appreciation Fund - Class B Shares Investment Objective: The investment objective is to provide capital appreciation. Federated Communications Technology Fund - Class B Shares Investment Objective: The investment objective is to achieve capital appreciation. Federated Growth Strategies Fund - Class B Shares Investment Objective: The investment objective is to provide appreciation of capital. Federated Kaufmann Fund - Class B Shares Investment Objective: The investment objective is to provide capital appreciation. Federated Large Cap Growth Fund - Class B Shares Investment Objective: The investment objective is to provide capital appreciation. Federated Large Cap Tech Fund - Class B Shares Investment Objective: The investment objective is to provide capital appreciation. Federated Market Opportunity Fund - Class B Shares Investment Objective: The investment objective is to provide capital appreciation and high current income. Federated New Economy Fund - Class B Shares Investment Objective: The investment objective is to provide capital appreciation. Federated Small Cap Strategies Fund - Class B Shares Investment Objective: The investment objective is to provide capital appreciation. FEDERATED EQUITY INCOME FUND, INC. - Class B Shares Investment Objective: The investment objective of the Corporation is to provide above-average income and capital appreciation. FEDERATED FIXED INCOME SECURITIES, INC. Federated Strategic Income Fund - Class B Shares Investment Objective: The investment objective is to seek a high level of current income. FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC. - Class B Shares Investment Objective: The investment objective of the Corporation is to provide current income. FEDERATED GOVERNMENT INCOME SECURITIES, INC. - Class B Shares Investment Objective: The investment objective of the Corporation is to provide current income. FEDERATED HIGH INCOME BOND FUND, INC. - Class B Shares Investment Objective: The investment objective of the Corporation is to seek high current income. FEDERATED INTERNATIONAL SERIES, INC. Federated International Equity Fund - Class B Shares Investment Objective: The investment objective is to obtain a total return on its assets. Federated International Bond Fund - Class B Shares Investment Objective: The investment objective is to seek a high level of current income in U.S. dollars consistent with prudent investment risk. The secondary objective is to provide capital appreciation. FEDERATED INVESTMENT SERIES FUNDS, INC. Federated Bond Fund - Class B Shares Investment Objective: The investment objective is to provide as high a level of current income as is consistent with the preservation of capital. FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC. - Class B Shares Investment Objective: The investment objective of the Corporation is to provide a high level of current income which is generally exempt from the federated regular income tax. FEDERATED MUNICIPAL SECURITIES FUND, INC. - Class B Shares Investment Objective: The investment objective of the Corporation is to provide for its shareholders a high level of current income which is exempt from federal regular income tax. FEDERATED MUNICIPAL SECURITIES INCOME TRUST Federated California Municipal Income Fund - Class B Shares Investment Objective: The investment objective is to provide current income exempt from federal regular income tax (federal regular income tax does not include the federal alternative minimum tax) and the personal income taxes imposed by the state of California and California municipalities. Federated Pennsylvania Municipal Income Fund - Class B Shares Investment Objective: The investment objective is to provide current income exempt from federal regular income tax and the personal income taxes imposed by the state of Pennsylvania and Pennsylvania municipalities. FEDERATED STOCK AND BOND FUND, INC. - Class B Shares Investment Objective: The investment objective of the Corporation is to provide relative safety of capital with the possibility of long-term growth of capital and income. Consideration is also given to current income. FEDERATED UTILITY FUND, INC. - Class B Shares Investment Objective: The investment objectives of the Corporation are current income and long-term capital growth of income. The secondary objective is to provide capital appreciation. FEDERATED WORLD INVESTMENT SERIES, INC. Federated World Utility Fund - Class B Shares Investment Objective: The investment objective is to provide total return. Federated Asia Pacific Growth Fund - Class B Shares Investment Objective: The investment objective is to provide long-term growth of capital. Federated Emerging Markets Fund - Class B Shares Investment Objective: The investment objective is to provide long-term growth of capital. Federated European Growth Fund - Class B Shares Investment Objective: The investment objective is to provide long-term growth of capital. Federated Global Equity Income Fund - Class B Shares Investment Objective: The investment objective is to provide capital appreciation and above-average income. Federated Global Financial Services Fund - Class B Shares Investment Objective: The investment objective is to provide long-term growth of capital. Federated International Growth Fund - Class B Shares Investment Objective: The investment objective is to provide long-term growth of capital. Federated International High Income Fund - Class B Shares Investment Objective: The investment objective is to seek a high level of current income. The secondary objective is to provide capital appreciation. Federated International Small Company Fund - Class B Shares Investment Objective: The investment objective is to provide long-term growth of capital. MONEY MARKET OBLIGATIONS TRUST Liberty U.S. Government Money Market Trust - Class B Shares Investment Objective: The investment objective is stability of principal and current income consistent with stability of principal. 13620.148 #200982 Schedule V FORM OF LEGEND NEITHER ANY [DISTRIBUTOR], ANY [ADVISOR], ANY [FUND] NOR ANY OF THEIR RESPECTIVE AFFILIATES WILL RECEIVE ANY PORTION OF THE PROCEEDS FROM THE SALE OF THE [SECURITIES]. NEITHER ANY [DISTRIBUTOR], ANY [ADVISOR], ANY [FUND] NOR ANY OF THEIR RESPECTIVE AFFILIATES IS RESPONSIBLE FOR THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED IN THIS [MEMORANDUM]. 13620.148 #200982 Schedule VI BANKRUPTCY REMOTE COVENANTS The Seller shall, and the Parent shall cause the Seller to: 1. maintain books and records separate from any other Person; 2. maintain its accounts separate from any other Person; 3. not commingle assets with those of any affiliate; 4. conduct its own business in its own name; 5. prepare and maintain separate financial statements; 6. pay its own liabilities out of its own funds; 7. observe all corporate formalities; 8. maintain an arm's-length relationship with its affiliates; 9. not guarantee or become obligated for the debts of any other entity or hold out its credit as being available to satisfy the obligations of others; 10. not acquire obligations or securities of its shareholders; 11. allocate fairly and reasonably any overhead for shared office space, if any; 12. use separate stationery, invoices and checks; 13. except as contemplated in this Agreement and the Master Agreement (as defined in the Collection Agency Agreement) not pledge its assets for the benefit of any other Person or make any loans or advances to any Person; 14. hold itself out as a separate entity; 15. correct any known misunderstanding regarding its separate identity; 16. maintain adequate capital in light of its contemplated business operations, including an initial capital contribution by FII Holdings Inc. of $25,000; 17. ensure that its certificate of incorporation shall: (a) limit its corporate purposes to the performance of its obligations under the Program Documents and the Other Purchasers' Program Documents and activities incidental thereto; (b) prohibit it from incurring Debt, other than in connection with the activities described in (a); (c) require that it have at least one duly appointed Independent Director; (d) require the unanimous consent of its directors to: (i) institute bankruptcy or insolvency proceedings; (ii) dissolve, liquidate, consolidate, merge, or sell all, or substantially all, of its assets, (iii) engage in any activity other than that specified in (a) above, or (iv) amend its certificate of incorporation; and (e) require that the directors consider the interests of the Purchaser and creditors in connection with all corporate actions; 18. not permit the Distributor or the Transferor to have any equity or other ownership interest, direct or indirect, in it; 19. not conduct its daily business such that it requires management by any other Federated Entity or other Person; and 20. not enter into any contract or agreement with any Person unless such Person has agreed in writing not to institute any proceeding against the Seller of the type referred to in Section 6.01(e) of the Purchase Agreement so long as there shall not have elapsed one (1) year and one (1) day since any Share relating to a Purchased Receivable shall be outstanding. 13620.148 #200982 2 EXHIBIT A PURCHASE NOTICE Citicorp North America, Inc. 399 Park Avenue New York, New York 10043 Attention: Bankers Trust Company Four Albany Street New York, New York 10006 Re: Purchase and Sale Agreement dated as of December 21, 2000 (the "Purchase Agreement") among Federated Funding 1997-1, Inc., Federated Investors Management Company, Federated Securities Corp., Federated Investors, Inc., Citibank, N.A. and Citicorp North America, Inc., as program AGENT -------------------------------------------------------------- Pursuant to Section 2.02 of the above-referenced Purchase Agreement, you are hereby notified that on _______________, 20__ (the "Purchase Date"), the undersigned proposes, subject to the terms and conditions set forth in the Purchase Agreement, to sell to Citibank, N.A. certain Receivables relating to each of the Funds, in the amount of $_________. The Sale Cut-off Dates and the Purchase Prices for such Receivables are set forth on Schedule I attached hereto. The Purchase Prices for such Receivables have been computed as set forth in Schedule II hereto. Capitalized terms used herein unless otherwise defined herein shall have the meanings assigned to such terms in Appendix A to the Purchase Agreement. The undersigned certifies that the conditions precedent set forth in Section 3.02 of the Purchase Agreement have been satisfied. The undersigned represents that Schedule I hereto is true, correct and complete and accurately describes the Receivables to be purchased by the Purchaser on the Purchase Date, that each Receivable represents an entitlement to Asset Based Sales Charges and Shareholder Servicing Fees at an annual rate of one percent (1%) per annum of Net Asset Value. FEDERATED FUNDING 1997-1, INC. By:____________________________ Authorized Signatory 13620.148 #200982 2 SCHEDULE I TO EXHIBIT A Purchase Period for each Fund __________________ Sale Cutoff Date for each Fund __________________ Total Issue Price of Shares Related Name to Receivables Purchase of Fund to be Purchased Amount ($) $------- $------- $------- $------- $------- $------- $-------- $------- 13620.148 #200982 7 SCHEDULE II TO EXHIBIT A [CALCULATION OF PURCHASE PRICE FOR THE RECEIVABLES RELATING TO EACH FUND] EXHIBIT B-1 FEDERATED FUNDING 1997-1, INC. Certificate (Pursuant to Section 3.01(c) of the Purchase and Sale Agreement) I, the undersigned [Secretary] [Assistant Secretary] of Federated Funding 1997-1, Inc., a Delaware corporation (the "Seller"), DO HEREBY CERTIFY THAT: 1. This Certificate is furnished pursuant to Section 3.01(c) of that certain Purchase and Sale Agreement dated as of December 21, 2000 (said Purchase and Sale Agreement, as in effect on the date of this Certificate, being herein called the "Purchase Agreement") among Federated Investors Management Company, Federated Securities Corp., Federated Investor, Inc., the Seller, Citibank, N.A. and Citicorp North America, Inc. Unless otherwise defined herein, capitalized terms used in this Certificate shall have the meanings assigned to those terms in Appendix A to the Purchase Agreement. 2. Attached hereto as Annex A is a copy of the Articles of Incorporation of the Seller as in effect on the date hereof, certified by the Secretary of State of Delaware. 3. Attached hereto as Annex B is a true and correct copy of the By-laws of the Seller as in effect on the date hereof. 4. Attached hereto as Annex C is a true and correct copy of resolutions duly adopted by unanimous consent of the Board of Directors of the Seller on _______, 20__ which resolutions have not been revoked, modified, amended or rescinded and are still in full force and effect, and the Purchase Agreement, the Transferor's Transfer Agreement, the Collection Agency Agreement, the Servicing Agreement and the other Program Documents are in substantially the forms of those documents submitted to, and approved by, the Board of Directors of the Seller. 5. The below-named persons have been duly elected and have duly qualified as, and at all times since their appointment (to and including the date hereof) have been, officers of the Seller, holding the respective offices below set opposite their names, and the signatures below set opposite their names are their genuine signatures: NAME OFFICE SIGNATURE - ------------------- ------------------- ------------------- - ------------------- ------------------- ------------------- - ------------------- ------------------- ------------------- - ------------------- ------------------- ------------------- WITNESS my hand as of this ____ day of _______________, 20__. By:_______________________________ [Secretary][Assistant Secretary] FEDERATED FUNDING 1997-1, INC. I, the undersigned [President] [Vice President] of the Seller, DO HEREBY CERTIFY that: 1. __________________ is the duly elected and qualified [Secretary] [Assistant Secretary] of the Seller and the signature above is [his] [her] genuine signature. 2. The Purchase Agreement and each other Program Document is subsisting and in full force and effect on the date hereof. 3. The representations and warranties on the part of the Seller contained in the Purchase Agreement and the other Program Documents to which the Seller is a party are true and correct in all material respects at and as of the date hereof as though made on and as of the date hereof. 4. The conditions precedent set forth in Article III of the Purchase Agreement are fully satisfied and no Event of Termination (or event which with the passage of time or notice, or both would constitute an Event of Termination) has occurred and is continuing or would occur with the Purchase of Receivables pursuant to the Purchase Agreement. WITNESS my hand as of this ____ day of December __, 2000 By:____________________________ [President] [Vice President] FEDERATED FUNDING 1997-1, INC. 13620.091 #201425 EXHIBIT B-2 FEDERATED SECURITIES CORP. Certificate (Pursuant to Section 3.01(c) of the Purchase and Sale Agreement) I, the undersigned [Secretary] [Assistant Secretary] of Federated Securities Corp., a Pennsylvania Corporation (the "Distributor"), DO HEREBY CERTIFY THAT: 1. This Certificate is furnished pursuant to Section 3.01(c) of that certain Purchase and Sale Agreement dated as of December 21, 2000 (said Purchase and Sale Agreement, as in effect on the date of this Certificate, being herein called the "Purchase Agreement") among the Distributor, Federated Funding 1997-1, Inc., Federated Investors, Inc., Federated Investors Management Company, Citibank, N.A. and Citicorp North America, Inc. Unless otherwise defined herein, capitalized terms used in this Certificate shall have the meanings assigned to those terms in Appendix A to the Purchase Agreement. 2. Attached hereto as Annex A is a copy of the Articles of Incorporation of the Distributor as in effect on the date hereof, certified by the Secretary of State of Pennsylvania. 3. Attached hereto as Annex B is a true and correct copy of the By-laws of the Distributor as in effect on the date hereof. 4. Attached hereto as Annex C is a true and correct copy of resolutions duly adopted by unanimous consent of the Board of Directors of the Distributor on _______, 20__ which resolutions have not been revoked, modified, amended or rescinded and are still in full force and effect, and the Purchase Agreement, the Distributor's Transfer Agreement, the Collection Agency Agreement, the Servicing Agreement and the other Program Documents are in substantially the forms of those documents submitted to, and approved by, the Board of Directors of the Distributor. 5. The below-named persons have been duly elected and have duly qualified as, and at all times since their appointment (to and including the date hereof) have been, officers of the Distributor, holding the respective offices below set opposite their names, and the signatures below set opposite their names are their genuine signatures: NAME OFFICE SIGNATURE - ------------------- ------------------- ------------------- - ------------------- ------------------- ------------------- - ------------------- ------------------- ------------------- - ------------------- ------------------- ------------------- WITNESS my hand as of this ____ day of _______________, 20__. By:_______________________________ [Secretary][Assistant Secretary] FEDERATED SECURITIES CORP. I, the undersigned [President] [Vice President] of the Distributor, DO HEREBY CERTIFY that: 1. __________________ is the duly elected and qualified [Secretary] [Assistant Secretary] of the Distributor and the signature above is [his] [her] genuine signature. 2. Each of the Purchase Agreement, the Servicing Agreement and each other Program Document is subsisting and in full force and effect on the date hereof. 3. The representations and warranties on the part of the Distributor contained in the Purchase Agreement and the other Program Documents to which the Distributor is a party are true and correct in all material respects at and as of the date hereof as though made on and as of the date hereof.. 4. The conditions precedent set forth in Article III of the Purchase Agreement are fully satisfied and no Event of Termination (or event which with the passage of time or notice, or both would constitute an Event of Termination) has occurred and is continuing or would occur with the Purchase of Receivables pursuant to the Purchase Agreement. WITNESS my hand as of this ____ day of December __, 2000 By:____________________________ [President] [Vice President] FEDERATED SECURITIES CORP. EXHIBIT B-3 FEDERATED INVESTORS, INC. Certificate (Pursuant to Section 3.01(c) of the Purchase and Sale Agreement) I, the undersigned [Secretary] [Assistant Secretary] of Federated Investors, Inc., a Pennsylvania corporation (the "Parent"), DO HEREBY CERTIFY THAT: 1. This Certificate is furnished pursuant to Section 3.01(c) of that certain Purchase and Sale Agreement dated as of December 21, 2000 (said Purchase and Sale Agreement, as in effect on the date of this Certificate, being herein called the "Purchase Agreement") among Federated Funding 1997-1, Inc., Federated Securities Corp., the Parent, Federated Investors Management Company, Citibank, N.A. and Citicorp North America, Inc. Unless otherwise defined herein, capitalized terms used in this Certificate shall have the meanings assigned to those terms in Appendix A to the Purchase Agreement. 2. Attached hereto as Annex A is a copy of the Articles of Incorporation of the Parent as in effect on the date hereof, certified by the Secretary of State of Pennsylvania. 3. Attached hereto as Annex B is a true and correct copy of the By-laws of the Parent as in effect on the date hereof. 4. Attached hereto as Annex C is a true and correct copy of resolutions duly adopted by unanimous consent of the Board of Directors of the Parent on _______, 20__ which resolutions have not been revoked, modified, amended or rescinded and are still in full force and effect, and the Purchase Agreement and the other Program Documents are in substantially the forms of those documents submitted to, and approved by, the Board of Directors of the Parent. 5. The below-named persons have been duly elected and have duly qualified as, and at all times since their appointment (to and including the date hereof) have been, officers of the Parent, holding the respective offices below set opposite their names, and the signatures below set opposite their names are their genuine signatures: NAME OFFICE SIGNATURE - ------------------- ------------------- ------------------- - ------------------- ------------------- ------------------- - ------------------- ------------------- ------------------- - ------------------- ------------------- ------------------- WITNESS my hand as of this ____ day of _______________, 20__. By:_______________________________ [Secretary][Assistant Secretary] FEDERATED INVESTORS, INC. I, the undersigned [President] [Vice President] of the Parent, DO HEREBY CERTIFY that: 1. __________________ is the duly elected and qualified [Secretary] [Assistant Secretary] of the Parent and the signature above is [his] [her] genuine signature. 2. The Purchase Agreement and each other Program Document is subsisting and in full force and effect on the date hereof. 3. The representations and warranties on the part of the Parent contained in the Purchase Agreement and the other Program Documents to which the Parent is a party are true and correct in all material respects at and as of the date hereof as though made on and as of the date hereof. 4. The conditions precedent set forth in Article III of the Purchase Agreement are fully satisfied and no Event of Termination (or event which with the passage of time or notice, or both would constitute an Event of Termination) has occurred and is continuing or would occur with the Purchase of Receivables pursuant to the Purchase Agreement. WITNESS my hand as of this ____ day of December __, 2000 By:____________________________ [President] [Vice President] FEDERATED INVESTORS, INC. 13620.148 #200982 EXHIBIT B-4 FEDERATED INVESTORS MANAGEMENT COMPANY Certificate (Pursuant to Section 3.01(c) of the Purchase and Sale Agreement) I, the undersigned [Secretary] [Assistant Secretary] of Federated Investors Management Company, a Pennsylvania Corporation (the "Transferor"), DO HEREBY CERTIFY THAT: 1. This Certificate is furnished pursuant to Section 3.01(c) of that certain Purchase and Sale Agreement dated as of December 21, 2000 (said Purchase and Sale Agreement, as in effect on the date of this Certificate, being herein called the "Purchase Agreement") among Federated Funding 1997-1, Inc., Federated Securities Corp., Federated Investors, Inc., the Seller, Citibank, N.A. and Citicorp North America, Inc. Unless otherwise defined herein, capitalized terms used in this Certificate shall have the meanings assigned to those terms in Appendix A to the Purchase Agreement. 2. Attached hereto as Annex A is a copy of the [Articles of Incorporation] of the Transferor as in effect on the date hereof, certified by the Secretary of State of Pennsylvania. 3. Attached hereto as Annex B is a true and correct copy of the By-laws of the Transferor as in effect on the date hereof. 4. Attached hereto as Annex C is a true and correct copy of resolutions duly adopted by unanimous consent of the Board of Directors of the Transferor on _______, 20__ which resolutions have not been revoked, modified, amended or rescinded and are still in full force and effect, and the Purchase Agreement and the other Program Documents are in substantially the forms of those documents submitted to, and approved by, the Board of Directors of the Transferor. 5. The below-named persons have been duly elected and have duly qualified as, and at all times since their appointment (to and including the date hereof) have been, officers of the Transferor, holding the respective offices below set opposite their names, and the signatures below set opposite their names are their genuine signatures: NAME OFFICE SIGNATURE - ------------------- ------------------- ------------------- - ------------------- ------------------- ------------------- - ------------------- ------------------- ------------------- - ------------------- ------------------- ------------------- WITNESS my hand as of this ____ day of _______________, 20__. By:_______________________________ [Secretary][Assistant Secretary] FEDERATED INVESTORS MANAGEMENT COMPANY I, the undersigned [President] [Vice President] of the Transferor, DO HEREBY CERTIFY that: 1. __________________ is the duly elected and qualified [Secretary] [Assistant Secretary] of the Transferor and the signature above is [his] [her] genuine signature. 2. The Purchase Agreement and each other Program Document is subsisting and in full force and effect on the date hereof. 3. The representations and warranties on the part of the Transferor contained in the Purchase Agreement and the other Program Documents to which the Transferor is a party are true and correct in all material respects at and as of the date hereof as though made on and as of the date hereof. 4. The conditions precedent set forth in Article III of the Purchase Agreement are fully satisfied and no Event of Termination (or event which with the passage of time or notice, or both would constitute an Event of Termination) has occurred and is continuing or would occur with the Purchase of Receivables pursuant to the Purchase Agreement. WITNESS my hand as of this ____ day of December __, 2000 By:____________________________ [President] [Vice President] FEDERATED INVESTORS MANAGEMENT COMPANY EXHIBIT C FORM OF DISTRIBUTION AGREEMENT EXHIBIT D FORM OF PROSPECTUS EXHIBIT E FORM OF DISTRIBUTION PLAN EXHIBIT F FORM OF PRINCIPAL SHAREHOLDER SERVICER'S AGREEMENT EXHIBIT G FORM OF SHAREHOLDER SERVICER'S AGREEMENT EXHIBIT H ADDENDUM Dated as of ________, ____ Reference is hereby made to that certain Purchase and Sale Agreement dated as of December 21, 2000 (as from time to time amended, supplemented, waived or modified, the "Purchase Agreement") among Federated Funding 1997-1, Inc. (together with its permitted successors and assigns, the "Seller"), Federated Investors Management Company (together with its permitted successors and assigns, the "Transferor"), Federated Securities Corp. (the "Distributor"), Federated Investors, Inc. (together with its permitted successors and assigns, the "Parent"), Citibank, N.A. (together with its permitted successors and assigns, the "Purchaser") and Citicorp North America, Inc., as program agent (together with its permitted successors and assigns, the "Program Agent"). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings assigned to such terms in the Purchase Agreement. Pursuant to the terms of Section 2.03 of the Purchase Agreement, the Seller hereby requests that effective as of the Addition Effective Date [INSERT NAME OF FUND] a series of [INSERT NAME OF COMPANY], an Additional Eligible Fund, become a "Fund" under and for all purposes of the Purchase Agreement [and that [INSERT NAME OF COMPANY], an investment company registered with the SEC under the Investment Company Act (the "Additional Company") become a "Company" under and for all purposes of the Purchase Agreement. On and as of the Addition Effective Date, (i) such Additional Fund shall become a Fund under and for all purposes of the Program Documents, [and the Additional Company shall constitute a Company under the Program Documents,]* (ii) the Servicing Agreement and the other Program Documents shall be deemed to be supplemented to reflect such addition, (iii) Annexes A, B, C, D and E to this Addendum shall be deemed to be made a part of Exhibits C, D, E, F and G to the Purchase Agreement, and (iv) any reference in the Purchase Agreement to any change or modification since the date of the Purchase Agreement to the Distribution Agreement, the Distribution Plan, the Advisory Agreement, the Principal Shareholder Servicer's Agreement, the Shareholder Servicer's Agreement or the Prospectus in respect of such Additional Fund shall be deemed to refer to any change or modification thereof since the Addition Effective Date. In addition, on and as of the Addition Effective Date, Schedule I to the Purchase Agreement is hereby deemed supplemented to add the following information under each heading: - -------------- * Insert if the investment company relating to the Additional Fund is not an existing "Company" under the Purchase Agreement. FUNDS SHARES [INSERT NAME OF Class __ FUND] COMPANIES [INSERT NAME OF ADDITIONAL COMPANY]* In addition, on and as of the Addition Effective Date, Schedule IV to the Purchase Agreement is hereby deemed supplemented to add the following information under each heading: FUND FUNDAMENTAL INVESTMENT ---- OBJECTIVES AND POLICIES Each of the Seller, the Distributor and the Parent represents and warrants to the Program Agent and the Purchaser that, on and immediately after the Addition Effective Date, (i) its representations and warranties contained in Article IV of the Purchase Agreement are true and correct in all respects, (ii) no Event of Termination (or event which with the passage of time or notice, or both, would constitute an Event of Termination has occurred, and (iii) the conditions precedent set forth in Article III to the Purchase Agreement are satisfied. The Addition Effective Date shall occur when (a) a counterpart hereof, signed by each of the parties hereto, has been received by the Program Agent, and (b) the other requirements described in Section 2.03 of the Purchase Agreement have been fully satisfied. FEDERATED FUNDING 1997-1, INC. By:___________________________ Name: Title: FEDERATED INVESTORS MANAGEMENT COMPANY By:___________________________ Name: Title: FEDERATED SECURITIES CORP. By:__________________________ Name: Title: FEDERATED INVESTORS, INC. By:__________________________ Name: Title: Acknowledged and Agreed to as of the date first written above CITIBANK, N.A. By:__________________________ Name: CITICORP NORTH AMERICA, INC., as Program Agent By:__________________________ Name: Title: 13620.148 #200982 ANNEX A to Exhibit H DISTRIBUTION AGREEMENT OF ADDITIONAL FUND ANNEX B to Exhibit H PROSPECTUS OF ADDITIONAL FUND ANNEX C to Exhibit H DISTRIBUTION PLAN OF ADDITIONAL FUND ANNEX D to Exhibit H PRINCIPAL SHAREHOLDER SERVICER'S AGREEMENT OF ADDITIONAL FUND ANNEX E to Exhibit H SHAREHOLDER SERVICER'S AGREEMENT OF ADDITIONAL FUND EXHIBIT I FORM OF TAKE-OUT NOTICE [Date] Federated Funding 1997-1, Inc. 1001 Liberty Avenue Pittsburgh, Pennsylvania 15222-3779 Ladies and Gentlemen: Pursuant to that certain Purchase and Sale Agreement dated as of December 21, 2000 (as amended and supplemented, the "Purchase Agreement") among Federated Funding 1997-1, Inc., Federated Investors Management Company, Federated Securities Corp., Federated Investors, Inc., Citibank N.A. and the undersigned Citicorp North America, Inc., we hereby deliver this Take-out Notice advising you that the Purchaser completed a Take-out Transaction [stipulate transaction]. The "Take-out Adjustment Amount" in connection with such Take-out Transaction is $_________. Capitalized terms used herein and which are not otherwise defined herein shall have the meanings assigned to such terms in the Purchase Agreement. Very truly yours, CITICORP NORTH AMERICA, INC., as Program Agent By:________________________ Authorized Signatory Acknowledged and agreed as of the date first written above: FEDERATED FUNDING 1997-1, INC. By:_______________________ Authorized Signatory 13620.148 #200982 - ------------------------------------------------------------------------------ PURCHASE AND SALE AGREEMENT Dated as of December 21, 2000 among FEDERATED INVESTORS MANAGEMENT COMPANY, as Transferor FEDERATED SECURITIES CORP., as Distributor, Principal Shareholder Servicer and Servicer FEDERATED FUNDING 1997-1, INC., as Seller FEDERATED INVESTORS, INC. as Parent CITIBANK, N.A., as Purchaser and CITICORP NORTH AMERICA, INC., as Program Agent - ------------------------------------------------------------------------------ [Type VII-C] 13620.148 #200982 iv i TABLE OF CONTENTS PAGE PURCHASE AND SALE AGREEMENT Article I DEFINITIONS AND RULES OF CONSTRUCTION SECTION 1.01. Definitions...................................................2 Article II PURCHASE AND SALE OF RECEIVABLES; ADDITIONAL FUNDS SECTION 2.01. Purchase of Receivables.......................................2 SECTION 2.02. Purchase Notices..............................................3 SECTION 2.03. Additional Funds, Etc.........................................3 Article III CONDITIONS PRECEDENT SECTION 3.01. Conditions Precedent to Effectiveness.........................4 SECTION 3.02. Conditions Precedent to the Purchaser's Obligation to Purchase Receivables...................................................5 Article IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Seller, the Distributor, the Transferor and the Parent.................................6 SECTION 4.02. Additional Representations and Warranties of the Parent......10 SECTION 4.03. Additional Representations and Warranties of the Distributor.11 SECTION 4.04. Additional Representations and Warranties of the Transferor..12 SECTION 4.05. Additional Representations and Warranties of the Seller......14 SECTION 4.06. Representations and Warranties of the Purchaser and the Program Agent........................................................15 Article V COVENANTS SECTION 5.01. Covenants of the Seller, the Distributor, the Transferor and the Parent...............................................15 SECTION 5.02. Additional Covenants of the Parent...........................19 SECTION 5.03. Additional Covenants of the Distributor......................23 SECTION 5.04. Additional Covenants of the Seller...........................24 SECTION 5.05. Additional Covenants of the Transferor.......................25 Article VI EVENTS OF TERMINATION SECTION 6.01. Events of Termination........................................25 Article VII PARENT'S UNDERTAKINGS SECTION 7.01. Undertakings; Payment of Damages.............................28 SECTION 7.02. Agreement Not Affected.......................................28 SECTION 7.03. Waiver of Notice; No Offset; No Subrogation..................28 Article VIII THE PROGRAM AGENT SECTION 8.01. Authorization and Action.....................................29 SECTION 8.02. Program Agent's Reliance, Etc................................29 SECTION 8.03. Indemnification..............................................30 Article IX MISCELLANEOUS SECTION 9.01. No Waiver; Rights and Remedies; Modifications in Writing.....30 SECTION 9.02. Payment......................................................31 SECTION 9.03. Notices, Etc.................................................31 SECTION 9.04. Costs and Expenses; Indemnification..........................32 SECTION 9.05. Taxes........................................................35 SECTION 9.06. Execution in Counterparts....................................37 SECTION 9.07. Binding Effect; Assignment...................................37 SECTION 9.08. Governing Law................................................38 SECTION 9.09. Severability of Provisions...................................38 SECTION 9.10. Confidentiality..............................................38 SECTION 9.11. Intent of Agreement..........................................39 SECTION 9.12. Liabilities to any Fund or any Company.......................39 SECTION 9.13. Entire Agreement.............................................40 SECTION 9.14. Assignee Rights; Take-out Transactions; Etc..................40 SECTION 9.15. Survival.....................................................40 SECTION 9.16. Continuing Obligations.......................................42 SECTION 9.17. Undertaking of the Parties...................................42 SECTION 9.18. Limited Liability............................................42 SECTION 9.19. No Proceedings...............................................42 APPENDIX A Definitions List SCHEDULES SCHEDULE I List of Companies, Funds and Shares SCHEDULE II CDSCs SCHEDULE III Transferable NASD Cap SCHEUDLE IV Fundamental Investment Objectives SCHEDULE V Form of Legend SCHEDULE VI Bankruptcy Remote Covenants EXHIBITS EXHIBIT A Form of Purchase Notice EXHIBIT B-1 Form of Seller's Certificate EXHIBIT B-2 Form of Distributor's Certificate EXHIBIT B-3 Form of Parent's Certificate EXHIBIT B-4 Form of Transferor's Certificate EXHIBIT C Form of Distribution Agreement EXHIBIT D Form of Prospectus EXHIBIT E Form of Distribution Plan EXHIBIT F Form of Principal Shareholder Servicer's Agreement EXHIBIT G Form of Shareholder Servicer's Agreement EXHIBIT H Form of Addendum EXHIBIT I Form of Take-out Notice 13620.148 #200982 EX-10.27 4 0004.txt Amendment No. 2 to the Federated Investors Program Documents Exhibit 10.27 Amendment No. 2 to the Federated Investors Program Documents AMENDMENT NO. 2 TO THE FEDERATED INVESTORS PROGRAM DOCUMENTS THIS AMENDMENT NO. 2 TO THE FEDERATED INVESTORS PROGRAM DOCUMENTS (this "AMENDMENT") is made as of the 21st day of December, 2000, among Federated Investors, Inc. (as successor to Federated Investors), a Pennsylvania corporation (together with its permitted successors and assigns, the "Parent"), Federated Funding 1997-1, Inc., a Delaware corporation (together with its permitted successors and assigns, in its capacity as seller hereunder and as beneficial owner of the Initial Purchaser, the "Seller"), Federated Investors Management Company, a Pennsylvania corporation (together with its permitted successors and assigns, the "Transferor"), Federated Securities Corp., a Pennsylvania corporation (together with its permitted successors and assigns, the "Distributor"), Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee of the PLT Finance Trust 1997-1 (together with its permitted successors and assigns, the "Initial Purchaser"), Putnam Lovell Finance L.P. (formerly PLT Finance, L.P.) (together with its permitted successors and assigns, the "Revolving Purchaser" and together with the Initial Purchaser, the "Purchasers"), Putnam Lovell Securities Inc. (formerly Putnam, Lovell and Thornton Inc.), a Delaware corporation (together with its permitted successors and assigns, the "Program Administrator") and Bankers Trust Company, not in its individual capacity but solely as Collection Agent except as otherwise expressly provided (together with its permitted successors and assigns in such capacity, the " Collection Agent") (collectively, the "Parties"), and amends and is supplemental to the Program Documents (such term and any other capitalized terms used in this preamble or the recitals hereto without definition shall have the meanings set forth below). W I T N E S S E T H: WHEREAS, the Parties are parties to that certain Federated Investors Program Master Agreement, dated as of October 24, 1997 (the "Master Agreement"); WHEREAS, the Revolving Purchaser Termination Date has occurred and the Parties desire to supplement and amend the Program Documents in connection therewith; WHEREAS, the Parties now agree to amend certain of the Program Documents as provided herein. NOW, THEREFORE, in consideration of the premises and such other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged by the Parties, it is hereby agreed as follows: 1. RULES OF CONSTRUCTION; DEFINITIONS. The rules of construction set forth in Schedule X to the Master Agreement, as amended hereby, shall be applied to this Amendment. Capitalized terms not otherwise defined herein shall have the meanings assigned to such terms in Schedule X to such Master Agreement, as amended hereby. 