EXHIBIT 99.d(ii)(u)
SECURITIES LENDING
MANAGEMENT AGREEMENT
dated as of July 2, 2001
between
American AAdvantage Funds, on behalf of its series,
American AAdvantage High Yield Bond Fund
and
Metropolitan West Securities, Inc.
TABLE OF CONTENTS
Page
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SECTION I. DEFINITIONS.....................................................1
SECTION II. APPOINTMENT AS AGENT...........................................3
2.1 General Appointment...............................................3
SECTION III. CUSTODIAL ACCOUNT.............................................4
3.1 Deposit of Assets.................................................4
3.2 Additions and Withdrawals.........................................4
3.3 Reports...........................................................4
3.4 Disclosure of Custodial Account Information.......................4
SECTION IV. SECURITIES LENDING TRANSACTIONS................................5
4.1 Lending Transactions..............................................5
4.2 List of Borrowers and Counterparties..............................6
4.3 Xxxx-to-Market....................................................6
4.4 Distributions; Voting, etc........................................6
SECTION V. INVESTMENTS.....................................................7
5 Investments.......................................................7
SECTION VI. TRANSACTION PROCEDURES.........................................7
6.1 Confirmations; Transaction Reports................................7
6.2 Defaults by Counterparties........................................7
6.3 Termination of Loans and Investments..............................8
6.4 Risk of Loss......................................................8
6.5 Use of Third Party Services.......................................8
6.6 Use of Book-Entry System..........................................9
6.7 MetWest's Other Clients...........................................9
SECTION VII. REMITTANCES...................................................9
7.1 Compensation to MetWest...........................................9
7.2 Payments to Client................................................9
SECTION VIII. REPRESENTATIONS, WARRANTIES AND COVENANTS...................10
8.1 By Client........................................................10
8.2 By MetWest.......................................................11
SECTION IX. NO AFFILIATE TRANSACTIONS.....................................12
9 No Affiliate Transactions........................................12
SECTION X. STANDARD OF CARE...............................................12
10.1 Standard of Care.................................................12
10.2 Force Majeure....................................................13
10.3 Lending Opportunities............................................13
10.4 No Implied Duties................................................13
SECTION XI. INDEMNIFICATION...............................................13
11.1 General..........................................................13
11.2 Continuing Obligation............................................14
SECTION XII. RELIANCE ON THIRD PARTIES....................................14
12.1 Reliance on the Statements, Representations and Warranties of
Borrowers, Counterparties or Other Obligors .....................14
12.2 Reliance on Instructions.........................................14
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SECTION XIII. DURATION AND TERMINATION....................................14
13.1 General..........................................................14
SECTION XIV. MISCELLANEOUS................................................15
14.1 Exclusivity......................................................15
14.2 Certificate......................................................15
14.3 Notices..........................................................15
14.4 Cumulative Rights and No Waiver..................................16
14.5 Severability.....................................................16
14.6 Amendments.......................................................16
14.7 Assignment.......................................................16
14.8 Governing Law....................................................16
14.9 Waiver of Immunity...............................................17
14.10 No Third Party Beneficiaries.....................................17
14.11 Entire Agreement.................................................17
14.12 Counterparts.....................................................17
14.13 Further Assurances...............................................17
14.14 Records..........................................................17
14.15 Client is a Massachusetts Business Trust.........................18
Exhibits
EXHIBIT A - COLLATERAL AND INVESTMENT GUIDELINES
EXHIBIT B - LIST OF BORROWERS AND COUNTERPARTIES
EXHIBIT C - FEES
EXHIBIT D - CLIENT AUTHORIZED SIGNATORIES
EXHIBIT E - FORM OF SECURITIES LOAN AGREEMENT WITH BORROWERS
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SECURITIES LENDING
MANAGEMENT AGREEMENT
This
SECURITIES LENDING MANAGEMENT AGREEMENT (the "Agreement")
is entered into this 2nd day of July, 2001, between the American AAdvantage High
Yield Bond Fund, a series of the
American AAdvantage Funds ("Client"), and
Metropolitan West Securities, Inc. ("MetWest").
SECTION I. DEFINITIONS
Whenever used in this Agreement, unless the context otherwise
requires, the following words shall have the meanings set forth below:
"Affiliate" shall mean, in relation to any person, any entity
controlled (directly or indirectly) by the person, any entity that controls
(directly or indirectly) the person, or any entity (directly or indirectly)
under common control with the person. (For purposes of this definition,
"control" of any entity or person means ownership of a majority of the voting
power of the entity or person.)
"Affiliate Transactions" shall mean any Loan or Investment in
which an Affiliate of MetWest acts as principal or in which MetWest and an
Affiliate of MetWest both act as agents.
"Book-Entry System" shall mean the United States Federal
Reserve/Treasury book-entry system for receiving and delivering United States
Government Securities and any successors of such system.
"Borrower" shall mean U.S. registered broker-dealers or U.S.
regulated banks borrowing Securities under a Securities Loan Agreement, which is
on the List of Borrowers and Counterparties approved by Client.
"Business Day" shall mean any day on which MetWest is open for
business and on which the Book-Entry System, and/or the applicable Depositories
are open for business.
"Cash Collateral" shall mean any Collateral that takes the
form of federal funds,
New York Clearing House funds, or other U.S. Dollar
deposits.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Collateral" shall mean Cash Collateral, United States
Government Securities transferred or delivered pursuant to a Securities Loan
Agreement to Client as collateral, including any substitute or additional
collateral transferred or delivered thereto.
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"Collateral and Investment Guidelines" shall mean the
guidelines established by the Client and MetWest with regard to the transactions
described herein, a copy of which is attached hereto as Exhibit A.
"Counterparty" shall mean an entity that is an obligor on an
Investment that is made up of one or more underlying securities (such as a
repurchase agreement), but shall not include obligors on any such underlying
securities.
"Custodial Account" shall mean one or more accounts
established by Client at State Street Bank and Trust Company that hold
Securities to be loaned by MetWest on behalf of Client and the assets of Client
to be managed by MetWest, including Collateral, Investments, distributions
received with respect to Securities, Collateral and Investments ("Proceeds"),
and any Securities Loan Fee.
"Depository" shall mean the Depository Trust Company, the
Participants Trust Company and any other securities depository, local custodian
or clearing agency (and their respective successors and nominees) registered
with the appropriate governmental organization or otherwise authorized to act as
a securities depository or clearing agency.
"Distribution" shall mean a payment of the type referred to in
Section 4.4(b) of this Agreement.
"Fee" shall mean the compensation to be paid to MetWest for
its services hereunder as provided in Section 7.1.
"Investment" shall mean any security, financial instrument,
participation or interest in property or other asset that is purchased with Cash
Collateral as an investment..
"List of Borrowers and Counterparties" shall mean the list of
Borrowers and Counterparties approved by Client and attached hereto as Exhibit
B.
"Loan" shall mean a loan of Securities under a Securities Loan
Agreement.
"Loaned Security" shall mean any Security that is subject to a
Loan.
"Net Income" for each Client shall mean an amount equal to:
(i) all income from Investments, plus (ii) any Securities Loan Fees, minus (iii)
any Rebates paid or payable by Client to Borrowers.
"Oral Instructions" shall mean non-written communications
actually received by MetWest from a person reasonably believed by MetWest to be
authorized to act on behalf of Client.
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"Permissible Investments" shall mean the categories of
Investments approved by Client and listed on the Collateral and Investment
Guidelines, provided that such Investments shall not include Securities issued
by MetWest or any Affiliate thereof.
"Rebate" shall mean the amount payable by Client to a Borrower
pursuant to a Securities Loan Agreement in connection with Loans collateralized
by Cash Collateral.
"Securities Loan Agreement" shall mean the agreement(s)
pursuant to which MetWest lends securities on behalf of its clients (including
Client) from time to time, in the form attached hereto as Exhibit E.
"Securities Loan Fee" shall mean the amount payable by a
Borrower to Client pursuant to a Securities Loan Agreement in connection with
Loans collateralized by Collateral other than Cash Collateral.
"Security" shall include: (i) United States Government
Securities; (ii) bonds, debentures, corporate debt securities, notes, mortgages,
convertible debt securities or other debt obligations; (iii) any certificates,
warrants or other instruments representing rights to receive, purchase or
subscribe for any of (i) or (ii) above, or evidencing or representing any other
rights or interests therein owned by Client and which are to be loaned hereunder
by MetWest.
"United States Government Security" shall mean a book-entry
Treasury security (as defined in Subpart O of Treasury Department Circular No.
300, 31 C.F.R. 306) and any other security issued or fully guaranteed by the
United States Government or any agency, instrumentality or establishment of the
United States Government.
"Written Instructions" shall mean written communications
actually received by MetWest from a person reasonably believed by MetWest to be
authorized to act on behalf of Client, whether by letter, memorandum, telegram,
cable, telex, telecopy, facsimile, computer, video (CRT) terminal or other
on-line system, or any other method agreed to by the parties whereby MetWest is
able to verify with a reasonable degree of certainty the identity of the sender
of such communications or the sender is required to provide a password or other
identification code.
SECTION II. APPOINTMENT AS AGENT
2.1 General Appointment.
Client hereby appoints MetWest as Client's agent and
attorney-in-fact with power and authority to (i) lend Client's Securities that
are deposited in a Custodial Account to Borrowers, (ii) to arrange for Client to
receive Collateral in respect of Loans and (iii) to manage Cash Collateral by
making Investments pursuant to the terms of this Agreement. The appointment of
MetWest is on a fully discretionary basis except that (i) Loans shall be made
only to Borrowers whom Client has approved pursuant to Section 4.2 and shall not
in the aggregate
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exceed the maximum lending capacity to such Borrower as described on the List of
Borrowers and Counterparties and (ii) Investments shall be Permissible
Investments. MetWest shall make no Loan to any Affiliate of MetWest or enter
into any Investment pursuant to a transaction in which an Affiliate of MetWest
acts as principal. Client further authorizes and appoints MetWest as Client's
agent and attorney-in-fact with full power and authority (i) to establish on
Client's behalf such trading accounts in Client's name as may be necessary to
effect Loans and Investments of Cash Collateral, (ii) to execute and deliver
such contracts and other documents on behalf of Client, as MetWest in its sole
discretion deems necessary or advisable to establish such trading accounts or to
effect Loans or Investments and (iii) to act, in MetWest's sole discretion in
Client's name to enforce any remedies available to Client under any such
contracts or documents.
SECTION III. CUSTODIAL ACCOUNT
3.1 Deposit of Assets.
Client agrees that all Securities, Collateral, Investments,
Proceeds and Securities Loan Fees shall be deposited into a Custodial Account.
Except as otherwise provided herein, MetWest shall not have any beneficial
interest in the Securities, Collateral, Investments or Securities Loan Fees held
in any Custodial Account.
3.2 Additions and Withdrawals.
During the term of this Agreement, Client may add assets to or
withdraw assets from any Custodial Account provided that for any withdrawal of
Collateral, Client has delivered to MetWest Written Instructions of such
withdrawal at least two Business Days prior thereto, and the withdrawal shall be
subject to the provisions of Section 6.3 of this agreement.
3.3 Reports.
MetWest shall send, or shall arrange to have sent, to Client
by the fifteenth (15th) Business Day of each month a statement detailing the
securities lending activity in each Custodial Account for the previous calendar
month. The statement will, among other things, set forth for each Loan made or
outstanding during the previous calendar month the Loaned Securities, the
related Collateral, Rebate and Securities Loan Fee and such other information as
may be reasonably requested by Client. At the request of Client, MetWest shall
send, or shall arrange to have sent, to Client weekly or daily reports in such
format as shall be agreed to by MetWest and Client.
3.4 Disclosure of Custodial Account Information.
Client understands and agrees that MetWest may supply any
information regarding any Custodial Account that MetWest reasonably believes is
required to be disclosed pursuant to any statute, regulation, rule or order now
or hereafter in effect, upon the request of a
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regulatory agency, or to any third party (including an Affiliate of MetWest)
providing services pursuant to Section 6.6 of this Agreement. In addition,
Client authorizes MetWest to disclose (a) to any Borrower who at any time so
requests, (i) Client's name, (ii) that Client has authorized MetWest to lend the
Securities, (iii) that the Loaned Securities are owned by Client, and (iv) any
publicly available information concerning Client in MetWest's possession; and
(b) to any third party providing services pursuant to Section 6.6 of this
Agreement, (i) Client's name, (ii) that Client has authorized MetWest to manage
Collateral and make Investments, and (iii) that the assets in each Custodial
Account are owned by Client.
SECTION IV. SECURITIES LENDING TRANSACTIONS
4.1 Lending Transactions.
MetWest, as agent on behalf of Client, shall use its best
efforts to enter into Loans on each Business Day that Client has Securities
available for Loans. MetWest shall enter into a Loan with a Borrower pursuant to
a Securities Loan Agreement substantially in the form set forth in Exhibit E and
on such pricing terms as determined by MetWest, provided that (a) such Borrower
is listed on the List of Borrowers and Counterparties; (b) the amount of the
Loan to a Borrower when aggregated with the market value of all outstanding
Loans to such Borrower does not exceed the maximum lending capacity of such
Borrower as described on the list of Borrowers and Counterparties; (c) the
Collateral received with respect to the Loan is of the type listed as Collateral
on the Collateral and Investment Guidelines; (d) the maturity of the Loan does
not exceed the maximum maturity for a Loan set forth in the Collateral and
Investment Guidelines; and (e) such Borrower is not an Affiliate of MetWest.
Notwithstanding the foregoing, MetWest shall loan no more than thirty three and
one third percent (33 1/3%) of the market value of Client's total assets,
including the aggregate value of all Collateral hereunder.
MetWest, as agent on behalf of Client, shall take all actions
it deems necessary or appropriate, in its sole judgment, in connection with any
Loan, including (a) directing the transfer of Collateral into the Custodial
Account; (b) directing the transfer into the Custodial Account of Distributions
in respect of Loaned Securities and Collateral and any applicable Securities
Loan Fee; and (c) negotiating with each Borrower the type and amount of
Collateral, the Margin Percentage (as defined in Section 4.3 below), and the
amount of Rebate or Securities Loan Fee.
Notwithstanding anything to the contrary, Client acknowledges
and agrees that MetWest is (a) acting solely as Client's agent in entering into
Loans, with Client as the principal on all such Loans, and (b) under no duty to
enter into any transaction with respect to Securities that do not satisfy
Sections 8.1(g) and (h) of this Agreement.
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4.2 List of Borrowers and Counterparties.
Client and MetWest agree that the List of Borrowers and
Counterparties may be amended after the date hereof by either party upon
obtaining the written consent of the other party.
4.3 Xxxx-to-Market.
Each Securities Loan Agreement shall provide that the fair
market value of the Collateral received with respect to the Loaned Securities
shall be equal to that percentage (the "Margin Percentage") of the Loan as is
agreed to by the Borrower and MetWest, on behalf of Client, provided that the
Margin Percentage shall be not less than 102 percent and the maintenance Margin
Percentage shall be not less than 100 percent, or such lower percentages
permitted with prior written permission of the Client. On a daily basis, MetWest
shall determine the fair market value of Collateral and the outstanding Loan in
order to determine that the Borrower is complying with the Margin Percentage. In
the event that, on any Business Day, the fair market value of the Collateral is
greater than or less than the product of the outstanding Loan multiplied by the
Margin Percentage, MetWest shall exercise the rights afforded to the Client by
Section 8 of the Securities Loan Agreement. MetWest is not in any way
responsible for providing additional Collateral or eliminating such deficiency.
