Execution Copy
SECURITIES LENDING AUTHORIZATION AGREEMENT
Between
FIFTH THIRD FUNDS
ON BEHALF OF ITS SERIES AS LISTED ON SCHEDULE B
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
PAGE
1. DEFINITIONS ....................................................... 1
0. XXXXXXXXXXX XX XXXXX XXXXXX ....................................... 2
3. SECURITIES TO BE LOANED ........................................... 3
4. BORROWERS ......................................................... 3
5. SECURITIES LOAN AGREEMENTS ........................................ 4
6. LOANS OF AVAILABLE SECURITIES ..................................... 5
7. DISTRIBUTIONS ON AND VOTING RIGHTS WITH RESPECT TO
LOANED SECURITIES .............................................. 5
8. COLLATERAL ........................................................ 6
9. INVESTMENT OF CASH COLLATERAL AND COMPENSATION .................... 7
10. FEE DISCLOSURE .................................................... 9
11. RECORDKEEPING AND REPORTS ......................................... 9
12. STANDARD OF CARE .................................................. 9
13. REPRESENTATIONS AND WARRANTIES .................................... 10
14. BORROWER DEFAULT INDEMNIFICATION .................................. 11
15. CONTINUING AGREEMENT AND TERMINATION .............................. 12
16. NOTICES ........................................................... 13
17. SECURITIES INVESTORS PROTECTION ACT ............................... 13
18. AUTHORIZED REPRESENTATIVES ........................................ 14
19. AGENTS ............................................................ 14
20. FORCE MAJEURE ..................................................... 14
21. NON-US BORROWERS .................................................. 14
22. MISCELLANEOUS ..................................................... 14
23. COUNTERPARTS ...................................................... 15
24. MODIFICATION ...................................................... 15
EXHIBITS AND SCHEDULES
SCHEDULE A (Schedule of Fees)
SCHEDULE B (Funds)
SCHEDULE C (Acceptable Forms of Collateral)
EXHIBIT 4.1 (State Street Securities Loan Agreement)
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SECURITIES LENDING AUTHORIZATION AGREEMENT
Agreement dated the 8th day of May, 2007 between FIFTH THIRD FUNDS (the
"Trust"), a Massachusetts business trust, on behalf of its series as listed on
Schedule B (as amended from time to time), severally and not jointly, each a
registered management investment company organized and existing under the laws
of Massachusetts (each such series, a "Fund" and, collectively, the "Funds"),
and STATE STREET BANK AND TRUST COMPANY acting either directly or through any
State Street Affiliates (defined below) (collectively, "State Street"), setting
forth the terms and conditions under which State Street is authorized to act on
behalf of the Trust with respect to the lending of certain securities of the
Trust held by State Street as custodian.
This Agreement shall be deemed for all purposes to constitute a separate
and discrete agreement between State Street and each Fund, and no Fund shall be
responsible or liable for any of the obligations of any other Fund under this
Agreement or otherwise, notwithstanding anything to the contrary contained
herein. In addition, with respect to transactions entered into by a Fund,
neither State Street nor any Borrower (as defined below) shall in any event have
recourse to the assets of any other Fund.
NOW, THEREFORE, in consideration of the mutual promises and of the mutual
covenants contained herein, each of the parties does hereby covenant and agree
as follows:
1. Definitions. For the purposes hereof:
(a) "Authorized Representative" means any person who is, or State Street
reasonably believes to be, authorized to act on behalf of a Fund with respect to
any of the transactions contemplated by this Agreement.
(b) "Available Securities" means the securities of the Funds that are
available for Loans pursuant to Section 3.
(c) "Borrower" means any of the entities to which Available Securities
may be loaned under a Securities Loan Agreement, as described in Section 4.
(d) "Collateral" means collateral delivered by a Borrower to secure its
obligations under a Securities Loan Agreement.
(e) "Investment Manager" when used in any provision, means the person or
entity who has discretionary authority over the investment of the Available
Securities to which the provision applies.
(f) "Loan" means a loan of Available Securities to a Borrower.
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(g) "Loaned Security" shall mean any "security" which is delivered as a
Loan under a Securities Loan Agreement; provided that, if any new or different
security shall be exchanged for any Loaned Security by recapitalization, merger,
consolidation, or other corporate action, such new or different security shall,
effective upon such exchange, be deemed to become a Loaned Security in
substitution for the former Loaned Security for which such exchange was made.
(h) "Market Value" of a security means the market value of such security
(including, in the case of a Loaned Security that is a debt security, the
accrued interest on such security) as determined by the independent pricing
service designated by State Street, or such other independent sources as may be
selected by State Street on a reasonable basis. Upon reasonable request, State
Street shall provide to the Fund a list of such pricing information services
currently in use by State Street.
(i) "Replacement Securities" means securities of the same issuer, class
and denomination as Loaned Securities.
(j) "Securities Loan Agreement" means the agreement between a Borrower
and State Street (on behalf of the Funds) that governs Loans, as described in
Section 5.
(k) "State Street Affiliates" means any entity that directly or
indirectly through one or more intermediaries, controls State Street or that is
controlled by or is under common control with State Street.
2. Appointment of State Street.
Each Fund hereby appoints and authorizes State Street as its agent to lend
Available Securities to Borrowers in accordance with the terms of this
Agreement. State Street shall have the responsibility and authority to do or
cause to be done all acts State Street shall determine to be desirable,
necessary, or appropriate to implement and administer this securities lending
program. Each Fund agrees that State Street is acting as a fully disclosed agent
and not as principal in connection with the securities lending program. State
Street shall take action as agent of the Fund only on a disclosed basis. State
Street is also hereby authorized to request a third party bank to undertake
certain custodial functions in connection with holding of the Collateral
provided by a Borrower pursuant to the terms hereof. In connection therewith,
State Street may instruct such third party bank to establish and maintain a
Borrower's account and a State Street account wherein all Collateral, including
cash, shall be maintained by such bank (as applicable) in accordance with the
terms of a form of custodial arrangement which shall also be consistent with the
terms hereof.
3. Securities to be Loaned.
All of the Fund's securities held by State Street as custodian shall be
subject to this securities lending program and constitute Available Securities
hereunder, except those
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securities which the Fund or the Investment Manager specifically identifies
herein or in notices to State Street as not being Available Securities. In the
absence of any such identification herein or other notices identifying specific
securities as not being Available Securities, State Street shall have no
authority or responsibility for determining whether any of the Fund's securities
should be excluded from the securities lending program.
4. Borrowers.
The Available Securities may be loaned to any Borrower identified on the
schedule of borrowers attached hereto as Schedule D, as such schedule may be
modified from time to time by State Street and either the Fund, or the
Investment Manager, on behalf of the Fund (including, without limitation, State
Street, to the extent so identified on Schedule D). However, if Available
Securities are loaned to State Street, in addition to being consistent with the
terms hereof, said Loan shall be made in accordance with the terms of the
Securities Loan Agreement attached hereto as Exhibit 4.1, as modified from time
to time in accordance with the provisions therein and herein (hereinafter, the
"State Street Securities Loan Agreement"). The form of the State Street
Securities Loan Agreement may be modified by State Street from time to time,
without the consent of the Funds, in order to comply with the requirements of
law or any regulatory authority having jurisdiction over State Street, the
Funds, the securities lending program or in any other manner that is not
material and adverse to the interests of the Funds.
Each Fund acknowledges that it is aware that State Street, acting as
"Lender's Agent" hereunder and thereunder, is or may be deemed to be the same
legal entity as State Street acting as "Borrower" under the State Street
Securities Loan Agreement, notwithstanding the different designations used
herein and therein or the dual roles assumed by State Street hereunder and
thereunder. Each Fund represents that the power granted herein to State Street,
as agent, to lend Available Securities owned by the Fund (including, in legal
effect, the power granted to State Street to make Loans to itself) and the other
powers granted to State Street, as agent herein, are given expressly for the
purpose of averting and waiving any prohibitions upon such lending or other
exercise of such powers which might exist in the absence of such powers, and
that transactions effected pursuant to and in compliance with this Agreement and
the State Street Securities Loan Agreement will not constitute a breach of trust
or other fiduciary duty by State Street.
Each Fund further acknowledges that it has granted State Street the power
to effect Loans with State Street and other powers assigned to State Street
hereunder and under the Securities Loan Agreements and the State Street
Securities Loan Agreement as a result of the Fund's desire to increase the
opportunity for it to lend securities held in its account on fair and reasonable
terms to qualified Borrowers without such loans being considered a breach of
State Street's fiduciary duty. In connection therewith, each party hereby agrees
that it shall furnish to the other party, upon request (i) the most recent
available audited statement of its financial condition, and (ii) the most recent
available unaudited statement of its financial condition, if more recent than
the audited statement. As long as any Loan is outstanding
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under this Agreement, each party shall also promptly deliver to the other party
all such financial information that is subsequently available, and any other
financial information or statements that such other party may reasonably
request.
In the event any such Loan is made to Xxxxx Xxxxxx, Xxxxx Xxxxxx hereby
covenants and agrees for the benefit of the Funds that it has adopted and
implemented procedural safeguards to help ensure that all actions taken by it
hereunder will be effected by individuals other than, and not under the
supervision of, individuals who are acting in a capacity as Borrower thereunder,
and that all trades effected hereunder will take place at the same fully
negotiated "arms length" prices offered to similarly situated third parties by
State Street when it acts as lending agent, notwithstanding the inherent
conflict of interest with respect to Loans to be effected by Xxxxx Xxxxxx xx
Xxxxx Xxxxxx.
Xxxxx Xxxxxx shall not be responsible for any statements, representations,
warranties or covenants made by any Borrower in connection with any Loan or for
any Borrower's performance of or failure to perform the terms of any Loan under
the applicable Securities Loan Agreement or any related agreement, including the
failure to make any required payments, except as otherwise expressly provided
herein. For avoidance of doubt, the foregoing sentence shall not serve as any
limitation on a Fund's remedies against State Street Bank and Trust Company, or
a State Street Affiliate, under the applicable Securities Loan Agreement or
applicable law, to the extent it is the Borrower of a Loan of Available
Securities of such Fund authorized in accordance herewith.
5. Securities Loan Agreements.
Each Fund authorizes State Street to enter into one or more Securities
Loan Agreements with such Borrowers as may be selected by State Street. Each
Securities Loan Agreement shall have such terms and conditions as State Street
may negotiate with the Borrower. Certain terms of individual Loans, including
rebate fees to be paid to the Borrower for the use of cash Collateral, shall be
negotiated at the time a Loan is made.
