Exhibit 99(h)(4)
SECURITIES LENDING AGREEMENT ("Lending Agreement") amended and restated as of
August 11, 2005, among JPMorgan Chase Bank, N.A. ("Bank"), having its principal
place of business at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000 and JPMorgan
Trust I, JPMorgan Trust II, X.X. Xxxxxx Xxxxxxx Mutual Fund Group, Inc.,
JPMorgan Investment Trust (formerly One Group Investment Trust) and X.X. Xxxxxx
Mutual Fund Investment Trust on behalf of each of the JPMorgan Funds listed on
Exhibit A hereto (each, a "Lender"), having its principal place of business at
000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
It is hereby agreed as follows:
SECTION 1 - DEFINITIONS
Unless the context clearly requires otherwise, the following words
shall have the meanings set forth below when used herein:
a) "Account" shall mean the securities account established and
maintained by Bank on behalf of Lender pursuant to one or more
separate Global Custody Agreements ("Custody Agreement"), between
Bank and Lenders, which Custody Agreement provides, INTER ALIA,
for the safekeeping of Securities received by Bank from time to
time on behalf of Lender.
b) "Adviser" means the investment adviser of Lender as identified on
Exhibit A. Unless notified to the contrary by Lender, actions
taken by, and Proper Instructions given by, Adviser may be deemed
by Bank to be taken or given by Lender and notices provided by
Bank to Adviser shall be deemed received by Lender. Lender shall
promptly notify Bank of any change in the identity of the Adviser.
c) "Affiliate" shall mean an entity controlling, controlled by, or
under common control with, Bank.
d) "Authorized Investment" shall mean any type of instrument,
security, participation or other property in which Cash Collateral
may be invested or reinvested, as described in Section 5(e) hereof
and APPENDIX 1 hereto (and as such Appendix may be amended from
time to time by written agreement as provided herein).
e) "Authorized Person" shall mean, except to the extent that Bank is
advised to the contrary by Proper Instruction, any person
(typically an employee of Adviser) who is authorized to give
instructions to Bank pursuant to the Agreement and any mandates
given to Bank in connection with such Agreement. An Authorized
Person shall continue to be so until such time as Bank receives
Proper Instructions that any such person is no longer an
Authorized Person.
f) "Borrower" shall mean an entity listed on APPENDIX 2 hereto other
than any entity which Bank shall have been instructed to delete
from such list pursuant to Written Instructions and as such
Appendix may be amended in accordance with Section 4(b) hereof.
g) "Business Day" shall have the meaning assigned thereto in the
applicable MSLA, including any applicable Addendum or Exhibit
thereto and shall, include, as applicable, a New York Business Day
and a Foreign Business Day.
h) "Cash Collateral" shall mean fed funds and such U.S. currency as
may be pledged by a Borrower in connection with a particular Loan.
i) "Collateral" shall mean the types of collateral acceptable to
Lender as set forth in Appendix 3 hereto. As of the date hereof,
APPENDIX 3 is limited to Cash Collateral except for the JPMorgan
100% U.S. Treasury Securities Money Market Fund.
j) "Collateral Account" shall mean, as the case may be, an account
maintained by Bank with itself, with any Depository or with any
Triparty Institution and designated as a Collateral Account for
the purpose of holding any one or more of Collateral, Authorized
Investments, and Proceeds in connection with Loans hereunder.
k) "Collateral Amount" shall have the meaning assigned thereto in
Section 5(c) hereof.
l) "Collateral Requirement" shall have the meaning assigned thereto
in Section 5(c) hereof.
m) "Custody Agreement" shall have the meaning assigned thereto in the
definition of Account.
n) "Depository" shall mean: (i) The Depository Trust Company, and any
other securities depository or clearing agency (and each of their
respective successors and nominees) registered with the U.S.
Securities and Exchange Commission or registered with or regulated
by the applicable foreign equivalent thereof or otherwise able to
act as a securities depository or clearing agency, (ii) any
transnational depository, (iii) the Federal Reserve book-entry
system for the receiving and delivering of U.S. Government
Securities, and (iv) any other national system for the central
handling of that country's government securities.
o) "Distributions" shall have the meaning assigned thereto in Section
3(b)(v) hereof.
p) "Dollars" shall have the meaning assigned thereto in Section 5(c)
hereof.
q) "Loan" shall mean a loan of Securities hereunder.
r) "Loan Fee" shall mean the amount payable by a Borrower to Bank
pursuant to the applicable MSLA in connection with Loans
collateralized other than by Cash Collateral.
s) "Market Value" shall have the meaning assigned thereto in Section
7(c)(iii) hereof.
2
t) "MSLA" shall mean a master securities lending agreement or
securities borrowing agreement between Bank and a Borrower,
pursuant to which Bank lends securities on behalf of its customers
(including Lender) from time to time. A copy of Bank's standard
forms of MSLA, including (as applicable) the international
addendum thereto, are annexed (i) as Appendix 5A in the case of
borrowers located in the United States, and (ii) as Appendix 5B in
the case of borrowers located outside the United States. (The
location of each Borrower is indicated in Appendix 2.)
u) "Non-U.S. Securities" shall mean Securities other than "U.S.
Securities" as defined below, and shall include Global Depositary
Receipts.
v) "Oral Instructions" shall have the meaning assigned thereto in
Section 10 hereof.
w) "Proceeds" shall mean interest, dividends and other payments and
Distributions received by Bank in connection with Authorized
Investments.
x) "Proper Instructions" shall mean Oral Instructions and Written
Instructions.
y) "Rebate" shall mean the amount payable by Bank on behalf of Lender
to a Borrower in connection with Loans collateralized by Cash
Collateral, which shall be a percentage of the Cash Collateral as
agreed by the Borrower and Bank.
z) "Return Date" shall have the meaning assigned thereto in Section
7(c)(i) hereof.
aa) "Securities" shall mean government securities (including U.S.
Government Securities), equity securities, bonds, debentures,
other corporate debt securities, notes, mortgages or other
obligations, and any certificates, warrants or other instruments
representing rights to receive, purchase, or subscribe for the
same, or evidencing or representing any other rights or interests
therein and held pursuant to the Custody Agreement.
bb) "Term Loan" shall have the meaning assigned thereto in Section
5(h) hereof.
cc) "Triparty Institution" shall mean a financial institution
qualified to act as a custodian under the Investment Company Act
of 1940 and the rules and regulations thereunder (" '40 Act") with
which Bank shall have previously entered a triparty agreement
among itself, such Triparty Institution and a particular Borrower
providing, among other things, for the holding of Collateral in a
Collateral Account at such Triparty Institution in Bank's name on
behalf of Bank's lending customers and for the substitution of
Collateral; provided, however, that any substituted Collateral
shall meet the then standards for acceptable Collateral set by
Bank.
dd) "U.S. Government Securities" shall mean book-entry securities
issued by the U.S. Treasury (as defined in Subpart 0 of Treasury
Department Circular No. 300 and any successor provisions) and any
other securities issued or fully guaranteed by the United States
government or any agency, instrumentality or establishment of the
U.S. government, including, without limitation, securities
commonly known as "Xxxxxx Xxxx," "Xxxxx Xxxx," "Xxxxxx Xxxx" and
"Xxxxxxx Macs".
3
ee) "U.S. Securities" shall mean Securities issued by an issuer that
is organized under the laws of the United States or any State
thereof or that are otherwise traded in the United States, and
shall include American Depositary Receipts.
ff) "Written Instructions" shall have the meaning assigned thereto in
Section 10 hereof.
SECTION 2 - APPOINTMENT. AUTHORITY
(a) APPOINTMENT. Lender hereby appoints Bank as its agent to lend
Securities in the Accounts on Lender's behalf on a fully disclosed basis to
Borrowers from time to time in accordance with the terms hereof and on such
terms and conditions and at such times as Bank shall determine and Bank may
exercise all rights and powers provided under any MSLA as may be incidental
thereto, and Bank hereby accepts appointment as such agent and agrees to so act.
(b) AUTHORITY. Lender hereby authorizes and empowers Bank to execute
in Lender's name and on its behalf and at its risk all agreements and documents
as may be necessary to carry out any of the powers herein granted to Bank.
Lender grants Bank the authority set forth herein notwithstanding its awareness
that Bank: (1) in its individual capacity or acting in a fiduciary capacity for
other accounts, may have transactions with the same institutions to which Bank
may be lending Securities hereunder, which transactions may give rise to actual
or potential conflict of interest situations; and (2) may use EquiLend, a
securities lending platform in which Bank has an equity interest (and therefore
a financial interest in its success), to transact certain Loans with Borrowers
that are EquiLend participants (it being understood that EquiLend will neither
act as principal in, nor guarantee, any such Loan).. Bank shall not be bound to:
(i) account to Lender for any sum received or profit made by Bank for its own
account or the account of any other person or (ii) disclose or refuse to
disclose any information or take any other action if the same would or might in
Bank's judgment, made in good faith, constitute a breach of any law or
regulation or be otherwise actionable with respect to Bank; provided that, in
circumstances mentioned in (ii) above, Bank shall promptly inform Lender of the
relevant facts (except where doing so would, or might in Bank's judgment, made
in good faith, constitute a breach of any law or regulation or be otherwise
actionable as aforesaid).
SECTION 3 - REPRESENTATIONS AND WARRANTIES
(a) REPRESENTATIONS OF EACH PARTY. Each party hereto represents and
warrants to the other that: (i) it has the power to execute and deliver this
Lending Agreement, to enter into the transactions contemplated hereby, and to
perform its obligations hereunder; (ii) it has taken all necessary action to
authorize such execution, delivery, and performance; (iii) this Lending
Agreement constitutes a legal, valid, and binding obligation enforceable against
it; and (iv) the execution, delivery, and performance by it of this Lending
Agreement shall at all times comply with all applicable laws and regulations.
(b) REPRESENTATIONS OF LENDER. Lender represents and warrants to Bank
that: (i) this Lending Agreement is, and each Loan shall be, legally and validly
entered into, and does not and shall not violate any statute, regulation, rule,
order or judgment binding on Lender, or any provision of Lender's charter or
by-laws, or any agreement binding on Lender or affecting its property; (ii) the
person executing this Lending Agreement and all Authorized Persons acting on
behalf of Lender has and have been duly and properly authorized to do so; (iii)
it is lending Securities as
4
principal and shall not transfer, assign or encumber its interest in, or rights
with respect to, any Securities available for Loan hereunder; (iv) it is the
beneficial owner of all Securities or otherwise has the right to lend
Securities; and (v) it is entitled to receive all interest, dividends and other
distributions (including, but not limited to, payments made by the depositary in
connection with American Depositary Receipts and Global Depositary Receipts )
("Distributions") made by the issuer with respect thereto. Lender shall promptly
identify to Bank by notice, which notice may be oral, any Securities that are no
longer subject to the representations contained in (b).
(c) REPRESENTATIONS OF LENDER IN RESPECT OF THE MSLAs. Lender further
represents and warrants to Bank that the representations and warranties to be
given by Bank on Lender's behalf as set out in the MSLAs are true and will
continue to be true at all times until termination of Bank's authority to act as
Lender's agent as provided in this Lending Agreement.
SECTION 4 - BORROWERS
(a) MSLA. Lender hereby acknowledges receipt of the forms of MSLA (as
set forth in APPENDICES 5A AND 5B) and authorizes Bank to lend Securities in the
Account to Borrowers thereunder pursuant to an agreement substantially in the
form thereof.
(b) BORROWERS. Securities may be lent to any Borrower listed in
Appendix 2, as such Appendix may be updated from time to time to add new
Borrowers and to delete entities that have ceased to be potential Borrowers.
Either Lender or Adviser (with the Adviser acting hereunder in its capacity as
an Authorized Person) shall have full discretion to remove any borrower from
Appendix 2 upon five Business Days' written notice to Bank. Bank shall provide
Adviser and Lender with notice of each proposed addition of a Borrower to such
list. If Lender or Adviser (in its capacity as an Authorized Person) notifies
Bank in writing within five Business Days from the date of any such notice that
it objects to a potential Borrower, no Loans of Securities shall be made to such
potential Borrower. If Lender or Adviser does not so object within such five
Business Day period, each potential Borrower notified to Lender and Adviser by
Bank shall be deemed acceptable to Lender as of the expiration of such five
Business Day period.
SECTION 5 - LOANS
(a) SECURITIES TO BE LENT. LENDING OPPORTUNITIES. LOAN INITIATION. All
Securities of Lender held by Bank that are issued, settled or traded in the
markets that have been approved by Bank from time to time for purposes of Bank's
discretionary securities lending program shall be subject to the terms hereof
unless Lender or Adviser (in its capacity as an Authorized Person) notifies the
Bank in writing to the contrary. Bank shall seek to assure that Lender receives
a fair allocation of lending opportunities vis-a-vis other lenders, taking into
account the demand for and availability of Securities, types of Collateral,
eligibility of Borrowers, limitations on investments of Cash Collateral, tax
treatment, and similar commercial factors. From time to time, Bank may lend to
Borrowers Securities held in the Account (except Securities that Lender has
notified to Bank are unavailable or Securities that are no longer subject to the
representations set forth in Section 3) and shall deliver such Securities
against receipt of Collateral in accordance with the applicable MSLA. Bank shall
have the right to decline to make any Loans to any Borrower and to discontinue
lending to any Borrower in its sole discretion and without notice to Lender.
5
(b) RECEIPT OF COLLATERAL. COLLATERAL SUBSTITUTION. For each Loan,
Bank or a Triparty Institution shall receive and hold all Collateral required by
the applicable MSLA in a Collateral Account, and Bank is hereby authorized and
directed, without obtaining any further approval from Lender, to invest and
reinvest all or substantially all Cash Collateral in accordance with APPENDIX 1
as promptly as practicable. Bank shall credit, or where applicable shall have a
Triparty Institution credit, all Collateral, Authorized Investments and Proceeds
to a Collateral Account and Bank shall xxxx its books and records to identify
Lender's interest therein, it being understood, however, that all monies
credited to a Collateral Account may for purposes of investment be commingled
with cash collateral held for other lenders of securities on whose behalf Bank
may act (it being understood that such commingling shall be only to the extent
permitted by applicable law, regulations and interpretations thereof). Bank may,
in its sole discretion, liquidate any Authorized Investment and credit the net
proceeds to a Collateral Account. Bank shall accept substitutions of Collateral
acceptable under APPENDIX 1 in accordance with the applicable MSLA, and shall
credit, or where applicable shall have a Triparty Institution credit, all such
substitutions to a Collateral Account.
(c) XXXX TO MARKET PROCEDURES. (i) Bank shall require initial
Collateral for a Loan in an amount determined by applying the then applicable
"Collateral Requirement" (as defined below) to the Market Value of the Security
that is the subject of the Loan together with, in the case of fixed income
Securities, any accrued but unpaid interest thereon. The "Collateral
Requirement" with respect to a given Security shall be an amount equal to the
then applicable percentage (currently 102% where securities and the collateral
therefor are denominated in the same currency, and 105% for all other
securities) of the Market Value of the Security which is the subject of a Loan
as determined as of the close of trading on the preceding Business Day;
provided, however, that with respect to Securities such as U.S. Treasury strips
and bills, where the market functions to not allow for the sale of such
Securities at greater than par, the Collateral Requirement shall equal the
lesser of 100% of the par value of the Security or 102% of its Market Value.
(ii)(A) With respect to each Loan of Securities denominated in U.S. dollars
("Dollars") if, and only if, the aggregate Market Value of the Collateral held
by Bank on behalf of Lender for such Loan on any Business Day is less than the
aggregate Market Value of the Securities which are the subject of such Loan
(together with accrued but unpaid interest in the case of fixed income
Securities, but in any event exclusive of any diminution in the value of Cash
Collateral investments), Bank shall demand, as needed, on each such Business Day
on behalf of Lender, that the Borrower, provide additional Collateral in
accordance with the applicable MSLA (it being acknowledged that pursuant to the
forms of MSLA, Collateral shall be delivered by a Borrower by the close of the
Business Day following the Business Day on which a Collateral demand is made by
Bank). Such additional Collateral demanded, together with the Collateral then
held by Bank on behalf of Lender for such Loan, shall be not less than the
applicable Collateral Requirement. (B) With respect to all loans of Securities
denominated other than in Dollars from all lenders to a given Borrower
(including Loans made hereunder), each Business Day Bank shall determine if the
Market Value of all Collateral received by Bank from that Borrower in connection
with all such loans is at least equal to the aggregate amount ("Collateral
Amount") determined by applying the applicable Collateral Requirement to each
Security denominated other than in Dollars on Loan to such Borrower from all
lenders. If the Market Value of the Collateral held for any individual Security
falls below the Market Value of such Security, or if the Market Value of all
Collateral received from a given Borrower in respect of such Loans is not at
least equal to the Collateral Amount, Bank shall demand, as needed, on each such
Business Day on behalf of Lender, that Borrower provide additional Collateral in
accordance with the applicable MSLA so as to meet the Collateral Amount by
marking specific Loans (it being acknowledged that
6
pursuant to the forms of MSLA, Collateral shall be delivered by a Borrower by
the close of the Business Day following the Business Day on which a Collateral
demand is made by Bank). In respect of the forgoing, additional Collateral shall
not be demanded to the extent that a Collateral shortfall is on account of a
diminution in the value of Cash Collateral investments. In accordance with
general market practice, the Market Value of certain Securities (including,
without limitation, U.S. Government Securities), whether on Loan or received as
Collateral, may be determined on a same day basis by reference to recognized
pricing services. Bank may from time to time establish DE MINIMIS guidelines
with respect to Collateral pursuant to which a xxxx to market would not be made
even where otherwise required hereunder.
(d) CHANGES IN PROCEDURES APPLICABLE TO COLLATERAL. The Collateral
procedures set forth in Sections 5(b)-(c) above reflect Bank's current practice
and may be changed by Bank from time to time based on general market conditions
(including volatility of Securities on Loan and of securities Collateral, if and
when taken), the Market Value of Securities on Loan to a given Borrower, and in
accordance with general market practice and regulatory requirements. Bank shall
notify Adviser (in its capacity as an Authorized Person) Lender of material
revisions to the foregoing procedures. Unless Adviser (acting in its capacity as
an Authorized Person) or Lender objects in writing, such change shall be deemed
acceptable to Lender. No change will be effective if objected to by Adviser or
Lender; it being understood that Bank may terminate this Lending Agreement
forthwith on notice to Lender if Lender does not accept any such change.
(e) INVESTMENT OF CASH COLLATERAL. (i) Bank is hereby authorized to
invest and reinvest Cash Collateral in accordance with the investment guidelines
annexed hereto as APPENDIX 1. Appendix 1 may be amended at any time by Lender or
Adviser to delete types of permissible investments upon five Business Days'
prior notice to Bank. Appendix 1 may also be amended by written agreement
between Lender or Adviser (acting in its capacity as an Authorized Person) and
Bank. (ii) Authorized Investments are made for the account of, and at the sole
risk of, Lender. In that connection, Lender shall pay to Bank on demand in cash
an amount equal to any deficiency in the amount of Collateral available for
return to a Borrower pursuant to the applicable MSLA. Bank is authorized to
select brokers and dealers for the execution of trades in connection with the
investment of Cash Collateral, which broker or dealer may (subject to the '40
Act) be an Affiliate of Bank provided that a competitive execution price is
obtained.
(f) DISTRIBUTIONS AND VOTING RIGHTS.
(i) Bank shall credit the Account on payable date with the amount of
all cash Distributions (but for purposes of this Section 5(f) and Section 7(b)
hereof, the term "cash Distributions" shall not include any principal payment,
whether paid upon the maturity of any debt Security or prior to its maturity)
with respect to Securities on Loan over their record date that Lender would have
received under the Custody Agreement had such Securities not been on Loan over
record date; provided, that with respect to Non-U.S. Securities, Bank's
obligation to credit the Account shall extend only to record dates (and
Distributions made during the period of the relevant Loan) up to and including
the date of any Event of Default (as defined in the applicable MSLA). To the
extent that cash Distributions are not delivered to Bank by Borrower and Bank
has so credited the Account with such Distributions, Bank shall be subrogated to
Lender's rights against Borrower as provided in Section 7(d). In connection with
the foregoing, Lender shall promptly return any amount so credited upon oral or
written notification from Bank that: (a) such amount has not been paid by the
issuer of the Securities or the paying agent therefor (as applicable) in the
ordinary course
7
of business or (b) such amount was incorrectly credited. If Lender does not
promptly return any amount upon such notification, Bank shall be entitled, upon
oral or written notification to Lender, to reverse such credit by debiting the
Account for the amount previously credited.
(ii) (a) Any non-cash Distribution which is in the nature of a stock
split or a stock dividend shall be added to the existing Loan to which such
dividend relates as of the date such non-cash Distribution is payable and shall
be subject to the provisions hereof and the applicable MSLA. (b) Any non-cash
Distribution which is in the nature of warrants or rights to purchase shares
made with respect to any Securities on Loan shall be deemed to be a new Loan
made by Lender to Borrower (and shall be considered to constitute Securities on
Loan) as of the date such non-cash Distribution is payable and shall be subject
to the provisions hereof; provided that Lender or Adviser (acting in its
capacity as an Authorized Person) may, by giving Bank ten (10) Business Days'
notice prior to the date of such non-cash Distribution (or such different amount
of time as Bank may from time to time require on advice to Lender), direct Bank
to request that the Borrower deliver such non-cash Distribution to Bank pursuant
to the applicable MSLA, in which case Bank shall credit such non-cash
Distribution to the Account. (c) If, despite (a) and (b) Lender or Adviser
(acting in its capacity as an Authorized Person) requests that Bank instruct the
Borrower to deliver a non-cash Distribution on its payable date, and Borrower
fails so to deliver the non-cash Distribution, the indemnity provisions and
corresponding subrogation rights set forth in Section 7 shall apply.
(iii) During the term of any Loan, Bank shall permit the Securities on
Loan to be transferred into the name of and be voted by the Borrower or others.
Lender shall not be entitled to: (a) participate in any dividend reinvestment
program with respect to Securities that are eligible for Loan (whether or not
actually on Loan) as of the applicable record date for such Securities or (b)
vote proxies with respect to Securities that are on Loan as of the applicable
record date for such Securities. In those markets where it is not practical or
permissible to do so (E.G., Finland, Norway and Sweden), Lender shall not be
entitled to vote proxies with respect to Securities that are eligible for Loan
(but not actually on Loan) as of the applicable record date for such Securities.
Notwithstanding the foregoing, Lender or Adviser (acting in its capacity as an
Authorized Person) shall be entitled to instruct Bank to recall Securities on
Loan to vote proxies (it being understood and agreed that in such cases the
right to vote shall be contingent on such Securities being received back from
Loan prior to any applicable proxy voting deadlines imposed by the issuer and
Bank). Lender or Adviser (acting in its capacity as an Authorized Person) may
also request that Bank obtain from a Borrower a commitment to vote or consent as
directed with respect to a material event affecting Securities on Loan when
Lender or Adviser (acting in its capacity as an Authorized Person) believes it
necessary to so vote or consent, it being understood, however, that a Borrower
has no obligation to so vote or consent and may, in some circumstances, be
unable to do so.
(g) ADVANCES, OVERDRAFTS AND INDEBTEDNESS. SECURITY INTEREST. Bank
may, in its sole discretion, advance funds on behalf of Lender in order to pay
to Borrowers any Rebates or to return to Borrowers Cash Collateral to which they
are entitled pursuant to the applicable MSLA. Lender shall repay Bank on demand
the amount of any advance or any other amount owed by Lender hereunder. Any such
advance shall bear interest at the rate customarily charged by Bank for such
advances at the time such advance is made. In order to secure repayment of any
advance or other indebtedness of Lender to Bank arising hereunder, Bank shall
have a continuing lien and security interest in and to all assets now or
hereafter held in the Account and any Collateral Account (to which Lender is
entitled hereunder) and any other property at any time held by it for the
benefit
8
of Lender or in which Lender may have an interest which is then in Bank's
possession or control or in the possession or control of any third party acting
on Bank's behalf. In this regard, Bank shall be entitled to all the rights and
remedies of a pledgee under common law and a secured party under the New York
Uniform Commercial Code and/or any other applicable laws and/or regulations as
then in effect.
(h) TERMINATION OF A LOAN. (i) Loans shall generally be terminable on
demand. With the prior approval of Lender, however, Loans may be made on the
basis of a reasonably anticipated termination date ("Term Loan") and without
providing for the right of substitution of equivalent securities. Termination of
a Term Loan prior to its anticipated termination date by either Lender or
Borrower may result in the terminating party having to pay the non-terminating
party damages based on the cost of obtaining a replacement loan. (ii) Bank shall
terminate any Loan of Securities to a Borrower as soon as practicable after: (a)
receipt by Bank of a notice of termination of the respective MSLA; (b) receipt
by Bank of Written Instructions directing it to terminate a Loan; (c) receipt by
Bank of Written Instructions instructing it to delete from APPENDIX 2 the
Borrower to which such Loan was made; (d) receipt by Bank of Written
Instructions advising that the Security subject to a Loan is no longer subject
to the representations contained in Section 3 hereof; (e) receipt by Bank of
notice advising that an Event of Default (as defined in the applicable MSLA) has
occurred and is continuing beyond any applicable grace period; (f) whenever
Bank, in its sole discretion, elects to terminate such Loan other than a Term
Loan; or (g) termination hereof. (iii) Lender acknowledges that: (1) termination
hereof may result in the termination of certain Authorized Investments prior to
their maturity which, in turn, may result in losses being realized in such
Authorized Investments; and (2) any such losses shall be for the account and
sole risk of Lender.
(i) SALE OF A SECURITY ON LOAN. Lender shall advise Bank of the sale
of Securities no later than 9:00 a.m. on the Business Day after the sale date
(which notice need not be limited to Securities on Loan, but must include such
Securities). Bank shall not be liable for any failures occurring on a settlement
date for sale of Securities if timely notice is not given by Lender as provided
in the preceding sentence, and shall not be liable in any event (except as
provided in Section 7) for failure of a Borrower to return Securities on Loan in
a timely fashion; provided that, if notice is given by Lender to Bank by the
time set out in the preceding sentence and the Borrower does not return the
Security on Loan within the settlement time frame applicable to the sale of such
Security, Bank shall credit Lender for any related overdraft charges and
reimburse Lender for those charges that may be incurred in connection with any
resulting sale fail or, alternatively, Bank shall credit to the Account a
security identical to the Security on Loan. In connection with the foregoing,
Lender shall subrogate Bank to any rights Lender may have against the Borrower
to the extent Bank makes any such payment or credit (where the credit or payment
resulted in any expense to Bank). Lender shall receive contractual settlement
date accounting (as described in Section 6(b) of the Custody Agreement) with
respect to Securities that are on Loan to the same extent that Lender would be
entitled to contractual settlement date accounting under the Custody Agreement
for the sale of Securities that were not on Loan; it being understood and
agreed, however, that in any given case Lender shall not be entitled to be
credited with a security identical to a Security on Loan and to receive
contractual settlement date accounting in respect of the sale of such Security.
(j) RECORDKEEPING AND REPORTS. Bank shall establish and maintain such
records as are reasonably necessary to account for Loans that are made and the
income derived therefrom. Bank
9
shall provide Lender and Adviser (acting in its capacity as an Authorized
Person) with a monthly statement describing the Loans made during the preceding
month and the income derived from Loans during the period covered by such
statement. A party shall comply with reasonable requests of the other party for
information necessary to the requester's performance of its duties hereunder.
SECTION 6 - DEFAULT BY BORROWER
(i) Bank may assume (unless it has actual knowledge to the contrary)
that any representations made by a Borrower in connection with any Loan are
true, that no event which is or may become an Event of Default (as defined in
the applicable MSLA) has occurred and that a Borrower has complied with its
obligations under the applicable MSLA. Subject to Sections 5(f)(i)-(ii) and
Sections 7(b)-(c) hereof, Bank shall have no responsibility for any breach of
any obligation by any Borrower under or in connection with any MSLA or Loan.
Bank shall have no responsibility for the accuracy or completeness of any
information supplied by any Borrower. Bank shall not be liable as a result of
taking or omitting to take any action, provided that Bank shall have carried out
its responsibilities as lending agent hereunder in good faith. (ii) If any
Borrower with respect to any Loan effected pursuant hereto and pursuant to the
applicable MSLA fails to return any Securities on Loan when due thereunder for
reasons other than relating to the solvency of the Borrower, Bank shall then, in
addition to taking whatever action may be required by Section 7(c) hereof, take
whatever action it deems appropriate in accordance with general market practice
and Bank's reasonable judgment, including, but not necessarily limited to,
claiming compensation from such Borrower on behalf of Lender in the event a
trade executed by Lender fails on account of such Borrower's failure timely to
have returned Securities on Loan or, where Bank deems it necessary, such other
action as may be permitted by the applicable MSLA. (iii) If any Borrower with
respect to any Loan effected pursuant hereto and pursuant to the applicable MSLA
fails to return any Securities on Loan when due thereunder for reasons relating
to the solvency of the Borrower, Bank shall then, in addition to taking whatever
action may be required by Section 7(c) hereof, take such action as its deems
appropriate in accordance with Bank's reasonable judgment under the applicable
MSLA.
SECTION 7 - LIABILITIES. INDEMNIFICATION
(a) LIABILITIES. Except as provided in Sections 5(f)(i)-(ii) and
Sections 7(b)-(c) hereof, Bank shall not be liable for any costs, expenses,
damages, liabilities or claims (including attorneys' and accountants' fees)
incurred by Lender, except those costs, expenses, damages, liabilities and
claims arising out of the negligence, bad faith or willful misconduct of Bank.
Bank shall have no obligation hereunder for: (i) costs, expenses, damages,
liabilities or claims (including attorneys' and accountants' fees), which are
sustained or incurred by Lender by reason of any action or inaction by any
pricing service, any Depository or a Triparty Institution or their respective
successors or nominees; and (ii) any failure to perform any obligation due to
any matters beyond the control of Bank. In no event shall Bank be liable for
indirect or consequential damages or lost profits or loss of business, arising
hereunder or in connection herewith, even if previously informed of the
possibility of such damages and regardless of the form of action.
Except for any costs or expenses incurred by Bank in performing its
obligations pursuant to Sections 5(f)(i)-(ii) and Sections 7(b)-(c) hereof and
ordinary operating expenses incurred by Bank in providing services hereunder,
Lender shall indemnify Bank and hold it harmless from and against any and all
costs, expenses, damages, liabilities or claims, including reasonable fees and
expenses of
10
counsel, which Bank may sustain or incur or which may be asserted against Bank
by reason of or as a result of any action taken or omitted by Bank in connection
with operating hereunder or enforcing Lender's rights under the applicable MSLA,
other than those costs, expenses, damages, liabilities or claims arising out of
the negligence, bad faith or willful misconduct of Bank. The foregoing indemnity
shall be a continuing obligation of Lender, its successors and assigns,
notwithstanding the termination of any Loans hereunder or of this Lending
Agreement. Bank may charge any amounts to which it is entitled hereunder against
the Account, and Lender shall be entitled to an accounting of all amounts so
charged. Actions taken or omitted in reliance upon Proper Instructions, or upon
any information, order, indenture, stock certificate, power of attorney,
assignment, affidavit or other instrument reasonably believed by Bank, in good
faith, to be genuine or bearing the signature of a person or persons believed,
in good faith, to be authorized to sign, countersign or execute the same, shall
be conclusively presumed to have been taken or omitted in good faith.
(b) INDEMNIFICATION OF LENDER IN RESPECT OF DISTRIBUTIONS. If the
Borrower in respect of any Loan effected pursuant hereto and pursuant to the
applicable MSLA fails to deliver any non-cash Distributions with respect to
Securities on Loan as and when requested to do so by Bank as provided in Section
5(f)(ii)(c) hereof, Bank shall with respect to: (x) U.S. Securities at its
option, credit such non-cash Distribution or an amount equivalent thereto to the
Account on the date it is due, and (y) Non-U.S. Securities, for any non-cash
Distributions made during the period of the relevant Loan (up to and including
the date of any Event of Default) or for any non-cash Distributions for which
the record date occurs on or before the date of any Event of Default, Bank
shall, at its option, either (i) purchase for the Account replacement securities
(of an equal amount of the same issue, class, type or series as the
Distribution) on the principal market in which such securities are traded or
(ii) credit the Account with the Market Value in Dollars of such Distributions
on the due date as determined by Bank in good faith. The foregoing shall,
subject to Sections 7(c)(iii) and 7(d) hereof, be at Bank's expense.
(c) INDEMNIFICATION OF LENDER IN RESPECT OF SECURITIES.
(i) U.S. SECURITIES. If the Borrower in respect of any Loan of U.S.
Securities effected pursuant hereto and pursuant to the applicable MSLA fails to
return any Securities on Loan to Bank for the Account when due thereunder, which
is the date an Event of Default shall have occurred under the applicable MSLA
(the "Return Date"), then Bank shall, at its expense, but subject to Sections
7(c)(iii) and 7(d) hereof, deposit replacement Securities of the same issue,
type, class and series to the Account, as soon as practicable. If Bank is unable
to obtain replacement Securities, Bank shall, at its expense, but subject to
Sections 7(c)(iii) and 7(d) hereof, credit the Account in Dollars with the
Market Value of such Securities on Loan on the credit date.