2. AMENDMENTS TO THE PROGRAM DOCUMENTS. Subject to the terms ----------------------------------- and conditions of this Amendment, the Program Documents are hereby amended and supplemented as set forth in Exhibit A. 3. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AMENDMENT. ------------------------------------------------------- The effectiveness of this Amendment shall be subject to the fulfillment or waiver on the date of this Amendment of the following conditions precedent: (a) This Amendment shall have been duly authorized, executed and delivered by the Parties; (b) The Amended and Restated Federated Investors Program Collection Agency Agreement dated as of the date hereof (the "Amended and Restated Collection Agency Agreement") shall have been duly authorized, executed and delivered by the parties thereto; (c) The Amended and Restated Federated Investors Program Servicer Agent Agreement dated as of the date hereof (the "Amended and Restated Servicer Agreement") shall have been duly authorized, executed and delivered by the parties thereto; (d) Each of the Distributor, the Transferor, the Seller, the Initial Purchaser, the Revolving Purchaser and the Program Administrator shall have executed a revised Irrevocable Payment Instruction in the form attached to the Amended and Restated Collection Agency Agreement; (e) The other Parties to this Amendment shall have received a certificate of Secretary of each of the Seller, the Transferor, the Parent and the Distributor certifying as to and attaching (i) a copy of the resolutions of the Board of Directors or governing body authorizing the execution, delivery and performance by such Federated Entity of this Amendment, the Amended and Restated Collection Agency Agreement and the Amended and Restated Servicer Agreement (ii) an incumbency certificate of such Federated Entity as to the person or persons authorized to execute and deliver this Amendment with specimen signatures of such persons acting on behalf thereof, and (iii) a certificate of good standing of such Federated Entity issued by the Secretary of State of the state of organization of each such Federated Entity; and (f) The Parent shall have paid all reasonable fees and expenses of the Initial Purchaser, the Revolving Purchaser, the Program Administrator and the Collection Agent (including the reasonable accrued fees and expenses of counsel to the Initial Purchaser, the Revolving Purchaser, the Program Administrator and the Collection Agent) then due and payable in connection herewith. 4. CONDITIONS SUBSEQUENT. Each of the Distributor, Transferor and Seller agree that prior to January 15, 2000, it shall cause, at its sole expense, the Initial Purchaser, the Revolving Purchaser and the Program Administrator to receive legal opinions addressed to each of them, and upon which they and their successors, assigns and, in the case of any Placement Trust to which they have transferred Purchased Portfolio Assets, the investors therein, can rely, in form and substance reasonably satisfactory to them, to the effect that each of this Agreement, the Amended and Restated Collection Agency Agreement, the Program Servicer Agent Agreement and the Irrevocable Payment Instruction to which it or a Fund is a party has been duly authorized, executed and delivered by it or such Fund and is enforceable in accordance with its terms and as to such other matters that are typically covered by opinions given in respect of similar documentation in connection with transactions of this type, subject to customary qualifications. 5. REPRESENTATIONS AND WARRANTIES. Each of the Parties hereto represents and warrants as of the date hereof to each of the other Parties that this Amendment has been duly authorized, executed and delivered by such Party pursuant to its limited partnership, corporate or trust powers, as the case may be, and constitutes the legal, valid and binding obligation of such Party and that each of its respective representations and warranties set forth in the Master Agreement, as amended hereby, are true and correct on and as of the date hereof as if made on and as of the date hereof (except such thereof as speak only as of an earlier date). 6. CONFIRMATION OF THE PROGRAM DOCUMENTS. Except as herein expressly amended, each of the Program Documents is ratified and confirmed in all respects and shall remain in full force and effect in accordance with its terms. Each reference in the Program Documents to the "Program Documents," "Master Agreement," "Program Funding and Collection Agency Agreement," or "Program Servicer Agreement" shall mean the Program Documents, the Master Agreement, the Program Funding and Collection Agency Agreement, or the Program Servicer Agreement as amended and supplemented by this Amendment, the Amended and Restated Collection Agency Agreement or the Amended and Restated Servicer Agent Agreement, as the case may be, and shall be read and construed as if the terms of this Amendment were included therein by way of addition or substitution, as the case may be. 7. GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ------------- ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CONFLICT OF LAW RULES. 8. COUNTERPARTS. This Amendment may be executed in ------------ counterparts which, taken together, shall constitute a single document. 9. MODIFICATIONS IN WRITING. No amendment, modification, supplement, termination or waiver of this Amendment shall be effective unless the same shall be in writing and signed by the Parties and otherwise made in accordance with the provisions of the Program Documents. IN WITNESS WHEREOF, each of the Parties has executed this Amendment by its duly authorized representative on the day and year first above written. FEDERATED INVESTORS, INC. as Parent By:__/S/DENIS MCAULEY III Name: Denis McAuley III Title: Vice President FEDERATED FUNDING 1997-1, INC., as Seller By:_/S/RAYMOND J. HANLEY_____ -------------------- Name: Raymond J. Hanley Title: Vice President FEDERATED INVESTORS MANAGEMENT COMPANY, as Transferor By:__/S/RAYMOND J. HANLEY_____ -------------------- Name: Raymond J. Hanley Title: Senior Vice President FEDERATED SECURITIES CORP., as Distributor, Principal Shareholder Servicer and Program Servicer Agent By:__/S/RAYMOND J. HANLEY Name: Raymond J. Hanley Title: Vice President WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee for PLT Finance Trust 1997-1, as Initial Purchaser By:_/S/DENISE M. GERAN --------------------- Name: Denise M. Geran Title: Senior Financial Services Officer PUTNAM LOVELL FINANCE L.P., as Revolving Purchaser By: Putnam Lovell Finance Inc., its General Partner By: __SIGNATURE ILLEGIBLE ------------------------ Name: Title: PUTNAM LOVELL SECURITIES INC., as Program Administrator By: SIGNATURE ILLEGIBLE -------------------------- Name: Title: BANKERS TRUST COMPANY, as Collection Agent By: _SIGNATURE ILLEGIBLE______ ------------------- Name: Title: A-3 Amendment No. 2 to the Federated Investors Program Documents A-1 Exhibit A to Amendment No. 2 to the Federated Investors Program Documents AMENDMENTS TO THE MASTER AGREEMENT Subject to the terms and conditions of this Amendment, Schedule X to the Master Agreement is hereby amended as follows: 1. all references to the "Funding and Collection Agent" shall be deleted and replaced with a reference to the "Collection Agent". 2. all references to the "Funding and Collection Agent Fee" shall be deleted and replaced with a reference to the "Collection Agent Fee". 3. all references to the "Program Funding and Collection Agency Agreement" shall be deleted and replaced with a reference to the "Collection Agency Agreement". 4. all references to Exhibit J to the Master Agreement shall be deleted and replaced with a reference to Exhibit A to the Collection Agency Agreement. 5. all references to Exhibit L to the Master Agreement shall be deleted and replaced with a reference to Exhibit B to the Collection Agency Agreement. 6. Section 5.02(b) is amended by adding the following language at the end thereof: "PROVIDED, that the Bankruptcy Remote Covenants shall -------- not be construed to prevent the Seller from selling Portfolio Assets, not purchased by the Purchasers, to a subsequent purchaser in a True Sale as contemplated by the proviso to Section 5.01(n) or from granting any such purchaser a security interest in such Portfolio Assets sold to such purchaser in the event the transaction is not recognized as a True Sale;" 7. Section 5.01(t) of the Master Agreement is amended by adding at the end thereof the following clause: ", it being understood that the Program Servicing Agent shall not be responsible for the proper operation of the Excel Spreadsheet if the Program Servicer Agent shall have properly input the required data and it has not modified the spreadsheet mechanics without the prior written consent of the Program Administrator and the CITI Program Agent". 8. Schedule X to the Master Agreement is hereby amended as follows: a) by deleting the existing definitions of the following defined terms and replacing them in their entirety with the following definitions: "COMPANY" means each investment company registered with the SEC under the Investment Company Act specified on Schedule I to the Collection Agency Agreement, as the same may be supplemented pursuant to Section 9.18 of the Master Agreement and Section 8.11 of the Collection Agency Agreement. "COMPLETE TERMINATION" shall (i) in respect of the Distribution Plan in respect of any Fund have the meaning assigned to such term in such Distribution Plan in effect on the date of the Master Agreement, and (ii) in respect of the Principal Shareholder Servicer's Agreement in respect of any Fund have the meaning assigned to such term in such Principal Shareholder Servicer's Agreement in effect on the date of the Master Agreement. "FUND" means each separate series of a Company specified on Schedule I to the Collection Agency Agreement, as the same may be supplemented pursuant to Section 9.18 of the Master Agreement and Section 8.11 of the Collection Agency Agreement. "PURCHASED PORTFOLIO ASSETS" means the Initial Purchaser's Purchased Portfolio Assets and the Revolving Purchaser's Purchased Portfolio Assets. "SHARES" means in respect of any Fund, any class of shares of such Fund which are specified on Schedule I to the Collection Agency Agreement, as the same may be supplemented pursuant to Section 9.18 of the Master Agreement and Section 8.11 of the Collection Agency Agreement. b) by deleting the existing definition and replacing it with the definition "shall have the meaning set forth in the Collection Agency Agreement" for each of the following defined terms: "Advisor"; "Allocation Procedures"; "Deposited Collection Funds"; "Investor Report"; "Irrevocable Payment Instruction"; "Monthly Collection Determination Date"; "Permitted Conversion Feature"; "Permitted Free Exchange"; "Portfolio Assets"; "Program Servicing Procedures"; and "Purchaser". c) by inserting the following new defined term: "COLLECTION AGENCY AGREEMENT" means the Amended and Restated Federated Investors Program Collection Agency Agreement, dated as of December 21, 2000 among the Purchasers, the Program Administrator, the Seller, the Transferor, the Distributor and the Collection Agent. d) by inserting a new definition which reads in its entirety "shall have the meaning set forth in the Collection Agency Agreement" for each of the following terms: "CITI Program Agent"; "Collection Agent"; "Collection Agent Fee"; "Excel Spreadsheet"; "Former Purchasers"; "Initial Purchaser's Ancillary Rights"; "Initial Purchaser's Program Collections"; "Initial Purchaser's Program Documents"; "Initial Purchaser's Purchased Portfolio Assets"; "Party"; "Revolving Purchaser's Ancillary Rights"; "Revolving Purchaser's Program Collections"; "Revolving Purchaser's Program Documents"; and "Revolving Purchaser's Purchased Portfolio Assets". AMENDMENTS TO THE COLLECTION AGENCY AGREEMENT Subject to the terms and conditions of this Amendment, the Program Funding and Collection Agency Agreement shall be replaced in its entirety by an Amended and Restated Federated Investors Program Collection Agency Agreement in the form attached hereto as Exhibit B. AMENDMENTS TO THE PROGRAM SERVICER AGREEMENT Subject to the terms and conditions of this Amendment, the Program Servicer Agreement shall be replaced in its entirety by an Amended and Restated Federated Investors Program Servicer Agent Agreement in the form attached hereto as Exhibit C. B-1 01740.072#210186v4 Exhibit B to Amendment No. 2 to the Federated Investors Program Documents FORM OF AMENDED AND RESTATED FEDERATED INVESTORS PROGRAM COLLECTION AGENCY AGREEMENT C-1 01740.072#210186 Exhibit C to Amendment No. 2 to the Federated Investors Program Documents FORM OF AMENDED AND RESTATED FEDERATED INVESTORS PROGRAM SERVICE AGENT AGREEMENT 1 EXECUTION COPY ================================================================================ AMENDMENT NO. 2 TO THE FEDERATED INVESTORS PROGRAM DOCUMENTS DATED AS OF DECEMBER 21, 2000 AMONG FEDERATED INVESTORS, INC. AS PARENT, FEDERATED FUNDING 1997-1, INC., AS SELLER, FEDERATED INVESTORS MANAGEMENT COMPANY, AS TRANSFEROR, FEDERATED SECURITIES CORP., AS DISTRIBUTOR, PRINCIPAL SHAREHOLDER SERVICER AND PROGRAM SERVICER AGENT, WILMINGTON TRUST COMPANY, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS OWNER TRUSTEE OF PLT FINANCE TRUST 1997-1, AS INITIAL PURCHASER PUTNAM LOVELL FINANCE L.P. (FORMERLY PLT FINANCE, L.P.) AS REVOLVING PURCHASER PUTNAM LOVELL SECURITIES INC., (FORMERLY PUTNAM, LOVELL & THORNTON INC.) AS PROGRAM ADMINISTRATOR and BANKERS TRUST COMPANY, NOT IN ITS INDIVIDUAL CAPACITY AS INDENTURE TRUSTEE BUT SOLELY AS COLLECTION AGENT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED ================================================================================ EX-10.28 5 0005.txt Exhibit 10.28 $150,000,000 Revolving Credit AMENDED AND RESTATED SENIOR SECURED CREDIT AGREEMENT Dated as of January 23, 2001 by and among FEDERATED INVESTORS, INC. and THE BANKS SET FORTH HEREIN and PNC BANK, NATIONAL ASSOCIATION, as Agent and THE BANK OF NEW YORK, as Syndication Agent 1. CERTAIN DEFINITIONS....................................................1 1.1 Certain Definitions..............................................1 1.2 Construction....................................................16 1.3 Accounting Principles...........................................17 2. REVOLVING CREDIT AND SWING LOAN FACILITIES............................17 2.1 The Commitments.................................................17 2.2 Nature of the Banks' and the Borrower's Obligations.............18 2.3 Fees............................................................18 2.4 Permanent Reductions of Commitments.............................19 2.5 [Intentionally omitted].........................................19 2.6 Loan Requests...................................................19 2.7 Making Loans....................................................20 2.8 Borrowings to Repay Swing Loans.................................21 2.9 Notes...........................................................21 2.10 Letter of Credit Subfacility....................................21 2.11 Use of Proceeds.................................................25 2.12 Option of Borrower to Term-Out the Revolving Credit Loans upon Revolving Credit Expiration Date................................25 2.13 Extension by Banks of the Revolving Credit Expiration Date......25 2.14 Release of Collateral...........................................27 3. [Intentionally Omitted]...............................................27 4. INTEREST RATES........................................................27 4.1 Interest Rate Options...........................................27 4.2 Euro-Rate Interest Periods......................................28 4.3 Interest After Default..........................................29 4.4 Euro-Rate Unascertainable.......................................29 4.5 Selection of Interest Rate Options..............................30 5. PAYMENTS..............................................................30 5.1 Payments........................................................30 5.2 Pro Rata Treatment of the Banks.................................31 5.3 Interest Payment Dates..........................................31 5.4 Voluntary Prepayments...........................................31 5.5 Additional Compensation in Certain Circumstances................33 5.6 Settlement Date Procedures......................................34 6. REPRESENTATIONS AND WARRANTIES........................................35 6.1 Representations and Warranties..................................35 6.2 Updates to Schedules............................................41 7. CONDITIONS OF LENDING.................................................41 7.1 Closing Date....................................................41 7.2 Each Additional Loan............................................44 8. COVENANTS.............................................................44 8.1 Affirmative Covenants...........................................44 8.2 Negative Covenants..............................................47 8.3 Reporting Requirements..........................................53 9. DEFAULT...............................................................56 9.1 Events of Default...............................................56 9.2 Consequences of Event of Default................................57 9.3 Notice of Sale..................................................59 10. THE AGENT.............................................................59 10.1 Appointment.....................................................59 10.2 Delegation of Duties............................................60 10.3 Nature of Duties; Independent Credit Investigation..............60 10.4 Actions in Discretion of the Agent; Instructions from the Banks.60 10.5 Reimbursement and Indemnification of the Agent by the Borrower..61 10.6 Exculpatory Provisions..........................................61 10.7 Reimbursement and Indemnification of the Agent by the Banks.....62 10.8 Reliance by the Agent...........................................62 10.9 Notice of Default...............................................62 10.10 Notices.........................................................62 10.11 PNC Bank, National Association and the Banks in Their Individual Capacities......................................................63 10.12 Holders of Notes................................................63 10.13 Equalization of the Banks.......................................63 10.14 Successor Agent.................................................63 10.15 The Agent's Fee.................................................64 10.16 Calculations....................................................64 10.17 Beneficiaries...................................................64 11. MISCELLANEOUS.........................................................65 11.1 Modifications, Amendments or Waivers............................65 11.2 No Implied Waivers; Cumulative Remedies; Writing Required.......65 11.3 Reimbursement and Indemnification of the Banks by the Borrower; Taxes...........................................................66 11.4 Holidays........................................................66 11.5 Funding by Branch, Subsidiary or Affiliate......................66 11.6 Notices.........................................................67 11.7 Severability....................................................68 11.8 Governing Law...................................................68 11.9 Prior Understanding.............................................68 11.10 Duration; Survival..............................................68 11.11 Successors and Assigns..........................................69 11.12 Confidentiality.................................................70 11.13 Counterparts....................................................71 11.14 The Agent's or the Bank's Consent...............................71 11.15 Exceptions......................................................71 11.16 Consent to Jurisdiction; Waiver of Jury Trial...................71 11.17 Limitation of Liability.........................................71 11.18 Tax Withholding Clause..........................................72 11.19 Syndication Agent...............................................72 SCHEDULES Schedule 1.1(a) - Commitments of the Banks Schedule 6.1(c) - Subsidiaries of the Borrower Schedule 6.1(m) - Consents and Approvals Schedule 6.1(s) - Insurance Schedule 6.1(u) - Material Contracts Schedule 8.2(e) - Existing Indebtedness and Liens Schedule 8.2(h) - Loans and Investments Schedule 11.6 - Notice Information EXHIBITS Exhibit A - Form of Assignment and Assumption Agreement Exhibit B - Form of Security Agreement Exhibit C - Form of Intercompany Subordination Agreement Exhibit E - Form of Pledge Agreement Exhibit F - Form of Revolving Credit Note Exhibit G - Form of Swing Note Exhibit H-1 - Form of Revolving Credit Loan Request Exhibit H-2 - Form of Swing Loan Request Exhibit J - Requirements of Opinion of Counsel Exhibit K - Form of Opinion of Counsel (regarding New Subsidiaries) Exhibit L - Form of Compliance Certificate Exhibit M - Form of Confidentiality Agreement 73 AMENDED AND RESTATED CREDIT AGREEMENT THIS AMENDED AND RESTATED CREDIT AGREEMENT is dated as of January 23, 2001, and is made by and among FEDERATED INVESTORS, INC., a Pennsylvania corporation (the "BORROWER"), the BANKS (as hereinafter defined), PNC BANK, NATIONAL ASSOCIATION in its capacity as agent for the Banks under this Agreement (hereinafter referred to in such capacity as the "AGENT") and THE BANK OF NEW YORK, as syndication agent (the "SYNDICATION AGENT"). W I T N E S S E T H : WHEREAS, the Borrower has requested the Agent and the Banks to amend and restate the Senior Secured Credit Agreement, (the "EXISTING SENIOR CREDIT AGREEMENT") dated as of January 31, 1996 among the Borrower, the Banks set forth therein and the Agent, as amended, to provide to the Borrower a $150,000,000 revolving credit facility (the "REVOLVING CREDIT FACILITY"); and WHEREAS, the Revolving Credit Facility shall be used for general business purposes, including acquisitions; and WHEREAS, the Agent and the Banks are willing to amend and restate the Existing Senior Credit Agreement upon the terms and conditions hereinafter set forth. NOW, THEREFORE, the parties hereto, in consideration of their mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, amend and restate the Existing Senior Credit Agreement as follows: 1. CERTAIN DEFINITIONS 1.1 CERTAIN DEFINITIONS. ------------------- In addition to words and terms defined elsewhere in this Agreement, the following words and terms shall have the following meanings, respectively, unless the context hereof clearly requires otherwise: AFFILIATE as to any person shall mean any other person (i) which directly or indirectly controls, is controlled by, or is under common control with such person, (ii) which beneficially owns or holds five percent (5%) or more of any class of the voting stock of such person, or (iii) fifty percent (50%) or more of the voting stock (or in the case of a person which is not a corporation, fifty percent (50%) or more of the equity interest) of which is beneficially owned or held, directly or indirectly, by such person. AGENT shall mean PNC Bank, National Association and its successors. AGENT'S FEE shall have the meaning specified in Section 10.15. AGREEING BANKS shall have the meaning specified in Section 2.13(a). AGREEMENT shall mean this Senior Secured Credit Agreement, as amended and restated herein and as the same may be further supplemented, amended, restated or modified from time to time, including all schedules and exhibits. ASSIGNMENT AND ASSUMPTION AGREEMENT shall mean an Assignment and Assumption Agreement by and among a Purchasing Bank, the Transferor Bank and the Agent in the form of EXHIBIT A. AUDITED STATEMENTS shall have the meaning specified in Section 6.1(i). AUTHORIZED OFFICER shall mean those persons designated by written notice to the Agent from the Borrower, authorized to execute notices, reports and other documents required hereunder. The Borrower may amend such list of persons from time to time by giving written notice of such amendment to the Agent. BANKS shall mean the financial institutions named on SCHEDULE 1.1(A) and their respective successors and assigns as permitted hereunder, each of which is referred to herein as a Bank. BASE RATE shall mean the greater of (i) the interest rate per annum announced from time to time by the Agent at its Principal Office as its then prime rate, which rate may not be the lowest rate then being charged commercial borrowers by the Agent, or (ii) the Federal Funds Effective Rate plus one-half percent (0.50%) per annum. BASE RATE OPTION shall mean the Interest Rate Option set forth in Section 4.1(a). BASE RATE PORTION shall mean the portion of the Loans bearing interest at any time under the Base Rate Option. BENEFIT ARRANGEMENT shall mean at any time an "employee benefit plan," within the meaning of Section 3(3) of ERISA, which is neither a Defined Benefit Pension Plan nor a Multiemployer Plan, but which is maintained, sponsored or otherwise contributed to, by any member of the ERISA Group. Thus, a Benefit Arrangement includes, e.g., an "employee welfare benefit plan" within the meaning of Section 3(1) of ERISA, a money purchase pension plan, a funded deferred profit-sharing plan and an ESOP. BORROWER shall mean Federated Investors, Inc., a Pennsylvania -------- corporation. BORROWING DATE shall mean with respect to any Loan, the date for the making thereof or the renewal or conversion thereof to the same or a different Interest Rate Option, which shall be a Business Day, as specified in the relevant Loan Request. BORROWING TRANCHE shall mean, with respect to the Euro-Rate Portion, Loans to which a Euro-Rate Option applies by reason of the selection of, conversion to or renewal of such Interest Rate Option on the same day and having the same Euro-Rate Interest Period, and, with respect to the Base Rate Portion, Loans to which the Base Rate Option or PNC Quoted Rate Option applies by reason of the selection of or conversion to such Interest Rate Options. BUSINESS DAY shall mean (i) with respect to matters relating to the Euro-Rate Option, a day on which banks in the London interbank market are dealing in U.S. Dollar deposits and on which commercial banks are open for domestic and international business in Pittsburgh, Pennsylvania and New York, New York and (ii) with respect to any other matter, a day on which commercial banks are open for business in Pittsburgh, Pennsylvania and New York, New York. CLASS A SHARES shall mean the Class A Common Stock of the Borrower. CLASS B SHARES shall mean the Class B Common Stock of the Borrower. CLOSING DATE shall mean January 23, 2001. COBRA VIOLATION shall mean a failure by any of the Companies to comply with group health plan continuation coverage requirements of Sections 601 et seq. of ERISA. COLLATERAL shall mean the Pledged Collateral and the UCC Collateral. COMMITMENT shall mean, as to any Bank, its Revolving Credit Commitment, and COMMITMENTS shall mean the Revolving Credit Commitments of all of the Banks. COMMON SHARES shall mean the Class A Shares and Class B Shares. COMPANIES shall mean the Borrower and its Subsidiaries. CONSOLIDATED EBITDA for each fiscal quarter for the four (4) fiscal quarters then ended shall mean (i) the sum of net income, depreciation, amortization, other non-cash charges to net income (excluding any non-cash charges which require an accrual or reserve for cash charges for any future period), interest expense and income tax expense MINUS (ii) non-cash credits to net income, in each case of the Borrower and its Consolidated Subsidiaries for such period determined in accordance with GAAP; PROVIDED that if the Borrower and Consolidated Subsidiaries shall make one or more acquisitions of the capital stock of any Person or all or substantially all of the assets of any Person permitted by Section 8.2(j) during such period, Consolidated EBITDA for such period shall be adjusted on a PRO FORMA basis in a manner satisfactory to the Agent to give effect to all such acquisitions as if they had occurred at the beginning of such period. CONSOLIDATED SUBSIDIARIES shall mean and include those subsidiaries or other entities whose accounts are consolidated with the accounts of the Borrower in accordance with GAAP PROVIDED that for the purpose of calculating the financial ratios in Sections 8.2(a)-(c) the impact of the consolidation of any Special Purpose Subsidiary or entity to which Designated Assets are sold or assigned by a Special Purpose Subsidiary, in either case pursuant to the Master Agreement, the Purchase and Sale Agreement or any similar agreement or program and in accordance with Section 8.2(k)(i), shall be excluded. CONTROL or CONTROL shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, including the power to elect a majority of the directors or trustees of a corporation or trust, as the case may be. CONTROLLED GROUP shall mean (i) the controlled group of corporations as defined in Section 1563 of the Internal Revenue Code and regulations thereunder, and (ii) the group of trades or businesses under common control as defined in Section 414(c) of the Internal Revenue Code and regulations thereunder, in the case of either clause (i) or (ii), of which the Borrower or any Subsidiary is a part or may become a part. DEFINED BENEFIT PENSION PLAN shall mean at any time an employee pension benefit plan (including a Multiple Employer Plan but not a Multiemployer Plan) which is covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five (5) years been maintained by any entity which was at such time a member of the ERISA Group for employees of any entity which was at such time a member of the ERISA Group. DESIGNATED ASSETS shall mean the right to receive deferred sales charges, including 12b-1 and contingent deferred sales charges, and any comparable fees from a Fund relating to the sale of Fund shares or sales of other interest in or obligations of Funds and the maintenance of customer accounts, including shareholder servicing fees. DOLLAR, DOLLARS, U.S. DOLLARS and the symbol $ shall mean lawful ----------------------------- money of the United States of America. DOMESTIC SUBSIDIARIES shall mean any Subsidiary of the Borrower that is organized or incorporated under the Laws of any state or commonwealth in the United States of America. ENVIRONMENTAL COMPLAINT shall mean any written complaint setting forth a cause of action for personal or property damage or equitable relief arising under any Environmental Law, an order, notice of violation, citation, request for information issued pursuant to any Environmental Laws by an Official Body, a subpoena or other written notice of any type relating to, arising out of, or issued pursuant to any Environmental Law. ENVIRONMENTAL LAWS shall mean all federal, state, local or foreign laws and regulations, including permits, orders, judgments, consent decrees issued, or entered into, pursuant thereto, relating to pollution or protection of human health or the environment. ERISA shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect. ERISA GROUP shall mean, at any time, the Borrower and all members of a Controlled Group. ESOP shall mean an employee stock ownership plan. EURO-RATE shall mean with respect to the Loans comprising any Borrowing Tranche to which the Euro-Rate Option applies for any Euro-Rate Interest Period, the interest rate per annum determined by the Agent by dividing (the resulting quotient rounded upward, if necessary, to the nearest 1/100 of 1% per annum) (i) the rate of interest determined by the Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the average of the London interbank offered rates for U.S. Dollars quoted by the British Bankers' Association as set forth on Dow Jones Markets Service (formerly known as Telerate) (or appropriate successor or, if British Bankers' Association or its successor ceases to provide such quotes, a comparable replacement determined by the Agent) display page 3750 (or such other display page on the Dow Jones Market Service system as may replace display page 3750) two (2) Business Days prior to the first day of such Euro-Rate Interest Period for an amount comparable to such borrowing and having a borrowing date and a maturity comparable to such Euro-Rate Interest Period by (ii) a number equal to 1.00 MINUS the Euro-Rate Reserve Percentage. The Euro-Rate may also be expressed by the following formula: Euro-Rate = Average of London Interbank offered rates quoted by BBA as shown on Dow Jones Markets Service display page 3750 OR APPROPRIATE SUCCESSOR 1.00 - Euro-Rate Reserve Percentage EURO-RATE INTEREST PERIODS shall have the meaning specified in Section 4.2. EURO-RATE OPTION shall mean the Interest Rate Option set forth in Section 4.1(b). EURO-RATE PORTION shall mean the portion of the Revolving Credit Loans bearing interest at any time under the Euro-Rate Option. EURO-RATE RESERVE PERCENTAGE shall mean the maximum percentage (expressed as a decimal rounded upward to the nearest 1/100 of 1%) as determined by the Agent (which determination shall be conclusive absent manifest error) which is in effect during any relevant period (or, if more than one such percentage shall be applicable, the daily average of such percentages for those days in such period during which any such percentages shall be so applicable), as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including