Exhibit h.14
SECURITIES LENDING AGENCY AGREEMENT
BETWEEN
INVESTORS BANK & TRUST COMPANY
AND
iSHARES, INC.
SECURITIES LENDING AGENCY AGREEMENT
AGREEMENT, dated as of May 21, 2002, between iShares, Inc. (the
"Client"), a Maryland corporation, acting on behalf of the funds listed on
Schedule A hereto (each fund, a "Lender"), and Investors Bank & Trust Company, a
trust company organized and existing under the laws of the Commonwealth of
Massachusetts (the "Bank"). Schedule A may be amended from time to time by
written notice from the Client to the Bank.
WHEREAS, the Client is registered as an open-end investment company
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Bank currently acts as custodian for securities held by it
in the Account (as defined below) from time to time on behalf of the Lender;
WHEREAS, the Client desires to appoint the Bank as its agent for the
purpose of lending securities in the Account as more fully set forth below; and
WHEREAS, the Bank has agreed to act as the Client's agent for such
purpose pursuant to the terms hereof;
NOW, THEREFORE, for and in consideration of the mutual promises set
forth herein, the parties hereto agree as follows:
1. Definitions.
Whenever used in this Agreement, unless the context otherwise requires,
the following words shall have the meanings set forth below. Capitalized terms
used but not defined herein shall have the meaning assigned to them in the
applicable Securities Borrowing Agreement.
1.1 "Account" shall mean the custodial account or accounts established
and maintained by the Bank on behalf of each Lender for the safekeeping of
securities and monies received by the Bank from time to time.
1.2 "Approved Investment" shall mean any type of security,
participation or interest in property in which Cash Collateral may be invested
or reinvested, as set forth on Schedule I hereto (which may be amended from time
to time to add additional Approved Investments with the written consent of the
Bank and the Client, or to delete any Approved Investment at the written
direction of the Client).
1.3 "Authorized Person" shall be any officer of the Client and any
other person, whether or not any such person is an officer or employee of the
Client, duly authorized by corporate resolutions of the Board of Directors or
Trustees, as the case may be, of the Client to give Oral and/or Written
Instructions on behalf of the Client, such persons to be designated in a
Certificate which contains a specimen signature of such person.
1.4 "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for receiving and delivering Government Securities (as defined
herein), its successors and nominees.
1.5 "Borrower" shall mean any entity named on Schedule II hereto (as
such Schedule may be amended from time to time to add additional Borrowers with
the written consent of the Bank and the Client, or to delete any Borrower at the
written direction of the Client). The Client will promptly notify the Bank if at
any time any Borrower is or becomes or potential Borrower is an "affiliated
person," as defined in the 1940 Act, of any Lender, or an affiliated person of
such affiliated person.
If the Client provides such notice, the Bank shall take appropriate
action to prevent the applicable Lenders from engaging in a Loan with any
Borrower so identified by the Client. The Bank shall be entitled to rely upon
such notices from the Client (and the absence of such notices) in its operation
of the securities lending program.
1.6 "Cash Collateral" shall mean either fed funds or New York Clearing
House funds, as applicable for a particular loan of Securities.
1.7 "Certificate" shall mean any notice, instruction, schedule or other
instrument in writing, authorized or required by this Agreement to be given to
the Bank, which is actually received by the Bank and signed on behalf of the
Client by an Authorized Person or a person reasonably believed by the Bank to be
an Authorized Person.
1.8 "Collateral" shall mean Cash Collateral unless the Bank and the
Client have agreed in writing to additional collateral, including Government
Securities and Letters of Credit.
1.9 "Collateral Account" shall mean a segregated account established
and maintained by the Bank for the purpose of holding Collateral and Approved
Investments, interest, dividends and other payments and distributions received
with respect to Collateral and Approved Investments ("Distributions"), and any
Securities Loan Fee paid by Borrowers in connection with Securities loans
hereunder.