(ii) NON-U.S. SECURITIES. If the Borrower in respect of any Loan of
Non-U.S. Securities effected pursuant hereto and pursuant to the applicable MSLA
fails to return any such Securities on Loan to Bank for the Account on the
Return Date, Bank shall, at Bank's sole election and at its expense, but subject
to Sections 7(c)(iii) and 7(d) hereof and to Bank not being responsible to
compensate Lender for any increase in the Market Value of such Non-U.S.
Securities after the Return Date, as soon as practicable, either (x) deposit
replacement Securities of the same issue, type, class and series to the Account
as the Securities on Loan up to the Market Value of such Securities determined
as of the Return Date or (y) credit the Account, in Dollars, with the Market
Value of the Securities on Loan determined as of the Return Date.
11
(iii) In connection with Section 7(b) and Section (c)(i) and (ii)
above, "Market Value" (or "Value" in the case of Borrowers subject to Appendix
5B) shall: (y) be determined by Bank in accordance with the applicable MSLA,
including the computation of Dollar equivalents where Securities on Loan and/or
Collateral (and Proceeds) are denominated in a currency other than Dollars; and
(z) in the case of fixed income Securities, including any accrued but unpaid
interest thereon. If the Market Value of the Cash Collateral on a credit date or
a Return Date is less than that which is required to purchase replacement
securities (and non-cash Distributions) or to credit the Account with the Market
Value in Dollars of the Securities on Loan (and non-cash Distributions) as a
result of a decrease in the Market Value of Authorized Investments, Bank shall
not be responsible for that decrease and shall deposit replacement securities or
credit the Account, with the Market Value of such Securities on Loan only to an
amount net of the decrease in Market Value of Authorized Investments.
(d) SUBROGATION. If Bank makes a payment or a purchase pursuant to
Sections 5(f), 7(b) or 7(c) Bank shall, to the extent of such payment or
purchase, be subrogated to, and Lender shall assign and be deemed to have
assigned to Bank, all of its rights in, to and against the Borrower (and any
guarantor thereof) in respect of such Loan, any Collateral pledged by the
Borrower in respect of such Loan, and all proceeds of such Collateral. In the
event that Lender receives or is credited with any payment, benefit or value
from or on behalf of the Borrower in respect of rights to which Bank is
subrogated as provided herein, Lender shall promptly remit or pay to Bank the
same (or its Dollar equivalent).
SECTION 8 - BANK COMPENSATION
The compensation payable to Bank hereunder shall be as set forth in the
fee schedule annexed hereto as APPENDIX 6, as the same may be amended from time
to time. Bank is authorized, on a monthly basis, to charge such fees (together
with reasonable expenses incurred by Bank hereunder) and any other amounts owed
by Lender hereunder against the Account and/or a Collateral Account.
SECTION 9 - TAXES
(a) Lender shall be responsible for all filings, tax returns and
reports on any Loans undertaken by Bank on Lender's behalf which are to be made
to any authority whether governmental or otherwise and for the payment of all
unpaid calls, taxes (including, without limitation, any value added tax),
imposts, levies or duties due on any principal or interest, or any other
liability or payment arising out of or in connection with any Securities or any
Collateral, and insofar as Bank is under any obligation (whether of a
governmental nature or otherwise) to pay the same on Lender's behalf, Bank may
do so out of any monies or assets held by it pursuant to the terms of the
Custody Agreement or hereunder.
(b) Lender acknowledges that: (i) the tax treatment of the payments
made by a Borrower to Lender in lieu of Distributions (including, by way of
illustration and not of limitation, with respect to any dividends received
deduction and amounts paid by the depositary on American Depositary Receipts and
Global Depositary Receipts) may differ from the tax treatment of the
Distribution to which such payments relate; and (ii) it has made its own
determination as to the tax treatment of
12
any Loan made pursuant hereto, of any in lieu of payments made by a Borrower and
of any remuneration and any other amounts that may be received by it hereunder.
(c) The parties intend any Loan to qualify as a securities lending
transaction subject to Section 1058 of the Internal Revenue Code of 1986, as
amended, and, in that connection, Bank confirms that its documentation is
designed to help assure that lending transactions so qualify. Each party shall
refrain from taking any action that would reasonably be expected to cause any
Loan to fail to so qualify.
SECTION 10 - INSTRUCTIONS
(a)(i) WRITTEN INSTRUCTIONS. "Written Instructions" shall mean written
communications actually received by Bank from an Authorized Person or from a
person reasonably believed by Bank to be an Authorized Person by letter,
memorandum, telegram, cable, telex, telecopy facsimile, computer, video (CRT)
terminal or other on-line system, or any other method reasonably acceptable to
Bank and whereby Bank is able to verify with a reasonable degree of certainty
the identity of the sender of such communications or which communications are
transmitted with proper testing or authentication pursuant to terms and
conditions which Bank may specify. (ii) ORAL INSTRUCTIONS. "Oral Instructions"
shall mean oral communications actually received by Bank from an Authorized
Person or from a person reasonably believed by Bank to be an Authorized Person.
Oral Instructions shall promptly thereafter be confirmed in writing by an
Authorized Person (which confirmation may bear the facsimile signature of such
Person), but Lender shall hold Bank harmless for the failure of an Authorized
Person to send such confirmation in writing, the failure of such confirmation to
conform to the Oral Instructions received, or Bank's failure to produce such
confirmation at any subsequent time. Lender shall be responsible for
safeguarding any testkeys, identification codes or other security devices which
Bank may make available to Lender or its Authorized Persons.
(b) Unless otherwise expressly provided, all Proper Instructions shall
continue in full force and effect until canceled or superseded.
SECTION 11 - PRICING SERVICES
Bank may use any pricing service referred to in an applicable MSLA and
any other recognized pricing service (including itself and any of its
Affiliates) in order to perform its valuation responsibilities with respect to
Securities, Collateral and Authorized Investments, and Lender shall hold Bank
harmless from and against any loss or damage suffered or incurred as a result of
errors or omissions of any such pricing service. If Lender or Adviser (acting in
its capacity as an Authorized Person) advises Bank that there is a material
discrepancy between the price assigned to a Security in the calculation of a
Lender's net asset value by Lender and the price assigned by Bank in connection
with the indemnity contained in Section 7(c) where Bank credits the Market Value
of a Security to Lender, the parties shall negotiate in good faith on the price
to apply.
SECTION 12 - TERMINATION
This Lending Agreement may be terminated at any time by any party upon
delivery to the other party of notice specifying the date of such termination,
which shall be not less than 30 days after the date of receipt of such notice.
Notwithstanding any such notice, this Lending Agreement
13
shall continue in full force and effect with respect to all Loans outstanding on
the termination date, which Loans shall, however, be terminated as soon as
reasonably practicable.
SECTION 13 - MISCELLANEOUS
(a) LEGAL PROCEEDINGS. Bank may refrain from bringing any legal action
or proceeding arising out of or in connection with any Loan until it shall have
received such security as it may require for all costs, expenses (including
legal fees) and liabilities which it shall or may expend or incur in relation
thereto.
(b) INTEGRATION. LENDING AGREEMENT TO GOVERN. This Lending Agreement
and the Custody Agreement contain the complete agreement of the parties with
respect to the subject matter hereof and supersede and replace any previously
made proposals, representations, warranties or agreements with respect thereto
by the parties, including, without limitation, the Securities Lending Agreement,
dated as of October 22, 2002 between each of the JPMorgan Funds listed on
Exhibit A of such agreement and Bank, the Securities Lending Agreement between
Bank and One Group Mutual Funds effective as October 18, 2004 with respect to
the Equity Funds other than the Balanced Fund and December 6, 2004 with respect
to the Fixed Income, Balanced and Money Market Funds and the Securities Lending
Agreement between Bank and One Group Investment Trust (now known as JPMorgan
Investment Trust) effective as of October 18, 2004 with respect to the Equity
Portfolios other than the Balanced Portfolio and December 6, 2004 with respect
to the Fixed Income and Balanced Portfolios. In the event of any conflict
between this Lending Agreement and the Custody Agreement, this Lending Agreement
shall govern.
(c) CONFIDENTIALITY OF PORTFOLIO HOLDINGS AND OTHER INFORMATION. Bank
shall keep confidential, and will cause its employees to keep confidential, all
non-public information concerning the Lender's portfolio holdings and other
confidential information (collectively, "Lender Confidential Information")
obtained hereunder from or on behalf of the Lender. Bank will use Lender
Confidential Information only for the purposes of providing services under this
Agreement and will disclose such Confidential Information only to the extent
necessary to provide the services specified in this Agreement or as otherwise
required by law. Lender shall keep confidential all confidential information
provided to it by Bank under this Agreement ("Bank Confidential Information"),
except to the extent that disclosure is required by applicable law or otherwise
with the consent of Bank. Confidential Information of a disclosing party shall
in no event include information which the receiving party (i) knew at the time
of first disclosure to it; (ii) is or becomes generally known in the industry or
public knowledge without default by the receiving party of its obligations
hereunder; (iii) can demonstrate, from written records, has been independently
developed through employees none of whom had access to Confidential Information;
or (iv) is generally furnished to third parties by the disclosing party without
confidentiality restriction. A receiving party may disclose the other party's
Confidential Information pursuant to regulatory duties or competent judicial
order provided that such party provides to the other party prompt detailed
notice of such duties or order to permit the other party to seek an appropriate
protective order or otherwise intervene to protect its Confidential Information.
Notwithstanding anything herein that may be to the contrary, a receiving party
may disclose Confidential Information of the other party to its regulatory
authority having supervisory jurisdiction over it pursuant to a request made
during the course of a supervisory examination or otherwise.
14
(d) NOTICES. Unless expressly provided herein to the contrary, notices
hereunder shall be in writing, and delivered by facsimile, telecopier, overnight
express mail, first-class postage prepaid, delivered personally or by receipted
courier service. All such notices which are mailed shall be deemed delivered
upon receipt. Notices shall be addressed as follows (or to such other address as
a party may from time to time designate on notice duly given in accordance with
this Section): notices to Bank shall be addressed to it at, 0 Xxx Xxxx Xxxxx,
Xxx Xxxx, Xxx Xxxx, 00000, Attention: Global Securities Lending; notices to be
given to Lender shall be addressed to it at its offices at 000 Xxxxx Xxxxxx. Xxx
Xxxx, Xxx Xxxx 00000, Attention: Xxxx X. Xxxxxxx, Esq., with copies to Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx Xxxxx, Xxxxx Xxxxxx, and Xxxxxxxx Xxxxxxx.
(d) AMENDMENTS. WAIVER. This Lending Agreement may be modified only
by a written amendment signed by both parties, and no waiver of any provision
hereof shall be effective unless expressed in a writing signed by the party to
be charged.
(e) GOVERNING LAW. CONSENT TO JURISDICTION. WAIVER OF IMMUNITY. THIS
LENDING AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF. Bank and
Lender each hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and Lender hereby waives any claim of FORUM NON CONVENIENS to the
extent that it may lawfully do so. To the extent that in any jurisdiction Lender
may now or hereafter be entitled to claim, for itself or its assets, immunity
from suit, execution, attachment (before or after judgment) or other legal
process, Lender irrevocably shall not claim, and it hereby waives, such
immunity.
(f) COUNTERPARTS. HEADINGS. This Lending Agreement may be executed in
several counterparts, each one of which shall constitute an original, and all
collectively shall constitute but one instrument. The headings of the sections
hereof are included for convenience of reference only and do not form part of
this Lending Agreement.
(g) SEVERABILITY. Any provisions hereof which may be determined by
competent authority to be 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, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
(h) IDENTITY OF ADVISER. If Lender is a registered investment company,
the name of the investment adviser (and subadvisers, if any), to Lender is set
forth on Exhibit A. Lender shall promptly notify Bank of any change in the
identity of any of the foregoing.
(i) MULTIPLE LENDERS. This Lending Agreement shall, and shall be
deemed to, create a separate agreement for each series or investment company (in
the case of an investment company that does not consist of a separate series)
listed on Exhibit A. For any Loan, each reference in this Lending Agreement to
Lender shall be, and shall be deemed to be, a reference solely to the particular
series or investment company to which that Loan relates. In no circumstances
shall the rights, obligations or remedies with respect to a particular series or
investment company, as the case may be, constitute a right, obligation or remedy
with respect to any other series or investment company. Specifically, and
without limiting the scope of the foregoing, Bank shall have no right to
15
set off claims of, or amounts payable to, one series or investment company, as
the case may be, by applying property of any other series or investment company.
IN WITNESS WHEREOF, the parties have executed this Lending Agreement as
of the date first above-written.
JPMORGAN TRUST I JPMORGAN CHASE BANK, N.A.
(on behalf of each of the respective
funds listed on Exhibit A to which the
above entity relates)
By: /s/ Xxxxxx X. Xxxxx By: /s/ Xxxxxx X. Xxxxxx
------------------------- -------------------------
Name: Xxxxxx X. Xxxxx Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President Title: Senior Vice President
Date: August 26, 2005 Date: August 26, 2005
JPMORGAN TRUST II X.X. XXXXXX XXXXXXX MUTUAL FUND
GROUP, INC.,
(on behalf of each of the respective (on behalf of each of the respective funds
funds listed on Exhibit A to which listed on Exhibit A to which the above
the above entity relates) entity relates)
By: /s/ Xxxxxx X. Xxxxx By: /s/ Xxxxxx X. Xxxxx
------------------------- -------------------------
Name: Xxxxxx X. Xxxxx Name: Xxxxxx X. Xxxxx
Title: Senior Vice President Title: Senior Vice President
Date: August 26, 2005 Date: August 26, 2005
JPMORGAN MUTUAL FUND INVESTMENT TRUST
(on behalf of each of the respective
funds listed on Exhibit A to which
the above entity relates)
By: /s/ Xxxxxx X. Xxxxx
-------------------------
Name: Xxxxxx X. Xxxxx
Title: Senior Vice President
Date: August 26, 2005
16
JPMORGAN INVESTMENT TRUST
(on behalf of each of the respective
funds listed on Exhibit A to which
the above entity relates)
By: /s/ Xxxxxx X. Xxxxx
-------------------------
Name: Xxxxxx X. Xxxxx
Title: Senior Vice President
Date: August 26, 2005
17
EXHIBIT A
PARTICIPATING FUNDS
JPMORGAN TRUST I
NAME OF INVESTMENT ADVISOR: X.X. Xxxxxx Investment Management Inc.
JPMorgan 100% U.S. Treasury Securities Money Market Fund
JPMorgan International Equity Fund
JPMorgan Intrepid European Fund
JPMorgan International Opportunities fund
JPMorgan Japan Fund
JPMorgan International Value Fund
JPMorgan Global Healthcare Fund
JPMorgan Asia Equity Fund
JPMorgan Emerging Markets Equity Fund
JPMorgan Growth & Income Fund
JPMorgan Capital Growth Fund
JPMorgan Small Cap Equity Fund
JPMorgan US Equity Fund
JPMorgan Dynamic Small Cap Fund
JPMorgan U.S. Small Company Fund
JPMorgan Small Cap Core Fund
JPMorgan Diversified Fund - Large Cap
JPMorgan Diversified Fund - Small Cap
JPMorgan Disciplined Equity Fund
JPMorgan Mid Cap Equity Fund
JPMORGAN TRUST II
NAME OF INVESTMENT ADVISOR: JPMorgan Investment Advisors Inc.
JPMorgan Core Bond Fund
JPMorgan Core Plus Bond Fund*
JPMorgan Intermediate Bond Fund
JPMorgan High Yield Bond Fund*
JPMorgan Short Duration Bond Fund
JPMorgan Mortgage-Backed Securities Fund
JPMorgan Government Bond Fund
JPMorgan Treasury & Agency Fund
JPMorgan U.S. Government Money Market Fund
JPMorgan Liquid Assets Money Market Fund
JPMorgan Diversified Mid Cap Fund
(now known as the JPMorgan Intrepid Mid Cap Fund)
JPMorgan Equity Income Fund
JPMorgan Equity Index Fund
JPMorgan Large Cap Growth Fund
JPMorgan Large Cap Value Fund
JPMorgan Market Expansion Index Fund
JPMorgan Diversified Mid Cap Growth Fund
JPMorgan Diversified Mid Cap Value Fund
JPMorgan Small Cap Growth Fund
JPMorgan Small Cap Value Fund
JPMorgan Technology Fund
18
*Sub-Advised by JPMorgan High Yield Partners LLC
EXHIBIT A
PARTICIPATING FUNDS CONTINUED
JPMORGAN TRUST II
NAME OF INVESTMENT ADVISOR: X.X. Xxxxxx Investment Management Inc.
JPMorgan International Equity Index Fund
X.X. XXXXXX XXXXXXX MUTUAL FUND GROUP, INC.
NAME OF INVESTMENT ADVISOR: X.X. Xxxxxx Investment Management Inc.
JPMorgan Mid Cap Value Fund
X.X. XXXXXX MUTUAL FUND INVESTMENT TRUST
NAME OF INVESTMENT ADVISOR: X.X. Xxxxxx Investment Management Inc.
JPMorgan Mid Cap Growth Fund (now known as the JPMorgan Growth Advantage Fund)
JPMORGAN INVESTMENT TRUST
NAME OF INVESTMENT ADVISOR: JPMorgan Investment Advisors Inc.
JPMorgan Investment Trust Bond Portfolio
JPMorgan Investment Trust Government Bond Portfolio
JPMorgan Investment Trust Balanced Portfolio
JPMorgan Investment Trust Equity Index Portfolio
JPMorgan Investment Trust Large Cap Growth Portfolio
JPMorgan Investment Trust Diversified Equity Portfolio
JPMorgan Investment Trust Mid Cap Growth Portfolio
JPMorgan Investment Trust Diversified Mid Cap Portfolio
JPMorgan Investment Trust Mid Cap Value Portfolio
19
APPENDIX 1
JPMORGAN CHASE BANK, N.A.
SECURITIES LENDING INVESTMENT GUIDELINES
SEPARATE ACCOUNT FOR
JPMORGAN 100% U.S. TREASURY SECURITIES MONEY MARKET FUND
A. OBJECTIVE
To obtain an attractive yield on securities lending cash collateral by
investing in short term, fixed income securities (and other securities with
debt-like characteristics) that satisfy these guidelines, as applied at the
time of purchase, with the aim to be fully invested as of the close of
business on each day.
B. PERMISSIBLE INVESTMENTS
1. INSTRUMENTS
Fixed-income securities and other securities with debt-like characteristics
on a fixed rate and floating rate basis are permitted as set forth below:
U.S. Treasury Securities
2. CURRENCY
Shall be limited to the same currency in which the loan collateral is
denominated.
C. PROHIBITED INVESTMENTS
1. EQUITY SECURITIES
Equity securities are prohibited.
2. CERTAIN DERIVATIVES
No investment shall be made in any instrument whose coupon rate moves in
the opposite direction of the index to which such instrument is tied. In
addition, in the event that investments are made in instruments whose
coupon rate moves when the index to which such rate is tied moves, such
investments shall only be in those of such instruments whose movements in
the coupon rate are equivalent to movements in the index.
3. FLOATING RATE SECURITIES
Floating rate securities with an interest rate cap, with the exception of
those capped to comply with state usury laws.
4. REPURCHASE AGREEMENTS
Repurchase Agreements are prohibited.
D. CONCENTRATION GUIDELINES
(i) Not more than 5% of the total assets available for investment on
behalf of the Lender, measured at the time of purchase, may be
invested in the securities of a single issuer other than U.S.
Government Securities, as to which there is no limitation.
(ii) With respect to these limits, par values will be used to measure
conformity to limits expressed in dollars, while purchase prices will
be used for limits expressed in percentages.
E. MATURITY GUIDELINES
1. FIXED RATE INSTRUMENTS: shall have a Final Maturity at the time of
purchase that does not exceed 397 days.
2. FLOATING RATE INSTRUMENTS: U.S. Government Securities shall have a
Final Maturity that does not exceed 397 days.
3. "FINAL MATURITY" for purposes of these guidelines means the following:
(a) with respect to a Government Security which is a
Variable Rate Security(1) where the variable rate of
interest is readjusted no less frequently than every 762
calendar days, the maturity shall be deemed to be equal to
the period remaining until the next readjustment of the
interest rate;
(b) with respect to a Government Security which is a
Floating Rate Security(2), the maturity shall be deemed to
have a remaining maturity of one day;
(c) with respect to a Variable Rate Security, the principal
amount of which, in accordance with the terms of the
security, must unconditionally be paid in 397 calendar days
or less, the maturity shall be deemed to be equal to the
earlier of the period remaining until the next readjustment
of the interest rate or the period remaining until the
principal amount can be recovered through demand;
(d) with respect to a Variable Rate Security, the principal
amount of which is scheduled to be paid in more than 397
days, that is subject to a Demand Feature the maturity shall
be deemed to be equal to the longer of the period remaining
until the next readjustment of the interest rate or the
period remaining until the principal amount can be recovered
through demand;
(e) with respect to a Floating Rate Security, the principal
amount of which is scheduled to be paid in more than 397
days, that is subject to a Demand Feature the maturity shall
be deemed to be equal to the period remaining until the
principal amount can be recovered through demand; and
(f) with respect to a Floating Rate Security, the principal
amount of which, in accordance with the terms of the
security, must unconditionally be paid in 397 calendar days
or less, the maturity shall be deemed to be one day through
demand.
----------
(1) A "Variable Rate Security" means a security the terms of which provide for
the adjustment of its interest rate on set dates (such as the last day of a
month or calendar quarter) and that, upon each adjustment until the final
maturity of the instrument or the period remaining until the final maturity of
the instrument or the period remaining until the principal amount can be
recovered through demand, can reasonably be expected to have a market value that
approximates its amortized cost.
(2) A "Floating Rate Security" means a security the term of which provide for
the adjustment of its interest rate whenever a specified interest rate changes
and that, at any time until the final maturity of the instrument or the period
remaining until the principal amount can be recovered through demand, can
reasonably be expected to have a market value that approximates its amortized
cost.
2
4. The maximum weighted average maturity of all investments, excluding
investments matched to term loans, on behalf of Lender shall not
exceed 60 days at the time of purchase.
5. For purposes of calculating weighted average maturity in E. 4 above, a
floating rate instrument shall be deemed to have a maturity as
calculated in E.3 above.
3
****************
EACH LENDER SHOULD REGULARLY ANALYZE THESE GUIDELINES TO DETERMINE THEIR
CONTINUED APPROPRIATENESS, RECOGNIZING THAT ALL INVESTMENTS BEAR RISK AND THAT
RETURN OF PRINCIPAL IS NOT ASSURED. PLEASE INDICATE YOUR ACCEPTANCE OF THESE
GUIDELINES BY SIGNING IN THE SPACE PROVIDED BELOW.
JPMORGAN TRUST I ON BEHALF OF ITS SERIES LISTED ABOVE:
BY: /s/ Xxxxxx X. Xxxxx
------------------------
NAME: Xxxxxx X. Xxxxx
----------------------
TITLE: Senior Vice President
---------------------
DATE: August 26, 2005
----------------------
4
APPENDIX 1
JPMORGAN CHASE BANK, N.A.
SECURITIES LENDING INVESTMENT GUIDELINES
SEPARATE ACCOUNT FOR EACH OF THE FOLLOWING FUNDS
JPMORGAN CORE BOND FUND
JPMORGAN CORE PLUS BOND FUND
JPMORGAN INTERMEDIATE BOND FUND
JPMORGAN HIGH YIELD BOND FUND
JPMORGAN SHORT DURATION BOND FUND
JPMORGAN MORTGAGE-BACKED SECURITIES FUND
JPMORGAN INVESTMENT TRUST BOND PORTFOLIO
A. OBJECTIVE
To obtain an attractive yield on securities lending cash collateral by
investing in short term, fixed income securities (and other securities with
debt-like characteristics) that satisfy these guidelines, as applied at the
time of purchase, with the aim to be fully invested as of the close of
business on each day.
B. PERMISSIBLE INVESTMENTS
1. INSTRUMENTS
Both fixed-income securities and other securities with debt-like
characteristics on a fixed rate and floating rate basis are permitted, as
set forth below:
Asset-backed securities
Bank Notes
Bankers' Acceptances
Certificates of Deposit
Commercial Paper
Corporate Bonds
Deposit Notes
Investment Agreements, Funding Agreements, or GICs entered into,
with, or guaranteed by an insurance company
Loan Participations
Master Notes
Medium Term Notes
Overnight Repurchase Agreements, subject to the requirements of
paragraph F
Time Deposits
U.S. Government Securities, which shall include securities
issued or guaranteed as to principal and interest by the United
States Government, its agencies, instrumentalities or
establishments
2. COMMINGLED VEHICLES
In addition, for purposes of these guidelines, shares of a money market
mutual fund registered with the Securities and Exchange Commission as an
investment company under the Investment Company Act of 1940, as amended,
shall be: (i) permissible investments, (ii) deemed to have a "Final
Maturity" of one day for purposes of the Maturity Guidelines in paragraph
E, and (iii) not subject to the Quality Guidelines in paragraph G. If the
money market mutual fund is advised by an affiliate of JPMorgan Chase &
Co., such purchase may be made only in accordance with, and to the extent
permitted by, the purchasing fund's registration statement and an exemptive
order issued by the SEC.
5
3. CURRENCY
Shall be limited to the same currency in which the loan collateral is
denominated.
4. NON-U.S. ISSUERS
Provided that an issuer otherwise meets the criteria set forth in these
guidelines, there is no geographic limitation.
C. PROHIBITED INVESTMENTS
1. EQUITY SECURITIES
Equity securities are prohibited.
2. CERTAIN DERIVATIVES
No investment shall be made in any instrument whose coupon rate moves in
the opposite direction of the index to which such instrument is tied. In
addition, in the event that investments are made in instruments whose
coupon rate moves when the index to which such rate is tied moves, such
investments shall only be in those of such instruments whose movements in
the coupon rate are equivalent to movements in the index.
3. FLOATING RATE SECURITIES
Floating rate securities with an interest rate cap, with the exception of
those capped to comply with state usury laws.
D. CONCENTRATION GUIDELINES
(i) Not more than 5% of the total assets available for investment on
behalf of the Lender, measured at the time of purchase, may be invested in
the securities of a single issuer other than U.S. Government Securities and
repurchase agreements that are collateralized fully, as to which there is
no limitation.
(ii) With respect to these limits, par values will be used to measure
conformity to limits expressed in dollars, while purchase prices will be
used for limits expressed in percentages.
E. MATURITY GUIDELINES
1. FIXED RATE INSTRUMENTS: shall have a Final Maturity at the time of
purchase that does not exceed 12 months.
2. FLOATING RATE INSTRUMENTS: All floating rate instruments shall have a
Final Maturity that does not exceed 3 years.
3. "FINAL MATURITY" for purposes of these guidelines means the earliest
of: (i) the date noted on the face of the instrument as the date on
which the principal amount must be paid or (ii) in the case of an
instrument with an unconditional put or unconditional demand feature,
the date on which the principal amount of the instrument can be
recovered by demand. With respect to asset-backed securities, the
expected final maturity shall be deemed to be the Final Maturity.
4. A repurchase agreement shall be deemed to have a maturity equal to the
period remaining until the date on which the repurchase of the
underlying securities is scheduled to occur or, where no date is
specified but the agreement is subject to a demand, the notice period
applicable to a demand for the
6
repurchase of the securities. Only overnight repurchase agreements are
permitted as cash collateral investments.
5 The maximum weighted average maturity of all investments, excluding
investments matched to term loans, on behalf of Lender shall not
exceed 90 days at the time of purchase.
6 For purposes of calculating weighted average maturity in E. 5 above, a
floating rate instrument shall be deemed to have a maturity equal to
the period remaining until the next readjustment of the interest rate.
F. OVERNIGHT REPURCHASE AGREEMENTS
All Repurchase Agreements must comply with the Funds' Repurchase Guidelines
attached hereto including the requirements applicable to collateralization
and repurchase agreement counterparties.
1. PERMITTED COLLATERAL
- Asset-backed securities
- Bills, bonds or notes issued by the United States Treasury, as
well as other securities guaranteed as to principal and interest
by the Government of the United States, its agencies,
instrumentalities or establishments
- Collateralized Mortgage Obligations
- Corporate obligations
- Mortgage-backed securities, including private label issuers Money
market instruments (including, but not limited to, certificates
of deposit, bank notes, deposit notes, bankers' acceptances and
commercial paper)
G. QUALITY GUIDELINES
1. RATINGS
a. Except with respect to permitted collateral for repurchase
agreements (F.1.) and as noted below, a permissible investment must
have a minimum short-term rating as provided by a Nationally
Recognized Statistical Rating Organization ("NRSRO") as follows:
Any one of the following: A-1 by Standard & Poors ("S&P"), P-1 by
Xxxxx'x Investor Services ("Moody's"), F-1 by Fitch (or an
equivalent rating by another NRSRO).
A security without its own rating shall be considered to be rated
if the issuer of the security is rated with respect to: (i) a
class of short-term debt obligations, in the case of short-term
ratings, or (ii) a class of long-term debt obligations, in the
case of long-term ratings, or (iii) any security of the issuer
within a class the same as the unrated security that is
comparable in priority of payment to the unrated security to be
purchased.
Long-term ratings shall be used only if a security is not rated
and no security of the same issuer that is comparable in priority
with such security is rated. Where a long-term rating is used,
the issuer must have a minimum long-term rating as follows:
Any one of the following: A- by S&P, A3 by Moody's, A- by Fitch
or equivalent rating by another NRSRO.
b. Permitted collateral for repurchase agreements (see F.1.) must have
a rating in the highest two categories from at least two NRSROs in the
case of money market instruments and BBB/Baa or the equivalent for
corporate obligations.
7
2. DOWNGRADES
Securities may not be purchased based on an S&P, Xxxxx'x, Fitch or another
NRSRO's rating where the applicable NRSRO has announced publicly that it is
examining the relevant rating for a possible .downgrade. The foregoing
limitation shall not apply to securities rated A-1+ by S&P.
In the event that a security held falls below the minimum guideline as
detailed in this paragraph G as a result of being downgraded by an NRSRO,
JPMorgan shall notify the Lender and await instructions as to whether the
affected security should be sold. In the absence of a contrary instruction,
JPMorgan shall take no action in respect of the affected security. In no
event shall JPMorgan be liable for any consequences of a rating downgrade,
including, but not limited to, retention of the affected security in the
absence of a sale instruction from Lender. Lender acknowledges that any
loss from a sale shall be for its account.
H. EXTENSION TRADES
From time to time a particular holding may be sold and a different issue
purchased in its stead (an "extension trade"). An extension trade allows
the seller to realize a gain on the issue being sold, while reinvesting the
proceeds (ex the gain) into other paper.
8
****************
EACH LENDER SHOULD REGULARLY ANALYZE THESE GUIDELINES TO DETERMINE THEIR
CONTINUED APPROPRIATENESS, RECOGNIZING THAT ALL INVESTMENTS BEAR RISK AND THAT
RETURN OF PRINCIPAL IS NOT ASSURED. PLEASE INDICATE YOUR ACCEPTANCE OF THESE
GUIDELINES BY SIGNING IN THE SPACE PROVIDED BELOW.
JPMORGAN TRUST II ON BEHALF OF ITS SERIES LISTED ABOVE:
BY: /s/ Xxxxxx X. Xxxxx
------------------------
NAME: Xxxxxx X. Xxxxx
----------------------
TITLE: Senior Vice President
---------------------
DATE: August 26, 2005
----------------------
JPMorgan Investment Trust on behalf of its series listed above:
BY: /s/ Xxxxxx X. Xxxxx
------------------------
NAME: Xxxxxx X. Xxxxx
----------------------
TITLE: Senior Vice President
---------------------
DATE: August 26, 2005
----------------------
9
APPENDIX 1
JPMORGAN CHASE BANK, N.A.