4.4 Distributions; Voting, etc.
(a) Client acknowledges that, during the term of any Loan, the
Borrower shall hold all incidents of ownership with respect to the Loaned
Securities, including, but without limitation, the rights to vote the Loaned
Securities and to transfer or lend Loaned Securities to others. In no event
shall MetWest be responsible for or have any obligations with respect to any
right to vote any Loaned Securities.
(b) Each Borrower shall, in accordance with the terms of the
Securities Loan Agreement, promptly pay to Client's Custodial Account the
equivalent (sometimes called a "manufactured" payment or dividend) of all
Distributions made by the issuer of the Loaned Securities during the term of the
Loan to which the Client would have been entitled had the Securities not been
loaned, including, but not limited to, cash dividends, interest payments, shares
of stock as a result of stock splits, stock dividends and the rights to purchase
additional securities. All such equivalent payments shall be in the same amount
that Client would have received had it not loaned the securities. MetWest, as
agent for Client, shall make every reasonable effort to obtain for Client all
Distributions (or the equivalent thereof) with respect to the Loaned Securities
and shall have credited the aggregate amount of such Distribution (net of
applicable fees) to the Custodial Account on the date such amounts are delivered
by the Borrower to the Custodial Account. Conversely, Client agrees that
MetWest, as agent for Client, may direct the transfer from the
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Custodial Account to a Borrower for any Distributions received by Client on
Collateral other than Cash Collateral.
SECTION V. INVESTMENTS
5 Investments.
Client hereby authorizes and agrees that MetWest has full and
exclusive discretionary authority to manage all Cash Collateral and, in that
regard, MetWest hereby agrees to use its best efforts to purchase Investments
with all available Cash Collateral in the Custodial Account, provided that (a)
each Investment is a Permissible Investment pursuant to the Collateral and
Investment Guidelines, (b) no such Investment may be made pursuant to a
transaction in which an Affiliate of MetWest acts as principal, and (c) for each
Investment involving a Counterparty, such Counterparty is listed on the List of
Borrowers and Counterparties.
SECTION VI. TRANSACTION PROCEDURES
6.1 Transaction Reports.
MetWest shall deliver to Client reports of any Loan or
Investment transaction as is requested by Client, which shall identify, among
other things, the Borrower and the basic terms of any transaction, within five
(5) Business Days after the settlement date of the transaction and shall deliver
to client such daily, weekly or monthly summary reports in a form and manner
agreed to by the Parties. MetWest shall send, or shall arrange to have sent, to
Client by the fifteenth (15th) Business Day of each month a report which will
provide a list of all Loans outstanding and closed during the preceding month.
The report will identify for each open Loan position, the Loaned Securities, the
value of the Loaned Securities for collateralization purposes, the current value
of the Collateral, the applicable Rebate or Securities Loan Fee, and the number
of days the Loaned Securities have been on loan.
6.2 Defaults by Counterparties.
(a) Upon the occurrence of an event of default (as defined in
the Securities Loan Agreement or other documentation governing an Investment) by
a Borrower or a Counterparty or other obligor on an Investment, MetWest may,
unless such event of default is cured prior thereto, terminate such Loan or
Investment in accordance with the Securities Loan Agreement or any documentation
covering the Investment, and MetWest shall inform Client regarding its rights
thereunder.
(b) Seventy-five percent of all expenses incurred by MetWest
in acting pursuant to this Section 6.2 shall be borne by Client, and any such
amounts (as well as any other amounts to which MetWest is entitled hereunder)
will be charged to the Client.
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(c) Client hereby understands and agrees that MetWest is
acting as agent for Client and is not in any way responsible for the performance
of a Borrower under any Securities Loan Agreement or a Counterparty or other
obligor under an Investment and shall in no way bear any responsibility for any
default by either of them.
(d) In the event for any reason there is a failure on the part
of a Borrower to deliver Loaned Securities to Client on an agreed upon date,
MetWest may, but shall not be obligated to, invest Cash Collateral with respect
to such Loaned Securities overnight in any short term investment account or take
such other action as it deems appropriate to the extent such action is
consistent with this agreement.
6.3 Termination of Loans and Investments.
MetWest shall terminate any Loan and Investment prior to the
agreed upon termination date for such Loan or Investment, as set forth in the
Securities Loan Agreement or documents governing such Investment, as soon as
practicable after:
(a) receipt by MetWest of Oral Instructions or Written
Instructions from Client to terminate a Loan or Investment;
(b) receipt by MetWest of Oral Instructions or Written
Instructions from Client advising that the Loaned Security is no longer subject
to the representations contained in Sections 8.1(g) or (h);
(c) the occurrence of an event of default under a Securities
Loan Agreement or by a Counterparty under the documents governing the
Investment; or
(d) termination of this Agreement.
All Loans shall be terminable upon demand. The Securities
subject to a terminated Loan shall be returned to the Custodial Account within
the applicable standard settlement period, which period shall be not more than
five business days.
6.4 Risk of Loss.
MetWest does not give any assurance as to the economic result
of any Loan or Investment, and Client as the principal bears all risk of loss
and liability under each Loan and Investment made in accordance with the
provisions of this Agreement, including, but not limited, to any event of
default, early termination under a Securities Loan Agreement or document
governing an Investment, unless otherwise agreed to in writing by MetWest or
unless otherwise provided under the Securities Loan Agreement or document.
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6.5 Use of Third Party Services.
Client hereby authorizes MetWest, in its sole discretion, to
appoint, utilize and reasonably rely upon the services of third parties,
including, but not limited to, recognized security data and pricing information
sources. Client understands and agrees that such third parties are not and shall
not be construed to be a party to this Agreement or otherwise be deemed in any
way to be in privity of contract with Client. MetWest shall not be responsible
for delays, failures in performance, or other actions by such third parties
selected by MetWest in the exercise of reasonable care, except to the extent
such action or inaction by a third party was caused in part by MetWest. The
Client authorizes MetWest, as Client's agent, to compensate any such third
parties and to pay all related expenses and fees, provided that (a) no more than
reasonable compensation shall be paid to any such third party and (b) no
compensation shall be paid to any Affiliate of MetWest.
6.6 Use of Book-Entry System.
Client hereby authorizes MetWest, in its sole discretion, to
deposit in the Book-Entry System, and the applicable Depositories all Securities
eligible for deposit therein and to utilize the Book-Entry System, and
Depositories to the extent possible in connection with MetWest's receipt and
delivery of Securities, Collateral, Investments and monies under this Agreement.
6.7 MetWest's Other Clients.
MetWest shall use its best efforts to treat Client on parity
with other clients in making Loans and Investments on its behalf, taking into
account the demand for specific securities, location of securities, availability
of securities, size of security position, types of Collateral, eligibility of
Borrowers, limitations on Investments and such other factors as MetWest deems
appropriate. MetWest shall nevertheless have the right to decline to make any
Loans or Investments and to terminate any Loans or Investments in its sole
discretion.
SECTION VII. REMITTANCES
7.1 Compensation to MetWest.
As compensation for the services provided by MetWest
hereunder, Client shall pay to MetWest a periodic Fee in such amounts and for
such periods (each, a "Fee Period") as are set forth on Exhibit C hereto. Client
agrees to pay the Fee on the 15th day of each month (or if such day is not a
Business Day then on the next succeeding Business Day) from the Custodial
Account.
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7.2 Payments to Client.
MetWest shall coordinate the transfer, by the 15th day of the
month (or, if such day is not a Business Day, on the next succeeding Business
Day) to the Custodial Account, an amount for the immediately preceding Fee
Period equal to the Net Income (as defined in Section 1), minus the Fee (as
described above),with respect to the previous Fee Period.
SECTION VIII. REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 By Client.
Client hereby represents, warrants and covenants to MetWest,
on each day that a Loan is outstanding, as follows:
(a) Client is entering into this Agreement and each Loan and
Investment as a principal for its own account;
(b) Client has been duly organized and is validly existing and
has the full power and authority to execute, deliver and perform its obligations
under this Agreement and any documents contemplated herein including, without
limitation, any Securities Loan Agreement, repurchase agreement or other
documentation that MetWest executes as agent for Client (the "Other Documents");
(c) The execution, delivery and performance of this Agreement
and the Other Documents by Client have been duly authorized by Client;
(d) The person executing this Agreement and all persons acting
on behalf of Client have been duly and properly authorized to do so;
(e) This Agreement is, and each Other Document, Loan and
Investment will be, a legal, valid and binding agreement of Client and will be
enforceable against Client in accordance with its terms, except as may be
limited by bankruptcy, insolvency or similar laws, or by equitable principles
relating to or limiting creditors' rights generally;
(f) The execution, delivery and performance of this Agreement
and each Other Document does not and will not (i) violate any provision of
Client's governing documents and instruments, (ii) conflict with or result in a
default under any agreement to which Client is a party or by which any of its
properties is bound, or (iii) violate any law, regulation, judgment or order
affecting Client or by which Client is bound;
(g) Client will not transfer, assign or encumber its interest
in, or rights with respect to, any assets in the Custodial Account, except as
required by this Agreement;
(h) Except as otherwise described in Written Instructions
delivered to MetWest by Client, Client is the beneficial owner of the
Securities, and all Securities in the Custodial
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Account are free and clear of all liens, claims, security interests and
encumbrances (other than liens, claims, security interests or encumbrances
created under this Agreement) (collectively, "Claims") and has the right to
transfer all right, title and interest in and to the Securities to Borrowers
free from Claims;
(i) Client acknowledges that it has received a copy of Part II
of MetWest's Form ADV at least 48 hours before signing this Agreement.
(j) Client agrees to make available to MetWest Client's most
recent publicly available audited and unaudited statements of financial
condition and earnings, and represents that such statements will be true and
correct, prepared in accordance with generally accepted accounting principles
applied on a consistent basis, and reflective of Client's true financial
condition;
(k) Client represents that the Loans and Investments
contemplated herein are not inconsistent with any law, regulation, rule or order
or any judgment decree or order of any court or regulatory agency, whether now
or hereafter in effect and whether known or unknown to MetWest;
(l) Client is capable of assessing the merits of and
understanding (on its own behalf or through independent professional advice),
and understands and accepts, the terms, conditions and risks of this Agreement
and of the Loans and Investments contemplated hereunder; Client has had an
opportunity to review the Agreement and reach its own conclusions regarding the
tax and accounting consequences of the Loans and Investments contemplated
hereunder, and acknowledges that neither MetWest nor any of its Affiliates have
made any representation or given any advice with respect thereto and that
nothing in this Agreement or any exhibit or schedule hereto shall be construed
as a representation by MetWest with respect to any of the tax or accounting
consequences of the Agreement or any person; and Client has not relied on the
views, advice or any recommendation of MetWest or any of its Affiliates in
entering into this Agreement;
(m) Client has provided to MetWest all information with
respect to the withholding tax requirements of any taxing authority applicable
to Client; and
(n) Client shall promptly notify MetWest of any change in
circumstances that materially affects the accuracy of the representations set
forth in Section 8.1.
8.2 By MetWest.
MetWest hereby represents, warrants and covenants to Client,
on each day that a Loan is outstanding, as follows:
(a) MetWest has been duly organized and is validly existing
and has the full power and authority to execute, deliver and perform its
obligations under this Agreement and
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any documents contemplated herein including, without limitation, any Securities
Loan Agreement, repurchase agreement or other documentation that MetWest
executes as agent for Client (the "Other Documents");
(b) The execution, delivery and performance of this Agreement
and the Other Documents by MetWest have been duly authorized by MetWest;
(c) The persons executing this Agreement and all persons
acting on behalf of MetWest have been duly and properly authorized to do so;
(d) This Agreement is, and each Other Document, Loan and
Investment will be, a legal, valid and binding agreement of MetWest and will be
enforceable against MetWest in accordance with its terms, except as may be
limited by bankruptcy, insolvency or similar laws, or by equitable principles
relating to or limiting creditors' rights generally;
(e) The execution, delivery and performance of this Agreement
and each Other Document does not and will not (i) violate any provision of
MetWest's governing documents and instruments, (ii) conflict with or result in a
default under any agreement to which MetWest is a party or by which any of its
properties is bound, or (iii) violate any law, regulation, judgment or order
affecting MetWest or by which MetWest is bound;
(f) MetWest acknowledges that, with respect to any Loans or
Investments, that Client is not responsible for MetWest's compliance and shall
not have any liability for MetWest's compliance with any law, regulation, rule
or order or any judgment decree or order of any court or regulatory agency,
whether now or hereafter in effect and whether known or unknown to Client; and
(g) MetWest shall promptly notify Client of any change in
circumstances that materially affects the accuracy of the representations set
forth in Section 8.2.
SECTION IX. NO AFFILIATE TRANSACTIONS
9 No Affiliate Transactions.
MetWest shall not enter into any transactions with any
Affiliates on behalf of Client related to any transactions or services
contemplated by this Agreement.
SECTION X. STANDARD OF CARE
10.1 Standard of Care.
With respect to Loans and Investments, MetWest acknowledges
that it will perform its services in good faith and in accordance with
applicable law, including the Investment Company Act of 1940, as amended, and
the rules thereunder, and with the care, skill,
12
prudence and diligence under the circumstances then prevailing that a prudent
person acting in a like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like aims. MetWest and its
Affiliates, directors, officers, employees and agents shall not be liable for
any costs, expenses, damages, liabilities or claims (including attorneys' and
accountants' fees) incurred by Client, except those costs, expenses, damages,
liabilities or claims arising out of the negligence, bad faith or willful
misconduct of MetWest, or its failure to comply with the terms of or
representations in this Agreement. Moreover, except to the extent that MetWest
otherwise agrees in writing, MetWest shall have no obligation hereunder for
costs, expenses, damages, liabilities or claims (including attorneys' and
accountants' fees), which are sustained or incurred by reason of any action or
inaction by any Borrower, Counterparty, obligor on any Investment, pricing
service, the Book-Entry System, any Depository, or any third party, or their
respective successors or nominees, except to the extent that MetWest contributed
to the action or inaction that resulted in a loss to the Client. In no event
shall MetWest or Client be liable for special, indirect or consequential
damages, or lost profits or loss of business, arising under or in connection
with this Agreement, even if previously informed of the possibility of such
damages and regardless of the form of action. The applicable securities laws may
impose liabilities under certain circumstances on persons who act in good faith,
and therefore nothing herein shall in any way constitute a waiver or limitation
of any rights which the Client may have under any securities laws.
10.2 Force Majeure.
MetWest shall not be responsible or liable for any failure or
delay in the performance of its obligations under this Agreement arising out of
or caused, directly or indirectly, by circumstances beyond its control,
including, without limitation: acts of God; earthquakes; fires; floods; wars;
civil or military disturbances; sabotage; epidemics; riots; interruptions, loss
or malfunctions of utilities, transportation, computer (hardware or software) or
communications service; accidents; labor disputes; acts of civil or military
authority; or governmental actions.
