EX-99.(G)(1)
EXECUTION VERSION
SECURITIES LENDING AGENCY AGREEMENT (this "Agreement") dated as of
April 1, 2010 among Xxxxx Fargo Funds Trust, Xxxxx Fargo Master Trust and Xxxxx
Fargo Variable Trust (the "Trusts" and each a "Trust"), on behalf of their funds
now existing or hereafter created (the "Funds"), and Xxxxxxx Sachs Bank USA,
doing business as Xxxxxxx Xxxxx Agency Lending ("GSAL").
WHEREAS, The Trusts and State Street Bank and Trust Company
("Custodian") have entered into a Master Custodian Agreement dated August 10,
2009 pursuant to which Custodian has assumed certain responsibilities with
respect to securities and other property held for the benefit of the Funds in
custody accounts (each such custody account is referred to herein as a "Custody
Account");
WHEREAS, each of the Funds listed on Appendix A (each such Fund is
referred to herein as "Lender") wishes to retain the services of GSAL to act as
its agent in lending securities from time to time held in the Custody Account to
certain borrowers, on the terms and conditions hereinafter set forth; and
WHEREAS, GSAL is willing to act as agent for Lender in lending such
securities owned by Lender to certain borrowers, on the terms and conditions
hereinafter set forth including, but not limited to, liaising with Custodian
with respect to the administration of such lending activity on Lender's behalf
and Lender has provided notification to Custodian to such effect.
NOW, THEREFORE, in consideration of the premises and agreements
contained herein, the parties hereto, intending to be bound, hereby agree as
follows with respect to the services to be provided to each Lender:
1. (a) With respect to those securities ("Available Securities")
identified in Schedule 1 hereto which are held in the Custody Account (and until
Lender notifies GSAL otherwise), Lender hereby appoints and authorizes GSAL, as
its agent on a disclosed basis, to lend such securities, upon such terms and
conditions and at such time or times, as GSAL, in its discretion, shall
determine, subject to the oversight of the Lender, including such guidelines as
the Lender may from time to time communicate to GSAL with respect to the lending
of Available Securities and which GSAL has consented to (which consent shall not
be unreasonably withheld) ("Guidelines"), and GSAL hereby accepts such
appointment. Lender may amend Schedule 1 to add or remove Available Securities
from time to time upon written notice to GSAL. To facilitate performance of its
lending agency activities (as more fully described below), GSAL may, in its
discretion and upon reasonable prior written notice to Lender, from time to time
appoint one or more persons to act as its sub-agent hereunder and under any
securities loan agreement ("SLA") entered into with respect to the loan of
securities held in the Custody Account, and Lender hereby approves any such
appointment; provided,
however, that without prior notice to Lender, GSAL may appoint one or more of
persons controlling, controlled by or under common control with GSAL ("GS
Affiliates") to act as sub-agent with respect to the performance of operational
and administrative back office supporting functions, including without
limitation the performance of monitoring and processing asset servicing events
and performing credit analyses. GSAL shall remain fully responsible for any
obligations delegated to a sub-agent and for any actions taken or omitted by a
sub-agent as if GSAL had taken or omitted to take such actions itself, unless
Lender directed GSAL to appoint such sub-agent (provided, that GSAL shall
monitor from time to time any such directed sub-agent in accordance with the
standard of care set forth in Section 16). GSAL shall have the right, in its
discretion, to terminate any appointment of a sub-agent or to modify the terms
of any such appointment, provided that GSAL shall provide prior written notice
to Lender in the event such termination or modification has a reasonable
likelihood of having a materially adverse impact on Lender.
(b) With respect to Available Securities, GSAL will use reasonable
efforts to the extent practicable to allocate loans among participants in its
agency securities lending program in a manner that, after taking into account
the Guidelines, is reasonably fair to all participants, including the Lender.
(c) The Guidelines provide that Lender may lend securities
representing 50% of its total assets immediately prior to making the loan unless
a lower percentage is set forth in an investment policy that is described in the
Lender's registration statement. Lender shall notify GSAL if a lower percentage
applies and if so, the amount of such lower percentage.
2. (a) During the term of any securities loan, GSAL shall permit the
loaned securities to be transferred into the name of and voted (where
applicable) by the borrower or others. For each loan of securities, GSAL shall
require the borrower to pledge as collateral (i) cash in U.S. dollars; (ii) U.S.
Government Securities; or (iii) irrevocable performance letters of credit issued
by (a) a domestic bank that is organized under the laws of the United States,
(b) a domestic bank that is organized under the laws of a State, or (c) a
foreign bank that has filed an agreement with the Federal Reserve Board to
comply with the same rules and regulations applicable to U.S. banks in
securities credit transactions (collectively, "Collateral") having an initial
market value (as determined by GSAL pursuant to the applicable SLA) at least
equal to the amount determined pursuant to the applicable SLA) and the
Guidelines.
(b) Collateral will be received from a borrower prior to or
simultaneous with delivery of securities loaned. If the borrower does not
provide the required Collateral to GSAL, as agreed, then GSAL will cancel the
corresponding loan instruction prior to delivery.
(c) With respect to loans involving domestic securities, Collateral
shall be remarked to the percentage of the market value of the securities loaned
(including any accrued interest) as specified in the applicable SLA and the
Guidelines for domestic securities. With respect to loans involving foreign
securities, Collateral shall be
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remarked to the percentage of the market value of the securities loaned
(including any accrued interest) as specified in the applicable SLA and the
Guidelines for foreign securities. With respect to loans of U.S. Government
Securities, GSAL shall remark Collateral to the percentage of market value
specified in the applicable SLA and the Guidelines for U.S. Government
Securities if the market value of such Collateral falls below 100% of the market
value of the securities loaned (including any accrued interest). If, as a result
of marking-to-market, Collateral is required to be returned to the Borrower
under an SLA, GSAL will timely return such Collateral to the Borrower. GSAL is
authorized to consent to any adjustment in the amount available to be drawn
under any letter of credit or to debit the Cash Collateral Investments (as
defined in paragraph 9) in order to satisfy any requirement under an SLA to
return excess Collateral to a Borrower as a result of marking-to-market.
(d) All Collateral is intended to be received, held and administered
for the benefit of Lender by Custodian in the Custody Account, except as
otherwise provided herein. GSAL is authorized in its discretion to terminate, on
Lender's behalf, any securities loan entered into with a borrower without prior
notice to Lender, subject to the conditions of the relevant SLA. Lender may
itself instruct GSAL to terminate any loan and recall loaned securities on any
date, subject to the conditions of the relevant SLA. GSAL agrees to comply with
any such instruction.
3. GSAL may lend securities from the Custody Account, as agent, only
to one or more of the institutions (each, an "Approved Borrower") listed on
Schedule 2 hereto, and Lender hereby specifically approves such list of
institutions. Lender understands and agrees that Schedule 2 may be amended by
GSAL from time to time to add or delete borrowers and that GSAL will notify
Lender of each such proposed change. With respect to a deleted borrower, such
change shall be effective immediately upon notification to Lender to such
effect. With respect to a proposed additional borrower, unless Lender notifies
GSAL, within three Business Days of the giving by GSAL of notice of the proposed
additional borrower(s), of Lender's disapproval of any such additional
borrower(s), Lender agrees that Schedule 2 shall be deemed amended to add the
name(s) of such borrower(s). Lender may at any time and from time to time
instruct GSAL to remove a person from Schedule 2, and from and after GSAL's
receipt of such instruction, Schedule 2 shall be deemed amended to remove such
person as an Approved Borrower.
4. Notwithstanding anything herein to the contrary, during such time
that Lender is a plan or other entity subject to the requirements of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), (any such
plan or other entity referred to herein as an "ERISA Plan Lender"), the
provisions of Annex I to this Agreement shall become effective (and shall be
deemed incorporated by reference in this Agreement as if fully set forth herein)
and any provision of Annex I or of ERISA governing the lending of securities of
an ERISA Plan Lender under this Agreement shall override any inconsistent
provisions otherwise contained in this Agreement. Lender represents that at the
time of this Agreement (check appropriate item):
[_] it is an ERISA Plan Lender, or
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[_]
[X] it is not an ERISA Plan Lender.
Lender shall notify GSAL in writing if at any time during the term of this
Agreement its status changes from that specified above, and, until such notice
is received, GSAL shall be entitled to rely on the status of Lender represented
to it as aforesaid.
5. Lender fully understands and agrees that GSAL intends to execute or
cause to be executed an SLA (in substantially the form of Schedule 3) as
Lender's agent on a disclosed basis with each borrower, and Lender hereby
approves such form of SLA. Lender understands and agrees that GSAL may revise
the terms of any SLA with any borrower as GSAL deems necessary or appropriate,
in its discretion, for the effectuation of any transaction contemplated hereby
or thereby; provided, that any material change to the terms of the SLA attached
hereto as Schedule 3 shall not be effective unless approved in advance in
writing by Lender. Lender also agrees to promptly furnish to GSAL its financial
statements to enable GSAL to comply with any request therefor by a borrower in
connection with any SLA.
6. GSAL is authorized by Lender to negotiate on Lender's behalf with
each borrower all terms of a securities loan, including the amounts or fees to
be received or paid pursuant to the applicable SLA, subject to the Guidelines
(which may among other things include restrictions relating to permissible
ranges of rebate rates, spreads, or similar economic terms). GSAL shall prepare
a transactional confirmation in respect of each loan effected pursuant to an
SLA, setting forth the securities borrowed and the material terms of the loan,
and shall transmit the same to the borrower in accordance with such SLA. Lender
understands and agrees that the identity of Lender will be disclosed by GSAL to
a borrower under a securities loan at any time upon request of the borrower. The
basis of GSAL's compensation for its activities hereunder and in respect of any
securities loan is set forth in Schedule 4 hereto.
7. GSAL is authorized to notify Lender or Custodian whenever a
securities loan has been agreed to on behalf of Lender with an Approved
Borrower. In respect of the commencement of any loan, GSAL shall instruct the
borrower to transfer to the Custody Account the required Collateral and shall
advise Lender or Custodian to receive the same. GSAL shall also advise Lender or
Custodian which securities in the Custody Account have been lent and the
transfer instructions supplied by the borrower with respect thereto. Upon
termination of the loan, GSAL shall instruct the borrower to return the loaned
securities to the Custody Account and shall advise Lender or Custodian to
receive the same. GSAL shall also advise Lender or Custodian as to Collateral
due the borrower and the borrower's transfer instructions with respect thereto.
Once the Custodian has confirmed settlement of the return of the loaned
securities, GSAL shall effect the return of Collateral due the borrower in
accordance with the borrower's transfer instructions with respect thereto.