SECURITIES LENDING INVESTMENT GUIDELINES
SEPARATE ACCOUNT FOR EACH OF THE FOLLOWING FUNDS
JPMORGAN DIVERSIFIED MID CAP FUND
JPMORGAN EQUITY INCOME FUND
JPMORGAN EQUITY INDEX FUND
JPMORGAN LARGE CAP GROWTH FUND*
JPMORGAN LARGE CAP VALUE FUND
JPMORGAN MARKET EXPANSION INDEX FUND
JPMORGAN DIVERSIFIED MID CAP GROWTH FUND
JPMORGAN DIVERSIFIED MID CAP VALUE FUND
JPMORGAN SMALL CAP GROWTH FUND
JPMORGAN SMALL CAP VALUE FUND
JPMORGAN TECHNOLOGY FUND*
JPMORGAN GROWTH & INCOME FUND*
JPMORGAN CAPITAL GROWTH FUND*
JPMORGAN SMALL CAP EQUITY FUND*
JPMORGAN MID CAP VALUE FUND*
JPMORGAN US EQUITY FUND*
JPMORGAN MID CAP GROWTH FUND*
JPMORGAN DYNAMIC SMALL CAP FUND*
JPMORGAN U.S. SMALL COMPANY FUND -*
JPMORGAN SMALL CAP CORE FUND*
JPMORGAN DIVERSIFIED FUND - LARGE CAP*
JPMORGAN DIVERSIFIED FUND - SMALL CAP*
JPMORGAN DISCIPLINED EQUITY FUND*
JPMORGAN MID CAP EQUITY FUND*
JPMORGAN INVESTMENT TRUST BALANCED PORTFOLIO*
JPMORGAN INVESTMENT TRUST EQUITY INDEX PORTFOLIO
JPMORGAN INVESTMENT TRUST LARGE CAP GROWTH PORTFOLIO
JPMORGAN INVESTMENT TRUST DIVERSIFIED EQUITY PORTFOLIO
JPMORGAN INVESTMENT TRUST MID CAP GROWTH PORTFOLIO
JPMORGAN INVESTMENT TRUST DIVERSIFIED MID CAP PORTFOLIO
JPMORGAN INVESTMENT TRUST MID CAP VALUE PORTFOLIO
A. OBJECTIVE
To obtain an attractive yield on securities lending cash collateral by
investing in short term, fixed income securities (and other securities
with debt-like characteristics) that satisfy these guidelines, as
applied at the time of purchase, with the aim to be fully invested as of
the close of business on each day.
B. PERMISSIBLE INVESTMENTS
1. INSTRUMENTS
Both fixed-income securities and other securities with debt-like
characteristics on a fixed rate and floating rate basis are permitted,
as set forth below:
Bank Notes
Bankers' Acceptances
Certificates of Deposit
Commercial Paper
10
Corporate Bonds (for funds designated * above)
Deposit Notes
Master Notes
Medium Term Notes
Repurchase Agreements, subject to the requirements of
paragraph F
Time Deposits
U.S. Government Securities, which shall include securities
issued or guaranteed as to principal and interest by the
United States Government, its agencies, instrumentalities
or establishments
2. COMMINGLED VEHICLES
In addition, for purposes of these guidelines, shares of a money market
mutual fund registered with the Securities and Exchange Commission as an
investment company under the Investment Company Act of 1940, as amended,
shall be: (i) permissible investments, (ii) deemed to have a "Final
Maturity" of one day for purposes of the Maturity Guidelines in
paragraph E, and (iii) not subject to the Quality Guidelines in
paragraph G. If the money market mutual fund is advised by an affiliate
of JPMorgan Chase & Co., such purchase may be made only in accordance
with, and to the extent permitted by, the purchasing fund's registration
statement and an exemptive order issued by the SEC.
3. CURRENCY
Shall be limited to the same currency in which the loan collateral
is denominated.
4. NON-U.S. ISSUERS
Provided that an issuer otherwise meets the criteria set forth in these
guidelines, there is no geographic limitation.
C. PROHIBITED INVESTMENTS
1. EQUITY SECURITIES
Equity securities are generally prohibited, except that equity
securities that (i) have predominantly debt characteristics (such as
owner trust certificates) or (ii) are permitted under F.1 below, are not
prohibited.
2. CERTAIN DERIVATIVES
No investment shall be made in any instrument whose coupon rate moves in
the opposite direction of the index to which such instrument is tied. In
addition, in the event that investments are made in instruments whose
coupon rate moves when the index to which such rate is tied moves, such
investments shall only be in those of such instruments whose movements
in the coupon rate are equivalent to movements in the index.
3. FLOATING RATE SECURITIES
Floating rate securities with an interest rate cap, with the exception
of those capped to comply with state usury laws.
D. CONCENTRATION GUIDELINES
1. Not more than 5% of the total assets available for investment on
behalf of the Lender, measured at the time of purchase, may be
invested in the securities of a single issuer other than U.S.
Government Securities and repurchase agreements that are
collateralized fully, as to which there is no limitation.
11
2. With respect to these limits, par values will be used to measure
conformity to limits expressed in dollars, while purchase prices
will be used for limits expressed in percentages.
E. MATURITY GUIDELINES
1. FIXED RATE INSTRUMENTS: shall have a Final Maturity at the time of
purchase that does not exceed 12 months.
2. FLOATING RATE INSTRUMENTS: All floating rate instruments shall
have a Final Maturity that does not exceed 3 years.
3. "FINAL MATURITY" for purposes of these guidelines means the
earliest of: (i) the date noted on the face of the instrument as
the date on which the principal amount must be paid or (ii) in the
case of an instrument with an unconditional put or unconditional
demand feature, the date on which the principal amount of the
instrument can be recovered by demand. With respect to asset
backed securities, the expected final maturity shall be deemed to
be the Final Maturity.
4. A repurchase agreement shall be deemed to have a maturity equal to
the period remaining until the date on which the repurchase of the
underlying securities is scheduled to occur or, where no date is
specified but the agreement is subject to a demand, the notice
period applicable to a demand for the repurchase of the
securities. Only overnight repurchase agreements are permitted as
cash collateral investments.
5. The maximum weighted average maturity of all investments,
excluding investments matched to term loans, on behalf of Lender
shall not exceed 90 days at the time of purchase.
6. For purposes of calculating weighted average maturity in E. 5
above, a floating rate instrument shall be deemed to have a
maturity equal to the period remaining until the next readjustment
of the interest rate.
F. OVERNIGHT REPURCHASE AGREEMENTS
All Repurchase Agreements must comply with the Funds' Repurchase
Guidelines attached hereto including the requirements applicable to
collateralization and repurchase agreement counterparties.
1. PERMITTED COLLATERAL
- Bills, bonds or notes issued by the United States Treasury, as
well as other securities guaranteed as to principal and
interest by the Government of the United States, its agencies,
instrumentalities or establishments
- Corporate obligations (for funds designated * above)
- Money market instruments (including, but not limited to,
certificates of deposit, bank notes, deposit notes, bankers'
acceptances and commercial paper)
- Publicly traded U.S. Dollar-denominated equities, together
with equity-like securities (including, but not limited to,
convertible debt, exchange traded funds, and ADRs)
G. QUALITY GUIDELINES
1. RATINGS
(i) Except with respect to permitted collateral for repurchase
agreements (F.1.) and as noted below, a permissible investment
must have a minimum short-term rating as provided by a Nationally
Recognized Statistical Rating Organization ("NRSRO") as follows:
12
Any one of the following: A-1 by Standard & Poors ("S&P"),
P-1 by Xxxxx'x Investor Services ("Moody's"), F-1 by Fitch
(or an equivalent rating by another NRSRO).
A security without its own rating shall be considered to be rated
if the issuer of the security is rated with respect to: (i) a
class of short-term debt obligations, in the case of short-term
ratings, or (ii) a class of long-term debt obligations, in the
case of long-term ratings, or (iii) any security of the issuer
within a class the same as the unrated security that is comparable
in priority of payment to the unrated security to be purchased.
Long-term ratings shall be used only if a security is not rated
and no security of the same issuer that is comparable in priority
with such security is rated. Where a long-term rating is used, the
issuer must have a minimum long-term rating as follows:
Any one of the following: A- by S&P, A3 by Moody's, A- by
Fitch or equivalent rating by another NRSRO
(ii) Permitted collateral for repurchase agreements (see F.1.)
must have a rating in the highest two categories from at least two
NRSROs in the case of money market instruments and BBB/Baa or the
equivalent for corporate obligations.
2. DOWNGRADES
Securities may not be purchased based on an S&P, Xxxxx'x, Fitch or
another NRSRO's rating where the applicable NRSRO has announced publicly
that it is examining the relevant rating for a possible downgrade. The
foregoing limitation shall not apply to securities rated A-1+ by S&P.
In the event that a security held falls below the minimum guideline as
detailed in this paragraph G as a result of being downgraded by an
NRSRO, JPMorgan shall notify the Lender and await instructions as to
whether the affected security should be sold. In the absence of a
contrary instruction, JPMorgan shall take no action in respect of the
affected security. In no event shall JPMorgan be liable for any
consequences of a rating downgrade, including, but not limited to,
retention of the affected security in the absence of a sale instruction
from Lender. Lender acknowledges that any loss from a sale shall be for
its account.
H. EXTENSION TRADES
From time to time a particular holding may be sold and a different issue
purchased in its stead (an "extension trade"). An extension trade allows
the seller to realize a gain on the issue being sold, while reinvesting
the proceeds (ex the gain) into other paper.
13
****************
EACH LENDER SHOULD REGULARLY ANALYZE THESE GUIDELINES TO DETERMINE THEIR
CONTINUED APPROPRIATENESS, RECOGNIZING THAT ALL INVESTMENTS BEAR RISK AND THAT
RETURN OF PRINCIPAL IS NOT ASSURED. PLEASE INDICATE YOUR ACCEPTANCE OF THESE
GUIDELINES BY SIGNING IN THE SPACE PROVIDED BELOW.
JPMORGAN TRUST I ON BEHALF OF ITS SERIES LISTED ABOVE:
BY: /s/ Xxxxxx X. Xxxxx
------------------------
NAME: Xxxxxx X. Xxxxx
----------------------
TITLE: Senior Vice President
---------------------
DATE: August 26, 2005
----------------------
JPMORGAN TRUST II ON BEHALF OF ITS SERIES LISTED ABOVE:
BY: /s/ Xxxxxx X. Xxxxx
------------------------
NAME: Xxxxxx X. Xxxxx
----------------------
TITLE: Senior Vice President
---------------------
DATE: August 26, 2005
----------------------
X.X. XXXXXX XXXXXXX MUTUAL FUND GROUP, INC. ON BEHALF OF THE JPMORGAN MID CAP
VALUE FUND
BY: /s/ Xxxxxx X. Xxxxx
------------------------
NAME: Xxxxxx X. Xxxxx
----------------------
TITLE: Senior Vice President
---------------------
DATE: August 26, 2005
----------------------
X.X. XXXXXX MUTUAL FUND INVESTMENT TRUST ON BEHALF OF THE JPMORGAN MID CAP
GROWTH FUND
BY: /s/ Xxxxxx X. Xxxxx
------------------------
NAME: Xxxxxx X. Xxxxx
----------------------
TITLE: Senior Vice President
---------------------
DATE: August 26, 2005
----------------------
JPMORGAN INVESTMENT TRUST ON BEHALF OF ITS SERIES LISTED ABOVE:
BY: /s/ Xxxxxx X. Xxxxx
------------------------
NAME: Xxxxxx X. Xxxxx
----------------------
TITLE: Senior Vice President
---------------------
DATE: August 26, 2005
----------------------
14
APPENDIX 1
JPMORGAN CHASE BANK, N.A.
SECURITIES LENDING INVESTMENT GUIDELINES
SEPARATE ACCOUNT FOR EACH OF THE FOLLOWING FUNDS
JPMORGAN GOVERNMENT BOND FUND
JPMORGAN TREASURY & AGENCY FUND
JPMORGAN INVESTMENT TRUST GOVERNMENT BOND PORTFOLIO
A. OBJECTIVE
To obtain an attractive yield on securities lending cash collateral by
investing in short term, fixed income securities (and other securities
with debt-like characteristics) that satisfy these guidelines, as
applied at the time of purchase, with the aim to be fully invested as of
the close of business on each day.
B. PERMISSIBLE INVESTMENTS
1. INSTRUMENTS
Both fixed-income securities and other securities with debt-like
characteristics on a fixed rate and floating rate basis are permitted,
as set forth below:
Overnight Repurchase Agreements, subject to the requirements of
paragraph F
U.S. Government Securities, which shall include securities issued
or guaranteed as to principal and interest by the United States
Government, its agencies, instrumentalities or establishments
2. COMMINGLED VEHICLES
In addition, for purposes of these guidelines, shares of a money market
mutual fund registered with the Securities and Exchange Commission as an
investment company under the Investment Company Act of 1940, as amended,
which invest solely in securities issued or guaranteed by the United
States Government or its agencies and repurchase agreements
collateralized by such securities, shall be: (i) permissible
investments, (ii) deemed to have a "Final Maturity" of one day for
purposes of the Maturity Guidelines in paragraph E, and (iii) not
subject to the Quality Guidelines in paragraph G. If the money market
mutual fund is advised by an affiliate of JPMorgan Chase & Co., such
purchase may be made only in accordance with, and to the extent
permitted by, the purchasing fund's registration statement and an
exemptive order issued by the SEC.
3. CURRENCY
Shall be limited to the same currency in which the loan collateral is
denominated.
C. PROHIBITED INVESTMENTS
1. EQUITY SECURITIES
Equity securities are prohibited.
2. CERTAIN DERIVATIVES
No investment shall be made in any instrument whose coupon rate moves in
the opposite direction of the index to which such instrument is tied. In
addition, in the event that investments are made in instruments
15
whose coupon rate moves when the index to which such rate is tied moves,
such investments shall only be in those of such instruments whose
movements in the coupon rate are equivalent to movements in the index.
3. FLOATING RATE SECURITIES
Floating rate securities with an interest rate cap, with the exception
of those capped to comply with state usury laws.
D. CONCENTRATION GUIDELINES
1. Not more than 5% of the total assets available for investment on
behalf of the Lender, measured at the time of purchase, may be
invested in the securities of a single issuer other than U.S.
Government Securities and repurchase agreements that are
collateralized fully, as to which there is no limitation.
2. With respect to these limits, par values will be used to measure
conformity to limits expressed in dollars, while purchase prices
will be used for limits expressed in percentages.
E. MATURITY GUIDELINES
1. FIXED RATE INSTRUMENTS: shall have a Final Maturity at the time of
purchase that does not exceed 12 months.
2. FLOATING RATE INSTRUMENTS: All floating rate instruments shall
have a Final Maturity that does not exceed 3 years.
3. "FINAL MATURITY" for purposes of these guidelines means the
earliest of: (i) the date noted on the face of the instrument as
the date on which the principal amount must be paid or (ii) in the
case of an instrument with an unconditional put or unconditional
demand feature, the date on which the principal amount of the
instrument can be recovered by demand. With respect to asset
backed securities, the expected final maturity shall be deemed to
be the Final Maturity.
4. A repurchase agreement shall be deemed to have a maturity equal to
the period remaining until the date on which the repurchase of the
underlying securities is scheduled to occur or, where no date is
specified but the agreement is subject to a demand, the notice
period applicable to a demand for the repurchase of the
securities. Only overnight repurchase agreements are permitted as
cash collateral investments.
5. The maximum weighted average maturity of all investments,
excluding investments matched to term loans, on behalf of Lender
shall not exceed 90 days at the time of purchase.
6. For purposes of calculating weighted average maturity in E. 5
above, a floating rate instrument shall be deemed to have a
maturity equal to the period remaining until the next readjustment
of the interest rate.
F. OVERNIGHT REPURCHASE AGREEMENTS
All Repurchase Agreements must comply with the Funds' Repurchase
Guidelines attached hereto including the requirements applicable to
collateralization and repurchase agreement counterparties.
1. PERMITTED COLLATERAL
Bills, bonds or notes issued by the United States Treasury, as
well as other securities guaranteed as to principal and interest
by the Government of the United States, its agencies,
instrumentalities or establishments
16
G. EXTENSION TRADES
From time to time a particular holding may be sold and a different issue
purchased in its stead (an "extension trade"). An extension trade allows
the seller to realize a gain on the issue being sold, while reinvesting
the proceeds (ex the gain) into other paper.
17
****************
EACH LENDER SHOULD REGULARLY ANALYZE THESE GUIDELINES TO DETERMINE THEIR
CONTINUED APPROPRIATENESS, RECOGNIZING THAT ALL INVESTMENTS BEAR RISK AND THAT
RETURN OF PRINCIPAL IS NOT ASSURED. PLEASE INDICATE YOUR ACCEPTANCE OF THESE
GUIDELINES BY SIGNING IN THE SPACE PROVIDED BELOW.
JPMORGAN TRUST II ON BEHALF OF ITS SERIES LISTED ABOVE:
BY: /s/ Xxxxxx X. Xxxxx
------------------------
NAME: Xxxxxx X. Xxxxx
----------------------
TITLE: Senior Vice President
---------------------
DATE: August 26, 2005
----------------------
JPMORGAN INVESTMENT TRUST ON BEHALF OF ITS SERIES LISTED ABOVE:
BY: /s/ Xxxxxx X. Xxxxx
------------------------
NAME: Xxxxxx X. Xxxxx
----------------------
TITLE: Senior Vice President
---------------------
DATE: August 26, 2005
----------------------
18
APPENDIX 1
JPMORGAN CHASE BANK, N.A.
SECURITIES LENDING INVESTMENT GUIDELINES
SEPARATE ACCOUNT FOR
JPMORGAN U.S. GOVERNMENT MONEY MARKET FUND
A. OBJECTIVE
To obtain an attractive yield on securities lending cash collateral by
investing in short term, fixed income securities (and other securities
with debt-like characteristics) that satisfy these guidelines, as
applied at the time of purchase, with the aim to be fully invested as of
the close of business on each day.
B. PERMISSIBLE INVESTMENTS
1. INSTRUMENTS
Both fixed-income securities and other securities with debt-like
characteristics on a fixed rate and floating rate basis are permitted,
as set forth below:
Overnight Repurchase Agreements, subject to the requirements of
paragraph F
U.S. Government Securities, which shall include securities issued
or guaranteed as to principal and interest by the United States
Government, its agencies, instrumentalities or establishments
2. COMMINGLED VEHICLES
In addition, for purposes of these guidelines, shares of a money market
mutual fund registered with the Securities and Exchange Commission as an
investment company under the Investment Company Act of 1940, as amended,
which invest solely in securities issued or guaranteed by the United
States Government or its agencies and repurchase agreements
collateralized by such securities, shall be: (i) permissible
investments, (ii) deemed to have a "Final Maturity" of one day for
purposes of the Maturity Guidelines in paragraph E, and (iii) not
subject to the Quality Guidelines in paragraph G. If the money market
mutual fund is advised by an affiliate of JPMorgan Chase & Co., such
purchase may be made only in accordance with, and to the extent
permitted by, the purchasing fund's registration statement and an
exemptive order issued by the SEC.
3. CURRENCY
Shall be limited to the same currency in which the loan collateral is
denominated.
C. PROHIBITED INVESTMENTS
1. EQUITY SECURITIES
Equity securities are prohibited.
2. CERTAIN DERIVATIVES
No investment shall be made in any instrument whose coupon rate moves in
the opposite direction of the index to which such instrument is tied. In
addition, in the event that investments are made in instruments whose
coupon rate moves when the index to which such rate is tied moves, such
investments shall only
19
be in those of such instruments whose movements in the coupon rate are
equivalent to movements in the index.
3. FLOATING RATE SECURITIES
Floating rate securities with an interest rate cap, with the exception
of those capped to comply with state usury laws.
D. CONCENTRATION GUIDELINES
1. Not more than 5% of the total assets available for investment on
behalf of the Lender, measured at the time of purchase, may be
invested in the securities of a single issuer other than U.S.
Government Securities and repurchase agreements that are
collateralized fully, as to which there is no limitation.
2. With respect to these limits, par values will be used to measure
conformity to limits expressed in dollars, while purchase prices
will be used for limits expressed in percentages.
E. MATURITY GUIDELINES
1. FIXED RATE INSTRUMENTS: shall have a Final Maturity at the time of
purchase that does not exceed 397 days.
2. FLOATING RATE INSTRUMENTS: U.S. Government Securities shall have a
Final Maturity that does not exceed 397 days.
3. "FINAL MATURITY" for purposes of these guidelines means the
following:
(a) with respect to a Government Security which is a Variable Rate
Security(1) where the variable rate of interest is readjusted no
less frequently than every 762 calendar days, the maturity shall
be deemed to be equal to the period remaining until the next
readjustment of the interest rate;
(b) with respect to a Government Security which is a Floating Rate
Security(2), the maturity shall be deemed to have a remaining
maturity of one day;
(c) with respect to a Variable Rate Security, the principal amount
of which, in accordance with the terms of the security, must
unconditionally be paid in 397 calendar days or less, the maturity
shall be deemed to be equal to the earlier of the period remaining
until the next readjustment of the interest rate or the period
remaining until the principal amount can be recovered through
demand;
(d) with respect to a Variable Rate Security, the principal
amount of which is scheduled to be paid in more than 397 days,
that is subject to a Demand Feature the maturity shall be
deemed to be equal to the longer of the period remaining until
the next readjustment of the interest rate or the period
remaining until the principal amount can be recovered through
demand;
----------
(1) A "Variable Rate Security" means a security the terms of which provide for
the adjustment of its interest rate on set dates (such as the last day of a
month or calendar quarter) and that, upon each adjustment until the final
maturity of the instrument or the period remaining until the final maturity of
the instrument or the period remaining until the principal amount can be
recovered through demand, can reasonably be expected to have a market value that
approximates its amortized cost.
(2) A "Floating Rate Security" means a security the term of which provide for
the adjustment of its interest rate whenever a specified interest rate changes
and that, at any time until the final maturity of the instrument or the period
remaining until the principal amount can be recovered through demand, can
reasonably be expected to have a market value that approximates its amortized
cost.
20
(e) with respect to a Floating Rate Security, the principal
amount of which is scheduled to be paid in more than 397 days,
that is subject to a Demand Feature the maturity shall be
deemed to be equal to the period remaining until the principal
amount can be recovered through demand; and
(f) with respect to a Floating Rate Security, the principal
amount of which, in accordance with the terms of the security,
must unconditionally be paid in 397 calendar days or less, the
maturity shall be deemed to be one day through demand.
4. A repurchase agreement shall be deemed to have a maturity equal to
the period remaining until the date on which the repurchase of the
underlying securities is scheduled to occur or, where no date is
specified but the agreement is subject to a demand, the notice
period applicable to a demand for the repurchase of the
securities. Only overnight repurchase agreements are permitted as
cash collateral investments.
5. The maximum weighted average maturity of all investments,
excluding investments matched to term loans, on behalf of Lender
shall not exceed 60 days at the time of purchase.
6. For purposes of calculating weighted average maturity in E. 5
above, a floating rate instrument shall be deemed to have a
maturity as calculated in E.3 above.
F. OVERNIGHT REPURCHASE AGREEMENTS
All Repurchase Agreements must comply with the Funds' Repurchase
Guidelines attached hereto including the requirements applicable to
collateralization and repurchase agreement counterparties.
1. PERMITTED COLLATERAL
- Bills, bonds or notes issued by the United States Treasury, as
well as other securities guaranteed as to principal and
interest by the Government of the United States, its agencies,
instrumentalities or establishments
G. EXTENSION TRADES
From time to time a particular holding may be sold and a different issue
purchased in its stead (an "extension trade"). An extension trade allows
the seller to realize a gain on the issue being sold, while reinvesting
the proceeds (ex the gain) into other paper.
21
****************
EACH LENDER SHOULD REGULARLY ANALYZE THESE GUIDELINES TO DETERMINE THEIR
CONTINUED APPROPRIATENESS, RECOGNIZING THAT ALL INVESTMENTS BEAR RISK AND THAT
RETURN OF PRINCIPAL IS NOT ASSURED. PLEASE INDICATE YOUR ACCEPTANCE OF THESE
GUIDELINES BY SIGNING IN THE SPACE PROVIDED BELOW.
JPMORGAN TRUST II ON BEHALF OF ITS SERIES LISTED ABOVE:
BY: /s/ Xxxxxx X. Xxxxx
------------------------
NAME: Xxxxxx X. Xxxxx
----------------------
TITLE: Senior Vice President
---------------------
DATE: August 26, 2005
----------------------
22
APPENDIX 1
JPMORGAN CHASE BANK, N.A.
SECURITIES LENDING INVESTMENT GUIDELINES
SEPARATE ACCOUNT FOR EACH OF THE FOLLOWING FUNDS
JPMORGAN LIQUID ASSETS MONEY MARKET FUND
A. OBJECTIVE
To obtain an attractive yield on securities lending cash collateral by
investing in short term, fixed income securities (and other securities
with debt-like characteristics) that satisfy these guidelines, as
applied at the time of purchase, with the aim to be fully invested as of
the close of business on each day.
B. PERMISSIBLE INVESTMENTS
1. INSTRUMENTS
Both fixed-income securities and other securities with debt-like
characteristics on a fixed rate and floating rate basis are permitted,
as set forth below:
Asset-backed securities
Bank Notes
Bankers' Acceptances
Certificates of Deposit
Commercial Paper
Corporate Bonds
Deposit Notes
Master Notes
Medium Term Notes
Overnight Repurchase Agreements, subject to the requirements
of paragraph F
Time Deposits
U.S. Government Securities, which shall include securities
issued or guaranteed as to principal and interest by the
United States Government, its agencies, instrumentalities or
establishments
2. COMMINGLED VEHICLES
In addition, for purposes of these guidelines, shares of a money market
mutual fund registered with the Securities and Exchange Commission as an
investment company under the Investment Company Act of 1940, as amended,
shall be: (i) permissible investments, (ii) deemed to have a "Final
Maturity" of one day for purposes of the Maturity Guidelines in
paragraph E, and (iii) not subject to the Quality Guidelines in
paragraph G. If the money market mutual fund is advised by an affiliate
of JPMorgan Chase & Co., such purchase may be made only in accordance
with, and to the extent permitted by, the purchasing fund's registration
statement and an exemptive order issued by the SEC.
3. CURRENCY
Shall be limited to the same currency in which the loan collateral is
denominated.
4. NON-U.S. ISSUERS
Provided that an issuer otherwise meets the criteria set forth in these
guidelines, there is no geographic limitation.
23
C. PROHIBITED INVESTMENTS
1. EQUITY SECURITIES
Equity securities are prohibited.
2. CERTAIN DERIVATIVES
No investment shall be made in any instrument whose coupon rate moves in
the opposite direction of the index to which such instrument is tied. In
addition, in the event that investments are made in instruments whose
coupon rate moves when the index to which such rate is tied moves, such
investments shall only be in those of such instruments whose movements
in the coupon rate are equivalent to movements in the index.
3. FLOATING RATE SECURITIES
Floating rate securities with an interest rate cap, with the exception
of those capped to comply with state usury laws.
D. CONCENTRATION GUIDELINES
1. Not more than 5% of the total assets available for investment on
behalf of the Lender, measured at the time of purchase, may be
invested in the securities of a single issuer other than U.S.
Government Securities and repurchase agreements that are
collateralized fully, as to which there is no limitation.
2. With respect to these limits, par values will be used to measure
conformity to limits expressed in dollars, while purchase prices
will be used for limits expressed in percentages.
E. MATURITY GUIDELINES
1. FIXED RATE INSTRUMENTS: shall have a Final Maturity at the time of
purchase that does not exceed 397 days.
2. FLOATING RATE INSTRUMENTS: shall have a Final Maturity that does
not exceed 397 days.
3. "FINAL MATURITY" for purposes of these guidelines means the
following:
(a) with respect to a Government Security which is a Variable Rate
Security(1) where the variable rate of interest is readjusted
no less frequently than every 762 calendar days, the maturity
shall be deemed to be equal to the period remaining until the
next readjustment of the interest rate;
(b) with respect to a Government Security which is a Floating Rate
Security(2), the maturity shall be deemed to have a remaining
maturity of one day;
----------
(1) A "Variable Rate Security" means a security the terms of which provide for
the adjustment of its interest rate on set dates (such as the last day of a
month or calendar quarter) and that, upon each adjustment until the final
maturity of the instrument or the period remaining until the final maturity of
the instrument or the period remaining until the principal amount can be
recovered through demand, can reasonably be expected to have a market value that
approximates its amortized cost.
(2) A "Floating Rate Security" means a security the term of which provide for
the adjustment of its interest rate whenever a specified interest rate changes
and that, at any time until the final maturity of the instrument or the period
remaining until the principal amount can be recovered through demand, can
reasonably be expected to have a market value that approximates its amortized
cost.
24
(c) with respect to a Variable Rate Security, the principal amount
of which, in accordance with the terms of the security, must
unconditionally be paid in 397 calendar days or less, the maturity
shall be deemed to be equal to the earlier of the period remaining
until the next readjustment of the interest rate or the period
remaining until the principal amount can be recovered through
demand;
(d) with respect to a Variable Rate Security, the principal amount
of which is scheduled to be paid in more than 397 days, that is
subject to a Demand Feature the maturity shall be deemed to be
equal to the longer of the period remaining until the next
readjustment of the interest rate or the period remaining until
the principal amount can be recovered through demand;
(e) with respect to a Floating Rate Security, the principal amount
of which is scheduled to be paid in more than 397 days, that is
subject to a Demand Feature the maturity shall be deemed to be
equal to the period remaining until the principal amount can be
recovered through demand;
(f) with respect to a Floating Rate Security, the principal amount
of which, in accordance with the terms of the security, must
unconditionally be paid in 397 calendar days or less, the maturity
shall be deemed to have a maturity of one day through demand; and
(g) With respect to asset-backed securities, the expected final
maturity shall be deemed to be the Final Maturity.
3. 4A repurchase agreement shall be deemed to have a maturity equal
to the period remaining until the date on which the repurchase of
the underlying securities is scheduled to occur or, where no date
is specified but the agreement is subject to a demand, the notice
period applicable to a demand for the repurchase of the
securities. Only overnight repurchase agreements are permitted as
cash collateral investments.
4. The maximum weighted average maturity of all investments,
excluding investments matched to term loans, on behalf of Lender
shall not exceed 60 days at the time of purchase.
5. For purposes of calculating weighted average maturity in E. 4
above, a floating rate instrument shall be deemed to have a
maturity as calculated in E.3. above.
F. OVERNIGHT REPURCHASE AGREEMENTS
All Repurchase Agreements must comply with the Funds' Repurchase
Guidelines attached hereto including the requirements applicable to
collateralization and repurchase agreement counterparties.
1. PERMITTED COLLATERAL
- Asset-backed securities
- Bills, bonds or notes issued by the United States Treasury, as
well as other securities guaranteed as to principal and
interest by the Government of the United States, its agencies,
instrumentalities or establishments
- Corporate obligations
- Money market instruments (including, but not limited to,
certificates of deposit, bank notes, deposit notes, bankers'
acceptances and commercial paper)
G. QUALITY GUIDELINES
1. RATINGS
25
a. Except with respect to permitted collateral for repurchase
agreements (F.1.) and as noted below, a permissible investment
must have a minimum short-term rating as provided by two
Nationally Recognized Statistical Rating Organizations ("NRSRO")
as follows:
Any one of the following: A-1 by Standard & Poors ("S&P"), P-1
by Xxxxx'x Investor Services ("Moody's"), F-1 by Fitch (or an
equivalent rating by another NRSRO).
A security without its own rating shall be considered to be rated
if the issuer of the security is rated with respect to: (i) a
class of short-term debt obligations, in the case of short-term
ratings, or (ii) a class of long-term debt obligations, in the
case of long-term ratings, or (iii) any security of the issuer
within a class the same as the unrated security that is comparable
in priority of payment to the unrated security to be purchased.
Long-term ratings shall be used only if a security is not rated
and no security of the same issuer that is comparable in priority
with such security is rated. Where a long-term rating is used, the
issuer must have a minimum long-term rating as follows:
Any one of the following: A- by S&P, A3 by Moody's, A- by
Fitch or equivalent rating by another NRSRO
b.) Permitted collateral for repurchase agreements (see F.1.) must
have a rating in the highest two categories from at least two
NRSROs in the case of money market instruments and BBB/Baa or the
equivalent for corporate obligations.
2. DOWNGRADES
Securities may not be purchased based on an S&P, Xxxxx'x, Fitch or
another NRSRO's rating where the applicable NRSRO has announced publicly
that it is examining the relevant rating for a possible downgrade. The
foregoing limitation shall not apply to securities rated A-1+ by S&P.
In the event that a security held falls below the minimum guideline as
detailed in this paragraph G as a result of being downgraded by an
NRSRO, JPMorgan shall notify the Lender and await instructions as to
whether the affected security should be sold. In the absence of a
contrary instruction, JPMorgan shall take no action in respect of the
affected security. In no event shall JPMorgan be liable for any
consequences of a rating downgrade, including, but not limited to,
retention of the affected security in the absence of a sale instruction
from Lender. Lender acknowledges that any loss from a sale shall be for
its account.
H. EXTENSION TRADES
From time to time a particular holding may be sold and a different issue
purchased in its stead (an "extension trade"). An extension trade allows
the seller to realize a gain on the issue being sold, while reinvesting
the proceeds (ex the gain) into other paper.
26
****************
EACH LENDER SHOULD REGULARLY ANALYZE THESE GUIDELINES TO DETERMINE THEIR
CONTINUED APPROPRIATENESS, RECOGNIZING THAT ALL INVESTMENTS BEAR RISK AND THAT
RETURN OF PRINCIPAL IS NOT ASSURED. PLEASE INDICATE YOUR ACCEPTANCE OF THESE
GUIDELINES BY SIGNING IN THE SPACE PROVIDED BELOW.
