SECURITIES LENDING AUTHORIZATION AGREEMENT Between PACIFIC SELECT FUND ON BEHALF OF THE LONG/SHORT LARGE-CAP PORTFOLIO and STATE STREET BANK AND TRUST COMPANY
Exhibit (h)(k)
EXECUTION VERSION
Between
PACIFIC SELECT FUND
ON BEHALF OF THE LONG/SHORT LARGE-CAP PORTFOLIO
ON BEHALF OF THE LONG/SHORT LARGE-CAP PORTFOLIO
and
STATE STREET BANK AND TRUST COMPANY
Agreement dated the 17th day of April, 2009 between PACIFIC SELECT FUND ON BEHALF OF THE
LONG/SHORT LARGE-CAP PORTFOLIO (the “Client”), a business trust organized and existing under the
laws of the Commonwealth of Massachusetts, and STATE STREET BANK AND TRUST COMPANY acting either
directly or through any State Street Affiliates (defined below) (collectively, “State
Street”), setting forth the terms and conditions under which State Street is authorized to act on
behalf of the Client with respect to the lending of certain securities of the Client held by State
Street as agent, trustee or custodian.
NOW, THEREFORE, in consideration of the mutual promises and of the mutual covenants contained
herein, each of the parties hereto does hereby covenant and agree as follows:
1. Definitions. For the purposes hereof:
(a) “Authorized Representative” means any person who is, or State Street reasonably believes
to be, authorized to act on behalf of the Client with respect to any of the transactions
contemplated by this Agreement.
(b) “Available Securities” means the securities of the Client that are available for Loans
pursuant to Section 3.
(c) “Borrower” means any of the entities to which Available Securities may be loaned under a
Securities Loan Agreement, as described in Section 4.
(d) “Collateral” means cash in U.S. currency that is delivered by a Borrower to secure its
obligations under a Securities Loan Agreement.
(e) “Financing Transaction” means a Loan whereby the cash Collateral received under this
Agreement will be used as cash collateral to secure Client’s securities borrowing transactions
pursuant to the SLSA (as defined hereunder) where the Client is a borrower of securities and State
Street, acting as principal, is a lender of securities.
(f) “Investment Manager” when used in any provision, means the person or entity
that has discretionary authority over the investment of the Available Securities to which the
provision applies.
(g) “Loan” means a loan of Available Securities to a Borrower.
(h) “Loaned Security” shall mean any “security” which is delivered for Loan under a
Securities Loan Agreement; provided that, if any new or different security shall be exchanged for
any Loaned Security by recapitalization, merger, consolidation, or other corporate action, such new
or different security shall, effective upon such exchange, be deemed to become
a Loaned Security in
substitution for the former Loaned Security for which such exchange was made.
(i) “Market Value” of a security means the market value of such security (including, in the
case of a Loaned Security that is a debt security, or a debt security subject to a Sales and
Repurchase transaction, the accrued interest on such security) as determined by the independent
pricing service designated by State Street, or such other independent sources as may be selected by
State Street on a reasonable basis. Upon reasonable request, State Street agrees to provide a list
of such pricing services currently in use by State Street.
(j) “Replacement Securities” means securities of the same issuer, class and denomination as
Loaned Securities.
(k)
“Securities Loan Agreement” means the agreement between a Borrower and State Street (on behalf of the Client) that governs Loans, as described in Section 5.
(l) “SLSA” means that certain Securities Lending and Services
Agreement dated as of February 11, 2009 between State Street Bank and Trust Company and the Client.
(m) “State Street Affiliates” means any entity that directly or indirectly through one or
more intermediaries, controls State Street or that is controlled by or is under common control with
State Street.
2. Appointment of State Street. The Client hereby appoints and authorizes State
Street as its agent to lend Available Securities to Borrowers in accordance with the terms of this
Agreement. State Street shall have the responsibility and authority to do or cause to be done all
acts State Street shall determine to be desirable, necessary, or appropriate to implement and
administer this securities lending program. The Client agrees that State Street is acting as a
fully disclosed agent and not as principal in connection with the securities lending program.
State Street may take action as agent of the Client on an undisclosed or a disclosed basis.
3. Securities to be Loaned. All of the Client’s Available Securities held by State
Street as trustee or custodian shall be subject to this securities lending program and constitute
Available Securities hereunder, except (a) those securities, which the Client or the Investment
Manager specifically identifies herein as not being Available Securities or (b) any securities
identified as Inter-Manager Borrowed Securities (as such term is defined in the SLSA). In the
absence of any such identification herein or other notices specifically identifying securities as
not being Available Securities, State Street shall have no authority or responsibility for
determining whether any of the Client’s securities should be excluded from the lending program.
The parties understand that the primary purpose of entering into this Agreement is to enter
into Financing Transactions. Unless otherwise instructed by the Client, State Street shall use
reasonable efforts to limit Client’s lending under this Agreement to Financing Transactions,
including such additional lending that State Street deems to be reasonable in anticipation of
future Financing Transactions. Notwithstanding the foregoing, State Street will not make any Loan
if such Loan would cause the Client to exceed the maximum permissible amount of the
Client’s net assets that may be loaned, currently one-third (33 1/3%) of total portfolio assets (or,
stated another way for the purposes of clarity in reliance upon the Xxxxxxx Funds, SEC
No-Action Letter (pub. avail. November 25, 1997), fifty percent (50%) of the Client’s net portfolio
assets).