10.3 Lending Opportunities.
Client acknowledges that MetWest or its Affiliates may from
time to time lend securities to, or through, or enter into similar transactions
with any Borrower.
10.4 No Implied Duties.
MetWest shall not have any duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied against
MetWest in connection with this Agreement.
13
SECTION XI. INDEMNIFICATION
11.1 General.
Each party hereto (the "Indemnifying Party") shall indemnify
and hold harmless the other party hereto, its Affiliates and their respective
directors, officers, employees and agents (each an "Indemnified Party") from and
against any and all costs, expenses, damages, liabilities (joint and several) or
claims, including reasonable fees and expenses of counsel, which any Indemnified
Party sustains or incurs as a direct result of any breach by the Indemnifying
Party of any of its acknowledgments, representations or agreements contained
herein or as a result of any action taken or omitted by the Indemnifying Party
in connection with this Agreement, other than those costs, expenses, damages,
liabilities or claims arising out of the negligence, bad faith or willful
misconduct of such Indemnified Party. Actions taken or omitted in reliance upon
Oral or Written Instructions or upon any information, order, indenture, stock
certificate, power of attorney, assignment, affidavit or other instrument
reasonably believed by any Indemnified Party to be duly authorized shall be
conclusively presumed to have been taken or omitted in good faith.
11.2 Continuing Obligation.
Each party acknowledges that the above indemnification
provision is a continuing obligation of itself and its successors and assigns,
notwithstanding the termination of any Loans, Investments or this Agreement.
SECTION XII. RELIANCE ON THIRD PARTIES
12.1 Reliance on the Statements, Representations and Warranties of
Borrowers, Counterparties or Other Obligors.
MetWest shall be entitled to rely upon, and to provide to
Borrowers and Counterparties, the most recent publicly available audited and
unaudited statements of financial condition and earnings of Client and to rely
upon reasonable representations and warranties made by Borrowers, Counterparties
or other obligors. MetWest shall not be liable for any loss or damage suffered
as a result of any such reliance.
12.2 Reliance on Instructions.
MetWest shall be entitled to rely upon any Written or Oral
Instructions actually received by MetWest and reasonably believed by MetWest to
be duly authorized. Client agrees to forward to MetWest Written Instructions
confirming Oral Instructions in such a manner that Written Instructions are
received by MetWest by the close of business on the same day that Oral
Instructions are received. Client agrees that the fact that such confirming
Written Instructions are not received or that contrary instructions are received
by MetWest shall in no way affect the validity or enforceability of the
transactions authorized by Client pursuant to the Oral
14
Instructions. In this regard, the records of MetWest shall be presumed to
reflect accurately any Oral Instructions given by a person believed by MetWest
to be duly authorized.
SECTION XIII. DURATION AND TERMINATION
13.1 General
This Agreement, unless sooner terminated as provided herein,
shall continue for two years and thereafter for periods of one year for so long
as such continuance thereafter is specifically approved at least annually (a) by
the vote of a majority of those members of the Board of Trustees of the Client
who are not parties to this Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by the Board Trustees of the Client or by vote of a majority of the
outstanding voting securities of the Client; provided, however, that if the
shareholders of the Client fail to approve the Agreement as provided herein,
MetWest may continue to serve hereunder in the manner and to the extent
permitted by the Investment Company Act of 1940, as amended, and the rules and
exemptions thereunder. The foregoing requirement that continuance of this
Agreement be "specifically approved at least annually" shall be construed in a
manner consistent with the Investment Company Act of 1940, as amended, and the
rules thereunder. This Agreement may be terminated by Client at any time,
without the payment of any penalty, by the vote of a majority of the Trustees of
the Client or by vote of a majority of the outstanding voting securities of
Client or by a determination by AMR Investment Services, Inc. (Client's manager)
on not less than 30 days nor more than 60 days written notice to MetWest, or by
MetWest, at any time without the payment of any penalty, on 60 days written
notice to Client. As used in this Section 13.1, the terms "interested persons"
and a "vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in the Investment Company Act of 1940, as amended,
and the rules thereunder, subject to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
SECTION XIV. MISCELLANEOUS
14.1 Exclusivity.
Client agrees that it shall not enter into any other agreement
with any third party with respect to any Custodial Account whereby such third
party is permitted to make loans on behalf of Client of Securities in a
Custodial Account or any investments of Cash Collateral in a Custodial Account.
14.2 Certificate.
Client agrees to furnish to MetWest a certificate regarding
authorized signatories and to furnish updates thereto as such persons change.
Such certificate shall be attached hereto as Exhibit D.
15
14.3 Notices.
(a) Any notice or other instrument in writing authorized or
required by this Agreement to be given to MetWest shall be sufficiently given if
addressed to MetWest and received by it at its offices at 00000 Xxx Xxxxxxx
Xxxxxxxxx, 0xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxx 00000, Fax: (000) 000-0000, Attn:
Securities Lending Group, or at such other places as MetWest may from time to
time designate in writing.
(b) Any notice or other instrument in writing authorized or
required by this Agreement to be given to Client shall be sufficiently given if
addressed to Client and received by it at its office at 4333 Xxxx Xxxxxx Blvd.,
MD 5645, Xxxx Xxxxx, XX 00000, Fax: (000) 000-0000, Attn: Xxxxxxx X. Xxxxx or at
such other place as Client may from time to time designate in writing.
All notices to be delivered hereunder this Agreement shall be effective upon
receipt.
14.4 Cumulative Rights and No Waiver.
Except as provided herein, each and every right granted to
MetWest or Client, respectively, hereunder or under any other document delivered
hereunder or in connection herewith, or allowed either party by law or equity,
shall be cumulative and may be exercised from time to time. No failure on the
part of MetWest or Client to exercise, and no delay in exercising, any of their
respective rights will operate as a waiver thereof, nor will any single or
partial exercise by MetWest or Client of any of their respective rights preclude
any other or future exercise thereof or the exercise of any other right.
14.5 Severability.
If any provision in or obligation under this Agreement is
deemed to be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions and
obligations shall not in any way be affected or impaired thereby, and if any
provision is inapplicable to any person or circumstances, it shall nevertheless
remain applicable to all other persons and circumstances.
14.6 Amendments.
This Agreement may not be amended or modified in any manner
except by a written agreement executed by all parties hereto.
14.7 Assignment.
This Agreement shall terminate automatically in the event of
its "assignment" as that term is defined in the Investment Company Act of 1940,
as amended, and related rules and interpretations thereunder.
16
14.8 Governing Law.
THE CLIENT AGREES THAT ALL CONTROVERSIES WHICH MAY ARISE
BETWEEN OR AMONG ANY OF THE PARTIES HERETO, INCLUDING, BUT NOT LIMITED TO, THOSE
INVOLVING ANY TRANSACTION OR THE CONSTRUCTION, PERFORMANCE OR BREACH OF THIS OR
ANY OTHER AGREEMENT RELATED HERETO BETWEEN THE PARTIES AS ALLOWED BY THE LAWS OF
THE STATE OF
NEW YORK, WHETHER ENTERED INTO PRIOR TO, ON OR SUBSEQUENT TO THE
DATE HEREOF, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES AND ANY DISPUTES SHALL BE BROUGHT SOLELY
BEFORE THE COURTS OF
NEW YORK IN THE CITY OF
NEW YORK OR FEDERAL COURTS OF THE
SOUTHERN DISTRICT OF
NEW YORK.
14.9 Waiver of Immunity.
To the extent that Client may now or hereafter in any
jurisdiction be entitled to claim, for itself or its assets, immunity from suit,
execution, attachment (before or after judgment) or other legal process, Client
irrevocably agrees not to claim, and hereby waives, such immunity.
14.10 No Third Party Beneficiaries.
In performing hereunder, MetWest is acting solely on behalf of
Client, and no contractual or service relationship shall be deemed to be
established hereby between MetWest and any other person.
14.11 Entire Agreement.
This Agreement constitutes the entire agreement of the parties
with respect to its subject matter (except as otherwise provided herein) and
supersedes all prior oral and written agreements in regard thereto.
14.12 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 instrument.
14.13 Further Assurances.
At any time and from time to time, each of Client and MetWest
will promptly execute and deliver or file all further instruments and documents
and take all further action that the other party may reasonably request to
permit such other party to perform its duties, or to enforce its rights and
remedies, under this Agreement.
17
14.14 Records.
Any records required to be maintained and preserved pursuant
to the provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Investment
Company Act of 1940, as amended, which are prepared or maintained by MetWest on
behalf of the Client are the property of the Client and will be surrendered
promptly to the Client on request and made available for inspection upon
reasonable request by Client.
14.15 Client is a Massachusetts Business Trust
Client is organized as a Massachusetts business trust. A copy
of Client's Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts, and notice is hereby given that this instrument
is not binding upon any of the Trustees, officers, or shareholders of the Client
individually. Any responsibility or liability of a series of the Client under
any provision of this Agreement shall be satisfied solely from the assets of the
particular series, tangible or intangible, realized or unrealized, and in no
event shall MetWest have any recourse against any one series for the obligations
of any other series of the Client.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective duly authorized corporate officers
as of the day and year first above written.
ACCEPTED AND APPROVED BY:
METROPOLITAN WEST SECURITIES, INC.
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
American AAdvantage Funds, on behalf of
its series, the American AAdvantage High
Yield Bond Fund
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
18
EXHIBIT A
INVESTMENT GUIDELINES
OBJECTIVES
The key objectives of the management of cash collateral supporting securities
loans are to:
o safeguard principal
o assure that all cash collateral is invested in a timely manner,
o maintain adequate liquidity to meet the needs of clients and/or their
investment advisors, and
o consistent with these objectives, to optimize the spread between the
earnings on cash collateral investments and rebate rates paid to the
borrowers of securities.
PERMITTED INVESTMENTS
U.S. Treasury Bills and Notes
U.S. Agency Discount and Coupon Notes
Domestic, Yankee or Eurodollar:
o certificates of deposit
o bankers acceptances
o medium-term notes/bank notes
o time deposits
o commercial paper
o Master Notes
o Repurchase agreements, including Tri-Party Agreements, collateralized
at 102% which collateral consists of U.S. dollar denominated
securities, other than derivative securities, rated at least (i) A-1
by Standard and Poor's or P-1 by Moody's for short term securities,
(ii) A- by Standard and Poor's or A3 by Moody's for long term
securities.
o Investment Funding Agreements with puts of a year or less which are
rated or which are issued by an entity rated AA or better by Standard
& Poor's and Aa2 or better by Moodys.
o Floating Rate Asset Backed Securities with an expected average life
of five years or less which are rated AAA by Standard & Poor's and Aaa
by Moodys.
o Money Market Mutual Funds.
o Corporate Debt Obligations.
A-1
INVESTMENT QUALITY
All investments, except as provided otherwise in this Exhibit,
must be (i) high quality, U.S. dollar-denominated obligations (ii) rated A-1 by
Standard and Poors or P-1 by Moodys or its equivalent by any two nationally
recognized statistical rating organizations (NRSRO), at least one of which NRSRO
is either Moodys or Standard and Poors (the Requisite NRSROs) if such
investments are short-term and (iii) rated at least A by Standard and Poor's and
A2 by Moody's if such investments are long-term.
DIVERSIFICATION
Investments in obligations of any issuer (other than U.S. Treasury
or Agency securities) cannot exceed 5% of the value of the total assets as of
the date the investment is made. For purposes of this preceding sentence, issuer
shall include an issuer and any subsidiary, which is consolidated on such
issuers balance sheet.
For purposes of issuer concentration limits, with respect to
repurchase agreements, only the counterparties to such agreements will be
considered and not the issuers of the underlying securities.
OTHER RESTRICTIONS
Unsecured direct obligations of broker/dealers are permitted to
the extent that, when aggregated with loans to such broker/dealers, they do not
exceed the Counterparty maximum percentage of available securities to loan set
forth in Exhibit B. Notwithstanding anything to the contrary, repurchase
agreements with, and secured obligations of, broker/dealers shall not be subject
to the percentage limits set forth in Exhibit B.
o Obligations with stated lifetime caps are not permitted, except for
statutory caps, including usury caps.
o Obligations denominated in non-U.S. dollar currencies are not permitted.
o Variable rate obligations must be based on a leading money market index
such as Fed Funds or LIBOR.
o Derivative instruments are not permitted.
o No mortgage or mortgage backed securities are permitted except to the
extent that such securities are delivered with respect to repurchase
agreements.
MATURITY/MISMATCH
The maximum weighted average maturity of the clients Loans and
cash collateral investments is 30 days. Put features and floating and variable
rate note reset dates will be used as the proxy for maturity date in calculating
the weighted average maturity of the Loans and Cash Collateral investments.
No fixed rate instrument will have a maturity date in excess of 33
days from time of purchase, subject to any maturity shortening provisions.
o Floating and variable rate instruments, except for Floating and Variable
Rate Asset Backed securities, may have a stated final maturity of up to
two-years maturity (such instruments must reset at least annually), and
o Weighted average mismatch between Loans and Cash Collateral investments
cannot exceed 14 days at any time.
o Money market funds are viewed as having a one-day maturity.
A-2
RATINGS
For purposes of this Exhibit, the ratings required for investments
to be in compliance with these Investment Guidelines shall be required only as
of the date such investment is purchased. Therefore, if an investment is
downgraded after it is purchased, MetWest will not be in default of these
Investment Guidelines solely because of such downgrade.
ACCEPTED AND APPROVED BY:
METROPOLITAN WEST SECURITIES, INC.
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
ACCEPTED AND APPROVED BY:
AMERICAN AADVANTAGE HIGH YIELD BOND FUND
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
A-3
THE AMERICAN AADVANTAGE HIGH YIELD BOND FUND
EXHIBIT B
LIST OF BORROWERS AND COUNTERPARTIESLIST OF BORROWERS UNDER SECURITIES LOAN
AGREEMENTS AND COUNTERPARTIES UNDER REPURCHASE AGREEMENTS
Dated As of July 2, 2001
BORROWER/COUNTERPARTY DOMICILE LIMIT (% OF CLIENT ASSETS)
--------------------- -------- --------------------------
ABN AMRO Bank, NV (New York Branch) US 5%
ABN AMRO, Inc. US 5%
Banc One Capital Markets, Inc. (formerly, First Chicago Capital US 5%
Markets, Inc.)
Bank of Nova Scotia US 5%
Banc of America Securities, LLC (formerly, Bank America US 5%
Xxxxxxxxx Xxxxxxx; BA Securities Inc. // merged with
Nationsbank Xxxxxxxxxx Securities Inc.)
Barclay's Capital, Inc. (formerly, Barclays Capital Group; US 5%
Barclays de Zoete Wedd Securities, Inc.) US 5%
Bear Xxxxxxx & Company, Inc.
Bear Xxxxxxx Mortgage Capital Corp.
Bear Xxxxxxx International Limited
Bear Xxxxxxx Securities Corp.