JPMORGAN TRUST II ON BEHALF OF ITS SERIES LISTED ABOVE:
BY: /s/ Xxxxxx X. Xxxxx
------------------------
NAME: Xxxxxx X. Xxxxx
----------------------
TITLE: Senior Vice President
---------------------
DATE: August 26, 2005
----------------------
27
APPENDIX 1
JPMORGAN CHASE BANK, N.A.
SECURITIES LENDING INVESTMENT GUIDELINES
SEPARATE ACCOUNT FOR EACH OF THE FOLLOWING FUNDS
JPMORGAN INTERNATIONAL EQUITY INDEX FUND
JPMORGAN INTERNATIONAL EQUITY FUND
JPMORGAN INTREPID EUROPEAN FUND
JPMORGAN INTERNATIONAL OPPORTUNITIES FUND
JPMORGAN JAPAN FUND
JPMORGAN INTERNATIONAL VALUE FUND
JPMORGAN GLOBAL HEALTHCARE FUND
JPMORGAN ASIA EQUITY FUND
JPMORGAN EMERGING MARKETS EQUITY FUND
A. OBJECTIVE
To obtain an attractive yield on securities lending cash collateral by
investing in short term, fixed income securities (and other securities
with debt-like characteristics) that satisfy these guidelines, as
applied at the time of purchase, with the aim to be fully invested as of
the close of business on each day.
B. PERMISSIBLE INVESTMENTS
1. INSTRUMENTS
Both fixed-income securities and other securities with debt-like
characteristics on a fixed rate and floating rate basis are permitted,
as set forth below:
Certificates of Deposit
Commercial Paper
Repurchase Agreements, subject to the requirements of
paragraph F
Time Deposits
U.S. Government Securities, which shall include securities
issued or guaranteed as to principal and interest by the
United States Government, its agencies, instrumentalities
or establishments
2. COMMINGLED VEHICLES
In addition, for purposes of these guidelines, shares of a money market
mutual fund registered with the Securities and Exchange Commission as an
investment company under the Investment Company Act of 1940, as amended,
shall be: (i) permissible investments, (ii) deemed to have a "Final
Maturity" of one day for purposes of the Maturity Guidelines in
paragraph E, and (iii) not subject to the Quality Guidelines in
paragraph G. If the money market mutual fund is advised by an affiliate
of JPMorgan Chase & Co., such purchase may be made only in accordance
with, and to the extent permitted by, the purchasing fund's registration
statement and an exemptive order issued by the SEC.
3. CURRENCY
Shall be limited to the same currency in which the loan collateral is
denominated.
4. NON-U.S. ISSUERS
28
Provided that an issuer otherwise meets the criteria set forth in these
guidelines, there is no geographic limitation.
C. PROHIBITED INVESTMENTS
1. EQUITY SECURITIES
Equity securities are generally prohibited, except that equity
securities that (i) have predominantly debt characteristics (such as
owner trust certificates) or (ii) are permitted under F.1 below, are not
prohibited.
2. CERTAIN DERIVATIVES
No investment shall be made in any instrument whose coupon rate moves in
the opposite direction of the index to which such instrument is tied. In
addition, in the event that investments are made in instruments whose
coupon rate moves when the index to which such rate is tied moves, such
investments shall only be in those of such instruments whose movements
in the coupon rate are equivalent to movements in the index.
3. FLOATING RATE SECURITIES
Floating rate securities with an interest rate cap, with the exception
of those capped to comply with state usury laws.
D. CONCENTRATION GUIDELINES
1. Not more than 5% of the total assets available for investment on
behalf of the Lender, measured at the time of purchase, may be
invested in the securities of a single issuer other than U.S.
Government Securities and repurchase agreements that are
collateralized fully, as to which there is no limitation.
2. With respect to these limits, par values will be used to measure
conformity to limits expressed in dollars, while purchase prices
will be used for limits expressed in percentages.
E. MATURITY GUIDELINES
1. FIXED RATE INSTRUMENTS: shall have a Final Maturity at the time of
purchase that does not exceed 12 months.
2. FLOATING RATE INSTRUMENTS: All floating rate instruments shall
have a Final Maturity that does not exceed 3 years.
3. "FINAL MATURITY" for purposes of these guidelines means the
earliest of: (i) the date noted on the face of the instrument as
the date on which the principal amount must be paid or (ii) in the
case of an instrument with an unconditional put or unconditional
demand feature, the date on which the principal amount of the
instrument can be recovered by demand. With respect to asset
backed securities, the expected final maturity shall be deemed to
be the Final Maturity.
A repurchase agreement shall be deemed to have a maturity equal to the
period remaining until the date on which the repurchase of the
underlying securities is scheduled to occur or, where no date is
specified but the agreement is subject to a demand, the notice period
applicable to a demand for the repurchase of the securities. Only
overnight repurchase agreements are permitted as cash collateral
investments.
4. The maximum weighted average maturity of all investments,
excluding investments matched to term loans, on behalf of Lender
shall not exceed 90 days at the time of purchase.
29
5. For purposes of calculating weighted average maturity in E. 5
above, a floating rate instrument shall be deemed to have a
maturity equal to the period remaining until the next readjustment
of the interest rate.
F. OVERNIGHT REPURCHASE AGREEMENTS
All Repurchase Agreements must comply with the Funds' Repurchase
Guidelines attached hereto including the requirements applicable to
collateralization and repurchase agreement counterparties.
1. PERMITTED COLLATERAL
- Bills, bonds or notes issued by the United States
Treasury, as well as other securities guaranteed as to
principal and interest by the Government of the United
States, its agencies, instrumentalities or establishments
- Corporate obligations (except the International Equity
Index Fund)
- Money market instruments (including, but not limited to,
certificates of deposit, bank notes, deposit notes,
bankers' acceptances and commercial paper)
- Publicly traded U.S. Dollar-denominated equities, together
with equity-like securities (including, but not limited
to, convertible debt, exchange traded funds, ADRs and
warrants and rights)
G. QUALITY GUIDELINES
1. RATINGS
(a) Except with respect to permitted collateral for reverse
repurchase agreements (F.1.) and as noted below, a permissible
investment must have a minimum short-term rating as provided by a
Nationally Recognized Statistical Rating Organization ("NRSRO") as
follows:
Any one of the following: A-1 by Standard & Poors ("S&P"), P-1
by Xxxxx'x Investor Services ("Moody's"), F-1 by Fitch (or an
equivalent rating by another NRSRO).
A security without its own rating shall be considered to be rated
if the issuer of the security is rated with respect to: (i) a
class of short-term debt obligations, in the case of short-term
ratings, or (ii) a class of long-term debt obligations, in the
case of long-term ratings, or (iii) any security of the issuer
within a class the same as the unrated security that is comparable
in priority of payment to the unrated security to be purchased.
Long-term ratings shall be used only if a security is not rated
and no security of the same issuer that is comparable in priority
with such security is rated. Where a long-term rating is used, the
issuer must have a minimum long-term rating as follows:
Any one of the following: A- by S&P, A3 by Moody's, A- by
Fitch or equivalent rating by another NRSRO
(b) Permitted collateral for repurchase agreements (see F.1.) must
have a rating in the highest two categories from at least two
NRSROs in the case of money market instruments and BBB/Baa or the
equivalent for corporate obligations.
2. DOWNGRADES
Securities may not be purchased based on an S&P, Xxxxx'x, Fitch or
another NRSRO's rating where the applicable NRSRO has announced publicly
that it is examining the relevant rating for a possible downgrade. The
foregoing limitation shall not apply to securities rated A-1+ by S&P.
30
In the event that a security held falls below the minimum guideline as
detailed in this paragraph G as a result of being downgraded by an
NRSRO, JPMorgan shall notify the Lender and await instructions as to
whether the affected security should be sold. In the absence of a
contrary instruction, JPMorgan shall take no action in respect of the
affected security. In no event shall JPMorgan be liable for any
consequences of a rating downgrade, including, but not limited to,
retention of the affected security in the absence of a sale instruction
from Lender. Lender acknowledges that any loss from a sale shall be for
its account.
H. EXTENSION TRADES
From time to time a particular holding may be sold and a different issue
purchased in its stead (an "extension trade"). An extension trade allows
the seller to realize a gain on the issue being sold, while reinvesting
the proceeds (ex the gain) into other paper.
31
****************
EACH LENDER SHOULD REGULARLY ANALYZE THESE GUIDELINES TO DETERMINE THEIR
CONTINUED APPROPRIATENESS, RECOGNIZING THAT ALL INVESTMENTS BEAR RISK AND THAT
RETURN OF PRINCIPAL IS NOT ASSURED. PLEASE INDICATE YOUR ACCEPTANCE OF THESE
GUIDELINES BY SIGNING IN THE SPACE PROVIDED BELOW.
JPMORGAN TRUST I ON BEHALF OF ITS SERIES LISTED ABOVE:
BY: /s/ Xxxxxx X. Xxxxx
------------------------
NAME: Xxxxxx X. Xxxxx
----------------------
TITLE: Senior Vice President
---------------------
DATE: August 26, 2005
----------------------
JPMORGAN TRUST II ON BEHALF OF ITS SERIES LISTED ABOVE:
BY: /s/ Xxxxxx X. Xxxxx
------------------------
NAME: Xxxxxx X. Xxxxx
----------------------
TITLE: Senior Vice President
---------------------
DATE: August 26, 2005
----------------------
32
APPENDIX 3
ACCEPTABLE COLLATERAL
1. Cash
2. U.S. Treasury Securities (with respect to the 100% U.S. Treasury
Securities Money Market Fund only)
APPENDIX 5A
MASTER
SECURITIES LENDING AGREEMENT
This MASTER
SECURITIES LENDING AGREEMENT dated as of ______________ 200_ by
and between (the "Borrower") and JPMORGAN CHASE BANK, as trustee or managing
agent for those certain trusts and accounts (including accounts subject to
ERISA, as hereinafter defined) from time to time listed in Appendix A hereto
(JPMorgan Chase Bank, acting in its capacity as trustee or managing agent for
each such trust or account, and not in its individual capacity, is hereinafter
referred to as the "Trustee").
W I T N E S S E T H T H A T:
WHEREAS, the Borrower desires to borrow, from time to time, certain
securities from the Accounts, as hereinafter defined, on the terms and
conditions hereinafter set forth; and
WHEREAS, the Trustee is willing, subject to mutual agreement as to each
loan in the manner hereinafter set forth, to lend such securities to the
Borrower from time to time on behalf of the Accounts on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
the parties hereto hereby agree as follows:
1. DEFINITIONS. As used in this Agreement the following words and terms
shall have the meanings set forth below, unless the context clearly indicates
otherwise:
a) "Account" shall mean each trust or account from time to time listed in
Appendix A hereto, as the same may be amended from time to time in
accordance with paragraph 12 hereof.
b) "Approved Securities" shall mean book-entry securities issued by the U.S.
Treasury (as defined in Subpart O of Treasury Department Circular No. 300
and any successor provisions) and any other securities issued or fully
guaranteed by the United States government or any agency, instrumentality
or establishment of the U.S. government, including, without limitation,
securities commonly known as "Xxxxxx Xxxx", "Xxxxx Xxxx", "Xxxxxx Xxxx" and
"Xxxxxxx Macs", and any other securities as agreed to by the Borrower and
the Trustee from time to time, which are acceptable to the Trustee in its
sole discretion.
c) "Business Day" shall mean any day on which banks and the NYSE are open for
business in
New York City.
d) "Collateral" shall mean, collectively, (a) all Pledged Cash from time to
time held by the Trustee hereunder, any property in which such Pledged Cash
may from time to time be invested or reinvested by the Trustee and held by
it (but not the income or distributions thereon or gains therefrom), and
any amounts or other proceeds arising in connection with the sale,
exchange, collection or other disposition of any of the foregoing, (b) all
Approved Securities from time to time delivered by the Borrower and held by
the Trustee hereunder, the interest or other income therefrom and the
proceeds thereof, and (c) all Letters of Credit from time to time held by
the Trustee hereunder and the proceeds thereof, in each case regardless of
whether the same has been allocated at any time or from time to time to any
particular Loan.
e) "Equivalent Securities" shall mean securities of an identical type, nominal
value, description and number, of the same issuer and of the same class, as
the Loaned Securities.
f) "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
g) "Letter of Credit" shall mean an irrevocable performance letter of credit
issued by a bank acceptable to the Trustee for the account of the Borrower
or any other person acceptable to the Trustee, which letter of credit (a)
expires not earlier than such time as shall be agreed between the Borrower
and the Trustee, (b) names as beneficiary JPMorgan Chase Bank, as trustee
or managing agent, (c) is payable to the beneficiary upon presentation of a
draft in the amount of any drawing and a statement of the beneficiary that
the amount being drawn thereunder represents money owed to the beneficiary
in connection with a loan or loans of securities, (d) permits any number of
partial drawings (which PRO TANTO reduce the amount available under the
Letter of Credit), and (e) otherwise contains such terms and provisions as
are required by or acceptable to the Trustee.
h) "Loan" shall mean each securities loan made pursuant to paragraph 2 hereof.
i) "Loaned Securities" shall mean all securities loaned to the Borrower
hereunder or an equal principal amount of the same issue or series and any
securities issued in exchange therefor.
j) "Market Value" shall mean, with respect to any security, as of any date of
determination thereof, (a) the closing price of such security on the NYSE
on the trading day next preceding such date of determination, or (b) if
such security is not listed on the NYSE, the closing price of such security
on any national securities exchange selected by the Trustee on which such
security is listed on the trading day next preceding such date of
determination, or (c) if such security is not listed on any national
securities exchange, the asked price of such security as quoted by a
recognized pricing service selected by the Trustee (including as evidenced
by quotations available through Bloomberg's Financial Service and any
pricing service provided by JPMorgan Chase Bank, or any affiliate thereof),
at or as nearly as practicable at the close of business on the last trading
day during which such security was traded next preceding such date of
determination, or (d) with respect to a marketable United States government
obligation, the price of such security as quoted by a recognized pricing
service selected by the Trustee (including as evidenced by quotations
available through Bloomberg's Financial Service and any pricing service
provided by JPMorgan Chase Bank, or any affiliate thereof), or if the
Trustee so chooses the dealer asked price quoted by a recognized dealer in
such security (which may be JPMorgan Chase Bank or any affiliate thereof)
at or as nearly as practicable at the close of business on the last
Business Day preceding such date of determination; provided, that the
market value of any security held as Collateral as to which the issuer of
such security is in default or as to which any third party has asserted an
interest shall be zero for purposes hereof. In addition, the term "Market
Value", shall mean, as of any date of determination thereof, (a) with
respect to any Pledged Cash or Collateral in which such Pledged Cash is
invested, the amount of such Pledged Cash originally paid to the Trustee,
as reduced by any payments of such Pledged Cash to or for the account of
the Borrower, and (b) with respect to any Letter of Credit, the undrawn
balance thereof which the Trustee may at any such time prior to the
expiration of such Letter of Credit, draw thereunder; provided, however,
that the market value of any Letter of Credit as to which the issuing bank
has defaulted in honoring any draft drawn thereunder or has indicated its
intention not to honor any such draft or as to which any judicial or
similar restraint on payments thereunder exists shall be zero for all
purposes hereof.
k) "NYSE" shall mean the
New York Stock Exchange, Inc.
l) "Pledged Cash" shall mean the aggregate amount of cash paid to the Trustee
from time to time as Collateral with respect to any Loan, as reduced to
reflect any amounts thereof paid to or for the account of the Borrower and
any increases or decreases resulting from marking to market adjustments.
m) "Required Value" shall mean at any date, with respect to any Loan, an
amount equal to at least 102% of the then current Market Value of the
relevant Loaned Securities which are the subject of that Loan as of the
close of trading on the preceding Business Day, except in the case of
certain discounted securities at
2
or approaching maturity, for which "Required Value" shall mean, with
respect to any Loan, an amount equal to at least 100% of the par value of
the relevant Loaned Securities.
n) "SEC" shall mean the Securities and Exchange Commission.
2. LOANS OF SECURITIES.
(a) THE LOANS. From time to time, upon the request of the Borrower, the
Trustee may, in its sole discretion, lend securities to the Borrower from one or
more of the Accounts. Each such Loan shall be made on the terms and subject to
the conditions hereinafter set forth, except as may be otherwise expressly
agreed in writing by the parties hereto at the time such Loan is made. The
Borrower hereby unconditionally agrees that it will punctually return all Loaned
Securities to the Trustee at the times when the Loan of such Loaned Securities
is terminated hereunder or when such Loaned Securities are otherwise required to
be returned to the Trustee in accordance with the terms hereof, and that it will
punctually pay, or cause to be paid, when due, all other amounts at any time
payable by it hereunder or in connection herewith.
(b) OBLIGATIONS TO BE SEPARATE. Each and every obligation, liability or
undertaking of the Trustee or an Account with respect to any Loan (i) shall be
solely an obligation, liability or undertaking of, and binding upon, the Account
by which such Loan is made and the Trustee acting for such Account in its
capacity as such and (ii) shall be payable solely from the available assets of
such Account. No such obligation, liability or undertaking shall be binding upon
or affect any other Account, the Trustee acting in any other capacity or
JPMorgan Chase Bank in its individual capacity.
3. METHOD OF MAKING THE LOANS.
(a) DELIVERY OF LOANED SECURITIES. Each Loan hereunder shall be made by the
Trustee delivering to the Borrower the Loaned Securities that are the subject of
such Loan against receipt by the Trustee of the Collateral required to secure
such Loan. The Trustee may deliver Loaned Securities to the Borrower either by
(i) delivering to the Borrower certificates representing the Loaned Securities,
duly endorsed in blank or accompanied by duly executed stock or bond transfer
powers, as the case may be, with signatures guaranteed by a bank or a member
firm of the
New York Stock Exchange, Inc., in which event the Trustee shall list
the Loaned Securities on a schedule and receipt, which the Borrower shall
execute and return when the Loaned Securities are received, or (ii) causing the
Loaned Securities to be credited to the Borrower's account or the Borrower's
agent's account at the Depository Trust Company (or any other depository or
clearing agency agreed by the Borrower and the Trustee), including the Federal
Reserve/Treasury Book Entry System. The Borrower agrees that the completion of a
delivery of Loaned Securities to it as provided in this paragraph 3 shall
constitute its acceptance and receipt thereof and that each such acceptance and
receipt shall be deemed to constitute, and shall constitute, a representation by
the Borrower that as of the date of such acceptance and receipt (i) all
representations and warranties by the Borrower herein are true and correct, as
if made on and as of such date, (ii) no default hereunder has occurred and is
continuing, and (iii) except as otherwise theretofore disclosed to the Trustee
in writing, there has been no material adverse change in the financial condition
or business of the Borrower since the date of the most recent financial
statements of the Borrower provided to the Trustee in accordance with
subparagraph 7(c) or 8(a) hereof.
(b) DELIVERY OF COLLATERAL. The Borrower hereby agrees that, as a condition
precedent to the making of any Loan, or, in the Trustee's sole discretion,
simultaneously with the making of any Loan, it shall deliver to the Trustee
Collateral consisting of (i) cash, (ii) Approved Securities, and/or (iii)
Letters of Credit having an aggregate Market Value on the date of such Loan at
least equal to the Required Value with respect to such Loan on such date.
Collateral at any time delivered to the Trustee under this paragraph or
paragraph 6 hereof shall be of such type or types listed above as are then
acceptable to the Trustee in its sole discretion.
(c) MANNER OF COLLATERAL DELIVERY. Unless otherwise agreed by the Trustee
and the Borrower, the delivery of Pledged Cash shall be made by (i) the Borrower
transferring funds by wire, (ii) the Borrower delivering to the Trustee a
certified or bank check representing
New York Clearing House funds, (iii) the
3
Borrower causing the Borrower's account or the Borrower's agent's account at a
depository to be debited and the Trustee's account to be credited in a
corresponding amount, (iv) if agreed to, at the time, by the parties hereto,
causing the Borrower's account at JPMorgan Chase Bank to be charged or (v) any
combination of any of the foregoing. Delivery of Approved Securities shall be
effected for purposes hereof by normal and customary delivery procedures
satisfactory, at the time, to the Trustee. Such procedures shall include, but
are not limited to, delivery through book entry transfer pursuant to the rules
and procedures of the Depository Trust Company (or any other clearing agency
registered by the SEC) or the Federal Reserve/Treasury Book Entry System, as the
case may be. All such deliveries shall be deemed to have been effected for
purposes hereof when final, irreversible, credit has been made to the account of
the party entitled to the receipt of such credit under the rules of such
clearing agency or book entry system.
(d) DELIVERY OF LETTERS OF CREDIT. The delivery of a Letter of Credit shall
be effected for the purposes of this Agreement by (i) physical delivery of the
original executed Letter of Credit or (ii) tested telex by the issuing,
confirming or advising bank to the Trustee. Unless the Trustee otherwise agrees
to same day delivery of a Letter of Credit, no such delivery shall be effective
until one Business Day after the receipt of a Letter of Credit by the Trustee,
during which period the Trustee may reject such Letter of Credit, by oral notice
to the Borrower, if such Letter of Credit is not in the form approved by the
Trustee.
4. THE COLLATERAL.
(a) PLEDGE. As security for the prompt payment and performance of any and
all obligations of the Borrower at any time or from time to time existing
hereunder, or in connection with any Loan, the Borrower hereby pledges to the
Trustee, and grants to the Trustee a security interest in, all Collateral (other
than Letters of Credit) whether now owned or hereafter acquired, and whenever
delivered to the Trustee (except insofar as greater rights are provided in
subparagraph 4(b) hereof) and agrees that such pledge and grant of a security
interest shall be effective immediately as to any Collateral upon delivery
thereof to the Trustee. The Borrower hereby agrees that the Trustee shall have
all right, title and interest in and to the Letters of Credit delivered as
Collateral hereunder. The Trustee shall not be obligated to release Collateral,
or take any other action with respect thereto, except as expressly provided
herein.
(b) PLEDGED CASH. The Trustee shall have the unrestricted right to use and
invest Collateral consisting of Pledged Cash, and any Collateral in which
Pledged Cash is invested and reinvested, as it may elect, for the sole account
of the Accounts. So long as appropriate records allocating such Pledged Cash or
other Collateral are maintained, the Trustee may commingle such Pledged Cash or
other Collateral with any other Collateral or other funds or assets, including
funds or assets held by JPMorgan Chase Bank acting in any capacity as collateral
agent under other lending agreements, and may hold the same in its own name or
the name of its nominee. The Trustee shall be entitled to collect and retain,
for the account of the affected Account or Accounts, any income on such
Collateral and any net gains realized upon the sale, maturity, payment,
retirement or other disposition of such investments or reinvestments. The
Accounts shall bear the risk of all losses in value of the principal amount of
any Collateral in which Pledged Cash is invested or reinvested. The sole
obligation of the Trustee with respect to Pledged Cash is to repay such Pledged
Cash to the Borrower as required by paragraphs 6, 9, and 10 hereof.
(c) APPROVED SECURITIES. The Trustee may commingle any Approved Securities
held by it with other Collateral or other assets, including assets held by
JPMorgan Chase Bank acting in any capacity as collateral agent under other
lending agreements, and may hold the same in its own name or the name of its
nominee. Unless a default by the Borrower hereunder shall have occurred and be
continuing, the Borrower shall be entitled to receive all interest payments or
other distributions on Approved Securities held as Collateral that are received
by the Trustee (if any). The parties hereto shall deliver such suitable
assignments, orders and other instruments as may be required in order to
effectuate the provisions of the preceding sentence. If any interest or other
distribution on any Approved Securities is paid to the Borrower or to the
Trustee in respect of a time when the recipient thereof is not entitled to
receive such distribution, such recipient shall forthwith pay or deliver such
distribution, or the equivalent thereof, to the party entitled to receive the
same. The Borrower shall bear the risk of all losses in value of the principal
amount of Approved Securities held as
4
Collateral. The sole obligation of the Trustee with respect to Approved
Securities held as Collateral, except as provided in this paragraph, is to
deliver such Approved Securities to the Borrower as required by paragraphs 6, 9
and 10 hereof.
(d) SUBSTITUTIONS OF APPROVED SECURITIES. Prior to the maturity of any
Approved Securities, the Borrower may substitute other securities for the
Approved Securities if (i) such substituted securities, together with all
Collateral then held by the Trustee for such Loan, shall equal no less than the
Required Value for such Loan, and (ii) such substituted securities Collateral is
reasonably acceptable to the Trustee and the Account. In addition, the Trustee
shall have the right to request that other securities be substituted by the
Borrower for the Approved Securities if for any reason the Approved Securities
are not at any time reasonably acceptable to the Trustee or the Account.
5. RIGHTS OF BORROWER AND TRUSTEE WITH RESPECT TO LOANED SECURITIES.
(a) BORROWER'S RIGHTS. Until a Loan is terminated in accordance with the
provisions hereof, the Borrower shall have all the incidents of ownership of the
relevant Loaned Securities, including, without limitation, the right to transfer
such Loaned Securities or any part thereof to others, free and clear of any
right, title or interest of the Trustee, and to vote or otherwise consent as
holder thereof, subject, however, to all rights of the Trustee and all
obligations of the Borrower hereunder, including the provisions of subparagraph
5(b) hereof.
(b) TRUSTEE'S RIGHTS. The Trustee shall be entitled to receive all
interest, dividends and other distributions of any kind whatsoever on or with
respect to the Loaned Securities made during the period of the relevant Loan or
for which the record date occurs during the period of the relevant Loan. Upon
the payment or distribution of any of the foregoing to any person other than the
Trustee, the Borrower shall, on the due date for payment or distribution
thereof, pay and deliver the same or identical property (with any such
endorsements or assignments as shall be customary and appropriate to effect the
delivery) to the Trustee, for the account of the relevant Account, irrespective
of whether the Borrower received the same; provided, however, that (i) any
distribution of securities made in exchange for Loaned Securities shall be
considered as substituted for such Loaned Securities and need not be delivered
to the Trustee until the relevant Loan is terminated hereunder, (ii) any
dividend payable solely in shares of stock which is distributed with respect to
any Loaned Securities shall become a new Loan (and shall constitute Loaned
Securities, on the same terms as the Loaned Securities in respect of which they
were distributed, for all purposes hereof) and need not be delivered to the
Trustee until such new Loan is terminated hereunder, if at or before the
delivery of such dividend the Borrower shall have delivered such additional
Collateral for such new Loan to the Trustee as shall be necessary to make the
aggregate Market Value of the Collateral for such Loan, determined on the date
of such distribution, at least equal to the Required Value with respect to such
Loan determined on such date, and (iii) any distribution of warrants or rights
to purchase shares made with respect to any Loaned Securities shall be deemed to
be, and shall be, a new Loan made to the Borrower from the Account which loaned
the Borrower the Loaned Securities with respect to which such distribution is
made (and shall be treated as Loaned Securities, and as a separate Loan, for all
purposes hereof) and need not be delivered to the Trustee until such new Loan is
terminated in accordance herewith, if at or before the delivery of such
distribution the Borrower and the Trustee shall have agreed upon the Required
Value for such new Loan and the Borrower shall have delivered to the Trustee
Collateral for such new Loan having a Market Value acceptable to the Trustee.
6. ALLOCATION AND ADJUSTMENT OF COLLATERAL.
(a) ALLOCATION OF COLLATERAL. Except as provided in the following sentence,
upon receipt of Collateral for a Loan, such Collateral shall be allocated to
such Loan; provided that, if Collateral is received on the same day for more
than one Loan, the Trustee shall allocate such Collateral to each Loan then
being made so that each such Loan is secured by not less than the Required Value
of Collateral as specified herein. Any Collateral received by the Trustee with
respect to a Loan in excess of the Required Value for such Loan may be held by
the Trustee as collateral security for all Loans made to the Borrower at any
time without being
5
allocated to any one Loan or, in the sole discretion of the Trustee, may be
allocated at any time to any Loan or Loans then outstanding hereunder. All
allocations of Collateral shall be marked in the Trustee's books, which shall be
conclusive evidence of such allocations.
(b) MARKING TO MARKET. If at any time the aggregate Market Value of the
Collateral allocated to any Loan exceeds the Required Value for such Loan, then
the Trustee shall, upon oral demand, redeliver to the Borrower Collateral having
an aggregate Market Value equal to such excess by the close of business on such
Business Day or as otherwise agreed. If at any time the aggregate Market Value
of the Collateral allocated to any Loan is less than the Required Value for such
Loan, then the Borrower shall, upon oral demand by the Trustee, deliver to the
Trustee additional Collateral having a Market Value at least equal to such
deficiency. The Borrower unconditionally agrees to deliver such additional
Collateral to the Trustee in the manner specified herein before the close of
business on the date of such demand or as otherwise agreed.
(c) REALLOCATION OF COLLATERAL. The Trustee shall have the right, at its
sole election, at any time and from time to time, to allocate and/or reallocate
any Collateral held by it hereunder to or among any outstanding Loan or Loans.
(d) PARTIAL RETURNS OF COLLATERAL. If, at the time, less than all of the
Collateral held by the Trustee which has been allocated to any Loan or which is
unallocated is required to be returned by the Trustee to the Borrower, the
selection of the portion of such Collateral to be returned shall be solely at
the election of the Trustee. If at any time the Trustee is required, or desires,
to return a portion of any Approved Security to the Borrower pursuant to this
Agreement, the Borrower shall, at the oral request of the Trustee, take all such
action as is necessary to cause such Approved Security to be reissued in such
denominations as are required to permit such a partial return and in such case
the Trustee shall not be obligated to return Collateral hereunder unless and
until such action has been taken and may thereafter make required returns of
Collateral hereunder by returning Approved Securities in such amounts as are, as
nearly as practicable, equal to but not greater than the required return. The
return to the Borrower of Approved Securities the Market Value of which on the
day on which the requirement to return the same was established was then
sufficient to comply with such requirement of return shall be in full compliance
with this Agreement and a full discharge of the Trustee's obligation to make
such return, notwithstanding the fact that at the date of such return the Market
Value of any such Approved Securities may have declined. Whenever a Letter of
Credit is to be returned in part, such return shall be effected by the Trustee's
consent to a reduction equivalent to such part in the amount available for
drawings under such Letter of Credit.
7. REPRESENTATIONS AND WARRANTIES OF BORROWER. The Borrower hereby
represents and warrants to the Trustee that:
(a) DUE AUTHORIZATION, ETC. The making and performance by the Borrower of
this Agreement and the transactions contemplated hereby have been duly
authorized by the Borrower; the Borrower has the requisite power and authority
to make and perform the same; and such making and performance will not violate
any applicable provision of law or regulation or result in the breach of or
constitute a default or result in the creation of any lien or encumbrance under
any agreement or other instrument to which the Borrower is a party or by which
the Borrower or its property may be bound or affected. This Agreement
constitutes a legal, valid and binding obligation of the Borrower, enforceable
in accordance with its terms. At any time that any Collateral is delivered to
the Trustee hereunder the Borrower shall have the absolute right to transfer
title to, and dispose of, such Collateral to the Trustee, and the Trustee shall
at all times have a perfected security interest in all such Collateral, except
that in the case of Letters of Credit the Trustee shall have all right, title
and interest therein, in each case subject to no equal, prior or other liens,
charges, encumbrances or other claims of any kind (except, in the case of
Approved Securities, those in favor of JPMorgan Chase Bank or the Federal
Reserve Bank).
(b) BORROWER'S STATUS. The Borrower is either a bank or a broker- dealer
registered under the Securities Exchange Act of 1934, as amended. Neither the
Borrower nor any affiliate (as defined in Department of Labor Prohibited
Transaction Exemption 81-6) of the Borrower has discretionary authority or
control with
6
respect to investment of any plan assets held in any Account to which this
Agreement is applicable or renders investment advice (within the meaning of
29 CFR 2510.3-21(c)) with respect to such assets, and the Borrower will promptly
notify the Trustee of any change which would make the foregoing representation
untrue. In connection with the foregoing, Trustee acknowledges that such
representation and warranty shall not take effect until the Borrower has been
furnished with a list of Accounts and has been given a reasonable opportunity to
review the same (but in no event greater than 10 Business Days from the date
such list is furnished to the Borrower). The Borrower shall advise the Trustee
as soon as possible, but in no event later than the expiration of the 10 Day
period referred to in the preceding sentence of the identity of any Account(s)
as to which Borrower cannot make the representation and warranty referred to in
this subsection (b), in which event any such Account(s) shall be deleted from
the list of Accounts eligible to lend to the Borrower. If the Borrower does not
so notify the Trustee, such Account(s) shall be deemed acceptable and such
representation and warranty shall be considered to be in effect.
(c) FINANCIAL STATEMENTS. The Borrower has heretofore delivered to the
Trustee a copy of the most recent annual consolidated financial statements of
the Borrower and its consolidated subsidiaries, duly audited by independent
certified public accountants, including a balance sheet as at the end of the
fiscal year, and a copy of the most recent unaudited consolidated financial
statements of the Borrower and its consolidated subsidiaries, including a
balance sheet as at the end of the period covered thereby, and each of said
statements and the related notes thereto are complete and correct and fairly
present the consolidated financial condition and results of operations of the
Borrower and its consolidated subsidiaries, all in conformity with generally
accepted accounting principles consistently applied.