1.10 "Depository" shall mean the Depository Trust Company,
Participant's Trust Company, Euroclear, and any other securities depository or
clearing agency (and their respective successors and nominees) authorized under
applicable law or regulation to act as a securities depository or clearing
agency, including any foreign securities depository approved by the Client.
1.11 "Government Security" shall mean book-entry Treasury securities
(as defined in Subpart 0 of Treasury Department Circular No. 300, 31 C.F.R. 306)
and any other securities issued or fully guaranteed by the United States
government or any agency or instrumentality of the United States government.
1.12 "Letter of Credit" shall mean a clean, unconditional and
irrevocable letter of credit in favor of the Bank as agent for the Lender issued
by a bank named on Schedule III hereto as may be amended from time to time to
add additional banks by the written consent of the parties hereto, or to delete
any Bank at the written direction of the Client.
1.13 "Oral Instructions" shall mean verbal instructions actually
received by the Bank from an Authorized Person or from a person reasonably
believed by the Bank to be an Authorized Person.
1.14 "Rebate" shall mean the amount payable by the Lender to a Borrower
(as set forth in a Receipt) in connection with Securities loans at any time
collateralized by Cash Collateral.
1.15 "Receipt" shall mean an advice or confirmation setting forth the
terms of a particular loan of Securities hereunder, including, without
limitation, the Collateral with respect to such loan.
1.16 "Securities Borrowing Agreement" shall mean with, respect to any
Borrower, the agreement pursuant to which the Bank lends securities on behalf of
its customers (including the Lender) to such Borrower as may be amended from
time to time.
1.17 "Securities Loan Fee" shall mean the amount payable by a Borrower
to the Bank, as agent for the Lender, pursuant to the applicable Securities
Borrowing Agreement in connection with Securities loans, if any, collateralized
by Collateral other than Cash Collateral.
1.18 "Security" shall mean any Government Securities, non-U.S.
securities, common stock and other equity securities, bonds, debentures,
corporate debt securities, notes, mortgages or other obligations, and any
certificates, warrants or other instruments representing rights to receive,
purchase, or subscribe for the same, or evidencing or representing any other
rights or interests therein, which are available for lending pursuant to Section
2.2 of this Agreement.
1.19 "Written Instructions" shall mean written communications actually
received by the Bank from an Authorized Person or from a person reasonably
believed by the Bank to be an Authorized Person by letter, memorandum, telegram,
cable, telex, telecopy facsimile, computer, video (CRT) terminal or other
on-line system, or
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any other method whereby the Bank is able to verify with a reasonable degree of
certainty the identity of the sender of such communications or the sender is
required to provide a password or other identification code.
2. Appointment; Scope of Agency Authority.
2.1 Appointment. The Client hereby appoints the Bank as its agent to
lend Securities in the Account to Borrowers from time to time as hereinafter set
forth, and the Bank hereby accepts appointment as such agent and agrees to so
act.
2.2 Securities Subject to Lending. Unless the Client provides otherwise
in writing to the Bank, all Securities maintained in the Account shall be
available for lending pursuant to this Agreement.
2.3 Securities Borrowing Agreement. The Lender hereby acknowledges
receipt of a Securities Borrowing Agreement with respect to each Borrower. The
Bank is hereby authorized to lend Securities in the Account to Borrowers
pursuant to such agreements. The Bank shall provide the Client with any proposed
material amendments or changes to such agreements prior to their effectiveness.
The Client may elect, without penalty, to terminate any Borrower from Schedule
II if it opposes the change. Attached hereto as Exhibit A are the forms of
Securities Borrowing Agreements in effect between the Bank and the Borrowers as
of the date hereof.
2.4 Loan Opportunities. The Client on behalf of each Lender
acknowledges and agrees that the Bank shall have the right to decline to make
any loans of Securities under any Securities Borrowing Agreement and to
discontinue lending under any Securities Borrowing Agreement in its sole
discretion and without notice to the Client. The Client on behalf of each Lender
agrees that it shall have no claim against the Bank based on, or relating to,
loans made for other customers or for the Bank's own account, or loan
opportunities refused hereunder, whether or not the Bank has made fewer or more
loans for any other customer or for the Bank's own account than for the Lender,
and whether or not any loan for another customer or for the Bank's own account,
or the opportunity refused, could have resulted in loans made hereunder.