Chase Securities, Inc. US 5%
CIBC World Markets Corp. (formerly, CIBC Xxxxxxxxxxx Corp.;
CIBC Wood Gundy Securities Corp.)
Credit Suisse First Boston Corporation US 5%
Deutsche Bank US 5%
Deutsche Bank Securities, Inc.
(formerly, Deutsche Xxxxxx Xxxxxxxx)
Dresdner Kleinwort Xxxxxx North America, LLC US 5%
First Union Securities Inc. (formerly, First Union Capital US 5%
Markets Corp.)
Fleet Securities Inc. US 5%
A-1
Xxxxxxx Xxxxx & Co. US 5%
ING Barings LLC US 5%
X.X. Xxxxxx Securities, Inc. US 5%
Xxxxxx Brothers, Inc US 5%
Xxxxxx Commercial Paper Inc.
Xxxxxxx Xxxxx & Co. US 5%
Xxxxxxx Xxxxx Government Securities, Inc.
Xxxxxxx Xxxxx Mortgage Capital, Inc.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx, Inc.
Xxxxxx Xxxxxxx & Co., Inc. US 5%
Xxxxxx Xxxxxxx Xxxx Xxxxxx Discover & Co Inc.
Xxxxxx Xxxxxxx Mortgage Capital Inc.
Prudential Securities, Inc. US 5%
RBC Dominion Securities Corp. US 5%
RBC Dominion Securities, Inc. US 5%
Xxxxxxx Xxxxx Barney Inc. US 5%
Salomon Brothers Holdings Company, Inc.
UBS Warburg LLC (formerly, Warburg Dillon Read, LLC - merged
entity of UBS Securities LLC and SBC Warburg Dillon Read Inc.) US 5%
ADDITIONAL RESTRICTIONS:
I. A Loan may not be made if at the time entered into such Loan would cause
Client to have more than one-third (1/3) of its total assets loaned to
Borrowers.
A-2
ACCEPTED AND APPROVED BY:
METROPOLITAN WEST SECURITIES, INC
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
ACCEPTED AND APPROVED BY:
AMERICAN AADVANTAGE HIGH YIELD BOND FUND
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
A-3
EXHIBIT C
FEES
MetWest shall receive a Fee equal to 25% of the Net Income during each
Fee Period for services provided to the Client under the Agreement.
For purposes of the Agreement, a Fee Period shall be the customary
MetWest reporting period.
A-4
EXHIBIT D
CLIENT AUTHORIZED SIGNATORIES
A-5
EXHIBIT E
FORM OF SECURITIES LOAN AGREEMENT WITH BORROWERS
A-6
THE
BOND
MARKET MASTER SECURITIES
ASSOCIATION LOAN AGREEMENT
--------------------------------------------------------------------------------
Dated as of
-----------------------------------------------------------------------
Between:
-----------------------------------------------------------------------
and
-----------------------------------------------------------------------
This Agreement sets forth the terms and conditions under which one
party ("Lender") may, from time to time, lend to the other party
("Borrower") certain securities against a pledge of collateral.
Capitalized terms not otherwise defined herein shall have the meanings
provided in Section 26.
The parties hereto agree as follows:
1. LOANS OF SECURITIES.
1.1 Subject to the terms and conditions of this Agreement,
Borrower or Lender may, from time to time, orally seek to
initiate a transaction in which Lender will lend securities to
Borrower. Borrower and Lender shall agree orally on the terms
of each Loan, including the issuer of the securities, the
amount of securities to be lent, the basis of compensation,
and the amount of Collateral to be transferred by Borrower,
which terms may be amended during the Loan.
1.2 Notwithstanding any other provision in this Agreement
regarding when a Loan commences, a Loan hereunder shall not
occur until the Loaned Securities and the Collateral therefor
have been transferred in accordance with Section 16.
1.3 WITHOUT WAIVING ANY RIGHTS GIVEN TO LENDER HEREUNDER, IT IS
UNDERSTOOD AND AGREED THAT THE PROVISIONS OF THE SECURITIES
INVESTOR PROTECTION ACT OF 1970 MAY NOT PROTECT LENDER WITH
RESPECT TO LOANED SECURITIES HEREUNDER AND THAT, THEREFORE,
THE COLLATERAL DELIVERED TO LENDER MAY CONSTITUTE THE ONLY
SOURCE OF SATISFACTION OF BORROWER'S OBLIGATIONS IN THE EVENT
BORROWER FAILS TO RETURN THE LOANED SECURITIES.
2. TRANSFER OF LOANED SECURITIES.
2.1 Unless otherwise agreed, Lender shall transfer Loaned
Securities to Borrower hereunder on or before the Cutoff Time
on the date agreed to by Borrower and Lender for the
commencement of the Loan.
May 1993 - Master Securities Loan Agreement - 1
2.2 Unless otherwise agreed, Borrower shall provide Lender, in
each Loan in which Lender is a Customer, with a schedule and
receipt listing the Loaned Securities. Such schedule and
receipt may consist of (a) a schedule provided to Borrower by
Lender and executed and returned by Borrower when the Loaned
Securities are received, (b) in the case of securities
transferred through a Clearing Organization which provides
transferors with a notice evidencing such transfer, such
notice, or (c) a confirmation or other document provided to
Lender by Borrower.
3. COLLATERAL.
3.1 Unless otherwise agreed, Borrower shall, prior to or
concurrently with the transfer of the Loaned Securities to
Borrower, but in no case later than the close of business on
the day of such transfer, transfer to Lender Collateral with a
market value at least equal to a percentage of the market
value of the Loaned Securities agreed to by Borrower and
Lender (which shall be not less than 100% of the market value
of the Loaned Securities) (the "Margin Percentage").
3.2 The Collateral transferred by Borrower to Lender, as adjusted
pursuant to Section 8, shall be security for Borrower's
obligations in respect of such Loan and for any other
obligations of Borrower to Lender. Borrower hereby pledges
with, assigns to, and grants Lender a continuing first
security interest in, and a lien upon, the Collateral, which
shall attach upon the transfer of the Loaned Securities by
Lender to Borrower and which shall cease upon the transfer of
the Loaned Securities by Borrower to Lender. In addition to
the rights and remedies given to Lender hereunder, Lender
shall have all the rights and remedies of a secured party
under the
New York Uniform Commercial Code. It is understood
that Lender may use or invest the Collateral, if such consists
of cash, at its own risk, but that (unless Lender is a
Broker-Dealer) Lender shall, during the term of any Loan
hereunder, segregate Collateral from all securities or other
assets in its possession. Lender may pledge, repledge,
hypothecate, rehypothecate, lend, relend, sell or otherwise
transfer the Collateral, or re-register Collateral evidenced
by physical certificates in any name other than Borrower's,
only (a) if Lender is Broker-Dealer or (b) in the event of a
Default by Borrower. Segregation of Collateral may be
accomplished by appropriate identification on the books and
records of Lender if it is a "financial intermediary" or a
"clearing corporation" within the meaning of the
New York
Uniform Commercial Code.
3.3 Except as otherwise provided herein, upon transfer to Lender
of the Loaned Securities on the day a Loan is terminated
pursuant to Section 5, Lender shall be obligated to transfer
the Collateral (as adjusted pursuant to Section 8) to Borrower
no later than the Cutoff Time on such day or, if such day is
not a day on which a transfer of such Collateral may be
effected under Section 16, the next day on which such a
transfer may be effected.
3.4 If Borrower transfers Collateral to Lender, as provided in
Section 3.1, and Lender does not transfer the Loaned
Securities to Borrower, Borrower shall have the absolute right
to the return of the Collateral; and if Lender transfers
Loaned Securities to Borrower and Borrower does not transfer
Collateral to Lender as provided in Section 3.1, Lender shall
have the absolute right to the return of the Loaned
Securities.
3.5 Borrower may, upon reasonable notice to Lender (taking into
account all relevant factors, including industry practice, the
type of Collateral to be substituted and the applicable
2 - May 1993 - Master Securities Loan Agreement
method of transfer), substitute Collateral for Collateral
securing any Loan or Loans; provided, however, that such
substituted Collateral shall (a) consist only of cash,
securities or other property that Borrower and Lender agreed
would be acceptable Collateral prior to the Loan or Loans and
(b) have a market value such that the aggregate market value
of such substituted Collateral, together with all other
Collateral for Loans in which the party substituting such
Collateral is acting as Borrower, shall equal or exceed the
agreed upon Margin Percentage of the market value of the
Loaned Securities. Prior to the expiration of any letter of
credit supporting Borrower's obligations hereunder, Borrower
shall, no later than the Cutoff Time on the date such letter
of credit expires, obtain an extension of the expiration of
such letter of credit or replace such letter of credit by
providing Lender with a substitute letter of credit in an
amount at least equal to the amount of the letter of credit
for which it is substituted.
3.6 Lender acknowledges that, in connection with Loans of
Government Securities and as otherwise permitted by applicable
law, some securities provided by Borrower as Collateral under
this Agreement may not be guaranteed by the United States.
4. FEES FOR LOAN.
4.1 Unless otherwise agreed, (a) Borrower agrees to pay Lender a
loan fee (a "Loan Fee"), computed daily on each Loan to the
extent such Loan is secured by Collateral other than cash,
based on the aggregate par value (in the case of Loans of
Government Securities) or the aggregate market value (in the
case of all other Loans) of the Loaned Securities on the day
for which such Loan Fee is being computed, and (b) Lender
agrees to pay Borrower a fee or rebate (a "Cash Collateral
Fee") on Collateral consisting of cash, computed daily based
on the amount of cash held by Lender as Collateral, in the
case of each of the Loan Fee and the Cash Collateral Fee at
such rates as Borrower and Lender may agree. Except as
Borrower and Lender may otherwise agree (in the event that
cash Collateral is transferred by clearing house funds or
otherwise), Loan Fees shall accrue from and including the date
on which the Loaned Securities are transferred to Borrower to,
but excluding, the date on which such Loaned Securities are
returned to Lender, and Cash Collateral Fees shall accrue from
and including the date on which the cash Collateral is
transferred to Lender to, but excluding, the date on which
such cash Collateral is returned to Borrower.
4.2 Unless otherwise agreed, any Loan Fee or Cash Collateral Fee
payable hereunder shall be payable:
(a) in the case of any Loan of securities other than
Government Securities, upon the earlier of (i) the
fifteenth day of the month following the calendar
month in which such fee was incurred or (ii) the
termination of all Loans hereunder (or, if a transfer
of cash in accordance with Section 16 may not be
effected on such fifteenth day or the day of such
termination, as the case may be, the next day on
which such a transfer may be effected); and
(b) in the case of any Loan of Government Securities,
upon the termination of such Loan.
Notwithstanding the foregoing, all Loan Fees shall be payable by Borrower
immediately in the event of a Default hereunder by Borrower and all Cash
Collateral Fees shall be payable immediately by Lender in the event of a Default
by Lender.
May 1993 - Master Securities Loan Agreement - 3
5. TERMINATION OF THE LOAN.
Unless otherwise agreed, (a) Borrower may terminate a Loan on
any Business Day by giving notice to Lender and transferring
the Loaned Securities to Lender before the Cutoff Time on such
Business Day, and (b) Lender may terminate a Loan on a
termination date established by notice given to Borrower prior
to the close of business on a Business Day. The termination
date established by a termination notice given by Lender to
Borrower shall be a date no earlier than the standard
settlement date for trades of the Loaned Securities entered
into on the date of such notice, which date shall, unless
Borrower and Lender agree to the contrary, be (i) in the case
of Government Securities, the next Business Day following such
notice and (ii) in the case of all other securities, the third
Business Day following such notice. Unless otherwise agreed,
Borrower shall, on or before the Cutoff Time on the
termination date of a Loan, transfer the Loaned Securities to
Lender; provided, however, that upon such transfer by
Borrower, Lender shall transfer the Collateral (as adjusted
pursuant to Section 8) to Borrower in accordance with Section
3.3.
6. RIGHTS OF BORROWER IN RESPECT OF THE LOANED SECURITIES.
Except as set forth in Sections 7.1 and 7.2 and as otherwise
agreed by Borrower and Lender, until Loaned Securities are
required to be redelivered to Lender upon termination of a
Loan hereunder, Borrower shall have all of the incidents of
ownership of the Loaned Securities, including the right to
transfer the Loaned Securities to others. Lender hereby waives
the right to vote, or to provide any consent or to take any
similar action with respect to, the Loaned Securities in the
event that the record date or deadline for such vote, consent
or other action falls during the term of the Loan.
7. DIVIDENDS, DISTRIBUTIONS, ETC.
7.1 Lender shall be entitled to receive all distributions made on
or in respect of the Loaned Securities which are not otherwise
received by Lender, to the full extent it would be so entitled
if the Loaned Securities had not been lent to Borrower,
including, but not limited to: (a) cash and all other
property, (b) stock dividends, (c) securities received as a
result of split ups of the Loaned Securities and distributions
in respect thereof, (d) interest payments, and (e) all rights
to purchase additional securities.
7.2 Any cash distributions made on or in respect of the Loaned
Securities, which Lender is entitled to receive pursuant to
Section 7.1, shall be paid by the transfer of cash to Lender
by Borrower, on the date any such distribution is paid, in an
amount equal to such cash distribution, so long as Lender is
not in Default at the time of such payment. Non-cash
distributions received by Borrower shall be added to the
Loaned Securities on the date of distribution and shall be
considered such for all purposes, except that if the Loan has
terminated, Borrower shall forthwith transfer the same to
Lender.
7.3 Borrower shall be entitled to receive all cash distributions
made on or in respect of non-cash Collateral which are not
otherwise received by Borrower, to the full extent it would be
so entitled if the Collateral had not been transferred to
Lender. Any distributions of cash made on or in respect of
such Collateral which Borrower is entitled to receive
hereunder shall be paid by the transfer of cash to Borrower by
Lender, on the date any such distribution is paid, in an
amount equal to such cash distribution, so long as Borrower is
not in Default at the time of such payment.
4 - May 1993 - Master Securities Loan Agreement
7.4 (a) Unless otherwise agreed, if (i) Borrower is required
to make a payment (a "Borrower Payment") with respect
to cash distributions on Loaned Securities under
Sections 7.1 and 7.2 ("Securities Distributions"), or
(ii) Lender is required to make a payment (a "Lender
Payment") with respect to cash distributions on
Collateral under Section 7.3 ("Collateral
Distributions"), and (iii) Borrower or Lender, as the
case may be ("Payor"), shall be required by law to
collect any withholding or other tax, duty, fee, levy
or charge required to be deducted or withheld from
such Borrower Payment or Lender Payment ("Tax"), then
Payor shall (subject to subsections (b) and (c)
below), pay such additional amounts as may be
necessary in order that the net amount of the
Borrower Payment or Lender Payment received by the
Lender or Borrower, as the case may be ("Payee"),
after payment of such Tax equals the net amount of
the Securities Distribution or Collateral
Distribution that would have been received if such
Securities Distribution or Collateral Distribution
had been paid directly to the Payee.
(b) No additional amounts shall be payable to a Payee
under subsection (a) above to the extent that Tax
would have been imposed on a Securities Distribution
or Collateral Distribution paid directly to the
Payee.