7A. REPRESENTATIONS AND WARRANTIES OF TRUSTEE ON BEHALF OF EACH ACCOUNT.
The Trustee represents and warrants that each Account has represented and
warranted to the Trustee that it: (i) has authorized Trustee to execute and
deliver an agreement substantially in the form hereof, to enter into the
transactions contemplated hereby, and to perform Trustee's obligations
hereunder; (ii) is the beneficial owner of all securities lent by it hereunder
or otherwise has the right to lend such securities; and (iii) is entitled to
receive all interest, dividends and other distributions made by the issuer with
respect to such securities.
8. COVENANTS OF BORROWER. The Borrower hereby covenants and agrees with the
Trustee as follows:
(a) DELIVERY OF FINANCIAL STATEMENTS, ETC. The Borrower will furnish to the
Trustee, (i) as soon as available, a copy of the annual consolidated financial
statements of the Borrower and its consolidated subsidiaries duly audited by
independent certified public accountants, including a balance sheet as at the
end of such fiscal year, prepared in accordance with generally accepted
accounting principles consistently applied, (ii) as soon as available for each
quarter, a copy of the consolidated financial statements of the Borrower and its
consolidated subsidiaries for the period then ended, including a balance sheet
as at the end of such period, prepared in accordance with generally accepted
accounting principles on a basis consistent with that used in the preparation of
the financial statements referred to in clause (i) above and certified by an
appropriate officer of the Borrower, (iii) promptly after the filing thereof, a
copy of each report or other instrument filed by the Borrower with the SEC, (iv)
promptly after the occurrence of any default under this Agreement, a written
notice setting forth the nature of such default and the steps being taken by the
Borrower to remedy such default, and (v) from time to time such further
information (whether or not of the kind mentioned above) regarding the business,
affairs and financial condition of the Borrower as the Trustee may reasonably
request.
(b) NOTICE OF CERTAIN ACTIONS. The Borrower will give the Trustee immediate
notice (i) if at any time there is entered against the Borrower any order,
decree, determination or instruction issued on the authority of any rule,
regulation or proceeding of any governmental commission, bureau or other
administrative agency or self-regulatory organization, including the SEC and the
NYSE, which could have a material adverse effect on the ability of the Borrower
to perform its obligations under this Agreement or to carry on its business as
conducted at the date of this Agreement or which would prohibit expansion or
require reduction of the business of the Borrower as conducted at the date of
this Agreement or which might adversely affect the borrowing of securities by
the Borrower, (ii) if at any time any litigation, arbitration or
7
similar proceeding against or affecting the Borrower is commenced which could
have a material adverse effect on the ability of the Borrower to perform its
obligations under this Agreement or to carry on its business as conducted at the
date of this Agreement or which would prohibit expansion or require reduction of
the business of the Borrower as conducted at the date of this Agreement or which
might adversely affect the borrowing of securities by the Borrower, (iii) if at
any time there is commenced any investigation or proceeding which may result in
the expulsion of the Borrower from any stock exchange, including the NYSE, or
from the National Association of Securities Dealers, Inc., or from any
self-regulatory organization, or a suspension of the Borrower's power under
Federal or state law to transact business as a broker or dealer in securities or
if the Borrower is so expelled or suspended, (iv) if at any time any
communication is received by the Borrower from the SEC or any stock exchange,
including the NYSE, constituting a warning to the Borrower of the violation, or
threatened violation, of any rule of the SEC or of such exchange a failure to
comply with which could have a material adverse effect on the ability of the
Borrower to perform its obligations under this Agreement or to carry on its
business as conducted at the date of this Agreement or result in a prohibition
on expansion or a requirement for reduction of the business of the Borrower as
conducted at the date of this Agreement or adversely affect the borrowing of
securities by the Borrower, (v) if at any time the Borrower shall receive
information that the Borrower is under special surveillance by any stock
exchange, including the NYSE, or by any other self-regulatory organization, (vi)
if at any time the Borrower shall receive information that the SEC or any
self-regulatory organization, including the NYSE, has notified the Securities
Investor Protection Corporation ("SIPC") pursuant to Section 5(a) (1) of the
Securities Investor Protection Act of 1970 ("SIPC Act") of facts which indicate
that the Borrower is in or is approaching financial difficulty, or (vii) if at
any time SIPC shall file an application for a protective decree with respect to
the Borrower under Section 5(a) (3) of the SIPC Act. Any such notice shall set
forth in reasonable detail a description of the event which has occurred and of
the action, if any, which the Borrower proposes to take with respect thereto.
The Borrower will forward to the Trustee a copy of any order, decree,
determination, instruction or other written evidence received by it of or with
respect to any matter referred to in the first sentence of this subparagraph (b)
with respect to which notice is required to be given to the Trustee by such
sentence. The Borrower will comply with any such order, decree, determination or
instruction within the time required for such compliance and with any changes of
rules or regulations of the SEC or the NYSE or any other self-regulatory
organization by the effective date thereof or the time for compliance specified
therein or, within the time required for compliance, shall cause the same to be
revoked, reversed or modified to the satisfaction of the Trustee.
(c) FURTHER ACTS. The Borrower will, from time to time, do and perform any
and all acts and execute any and all further instruments required or reasonably
requested by the Trustee more fully to effect the purposes of this Agreement and
the pledge of the Collateral hereunder, including, without limitation, the
execution and filing of financing statements and continuation statements
relating to the Collateral under the provisions of the
New York State Uniform
Commercial Code.
9. TERMINATION OF LOANS WITHOUT A DEFAULT.
(a) TERMINATION BY THE BORROWER. The Borrower may at any time terminate any
Loan by (unless otherwise agreed) giving the Trustee oral notice of such
termination and delivering the Loaned Securities or Equivalent Securities with
respect to such Loan to the Trustee on the date specified in such oral notice.
The date so specified shall be as agreed by the Borrower and the Trustee. In the
event that the Borrower terminates any term loan prior to the expiration of the
agreed term, the Borrower may be liable for any costs or expenses incurred as a
result thereof.
(b) TERMINATION BY THE TRUSTEE. Each Loan made hereunder shall be a demand
loan. The Trustee may at any time terminate any Loan, in whole or in part, by
giving the Borrower oral notice of such termination, whereupon such Loan, or the
portion thereof being terminated, shall become due on the date specified in such
notice unless it shall become due sooner pursuant to paragraph 10 hereof. The
date so specified shall be not less than: (i) in the case of a Loan of U.S.
Government Securities, one New York Business Day subsequent to the giving of
such notice; and (ii) in the case of a Loan of any other Loaned Securities
(unless otherwise agreed by the parties hereto as evidenced in the confirmation
relating to a Loan), the
8
lesser of five days or the standard market settlement time in the principal
market in which the Loaned Securities are traded. For purposes of clause (ii),
if there is a difference between the settlement time for sales and purchases in
the applicable market, the standard market settlement time for such market for
purposes of this Section 9(b) shall be the shorter of the two times. The
Borrower hereby unconditionally promises to redeliver the Loaned Securities that
are the subject of any Loan so terminated to the Trustee through the same
delivery means as the Loaned Securities were delivered by the Trustee to the
Borrower, on the date so specified with respect to such Loan, which shall be
within the same timeframe as applicable to the delivery of the Loaned Securities
by the Trustee to the Borrower.
(c) RETURN OF COLLATERAL. Upon the termination of any Loan in accordance
with this paragraph 9 and the return of the Loaned Securities with respect to
such Loan to the Trustee, the Trustee shall, unless otherwise directed by the
Borrower, deliver the Collateral then allocated to such Loan to the Borrower;
provided, however, that if any default hereunder shall have occurred and be
continuing the Trustee shall not be obligated to return any such Collateral
until such default shall have been cured, and that if a record date for any
distribution with respect to the Loaned Securities occurred during the period of
such Loan and such distribution has not been paid or delivered to the Trustee,
the Trustee may retain a portion of the Collateral for such Loan sufficient to
satisfy the Borrower's obligation with respect to such distribution until such
obligation has been satisfied in accordance with paragraph 5(b) hereof. Such
delivery shall occur on the date of the return of the relevant Loaned
Securities. The Trustee acknowledges that, if at the election of the Borrower,
upon the termination in accordance with this paragraph 9 of any Loan which is
secured by a Letter of Credit, or a portion thereof, and the return of the
Loaned Securities with respect to such Loan, such Letter of Credit, or portion
thereof, is not returned to the Borrower, the Trustee shall have no further
right to draw under such Letter of Credit with respect to such Loan to the
extent that the obligations of the Borrower with respect to such Loan have been
fully discharged and the payments and deliveries of Loaned Securities made in
respect of such obligations are not subsequently recovered from the Trustee in
any bankruptcy, insolvency or similar proceeding.
10. DEFAULTS.
(a) EVENTS OF DEFAULT. Any one or more of the following events shall
constitute an "Event of Default" hereunder:
(i) A failure by the Borrower to deliver any Loaned Securities on the date
specified for such delivery in accordance with subparagraph 9(a) or (b) hereof
or any other default by the Borrower in the due performance or observance of any
covenant or agreement contained herein; or
(ii) Any representation or warranty made by the Borrower herein or in
connection herewith or with any borrowing hereunder shall be breached or prove
to have been untrue when made; or
(iii) A violation by the Borrower, in connection with any Loaned Securities
or the holding or disposition thereof by the Borrower, of any applicable law,
regulation or rule of the United States, any state or any instrumentality of
either thereof, the NYSE or any other national securities exchange to the
requirements of which the Borrower may be subject, or the Board of Governors of
the Federal Reserve System or the National Association of Securities Dealers,
Inc.; or
(iv) A violation by the Borrower of any rule limiting its aggregate
indebtedness or requiring a minimum net capital imposed under the Securities
Exchange Act of 1934, as amended, or the rules and regulations thereunder or
imposed by any stock exchange, or the imposition, under any such rule, of a
prohibition against expansion, or a requirement of any reduction, of the
business of the Borrower; or
(v) The occurrence of any event of which the Borrower is required to notify
the Trustee pursuant to clause (i), (iii), (vi), or (vii) of subparagraph 8(b)
hereof; or
9
(vi) The Borrower or any bank which has issued a Letter of Credit held as
Collateral shall (1) apply for or consent to the appointment of or the taking of
possession by a trustee, receiver, custodian, liquidator, conservator or the
like of itself or of all or any substantial part of its property, (2) admit in
writing its inability, or be generally unable, to pay its debts as such debts
become due or voluntarily suspend payment of its obligations, (3) make a general
assignment for the benefit of its creditors, (4) commence a voluntary case under
the Federal Bankruptcy Code (as now or hereafter in effect) or, in the case of
any such bank, under the analogous law pertaining to it, (5) file a petition
seeking to take advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, (6) fail to
controvert in a timely or appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case under such Bankruptcy Code or
analogous law, or (7) take any corporate action for the purpose of effecting any
of the foregoing; or
(vii) A proceeding or case shall be commenced, without the application or
consent of the Borrower or any bank which has issued a Letter of Credit held as
Collateral, as the case may be, before any court, agency or supervisory
authority having jurisdiction in the premises, seeking (1) the liquidation,
reorganization, dissolution, winding-up, marshaling of assets or composition or
adjustment of debts of the Borrower or such bank, (2) the appointment of a
trustee, receiver, custodian, liquidator, conservator or the like of the
Borrower or such bank or of all or any substantial part of its assets or (3)
similar relief in respect of the Borrower or such bank under any law relating to
bankruptcy, insolvency, reorganization, winding-up or composition and adjustment
of debts, and such proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the foregoing shall be entered
and continue unstayed and in effect, for a period of 30 days; or any action
shall be taken by any agency or supervisory authority having jurisdiction which
results in the occurrence of any of the events specified in clauses (1) through
(3) above; or any order for relief against the Borrower or any such bank shall
be entered in an involuntary proceeding or case under such Bankruptcy Code or,
in the case of any such bank, under the analogous law pertaining to it.
(b) AUTOMATIC TERMINATION. Upon the occurrence of any Event of Default all
outstanding Loans shall terminate and become immediately due, without any notice
or other action on the part of the Trustee, and the Borrower shall immediately
deliver all Loaned Securities to the Trustee.
(c) TRUSTEE'S REMEDIES. If an Event of Default shall have occurred and be
continuing the Trustee may take whatever action at law or in equity may appear
necessary or desirable to collect any and all amounts due and thereafter to
become due hereunder and to enforce the performance or observance by the
Borrower of any and all obligations, covenants and agreements of the Borrower
under or in connection with this Agreement. Without in any way limiting the
foregoing, if the Borrower shall fail to immediately deliver any Loaned
Securities to the Trustee in accordance with subparagraph 10(b) hereof, the
Trustee may in its sole discretion either (i) purchase securities equivalent to
the Loaned Securities which have not been delivered, or any part thereof, in any
principal market for such securities and apply such purchased securities towards
the Borrower's obligation to deliver such Loaned Securities, or (ii) by oral
notice to the Borrower (confirmed in writing), and without purchasing equivalent
securities, hold the Borrower liable for an amount equal to the Market Value
(including for this purpose accrued interest to the date of such oral notice) of
the Loaned Securities which have not been delivered, or any part thereof as
specified in such notice, determined as of the date of such oral notice,
whereupon the Borrower's obligation to deliver such Loaned Securities to the
Trustee hereunder (to the extent equivalent securities have been purchased or
the Trustee has given an oral notice with respect thereto pursuant to clause
(ii) above) shall terminate for all purposes and the Borrower shall thereafter
be obligated to the Trustee hereunder for, and hereby agrees to pay to the
Trustee, the full amount of the purchase price of such securities or the Market
Value (including accrued interest as provided above) thereof, as the case may
be.
(d) APPLICATION OF COLLATERAL. The Trustee shall have all of the rights,
powers and remedies with respect to the Collateral of a secured party, or, in
the case of Letters of Credit, a beneficiary, under the New York State Uniform
Commercial Code as in effect from time to time. Without in any way limiting the
foregoing, upon the occurrence of any Event of Default the Trustee may draw upon
any Letters of Credit then held as Collateral and liquidate any or all other
Collateral then held by it. The proceeds of the
10
foregoing, together with any Pledged Cash then held, may be applied by the
Trustee to the payment of any and all amounts due and to become due to it
hereunder, including without limitation amounts due to the Trustee in accordance
with subparagraph 10(c) hereof. In addition to and without limiting the
foregoing, the Trustee may sell or cause to be sold all or any of the Collateral
in the Borough of Manhattan, New York City, or elsewhere, in one or more sales,
at such price as the Trustee may deem best, and for cash or on credit or for
future delivery, without assumption of any credit risk, at public or private
sale, without demand of performance or notice of intention to sell or of time or
place of sale (except such notice as is required by applicable statute and
cannot be waived), and the Trustee or anyone else may be the purchaser of any or
all of the Collateral so sold and thereafter hold the same absolutely, free from
any claim or right of whatsoever kind, including any equity of redemption, of
the Borrower, any such demand, notice or right and equity being hereby expressly
waived and released. It is expressly understood and agreed by the parties hereto
that any allocation of Collateral to any Loan or liabilities due to any Account
pursuant to the terms hereof shall in no way affect the ability of the Trustee
to apply such Collateral to the satisfaction of any obligation of the Borrower
hereunder upon any default hereunder, regardless of the Loan or Account to which
such obligation relates, and that all Collateral at any time given hereunder
shall constitute collateral security for all the Borrower's obligations to the
Trustee hereunder without distinction of any kind and upon any default hereunder
may be applied to any such obligation or obligations as the Trustee in its sole
discretion may elect.
(e) BORROWER'S REMEDIES. If at any time any Lender Default (as such term is
hereinafter defined) shall have occurred and be continuing with respect to any
Account, the Borrower may, by oral notice to the Trustee, declare all
outstanding Loans made by such Account (the "Defaulted Loans") to be terminated
and to be immediately due, whereupon the same shall terminate and become
immediately due without any further notice or other action on the part of the
Borrower, and the Trustee shall immediately deliver all Collateral for such
Defaulted Loans to the Borrower in accordance with subparagraph 9(c) hereof
against receipt of the Loaned Securities which are the subject of such Defaulted
Loans; provided, however, that upon the occurrence of any Lender Default
referred to in clause (iv) of the definition of Lender Default below with
respect to any Account all outstanding Loans made by such Account shall
automatically terminate and become immediately due, without any notice or other
action on the part of the Borrower, and the Trustee shall immediately deliver
all Collateral for such Defaulted Loans to the Borrower in accordance with
subparagraph 9(c) after tender to the Trustee of the Loaned Securities which are
the subject of such Defaulted Loans. If the Trustee shall fail to deliver any
such Collateral to the Borrower in accordance with this subparagraph 10(e) after
tender to the Trustee of the Loaned Securities which are the subject of the Loan
secured by such Collateral, the Borrower shall have the right, in addition to
any other remedies which may be available at law or in equity, after oral notice
(confirmed in writing) to the Trustee, to sell in a commercially reasonable
manner, the Loaned Securities then held by it which are the subject of the Loan
secured by such Collateral, for the account of the Account which made such Loan,
and apply the proceeds of such sale in accordance with this subparagraph 10(e).
Upon receipt by the Trustee of any such notice of sale, the Trustee's obligation
to return any Pledged Cash or Approved Securities allocated to the Loan with
respect to which such notice was given which have not theretofore been returned
to the Borrower shall terminate for all purposes and the Trustee shall
thereafter be obligated, on behalf of the Account, to the Borrower hereunder,
with respect to such Loan, for, and hereby agrees to pay to the Borrower, an
amount equal to such Pledged Cash and the Market Value (including for this
purpose accrued interest to the date of the relevant Lender Default) of such
Approved Securities, determined as of the date of the relevant Lender Default.
The proceeds of any sale of Loaned Securities under this subparagraph 10(e)
shall be automatically applied to the payment of any and all amounts due to the
Borrower hereunder from the Account which loaned such Loaned Securities to the
Borrower, including without limitation amounts due to the Borrower in accordance
with this subparagraph 10(e). Except as otherwise provided in this subparagraph
10(e), if a Lender Default has occurred with respect to any Account and the
Loans made by such Account have been terminated pursuant to this subparagraph
10(e), the Borrower shall not be obligated to (i) return any Loaned Securities
which are the subject of any Defaulted Loan made by such Account, or the
proceeds of any sale thereof, or (ii) pay or deliver to the Trustee pursuant to
subparagraph 5(b) hereof any interest, dividends or other distributions with
respect to the Loaned Securities which are the subject of any Defaulted Loan
made by such Account until all of the obligations hereunder of such Account have
been satisfied; provided, however, that upon satisfaction of all obligations of
such Account hereunder any and all such Loaned
11
Securities, proceeds, interest, dividends and other distributions which have not
been applied to the satisfaction of such obligations shall be returned to the
Trustee for the account of such Account. As used herein, the term "Lender
Default" shall mean, with respect to any Account, any one or more of the
following events: (i) a failure by such Account to deliver any Pledged Cash or
Approved Securities to the Borrower in accordance with subparagraph 9(c) hereof;
(ii) a failure by such Account to deliver any Collateral to the Borrower in
accordance with subparagraph 6(b) hereof; (iii) a failure by such Account to pay
or deliver to the Borrower any interest payment or other distribution on any
Approved Securities held as Collateral in accordance with subparagraph 4(c)
hereof and the continuance of such default for a period of one Business Day
after written notice thereof has been given to the Trustee by the Borrower; (iv)
such Account, if such Account is not an employee benefit plan subject to ERISA,
shall make a general assignment for the benefit of its creditors, or shall admit
in writing its inability to pay its debts as they become due, or shall file a
petition in bankruptcy or shall be adjudicated a bankrupt or insolvent, or shall
file a petition seeking reorganization, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, or shall seek,
consent to or acquiesce in the appointment of any liquidator (or similar
official) of itself or of any material part of its properties, or any petition,
not dismissed within 30 calendar days, shall be filed against such Account
(other than by the Borrower) in any court or before any agency alleging the
bankruptcy or insolvency of such Account or seeking any reorganization,
arrangement, composition, readjustment of debts, liquidation, dissolution or
similar relief with respect to such Account under any present or future statute,
law or regulation, or the appointment of a liquidator of all or any material
part of such Account's property, or, if such Account is an employee benefit plan
subject to ERISA, the Pension Benefit Guaranty Corporation, or any successor
thereof, shall institute proceedings to terminate such plan under section 4042
of ERISA; or (v) such Account, if such Account is not an employee benefit plan
subject to ERISA, shall have any license, charter or other authorization
necessary to conduct a material portion of its business withdrawn, suspended or
revoked by any applicable federal or state government or agency thereof, or, if
such Account is an employee benefit subject to ERISA, a final determination
shall be rendered that such plan no longer is exempt from tax under Section
501(a) of the Internal Revenue Code of 1986, as amended.
(f) PAYMENT OF EXPENSES. If any Event of Default shall occur the Borrower
shall pay to the Trustee, on demand, all out-of-pocket expenses, including
reasonable attorneys' fees, paid or incurred by the Trustee in realizing upon
any Collateral or enforcing any covenants or obligations hereunder and all fees,
commissions, taxes and other out-of-pocket expenses, including reasonable
attorneys' fees, paid or incurred in connection with the purchase of any
equivalent securities in accordance with subparagraph 10(c) hereof. Amounts
payable under this subparagraph 10(f) and subparagraph 10(c) hereof shall be
paid to the Trustee by the Borrower on demand, together with interest thereon
from the date such amounts were paid by the Trustee or otherwise became payable
to the Trustee to the date of the payment of such amounts to the Trustee,
whether out of the proceeds of Collateral or otherwise, at a rate per annum
equal to 1/2 of 1% above the prime commercial lending rate per annum as
announced from time to time by JPMorgan Chase Bank at its principal office in
New York, as in effect from time to time during such period, but in no event at
a rate in excess of the highest rate permissible under any applicable usury law.
(g) REMEDIES CUMULATIVE. No remedy herein conferred upon the Trustee or the
Borrower shall be exclusive of any other remedy but each and every such remedy
shall be cumulative and shall be in addition to every remedy given to such party
under this Agreement or now or hereafter existing at law or in equity or by
statute.
(h) RETURN OF COLLATERAL AFTER A DEFAULT. If the Loans hereunder have been
terminated pursuant to subparagraph 10(b) hereof, the Trustee shall not be
obligated to return any Collateral to the Borrower until (i) all Loaned
Securities have been returned to the Trustee or securities equivalent to such
Loaned Securities have been acquired by the Trustee, (ii) all amounts due and to
become due hereunder have been paid to the Trustee in full, and (iii) the
Borrower has delivered to the Trustee any and all property of any kind which it
is then or may thereafter be required to deliver to the Trustee hereunder. If
each of the conditions in the preceding sentence is satisfied the Trustee shall
deliver all Collateral then held by it which has not been applied to the
satisfaction of the Borrower's obligations hereunder to the Borrower.
12
11. TRANSFER TAXES, NECESSARY COSTS AND COMPENSATION. The Borrower shall
pay all transfer taxes and necessary costs with respect to the transfer of
Loaned Securities by the Trustee to the Borrower and from the Borrower to the
Trustee upon the termination of each Loan. In addition, the Borrower shall
reimburse the Trustee for any loss, including interest and/or penalties,
incurred by the Trustee by reason of the Borrower's failure to pay all such
taxes and costs. Except as otherwise expressly provided in paragraph 10 hereof,
the Borrower shall pay the Trustee interest on any and all amounts not paid when
due hereunder from the date due until paid at the current daily average offered
rate for federal funds.
12. ADDITION AND REMOVAL OF ACCOUNTS. The Account which makes any
particular Loan shall be determined in the sole discretion of the Trustee at the
time such Loan is made and recorded in the Trustee's books (which shall be
conclusive). The Borrower agrees to accept any loan of securities requested by
it from any Account or Accounts listed in Appendix A hereto (except that
Borrower may delete one or more Accounts from Appendix A on not less than five
Business Days prior notice to the Trustee), and the Trustee shall not be
required to notify the Borrower at any time as to which of such Accounts has
made or may make any Loan hereunder; provided, however, that the Trustee shall
record with respect to each Loan the identity of the lending Account. The
Trustee may at any time amend Appendix A hereto to add further trusts and
accounts to the list of Accounts set forth therein and to remove Accounts from
such list by delivering a copy of the amendment to Appendix A to the Borrower.
Any such amendment shall become effective 10 Business Days after the receipt
thereof by the Borrower unless the Trustee has theretofore received a written
notice from the Borrower objecting to such amendment. Notwithstanding anything
contained in this Agreement that may be to the contrary, information concerning
both the addition and deletion by Trustee of Account(s) from Appendix A and the
acceptance or objection by Borrower to the addition of Account(s) to Appendix A
may in each case be communicated by e-mail (with a "return receipt" requested),
which e-mail shall be sent (i) by a person who would otherwise be authorized to
send the same if it were sent in writing, and (ii) to any person who would
otherwise be authorized to receive the same if it were sent in writing.
13. INDEMNIFICATION. The Borrower agrees to indemnify and hold harmless the
Trustee from any and all damages, losses, liabilities, costs and expenses
(including reasonable attorneys' fees) which the Trustee may incur or suffer
arising in any way out of the use by the Borrower of Loaned Securities or any
failure of the Borrower to deliver Loaned Securities in accordance herewith or
otherwise comply with the terms of this Agreement, except those caused by the
gross negligence or willful misconduct of the Trustee.
14. NOTICES, DELIVERIES, ETC. All oral notices specified herein shall be
given in person or by telephone. All other notices and communications hereunder
shall be in writing and all such other notices and communications, and all
deliveries and payments hereunder, shall be delivered by hand or mailed by
certified or registered mail, or given by telegram confirmed by certified or
registered mail as follows:
If to the Trustee, to:
JPMorgan Chase Bank
Securities Lending Division
0 Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Securities Lending Business Executive
Telephone: (000) 000-0000
13
If to the Borrower, to:
or, in either case, to such other person and at such other address or telephone
number as either party may designate by written notice to the other hereunder.
15. MISCELLANEOUS. Neither this Agreement, any obligation to return a
security borrowed hereunder or any other obligation of the Borrower hereunder
shall be assignable by either party without the prior written consent of the
other party. Subject to the foregoing, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. This Agreement shall be governed by and construed in accordance
with the law of the State of New York, except to the extent such law is
preempted by ERISA or other applicable Federal law. This Agreement shall not be
modified or amended except by an instrument in writing signed by each of the
parties hereto.
16 FEES. The compensation in connection with Loans and the manner of
payment thereof shall be as agreed upon from time to time by the parties hereto.
With respect to Loans secured by Approved Securities, the Borrower shall pay to
the Trustee a loan fee negotiated at the time of the Loan. With respect to Loans
secured by Pledged Cash, the Trustee shall pay to the Borrower a rate of
interest earned on Pledged Cash investments as negotiated at the time of the
Loan or subsequently revised from time to time by the mutual consent of the
parties. Each agreement by the parties hereto with respect to the foregoing
matters shall be evidenced by a written confirmation from the Trustee to the
Borrower and shall be deemed to be, and shall be, a part of this Agreement for
all purposes hereof as fully as if such agreement were set forth herein in full,
and each and every amount due under any such agreement shall be deemed to
constitute, and shall constitute, an amount due under this Agreement for all
purposes hereof.
17. SIPC ACT. THE TRUSTEE ACKNOWLEDGES THAT THE PROVISIONS OF THE
SECURITIES INVESTORS PROTECTION ACT OF 1970 MAY NOT PROTECT THE TRUSTEE OR THE
ACCOUNTS WITH RESPECT TO THE SECURITIES LOAN TRANSACTIONS HEREUNDER BETWEEN THE
TRUSTEE AND THE BORROWER AND THAT, THEREFORE, THE COLLATERAL DELIVERED BY THE
BORROWER TO THE TRUSTEE MAY IN EFFECT CONSTITUTE THE ONLY SOURCE OF SATISFACTION
OF THE BORROWER'S OBLIGATIONS IN THE EVENT THE BORROWER FAILS TO RETURN THE
SECURITIES. The Trustee agrees to notify the Accounts of this provision. This
provision does not constitute a limitation on any obligations of the Borrower
hereunder or a waiver by the Trustee of any of its rights hereunder.
14
18. EFFECTIVE DATE. This Agreement shall be and become effective as of the
date first above written.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective duly authorized officers as of the
date first above written.
JPMORGAN CHASE BANK
as trustee and managing agent
By
---------------------------------
Name:
Title:
AS BORROWER
By
---------------------------------
Name:
Title:
15
INTERNATIONAL ADDENDUM TO MASTER
SECURITIES LENDING AGREEMENT
ADDENDUM, dated , 2003, to the Master
Securities Lending Agreement, as
amended ("Agreement"), dated ,between (the "Borrower") and JPMORGAN CHASE
BANK, as trustee or managing agent for certain trusts or accounts (the
"Trustee").
It is hereby agreed as follows:
1. Unless otherwise provided herein, all terms and conditions of the
Agreement are expressly incorporated herein by reference and except as modified
hereby, the Agreement is confirmed in all respects. Capitalized terms used
herein without definition shall have the meanings ascribed to them in the
Agreement.
2. Section 1 of the Agreement is amended as follows:
a. The definition of "Approved Securities" is amended by inserting
the phrase "("U.S. Government Securities") or any other securities, in each
case" after the word "government".
b. The definition of "business day" is deleted and replaced in
appropriate alphabetic sequence by the following:
"Foreign Business Day" shall mean (unless otherwise agreed) with respect
to: (i) International Securities (whether comprising Loaned Securities
or Collateral consisting of Approved Securities), any day on which banks
are open for business in the country in which the principal market for
such Securities is located and on which regular trading therein occurs
in such Securities in such market, and (ii) cash Collateral denominated
in other than U.S. dollars, any day on which banks are open for business
in the country of issuance of such cash.
"New York Business Day" shall mean (unless otherwise agreed) with
respect to (i) Loaned Securities other than International Securities and
(ii) Collateral comprising Letters of Credit, and U.S.
dollar-denominated Approved Securities and cash, any day on which
national banks and the NYSE are open for business in New York City.
c. The definition of "Collateral" is amended by adding the words
"or International Securities" after the words "Approved Securities" in clause
(b) thereof.
d. A new term, "Dollar Equivalent", is added. "'Dollar Equivalent'
shall mean, as of any date of determination thereof, in respect of any
International Securities or Collateral denominated or issued in an International
Currency or otherwise, the equivalent thereof in United States dollars
calculated by the Trustee on the basis of the most current spot rate of exchange
quoted by JPMorgan Chase Bank, or other source selected by the Trustee in its
sole discretion, for selling the relevant International Currency for United
States dollars in a recognized foreign exchange market selected by the Trustee
in its sole discretion."
e. A new term, "International Currency", is added. "'International
Currency' shall mean a currency other than United States dollars which is freely
transferable and freely convertible into United States dollars."
f. A new term, "International Securities", is added.
"'International Securities' shall mean, with respect to a Loan, securities
denominated or issued in an International Currency which are acceptable to the
Trustee in its sole discretion."
g. The definition of "Letter of Credit" is amended in clause (e)
by adding the words "and is payable in such currency or currencies" after the
word "provisions" and by adding the words "in its sole discretion" after the
word "Trustee".
h. The definition of "Market Value" is amended as follows: The
reference to "national" in clause (b) is replaced with the words "foreign or
domestic"; the reference to "national" in clause (c) is replaced with the word
"such"; the parenthetical in clause (c) is amended by adding the words "to or"
following the word "provided"; the parenthetical in clause (d) is amended by
adding the words "to or" following the word "provided"; the proviso clause in
the first sentence is amended by adding, between the words "security" and
"held", the words "determined in clauses (a)-(d) hereinabove shall include
accrued interest and the market value of any security"; the phrase "New York
Business Day" is substituted for the phrase "business day"; and the phrase "New
York Business Days" is substituted for the phrase "business days"; and a new
last sentence is added, namely, "In all cases involving International Securities
or Collateral denominated or issued in an International Currency, Market Value
shall be adjusted by the Trustee to a Dollar Equivalent".
3. Section 3(a) of the Agreement is amended by inserting the phrase
"prior or contemporaneous" after the word "against" in the first sentence
thereof.
Section 3(a) of the Agreement is amended by adding to the first sentence
thereof the words "as evidenced in the relevant Loan Confirmation" after the
word "Borrower" and by adding the words "(other than International Securities)"
after the reference to both "Loaned Securities" and "Approved Securities"
therein.
Section 3(a) is further amended by adding a new last sentence, namely,
"Delivery of International Securities shall be effected in the manner agreed to
by the Trustee and the Borrower, as evidenced in the relevant Loan
confirmation."
4. Section 3(b) of the Agreement is amended by adding a new clause
(iii), "International Securities" and designating existing clause (iii) as (iv).
5. Section 3(d) of the Agreement is amended by substituting the
phrase "New York Business Day" for the phrase "business day".