6. Loans of Available Securities.
State Street shall be responsible for determining whether any Loans of a
Fund's Available Securities shall be made and shall have the authority to
terminate any Loan in its discretion, at any time and without prior notice to
the Fund. In the event of a default by a Borrower on any Loan (within the
meaning of the applicable Securities Lending Agreement), State Street shall be
fully protected in acting in any manner it deems reasonable and appropriate. All
Loans will be terminable on demand (which, for clarity, may mean a period not
longer than the customary settlement period for the Available Securities in
question) and, upon notice to State Street, a Fund has the right to direct State
Street to initiate action to terminate any Loan of its Available Securities made
under this Agreement.
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Each Fund acknowledges that State Street administers securities lending
programs for other clients of State Street. State Street will allocate
securities lending opportunities among its clients, using reasonable and
equitable methods established by State Street from time to time. State Street
does not represent or warrant that any amount or percentage of a Fund's
Available Securities will in fact be loaned to Borrowers. Each Fund agrees that
it shall have no claim against State Street and State Street shall have no
liability arising from, based on, or relating to, loans made for other clients,
or loan opportunities refused hereunder, whether or not State Street has made
fewer or more loans for any other client, and whether or not any loan for
another client, or the opportunity refused, could have resulted in loans made
under this Agreement.
Each Fund also acknowledges that, under the applicable Securities Loan
Agreements, the Borrowers will not be required to return Loaned Securities
immediately upon receipt of notice from State Street terminating the applicable
Loan, but instead will be required to return such Loaned Securities within such
period of time following such notice as is specified in the applicable
Securities Loan Agreement and in no event later than the end of the customary
settlement period. Upon receiving a notice from the Fund or the Investment
Manager that Available Securities which have been loaned to a Borrower should no
longer be considered Available Securities (whether because of the sale of such
securities or otherwise), State Street shall notify promptly thereafter the
Borrower which has borrowed such securities that the Loan of such Available
Securities is terminated and that such Available Securities are to be returned
within the time specified by the applicable Securities Loan Agreement and in no
event later than the end of the customary settlement period.
7. Distributions on and Voting Rights with Respect to Loaned Securities.
Except as provided in the next sentence, all interest, dividends, and
other distributions paid with respect to Loaned Securities shall be credited to
the Fund's account on the date such amounts are delivered by the Borrower to
State Street. Any non-cash distribution on Loaned Securities which is in the
nature of a stock split or a stock dividend shall be added to the Loan to which
such dividend relates (and shall be considered to constitute Loaned Securities)
as of the date such non-cash distribution is actually made; provided that the
Fund or Investment Manager may, by giving State Street ten (10) business days'
notice prior to the date of such non-cash distribution, direct State Street to
request that the Borrower deliver such non-cash distribution to State Street,
pursuant to the applicable Securities Loan Agreement, in which case State Street
shall credit such non-cash distribution to the Fund's account on the date it is
delivered to State Street.
Each Fund acknowledges that it will not be entitled to participate in any
dividend reinvestment program or to vote with respect to Available Securities
that are on Loan on the applicable record date for such Available Securities.
Each Fund also acknowledges that any payments of distributions from
Borrower to the Fund are in substitution for the interest or dividends accrued
or paid in respect of Loaned
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Securities and that the tax and accounting treatment of such payments may differ
from the tax and accounting treatment of such interest or dividends.
If an installment, call or rights issue becomes payable on or in respect
of any Loaned Securities, State Street shall use all reasonable endeavors to
ensure that any timely instructions from the affected Fund or its Investment
Manager are complied with, but State Street shall not be required to make any
payment unless the Fund has first provided State Street with funds to make such
payment.
Each Fund acknowledges and agrees that, with respect to a dividend paid
during the Loan term by a company that is a resident of France, the Fund will
not be entitled to receive, either from the French company or the Borrower, any
additional dividends (sometimes referred to as "complementary coupons") declared
and payable by such company that are equivalent to a refund of any prepayment of
French tax ("equalization tax" or "precompte") or an additional tax credit
adjustment ("credit d'impot").
Each Fund further acknowledges and agrees that the Fund will be required
to accept cash in lieu of fractional shares in all instances in which an issuer
does not issue fractional shares.
8. Collateral.
(a) Receipt of Collateral. Each Fund hereby authorizes State Street (or
a third party bank as described in Section 2 above) to receive and to hold, on
the Fund's behalf, Collateral from Borrowers to secure the obligations of
Borrowers with respect to any Loan of Available Securities made on behalf of the
Fund pursuant to the Securities Loan Agreements. All investments of cash
Collateral shall be for the account and at the risk of the Fund. Concurrently
with or prior to the delivery of the Loaned Securities to the Borrower under any
Loan, State Street shall receive from the Borrower Collateral in any of the
forms listed on Schedule C. Said Schedule may be amended from time to time by
State Street and the Fund.
(b) Marking to Market. The initial Collateral received shall have
(depending on the nature of the Loaned Securities and the Collateral received) a
value of 102% or 105% of the Market Value of the Loaned Securities, or such
other value, but not less than 102% of the Market Value of the Loaned
Securities, as may be applicable in the jurisdiction in which such Loaned
Securities are customarily traded.
Pursuant to the terms of the applicable Securities Loan Agreement, State
Street shall, in accordance with State Street's reasonable and customary
practices, xxxx Loaned Securities and Collateral to their Market Value each
business day based upon the Market Value of the Collateral and the Loaned
Securities at the close of business employing the most recently available
pricing information and receive and deliver Collateral in order to maintain the
value
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of the Collateral at no less than one hundred percent (100%) of the Market Value
of the Loaned Securities.
(c) Return of Collateral. The Collateral shall be returned to Borrower
at the termination of the Loan upon the return of the Loaned Securities by
Borrower to State Street in accordance with the applicable Securities Loan
Agreement.
(d) Limitations. State Street shall invest cash Collateral in accordance
with any directions, including any limitations established by the Funds and set
forth on Schedule A. State Street does not assume any market or investment risk
of loss with respect to the investment of cash Collateral. If the value of the
cash Collateral so invested is insufficient to return any and all other amounts
due to such Borrower pursuant to the Securities Loan Agreement, the Fund shall
be responsible for such shortfall as set forth in Section 9.
9. Investment of Cash Collateral and Compensation.
To the extent that a Loan is secured by cash Collateral, such cash
Collateral, including money received with respect to the investment of the same,
or upon the maturity, sale, or liquidation of any such investments, shall be
invested by State Street in any cash collateral investment vehicle designated on
Schedule A. State Street does not assume any market or investment risk of loss
associated with any investment or change of investment in any such investments,
including any cash collateral investment vehicle designated on Schedule A.
Each Fund acknowledges that interests in such mutual funds, securities
lending trusts and other collective investment funds, to which State Street
and/or one or more of the State Street Affiliates provide services are not
guaranteed or insured by State Street or any of the State Street Affiliates or
by the Federal Deposit Insurance Corporation or any government agency.
The net income generated by any investment made pursuant to the first
paragraph of this Section 9 shall be allocated among the Borrower, State Street,
and the Fund, as follows: (a) a portion of such income shall be paid to the
Borrower in accordance with the agreement negotiated between the Borrower and
State Street; (b) the balance, if any, shall be split between State Street, as
compensation for its services in connection with this securities lending
program, and the Fund and such income shall be credited to the Fund's account,
in accordance with the fee split set forth on Schedule A.
In the event the net income generated by any investment made pursuant to
the first paragraph of this Section 9 does not equal or exceed the amount of the
rebate fee due the Borrower for the use of cash Collateral, in accordance with
the agreement between Borrower and State Street, State Street and the Fund
shall, in accordance with the fee split set forth on Schedule A, share the
amount of the rebate fee due to the Borrower that is equal to the difference
between the net income generated and the amount of the rebate fee due to be paid
to the Borrower pursuant to the Securities Loan Agreement. The Fund shall be
solely
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responsible for any and all other amounts due to such Borrower pursuant to the
Securities Loan Agreement and State Street may debit the Fund's account
accordingly. In the event debits to the Fund's account produce a deficit
therein, State Street shall sell or otherwise liquidate investments made with
cash Collateral and credit the net proceeds of such sale or liquidation to
satisfy the deficit. In the event the foregoing does not eliminate the deficit,
State Street shall have the right to charge the deficiency to any other account
or accounts maintained by the Fund with State Street.
To the extent that a Loan is secured by non-cash Collateral, the Borrower
shall be required to pay a loan premium, the amount of which shall be negotiated
by State Street. Such loan premium shall be allocated between State Street and
the applicable Fund as follows: (a) a portion of such loan premium shall be paid
to State Street as compensation for its services in connection with this
securities lending program, in accordance with Schedule A hereto; and (b) the
remainder of such loan premium shall be credited to the Fund's account.
Each Fund hereby agrees that it shall reimburse State Street for any and
all funds advanced by State Street on behalf of the Fund as a consequence of the
Fund's obligations hereunder, including the Fund's obligation to return cash
Collateral to the Borrower and to pay any fees due the Borrower, all as provided
in Section 8 hereof.
10. Fee Disclosure.
The fees associated with the investment of cash Collateral in funds
maintained or advised by State Street are disclosed on Schedule A hereto. Said
fees may be changed from time to time by State Street upon notice to the Funds.
An annual report with respect to such funds is available to the Funds, at no
expense, upon request.
11. Recordkeeping and Reports.
State Street will establish and maintain such records as are reasonably
necessary to account for Loans that are made and the income derived therefrom.
On a monthly basis, State Street will provide the Funds with a statement
describing the Loans made, and the income derived from the Loans, during the
period covered by such statement. Each party to this Agreement shall comply with
the reasonable requests of the other for information necessary to the
requester's performance of its duties in connection with this securities lending
program.
Each Fund hereby agrees to participate in the Performance Explorer service
offered by State Street through Data Explorers Limited and each Fund further
agrees that as a condition for its participation in the Performance Explorer
service, State Street is authorized by the Fund to provide to Data Explorers
Limited information relating to the Fund's Loaned Securities on an anonymous
basis for aggregation into the Data Explorers Limited database, provided that
the identity of the Fund as owner of the Loaned Securities is in no way
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identifiable and provided further that Data Explorers Limited has agreed to
treat any such information provided to it confidentially and to use such
information solely for the purposes of providing the service. Accordingly, each
Fund will be entitled to participate in the Performance Explorer's light level
access, as described in the then current Data Explorers Limited brochure as
provided to the Funds herewith and upon request, to information gathered through
Data Explorers Limited. State Street does not control Data Explorers Limited,
and hence, such access is subject to change by Data Explorers Limited.
12. Standard of Care and Indemnification.
(a) State Street shall use reasonable care in the performance of its
duties hereunder consistent with that exercised by banks generally in the
performance of duties arising from acting as agent for clients in securities
lending transactions.