supplemental, marginal and emergency reserve requirements) with respect to eurocurrency funding (currently referred to as "EUROCURRENCY LIABILITIES") of a member bank in the Federal Reserve System. EVENT OF DEFAULT shall mean any of the Events of Default described in Section 9.1. EXISTING SENIOR CREDIT AGREEMENT shall have the meaning given to such term in the first recital clause. FACILITY FEE shall have the meaning specified in Section 2.3(a). FEDERAL FUNDS EFFECTIVE RATE for any day shall mean the rate per annum (based on a year of 360 days and actual days elapsed and rounded upward to the nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the "FEDERAL FUNDS EFFECTIVE RATE" as of the date of this Agreement; PROVIDED, if such Federal Reserve Bank (or its successor) does not announce such rate on any day, the "FEDERAL FUNDS EFFECTIVE RATE" for such day shall be the Federal Funds Effective Rate for the last day on which such rate was announced. FEDERATED BANK shall mean Federated Investors Trust Company, a state chartered bank under the laws of New Jersey. FOREIGN SUBSIDIARIES shall mean any Subsidiary of the Borrower that is not a Domestic Subsidiary. FUND FEES shall mean the management, administrative, shareholder services, 12b-1, back-end and other similar fees contractually due any of the Companies. FUNDS shall mean the mutual funds, collateralized bond obligation vehicles, collateralized mortgage obligation vehicles, investment conduits or other entities for which any of the Companies serves as an advisor, an administrator, a distributor, as servicer, a transfer agent, a portfolio or fund accountant, or a clearing servicer. GAAP shall mean generally accepted accounting principles as are in effect from time to time, subject to the provisions of Section 1.3, and applied on a consistent basis (except for changes in application in which the Borrower's independent certified public accountants concur) both as to classification of items and amounts. GOVERNMENTAL ACTS shall have the meaning given to such term in Section 2.10(h). GRANTORS shall mean the Borrower and certain of its Subsidiaries who are signatories to the Security Agreement as indicated in EXHIBIT B. GUARANTY of any person shall mean any obligation of such person guaranteeing or in effect guaranteeing any liability or obligation of any other person in any manner, whether directly or indirectly, including any agreement to indemnify or hold harmless any other person, any performance bond or other suretyship arrangement and any other form of assurance against loss, except endorsement of negotiable or other instruments for deposit or collection in the ordinary course of business. HISTORICAL STATEMENTS shall have the meaning specified in Section 6.1(i). INDEBTEDNESS shall mean as to any person at any time, any and all indebtedness, obligations or liabilities (whether matured or unmatured, liquidated or unliquidated, direct or indirect, absolute or contingent, or joint or several) of such person for or in respect of: (i) borrowed money, (ii) amounts raised under or liabilities in respect of any note purchase or acceptance credit facility, (iii) reimbursement obligations under any letter of credit, currency swap agreement, interest rate swap, cap, collar or floor agreement or other interest rate protection device, (iv) any other transaction (including forward sale or purchase agreements, capitalized leases and conditional sales agreements) having the commercial effect of a borrowing of money entered into by such person to finance its operations or capital requirements (but not including trade payables and accrued expenses incurred in the ordinary course of business which are not represented by a promissory note or other evidence of indebtedness and which are not more than thirty (30) days past due), or (v) any Guaranty of Indebtedness for borrowed money. INTERCOMPANY SUBORDINATION AGREEMENT shall mean the Intercompany Subordination Agreement in the form of EXHIBIT C executed and delivered by the Companies to the Agent for the benefit of the Banks, as amended, restated or supplemented from time to time in accordance with the terms thereof. INTERCREDITOR AGREEMENT (SENIOR NOTES) shall mean the Intercreditor and Collateral Agency Agreement between the Banks, the holders of the Senior Notes, and PNC, as collateral agent for the benefit of the Banks and the holders of the Senior Notes, dated as of June 15, 1996, as amended, restated or supplemented from time to time in accordance with the terms thereof. INTEREST PAYMENT DATE shall mean each date specified for the payment of interest in Section 5.3. INTEREST RATE OPTION shall mean the Euro-Rate Option, the Base Rate Option or the PNC Quoted Rate Option. INTERIM STATEMENTS shall have the meaning specified in Section 6.1(i). INTERNAL REVENUE CODE shall mean the Internal Revenue Code of 1986, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect. INVESTLINK shall mean Investlink Technologies, Inc., an indirect ---------- Subsidiary of the Borrower. INVESTMENT COMPANY ACT shall mean the Investment Company Act of 1940, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect. IRS shall mean the Internal Revenue Service. LABOR CONTRACTS shall have the meaning specified in Section 6.1(u). LAW shall mean any law (including common law), constitution, statute, treaty, regulation, rule, ordinance, opinion, release, ruling, order, injunction, writ, decree or award of any Official Body. LETTER OF CREDIT shall have the meaning assigned to that term in Section 2.10(a). LETTER OF CREDIT FEE shall have the meaning assigned to that term in Section 2.10(c). LETTER OF CREDIT FRONTING FEE shall have the meaning assigned to that term in Section 2.10(c). LETTER OF CREDIT OUTSTANDINGS shall mean at any time the sum of (i) the aggregate undrawn face amount of outstanding Letters of Credit and (ii) the aggregate amount of all unpaid and outstanding Reimbursement Obligations. LEVERAGE RATIO shall mean the ratio of Total Indebtedness to Consolidated EBITDA. LIEN shall mean any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature whatsoever, whether voluntarily or involuntarily given, including any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security and any filed financing statement or other notice of any of the foregoing (whether or not a lien or other encumbrance is created or exists at the time of the filing). LIMITED INVESTMENTS shall mean the following: (i) investments or contributions by a Loan Party directly or indirectly in the capital stock of or other payments (except in connection with transactions for fair value in the ordinary course of business, including usual and customary service and occupancy contracts) to any of the Special Purpose Subsidiaries, (ii) loans by a Loan Party directly or indirectly to any of the Special Purpose Subsidiaries, (iii) guarantees by a Loan Party directly or indirectly of the obligations of any of the Special Purpose Subsidiaries, or (iv) other obligations, contingent or otherwise, of the Loan Parties to or for the benefit of any of the Special Purpose Subsidiaries. LOAN PARTIES shall mean the Pledgors and the Companies. LOAN REQUEST shall mean a Revolving Credit or Swing Loan Request made in accordance with Section 2.6(a) or 2.6(b) respectively, or, with respect to a Revolving Credit Loan, a request to select, convert to or renew a Euro-Rate Option in accordance with Section 4.2. LOANS shall mean collectively and LOAN shall mean separately all Revolving Credit Loans, Swing Loans and Term Loans or any Revolving Credit Loan Swing Loan or Term Loan. MASTER AGREEMENT shall mean the Federated Investors Program ---------------- Master Agreement dated as of October 24, 1997, among Federated Investors, Federated Funding 1997-1, Inc., Federated Investors Management Company, Federated Securities Corp., the Owner Trustee of the PLT Finance Trust 1997-1, PLT Finance, L.P., Putnam, Lovell & Thorton Inc., and Bankers Trust Company, as amended or replaced from time to time as permitted under this Agreement. MATERIAL ADVERSE CHANGE shall mean any set of circumstances or events which (i) has or could reasonably be expected to have any material adverse effect whatsoever upon the validity or enforceability of this Agreement or any other Senior Loan Document, (ii) is or could reasonably be expected to be material and adverse to the business, properties, assets, financial condition, results of operations or prospects of the Companies, (iii) impairs materially or could reasonably be expected to impair materially the ability of any of the Companies to pay punctually its Indebtedness or perform any other obligations in connection with its Indebtedness, or (iv) impairs materially or could reasonably be expected to impair materially the ability of the Agent or any of the Banks, to the extent permitted, to enforce their legal remedies pursuant to this Agreement or any other Senior Loan Document. MONTH, with respect to a Euro-Rate Interest Period, shall mean the interval between the days in consecutive calendar months numerically corresponding to the first day of such Euro-Rate Interest Period. Any Euro-Rate Interest Period which begins on the last Business Day of a calendar month for which there is no numerically corresponding Business Day in the subsequent calendar month shall end on the last Business Day of such subsequent month. MULTIEMPLOYER PLAN shall mean any employee benefit plan which is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to which the Borrower, any Subsidiary of the Borrower or any member of the ERISA Group is then making or accruing an obligation to make contributions or, within the preceding five (5) plan years, has made or had an obligation to make such contributions. MULTIPLE EMPLOYER PLAN shall mean a Defined Benefit Pension Plan which has two (2) or more contributing sponsors (including the Borrower or any member of the ERISA Group) at least two (2) of whom are not under common control, as such a plan is described in Sections 4063 and 4064 of ERISA. NON-AGREEING BANKS shall have the meaning specified in Section 2.13(a). NOTES shall mean the Revolving Credit Notes, the Term Notes and the Swing Note. OFFICIAL BODY shall mean any national, federal, state, local or other government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic. PASSPORT shall mean Passport Research Ltd., an indirect -------- Subsidiary of the Borrower. PBGC shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor. PERMITTED INVESTMENTS shall mean: (i) investments made under usual and customary terms in the ordinary course of business in or relating to the establishment or maintenance of the Funds; (ii) direct obligations of the United States of America or any agency or instrumentality thereof or obligations backed by the full faith and credit of the United States of America, maturing in sixty (60) months or less from the date of acquisition; (iii).commercial paper maturing in one hundred eighty (180) days or less rated not lower than A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors Service on the date of acquisition; (iv)..demand deposits, time deposits or certificates of deposit maturing within five (5) years in commercial banks whose obligations are rated A-1, P-1 or the equivalent or better by Standard & Poor's Corporation or Moody's Investors Service on the date of acquisition; (v)...corporate obligations rated A or better by Standard & Poor's Corporation or Moody's Investors Service on the date of acquisition, maturing in sixty (60) months or less from the date of acquisition; (vi)..repurchase agreements and reverse repurchase agreements maturing within one (1) year and entered into with commercial banks or investment banking firms of recognized standing with respect to any investment permitted under clauses (i) through (v) above; (vii).any interest rate protection instrument reasonably acceptable to the Agent; (viii) any Fund (A) for which any of the Companies serves as an investment advisor or (B) for which none of the Companies serves as an investment advisor, PROVIDED that the aggregate investment in Funds governed by clause (B) shall not exceed $20,000,000 at any one time; and (ix)..any money market fund with minimum investment amounts of not less than $250,000. PERMITTED LIENS shall mean: (i)...Liens for taxes, assessments, or similar charges, incurred in the ordinary course of business and which are not yet due and payable; (ii)..pledges or deposits made in the ordinary course of business to secure payment of workmen's compensation, or to participate in any fund in connection with workmen's compensation, unemployment insurance, old-age pensions or other social security programs; (iii).Liens of mechanics, materialmen, warehousemen, carriers, or other like liens, securing obligations incurred in the ordinary course of business that are not yet due and payable and Liens of landlords securing obligations to pay lease payments that are not yet due and payable or in default; (iv)..(A) good-faith pledges or deposits made in the ordinary course of business to secure performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases, not in excess of the aggregate amount due thereunder, or to secure statutory obligations, or surety, appeal, indemnity, performance or other similar bonds required in the ordinary course of business and (B) Liens granted to surety companies or to financial institutions to secure standby letters of credit issued by such institutions to surety companies as an inducement for such surety companies to issue or maintain existing surety, appeal, indemnity, performance or other similar bonds required in the ordinary course of business; (v)...encumbrances consisting of zoning restrictions, easements or other restrictions on the use of real property, none of which materially impairs the use of such property or the value thereof, and none of which is violated in any material respect by existing or proposed structures or land use; (vi)..Liens, security interests and mortgages in favor of (A) the Agent for the benefit of the Banks and (B) the holders of the Senior Notes PROVIDED, any liens, security interests or mortgages in favor of the holders or the Senior Notes shall relate only to the Collateral or any portion thereof and not to any other assets or property of any nature not included in the Collateral, PROVIDED further that after the Agent and the Banks have released the Collateral pursuant to Section 2.14, any Liens, security interests and mortgages in favor of the holders of Senior Notes shall not be Permitted Liens; (vii).any Lien existing on the date of this Agreement and described on SCHEDULE 8.2(E), PROVIDED that the principal amount secured thereby as of the Closing Date is not hereafter increased and no additional assets become subject to such Lien; (viii) operating leases; (ix)..capital leases made under usual and customary terms in the ordinary course of business and Purchase Money Security Interests as and to the extent permitted in Section 8.2(e)(iii); and (x)...the following, (A) if the validity or amount thereof is being contested in good faith by appropriate and lawful proceedings diligently conducted so long as levy and execution thereon have been stayed and continue to be stayed or (B) if a final judgment is entered and such judgment is discharged within thirty (30) days of entry, and in either case they do not affect the Collateral or result in a Material Adverse Change: (1) claims or Liens for taxes, assessments or charges due and payable and subject to interest or penalty, PROVIDED that each of the Companies maintains such reserves or other appropriate provisions as shall be required by GAAP and pays all such taxes, assessments or charges forthwith upon the commencement of proceedings to foreclose any such Lien; (2) claims, Liens or encumbrances upon, and defects of title to, real or personal property other than the Collateral, including any attachment of personal or real property or other legal process prior to adjudication of a dispute on the merits; (3) claims or Liens of mechanics, materialmen, warehousemen, carriers, or other statutory nonconsensual Liens; or (4) Liens of governmental entities arising under federal or state environmental laws. PERSON or PERSON shall mean any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, joint venture, government or political subdivision or agency thereof, or any other entity. PLEDGE AGREEMENT shall mean the Pledge Agreement in the form of EXHIBIT E executed and delivered by the Pledgors to the Agent for the benefit of the Banks as security for the Loans, as amended, restated or supplemented from time to time in accordance with the terms thereof. PLEDGED COLLATERAL shall mean that portion of the Collateral which consists of the issued and outstanding shares of capital stock, beneficial interests or partnership interests of the Companies and related items which are pledged under the Pledge Agreement. PLEDGED SHARES shall mean that portion of the Pledged Collateral which consists of all of the issued and outstanding Class A Shares. PLEDGED SUBSIDIARY shall mean a Subsidiary (other than Passport) of the Borrower whose outstanding capital stock or shares of beneficial interest or partnership interests are pledged to the Agent for the benefit of the Banks under the Pledge Agreement. PLEDGING SUBSIDIARIES shall mean FII Holdings, Inc., Federated Services Company, Federated International Holdings, BV (subject to Section 8.1(l) and any Subsidiaries of the Borrower which join the Pledge Agreement after the date hereof pursuant to Section 8.1(l). PLEDGORS shall mean the Borrower, the Pledging Subsidiaries and the holders of the Class A Shares. PNC shall mean PNC Bank, National Association and its successors and assigns. PNC QUOTED RATE OPTION shall mean the Interest Rate Option set forth in Section 4.1(b-1). POTENTIAL DEFAULT shall mean any event or condition which with notice, passage of time or a determination by the Agent, all the Banks or the Required Banks, or any combination of the foregoing, as the case may be, would constitute an Event of Default. PREFERRED SHARES shall mean the Preferred Stock of the Borrower. PRINCIPAL OFFICE shall mean the main banking office of the Agent in Pittsburgh, Pennsylvania. PRIOR SECURITY INTEREST shall mean a valid and enforceable perfected first priority security interest under the Uniform Commercial Code in the UCC Collateral and the Pledged Collateral which is subject only to Liens for taxes not yet due and payable to the extent such prospective tax payments are given priority by statute as permitted hereunder. PROHIBITED TRANSACTION shall mean any prohibited transaction as defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA for which neither an individual nor a class exemption has been issued by the United States Department of Labor. PURCHASE AND SALE AGREEMENT shall mean the Purchase and Sale --------------------------- Agreement dated as of December 21, 2000 by and among Federated Investors Management Company, Federated Securities Corp., Federated Funding 1997-1, Inc., Federated Investors, Inc., Citibank, N.A., and Citicorp North America, Inc. PURCHASE MONEY SECURITY INTEREST shall mean Liens upon tangible personal property securing loans to any Loan Party or Subsidiary of a Loan Party or deferred payments by such Loan Party or Subsidiary for the purchase of such tangible personal property. PURCHASING BANK shall mean a Bank which becomes a party to this Agreement by executing an Assignment and Assumption Agreement. RATABLE SHARE shall mean the proportion that a Bank's Commitment bears to the Commitments of all the Banks. REGULATION U shall mean Regulation U, T, G or X as promulgated by the Board of Governors of the Federal Reserve System, as amended from time to time. REIMBURSEMENT OBLIGATIONS shall have the meaning given to such term in Section 2.10(d)(i). REPORTABLE EVENT shall mean (i) a reportable event described in Section 4043 of ERISA and regulations thereunder with respect to a Defined Benefit Pension Plan, (ii) a withdrawal by a substantial employer from a Defined Benefit Pension Plan to which more than one employer contributes, as referred to in Section 4063(b) of ERISA, or (iii) a cessation of operations at a facility causing more than twenty percent (20%) of plan participants to be separated from employment, as referred to in Section 4062(f) of ERISA. REQUIRED BANKS shall mean (i) if there are no Loans outstanding, Banks whose Commitments aggregate at least 51% of the total Commitments of all Banks, or (ii) if there are Loans outstanding, Banks, the total principal amount of whose Loans outstanding aggregate at least 51% of the total principal amount of the Loans outstanding hereunder as of the immediately preceding Settlement Date. RESTRICTED STOCK shall mean the Class B Shares issued under and in accordance with the Federated Investors Employee Restricted Stock Plan. REVOLVING CREDIT COMMITMENT shall mean, as to any Bank at any time, the amount initially set forth opposite its name on SCHEDULE 1.1(A) in the column labeled "Amount of Commitment for Revolving Credit Loans" and thereafter on Schedule I to the most recent Assignment and Assumption Agreement, and REVOLVING CREDIT COMMITMENTS shall mean the aggregate Revolving Credit Commitments of all of the Banks. REVOLVING CREDIT EXPIRATION DATE shall mean the date 364 days after the Closing Date or such later date as determined pursuant to Section 2.13(a). REVOLVING CREDIT FACILITY shall have the meaning given to such term in the first recital clause. REVOLVING CREDIT LOAN REQUEST shall mean a request for Revolving Credit Loans made in accordance with Section 2.6(a). REVOLVING CREDIT LOANS shall mean collectively all, and Revolving Credit Loan shall mean separately any, of the revolving credit loans made by the Banks or one of the Banks to the Borrower pursuant to Section 2.1(a). REVOLVING CREDIT NOTES shall mean collectively all, and REVOLVING CREDIT NOTE shall mean separately any, of the Revolving Credit Notes of the Borrower in the form of EXHIBIT F, evidencing the Revolving Credit Loans, together with all amendments, restatements, extensions, renewals, replacements, refinancings or refundings thereof in whole or in part. REVOLVING FACILITY USAGE shall mean at any time the sum of the Revolving Credit Loans and Swing Loans outstanding and the Letter of Credit Outstandings. SECTION 12B-1 PLAN shall mean a plan of distribution adopted by a mutual fund pursuant to Rule 12b-1 of the Investment Company Act. SECURITY AGREEMENT shall mean the Security Agreement in the form of EXHIBIT B executed and delivered by the Grantors to the Agent for the benefit of the Banks as security for the Loans, as amended, restated or supplemented from time to time in accordance with the terms thereof. SENIOR LOAN DOCUMENTS shall mean this Agreement, the Notes, the Intercompany Subordination Agreement, the Security Agreement, the Pledge Agreement, the Intercreditor Agreement (Senior Notes) and any other instruments, certificates, powers of attorney or documents delivered or contemplated to be delivered thereunder or in connection herewith, as the same may be supplemented or amended from time to time in accordance herewith, and SENIOR LOAN DOCUMENT shall mean any of the Senior Loan Documents. SENIOR NOTES shall mean those certain 7.96% Senior Secured Notes due 2006. SETTLEMENT DATE shall mean the second Business Day of each month and the third Wednesday of each month (if such day is a Business Day and if not, the next succeeding Business Day) and any other Business Day on which the Agent elects to effect settlement pursuant to Section 5.6. SHAREHOLDER RIGHTS AGREEMENT shall mean the Shareholder Rights Agreement dated August 1, 1989 among Standard Fire, the Borrower and the persons executing a letter substantially in the form of EXHIBIT A thereto, as amended through the Closing Date and as the same may be further amended from time to time in accordance herewith. SOLVENT shall mean, with respect to any person on a particular date, that on such date (i) the fair value of the property of such person is greater than the total amount of liabilities, including contingent liabilities, of such person, (ii) the present fair salable value of the assets of such person is not less than the amount that will be required to pay the probable liability of such person on its debts as they become absolute and matured, (iii) such person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (iv) such person does not intend to, and does not believe that it will, incur debts or liabilities beyond such person's ability to pay as such debts and liabilities mature, and (v) such person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such person's property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such person is engaged. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. SPECIAL PURPOSE SUBSIDIARY shall mean any corporation, business trust or other entity formed by the Borrower to engage in the limited activities permitted by Section 8.2(p)(i) and shall be an indirect wholly owned subsidiary of the Borrower, PROVIDED, that if the Special Purpose Subsidiary is organized under the law of a foreign jurisdiction which requires that residents of such foreign jurisdiction maintain a certain level of ownership interest in such Special Purpose Subsidiary, then a wholly owned Subsidiary of the Borrower shall own a number of outstanding shares of such Special Purpose Subsidiary that is not less than the greater of (i) 51% of the outstanding shares of such Special Purpose Subsidiary and (ii) the number of outstanding shares of such Special Purpose Subsidiary required pursuant to the law of such foreign jurisdiction. SUBSIDIARY of any person at any time shall mean (i) any corporation or trust of which fifty percent (50%) or more (by number of shares or number of votes) of the outstanding capital stock or shares of beneficial interest normally entitled to vote for the election of one or more directors or trustees (regardless of any contingency which does or may suspend or dilute the voting rights) is at such time owned directly or indirectly by such person or one or more of such person's Subsidiaries, or any partnership of which such person is a general partner or of which fifty percent (50%) or more of the partnership interests is at the time directly or indirectly owned by such person or one or more of such person's Subsidiaries, and (ii) any corporation, trust, partnership or other entity which is controlled or capable of being controlled by such person or one or more of such person's Subsidiaries. For the purposes of this Agreement, none of the Special Purpose Subsidiaries or the Funds shall be considered a "Subsidiary" of the Borrower. For the purposes of this Agreement, the term "wholly owned Subsidiaries" shall include (x) all Subsidiaries of which all of the outstanding shares of capital stock or beneficial interest of such Subsidiary are owned by the Borrower or another wholly owned Subsidiary of the Borrower, or (v) foreign Subsidiaries where the law of the applicable foreign jurisdiction requires that residents of such foreign jurisdiction maintain a certain level of ownership interest in such Subsidiary and the Borrower or another wholly owned Subsidiary of the Borrower owns not less than the greater of (a) 51% of the outstanding shares of capital stock or beneficial interests of such Subsidiary and (B) the number of outstanding shares of capital stock or beneficial interests of such Subsidiary required pursuant to the law of such foreign jurisdiction are owned by the Borrower or another wholly owned Subsidiary of the Borrower. SUBSIDIARY SHARES shall have the meaning specified in Section 6.1(c). SUPERMAJORITY BANKS shall have the meaning specified in Section 2.13(a). SWING LOAN COMMITMENT shall mean PNC's commitment to make Swing Loans to the Borrower pursuant to Section 2.1(b) in an aggregate principal amount up to $20,000,000. SWING LOAN REQUEST shall mean a request for Swing Loans made in accordance with Section 2.6(b). SWING LOANS shall mean collectively and SWING LOAN shall mean separately all swing loans or any swing loan made by PNC to the Borrower pursuant to Section 2.1(b). SWING NOTE shall mean the Swing Note of the Borrower in the form of EXHIBIT G, evidencing the Swing Loans, together with all amendments, extensions, renewals, restatements, refinancings or refundings thereof in whole or in part. TERM LOANS shall mean collectively and TERM LOAN shall mean separately all term loans or any term loan made by the Banks or one of the Banks pursuant to Section 2.12. TERM NOTE shall have the meaning specified in Section 2.12. TERM-OUT OPTION shall have the meaning specified in Section 2.12. TOTAL INDEBTEDNESS shall mean, for any fiscal quarter for the fiscal quarter then ended, all Indebtedness of the Borrower and its Consolidated Subsidiaries. TRANSFEROR BANK shall mean the selling Bank pursuant to an Assignment and Assumption Agreement. UCC COLLATERAL shall mean that portion of the Collateral which consists of the property of the Companies in which security interests are granted under the Security Agreement. UNIFORM COMMERCIAL CODE shall have the meaning assigned to that term in Section 6.1(p). UNPLEDGED SHARES shall mean all of the issued and outstanding shares of capital stock of the Borrower other than the Class A Shares. USAGE FEE shall have the meaning specified in Section 2.3(b). 1.2 CONSTRUCTION. ------------ Unless the context of this Agreement otherwise clearly requires, references to the plural include the singular, the singular the plural, and the part the whole, "or" has the inclusive meaning represented by the phrase "and/or," and "including" has the meaning represented by the phrase "including without limitation." References in this Agreement to "determination" of or by the Agent or the Banks shall be deemed to include good-faith estimates by the Agent or the Banks (in the case of quantitative determinations) and good-faith beliefs by the Agent or the Banks (in the case of qualitative determinations). Whenever the Agent or the Banks are granted the right herein to act in its or their sole discretion or to grant or withhold consent, such right shall be exercised in good faith. The words "hereof," "herein," "hereunder" and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. The section headings and other headings contained in this Agreement and the Table of Contents preceding this Agreement are for reference purposes only and shall not control or affect the construction of this Agreement or the interpretation thereof in any respect. Section, subsection, schedule and exhibit references are to this Agreement unless otherwise specified. 1.3 ACCOUNTING PRINCIPLES. --------------------- Except as otherwise provided in this Agreement, all computations and determinations as to accounting or financial matters and all financial statements to be delivered pursuant to this Agreement shall be made and prepared in accordance with GAAP (including principles of consolidation where appropriate), and all accounting or financial terms shall have the meanings ascribed to such terms by GAAP provided that for the purpose of determining compliance with Section 8.2(e) and (f), the impact of the incurrence of indebtedness or creation of liens in connection with the sale or transfer of Designated Assets as described and permitted under Section 8.2(k)(i) shall be excluded. If one or more changes in GAAP after the date of this Agreement are required to be applied to then existing transactions, and either a violation of one or more provisions hereof shall have occurred which would not have occurred if no change in accounting principles had taken place or a violation of one or more of the provisions hereof shall not occur which would have occurred if no change in accounting principles had taken place: (a) the parties agree that any such violation shall not be considered to constitute an Event of Default for a period of thirty (30) days; (b) the parties agree in such event to negotiate in good faith to attempt to draft an amendment of this Agreement satisfactory to the Required Banks which shall approximate to the extent possible the economic effect of the original provisions hereof after taking into account such change or changes in GAAP; and (c) if the parties are unable to negotiate such an amendment satisfactory to the Required Banks within thirty (30) days, then as used in this Agreement "GAAP" shall mean generally accepted accounting principles as in effect prior to such change. 2. REVOLVING CREDIT AND SWING LOAN FACILITIES 2.1 THE COMMITMENTS. --------------- (a) REVOLVING CREDIT COMMITMENTS. Subject to the terms and conditions hereof and relying upon the representations and warranties herein set forth, each Bank severally agrees to make Revolving Credit Loans to the Borrower at any time or from time to time on or after the date hereof to, but not including, the Revolving Credit Expiration Date in an aggregate principal amount not to exceed, at any one time such Bank's Revolving Credit Commitment MINUS such Bank's Ratable Share of the Letter of Credit Outstandings. Within such limits of time and amount and subject to the other provisions of this Agreement, the Borrower may borrow, repay and reborrow pursuant to this Section 2.1(a). (b) SWING LOAN COMMITMENT. Subject to the terms and conditions hereof and relying upon the representations and warranties herein set forth, and in order to facilitate loans and repayments between Settlement Dates, PNC may make, at its option, cancelable at any time for any reason whatsoever, swing loans (the "SWING LOANS") to the Borrower at any time or from time to time after the date hereof to, but not including, the Revolving Credit Expiration Date in an aggregate principal amount up to $20,000,000 (the "SWING LOAN COMMITMENT"), PROVIDED that the aggregate principal amount of PNC's Swing Loans and the Revolving Credit Loans of all the Banks at any one time outstanding shall not exceed the Revolving Credit Commitments of all the Banks. Within such limits of time and amount and subject to the other provisions of this Agreement, the Borrower may borrow, repay and reborrow pursuant to this Section 2.1(b). 2.2 NATURE OF THE BANKS' AND THE BORROWER'S OBLIGATIONS. --------------------------------------------------- Each Bank shall be obligated to participate in each request for Revolving Credit Loans pursuant to Section 2.6 in accordance with its Ratable Share. The aggregate of each Bank's Revolving Credit Loans outstanding hereunder to the Borrower at any time shall never exceed its Revolving Credit Commitment MINUS its Ratable Share of the Letter of Credit Outstandings at such time. The obligations of each Bank hereunder are several. The failure of any Bank to perform its obligations hereunder shall not affect the obligations of the Borrower to any other party nor shall any other party be liable for the failure of such Bank to perform its obligations hereunder. The Banks shall have no obligation to make Revolving Credit Loans hereunder on or after the Revolving Credit Expiration Date. 2.3 FEES. ---- (a) FACILITY FEES. ------------- Accruing from the Closing Date until the Revolving Credit Expiration Date, the Borrower agrees to pay to the Agent for the account of each Bank, as consideration for such Bank's Revolving Credit Commitment hereunder, a facility fee (the "FACILITY FEE") equal to a percentage per annum (computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed) equal to 0.10% of such Bank's Revolving Credit Commitment as the same may be constituted from time to time All Facility Fees shall be payable in arrears on the second Business Day of each April, July, October and January after the date hereof and on the Revolving Credit Expiration Date or upon acceleration of the Notes. (b) USAGE FEES. Accruing from the Closing Date until the Revolving Credit Expiration Date, the Borrower agrees to pay to the Agent for the account of each Bank, as consideration for such Bank's Revolving Credit Commitment hereunder, a usage fee (the "USAGE FEE") equal to a percentage per annum (computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed) equal to 0.125% of the daily amount of the Revolving Facility Usage for each day that the Revolving Facility Usage exceeds fifty percent (50%) of the Revolving Credit Commitments (for purposes of this computation, PNC's Swing Loans shall be deemed to be borrowed amounts under its Revolving Credit Commitment and Letter of Credit Outstandings shall be deemed to be borrowed amounts under each Bank's Revolving Credit Commitments in accordance with its Ratable Share). All Usage Fees shall be payable in arrears on the second Business Day of each April, July, October and January after the date hereof and on the Revolving Credit Expiration Date or upon acceleration of the Notes. 