4. Borrowers.
The Client hereby authorizes State Street to effect Loans of Available Securities
of the Client with any person on State Street’s approved list of Borrowers, including, without
limitation, State Street Bank and Trust Company and any affiliate thereof (each acting in the
capacity of a Borrower, hereafter also referred to as an “SSB Borrower”), which list will be
supplied to the Client on request. State Street’s approved list of Borrowers is available to the
Client at any time, and the Client may restrict State Street from lending Available Securities to
any Borrower on such approved list of Borrowers upon written instruction to State Street.
The Client acknowledges that it is aware that State Street, acting as the Client’s agent
pursuant hereto, is or may be deemed to be the same legal entity as, or affiliated with, SSB
Borrower acting as “Borrower” under a Securities Loan Agreement. The Client represents that (i)
the power granted herein to State Street, as Client’s agent, to enter into Loan transactions with
Borrowers (including any SSB Borrower) and the other powers granted to State Street, as agent
pursuant hereto, are given as a result of the Client’s desire to increase its opportunity to lend
securities held in its account on commercially reasonable terms, without such loans being
considered a breach of State Street’s fiduciary duty, and are given expressly for the purpose of
averting and waiving any prohibitions upon such lending, investment or exercise of such other
powers which might otherwise exist in the absence of such powers, and (ii) transactions effected
pursuant to and in compliance with this Agreement and any Securities Loan Agreement (including any
Securities Loan Agreement with any SSB Borrower) will not constitute a breach of trust or other
fiduciary duty or any other duty by State Street or affiliates thereof.
In connection with a Loan to any SSB Borrower pursuant hereto, the Client shall
furnish, and State Street shall cause the applicable SSB Borrower to furnish, to State Street for
delivery to the other, upon request (i) the most recent available audited statement of its
financial condition, and (ii) the most recent available unaudited statement of its financial
condition, if more recent than the audited statement. As long as any Loan to an SSB Borrower is
outstanding under this Agreement, the Client shall, and State Street shall cause the SSB Borrower
to, in either case, upon request, also promptly deliver to the other (via State Street) all such
recent financial information that is subsequently available, and any other financial information or
statements that the other may reasonably request.
In the event any such Loan is effected by State Street to SSB Borrower, State Street hereby
covenants and agrees for the benefit of the Client that it has adopted and implemented procedural
safeguards to help ensure that all actions taken by State Street as agent on behalf of the Client
in respect of a Loan transaction pursuant hereto will be effected (i) at “arms length” terms,
including prices, and (ii) by individuals other than individuals who are acting on behalf of SSB
Borrower in its principal capacity as Borrower in the Loan transaction.
Without prejudice to the obligations of a SSB Borrower under a Securities Loan Agreement, if
applicable, State Street shall not be responsible for any statements, representations, warranties
or covenants made by any Borrower in connection with any Loan or for any Borrower’s performance of
or failure to perform the terms of any Loan under the applicable Securities Loan Agreement or any
related agreement, including the failure to make any required payments, except as otherwise
expressly provided herein.
5. Securities Loan Agreements. The Client authorizes State Street to enter into one
or more Securities Loan Agreements with such Borrowers as may be selected by State Street. Each
Securities Loan Agreement shall have such terms and conditions as State Street may negotiate with
the Borrower. Certain terms of individual Loans, including rebate fees to be paid to the Borrower
for the use of cash Collateral, shall be negotiated at the time a Loan is made. State Street has
provided the Client copies of its forms of Securities Loan Agreements used with Borrowers and will
provide copies of any such forms as may be updated from time to time or copies of executed
Securities Loan Agreements with any Borrower upon reasonable request. State Street shall notify
the Client in the event that State Street receives a notice advising it that an insolvency-related
default of a Borrower with whom Client has securities on Loan has occurred.
6. Loans of Available Securities. State Street shall be responsible for determining
whether any such Loan shall be made, and for negotiating and establishing the terms of each such
Loan. State Street shall have the authority to terminate any Loan in its discretion, at any time
and without prior notice to the Client. In the event of a default by a Borrower on any Loan
(within the meaning of the applicable Securities Lending Agreement) State Street shall be fully
protected in acting in any manner it deems reasonable and appropriate. Upon notice to State
Street, the Client has the right to direct State Street to initiate action to terminate any Loan
made under this Agreement for any reason.
The Client acknowledges that State Street administers securities lending programs for other
clients of State Street. State Street will allocate securities lending opportunities among its
clients, using reasonable and equitable methods established by State Street from time to time.
State Street does not represent or warrant that any amount or percentage of the Client’s Available
Securities will in fact be loaned to Borrowers. The Client agrees that it shall have no claim
against State Street and State Street shall have no liability arising from, based on, or relating
to, Loans made for other clients, or Loan opportunities refused hereunder, whether or not State
Street has made fewer or more Loans for any other client, and whether or not any Loan for another
client, or the opportunity refused, could have resulted in Loans made under this Agreement.
The Client also acknowledges that, under the applicable Securities Loan Agreements, Borrowers
will not be required to return Loaned Securities immediately upon receipt of notice from State
Street terminating the applicable Loan, but instead will be required to return such Loaned
Securities within such period of time following such notice as is specified in the applicable
Securities Loan Agreement, but not later than the end of the customary settlement period. Upon
receiving a notice from the Client or the Investment Manager that Available
Securities which have been loaned to a Borrower should no longer be considered Available
Securities (whether because of the sale of such securities or otherwise), State Street shall notify reasonably
promptly thereafter the Borrower which has borrowed such securities that the Loan of such Available
Securities is terminated and that such Available Securities are to be returned within the time
specified by the applicable Securities Loan Agreement, but not later than the end of the customary
settlement period (e.g., within three business days for most U.S. equity securities). State Street
will use reasonable efforts to pursue available rights and remedies under the Securities Loan
Agreement to protect the interests of State Street’s securities lending clients, including the
Client.