(b) Each Fund shall indemnify State Street and hold State Street
harmless from any loss or liability (including without limitation, the
reasonable fees and disbursements of counsel) incurred by State Street in
rendering services hereunder or in connection with any breach of the terms of
this Agreement by such Fund, except such loss or liability which results from
the State Street's failure to exercise the standard of care required by this
Section 12. Nothing in this Section shall derogate from the indemnities provided
by State Street in Section 14. Upon prior notice to the affected Fund, State
Street may charge any amounts to which it is entitled under this Section 12, and
not in good faith disputed by the affected Fund, against the affected Fund's
account.
(c) Notwithstanding any express provision to the contrary herein,
neither party shall be liable for any indirect, consequential, incidental,
special or exemplary damages, even if it has been apprised of the likelihood of
such damages occurring.
(d) Each Fund acknowledges that in the event that its participation in
securities lending generates income for the Fund, State Street may be required
to withhold tax or may claim such tax from the Fund as is appropriate in
accordance with applicable law.
(e) State Street, in determining the Market Value of Securities,
including without limitation, Collateral, may rely upon any generally recognized
pricing service and shall not be liable for any errors made by such service.
13. Representations and Warranties.
Each party hereto represents and warrants that (a) it has and will have
the legal right, power and authority to execute and deliver this Agreement, to
enter into the transactions contemplated hereby, and to perform its obligations
hereunder; (b) it has taken all necessary action to authorize such execution,
delivery, and performance; (c) this Agreement constitutes a legal, valid, and
binding obligation enforceable against it; and (d) the execution, delivery,
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and performance by it of this Agreement will at all times comply with all
applicable laws and regulations.
Each Fund represents and warrants that (a) it has made its own
determination as to the tax and accounting treatment of any dividends,
remuneration or other funds received hereunder; (b) it is the legal and
beneficial owner of (or exercises complete investment discretion over) all
Available Securities free and clear of all liens, claims, security interests and
encumbrances and no such security has been sold, and that it is entitled to
receive all distributions made by the issuer with respect to Loaned Securities;
and (c) the financial statements delivered to State Street pursuant to Section 4
fairly present its financial condition and there has been no material adverse
change in its financial condition or the financial condition of any parent
company since the date of the balance sheet included within such financial
statements. Each Loan shall constitute a present representation by the Fund that
there has been no material adverse change in its financial condition or the
financial condition of any parent company that has not been disclosed in writing
to State Street since the date of the most recent financial statements furnished
to State Street pursuant to Section 4.
Each Fund further represents and warrants that it will immediately notify
State Street orally and by written notice, of the relevant details of any
corporate actions, private consent offers/agreements and/or any other off-market
arrangements that may require the recall and/or restriction of a security from
lending activity. Such written notice shall be delivered sufficiently in advance
so as to: (a) provide State Street with reasonable time to notify Borrowers of
any instructions necessary to comply with the terms of the corporate actions,
private consent offers/agreements and/or other off-market arrangements, and (b)
provide such Borrowers with reasonable time to comply with such instructions.
The person executing this Agreement on behalf of the Funds represents that
he or she has the authority to execute this Agreement on behalf of the Funds.
Each Fund hereby represents to State Street that: (i) its policies and
objectives generally permit it to engage in securities lending transactions;
(ii) its policies permit it to purchase shares of the State Street Navigator
Securities Lending Trust with cash Collateral; (iii) its participation in State
Street's securities lending program, including the investment of cash Collateral
in the State Street Navigator Securities Lending Trust, and the existing series
thereof has been approved by a majority of the directors or trustees which
directors and trustees are not "interested persons" within the meaning of
section 2(a)(19) of the Investment Company Act of 1940, and such directors or
trustees will evaluate the securities lending program no less frequently than
annually to determine that the investment of cash Collateral in the State Street
Navigator Securities Lending Trust, including any series thereof, is in the
Fund's best interest; and (iv) its prospectus provides appropriate disclosure
concerning its securities lending activity.
Each Fund hereby further represents that it is not subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") with respect to
this Agreement and the
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Securities; that it qualifies as an "accredited investor" within the meaning of
Rule 501 of Regulation D under the Securities Act of 1933, as amended; and that
the taxpayer identification number(s) and corresponding tax year-end are as set
forth on Schedule B.
14. Borrower Default Indemnification.
(a) If at the time of a default by a Borrower with respect to a Loan
(within the meaning of the applicable Securities Loan Agreement), some or all of
the Loaned Securities (including any non-cash distributions in the nature of a
stock split or stock dividend added to the Loan pursuant to Section 7 hereof)
under such Loan have not been returned by the Borrower, and subject to the terms
of this Agreement, State Street shall indemnify the affected Fund against the
failure of the Borrower as follows. State Street shall reasonably promptly
purchase a number of Replacement Securities equal to the number of such
unreturned Loaned Securities (including any non-cash distributions in the nature
of a stock split or stock dividend added to the Loan pursuant to Section 7
hereof), to the extent that such Replacement Securities are available on the
open market. Such Replacement Securities shall be purchased by applying the
proceeds of the Collateral with respect to such Loan to the purchase of such
Replacement Securities. If and to the extent that such proceeds are insufficient
or the Collateral is unavailable, the purchase of such Replacement Securities
shall be made at State Street's expense, except to the extent any such
insufficiency is the result of losses on the investment of cash Collateral in
accordance herewith, which, as agreed in Section 8(d) and the first paragraph of
Section 9, shall be for the account of the Fund. To the extent any amount of
indemnification to any Fund hereunder is to be made at State Street's expense,
State Street may reduce such amount to be paid at State Street's expense, by any
amount owed by such Fund to State Street in reimbursement for amounts paid or
advanced by State Street on behalf of such Fund pursuant to the last paragraph
of Section 9 hereof.
(b) If State Street is unable to purchase Replacement Securities
pursuant to Paragraph 14(a) hereof, State Street (at its expense, if and to the
extent of any Collateral deficiency described in paragraph 14(a) hereof) shall
credit to the affected Fund's account an amount (in U.S. dollars) equal to the
Market Value of the unreturned Loaned Securities for which Replacement
Securities are not so purchased, determined as of (i) the last day the
Collateral continues to be successfully marked to market by the Borrower against
the unreturned Loaned Securities; or (ii) the day on which the credit is made,
if higher.
(c) In addition to making the purchases or credits required by
Paragraphs (a) and (b) hereof, State Street shall credit to the affected Fund's
account the value (in U.S. dollars) of all distributions on the Loaned
Securities (not otherwise credited to the Fund's accounts with State Street) for
record dates which occur before the date that State Street purchases Replacement
Securities pursuant to Paragraph (a) or credits the Fund's account pursuant to
Paragraph (b).
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(d) Any credits required under Paragraphs (b) and (c) hereof shall be
made by application of the proceeds of the Collateral, if any, that remains
after the purchase of Replacement Securities pursuant to Paragraph (a). If and
to the extent that the Collateral is unavailable or the value of the proceeds of
the remaining Collateral is less than the value of the sum of the credits
required to be made under Paragraphs (b) and (c), such credits shall be made at
State Street's expense.
(e) If after application of Paragraphs (a) through (d) hereof,
additional Collateral remains or any previously unavailable Collateral becomes
available or any additional amounts owed by the Borrower with respect to such
Loan are received from the Borrower, State Street shall apply the proceeds of
such Collateral or such additional amounts first to reimburse itself for any
amounts expended by State Street pursuant to Paragraphs (a) through (d) above,
and then to credit to the Fund's account all other amounts owed by the Borrower
to the Fund with respect to such Loan under the applicable Securities Loan
Agreement.
(f) In the event that State Street is required to make any payment
and/or incur any loss or expense under this Section, State Street shall, to the
extent of such payment, loss, or expense, be subrogated to, and succeed to, all
of the rights of the Fund against the Borrower under the applicable Securities
Loan Agreement.
15. Continuing Agreement and Termination.
It is the intention of the parties hereto that this Agreement shall
constitute a continuing agreement in every respect and shall apply to each and
every Loan, whether now existing or hereafter made. The Funds and State Street
may each at any time terminate this Agreement upon five (5) business days'
written notice to the other to that effect. Following such termination, (a) no
further Loans shall be made hereunder by State Street on behalf of the Funds,
and (b) State Street shall, within a reasonable time after termination of this
Agreement, terminate any and all outstanding Loans. The provisions hereof shall
continue in full force and effect in all other respects until all Loans have
been terminated and all obligations satisfied as herein provided. State Street
does not assume any market or investment risk of loss associated with the Fund's
change in cash Collateral investment vehicles or termination of, or change in,
its participation in this securities lending program and the corresponding
liquidation of cash Collateral investments.
16. Notices.
Except as otherwise specifically provided herein, notices under this
Agreement may be made orally, in writing, or by any other means mutually
acceptable to the parties. If in writing, a notice shall be sufficient if
delivered to the party entitled to receive such notices at the following
addresses:
12
If to the Funds:
Fifth Third Funds
38 Fountain Square Plaza
MD 1090BD
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxx
If to State Street:
State Street Bank and Trust Company
Securities Finance
State Street Financial Center
Xxx Xxxxxxx Xxxxxx
Xxxxxx, XX 0000-0000
or to such other addresses as either party may furnish the other party by
written notice under this section.
Whenever this Agreement permits or requires the Funds to give notice to,
or to direct or provide information to State Street, such notice, direction, or
information shall be provided to State Street on the Funds' behalf by any
individual designated for such purpose by the Funds in a written notice to State
Street. This Agreement shall be considered such a designation of the person
executing the Agreement on the Funds' behalf. After State Street's receipt of
such a notice of designation and until its receipt of a notice revoking such
designation, State Street shall be fully protected in relying upon the notices,
directions, and information given by such designee.
17. Securities Investors Protection Act of 1970 Notice.
EACH FUND IS HEREBY ADVISED AND ACKNOWLEDGES THAT THE PROVISIONS OF THE
SECURITIES INVESTOR PROTECTION ACT OF 1970 MAY NOT PROTECT THE FUND WITH RESPECT
TO THE LOAN OF SECURITIES HEREUNDER AND THAT, THEREFORE, THE COLLATERAL
DELIVERED TO THE FUND MAY CONSTITUTE THE ONLY SOURCE OF SATISFACTION OF THE
BROKER'S OR DEALER'S OBLIGATION IN THE EVENT THE BROKER OR DEALER FAILS TO
RETURN THE SECURITIES.
18. Authorized Representatives.
Each Fund authorizes State Street to accept and to act on any instructions
or other communications, regardless of how sent or delivered, from any
Authorized Representative. Each Fund shall be fully responsible for all acts of
any Authorized Representative, even if that person exceeds his or her authority,
and in no event shall State Street be liable to a Fund
13
or any other third party for any losses or damages arising out of or relating to
any act State Street takes or fails to take in pursuant to any such instructions
or other communications.