8. In respect of loans of securities entered into on Lender's behalf,
GSAL will value on a daily basis, in accordance with the applicable SLA, the
loaned
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securities and all pledged Collateral and, where applicable, GSAL shall,
in accordance with the provisions of the applicable SLA, request the borrower to
deliver sufficient additional collateral to the Custody Account to satisfy the
applicable margin requirement and shall advise the Lender or Custodian to
receive the same. Lender acknowledges and agrees that, pursuant to any SLA, GSAL
may permit a borrower to substitute Collateral, which is of the type specified
in Section 2 hereto and is otherwise acceptable to GSAL in its discretion,
during the term of any loan so long as the required margin in respect of such
loan continues to be satisfied after such substitution. If, as a result of
marking to market, Collateral is required to be returned to the borrower under
the SLA, GSAL may advise Lender or Custodian regarding the amount and type of
Collateral requested by borrower to be returned and the manner, timing and means
by which such return was requested by borrower to be effected.
9. (a) Lender shall have the right, pursuant to the SLA, to invest
cash Collateral received in respect of any loan, subject to an obligation, upon
the termination of the loan, to return to the borrower the amount of cash
initially pledged (as adjusted for any interim marks-to-market). Lender shall
direct GSAL and/or Custodian, from time to time, as specified in Schedule 5
hereto, as to the manner and means by which such cash Collateral is to be
invested and the types of permissible investments (collectively, the "Cash
Collateral Investments"). Lender hereby authorizes GSAL to direct withdrawals
from, and contributions to, the Cash Collateral Investments to satisfy Lender's
obligations arising to a borrower or GSAL pursuant to this Agreement or an SLA.
(b) Lender acknowledges and agrees that any income or gains and
losses from investing and reinvesting any cash Collateral delivered by a
borrower to GSAL pursuant to an SLA shall be at Lender's risk and for Lender's
account, and Lender agrees that to the extent any such losses reduce the amount
of cash Collateral below the amount required to be returned to the borrower upon
the termination of any loan made on Lender's behalf (after giving effect to any
Cash Collateral Fee (as defined in the applicable SLA) due the borrower), Lender
will, on demand of GSAL, immediately pay to GSAL (for transmission to such
borrower) an equivalent amount in cash in U.S. dollars. GSAL is hereby
authorized and instructed, and GSAL agrees, to effect any required liquidation
of Cash Collateral Investments to satisfy Lender's obligation to return cash
Collateral pursuant to a xxxx to market or upon termination of any loan of
securities. All proceeds and earnings derived from the Cash Collateral
Investments shall be deposited in the Custody Account unless otherwise directed
by Lender.
10. Where Collateral consists of securities, Lender, pursuant to the
applicable SLA, may pledge, repledge, hypothecate, rehypothecate, lend, relend,
sell or otherwise transfer the same to third parties, in which case Lender shall
direct Custodian (or GSAL to direct Custodian) as to the intended disposition.
GSAL shall also advise Custodian, on the due date therefor, of any Cash
Collateral Fees or amounts (including payments in lieu of distribution on
securities Collateral) that are due to a borrower, and on behalf of Lender, to
effect prompt payment thereof to the borrower by appropriate debit to the
Custody Account and transfer to the borrower. With respect to fees and
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amounts (including in lieu of distributions on loaned securities) due to Lender
from a borrower, GSAL shall advise Custodian of the fees and amounts to be
received on the due date therefor in the Custody Account pursuant to Lender's
direction. Lender acknowledges and agrees that, in respect of any loan entered
into on Lender's behalf, GSAL may at its option advance its own funds to pay any
such Cash Collateral Fee or other fees or amounts due the borrower; provided,
that no such advance shall be made except to the extent GSAL is not able to
debit the Custody Account for the amount due the borrower). If GSAL makes any
such advance, or if Lender does not pay to GSAL when due the applicable
securities lending fee, Lender will be liable to GSAL until payment in full of
such liability, at a rate per annum equal to 1/2% above the highest broker call
rate of interest as published in the Wall Street Journal (Eastern edition) from
day to day; provided that Lender shall not be liable for such interest on any
such advance unless GSAL shall have notified Lender promptly of such advance.
Lender acknowledges and agrees that the obligation of Lender to pay to the
borrower the Cash Collateral Fee in respect of any loan of securities is
independent of the results of investment of the related cash Collateral. As
security for any and all obligations of Lender to GSAL arising hereunder or
under any SLA or loan of securities effected on Lender's behalf at any time and
from time to time, Lender hereby assigns and grants to GSAL a security interest
in, and hereby pledges, all of its right, title and interest in, to and under
the Cash Collateral Investments held by the Custodian, subject and subordinate
to (x) any security interest of, and pledge to, if any, the Custodian over the
cash and securities in the Custody Account granted by Lender to Custodian and
(y) the security interest of, and pledge to, if any, a bank or other financial
institution that is a lender to the Lender pursuant to a credit agreement or
similar arrangement with such Lender.
11. In the event of a default by a borrower which could have an
adverse effect on Lender with respect to any loan entered into pursuant to an
SLA, GSAL shall promptly notify Lender and shall, and is hereby authorized by
Lender to, exercise on Lender's behalf, (i) in its discretion, and without prior
notification to Lender, or (ii) upon instruction of Lender, any and all remedies
provided thereunder or available under applicable law. In addition, the
following applies:
(a) If a borrower fails, pursuant to the SLA with GSAL, to return
loaned securities (including any non-cash distributions in the nature of a stock
split or stock dividend added to a loan) with respect to a loan when due for any
reason ("Default Event"), then GSAL shall indemnify the Lender as set forth
below. GSAL shall, to the extent deemed prudent by GSAL or to the extent
directed by Lender, promptly, at its expense, purchase ("Buy-In") for the
Lender's account, for settlement in the normal course, replacement securities of
the same quantity, issue, type, class and series as that of the loaned
securities, provided however, that if the value of the Collateral ("Collateral
Value", as defined below) is less than the purchase cost of replacement
securities, GSAL shall be responsible for satisfying such shortfall but only to
the extent that such shortfall is not due to any diminution in the Collateral
Value due to investment losses (which are borne by Lender pursuant to Section 9
of this Agreement). In addition, provided that the Lender or Custodian provides
sale notification to GSAL by
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the close of business on trade date in the principal market for the affected
security, GSAL shall indemnify the Lender for overdraft charges at the Custodian
during the Default Event Period (as defined below) in connection with (i) the
Lender's settlement of foreign exchange contracts that correspond to the loaned
securities that are subject to the Default Event, and/or (ii) purchases of
securities that were intended to be purchased with the proceeds of the sale of
the securities that are subject to the Default Event. For purposes of this
Section 10(a), "Default Event Period" shall mean the period from the date of the
Default Event until (i) the settlement date of the Buy-In, (ii) the date payment
is received by the Lender pursuant to paragraph (b) below, or (iii) the date of
the return of the loaned securities, whichever is applicable. In the event the
Lender fails to meet its sale settlement obligations with respect to loaned
securities as a result of a Default Event and the applicable exchange or broker
performs a "buy-in" to prevent a "market" short position, and the Lender
provides notification of such sale to GSAL by the close of business on trade
date in the principal market for the affected security, GSAL shall be liable for
direct losses, expenses and liabilities incurred by the Lender in connection
with such buy-in except to the extent of the negligence of the Custodian.
(b) In the event GSAL and the Lender mutually determine for GSAL
not to engage in an actual Buy-In under the SLA, GSAL shall, at its expense,
credit the Custody Account in United States dollars with the market value of
such unreturned loaned securities (including, in the case of debt securities,
accrued but unpaid interest and, in the case of equity securities, dividends or
distributions declared but not paid or remitted to Lender or any non-cash
distributions in the nature of a stock split or stock dividend added to a loan)
determined as of the credit date.
(c) In addition to making the purchases or credits required by
paragraphs (a) and (b) hereof, GSAL shall credit Lender the value of all
distributions on the loaned securities for record dates which occur before the
date that GSAL completes the Buy-In under paragraph (a) or credits Lender's
account under paragraph (b) (whether or not such record dates occur prior to the
date of the applicable Default Event).
(d) Any credits required under Paragraphs (b) and (c) shall be
made by application of the proceeds of the Collateral, if any, that remains
after any Buy-In that is effected by GSAL under paragraph (a). If and to the
extent the Collateral Value is less than the sum of the credits required under
paragraphs (b) and (c), such credits shall be made at GSAL's expense.
(e) Collateral Value shall be (A) in the case of loans
collateralized solely by cash Collateral, the value of the cash Collateral
pledged by a borrower with respect to a loan, (B) in the case of loans
collateralized solely by securities Collateral, the market value of such
Collateral, and (C) in the case of loans collateralized solely by letters of
credit, the respective available undrawn amounts, and, in each case above,
Collateral Value shall be determined on the date of the Buy-In (or the payment
made pursuant to (f) below). Where a loan is collateralized by more than one
type of Collateral, the aggregate market value of Collateral securing such loan
(for the purpose of computing the indemnity) shall be the sum of the market
values for each relevant type of Collateral. Market value shall be determined by
GSAL, where applicable, based
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upon prices obtained from recognized pricing services or dealer price quotations
other than the Borrower.
(f) If, on the date of the Default Event, GSAL is not in
possession or control of the Collateral allocated to the defaulted Loan, Lender
shall promptly cause such Collateral to be transferred to GSAL for application
against the cost of any Buy-In.
(g) In the event that GSAL is required to perform or make any
payment under this Section, the Lender agrees that, to the extent of such
performance or payment, GSAL shall be subrogated to, and the Lender shall
assign, and be deemed to have assigned, to GSAL all of Lender's rights in, to
and against the borrower in respect of the related loan, any Collateral pledged
by the borrower in respect of such loan (including any letters of credit and the
issuers thereof) and all proceeds of such Collateral (but not until all of the
obligations of the borrower to Lender have been fully paid). In the event that
Lender receives or is credited with any payment, benefit or value from or on
behalf of the borrower in respect of rights to which GSAL is subrogated as
provided herein, Lender shall promptly remit or pay to GSAL the same (or, where
applicable, its United States dollar equivalent).
12. GSAL (i) will, upon request by Lender, provide to Lender a daily
statement of activity setting forth information relating to loaned securities,
marks-to-market and terminations and (ii) will mail to Lender on or about the
7th (seventh) Business Day of each month, a statement indicating for the
preceding calendar month the securities lent from the Custody Account, the value
of such securities, the identity of the borrowers, the nature and amount of
Collateral received as security for the loaned securities, the amounts of any
fees or payments paid with respect to each loan and such other information as
GSAL and Lender may agree to from time to time or as Lender may reasonably
request; provided that GSAL shall comply with any reasonable request made by
Lender in light of GSAL's then current systems and subject to policies and
procedures of GSAL reasonably designed to protect its proprietary or
confidential information and reimbursement by Lender for any extraordinary costs
incurred in responding to such requested information. For purposes hereof,
"Business Day" means any day on which GSAL is open for business in Boston,
Massachusetts.