In the event that (a) Loaned Securities are sold by the Client and such Loaned Securities are
not returned to the Client within the customary settlement period, and (b) the Client is bought-in
by a third party with regard to such Loaned Securities in accordance with Rule 204T of Regulation
SHO, State Street shall be liable to the Client for the amount of the cost of the buy-in purchase
which exceeds the proceeds of the sale of the Loaned Securities; provided, however, that State
Street shall not be liable for any such losses unless (y) the Client provides State Street with
written notice of the sale of the Loaned Securities by 6:00 p.m. Boston time on the trade date, and
(z) the Client provides State Street with written notice of the buy-in purchase, which notice shall
include those details required by State Street’s Investment Manager Guide, as amended from time to
time, (i) by 2:00 p.m. Boston time on the date of the buy-in purchase, or (ii) if the buy-in
purchase occurs at market close, as soon as reasonably practicable, but in any event on the date
(determined according to Boston time) of the buy-in purchase. In the event that State Street is
required to make any payment and/or incur any loss or expense under this paragraph, (1) Client’s
ownership of, interest in or right to the relevant Loaned Securities will cease upon receipt of
such payment, and (2) State Street shall, to the extent of such payment, loss, or expense, be
subrogated to, and succeed to, all of the rights of the Client against the Borrower under the
applicable Securities Loan Agreement.
7. Distributions on and Voting Rights with Respect to Loaned Securities. Except as
provided in the next sentence, all substitute interest, dividends, and other distributions paid
with respect to Loaned Securities shall be credited to the Client’s account on the date such
amounts are delivered by the Borrower to State Street. Any non-cash distribution on Loaned
Securities which is in the nature of a stock split or a stock dividend shall be added to the Loan
(and shall be considered to constitute Loaned Securities) as of the date such non-cash distribution
is received by the Borrower; provided that the Client or Investment Manager may, by giving
State Street ten (l0) business days notice prior to the date of such non-cash distribution, direct
State Street to request that the Borrower deliver such non-cash distribution to State Street,
pursuant to the applicable Securities Loan Agreement, in which case State Street shall credit such
non-cash distribution to the Client’s account on the date it is delivered to State Street.
The Client acknowledges that it will not be entitled to participate in any dividend
reinvestment program or to vote with respect to securities that are on Loan on the applicable
record date for such securities.
The Client also acknowledges that any payments of distributions from Borrower to the Client
are in substitution for the interest or dividend accrued or paid in respect of Loaned Securities
and that the tax and accounting treatment of such payment may differ from the tax and accounting
treatment of such interest or dividend payments.
If an installment, call or rights issue becomes payable on or in respect of any Loaned
Securities, State Street shall use all reasonable endeavors to ensure that any timely instructions
from the Client are complied with, but State Street shall not be required to make any payment
unless the Client has first placed funds with State Street to make such payment.
Client acknowledges and agrees that, with respect to a dividend paid during the Loan term by a
company that is a resident of France, the Client will not be entitled to receive, either from the
French company or the Borrower, any additional dividends (sometimes referred to as “complementary
coupons”) declared and payable by such company that are equivalent to a tax credit adjustment (such
as “credit d’impot étranger”).
The Client further acknowledges and agrees that the Client will be required to accept cash in
lieu of fractional shares in all instances in which an issuer does not issue fractional shares.
8. Collateral.
(a) Receipt of Collateral. The Client authorizes State Street to receive and to
hold, on the Client’s behalf, Collateral from Borrowers to secure the obligations of Borrowers with
respect to any Loan of Available Securities made on behalf of the Client pursuant to the Securities
Loan Agreements. All investments of cash Collateral shall be for the account and at the risk of
the Client. Concurrently with or prior to the delivery of the Loaned Securities to the Borrower
under any Loan, State Street shall receive from the Borrower Collateral. The initial Collateral
received shall have a value of at least 102% or 105% of the Market Value of the Loaned Securities
(depending on the nature of the Loaned Securities and the Collateral received), or such other
value, but not less than 102% of the Market Value of the Loaned Securities, as may be applicable
in the jurisdiction in which such Loaned Securities are customarily traded.
Pursuant to the terms of the applicable Securities Loan Agreement, State Street shall, in
accordance with State Street’s reasonable and customary practices, xxxx Loaned Securities and
Collateral to their Market Value each business day based upon the Market Value of the Collateral
and the Loaned Securities at the close of business employing the most recently available pricing
information, and ensure that each applicable Securities Loan Agreement shall require each Borrower
to deliver additional Collateral (for Collateral comprised of a letter of credit, an additional or
replacement letter of credit) to State Street as follows:
In the case of Loans from the Client to a Borrower of (i) US equity securities, (ii) US
corporate debt securities, and (iii) non-US corporate debt securities, the Borrower will in each
case be required to deliver additional Collateral in the event that the Market Value of the
Collateral in respect of such Loans is less than one hundred and two percent (102%) of the
Market Value of the Loaned Securities, and such additional Collateral together with all
Collateral previously delivered in respect of such Loans shall have a Market Value of not less than
one hundred and two percent (102%) of the Market Value of the Loaned Securities.
Unless market practice otherwise permits (but in no event in an amount less than one hundred
percent (100%)), in the case of Loans from the Client to a Borrower of non-US equity securities,
the Borrower will be required to deliver additional Collateral in the event that the Market Value
of the Collateral in respect of such Loans is less than one hundred and five percent (105%) of the
Market Value of the Loaned Securities, and such additional Collateral together with all Collateral
previously delivered in respect of such Loans shall have a Market Value of not less than one
hundred and five percent (105%) of the Market Value of the Loaned Securities.