19. Agents.
State Street may use such agents, including but not limited to, such
regulated clearing agents, securities depositaries, nominees, sub-custodians,
third party custodians and State Street Affiliates, as State Street deems
appropriate to carry out its duties under this Agreement. To the extent the
State Street Affiliates act as State Street's agent hereunder, State Street
agrees to be responsible for the acts and omissions of such the State Street
Affiliates as though performed by State Street directly. The Client agrees that
State Street's sole liability for the acts or omissions of any other agent shall
be limited to liability arising from State Street's failure to use reasonable
care in the selection of such agent.
20. Force Majeure.
State Street shall not be responsible for any losses, costs or damages
suffered by a Fund resulting directly or indirectly from war, riot, revolution,
terrorism, acts of government or other causes beyond the reasonable control of
State Street.
21. Non-US Borrowers.
In the event a Fund approves lending to Borrowers resident in the United
Kingdom ("UK"), the Fund shall provide sufficient documentation, in the form and
manner required by the UK Inland Revenue, to establish that the Fund is (1) the
beneficial owner of any manufactured dividends received and (2) not a UK
recipient for purposes of UK manufactured overseas dividend rules
22. Miscellaneous.
This Agreement supersedes any other agreement between the parties or any
representations made by one party to the other, whether oral or in writing,
concerning Loans of Available Securities by State Street on behalf of the Funds.
This Agreement shall not be assigned by either State Street or the Fund without
the prior written consent of the other party. Subject to the foregoing, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, representatives, successors, and assigns.
This Agreement shall be governed and construed in accordance with the laws of
The Commonwealth of Massachusetts. Each Fund hereby irrevocably submits to the
jurisdiction of any Massachusetts state or Federal court sitting in The
Commonwealth of Massachusetts in any action or proceeding arising out of or
related to this Agreement and hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard and determined in such
Massachusetts state or Federal court except that this provision shall not
preclude any party from removing any action to Federal court. Each Fund hereby
irrevocably waives, to the fullest extent it may effectively do so, the defense
of an inconvenient forum to the
14
maintenance of such action or proceeding. Each Fund hereby irrevocably consents
to the service of any and all process in any such action or proceeding by the
mailing of copies of such process to the Funds at their address specified in
Section 16 hereof. Each Fund agrees that a final judgment in any such action or
proceeding, all appeals having been taken or the time period for such appeals
having expired, shall be conclusive and may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by law. The provisions
of this Agreement are severable and the invalidity or unenforceability of any
provision hereof shall not affect any other provision of this Agreement. If in
the construction of this Agreement any court should deem any provision to be
invalid because of scope or duration, then such court shall forthwith reduce
such scope or duration to that which is appropriate and enforce this Agreement
in its modified scope or duration.
23. Counterparts.
The Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but such counterparts shall, together,
constitute only one (1) instrument.
24. Modification.
This Agreement shall not be modified except by an instrument in writing
signed by the parties hereto.
25. Massachusetts Business Trust Disclosure. State Street is hereby expressly
put on notice of the limitation on liability set forth in the Declaration of
Trust of the Funds and agrees that the obligations assumed by any Fund hereunder
shall be limited in all cases to the Fund and
[Continued on next page]
15
its assets. In addition, the obligations of a Fund are not personally binding
upon, nor shall recourse be had against the private property of, any of the
Trustees, shareholders, officers, employees or agents of the Fund, but only the
property of the Fund shall be bound.
IN WITNESS WHEREOF, each of the parties has caused their duly authorized
officer(s) to execute this Agreement, effective as of the first date set forth
above.
FIFTH THIRD FUNDS, on behalf of its respective
series as listed on Schedule B, severally and not jointly
By: /s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title Vice President
STATE STREET BANK AND TRUST COMPANY
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxxxx
Title Senior Managing Director
16
Schedule A
This Schedule is attached to and made part of the Securities Lending
Authorization Agreement, dated the 8th day of May, 2007, between FIFTH THIRD
FUNDS, ON BEHALF OF ITS RESPECTIVE SERIES AS LISTED ON SCHEDULE B, SEVERALLY
AND NOT JOINTLY (the "Funds") and STATE STREET BANK AND TRUST
COMPANY ("State Street").
Schedule of Fees
1. Subject to Paragraph 2 below, all proceeds collected by State Street on
investment of cash Collateral or any fee income shall be allocated as follows
- Seventy-five percent (75%) payable to the Fund, and
- Twenty-five percent (25%) payable to State Street.
2. All payments to be allocated under Paragraph 1 above shall be made after
deduction of such other amounts payable to State Street or to the Borrower under
the terms of this Securities Lending Authorization Agreement.
3. The Client instructs State Street to invest cash Collateral in the State
Street Navigator Securities Lending Prime Portfolio (the "Prime Portfolio"). The
management fees for investing in the Prime Portfolio are as follows:
State Street Navigator Securities Lending Prime Portfolio:
On an annualized basis, the management/trustee/custody/fund
administration/transfer agent fee for investing cash Collateral in the State
Street Navigator Securities Lending Prime Portfolio is not more than 5.00 basis
points netted out of yield. The trustee may pay out of the assets of the Prime
Portfolio all reasonable expenses and fees of the Prime Portfolio, including
professional fees or disbursements incurred in connection with the operation of
the Prime Portfolio.
Schedule B
This Schedule is attached to and made part of the Securities Lending
Authorization Agreement, dated the 8th day of May, 2007 between FIFTH THIRD
FUNDS, ON BEHALF OF ITS RESPECTIVE SERIES AS LISTED ON SCHEDULE B, SEVERALLY AND
NOT JOINTLY (the "Funds") and STATE STREET BANK AND TRUST
COMPANY ("State Street").
Fund Name Taxpayer Identification Number Tax Year-End
-----------------------------------------------------------------------------------
LifeModel Aggressive Fund 00-0000000
-----------------------------------------------------------------------------------
LifeModel Moderately Aggressive 00-0000000
-----------------------------------------------------------------------------------
LifeModel Moderate Fund 00-0000000
-----------------------------------------------------------------------------------
LifeModel Moderately Cons Fund 00-0000000
-----------------------------------------------------------------------------------
LifeModel Conservative Fund 00-0000000
-----------------------------------------------------------------------------------
Strategic Income Fund 00-0000000
-----------------------------------------------------------------------------------
Municipal Bond Fund 00-0000000
-----------------------------------------------------------------------------------
Bond Fund 00-0000000
-----------------------------------------------------------------------------------
U.S. Government Bond Fund 00-0000000
-----------------------------------------------------------------------------------
Ohio Municipal Bond Fund 00-0000000
-----------------------------------------------------------------------------------
Short Term Bond Fund 00-0000000
-----------------------------------------------------------------------------------
Intermediate Bond Fund 00-0000000
-----------------------------------------------------------------------------------
Intermediate Municipal Bond Fund 00-0000000
-----------------------------------------------------------------------------------
Michigan Municipal Bond Fund 00-0000000
-----------------------------------------------------------------------------------
High Yield Bond Fund 00-0000000
-----------------------------------------------------------------------------------
Multi Cap Value Fund 00-0000000
-----------------------------------------------------------------------------------
Micro Cap Value Fund 00-0000000
-----------------------------------------------------------------------------------
Small Cap Growth Fund 00-0000000
-----------------------------------------------------------------------------------
Mid Cap Growth Fund 00-0000000
-----------------------------------------------------------------------------------
Technology Fund 00-0000000
-----------------------------------------------------------------------------------
Quality Growth Fund 00-0000000
-----------------------------------------------------------------------------------
Equity Index Fund 00-0000000
-----------------------------------------------------------------------------------
Small Cap Value Fund 00-0000000
-----------------------------------------------------------------------------------
International Equity Fund 00-0000000
-----------------------------------------------------------------------------------
Disciplined Large Cap Value Fund 00-0000000
-----------------------------------------------------------------------------------
Dividend Growth Fund 00-0000000
-----------------------------------------------------------------------------------
Large Cap Core Fund 00-0000000
-----------------------------------------------------------------------------------
Prime Money Market Fund 00-0000000
-----------------------------------------------------------------------------------
Institutional Money Market Fund 00-0000000
-----------------------------------------------------------------------------------
Institutional Government MMKT Fd 00-0000000
-----------------------------------------------------------------------------------
Government Money Market Fund 00-0000000
-----------------------------------------------------------------------------------
Michigan Municipal MMKT Fund 00-0000000
-----------------------------------------------------------------------------------
Municipal Money Market Fund 00-0000000
-----------------------------------------------------------------------------------
Balanced Fund 00-0000000
-----------------------------------------------------------------------------------
Balanced Fund - Fixed Inc 00-0000000
-----------------------------------------------------------------------------------
Balanced Fund - Equity 00-0000000
-----------------------------------------------------------------------------------
Fifth Third Clearing Account 999999997
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Schedule C
This Schedule is attached to and made part of the Securities Lending
Authorization Agreement, dated the 8th day of May 2007 between FIFTH THIRD
FUNDS, ON BEHALF OF ITS RESPECTIVE SERIES AS LISTED ON SCHEDULE B, SEVERALLY AND
NOT JOINTLY (the "Funds") and STATE STREET BANK AND TRUST COMPANY
("State Street").
Acceptable Forms of Collateral
o Cash (U.S. and foreign currency);
o Securities issued or guaranteed by the United States government or its
agencies or instrumentalities;
o Irrevocable bank letters of credit issued by a person other than the
Borrower or an affiliate of the Borrower may be accepted as Collateral, if
State Street has reasonably determined that it is appropriate to accept
such letters of credit as Collateral under the securities lending programs
it administers; and
o Such other Collateral as the parties may agree to in writing from time to
time.
Schedule D
This Schedule is attached to and made part of the Securities Lending
Authorization Agreement, dated the 8th day of May 2007 between FIFTH THIRD
FUNDS, ON BEHALF OF ITS RESPECTIVE SERIES AS LISTED ON SCHEDULE B, SEVERALLY AND
NOT JOINTLY (the "Funds") and XXXXX XXXXXX XXXX XXX XXXXX XXXXXXX
("Xxxxx Xxxxxx").
Approved Borrowers
EXHIBIT 4.1
STATE STREET SECURITIES LOAN AGREEMENT
The attached document is proprietary, and contains information which is
confidential and proprietary, to State Street Bank and Trust Company ("State
Street"). It is being provided for the exclusive purpose of allowing you to
assess your participation in a securities lending program operated by State
Street and in which State Street is the Borrower. Its use for any other purpose
or its distribution to anyone other than your own personnel engaged in this
assessment is prohibited without State Street's prior written permission.