13. The parties acknowledge that:
THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION ACT OF 1970
MAY NOT PROTECT THE LENDER WITH RESPECT TO THE SECURITIES LOAN TRANSACTION AND
THAT, THEREFORE, THE COLLATERAL DELIVERED BY THE BROKER OR DEALER, AS BORROWER,
TO THE LENDER MAY CONSTITUTE THE ONLY SOURCE OF SATISFACTION OF THE BROKER'S OR
DEALER'S OBLIGATION IN THE EVENT THE BROKER OR DEALER FAILS TO RETURN THE
SECURITIES.
14. Lender acknowledges that, under the applicable SLA, the borrowers
will not be required to return loaned securities immediately upon receipt of
notice from GSAL terminating the applicable loan, but instead will be required
to return such loaned securities within such period of time following such
notice as is specified in
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the applicable SLA. Upon receiving a notice from Custodian, Lender or Lender's
investment manager that Available Securities which have been lent to a borrower
should no longer be considered Available Securities (whether because of the sale
of such securities or otherwise), GSAL shall notify promptly (and in no event
later than the next Business Day) thereafter the borrower which has borrowed
such securities that the loan of such securities is terminated and that such
securities are to be returned within the time specified by the applicable SLA.
15.(a) Lender shall be entitled to receive all distributions (made on,
or in respect of the Available Securities that are lent to a borrower as
contemplated hereby), which are not otherwise received by Lender, to the full
extent it would be so entitled if the Available Securities (i.e., those which
are lent) had not been lent to the borrower, including, but not limited to cash
and all other property, dividends, securities received as dividends, interest
payments and rights to purchase securities and all other distributions, if any.
(b) Any cash distribution made on or in respect of the Available
Securities that are lent which Lender is entitled to receive under Section
15(a), and any fee payable by a borrower to Lender under an SLA, shall be paid
by the transfer of cash to the Custody Account by the borrower and GSAL shall
arrange for such payment on or as soon as is practicable after the date such
distribution or fee payable by the borrower, in an amount equal to such
distribution. Non-cash distributions received by the borrower shall be added to
the Available Securities that are lent to the borrower on the date of
distribution and shall be considered such for all purposes, except that if the
loan has terminated, GSAL shall arrange for the immediate transfer of same to
the Custody Account.
(c) Lender acknowledges that any payments of distributions from
the borrower to Lender are in substitution for the interest or dividend accrued
or paid in respect of loaned securities and that the tax treatment of such
payment may differ from the tax treatment of such interest or dividend. Lender
also acknowledges that GSAL or Custodian may be required to withhold tax on
amounts payable to or by Lender pursuant to a securities loan and GSAL may at
any time claim from Lender any shortfall in the amount GSAL so withheld.
16. Subject to the requirements of applicable law and except as
expressly set forth in this Agreement, GSAL shall not be liable with respect to
any losses incurred by Lender in connection with this securities lending program
or under any provision hereof, except to the extent that such losses result from
the negligence, bad faith or willful misconduct of GSAL in the performance of
its duties under this Agreement.
17. The responsibilities of GSAL and Custodian with respect to
negotiating and administering each securities loan shall be set forth in, and
governed by, the written operational procedures established from time to time by
GSAL and Custodian and agreed to by Lender, and are incorporated by reference
herein. GSAL shall have no liability whatsoever to Lender or any borrower
arising from or based upon
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any failure or delay by Custodian, for whatever reason, to perform Custodian's
obligations to Lender as Custodian under any loan of securities (including
complying with any instructions, orders or directions with respect to receipt
and delivery of securities, Collateral and fees, and investment and
liquidation/redemption of investments of Collateral), except to the extent that
such losses result from the negligence, bad faith or willful misconduct of GSAL
in the performance of its duties under this Agreement. Reasonable and customary
transaction fees and expenses of Custodian relating to the transfer of
securities and cash in connection with the Agreement shall be paid or reimbursed
by GSAL.
18. Each party represents and warrants to each other that (i) it has
due authority to enter into and perform this Agreement and any transactions
contemplated thereby; (ii) the execution and performance of this Agreement and
any transaction contemplated thereby has been duly authorized by all necessary
action, corporate or otherwise, and does not and will not violate any law,
regulation, charter, by-law or other instrument, restriction or provision
applicable to it; and (iii) this Agreement constitutes such party's legal, valid
and binding obligation enforceable in accordance with its terms. In addition,
Lender represents that, as to any securities lent at any time and from time to
time from the Custody Account, Lender shall be the owner thereof with clear
title thereto and no lien, charge or encumbrance upon such securities shall
exist except as otherwise created hereunder.
19. Lender grants GSAL the authority set forth in this Agreement
notwithstanding its awareness that GSAL, in its individual capacity or acting in
a fiduciary capacity for other accounts, may have transactions or existing
relationships with the same institutions to which loans of securities may be
made hereunder, which transactions or relationships may give rise to potential
conflict of interest situations. GSAL personnel who arrange for loans of
Lender's securities will be organizationally separated (including supervision)
from all GS Affiliate personnel who handle the borrowing of securities for GS
Affiliates. Any confidential information about Lender, including but not limited
to the identification and amount of securities positions held by Lender,
disclosed to or obtained by GSAL or GS Affiliates as well as the details of
transactions hereunder, shall be kept confidential by GSAL except to the extent
reasonably necessary for GSAL to perform its role as Lender's agent (or for GS
Affiliates to perform their roles on behalf of GSAL) hereunder and except as may
be necessary to comply with applicable law or regulation or to cooperate with
any reasonable request made by an entity with regulatory jurisdiction over GSAL
or to obtain confidential legal, tax or accounting advice and, notwithstanding
anything contrary in this Agreement, GSAL agrees to prohibit its employees from
trading on the basis of any such confidential information. GSAL's obligations in
this section 19 shall continue following any expiration or termination of this
Agreement.
20. GSAL shall have no duties or responsibilities in respect of
securities lending transactions except those expressly set forth in this
Agreement. GSAL 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
10
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; governmental
actions; or inability to obtain labor, material, equipment or transportation.
GSAL shall be entitled to conclusively rely upon any certification, notice or
other communication (including by telephone, telex, facsimile, telegram or
cable) reasonably believed by it to be genuine and correct and to have been
signed or sent by or on behalf of an approved person ("Approved Person") of
Lender. Set forth in Schedule 6 hereto is a list of Approved Persons, which list
may be amended by Lender from time to time upon notice to GSAL.
21. Lender hereby authorizes and empowers GSAL to execute in Lender's
name and on its behalf and at its risk all agreements and documents as may be
necessary or appropriate in the judgment of GSAL to carry out the purposes of
this Agreement. It is understood and agreed that GSAL is authorized to supply
any information regarding Lender and any loan of securities effected pursuant
hereto which is required by applicable law.
22. GSAL acknowledges that the Lender may be required to seek
information from GSAL in order to comply with Rule 38a-1 promulgated under the
Investment Company Act of 1940, as amended or other applicable laws and
regulations. GSAL shall use its best efforts to respond to such requests for
information from Lender, subject to policies and procedures of GSAL reasonably
designed to protect its proprietary or confidential information and subject to
reimbursement by Lender for any extraordinary costs incurred in responding to
such requests. Throughout the term of this Agreement, GSAL agrees to provide the
Lender with any certifications, information and access to personnel and
resources that the Lender may reasonably request to enable the Lender to comply
with Rule 38a-1 under the Investment Company Act of 1940, as amended and other
applicable laws and regulations. Without limiting the foregoing, no less
frequently than annually, GSAL shall provide to the Lender a Type II SAS 70
audit covering GSAL's securities lending operations controls and procedures.
23. This Agreement may be terminated by any party on sixty days'
written notice to the other party to such effect. The only effects of any such
termination of this Agreement will be that (a) following such termination, no
further loans shall be made hereunder by GSAL on behalf of Lender, (b) GSAL
shall, within a reasonable time after termination of this Agreement, terminate
any and all outstanding loans and (c) in the event Lender has appointed a
successor lending agent, the parties shall use commercially reasonable efforts
to transition Lender's securities lending activity to such successor lending
agent as soon as practicable after any such termination. The provisions hereof
shall continue in full force and effect in all other respects until all loans
have been terminated and all obligations satisfied as herein provided.
11
24. GSAL represents that as a subsidiary of The Xxxxxxx Xxxxx Group,
Inc., its payment obligations under this Agreement are, as of the date of this
Agreement, covered by that certain General Guarantee Agreement, dated December
1, 2008, by The Xxxxxxx Sachs Group, Inc., a copy of which is attached as
Schedule 9 (the "Guarantee"). GSAL shall notify Lender promptly of its becoming
aware of any termination of the Guarantee or any material modification of the
Guarantee in a manner materially adverse to Lender. Such notification shall
occur simultaneously, or promptly following any public notice of such
termination or any public notice of such material modification of the Guarantee.
25. All notices, demands and other communications hereunder shall be
in writing and delivered or transmitted (as the case may be) by electronic mail,
registered mail, facsimile, telex or courier, or be effected by telephone
promptly confirmed in writing and delivered or transmitted as aforesaid, to the
intended recipient in accordance with Schedule 7 hereto. Notices shall be
effective upon receipt.
26. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York. This Agreement shall not be modified or
amended except by an instrument in writing signed by Lender and GSAL. This
Agreement supersedes any other agreement between the parties hereto concerning
loans of securities held in the Custody Account. This Agreement shall not be
assigned by either party without the prior written consent of the other party.
[Signature pages follow]
12
XXXXX FARGO FUNDS TRUST, on behalf of
the Lenders listed on Appendix A as
amended from time to time
By
-------------------------------------
Name: C. Xxxxx Xxxxxxx
Title: Secretary
XXXXX FARGO MASTER TRUST, on behalf of
the Lenders listed on Appendix A as
amended from time to time
By
-------------------------------------
Name: C. Xxxxx Xxxxxxx
Title: Secretary
XXXXX FARGO VARIABLE TRUST, on behalf of
the Lenders listed on Appendix A as
amended from time to time
By
-------------------------------------
Name: C. Xxxxx Xxxxxxx
Title: Secretary
XXXXXXX XXXXX BANK USA
By
-------------------------------------
Name:
Title:
ANNEX I
SPECIAL PROVISIONS APPLICABLE TO ERISA PLAN LENDERS
To the extent that securities to be loaned under the Agreement are those of
an ERISA Plan Lender the following provisions shall be effective:
SECTION 1 - REPRESENTATIONS OF ERISA PLAN LENDER
(a) The person executing this Agreement on behalf of ERISA Plan Lender
represents that he or she is a fiduciary of ERISA Plan Lender with the authority
to execute this Agreement on behalf of ERISA Plan Lender and is independent of
GSAL and any affiliate of GSAL (within the meaning of U.S. Department of Labor
Prohibited Transaction Class Exemption ("PTCE") 82-63).