In the case of Loans from the Client to a Borrower of (i) US government securities (including
securities issued by US agencies or instrumentalities), and (ii) sovereign debt issued by non-US
governments, the Borrower will in each case be required to deliver additional Collateral in the
event that the Market Value of the Collateral in respect of such Loans is less than one hundred
percent (100%) of the Market Value of the Loaned Securities, and such additional Collateral
together with all Collateral previously delivered in respect of such Loans shall have a Market
Value of not less than one hundred and two percent (102%) of the Market Value of the Loaned
Securities.
(b) Return of Collateral. The Collateral shall be returned to Borrower at the
termination of the Loan upon the return of the Loaned Securities by Borrower to State Street in
accordance with the applicable Securities Loan Agreement.
(c) Limitations. State Street shall invest cash Collateral in accordance with any
directions, including any limitations established by the Client from time to time and set forth on
Schedule A. State Street does not assume any market or investment risk of loss with
respect to the investment of cash Collateral. If the value of the cash Collateral so invested is
insufficient to return any and all amounts due to such Borrower pursuant to the Securities Loan
Agreement, the Client shall be responsible for such shortfall and State Street may debit the
Client’s account as set forth in Section 9.
9. Use of Cash Collateral; Investment of Cash Collateral and Compensation.
(a) It is understood that the Client, acting through State Street as its agent, may use,
invest and re-hypothecate cash Collateral as described herein.
(b) To the extent that a Loan is secured by cash Collateral, State Street shall invest cash
Collateral, including money received with respect to the investment of the same, or upon the
maturity, sale, or liquidation of any such investments, in accordance with any directions,
including any limitations established by the Client from time to time and set forth on Schedule
A. State Street does not assume any market or investment risk of loss associated with any
investment or change of investment in any such investments, including any cash collateral
investment vehicle designated on Schedule A.
The Client acknowledges that interests in such mutual funds, repurchase accounts, securities
lending trusts and other collective investment funds, to which State Street and/or one or more of
the State Street Affiliates provide services are not guaranteed or insured by State Street or State
Street Affiliates or by the Federal Deposit Insurance Corporation or any government agency. The
Client hereby authorizes State Street to purchase or sell investments of cash Collateral to or from
other accounts held by State Street or State Street Affiliates.
The net income generated by any investment of cash Collateral made pursuant to the first
paragraph of this Section 9(b) shall be allocated among the Borrower, State Street, and the Client,
as follows: (i) a portion of such income shall be paid to the Borrower in accordance with the
agreement negotiated between the Borrower and State Street; (ii) the balance, if any, shall be
split between State Street as compensation for its services in connection with this securities
lending program and the Client as such income. Any such income will be credited to the Client’s
account in accordance with the fee schedule attached hereto as Schedule A.
In the event the net income generated by any investment of cash Collateral made pursuant to
the first paragraph of this Section 9 does not equal or exceed the amount of the rebate fee due the
Borrower for the use of cash Collateral in accordance with the agreement between Borrower and State
Street, State Street and the Client shall, in accordance with the fee split set forth on
Schedule A share the amount of the rebate fee due to the Borrower that is equal to the
difference between the net income generated and the amounts to be paid to the Borrower pursuant to
the Securities Loan Agreement; provided, however, that for a Financing Transaction, the Client
shall be solely responsible for the payment of the rebate fee to the Borrower. The Client shall
be solely responsible for any and all other amounts due to such Borrower pursuant to the Securities
Loan Agreement and State Street may debit the Client’s account accordingly. In the event debits to
the Client’s account produce a deficit therein, State Street shall sell or otherwise liquidate
investments made with cash Collateral and credit the net proceeds of such sale or liquidation to
satisfy the deficit. In the event the foregoing does not eliminate the deficit, State Street shall
have the right to charge the deficiency to any other account or accounts maintained by the Client
with State Street.
To the extent that a Loan is secured by non-cash Collateral, the Borrower shall be required to
pay a loan premium, the amount of which shall be negotiated by State Street. Such loan premium
shall be allocated between State Street and the Client as follows: (a) a portion of such loan
premium shall be paid to State Street as compensation for its services in connection with this
securities lending program, in accordance with Schedule A hereto; and (b) the remainder of
such loan premium shall be credited to the Client’s account.
The Client shall reimburse State Street for any and all funds advanced by State Street on
behalf of the Client as a consequence of the Client’s obligations hereunder, including the Client’s
obligation to return cash Collateral to the Borrower and to pay any fees due the Borrower, all as
provided in Section 8 or this Section 9.
10. Fee Disclosure. The fees associated with any investment of cash Collateral in
funds maintained or advised by State Street are disclosed on Schedule A hereto. Said fees
may be
changed from time to time by State Street upon notice to the Client. An annual report with
respect to such funds is available to the Client, at no expense, upon request.
11. Recordkeeping and Reports. State Street will establish and maintain such records
as are reasonably necessary to account for Loans that are made and the income derived therefrom.
State Street’s records shall be presumed to reflect accurately any instructions, directions or
other communications, regardless of how communicated, sent or delivered, from any Authorized
Representative. On a monthly basis, State Street will make available a statement to the Client
describing the Loans made, and the income derived from Loans, during the period covered by such
statement. Each party to this Agreement shall comply with the reasonable requests of the other for
information necessary to the requester’s performance of its duties in connection with this
securities lending program.