SECURITIES LOAN AGREEMENT
Between
STATE STREET BANK AND TRUST COMPANY,
as Lender's Agent
And
STATE STREET BANK AND TRUST COMPANY, as Borrower
TABLE OF CONTENTS
PAGE
----
1. TERMS OF LOAN 1
2. DELIVERIES AND TREATMENT OF BORROWED SECURITIES 3
3. DELIVERIES AND TREATMENT OF COLLATERAL 4
4. MARKS TO MARKET; MAINTENANCE OF COLLATERAL 5
5. FEES 6
6. REPRESENTATIONS OF THE PARTIES 8
7. COVENANTS 8
8. TERMINATION OF LOAN WITHOUT DEFAULT 9
9. EVENTS OF XXXXXXX 00
00. LENDER'S REMEDIES ON BORROWER'S DEFAULT 11
11. BORROWER'S REMEDIES ON LENDER'S DEFAULT 12
12. DEFINITIONS 12
13. INDEMNIFICATION 14
14. WAIVERS, GENERAL 14
15. STANDARD OF CARE 14
16. CONTINUING AGREEMENT; TERMINATION; REMEDIES 14
17. NOTICES 15
18. TIME 15
19. SECURITIES CONTRACTS 15
20. DECLARATION OF TRUST 16
21. MISCELLANEOUS 16
22. MODIFICATION 16
SECURITIES LOAN AGREEMENT
Agreement dated the 15th day of September, 1997 between STATE STREET BANK
AND TRUST COMPANY, a Massachusetts trust company, acting through its Global
Securities Lending Division, in its capacity as trustee, agent or custodian for
certain securities of its clients (in such capacity, "Lender's Agent"), and
STATE STREET BANK AND TRUST COMPANY, acting through the Money Market Division of
the Financial Markets Group, as Borrower ("Borrower"), setting forth the terms
and conditions under which one or more clients of Lender's Agent (hereinafter,
each a "Lender") from time to time, may lend to Borrower Securities (as defined
herein), against the receipt of collateral as specified herein.
Capitalized terms not otherwise defined shall have the meanings ascribed
to them in Section 12.
WHEREAS, each Lender has appointed Lender's Agent as its agent to act on
its behalf with respect to the lending of Securities to Borrower in accordance
with the terms of a securities lending authorization agreement (hereinafter, the
Securities Lending Authorization Agreement) between such Lender and Lender's
Agent.
WHEREAS, pursuant to each Securities Lending Authorization Agreement,
Lender's Agent has been granted the responsibility and authority to do or cause
to be done all acts Lender's Agent shall determine to be desirable, necessary or
appropriate to implement or administer a securities lending program on behalf of
the Lender party thereto.
WHEREAS, upon request of Borrower, Lender's Agent may, from time to time,
in its discretion and on behalf of one or more Lenders, lend Available
Securities to Borrower against the receipt of Collateral (as defined herein)
delivered by Borrower.
NOW, THEREFORE, Lender's Agent and Borrower agree as follows:
1. Terms of Loan.
1.1 Upon request of Borrower, Lender's Agent may, from time to time, in
its discretion and on behalf of the Lenders, lend Securities to Borrower against
the receipt of Collateral delivered by Borrower. Lender's Agent and Borrower
shall agree on the terms of each Loan, including the identity and amount of the
securities to be loaned, the basis of compensation, and the type and amount of
Collateral to be delivered by Borrower (subject to the terms and conditions of
this Agreement), which terms may be amended during the period of the Loan only
by mutual agreement of the parties hereto.
1.2 Loans, all applicable terms and conditions thereof, and amendments
and activity, if any, with respect thereto, shall be evidenced by Lender's
Agent's records pertaining to such Loans maintained by Lender's Agent in the
regular course of its business and such records shall represent conclusive
evidence thereof except for manifest error or willful misconduct. Lender's Agent
will send Borrower monthly statements of outstanding Loans showing Loan activity
which Borrower agrees to examine promptly and to advise Lender's Agent of any
error or exceptions. Borrower's failure to so advise Lender's Agent within
twenty (20) days after
delivery of any such statement shall be deemed to be such party's admission of
the accuracy and correctness of the contents thereof and such party shall be
fully bound thereby.
1.3 Notwithstanding any other provisions in this Agreement with respect
to when a Loan occurs, a Loan hereunder shall not occur until the Borrowed
Securities and the Collateral therefor are delivered. If, on any Business Day,
Borrower delivers Collateral, as provided in Section 3.1 hereunder, and Lender's
Agent does not deliver the Borrowed Securities, Borrower shall have the absolute
right to the prompt return of the Collateral; and if, on any Business Day,
Lender's Agent delivers Borrowed Securities and Borrower does not deliver
Collateral as provided in Section 3.1 hereunder, Lender's Agent shall have the
absolute right to the prompt return of the Borrowed Securities.
1.4 Lender's Agent shall maintain records in accordance with its usual
practice showing the allocation among the participating Lenders of the Loans,
the compensation therefor, the collateral with respect thereto and other
relevant information. Lender's Agent shall implement appropriate procedures and
policies to restrict lending of Securities hereunder on behalf of the respective
Lenders beyond the maximum credit risk and financial exposure limits which may
be set by such Lenders and Borrower.
2. Deliveries and Treatment of Borrowed Securities.
2.1 With respect to each Loan, Lender's Agent shall deliver the Borrowed
Securities to Borrower (a) by delivering to Borrower certificates representing
the Borrowed Securities together with such transfer documents as are customary
for such securities, if any, (b) by causing the Borrowed Securities to be
credited to Borrower's Account and debited from the Relevant Lender's Account at
a clearing organization agreed to by the Parties, and such crediting and
debiting shall result in receipt by Borrower and Lender's Agent of a notice of
such crediting and debiting, which notice shall constitute a schedule of the
Borrowed Securities, or (c) by any other method customary for the delivery of
such Securities at the Securities Trading Location and as agreed to by the
Parties.
2.2 Except as provided in Section 2.3, Borrower shall exercise all of
the incidents of ownership with respect to the Borrowed Securities, including
the right to transfer the Borrowed Securities to others, until the Borrowed
Securities are returned to Lender's Agent in accordance herewith.
2.3 Lender's Agent, on behalf of the Relevant Lender, shall be entitled
to receive all distributions (including payments upon maturity and other
redemption) made on or in respect of the Borrowed Securities, the payable dates
for which are during the term of the Loan and which are not otherwise received
by Lender's Agent, to the full extent the Relevant Lender would be so entitled
if the Borrowed Securities had not been loaned to Borrower, including, without
limitation, (a) all cash dividends, (b) all other distributions of cash or
property, (c) stock dividends and bonus issues, (d) securities received as a
result of split-ups of the Borrowed Securities and distributions in respect
thereof, (e) interest payments, (f) in the case of a rights issue, the Borrowed
Securities together with the securities allotted thereon; (g) in the case of
redemptions, a sum of money equivalent to the proceeds of redemption; (h) any
rights relating to conversion, sub-division, consolidation, preemption, rights
arising under a takeover offer or
3
other rights, including those requiring election by the holder for the time
being of such securities which become exercisable prior to the redelivery of
Borrowed Securities, in which event the Lender may, within a reasonable time
before the latest time for the exercise of the right or option give written
notice to the Borrower that on redelivery of securities it wishes to receive
redelivered Borrowed Securities in such form as if the right is exercised or, in
the case of a right which may be exercised in more than one manner, is specified
in such written notice; (i) in the case of a capitalized issue, the Borrowed
Securities together with the securities allotted by way of a bonus thereon; (j)
in the case of any event similar to any of the foregoing, the Borrowed
Securities together with or replaced by a sum of money or securities equivalent
to that received in respect of such Borrowed Securities resulting from such
event; and (k) all rights to purchase additional securities.
Cash dividends and other distributions shall be paid gross of any foreign
withholding taxes. Any cash distributions made on or in respect of the Borrowed
Securities which Lender's Agent is entitled to receive pursuant to this Section
shall be paid to Lender's Agent for the Account of the Relevant Lender by
Borrower on payable, maturity, or redemption date. Non-cash distributions other
than those in the nature of stock splits or stock dividends shall be paid to
Lender's Agent for the Account of the Relevant Lender as soon as possible under
the best efforts of Borrower. Accordingly, Borrower shall either: (i) redeliver
the Borrowed Securities in time to allow the respective Relevant Lender to
participate in rights, fees or other benefits which attach to the Borrowed
Securities as described in this Section 2; or (ii) exercise such rights, fees or
other benefits as directed by Lender's Agent. Furthermore, in the event a
re-registration process is necessary in order to transfer such rights, fees or
other benefits, and a Loan is terminated prior to the applicable record/payable
date but not sufficiently prior to the record/payable date to enable Lender's
Agent to re-register the Borrowed Securities in its own name, Borrower is to
forward, and/or act on Lender Agent's behalf in accordance with Lender Agent's
instructions with respect to, all rights, fees and other benefits on the
Borrowed Securities.
2.4 With respect to Section 2.3(k) above, Lender's Agent may, at its
sole option, (A) direct Borrower to purchase additional securities or (B)
terminate the Loan of specified securities so that Lender's Agent may exercise
its purchase rights. In the case of option (A) under the next preceding
sentence, Borrower may elect either (i) to retain such additional securities as
part of its Loan, in which case Lender's Agent and Borrower shall make such
arrangements as are necessary to provide that Borrower has adequate funds to
purchase such additional securities and that the Loan of such additional
securities is collateralized as required herein; or, (ii) to deliver such
additional securities to Lender's Agent (on the date specified by Lender's
Agent). In the case of option (B) under the second preceding sentence, the
applicable provisions of this Agreement regarding termination of Loans shall
apply.
Non-cash distributions which are in the nature of stock splits or stock
dividends and which are received by Borrower shall be added to the Borrowed
Securities and shall be considered such for all purposes, except that: (i) if
the Borrowed Securities have been returned to Lender's Agent or if Borrower is
in Default hereunder, Borrower shall forthwith deliver any such non-cash
distributions to Lender's Agent; and (ii) Lender's Agent may direct Borrower,
upon no less than six Business Days' notice prior to the date of such a non-cash
distribution, to deliver the same to Lender's Agent on the Business Day next
following the date of such non-cash distribution.