(b) ERISA Plan Lender agrees to immediately notify GSAL if at any time:
(i) any potential borrower which is a broker-dealer registered under
the Securities Exchange Act of 1934, as amended (the "1934 Act"), a
broker/dealer exempted from registration under Section 15 (a)(1) of the
1934 Act as a dealer of exempted Government securities, or a bank (or any
of such potential borrower's affiliates, as defined in PTCE 81-6) has
discretionary authority or control with respect to the investment of any
Available Securities, or renders investment advice (within the meaning of
29 CFR Section 2510.3-21(c)) with respect to any Available Securities, or.
(ii) any potential borrower not described in clause (i) above (or any
of such potential borrower's affiliates, as defined in PTCE 81-6) is a
party-in-interest with respect to ERISA Plan Lender (within the meaning of
Section 3(14) of ERISA) or a disqualified person with respect to ERISA Plan
Lender (within the meaning of Section 4975(e)(2) of the Internal Revenue
Code of 1986, as amended).
In determining whether to enter into a securities loan under this Agreement
on behalf of ERISA Plan Lender, GSAL shall be entitled to rely conclusively upon
such notice from ERISA Plan Lender.
(c) To the extent cash collateral of ERISA Plan Lender will be invested in
the BGA Trust, ERISA Plan Lender represents that Schedule 8 contains a full and
complete list of (i) any party in interest to ERISA Plan Lender (and any
affiliate thereof, as defined in PTCE 84-14) who has (or during the immediately
preceding one year exercised) the authority to terminate the investment manager
of the BGA Trust (within the meaning of PTCE 84-14), including the ability to
terminate the appointment of GSAL under this Agreement, or (ii) any party in
interest to ERISA Plan Lender (and any affiliate thereof, as defined in PTCE
81-8) who has discretionary authority or control with respect to the assets
subject to this Agreement or renders investment advice with respect to those
February 2 2009 version
assets (within the meaning of PTCE 81-8). ERISA Plan Lender shall supplement or
modify Schedule 8 from time to time during the term of this Agreement to the
extent necessary to maintain its accuracy.
SECTION 2 - REPRESENTATIONS OF GSAL
(a) With respect to ERISA Plan Lender, no advance of funds described in
subparagraph 9(b) of the Agreement shall be made by GSAL unless the terms and
conditions of such advance comply with PTCE 80-26.
(b) If ERISA Plan Lender provides notice to GSAL described in Section 1(b)
above, GSAL shall not engage in any securities loan on behalf of ERISA Plan
Lender with a potential borrower identified pursuant to Section 1(b) by ERISA
Plan Lender that would constitute a prohibited transaction under ERISA.
(c) GSAL is a "fiduciary" (as that term is defined in Section 3(21)(A) of
ERISA) with respect to its duties under this Agreement as they relate to assets
of ERISA Plan Lender.
16
APPENDIX A
Lenders
XXXXX FARGO FUNDS TRUST
XXXXX FARGO MASTER TRUST
XXXXX FARGO VARIABLE TRUST
XXXXX FARGO FUNDS TRUST
1. Asia Pacific Fund
2. Asset Allocation Fund
3. Capital Growth Fund
4. C&B Mid Cap Value Fund
5. Common Stock Fund
6. Discovery Fund
7. Emerging Markets Equity Fund
8. Endeavor Select Fund
9. Enterprise Fund
10. Government Securities Fund
11. Growth Fund
12. High Income Fund
13. Income Plus Fund
14. International Core Fund
15. International Equity Fund
16. Large Cap Growth Fund
17. Large Company Core Fund
18. Large Company Value Fund
19. Managed Account CoreBuilder Shares Series G
20. Mid Cap Disciplined Fund
21. Mid Cap Growth Fund
22. Opportunity Fund
23. Short Duration Government Bond Fund
24. Short-Term Bond Fund
25. Short-Term High Yield Bond Fund
26. Small Cap Disciplined Fund
27. Small Cap Growth Fund
28. Small Cap Opportunities Fund
29. Specialized Financial Services Fund
30. Specialized Technology Fund
31. Strategic Income Fund
32. Ultra Short-Term Income Fund
33. U.S. Value Fund
XXXXX FARGO MASTER TRUST
1. C&B Large Cap Value Portfolio
2. Disciplined Growth Portfolio
17
3. Diversified Stock Portfolio
4. Diversified Fixed Income Portfolio
5. Emerging Growth Portfolio
6. Equity Income Portfolio
7. Equity Value Portfolio
8. Index Portfolio
9. Inflation-Protected Bond Portfolio
10. International Core Portfolio
11. International Growth Portfolio
12. International Index Portfolio
13. International Value Portfolio
14. Large Cap Appreciation Portfolio
15. Large Company Growth Portfolio
16. Managed Fixed Income Portfolio
17. Small Cap Index Portfolio
18. Small Company Growth Portfolio
19. Small Company Value Portfolio
20. Stable Income Portfolio
21. Total Return Bond Portfolio
XXXXX FARGO VARIABLE TRUST
1. VT Asset Allocation Fund
2. VT C&B Large Cap Value Fund
3. VT Discovery Fund
4. VT Equity Income Fund
5. VT International Core Fund
6. VT Large Company Core Fund
7. VT Large Company Growth Fund
8. VT Opportunity Fund
9. VT Small Cap Growth Fund
10. VT Small/Mid Cap Value Fund
11. VT Total Return Bond Fund
18
SCHEDULE 1
AVAILABLE SECURITIES
GSAL shall lend securities held in a Lender's Custody Account. Except as set
forth in a written instrument provided from time to time by Lender, any
securities held in a Custody Account for Lender shall be available for lending
pursuant to this Agreement ("Available Securities").
19
SCHEDULE 2
LIST OF APPROVED BORROWERS
Barclays Capital Inc.
BNP Paribas Prime Brokerage Inc. / BNP Paribas Securities Corp.
Citigroup Global Markets Inc.
Credit Suisse Securities (USA) LLC
Deutsche Bank Securities Inc.
Xxxxxxx, Sachs & Co.*
ING Financial Markets LLC
X.X. Xxxxxx Clearing Corp.
Xxxxxxx Xxxxx Xxxxxx Xxxxxx & Xxxxx Inc.
Xxxxxx Xxxxxxx & Co. Inc. / MS Securities Services Inc.
SG Americas Securities LLC
UBS Securities LLC
* Lenders may from time to time impose additional limitations on the amount
that can be on loan at any time to such counterparty.
20
SCHEDULE 3
FORM OF SECURITIES LOAN AGREEMENT
SECURITIES LOAN AGREEMENT
SECURITIES LOAN AGREEMENT dated ____________ by and between Xxxxxxx
Sachs Bank USA, doing business as Xxxxxxx Xxxxx Agency Lending, as agent for
accounts (in such capacity and not in its individual capacity, "Lender"), and
_____________________ ("Borrower") setting forth the terms and conditions under
which Lender, on behalf of disclosed accounts (each, an "Account" and,
collectively, the "Accounts") hereto lends to Borrower certain securities
against a pledge of collateral.
Lender and Borrower as the parties hereto agree as follows:
1. Loan of Securities.
1.1 Subject to the terms and conditions of this Agreement, either party
hereto may orally initiate a transaction whereby Lender may, from time to time,
lend securities to Borrower. The parties shall agree orally on the terms of each
Loan, including the date of commencement of the Loan, the issuer of the
securities, the description and amount of securities to be lent and the method
and location of their delivery, the terms of compensation (including any
applicable rebate), the Margin Percentage, and the type(s) and amount of
Collateral to be transferred by Borrower and the method and location of their
delivery, which terms may be amended during the Loan upon mutual agreement of
the parties.
1.2 (a) Each Loan shall be evidenced by a written confirmation
("Confirmation") to be prepared by Lender and delivered to Borrower at or about
the commencement of the Loan. The Confirmation shall set forth the material
terms of the Loan. The Confirmation, together with this Agreement, shall
constitute conclusive evidence of the terms of any Loan agreed to by Borrower
and Lender, unless with respect to the Confirmation specific objection is made
immediately after receipt thereof by Borrower.
(b) If the parties heretofore agree, each Loan shall not be evidenced by
the method specified in 1.2(a) but rather by Lender's records pertaining to such
Loans maintained by Lender in the regular course of its business and which shall
represent conclusive evidence thereof except for manifest error or willful
misconduct. Lender shall send Borrower monthly statements of outstanding Loans
showing Loan activity which Borrower agrees to examine promptly and to advise
Lender of any errors or exceptions. Borrower's failure to so advise Lender
within twenty (20) days after delivery of any such statement shall be deemed to
be Borrower's admission of the accuracy and correctness of the contents thereof
and Borrower shall be fully bound thereby. The foregoing shall not be construed
to prevent the parties hereto from mutually agreeing to amend or correct such
statements if there has been manifest error in the preparation of such
statements.
(c) Irrespective of whether the parties agree to 1.2(a) or (b) above, on a
monthly basis, Lender shall furnish to Borrower a list of Accounts on whose
behalf Lender is authorized to effect loans as agent. In respect to any Loan,
the identity of the Account acting as lender shall be promptly furnished to
Borrower upon its request and, in any event, shall be automatically furnished to
Borrower by Lender upon the occurrence of a Default involving such Account.
1.3 Notwithstanding the provisions in this Agreement with respect to when a
Loan occurs, a Loan hereunder shall not occur until the Loaned Securities and
the Collateral therefore are transferred.
1.4 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
21
SATISFACTION OF BORROWER'S OBLIGATIONS IN THE EVENT BORROWER FAILS TO RETURN THE
LOANED SECURITIES.
2. Transfer of Loaned Securities. On the date for the commencement of the
Loan, Lender shall transfer the Loaned Securities to Borrower or its designee by
either (a) delivering to Borrower or its designee certificates representing the
Loaned Securities together with duly executed stock or bond transfer powers or
certificates or other instruments of transfer or assignment as are customary in
the market in which such Loaned Securities are delivered; (b) causing the Loaned
Securities to be credited to Borrower's account and debited to Lender's account
at a clearing agency ("Clearing Organization") at which Borrower and Lender
maintain accounts; or (c) any other method of transfer as agreed upon by the
parties. Borrower agrees that the completion of a delivery of Loaned Securities
to it pursuant to a Loan shall constitute its acceptance and receipt thereof and
each such acceptance and receipt shall be deemed to constitute, and shall
constitute, a representation by Borrower that as of the date of such acceptance
and receipt (i) all representations and warranties by Borrower herein are true
and correct, as if made on and as of such date, (ii) no Default hereunder has
occurred and is continuing, and (iii) except as otherwise theretofore disclosed
to Lender in writing, there has been no material adverse change in the financial
condition or business of Borrower or any direct or indirect parent since the
date of the most recent financial statements of Borrower provided to Lender
hereunder and that, where Borrower is a registered broker-dealer under the
Securities Exchange Act of 1934, as amended ("Exchange Act"), it is in
compliance with Rule 15c3-1 thereunder.