(c) No additional amounts shall be payable to a Payee
under subsection (a) above to the extent that such
Payee is entitled to an exemption from, or reduction
in the rate of, Tax on a Borrower Payment or Lender
Payment subject to the provision of a certificate or
other documentation, but has failed timely to provide
such certificate or other documentation.
(d) Each party hereto shall be deemed to represent that,
as of the commencement of any Loan hereunder, no Tax
would be imposed on any cash distribution paid to it
with respect to (i) Loaned Securities subject to a
Loan in which it is acting as Lender or (ii)
Collateral for any Loan in which it is acting as
Borrower, unless such party has given notice to the
contrary to the other party hereto (which notice
shall specify the rate at which such Tax would be
imposed). Each party agrees to notify the other of
any change that occurs during the term of a Loan in
the rate of any Tax that would be imposed on any such
cash distributions payable to it.
7.5 To the extent that, under the provisions of Sections 7.1
through 7.4 (a) a transfer of cash or other property by
Borrower would give rise to a Margin Excess (as defined in
Section 8.3 below) or (b) a transfer of cash or other property
by Lender would give rise to a Margin Deficit (as defined in
Section 8.2 below), Borrower or Lender (as the case may be)
shall not be obligated to make such transfer of cash or other
property in accordance with such Sections, but shall in lieu
of such transfer immediately credit the amounts that would
have been transferable under such Sections to the account of
Lender or Borrower (as the case may be).
8. XXXX TO MARKET.
8.1 Borrower shall daily xxxx to market any Loan hereunder and in
the event that at the close of trading on any Business Day the
market value of the Collateral for any Loan to Borrower shall
be less than 100% of the market value of all the outstanding
Loaned Securities subject to such Loan, Borrower shall
transfer additional Collateral no later than the close of the
next Business Day so that the market value of such additional
Collateral,
May 1993 - Master Securities Loan Agreement - 5
when added to the market value of the other Collateral for
such Loan, shall equal 100% of the market value of the Loaned
Securities.
8.2 In addition to any rights of Lender under Section 8.1, in the
event that at the close of trading on any Business Day the
aggregate market value of all Collateral for Loans by Lender
shall be less than the Margin Percentage of the market value
of all the outstanding Loaned Securities subject to such Loans
(a "Margin Deficit"), Lender may, by notice to Borrower,
demand that Borrower transfer to Lender additional Collateral
so that the market value of such additional Collateral, when
added to the market value of all other Collateral for such
Loans, shall equal or exceed the agreed upon Margin Percentage
of the market value of the Loaned Securities. Unless otherwise
agreed, such transfer is to be made no later than the close of
the next Business Day following the day of Lender's notice to
Borrower.
8.3 In the event that at the close of trading on any Business Day
the market value of all Collateral for Loans to Borrower shall
be greater than the Margin Percentage of the market value of
all the outstanding Loaned Securities subject to such Loans (a
"Margin Excess"), Borrower may, by notice to Lender, demand
that Lender transfer to Borrower such amount of the Collateral
selected by Borrower so that the market value of the
Collateral for such Loans, after deduction of such amounts,
shall thereupon not exceed the Margin Percentage of the market
value of the Loaned Securities. Unless otherwise agreed, such
transfer is to be made no later than the close of the next
Business Day following the day of Borrower's notice to Lender.
8.4 Borrower and Lender may agree, with respect to one or more
Loans hereunder, to xxxx the values to market pursuant to
Sections 8.2 and 8.3 by separately valuing the Loaned
Securities lent and the Collateral given in respect thereof on
a Loan-by-Loan basis.
8.5 Borrower and Lender may agree, with respect to any or all
Loans hereunder, that the respective rights of Lender and
Borrower under Sections 8.2 and 8.3 may be exercised only
where a Margin Excess or Margin Deficit exceeds a specified
dollar amount or a specified percentage of the market value of
the Loaned Securities under such Loans (which amount or
percentage shall be agreed to by Borrower and Lender prior to
entering into any such Loans).
9. REPRESENTATIONS.
Each party to this Agreement hereby makes the following representations
and warranties, which shall continue during the term of any Loan
hereunder:
9.1 Each party hereto represents and warrants that (a) it has the
power to execute and deliver this Agreement, to enter into the
Loans contemplated hereby and to perform its obligations
hereunder; (b) it has taken all necessary action to authorize
such execution, delivery and performance; and (c) this
Agreement constitutes a legal, valid and binding obligation
enforceable against it in accordance with its terms.
9.2 Each party hereto represents and warrants that the execution,
delivery and performance by it of this Agreement and each Loan
hereunder will at all times comply with all applicable
6 - May 1993 - Master Securities Loan Agreement
laws and regulations including those of applicable
regulatory and self-regulatory organizations.
9.3 Each party hereto represents and warrants that it has not
relied on the other for any tax or accounting advice
concerning this Agreement and that it has made its own
determination as to the tax and accounting treatment of any
Loan and any dividends, remuneration or other funds received
hereunder.
9.4 Borrower represents and warrants that it is acting for its own
account. Lender represents and warrants that it is acting for
its own account unless it expressly specifies otherwise in
writing and complies with Section 10.3(b).
9.5 Borrower represents and warrants that (a) it has, or will have
at the time of transfer of any Collateral, the right to grant
a first security interest therein subject to the terms and
conditions hereof, and (b) it (or the person to whom it
relends the Loaned Securities) is borrowing or will borrow the
Loaned Securities (except for Loaned Securities that qualify
as "exempted securities" under Regulation T of the Board of
Governors of the Federal Reserve System) for the purpose of
making delivery of such securities in the case of short sales,
failure to receive securities required to be delivered, or as
otherwise permitted pursuant to Regulation T as in effect from
time to time.
9.6 Lender represents and warrants that it has, or will have at
the time of transfer of any Loaned Securities, the right to
transfer the Loaned Securities subject to the terms and
conditions hereof.
10. COVENANTS.
10.1 Each party hereto agrees and acknowledges that (a) each Loan
hereunder is a "securities contract," as such term is defined
in Section 741(7) of Title 11 of the United States Code (the
"Bankruptcy Code"), (b) each and every transfer of funds,
securities and other property under this Agreement and each
Loan hereunder is a "settlement payment" or a "margin
payment," as such terms are used in Sections 362(b)(6) and
546(e) of the Bankruptcy Code, and (c) the rights given to
Borrower and Lender hereunder upon a Default by the other
constitute the right to cause the liquidation of a securities
contract and the right to set off mutual debts and claims in
connection with a securities contract, as such terms are used
in Sections 555 and 362(b)(6) of the Bankruptcy Code. Each
party hereto further agrees and acknowledges that if a party
hereto is an "insured depository institution," as such term is
defined in the Federal Deposit Insurance Act, as amended
("FDIA"), then each Loan hereunder is a "securities contract"
and "qualified financial contract," as such terms are defined
in the FDIA and any rules, orders or policy statements
thereunder.
10.2 Borrower agrees to be liable as principal with respect to its
obligations hereunder.
10.3 Lender agrees either (a) to be liable as principal with
respect to its obligations hereunder or (b) to execute and
comply fully with the provisions of Annex I (the terms and
conditions of which Annex are incorporated herein and made a
part hereof).
10.4 Promptly upon (and in any event within seven (7) Business Days
after) demand by Lender, Borrower shall furnish Lender with
Borrower's most recent publicly-available
May 1993 - Master Securities Loan Agreement - 7
financial statements and any other financial statements
mutually agreed upon by Borrower and Lender. Unless otherwise
agreed, if Borrower is subject to the requirements of Rule
17a-5(c) under the Exchange Act, it may satisfy the
requirements of this Section by furnishing Lender with its
most recent statement required to be furnished to customers
pursuant to such Rule.
10.5 Except to the extent required by applicable law or regulation
or as otherwise agreed, Borrower and Lender agree that Loans
hereunder shall in no event be "exchange contracts" for
purposes of the rules of any securities exchange and that
Loans hereunder shall not be governed by the buy-in or similar
rules of any such exchange, registered national securities or
other self-regulatory organization.
11. EVENTS OF DEFAULT.
All Loans hereunder may, at the option of the non-defaulting party
exercised by notice to the defaulting party (which option shall be
deemed to have been exercised, even if no notice is given, immediately
upon the occurrence of an event specified in subsection (e) below), be
terminated immediately upon the occurrence of any one or more of the
following events (individually, a "Default"):
11.1 if any Loaned Securities shall not be transferred to Lender
upon termination of the Loan as required by Section 5;
11.2 if any Collateral shall not be transferred to Borrower upon
termination of the Loan as required by Sections 3.3 and 5;
11.3 if either party shall fail to transfer Collateral as required
by Section 8;
11.4 if either party (i) shall fail to transfer to the other party
amounts in respect of distributions required to be transferred
by Section 7, (ii) shall have received notice of such failure
from the non-defaulting party, and (iii) shall not have cured
such default by the Cutoff Time on the next day after such
notice on which a transfer of cash may be effected in
accordance with Section 16;
11.5 if (i) either party shall commence as debtor any case or
proceeding under any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar law, or seek the
appointment of a receiver, conservator, trustee, custodian or
similar official for such party or any substantial part of its
property, (ii) any such case or proceeding shall be commenced
against either party, or another shall seek such an
appointment, or any application shall be filed against either
party for a protective decree under the provisions of the
Securities Investor Protection Act of 1970, which (A) is
consented to or not timely contested by such party, (B)
results in the entry of an order for relief, such an
appointment, the issuance of such a protective decree or the
entry of an order having a similar effect, or (C) is not
dismissed within 15 days, (iii) either party shall make a
general assignment for the benefit of creditors, or (iv)
either party shall admit in writing its inability to pay its
debts as they become due;
11.6 if either party shall have been suspended or expelled from
membership or participation in any national securities
exchange or registered national securities association of
which it is
8 - May 1993 - Master Securities Loan Agreement
a member or other self-regulatory organization to whose rules
it is subject or if it is suspended from dealing in securities
by any federal or state government agency thereof.
11.7 if either party shall have its 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;
11.8 if any representation made by either party in respect of this
Agreement or any Loan or Loans hereunder shall be incorrect or
untrue in any material respect during the term of any Loan
hereunder;
11.9 if either party notifies the other, orally or in writing, of
its inability to or its intention not to perform its
obligations hereunder or otherwise disaffirms, rejects or
repudiates any of its obligations hereunder; or
11.10 if either party (i) shall fail to perform any material
obligation under this Agreement not specifically set forth in
clauses (a) through (i) above, including but not limited to
the payment of fees as required by Section 4, and the payment
of transfer taxes as required by Section 14, (ii) shall have
received notice of such failure from the non-defaulting party
and (iii) shall not have cured such failure by the Cutoff Time
on the next day after such notice on which a transfer of cash
may be effected under Section 16.
12. LENDER'S REMEDIES.
Upon the occurrence of a Default under Section 11 entitling Lender to
terminate all Loans hereunder, Lender shall have the right (without
further notice to Borrower), in addition to any other remedies provided
herein or under applicable law, (a) to purchase a like amount of Loaned
Securities ("Replacement Securities") in the principal market for such
securities in a commercially reasonable manner, (b) to sell any
Collateral in the principal market for such Collateral in a
commercially reasonable manner and (c) to apply and set off the
Collateral and any proceeds thereof (including any amounts drawn under
a letter of credit supporting any Loan) against the payment of the
purchase price for such Replacement Securities and any amounts due to
Lender under Sections 4, 7, 14 and 17. In the event Lender shall
exercise such rights, Borrower's obligation to return a like amount of
the Loaned Securities shall terminate. Lender may similarly apply the
Collateral and any proceeds thereof to any other obligation of Borrower
under this Agreement, including Borrower's obligations with respect to
distributions paid to Borrower (and not forwarded to Lender) in respect
of Loaned Securities. In the event that (i) the purchase price of
Replacement Securities (plus all other amounts, if any, due to Lender
hereunder) exceeds (ii) the amount of the Collateral, Borrower shall be
liable to Lender for the amount of such excess together with interest
thereon at a rate equal to (A) in the case of purchases of Foreign
Securities, LIBOR, (B) in the case of purchases of any other securities
(or other amounts, if any, due to Lender hereunder), the Federal Funds
Rate or (C) such other rate as may be specified in Schedule B, in each
case as such rate fluctuates from day to day, from the date of such
purchase until the date of payment of such excess. As security for
Borrower's obligation to pay such excess, Lender shall have, and
Borrower hereby grants, a security interest in any property of Borrower
then held by or for Lender and a right of setoff with respect to such
property and any other amount payable by Lender to Borrower. The
purchase price of Replacement Securities purchased under this Section
12 shall include, and the proceeds of any sale of Collateral shall be
determined after deduction of, broker's fees and commissions and all
other reasonable costs, fees and expenses related to such purchase or
sale (as the case may be). In the event Lender exercises its rights
under this Section 12, Lender may elect in its sole discretion, in lieu
of purchasing all or a portion of the
May 1993 - Master Securities Loan Agreement - 9
Replacement Securities or selling all or a portion of the Collateral,
to be deemed to have made, respectively, such purchase of Replacement
Securities or sale of Collateral for an amount equal to the price
therefor on the date of such exercise obtained from a generally
recognized source or the most recent closing bid quotation from such a
source. Subject to Section 19. upon the satisfaction of all obligations
hereunder, any remaining Collateral shall be returned to Borrower.
13. BORROWER'S REMEDIES.
Upon the occurrence of a Default under Section 11 entitling Borrower to
terminate all Loans hereunder, Borrower shall have the right (without
further notice to Lender), in addition to any other remedies provided
herein or under applicable law, (a) to purchase a like amount of
Collateral ("Replacement Collateral") in the principal market for such
Collateral in a commercially reasonable manner, (b) to sell a like
amount of the Loaned Securities in the principal market for such
securities in a commercially reasonable manner and (c) to apply and set
off the Loaned Securities and any proceeds thereof against (i) the
payment of the purchase price for such Replacement Collateral (ii)
Lender's obligation to return any cash or other Collateral and (iii)
any amounts due to Borrower under Sections 4, 7 and 17. In such event,
Borrower may treat the Loaned Securities as its own and Lender's
obligation to return a like amount of the Collateral shall terminate;
provided, however, that Lender shall immediately return any letters of
credit supporting any Loan upon the exercise or deemed exercise by
Borrower of its termination rights under Section 11. Borrower may
similarly apply the Loaned Securities and any proceeds thereof to any
other obligation of Lender under this Agreement, including Lender's
obligations with respect to distributions paid to Lender (and not
forwarded to Borrower) in respect of Collateral. In the event that (i)
the sales price received from such Loaned Securities is less than (ii)
the purchase price of Replacement Collateral (plus the amount of any
cash or other Collateral not replaced by Borrower and all other
amounts, if any, due to Borrower hereunder), Lender shall be liable to
Borrower for the amount of any such deficiency, together with interest
on such amounts at a rate equal to (A) in the case of Collateral
consisting of Foreign Securities, LIBOR, (B) in the case of Collateral
consisting of any other securities (or other amounts due, if any, to
Borrower hereunder), the Federal Funds Rate or (C) such other rate as
may be specified in Schedule B, in each case as such rate fluctuates
from day to day, from the date of such sale until the date of payment
of such deficiency. As security for Lender's obligation to pay such
deficiency, Borrower shall have, and Lender hereby grants, a security
interest in any property of Lender then held by or for Borrower and a
right of setoff with respect to such property and any other amount
payable by Borrower to Lender. The purchase price of any Replacement
Collateral purchased under this Section 13 shall include, and the
proceeds of any sale of Loaned Securities shall be determined after
deduction of, broker's fees and commissions and all other reasonable
costs, fees and expenses related to such purchase or sale (as the case
may be). In the event Borrower exercises its rights under this Section
13, Borrower may elect in its sole discretion, in lieu of purchasing
all or a portion of the Replacement Collateral or selling all or a
portion of the Loaned Securities, to be deemed to have made,
respectively, such purchase of Replacement Collateral or sale of Loaned
Securities for an amount equal to the price therefor on the date of
such exercise obtained from a generally recognized source or the most
recent closing bid quotation from such a source. Subject to Section 19,
upon the satisfaction of all Lender's obligations hereunder, any
remaining Loaned Securities (or remaining cash proceeds thereof) shall
be returned to Lender. Without limiting the foregoing, the parties
hereto agree that they intend the Loans hereunder to be loans of
securities. If, however, any Loan is deemed to be a loan of money by
Borrower to Lender, then Borrower shall have, and Lender shall be
deemed to have granted, a security interest in the Loaned Securities
and the proceeds thereof
10 - May 1993 - Master Securities Loan Agreement
14. TRANSFER TAXES.
All transfer taxes with respect to the transfer of the Loaned
Securities by Lender to Borrower and by Borrower to Lender upon
termination of the Loan shall be paid by Borrower.