2.4 PERMANENT REDUCTIONS OF COMMITMENTS. ----------------------------------- (a) VOLUNTARY REDUCTIONS. The Borrower shall be permitted, without premium or penalty, at any time upon five (5) Business Day's notice to the Agent, to reduce permanently the Revolving Credit Commitments in an aggregate amount of not less than $5,000,000 and in integral multiples of $1,000,000 for amounts in excess of $5,000,000, and each Bank's Revolving Credit Commitments shall be reduced in accordance with its Ratable Share; PROVIDED, HOWEVER, the principal amount of all Revolving Credit Loans outstanding at any time shall not be permitted to exceed the Revolving Credit Commitments of all the Banks at such time. (b) EFFECT OF REDUCTIONS. After each such reduction, the Facility Fee and the Usage Fee shall be calculated upon the Revolving Credit Commitments of the Banks as so reduced, and the amount of the reduction of the Revolving Credit Commitments may not be reinstated. 2.5 [INTENTIONALLY OMITTED] 2.6 LOAN REQUESTS. ------------- (a) REVOLVING CREDIT LOAN REQUESTS. Except as otherwise provided herein, the Borrower may from time to time prior to the Revolving Credit Expiration Date request the Banks to make Revolving Credit Loans, or renew or convert the Interest Rate Option applicable to existing Revolving Credit Loans, by the delivery to the Agent, not later than 2:00 p.m. Pittsburgh time (i) three (3) Business Days prior to the proposed Borrowing Date with respect to the making of Revolving Credit Loans to which the Euro-Rate Option applies or the conversion to or the renewal of the Euro-Rate Option for any Revolving Credit Loans; and (ii) not later than 11:00 a.m. Pittsburgh time on the proposed Borrowing Date with respect to the making of a Revolving Credit Loan to which the Base Rate Option applies or the last day of the preceding Euro-Rate Interest Period with respect to the conversion to the Base Rate Option for any Revolving Credit Loan, of a duly completed request therefor substantially in the form of EXHIBIT H-1 or a request by telephone immediately confirmed in writing by letter, facsimile or telex (each, a "REVOLVING CREDIT LOAN Request"), it being understood that the Agent may rely on the authority of any person making such a telephonic request without the necessity of receipt of such written confirmation. Each Revolving Credit Loan Request shall be irrevocable and shall specify (i) the proposed Borrowing Date; (ii) the aggregate principal amount of the proposed Revolving Credit Loans comprising the Borrowing Tranche, which shall be in integral multiples of $50,000 and not less than $5,000,000 for Revolving Credit Loans to which the Euro-Rate Option applies and not less than the lesser of $1,000,000 or the maximum amount available under the Revolving Credit Commitments for Revolving Credit Loans to which the Base Rate Option applies; (iii) whether the Euro-Rate Option or the Base Rate Option shall apply to the proposed Revolving Credit Loans comprising the Borrowing Tranche; and (iv) in the case of Revolving Credit Loans to which the Euro-Rate Option applies, an appropriate Euro-Rate Interest Period for the proposed Revolving Credit Loans comprising the Borrowing Tranche. If no such notice is given at least three (3) Business Days prior to the expiration of any Euro-Rate Interest Period for any Revolving Credit Loan or portion thereof, the Borrower shall be deemed to have converted such Revolving Credit Loan or portion thereof to the Base Rate Option commencing upon the last day of that Euro-Rate Interest Period. (b) SWING LOAN REQUESTS. Except as otherwise provided herein, the Borrower may from time to time prior to the Revolving Credit Expiration Date request PNC to make Swing Loans by delivery to PNC not later than 3:00 p.m. Pittsburgh time on the proposed Borrowing Date of a duly completed request therefor substantially in the form of EXHIBIT H-2 or a request by telephone immediately confirmed in writing by letter, facsimile or telex (each, a "SWING LOAN REQUEST"), it being understood that the Agent may rely on the authority of any person making such a telephonic request without the necessity of receipt of such written confirmation. Each Swing Loan Request shall be irrevocable and shall specify (i) the proposed Borrowing Date (ii) whether the Base Rate Option or the PNC Quoted Rate Option shall apply and (iii) the principal amount of such Swing Loan, which shall not be less than $100,000. PNC shall use reasonable efforts to inform the Borrower by 12:00 noon (Pittsburgh time) on each Business Day as to what the PNC Quoted Rate Option is on such Business Day. If PNC has not informed the Borrower as to the PNC Quoted Rate Option available on any Business Day, the Borrower may also telephone PNC on any Business Day to request PNC to provide the Borrower with the PNC Quoted Rate Option available on such Business Day, and PNC shall promptly respond to such request. If the Borrower elects the PNC Quoted Rate Option to apply with respect to any Swing Loan, such PNC Quoted Rate Option will be in effect until 3:00 p.m. (Pittsburgh time) on the following Business Day. 2.7 MAKING LOANS. ------------ (a) REVOLVING CREDIT LOANS. The Agent shall, promptly after receipt by it of a Revolving Credit Loan Request pursuant to Section 2.6(a), notify the Banks of its receipt of such Revolving Credit Loan Request specifying: (i) the proposed Borrowing Date and the time and method of disbursement of such Revolving Credit Loan; (ii) the amount and type of such Revolving Credit Loan and the applicable Euro-Rate Interest Period (if any); and (iii) the apportionment among the Banks of the Revolving Credit Loans as determined by the Agent in accordance with Section 2.2. Each Bank shall remit the principal amount of each Revolving Credit Loan to the Agent such that the Agent is able to, and the Agent shall, to the extent the Banks have made funds available to it for such purpose, fund such Revolving Credit Loan to the Borrower in U.S. Dollars and immediately available funds at the Principal Office prior to 3:00 p.m. Pittsburgh time on the Borrowing Date; PROVIDED that if any Bank fails to remit such funds to the Agent in a timely manner the Agent may elect in its sole discretion to fund with its own funds the Revolving Credit Loan of such Bank on the Borrowing Date; PROVIDED, FURTHER, that such funding by the Agent shall not be deemed to increase the Revolving Credit Commitment of the Agent or to reduce the Revolving Credit Commitment of such Bank. (b) SWING LOANS. So long as PNC elects to make Swing Loans, PNC shall, after receipt by it of a Swing Loan Request pursuant to Section 2.6(b), fund such Swing Loan to the Borrower in U.S. Dollars and immediately available funds at the Principal Office prior to 5:00 p.m. Pittsburgh time on the Borrowing Date; PROVIDED that after PNC receives notice of default as set forth in Section 10.9, PNC shall not make any Swing Loans. 2.8 BORROWINGS TO REPAY SWING LOANS. ------------------------------- PNC may at its option, exercisable at any time for any reason whatsoever, demand repayment of the Swing Loans, and each Bank shall make a Revolving Credit Loan in an amount equal to such Bank's Ratable Share of the aggregate principal amount of the outstanding Swing Loans plus, if PNC so requests, accrued interest thereon, PROVIDED that no Bank shall be obligated in any event to make Revolving Credit Loans in excess of its Revolving Credit Commitment MINUS its Ratable Share of the Letter of Credit Outstandings. Revolving Credit Loans made pursuant to the preceding sentence shall bear interest at the Base Rate Option and shall be deemed to have been properly requested in accordance with Section 2.6(a) without regard to any of the requirements of that provision. PNC shall provide notice to the Banks (which may be telephonic or written notice by letter, facsimile or telex) that such Revolving Credit Loans are to be made under this Section 2.8 and of the apportionment among the Banks, and the Banks shall be unconditionally obligated to fund such Revolving Credit Loans (whether or not the conditions specified in Section 7.2 are then satisfied) by the time PNC so requests, which shall not be earlier than 3:00 p.m. Pittsburgh time on the Business Day next succeeding the date the Banks receive such notice from PNC. 2.9 NOTES. ----- (a) REVOLVING CREDIT NOTES. The obligation of the Borrower to repay the aggregate unpaid principal amount of the Revolving Credit Loans made to it by each Bank together with interest thereon shall be evidenced by a promissory note of the Borrower dated the Closing Date in the form of EXHIBIT F payable to the order of each Bank in a face amount equal to the Revolving Credit Commitment of such Bank. The Revolving Credit Notes shall be payable in full on the Revolving Credit Expiration Date or earlier acceleration of the Notes. (b) SWING NOTE. The obligation of the Borrower to repay the unpaid principal amount of the Swing Loans made to it by PNC together with interest thereon shall be evidenced by a demand promissory note of the Borrower dated the Closing Date in the form of EXHIBIT G payable to the order of PNC in a face amount equal to the Swing Loan Commitment. 2.10 LETTER OF CREDIT SUBFACILITY. ---------------------------- (a) ISSUANCE OF LETTERS OF CREDIT. The Borrower may request the issuance of a letter of credit (each a "LETTER OF CREDIT") on behalf of itself or another Company by delivering to the Agent a completed application and agreement for letters of credit in such form as the Agent may specify from time to time by no later than 10:00 a.m. Pittsburgh time at least three (3) Business Days, or such shorter period as may be agreed to by the Agent, in advance of the proposed date of issuance. Subject to the terms and conditions hereof and in reliance on the agreements of the other Banks set forth in this Section 2.10, the Agent will issue a Letter of Credit PROVIDED that each Letter of Credit shall (A) have a maximum maturity of three hundred sixty-four (364) days from the date of issuance, (B) in the event that the Letter of Credit shall have an expiration date later than the Revolving Credit Expiration Date, the Borrower shall provide to the Agent with respect to any such Letter of Credit no later than five (5) Business Days prior to the Revolving Credit Expiration Date either (i) cash collateral for deposit in a non-interest bearing account with the Agent an amount equal to the maximum amount available to be drawn on such Letter of Credit and the Borrower pledges to the Agent and the Banks a security interest in all such cash as security for the Letter of Credit Outstandings, or (ii) a replacement letter of credit, PROVIDED, FURTHER, that in no event shall (i) the Letter of Credit Outstandings exceed, at any one time, $25,000,000, or (ii) the Revolving Facility Usage exceed, at any one time, the Revolving Credit Commitments. (b) PARTICIPATIONS. Immediately upon issuance of each Letter of Credit, and without further action, each Bank shall be deemed to, and hereby agrees that it shall, have irrevocably purchased for such Bank's own account and risk from the Agent an individual participation interest in such Letter of Credit and drawings thereunder in an amount equal to such Bank's Ratable Share of the maximum amount which is or at any time may become available to be drawn thereunder and each such Bank shall be responsible to reimburse the Agent immediately for its Ratable Share of any disbursement under any Letter of Credit which has not been reimbursed by the Borrower in accordance with Section 2.10(d). (c) LETTER OF CREDIT FEES. The Borrower shall pay (i) to the Agent for the ratable account of the Banks a fee (the "LETTER OF CREDIT FEE") equal to forty (40) basis points per annum (computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed), which fee shall be computed on the daily average Letter of Credit Outstandings and shall be payable quarterly in arrears commencing with the second Business Day of each April, July, October and January following issuance of each Letter of Credit and on the Revolving Credit Expiration Date, and (ii) to the Agent for its own account a fee (the "LETTER OF CREDIT FRONTING FEE") equal to 0.125% per annum (computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed), which fee shall be computed on the daily average Letter of Credit Outstandings and shall be payable quarterly in arrears commencing on the Closing Date and thereafter on the second Business Day of each April, July, October and January. The Borrower shall also pay to the Agent for the Agent's sole account the Agent's then in effect customary fees and administrative expenses payable with respect to the Letters of Credit as the Agent may generally charge or incur from time to time in connection with the issuance, maintenance, modification (if any), assignment or transfer (if any), negotiation, and administration of Letters of Credit. (d) DISBURSEMENTS, REIMBURSEMENT. ---------------------------- (i) The Borrower shall be obligated immediately to reimburse the Agent for all amounts which the Agent is required to advance pursuant to the Letters of Credit (collectively, the "REIMBURSEMENT OBLIGATIONS"). Such amounts advanced shall become, at the time the amounts are advanced, Revolving Credit Loans from the Banks. Such Revolving Credit Loans shall bear interest at the rate applicable under the Base Rate Option unless the Borrower elects to have a different Interest Rate Option apply to such Revolving Credit Loans pursuant to and in accordance with the provisions contained in Section 4.1. (ii) The Agent will notify (A) the Borrower of each demand or presentment for payment or other drawing under each Letter of Credit, and (B) the Banks of the amount required to be advanced pursuant to the Letters of Credit. Before 10:00 a.m. (Pittsburgh time) on the date of any advance the Agent is required to make pursuant to the Letters of Credit, each Bank shall make available such Bank's Ratable Share of such advance in immediately available funds to the Agent. (e) DOCUMENTATION. The Borrower agrees to be bound by the terms of the Agent's application and agreement for Letters of Credit and the Agent's written regulations and customary practices relating to Letters of Credit, though such interpretation may be different from the Borrower's own. In the event of a conflict between such application or agreement and this Agreement, this Agreement shall govern. It is understood and agreed that, except in the case of gross negligence or willful misconduct, the Agent shall not be liable for any error, negligence and/or mistakes, whether of omission or commission, in following any Company's instructions or those contained in the Letters of Credit or any modifications, amendments or supplements thereto. (f) DETERMINATIONS TO HONOR DRAWING REQUESTS. In determining whether to honor any request for drawing under any Letter of Credit by the beneficiary thereof, the Agent shall be responsible only to determine that the documents and certificates required to be delivered under such Letter of Credit have been delivered and that they comply on their face with the requirements of such Letter of Credit. (g) NATURE OF PARTICIPATION AND REIMBURSEMENT OBLIGATIONS. The obligation of the Banks to participate in Letters of Credit pursuant to Section 2.10(b) and the obligation of the Banks pursuant to Section 2.10(d) to fund Revolving Credit Loans upon a draw under a Letter of Credit and the obligations of the Borrower to reimburse the Agent upon a draw under a Letter of Credit pursuant to Section 2.10 shall be absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of such Sections under all circumstances, including the following circumstances: (i) the failure of any Company or any other Person to comply with the conditions set forth in Sections 2.1, 2.6, 2.7 or 7.2 or as otherwise set forth in this Agreement for the making of a Revolving Credit Loan, it being acknowledged that such conditions are not required for the making of a Revolving Credit Loan under Section 2.10(d); (ii) any lack of validity or enforceability of any Letter of Credit; (iii) the existence of any claim, set-off, defense or other right which any Company or any Bank may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the Agent or other bank or any other Person or, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between any Company or Subsidiaries of a Company and the beneficiary for which any Letter of Credit was procured); (iv) any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (v) payment by the Agent under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit; (vi) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of any Company or Subsidiaries of any Company; (vii) any breach of this Agreement or any other Senior Loan Document by any party thereto; (viii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing; (ix) the fact that an Event of Default or a Potential Default shall have occurred and be continuing; or (x) the Revolving Credit Expiration Date shall have passed or this Agreement or the Revolving Credit Commitments hereunder shall have been terminated (in which case the Borrower shall be required to immediately reimburse the Agent and the Banks for the amount of any drawing funded by the Banks). (h) INDEMNITY. In addition to amounts payable as provided in Section 10.5, the Borrower hereby agrees to protect, indemnify, pay and save harmless the Agent from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and allocated costs of internal counsel) which the Agent may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit, other than as a result of (A) the gross negligence or willful misconduct of the Agent as determined by a final judgment of a court of competent jurisdiction or (B) subject to the following clause (ii), the wrongful dishonor by the Agent of a proper demand for payment made under any Letter of Credit or (ii) the failure of the Agent to honor a drawing under any such Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority (all such acts or omissions herein called "GOVERNMENTAL ACTS"). (i) LIABILITY FOR ACTS AND OMISSIONS. As between the Borrower and the Agent, the Borrower assumes all risks of the acts and omissions of, or misuse of the Letters of Credit by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, the Agent shall not be responsible for : (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for an issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) failure of the beneficiary of any such Letter of Credit to comply fully with any conditions required in order to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit; or (viii) any consequences arising from causes beyond the control of the Agent, including any Governmental Acts, and none of the above shall affect or impair, or prevent the vesting of, any of the Agent's rights or powers hereunder. In furtherance and extension and not in limitation of the specific provisions set forth above, any action taken or omitted by the Agent under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good-faith, shall not put the Agent under any resulting liability to the Borrower. 2.11 USE OF PROCEEDS. --------------- The proceeds of the Revolving Credit Loans shall be used for lawful purposes in accordance with the second recital clause above. 2.12 OPTION OF BORROWER TO TERM-OUT THE REVOLVING CREDIT LOANS UPON --------------------------------------------------------------- REVOLVING CREDIT EXPIRATION DATE. -------------------------------- The Borrower may elect, by written request which shall be delivered ten (10) days prior to the Revolving Credit Expiration Date, to repay all amounts or a portion thereof of principal outstanding under the Revolving Credit Loans due and payable on the Revolving Credit Expiration Date in four (4) equal quarterly installments which such installments shall be made on the second Business Day of each April, July, October and January following the Revolving Credit Expiration Date (the "TERM-OUT OPTION"). If the Borrower elects the Term-Out Option, it shall deliver to each Bank, on or before the Revolving Credit Expiration Date a term note for its Ratable Share and setting forth such obligation of the Borrower (the "TERM NOTE"). Additionally, the Borrower hereby agrees to execute such amendments and modifications to the Loan Documents, prior to the Revolving Credit Expiration Date, as Agent shall reasonably request to evidence and govern the Term Loan; provided that no amendments or modifications to the Loan Documents shall be made with respect to any covenants of the Borrower or to the rate of interest under any Interest Rate Option. 2.13 EXTENSION BY BANKS OF THE REVOLVING CREDIT EXPIRATION DATE. ---------------------------------------------------------- (a) REQUESTS; APPROVAL BY ALL BANKS OR REQUIRED BANKS; OPTIONAL CONVERSION ----------------------------------------------------------------------- TO TERM LOANS FOR NON-AGREEING BANKS - ------------------------------------ (i) No earlier than sixty (60) days and no later than forty-five (45) days prior to the then applicable Revolving Credit Expiration Date, the Borrower may request a 364-day extension of the Revolving Credit Expiration Date by written notice to the Agent. Agent shall promptly notify the Banks of such request. No later than thirty (30) days prior to the then applicable Revolving Credit Expiration Date, each Bank shall respond to the Agent in writing as to whether or not it agrees to the Borrower's request for such extension; provided, however, that the failure of any Bank to respond within such time period shall not in any manner constitute an agreement by such Bank to extend the Revolving Credit Expiration Date. (ii) If all Banks elect to extend the then applicable Revolving Credit Expiration Date, the Agent shall so notify the Banks and the Borrower promptly, but in no event earlier than thirty (30) days prior to the then applicable Revolving Credit Expiration Date, that such Revolving Credit Expiration Date shall be extended for an additional period of 364 days. Borrower hereby agrees to execute such amendments and modifications to the Loan Documents, prior to the extension of the Revolving Credit Expiration Date, as Agent shall reasonably request to evidence and govern the extension of such date. (iii) In the event that Banks with at least eighty percent (80%) of the Commitments (the "SUPERMAJORITY BANKS"), but less than all of the Banks, shall agree to an extension of the Revolving Credit Expiration Date in accordance with this Section 2.13(a)(i), the Agent shall so notify the Banks and the Borrower promptly, but in no event earlier than thirty (30) days prior to the then applicable Revolving Credit Expiration Date, and: (i) the Revolving Credit Commitments of those Banks not agreeing to an extension of the Revolving Credit Expiration Date (the "NON-AGREEING BANKS") shall be terminated on the Revolving Credit Expiration Date (without giving effect to the extension thereof) and all Loans owing to the Non-Agreeing Banks together with all interest thereon and costs and expenses related thereto shall be due and payable on such Revolving Credit Expiration Date except to the extent that (A) the Borrower shall substitute for such Non-Agreeing Bank another financial institution pursuant to a duly executed Assignment and Assumption Agreement and in accordance with the terms and conditions of Section 11.11 (except that such financial institution shall only be assigned the Revolving Credit Loan and Revolving Credit Commitment of such Non-Agreeing Bank) or (B) Borrower has elected, by written notice received by the Agent no later than ten (10) days prior to the Revolving Credit Expiration Date, to convert all or any portion of the Loans of the Non-Agreeing Banks to Term Loans in accordance with Section 2.12 and, to the extent that less than the full aggregate amount of Loans of the Banks are to be so converted, then the Borrower shall convert each and every Non-Agreeing Bank's Loans on a PRO RATA basis, (ii) the Revolving Credit Commitments of the Banks agreeing to an extension of the Revolving Credit Expiration Date (the "AGREEING BANKS") shall be extended for an additional period of 364 days, and (iii) none of the Agreeing Banks shall be required to increase its Revolving Credit Commitment. The Borrower hereby agrees to execute such amendments and modifications to the Loan Documents, prior to any extension of the Revolving Credit Expiration Date, as Agent shall reasonably request to evidence and govern the extension of such date and the Term Loans, if any, arising under this Section 2.13. (b) FAILURE OF SUPERMAJORITY BANKS TO EXTEND; OPTIONAL CONVERSION TO TERM ------------------------------------------------------------------------ LOAN. ---- In the event that less than the Supermajority Banks shall agree to an extension of the Revolving Credit Expiration Date in accordance with Section 2.13, the Agent shall promptly so notify the Borrower and the Banks, the Revolving Credit Commitments shall be terminated on the Revolving Credit Expiration Date, and all Loans, together with all interest thereon and costs and expenses related thereto, shall be due and payable on the Revolving Credit Expiration Date, unless the Borrower has elected, by written notice received by the Agent no later than ten (10) days prior to the Revolving Credit Expiration Date (which notice Agent shall promptly forward to the Banks), to convert all or a portion of the Loans outstanding on the Revolving Credit Expiration Date to Term Loans in accordance with Section 2.12. Any failure of the Agent or any Bank to notify any party hereto that the Revolving Credit Expiration Date will not be extended shall not constitute a commitment or agreement of any nature to extend such date. 2.14 RELEASE OF COLLATERAL. --------------------- Upon full, final and unconditional release of the Collateral by the holders of the Senior Notes as evidenced in a manner satisfactory to the Agent, the Agent and the Banks will release their Prior Security Interest in the Collateral, provided however that the Borrower and the other Loan Parties, as applicable covenant and agree that they shall (i) continue to maintain compliance at all times with all of the covenants and conditions of this Agreement, including without limitation the covenant contained in Section 8.2(f) (ii) enter into any reasonable amendments to this Agreement required to evidence such release and (iii) enter into a guaranty agreement in form and substance reasonably acceptable to the Agent to guaranty the Loans and all of the obligations of the Borrower and the other Loan Parties under this Agreement and any of the other Senior Loan Documents. 3. [Intentionally Omitted] 4. INTEREST RATES 4.1 INTEREST RATE OPTIONS. --------------------- The Borrower shall pay interest in respect of the outstanding unpaid principal amount of the Loans as selected from one (1) of the three (3) Interest Rate Options set forth below, it being understood that subject to the provisions of this Agreement, the Borrower may select different Interest Rate Options and different Euro-Rate Interest Periods to apply simultaneously to the Loans comprising different Borrowing Tranches and may convert to or renew one or more Interest Rate Options with respect to all or any portion of the Loans comprising any Borrowing Tranche; PROVIDED that there shall not be at any one time outstanding more than seven (7) Borrowing Tranches in the aggregate among all the Loans accruing interest at the Euro-Rate Option, PROVIDED, FURTHER, that only the Base Rate Option or the PNC Quoted Rate Option shall be applicable with respect to Swing Loans, PROVIDED, FURTHER, that the PNC Quoted Rate Option shall not be applicable with respect to any Loans other than the Swing Loans. The Agent's determination of a rate of interest and any change therein shall in the absence of manifest error be conclusive and binding upon all parties hereto. If at any time the designated rate applicable to any Loan made by the Bank exceeds such Bank's highest lawful rate, the rate of interest on such Bank's Loan shall be limited to such Bank's highest lawful rate; PROVIDED, that the portion of interest which exceeds the amount such Bank can lawfully receive and, thus, is not paid to such Bank shall be due and payable upon the following Interest Payment Date(s) to the extent lawfully permissible. (a) BASE RATE OPTION: A fluctuating rate per annum (computed on the basis of a year of (i) 365 or 366 days, as the case may be, and actual days elapsed, for Loans based on the Agent's prime rate or (ii) 360 days and actual days elapsed for Loans based on the Federal Funds Effective Rate) equal to the Base Rate), such interest rate to change automatically from time to time effective as of the effective date of each change in the Base Rate. (b) EURO-RATE OPTION: A rate per annum (computed on a basis of a year of 360 days and actual days elapsed) equal to (i) the Euro-Rate PLUS forty (40) basis points, or (ii) after election by the Borrower of the Term-Out Option, the Euro-Rate PLUS, if the initial principal amount of the Term Loans is equal to or greater than $75,000,000, seventy-five (75) basis points and, if the initial principal amount of the Term Loans is less than $75,000,000, sixty-two and one-half (62-1/2%) basis points (which, in either case, includes all fees charged in connection with the Term Loans under this Agreement except the Agent's Fee).) The Euro-Rate shall be adjusted automatically with respect to any Euro-Rate Portion outstanding on the effective date of any change in the Euro-Rate Reserve Percentage notwithstanding that such effective date occurs during a Euro-Rate Interest Period. The Agent shall give prompt notice to the Borrower of the Euro-Rate as determined or adjusted in accordance herewith, which determination shall be conclusive. (b-1).PNC QUOTED RATE OPTION: A fixed rate per annum computed on the basis of a year of 365 or 366 days, as the case may be, equal to such interest rate as offered by PNC pursuant to Section 2.6(b) hereof, such interest rate to remain in effect from the time the PNC Quoted Rate Option is elected until 3:00 p.m. (Pittsburgh time) on the following Business Day. (c) RATE QUOTATIONS. The Borrower may call the Agent on or before the date on which a Loan Request is to be delivered to receive an indication of the rates then in effect, but it is acknowledged that such indication shall not be binding on the Agent or the Banks nor affect the rate of interest which thereafter is actually in effect when the election is made. 4.2 EURO-RATE INTEREST PERIODS. -------------------------- At any time when the Borrower shall select, convert to or renew the Euro-Rate Option to apply to any Revolving Credit Loan, the Borrower shall notify the Agent thereof at least three (3) Business Days prior to the effective date of such Euro-Rate Option by delivering a Loan Request. The notice shall select a Euro-Rate interest period during which such Interest Rate Option shall apply, such periods to be one (1), two (2), three (3) or six (6) months (the "EURO-RATE INTEREST PERIODS"); PROVIDED that: (a) any Euro-Rate Interest Period which would otherwise end on a date which is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in the next calendar month, in which case such Euro-Rate Interest Period shall end on the next preceding Business Day; (b) any Euro-Rate Interest Period which begins on the last Business Day of a calendar month for which there is no numerically corresponding Business Day in the subsequent calendar month during which such Interest Period is to end shall end on the last Business Day of such subsequent month; (c) the Euro-Rate Portion for each Euro-Rate Interest Period shall be in integral multiples of $50,000 and not less than $5,000,000; (d) the Borrower shall not select, convert to or renew a Euro-Rate Interest Period for any portion of the Revolving Credit Loans that would end after the Revolving Credit Expiration Date; and (e) in the case of the renewal of the Euro-Rate Option at the end of a Euro-Rate Interest Period, the first day of the new Euro-Rate Interest Period shall be the last day of the preceding Euro-Rate Interest Period, without duplication in payment of interest for such day. 4.3 INTEREST AFTER DEFAULT. ---------------------- To the extent permitted by Law, upon the occurrence and during the continuance of an Event of Default, after any principal of or interest on any Loan or any fee or other amounts hereunder shall have become due and payable by its terms or by acceleration, declaration or otherwise, and after expiration of any applicable grace period, such principal, interest, fee or other amount shall bear interest for each day thereafter until paid in full (before and after judgment) at a rate per annum which shall be equal to two percent (2%) above the rate of interest otherwise applicable with respect to such amount or two percent (2%) above the Base Rate Option if no rate of interest is otherwise applicable, payable on demand. The Borrower acknowledges that such increased interest rate reflects, among other things, the fact that such Loans or other amounts have become a substantially greater risk given their default status and that the Banks are entitled to additional compensation for such risk. 4.4 EURO-RATE UNASCERTAINABLE. ------------------------- If (a) on any date on which a Euro-Rate would otherwise be determined, the Agent shall have determined (which determination shall be conclusive absent manifest error) that: (i) adequate and reasonable means do not exist for ascertaining such Euro-Rate, or (ii) a contingency has occurred which materially and adversely affects the London interbank market, (b) at any time any Bank shall have determined (which determination shall be conclusive absent manifest error) that: (i) the making, maintenance or funding of any Loan to which the Euro-Rate Option applies has been made impracticable or unlawful by compliance by such Bank in good faith with any Law or any interpretation or application thereof by any Official Body or with any request or directive of any such Official Body (whether or not having the force of Law), (ii) the Euro-Rate Option will not adequately and fairly reflect the cost to such Bank of the establishment or maintenance of any Loan, or if any Bank determines after making all reasonable efforts that deposits of the relevant amount in Dollars for the relevant Euro-Rate Interest Period for a Loan to which the Euro-Rate Option applies are not available to such Bank in the London interbank market, then, in the case of any event specified in subsection (a) above, the Agent shall promptly so notify the Banks and the Borrower thereof, and in the case of an event specified in subsection (b) above, such Bank shall promptly so notify the Agent and attach a certificate to such notice as to the specific circumstances of such notice and the Agent shall promptly send copies of such notice and certificate to the other Banks and the Borrower. Upon such date as shall be specified in such notice (which shall not be earlier than the date such notice is given) the obligation of (A) the Banks in the case of such notice given by the Agent, or (B) such Bank in the case of such notice given by such Bank, to allow the Borrower to select, convert to or renew the Euro-Rate Option shall be suspended until the Agent shall have later notified the Borrower, or such Bank shall have later notified the Agent, of the Agent's or such Bank's, as the case may be, determination (which determination shall be conclusive absent manifest error) that the circumstances giving rise to such previous determination no longer exist. If at any time the Agent makes a determination under subsection (a) of this Section 4.4 or any Bank notifies the Agent of a determination under subsection (b) of this Section 4.4 and, in either case, the Borrower has previously notified the Agent of its selection of, conversion to or renewal of the Euro-Rate Option and such Euro-Rate Option has not yet gone into effect, such notification shall be deemed to provide for selection of, conversion to or renewal of the Base Rate Option otherwise available with respect to such Loans. If any Bank notifies the Agent of a determination under subsection (b) of this Section 4.4, the Borrower shall, subject to the Borrower's indemnification obligations under Section 5.5(b), as to any Loan of the Bank to which the Euro-Rate Option applies, on the date specified in such notice either convert such Loan to the Base Rate Option otherwise available with respect to such Loan or prepay such Loan in accordance with Section 5.4. Absent due notice from the Borrower of conversion or prepayment, such Loan shall automatically be converted to the Base Rate Option otherwise available with respect to such Loan upon such specified date. 4.5 SELECTION OF INTEREST RATE OPTIONS. ---------------------------------- (a) If the Borrower fails to select a Euro-Rate Interest Period in accordance with the provisions of Section 4.2 in the case of renewal of the Euro-Rate Portion, the Borrower shall be deemed to have converted such Loan or option thereof to the Base Rate Option otherwise available with respect to such Loans, commencing upon the last day of that Euro-Rate Interest Period. If an Event of Default shall occur and be continuing, the Agent shall limit the Borrower to the Base Rate Option hereunder; PROVIDED, HOWEVER, that, unless the Loans have been accelerated hereunder, such limitation with respect to the Euro-Rate Portion shall not be effective until the expiration of any applicable Euro-Rate Interest Period. (b) If the Borrower fails to select an Interest Rate Option in accordance with the provisions of Section 4.1 for any Swing Loan to which the PNC Quoted Rate applies before the PNC Quoted Rate Option expires, the Borrower shall be deemed to have converted such loan to the Base Rate Option otherwise available with respect to such Swing Loan, commencing immediately upon the expiration of the PNC Quoted Rate Option. 