3. Transfer of Collateral.
3.1 On or prior to the receipt of the Loaned Securities, Borrower shall
transfer to Lender Collateral in an amount (the "Required Value") equal to the
percentage (the "Margin Percentage") of the market value of the Loaned
Securities as agreed to by the parties (which shall not be less than 100% of the
market value of the Loaned Securities) and shall be equal to the percentage
specified in Annex I hereto for particular types of loans.
3.2 All transfers of Collateral consisting of securities (including those
made pursuant to Section 8) shall be effected in the same manner as that
provided in Section 2 for Loaned Securities. All transfers of Collateral
consisting of cash (including those made pursuant to Section 8) shall be made by
(a) wire transfer in immediately available, freely transferable funds or (b)
such other means as the parties hereto may agree. All transfers of Collateral
consisting of a letter of credit from Borrower to Lender shall be made by
delivery to Lender of an irrevocable performance letter of credit issued by a
bank (not affiliated with Borrower) which is acceptable to Lender and is insured
by the Federal Deposit Insurance Corporation or is a foreign bank that has filed
an agreement with the Board of Governors of the Federal Reserve System on Form
FR T-2 (or any successor). Transfer of a letter of credit from Lender to
Borrower shall be made by causing such letter of credit to be returned or,
through the written consent of Lender, causing the amount of such letter of
credit to be reduced to the amount required after such transfer.
3.3 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, and Borrower hereby
pledges with, assigns to, and grants Lender a continuing security interest in,
and a lien upon, the Collateral (other than letters of credit), which shall
attach upon the delivery of the Collateral to Lender and which shall cease upon
the redelivery of the Collateral to Borrower.
3.4 Lender may use or invest the Collateral, if such consists of cash, at
its own risk and for its own benefit and shall be entitled to retain all income
and profits therefrom and shall bear all losses with respect thereto. If the
Collateral consists of securities, Lender may pledge, repledge, hypothecate,
rehypothecate, lend, relend, sell or otherwise transfer the Collateral and
commingle, with other collateral or with its own assets, the Collateral.
Borrower irrevocably appoints Lender to be the attorney-in-fact of Borrower for
the purpose of doing or performing any act or thing (including, without
limitation, executing any document) and to take all other steps as may be
required to enable Lender to effect transfer thereof to a third party or to
otherwise realize upon any Collateral which has been transferred to it pursuant
to any Loan.
3.5 Except as provided in Section 12, Lender shall be obligated to return
the Collateral to Borrower upon tender to Lender of the Loaned Securities on
termination of the Loan.
22
3.6 If, on any Business Day corresponding to the commencement date for a
Loan, Borrower transfers the Collateral and Lender does not transfer the Loaned
Securities, Borrower shall have the absolute right to the immediate return of
the Collateral; and if, on any such Business Day, Lender transfers Loaned
Securities and Borrower does not transfer Collateral hereunder, Lender shall
have the absolute right to the immediate return of the Loaned Securities.
3.7 Borrower may, upon reasonable notice to Lender and with Lender's
consent (which shall not be unreasonably withheld), substitute Collateral for
Collateral securing any Loan; provided, however, that such substituted
Collateral shall (a) consist only of cash, securities or other property that the
parties agreed would be acceptable Collateral prior to the commencement of the
Loan or Loans and (b) have a market value such that the aggregate market value
of such substituted Collateral shall equal or exceed the agreed upon Margin
Percentage of the market value of the Loaned Securities. Substituted Collateral
shall constitute Collateral hereunder for all purposes.
3.8 A transfer of Loaned Securities or Collateral may be effected on any
day except (i) a day on which the intended transferee is closed for business
(which transferee may be a designee or agent) or (ii) 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.
3.9 (a) Except as provided in the following sentence, upon receipt of
Collateral for a Loan, such Collateral shall be allocated to such Loan; provided
that if Collateral is received on the same day for more than one Loan, the
Lender shall allocate such Collateral to each Loan then being made so that each
such Loan is secured by not less than the Required Value of Collateral. Any
Collateral received by Lender with respect to a Loan in excess of the Required
Value for such Loan may be held by Lender as collateral security for all Loans
made to Borrower at any time without being allocated to any one Loan or, in the
sole discretion of Lender, may be allocated at any time to any Loan or Loans
then outstanding hereunder. All allocations of Collateral shall be marked in
Lender's books, which shall be conclusive evidence of such allocations.
(b) Lender shall have the right, at its sole election, at any time and from
time to time, to allocate and/or reallocate any Collateral held by it hereunder
to or among any outstanding Loan or Loans.
(c) It is expressly understood and agreed by the parties hereto that any
allocation of Collateral to any Loan or liabilities due to any Account pursuant
to the terms hereof shall in no way affect the ability of Lender to apply such
Collateral to the satisfaction of any obligation of Borrower hereunder upon any
default hereunder, regardless of the Loan or Account to which such obligation
relates, and that all Collateral at any time given hereunder shall constitute
collateral security for all the Borrower's obligations to Lender hereunder
without distinction of any kind and upon any default hereunder may be applied to
any such obligation or obligations as Lender in its sole discretion may elect.
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 cash Collateral or Collateral other than cash, based on the aggregate market
value, on each day for which such Loan Fee is being computed, of the Loaned
Securities so secured, 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, the parties shall agree on the applicable rates
therefor. Unless otherwise agreed, 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 upon the earlier of (i) the seventh day of the month
following the calendar month in which such fee was incurred or
23
(ii) the termination of all Loans hereunder (or, if a transfer of cash under
Section 3.8 may not be effected on such seventh day or the day of such
termination, as the case may be, the next day on which such a transfer may be
effected). 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 hereunder by Lender.
5. Termination of the Loan.
5.1 Each Loan shall be terminable on demand, notwithstanding any
expectation by any party that a Loan would remain outstanding for a given time
period. Borrower may terminate a loan at any time by giving notice to Lender at
least two Business Days prior to the termination date established by such
notice. On the termination date, Borrower shall transfer the Loaned Securities
to Lender in the same manner as initial transfer thereof from Lender to Borrower
was effected pursuant to Section 2, whereupon Lender shall transfer to Borrower
the Collateral (as adjusted pursuant to Section 8) by close of the day (which
must be a day upon which Lender or its designee or agent holding the Collateral
is open for business in the jurisdiction in which such Collateral is held) next
succeeding the day of such receipt of the Loaned Securities.
5.2 Lender may terminate a Loan at any time by giving notice to Borrower
prior to the close of business on a Business Day. The termination date
established by such notice shall be a Business Day no later than the earlier to
occur of (i) the standard settlement date for trades of the Loaned Securities
entered into on the date of such notice in the principal market therefor or (ii)
five Business Days from the giving of such notice. On the termination date,
Borrower shall transfer to Lender the Loaned Securities in the same manner as
initial transfer thereof from Lender to Borrower was effected pursuant to
Section 2, whereupon Lender shall transfer to Borrower the Collateral (as
adjusted pursuant to Section 8) by close of the day (which must be a day upon
which Lender or its designee or agent holding the Collateral is open for
business in the jurisdiction in which such Collateral is held) next succeeding
the day of such receipt of the Loaned Securities.
5.3 For purposes of this Agreement, any required return by Borrower of
Loaned Securities shall include securities identical in issuer, type, class and
face amount to those actually transferred by Lender to Borrower at the
commencement of the related Loan, and any required return by Lender of
Collateral consisting of securities shall include securities identical in
issuer, type, class and face amount to those actually transferred by Borrower to
Lender during the term of the Loan.
6. Rights of Borrower in Respect of the Loaned Securities. Until a Loan is
terminated in accordance herewith, 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 the Loaned
Securities 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 the record dates for which occur during the
term of the Loan (or the record date for which occurs at a time following return
of Loaned Securities upon termination of the Loan but prior to re-registration
thereof in the name of Lender or its designee in the normal course) and 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) all property (including cash dividends and all other
distributions of cash or property), (b) stock dividends and bonus issues, (c)
securities received as a result of split ups of the Loaned Securities and
distributions in respect thereof, (d) interest payments, (e) all rights to
purchase additional securities, and (f) payments upon maturity or other
redemption.
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 (denominated in the currency of issue for the Loaned
Securities, unless otherwise agreed) to Lender by Borrower on the relevant
payment date therefor, in an amount equal to such cash distribution (subject to
the provisions of Section 7.6), so long as Lender is not then in Default.
Non-cash distributions received by Borrower shall be added to the Loaned
Securities (unless otherwise
24
agreed by the parties) and shall be considered such for all purposes, except
that if the Loan has terminated, Borrower shall forthwith deliver the same to
Lender.
7.3 So long as Loaned Securities have not been returned to Lender and
re-registered in the name of Lender or its nominee, the parties agree that all
rights arising in respect of conversions, subdivisions, consolidations,
redemptions, takeovers, preemptions, options or other rights shall be for the
benefit of Lender and shall be deemed to have been exercised for the benefit of
Lender in accordance with Lender's prior instructions to Borrower. Borrower will
use its best efforts to seek instructions from Lender with respect to each of
the foregoing at such time and in such manner as to be able to act timely in
accordance with such instructions. Borrower's obligation to remit distributions
and to return Loaned Securities upon the termination of the Loan shall be made
after giving full effect to such instructions, irrespective of the extent of
Borrower's compliance with such instructions.
7.4 Borrower shall be entitled to receive all cash distributions made on or
in respect of non-cash Collateral the record or payment dates for which occur
during the term of the Loan and which are not otherwise received by Borrower, to
the full extent it would be so entitled if the Collateral had not been delivered
to Lender. Any distributions made on or in respect of such Collateral which
Borrower is entitled to receive hereunder shall be paid by the transfer of cash
(denominated in the currency of issue of the non-cash Collateral, unless
otherwise agreed) by Lender to Borrower, upon the date of Lender's receipt, in
an amount equal to such cash distribution (subject to the provision of Section
7.6), so long as Borrower is not then in Default.
7.5 Lender shall not be required to take any action pursuant to Section 7.4
to the extent that, as a result of such action, Borrower would become obligated
to transfer Collateral to Lender under Section 8.