15. MARKET VALUE.
15.1 Unless otherwise agreed, if the principal market for the
securities to be valued is a national securities exchange in
the United States, their market value shall be determined by
their last sale price on such exchange on the preceding
Business Day or, if there was no sale on that day, by the last
sale price on the next preceding Business Day on which there
was a sale on such exchange, all as quoted on the Consolidated
Tape or, if not quoted on the Consolidated Tape, then as
quoted by such exchange.
15.2 Except as provided in Section 15.3 or 15.4 or as otherwise
agreed, if the principal market for the securities to be
valued is the over-the-counter market, their market value
shall be determined as follows. If the securities are quoted
on the National Association of Securities Dealers Automated
Quotations System ("NASDAQ"), their market value shall be the
closing sale price on NASDAQ on the preceding Business Day or,
if the securities are issues for which last sale prices are
not quoted on NASDAQ, the closing bid price on such day If the
securities to be valued are not quoted on NASDAQ, their market
value shall be the highest bid quotation as quoted in any of
The Wall Street Journal, the National Quotation Bureau pink
sheets, the Salomon Brothers quotation sheets, quotations
sheets of registered market makers and, if necessary, dealers'
telephone quotations on the preceding Business Day. In each
case, if the relevant quotation did not exist on such day,
then the relevant quotation on the next preceding Business Day
in which there was such a quotation shall be the market value.
15.3 Unless otherwise agreed, if the securities to be valued are
Government Securities, their market value shall be the average
of the bid and ask prices as quoted on Prophesy at 3:30 P.M.
New York time on the Business Day preceding the date on which
such determination is made. If the securities are not so
quoted on such day, their market value shall be determined as
of the next preceding Business Day on which they were so
quoted. If the securities to be valued are Government
Securities that are. n6t quoted on Prophesy, their market
value shall be determined as of the close of business on the
preceding Business Day in accordance with market practice for
such securities.
15.4 Unless otherwise agreed, if the securities to be valued are
Foreign Securities, their market value shall be determined as
of the close of business on the preceding Business Day in
accordance with market practice in the principal market for
such securities.
15.5 Unless otherwise agreed, the market value of a letter of
credit shall be the undrawn amount thereof.
15.6 All determinations of market value under Sections 15.1, 15.2,
15.3 and 15.4 shall include, where applicable, accrued
interest to the extent not already included therein (other
than any interest transferred to the other party pursuant to
Section 7), unless market practice with respect to the
valuation of such securities in connection with securities
loans is to the contrary. All determinations of market value
that are required to be made at the close of trading on any
Business Day pursuant to Section 8 or otherwise hereunder
shall be made as if being
May 1993 - Master Securities Loan Agreement - 11
determined at the commencement of trading on the next Business
Day. The determinations of market value provided for in this
Section 15 shall apply for all purposes under this Agreement,
except for purposes of Sections 12 and 13.
16. TRANSFERS.
16.1 All transfers of securities hereunder shall be by (a) physical
delivery of certificates representing such securities together
with duly executed stock and 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., (b) transfer on the
books of a Clearing Organization, or (c) such other means as
Borrower and Lender may agree. In every transfer of securities
hereunder, the transferor shall take all steps necessary (i)
to effect a "transfer" under Section 8-313 of the New York
Uniform Commercial Code or, where applicable, under any U.S.
federal regulation governing transfers of securities and (ii)
to provide the transferee with comparable rights under any
applicable foreign law or regulation.
16.2 All transfers of cash Collateral hereunder shall be by (a)
wire transfer in immediately available, freely transferable
funds or (b) such other means as Borrower and Lender may
agree. All other transfers of cash hereunder shall be made in
accordance with the preceding sentence or by delivery of a
certified or official bank check representing next-day New
York Clearing House Funds.
16.3 All transfers of a letter of credit from Borrower to Lender
shall be made by physical delivery to Lender of an irrevocable
letter of credit issued by a "bank" as defined in Section
3(a)(6)(A)-(C) of the Exchange Act. Transfer of a letter of
credit from Lender to Borrower shall be made by causing such
letter of credit to be returned or by causing the amount of
such letter of credit to be reduced to the amount required
after such transfer.
16.4 A transfer of securities, cash or letters of credit may be
effected under this Section 16 on any day except (a) a day on
which the transferee is closed for business at its address set
forth in Schedule A hereto or (b) a day on which a Clearing
Organization or wire transfer system is closed, if the
facilities of such Clearing Organization or wire transfer
system are required to effect such transfer.
17. CONTRACTUAL CURRENCY.
17.1 Borrower and Lender agree that: (a) any payment in respect of
a distribution under Section 7 shall be made in the currency
in which the underlying distribution of cash was made; (b) any
return of cash shall be made in the currency in which the
underlying transfer of cash was made and (c) any other payment
of cash in connection with a Loan under this Agreement shall
be in the currency agreed upon by Borrower and Lender in
connection with such Loan (the currency established under
clause (a), (b) or (c) hereinafter referred to as the
"Contractual Currency"). Notwithstanding the foregoing, the
payee of any such payment may, at its option, accept tender
thereof in any other currency; provided, however, that, to the
extent permitted by applicable law, the obligation of the
payor to make such payment will be discharged only to the
extent of the amount of Contractual Currency that such payee
may, consistent with normal banking procedures, purchase with
such other currency (after deduction of any premium and costs
of exchange) on the banking day next succeeding its receipt of
such currency.
12 - May 1993 - Master Securities Loan Agreement
17.2 If for any reason the amount in the Contractual Currency
received under Section 17.1, including amounts received after
conversion of any recovery under any judgment or order
expressed in a currency other than the Contractual Currency,
falls short of the amount in the Contractual Currency due in
respect of this Agreement, the party required to make the
payment will (unless a Default has occurred and such party is
the non-defaulting party) as a separate and independent
obligation and to the extent permitted by applicable law,
immediately pay such additional amount in the Contractual
Currency as may be necessary to compensate for the shortfall.
17.3 If for any reason the amount in the Contractual Currency
received under Section 17.1 exceeds the amount in the
Contractual Currency due in respect of this Agreement, then
the party receiving the payment will (unless a Default has
occurred and such party is the non-defaulting party) refund
promptly the amount of such excess.
18. ERISA.
Lender shall, if any of the securities transferred to the Borrower
hereunder for any Loan have been or shall be obtained, directly or
indirectly, from or using the assets of any Plan, so notify Borrower in
writing upon the execution of the Agreement or upon initiation of such
Loan under Section 1.1. If Lender so notifies Borrower, then Borrower
and Lender shall conduct the Loan in accordance with the terms and
conditions of Department of Labor Prohibited Transaction Exemption 81-6
(46 Fed. Reg. 7527, Jan. 23, 1981; as amended, 52 Fed. Reg. 18754, May
19, 1987), or any successor thereto (unless Borrower and Lender have
agreed prior to entering into a Loan that such Loan will be conducted
in reliance on another exemption, or without relying on any exemption,
from the prohibited transaction provisions of Section 406 of the
Employee Retirement Income Security Act of 1974, as amended, and
Section 4975 of the Internal Revenue Code of 1986, as amended). Without
limiting the foregoing and notwithstanding any other provision of this
Agreement, if the Loan will be conducted in accordance with Prohibited
Transaction Exemption 81-6, then:
18.1 Borrower represents and warrants to Lender that it is either
(i) a bank subject to federal or state supervision, (ii) a
broker-dealer registered under the Exchange Act or (iii)
exempt from registration under Section 15(a)(1) of the
Exchange Act as a dealer in Government Securities.
18.2 Borrower represents and warrants that, during the term of any
Loan hereunder, neither Borrower nor any affiliate of Borrower
has any discretionary authority or control with respect to the
investment of the assets of the Plan involved in the Loan or
renders investment advice (within the meaning of 29 C.F.R.
Section 2510.3-21(c)) with respect to the assets of the Plan
involved in the Loan. Lender agrees that, prior to or at the
commencement of any Loan hereunder, it will communicate to
Borrower information regarding the Plan sufficient to identify
to Borrower any person or persons that have discretionary
authority or control with respect to the investment of the
assets of the Plan involved in the Loan or that render
investment advice (as defined in the preceding sentence) with
respect to the assets of the Plan involved in the Loan. In the
event Lender fails to communicate and keep current during the
term of any Loan such information, Lender rather than Borrower
shall be deemed to have made the representation and warranty
in the first sentence of this clause (b).
May 1993 - Master Securities Loan Agreement - 13
18.3 Borrower and Lender agree that:
(a) the term "Collateral" shall mean cash, securities
issued or guaranteed by the United States government
or its agencies or instrumentalities, or irrevocable
bank letters of credit issued by a person other than
Borrower or an affiliate thereof;
(b) prior to the making of any Loans hereunder, Borrower
shall provide Lender with (A) the most recent
available audited statement of Borrower's financial
condition and (B) the most recent available unaudited
statement of Borrower's financial condition (if more
recent than the most recent audited statement), and
each Loan made hereunder shall be deemed a
representation by Borrower that there has been no
material adverse change in Borrower's financial
condition subsequent to the date of the latest
financial statements or information furnished in
accordance herewith;
(c) the Loan may be terminated by Lender at any time,
whereupon Borrower shall deliver the Loaned
Securities to Lender within the lesser of (A) the
customary delivery period for such securities; (B)
five Business Days and (C) the time negotiated for
such delivery between Borrower and Lender; provided,
however, that Borrower and Lender may agree to a
longer period only if permitted by Prohibited
Transaction Exemption 8 1-6; and
(d) the Collateral transferred shall be security only for
obligations of Borrower to the Plan with respect to
Loans, and shall not be security for any obligation
of Borrower to any agent or affiliate of the Plan.
19. SINGLE AGREEMENT.
Borrower and Lender acknowledge that, and have entered into this
Agreement in reliance on the fact that, all Loans hereunder constitute
a single business and contractual relationship and have been entered
into in consideration of each other. Accordingly, Borrower and Lender
hereby agree that payments, deliveries and other transfers made by
either of them in respect of any Loan shall be deemed to have been made
in consideration of payments, deliveries and other transfers in respect
of any other Loan hereunder, and the obligations to make any such
payments, deliveries and other transfers may be applied against each
other and netted. In addition, Borrower and Lender acknowledge that,
and have entered into this Agreement in reliance on the fact that, all
Loans hereunder have been entered into in consideration of each other.
Accordingly, Borrower and Lender hereby agree that (a) each shall
perform all of its obligations in respect of each Loan hereunder, and
that a default in the performance of any such obligation by Borrower or
by Lender (the "Defaulting Party") in any Loan hereunder shall
constitute a default by the Defaulting Party under all such Loans
hereunder, and (b) the non-defaulting party shall be entitled to set
off claims and apply property held by it in respect of any Loan
hereunder against obligations owing to it in respect of any other Loan
with the Defaulting Party.
14 - May 1993 - Master Securities Loan Agreement
20. APPLICABLE LAW.
THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAW PRINCIPLES THEREOF.
21. WAIVER.
The failure of a party to this Agreement to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this
Agreement. All waivers in respect of a Default must be in writing.
22. REMEDIES.
All remedies hereunder and all obligations with respect to any Loan
shall survive the termination of the relevant Loan, return of Loaned
Securities or Collateral and termination of this Agreement.
23. NOTICES AND OTHER COMMUNICATIONS.
Unless another address is specified in writing by the respective party
to whom any notice or other communication is to be given hereunder, all
such notices or communications shall be in writing or confirmed in
writing and delivered at the respective addresses set forth in Schedule
A attached hereto. All notices shall be effective upon actual receipt,
provided, however, that if any notice shall be received by a party on a
day on which such party is not open for business at its office located
at the address set forth in Schedule A, such notice shall be deemed to
have been received by such party at the opening of business on the next
day on which such party is open for business at such address.
24. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
24.1 EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS
TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL
OR NEW YORK STATE COURT SITTING IN NEW YORK CITY, AND ANY
APPELLATE COURT FROM ANY SUCH COURT, SOLELY FOR THE PURPOSE OF
ANY SUIT, ACTION OR PROCEEDING BROUGHT TO ENFORCE ITS
OBLIGATIONS HEREUNDER OR RELATING IN ANY WAY TO THIS AGREEMENT
OR ANY LOAN HEREUNDER AND (B) WAIVES, TO THE FULLEST EXTENT IT
MAY EFFECTIVELY DO SO, ANY DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT
AND ANY RIGHT OF JURISDICTION ON ACCOUNT OF ITS PLACE OF
RESIDENCE OR DOMICILE.
24.2 EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT THAT IT
MAY HAVE TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
May 1993 - Master Securities Loan Agreement - 15
25. MISCELLANEOUS.
This Agreement supersedes any other agreement between the parties
hereto concerning loans of securities between Borrower and Lender. This
Agreement shall not be assigned by either party without the prior
written consent of the other party and any attempted assignment without
such consent shall be null and void. Subject to the foregoing, this
Agreement shall be binding upon and shall ensure to the benefit of
Borrower and Lender and their respective heirs, representatives,
successors and assigns. This Agreement may be terminated by either
party upon written notice to the other, subject only to fulfillment of
any obligations then outstanding. This Agreement shall not be modified,
except by an instrument in writing signed by the party against whom
enforcement is sought. The parties hereto acknowledge and agree that,
in connection with this Agreement and each Loan hereunder, time is of
the essence. Each provision and agreement herein shall be treated as
separate and independent from any other provision herein and shall be
enforceable notwithstanding the unenforceability of any such other
provision or agreement.