5. PAYMENTS 5.1 PAYMENTS. -------- All payments and prepayments to be made in respect of principal, interest, Facility Fees, Usage Fees, Letter of Credit Fees, Letter of Credit Fronting Fees, Agent's Fees or other amounts due from the Borrower hereunder shall be payable prior to 11:00 a.m. Pittsburgh time (or 3:00 p.m. Pittsburgh time, in the event payments are to be made using the proceeds of Loans to be made on such date), on the date when due without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by the Borrower, and without set-off, counterclaim or other deduction of any nature, and an action therefor shall immediately accrue. Such payments shall be made to the Agent at the Principal Office for the account of PNC with respect to the Swing Loans and the ratable accounts of the Banks with respect to the Revolving Credit Loans in U.S. Dollars and in immediately available funds, and the Agent shall promptly distribute such amounts to the Banks in immediately available funds, subject to the provisions of Section 5.6; PROVIDED that in the event payments are received by 11:00 a.m. Pittsburgh time by the Agent with respect to the Revolving Credit Loans on the Settlement Date and such payments are not distributed to the Banks on the same day received by the Agent, the Agent shall pay the Banks the Federal Funds Effective Rate with respect to the amount of such payments for each day held by the Agent and not distributed to the Banks. The Agent's and each Bank's statement of account, ledger or other relevant record shall, in the absence of manifest error, be conclusive as the statement of the amount of principal of and interest on the Loans and other amounts owing under this Agreement and shall be deemed an "account stated." 5.2 PRO RATA TREATMENT OF THE BANKS. ------------------------------- Each borrowing, and each selection of, conversion to or renewal of any Interest Rate Option and each payment or prepayment by the Borrower with respect to principal, interest, Facility Fees, Usage Fees, Letter of Credit Fees, Letter of Credit Fronting Fees or other fees (except for the Agent's Fees and the fees set forth in the second sentence of Section 2.10(c)) or amounts due from the Borrower hereunder to the Banks with respect to the Revolving Credit Loans, shall (except as provided in Section 4.4(b), 5.4 or 5.5) be made in proportion to the Revolving Credit Loans outstanding from each Bank and, if no Revolving Credit Loans are then outstanding, in proportion to the Ratable Share of each Bank. 5.3 INTEREST PAYMENT DATES. ---------------------- Interest on Loans to which the Base Rate Option or the PNC Quoted Rate Option applies shall be due and payable in arrears on the second Business Day of each April, July, October and January after the date hereof and on the Revolving Credit Expiration Date (with respect to Revolving Credit Loans) and upon any earlier acceleration of the Notes. Interest on the Euro-Rate Portion shall be due and payable on the last day of each Euro-Rate Interest Period and, if any such Euro-Rate Interest Period is longer than three (3) months, also on the second Business Day after the end of the third month during such period and on the Revolving Credit Expiration Date (with respect to Revolving Credit Loans) and upon any earlier acceleration of the Notes. 5.4 VOLUNTARY PREPAYMENTS. --------------------- (a) The Borrower shall have the right at its option from time to time to prepay the Loans in whole or part without premium or penalty (except as provided in sub-section (b) below or in Section 5.5): (i) at any time with respect to any Swing Loan or any other Loan to which the Base Rate Option applies; (ii) on the last day of the applicable Euro-Rate Interest Period with respect to Revolving Credit Loans to which the Euro-Rate Option applies; and (iii) on the date specified in a notice by any Bank pursuant to Section 4.4(b) with respect to any Revolving Credit Loan to which the Euro-Rate Option applies. Whenever the Borrower desires to prepay any part of the Loans, it shall provide a prepayment notice to the Agent at least one (1) Business Day prior to the date of prepayment of Revolving Credit Loans or no later than 3:00 p.m. Pittsburgh time on the date of prepayment of Swing Loans setting forth the following information: (x) the date, which shall be a Business Day, on which the proposed prepayment is to be made; and (y) the total principal amount of such prepayment, which shall not be less than $100,000 for any Swing Loan or $1,000,000 for any Revolving Credit Loan. All prepayment notices shall be irrevocable. The principal amount of the Loans to which the Euro-Rate Option applies for which a prepayment notice is given, together with interest on such principal amount and any related fees shall be due and payable on the date specified in such prepayment notice as the date on which the proposed prepayment is to be made. The principal amount of the Loans to which the Base Rate Option applies for which a prepayment notice is given shall be due and payable on the date specified in such prepayment notice as the date on which the proposed prepayment is made; but interest on such principal amount and any related fees shall be due and payable on the next scheduled Interest Payment Date. All prepayments permitted pursuant to this Section 5.4(a) shall be applied to the unpaid installments of principal of the Loans in the inverse order of scheduled maturities. Unless otherwise specified by the Borrower with respect to prepayments of the Euro-Rate Portion permitted under this Section 5.4(a)(ii) or (iii) above, all prepayments shall be applied first to the Base Rate Portion and then to the Euro-Rate Portion, subject to Section 5.5(b). (b) In the event any Bank (i) gives notice under Section 4.4(b) or Section 5.5(a), (ii) does not fund Loans because the making of such Loans would contravene any Law applicable to such Bank pursuant to Section 7.2, (iii) does not approve any action as to which consent of the Required Banks is requested by the Borrower and obtained hereunder, or (iv) becomes subject to the control of an Official Body (other than normal and customary supervision), then the Borrower shall have the right at its option, with the consent of the Agent, which shall not be unreasonably withheld, to prepay the Loans of such Bank in whole together with all interest accrued thereon, within ninety (90) days after (w) receipt of such Bank's notice under Section 4.4(b) or 5.5(a), (x) the date such Bank has failed to fund Loans pursuant to Section 7.2 because the making of such Loans would contravene Law applicable to such Bank, (y) the date of obtaining the consent which such Bank has not approved, or (z) the date such Bank became subject to the control of an Official Body, as applicable; PROVIDED that the Borrower shall also pay to such Bank at the time of such prepayment any amounts required under Section 5.4(a) and Section 5.5 and any accrued interest due on such amount and any related fees; PROVIDED, HOWEVER, that the Revolving Credit Commitment of such Bank shall be provided by one or more of the remaining Banks or a replacement bank acceptable to the Agent and the Borrower in the exercise of their reasonable discretion; PROVIDED, FURTHER, the remaining Banks shall have no obligation hereunder to increase their Revolving Credit Commitments. Notwithstanding the foregoing, the Agent may only be replaced in accordance with Section 10.14 and the Agent must at all times be a Bank hereunder. 5.5 ADDITIONAL COMPENSATION IN CERTAIN CIRCUMSTANCES. ------------------------------------------------ (a) INCREASED COSTS OR REDUCED RETURN RESULTING FROM TAXES, RESERVES, CAPITAL ADEQUACY REQUIREMENTS, EXPENSES, ETC. If any Law, guideline or interpretation or any change in any Law, guideline or interpretation or application thereof by any Official Body charged with the interpretation or administration thereof or compliance with any request or directive (whether or not having the force of Law) of any central bank or other Official Body: (i) subjects any Bank to any tax or changes the basis of taxation with respect to this Agreement, the Notes, the Loans or payments by the Borrower of principal, interest, Facility Fees, Usage Fees, Letter of Credit Fees, Letter of Credit Fronting Fees, Agent's Fees or other amounts due from the Borrower hereunder or under the Notes (except for taxes on the overall net income of such Bank), (ii) imposes, modifies or deems applicable any reserve, special deposit or similar requirement against credits or commitments to extend credit extended by, or assets (funded or contingent) of, deposits with or for the account of, or other acquisitions of funds by, any Bank, or (iii) imposes, modifies or deems applicable any capital adequacy or similar requirement (A) against assets (funded or contingent) of, or credits or commitments to extend credit extended by, any Bank, or (B) otherwise applicable to the obligations of any Bank under this Agreement, and the result of any of the foregoing is to increase the cost to, reduce the income receivable by, or impose any expense (including loss of margin) upon any Bank with respect to this Agreement, the Notes or the making, maintenance or funding of any part of the Loans (or, in the case of any capital adequacy or similar requirement, to have the effect of reducing the rate of return on the capital of any Bank or any Bank's parent, taking into consideration the customary policies of any Bank or any Bank's parent with respect to capital adequacy) by an amount which such Bank in its sole discretion deems to be material, such Bank shall from time to time notify in writing the Borrower and the Agent of the amount determined in good faith (using any averaging and attribution methods employed in good faith) by such Bank (which determination shall be conclusive, absent manifest error) to be necessary to compensate such Bank for such increase in cost, reduction of income or additional expense. Such notice shall set forth in reasonable detail the basis for such determination. Such amount shall be due and payable by the Borrower to such Bank ten (10) Business Days after such notice is given. (b) INDEMNITY. In addition to the compensation required by subsection (a) of this Section 5.5, the Borrower shall indemnify each Bank against all liabilities, losses or expenses (including loss of margin and any loss or expense incurred in liquidating or employing deposits from third parties, including any loss or expense incurred in connection with funds acquired by a Bank to fund or maintain Loans subject to the Euro-Rate Option) which such Bank sustains or incurs hereunder, including: (i) payment, prepayment, conversion or renewal of any Loan to which the Euro-Rate Option applies on a day other than the last day of the corresponding Euro-Rate Interest Period (whether or not such payment, prepayment, conversion or renewal is mandatory, voluntary or automatic and whether or not such payment or prepayment is then due); (ii) attempt by the Borrower to revoke (expressly, by later inconsistent notices or otherwise) in whole or part any notice relating to Loan Requests under Section 2.6 or voluntary prepayments under Section 5.4; or (iii) default by the Borrower in the performance or observance of any covenant or condition contained in this Agreement or any other Senior Loan Document, including any failure of the Borrower to pay when due (by acceleration or otherwise) any principal, interest, Facility Fees, Usage Fees, Letter of Credit Fees, Letter of Credit Fronting Fees, Agent's Fees or any other amount due hereunder. Notwithstanding the foregoing, nothing in the foregoing Section 5.5(b)(i), (ii) or (iii) shall be construed to permit the Borrower to engage in any action otherwise prohibited hereunder. If any Bank sustains or incurs any such loss or expense, it shall from time to time notify the Borrower of the amount determined in good faith by such Bank (which determination shall be conclusive absent manifest error and may include such assumptions, allocations of costs and expenses and averaging or attribution methods as such Bank shall deem reasonable) to be necessary to indemnify such Bank for such loss or expense. Such notice shall set forth in writing in reasonable detail the basis for such determination. Such amount shall be due and payable by the Borrower to such Bank ten (10) Business Days after such notice is given. 5.6 SETTLEMENT DATE PROCEDURES. -------------------------- In order to minimize the transfer of funds between the Banks and the Agent, the Borrower may borrow, repay and reborrow Swing Loans and PNC may make Swing Loans as provided in Section 2.1(b) during the period between Settlement Dates. Not later than 12:00 p.m. Pittsburgh time on each Settlement Date, the Agent shall notify each Bank of its Ratable Share of the Loans (including both the Swing Loans made by the Agent and the Revolving Credit Loans made by the Banks). Prior to 3:00 p.m. Pittsburgh time on such Settlement Date, each Bank shall pay to the Agent the amount equal to the positive difference, if any, between its Ratable Share of the Revolving Credit Loans and Swing Loans and its Revolving Credit Loans, and the Agent shall pay to each Bank its Ratable Share of all payments made by the Borrower to the Agent with respect to the Revolving Credit Loans. The Agent shall also effect settlement in accordance with the foregoing sentence on the proposed Borrowing Dates for Revolving Credit Loans and may at its option effect settlement on any other Business Day. These settlement procedures are established solely as a matter of administrative convenience, and nothing contained in this Section 5.6 shall relieve the Banks of their obligations to fund Revolving Credit Loans on dates other than a Settlement Date pursuant to Section 2.8. The Agent may at any time at its option for any reason whatsoever require each Bank to pay immediately to the Agent such Bank's Ratable Share of the outstanding Revolving Credit Loans and Swing Loan; PROVIDED the principal amount of such Bank's Revolving Credit Loans shall not exceed its Revolving Credit Commitment MINUS its Ratable Share of the Letter of Credit Outstanding; PROVIDED, FURTHER, nothing in this Section 5.6 shall require the Banks to fund any Revolving Credit Loan bearing interest at the Euro-Rate on a date other than in accordance with Section 2.7(a). 6. REPRESENTATIONS AND WARRANTIES 6.1 REPRESENTATIONS AND WARRANTIES. ------------------------------ The Borrower represents and warrants to the Agent and each of the Banks that: (a) ORGANIZATION AND QUALIFICATION. The Borrower is a corporation, duly organized, validly existing and in good standing under the laws of Pennsylvania; each Subsidiary of the Borrower is duly organized in the form of organization stated on SCHEDULE 6.1(C) and is validly existing and in good standing under the laws of its jurisdiction of organization; each Company has the lawful power to own or lease its properties and to engage in the business it presently conducts or proposes to conduct; and each Company is duly licensed or qualified and in good standing in each jurisdiction wherein the property owned or leased by it or the nature of the business transacted by it or both makes such licensing or qualification necessary. (b) CAPITALIZATION AND OWNERSHIP. The authorized shares of capital stock of the Borrower consist of 100,000,000 Preferred Shares, none of which is issued and outstanding, 20,000 Class A Common Shares of which 9,000 shares are issued and outstanding and, as of the close of business on January 16, 2001, 900,000,000 Class B Common Shares, of which 129,505,456 shares are issued and 116,950,809 shares are outstanding. All issued and outstanding shares have been validly issued and are fully paid and nonassessable. (c) SUBSIDIARIES. SCHEDULE 6.1(C) sets forth the name of each of the Borrower's Subsidiaries, the form and jurisdiction of organization of each, the owner(s) of its authorized capital stock, and the percentage of issued and the outstanding shares or interests (referred to herein as the "SUBSIDIARY SHARES") of each. Each Company has good and marketable title to all of the Subsidiary Shares it purports to own, free and clear in each case of any Lien except the pledge of the Subsidiary Shares pursuant to the Pledge Agreement. All Subsidiary Shares have been validly issued and are fully paid and nonassessable. There are no options, warrants or other rights outstanding to purchase any such shares. (d) POWER AND AUTHORITY. The Borrower has full power to enter into, execute, deliver and carry out this Agreement and the other Senior Loan Documents to which it is a party, to incur the Indebtedness contemplated by the Senior Loan Documents and to perform its obligations under the Senior Loan Documents to which it is a party and all such actions have been duly authorized by all necessary proceedings on its part. At the time of execution, the Grantors, the Pledgors and the Companies had full power to enter into, execute, deliver and carry out the Security Agreement, the Pledge Agreement and the Intercompany Subordination Agreement, respectively, and to perform their respective obligations thereunder and all such actions had been duly authorized by all necessary proceedings on their respective parts and the Grantors, the Pledgors and the Companies continue to have the full power and authority to perform their respective obligations under the Security Agreement, the Pledge Agreement and the Intercompany Subordination Agreement, respectively and no actions have been taken to rescind the same and each of the Security Agreement, the Pledge Agreement and the Intercompany Subordination Agreement, respectively continues in full force and effect. (e) VALIDITY AND BINDING EFFECT. This Agreement has been and each other Senior Loan Document, when duly executed and delivered by the Loan Parties which are parties thereto, will have been duly and validly executed and delivered by the Loan Parties. This Agreement constitutes, and the Security Agreement, the Pledge Agreement, the Intercompany Subordination Agreement and each other Senior Loan Document when duly executed and delivered by the Loan Parties pursuant to the provisions hereof or thereof will constitute, legal, valid and binding obligations of the Loan Parties, enforceable against them in accordance with their respective terms, except to the extent that enforceability of any of the foregoing Senior Loan Documents may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting the enforceability of creditors' rights generally or limiting the right of specific performance. (f) NO CONFLICT. Neither the execution and delivery of this Agreement or the other Senior Loan Documents by the Loan Parties nor the consummation of the transactions herein or therein contemplated or compliance with the terms and provisions hereof or thereof by them will conflict with, constitute a default under or result in any breach of the terms and conditions of the declaration of trust, articles of incorporation, bylaws, partnership agreement or equivalent documents of any Loan Party or of any Law or of any material agreement, instrument, order, writ, judgment, injunction or decree to which any Loan Party is a party or by which it is bound or to which it is subject, or will result in the creation or enforcement of any Lien whatsoever upon any property (now or hereafter acquired) of any Loan Party (other than Liens granted under the Senior Loan Documents); PROVIDED that foreclosure on the Pledged Collateral or other transfer of the Pledged Collateral under the Pledge Agreement without obtaining the approvals described in Section 9(b) of the Pledge Agreement may result in the termination of contracts under the Investment Company Act. (g) LITIGATION. There are no actions, suits, proceedings or investigations pending or, to the knowledge of the Borrower, threatened against any of the Companies at law or in equity before any Official Body which individually or in the aggregate may result in any Material Adverse Change. None of the Companies is in violation of any order, writ, injunction or any decree of any Official Body which may result in any Material Adverse Change. (h) TITLE TO PROPERTIES. Each of the Companies has good and marketable title to or valid leasehold interest in all properties, assets and other rights which it purports to own or lease or which are reflected as owned or leased on its books and records, free and clear of all liens and encumbrances except Permitted Liens, and subject to the terms and conditions of the applicable leases. The tangible and intangible personal property relating to facilities and computers of the Companies (including the leases, computer software and aircraft) are held by one or more wholly owned Pledged Subsidiaries. All leases of property are in full force and effect and, except as set forth on SCHEDULE 6.1(M), such leases do not require any consent to consummate the transactions contemplated hereby or to foreclose on the Pledged Shares. (i) FINANCIAL STATEMENTS. The Borrower has delivered to the Agent copies of the audited consolidated financial statements for the Borrower and its Consolidated Subsidiaries for fiscal year 1999 (the "AUDITED STATEMENTS"). In addition, the Borrower has delivered to the Agent copies of the unaudited interim financial statements for the Borrower and its Consolidated Subsidiaries for and as of the end of the fiscal quarter ended September 30, 2000 (the "INTERIM STATEMENTS") (the Audited and Interim Statements being collectively referred to as the "HISTORICAL STATEMENTS"). The Historical Statements are correct and complete and fairly represent the consolidated financial condition of the Borrower and its Consolidated Subsidiaries as of their dates and the consolidated results of operations for the fiscal periods then ended and have been prepared in accordance with GAAP consistently applied, subject (in the case of the Interim Statements) to normal year-end audit adjustments. None of the Companies has any significant liabilities, contingent or otherwise, or material forward or long-term commitments that are not disclosed in the Historical Statements or in the notes thereto, and except as disclosed therein there are no unrealized or anticipated losses from any commitments of any of the Companies which may cause a Material Adverse Change. Since December 31, 1999, there has been no Material Adverse Change. (j) MARGIN STOCK. None of the Companies engages or intends to engage principally, or as one of its important activities, in the business of extending credit for the purpose, immediately, incidentally or ultimately, of purchasing or carrying margin stock (within the meaning of Regulation U). No part of the proceeds of any Loan has been or will be used, immediately, incidentally or ultimately, to purchase or carry any margin stock (except investments in Funds in accordance with ordinary business operations), or to extend credit to others for the purpose of purchasing or carrying any margin stock or to refund Indebtedness originally incurred for such purpose, or for any purpose which entails a violation of or which is inconsistent with the provisions of the regulations of the Board of Governors of the Federal Reserve System. None of the Companies holds or intends to hold margin stock (including shares in the Funds) such that the aggregate current market value (as defined in Regulation U) of all such margin stock exceeds twenty-five percent (25%) of the value (as determined by any reasonable method) of the consolidated assets of the Companies. (k) FULL DISCLOSURE. Neither this Agreement nor any Senior Loan Document, nor any certificate, statement, agreement or other documents furnished to the Agent or any Bank in connection herewith or therewith contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein, in light of the circumstances under which they were made, not misleading. There is no fact known to any of the Companies which materially adversely affects the business, property, assets, financial condition or results of operations of the Companies taken as a whole, which has not been set forth in this Agreement or in the other agreements, documents, certificates and statements furnished in writing to the Agent and the Banks prior to or at the date hereof in connection with the transactions contemplated hereby. (l) TAXES. All federal, state, local and other tax returns required to have been filed with respect to the Companies have been filed, and payment or adequate provision has been made for the payment of all taxes, fees, assessments and other governmental charges which have or may become due pursuant to said returns or to assessments received except to the extent that such taxes, fees, assessments and other charges are being contested in good faith by appropriate proceedings diligently conducted and for which such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made. There are no agreements or waivers extending the statutory period of limitations applicable to any federal income tax return of the Companies for any period except with respect to the federal income tax return of the Companies for 1996 for which the associated statutory period of limitations was extended until December 31, 2001. (m) CONSENTS AND APPROVALS. No consent, approval, exemption, order or authorization of, or a registration or filing with, any Official Body or any other person is required by any Law or any agreement in connection with the execution, delivery and carrying out of this Agreement and the other Senior Loan Documents by the Loan Parties, except for the filing of financing statements in the state and county filing offices as listed on Schedule 6.1(m) attached hereto, all of which shall have been obtained or made on or prior to the Closing Date unless otherwise indicated on SCHEDULE 6.1(M), PROVIDED that foreclosure on the Pledged Collateral or other transfer of the Pledged Collateral under the Pledge Agreement may necessitate obtaining the approvals described in Section 9(b) of the Pledge Agreement. (n) NO EVENT OF DEFAULT; COMPLIANCE WITH INTERESTS. No event has occurred and is continuing and no condition exists or will exist after giving effect to the borrowings to be made on the Closing Date under the Senior Loan Documents which constitutes an Event of Default or Potential Default. None of the Companies is in violation of (i) any term of any declaration of trust, charter, instrument, bylaw, similar or other organizational or governing document or (ii) any agreement or instrument to which it is a party or by which it or any of its properties may be subject or bound where such violation would constitute a Material Adverse Change. (o) PATENTS, LICENSES, FRANCHISES, ETC. The Companies own or possess all the material patents, trademarks, service marks, tradenames, copyrights, licenses, registrations, franchises, permits and rights necessary to own and operate their respective properties and to carry on their respective businesses as presently conducted and planned to be conducted by the Companies, without known conflict with the rights of others. (p) SECURITY INTERESTS. The Liens granted or to be granted to the Agent for the benefit of the Banks pursuant to the Security Agreement and the Pledge Agreement in the Collateral constitute and will continue to constitute first-priority perfected security interests under the Uniform Commercial Code as enacted in each applicable jurisdiction (the "UNIFORM COMMERCIAL CODE") or other applicable Law entitled to all the rights, benefits and priorities provided by the Uniform Commercial Code or such Law. The grant of such Liens does not and will not impair or cause the termination of any investment advisory or other contracts of any of the Companies under any Law (including the Investment Company Act). Upon the filing of financing statements relating to said security interests in each office and in each jurisdiction where required in order to perfect the security interests described above, taking possession of any stock certificates evidencing the Pledged Collateral and recordation of the Security Agreement in the United States Patent and Trademark Office, all such action as is necessary or advisable to establish such rights of the Agent will have been taken. There will be upon execution and delivery of the Security Agreement and the Pledge Agreement and such filings and such taking of possession referred to in the preceding sentence, no necessity for any further action in order to preserve, protect and continue such rights, except the filing of continuation statements with respect to such financing statements within six (6) months prior to each five (5) year anniversary of the filing of such financing statements, PROVIDED that foreclosure on the Pledged Collateral or other transfer of the Pledged Collateral under the Pledge Agreement may necessitate obtaining the approvals described in Section 9(b) of the Pledge Agreement. All filing fees and other expenses in connection with each such action have been or will be paid by the Borrower. (q) PROCEEDS. The Borrower will use the proceeds of the Loans only for lawful purposes in accordance with the second recital clause and not in contravention of any applicable Law, including the Investment Company Act, or any other provision hereof. (r) STATUS OF THE PLEDGED COLLATERAL. All of the Pledged Collateral consisting of capital stock pledged or to be pledged by the Pledgors pursuant to the Pledge Agreement is duly authorized, validly issued, fully paid, nonassessable and owned beneficially and of record by the Pledgor pledging the same free and clear of any Lien or restriction on transfer, except as otherwise provided by the Pledge Agreement and except as the right of the Banks to dispose of the Pledged Shares may be limited by the Securities Act of 1933, as amended, and the regulations promulgated by the Securities and Exchange Commission thereunder and by applicable state securities laws, PROVIDED that foreclosure on the Pledged Shares or other transfer of the Pledged Shares under the Pledge Agreement may necessitate obtaining the approvals described in Section 9(b) of the Pledge Agreement. There are no agreements or understandings with respect to the Pledged Shares of capital stock included in the Pledged Collateral except the Shareholder Rights Agreement and the Articles of Incorporation and the Bylaws of the Borrower. The restrictions on transfer contained in the Shareholder Rights Agreement do not and shall not restrict the pledge of the Pledged Shares under the Pledge Agreement or the transfer of the Pledged Shares by the Agent. There are no agreements or understandings with respect to the Pledged Collateral consisting of capital stock of any Subsidiaries of the Borrower. The Banks hereby consent to amending and restating the second sentence of Section 4(b) of the Pledge Agreement to read as follows: "After the occurrence and during the continuation of an Event of Default, at the written direction of the Collateral Agent, the Pledgors shall not be entitled to exercise any of such rights, and the Collateral Agent may exercise all of such rights for the benefit of the Creditors." At such time as the consent of the holders of the Senior Notes is obtained pursuant to the Intercreditor Agreement (Senior Notes), the Banks expressly authorize PNC Bank, National Association, as collateral agent under the Pledge Agreement, to enter into an amendment to the Pledge Agreement reflecting the amendment described in the foregoing sentence. (s) INSURANCE. SCHEDULE 6.1(S) lists all insurance policies and other bonds to which any of the Companies is a party, all of which are valid and in full force and effect. No notice has been given or material claim made and no ground exists to cancel or avoid any of such policies or bonds or to reduce the coverage provided thereby. Such policies and bonds provide adequate coverage from reputable and financially sound insurers in amounts sufficient to insure the assets and risks of the Companies in accordance with prudent business practice in the industry of the Companies. (t) COMPLIANCE WITH LAWS. The Companies have complied in all respects with all applicable Laws, including federal and state securities laws and Section 17(a) of the Investment Company Act, in all jurisdictions in which any of the Companies is presently or will be doing business except where the failure to do so would not constitute a Material Adverse Change. (u) MATERIAL CONTRACTS. SCHEDULE 6.1(U) lists all material contracts relating to the business operations of the Companies, which are required to be included under applicable Securities and Exchange Commission regulations, including, to the extent required under such regulations, all employee benefit plans, employment agreements, collective bargaining agreements and labor contracts (the "LABOR CONTRACTS"), all investment advisory contracts, investment counseling contracts, Section 12b-1 Plans, distribution agreements, and administrative service agreements and all leases and other contracts for $1,000,000 or more entered into in the ordinary course of business. All material contracts of each of the Companies are valid, binding and enforceable upon each of the parties thereto in accordance with their respective terms, and there is no default thereunder with respect to any of the Companies and, to the Borrower's knowledge, with respect to parties other than the Companies. (v) INVESTMENT COMPANIES. None of the Companies is an "investment company" registered or required to be registered under the Investment Company Act or under the "control" of an "investment company" as such terms are defined in the Investment Company Act and none of them shall become such an "investment company" or under such "control." Each Fund that constitutes an "investment company" is in compliance in all material respects with all requirements applicable to an "investment company" under the Investment Company Act. (w) SOLVENCY. Each of the Companies is, and after consummation of this Agreement and the other Senior Loan Documents and giving effect to all Indebtedness incurred hereby and thereby and the Liens granted by the Companies in connection herewith will be, Solvent, as determined as of the Closing Date. (x) BENEFIT ARRANGEMENTS. -------------------- (i) Neither the Borrower nor any member of the ERISA Group sponsors, maintains or otherwise contributes to, or has within the preceding five (5) year period sponsored, maintained or otherwise contributed to, a Defined Benefit Pension Plan or a Multiemployer Plan. (ii) The Borrower and each member of the ERISA Group are in compliance in all material respects with any applicable provisions of ERISA with respect to all Benefit Arrangements. There has been no Prohibited Transaction with respect to any Benefit Arrangement, or COBRA Violation, which could result in any material liability of the Borrower or any other member of the ERISA Group. With respect to each Benefit Arrangement that is a defined contribution plan, the Borrower and each member of the ERISA Group (A) have fulfilled in all material respects their obligations under the minimum funding standards of ERISA, if applicable, or contractual obligations to contribute to such plans, and (B) have not had asserted against them any penalty for failure to fulfill the minimum funding requirements of ERISA. (iii) To the extent that any Benefit Arrangement is insured, the Borrower and all members of the ERISA Group have paid when due all premiums required to be paid for all periods through and including the Closing Date. To the extent that any Benefit Arrangement is funded other than with insurance, the Borrower and all members of the ERISA Group have made when due all contributions required to be paid for all periods through and including the Closing Date. (y) EMPLOYMENT MATTERS. Each of the Companies is in compliance with the Labor Contracts and all applicable federal, state and local labor and employment Laws, including those related to equal employment opportunity and affirmative action, labor relations, minimum wage, overtime, child labor, medical insurance continuation, worker adjustment and relocation notices, immigration controls and worker and unemployment compensation, where the failure to comply would constitute a Material Adverse Change. There are no outstanding grievances, arbitration awards or appeals therefrom arising out of the Labor Contracts or current or threatened strikes, picketing, handbilling or other work stoppages or slowdowns at facilities of the Companies which in any case would constitute a Material Adverse Change. (z) ENVIRONMENTAL MATTERS. The Companies are in material compliance with all applicable Environmental Laws and have not received any Environmental Complaint from any Official Body or private person alleging that any of the Companies is a potentially responsible party, and the Borrower has no reason to believe that such an Environmental Complaint might be received. (aa) EXISTING BUSINESS. The Companies are currently engaged in the mutual ----------------- fund, investment advisory, retirement plan servicing and financial services business. 