6. Section 4(c) of the Agreement is amended by adding the words "or
International Securities" after each reference to the words "Approved
Securities" in the first, second, fourth, fifth, and sixth sentences thereof.
Section 4(c) is further amended by adding the words ", as the case may
be," after the word Trustee in the fourth sentence thereof.
7. Section 5(b) of the Agreement is amended by inserting the
following after the phrase "the Borrower shall, within one business day after
the payment or distribution thereof" in the second sentence thereof: "(and such
business day shall be a New York Business Day with respect to interest,
dividends and distributions denominated in U.S. dollars or otherwise paid or
issued in respect of Loaned Securities other than International Securities and
shall be a Foreign Business Day in respect of all other interest, dividends and
distributions)".
8. Section 6(b) of the Agreement is amended by inserting the
following after the phrase "such demand" in the last sentence thereof: ", and
such business day shall be a New York Business Day with respect to Collateral
denominated in U.S. dollars or delivered to the Trustee in New York and shall be
a Foreign Business Day in respect of all other Collateral".
2
9. Section 6(d) of the Agreement is amended by substituting the
following sentence for the existing second sentence:
If at any time the Trustee is required, or desires, to return a portion
of any Approved Security or International Security held by it as
Collateral to the Borrower pursuant to this Agreement, the Borrower
shall, at the oral request of the Trustee, take all such action as is
necessary to cause such Approved Security or International Security to
be reissued in such denominations as are required to permit such a
partial return and in such case the Trustee shall not be obligated to
return Collateral hereunder unless and until such action has been taken
and may thereafter make required returns of Collateral hereunder by
returning Approved Securities or International Securities, as the case
may be, in such amounts as are, as nearly as practicable, equal to but
not greater than the required return.
Section 6(d) is further amended by inserting, in the third sentence
thereof, the words "or International Securities, as the case may be," after the
initial reference to "Approved Securities" therein.
10. Section 9(a) of the Agreement is amended by adding the following
at the end thereof: "and whether such business days shall be New York Business
Days or Foreign Business Days shall be determined by reference to the location
of the principal trading market for the Loaned Securities which are the subject
of the Loan being terminated.
11. Section 9(c) of the Agreement is amended by inserting: the (i)
phrase "of Collateral" after the phrase "Such delivery" in the second sentence
thereof"; and (ii) following after the phrase "Loaned Securities" in the second
sentence thereof: "where the Loaned Securities are not International Securities.
Where the Loaned Securities are International Securities, return of Collateral
shall occur on or before the New York Business Day next succeeding the Foreign
Business Day on which the Loaned Securities were returned."
12. Section 10(a)(iii) of the Agreement is amended by adding the words
"or any foreign jurisdiction" after the words "rule of the United States" and
deletion of the word "national" in the words "the NYSE or any other national
securities exchange.
13. Section 10(a)(vi)(7) of the Agreement is amended by adding the
words "or effect any process under the laws of any jurisdiction" after the words
"take any corporate action".
14. Section 10(c) of the Agreement is amended by substituting the
following clause for existing clause (i):
purchase securities equivalent to the Loaned Securities which have not
been delivered, or any part thereof, in any principal market for such
securities and apply the Market Value of such purchased securities
against the Market Value of the Loaned Securities on the date of such
purchase.
Section 10(c) of the Agreement is further amended by adding the
following as a new subparagraph at the end thereof:
If the Borrower fails to return Loaned Securities when due (at a time
when the Account is obligated to deliver the Loaned Securities to settle
a sale to third party ("Account Counterparty")) and this results in a
buy-in of equivalent securities by the Account Counterparty, Borrower
shall, promptly upon demand therefor, reimburse Trustee for any loss,
including interest and/or penalties, incurred by the Trustee and the
Account arising from or relating to such buy-in.
15. Section 10(e) of the Agreement is amended by substituting the
phrase "New York Business Day" for the phrase "business day".
3
16. Section 10(f) is amended as follows: In the first sentence
thereof, the words "and as of the date of any" are added immediately prior to
the word "demand" and immediately subsequent to the word "demand" the comma is
deleted and the following words are added: "therefor, an amount in United States
dollars equal to the Dollar Equivalent of". The first two clauses of the second
sentence (but no other clauses therein) are revised to read as follows: "Amounts
payable under this subparagraph 10(f) and subparagraph 10(c) hereof shall be
paid in United States dollars to the Trustee by the Borrower on and as of the
date of any demand therefor, together with the interest thereon in United States
dollars from the date such amounts were paid by the Trustee (including, where
applicable, Dollar Equivalents thereof) to the date of the repayment of such
amounts to the Trustee,".
17. Section 11 of the Agreement is amended by inserting the following:
(i) as a new first sentence, "All transfers of Loaned Securities shall be in
good deliverable form."; (ii) after the word "taxes" in the existing first
sentence thereof, ", relevant stamp duties, registration fees"; and (iii) after
the word "costs" in the existing first sentence thereof, "and shall arrange for
transfer deeds and/or documents, and shall pay any other applicable fees and
expenses".
Section 11 of the Agreement is further amended so that the existing
second and third sentences read as follows:
In addition, the Borrower shall reimburse the Trustee in United States
dollars for the Dollar Equivalent of any loss, including interest and/or
penalties, incurred by the Trustee by reason of the Borrower's failure
to pay all such taxes and costs and to arrange for such transfer deeds
and/or documents and to pay any other applicable fees and expenses, as
of the date of the incurrence of any such loss by the Trustee. Except as
otherwise expressly provided in paragraph 10 hereof, the Borrower shall
pay the Trustee interest in United States dollars on any and all amounts
(including, where applicable, Dollar Equivalents thereof) not paid when
due hereunder from the date due until paid at the current daily average
offered rate for federal funds.
18. Section 12 of the Agreement is amended by substituting the phrase
"New York Business Days" for the phrase "business days" in the last sentence
thereof.
19. Section 13 of the Agreement is amended by adding the following
sentences:
Without limiting the foregoing, if, under any applicable law and whether
pursuant to a judgment, against the Borrower or the liquidation,
bankruptcy or analogous process of the Borrower or for any other reason,
any amount due to the Trustee hereunder or in respect of any Loan is
paid in a currency other than United States dollars, then to the extent
that the payment actually received by the Trustee (when converted into a
Dollar Equivalent on the first day after the date of payment on which it
is practicable for the Trustee to effect the conversion) falls short of
the amount due hereunder or under the terms of the relevant Loan, the
Borrower shall, as a separate and independent obligation, indemnify the
Trustee and hold the Trustee harmless against the amount of such
shortfall."
20. Section 14 of the Agreement is amended by deleting the first two
sentences thereof and substituting, in lieu thereof, the following:
"14. NOTICES, DELIVERIES, ETC. All oral notices specified herein
shall be given in person or by telephone, if to the Trustee, to the Securities
Lending Business Executive at the address for the Trustee specified below or at
telephone number [ ] and, if to the Borrower, to at the address
for the Borrower specified below or at telephone number ________, or to such
other person and at such other address or telephone number as either party may
designate by written notice to the other hereunder. All other notices and
communications hereunder shall be in writing and delivered by hand or mailed by
certified or registered mail, if to the Trustee, to JPMorgan Chase Bank, [ ],
4
Attention: Securities Lending Division, Securities Lending Business Executive,
and if to the Borrower to, or at such other address and number as either party
may designate by written notice to the other hereunder."
Section 14 of the Agreement is further amended by adding the following
at the end thereof:
Deliveries of Loaned Securities and Collateral and payments due
hereunder or in respect of any Loan may be made in any manner to any
designee of the Borrower or the Trustee, as the case may be, upon
agreement of the other party as evidenced in the relevant Loan
confirmation.
IN WITNESS WHEREOF, the parties have executed this Addendum as of the
date first above
5
written.
JPMORGAN CHASE BANK.
--------------------------------- as trustee and managing agent
Insert name of Borrower
By: By:
---------------------- ------------------------
Name: Name:
Title: Title:
Date: Date:
0
XXXXX XXXXXX ADDENDUM
TO MASTER
SECURITIES LENDING AGREEMENT
ADDENDUM dated __________________ 200 , to the Master Securities Lending
Agreement dated ___________________, between _________________________________,
(the "Borrower") and JPMorgan Chase Bank, as trustee or managing agent for
certain trusts of accounts (the "Trustee").
It is hereby agreed as follows:
Paragraph 7 of the Agreement is hereby amended by adding the following
as a new Paragraph 7(d) thereof: "The Borrower: (i) shall borrow 'South
African Securities' (as hereinafter defined) solely in order to effect
delivery of such Securities under a transaction entered into by the
Borrower to sell the Securities; and (ii) hereby covenants that it shall
transfer South African Securities of the same kind and of the same or
equivalent quantity and quality to the Lender within a period of twelve
months from the date of such borrowing. For the avoidance of doubt, the
Borrower hereby confirms that the foregoing representations, warrants
and covenants shall survive the making of any Loan of South African
Securities until the return thereof by Borrower. For purposes hereof,
'South African Securities' shall mean any marketable security
contemplated in Item 15 of Schedule 1 of the South African Stamp Duties
Act, 1968 (as amended) ('1968 Act') (but, for purposes of clarity, shall
not include any marketable security made out to bearer or in any manner
so as to be transferable by delivery only)."
Subparagraph 9(a) of the Agreement is hereby amended by adding the
following at the end thereof: "In any event, with respect to South
African Securities, the Borrower shall terminate any Loan of such
Securities no later than twelve months from the making of such Loan,
regardless of whether the Borrower shall have received notice of
termination thereof. This obligation of termination shall be solely the
Borrower's, and the Borrower shall be responsible for any stamp or other
taxes or charges that may be assessed or incurred as a result of the
Borrower's failure to terminate such Loans within such twelve month
period, including, but not limited to, stamp or other taxes or charges
resulting from such Loans of South African Securities not falling within
the exemption from stamp duties and other taxes as set out in the 1968
Act and the South African Uncertificated Securities Tax, 1998 (as
amended). In addition, Borrower shall be responsible for, and shall hold
Trustee harmless from and against, any stamp or other taxes or charges
that may be assessed or incurred as a result of the Borrower's failure
to comply with the conditions for exemption from such stamp or other
taxes or charges including, but not limited to, those conditions set out
in subparagraph 7(d) above."
In witness whereof, the parties have executed this Addendum as of the
date first above written.
JPMORGAN CHASE BANK
(Borrower) as trustee or managing agent
By: By:
------------------------------------ --------------------------------
Name: Name:
---------------------------------- -------------------------------
Title: Title:
--------------------------------- ------------------------------
Date: Date:
---------------------------------- -------------------------------
TURKEY ADDENDUM
TO MASTER SECURITIES LENDING AGREEMENT
ADDENDUM dated , 200__, to the Master Securities Lending
Agreement dated , 200__, (the "Agreement") between ________________________
(the "Borrower") and JPMORGAN CHASE BANK, as trustee or managing agent for
certain trusts or accounts (the "Trustee").
It is hereby agreed as follows:
Section 5(b) of the Agreement is amended by inserting the following
after the phrase "received the same" in the second sentence thereof:
(except that in the case of any such payment or distribution on Loaned
Securities that are of a Turkish issuer, the Borrower shall remit all
such interest, dividends and other distributions to the Trustee within
two weeks of the issuance of the same)
In all other respects, the Agreement shall remain unchanged and in full
force and effect. All references to the Agreement shall hereafter be deemed to
mean and refer to the Agreement as amended by this Addendum.
In witness whereof, the parties have executed this Addendum as of the
day and year above written.
JPMORGAN CHASE BANK
As borrower as trustee and managing agent
By By
---------------------------- ----------------------------
1
DATED
OVERSEAS SECURITIES LENDER'S AGREEMENT
CONTENTS
CLAUSE PAGE
1. INTERPRETATION 1
2. LOANS OF SECURITIES 14
3. DELIVERY OF SECURITIES 14
4. RIGHTS AND TITLE 15
5. RATES 18
6. COLLATERAL 19
7. REDELIVERY OF EQUIVALENT SECURITIES 23
8. SET-OFF ETC. 24
9. TAXATION 26
10. LENDER'S WARRANTIES 27
11. BORROWER'S WARRANTIES 27
12. EVENTS OF XXXXXXX 00
00. OUTSTANDING PAYMENTS 29
14. TRANSACTIONS ENTERED INTO AS AGENT 29
15. TERMINATION OF COURSE OF DEALINGS BY NOTICE 31
16. GOVERNING PRACTICES 31
17. OBSERVANCE OF PROCEDURES 32
18. SEVERANCE 32
19. SPECIFIC PERFORMANCE 32
20. NOTICES 32
21. ASSIGNMENT 32
22. NON-WAIVER 33
23. ARBITRATION AND JURISDICTION 33
24. TIME 33
25. RECORDING 33
26. GOVERNING LAW 33
27. SCHEDULE 35
28. APPENDIX 38
THIS AGREEMENT is made the day of , 2002
BETWEEN:-
(1) JPMORGAN CHASE BANK (London branch) incorporated with limited liability as
a New York State chartered bank registered in England as a branch; and
whose registered branch address is 000 Xxxxxx Xxxx, Xxxxxx, XX0X 0XX.
(2) [INSERT NAME OF BORROWER]
WHEREAS:-
1. The Parties hereto are desirous of agreeing a procedure whereby either one
of them (the "LENDER") will make available to the other of them (the
"BORROWER") from time to time Securities (as hereinafter defined) in order
to enable the Borrower, subject to any Inland Revenue provisions then in
force, to fulfil a contract to sell such Securities or to on lend such
Securities to a third party to enable such party to fulfil a contract to
sell such Securities, whether or not as part of a chain of arrangements to
enable the final party in such chain to fulfil a contract to sell such
Securities or to replace an existing loan of Securities to such third
party, or for other purposes.
2. All transactions carried out under this Agreement will be effected in
accordance with the Rules (as hereinafter defined) TOGETHER WITH current
market practices, customs and conventions.
NOW THIS AGREEMENT WITNESSETH AND IT IS HEREBY AGREED AS FOLLOWS:-
1. INTERPRETATION
(A) In this Agreement:-
"ACT OF INSOLVENCY" means in relation to either Party
(i) its making a general assignment for the benefit of,
or entering into a reorganisation, arrangement, or
composition with creditors, or
(ii) its admitting in writing that it is unable to pay
its debts as they become due, or
1
(iii) its seeking, consenting to or acquiescing in the
appointment of any trustee, administrator, receiver
or liquidator or analogous officer of it or any
material part of its property, or;
(iv) the presentation or filing of a petition in respect
of it (other than by the other Party to this
Agreement in respect of any obligation under this
Agreement) in any court or before any agency
alleging or for the bankruptcy, winding-up or
insolvency of such Party (or any analogous
proceeding) or seeking any reorganisation,
arrangement, composition, re-adjustment,
administration, liquidation, dissolution or similar
relief under any present or future statute, law or
regulation, such petition (except in the case of a
petition for winding-up or any analogous proceeding
in respect of which no such 30 day period shall
apply) not having been stayed or dismissed within 30
days of its filing;
(v) the appointment of a receiver, administrator,
liquidator or trustee or analogous officer of such
Party over all or any material part of such Party's
property; or
(vi) the convening of any meeting of its creditors for
the purpose of considering a voluntary arrangement
as referred to in Section 3 of the Insolvency Act
1986 (or any analogous proceeding);
"AGENT" shall have the same meaning given in Clause 14;
"ALTERNATIVE COLLATERAL" means Collateral of a Value equal to the Collateral
delivered pursuant to Clause 6 and provided by way
of substitution for Collateral originally delivered
or previously substituted in accordance with the
provisions of Clauses 6(F) or 6(G);
2
"APPROPRIATE TAX VOUCHERS" means:-
(i) either such tax vouchers and/or certificates as
shall enable the recipient to claim and receive from
any relevant tax authority, in respect of interest,
dividends, distributions and/or other amounts
(including for the avoidance of doubt any
manufactured payment) relating to particular
Securities, all and any repayment of tax or benefit
of tax credit to which the Lender would have been
entitled but for the loan of Securities in
accordance with this Agreement and/or to which the
Lender is entitled in respect of tax withheld and
accounted for in respect of any manufactured
payment; or such tax vouchers and/or certificates as
are provided by the Borrower which evidence an
amount of overseas tax deducted which shall enable
the recipient to claim and receive from any relevant
tax authority all and any repayment of tax from the
UK Inland Revenue or benefits of tax credit in the
jurisdiction of the recipient's residence; and
(ii) such vouchers and/or certificates in respect of
interest, dividends, distributions and/or other
amounts relating to particular Collateral;
"APPROVED UK means a person who is approved as such for the
COLLECTING AGENT" purposes of the Rules of the UK Inland Revenue
relating to stocklending and manufactured interest
and dividends;
"APPROVED INTERMEDIARY" means a person who is approved as such for the
purposes of the Rules of the UK Inland Revenue
relating to stocklending and manufactured interest
and dividends;
"ASSURED PAYMENT" means a payment obligation of a Settlement Bank
arising (under the Assured Payment Agreement) as a
result of a transfer of stock or other securities to
a CGO stock account of a member of the CGO for whom
that Settlement Bank is acting;
3
"ASSURED PAYMENT means an agreement dated 24 October 1986 between the
AGREEMENT" Bank of England and all the other banks which are
for the time being acting as Settlement Banks in
relation to the CGO regulating the obligations of
such banks to make payments in respect of transfers
of securities through the CGO as supplemented and
amended from time to time;
"BASE CURRENCY" has the meaning given in the Schedule hereto;
"BID PRICE" in relation to Equivalent Securities or Equivalent
Collateral means the best available bid price
thereof on the most appropriate market in a standard
size;
"BID VALUE" Subject to Clause 8(E) means:-
(a) in relation to Equivalent Collateral at a
particular time:-
(i) in relation to Collateral Types B(x)
and C (more specifically referred to
in the Schedule) the Value thereof as
calculated in accordance with such
Schedule;
(ii) in relation to all other types of
Collateral (more specifically
referred to in the Schedule) the
amount which would be received on a
sale of such Collateral at the Bid
Price thereof at such time less all
costs, fees and expenses that would
be incurred in connection with
selling or otherwise realising such
Equivalent Collateral, calculated on
the assumption that the aggregate
thereof is the least that could
reasonably be expected to be paid in
order to carry out such sale or
realisation and adding thereto the
amount of any interest, dividends,
distributions or other amounts paid
to the Lender and in respect
4
of which equivalent amounts have not
been paid to the Borrower in
accordance with Clause 6(G) prior to
such time in respect of such
Equivalent Collateral or the original
Collateral held gross of all and any
tax deducted or paid in respect
thereof;
and
(b) in relation to Equivalent Securities at a
particular time the amount which would be
received on a sale of such Equivalent
Securities at the Bid Price thereof at such
time less all costs, fees and expenses that
would be incurred in connection therewith,
calculated on the assumption that the
aggregate thereof is the least that could
reasonably be expected to be paid in order to
carry out the transaction;
"BORROWER" with respect to a particular loan of Securities
means the Borrower as referred to in Recital 1 of
this Agreement;
"BORROWING REQUEST" means a request made (by telephone or otherwise) by
the Borrower to the Lender pursuant to Clause 2(A)
specifying the description, title and amount of the
Securities required by the Borrower, the proposed
Settlement Date and duration of such loan and the
date, time, mode and place of delivery which shall,
where relevant, include the bank agent clearing or
settlement system and account to which delivery of
the Securities is to be made;
"BUSINESS DAY" means a day on which banks and securities markets
are open for business generally in London and, in
relation to the delivery or redelivery of any of the
following in relation to any loan, in the place(s)
where the relevant Securities, Equivalent
Securities, Collateral (including Cash Collateral)
or Equivalent Collateral are to be delivered;
"CASH COLLATERAL" means Collateral that takes the form of a deposit of
currency;
5
"CENTRAL GILTS OFFICE" means the computer based system managed by the Bank
OR "CGO" of England to facilitate the book-entry transfer of
gilt-edged securities;
"CGO COLLATERAL" shall have the meaning specified in paragraph A of
the Schedule;
"CGO RULES" means the requirements of the CGO for the time being
in force as defined in the membership agreement
regulating membership of the CGO;
"CLOSE OF BUSINESS" means the time at which banks close in the business
centre in which payment is to be made or Collateral
is to be delivered;
"COLLATERAL" means such securities or financial instruments or
deposits of currency as are referred to in the
Schedule hereto or any combination thereof which are
delivered by the Borrower to the Lender in
accordance with this Agreement and shall include the
certificates and other documents of or evidencing
title and transfer in respect of the foregoing (as
appropriate), and shall include Alternative
Collateral;
"DEFAULTING PARTY" shall have the meaning given in Clause 12;
"EQUIVALENT COLLATERAL" in relation to any Collateral provided under this
or "COLLATERAL Agreement means securities, cash or other property,
EQUIVALENT TO" as the case may be, of an identical type, nominal
value, description and amount to particular
Collateral so provided and shall include the
certificates and other documents of or evidencing
title and transfer in respect of the foregoing (as
appropriate). If and to the extent that such
Collateral consists of securities that are partly
paid or have been converted, subdivided,
consolidated, redeemed, made the subject of a
takeover, capitalisation issue, rights issue or
event similar to any of the foregoing, the
expression shall have the following meaning:
(a) in the case of conversion, subdivision or
consolidation the securities into which the
relevant
6
Collateral has been converted, subdivided or
consolidated PROVIDED THAT, if appropriate,
notice has been given in accordance with
Clause 4(B)(vi);
(b) in the case of redemption, a sum of money
equivalent to the proceeds of the redemption;
(c) in the case of a takeover, a sum of money or
securities, being the consideration or
alternative consideration of which the
Borrower has given notice to the Lender in
accordance with Clause 4(B)(vi);
(d) in the case of a call on partly paid
securities, the paid-up securities PROVIDED
THAT the Borrower shall have paid to the
Lender an amount of money equal to the sum
due in respect of the call;
(e) in the case of a capitalisation issue, the
relevant Collateral TOGETHER WITH the
securities allotted by way of a bonus
thereon;
(f) in the case of a rights issue, the relevant
Collateral TOGETHER WITH the securities
allotted thereon, PROVIDED THAT the Borrower
has given notice to the Lender in accordance
with Clause 4(B)(vi), and has paid to the
Lender all and any sums due in respect
thereof;
(g) in the event that a payment or delivery of
Income is made in respect of the relevant
Collateral in the form of securities or a
certificate which may at a future date be
exchanged for securities or in the event of
an option to take Income in the form of
securities or a certificate which may at a
future date be exchanged for securities,
notice has been given to the Borrower in
accordance with Clause 4(B)(vi) the relevant
7
Collateral TOGETHER WITH securities or a
certificate equivalent to those allotted;
(h) in the case of any event similar to any of
the foregoing, the relevant Collateral
TOGETHER WITH or replaced by a sum of money
or securities equivalent to that received in
respect of such Collateral resulting from
such event;
For the avoidance of doubt, in the case of Bankers'
Acceptances (Collateral type B(v)), Equivalent
Collateral must bear dates, acceptances and
endorsements (if any) by the same entities as the
xxxx to which it is intended to be equivalent and
for the purposes of this definition, securities are
equivalent to other securities where they are of an
identical type, nominal value, description and
amount and such term shall include the certificate
and other documents of or evidencing title and
transfer in respect of the foregoing (as
appropriate);
"EQUIVALENT SECURITIES" means securities of an identical type, nominal
value, description and amount to particular
Securities borrowed and such term shall include the
certificates and other documents of or evidencing
title and transfer in respect of the foregoing (as
appropriate). If and to the extent that such
Securities are partly paid or have been converted,
subdivided, consolidated, redeemed, made the subject
of a takeover, capitalisation issue, rights issue or
event similar to any of the foregoing, the
expression shall have the following meaning:
(a) in the case of conversion, subdivision or
consolidation the securities into which the
borrowed Securities have been converted,
subdivided or consolidated PROVIDED THAT if
appropriate, notice has been given in
accordance with Clause 4(B)(vi);
(b) in the case of redemption, a sum of money
equivalent to the proceeds of the redemption;
8
(c) in the case of takeover, a sum of money or
securities, being the consideration or
alternative consideration of which the Lender
has given notice to the Borrower in
accordance with Clause 4(B)(vi);
(d) in the case of a call on partly paid
securities, the paid-up securities PROVIDED
THAT the Lender shall have paid to the
Borrower an amount of money equal to the sum
due in respect of the call;
(e) in the case of a capitalisation issue, the
borrowed Securities TOGETHER WITH the
securities allotted by way of a bonus
thereon;
(f) in the case of a rights issue, the borrowed
Securities TOGETHER WITH the securities
allotted thereon, PROVIDED THAT the Lender
has given notice to the Borrower in
accordance with Clause 4(B)(vi), and has paid
to the Borrower all and any sums due in
respect thereof;
(g) in the event that a payment or delivery of
Income is made in respect of the borrowed
Securities in the form of securities or a
certificate which may at a future date be
exchanged for securities or in the event of
an option to take Income in the form of
securities or a certificate which may at a
future date be exchanged for securities,
notice has been given to the Borrower in
accordance with Clause 4(B)(vi) the borrowed
Securities TOGETHER WITH securities or a
certificate equivalent to those allotted;
(h) in the case of any event similar to any of
the foregoing, the borrowed Securities
TOGETHER WITH or replaced by a sum of money
or securities equivalent to that received in
respect of such borrowed Securities resulting
from such event;
9
For the purposes of this definition,
securities are equivalent to other securities
where they are of an identical type, nominal
value, description and amount and such term
shall include the certificate and other
documents of or evidencing title and transfer
in respect of the foregoing (as appropriate);
"EVENT OF DEFAULT" has the meaning given in Clause 12;
"INCOME" any interest, dividends or other distributions of
any kind whatsoever with respect to any Securities
or Collateral;
"INCOME PAYMENT DATE", with respect to any Securities or Collateral means
the date on which Income is paid in respect of such
Securities or Collateral, or, in the case of
registered Securities or Collateral, the date by
reference to which particular registered holders are
identified as being entitled to payment of Income;
"LENDER" with respect to a particular loan of Securities
means the Lender as referred to in Recital 1 of this
Agreement;
"MANUFACTURED DIVIDEND" shall have the meaning given in Clause 4(B)(ii);
"MARGIN" shall have the meaning specified in the Schedule
hereto;
"NOMINEE" means an agent or a nominee appointed by either
Party and approved (if appropriate) as such by the
Inland Revenue to accept delivery of, hold or
deliver Securities, Equivalent Securities,
Collateral and/or Equivalent Collateral on its
behalf whose appointment has been notified to the
other Party;
"NON-DEFAULTING PARTY" shall have the meaning given in Clause 12;
"OFFER PRICE" in relation to Equivalent Securities or Equivalent
Collateral means the best available offer price
thereof on the most appropriate market in a standard
size;
10
"OFFER VALUE" Subject to Clause 8(E) means:-
(a) in relation to Collateral equivalent to
Collateral types B (ix) and C (more
specifically referred to in the Schedule
hereto) the Value thereof as calculated in
accordance with such Schedule; and
(b) in relation to Equivalent Securities or
Collateral equivalent to all other types of
Collateral (more specifically referred to in
the Schedule hereto) the amount it would cost
to buy such Equivalent Securities or
Equivalent Collateral at the Offer Price
thereof at such time together with all costs,
fees and expenses that would be incurred in
connection therewith, calculated on the
assumption that the aggregate thereof is the
least that could reasonably be expected to be
paid in order to carry out the transaction;
"PARTIES" means the Lender and the Borrower and "Party" shall
be construed accordingly;
"PERFORMANCE DATE" shall have the meaning given in Clause 8;
"PRINCIPAL" shall have the meaning given in Clause 14;
11
"REFERENCE PRICE" means:
(a) in relation to the valuation of Securities,
Equivalent Securities, Collateral and/or
Collateral equivalent to types B (ii),
(viii), (xi) and (xii) (more specifically
referred to in the Schedule hereto) such
price as is equal to the mid market quotation
of such Securities, Equivalent Securities,
Collateral and/or Equivalent Collateral as
derived from a reputable pricing information
service (such as the services provided by
Reuters, Extel Statistical Services and
Telerate) reasonably chosen in good faith by
the Lender or if unavailable the market value
thereof as derived from the prices or rates
bid by a reputable dealer for the relevant
instrument reasonably chosen in good faith by
the Lender, in each case at Close of Business
on the previous Business Day;
(b) in relation to the valuation of Collateral
and/or Collateral equivalent to Collateral
types A and B(i) (more specifically referred
to in the Schedule hereto), the CGO Reference
Price of such Securities, Equivalent
Securities, Collateral and/or Equivalent
Collateral then current as determined in
accordance with the CGO Rules from time to
time in force.
(c) in relation to the valuation of Collateral
and/or Collateral equivalent to Collateral
types B(iii), (iv), (v), (vi) (vii) and (ix),
(more specifically referred to in the
Schedule hereto), the market value thereof as
derived from the rates bid by Barclays Bank
PLC for such instruments or, in the absence
of such a bid, the average of the rates bid
by two leading market makers for such
instruments at Close of Business on the
previous Business Day;
"RELEVANT PAYMENT DATE" shall have the meaning given in Clause 4(B)(i);
12
"RULES" means the rules for the time being of the Stock
Exchange (where either Party is a member of the
Stock Exchange) and/or any other regulatory
authority whose rules and regulations shall from
time to time affect the activities of the Parties
pursuant to this Agreement including but not limited
to the stocklending regulations and guidance notes
relating to both stocklending and manufactured
interest and dividends for the time being in force
of the Commissioners of the Inland Revenue and any
associated procedures required pursuant thereto
(PROVIDED THAT in an Event of Default, where either
Party is a member of the Stock Exchange, the Rules
and Regulations of the Stock Exchange shall
prevail);
"SECURITIES" means Overseas Securities as defined in the Income
Tax (Stock Lending) Regulations 1989 (S.1. 1989 No.
1299) (as amended by the Income Tax (Stock Lending)
(Amendment) Regulations 1990 (S.I. 1990 No. 2552)and
1993 (S.I. 1993 No. 2003)) or any statutory
modification or re-enactment thereof for the time
being in force which the Borrower is entitled to
borrow from the Lender in accordance with the Rules
and which are the subject of a loan pursuant to this
Agreement and such term shall include the
certificates and other documents of title in respect
of the foregoing;
"SETTLEMENT BANK" means a settlement member of the CHAPS and Town
Clearing systems who has entered into contractual
arrangements with the CGO to provide Assured Payment
facilities for members of the CGO;
"SETTLEMENT DATE" means the date upon which Securities are or are to
be transferred to the Borrower in accordance with
this Agreement;
"STOCK EXCHANGE" means the London Stock Exchange Limited;
"VALUE" at any particular time means in respect of
Securities and Equivalent Securities, the Reference
Price thereof then current and in respect of
Collateral and/or Equivalent Collateral such worth
as determined in accordance with the Schedule
hereto.
13
(B) All headings appear for convenience only and shall not affect the
interpretation hereof.
(C) Notwithstanding the use of expressions such as "borrow", "lend",
"Collateral", "Margin", "redeliver" etc. which are used to reflect
terminology used in the market for transactions of the kind provided for
in this Agreement, title to Securities "borrowed" or "lent" and
"Collateral" provided in accordance with this Agreement shall pass from
one Party to another as provided for in this Agreement, the Party
obtaining such title being obliged to redeliver Equivalent Securities or
Equivalent Collateral as the case may be.
(D) For the purposes of Clauses 6(H)-6(K) and 8(C)-8(E) of this Agreement or
otherwise where a conversion into the Base Currency is required, all
prices, sums or values (including any Value, Offer Value and Bid Value)
of Securities, Equivalent Securities, Collateral or Equivalent
Collateral (including Cash Collateral) stated in currencies other than
the Base Currency shall be converted into the Base Currency at the spot
rate of exchange at the relevant time in the London interbank market for
the purchase of the Base Currency with the currency concerned.
(E) Where at any time there is in existence any other agreement between the
Parties the terms of which make provision for the lending of Securities
(as defined in this Agreement) as well as other securities the terms of
this Agreement shall apply to the lending of such Securities to the
exclusion of any other such agreement.
2. LOANS OF SECURITIES
(A) The Lender will lend Securities to the Borrower, and the Borrower will
borrow Securities from the Lender in accordance with the terms and
conditions of this Agreement and with the Rules PROVIDED ALWAYS THAT the
Lender shall have received from the Borrower and accepted (by whatever
means) a Borrowing Request.
(B) The Borrower has the right to reduce the amount of Securities referred
to in a Borrowing Request PROVIDED THAT the Borrower has notified the
Lender of such reduction no later than midday London time on the day
which is two Business Days prior to the Settlement Date unless otherwise
agreed between the Parties and the Lender shall have accepted such
reduction (by whatever means).