7.6 (a) 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") and (ii) Borrower, Borrower's custodian
or Lender ("Payor") shall be required by law to collect any withholding or other
tax required to be deducted or withheld from such Borrower Payment ("Tax"), then
Borrower shall pay such additional amounts as may be necessary in order that the
net amount of the Borrower Payment received by Lender for the benefit of the
Affected Account, after payment of such Tax equals the net amount of the
Securities Distribution that would have been received by the Affected Account if
such Securities Distribution had been paid directly to it, provided, however,
that any Borrower Payment shall also take into account (and Borrower shall pay
such additional amounts which reflect) the value to the Affected Account (as
notified, orally or in writing, by Lender to Borrower) of any tax refund,
reclaim or credit which such Affected Account would otherwise have been entitled
to had it not lent the securities to Borrower but instead had retained ownership
thereof.
(b) If Lender is required to make a payment ("Lender Payment") with respect
to distributions on Collateral under Section 7.4 ("Collateral Distributions"),
Lender shall pay to Borrower the net amount of the Collateral Distribution which
Borrower would have received had it not pledged the Collateral and such
Collateral Distribution had instead been paid directly by the applicable
issuer(s) to Borrower.
(c) Each party shall supply to the other such tax information as may be
requested by the other to enable it to effect the Borrower Payment or Lender
Payment in the required amount, computed as per the immediately preceding
paragraphs of this Section 7.
8. Xxxx to Market Margin.
8.1 In the event that on any Business Day the market value of Collateral
subject to a Loan shall be less than the Margin Percentage of the market value
of the outstanding Loaned Securities subject to such Loan (a "Margin Deficit"),
Lender may, by notice (which may be oral) 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
subject to such Loan, shall equal or exceed the agreed upon Margin Percentage of
the market value of the Loaned Securities. Unless otherwise agreed, such
transfer (in the case of Collateral denominated in U.S. dollars) is to be made
in the United States in accordance with Lender's instructions no later than 3:00
p.m. Boston time on the day of such demand if demand is made prior to 11:00 a.m.
Boston time; in the case of all other types of Collateral and in the case of
Collateral denominated in U.S. dollars where demand is made subsequent to
25
11:00 a.m. Boston time, such transfer shall be completed by the close of
business of Lender (or its designee) in the location specified to Borrower for
transfer of additional Collateral on the next succeeding day on which Lender (or
its designee) is open for business thereat and not authorized or required to be
closed. If the additional Collateral to be posted is intended to be through
adjustment of a letter of credit heretofore delivered to Lender as Collateral,
Borrower agrees to cause the issuing bank to amend the original letter of credit
by delivery of an amended letter of credit to Lender within the applicable time
period described in the preceding sentence.
8.2 In the event that on any Business Day the market value of all
Collateral subject to a Loan shall be greater than the Margin Percentage of the
market value of the outstanding Loaned Securities subject to such Loan (a
"Margin Excess"), Borrower may, by notice (which may be oral) to Lender, demand
that Lender transfer to Borrower such amount of the Collateral selected by
Borrower so that the market value of the Collateral, after deduction of such
amount, shall not exceed the Margin Percentage of the market value of the Loaned
Securities. Unless otherwise agreed, such transfer (in the case of Collateral
denominated in U.S. dollars) is to be made in the United States in accordance
with Borrower's instructions no later than the close of business of Lender on
the day of such demand if demand is made prior to 11:00 a.m. Boston time; in the
case of all other types of Collateral and in the case of Collateral denominated
in U.S. dollars where demand is made subsequent to 11:00 a.m. Boston time, such
transfer shall be completed by the close of business of Borrower (or its
designee) in the location specified to Lender for transfer of excess Collateral
on the next succeeding day on which Borrower (or its designee) is open for
business thereat and not authorized or required to be closed; provided, however,
that if Lender is requested to return a portion of any security constituting
Collateral to Borrower pursuant to this Agreement, Borrower shall, at the oral
request of Lender, take all such action as is necessary to cause such security
to be reissued in such denominations as are required to permit such a partial
return and in such case Lender shall not be obligated to return Collateral
hereunder unless and until such action has been taken and may thereafter make
required returns of Collateral hereunder by returning such securities in such
amounts as are, as nearly as practicable, equal to but not greater than the
required return. The return to Borrower of securities the market value of which
on the date on which the requirement to return the same was established was then
sufficient to comply with such requirement of return shall be in full compliance
with this Agreement and a full discharge of Lender's obligation to make such
return, notwithstanding the fact that at the date of such return the market
value of any such securities may have declined. Where Collateral is in the form
of a letter of credit, Lender agrees to promptly consent to a reduction in the
undrawn balance of the letter of credit sufficient to eliminate the Margin
Excess, and if Borrower delivers to Lender an amended letter of credit within
the time period described in the second sentence of this Section 8.2.
8.3 Borrower and Lender may agree, with respect to one or more Loans
hereunder, to xxxx the values to market pursuant to Sections 8.1 and 8.2 by
valuing the Loaned Securities lent and the Collateral given in respect thereof
on an aggregate basis.
8.4 Borrower and Lender may agree, with respect to any or all Loans
hereunder, that the respective rights of Lender and Borrower under Sections 8.1
and 8.2 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 of the Parties Hereto. The parties hereby make 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 the
case of Lender, solely in its capacity as agent for the Account whose securities
are the subject of a Loan).
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 laws and regulations including those of
applicable securities regulatory and self-regulatory organizations.
26
9.3 Each party hereto represents and warrants that it has made its own
determination as to the tax treatment of any dividends, remuneration or other
funds received hereunder.
9.4 Borrower represents and warrants that all Loans will comply with
Regulation T and, without limiting the generality of the foregoing, that it (or
the party to whom it relends the Loaned Securities) is borrowing the Loaned
Securities for the purpose of making delivery of such securities in the case of
short sales, failure to receive securities required to be delivered or other
similar situations or as otherwise permitted pursuant to Regulation T of the
Board of Governors of the Federal Reserve System.
9.5 Borrower represents and warrants that it has, or will have at the time
of transfer to Lender of any Collateral hereunder (other than letters of
credit), the right to grant to Lender a first priority security interest therein
subject to the terms and conditions hereof. As to Collateral consisting of
letters of credit transferred to Lender hereunder, Borrower represents and
warrants that Lender shall have full unencumbered title thereto.
9.6 Lender represents and warrants that the Account acting as lender in any
Loan has represented and warranted to it that the Loaned Securities transferred
to Borrower shall be free and clear of any lien or encumbrance at the time of
transfer, and Borrower represents and warrants that the return to Lender of
Loaned Securities shall be free and clear of any lien or encumbrance at the time
of such return.
9.7 Lender represents and warrants that as to each Account, such Account
has represented and warranted to it that (i) such Account has duly authorized
Lender, as agent, to execute and deliver this Agreement on its behalf, and to
enter into Loans on its behalf, (ii) such Account has the requisite power to
perform, and has been duly authorized to perform, the obligations imposed
hereunder and under any Loan effected pursuant hereto, and (iii) the obligations
of such Account in respect of any Loan effected pursuant to this Agreement
constitute legal, valid and binding obligations of the Account, enforceable in
accordance with their terms.
9.8 Each of the representations and warranties set out in Section 2(i),
(ii), and (iii) and in Section 9, shall, notwithstanding any provision of
Section 2 or 9 or any other provision of the Agreement, be deemed made and
repeated for all purposes at and as of all times when any Loan entered into
hereunder is outstanding.
10. Covenants.
10.1 (a) If Borrower is not a broker-dealer registered under the Exchange
Act, it covenants as follows: Upon execution of this Agreement, Borrower shall
deliver to the Lender Borrower's and any parent company's most recent available
financial information, including (without limitation) the most recent available
audited and unaudited statements of Borrower's and any parent company's
financial condition that Borrower or such parent company is required to provide
to any governmental agency or self regulatory body. As long as any Loan is
outstanding under this Agreement, Borrower will promptly deliver to Lender all
such financial information that is subsequently available, and any other
financial information or statements that Lender may reasonably request.
(b) If Borrower is a broker-dealer registered under the Exchange Act, it
covenants as follows: Upon execution of this Agreement, Borrower shall deliver
to Lender the most recent statements of Borrower required to be furnished to
Borrower's customers by Rule 17a-5(c) and (d) under the Exchange Act. As long as
any Loan is outstanding under this Agreement, Borrower shall promptly deliver to
Lender all such statements subsequently required to be furnished to Borrower's
customers by such Rule (or any successor thereto). Upon execution of this
Agreement, Borrower shall also deliver to Lender Borrower's and any parent
company's most recent financial information otherwise available to its
shareholders, the SEC, or the public, as the case may be including (without
limitation) the most recent available audited and unaudited statements of
Borrower's or any parent company's financial condition and any report or notice
required by Rules 17a-5(a)(2)(i) and (ii) and 17a-11 under the Exchange Act. As
long as any Loan is outstanding under this Agreement, Borrower will promptly
deliver to the Lender all such financial information that is subsequently
available, and any other financial information or statements that Lender may
reasonably request including profit and loss information.
(c) Upon request of Borrower, Lender shall request of any Account that such
Account provide to Lender (for delivery to Borrower) a copy of such Account's
most recent financial statement.
27
10.2 Borrower shall be liable as principal with respect to its obligations
hereunder and shall at all times in respect of each Loan effected pursuant
hereto maintain Collateral having a market value at least equal to 100% of the
market value of the Loaned Securities.
10.3 Borrower agrees to cause every letter of credit delivered by it and
constituting Collateral hereunder to be renewed or replaced by Collateral
(including, without limitation, a renewal or replacement letter of credit)
satisfactory to Lender at least seven days prior to the scheduled expiration
date of such letter of credit.