6.2 UPDATES TO SCHEDULES. -------------------- Should any of the information or disclosures provided on any of the Schedules attached hereto become outdated or incorrect in any material respect, the Borrower shall promptly provide the Agent in writing with such revisions or updates to such Schedule as may be necessary or appropriate to update or correct the same; PROVIDED, unless any such Schedules have become outdated or incorrect in any material and adverse respect, the Borrower may provide such revisions or updates on a quarterly basis at the same time as the Borrower delivers its quarterly compliance certificate in accordance with Section 8.3(d); PROVIDED, FURTHER, that no Schedule that has become outdated or incorrect in any material and adverse respect shall be deemed to have been amended, modified or superseded by any such correction or update, nor shall any breach of warranty or representation resulting from the inaccuracy or incompleteness of any such Schedule be deemed to have been cured thereby. 7. CONDITIONS OF LENDING The obligation of each Bank to make Loans hereunder is subject to the performance by the Borrower of its obligations to be performed hereunder at or prior to making of any such Loans and to the satisfaction of the following further conditions: 7.1 CLOSING DATE. ------------ On the Closing Date: (a) The representations and warranties of the Borrower contained in Article 6 shall be true and accurate on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of such date (except representations and warranties which relate solely to an earlier date or time, which representations and warranties shall be true and correct on and as of the specific dates or times referred to therein), and the Borrower shall have performed and complied with all covenants and conditions hereof; no Event of Default or Potential Default under this Agreement shall have occurred and be continuing or shall exist; and there shall be delivered to the Agent for the benefit of each Bank a certificate of the Borrower, dated the Closing Date and signed by the Chief Executive Officer, President, Chief Financial Officer, Treasurer or Controller of the Borrower, to both such effects. (b) There shall be delivered to the Agent for the benefit of each Bank a certificate dated the Closing Date and signed by the Secretary or an Assistant Secretary of each of the Companies, certifying as appropriate as to: (i) all action taken by such Company in connection with this Agreement and the other Senior Loan Documents to which it is a party, as applicable; (ii) the names of the officer or officers authorized to sign this Agreement and the other Senior Loan Documents to which such Company is a party and the true signatures of such officer or officers and, in the case of the Borrower, specifying the Authorized Officers who are authorized to act on behalf of the Borrower for purposes of this Agreement and the true signatures of such officers, on which the Agent and each Bank may conclusively rely; and (iii) copies of its organizational documents, including its declaration of trust or articles of incorporation and bylaws or partnership agreement, as applicable, as in effect on the Closing Date certified by the appropriate state official where such documents are filed in a state office together with certificates from the appropriate state officials as to the continued existence and good standing of each of the Companies in each state where organized or qualified to do business, PROVIDED such certifications of state officials shall not be required for Federated Fonds - Service GmbH, Federated International Holdings, BV, Federated International - Europe GmbH and Federated International Management, Ltd. (c) The Notes, the Intercompany Subordination Agreement, the Pledge Agreement and the Security Agreement shall have been duly executed and delivered to the Agent for the benefit of the Banks, together with all appropriate financing statements, appropriate stock powers and certificates evidencing the Pledged Collateral. With respect to shareholders of the Borrower who are Pledgors, there shall be delivered to the Agent, for the benefit of the Banks, certification of authority and proof of incumbency or identity reasonably satisfactory to the Agent and its counsel of the officer, trustee, custodian or other person executing the Pledge Agreement on behalf of such Pledgor, including signature guarantees in the case of shareholders who are individuals. (d) There shall be delivered to the Agent, for the benefit of each Bank, a legal opinion of outside counsel reasonably acceptable to the Agent and its counsel (who may rely on the opinions of such other counsel as may be acceptable to the Agent), dated the Closing Date and in form and substance satisfactory to the Agent and its counsel in substantially the form of EXHIBIT J. (e) All legal details and proceedings in connection with the transactions contemplated by this Agreement and the other Senior Loan Documents shall be in form and substance satisfactory to the Banks and counsel for the Banks, and the Banks shall have received all such other counterpart originals or certified or other copies of such documents and proceedings in connection with such transactions, in form and substance satisfactory to the Banks and said counsel, as the Banks or said counsel may reasonably request. (f) The Borrower shall pay or cause to be paid, to the extent not previously paid (i) to the Agent for its own account, all fees payable on or before the Closing Date as set forth in that certain letter dated November 14, 2000 and the costs and expenses for which the Agent is entitled to be reimbursed, (ii) to the Agent, for the account of the Banks (as defined in the Existing Senior Credit Agreement), all accrued interest (if any) and any other fees and expenses accrued pursuant to the Existing Credit Agreement and (iii) to the Agent for the account of the Banks all fees accrued through the Closing Date and the costs and expenses for which the Banks are entitled to be reimbursed pursuant to this Agreement. (g) All material consents required to effectuate the transactions contemplated by the Senior Loan Documents shall have been obtained. (h) There shall be no Material Adverse Change in the Historical Statements previously delivered to the Agent since the date of their preparation; since December 31, 1999, there shall be no Material Adverse Change; and there shall be delivered to the Agent, for the benefit of each Bank, a certificate dated the Closing Date and signed by the Chief Executive Officer, President, Chief Financial Officer, Treasurer or Controller of the Borrower to each such effect. (i) The making of the Loans shall not contravene any Law applicable to the Borrower or any of the Banks, and the Banks and the Agent shall have received all such certificates and documents in relation thereto as the Banks and the Agent and their respective counsel shall have reasonably requested. (j) No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain or prohibit, or to obtain damages in respect of this Agreement or the consummation of the transactions contemplated hereby or which, in the Agent's sole discretion, would make it inadvisable to consummate the transactions contemplated by this Agreement or any of the other Senior Loan Documents. (k) The Borrower shall deliver evidence acceptable to the Agent that adequate insurance in compliance with Section 8.1(c) is in full force and effect and that all premiums then due thereon have been paid, together with a certified copy of the Borrower's casualty insurance policy or policies evidencing coverage satisfactory to the Agent, with additional insured and lender loss payable endorsements in form and substance satisfactory to the Agent and its counsel naming the Agent as additional insured and lender loss payee for the benefit of the Banks. (l) The Agent shall have received copies of all lien search results and copies of all filing receipts and acknowledgments issued by any governmental authority to evidence any recordation or filing necessary to perfect the Lien of the Agent for the benefit of the Banks on the Collateral or other satisfactory evidence of such recordation and filing and to evidence that such Lien constitutes a Prior Security Interest in favor of the Agent for the benefit of the Banks. 7.2 EACH ADDITIONAL LOAN. -------------------- At the time of making any Loans (including conversions or renewals of existing Loans) or issuing any Letters of Credit other than Loans made or Letters of Credit issued on the Closing Date hereunder and after giving effect to the proposed borrowings: the representations and warranties contained in Article 6 and any certificates delivered by any of the Companies after the Closing Date shall be true on and as of the date of such additional Loan or Letter of Credit with the same effect as though such representations, warranties and certifications had been made on and as of such date (except representations, warranties and certifications which expressly relate solely to an earlier date or time, which representations, warranties and certifications shall be true and correct on and as of the specific dates or times referred to therein or made), and the Borrower shall have performed and complied with all covenants and conditions hereof; no Event of Default or Potential Default shall have occurred and be continuing or shall exist; the making of the Loans shall not contravene any Law applicable to the Borrower or any of the Banks; and the Borrower shall have delivered to the Agent a duly executed and completed Loan Request or application for a Letter of Credit as the case may be. 8. COVENANTS 8.1 AFFIRMATIVE COVENANTS. --------------------- The Borrower covenants and agrees that until payment in full of the Loans and interest thereon, satisfaction of all of the Borrower's other obligations hereunder and termination of the Revolving Credit Commitments and the Swing Loan Commitment, it shall, unless otherwise consented to in writing by the Required Banks, comply at all times with the following affirmative covenants: (a) PRESERVATION OF EXISTENCE, ETC. The Borrower shall maintain, and shall cause each of its Subsidiaries to maintain, its existence and its license or qualification and good standing in each jurisdiction in which its ownership or lease of property or the nature of its business makes such license or qualification necessary, except as otherwise permitted in Section 8.2(j). (b) PAYMENT OF LIABILITIES, INCLUDING TAXES, ETC. The Borrower shall pay and discharge, and shall cause each of its Subsidiaries to pay and discharge, all liabilities to which it is subject or which are asserted against it, promptly as and when the same shall become due and payable, including all taxes, assessments and governmental charges upon it or any of its properties, assets, income or profits, prior to the date on which penalties attach thereto, except to the extent that such liabilities, including taxes, assessments or charges, are being contested in good faith and by appropriate and lawful proceedings diligently conducted and for which such reserve or other appropriate provisions, if any, as shall be required by GAAP shall have been made, but only to the extent that failure to discharge any such liabilities would not result in a Material Adverse Change; PROVIDED that the Borrower and each of its Subsidiaries will pay all such liabilities forthwith upon the commencement of proceedings to foreclose any Lien which may have attached as security therefor. (c) MAINTENANCE OF INSURANCE. The Loan Parties shall maintain and shall cause each of its Subsidiaries to maintain, with financially sound and reputable insurers, public liability and property damage insurance with respect to its business and properties and the business and properties of its Subsidiaries against loss or damage of the kinds customarily carried or maintained by Persons of established reputation engaged in similar businesses and in amounts acceptable to Agent and will deliver evidence thereof to Agent. The Loan Parties shall cause, pursuant to endorsements and assignments in form and substance reasonably satisfactory to Agent, the Agent, for the benefit of Agent and Banks, to be named as lender's loss payee in the case of casualty insurance, Agent, for the benefit of Agent and Banks, to be named as additional insured in the case of all liability insurance and Agent, for the benefit of Agent and Banks, to be named as assignee in the case of all business interruption insurance; PROVIDED, that notwithstanding the foregoing, in the absence of a Potential Default or an Event of Default, the Loan Parties may receive and retain proceeds from such casualty policies to the extent that such proceeds are less than or equal to $500,000. (d) MAINTENANCE OF PROPERTIES AND LEASES. The Borrower shall maintain, and shall cause each of its Subsidiaries to maintain, in good repair, working order and condition (ordinary wear and tear excepted) in accordance with the general practice of other businesses of similar character and size, all of those properties useful or necessary to its business, and from time to time the Borrower shall make, and shall cause each Subsidiary to make, all appropriate repairs, renewals or replacements thereof. (e) VISITATION RIGHTS. The Borrower shall permit, and shall cause each of its Subsidiaries to permit, any of the officers or authorized employees or representatives of any of the Banks to visit and inspect any of its properties and to examine and make excerpts from its books and records and discuss its business affairs, finances and accounts with its officers, all in such reasonable detail and at such reasonable times and as often as any of the Banks may reasonably request, subject to the provisions of Section 11.12, PROVIDED that each Bank shall provide the Borrower and the Agent with reasonable notice prior to any visit or inspection. In the event any Bank desires to visit or inspect any of the Companies as permitted in the preceding sentence, such Bank shall make a reasonable effort to conduct such visit or inspection contemporaneously with any visit or inspection to be performed by the Agent. (f) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Borrower shall maintain and keep, and shall cause each of its Subsidiaries to maintain and keep, proper books of record and account which enable the Borrower and its Subsidiaries to issue financial statements in accordance with GAAP and as otherwise required by applicable Laws of any Official Body having jurisdiction over the Borrower or any Subsidiary, and in which full, true and correct entries shall be made in all material respects of all its dealings and business and financial affairs. (g) MAINTENANCE OF PATENTS, TRADEMARKS, ETC. The Borrower shall maintain, and shall cause each of its Subsidiaries to maintain, in full force and effect, all patents, trademarks, tradenames, copyrights, licenses, franchises, permits and other authorizations necessary for the ownership and operation of its properties and business if the failure so to maintain the same would constitute a Material Adverse Change. (h) BENEFIT ARRANGEMENTS. The Borrower shall, and shall cause each member of the ERISA Group to, comply with ERISA, the Internal Revenue Code and other applicable Laws applicable to Benefit Arrangements except where such failure, alone or in conjunction with any other failure, would not result in a Material Adverse Change. Without limiting the generality of the foregoing, the Borrower shall cause Benefit Arrangements which are defined contribution plans maintained by the Borrower or any member of the ERISA Group to be funded in accordance with the minimum funding requirements of ERISA and shall make, and cause each member of the ERISA Group to make, in a timely manner, all contributions due to Benefit Arrangements. (i) COMPLIANCE WITH LAWS. The Borrower shall comply, and shall cause each of its Subsidiaries to comply, with all applicable Laws, including all Environmental Laws, in all respects, including the Investment Company Act, PROVIDED that it shall not be deemed to be a violation of this Section 8.1(i) as the result of any failure to comply with any Law if such failure to comply would not result in fines, penalties, other similar liabilities or injunctive relief which in the aggregate would constitute a Material Adverse Change. (j) OWNERSHIP OF SUBSIDIARIES. The Borrower shall keep and maintain 100% ownership and control of each of its Subsidiaries, except (i) Passport, Investlink, and Federated Fonds - Service GmbH (in which event the percentage of ownership of at least 50% shall be maintained), and (ii) Subsidiaries which are less than wholly owned and which may be created or acquired in the future pursuant to Section 8.2(h)(iii). (k) USE OF PROCEEDS. The Borrower will use the proceeds of the Loans only for lawful purposes in accordance with the second recital clause and such uses shall not contravene any applicable Law, including the Investment Company Act, or any other provision hereof. (l) NEW SUBSIDIARIES. The Borrower shall pledge, and shall cause each of its Subsidiaries as applicable to pledge, to the Agent for the benefit of the Banks, all of the capital stock of any Domestic Subsidiaries hereafter created or acquired by any of the Companies and 65% of the capital stock of any Foreign Subsidiaries (other than any Foreign Subsidiaries owned by another Foreign Subsidiary) hereafter created or acquired by any of the Companies, and shall cause each such Subsidiary to enter into the Intercompany Subordination Agreement and (other than registered investment adviser or broker-dealer Subsidiaries or Foreign Subsidiaries) the Security Agreement and shall cause to be delivered a legal opinion of such outside counsel reasonably acceptable to the Agent and its counsel in form and substance satisfactory to the Agent and its counsel as to the matters set forth on EXHIBIT K. The Banks hereby consent to the release of the capital stock of Federated Fonds - Service GmbH which is pledged by Federated International Holdings, BV pursuant to the Pledge Agreement and, at such time as the consent of the holders of the Senior Notes is obtained pursuant to the Intercreditor Agreement (Senior Notes), expressly authorize PNC Bank, National Association, as collateral agent under the Intercreditor Agreement (Senior Notes), to release such stock from the Pledge Agreement. (m) FURTHER ASSURANCES. The Borrower shall faithfully preserve and protect, and shall cause each of its Subsidiaries to faithfully preserve and protect, from time to time, at its expense, the Agent's Lien on and Prior Security Interest in the Collateral as a continuing first priority perfected Lien under the Uniform Commercial Code, subject only to Permitted Liens, and shall do, and shall cause each of its Subsidiaries as applicable to do, such other acts as the Agent in its sole discretion may deem necessary or advisable from time to time in order to preserve, perfect and protect the Liens granted under the Senior Loan Documents and to exercise and enforce its rights and remedies thereunder with respect to the Collateral. 8.2 NEGATIVE COVENANTS. ------------------ The Borrower covenants and agrees that until payment in full of the Loans and interest thereon, satisfaction of all of the Borrower's other obligations hereunder and termination of the Revolving Credit Commitments and the Swing Loan Commitment, it shall, unless otherwise consented to in writing by the Required Banks, comply with the following negative covenants: (a) MINIMUM CONSOLIDATED EBITDA. The Borrower shall not permit Consolidated EBITDA as of the end of each fiscal quarter for the four (4) fiscal quarters then ended to be less than $200,000,000. (b) MINIMUM INTEREST COVERAGE RATIO. The Borrower shall not permit the ratio of Consolidated EBITDA to consolidated interest expense of the Borrower and its Consolidated Subsidiaries as of the end of each fiscal quarter for the four (4) fiscal quarters then ended to be less than 4.0 to 1.0. (c) MAXIMUM LEVERAGE RATIO . The Borrower shall not permit the Leverage Ratio as of the end of each fiscal quarter beginning with the fiscal quarter ended December 31, 2000 to exceed 2.0 to 1.0. (d) [INTENTIONALLY OMITTED] ----------------------- (e) INDEBTEDNESS. The Borrower shall not, and shall not permit any of its Subsidiaries to, at any time create, incur, assume or suffer to exist any Indebtedness, except: (i) Indebtedness under the Senior Loan Documents; (ii) Indebtedness under the Senior Notes; (iii) Indebtedness pursuant to capitalized leases made under usual and customary terms in the ordinary course of business and Indebtedness secured solely by Purchase Money Security Interests not exceeding at any one time in the aggregate $30,000,000; (iv) existing Indebtedness as set forth on SCHEDULE 8.2(E) (including any extensions or renewals thereof, PROVIDED there is no increase in the principal amount thereof as of the Closing Date unless otherwise specified on SCHEDULE 8.2(E)); (v) intercompany Indebtedness which is subordinated to the Loans pursuant to the Intercompany Subordination Agreement, (vi) any short-term Indebtedness under securities clearing arrangements secured by or for which marketable securities and related cash balances with customary loan-to-value ratios are available to repay such Indebtedness; (vii) unsecured Indebtedness assumed in connection with an acquisition permitted by Section 8.2(j)(iii); or (viii) unsecured Indebtedness (in addition to Indebtedness permitted above) not to exceed at any one time in the aggregate $25,000,000. (f) LIENS. The Borrower shall not, and shall not permit any of its Subsidiaries to, at any time create, incur, assume or suffer to exist any Lien on any of its property or assets, tangible or intangible, now owned or hereafter acquired, or agree to become liable to do so, except Permitted Liens. (g) GUARANTIES. The Borrower shall not, and shall not permit any of its Subsidiaries to, at any time directly or indirectly, become or be liable in respect of any Guaranty, or assume, guaranty, become surety for, endorse or otherwise agree, become or remain directly or contingently liable upon or with respect to any obligation or liability of any other person, except for the Liens granted under the Senior Loan Documents, and the guarantee by the Companies of obligations of the Subsidiaries of the Borrower (other than any Subsidiary which is not wholly owned) to third parties, which obligations are incurred in the ordinary course of such Subsidiaries' business consistent with industry practice and not otherwise forbidden by this Agreement; PROVIDED that, except for Limited Investments, in no event shall the Borrower or its Subsidiaries become or be liable in respect of any Guaranty, or assume, guarantee, become surety for, endorse or otherwise agree, become or remain directly or contingently liable upon or with respect to any obligation or liability of the Special Purpose Subsidiaries. (h) LOANS AND INVESTMENTS. The Borrower shall not, and shall not permit any of its Subsidiaries to, at any time make or suffer to remain outstanding any loan or advance to, or purchase, acquire or own any stock, bonds, notes or securities of, or any partnership interest (whether general or limited) in, or any other investment or interest in, or make any capital contribution to, any other person, or agree, become or remain liable to do any of the foregoing, except: (i) loans and investments as set forth on SCHEDULE 8.2(H) (including any extensions or renewals thereof, PROVIDED there is no increase in the principal amount thereof as of the Closing Date unless otherwise specified on SCHEDULE 8.2(H)); (ii) investments in wholly owned Subsidiaries existing on the date hereof and wholly owned Subsidiaries hereafter created or acquired, PROVIDED the Borrower and each of its Subsidiaries shall comply with the requirements of Section 8.1(l); (iii) investments in (A) Subsidiaries, which are less than wholly owned, but over which the Borrower maintains control, and (B) corporate entities in which the Borrower does not maintain control but for which none of the Companies has any liability greater than its initial investment in such entity and where the activities in which such entity engages are consistent with the activities set forth in Section 6.1(aa), PROVIDED, that (1) the investments permitted by clause (B) of this Section 8.2(h)(iii) shall not exceed $10,000,000, (2) the stock of any such Subsidiary or corporate entity which is owned by the Borrower or another Subsidiary shall be pledged to the Agent for the benefit of the Banks under the Pledge Agreement PROVIDED THAT, notwithstanding the foregoing, in no event shall the Borrower or another Subsidiary be required to pledge more than 65% of the capital stock of any Foreign Subsidiary, PROVIDED, FURTHER, however, with respect to investments pursuant to clause (B) above, such stock must be pledged only upon the request of the Agent, upon the occurrence of an Event of Default or Potential Default; (iv) intercompany loans which are subordinated to the Loans pursuant to the Intercompany Subordination Agreement, (v) trade credit extended, and loans and advances extended to subcontractors or suppliers, under usual and customary terms in the ordinary course of business; (vi) advances to employees to meet expenses incurred by such employees in the ordinary course of business; (vii) Permitted Investments; (viii) loans, advances and investments in Subsidiaries existing on the date hereof; and (ix) Limited Investments in the Special Purpose Subsidiaries so long as the Limited Investments in all Special Purpose Subsidiaries do not exceed $500,000 in the aggregate. (i) DIVIDENDS AND RELATED DISTRIBUTIONS. The Borrower shall not make or pay, or agree to become or remain liable to make or pay, any dividend or other distribution of any nature (whether in cash, property, securities or otherwise) on account of or in respect of any shares of the capital stock of the Borrower (including the Preferred Shares and the Common Shares), or on account of the purchase, redemption, retirement or acquisition of any shares of the capital stock (or warrants, options or rights therefor) of the Borrower, nor permit any such action to be taken indirectly by any of its Subsidiaries, except: (i) [intentionally omitted]; (ii) in addition to repurchases of Unpledged Shares permitted pursuant to Section 8.2(i)(iv) below, so long as no Event of Default or Potential Default has occurred and is continuing, the Borrower may repurchase not in excess of (a) from and after January 1, 2001 through the term of the Agreement, primarily on a public stock exchange and in accordance with any stock repurchase plan authorized by the Borrower's Board of Directors from time to time, up to $125,000,000 of Unpledged Shares but, so long as the Senior Notes remain outstanding, in no event more than the amount permitted pursuant to the note purchase agreements entered into in connection with the Senior Notes, and (b) during the term of this Agreement, $5,000,000 of Restricted Stock; (iii) any Subsidiary which is less than wholly owned may make distributions as permitted under its organizational documents; and (iv) during the Borrower's fiscal year 2001 and thereafter, so long as (A) no Event of Default or Potential Default has occurred and is continuing, and (B) the Borrower is in compliance with Section 8.2(a), in the case of both clauses (A) and (B) after giving effect to any such dividend or stock repurchase payment, the Borrower may (1) make dividend payments with respect to the Common Shares and in an amount not to exceed, and (2) in addition to repurchases of Unpledged Shares permitted pursuant to Section 8.2(i)(ii) above, repurchase Unpledged Shares for an amount not to exceed, in any fiscal year on a cumulative basis for clauses (1) and (2), 50% of any net income (or minus 100% of any net loss) of the Borrower and its Subsidiaries from January 1, 2000 through the date of payment. (j) LIQUIDATIONS, MERGERS, CONSOLIDATIONS AND ACQUISITIONS. The Borrower shall not, and shall not permit any of its Subsidiaries to, dissolve or liquidate or wind-up its affairs, or become a party to any merger or consolidation, or acquire by purchase, lease or otherwise all or substantially all of the assets or capital stock of any other person, except: (i) [Intentionally omitted] (ii) any Grantor (other than the Borrower) may liquidate into, merge or consolidate with a wholly owned Grantor (other than the Borrower) and any wholly owned Subsidiary which is not a Grantor may liquidate into, merge or consolidate with a wholly owned Subsidiary (so long as if the entity into which any wholly-owned Subsidiary which is not a Grantor is liquidating, merging or consolidating is a Grantor, it continues to be a Grantor after the liquidation, merger or consolidation); and (iii) the Borrower or another Pledged Subsidiary may effect an acquisition of the capital stock or assets (tangible or intangible) of another person or persons, so long as (A) such person is a company which engages in the mutual fund, investment advisory, retirement plan servicing or financial services business or a business related or ancillary to any of the foregoing, (B) if such person is a public company, the acquisition is not hostile and (C) after giving effect to such acquisition, no Event of Default or Potential Default shall exist or be continuing and fifteen (15) days prior to the consummation of such acquisition, the Borrower shall have provided to the Agent and the Banks pro forma financial statements for the Borrower and the Consolidated Subsidiaries, after giving effect to such acquisition, demonstrating such compliance. (k) DISPOSITIONS OF ASSETS OR SUBSIDIARIES. The Borrower shall not, and shall not permit any of its Subsidiaries to, sell, convey, assign, lease, abandon or otherwise transfer or dispose of, voluntarily or involuntarily, any of its properties or assets, tangible or intangible (including sale, assignment, discount or other disposition of accounts, contract rights, chattel paper, equipment or general intangibles with or without recourse or of capital stock, shares of beneficial interest or partnership interests of a Subsidiary), except: (i) any sale, transfer or lease of assets by the Borrower or any wholly owned Subsidiary to the Borrower or any other wholly owned Grantor and any sale or transfer of Designated Assets by a Subsidiary of the Borrower to another Subsidiary of the Borrower followed by an immediate transfer to a Special Purpose Subsidiary, in connection with a securitization or other receivables sale transaction so long as such transaction is non-recourse to any of the Companies or any Special Purpose Subsidiary (except for customary recourse provisions, including recourse to the Designated Assets being sold or transferred). (ii) any sale, transfer or lease of assets which are no longer necessary or required in the conduct of the Borrower's or any Subsidiary's business resulting in after-tax proceeds (net of reasonable and customary expenses in connection with such sale, transfer or lease) not exceeding in the aggregate $10,000,000 in any fiscal year; (iii) any sale, transfer or lease of assets in the ordinary course of business which are replaced by substitute assets; PROVIDED such substitute assets are subject to the Banks' Prior Security Interest; and (iv) any sale, transfer or lease of assets, other than those specifically excepted pursuant to clauses (i) through (iii) above, which is approved by the Required Banks. (l) SELF-DEALING. The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into or carry out any transaction (including purchasing property or services from or selling property or services to any Affiliate or other person), except upon arm's-length terms and conditions and in accordance with all applicable Law (including the Investment Company Act) provided that the foregoing requirements regarding arms-length terms and conditions shall not be applicable to transactions (i) permitted in the Shareholder Rights Agreement or (ii) between or among the Borrower or any Subsidiaries over which the Borrower maintains control. (m) BENEFIT ARRANGEMENTS. The Borrower shall not, and shall not permit any -------------------- of its Subsidiaries or member of the ERISA Group to: (i) fail to satisfy the minimum funding requirements of ERISA and the Internal Revenue Code with respect to any Benefit Arrangement which is a money purchase pension plan; (ii) request a minimum funding waiver from the IRS with respect to any Benefit Arrangement which is a money purchase pension plan; (iii) engage in a Prohibited Transaction with any Benefit Arrangement which, alone or in conjunction with any other circumstances or set of circumstances resulting in liability under ERISA, would constitute a Material Adverse Change; (iv) commit a COBRA Violation which would constitute a Material Adverse Change; (v) fail to give any and all notices and make all disclosures and governmental filings required under ERISA or the Internal Revenue Code, where such failure is likely to result in a Material Adverse Change; or (vi) adopt a Defined Benefit Pension Plan or adopt, or otherwise agree to contribute to, a Multiemployer Plan or a Multiple Employer Plan, PROVIDED that members of the Controlled Group other than the Companies may incur obligations under Defined Benefit Pension Plans so long as the total "benefit liabilities" as defined in Section 4001(a)(16) of ERISA under such Defined Benefit Pension Plans do not at any time exceed $1,000,000. (n) [INTENTIONALLY OMITTED] ----------------------- (o) [INTENTIONALLY OMITTED] ----------------------- (p) CONTINUATION OF OR CHANGE IN BUSINESS. The enterprises represented by the Companies taken as a whole shall continue to engage in their respective businesses substantially as conducted and operated by the Companies during the present fiscal year, and the Borrower shall not permit any material change in such businesses (i.e., the mutual fund, investment advisory, retirement plan servicing and financial services business, and the business of Federated Bank, as such businesses now exist or may exist in the future), either directly or indirectly (including by means of loans and investments), and any change must be in accordance with all applicable Law (including the Investment Company Act); PROVIDED, that (i) the only activities in which the Special Purpose Subsidiaries shall be permitted to engage are to finance broker commissions with respect to the sale of proprietary or private label mutual funds administered or distributed by the Companies and to hold stock of other Special Purpose Subsidiaries, PROVIDED (A) the Special Purpose Subsidiaries shall not enter into any agreements which permit any cross-defaults with any of the Senior Loan Documents and (B) the Limited Investments in the Special Purpose Subsidiaries by the Companies are not greater than $500,000 in the aggregate; and (ii) the Borrower, FII Holdings, Inc. and Federated Services Company shall not become registered as investment advisers or broker-dealers. (q) [INTENTIONALLY OMITTED] --------------------- (r) [INTENTIONALLY OMITTED] --------------------- (s) CHANGES IN OTHER DOCUMENTS. The Borrower shall not amend or modify any provisions of the Shareholder Rights Agreements, its organizational documents (including Articles of Incorporation and Bylaws) or the Senior Notes or any related agreement, document or instrument, without providing at least fifteen (15) Business Days' prior written notice to the Agent and, in the event such change would be adverse to the Banks as determined by the Agent in its sole discretion, obtaining the prior written consent of the Required Banks. Notwithstanding the foregoing, the Borrower may exercise its right to unilaterally terminate the Shareholder Rights Agreement, without providing any prior written notice or obtaining any prior written consent but the Borrower shall notify the Agent at such time of any termination. (t) INTERCOMPANY TRANSACTIONS. The Borrower shall not permit there to be any restriction on the dividends payable by its Subsidiaries except as otherwise required by Law or this Agreement. The Borrower shall not permit there to be any intercompany debt owing by the Borrower to its Subsidiaries unless such debt is subordinated to the Loans pursuant to the Intercompany Subordination Agreement. Except as permitted in Section 8.2(h), no existing business or assets of the Companies shall be transferred or otherwise diverted to or used for the benefit of Subsidiaries which are not wholly owned. (u) CHANGE IN OWNERSHIP. The Borrower shall not permit any change in the ownership of the Class A Shares except transfers of the Class A Shares may be made among the officers, directors and employees of the Borrower and its Subsidiaries and their respective family and affiliates, so long as the transfer is subject to the Pledge Agreement; PROVIDED however, that notwithstanding the provisions of this Section 8.2(u), the Borrower shall not take any action or permit any action to be taken which would result in less than all of the Class A Shares continuing to be pledged at all times to the Agent under the Pledge Agreement. (v) [INTENTIONALLY OMITTED] --------------------- (w) FISCAL YEAR AND ACCOUNTING METHODS. The Borrower shall not, and shall not permit any of its Subsidiaries to, (i) change its fiscal year from the twelve (12) month period beginning January 1 and ending December 31 or (ii) change from the accrual method of accounting. 