3. DELIVERY OF SECURITIES
14
The Lender shall procure the delivery of Securities to the Borrower or deliver
such Securities in accordance with the relevant Borrowing Request TOGETHER WITH
appropriate instruments of transfer duly stamped where necessary and such other
instruments as may be requisite to vest title thereto in the Borrower. Such
Securities shall be deemed to have been delivered by the Lender to the Borrower
on delivery to the Borrower or as it shall direct of the relevant instruments of
transfer, or in the case of Securities held by an agent or a clearing or
settlement system on the effective instructions to such agent or the operator of
such system to hold the Securities absolutely for the Borrower, or by such other
means as may be agreed.
4. RIGHTS AND TITLE
(A) The Parties shall execute and deliver all necessary documents and give
all necessary instructions to procure that all right, title and interest
in:
(i) any Securities borrowed pursuant to Clause 2;
(ii) any Equivalent Securities redelivered pursuant to Clause 7;
(iii) any Collateral delivered pursuant to Clause 6;
(iv) any Equivalent Collateral redelivered pursuant to Clauses 6 or
7;
shall pass from one Party to the other subject to the terms and
conditions mentioned herein and in accordance with the Rules, on
delivery or redelivery of the same in accordance with this Agreement,
free from all liens, charges and encumbrances. In the case of
Securities, Collateral, Equivalent Securities or Equivalent Collateral
title to which is registered in a computer based system which provides
for the recording and transfer of title to the same by way of book
entries, delivery and transfer of title shall take place in accordance
with the rules and procedures of such system as in force from time to
time. The Party acquiring such right, title and interest shall have no
obligation to return or redeliver any of the assets so acquired but, in
so far as any Securities are borrowed or any Collateral is delivered to
such Party, such Party shall be obliged, subject to the terms of this
Agreement, to redeliver Equivalent Securities or Equivalent Collateral
as appropriate.
(B) (i) Where Income is paid in relation to any Securities on or by
reference to an Income Payment Date on which such Securities are
the subject of a loan hereunder, the Borrower shall, on the date
of the payment of such Income, or on such other date as the
Parties may from time to time agree, (the "RELEVANT PAYMENT
DATE") pay and deliver a sum of money or property equivalent to
the
15
same (with any such endorsements or assignments as shall be
customary and appropriate to effect the delivery) to the Lender
or its Nominee, irrespective of whether the Borrower received
the same. The provisions of sub-paragraphs (ii) to (v) below
shall apply in relation thereto.
(ii) Subject to sub-paragraph (iii) below, in the case of any Income
comprising a payment, the amount (the "MANUFACTURED DIVIDEND")
payable by the Borrower shall be equal to the amount of the
relevant Income together with an amount equivalent to any
deduction, withholding or payment for or on account of tax made
by the relevant issuer (or on its behalf) in respect of such
Income together with an amount equal to any other tax credit
associated with such Income unless a lesser amount is agreed
between the Parties or an Appropriate Tax Voucher (together with
any further amount which may be agreed between the Parties to be
paid) is provided in lieu of such deduction, withholding tax
credit or payment.
(iii) Where either the Borrower, or any person to whom the Borrower
has on-lent the Securities, is unable to make payment of the
Manufactured Dividend to the Lender without accounting to the
Inland Revenue for any amount of relevant tax (as required by
Schedule 23A to the Income and Corporation Taxes Act 1988) the
Borrower shall pay to the Lender or its Nominee, in cash, the
Manufactured Dividend less amounts equal to such tax. The
Borrower shall at the same time if requested supply Appropriate
Tax Vouchers to the Lender.
(iv) If at any time any Manufactured Dividend falls to be paid and
neither of the Parties is an Approved UK Intermediary or an
Approved UK Collecting Agent, the Borrower shall procure that
the payment is paid through an Approved UK Intermediary or an
Approved UK Collecting Agent agreed by the Parties for this
purpose, unless the rate of relevant withholding tax in respect
of any Income that would have been payable to the Lender but for
the loan of the Securities would have been zero and no income
tax liability under Section 123 of the Income and Corporation
Taxes Act 1988 would have arisen in respect thereof.
(v) In the event of the Borrower failing to remit either directly or
by its Nominee any sum payable pursuant to this Clause, the
Borrower hereby undertakes to pay a rate to the Lender (upon
demand) on the amount due and outstanding at
16
the rate provided for in Clause 13 hereof. Interest on such sum
shall accrue daily commencing on and inclusive of the third
Business Day after the Relevant Payment Date, unless otherwise
agreed between the Parties.
(vi) Each Party undertakes that where it holds securities of the same
description as any securities borrowed by it or transferred to
it by way of collateral at a time when a right to vote arises in
respect of such securities, it will use its best endeavours to
arrange for the voting rights attached to such securities to be
exercised in accordance with the instructions of the Lender or
Borrower (as the case may be) PROVIDED ALWAYS THAT each Party
shall use its best endeavours to notify the other of its
instructions in writing no later than seven Business Days prior
to the date upon which such votes are exercisable or as
otherwise agreed between the Parties and that the Party
concerned shall not be obliged so to exercise the votes in
respect of a number of Securities greater than the number so
lent or transferred to it. For the avoidance of doubt the
Parties agree that subject as hereinbefore provided any voting
rights attaching to the relevant Securities, Equivalent
Securities, Collateral and/or Equivalent Collateral shall be
exercisable by the persons in whose name they are registered or
in the case of Securities, Equivalent Securities, Collateral
and/or Equivalent Collateral in bearer form, the persons by or
on behalf of whom they are held, and not necessarily by the
Borrower or the Lender (as the case may be).
(vii) Where, in respect of any borrowed Securities or any Collateral,
any rights relating to conversion, sub-division, consolidation,
pre-emption, rights arising under a takeover offer or other
rights, including those requiring election by the holder for the
time being of such Securities or Collateral, become exercisable
prior to the redelivery of Equivalent Securities or Equivalent
Collateral, then the Lender or Borrower, as the case may be,
may, within a reasonable time before the latest time for the
exercise of the right or option give written notice to the other
Party that on redelivery of Equivalent Securities or Equivalent
Collateral, as the case may be, it wishes to receive Equivalent
Securities or Equivalent Collateral in such form as will arise
if the right is exercised or, in the case of a right which may
be exercised in more than one manner, is exercised as is
specified in such written notice.
(viii) Any payment to be made by the Borrower under this Clause shall
be made in a manner to be agreed between the Parties.
17
5. RATES
(A) In respect of each loan of Securities, the Borrower shall pay to the
Lender, in the manner prescribed in sub-Clause (C), sums calculated by
applying such rate as shall be agreed between the Parties from time to
time to the daily Value of the relevant Securities.
(B) Where Cash Collateral is deposited with the Lender in respect of any
loan of Securities in circumstances where:
(i) interest is earned by the Lender in respect of such Cash
Collateral and that interest is paid to the Lender without
deduction of tax, the Lender shall pay to the Borrower, in the
manner prescribed in sub-Clause (C), an amount equal to the
gross amount of such interest earned. Any such payment due to
the Borrower may be set-off against any payment due to the
Lender pursuant to sub-Clause (A) hereof if either the Borrower
has warranted to the Lender in this Agreement that it is subject
to tax in the United Kingdom under Case I of Schedule D in
respect of any income arising pursuant to or in connection with
the borrowing of Securities hereunder or the Lender has notified
the Borrower of the gross amount of such interest or income; and
(ii) sub-Clause (B)(i) above does not apply, the Lender shall pay to
the Borrower, in the manner presented in sub-Clause (C), sums
calculated by applying such rates as shall be agreed between the
Parties from time to time to the amount of such Cash Collateral.
Any such payment due to the Borrower may be set-off against any
payment due to the Lender pursuant to sub-Clause (A) hereof.
(C) In respect of each loan of Securities, the payments referred to in
sub-Clauses (A) and (B) of this Clause shall accrue daily in respect of
the period commencing on and inclusive of the Settlement Day and
terminating on and exclusive of the Business Day upon which Equivalent
Securities are redelivered or Cash Collateral is repaid. Unless
otherwise agreed, the sums so accruing in respect of each calendar month
shall be paid in arrears by the Borrower to the Lender or to the
Borrower by the Lender (as the case may be) not later than the Business
Day which is one week after the last Business Day of the calendar month
to which such payments relate or such other date as the Parties shall
from time to time agree. Any payment made pursuant to sub-Clauses (A)
and (B) hereof shall be in such currency and shall be paid in such
manner and at such place as shall be agreed between the Parties.
18
6. COLLATERAL
(A) (i) Subject to sub-Clauses (B), (C) and (E) below the Borrower
undertakes to deliver Collateral to the Lender (or in accordance with
the Lender's instructions) TOGETHER WITH appropriate instruments of
transfer duly stamped where necessary and such other instruments as may
be requisite to vest title thereto in the Lender simultaneously with
delivery of the borrowed Securities and in any event no later than Close
of Business on the Settlement Date. Collateral may be provided in any of
the forms specified in the Schedule hereto (as agreed between the
Parties);
(ii) where Collateral is delivered to the Lender's Nominee any
obligation under this Agreement to redeliver or otherwise account for
Equivalent Collateral shall be an obligation of the Lender
notwithstanding that any such redelivery may be effected in any
particular case by the Nominee.
(B) Where CGO Collateral is provided to the Lender or its Nominee by
member-to-member delivery or delivery-by-value in accordance with the
provisions of the CGO Rules from time to time in force, the obligation
of the Lender shall be to redeliver Equivalent Collateral through the
CGO to the Borrower in accordance with this Agreement. Any references,
(howsoever expressed) in this Agreement, the Rules, and/or any other
agreement or communication between the Parties to an obligation to
redeliver such Equivalent Collateral shall be construed accordingly. If
the loan of Securities in respect of which such Collateral was provided
has not been discharged when the Collateral is redelivered, the Assured
Payment obligation generated on such redelivery shall be deemed to
constitute a payment of money which shall be treated as Cash Collateral
until the loan is discharged, or further Equivalent Collateral is
provided later during that Business Day. This procedure shall continue
daily where CGO Collateral is delivered-by-value for as long as the
relevant loan remains outstanding.
(C) Where CGO Collateral or other collateral is provided by
delivery-by-value to a Lender or its Nominee the Borrower may
consolidate such Collateral with other Collateral provided by the same
delivery to a third party for whom the Lender or its Nominee is acting.
(D) Where Collateral is provided by delivery-by-value through an alternative
book entry transfer system, not being the CGO, the obligation of the
Lender shall be to redeliver Equivalent Collateral through such book
entry transfer system in accordance with this Agreement. If the
19
loan of Securities in respect of which such Collateral was provided has
not been discharged when the Collateral is redelivered, any payment
obligation generated within the book entry transfer system on such
redelivery shall be deemed to constitute a payment of money which shall
be treated as Cash Collateral until the loan is discharged, or further
Equivalent Collateral is provided later during that Business Day. This
procedure shall continue when Collateral is delivered-by-value for as
long as the relevant loan remains outstanding;
(E) Where Cash Collateral is provided the sum of money so deposited may be
adjusted in accordance with Clause 6(H). Subject to Clause 6(H)(ii), the
Cash Collateral shall be repaid at the same time as Equivalent
Securities in respect of the Securities borrowed are redelivered, and
the Borrower shall not assign, charge, dispose of or otherwise deal with
its rights in respect of the Cash Collateral. If the Borrower fails to
comply with its obligations for such redelivery of Equivalent Securities
the Lender shall have the right to apply the Cash Collateral by way of
set-off in accordance with Clause 8.
(F) The Borrower may from time to time call for the repayment of Cash
Collateral or the redelivery of Collateral equivalent to any Collateral
delivered to the Lender prior to the date on which the same would
otherwise have been repayable or redeliverable PROVIDED THAT at the time
of such repayment or redelivery the Borrower shall have delivered or
delivers Alternative Collateral acceptable to the Lender.
(G) (i) Where Collateral (other than Cash Collateral) is delivered in
respect of which any Income may become payable, the Borrower
shall call for the redelivery of Collateral equivalent to such
Collateral in good time to ensure that such Equivalent
Collateral may be delivered prior to any such Income becoming
payable to the Lender, unless in relation to such Collateral the
Parties are satisfied before the relevant Collateral is
transferred that no tax will be payable to the UK Inland Revenue
under Schedule 23A of the Income and Corporation Taxes Xxx 0000.
At the time of such redelivery the Borrower shall deliver
Alternative Collateral acceptable to the Lender.
(ii) Where the Lender receives any Income in circumstances where the
Parties are satisfied as set out in Clause 6(G)(i) above, then
the Lender shall on the date on which the Lender receives such
Income or on such date as the Parties may from time to time
agree, pay and deliver a sum of money or property equivalent to
such Income (with any such endorsements or assignments as shall
be customary and
20
appropriate to effect the delivery) to the Borrower and shall
supply Appropriate Tax Vouchers (if any) to the Borrower.
(H) Unless the Schedule to this Agreement indicates that Clause 6(I) shall
apply in lieu of this Clause 6(H), or unless otherwise agreed between
the Parties, the Value of the Collateral delivered to or deposited with
the Lender or its nominated bank or depositary (excluding any Collateral
repaid or redelivered under sub-Clauses (H)(ii) or (I)(ii) below (as the
case may be) ("POSTED COLLATERAL")) in respect of any loan of Securities
shall bear from day to day and at any time the same proportion to the
Value of the Securities borrowed under such loan as the Posted
Collateral bore at the commencement of such loan. Accordingly:
(i) the Value of the Posted Collateral to be delivered or deposited
while the loan of Securities continues shall be equal to the
Value of the borrowed Securities and the Margin applicable
thereto (the "REQUIRED COLLATERAL VALUE");
(ii) if on any Business Day the Value of the Posted Collateral in
respect of any loan of Securities exceeds the Required
Collateral Value in respect of such loan, the Lender shall (on
demand) repay such Cash Collateral and/or redeliver to the
Borrower such Equivalent Collateral as will eliminate the
excess; and
(iii) if on any Business Day the Value of the Posted Collateral falls
below the Required Collateral Value, the Borrower shall (on
demand) provide such further Collateral to the Lender as will
eliminate the deficiency.
(I) Subject to Clause 6(J), unless the Schedule to this Agreement indicates
that Clause 6(H) shall apply in lieu of this Clause 6(I), or unless
otherwise agreed between the Parties:-
(i) the aggregate Value of the Posted Collateral in respect of all
loans of Securities outstanding under this Agreement shall equal
the aggregate of the Required Collateral Values in respect of
such loans;
(ii) if at any time the aggregate Value of the Posted Collateral in
respect of all loans of Securities outstanding under this
Agreement exceeds the aggregate of the Required Collateral
Values in respect of such loans, the Lender shall (on demand)
repay such Cash Collateral and/or redeliver to the Borrower such
Equivalent Collateral as will eliminate the excess;
21
(iii) if at any time the aggregate Value of the Posted Collateral in
respect of all loans of Securities outstanding under this
Agreement falls below the aggregate of Required Collateral
Values in respect of all such loans, the Borrower shall (on
demand) provide such further Collateral to the Lender as will
eliminate the deficiency.
(J) Where Clause 6(I) applies, unless the Schedule to this Agreement
indicates that this Clause 6(J) does not apply, if a Party (the "FIRST
PARTY") would, but for this Clause 6(J), be required under Clause 6(I)
to repay Cash Collateral, redeliver Equivalent Securities or provide
further Collateral in circumstances where the other Party (the "SECOND
PARTY") would, but for this Clause 6(J), also be required to repay Cash
Collateral or provide or redeliver Equivalent Collateral under Clause
6(I), then the Value of the Cash Collateral or Equivalent Collateral
deliverable by the first Party ("X") shall be set-off against the Value
of the Cash Collateral, or Equivalent Collateral or further Collateral
deliverable by the second Party ("Y") and the only obligation of the
Parties under Clause 6(I) shall be, where X exceeds Y, an obligation of
the first Party, or where Y exceeds X, an obligation of the second
Party, to repay Cash Collateral, redeliver Equivalent Collateral or to
deliver further Collateral having a Value equal to the difference
between X and Y.
(K) Where Cash Collateral is repaid, Equivalent Collateral is redelivered or
further Collateral is provided by a Party under Clause 6(I), the Parties
shall agree to which loan or loans of Securities such repayment,
redelivery or further provision is to be attributed and failing
agreement it shall be attributed, as determined by the Party making such
repayment, redelivery or further provision to the earliest outstanding
loan and, in the case of a repayment or redelivery up to the point at
which the Value of Collateral in respect of such loan is reduced to zero
and, in the case of a further provision up to the point at which the
Value of the Collateral in respect of such loan equals the Required
Collateral Value in respect of such loan, and then to the next earliest
outstanding loan up to the similar point and so on.
(L) Where any Cash Collateral falls to be repaid or Equivalent Collateral to
be redelivered or further Collateral to be provided under this Clause 6,
it shall be delivered within the minimum period after demand specified
in the Schedule or if no appropriate period is there specified within
the standard settlement time for delivery of the relevant type of Cash
Collateral, Equivalent Collateral or Collateral, as the case may be.
22
7. REDELIVERY OF EQUIVALENT SECURITIES
(A) The Borrower undertakes to redeliver Equivalent Securities in accordance
with this Agreement and the terms of the relevant Borrowing Request. For
the avoidance of doubt any reference herein or in any other agreement or
communication between the Parties (howsoever expressed) to an obligation
to redeliver or account for or act in relation to borrowed Securities
shall accordingly be construed as a reference to an obligation to
redeliver or account for or act in relation to Equivalent Securities.
(B) Subject to Clause 8 hereof and the terms of the relevant Borrowing
Request the Lender may call for the redelivery of all or any Equivalent
Securities at any time by giving notice on any Business Day of not less
than the standard settlement time for such Equivalent Securities on the
exchange or in the clearing organisation through which the relevant
borrowed Securities were originally delivered. The Borrower shall as
hereinafter provided redeliver such Equivalent Securities not later than
the expiry of such notice in accordance with the Lender's instructions.
Simultaneously with the redelivery of the Equivalent Securities in
accordance with such call, the Lender shall (subject to Clause 6(I), if
applicable) repay any Cash Collateral and redeliver to the Borrower
Collateral equivalent to the Collateral delivered pursuant to Clause 6
in respect of the borrowed Securities. For the avoidance of doubt any
reference herein or in any other agreement or communication between the
Parties (however expressed) to an obligation to redeliver or account for
or act in relation to Collateral shall accordingly be construed as a
reference to an obligation to redeliver or account for or act in
relation to Equivalent Collateral.
(C) If the Borrower does not redeliver Equivalent Securities in accordance
with such call, the Lender may elect to continue the loan of Securities
PROVIDED THAT if the Lender does not elect to continue the loan the
Lender may by written notice to the Borrower elect to terminate the
relevant loan. Upon the expiry of such notice the provisions of Clauses
(8) (B) to (F) shall apply as if upon the expiry of such notice an Event
of Default had occurred in relation to the Borrower (who shall thus be
the Defaulting Party for the purposes of this Agreement) and as if the
relevant loan were the only loan outstanding.
(D) In the event that as a result of the failure of the Borrower to
redeliver Equivalent Securities to the Lender in accordance with this
Agreement a "buy-in" is exercised against the Lender then provided that
reasonable notice has been given to the Borrower of the likelihood of
such a "buy-in", the Borrower shall account to the Lender for the total
costs and expenses reasonably incurred by the Lender as a result of such
"buy-in".
23
(E) Subject to the terms of the relevant Borrowing Request, the Borrower
shall be entitled at any time to terminate a particular loan of
Securities and to redeliver all and any Equivalent Securities due and
outstanding to the Lender in accordance with the Lender's instructions.
The Lender shall accept such redelivery and simultaneously therewith
(subject to Clause 6(I) if applicable) shall repay to the Borrower any
Cash Collateral or, as the case may be, redeliver Collateral equivalent
to the Collateral provided by the Borrower pursuant to Clause 6 in
respect thereof.
(F) Where a TALISMAN short term certificate (as described in paragraph C of
the Schedule) is provided by way of Collateral, the obligation to
redeliver Equivalent Collateral is satisfied by the redelivery of the
certificate to the Borrower or its expiry as provided for in the Rules
applying to such certificate.
(G) Where a Letter of Credit is provided by way of Collateral, the
obligation to redeliver Equivalent Collateral is satisfied by the Lender
redelivering for cancellation the Letter of Credit so provided, or where
the Letter of Credit is provided in respect of more than one loan, by
the Lender consenting to a reduction in the value of the Letter of
Credit.
8. SET-OFF ETC.
(A) On the date and time (the "PERFORMANCE DATE") that Equivalent Securities
are required to be redelivered by the Borrower in accordance with the
provisions of this Agreement the Lender shall simultaneously redeliver
the Equivalent Collateral and repay any Cash Collateral held (in respect
of the Equivalent Securities to be redelivered) to the Borrower. Neither
Party shall be obliged to make delivery (or make a payment as the case
may be) to the other unless it is satisfied that the other Party will
make such delivery (or make an appropriate payment as the case may be)
to it simultaneously. If it is not so satisfied (whether because an
Event of Default has occurred in respect of the other Party or
otherwise) it shall notify the other party and unless that other Party
has made arrangements which are sufficient to assure full delivery (or
the appropriate payment as the case may be) to the notifying Party, the
notifying Party shall (provided it is itself in a position, and willing,
to perform its own obligations) be entitled to withhold delivery (or
payment, as the case may be) to the other Party.
(B) If an Event of Default occurs in relation to either Party, the Parties'
delivery and payment obligations (and any other obligations they have
under this Agreement) shall be accelerated so as to require performance
thereof at the time such Event of Default occurs (the date of which
shall be the "PERFORMANCE DATE" for the purposes of this clause) and in
such event:
24
(i) the Relevant Value of the Securities to be delivered (or payment
to be made, as the case may be) by each Party shall be
established in accordance with Clause 8(C); and
(ii) on the basis of the Relevant Values so established, an account
shall be taken (as at the Performance Date) of what is due from
each Party to the other and (on the basis that each Party's
claim against the other in respect of delivery of Equivalent
Securities or Equivalent Collateral or any cash payment equals
the Relevant Value thereof) the sums due from one Party shall be
set-off against the sums due from the other and only the balance
of the account shall be payable (by the Party having the claim
valued at the lower amount pursuant to the foregoing) and such
balance shall be payable on the Performance Date.
(C) For the purposes of Clause 8(B) the Relevant Value:-
(i) of any cash payment obligation shall equal its par value
(disregarding any amount taken into account under (ii) or (iii)
below);
(ii) of any securities to be delivered by the Defaulting Party shall,
subject to Clause 8(E) below, equal the Offer Value thereof; and
(iii) of any securities to be delivered to the Defaulting Party shall,
subject to Clause 8(E) below, equal the Bid Value thereof.
(D) For the purposes of Clause 8(C), but subject to Clause 8(E) below, the
Bid Value and Offer Value of any securities shall be calculated as at
the Close of Business in the most appropriate market for securities of
the relevant description (as determined by the Non-Defaulting Party) on
the first Business Day following the Performance Date, or if the
relevant Event of Default occurs outside the normal business hours of
such market, on the second Business Day following the Performance Date
(the "DEFAULT VALUATION TIME");
(E) (i) Where the Non-Defaulting Party has following the occurrence of
an Event of Default but prior to the Default Valuation Time purchased
securities forming part of the same issue and being of an identical type
and description to those to be delivered by the Defaulting Party and in
substantially the same amount as those securities or sold securities
forming part of the same issue and being of an identical type and
description to those to be delivered by him to the Defaulting Party and
in substantially the same amount as those securities, the cost of such
purchase or the proceeds of such sale, as the case may be, (taking into
account all reasonable costs, fees and expenses that would be incurred
in connection
25
therewith) shall be treated as the Offer Value or Bid Value, as the case
may be, of the relevant securities for the purposes of this Clause 8.
(ii) Where the amount of any securities sold or purchased as
mentioned in (E)(i) above is not in substantially the same amount as
those securities to be valued for the purposes Clause 8(C) the Offer
Value or the Bid Value (as the case may be) of those securities shall be
ascertained by dividing the net proceeds of sale or cost of purchase by
the amount of the securities sold or purchased so as to obtain a net
unit price and multiplying that net unit price by the amount of the
securities to be valued.
(F) Any reference in this Clause 8 to securities shall include any asset
other than cash provided by way of Collateral.
(G) If the Borrower or the Lender for any reason fail to comply with their
respective obligations under Clauses 6(F) or 6(G) in respect of
redelivery of Equivalent Collateral or repayment of Cash Collateral such
failure shall be an Event of Default for the purposes of this Clause 8,
and the person failing to comply shall thus be the Defaulting Party.
(H) Subject to and without prejudice to its rights under Clause 8(A) either
Party may from time to time in accordance with market practice and in
recognition of the practical difficulties in arranging simultaneous
delivery of Securities, Collateral and cash transfers waive its right
under this Agreement in respect of simultaneous delivery and/or payment
PROVIDED THAT no such waiver in respect of one transaction shall bind it
in respect of any other transaction.
9. TAXATION
(A) The Borrower hereby undertakes promptly to pay and account for any
transfer or similar duties or taxes chargeable in connection with any
transaction effected pursuant to or contemplated by this Agreement, and
shall indemnify and keep indemnified the Lender against any liability
arising in respect thereof as a result of the Borrower's failure to do
so.
(B) The Borrower shall only make a Borrowing Request where the purpose of
the loan meets the requirements of the Rules regarding the conditions
that must be fulfilled for Section 129 of the Income and Corporation
Taxes Act 1988 (or any statutory modification or re-enactment thereof
for the time being in force) to apply to the arrangement concerning the
loan, unless the Lender is aware that the transaction is unapproved for
the purposes of the Rules of the UK Inland Revenue or such purpose is
not met.
26
(C) A Party undertakes to notify the other Party if it becomes or ceases to
be an Approved UK Intermediary or an Approved UK Collecting Agent.
10. LENDER'S WARRANTIES
Each Party hereby warrants and undertakes to the other on a continuing basis to
the intent that such warranties shall survive the completion of any transaction
contemplated herein that, where acting as a Lender:
(A) it is duly authorised and empowered to perform its duties and
obligations under this Agreement;
(B) it is not restricted under the terms of its constitution or in any other
manner from lending Securities in accordance with this Agreement or from
otherwise performing its obligations hereunder;
(C) it is absolutely entitled to pass full legal and beneficial ownership of
all Securities provided by it hereunder to the Borrower free from all
liens, charges and encumbrances;
(D) where the Schedule to this Agreement specifies that this Clause 10(D)
applies, it is not resident in the United Kingdom for tax purposes and
either is not carrying on a trade in the United Kingdom through a branch
or agency or if it is carrying on such a trade the loan is not entered
into in the course of the business of such branch or agency, and it has
(i) delivered or caused to be delivered to the Borrower a duly completed
and certified Certificate (MOD2) or a photocopy thereof bearing an
Inland Revenue acknowledgement and unique number and such Certificate or
photocopy remains valid or (ii) has taken all necessary steps to enable
a specific authorisation to make gross payment of the Manufactured
Dividend to be issued by the Inland Revenue;
11. BORROWER'S WARRANTIES
Each Party hereby warrants and undertakes to the other on a continuing basis to
the intent that such warranties shall survive the completion of any transaction
contemplated herein that, where acting as a Borrower:
(A) it has all necessary licenses and approvals, and is duly authorised and
empowered, to perform its duties and obligations under this Agreement
and will do nothing prejudicial to the continuation of such
authorisation, licences or approvals;
27
(B) it is not restricted under the terms of its constitution or in any other
manner from borrowing Securities in accordance with this Agreement or
from otherwise performing its obligations hereunder;
(C) it is absolutely entitled to pass full legal and beneficial ownership of
all Collateral provided by it hereunder to the Lender free from all
liens, charges and encumbrances;
(D) it is acting as principal in respect of this Agreement;
(E) where the Schedule to this Agreement specifies this Clause 11(E)
applies, it is subject to tax in the United Kingdom under Case I of
Schedule D in respect of any income arising pursuant to or in connection
with the borrowing of Securities hereunder.
12. EVENTS OF DEFAULT
Each of the following events occurring in relation to either Party (the
"DEFAULTING PARTY", the other Party being the "NON-DEFAULTING PARTY") shall be
an Event of Default for the purpose of Clause 8:-
(A) the Borrower or Lender failing to pay or repay Cash Collateral or
deliver or redeliver Collateral or Equivalent Collateral upon the due
date, and the Non-Defaulting Party serves written notice on the
Defaulting Party;
(B) the Lender or Borrower failing to comply with its obligations under
Clause 6, and the Non-Defaulting Party serves written notice on the
Defaulting Party;
(C) the Borrower failing to comply with Clause 4(B)(i), (ii) or (iii)
hereof, and the Non-Defaulting Party serves written notice on the
Defaulting Party;
(D) an Act of Insolvency occurring with respect to the Lender or the
Borrower and (except in the case of an Act of Insolvency which is the
presentation of a petition for winding up or any analogous proceeding or
the appointment of a liquidator or analogous officer of the Defaulting
Party in which case no such notice shall be required) the Non-Defaulting
Party serves written notice on the Defaulting Party;
(E) any representations or warranties made by the Lender or the Borrower
being incorrect or untrue in any material respect when made or repeated
or deemed to have been made or repeated, and the Non-Defaulting Party
serves written notice on the Defaulting Party;
28
(F) the Lender or the Borrower admitting to the other that it is unable to,
or it intends not to, perform any of its obligations hereunder and/or in
respect of any loan hereunder, and the Non-Defaulting Party serves
written notice on the Defaulting Party;
(G) the Lender (if appropriate) or the Borrower being declared in default by
the appropriate authority under the Rules or being suspended or expelled
from membership of or participation in any securities exchange or
association or other self-regulatory organisation, or suspended from
dealing in securities by any government agency, and the Non-Defaulting
Party serves written notice on the Defaulting Party;
(H) any of the assets of the Lender or the Borrower or the assets of
investors held by or to the order of the Lender or the Borrower being
transferred or ordered to be transferred to a trustee by a regulatory
authority pursuant to any securities regulating legislation and the
Non-Defaulting Party serves written notice on the Defaulting Party, or
(I) the Lender or the Borrower failing to perform any other of its
obligations hereunder and not remedying such failure within 30 days
after the Non-Defaulting Party serves written notice requiring it to
remedy such failure, and the Non-Defaulting Party serves a further
written notice on the Defaulting Party.
Each Party shall notify the other if an Event of Default occurs in relation to
it.
13. OUTSTANDING PAYMENTS
In the event of either Party failing to remit either directly or by its Nominee
sums in accordance with this Agreement such Party hereby undertakes to pay a
rate to the other Party upon demand on the net balance due and outstanding of 1%
above the Barclays Bank PLC base rate from time to time in force.
14. TRANSACTIONS ENTERED INTO AS AGENT
(A) Subject to the following provisions of this Clause, the Lender may enter
into loans as agent (in such capacity, the "AGENT") for a third person
(a "PRINCIPAL"), whether as custodian or investment manager or otherwise
(a loan so entered into being referred to in this clause as an "Agency
Transaction").
(B) A Lender may enter into an Agency Transaction if, but only if:-
(i) if specifies that loan as an Agency Transaction at the time when
it enters into it;
29
(ii) it enters into that loan on behalf of a single Principal whose
identity is disclosed to the Borrower (whether by name or by
reference to a code or identifier which the Parties have agreed
will be used to refer to a specified Principal) at the time when
it enters into the loan; and
(iii) it has at the time when the loan is entered into actual
authority to enter into the loan and to perform on behalf of
that Principal all of that Principal's obligations under the
agreement referred to in (D)(ii) below.
(C) The Lender undertakes that, if it enters as agent into an Agency
Transaction, forthwith upon becoming aware:-
(i) of any event which constitutes an Act of Insolvency with respect
to the relevant Principal; or
(ii) of any breach of any of the warranties given in Clause 14(E)
below or of any event or circumstance which has the result that
any such warranty would be untrue if repeated by reference to
the current facts;
it will inform the Borrower of that fact and will, if so required by the
Borrower, furnish it with such additional information as it may
reasonably request.
(D) (i) Each Agency Transaction shall be a transaction between the
relevant Principal and the Borrower and no person other than the
relevant Principal and the Borrower shall be a party to or have
any rights or obligations under an Agency Transaction. Without
limiting the foregoing, the Lender shall not be liable as
principal for the performance of an Agency Transaction or for
breach of any warranty contained in Clause 10(D) or 11(E) of
this Agreement, but this is without prejudice to any liability
of the Lender under any other provision of this Clause.
(ii) All the provisions of the Agreement shall apply separately as
between the Borrower and each Principal for whom the Agent has
entered into an Agency transaction or Agency Transactions as if
each such Principal were a party to a separate agreement with
the Borrower in all respects identical with this Agreement other
than this paragraph and as if the Principal were Lender in
respect of that agreement.