10.4 Borrower will give Lender immediate notice (i) if at any time there is
entered against Borrower or any direct or indirect parent any order, decree,
determination or instruction issued on the authority of any rule, regulation or
proceeding of any governmental commission, bureau or other administrative agency
or self-regulatory organization which could have a material adverse effect on
the ability of Borrower to perform its obligations under this Agreement or to
carry on its business as conducted at the date of this Agreement or which would
prohibit expansion or require reduction of the business of the Borrower as
conducted at the date of this Agreement or which might adversely affect the
borrowing of securities by Borrower, (ii) if at any time there is commenced any
investigation or proceeding which may result in the expulsion of Borrower from
any stock exchange or from any self-regulatory organization, or a suspension of
the Borrower's power under any law to transact business as a broker or dealer in
securities or if Borrower is so expelled or suspended, (iii) if at any time any
communication is received by Borrower or any direct or indirect parent from any
stock exchange, government agency, or regulatory body, constituting a warning to
Borrower or any direct or indirect parent of the violation, or threatened
violation, of any rule or a failure to comply with which could have a material
adverse effect on the ability of Borrower to perform its obligations under this
Agreement or to carry on its business as conducted at the date of this Agreement
or result in a prohibition on expansion or a requirement for reduction of the
business of the Borrower as conducted at the date of this Agreement or adversely
affect the borrowing of securities by Borrower, (iv) if at any time Borrower or
any direct or indirect parent will receive information that Borrower or any
direct or indirect parent is under special surveillance by any stock exchange,
or by any other self-regulatory organization, (v) if at any time Borrower or any
direct or indirect parent shall receive information that the Securities Investor
Protection Corporation ("SIPC") has been notified pursuant to Section 5(a) (1)
of the Securities Investor Protection Act of 1970 ("SIPC Act") of facts which
indicate that Borrower is in or is approaching financial difficulty, or (vi) if
at any time SIPC shall file an application for a protective decree with respect
to the Borrower under Section 5(a)(3) of the SIPC Act. Any such notice shall set
forth in reasonable detail a description of the event which has occurred and of
the action, if any, which Borrower proposes to take with respect thereto.
Borrower will forward to Lender a copy of any order, decree, determination,
instruction or other written evidence received by it of or with respect to any
matter referred to in the first sentence of this subparagraph 10.4.
10.5 Borrower and Lender hereto agree and acknowledge 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.
10.6 Borrower will, from time to time, do and perform any and all acts and
execute any and all further instruments required or reasonably requested by
Lender more fully to effect the purposes of this Agreement and the pledge of the
Collateral hereunder, including, without limitation, the execution and filing of
financing statements and continuation statements relating to the Collateral
under the provisions of the applicable Uniform Commercial Code.
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11. Events of Default. All Loans between Borrower and Lender 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"):
(a) if any Loaned Securities shall not be transferred to Lender on the
termination date of the Loan as required by Section 5.2;
(b) if any Collateral shall not be transferred to Borrower as contemplated
by Section 5.1;
(c) if Borrower shall fail to comply with the obligation to replace an
expiring letter of credit under Section 10.3 and such default is not
cured within one Business Day of notice of such failure to Borrower or
Borrower or Lender shall fail to deliver or return Collateral, as the
case may be, as required by Section 8;
(d) if Borrower or Lender shall fail to make the payment of distributions
as required by Section 7 and such default is not cured within one
Business Day of notice of such failure to Borrower or Lender, as the
case may be;
(e) if (i) Borrower or any direct or indirect parent or the Affected
Account 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, or (ii) any such case or proceeding
shall be commenced against either party or any direct or indirect
parent, 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, or (iii) either party
or any direct or indirect parent shall make a general assignment for
the benefit of creditors, or (iv) either party or any direct or
indirect parent shall admit in writing its inability to pay its debts
as they become due;
(f) if Borrower or any direct or indirect parent or the Affected Account
shall have been suspended or expelled from membership or participation
in any securities exchange or association or other self-regulatory
organization to whose rules it is subject or if it is suspended from
dealing in securities by any governmental agency or regulatory body;
(g) if Borrower or any direct or indirect parent or the Affected Account
shall have its license, charter, or other authorization necessary to
conduct a material portion of its business withdrawn, suspended or
revoked by any applicable government or agency or regulatory body
thereof;
(h) if any representation made or deemed to be made by a party shall be
incorrect or untrue in any material respect during the term of any
Loan hereunder;
(i) if Borrower or Lender (i) fails to provide to the other party
reasonable assurances of its ability to perform its obligations
hereunder or under any Loan within 24 hours after request therefor is
made in good faith by the requesting party; (ii) notifies the other,
orally or in writing, of its inability to or its intention not to
perform its obligations hereunder; or (iii) otherwise disaffirms,
rejects or repudiates any of its obligations hereunder;
(j) if Borrower or Lender (i) shall fail to perform any obligation under
this Agreement not specifically set forth in clauses (a) through (i)
above, including but not limited to the
29
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 next day after such notice on which a
transfer of cash may be effected;
(k) any Affiliate of Borrower shall default under any other securities
loan agreement with Xxxxxxx Xxxxx Agency Lending; or
(l) if a party ("X") consolidates or amalgamates with, or merges into, or
transfers all or substantially all its assets to, another entity and
(i) the resulting, surviving, or transferee entity has not assumed all
the obligations of X under this Agreement pursuant to an agreement
reasonably satisfactory to the other party or (ii) the financial
condition of the resulting, surviving, or transferee entity is, in the
judgment of the other party, materially weaker than that of X prior to
such transaction.
12. Lender's Remedies. If (a) any Default shall occur in respect of which
Borrower is the defaulting party or (b) Lender is obligated to redeliver, or is
otherwise deprived of its rights to, any Loaned Securities after their return,
or is in any way required to pay their value or any related sum over, as a
result of any bankruptcy, insolvency, liquidation, reorganization, or other
similar proceeding relating to Borrower or pursuant to any legal requirement,
including without limitation any laws relating to so-called 'preferences' or
preferential payments, Lender shall have the right, in addition to any other
remedies provided herein or under applicable law (without further notice to
Borrower), (i) to purchase, within a commercially reasonable time (taking into
consideration the nature of the market for the Loaned Securities), a like amount
of the Loaned Securities in the principal market for such securities, (ii) or to
treat the Loaned Securities as having been purchased by Borrower at a purchase
price equal to the market value thereof on the day of the Default (or on the
date of the event referred to in (b) above, as the case may be), and may apply
the Collateral to the payment of such purchase (whether actual or deemed), after
deducting therefrom all amounts, if any, due Lender under Sections 4, 7, 14 and
17 hereof. Lender may also apply the Collateral to any other obligation of
Borrower under this Agreement, including distributions paid to Borrower (and not
forwarded to Lender) in respect of Loaned Securities. In the event the purchase
price exceeds the market value of the Collateral on the date of purchase,
Borrower shall be liable to Lender for the amount of such excess (plus all
amounts, if any, due to Lender hereunder) together with interest on all such
amounts, in the case of purchases of Foreign Securities, at a per annum rate
equal to LIBOR plus 2%, and in the case of purchases of any other securities (or
other amounts, if any, due to Lender hereunder) at a per annum rate equal to the
Fed Funds Rate plus 2%, as it fluctuates from day to day, from the date of such
purchase until the date of payment of such excess. Lender shall have, as
security for Borrower's obligation to pay such excess, a security interest in or
right of setoff against any property of Borrower then held by Lender and any
other amount payable by Lender to Borrower. The purchase price of securities
purchased under this Section 12 shall include broker's fees and commissions and
all other reasonable costs, fees and expenses related to such purchase or
exercise of remedies including, without limitation, reasonable legal fees and
expenses. Upon the satisfaction of all obligations hereunder, any remaining
Collateral shall be returned to Borrower.
Notwithstanding any provision of the Agreement, Lender shall not be obligated to
make any payment to Borrower under the Agreement or in respect of any Loan
(including without limitation any return of Collateral) at any time after a
Default by Borrower has occurred unless and until Borrower has satisfied all of
its obligations (contingent or otherwise) to Lender, whether or not such
obligations have at the time matured.
13. Borrower's Remedies. In the event of any Default involving Lender or an
Account under Section 11 hereof, Borrower shall have the right, in addition to
any other remedies provided herein or under applicable law (without further
notice to Lender) to sell (or be deemed to have sold) a like amount of the
Loaned Securities in the principal market for such securities in a commercially
reasonable manner on the day of the Default and to retain (or be deemed to have
realized) the proceeds of such sale. In such event, Borrower may treat the
Loaned Securities as its own and Lender's obligation to return the Collateral
consisting of cash or securities shall terminate. In the event the sales price
received (or deemed to have been received) from such securities is less than the
market value of the Collateral consisting of cash or securities on the date of
sale (or deemed sale), the Account which defaulted on the Loan shall be liable
to Borrower for the amount of any deficiency (plus all amounts, if any, due to
Borrower hereunder), together with interest on all such amounts, in the case of
Collateral consisting of Foreign Securities, at a per annum rate equal to LIBOR
plus 2%, and in the case of Collateral consisting of any other securities (or
other amounts due, if any, to Borrower
30
hereunder), at a per annum rate equal to the Fed Funds Rate plus 2%, as it
fluctuates from day to day, from the date of such sale until the date of payment
of such deficiency. Borrower shall have, as security for the Account's
obligation to pay such deficiency, a security interest in or right of setoff
against any property of the Account then held by Borrower pursuant to this
Agreement and any other amount payable by Borrower to Lender in respect of such
Account arising hereunder. In calculating this deficiency, there shall be
deducted from the proceeds of the securities sold under this Section 13,
broker's fees and commissions and all other reasonable costs, fees and expenses
related (or deemed related) to such sale or exercise of remedies including,
without limitation, reasonable legal fees and expenses. Upon the satisfaction of
all the Account's obligations hereunder, any remaining Loaned Securities (or
remaining net cash proceeds from sale or deemed sale thereof) shall be returned
to Lender.
Where Collateral consists of a letter of credit, Lender, upon the exercise or
deemed exercise by Borrower of its termination rights under Section 11, shall
immediately return the letter of credit to Borrower and not seek to draw
thereunder and Borrower shall return to Lender an amount equal to the net
proceeds from the sale (or deemed sale) of the Loaned Securities as reduced by
all other amounts due to Borrower.
14. Transfer Taxes. All necessary costs, including, without limitation,
transfer taxes, stamp duties and fees with respect to any transfers hereunder of
Loaned Securities or Collateral shall be paid by Borrower. Borrower covenants
and agrees that it shall ensure that this Agreement and all instruments of
transfer in respect of any Loaned Securities or Collateral shall have been
stamped in accordance with all applicable laws.
15. Definitions. For the purposes hereof:
15.1 "Account" and "Accounts" shall have the meanings set forth in the
introduction.
15.2 "Affected Account" shall have the meaning set forth in Section 19.
15.3 "Affiliate" shall mean any entity which controls, is controlled by, or
is under common control with another entity.
15.4 "Bankruptcy Code" shall have the meaning set forth in Section 10.5.
15.5 "Borrower" shall have the meaning set forth in the introduction.
15.6 "Borrower Payment" shall have the meaning set forth in Section 7.6.
15.7 "Business Day" shall mean, with respect to any Loan hereunder, any day
(other than a Saturday or Sunday) recognized as a settlement day in the
principal market in which the Loaned Securities are traded, provided, however,
that for purposes of computing market value in Section 16, "Business Day" shall
mean a day on which regular trading occurs in the principal market for the
securities whose value is being determined. Notwithstanding the foregoing, for
purposes of marking to market in Section 8, "Business Day" shall mean any day
(other than a Saturday or Sunday) (i) on which regular trading occurs in the
principal market for any Loaned Securities or for any securities Collateral
under any outstanding Loan or (ii) on which transfers of cash Collateral may be
effected by Lender and Borrower (or any nominee or agent thereof).