Client hereby agrees to participate in the Performance Explorer service offered by State
Street through Data Explorers Limited and Client further agrees that as a condition for its
participation in the Performance Explorer service, State Street is authorized by Client to provide
to Data Explorers information relating to the Client’s Loaned Securities on an anonymous basis for
aggregation into the Data Explorers database, provided that the identity of Client as owner of the
Loaned Securities is in no way identifiable and provided further that Data Explorers Limited has
agreed to treat any such information provided to it confidentially and to use such information
solely for the purposes of providing the service.
12. Standard of Care and Indemnification.
(a) State Street shall use reasonable care in the performance of its duties hereunder
consistent with that exercised by banks generally in the performance of duties arising from acting
as agent for clients in securities lending and repurchase transactions (as appropriate).
(b) The Client shall indemnify State Street and hold State Street harmless from any loss or
liability (including without limitation, the reasonable fees and disbursements of counsel) incurred
by State Street in rendering services hereunder or in connection with any breach of the terms of
this Agreement by the Client, including any breach of a representation or warranty by the Client
hereunder, except such loss or liability which results from State Street’s failure to exercise the
standard of care required by Section 12(a). Nothing in this Section shall derogate from the
indemnities provided by State Street in Section 14. Upon prior notice to the Client, State Street,
acting in good faith, may charge against the Client’s account any amounts to which State Street is
entitled hereunder.
(c) Notwithstanding any express provision to the contrary herein, State Street shall not be
liable for any indirect, consequential, incidental, special, punitive, multiple or exemplary
damages, including lost profits, even if State Street has been apprised of the likelihood of such
damages occurring. Notwithstanding any express provision to the contrary herein, the Client shall
not be liable to State Street for any indirect, consequential, incidental, special, punitive,
multiple or exemplary damages, including lost profits, even if the Client has been apprised of the
likelihood of such damages occurring.
(d) The Client acknowledges that in the event that the Client’s participation in securities
lending generates income for the Client, State Street may be required to withhold tax or may claim
such tax from the Client as is appropriate in accordance with applicable law.
(e) State Street, in determining the Market Value of Securities, including without
limitation, Collateral, may rely upon any recognized pricing service and shall not be liable for
any errors made by such service.
13. Representations and Warranties. Each party hereto represents and warrants that
(a) it has and will have the legal right, power and authority to execute and deliver this
Agreement, to enter into the transactions contemplated hereby, and to perform its obligations
hereunder; (b) it has taken all necessary action to authorize such execution, delivery, and
performance; (c) this Agreement constitutes a legal, valid, and binding obligation enforceable
against it; and (d) the execution, delivery, and performance by it of this Agreement will at all
times comply with all applicable laws and regulations.
The Client represents and warrants that (a) it has made its own determination as to the tax
and accounting treatment of any dividends, remuneration or other funds received hereunder; (b) the
financial statements delivered to State Street pursuant to Section 4 fairly present its financial
condition as of the date thereof and there has been no material adverse change in its financial
condition since the date of the balance sheet included within such financial statements; c) it is
the legal and beneficial owner of (or exercises complete investment discretion over) all Available
Securities free and clear of all liens, claims, security interests and encumbrances and no such
security has been sold, and that it is entitled to receive all distributions made by the issuer
with respect to Loaned Securities. Each Loan shall constitute a present representation by the
Client that there has been no material adverse change in its financial condition that has not been
disclosed in writing to State Street since the date of the most recent financial statements
furnished to State Street pursuant to Section 4.
The Client further represents and warrants that it will immediately notify State Street orally
and by written notice, of the relevant details of any corporate actions, private consent
offers/agreements and/or any other off-market arrangements that may require the recall and/or
restriction of a security from lending activity. Such written notice shall be delivered
sufficiently in advance so as to: (a) provide State Street with reasonable time to notify Borrowers
of any instructions necessary to comply with the terms of the corporate actions, private consent
offers/agreements and/or other off-market arrangements, and (b) provide such Borrowers with
reasonable time to comply with such instructions.
The person executing this Agreement on behalf of the Client represents that he or she has the
authority to execute this Agreement on behalf of the Client.
The Client hereby represents to State Street that (i) it is not subject to the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”) with respect to this Agreement and the
Available Securities; (ii) it qualifies as an “accredited investor” within the meaning of Rule 501
of Regulation D under the Securities Act of 1933, as amended; (iii) that its taxpayer
identification number is 00-0000000; (iv) that its tax year end is December 31; and (v) income
earned hereunder is exempt from federal income tax under Internal Revenue Code Section 501(a).
If the Client is a management investment company that is, or is required to be, registered
under the Investment Company Act of 1940, as amended (the “1940 Act”), the Client acknowledges
that any obligation to determine whether any transaction made pursuant to this Agreement or the
SLSA is in compliance with those laws and regulations under the 1940 Act relating to the borrowing
or lending of securities or cash, the posting or receipt of collateral relating to such borrowing
or lending of cash or securities, or the issuance of ‘senior securities,’ as that term is defined
under Section 18 of the 1940 Act, including all obligations to compile and maintain such data and
make such calculations as are necessary or appropriate in order to make such determinations, as
well as all obligations that require the Client to segregate, identify and substitute Client
assets, and daily monitor such assets and their values (collectively, “Applicable 1940 Act
Requirements”), except as specifically set forth herein, is the obligation of Client and not State
Street or any State Street Affiliate. In addition, if the Client is a management investment
company that is, or is required to be, registered under the 1940 Act, the Client represents and
warrants to State Street as of the close of business on each day that the Client is so registered
or is required to be so registered, that (i) any transaction or series of transactions under this
Agreement and/or the SLSA that creates leverage as a matter of law or fact is (A) in furtherance of
the Client’s investment objective or objectives, (B) permitted or not otherwise prohibited by the
Client’s investment policies, and (C) disclosed in all material respects in the Client’s
registration statement filed with the Securities and Exchange Commission pursuant to Section 8 of
the 1940 Act, and (ii) Client is in compliance with all laws and regulations applicable to
Borrower, including Applicable 1940 Act Requirements.