8.3 REPORTING REQUIREMENTS. ---------------------- The Borrower covenants and agrees that until payment in full of the Loans and interest thereon, satisfaction of all of the Borrower's other obligations hereunder and termination of the Revolving Credit Commitments and the Swing Loan Commitment, it will furnish or cause to be furnished to the Agent and each of the Banks: (a) [INTENTIONALLY OMITTED] --------------------- (b) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in any event within forty-five (45) days after the end of each fiscal quarter in each fiscal year, its operations report, including, at a minimum, consolidated financial statements of the Borrower and its Consolidated Subsidiaries consisting of a consolidated balance sheet as of the end of such fiscal quarter and related consolidated statement of operations, retained earnings and cash flows for the fiscal quarter then ended and the fiscal year through that date, all in reasonable detail and certified (subject to normal year-end audit adjustments) by the Chief Executive Officer, President, Chief Financial Officer, Treasurer or Controller of the Borrower as having been prepared in accordance with GAAP, consistently applied, and setting forth in comparative form the respective financial statements for the corresponding date and periods in the previous fiscal year. (c) ANNUAL FINANCIAL STATEMENTS. As soon as available and in any event within ninety (90) days after the end of each fiscal year of the Borrower, financial statements of the Borrower and its Consolidated Subsidiaries consisting of consolidated and consolidating balance sheets as of the end of such fiscal year, and related consolidated and consolidating statement of operations, consolidated stockholders' equity, consolidated statement of retained earnings and consolidated statement of cash flow for the fiscal year then ended, all in reasonable detail and setting forth in comparative form the financial statements as of the end of and for the preceding fiscal year, and (in the case of the consolidated financial statements only) certified by Ernst & Young LLP or another independent certified public accountant of nationally recognized standing satisfactory to the Required Banks. The certificate or report of accountants shall be free of qualifications (other than (A) any consistency qualification, or (B) any qualification relating to an inconsistency with GAAP, that may result from a change in the method used to prepare Borrower's financial statements as to which such accountants concur) and shall not indicate the occurrence or existence of any event, condition or contingency which would materially impair the prospect of payment or performance of any covenant, agreement or duty of the Borrower under any of the Senior Loan Documents, together with a letter of such accountants substantially to the effect that based upon their ordinary and customary examination of the affairs of the Borrower, performed in connection with the preparation of such consolidated financial statements, and in accordance with generally accepted auditing standards, they are not aware of the existence of any condition or event which constitutes or would, upon notice or lapse of time, or both, constitute an Event of Default or, if they are aware of such condition or event, stating the nature thereof and confirming the Borrower's calculations with respect to the certificate to be delivered pursuant to Section 8.3(d) with respect to such financial statements. (d) CERTIFICATE OF THE BORROWER. Concurrently with the financial statements of the Borrower furnished to the Agent and to the Banks pursuant to Sections 8.3(b) and 8.3(c), a certificate of the Borrower signed by the Chief Executive Officer, President, Chief Financial Officer, Treasurer or Controller of the Borrower, in the form of EXHIBIT L, to the effect that, except as described pursuant to Section 8.3(e), (i) the representations and warranties of the Borrower contained in Article 6 and any certifications delivered by any of the Companies after the Closing Date are true on and as of the date of such certificate with the same effect as though such representations, warranties and certifications had been made on and as of such date (except representations, warranties and certifications which expressly relate solely to an earlier date or time) and the Borrower has performed and complied with all covenants and conditions hereof, (ii) no Event of Default or Potential Default exists and is continuing on the date of such certificate and (iii) containing calculations in sufficient detail to demonstrate the Leverage Ratio and compliance as of the date of the financial statements with the covenants contained in Section 8.1(l) and Sections 8.2(a), (b), (c), (h), (i), (j), (k) and (u). (e) NOTICE OF DEFAULT. Promptly after the Borrower has learned of the occurrence of an Event of Default, Potential Default or Material Adverse Change, a certificate signed by the Borrower's Chief Executive Officer, President, Chief Financial Officer, Treasurer or Controller setting forth the details of such Event of Default, Potential Default or Material Adverse Change and the action which the Borrower proposes to take with respect thereto. (f) NOTICE OF LITIGATION. Promptly after the commencement thereof, notice of all actions, suits, proceedings or investigations before or by any Official Body or any other person against any of the Companies or any of the Funds or which relates to the Collateral, involves a claim or series of claims of $5,000,000 or more or which if adversely determined would constitute a Material Adverse Change. (g) CERTAIN EVENTS. Written notice to the Agent of (i) any sale or other transfer of assets as permitted under subsections (i), (ii), (iii) or (iv) of Section 8.2(k), (ii) any merger, acquisition, consolidation or liquidation permitted under Section 8.2((j), (iii) any change in the ownership or management of the Borrower permitted under Section 8.2(u) or (v), (iv) the creation or acquisition of any new Subsidiaries or investment in any other corporate entity, such notice to be delivered to the Agent within five (5) Business Days after occurrence of such event or consummation of such transaction(s), and in the case of the creation or acquisition of a new Subsidiary or investment in any other corporate entity, accompanied by the items specified in Section 8.1 to be delivered within thirty (30) calendar days after the creation or acquisition of a new Subsidiary or investment in any other corporate entity, and (v) any amendment to the declaration of trust, certificate or articles of incorporation, bylaws, partnership agreement or other organizational documents of any of the Companies or the use by any of the Companies of any fictitious name, it being understood that any such amendments require at least ten (10) Business Days' prior notice to the Agent and may in some cases, including any amendment to the Articles of Incorporation of the Borrower which the Agent has determined would be adverse to the Banks pursuant to Section 8.2(s), require the prior written consent of the Required Banks. (h) OTHER NOTICES, REPORTS AND INFORMATION. At the same time sent or provided to the holders of the Senior Notes under the Senior Notes and related documents, all notices and reports provided under the Senior Notes and related documents (unless already provided pursuant to any other provision of this Section 8.3). Promptly upon their becoming available to the Borrower, (i) the annual budget of the Companies, to be supplied not later than fifteen (15) days prior to commencement of the fiscal year to which it is applicable, (ii) any reports including management letters submitted to any of the Companies by independent accountants in connection with any annual, interim or special audit, (iii) any reports, or notices distributed by any of the Companies to its shareholders on a date no later than the date supplied to the shareholders, (iv) upon request, periodic reports filed by any of the Companies with the Securities and Exchange Commission, (v) periodic reports of examination by the Securities and Exchange Commission or the National Association of Securities Dealers, Inc. of any of the Companies and any responses thereto, (vi) any Revenue Agent's Report and accompanying Statement of Income Tax Examination Changes and any notice of assessment or deficiency by the IRS within ten (10) days of receipt, and (vii) such other reports and information as the Banks may from time to time reasonably request. The Borrower shall also notify the Banks promptly of the enactment of any legislation or adoption of any Law which may result in a Material Adverse Change. (i) NOTICES REGARDING BENEFIT ARRANGEMENTS. Promptly upon becoming aware of the occurrence thereof, notice (including the nature of the event and, when known, any action taken or threatened by the IRS with respect thereto) of any Prohibited Transaction which could subject the Borrower or any member of the ERISA Group to a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Internal Revenue Code in connection with any Defined Benefit Pension Plan, Benefit Arrangement or any trust created thereunder. (j) FINANCIAL STATEMENTS REGARDING THE SPECIAL PURPOSE SUBSIDIARIES. At the same time that the Borrower provides the quarterly financial statements required under Section 8.3(b) for the Borrower and its Consolidated Subsidiaries, it shall also provide quarterly financial statements of the type required by Section 8.3(b) for the Special Purpose Subsidiaries. At the same time that the Borrower provides the annual financial statements required under Section 8.3(c) for the Borrower and its Consolidated Subsidiaries, it shall also provide consolidated and consolidating annual financial statements, of the type required by Section 8.3(c), for the Borrower, its Consolidated Subsidiaries and the Special Purpose Subsidiaries. (k) NOTICES REGARDING SPECIAL PURPOSE SUBSIDIARIES. Within five (5) Business Days after the creation of any new Special Purpose Subsidiary, the Borrower shall provide written notice to the Agent of the creation of any new Special Purpose Subsidiary, accompanied by the declaration of trust, certificate or articles of incorporation, bylaws or other organizational documents of the new Special Purpose Subsidiary. 9. DEFAULT 9.1 EVENTS OF DEFAULT. ----------------- An Event of Default shall mean the occurrence or existence of any one or more of the following events or conditions (whatever the reason therefor and whether voluntary, involuntary or effected by operation of Law): (a) The Borrower shall (i) fail to pay any principal of any Loan (including scheduled installments, mandatory prepayments or the payment due at maturity) or (ii) fail to pay any interest on any Loan or any other amount owing thereunder or hereunder within five (5) Business Days after such interest or other amount becomes due in accordance with the terms thereof or hereof; or (b) Any representation or warranty made at any time by the Borrower herein or by the Borrower or any other Loan Party in any other Senior Loan Document, or in any certificate, other instrument or statement furnished pursuant to the provisions hereof or thereof, shall prove to have been false or misleading in any material respect as of the time it was made or furnished; or (c) The Borrower shall default in the observance or performance of any covenant, condition or provision hereof or of any other Senior Loan Document and such default shall continue unremedied for a period of fifteen (15) Business Days after written notice thereof is given to the Borrower by the Agent at the request of any Bank (such grace period to be applicable only in the event such default can be remedied by corrective action of the Borrower as determined by the Agent in its sole discretion); PROVIDED no grace period shall apply to defaults in the observance or performance of Sections 8.2(a),(b),(c), (i), (j), (k), (p), (u) or Section 8.3(e); or (d) The Borrower or any other Loan Party shall default in the observance or performance of any covenant, condition or provision hereof or of any other Senior Loan Document and such default shall continue unremedied for a period of fifteen (15) Business Days after the Borrower or any other Loan Party becomes aware of the occurrence thereof (such grace period to be applicable only in the event such default can be remedied by corrective action of the Borrower or any other Loan Party as determined by the Agent in its sole discretion); PROVIDED no grace period shall apply to defaults in the observance or performance of Sections 8.2(a), (b), (c), (i), (j), (k), (p), (u) or Section 8.3(e); or (e) A default or event of default shall occur at any time under the Senior Notes or under the terms of any other Indebtedness (if any) of any of the Companies, or all or any part of the Senior Notes or other Indebtedness shall not be paid when due, and such default or event of default or non-payment continues unremedied for fifteen (15) Business Days after any of the Companies becomes aware thereof; PROVIDED no grace period hereunder shall apply in any event where such default, event of default or nonpayment permits the holder of any Indebtedness of the Companies to accelerate such Indebtedness; or (f) Any final judgment(s) for the payment of money in excess of $10,000,000 in the aggregate shall be entered against any of the Companies by a court having jurisdiction in the premises, which judgment(s) are not discharged, vacated, bonded or stayed pending appeal within a period of thirty (30) days from the date of entry; or (g) Any of the Senior Loan Documents shall cease to be legal, valid and binding agreements enforceable against any Loan Party executing the same or such Loan Party's heirs, representatives, successors and assigns (as permitted under the Senior Loan Documents) in accordance with the respective terms thereof or shall in any way be terminated (except in accordance with its terms) or become or be declared ineffective or inoperative or shall in any way be challenged or contested by any Loan Party or cease to give or provide the respective Liens, security interests, rights, titles, interests, remedies, powers or privileges intended to be created thereby; or (h) Within a period of twelve (12) consecutive calendar months, individuals who were directors of the Borrower on the first day of such period shall cease to constitute a majority of the board of directors of the Borrower other than as a result of death, voluntary resignation or retirement. (i) A proceeding shall have been instituted in a court having jurisdiction in the premises seeking a decree or order for relief in respect of any of the Companies in an involuntary case under any applicable bankruptcy, insolvency, reorganization or other similar Law now or hereafter in effect, or a receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator (or similar official) of any of the Companies shall have been appointed (pursuant to a proceeding or otherwise) or for any substantial part of its property, or for the winding-up or liquidation of its affairs, and such proceeding shall remain undismissed or unstayed and in effect for a period of thirty (30) consecutive days or such court shall enter a decree or order granting any of the relief sought in such proceeding; or (j) Any of the Companies shall commence a voluntary case under any applicable bankruptcy, insolvency, reorganization or other similar Law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such Law, or shall consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator (or other similar official) of itself or for any substantial part of its property (other than voluntary liquidations permitted under Section 8.2(j)) or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any action in furtherance of any of the foregoing. 9.2 CONSEQUENCES OF EVENT OF DEFAULT. -------------------------------- (a) If an Event of Default specified under subsections (a) through (h) of Section 9.1 shall occur and be continuing, no Bank shall have any further obligation to make Loans hereunder and the Agent, upon the request of the Required Banks, shall by written notice to the Borrower take any or all of the following actions: (i) terminate the Commitments, (ii) declare the unpaid principal amount of the Notes then outstanding and all interest accrued thereon, any unpaid fees and all other Indebtedness (including the stated amount of all outstanding Letters of Credit of the Borrower to the Banks hereunder and thereunder to be forthwith due and payable, and the same shall thereupon become and be immediately due and payable to the Agent for the benefit of each Bank, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, and (iii) require the Borrower to, and Borrower shall thereupon, deposit in a non-interest bearing account with the Agent, as cash collateral for its obligations under the Senior Loan Documents, an amount equal to the maximum amount currently or at any time thereafter available to be drawn on all outstanding Letters of Credit, and the Borrower hereby pledges to the Agent and the Banks, and grants to the Agent and the Banks a security interest in, all such cash as security for such obligations, provided that upon the earlier of (x) the curing of all existing Events of Default to the satisfaction of the Required Banks and (y) payment in full of the Loans, satisfaction of all of the Borrower's other obligations hereunder and termination of the Commitments, the Agent shall return such cash collateral to the Borrower; and (b) if an Event of Default specified under subsections (i) or (j) of Section 9.1 shall occur, the Banks shall have no further obligation to make Loans hereunder, the Commitments shall without any further action terminate and the unpaid principal amount of the Notes then outstanding and all interest accrued thereon, any unpaid fees and all other Indebtedness (including the stated amount of all outstanding Letters of Credit) of the Borrower to the Banks hereunder and thereunder shall be immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived; and (c) In case an Event of Default shall occur and be continuing, any Bank to whom any obligation is owed by the Borrower hereunder or under any other Senior Loan Document or any participant of such Bank which has agreed in writing to be bound by the provisions of Section 10.14 and any branch, subsidiary or affiliate of such Bank or participant anywhere in the world shall have the right, in addition to all other rights and remedies available to it, without notice to the Borrower, to set off against and apply to the then unpaid balance of all the Loans and all other obligations of the Borrower hereunder or under any other Senior Loan Document any debt owing to, and any other funds held in any manner for the account of, the Borrower by such Bank or participant or by such branch, subsidiary or affiliate, including all funds in all deposit accounts (whether time or demand, general or special, provisionally credited or finally credited, or otherwise) now or hereafter maintained by the Borrower for its own account (but not including funds held in custodian or trust accounts) with such Bank or participant or such branch, subsidiary or affiliate. Such right shall exist whether or not any Bank or the Agent shall have made any demand under this Agreement or any other Senior Loan Document, whether or not such debt owing to or funds held for the account of the Borrower is or are matured or unmatured and regardless of the existence or adequacy of any collateral, guaranty or any other security, right or remedy available to any Bank or the Agent; and (d) In case an Event of Default shall occur and be continuing, and whether or not the Agent shall have accelerated the maturity of the Loans of the Borrower pursuant to any of the foregoing provisions of this Section 9.2, the Agent on behalf of the Banks may proceed to protect and enforce its rights by suit in equity, action at law and/or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement or the Notes, including as permitted by applicable Law the obtaining of the EX PARTE appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of the Agent on behalf of the Banks; and (e) From and after the date on which the Agent has taken any action pursuant to this Section 9.2 and until all obligations of the Borrower have been paid in full, any and all proceeds received by the Agent from any sale or other disposition of the Collateral, or any part thereof, or the exercise of any other remedy by the Agent, shall be applied as follows: (i) first, to reimburse the Agent and the Banks for out-of-pocket costs, expenses and disbursements, including reasonable attorneys' fees and legal expenses, incurred by the Agent or the Banks in connection with realizing on the Collateral or collection of any obligations of the Borrower under any of the Senior Loan Documents, including advances made subsequent to an Event of Default by the Banks or any one of them or the Agent for the reasonable maintenance, preservation, protection or enforcement of, or realization upon, the Collateral, including advances for taxes, insurance, repairs and the like and reasonable expenses incurred to sell or otherwise realize on, or prepare for sale or other realization on, any of the Collateral; (ii) second, to the repayment of all Indebtedness then due and unpaid of the Borrower to the Banks incurred under this Agreement or any of the Senior Loan Documents, whether of principal, interest, fees, expenses or otherwise, in such manner as the Agent may determine in its discretion, subject to the provisions of Section 5.2; and (iii) the balance, if any, as required by Law. (f) In addition to all of the rights and remedies contained in this Agreement or in any of the other Senior Loan Documents, the Agent shall have all of the rights and remedies of a secured party under the Uniform Commercial Code or other applicable Law, all of which rights and remedies shall be cumulative and non-exclusive, to the extent permitted by Law. The Agent may, and upon the request of the Required Banks shall, exercise all post-default rights granted to the Agent and the Banks under the Senior Loan Documents or applicable Law. 9.3 NOTICE OF SALE. -------------- Any notice required to be given by the Agent of a sale, lease, or other disposition of the Collateral or any other related action by the Agent, if given ten (10) days prior to such proposed action, shall constitute commercially reasonable and fair notice thereof to the Borrower or any other Loan Party. 10. THE AGENT 10.1 APPOINTMENT. ----------- Each Bank hereby irrevocably designates, appoints and authorizes PNC to act as Agent for such Bank under this Agreement to execute and deliver or accept on behalf of each of the Banks the other Senior Loan Documents. Each Bank hereby irrevocably authorizes, and each holder of any Note by the acceptance of a Note shall be deemed irrevocably to authorize, the Agent to take such action on behalf of such Bank and such holder under the provisions of this Agreement and the other Senior Loan Documents and any other instruments and agreements referred to herein, and to exercise such powers and to perform such duties hereunder as are specifically delegated to or required of the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. PNC agrees to act as the Agent on behalf of the Banks to the extent provided in this Agreement. 10.2 DELEGATION OF DUTIES. -------------------- The Agent may perform any of its duties hereunder by or through agents or employees (PROVIDED such delegation is exercised with reasonable care and does not constitute a relinquishment of its duties as Agent) and, subject to Sections 10.5, 10.6 and 10.7, shall be entitled to engage and pay for the advice or services of any attorneys, accountants or other experts concerning all matters pertaining to its duties hereunder and to rely upon any advice so obtained, PROVIDED reasonable care is used in the selection of the foregoing experts. 10.3 NATURE OF DUTIES; INDEPENDENT CREDIT INVESTIGATION. -------------------------------------------------- The Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the other Senior Loan Documents and no implied covenants, functions, responsibilities, duties, obligations, or liabilities shall be read into this Agreement or shall otherwise exist. The duties of the Agent shall be mechanical and administrative in nature and shall include the duty to provide to each Bank an executed original of such Bank's Revolving Credit Note and an executed original of this Agreement and a copy of the other Senior Loan Documents; the Agent shall not have by reason of this Agreement a fiduciary or trust relationship in respect of any Bank; and nothing in this Agreement, expressed or implied, is intended to or shall be so construed as to impose upon the Agent any obligations in respect of this Agreement except as expressly set forth herein. Each Bank expressly acknowledges (i) that the Agent has not made any representations or warranties to it and that no act by the Agent hereafter taken, including any review of the affairs of the Borrower or any Subsidiary of the Borrower, shall be deemed to constitute any representation or warranty by the Agent to any Bank; (ii) that it has made and will continue to make, without reliance upon the Agent, its own independent investigation of the financial condition and affairs and its own appraisal of the creditworthiness of the Borrower in connection with this Agreement and the making and continuance of the Loans hereunder; and (iii) except as expressly provided herein, that the Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Bank with any credit or other information with respect thereto, whether coming into its possession before the making of any Loan or at any time or times thereafter. 10.4 ACTIONS IN DISCRETION OF THE AGENT; INSTRUCTIONS FROM THE BANKS. --------------------------------------------------------------- The Agent agrees, upon the written request of the Required Banks, to take or refrain from taking any action of the type specified as being within the Agent's rights, powers or discretion herein, PROVIDED that the Agent shall not be required to take any action which exposes the Agent to legal liability or which is contrary to this Agreement or any other Senior Loan Document or applicable Law. In the absence of a request by the Required Banks, the Agent shall have authority, in its sole discretion, to take or not to take any such action, unless this Agreement specifically requires the consent of the Required Banks or all of the Banks. Any action taken or failure to act pursuant to such instructions or discretion shall be binding on the Banks, subject to Section 10.6. Subject to the provisions of Section 10.6, no Bank shall have any right of action whatsoever against the Agent as a result of the Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Banks, or in the absence of such instructions, in the absolute discretion of the Agent. 10.5 REIMBURSEMENT AND INDEMNIFICATION OF THE AGENT BY THE BORROWER. -------------------------------------------------------------- The Borrower unconditionally agrees to pay or reimburse the Agent and save the Agent harmless against (i) liability for the payment of all reasonable and necessary out-of-pocket costs, expenses and disbursements for which reimbursement is customarily obtained, including fees and expenses of counsel and consultants, incurred by the Agent (a) in connection with the development, negotiation, preparation, printing, execution, administration, interpretation and performance of this Agreement and the other Senior Loan Documents, (b) relating to any requested amendments, waivers or consents pursuant to the provisions hereof, (c) in connection with the enforcement of this Agreement or any other Senior Loan Document or collection of amounts due hereunder or thereunder or the proof and allowability of any claim arising under this Agreement or any other Senior Loan Document, whether in bankruptcy or receivership proceedings or otherwise, and (d) in any workout or restructuring or in connection with the protection, preservation, exercise or enforcement of any of the terms hereof or of any rights hereunder or under any other Senior Loan Document or in connection with any foreclosure, collection or bankruptcy proceedings, and (ii) all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent, in its capacity as such, in any way relating to or arising out of this Agreement or any other Senior Loan Document or any action taken or omitted by the Agent hereunder or thereunder; PROVIDED that the Borrower shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements (a) if the same results from the Agent's gross negligence or willful misconduct, or (b) if the Borrower was not given notice of the subject claim and the opportunity to participate in the defense thereof, at its expense, or (c) if the same results from a compromise or settlement agreement entered into without the consent of the Borrower which consent shall not be unreasonably withheld. 10.6 EXCULPATORY PROVISIONS. ---------------------- Neither the Agent nor any of its directors, officers, employees, agents or affiliates shall (i) be liable to any Bank for any action taken or omitted to be taken by it or them hereunder, or in connection herewith, including pursuant to any other Senior Loan Document, unless caused by its or their own gross negligence or willful misconduct, (ii) be responsible in any manner to any of the Banks for the effectiveness, enforceability, genuineness, validity or the due execution of this Agreement or any other Senior Loan Document or for any recital, representation, warranty, document, certificate, report or statement herein or made or furnished under or in connection with this Agreement or any other Senior Loan Document, or (iii) be under any obligation to any of the Banks to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions hereof or thereof on the part of the Borrower or any Subsidiary of the Borrower, or the financial condition of the Borrower or any Subsidiary of the Borrower, or the existence or possible existence of any Event of Default or Potential Default. Neither the Agent nor any Bank nor any of their respective directors, officers, employees, agents, attorneys or affiliates shall be liable to the Borrower or any other Loan Party for consequential damages resulting from any breach of contract, tort or other wrong in connection with the negotiation, documentation or administration of the Senior Loan Documents or the collection of the Loans. 10.7 REIMBURSEMENT AND INDEMNIFICATION OF THE AGENT BY THE BANKS. ----------------------------------------------------------- Each Bank agrees to reimburse and indemnify the Agent (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so) in proportion to its Ratable Share from and against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent, in its capacity as such, in any way relating to or arising out of this Agreement or any other Senior Loan Document or any action taken or omitted by the Agent hereunder or thereunder, PROVIDED that no such reimbursement shall be required with respect to expenses incurred by the Agent during the time period through the Closing Date and no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements (i) if the same relates to or arises out of the Agent's gross negligence or willful misconduct, or (ii) if such Bank was not given notice of the subject claim and the opportunity to participate in the defense thereof, at its expense, or (iii) if the same results from a compromise and settlement agreement entered into without the consent of the Required Banks, which consent shall not be unreasonably withheld. 10.8 RELIANCE BY THE AGENT. --------------------- The Agent shall be entitled to rely upon any writing, telegram, telex or teletype message, facsimile, resolution, notice, consent, certificate, letter, cablegram, statement, order or other document or conversation by telephone or otherwise believed by it to be genuine and correct and to have been signed, sent or made by the proper person or persons, and upon the advice and opinions of counsel and other professional advisers selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action hereunder unless it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. 10.9 NOTICE OF DEFAULT. ----------------- The Agent shall not be deemed to have knowledge or notice of the occurrence of any Potential Default or Event of Default unless the Agent has received written notice from a Bank or the Borrower referring to this Agreement, specifically describing such Potential Default or Event of Default and stating that such notice is a "notice of default." 10.10 NOTICES. ------- The Agent shall promptly send to each Bank a copy of all notices received from the Borrower and/or any other Loan Party pursuant to the provisions of this Agreement or any other Senior Loan Document upon receipt thereof. The Agent shall promptly notify the Borrower and the other Banks of each change in the Base Rate and the effective date thereof. 10.11 PNC BANK, NATIONAL ASSOCIATION AND THE BANKS IN THEIR INDIVIDUAL ----------------------------------------------------------------- CAPACITIES. - ---------- With respect to its Commitments and the Loans made by it, the Agent shall have the same rights and powers hereunder as any other Bank and may exercise the same as though it were not the Agent, and the term "Banks" shall, unless the context otherwise indicates, include the Agent in its individual capacity. PNC and its affiliates and each of the Banks and their respective affiliates may, without liability to account, except as prohibited herein, make loans to, accept deposits from, discount drafts for, act as trustee under indentures of, and generally engage in any kind of banking or trust business with, the Borrower and its shareholders, any Subsidiary of the Borrower and their respective Affiliates, in the case of the Agent, as though it were not acting as Agent hereunder and in the case of each Bank, as though such Bank were not a Bank hereunder. 