26. DEFINITIONS.
For the purposes hereof:
26.1 "Broker-Dealer" shall mean any person that is a broker
(including a municipal securities broker), dealer, municipal
securities dealer, government securities broker or government
securities dealer as defined in the Exchange Act, regardless
of whether the activities of such person are conducted in the
United States or otherwise require such person to register
with the Securities and Exchange Commission or other
regulatory body.
26.2 "Business Day" shall mean, with respect to any Loan hereunder,
a day on which regular trading occurs in the principal market
for the Loaned Securities subject to such Loan, provided,
however, that for purposes of Section 15, such term shall mean
a day on which regular trading occurs in the principal market
for the securities whose value is being determined.
Notwithstanding the foregoing, (i) for purposes of Section 8,
"Business Day" shall mean any day on which regular trading
occurs in the principal market for any Loaned Securities or
for any securities Collateral under any outstanding Loan
hereunder and "next Business Day" shall mean the next day on
which a transfer of Collateral may be effected in accordance
with Section 16; and (ii) in no event shall a Saturday or
Sunday be considered a Business Day.
26.3 "Clearing Organization" shall mean The Depository Trust
Company, or, if agreed to by Borrower and Lender, such other
clearing agency at which Borrower (or Borrower's agent) and
Lender (or Lender's agent) maintain accounts, or a book-entry
system maintained by a Federal Reserve Bank.
26.4 "Collateral" shall mean, whether now owned or hereafter
acquired and to the extent permitted by applicable law, (a)
any property which Borrower and Lender agree shall be
acceptable collateral prior to the Loan and which is
transferred to Lender pursuant to Section 3 or 8 (including as
collateral, for definitional purposes, any letters of credit
mutually acceptable to Lender and Borrower), (b) any property
substituted therefor pursuant to Section 3.5, (c) all accounts
in which such property is deposited and all securities and the
like in which any cash collateral is invested or reinvested,
and (d) any proceeds of any of the foregoing. For purposes of
return of Collateral by Lender or purchase or sale of
securities pursuant to Section 12 or 13, such term shall
include securities
16 - May 1993 - Master Securities Loan Agreement
of the same issuer, class and quantity as the Collateral
initially transferred by Borrower to Lender.
26.5 "Customer" shall mean any person that is a customer of
Borrower under Rule 15c3-3 under the Exchange Act or any
comparable regulation of the Secretary of the Treasury under
Section 15C of the Exchange Act (to the extent that Borrower
is subject to such Rule or comparable regulation).
26.6 "Cutoff Time" shall mean a time on a Business Day by which a
transfer of cash, securities or other property must be made by
Borrower or Lender to the other, as shall be agreed by
Borrower and Lender in Schedule B or otherwise orally or in
writing or, in the absence of any such agreement, as shall be
determined in accordance with market practice.
26.7 "Default" shall have the meaning assigned in Section 11.
26.8 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
26.9 "Federal Funds Rate" shall mean the rate of interest
(expressed as an annual rate), as published in Federal Reserve
Statistical Release H.15(519) or any publication substituted
therefor, charged for federal funds (dollars in immediately
available funds borrowed by banks on an overnight unsecured
basis) on that day or, if that day is not a banking day in New
York City, on the next preceding banking day.
26.10 "Foreign Securities" shall mean, unless otherwise agreed,
securities that are principally cleared and settled outside
the United States.
26.11 "Government Securities" shall mean government securities as
defined in Section 3(a)(42)(A)-(C) of the Exchange Act.
26.12 "LIBOR" shall mean for any date, the offered rate for deposits
in U.S. dollars for a period of three months which appears on
the Reuters Screen LIBO page as of 11:00A.M., London time, on
such date (or, if at least two such rates appear, the
arithmetic mean of such rates).
26.13 "Loan" shall mean a loan of securities hereunder.
26.14 "Loaned Security" shall mean any security which is a security
as defined in the Exchange Act, transferred in a Loan
hereunder until such security (or an identical security) is
transferred back to Lender hereunder, except 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 is made. For purposes of return of Loaned
Securities by Borrower or purchase or sale of securities
pursuant to Section 12 or 13, such term shall include
securities of the same issuer, class and quantity as the
Loaned Securities, as adjusted pursuant to the preceding
sentence.
May 1993 - Master Securities Loan Agreement - 17
(26.15) "Plan" shall mean (a) any "employee benefit plan" as defined
in Section 3(3) of the Employee Retirement Income Security Act
of 1974 which is subject to Part 4 of Subtitle B of Title I of
such Act; (b) any "plan" as defined in Section 4975(e)(1) of
the Internal Revenue Code of 1986; or (c) any entity the
assets of which are deemed to be assets of any such "employee
benefit plan" or "plan" by reason of the Department of Labor's
plan asset regulation, 29 C.F.R. Section 2510.3-101.
By:
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Title:
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Date:
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By:
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Date:
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18 - May 1993 - Master Securities Loan Agreement
ANNEX I
LENDER ACTING AS AGENT
This Annex sets forth the terms and conditions governing all transactions in
which a party lending securities ("Agent") in a Loan is acting as agent for one
or more third parties (each, a "Principal"). Unless otherwise defined,
capitalized terms used in this Annex shall have the meanings assigned in the
Securities Loan Agreement of which it forms a part (such agreement, together
with this Annex and any other schedules or exhibits, referred to as the
"Agreement") and, unless otherwise specified, all section references herein are
intended to refer to sections of such Securities Loan Agreement.
1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. In addition to the
representations and warranties set forth in Section 9 of the Agreement,
Agent hereby makes the following representations and warranties, which
shall continue during the term of any Loan: Principal has duly
authorized Agent to execute and deliver the Agreement on its behalf,
has the power to so authorize Agent and to enter into the Loans
contemplated by the Agreement and to perform the obligations of Lender
under such Loans, and has taken all necessary action to authorize such
execution and delivery by Agent and such performance by it.
2. IDENTIFICATION OF PRINCIPALS. Agent agrees (a) to provide Borrower
prior to any Loan under the Agreement with a written list of Principals
for which it intends to act as Agent (which list may be amended in
writing from time to time with the consent of Borrower), and (b) to
provide Borrower, before the close of business on the next Business Day
after orally agreeing to enter into a Loan, with notice of the specific
Principal or Principals for whom it is acting in connection with such
Loan. If (i) Agent fails to identify such Principal or Principals prior
to the close of business on such next Business Day or (ii) Borrower
shall determine in its sole discretion that any Principal or Principals
identified by Agent are not acceptable to it, Borrower may reject and
rescind any Loan with such Principal or Principals, return to Agent any
Loaned Securities previously transferred to Borrower and refuse any
further performance under such Loan, and Agent shall immediately return
to Borrower any Collateral previously transferred to Agent in
connection with such Loan; provided, however, that (A) Borrower shall
promptly (and in any event within one Business Day) notify Agent of its
determination to reject and rescind such Loan and (B) to the extent
that any performance was rendered by any party under any Loan rejected
by Borrower, such party shall remain entitled to any fees or other
amounts that would have been payable to it with respect to such
performance if such Loan had not been rejected. Borrower acknowledges
that Agent shall not have any obligation to provide it with
confidential information regarding the financial status of its
Principals; Agent agrees, however, that it will assist Borrower in
obtaining from Agent's Principals such information regarding the
financial status of such Principals as Borrower may reasonably request.
3. LIMITATION OF AGENT'S LIABILITY. The parties expressly acknowledge that
if the representations and warranties of Agent under the Agreement,
including this Annex, are true and correct in all material respects
during the term of any Loan and Agent otherwise complies with the
provisions of this Annex, then (a) Agent's obligations under the
Agreement shall not include a guarantee of performance by its Principal
or Principals and (b) Borrower's remedies shall not include a right of
setoff against obligations, if any, of Agent arising in other
transactions in which Agent is acting as principal.
May 1993 - Master Securities Loan Agreement - A1-1
4. Multiple Principals.
(a) In the event that Agent proposes to act for more than one
Principal hereunder, Borrower and Agent shall elect whether
(i) to treat Loans under this Agreement as transactions
entered into on behalf of separate Principals or (ii) to
aggregate such Loans as if they were transactions by a single
Principal. Failure to make such an election in writing shall
be deemed an election to treat Loans under this Agreement as
transactions on behalf of separate Principals.
(b) In the event that Borrower and Agent elect (or are deemed to
elect) to treat Loans under the Agreement as transactions on
behalf of separate Principals, the parties agree that (i)
Agent will provide Borrower, together with the notice
described in Section 2(b) of this Annex, notice specifying the
portion of each Loan allocable to the account of each of the
Principals for which it is acting (to the extent that any such
Loan is allocable to the account of more than one Principal);
(ii) the portion of any individual Loan allocable to each
Principal shall be deemed a separate Loan under the Agreement;
(iii) the xxxx to market obligations of Borrower and Lender
under Section 8 of the Agreement shall be determined on a
Loan-by-Loan basis (unless the parties agree to determine such
obligations on a Principal-by-Principal basis); and (iv)
Borrower's and Lender's remedies under the Agreement upon the
occurrence of a Default shall be determined as if Agent had
entered into a separate Agreement with Borrower on behalf of
each of its Principals.
(c) In the event that Borrower and Agent elect to treat Loans
under this Agreement as if they were transactions by a single
Principal, the parties agree that (i) Agent's notice under
Section 2(b) of this Annex need only identify the names of its
Principals but not the portion of each Loan allocable to each
Principal's account; (ii) the xxxx to market obligations of
Borrower and Lender under Section 8 shall, subject to any
greater requirement imposed by applicable law, be determined
on an aggregate basis for all Loans entered into by Agent on
behalf of any Principal; and (iii) Borrower's and Lender's
remedies upon the occurrence of a Default shall be determined
as if all Principals were a single Lender.
(d) Notwithstanding any other provision of the Agreement
(including without limitation this Annex), the parties agree
that any transactions by Agent on behalf of a Plan shall be
treated as transactions on behalf of separate Principals in
accordance with Section 4(b) of this Annex (and all xxxx to
market obligations of the parties shall be determined on a
Loan-by-Loan basis).
5. INTERPRETATION OF TERMS. All references to "Lender" in the Agreement
shall, subject to the provisions of this Annex (including among other
provisions the limitations on Agent's liability in Section 3 of this
Annex), be construed to reflect that (i) each Principal shall have, in
connection with any Loan or Loans entered into by Agent on its behalf,
the rights, responsibilities, privileges and obligations of a "Lender"
directly entering into such Loan or Loans with Borrower under the
Agreement, and (ii) Agent's Principal or Principals have designated
Agent as their sole agent for performance of Lender's obligations to
Borrower and for receipt of performance by Borrower of its obligations
to Lender in connection with any Loan or Loans under the Agreement
(including, among other things, as agent for each Principal in
connection with transfers of securities, cash or other property and as
agent for giving and receiving all notices under the Agreement). Both
Agent and its Principal or Principals shall be deemed "parties" to the
Agreement and all refer-
A1-2 - May 1993 - Master Securities Loan Agreement
ences to a "party" or "either party" in the Agreement shall be deemed
revised accordingly (and any Default by Agent under paragraph (e) or
any other applicable provision of Section 11 shall be deemed a Default
by Lender).
By:
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May 1993 - Master Securities Loan Agreement - Al-3
SCHEDULE A
NAMES AND ADDRESSES FOR COMMUNICATIONS
May 1993 - Master Securities Loan Agreement - A2-l
SCHEDULE B
DEFINED TERMS AND SUPPLEMENTAL PROVISIONS
Cutoff Time[s]
May 1993 - Master Securities Loan Agreement - X0-0
XXX
XXXX
XXXXXX
ASSOCIATION AMENDMENT TO THE MASTER SECURITIES LOAN AGREEMENT
Dated as of
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Between:
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and
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The parties hereto, having previously entered into a [Master Securities
Loan Agreement] (the "Master Agreement"), dated as of _____________,
______ agree to amend and supplement the Master Agreement as set forth
below. Unless otherwise defined in Section 11.1 below, capitalized
terms used herein shall have the meanings assigned in the Master
Agreement.
1. COLLATERAL AND XXXX TO MARKET.
Notwithstanding anything to the contrary in the Master Agreement, in
connection with any Loan in which Lender is not a Customer, Borrower
and Lender may agree, as provided in Section 11.2 hereof, that the
market value of the Collateral, if any, transferred by Borrower to
Lender, upon initial transfer and for purposes of any xxxx-to-market or
similar provision of the Master Agreement, shall be equal to a
percentage of the market value of the Loaned Securities that is less
than 100%; provided, however, that in the event that the writing or
other confirmation evidencing such agreement does not set out such
percentage with respect to any such Loan, such percentage shall not,
for purposes of any xxxx-to-market or similar provision of the Master
Agreement, be less than the percentage that is obtained by dividing (i)
the market value of the Collateral required to be transferred by
Borrower to Lender with respect to such Loan at the commencement of the
Loan by (ii) the market value of the Loaned Securities required to be
transferred by Lender to Borrower at the commencement of the Loan.
2. PERMITTED PURPOSE.
2.1 Notwithstanding anything to the contrary in the Master
Agreement, with respect to any Loan of an Equity Security,
Borrower and Lender may agree, as provided in Section 11.2
hereof, that Borrower shall not be deemed to have made any
representation or warranty to Lender regarding the purpose for
which Borrower is borrowing or will borrow the Loaned
Security, including without limitation any representation or
warranty regarding the use of the Loaned Security by it (or
the person to whom it relends the Loaned Security) for the
purpose of making delivery of such security in the case of a
short sale, failure to receive securities required to be
delivered or otherwise. By entering into any such agreement,
Lender shall be deemed to have represented and warranted to
Borrower (which representation and warranty shall be deemed to
be repeated on each day during the term of such Loan) that
Lender is either (i) an "exempted borrower" within the meaning
of Regulation T or (ii) a member of a national securities
exchange or a broker or dealer registered with the Securities
and Exchange Commission that is entering into such Loan to
finance its activities as a market maker or an underwriter.
April 1998 - Amendment to the Master Securities Loan Agreement. - 1
2.2 Notwithstanding anything to the contrary in the Master
Agreement, with respect to any Loan of a security that is not
an Equity Security, Borrower shall not be deemed to have made
any representation or warranty to Lender regarding the purpose
for which Borrower is borrowing or will borrow the Loaned
Security, including without limitation any representation or
warranty regarding the use of the Loaned Security by it (or
the person to whom it relends the Loaned Security) for the
purpose of making delivery of such security in the case of a
short sale, failure to receive securities required to be
delivered or otherwise.
3. TERMINATION AND RIGHTS IN RESPECT OF COLLATERAL. Notwithstanding
anything to the contrary in the Master Agreement, if under the Master
Agreement Lender may pledge, repledge, hypothecate, rehypothecate,
lend, relend, sell or otherwise transfer the Collateral, or re-register
Collateral evidenced by physical certificates in any name other than
Borrower's:
(a) Borrower may not terminate a Loan, if the Collateral for such
Loan includes securities other than Government Securities,
except on a termination date established by notice given to
Lender prior to the close of business on a Business Day; the
date established by such termination notice given by Borrower
to Lender shall be a date no earlier than the standard
settlement date for trades of such Collateral entered into on
the date of such notice, which date shall, unless Borrower and
Lender agree to the contrary, be the third Business Day
following such notice; and
(b) Borrower waives the right to vote, or to provide any consent
or take any similar action with respect to, any Collateral in
the event that the record date or deadline for such vote,
consent or other action falls during the term of a Loan and
such Collateral is not required to be returned to Borrower
pursuant to any substitution, xxxx-to-market or similar
provision of the Master Agreement.