14. Borrower Default Indemnification.
(a) If at the time of a default by a Borrower with respect to a Loan (within the meaning of
the applicable Securities Loan Agreement), some or all of the Loaned Securities under such Loan
have not been returned by the Borrower, and subject to the terms of this Agreement, State Street
shall indemnify the Client against the failure of the Borrower as follows. State Street shall
purchase a number of Replacement Securities equal to the number of such unreturned Loaned
Securities, to the extent that such Replacement Securities are available on the open market. Such
Replacement Securities shall be purchased by applying the proceeds of the Collateral with respect
to such Loan to the purchase of such Replacement Securities. Subject to the Client’s obligations
pursuant to Section 8 and Section 9 hereof and Schedule A, paragraph 3(b), if and to the
extent that such proceeds are insufficient or the Collateral is unavailable, the purchase of such
Replacement Securities shall be made at State Street’s expense.
(b) If State Street is unable to purchase Replacement Securities pursuant to Section 14(a)
hereof, State Street shall credit to the Client’s account an amount equal to the Market Value of
the unreturned Loaned Securities for which Replacement Securities are not so purchased, determined
as of (i) the last day the Collateral continues to be successfully marked to market against the
unreturned Loaned Securities; or (ii) the next business day following the day referred to in (i)
above, if higher.
(c) In addition to making the purchases or credits required by Paragraphs (a), (b) and (c)
hereof, State Street shall credit to the Client’s account the value of all distributions on the
Loaned Securities (not otherwise credited to the Client’s accounts with State Street), the record
dates for which occur before the date that State Street purchases Replacement Securities pursuant
to Paragraph (a) or credits the Client’s account pursuant to Paragraph (b).
(d) Any credits required under Paragraphs (b) and (c) hereof shall be made by application of
the proceeds of the Collateral (if any) relating to the Loaned Securities that remains after the
purchase of Replacement Securities pursuant to Paragraph (a). If and to the extent that the
Collateral relating to the Loaned Securities is unavailable or the value of the proceeds of the
remaining Collateral is less than the value of the sum of the credits required to be made under
Paragraphs (b) and (c), such credits shall be made at State Street’s expense.
(e) If after application of Paragraphs (a) through (d) hereof, additional Collateral relating
to the Loaned Securities remains or any previously unavailable Collateral becomes available or any
additional amounts owed by the Borrower with respect to such Loan are received from the Borrower,
State Street shall apply the proceeds of such Collateral or such additional amounts first to
reimburse itself for any amounts expended by State Street pursuant to Paragraphs (a) through (d)
above, and then to credit to the Client’s account all other amounts owed by the Borrower to the
Client with respect to such Loan under the applicable Securities Loan Agreement.
(f) In the event that State Street is required to make any payment and/or incur any loss or
expense under this Section, State Street shall, to the extent of such payment, loss, or expense, be
subrogated to, and succeed to, all of the rights of the Client against the Borrower under the
applicable Securities Loan Agreement.
(g) Notwithstanding anything to the contrary in this Section 14, the Client agrees that State
Street shall not have any obligation to indemnify the Client under this Section 14 to the extent
that proceeds of Collateral from a Financing Transaction are insufficient or the Collateral from a
Financing Transaction is unavailable.
15. Continuing Agreement; Termination; Remedies. It is the intention of the parties
hereto that this Agreement shall constitute a continuing agreement in every respect and shall apply
to each and every Loan, whether now existing or hereafter made. The Client and State Street may
each at any time terminate this Agreement upon five (5) business days’ written notice to the other
to that effect. In the event that State Street terminates this Agreement other than for reasons
relating to (a) the creditworthiness of the Client, (b) a default event of the Client, or (c)
Client’s material breach of this Agreement or the SLSA, at the request of the Client State
Street shall permit any Loans outstanding as of the date of termination to continue for the earlier
of such time as it may take Client to contract with a third party to facilitate similar securities
lending services or sixty (60) days following the initial written notice of termination.
Notwithstanding the foregoing, the Client hereby acknowledges that the relevant Borrowers may
terminate the Loans at any time and/or that the relevant Borrowers may be restricted or removed
from State Street’s securities lending program at any time, which would cause any outstanding Loans
to such Borrower to be terminated. The only effects of any such termination of this
Agreement will be that (y) following such termination, no further Loans shall be made hereunder by State Street on
behalf of the Client, and (z) State Street shall, within a reasonable time after termination of
this Agreement (subject to the third sentence of this Section 15, if applicable), terminate any and
all outstanding Loans. The provisions hereof shall continue in full force and effect in all other
respects until all Loans have been terminated and all obligations satisfied as herein provided.
State Street does not assume any market or investment risk of loss associated with Client’s change
in cash Collateral investment vehicles or termination of, or change in, its participation in this
securities lending program and the corresponding liquidation of cash Collateral investments.
16. Notices. Except as otherwise specifically provided herein, notices under this
Agreement may be made orally, in writing, or by any other means mutually acceptable to the parties.
If in writing, a notice shall be sufficient if delivered to the party entitled to receive such
notices at the following addresses:
If to the Client:
Pacific Select Fund on behalf of the Long/Short Large Cap Portfolio
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxx
If to State Street:
State Street Bank and Trust Company
Securities Finance
State Street Financial Center
One Lincoln Street, SFC 3
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Securities Finance
State Street Financial Center
One Lincoln Street, SFC 3
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
or to such other addresses as either party may furnish the other party by written notice under this
section.