4
3. Deliveries and Treatment of Collateral.
3.1 Simultaneous to or prior to the transfer of Borrowed Securities
hereunder, Borrower shall deliver to Lender's Agent Collateral in an amount not
less than the applicable Margin Percentage of the current Market Value of the
Borrowed Securities. The Collateral shall be delivered by one or more of the
following methods, as agreed to by the parties pursuant to Section 1.1: (a)
Borrower delivering Securities to Lender's Agent, (b) Borrower delivering funds
to the Lender's Agent for the Account of the Relevant Lender, (c) Borrower
transferring funds by wire, (d) Borrower delivering to Lender Agent, or causing
to be credited to Lender Agent's account at a Clearing Organization, a certified
or official bank check representing New York Clearing House funds, (e) Borrower
delivering to Lender's Agent an irrevocable letter of credit issued by mutually
acceptable "bank" (as defined in Section 3(a)(6)(A)-(C) of the Securities
Exchange Act of 1934) that is not an Affiliate of Borrower, (f) Borrower
delivering U.S. Securities through the Federal Reserve book-entry system to the
account of Lender's Agent at the Federal Reserve Bank of Boston, (g) Borrower
delivering federal funds to the Lender Agent's account at the Federal Reserve
Bank of Boston or at a Clearing Organization, (h) Borrower delivering non-cash
Collateral through any Clearing Organization agreed to by the parties, and/or
(i) Borrower delivering to Lender's Agent, one or more other types of Collateral
as the Parties may agree.
As further security for the due and punctual performance by Borrower of
any and all of its obligations to Lender's Agent hereunder, Borrower hereby
grants and transfers to Lender's Agent a lien upon and a security interest in
any and all property (together with the proceeds thereof) in which the Borrower
at any time has rights and which at any time has been delivered, transferred, or
deposited in or credited to an account with, the Lender's Agent or otherwise at
any time is in the possession or under the control or recorded on the books of
the Lender's Agent, provided such property is delivered as collateral for a Loan
hereunder or under any other loan agreement with the Relevant Lender, including
(without limitation) any property which may be in transit by mail or carrier for
such purpose, or converted or affected by any documents in the Lender Agent's
possession for such purpose.
3.2 With respect to each Loan, the Collateral delivered by Borrower to
Lender's Agent, as adjusted pursuant to Section 4 below, shall be security for
the due and punctual performance by Borrower of any and all of its obligations
to Lender's Agent on behalf of the Relevant Lender hereunder now or hereafter
arising, and Borrower hereby pledges with, assigns to, and grants to Lender's
Agent on behalf of the Relevant Lender a continuing first security interest in,
and a lien upon, the Collateral and its proceeds. Borrower shall make
appropriate notations on its books and records so as to ensure the validity of
such security interest. Such first security interest shall attach upon the
delivery of the Collateral to Lender's Agent, shall survive the termination of
this Agreement, and shall cease only upon the return of the Collateral to
Borrower subsequent to the return of the Borrowed Securities to Lender's Agent.
In addition to the rights and remedies given to Lender's Agent hereunder,
Lender's Agent, on behalf of the Relevant Lender, shall have all the rights and
remedies of a secured party under the Uniform Commercial Code of Massachusetts.
3.3 Borrower understands that Lender's Agent may use or invest the
Collateral, to the extent that such Collateral consists of cash. Such use or
investment shall be at the risk of the Relevant Lender and, subject to the
payment of an agreed rebate fee pursuant to Section 5.2, and any other fees
5
payable hereunder, the Relevant Lender shall be entitled to retain all income
and profits therefrom and shall bear all losses therefrom. Except as provided in
Section 10, neither Lender's Agent nor any Lender may pledge, repledge,
hypothecate, rehypothecate, lend, or relend the Collateral, to the extent such
Collateral consists of other than cash. However, Lender's Agent may commingle
and hold non-cash Collateral in bulk.
3.4 With the approval of Lender's Agent, Borrower may at any time
substitute for any Securities held by Lender's Agent as Collateral for the
Borrowed Securities other Collateral with respect to the Borrowed Securities of
equal current Market Value to the Securities for which it is to be substituted.
Prior to the maturity of any U.S. Security (as defined in Section 12) that is
delivered to Lender's Agent as Collateral, Borrower shall replace such U.S.
Security with other Collateral acceptable to Lender's Agent and of equal current
Market Value to the U.S. Security for which it is to be substituted. Substituted
collateral shall be considered Collateral for all purposes hereof.
3.5 Borrower shall be entitled to receive all distributions made on or
in respect of non-cash Collateral the payable dates for which are during the
term of a 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's Agent; provided, however, that the amount, type or value of such
distribution which Borrower is entitled to receive hereunder shall not exceed
the amount, type and value received by State Street or its agents. Any
distributions made on or in respect of such Collateral which Borrower is
entitled to receive under this section shall be paid in the same currency as
such distribution is paid by the issuer, by Lender's Agent, acting on behalf of
the Relevant Lender, to Borrower forthwith upon receipt thereof by Lender's
Agent, so long as Borrower has not committed a Default at the time of such
receipt. Cash dividends and other distributions shall be paid gross of any
withholding taxes. Borrower acknowledges that distributions on non-cash
Collateral may be afforded different treatment than Borrower would have been so
entitled had it not delivered the Collateral to Lender's Agent, and agrees not
to claim Lender's Agent or any Relevant Lender for any disparate treatment as a
result of its receiving the distribution from Lender' Agent (as opposed to a
distribution from issuer directly).
3.6 Except as provided in Sections 10 and 11 hereunder, Lender's Agent
shall be obligated to return the Collateral to Borrower upon the return to
Lender's Agent of the Borrowed Securities.
4. Marks to Market: Maintenance of Collateral.
4.1 Borrower shall daily xxxx to market any Loans hereunder and in the
event that at the close of trading on any day the Market Value of all the
Collateral delivered by Borrower to Lender's Agent with respect to any Loan
hereunder shall be less than the Margin Percentage of the Market Value of all
Borrowed Securities outstanding with respect to such Loan, Borrower shall
deliver to Lender's Agent for the benefit of the Relevant Lender additional
Collateral by the close of the next Business Day so that the Market Value of the
additional Collateral when added to the Market Value of the Collateral with
respect to such Loan shall equal at least the Margin Percentage of the Market
Value of the Borrowed Securities outstanding with respect to such Loan. Such
additional Collateral shall be delivered as provided in Section 3.1 above.
4.2 In the event that at the close of trading on any day the Market
Value of all the Collateral delivered by Borrower to Lender's Agent with respect
to any Loan hereunder shall be less than the Margin Percentage of the Market
Value of all the Borrowed Securities outstanding with
6
respect to such Loan, Lender's Agent may, by oral notice to Borrower, demand
that Borrower deliver to Lender's Agent for the benefit of the Relevant Lender
additional Collateral such that the Market Value of such additional Collateral
when added to the Market Value of the Collateral with respect to such Loan shall
equal at least the Margin Percentage of the Market Value of the Borrowed
Securities outstanding with respect to such Loan. Except as provided below, such
delivery is to be made by the close of business on the day of Lender's Agent's
notice to Borrower if such notice is given before 11:30 a.m. on a Business Day,
or on the next Business Day if agreed to between the Parties. If Lender's
Agent's notice is given after 11:30 a.m. on a Business Day or is given on a day
other than a Business Day, such delivery is to be made by the close of business
of the next Business Day, unless such notice has been superseded by a proper
demand made pursuant to Section 4.3 before 11:30 a.m. of that next Business Day.
Such Collateral shall be delivered as provided in Section 3.1 above. If the
transfer of Collateral is to occur outside the United States, such delivery is
to be made not later than the time on such day that is customary in such
location.
4.3 In the event that at the close of trading on any day the Market
Value of all the Collateral delivered by Borrower to Lender's Agent with respect
to any Loan hereunder shall be greater than the Margin Percentage of the Market
Value of all the Borrowed Securities outstanding with respect to such Loan,
Borrower may, by oral notice to Lender's Agent, demand that Lender's Agent
deliver to Borrower such amount of Collateral as may be selected by Borrower, so
long as the Market Value of the remaining Collateral equals at least the Margin
Percentage of the Market Value of the Borrowed Securities outstanding with
respect to such Loan. Except as provided below, such delivery is to be made by
the close of business on the day of Borrower's notice to Lender's Agent if such
notice is given before 11:30 a.m. on a Business Day, or on the next Business Day
if agreed to between the Parties. If Borrower's notice is given after 11:30 a.m.
on a Business Day or is given on a day other than a Business Day, such delivery
is to be made by the close of business of the next Business Day, unless (a) such
notice has been superseded by a proper demand made pursuant to Section 4.2 or
this Section 4.3 given before 11:30 a.m. of that next Business Day, or (b)
additional Collateral is required to be delivered on that next Business Day
pursuant to Section 4.1. Such Collateral shall be delivered as provided in
Section 3.1 above. If the transfer of Collateral is to occur outside the United
States, such delivery is to be made not later than the time on such day that is
customary in such location.
5. Fees and Investment of Cash Collateral.
5.1 When an agreement to lend securities is made, Lender's Agent and
Borrower shall agree on the basis of compensation to be paid in respect of the
Loan.
5.2 To the extent that a Loan of Borrowed Securities is collateralized
by cash, the parties hereby agree that Lender's Agent for the benefit of the
Relevant Lender shall use and invest such cash Collateral, and that, in
consideration for such right to use and invest cash Collateral, Lender's Agent,
on behalf of the Relevant Lender, will pay Borrower a loan rebate fee computed
daily for each such Loan and based on the amount of cash Collateral delivered
with respect to such Loan. In the event Securities other than U.S. Securities
are borrowed hereunder, the amount of such loan rebate fee shall be computed (a)
from the first Business Day next following the day that cash Collateral is
delivered to Lender's Agent to the extent that such Loan is collateralized by
cash through a means other than Borrower's delivery of federal funds,
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and (b) from the first Business Day that cash Collateral is delivered to
Lender's Agent, to the extent that the Loan is collateralized by Borrower's
delivery of federal funds. Computation of such loan rebate fee shall be made
daily, through and including the earliest of: (i) the date that such cash
Collateral is returned to Borrower, to the extent that such Loan is
collateralized by cash through a means other than Borrower's delivery of federal
funds; (ii) the date next preceding the date such cash Collateral is returned to
Borrower, to the extent that such Loan is collateralized by Borrower's delivery
of federal funds; (iii) the date of a Default by Borrower; and (iv) the date
Lender's Agent gives notice of termination pursuant to Section 8.2, provided
that the parties may mutually agree that a loan rebate fee will be paid for all
or an agreed upon number of days after such notice is given (but in no event for
a period beyond the earliest of the dates described in clauses (i), (ii), and
(iii) of this sentence). Such loan rebate fee shall be payable before the tenth
Business Day following the rendering of a correct invoice by Borrower. In the
event U.S. Government Securities are borrowed hereunder, the amount of such loan
rebate fee shall be computed daily from the first Business Day that cash
Collateral is delivered to Lender's Agent, through and including the earliest of
(I) the date next preceding the date that such cash Collateral is returned to
Borrower; (II) the date of a Default by Borrower; and (III) the date Lender's
Agent gives notice of termination pursuant to Section 8.2, provided that the
parties may mutually agree that a loan rebate fee will be paid for all or an
agreed upon number of days, and provided the Borrower is not in Default, such
loan rebate fee shall be payable upon the date the Borrowed Securities are
returned to the Lender's Agent upon termination of the Loan. If requested by any
party to this agreement, Lender's Agent and Borrower shall renegotiate the loan
rebate fee from time to time.