4. DIVIDENDS, DISTRIBUTIONS, ETC.
4.1 Notwithstanding anything to the contrary in the Master
Agreement, Borrower shall be entitled to receive all
distributions made on or in respect of Collateral which are
not otherwise received by Borrower, to the full extent it
would be so entitled if such Collateral had not been
transferred to Lender, including, but not limited to (a) cash
and all other property, (b) stock dividends, (c) securities
received as a result of split ups of such Collateral and
distributions in respect thereof, (d) interest payments, and
(e) all rights to purchase additional securities.
4.2 Any cash distributions made on or in respect of Collateral,
which Borrower is entitled to receive pursuant to Section 4.1
hereof, shall be treated in accordance with the Master
Agreement. Non-cash distributions received by Lender shall be
added to the Collateral on the date of distribution and shall
be considered such for all purposes, except that if each Loan
secured by such Collateral has terminated, Lender shall
forthwith transfer the same to Borrower.
5. TRANSFER. Notwithstanding anything to the contrary in the Master
Agreement, all transfers by either Borrower or Lender of Loaned
Securities or Collateral consisting of "financial assets" (within the
meaning of the New York Uniform Commercial Code) thereunder shall be by
(a) in the case of certificated securities, physical delivery of
certificates representing such securities together with duly executed
stock and bond transfer powers, as the case may be, with signatures
2 - April 1998 - Amendment to the Master Securities Loan Agreement
guaranteed by a bank or a member firm of the New York Stock Exchange,
Inc., (b) registration of an uncertificated security in the
transferee's name by the issuer of such uncertificated security, (c)
the crediting by a securities intermediary of such financial assets to
the transferee's securities account maintained with such securities
intermediary, or (d) such other means as Borrower and Lender may agree.
For the avoidance of doubt, the parties agree and acknowledge that the
term "securities", as used in the Master Agreement and herein, shall
include any "security entitlements" with respect to such securities
(within the meaning of the New York Uniform Commercial Code), and that
the terms "financial intermediary" and "clearing corporation", as used
in the Master Agreement, shall mean a "securities intermediary" (within
the meaning of the New York Uniform Commercial Code).
6. REPRESENTATIONS AND WARRANTIES. Each of the parties hereto (and, in
the case of a party acting as agent in accordance with the terms of the
Master Agreement, each of its principals) represents and warrants that
(a) it has full power and authority to execute and deliver this
Amendment and to enter into any Loan contemplated by the Master
Agreement and to perform its obligations thereunder, as amended or
supplemented herein; (b) it has taken all necessary action to authorize
such execution, delivery and performance; and (c) this Amendment
constitutes a legal, valid and binding obligation, enforceable against
it in accordance with its terms and the terms of the Master Agreement.
7. ERISA. If any of the securities transferred to Borrower for any Loan
have been or shall be obtained, directly or indirectly, from or using
the assets of any Plan, and Borrower and Lender have not agreed to
conduct such Loan otherwise than in accordance with the terms and
conditions of Department of Labor Prohibited Transaction Exemption 81-6
(46 Fed. Reg. 7527, Jan. 23, 1981; as amended, 52 Fed. Reg. 18,754, May
19, 1987) or any successor thereto, then nothing in this Amendment
shall be construed to limit Borrower's obligation (i) to xxxx to market
such Loan daily and (ii) to transfer additional Collateral, in the
event that at the close of trading on any Business Day the market value
of the Collateral for any Loan to Borrower shall be less than 100% of
the market value of all the outstanding Loaned Securities subject to
such Loan, no later than the close of the next Business Day so that the
market value of such additional Collateral, when added to the market
value of the other Collateral for such Loan, shall equal 100% of the
market value of the Loaned Securities.
8. EVENTS OF DEFAULT. In addition to any events of default set forth in
the Master Agreement, it shall be an additional event of default under
the Master Agreement if either party fails to perform any covenant or
obligation required to be performed by it hereunder or if any
representation made by either party in respect hereof shall be
incorrect or untrue in any material respect during the term of any Loan
under the Master Agreement, as amended or supplemented herein;
provided, however, that to the extent that Section 4 hereof amends and
supplements any provisions in the Master Agreement governing the rights
of Borrower in respect of distributions on Collateral, any such failure
under Section 4 hereof shall constitute an event of default only after
the expiration of the notice period, if any, specified in the Master
Agreement with respect to the occurrence of an event of default for
such a failure.
9. TRANSFER TAXES. Unless otherwise agreed, all transfer taxes with
respect to the transfer of Collateral by Borrower to Lender and by
Lender to Borrower upon termination of the Loan or pursuant to any
substitution, xxxx-to-market or similar provision of the Master
Agreement shall be paid by Borrower.
10. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT
TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
April 1998 - Amendment to the Master Securities Loan Agreement - 3
11. DEFINITIONS AND INTERPRETATIONS.
11.1 Notwithstanding anything to the contrary in the Master
Agreement, the following terms shall have the following
meanings for purposes of this Amendment.
"Collateral" shall have the meaning specified in the Master
Agreement, except that, if any new or different security shall
be exchanged for any Collateral by recapitalization, merger,
consolidation or other corporate action, such new or different
security shall, effective upon such exchange, be deemed to
become Collateral in substitution for the former Collateral
for which such exchange is made.
"Customer" shall mean any person that is a customer of
Borrower under Rule 15c3-3 under the Exchange Act or any
comparable regulation of the Secretary of the Treasury under
Section 15C of the Exchange Act (to the extent that Borrower
is subject to such rule or comparable regulation). "Equity
Security" shall mean any security other than a `non-equity
security", as defined in Regulation T.
"Exchange Act" shall mean the Securities Exchange Act of 1934.
as amended.
"Government Securities" shall mean "government securities" as
defined in Section 3(a) (42) (A) - (C) of the Exchange Act.
"Plan" shall mean (i) any "employee benefit plan" as defined
in Section 3(3) of the Employee Retirement Income Security Act
of 1974 which is subject to Part 4 of Subtitle B of Title I of
such Act; (ii) any "plan" as defined in Section 4975(e) (1) of
the Internal Revenue Code of 1986; or (iii) any entity the
assets of which are deemed to be assets of any such "employee
benefit plan" or "plan" by reason of the Department of Labor's
plan asset regulation, 29 C.F.R. Section 2510.3-101.
"Regulation T" shall mean Regulation T of the Board of
Governors of the Federal Reserve System, as in effect from
time to time.
11.2 Any agreement between the parties pursuant to Section 1
or Section 2.1 shall be made (i) in writing, (ii) orally, if
confirmed promptly in writing or through any system that
compares Loans and in which Borrower and Lender are
participants, or (iii) in such other manner as may be agreed
by the parties in writing.
This Amendment shall be effective as of the date hereof;
provided, however, that this Amendment shall not affect the
terms of any Loan entered into prior to the date hereof.
Except as otherwise provided herein, the Master Agreement
shall remain unmodified and in full force and effect.
4 - April 1998 - Amendment to the Master Securities Loan Agreement
[Name of Party] [Name of Party]
By: By:
------------------------- -----------------------------
Title: Title:
---------------------- --------------------------
Date: Date:
----------------------- ---------------------------
April 1998 - Amendment to the Master Securities Loan Agreement - 5
THE
BOND MASTER SECURITIES LOAN AGREEMENT
MARKET
ASSOCIATION AMENDMENT RELATING TO EUROPEAN ECONOMIC AND MONETARY UNION
The parties hereto, having previously entered into a Master
Securities Loan Agreement dated as of_______________,as may
have previously been amended from time to time (the "Master
Agreement"), agree to amend and supplement the Master
Agreement as set forth below. Unless otherwise defined in
Paragraph 1, capitalized terms shall have the meanings
assigned to them in the Master Agreement.
1. DEFINITIONS
Notwithstanding anything to the contrary in the Master Agreement, the
following terms shall have the following meanings for purposes of this
Amendment:
(a) "euro" shall mean the currency of the member states of the
European Union that adopt a single currency in accordance with
the Treaty establishing the European Communities, as amended
by the Treaty on European Union.
(b) "euro unit", "national currency unit" and "transitional
period" shall have the meanings given to those terms in the
European Council Regulation on the legal framework for the
introduction of the euro on January 1, 1999.
(c) "TARGET" shall mean the Trans-European Automated Real-time
Gross Settlement Express Transfer system.
2. CONTINUITY OF CONTRACT
The parties agree that the introduction of the euro or the
non-occurrence or non-occurrence of any other event associated with
economic or monetary union in the European Community shall not have the
effect of altering any term of, nor of discharging or excusing any
performance under, the Master Agreement or any Loan thereunder, nor
give any party the right unilaterally to alter or terminate the Master
Agreement or any Loan thereunder, or, in and of itself, give rise to a
Default under the Master Agreement. An event associated with economic
or monetary union in the European Community shall include, but not be
limited to, (a) the introduction of or changeover to the euro; (b) the
fixing of conversion rates between a member state's currency and the
euro or between the currencies of member states; (c) the substitution
of the euro for the ECU; (d) the introduction of the euro as the lawful
currency of a member state; (e) the withdrawal from legal tender of any
currency that, before the introduction of the euro, was lawful currency
in one of the member states; (f) the disappearance or replacement of a
relevant price source or rate for the ECU or the national currency of
any member state, or the failure of a sponsor to publish or display a
relevant rate, price, page or screen; or (g) the redenomination,
renominalization or reconventioning of any Loaned Security or
securities Collateral.
April 1999 - Euro Amendment to the MSLA - 1
3. IDENTICAL SECURITIES AND EQUIVALENT SECURITIES COLLATERAL
The parties agree that for purposes of the definitions of "Loaned
Security" or "Collateral" in the Master Agreement, a Loaned Security or
securities Collateral will continue to be a Loaned Security or
securities Collateral, respectively, and will be considered to be
identical or equivalent to another Loaned Security or other securities
Collateral, as the case may be, notwithstanding the redenomination,
renominalization or reconventioning of such Loaned Security or
securities Collateral in connection with an event associated with
economic or monetary union in the European Community.
4. TRANSFERS OF CASH
a) The first sentence of Section 16.2 of the Master Agreement
shall be amended by adding the following after the word
"funds":
(b) for payments denominated in euro, through TARGET,':
Previous clause (b) shall become clause (c).
b) Section 16.4 of the Master Agreement shall be amended by
replacing the word "or" after the phrase "Schedule A hereto"
with a comma, and adding the following to the end of the
paragraph:
",or (c) in the case of payments denominated in euro, a day on
which TARGET is closed?'
5. CONTRACTUAL CURRENCY
a) The following sentence shall be added at the end of Section
17.1 of the Master Agreement:
"; and provided further, that (a) if the Contractual Currency
and such other currency are euro and a national currency unit
of a country that has agreed to adopt the euro as a single
currency, the obligations of the payor will be discharged only
to the extent that the amount paid in euro or such national
currency unit is equivalent to the amount obtained in
calculating the conversion of the amount of a national
currency unit to or from the euro in accordance with the
irrevocably fixed conversion rate specified by Council
Regulation (EC) No. 2866/98; and (b) if the Contractual
Currency and such other currency are two national currency
units, the obligations of the payor will be discharged only to
the extent that the amount paid is equivalent to the amount
obtained by converting one national currency unit into another
national currency unit in accordance with the conversion
method mandated by Article 4(4) of Council Regulation (BC) No.
1103/97?'
b) The parties agree that:
(i) For purposes of Section 17 of the Master Agreement,
amounts in euros (whether denominated in the euro
unit or a national currency unit) shall be treated as
the same currency only if those amounts are both
expressed in the euro unit or the same national
currency unit.
(ii) If as a result of an event associated with economic
or monetary union of the European Community, a Loaned
Security or securities Collateral are redenominated
into euro dur-
2 - April 1999 - Euro Amendment to the MSLA
ing the term of a Loan, the Contractual Currency for
purposes of making payments in respect of
distributions under Section 7 of the Master Agreement
or any other payment of cash in connection with a
Loan (other than a return of cash Collateral in
respect of a Loan) will be euro, unless otherwise
agreed.
(iii) Notwithstanding Section 17.1 of the Master Agreement,
the payee of any payments in respect of a Loan, a
Loaned Security or securities Collateral may, if the
payment is denominated in a national currency unit of
a country participating in euro, at its option,
accept tender thereof in euro, regardless of whether
the payment was received from the issuer or other
payor in euro or the applicable national currency
unit. The obligation of the payor of such payment
shall be discharged only to the extent that the
amount paid in euro is equivalent to the amount
expressed in the national currency unit where the
conversion is conducted in accordance with Section
17.1, as amended by this Amendment.
6. CALCULATIONS OF VALUE
For purposes of any valuation calculations required to be made under
the Master Agreement, where during the transitional period in relation
to the introduction of the euro, any relevant amounts are expressed in
two or more denominations of the euro, such relevant amounts shall
(where necessary) be converted into the euro unit in accordance with
Article 4(4) of Council Regulation (EC) No. 1103/97.
7. REPRESENTATIONS AND WARRANTIES
Each of the parties hereto (and, in the case of a party acting as agent
in accordance with the terms of the Agreement, each of its principals)
represents and warrants that (a) it has full power and authority to
execute and deliver this Amendment, to enter into any Loan contemplated
by the Master Agreement and to perform its obligations thereunder, as
amended or supplemented herein; (b) it has taken all necessary action
to authorize such execution, delivery and performance; and (c) this
Amendment constitutes a legal, valid and binding obligation,
enforceable against it in accordance with its terms and the terms of
the Master Agreement.
8. EVENTS OF DEFAULT
In addition to the events set forth in Section 11 of the Master
Agreement, it shall be an additional Default under Section 11 of the
Master Agreement if either party fails to perform any covenant or
obligation required to be performed by it hereunder or if any
representation made by either party in respect hereof shall be
incorrect or untrue in any material respect during the term of the Loan
under the Master Agreement, as amended or supplemented herein;
provided, however, that to the extent Sections 4 or 5 hereof amend and
supplement Section 7 of the Master Agreement, any such failure under
Sections 4 or 5 hereof shall constitute a Default only after the
expiration of any notice period, if any, specified in the Master
Agreement with respect to such failure.
9. EFFECTIVENESS
This Amendment shall be deemed to be effective as of December 31, 1998.
Except as otherwise modified herein, the Master Agreement shall remain
unmodified and in full force and effect.
April 1999 - Euro Amendment to the MSLA - 3
[Name of Party] [Name of Party]
By: By:
------------------------- -----------------------------
Title: Title:
---------------------- --------------------------
Date: Date:
----------------------- ---------------------------
4 - April 1999 - Euro Amendment to the MSLA