Whenever this Agreement permits or requires the Client to give notice to, direct, provide
information to State Street, such notice, direction, or information shall be provided to State
Street on the Client’s behalf by any individual designated for such purpose by the Client in a
written notice to State Street. (This Agreement shall be considered such a designation of the
person executing the Agreement on the Client’s behalf.) After its receipt of such a notice of
designation, and until its receipt of a notice revoking such designation, State Street shall be fully protected
in relying upon the notices, directions, and information given by such designee.
17. Securities Investors Protection Act of 1970 Notice. CLIENT IS HEREBY ADVISED AND
ACKNOWLEDGES THAT THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION ACT OF 1970 MAY NOT PROTECT
THE CLIENT WITH RESPECT TO THE LOAN OF SECURITIES HEREUNDER AND THAT, THEREFORE, THE COLLATERAL
DELIVERED TO THE CLIENT MAY CONSTITUTE THE ONLY SOURCE
OF SATISFACTION OF THE BROKER’S OR DEALER’S
OBLIGATION IN THE EVENT THE BROKER OR DEALER FAILS TO RETURN THE SECURITIES.
18. Authorized Representatives. The Client authorizes State Street to accept and to
act on any instructions or other communications, regardless of how sent or delivered, that is from
any Authorized Representative. The Client shall be fully responsible for all acts of any
Authorized Representative, even if that person exceeds his or her authority, and in no event shall
State Street be liable to the Client or any other third party for any losses or damages arising out
of or relating to any act State Street takes or fails to take in connection with any such
instructions or other communications.
19. Agents. State Street may use such agents, including but not limited to, such
regulated clearing agents, securities depositaries, nominees, sub-custodians, third party
custodians and State Street Affiliates, as State Street deems appropriate to carry out its duties
under this Agreement. To the extent the State Street Affiliates act as State Street’s agent
hereunder, State Street agrees to be responsible for the acts and omissions of such the State
Street Affiliates as though performed by State Street directly. The Client agrees that State
Street’s sole liability for the acts or omissions of any other agent shall be limited to liability
arising from State Street’s failure to use reasonable care in the selection of such agent.
20. Force Majeure. State Street shall not be responsible for any losses, costs or
damages suffered by the Client resulting directly or indirectly from war, riot, revolution,
terrorism, acts of government or other causes beyond the reasonable control or apprehension of
State Street. State Street represents that it has established and maintains commercially
reasonable business recovery procedures.
21. Non-US Borrowers. In the event the Client approves lending to Borrowers resident
in the United Kingdom (“UK”), the Client shall provide sufficient documentation, in the form and
manner required by the UK Inland Revenue, to establish that the Client is (1) the beneficial owner
of any manufactured dividends received and (2) not a UK recipient for purposes of UK manufactured
overseas dividend rules.
22. Miscellaneous. This Agreement supersedes any other agreement between the parties
or any representations made by one party to the other, whether oral or in writing, concerning Loans
of securities by State Street on behalf of the Client. This Agreement shall not be assigned by
either State Street or the Client 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 heirs, representatives, successors, and assigns. This Agreement shall
be governed and construed in accordance with the laws of The Commonwealth of Massachusetts.
The Client hereby irrevocably submits to the jurisdiction of any Massachusetts state or
Federal court sitting in The Commonwealth of Massachusetts in any action or proceeding arising out
of or related to this agreement, hereby irrevocably agrees that all claims in respect of such
action or proceeding may be heard and determined in such Massachusetts state or Federal court
except that this provision shall not preclude any party from removing any action to Federal court.
The Client waives, to the fullest extent permitted by applicable law, all immunity (whether on the
basis of sovereignty or otherwise) from jurisdiction, attachment (both before and after judgment)
and execution to which it might otherwise be entitled in any action or proceeding in the
Massachusetts state or Federal courts or the courts of any other country or jurisdiction, relating
in any way to this Agreement or any Loan, and agrees that it will not raise, claim or cause to be
pleaded any such immunity at or in respect of any such action or proceeding. The Client hereby
irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient
forum to the maintenance of such action or proceeding. As an alternative method of service, the
Client also irrevocably consents to the service of any and all process in any such action or
proceeding by the mailing of copies of such process to the Client at its address specified in
Section 16 hereof via registered, certified mail or overnight mail service which requires a
signature to prove delivery. The Client agrees that a final judgment in any such action or
proceeding, all appeals having been taken or the time period for such appeals having expired, shall
be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. The provisions of this Agreement are severable and the invalidity or
unenforceability of any provision hereof shall not affect any other provision of this Agreement.
If in the construction of this Agreement any court should deem any provision to be invalid because
of scope or duration, then such court shall forthwith reduce such scope or duration to that which
is appropriate and enforce this Agreement in its modified scope or duration.
23. Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall, together, constitute only
one (1) instrument.
24. Declaration of Trust. A copy of the Client’s Declaration of Trust is on file
with the Secretary of the Commonwealth of Massachusetts. The Declaration of Trust has been executed
on behalf of the Client by a trustee of Client in her capacity as trustee of the Client and not
individually. The obligations of this Agreement shall be binding upon the assets of the Client and
shall not be binding upon any trustee, officer or shareholder of Client individually.
25. Modification. This Agreement shall not be modified, except by an instrument in
writing signed by the parties hereto.
IN WITNESS THEROF, the parties hereto have caused this instrument to be duly executed and delivered
by their duly authorized officers as of the date first written above.