5.3 To the extent that a Loan of Borrowed Securities is collateralized
by other than cash, Lender's Agent and Borrower may agree that Borrower shall
pay to Lender's Agent, for the account of the Relevant Lender, a loan premium
based on the par value of the borrowed securities. The amount of such loan
premium shall be computed from the first Business Day that the borrowed
securities are delivered to Borrower, through and including the date next
preceding the date that securities identical to the Borrowed Securities are
returned to Lender's Agent pursuant to Section 8 or the date that Lender's Agent
makes a purchase of securities or an election to treat the Borrowed Securities
as sold pursuant to Section 10.1. Any fee payable by Borrower hereunder shall be
payable upon the earliest of the following: (a) the seventh Business Day of the
month following the month in which the fee was incurred; or (b) immediately, in
the event of a Default hereunder by Borrower; or (c) the date this Agreement is
terminated.
5.4 All necessary costs, including any and all taxes (such as, but not
limited to, transfer taxes), duties (including, without limitation, stamp
duties) and fees (if any), with respect to any transfers hereunder of the
Borrowed Securities or Collateral shall be paid by Borrower when the same become
due.
6. Representations of the Parties.
The parties hereby make the following representations and warranties,
which shall continue during the term of any Loan hereunder;
8
6.1 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.
6.2 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 agencies and organizations.
6.3 Borrower represents and warrants for the benefit of Lender's Agent
and each Lender that (a) it is a trust company duly organized and validly
existing under the laws of the Commonwealth of Massachusetts, (b) it is a bank
within the meaning of Section 3(a)(6)(A)-(C) of the Exchange Act, (c) it has, or
will have at the time of delivery of any Collateral, the right to grant a first
security interest therein subject to the terms and conditions hereof, and (d)
the purposes for which it borrows securities hereunder shall not violate the
laws of the Commonwealth of Massachusetts or the federal laws applicable
therein.
6.4 Borrower represents that the statements provided pursuant to Section
7.1 fairly represent its financial condition, and that there has been no
material adverse change in its financial condition or the financial condition of
any parent company since that date that has not been disclosed in writing to
Lender's Agent. Lender's Agent represents that it has not been informed of any
material adverse change in Lender's financial condition. Each Loan effected
hereunder shall constitute a present representation by: (i) Borrower that there
has been no material adverse change in its financial condition or the financial
condition of any parent company that has not been disclosed in writing to
Lender's Agent since the date of the most recent statement furnished to Lender's
Agent pursuant to Section 7.1; and (ii) Lender's Agent that it knows of no
material adverse change in the financial condition of any Lender that the
Borrower is not aware of.
7. Covenants.
7.1 To the extent that Lender's Agent has provided Borrower with written
statements identifying any of the Lenders as employee benefit plans subject to
Title 1 of the Employee Retirement Income Security Act of 1974 ("ERISA"), each
request by Borrower for a Loan shall constitute a present representation that,
except as disclosed in writing by Borrower to Lender's Agent, neither borrower
nor any Affiliate of Borrower is a "fiduciary" (within the meaning of Section
3(21) of ERISA) with respect to the assets of the Lender so identified that may
be Borrowed Securities hereunder. Borrower hereby makes the following covenants:
Upon execution of this Agreement, Borrower shall furnish to Lender's Agent (i)
the most recent available audited statement of Borrower's financial condition,
and (ii) the most recent available unaudited statement of Borrower's financial
condition. As long as any Loan is outstanding under this Agreement, Borrower
will promptly deliver to Lender's Agent all such financial information that is
subsequently available, and any other financial information or statements that
Lender's Agent may reasonably request.
9
7.2 Lender's Agent hereby makes the following covenants. Subject to
confidentiality restrictions, if any, Lender's Agent shall furnish to Borrower,
upon request, any of the following statements received from each Lender,
promptly upon such receipt (i) the most recent available audited statement of
such Lender's financial condition, and (ii) the most recent available unaudited
statement of such Lender's financial condition. As long as any Loan is
outstanding under this Agreement, Lender's Agent will promptly deliver to
Borrower, upon request, all such financial information that is subsequently
delivered to Lender's Agent and any other financial information or statements
pertaining to a Lender and received by Lender's Agent that Borrower may
reasonably request.
7.3 Lender's Agent and Borrower hereby covenant and agree for the
benefit of the Lenders that they each have adopted and implemented procedural
safeguards to help ensure that all actions taken by Lender's Agent hereunder
will be effected by individuals other than, and not under the supervision of,
individuals who are acting in a capacity as Borrower hereunder, and that all
transactions effected hereunder will take place at the same fully negotiated
"arms length" prices offered to similarly situated third parties by Lender's
Agent when it acts as lending agent for the various participants in its
securities lending program, notwithstanding the inherent conflict of interest
with respect to Loans to be effected by Lender's Agent to Borrower.
7.4 The Borrower covenants that it shall ensure that this Agreement and
all instruments of transfer of any Securities provided or returned pursuant to
the terms of this Agreement have been duly stamped in accordance with all
applicable legislation.
7.5 The Borrower covenants that at all times it shall ensure compliance
with those provisions of applicable law concerning the taxation of securities
lending arrangements so that Lender does not incur any unnecessary tax or
capital gains tax (other than income tax in respect of fees payable under this
Agreement) arising out of the provision of Borrowed Securities to the Borrower
and the return to Lender's Agent of Borrowed Securities.
8. Termination of Loan without Default.
8.1 Borrower may cause the termination of a Loan at any time by
returning the Borrowed Securities to Lender's Agent.
8.2 Lender's Agent may cause the termination of a Loan by giving notice
of termination of such Loan to Borrower, prior to the close of business on any
Business Day. Upon such notice, Borrower shall deliver the applicable Borrowed
Securities to Lender's Agent (i) in the event U.S. Securities are loaned, no
later than the close of business on the next Business Day; or (ii) in the event
Securities other than U.S. Securities are loaned, no later than the earlier of
(a) the end of the customary delivery period for such Securities or (b) the
third Business Day following the day on which Lender gives notice of termination
of such Loan Borrower.
8.3 Borrower's delivery of the Borrowed Securities to Lender's Agent
pursuant to Section 8.1 or 8.2 shall be made by causing Lender's Agent to credit
the Account of the Relevant Lender with the Borrowed Securities, by causing the
Borrowed Securities to be credited to the
10
Account of the Relevant Lender at the applicable Clearing Organization, or, if
Lender's Agent consents, by physical delivery to Lender of certificates
representing the Borrowed Securities. Upon such delivery by or on behalf of
Borrower, Lender's Agent shall concurrently therewith deliver the Collateral (as
adjusted pursuant to Section 4) to Borrower; provided, however, that if upon the
return of the Borrowed Securities there is not sufficient time for Lender's
Agent to effect a return of the Collateral to Borrower's Account, Lender's Agent
may return such Collateral on the next Business Day such return can be so
effected.
9. Events of Default.
With respect to each Loan, the following shall constitute defaults
hereunder (individually, a "Default")
(a) if Lender's Agent or Borrower fails to return the relevant Borrowed
Securities or Collateral as required by Section 8 hereof;
(b) if Lender's Agent or Borrower fails to deliver or return the
relevant Collateral, as required by Section 4 hereof;
(c) if Lender's Agent or Borrower fails to make the payment of
distributions with respect to such Loan as required by Section 2.3 and 3.5
hereof and such default is not cured within one Business Day of notice of such
failure to Borrower or Lender's Agent, as the case may be;
(d) if any party fails to make any payment with respect to such Loan due
hereunder;
(e) if any party, or any parent company of Borrower, or the Relevant
Lender makes a general assignment for the benefit of creditors, or admits in
writing its inability to pay its debts as they become due, or files or becomes
subject to a petition in bankruptcy or is adjudicated as bankrupt or insolvent,
or files or becomes subject to a petition seeking reorganization, liquidation,
dissolution, or similar relief under any present or future law or regulation, or
seeks, consents to or acquiesces in the appointment of any trustee, receiver, or
liquidator of it or any material part of its properties;
(f) if Borrower or the Relevant Lender has its license, charter, or
other authorization necessary to conduct a material portion of its business
withdrawn, suspended or revoked by any applicable federal or state government or
agency thereof;
(g) if it is found that Borrower or the Relevant Lender has made a
material misrepresentation of its financial condition;
(h) if Borrower breaches any covenants, representations, or agreements
herein;
(i) if a final judgment for the payment of money shall be rendered
against Borrower and such judgment shall not have been discharged or its
execution stayed pending appeal within
11
sixty (60) days of entry or such judgment shall not have been discharged within
sixty (60) days of expiration of any such stay.
10. Lender's Remedies on Borrower's Default.
10.1 In the event of any Default by Borrower under Section 9 hereof with
respect to a Loan, Lender's Agent, on behalf of the Relevant Lender, shall have
the right, in addition to any other remedies provided herein or under applicable
law, to terminate all Loans of such Relevant Lender, effective immediately upon
receipt of notice to that effect by Borrower, and at the option of Lender's
Agent (without further notice to Borrower) with respect to any or each such
Loan, either (a) to purchase a like amount of the Borrowed Securities in any
market for such securities or (b) to elect to treat the Borrowed Securities as
having been purchased by Borrower at a purchase price equal to the Replacement
Value. Lender's Agent may apply the relevant Collateral to the payment of such
purchase, after deducting therefrom all amounts, if any, due the Relevant
Lender, or Lender's Agent on its behalf, from Borrower under this Agreement. In
such event, Borrower's obligation to return the applicable Borrowed Securities
shall terminate. Borrower shall be liable to Lender's Agent, on behalf of the
Relevant Lender, for the cost of funds which Lender's Agent, on behalf of the
Relevant Lender, must advance to purchase such securities during any stay on the
application of the Collateral (whether such stay is automatic or imposed by a
court or any other governmental agency). In the event such purchase price or
Replacement Value exceeds the amount of the Collateral, Borrower shall be liable
to Lender's Agent, on behalf of the Relevant Lender, for the amount of such
excess (plus all amounts, if any, due by Borrower to the Lender's Agent, on
behalf of the Relevant Lender, hereunder) together with interest on all such
amounts at the Prime Rate, as it fluctuates from day to day, on demand from the
date of such purchase or election until the date of payment of such excess. Each
Lender shall have, as security for Borrower's obligation to such Lender to pay
such excess, a first security interest in or right of setoff against any
property of Borrower then held by such Lender and any other amount payable by
such Lender to Borrower. The purchase price of securities purchased under this
Section 10 shall include broker's fees and commissions and all other reasonable
costs, fees, and expenses related to such purchase. Lender's Agent shall
allocate among the Lenders and their respective Loans, in accordance with any
reasonable allocation method selected by Lender's Agent, the funds received,
Collateral realized upon and the costs of collection, including without
limitation, the cost of purchase of replacement securities. Upon the
satisfaction of all of Borrower's obligations to Lender's Agent, on behalf of
the Relevant Lender hereunder, any remaining Collateral held by Lender's Agent
on behalf of the Relevant Lender shall be returned to Borrower.
