EXHIBIT 99.h(xx)
INDEMNITY AGREEMENT
This Agreement is made effective the 13th day of January, 2004, by and
between Wachovia Bank, National Association ("Wachovia") and American AAdvantage
High Yield Bond Fund, a series of the American AAdvantage Funds ("Lender").
WHEREAS, pursuant to a Securities Lending Agency and Collateral
Management Agreement dated January 3rd, 2004 entered into between Lender, and
Metropolitan West Securities, LLC. ("Met West") as Lending Agent, ("Securities
Lending Agreement"), MetWest agreed to provide indemnification against loss due
to borrower default; and
WHEREAS, Wachovia has acquired MetWest; and
WHEREAS, Wachovia provides, as part of its usual and customary services
in connection with securities lending for its customers, indemnification against
lender loss due to borrower default.
NOW, THEREFORE, the parties hereto, for good and valuable consideration
the receipt and sufficiency of which is hereby acknowledged, agree to permit
MetWest to provide Lender, through Wachovia, indemnification against loss due to
borrower default in accordance with the following provisions:
1. In the event a borrower under the applicable Bond Market Association
Master Securities Loan Agreement ("Securities Loan Agreement") fails to return
loaned securities because it is the subject of a bankruptcy, insolvency,
reorganization, liquidation, receivership, conservatorship or similar event
(collectively, "Bankruptcy Event"), then Wachovia shall, at its expense (subject
to the succeeding paragraphs hereof and subject to any provisions regarding the
Lender's liability for principal losses associated with any investment of cash
collateral) and within 1 business day of the Bankruptcy Event as determined by
Wachovia (the "Indemnity Triggering Date"), credit Lender's account in United
States dollars with the difference (where a positive number) ("Indemnifiable
Amount") between (A) the market value of such loaned securities on the Indemnity
Triggering Date (including, in the case of debt securities, accrued, but unpaid
interest and, in the case of equity securities, dividends or distributions
declared but not paid or remitted to Lender) and (B) the market value of the
related collateral which shall be (i) in the case of loans collateralized solely
by cash collateral, the greater of the market value of the cash collateral on
the date of initial pledge as adjusted for any subsequent marks-to-market to the
Indemnity Triggering Date and the market value of the proceeds of cash
collateral investments on the Indemnity Triggering Date, (ii) in the case of
loans collateralized solely by securities collateral, the greater of the market
value of such collateral on the business day immediately preceding the Indemnity
Triggering Date and on the Indemnity Triggering Date, and (iii) in the
case of loans collateralized solely by
letters of credit, the respective available undrawn amounts on the Indemnity
Triggering Date. Where a loan is collateralized by more than one type of
collateral, the aggregate market value of collateral securing such loan (for the
purpose of computing the Indemnifiable Amount) shall be the sum of the market
values for each relevant type of collateral. Market value shall be determined by
Wachovia, where applicable, by utilizing recognized pricing services or dealer
price quotations.
2. In lieu of paying Lender the Indemnifiable Amount as provided above,
Wachovia may, at its sole option and expense, purchase for Lender's account
("Buy-In") on the Indemnity Triggering Date for settlement in the normal course
replacement securities of the same issue, type, class, and series as that of the
loaned securities, provided, however, that if Wachovia effects a Buy-In, Lender
agrees that, to the extent of such Buy-In, Wachovia shall be subrogated to, and
Lender shall assign and be deemed to have assigned to Wachovia, all of Lender's
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
(including any letters of credit and the issuers thereof), 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 Wachovia is subrogated as provided herein, Lender shall promptly remit
or pay to Wachovia the same (or, where applicable, its United States dollar
equivalent).
3. Wachovia shall not be liable to the Lender or any third party for
any loss occasioned by reason of action taken or omitted to be taken by Wachovia
hereunder or in connection herewith, except insofar as such loss is occasioned
by Wachovia's negligence or willful misconduct. The Lender agrees to reimburse
Wachovia for all losses, damages, taxes (other than income taxes on any fee paid
to Wachovia) and costs and expenses (including, without limitation, costs
incurred as a result of proceeding against any collateral upon a default by a
borrower and all amounts paid in the settlement of claims or satisfaction of
judgments and legal fees) which may arise out of (i) any action taken by
Wachovia pursuant to this Agreement or otherwise upon the instructions of the
Lender (except insofar as such losses, damages, taxes and expenses are incurred
as a result of Wachovia's negligence or willful misconduct) or (ii) the failure
by the Lender to fulfill the terms of any loan or any agreement relating
thereto, including this Agreement and any Securities Lending Agreement,
including without limitation, a failure by the Lender to give timely
notification to Wachovia or MetWest of any sale or
change in availability of Available Securities as required by the Securities
Lending Agreement.
In Witness Whereof, the parties hereto have executed this Agreement the
day and year first above written:
Wachovia Bank, National Association
By: ___________________________