PACIFIC SELECT FUND, ON BEHALF OF THE
LONG/SHORT LARGE-CAP PORTFOLIO
LONG/SHORT LARGE-CAP PORTFOLIO
By: /s/ Xxxx Xxx Xxxxx
Name: Xxxx Xxx Xxxxx
Title: Senior Vice President
STATE STREET BANK AND TRUST COMPANY
By: /s/ Xxxxx X. Xxxxxxxx
Name: Xxxxx X. Xxxxxxxx
Title: Executive Vice President
Schedule A
This Schedule is attached to and made part of the Securities Lending Authorization Agreement,
dated the 17th day of April, 2009 between PACIFIC SELECT FUND ON BEHALF OF THE LONG/SHORT LARGE CAP
PORTFOLIO (the “Client”) and STATE STREET BANK AND TRUST COMPANY (“State Street”).
Schedule of Fees
1. Subject to Paragraph 2 below, all proceeds collected by State Street on any investment of cash
Collateral or any fee income shall be allocated as follows:
- Seventy percent (70%) payable to the Client, and
- Thirty percent (30%) payable to State Street.
2. All payments to be allocated under Paragraph 1 above shall be made after deduction of such
other amounts payable to State Street or to the Borrower under the terms of the attached Securities
Lending Authorization Agreement.
3. Investment of cash Collateral
(a) Except as provided in paragraph (b) below, the Client hereby instructs State Street to (i)
deposit all cash Collateral received under the Securities Lending Authorization Agreement from the
Loan of Available Securities managed by X.X. Xxxxxx Investment Management, Inc. in the Client’s
custody demand deposit account, number 413914, held at State Street, and (ii) deposit all cash
Collateral received under the Securities Lending Authorization Agreement from the Loan of Available
Securities managed by Analytic Investors, LLC in the Client’s custody demand deposit account,
number 422493, held at State Street (the demand deposit accounts together, the “Accounts”). The
Client authorizes State Street, as lending agent, to instruct the Client’s custodian to transfer
cash to and from such Accounts with respect to obligations of the Client under the terms of the
Securities Lending Authorization Agreement.
(b) Notwithstanding anything contrary contained in the Securities Lending Authorization
Agreement, to the extent cash Collateral obtained from a Financing Transaction is deemed necessary
by the Client or by State Street, acting in its capacity as agent pursuant to the terms of the
SLSA, to provide cash to State Street Bank and Trust Company, acting in its capacity as principal
lender pursuant to the terms of the SLSA, as collateral in securities borrowing transactions under
the SLSA, the Client hereby authorizes and instructs State Street to transfer and deliver such cash
Collateral (including via liquidation of cash Collateral investments) to State Street Bank and
Trust Company, as principal lender, as cash collateral in such securities borrowing transactions
pursuant to the terms of the SLSA. Client acknowledges and agrees that the delivery of such cash Collateral shall not be deemed a violation by State
Street of any provisions of this Agreement. To the extent that cash Collateral obtained from a
Financing Transaction is not so transferred or used as cash collateral pursuant to the SLSA, the
Client hereby directs State Street to invest such cash Collateral in accordance with paragraph (a)
above, and in the event that such cash Collateral is no longer needed for Financing Transactions,
to invest such cash in accordance with paragraph (a) above. The Client understands and agrees that
cash Collateral obtained from a Financing Transaction that is not invested as set forth in (a)
above and/or is used as cash collateral in securities borrowing transactions pursuant to the terms
of the SLSA, will not generate investment income.
Notwithstanding anything contained in the Securities Lending Authorization Agreement, any use
or application of cash Collateral from a Financing Transaction shall be at the sole risk of the
Client. State Street does not assume and shall not be liable for any risk of loss, or liability
for damages, claims or expenses, associated with such use of such cash Collateral, including the
use of the cash Collateral to collateralize transactions pursuant to the terms of the SLSA and the
investment of such cash Collateral as set forth in paragraph (a) above. Subject to State Street’s
obligations to xxxx to market under Section 8 of the Securities Lending Authorization Agreement, if
the value of the cash Collateral for a Financing Transaction is unavailable or insufficient to
return any and all amounts due the relevant Borrower(s) pursuant to the Securities Loan
Agreement(s), the Client shall be responsible for such shortfall and State Street may debit any
account or accounts maintained by the Client with State Street.
PACIFIC SELECT FUND, on behalf of the LONG/SHORT LARGE-CAP PORTFOLIO
By: /s/ Xxxx Xxx Xxxxx
Name: Xxxx Xxx Xxxxx
Title: Senior Vice President
STATE STREET BANK AND TRUST COMPANY
By: /s/ Xxxxx X. Xxxxxxxx
Name: Xxxxx X. Xxxxxxxx
Title: Executive Vice President
CERTIFICATE OF SIGNING AUTHORITY AND INCUMBENCY
I,
, hereby certify that I am the
[Title of Authorized Officer]
of
,
duly organized and validly existing under the laws of
(the “Client”), and further certify in such
capacity that each of the
following individuals, acting singly, has been authorized to act in the name and on behalf of the
Client and to sign, acknowledge, deliver and accept delivery of agreements and other documents in
connection with securities lending transactions and that the true signature of each such individual
is shown below opposite his or her name, and State Street Bank and Trust Company may rely upon this
certificate until such time as it receives another certificate bearing a later date.
| Name | Title | Specimen Signature | ||||
IN WITNESS WHEREOF, I have hereunto set my hand this day of
, 200
[Authorized Officer]
I,
, hereby certify that
is the duly elected, qualified and
acting
[Title] of the Client, and his/her signature
appearing above is his/her
own true signature.
[name/title]
1