10.12 HOLDERS OF NOTES. ---------------- The Agent may deem and treat any payee of any Note as the owner thereof for all purposes hereof unless and until written notice of the assignment or transfer thereof shall have been filed with the Agent. Any request, authority or consent of any person who at the time of making such request or giving such authority or consent is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee or assignee of such Note or of any Note or Notes issued in exchange therefor. 10.13 EQUALIZATION OF THE BANKS. ------------------------- The Banks and the holders of any participations in any Notes agree among themselves that, with respect to all amounts received by any Bank or any such holder for application on any obligation hereunder or under any Note or under any such participation, whether received by voluntary payment, by realization upon security, by the exercise of the right of set-off or banker's lien, by counterclaim or by any other non-pro rata source, equitable adjustment will be made in the manner stated in the following sentence so that, in effect, all such excess amounts will be shared ratably among the Banks and such holders in proportion to their interests in payments under the Notes, except as otherwise provided in Sections 4.4 (b), 5.4 or 5.5. The Banks or any such holder receiving any such amount shall purchase for cash from each of the other Banks an interest in such Bank's Loans in such amount as shall result in a ratable participation by the Banks and each such holder in the aggregate unpaid amount under the Notes, PROVIDED that if all or any portion of such excess amount is thereafter recovered from the Bank or the holder making such purchase, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, together with interest or other amounts, if any, required by Law (including court order) to be paid by the Bank or the holder making such purchase. 10.14 SUCCESSOR AGENT. --------------- The Agent (i) may resign as Agent with the consent of the Borrower, such consent not to be unreasonably withheld or (ii) shall resign if such resignation is requested by the Required Banks or required by Section 5.4(b), in either case (i) or (ii) by giving not less than thirty (30) days' prior written notice to the Borrower and the Banks. If the Agent shall resign under this Agreement, then either (a) the Required Banks shall appoint from among the Banks a successor agent for the Banks, subject to the consent of such successor agent by the Borrower, such consent not to be unreasonably withheld, or (b) if a successor agent shall not be so appointed and approved within the thirty (30) day period following the Agent's notice to the Banks of its resignation, then the Agent shall appoint, with the consent of the Borrower, such consent not to be unreasonably withheld, a successor agent who shall serve as Agent until such time as the Required Banks appoint, and the Borrower consents, which consent shall not be unreasonably withheld, to the appointment of, a successor agent. Upon its appointment pursuant to either clause (a) or (b) above, such successor agent shall succeed to the rights, powers and duties of the Agent and the term "Agent" shall mean such successor agent, effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement. After the resignation of any Agent hereunder, the provisions of this Article 10 shall inure to the benefit of such former Agent, and such former Agent shall not by reason of such resignation be deemed to be released from liability for any actions taken or not taken by it while it was an Agent under this Agreement. 10.15 THE AGENT'S FEE. --------------- The Borrower shall pay to the Agent an annual fee (the "AGENT'S FEE"), payable annually in advance on the Closing Date and on each anniversary of the Closing Date (if extended pursuant to Section 2.13)and, if the Borrower elects the Term-Out Option, on the Revolving Credit Expiration Date, as set forth in that certain letter dated November 14, 2000 between the Borrower and the Agent. 10.16 CALCULATIONS. ------------ In the absence of gross negligence or willful misconduct, the Agent shall not be liable for any error in computing the amount payable to any Bank whether in respect of the Loans, fees or any other amounts due to the Banks under this Agreement. In the event an error in computing any amount payable to any Bank is made, the Agent, the Borrower and each affected Bank shall, forthwith upon discovery of such error, make such adjustments as shall be required to correct such error, and any compensation therefor will be calculated at the Federal Funds Effective Rate. 10.17 BENEFICIARIES. ------------- Except as set forth in Sections 10.5, 10.14, 10.15 and 10.16, the provisions of this Article 10 are solely for the benefit of the Agent and the Banks, and the Borrower or any other Loan Party shall not have any rights to rely on or enforce any of the provisions hereof. In performing its functions and duties under this Agreement, the Agent shall act solely as agent of the Banks and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for the Borrower or any other Loan Party. 11. MISCELLANEOUS 11.1 MODIFICATIONS, AMENDMENTS OR WAIVERS. ------------------------------------ With the written consent of the Required Banks, the Agent, acting on behalf of all the Banks, and the Borrower may from time to time enter into written agreements amending or changing any provision of this Agreement or any other Senior Loan Document or the rights of the Banks, the Borrower or the other Loan Parties hereunder or thereunder, or may grant written waivers or consents to a departure from the due performance of the obligations of the Borrower or the other Loan Parties hereunder or thereunder. Any such agreement, waiver or consent made with such written consent shall be effective to bind all the Banks; PROVIDED that without the written consent of all the Banks, no such agreement, waiver or consent may be made which will: (i) increase the amount of the Revolving Credit Commitment or any Term Loan of any Bank hereunder; (ii) reduce the scheduled principal payments of any Loan, reduce the rate of interest borne by any Loan (except as provided in Section 4.1(0)), or reduce any fees payable to any Bank hereunder; (iii) whether or not any Loans are outstanding, extend the time for payment of principal or interest of any Loan or any fees payable to any Bank hereunder; (iv) except as permitted under Section 8.2(k) or in connection with the sharing of Collateral in connection with the Senior Notes, release any Collateral or other security, if any, for the Borrower's obligations hereunder; or (v) amend Sections 4.1(c), 8.2(k), 10.6 or this Section 11.1, alter any provision hereof regarding the pro rata treatment of the Banks hereunder, change the definition of Required Banks, or change any requirement providing for the Banks or the Required Banks to authorize the taking of any action hereunder. 11.2 NO IMPLIED WAIVERS; CUMULATIVE REMEDIES; WRITING REQUIRED. --------------------------------------------------------- No course of dealing and no delay or failure of the Agent or any Bank in exercising any right, power, remedy or privilege under this Agreement or any other Senior Loan Document shall affect any other or future exercise thereof or operate as a waiver thereof; nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power, remedy or privilege preclude any further exercise thereof or of any other right, power, remedy or privilege. The rights and remedies of the Agent and the Banks under this Agreement and the other Senior Loan Documents are cumulative and not exclusive of any rights or remedies which they would otherwise have. Any waiver, permit, consent or approval of any kind or character on the part of any Bank of any breach or default under this Agreement or any such waiver of any provision or condition of this Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing. 11.3 REIMBURSEMENT AND INDEMNIFICATION OF THE BANKS BY THE BORROWER; TAXES. --------------------------------------------------------------------- The Borrower agrees unconditionally upon demand to pay or reimburse to each Bank and to save such Bank harmless against (i) liability for the payment of all reasonable and necessary out-of-pocket costs, expenses and disbursements for which reimbursement is customarily obtained, including fees and expenses of counsel for each Bank incurred by such Bank (a) after the date of the closing of the syndication hereunder, in connection with the administration and interpretation of this Agreement and other instruments and documents to be delivered hereunder, (b) relating to any amendments, waivers or consents pursuant to the provisions hereof, (c) in connection with the enforcement of this Agreement or any other Senior Loan Document, or collection of amounts due hereunder or thereunder or the proof and allowability of any claim arising under this Agreement or any other Senior Loan Document, whether in bankruptcy or receivership proceedings or otherwise, and (d) in any workout, restructuring or in connection with the protection, preservation, exercise or enforcement of any of the terms hereof or of any rights hereunder or under any other Senior Loan Document or in connection with any foreclosure, collection or bankruptcy proceedings, and (ii) all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against such Bank, in its capacity as such, in any way relating to or arising out of this Agreement or any other Senior Loan Document or any action taken or omitted by such Bank hereunder or thereunder; PROVIDED that the Borrower shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements (a) if the same results from such Bank's gross negligence or willful misconduct, or (b) if the Borrower was not given notice of the subject claim and the opportunity to participate in the defense thereof, at its expense, or (c) if the same results from a compromise or settlement agreement entered into without the consent of the Borrower, which consent shall not be unreasonably withheld. The Banks will attempt to minimize the fees and expenses of legal counsel for the Banks by considering the usage of one law firm to represent the Banks and the Agent where appropriate. The Borrower agrees unconditionally to pay all stamp, document, transfer, recording or filing taxes or fees and similar impositions now or hereafter determined by the Agent or any Bank to be payable in connection with this Agreement or any other Senior Loan Document, and the Borrower agrees unconditionally to save the Agent and the Banks harmless from and against any and all present or future claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any such taxes, fees or impositions. 11.4 HOLIDAYS. -------- Whenever any payment or action to be made or taken hereunder shall be stated to be due on a day which is not a Business Day, such payment or action shall be made or taken on the next following Business Day (except as provided in Section 4.2(a) with respect to Euro-Rate Interest Periods), and such extension of time shall be included in computing interest or fees, if any, in connection with such payment or action. 11.5 FUNDING BY BRANCH, SUBSIDIARY OR AFFILIATE. ------------------------------------------ (a) NOTIONAL FUNDING. Each Bank shall have the right from time to time, without notice to the Borrower, to deem any branch, subsidiary or affiliate (which for the purposes of this Section 11.5 shall mean any corporation or association which is directly or indirectly controlled by or is under direct or indirect common control with any corporation or association which directly or indirectly controls such Bank) of such Bank to have made, maintained or funded any Loan to which the Euro-Rate Option applies at any time, PROVIDED that immediately following (on the assumption that a payment was then due from the Borrower to such other office) and as a result of such change the Borrower would not be under any greater financial obligation pursuant to Section 5.5 than it would have been in the absence of such change. Notional funding offices may be selected by each Bank without regard to the Bank's actual methods of making, maintaining or funding the Loans or any sources of funding actually used by or available to such Bank. (b) ACTUAL FUNDING. Each Bank shall have the right from time to time to make or maintain any Loan by arranging for a branch, subsidiary or affiliate of such Bank to make or maintain such Loan subject to the last sentence of this Section 11.5(b). If any Bank causes a branch, subsidiary or affiliate to make or maintain any part of the Loans hereunder, all terms and conditions of this Agreement shall, except where the context clearly requires otherwise, be applicable to such part of the Loans to the same extent as if such Loan were made or maintained by such Bank but in no event shall any Bank's use of such a branch, subsidiary or affiliate to make or maintain any part of the Loans hereunder cause such Bank or such branch, subsidiary or affiliate to incur any cost or expenses payable by the Borrower hereunder or require the Borrower to pay any other compensation to any Bank (including any expenses incurred or payable pursuant to Section 5.5) which would otherwise not be incurred. 11.6 NOTICES. ------- Any notice, request, demand, direction or other communication to be given to or made upon any party hereto under any provision of this Agreement and any financial report to be given pursuant to Section 8.3 hereof (each, for purposes of this Section 11.6 only, a "NOTICE") shall be given or made by telephone or in writing (which includes by means of electronic transmission (i.e., "E-MAIL") or facsimile transmission or by setting forth such Notice on a site on the World Wide Web (a "WEBSITE POSTING") if Notice of such Website Posting (including the information necessary to access such site) has previously been delivered to the applicable parties hereto by another means set forth in this Section 11.6) in accordance with this Section 11.6, PROVIDED, that any financial report to be given pursuant to Section 8.3 hereof shall be made in writing. Any such Notice must be delivered to the applicable parties hereto at the addresses and numbers set forth under their respective names on SCHEDULE 11.6 hereof or in accordance with any subsequent unrevoked Notice from any such party that is given in accordance with this Section 11.6. Any Notice shall be effective: (a) In the case of hand-delivery, when delivered; (b) If given by mail, four days after such Notice is deposited with the United States Postal Service, with first-class postage prepaid, return receipt requested; (c) In the case of a telephonic Notice, when a party is contacted by telephone, if delivery of such telephonic Notice is confirmed no later than the next Business Day by hand delivery, a facsimile or electronic transmission, a Website Posting or an overnight courier delivery of a confirmatory Notice (received at or before noon on such next Business Day); (d) In the case of a facsimile transmission, when sent to the applicable party's facsimile machine's telephone number, if the party sending such Notice receives confirmation of the delivery thereof from its own facsimile machine; (e) In the case of electronic transmission, when actually received; (f) In the case of a Website Posting, upon delivery of a Notice of such posting (including the information necessary to access such site) by another means set forth in this Section 11.6; and (g) If given by any other means (including by overnight courier), when actually received. Any Bank giving a Notice to a Loan Party shall concurrently send a copy thereof to the Agent, and the Agent shall promptly notify the other Banks of its receipt of such Notice. 11.7 SEVERABILITY. ------------ The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction. 11.8 GOVERNING LAW. ------------- Each Letter of Credit and Section 2.10 shall be subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be revised or amended from time to time, and to the extent not inconsistent therewith the internal laws of the Commonwealth of Pennsylvania without regard to its conflict of laws principles and the balance of this Agreement shall be deemed to be a contract under the laws of the Commonwealth of Pennsylvania and for all purposes shall be governed by and construed and enforced in accordance with the internal laws of the Commonwealth of Pennsylvania without regard to its conflict of laws principles. 11.9 PRIOR UNDERSTANDING. ------------------- This Agreement supersedes all prior understandings and agreements, whether written or oral, between the parties hereto and thereto relating to the transactions provided for herein and therein, including any prior confidentiality agreements and commitments. 11.10 DURATION; SURVIVAL. ------------------ All representations and warranties of the Borrower contained herein or made in connection herewith shall survive the making of the Loans and shall not be waived by the execution and delivery of this Agreement, any investigation by the Agent or the Banks, the making of the Loans, or payment in full of the Loans. All covenants and agreements of the Borrower contained in Sections 8.1, 8.2 and 8.3 shall continue in full force and effect from and after the date hereof so long as the Borrower may borrow hereunder and until payment of all amounts due hereunder and termination of the Revolving Credit Commitments and the Swing Loan Commitment. All covenants and agreements of the Borrower contained herein relating to the payment of principal, interest, premiums, additional compensation or expenses and indemnification, including those set forth in the Notes, Article 5 and Sections 10.5 and 11.3, but not including third-party claims with respect to which indemnification may be sought under Section 10.5 or 11.3, shall survive for a period of one (1) year after payment in full of the Loans and termination of the Revolving Credit Commitments and the Swing Loan Commitment, and the Banks shall make any claim with respect to the foregoing within such period, PROVIDED that such period shall be extended with respect to any matters pending at the end of such one (1) year period. Except as otherwise provided above, all obligations of the Borrower and the other Loan Parties to the Banks, including indemnification obligations with respect to third-party claims under Section 10.5 or 11.3, shall survive the payment in full of the Loans and of all other obligations of the Borrower and the other Loan Parties and termination of the Revolving Credit Commitments and the Swing Loan Commitment. 11.11 SUCCESSORS AND ASSIGNS. ---------------------- This Agreement shall be binding upon and shall inure to the benefit of the Banks, the Agent, the Borrower and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights and obligations hereunder or any interest herein except under the circumstances contemplated under Section 8.1(a). Each Bank may, at its own cost, make assignments of or sell participations in its Revolving Credit Commitment and any Loan or Loans made by it to one (1) or more banks or other entities, subject to compliance with the following requirements of this Section 11.11. The consent of the Borrower shall be required for any assignment or participation except with respect to fundings by a branch, subsidiary or affiliate pursuant to Section 11.5, and such consent shall not be unreasonably withheld, it being understood that the Borrower may reasonably withhold such consent only if it determines in good faith that the prospective assignee or participant is a significant competitor, PROVIDED the consent of the Borrower shall not be required upon the occurrence and during the continuation of an Event of Default or Potential Default. The consent of the Agent shall also be required for any assignment except with respect to fundings by a branch, subsidiary or affiliate pursuant to Section 11.5, and such consent shall not be unreasonably withheld. Except (i) as otherwise provided in Section 5.4 (b), or (ii) with the consent of the Agent and the Borrower which consent may be withheld in their sole discretion, assignments may not be made in amounts less than $5,000,000. In the case of an assignment, upon the Agent's and the Borrower's consent thereto and receipt by the Agent from the assignee of (i) a duly executed Assignment and Assumption Agreement and (ii) a Three Thousand Five Hundred Dollar ($3,500) assignment fee payable to the Agent, the assignee shall have, to the extent of such assignment (unless otherwise provided therein), the same rights, benefits and obligations as it would have if it had been a signatory Bank hereunder. The Revolving Credit Commitments in Section 2.1 shall then be adjusted accordingly and, upon surrender of any Note subject to such assignment, the Borrower shall execute and deliver a new Revolving Credit Note to the assignee in an amount equal to the amount of the Revolving Credit Commitment assumed by it and a new Revolving Credit Note to the assigning Bank in an amount equal to the Revolving Credit Commitment retained by it hereunder. In the case of a participation, except as specified in Section 9.2(c), the participant shall not have any rights under this Agreement or any other Senior Loan Document, all of such Bank's obligations under this Agreement or any other Senior Loan Document shall remain unchanged and all amounts payable by the Borrower hereunder or thereunder shall be determined as if such Bank had not sold such participation. Any participant's rights against the Bank selling such participation shall be set forth in the agreement executed by such Bank in favor of such participant and shall not include any voting rights except with respect to changes of the type referenced in clauses (i), (ii), (iii) or (iv), of Section 11.1 and in clause (v) of Section 11.1 with respect to amending clauses (i), (ii), (iii) or (iv) of Section 11.1. Each Bank may furnish any publicly available information concerning the Borrower and, on a confidential basis subject to receipt of a confidentiality agreement in substantially the form of EXHIBIT M, any other information concerning the Borrower in the possession of such Bank from time to time to assignees and participants (including prospective assignees or participants), PROVIDED such assignees and participants agree to be bound by the provisions of Section 11.12. 11.12 CONFIDENTIALITY. --------------- The Agent and the Banks each agree to keep confidential all information obtained from the Borrower which is nonpublic and confidential or proprietary in nature (including any information the Borrower specifically designates as confidential), except as provided below, and to use such information only in connection with their respective capacities under this Agreement and for the purposes contemplated hereby. The Agent and the Banks shall be permitted to disclose such information (i) to outside legal counsel, accountants and other professional advisors who need to know such information in connection with the administration and enforcement of this Agreement, subject to receipt of written undertakings from such persons to maintain the confidentiality, (ii) to prospective assignees and participants as contemplated by Section 11.11 subject to compliance with the requirements of that Section, (iii) to the extent requested by any bank regulatory authority or, with notice to the Borrower to the extent practicable, as otherwise required by applicable Law or by any subpoena or similar legal process, or in connection with any investigation or proceeding arising out of the transactions contemplated by this Agreement, (iv) if such information is already in the possession of the Bank on a nonconfidential basis or is currently or becomes publicly available other than as a result of a breach of this Agreement by the Banks or the Agent or is currently or becomes available to the Banks or the Agent from a source not subject to confidentiality restrictions, or (v) the Borrower shall have consented to such disclosure. 11.13 COUNTERPARTS. ------------ This Agreement may be executed by different parties hereto on any number of separate counterparts, each of which, when so executed and delivered, shall be an original, and all such counterparts shall together constitute one and the same instrument. 11.14 THE AGENT'S OR THE BANK'S CONSENT. --------------------------------- Whenever the Agent's or any Bank's consent is required to be obtained under this Agreement or any of the other Senior Loan Documents as a condition to any action, inaction, condition or event, the Agent and each Bank shall be authorized to give or withhold such consent in its sole and absolute discretion and to condition its consent upon the giving of additional collateral, the payment of money or any other matter. 11.15 EXCEPTIONS. ---------- The representations, warranties and covenants contained herein shall be independent of each other and no exception to any representation, warranty or covenant shall be deemed to be an exception to any other representation, warranty or covenant contained herein unless expressly provided, nor shall any such exception be deemed to permit any action or omission that would be in contravention of applicable Law (including the Investment Company Act). 11.16 CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. --------------------------------------------- The Borrower hereby irrevocably consents to the non-exclusive jurisdiction of the Court of Common Pleas of Allegheny County and the United States District Court for the Western District of Pennsylvania, and waives personal service of any and all process upon it and consents that all such service of process be made by certified or registered mail directed to the Borrower at the addresses provided for in Section 11.6 and service so made shall be deemed to be completed upon actual receipt thereof. The Borrower waives any objection to jurisdiction and venue of any action instituted against it as provided herein and agrees not to assert any defense based on lack of jurisdiction or venue. THE BORROWER, THE AGENT AND EACH OF THE BANKS HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING OR COUNTERCLAIM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER SENIOR LOAN DOCUMENT OR THE COLLATERAL TO THE FULL EXTENT PERMITTED BY LAW. 11.17 LIMITATION OF LIABILITY. ----------------------- (a) TO THE FULLEST EXTENT PERMITTED BY LAW, NO CLAIM MAY BE MADE BY THE BORROWER OR ANY OTHER LOAN PARTY OR ANY OTHER PERSON AGAINST THE AGENT AND THE BANKS, OR ANY OF THEM, OR ANY AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE, ATTORNEY OR AGENT OF THE AGENT OR THE BANKS FOR ANY SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES (AS DIFFERENTIATED FROM DIRECT AND ACTUAL DAMAGES) IN RESPECT OF ANY CLAIM ARISING FROM OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY STATEMENT, COURSE OF CONDUCT, ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH (WHETHER FOR BREACH OF CONTRACT, TORT OR ANY OTHER THEORY OF LIABILITY); AND THE BORROWER HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR. (b) The parties to this Agreement are expressly put on notice of the limitation of liability as set forth in the declarations of trust of certain of the Borrower's Subsidiaries and agree that the obligations assumed by the Borrower and its Subsidiaries pursuant to this Agreement and the other Senior Loan Documents be limited in any case to the Borrower and its Subsidiaries and their respective assets. The parties to this Agreement shall not seek satisfaction of any obligation of the Borrower or its Subsidiaries under this Agreement from any of the shareholders of the Borrower, the trustees, officers or agents of those entities, or any of them, except as contemplated under the Pledge Agreement and the declarations of trust of certain of the Borrower's Subsidiaries. Notwithstanding the foregoing, nothing in such declarations of trust or elsewhere shall prohibit the Agent on behalf of the Banks from pursuing any remedies against any outside professionals or consultants employed by the Companies. 11.18 TAX WITHHOLDING CLAUSE. ---------------------- At least five (5) Business Days prior to the first date on which interest or fees are payable hereunder for the account of any Bank, each Bank that is not incorporated under the laws of the United States of America or a state thereof agrees that it will deliver to each of the Borrower and the Agent two (2) duly completed copies of (i) IRS Form W-9, 4224 or 1001, or other applicable form prescribed by the IRS, certifying in either case that such Bank is entitled to receive payments under this Agreement and the other Senior Loan Documents without deduction or withholding of any United States federal income taxes, or is subject to such tax at a reduced rate under an applicable tax treaty, or (ii) Form W-8 or other applicable form or a certificate of the Bank indicating that no such exemption or reduced rate is allowable with respect to such payments. Each Bank which so delivers a Form W-8, W-9, 4224 or 1001 further undertakes to deliver to each of the Borrower and the Agent two (2) additional copies of such form (or a successor form) on or before the date that such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Borrower or the Agent, either certifying that such Bank is entitled to receive payments under this Agreement and the other Senior Loan Documents without deduction or withholding of any United States federal income taxes or is subject to such tax at a reduced rate under an applicable tax treaty or stating that no such exemption or reduced rate is allowable. The Agent shall be entitled to withhold United States federal income taxes at the full withholding rate unless the Bank establishes an exemption or at the applicable reduced rate as established pursuant to the above provisions. 11.19 SYNDICATION AGENT. ----------------- The Syndication Agent shall have no rights, obligations or duties under this Agreement other than in its capacity as a Bank hereunder. [SIGNATURE PAGES FOLLOW] SIGNATURE PAGE 1 OF 9 TO AMENDED AND RESTATED SENIOR SECURED CREDIT AGREEMENT IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed this Amended and Restated Senior Secured Credit Agreement as of the date first above written. FEDERATED INVESTORS, INC. By: /S/ DENIS MCAULEY III -------------------------------------- Name: Denis McAuley III Title: Vice President SIGNATURE PAGE 2 OF 9 TO AMENDED AND RESTATED SENIOR SECURED CREDIT AGREEMENT PNC BANK, NATIONAL ASSOCIATION individually and as Agent By: /S/ BRUCE G. SHEARER -------------------------------------- Name: Bruce G. Shearer Title: Vice President SIGNATURE PAGE 3 OF 9 TO AMENDED AND RESTATED SENIOR SECURED CREDIT AGREEMENT THE BANK OF NEW YORK, individually and as Syndication Agent By: /S/ SCOTT BUITEKANT -------------------------------------- Name: Scott Buitekant Title: Vice President SIGNATURE PAGE 4 OF 9 TO AMENDED AND RESTATED SENIOR SECURED TO CREDIT AGREEMENT BANK OF AMERICA, NATIONAL ASSOCIATION By: /S/ MEHUL MEHTA -------------------------------------- Name: Mehul Mehta Title: Vice President SIGNATURE PAGE 5 OF 9 TO AMENDED AND RESTATED SENIOR SECURED CREDIT AGREEMENT FIRSTAR BANK, N.A. By: /S/ DAVID J. DANNEMILLER -------------------------------------- Name: David J. Dannemiller Title: Vice President SIGNATURE PAGE 6 OF 9 TO AMENDED AND RESTATED SENIOR SECURED CREDIT AGREEMENT STATE STREET BANK AND TRUST COMPANY By: /S/ JOHN T. DALEY -------------------------------------- Name: John T. Daley Title: Vice President SIGNATURE PAGE 7 OF 9 TO AMENDED AND RESTATED SENIOR SECURED CREDIT AGREEMENT NATIONAL CITY BANK OF PENNSYLVANIA By: /S/ PAUL SAKALIK -------------------------------------- Name: Paul Sakalik Title: Vice President SIGNATURE PAGE 8 OF 9 TO AMENDED AND RESTATED SENIOR SECURED CREDIT AGREEMENT BANK ONE, NA (Main Office Chicago) By: /S/ NICOLE HOLZAPFEL -------------------------------------- Name: Nicole Holzapfel Title: Vice President SIGNATURE PAGE 9 OF 9 TO AMENDED AND RESTATED SENIOR SECURED CREDIT AGREEMENT CITIBANK, N.A. By: /S/ PIERRE GUIGUI -------------------------------------- Name: Pierre Guigui Title: Vice President SCHEDULE 1.1(A) COMMITMENTS OF THE BANKS REVOLVING CREDIT RATABLE BANK COMMITMENT (US$) SHARE % PNC Bank, National Association $ 25,000,000 16.66666671% The Bank of New York $ 20,000,000 13.33333333% Bank of America, National $ 17,500,000 11.66666666% Association Firstar Bank, N.A. $ 17,500,000 11.66666666% State Street Bank and Trust $ 17,500,000 11.66666666% Company National City Bank of Pennsylvania $ 17,500,000 11.66666666% Bank One, NA (Main Office Chicago) $ 17,500,000 11.66666666% Citibank, N.A. $ 17,500,000 11.66666666% TOTAL $150,000,000 100.00000000% ------------ SCHEDULE 11.6 NOTICE INFORMATION FEDERATED INVESTORS, INC. Federated Investors Tower 1001 Liberty Avenue Pittsburgh, PA 15222-3779 Attn: John McGonigle Telephone No.: (412) 288-1936 Telecopier No.: (412) 288-7578 PNC BANK, NATIONAL ASSOCIATION One PNC Plaza 249 Fifth Avenue Pittsburgh, PA 15265 Telephone No.: (412) 768-7503 Telecopier No. (412) 762-7353 Attention: Bruce G. Shearer THE BANK OF NEW YORK One Wall Street 17th Floor New York, NY 10286 Telephone No.: (212) 635-6958 Telecopier No.: (212) 635-6348 Attention: Scott Buitekant BANK OF AMERICA, NATIONAL ASSOCIATION Financial Institutions 1405 231 South LaSalle Street Chicago, IL 60697 Telephone No.: (312) 828-4433 Telecopier No.: (312) 828-2147 Attention: Mehul Mehta SCHEDULE 11.6 NOTICE INFORMATION (CONTINUED) FIRSTAR BANK, N.A. 1350 Euclid Avenue, Suite 220 Mail Code 4432 Cleveland, OH 44115 Telephone No.: (216) 623-9233 Telecopier No.: (216) 623-9208 Attention: David Dannemiller STATE STREET BANK AND TRUST COMPANY Lafayette Corporate Center 2 Avenue de Lafayette, 2nd Floor Boston, MA 02111 Telephone No.: (617) 662-2312 Telecopier No.: (617) 662-2325 Attention: John Daley NATIONAL CITY BANK OF PENNSYLVANIA 20 Stanwix Street, 19th Floor Pittsburgh, PA 15222-4802 Telephone No.: (412) 644-7727 Telecopier No.: (412) 355-2283 Attention: Paul Sakalik SCHEDULE 11.6 NOTICE INFORMATION (CONTINUED) BANK ONE, NA (MAIN OFFICE CHICAGO) 153 West 51st Street 6th Floor New York, NY 10019 Telephone: (212) 373-1126 Telecopier: (212) 373-1393 Attention: Nicole Holzapfel CITIBANK, N.A. 399 Park Avenue 12th Floor, Zone 11 New York, NY 10043 Telephone: (212) 559-2849 Telecopier: (212) 371-6309 Attention: Pierre Guigui EX-21.01 6 0006.txt EXHIBIT 21.01 SIGNIFICANT SUBSIDIARIES OF FEDERATED INVESTORS, INC.: Federated Securities Corp., a Pennsylvania corporation Federated Investors Management Company, a Pennsylvania corporation FII Holdings, Inc., a Delaware corporation Federated Investment Management Company, a Delaware business trust Federated Investment Counseling, a Delaware business trust Federated Global Investment Management Corp., a Delaware corporation Federated International Management, Ltd., an Ireland company Federated Financial Services, Inc., a Pennsylvania corporation Passport Research Ltd., a Pennsylvania limited partnership Federated Services Company, a Pennsylvania corporation Federated Funding 1997-1, Inc., a Delaware corporation Federated Investors Trust Company, a New Jersey bank Federated Administrative Services, a Delaware business trust Federated Shareholder Services Company, a Delaware business trust Retirement Plan Services Company of America, a Delaware business trust, doing business as "Federated Retirement Plan Services Company" Edgewood Services, Inc., a New York corporation Federated Administrative Services, Inc., a Pennsylvania corporation Federated Private Asset Management, Inc., a Delaware corporation Federated International Holdings B.V., a Netherlands company Investlink Technologies, Inc., a Delaware corporation Federated International - Europe GmbH, a German company EX-23.01 7 0007.txt EXHIBIT 23.01 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-56429) pertaining to the Federated Investors, Inc. Employee Stock Purchase Plan and the Registration Statement (Form S-8 No. 333-62471) pertaining to the Federated Investors, Inc. 1998 Stock Incentive Plan of our report dated January 23, 2001, with respect to the consolidated financial statements of Federated Investors, Inc. incorporated by reference in this Annual Report on Form 10-K for the year ended December 31, 2000. /s/ Ernst & Young LLP Pittsburgh, Pennsylvania March 19, 2001 -----END PRIVACY-ENHANCED MESSAGE-----