11. Borrower's Remedies on or Lender's Agent Default.
11.1 With respect to each Loan, in the event of any Default by the
Relevant Lender, or by Lender's Agent by reason of the Relevant Lender's failure
to perform its obligations under the terms of its Securities Lending
Authorization Agreement, Borrower shall have the right to sell an amount of the
Borrowed Securities applicable to the Loans from the Relevant Lender, in the
principal market for such securities, that will provide proceeds equal in value
to the Market Value of the Collateral on the date of Default. In such event,
Borrower may retain the proceeds of such sale and the obligation of Lender's
Agent to return the Collateral applicable to the Loans from the Relevant Lender
shall terminate. In the
12
event the sale price received from such securities is less than the value of the
Collateral, Lender's Agent shall be liable to Borrower (but only if and to the
extent of the funds received from the Relevant Lender under its Securities
Lending Authorization Agreement) for the amount of any deficiency (plus all
amounts, if any, due to Borrower hereunder). Upon the satisfaction of all of the
obligations of Lender's Agent thereunder, any remaining Borrowed Securities
applicable to the Loans from the Relevant Lender shall be returned to Lender's
Agent.
12. Definitions.
For the purposes hereof:
12.1 "Account of the Relevant Lender" shall mean, with respect to each
Relevant Lender, either: (i) such Relevant Lender's sub-account reflected on the
books and records of Lender's Agent within the 3E Special Account of Lender's
Agent held in the Federal Reserve Book-Entry System; or (ii) an account
designated on the books and records of State Street Bank and Trust Company as
representing cash Collateral held by Lender's Agent as custodian on the Relevant
Lender's behalf.
12.2 "Affiliate" means (i) any person directly or indirectly, through one
or more intermediaries, controlling, controlled by, or under common control with
another person; (ii) any officer, director, or partner, or employee of such
other person; and (iii) any corporation or partnership of which such other
person is an officer, director or partner. For purposes of this definition the
term "control" means the power to exercise a controlling influence over the
management or policies of a person other than an individual.
12.3 "Available Securities" shall mean the securities available to be
loaned hereunder, as described in Section 1 hereof.
12.4 "Borrowed Security" shall mean any "security" (as defined in the
Exchange Act) which is either: (i) a U.S. Security, and is delivered as a Loan
hereunder, until such security is credited through the Federal Reserve
book-entry system, to the Lender's account at the Federal Reserve Bank of Boston
or until the security is replaced by purchase. For purposes of the return of
Borrowed Securities by Borrower pursuant to Section 8 or the purchase of
securities pursuant to Section 10, such term shall include securities of the
same issuer, class, and quantity as the Borrowed Securities; or (ii) not a U.S.
Security and which is delivered as a Loan hereunder, until the Clearing
Organization credits the Lender's accounts or the certificate for such security
is delivered or otherwise accepted back hereunder or until the security is
replaced by purchase, except that, if any new or different security shall be
exchanged for any Borrowed Security by recapitalization, merger, consolidation
or other corporate action, such new or different security shall, effective upon
such exchange, be deemed to become a Borrowed Security in substitution for the
former Borrowed Security for which such exchange was made. For purposes of the
return of Borrowed Securities by Borrower pursuant to Section 8 or the purchase
of securities pursuant to Sections 10 or 11 hereunder, such term shall include
securities of the same issuer, class and quantity as the Borrowed Securities, as
adjusted pursuant to the preceding sentence.
12.5 "Borrower's Account" shall mean the 3A Investment Account of State
Street Bank and Trust Company held through the Federal Reserve Book-Entry
System.
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12.6 "Business Day" shall mean any day recognized as a settlement day by
the Federal Reserve Bank of Boston and on which Lender's Agent is open for
business to the public.
12.7 "Clearing Organization" means any clearing agency for the transfer
of securities, the use of which is agreed to by the parties.
12.8 "Collateral" shall mean, with respect to each Loan whether now owned
or hereafter acquired, (a) that collateral delivered to Lender's Agent pursuant
to Section 3 or 4, and (b) all accounts in which such collateral is deposited
and all securities and the like in which all cash collateral is invested or
reinvested.
12.9 "Default" shall have the meaning set forth in Section 9 hereof.
12.10 "Loan" shall mean a single transaction for the loan of securities
hereunder by Lender's Agent to Borrower on behalf of a designated Relevant
Lender.
12.11 "Loaned Securities" shall mean securities subject to a Loan.
12.12 "Margin Percentage" shall mean one hundred and two percent (102%) in
respect of U.S. Securities or Sovereign Debt, one hundred and five percent
(105%) in respect of all other Securities or such other percentage as is agreed
to by the Lender's Agent and Borrower pursuant to Section 1.1.
12.13 "Market Value" of a security shall mean the fair market value of
such security (including, in the case of any Borrowed Security that is a debt
security, the accrued interest on such security) as determined by the
independent pricing service designated by Lender's Agent, or by such other
independent sources as may be selected on a reasonable basis by Lender's Agent.
"Market Value" of cash shall mean the notional amount thereof.
12.14 "Prime Rate" shall mean the prime rate as quoted in The Wall Street
Journal, New York Edition, for the business day preceding the date on which such
determination is made. If more than one rate is so quoted, the Prime Rate shall
be the average of the rates so quoted.
12.15 "Relevant Lender" shall mean, with respect to each Loan, the Lender
to whom such Loan is allocated as shown on the books of Lender's Agent
maintained pursuant to Section 1.4 hereof.
12.16 "Replacement Value" shall mean the price, including any brokerage or
other expenses and accrued interest, at which a like amount of securities
identical to the Borrowed Securities could be purchased in the principal market
for such securities at the time of the election of Lender's Agent under Section
10.1 hereof.
12.17 "Security" means any security (as defined in the Exchange Act) which
is delivered for Loan hereunder.
12.18 "State Street" shall mean State Street Bank and Trust Company.
12.19 "U.S. Security" means a security issued or guaranteed by the United
States government or any of its agencies.
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13. Indemnification.
Borrower hereby agrees to indemnify and hold harmless each Lender and
Lender's Agent from any and all damages, losses, costs, and expenses (including
attorney's fees) that such Lender or Lender's Agent may incur or suffer due to
the failure of the Borrower to perform its obligations under this Agreement.
This right to indemnification shall survive the termination of any Loan or of
this Agreement.
14. Waivers, General.
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 of
any other term of this Agreement. All waivers in respect of a Default must be in
writing.
15. Standard of Care.
Subject to the requirements of applicable law, Lender's Agent shall not be
liable with respect to any losses incurred by Borrower in connection with this
Agreement except to the extent that such losses result from the negligence of
Lender's Agent in the performance of its duties hereunder.
16. Continuing Agreement; Termination: Remedies.
It is the intention of the parties hereto that, subject to the termination
provisions set forth herein, this Agreement shall constitute a continuing
agreement in every respect and shall apply to each and every Loan, whether now
existing or hereafter made by Lender's Agent to Borrower. Lender's Agent and
Borrower may each at any time terminate this Agreement upon five (5) days'
written notice to the other parties to that effect. The sole effect of any such
termination of this Agreement will be that, following such termination, no
further Loans by Lender's Agent shall be made or considered made hereunder, but
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.
17. Notices.
Except as otherwise specifically provided herein, notices under this
Agreement may be made orally, in writing, or by any other means mutually
acceptable to the parties. If in writing, a notice shall be sufficient if
delivered to the party entitled to receive such notices at the following
addresses:
If to Lender's Agent:
State Street Bank and Trust Company
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Securities Lending Department
15
If to Borrower:
State Street Bank and Trust Company
Financial Markets Group
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Money Markets Area
or to such other addresses as either party may furnish the other party by
written notice under this section.
Telephone and facsimile notices shall be sufficient if communicated to the
party entitled to receive such notice at the following numbers:
If to Lender's Agent:
Telephone (000) 000-0000 Facsimile (000) 000-0000
If to Borrower:
Telephone: 000-0000 Facsimile 654-4270
18. Time.
All times specified herein shall be based on Boston time.
19. Securities Contracts.
Each party hereto agrees that this Agreement and the Loans made hereunder
shall be a "qualified financial contracts" for purposes of Section 11 (e)(8) of
the Federal Deposit Insurance Act, as amended, and any receivership or
conservationship proceeding thereunder.
20. Declaration of Trust.
Lender's Agent hereby covenants and agrees that with respect to any
Collateral delivered to Lender's Agent by Borrower hereunder, Lender's Agent
shall hold such Collateral, or, in the case of cash Collateral, shall hold any
securities or units representing the investment of such cash Collateral,
separate and apart from Lender's Agent's assets and Lender's Agent hereby
further declares that it holds such Collateral or such securities or units, as
the case may be, in trust for the benefit of the Relevant Lender.
21. Miscellaneous.
With respect to loans of Securities to Borrower by Lender's Agent on
behalf of Lenders, this Agreement supersedes any other agreement between the
parties. This Agreement shall not be assigned by any party without the prior
written consent of the other parties. Subject to the foregoing, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, representatives, successors and assigns. This Agreement
shall be governed and construed in accordance with the laws of the Commonwealth
of Massachusetts. The provisions of this Agreement are severable and the
invalidity or unenforceability of any provision hereof shall not affect any
other provision of this
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Agreement. If in the construction of this Agreement any court should deem any
provision to be invalid because of scope or duration, then such court shall
forthwith reduce such scope or duration to that which is appropriate and enforce
this Agreement in its modified scope or duration.
22. Modification.
This Agreement shall not be modified, except by an instrument in writing
signed by the party against whom enforcement is sought.
BORROWER: STATE STREET BANK AND TRUST COMPANY
Officer Xxxxxx X. Xxxxxx
Title SVP and General Mgr., London Branch
Signature /S/ Xxxxxx X. Xxxxxx
----------------------
LENDER'S AGENT: STATE STREET BANK AND TRUST
COMPANY
Officer: Xxxxxxx X. Xxxxxx
Title: SVP
Signature: /S/ Xxxxxxx X. Xxxxxx
-----------------------
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