15.8 "Cash Collateral Fee" shall have the meaning set forth in Section 4.1.
15.9 "Clearing Organization" shall have the meaning set forth in Section 2.
15.10 "Collateral" shall mean, whether now owned or hereafter acquired, (a)
all cash in a currency acceptable to Lender which is delivered to Lender
pursuant to Section 3 or 8, (b) any property in which such cash is invested or
reinvested (but not the income or distributions thereon or realized gains
derived from Lender's use or investment of such collateral, all of which shall
in any event be the property of Lender), (c) any securities issued or
31
guaranteed by the United States government or issued by agencies or
instrumentalities thereof which may not be guaranteed by the United States
government or by a foreign sovereign acceptable to Lender which are delivered to
Lender pursuant to Section 3 or 8, including the interest or distributions
thereon or other income therefrom, (d) all irrevocable letters of credit, issued
by issuers acceptable to Lender and otherwise satisfactory in form and substance
to Lender, which are delivered to Lender pursuant to Section 3 or 8, and (e) all
proceeds of each of the foregoing.
15.11 "Collateral Distributions" shall have the meaning set forth in
Section 7.6.
15.12 "Confirmation" shall have the meaning set forth in Section 1.2.
15.13 "Contractual Currency" shall have the meaning set forth in Section
16.2.
15.14 "Default" shall have the meaning set forth in Section 11.
15.15 "Exchange Act" shall have the meaning set forth in Section 2.
15.16 "FDIA" shall have the meaning set forth in Section 10.5.
15.17 "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.
15.18 "Foreign Securities" shall mean, unless otherwise agreed, securities
that are principally cleared and settled outside the United States.
15.19 "Lender" shall have the meaning set forth in the introduction.
15.20 "Lender Payment" shall have the meaning set forth in Section 7.6.
15.21 "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
LIBOR page as of 11:00 A.M., London time, on such date (or, if at least two such
rates appear, the arithmetic mean of such rates).
15.22 "Loan" shall mean a loan of securities hereunder.
15.23 "Loaned Security" shall mean any security which is transferred
pursuant to any Loan and shall be deemed to include any securities into which
any Loaned Securities may at any time be converted or for which they may be
exchanged, any additional securities distributed with respect to Loaned
Securities, and any securities issued otherwise in respect thereof, including
without limitation in any sub-division, consolidation, or exchange, unless the
Confirmation in respect of the Loan in question specifically provides to the
contrary.
15.24 "Loan Fee" shall have the meaning set forth in Section 4.1.
15.25 "Margin Deficit" and "Margin Excess" shall have the meanings set
forth in Sections 8.1 and 8.2, respectively.
15.26 "Margin Percentage" shall have the meaning set forth in Section 3.1.
15.27 "Plan" shall have the meaning set forth in Section 18.
15.28 "Required Value" shall have the meaning set forth in Section 3.1.
15.29 "Securities Distributions" shall have the meaning set forth in
Section 7.6.
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15.30 "SIPC" and "SIPC Act" shall have the meanings set forth in Section
10.4.
15.31 "Tax" shall have the meaning set forth in Section 7.6.
16. Market Value.
16.1 With respect to Loaned Securities and Collateral consisting of
securities, market value as of any date shall be determined on the basis of the
closing prices therefor as of the trading day (for the principal market in which
the securities are traded) immediately preceding the day of valuation, such
determination to be made by the independent pricing source notified to Borrower
by Lender upon Borrower's request. Such notification may be oral. Market value
shall include accrued interest in the case of debt securities. With respect to
Collateral consisting of cash, market value as of any date shall be the face
amount thereof held by Lender at the time of determination and, with respect to
Collateral consisting of letters of credit, market value as of any date shall be
the undrawn balance thereof which Lender may at such time draw thereunder except
that if, in the judgment of Lender, the creditworthiness of the issuer of any
letter of credit has been or may be impaired, then, upon notice to Borrower, the
market value of such letter of credit shall be zero.
16.2 Unless otherwise agreed, where the Loaned Securities in respect of a
Loan are denominated in a currency other than the currency in which the related
Collateral is denominated, the currency which shall be applicable for purposes
of determining market value shall be the currency in which the Collateral is
denominated (the "Contractual Currency"), and any Loaned Security not
denominated in the Contractual Currency shall be converted into a Contractual
Currency equivalent based on the most current spot rate of exchange quoted by
the independent source of exchange rates as notified to Borrower by Lender upon
Borrower's request. Such notification may be oral.
17. Contractual Currency.
17.1 Unless otherwise agreed, each payment of cash under this Agreement
(except as provided in Section 7.2) shall be made in 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.
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 Borrower
hereunder for any Loan have been or shall be obtained, directly or indirectly,
from or using the assets of any Plan (as hereafter defined), so notify Borrower
in writing upon the execution of the Agreement or upon initiation of such Loan
under Section 1.1 or as required pursuant to Section 1.2. 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 certifies that it is not a
party-in-interest to the plan for purposes of the Employee Retirement Income
Security Act of 1974. If the parties are relying on Prohibited Transaction
Exemption 81-6 to effect any Loan, then
33
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 exempted government securities (as defined in
Section 3(a)(12) of the Exchange Act) and (iv) neither it nor any affiliate (as
defined in Prohibited Transaction Exemption 81-6) 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. For purposes hereof, "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 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.
19. Obligations to be Separate. Each and every obligation, liability or
undertaking of an Account with respect to any Loan shall be solely an
obligation, liability or undertaking of, and binding upon, the Account by which
such Loan is made ("Affected Account") and shall be payable solely from the
available assets of such Account. No such obligation, liability or undertaking
shall be binding upon or affect any other Account. Neither Xxxxxxx Xxxxx Agency
Lending (in its individual capacity) nor any Affiliate thereof shall have any
liability to Borrower whatsoever in respect of any Loan, it being understood and
agreed that Borrower shall have recourse solely to the Affected Account in the
event of the occurrence of a Default involving the Affected Account.
20. Indemnification. Borrower agrees to indemnify and hold harmless Lender
and the Affected Account (including the sponsor and fiduciaries of any Affected
Account which is a Plan) from any and all damages, losses, liabilities, costs
and expenses (including attorneys' fees) which Lender or the Affected Account
may incur or suffer arising in any way out of the use by Borrower of Loaned
Securities or any failure of Borrower to deliver Loaned Securities in accordance
herewith or to otherwise comply with the terms of this Agreement.
21. Calculations. All determinations of the value of securities,
Collateral, or other property or amounts for any purpose under this Agreement
shall be made in good faith by Lender.
22. Limitation of Liability. A copy of the Agreement and Declaration of
Trust of each Account which is a Massachusetts business trust is on file with
the Secretary of State of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of each
such Account as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders of such
Account individually but are binding only upon the assets and property of each
such Account.
23. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to the
conflict of law principles thereof.
24. Waiver. The failure of either party 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.
25. Remedies. All remedies hereunder shall survive the termination of the
relevant Loan, return of Loaned Securities or Collateral and termination of this
Agreement.
26. Notices and Other Communications. Except as otherwise provided in this
Agreement, all notices, demands, and other communications hereunder shall be
sufficient if made in writing and delivered or transmitted (as the case may be)
by registered mail, facsimile, telex, or courier, or by telephone promptly
confirmed in writing and delivered or transmitted as aforesaid, to the intended
recipient at the addresses (or to the numbers) set forth on the signature page
hereof. Notices shall be effective upon receipt.
27. Miscellaneous. This Agreement supersedes any other agreement between
the parties concerning loans of securities between the parties hereto. This
Agreement shall not be assigned by either party without the prior written
consent of the other party. Subject to the foregoing, this Agreement shall be
binding upon and shall enure to
34
the benefit of the parties hereto and their respective heirs, representatives,
successors and assigns. This Agreement may be terminated by either party upon
giving 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.
XXXXXXX SACHS BANK USA in its capacity
as agent for Accounts not in its
individual capacity
By:
------------------------------------
Name:
Title:
Address for Notices:
Attention: ____________
Facsimile No.: ________
Telephone No.: ________
BORROWER NAME
as Borrower
By:
------------------------------------
Name:
Title:
Address for Notices:
Attention: ____________
Facsimile No.: ________
Telephone No.: ________
35
ANNEX I
Type of Loaned Security Margin Percentage/1/
----------------------- --------------------
Foreign equity and corporate securities 105%
United States equity and corporate securities 102%
(including American Depository Receipts)
United States government and agency securities 102%
Foreign government and agency securities 102%
----------
/1/ Pursuant to Section 3.1.
SCHEDULE 4
FEES
For cash collateralized loans: 10% of earnings on the investment of cash
collateral, net of any agreed upon rebate amount payable to borrower out of such
earnings.
For non-cash collateralized loans: 10% of lending fees payable by a borrower.
SCHEDULE 5
Cash Collateral Investments
Cash collateral will be invested in Xxxxx Fargo Securities Lending Cash
Investments, LLC or as otherwise directed by Lender from time to time in writing
to GSAL.
SCHEDULE 6
LIST OF APPROVED PERSONS
Xxxxx Fargo Funds Trust
Xxxxx Fargo Master Trust
Xxxxx Fargo Variable Trust
Xxxxxx XxXxxxx
C. Xxxxx Xxxxxxx
Xxxxxx Xxxx
Xxxxx Xxxxxxxx
Xxxxx Xxxxxxx
SCHEDULE 7
NOTICES
If to Lender:
Address: Xxxxx Fargo Funds Trust
Xxxxx Fargo Master Trust
Xxxxx Fargo Variable Trust
c/x Xxxxx Fargo Funds Management, LLC
000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: C. Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to GSAL:
Address: 000 Xxxx Xxxxxx
Xxxxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxx Xxxxxx, Vice President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
SCHEDULE 8
LIST OF PARTIES IN INTEREST DESCRIBED IN ANNEX I
Not applicable.
ERISA PLAN SPONSOR AND AFFILIATES
(list as appropriate)
TRUSTEE OF ERISA PLAN AND AFFILIATES
(list as appropriate)
INVESTMENT MANAGER OR OTHER PERSON EXECUTING THE SECURITIES LENDING AGENCY
AGREEMENT ON BEHALF OF ERISA PLAN AND AFFILIATES
(list as appropriate)
ANY OTHER PARTY IN INTEREST DESCRIBED IN SECTION 1(c) OF ANNEX I AND AFFILIATES
(list as appropriate)
SCHEDULE 9
GUARANTEE
[See attached pdf]