30
PROVIDED THAT
if there occurs in relation to the Agent an Event of Default or
an event which would constitute an Event of Default if the
Borrower served written notice under any sub-Clause of Clause
12, the Borrower shall be entitled by giving written notice to
the Principal (which notice shall be validly given if given to
the Lender in accordance with Clause 20) to declare that by
reason of that event an Event of Default is to be treated as
occurring in relation to the Principal. If the Borrower gives
such a notice then an Event of Default shall be treated as
occurring in relation to the Principal at the time when the
notice is deemed to be given; and
if the Principal is neither incorporated nor has established a
place of business in Great Britain, the Principal shall for the
purposes of the agreement referred to in (D)(ii) be deemed to
have appointed as its agent to receive on its behalf service of
process in the courts of England the Agent, or if the Agent is
neither incorporated nor has established a place of business in
the United Kingdom, the person appointed by the Agent for the
purposes of this Agreement, or such other person as the
Principal may from time to time specify in a written notice
given to the other party.
(iii) The foregoing provisions of this Clause do not affect the
operation of the Agreement as between the Borrower and the
Lender in respect of any transactions into which the Lender may
enter on its own account as principal.
(E) The Lender warrants to the Borrower that it will, on every occasion on
which it enters or purports to enter into a transaction as an Agency
Transaction, have been duly authorised to enter into that loan and
perform the obligations arising thereunder on behalf of the person whom
it specifies as the principal in respect of that transaction and to
perform on behalf of that person all the obligations of that person
under the agreement referred to in (D)(ii).
15. TERMINATION OF COURSE OF DEALINGS BY NOTICE
Each Party shall have the right to bring the course of dealing contemplated
under this Agreement to an end by giving not less than 15 Business Days' notice
in writing to the other Party (which notice shall specify the date of
termination) subject to an obligation to ensure that all loans and which have
been entered into but not discharged at the time such notice is given are duly
discharged in accordance with this Agreement and with the Rules.
16. GOVERNING PRACTICES
31
The Borrower shall use its best endeavours to notify the Lender (in writing) of
any changes in legislation or practices governing or affecting the Lender's
rights or obligations under this Agreement or the treatment of transactions
effected pursuant to or contemplated by this Agreement.
17. OBSERVANCE OF PROCEDURES
Each of the Parties hereto agrees that in taking any action that may be required
in accordance with this Agreement it shall observe strictly the procedures and
timetable applied by the Rules and, further, shall observe strictly any
agreement (oral or otherwise) as to the time for delivery or redelivery of any
money, Securities, Equivalent Securities, Collateral or Equivalent Collateral
entered into pursuant to this Agreement.
18. SEVERANCE
If any provision of this Agreement is declared by any judicial or other
competent authority to be void or otherwise unenforceable, that provision shall
be severed from the Agreement and the remaining provisions of this Agreement
shall remain in full force and effect. The Agreement shall, however, thereafter
be amended by the Parties in such reasonable manner so as to achieve, without
illegality, the intention of the Parties with respect to that severed provision.
19. SPECIFIC PERFORMANCE
Each Party agrees that in relation to legal proceedings it will not seek
specific performance of the other Party's obligation to deliver or redeliver
Securities, Equivalent Securities, Collateral or Equivalent Collateral but
without prejudice to any other rights it may have.
20. NOTICES
All notices issued under this Agreement shall be in writing (which shall include
telex or facsimile messages) and shall be deemed validly delivered if sent by
prepaid first class post to or left at the addresses or sent to the telex or
facsimile number of the Parties respectively or such other addresses or telex or
facsimile numbers as each Party may notify in writing to the other.
21. ASSIGNMENT
Neither Party may charge assign or transfer all or any of its rights or
obligations hereunder without the prior consent of the other Party.
32
22. NON-WAIVER
No failure or delay by either Party to exercise any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise of any right, power or privilege preclude any other or further exercise
thereof or the exercise of any other right, power or privilege as herein
provided.
23. ARBITRATION AND JURISDICTION
(A) All claims, disputes and matters of conflict between the Parties arising
hereunder shall be referred to or submitted for arbitration in London in
accordance with English Law before a sole arbitrator to be agreed
between the Parties or in default of agreement by an arbitrator to be
nominated by the Chairman of The Stock Exchange on the application of
either Party, and this Agreement shall be deemed for this purpose to be
a submission to arbitration within the Arbitration Acts 1950 and 1979,
or any statutory modification or re-enactment thereof for the time being
in force.
(B) This Clause shall take effect notwithstanding the frustration or other
termination of this Agreement.
(C) No action shall be brought upon any issue between the Parties under or
in connection with this Agreement until the same has been submitted to
arbitration pursuant hereto and an award made.
24. TIME
Time shall be of the essence of the Agreement.
25. RECORDING
The Parties agree that each may electronically record all telephonic
conversations between them.
26. GOVERNING LAW
This Agreement is governed by, and shall be construed in accordance with,
English Law.
33
IN WITNESS WHEREOF this Agreement has been executed on behalf of the Parties
hereto the day and year first before written.
SIGNED BY )
)
)
ON BEHALF OF )
JPMORGAN CHASE BANK )
(LONDON BRANCH) )
IN THE PRESENCE OF: )
SIGNED BY )
)
)
ON BEHALF OF )
[INSERT NAME OF BORROWER]
IN THE PRESENCE OF: )
34
SCHEDULE
COLLATERAL
TYPES
Collateral acceptable under this Agreement may include the following or
otherwise, as agreed between the Parties from time to time whether transferable
by hand or within a depositary:-
A. British Government Stock and other stock registered at the Bank of
England which is transferable through the CGO to the Lender or its
Nominee against an Assured Payment, hereinbefore referred to as CGO
Collateral.
B. (i) British Government Stock and Sterling Issues by foreign
governments (transferable through the CGO), in the form of an
enfaced transfer deed or a long term collateral certificate or
overnight collateral chit issued by the CGO accompanied (in each
case) by an executed unenfaced transfer deed;
(ii) Corporation and Commonwealth Stock in the form of registered
stock or allotment letters duly renounced;
(iii) UK Government Treasury Bills;
(iv) U.S. Government Treasury Bills;
(v) Bankers' Acceptances;
(vi) Sterling Certificates of Deposit;
(vii) Foreign Currency Certificates of Deposit;
(viii) Local Authority Bonds;
(ix) Local Authority Bills;
(x) Letters of Credit;
(xi) Bonds or Equities in registrable form or allotment letters duly
renounced;
(xii) Bonds or Equities in bearer form.
35
C. Unexpired TALISMAN short-term certificates issued by The Stock Exchange;
and
D. Cash Collateral.
VALUATION OF COLLATERAL
Collateral provided in accordance with this Agreement shall be evaluated by
reference to the following, or by such means as the Parties may from time to
time agree:-
(A) in respect of Collateral types A(i) and B(i), the current CGO value
calculated by reference to the middle market price of each stock as
determined daily by the Bank of England, adjusted to include the
accumulated interest thereon (the CGO Reference Price);
(B) in respect of Collateral types B(ii) to (ix), (xi) and (xii) the
Reference Price thereof;
(C) in respect of Collateral types B(x) and C the value specified therein.
MARGIN
The Value of the Collateral delivered pursuant to Clause 6 by the Borrower to
the Lender under the terms and conditions of this Agreement shall on each
Business Day represent not less than the Value of the borrowed Securities
TOGETHER WITH the following additional percentages hereinbefore referred to as
("the Margin") unless otherwise agreed between the Parties:-
(i) in the case of Collateral types B(i) to (x) and D: %, (for
Certificates of Deposit the Margin shall be the accumulated
interest thereon); or
(ii) in the case of Collateral types B(xi), (xii) and C: %
If the Value of the borrowed Securities includes any margin over the mid market
price of the borrowed Securities this shall be taken into account in determining
the Margin applicable.
BASIS OF MARGIN MAINTENANCE
Clause 6(H) (transaction by transaction margining)*/Clause 6 (I)(global
margining)* shall apply.
36
Clause 6(J) (netting of margin where one party both a Borrower and Lender)
shall/shall not* apply,
Minimum period after demand for transferring Cash Collateral or Equivalent
Collateral:
BASE CURRENCY
The Base Currency applicable to this Agreement is
LENDER'S WARRANTIES
Clause 10(D) shall/shall not* apply.
BORROWER'S WARRANTIES
Clause 11/(E) shall/shall not* apply.
[NB* Delete as appropriate.]
37
JPMORGAN OVERSEAS SECURITIES LENDER'S AGREEMENT
APPENDIX
The terms of this Appendix amend various of the provisions of the Overseas
Securities Lender's Agreement entered into between the Parties (the
"Agreement").
This Appendix supplements and forms part of the Agreement and accordingly the
Appendix and Agreement shall be treated as one single agreement between the
Parties.
Capitalised words in this Appendix bear the same meaning (save as otherwise
amended herein) as in the Agreement.
1. Recital 1 on page 1 shall be replaced with the following:-
"FROM TIME TO TIME THE PARTIES HERETO MAY ENTER INTO TRANSACTIONS IN
WHICH ONE PARTY (THE "LENDER") AGREES TO LEND TO THE OTHER (THE
"BORROWER" ) FROM TIME TO TIME SECURITIES (AS HEREINAFTER
DEFINED), SUBJECT TO ANY INLAND REVENUE PROVISIONS THEN IN
FORCE."
2. The following shall be inserted as Recital 3:-
"THE LENDER SHALL ENTER INTO LOANS OF SECURITIES AS AGENT ON BEHALF OF
THIRD PARTY BENEFICIAL OWNERS AND CLAUSE 14 SHALL TAKE EFFECT IN
ACCORDANCE THEREWITH.
3. In the definitions of "Approved UK Collecting Agent" and "Approved UK
Intermediary", the words "interest and" shall be deleted, and the word
"overseas" substituted.
4. The definition of "COLLATERAL" shall be replaced with the following:-
" "COLLATERAL" SHALL MEAN, COLLECTIVELY, ALL CASH, APPROVED
SECURITIES AND LETTERS OF CREDIT FROM TIME TO TIME PAID OR
DELIVERED BY THE BORROWER TO THE LENDER PURSUANT TO CLAUSE 6 AND
SHALL INCLUDE THE CERTIFICATES AND OTHER DOCUMENTS OF OR
EVIDENCING TITLE AND TRANSFER WITH RESPECT TO THE FOREGOING (AS
APPROPRIATE) AND SHALL INCLUDE ALTERNATIVE COLLATERAL. FOR THE
PURPOSES OF THIS DEFINITION A LETTER OF CREDIT SHALL MEAN AN
IRREVOCABLE LETTER OF CREDIT ISSUED BY A BANK ACCEPTABLE TO THE
LENDER FOR THE ACCOUNT OF THE BORROWER OR ANY OTHER PERSON
ACCEPTABLE TO THE LENDER AND WHICH CONTAINS SUCH TERMS AND
PROVISIONS AS ARE REQUIRED BY OR ACCEPTABLE TO THE LENDER IN ITS
DISCRETION. APPROVED SECURITIES SHALL MEAN SECURITIES OF SUCH
CLASS OR CLASSES FALLING WITHIN SECTION (i) OF THE LIST OF TYPES
OF COLLATERAL IN THE SCHEDULE HERETO BUT ONLY IN SO FAR AS ANY
SUCH CLASS HAS BEEN DESIGNATED BY NOTICE IN WRITING GIVEN BY THE
LENDER TO THE BORROWER FROM TIME TO TIME HEREAFTER AS CAPABLE OF
BEING APPROVED SECURITIES FOR THE PURPOSES OF THIS AGREEMENT AND
WHICH ARE ACCEPTABLE TO THE LENDER FOR THE PURPOSES HEREOF IN ITS
SOLE DISCRETION AND SUCH TERM SHALL INCLUDE THE CERTIFICATES AND
OTHER DOCUMENTS OF OR EVIDENCING TITLE AND TRANSFER WITH RESPECT
TO SUCH SECURITIES."
5. In the definitions of "Equivalent Collateral" and "Equivalent
Securities", the references to Clause 4(B)(vi) shall be replaced with
references to Clause 4(B)(vii).
6. The definition of "SECURITIES" shall be replaced with the following:-
" "SECURITIES" MEANS OVERSEAS SECURITIES AS DEFINED IN PARAGRAPH
1(1) OF SCHEDULE 23A TO THE INCOME AND CORPORATION TAXES ACT 1988
WHICH THE BORROWER IS ENTITLED TO BORROW FROM THE LENDER IN
ACCORDANCE WITH THE RULES AND WHICH ARE THE SUBJECT OF A LOAN
PURSUANT TO THIS AGREEMENT AND SUCH TERM SHALL INCLUDE THE
CERTIFICATES AND OTHER DOCUMENTS OF TITLE IN RESPECT OF THE
FOREGOING."
38
7. The following definitions shall be added to Clause 1 of the Agreement:-
"RELEVANT BANK" SHALL MEAN, WITH RESPECT TO ANY LOAN, A BANK
WHICH HAS ISSUED A LETTER OF CREDIT WHICH, OR A PORTION OF WHICH,
IS FOR THE TIME BEING ALLOCATED AS COLLATERAL FOR SUCH LOAN;
"RELEVANT ORGANISATION" SHALL MEAN ANY GOVERNMENTAL AGENCY,
BUREAU, COMMISSION OR DEPARTMENT AND ANY SELF-REGULATORY OR OTHER
ORGANISATION CONCERNED WITH DEALINGS, AND ANY ASSOCIATION OF
DEALERS, IN SECURITIES OF ANY DESCRIPTION;
8. A new Clause 1(F) shall be added as follows:
"(F) ANY REFERENCE IN THIS AGREEMENT TO AN ACT, REGULATION OR
OTHER LEGISLATION HEREUNDER SHALL INCLUDE A REFERENCE TO
ANY STATUTORY MODIFICATION OR RE-ENACTMENT THEREOF FOR THE
TIME BEING IN FORCE."
9. The existing wording of Clause 4(B)(iv) shall be deleted and the
following substituted:
"(iv) UNLESS OTHERWISE AGREED BETWEEN THE PARTIES AS INDICATED
IN THE SCHEDULE TO THIS AGREEMENT, IF ANY TIME ANY
MANUFACTURED DIVIDEND FALLS TO BE PAID AND NEITHER OF THE
PARTIES IS AN APPROVED UK INTERMEDIARY OR AN APPROVED UK
COLLECTING AGENT, THE BORROWER SHALL PROCURE THAT THE
PAYMENT IS PAID THROUGH AN APPROVED UK INTERMEDIARY OR AN
APPROVED UK COLLECTING AGENT AGREED BY THE PARTIES FOR
THIS PURPOSE, UNLESS THE RATE OF RELEVANT WITHHOLDING TAX
IN RESPECT OF ANY INCOME THAT WOULD HAVE BEEN PAYABLE TO
THE LENDER BUT FOR THE LOAN OF THE SECURITIES WOULD HAVE
BEEN ZERO AND NO INCOME TAX LIABILITY UNDER CHAPTER VIIA
OF PART IV OF THE INCOME AND CORPORATION TAXES ACT 1988
WOULD HAVE ARISEN IN RESPECT THEREOF."
10. Clause 4(B)(viii) shall be replaced by the following provisions (which
shall take effect as sub-clauses (viii), (ix) and (x) respectively) and
existing sub-clause (viii) of the Agreement shall be renumbered as
sub-clause (xi):-
"(viii) ANY DISTRIBUTION OF SECURITIES MADE IN EXCHANGE
FOR LOANED SECURITIES SHALL BE CONSIDERED AS SUBSTITUTED
FOR SUCH LOANED SECURITIES AND NEED NOT BE DELIVERED TO
THE LENDER UNTIL THE RELEVANT LOAN OF SECURITIES IS
TERMINATED HEREUNDER;
(ix) ANY DISTRIBUTION SOLELY IN THE FORM OF SECURITIES
WITH RESPECT TO ANY LOANED SECURITIES SHALL BE ADDED TO
SUCH LOANED SECURITIES (AND SHALL CONSTITUTE LOANED
SECURITIES, AND BE PART OF THE RELEVANT LOAN OF
SECURITIES, FOR ALL PURPOSES HEREOF) AND NEED NOT BE
DELIVERED TO THE LENDER UNTIL THE RELEVANT LOAN OF
SECURITIES IS TERMINATED HEREUNDER, IF AT OR BEFORE THE
MAKING OF SUCH DISTRIBUTION THE BORROWER SHALL HAVE
DELIVERED SUCH ADDITIONAL COLLATERAL FOR THE RELEVANT LOAN
TO THE LENDER FOR THE ACCOUNT OF THE RELEVANT PRINCIPAL AS
SHALL BE NECESSARY TO MAKE THE AGGREGATE VALUE OF THE
COLLATERAL FOR SUCH LOAN, DETERMINED ON THE DATE OF SUCH
DISTRIBUTION, AT LEAST EQUAL TO THE VALUE OF THE LOANED
SECURITIES PLUS THE MARGIN WITH RESPECT TO SUCH LOAN
(AFTER GIVING EFFECT TO THE ADDITION OF THE SECURITIES
BEING DISTRIBUTED) DETERMINED ON SUCH DATE; AND
39
(x) ANY DISTRIBUTIONS OF WARRANTS OR RIGHTS TO PURCHASE
SHARES MADE WITH RESPECT TO ANY LOANED SECURITIES SHALL BE
DEEMED TO BE, AND SHALL BE, A NEW LOAN OF SECURITIES MADE
TO THE BORROWER BY THE PRINCIPAL WHICH LOANED TO THE
BORROWER THE LOANED SECURITIES WITH RESPECT TO WHICH SUCH
DISTRIBUTION IS MADE (AND SHALL BE TREATED AS LOANED
SECURITIES, AND AS A SEPARATE LOAN, FOR ALL PURPOSES
HEREOF) AND NEED NOT BE DELIVERED TO THE LENDER UNTIL SUCH
NEW LOAN IS TERMINATED IN ACCORDANCE HEREWITH, IF AT OR
BEFORE THE MAKING OF SUCH DISTRIBUTION THE BORROWER AND
THE LENDER SHALL HAVE AGREED UPON THE MARGIN FOR SUCH NEW
LOAN AND THE BORROWER SHALL HAVE DELIVERED TO THE LENDER
COLLATERAL FOR SUCH NEW LOAN HAVING A ACCEPTABLE TO THE
LENDER.
11. The following shall be substituted for Clause 6(A)(i):-
"(A)(i) UNLESS THE PARTIES AGREE OTHERWISE AND SUBJECT TO
SUB-CLAUSES (B), (C) AND (E) BELOW THE BORROWER AGREES
THAT, AS A CONDITION PRECEDENT TO THE MAKING OF ANY LOAN,
IT SHALL DELIVER COLLATERAL TO THE LENDER (OR IN
ACCORDANCE WITH THE LENDER'S INSTRUCTIONS) TOGETHER WITH
APPROPRIATE INSTRUMENTS OF TRANSFER DULY STAMPED WHERE
NECESSARY AND SUCH OTHER INSTRUMENTS AS MAY BE REQUISITE
TO VEST TITLE THERETO IN THE LENDER."
12. The words commencing "... UNLESS IN RELATION TO ..." in the fifth line
down in Clause 6(G)(i) to the end of that clause shall be deleted and
the whole of Clause 6(G)(ii) shall be deleted.
13. In Clause 6(K), the reference to Clause 6(I) shall be replaced by a
reference to Clause 6(H).
14. The following shall be inserted as Clause 6(M):-
"(M) THE DELIVERY OF A LETTER OF CREDIT SHALL BE
EFFECTED FOR THE PURPOSES OF THIS AGREEMENT BY PHYSICAL
DELIVERY OF THE ORIGINAL EXECUTED LETTER OF CREDIT BY THE
ISSUING, CONFIRMING OR ADVISING BANK TO THE LENDER AT ITS
ADDRESS FOR DELIVERY OF NOTICES OR AS THE LENDER MAY
OTHERWISE AGREE, PROVIDED, HOWEVER, THAT NO SUCH DELIVERY
SHALL BE EFFECTIVE UNTIL ONE BUSINESS DAY AFTER THE
RECEIPT OF A LETTER OF CREDIT BY THE LENDER (OR, IF THE
RELEVANT LETTER OF CREDIT IS RECEIVED BY THE LENDER PRIOR
TO 3 P.M. (LONDON TIME) ON A BUSINESS DAY, UNTIL 5.30 P.M.
(LONDON TIME) ON SUCH BUSINESS DAY), DURING WHICH PERIOD
THE LENDER MAY REJECT SUCH LETTER OF CREDIT, BY ORAL
NOTICE TO THE BORROWER, IF SUCH LETTER OF CREDIT IS NOT IN
THE FORM REQUIRED BY OR ACCEPTABLE TO THE LENDER."
15. Clause 7B shall be amended as follows:-
(i) by the insertion of the following words at the end of the first
sentence:-
"(AND WHERE THERE IS A DIFFERENCE BETWEEN THE SETTLEMENT TIME FOR
SALES AND PURCHASES ON THE RELEVANT EXCHANGE OR CLEARING
ORGANISATION, THE STANDARD SETTLEMENT TIME SHALL BE THE SHORTER
OF THE TWO TIMES)."
(ii) in the third sentence, by the insertion of the following words
after "Simultaneously with the redelivery of the Equivalent
Securities in accordance with such call,":-
"OR AT SUCH OTHER TIME AS MAY BE AGREED BY THE PARTIES,"
40
16. The requirements pursuant to Clause 9(B) shall not apply as between the
Parties.
17. The following shall be inserted as Clause 11(F):-
"(F) THE BORROWER HAS HERETOFORE DELIVERED TO THE LENDER A COPY OF
THE ANNUAL [CONSOLIDATED] FINANCIAL STATEMENTS OF THE BORROWER
[AND ITS CONSOLIDATED SUBSIDIARIES] FOR ITS [FISCAL/FINANCIAL]
YEAR ENDED [ ], 19[ ] DULY AUDITED BY INDEPENDENT [CERTIFIED
PUBLIC ACCOUNTANTS/INTERNATIONALLY RECOGNISED AUDITORS],
INCLUDING A BALANCE SHEET AS AT THE END OF SUCH
[FISCAL/FINANCIAL] YEAR [AND THE RELATED STATEMENT OF INCOME AND
CHANGES IN FINANCIAL POSITION FOR SUCH FISCAL YEAR], AND A COPY
OF THE UNAUDITED [CONSOLIDATED] FINANCIAL STATEMENTS OF THE
BORROWER [AND ITS CONSOLIDATED SUBSIDIARIES] FOR THE [ ] MONTH
PERIOD ENDED [ ], 19[ ] INCLUDING A BALANCE SHEET AS AT THE END
OF SUCH PERIOD [AND THE RELATED STATEMENT OF INCOME AND CHANGES
IN FINANCIAL POSITION FOR SUCH PERIOD], AND EACH OF THE SAID
STATEMENTS AND RELATED NOTES THERETO ARE COMPLETE AND CORRECT AND
FAIRLY PRESENT THE [CONSOLIDATED] FINANCIAL CONDITION AND RESULTS
OF OPERATION OF THE BORROWER [AND ITS CONSOLIDATED SUBSIDIARIES]
AS AT THE SAID DATES AND FOR SUCH PERIODS, ALL IN CONFORMITY WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES CONSISTENTLY APPLIED;"
18. The following shall be inserted as Clause 11(G):-
"(G) IT IS AN APPROVED INTERMEDIARY."
19. Clause 12 shall be amended as follows:-
(i) by the deletion of "or" at the end of sub-clause (H);
(ii) in sub-clause (I) by the deletion of all the words after
"hereunder" and the substitution therefor of "and the
Non-Defaulting Party serves written notice on the Defaulting
Party";
(iii) by the addition of the following sub-clauses:-
"(J) A VIOLATION BY THE BORROWER IN CONNECTION WITH ANY SECURITIES THE
SUBJECT OF A LOAN HEREUNDER OR THE HOLDING OR DISPOSITION THEREOF
BY THE BORROWER, OF ANY APPLICABLE LAW, REGULATION OR RULE OF ANY
JURISDICTION, OR OF ANY RELEVANT ORGANISATION TO THE REQUIREMENTS
OF WHICH THE BORROWER MAY BE SUBJECT;
(K) THE OCCURRENCE OF ANY OTHER EVENT WHICH THE BORROWER IS REQUIRED
TO NOTIFY TO THE LENDER PURSUANT TO CLAUSE 27(B) HEREOF; OR
(L) AN ACT OF INSOLVENCY OCCURRING WITH RESPECT TO ANY RELEVANT BANK
AND (EXCEPT IN THE CASE OF AN ACT OF INSOLVENCY WHICH IS THE
PRESENTATION OF A PETITION FOR WINDING UP OR ANY ANALOGOUS
PROCEEDING IN RELATION TO THE RELEVANT BANK IN WHICH CASE NO SUCH
NOTICE SHALL BE REQUIRED) THE LENDER SERVES WRITTEN NOTICE ON THE
BORROWER."
20. The following shall take effect as Clause 27 of the Agreement:-
"COVENANTS OF THE BORROWER:
The Borrower hereby covenants and agrees with the Lender as follows:
(A) THE BORROWER WILL FURNISH TO THE LENDER (i) AS SOON AS AVAILABLE
AND IN ANY EVENT WITHIN [ ] DAYS AFTER THE END OF EACH OF ITS
[FISCAL/FINANCIAL] YEARS, A COPY OF THE ANNUAL [CONSOLIDATED]
FINANCIAL STATEMENTS OF THE BORROWER [AND ITS CONSOLIDATED
SUBSIDIARIES] DULY AUDITED BY INDEPENDENT [CERTIFIED PUBLIC
41
ACCOUNTANTS/INTERNATIONALLY RECOGNISED AUDITORS], INCLUDING A
BALANCE SHEET AS AT THE END OF SUCH [FISCAL/FINANCIAL] YEAR [AND
THE RELATED STATEMENT OF INCOME AND CHANGES IN FINANCIAL POSITION
FOR SUCH FISCAL YEAR], PREPARED IN ACCORDANCE WITH GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES CONSISTENTLY APPLIED, (ii) AS SOON
AS AVAILABLE AND IN ANY EVENT WITHIN [ ] DAYS AFTER THE END OF
EACH OF THE FIRST THREE QUARTERS OF EACH OF ITS
[FISCAL/FINANCIAL] YEARS, A COPY OF THE [CONSOLIDATED] FINANCIAL
STATEMENTS OF THE BORROWER [AND ITS CONSOLIDATED SUBSIDIARIES]
FOR THE PERIOD THEN ENDED, INCLUDING A BALANCE SHEET AS AT THE
END OF SUCH PERIOD [AND THE RELATED STATEMENT OF INCOME AND
CHANGES IN FINANCIAL POSITION FOR SUCH PERIOD], PREPARED IN
ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ON A
BASIS CONSISTENT WITH THAT USED IN THE PREPARATION OF THE
FINANCIAL STATEMENTS REFERRED TO IN SUB-PARAGRAPH (i) ABOVE AND
CERTIFIED BY AN APPROPRIATE OFFICER OF THE BORROWER, (iii)
PROMPTLY AFTER THE OCCURRENCE OF ANY DEFAULT UNDER THIS
AGREEMENT, A WRITTEN NOTICE SETTING FORTH THE NATURE OF SUCH
DEFAULT AND THE STEPS BEING TAKEN BY THE BORROWER TO REMEDY SUCH
DEFAULT, AND (iv) FROM TIME TO TIME SUCH FURTHER INFORMATION
(WHETHER OR NOT OF THE KIND MENTIONED ABOVE) REGARDING THE
BUSINESS, AFFAIRS AND FINANCIAL CONDITION OF THE BORROWER AS THE
LENDER MAY REASONABLY REQUEST.
(B) THE BORROWER WILL GIVE THE LENDER IMMEDIATE NOTICE IF AT
ANY TIME ANY ORDER, DECREE, DETERMINATION OR INSTRUCTION IS
ISSUED ON THE AUTHORITY OF ANY RULE, REGULATION OR PROCEEDING OF
ANY RELEVANT ORGANISATION IN RELATION TO THE BORROWER, OR ANY
LITIGATION, ARBITRATION OR SIMILAR PROCEEDING AGAINST OR
AFFECTING THE BORROWER IS COMMENCED, WHICH IN ANY SUCH CASE COULD
HAVE A MATERIAL ADVERSE EFFECT ON THE ABILITY OF THE BORROWER TO
PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT OR TO CARRY ON ITS
BUSINESS AS CONDUCTED AS AT THE DATE OF THIS AGREEMENT OR WHICH
MIGHT ADVERSELY AFFECT THE BORROWING OF SECURITIES BY THE
BORROWER. ANY SUCH NOTICE SHALL SET FORTH IN REASONABLE DETAIL A
DESCRIPTION OF THE EVENT WHICH HAS OCCURRED AND OF THE ACTION, IF
ANY WHICH THE BORROWER PROPOSES TO TAKE WITH RESPECT THERETO."
21. The Schedule shall be deleted and replaced by the following:-
"TYPES
THE FOLLOWING TYPES OF COLLATERAL SHALL UNLESS OTHERWISE AGREED
CONSTITUTE COLLATERAL ACCEPTABLE UNDER THIS AGREEMENT;
(i) US GOVERNMENT SECURITIES WHICH SHALL MEAN BOOK-ENTRY SECURITIES
ISSUED BY THE U.S. TREASURY (AS DEFINED IN SUBPART O OF TREASURY
DEPARTMENT CIRCULAR NO. 300 AND ANY SUCCESSOR PROVISIONS) AND ANY
OTHER SECURITIES ISSUED OR FULLY GUARANTEED BY THE UNITED STATES
GOVERNMENT OR ANY AGENT, INSTRUMENTALITY OR ESTABLISHMENT OF THE
U.S. GOVERNMENT, INCLUDING WITHOUT LIMITATION, SECURITIES
COMMONLY KNOWN AS "XXXXXX XXXX", "XXXXX XXXX" AND "XXXXXXX XXXX".
(ii) LETTERS OF CREDIT;
(iii) CASH COLLATERAL.
VALUATION OF COLLATERAL
COLLATERAL PROVIDED IN ACCORDANCE WITH THIS AGREEMENT SHALL BE EVALUATED
BY REFERENCE TO THE FOLLOWING, OR BY SUCH MEANS AS THE PARTIES MAY FROM
TIME TO TIME AGREE:-
42
(a) IN RESPECT OF COLLATERAL TYPE (i) ABOVE, THE REFERENCE PRICE
THEREOF;
(b) IN RESPECT OF COLLATERAL TYPE (ii) ABOVE, THE VALUE SPECIFIED
THEREIN.
MARGIN
"THE VALUE OF THE COLLATERAL DELIVERED PURSUANT TO CLAUSE 6 BY THE
BORROWER TO THE LENDER UNDER THE TERMS AND CONDITIONS OF THIS AGREEMENT
SHALL ON EACH BUSINESS DAY REPRESENT NOT LESS THAN 100% OF THE VALUE OF
THE BORROWED SECURITIES, AND OTHERWISE AS AGREED BETWEEN THE PARTIES
WITH RESPECT TO EACH LOAN".
BASIS OF MARGIN MAINTENANCE
"CLAUSE 6(H) (TRANSACTION BY TRANSACTION MARGINING) SHALL APPLY IN LIEU
OF CLAUSE 6(I); HOWEVER, THE LENDER SHALL HAVE THE RIGHT AT ITS SOLE
ELECTION, AT ANY TIME FROM TIME TO TIME, TO ALLOCATE AND/OR REALLOCATE
ANY COLLATERAL HELD BY IT HEREUNDER TO OR AMONG ANY OUTSTANDING LOANS.
CLAUSE 6(J) (NETTING OF MARGIN WHERE ONE PARTY BOTH A BORROWER AND
LENDER) SHALL APPLY, NOTWITHSTANDING THAT CLAUSE 6(I) DOES NOT APPLY.
THE MINIMUM PERIOD AFTER DEMAND FOR TRANSFERRING CASH COLLATERAL OR
EQUIVALENT COLLATERAL SHALL BE THE SAME BUSINESS DAY IF DEMAND IS MADE
BEFORE 11.00 AM, AND OTHERWISE AS AGREED BETWEEN THE PARTIES".
BASE CURRENCY
THE BASE CURRENCY APPLICABLE TO THIS AGREEMENT IS UNITED STATES DOLLARS
(US$).
LENDERS' WARRANTIES
CLAUSE 10(D) SHALL APPLY.
BORROWERS' WARRANTIES
CLAUSE 11(E) SHALL APPLY.
43
Appendix 6
Global Securities Lending
Fee Schedule
In connection with Loans hereunder, Bank shall be paid by Lender, monthly in
arrears a fee of: (i) 6 basis points (.06 of 1%), calculated on an annualized
basis and accrued daily, based upon the value of Collateral received from
Borrowers for each Loan of U.S. Securities outstanding during a given month
under this Lending Agreement; and (ii) 11.42 basis points (.1142 of 1%),
calculated on an annualized basis and accrued daily, based upon the value of
Collateral received from Borrowers for each Loan of non-U.S. Securities
outstanding during a given month under this Lending Agreement; provided that,
until further notice from Bank, commencing on the date of the Lending Agreement
and continuing until the giving of such notice, the forgoing fees have been
voluntarily reduced by Bank to: (i) 5 basis points (.05 of 1%) for each Loan of
U.S. Securities and (ii) 10 basis points (.1 of 1%) for each Loan of non-U.S.
Securities, respectively.