2.5 Use of Book-Entry System and Depositories. The Client on behalf of
each Lender hereby authorizes the Bank on a continuous and on-going basis, to
deposit in the Book-Entry System and any Depositories all Securities eligible
for deposit therein and to utilize the Book-Entry System and Depositories to the
extent possible in connection with its receipt and delivery of Securities,
Collateral, Approved Investments and monies under this Agreement. Where
Securities, Collateral (other than Cash Collateral) and Approved Investments
eligible for deposit in the Book-Entry System or a Depository are transferred to
the Account, the Bank shall identify as belonging to the Lender a quantity of
securities in a fungible bulk of securities shown on the Bank's account on the
books of the Book-Entry System or the applicable Depository. Securities,
Collateral and Approved Investments deposited in the Book-Entry System or a
Deposit will be represented in accounts which include only assets held by the
Bank for customers, including but not limited to accounts in which the Bank acts
in a fiduciary or agency capacity.
3. Representations and Warranties.
3.1 Client's Representations. The Client hereby represents and warrants
to the Bank, which representations and warranties shall be deemed to be
continuing and to be reaffirmed on any day that a Securities loan hereunder is
outstanding, that:
(a) This Agreement has been approved by the Board of Trustees
of the Client and the Approved Investments have been and will be annually
determined to be in the best interests of shareholders of each Lender; this
Agreement is, and each Securities loan and Approved Investment will be, legally
and validly entered into by the Client on behalf of each Lender, does not, and
will not, violate any statute, regulation, rule, order or, judgment binding on
the Lender, or any provision of the Client's charter or by-laws, or any
agreement binding on the Client or affecting its property, and is enforceable
against the Client and each Lender in accordance with its terms, except as may
be limited by bankruptcy, insolvency or similar laws, or by equitable principles
relating to or limiting creditors rights generally;
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(b) The person executing this Agreement and all Authorized
Persons acting on behalf of the Client or any Lender has and have been duly and
properly authorized to do so;
(c) Each Lender is lending Securities as principal for its own
account and it will not transfer, assign or encumber its interest in, or rights
with respect to, any securities loans;
(d) All Securities subject to lending pursuant to Section 2.2
of this Agreement are free and clear of all liens, claims, security interests
and encumbrances, no such Security subject to lending has been sold and the
Client on behalf of each Lender has no present intention to sell any of the
Securities subject to lending. The Client shall promptly delete from the list
referenced in Section 2.2 hereof any and all Securities which are no longer
subject to the representations contained in this sub-paragraph (d).
3.2 Bank's Representations The Bank hereby represents and warrants to
the Client, which representations and warranties shall be deemed to be
continuing and to be reaffirmed on any day that a Securities loan hereunder is
outstanding, that:
(a) This Agreement is legally and validly entered into by the
Bank, does not and will not, violate any statute, regulation, rule, order or,
judgment binding on the Bank, or any provision of the Bank's charter or by-laws,
or any agreement binding on the Bank or affecting its property, and is
enforceable against the Bank in accordance with its terms, except as may be
limited by bankruptcy, insolvency or similar laws, or by equitable principles
relating to or limiting creditors rights generally; and
(b) The person executing this Agreement on behalf of the Bank
and all persons acting on the Bank's behalf pursuant to this Agreement have been
duly and properly authorized to do so.
(c) It will comply with all laws, rules and regulations
applicable to the securities lending transactions contemplated by this
Agreement.
4. Securities Lending Transactions.
4.l Loan Initiation. From time to time the Bank may lend Securities to
Borrowers and deliver such Securities against receipt of Collateral in
accordance with the applicable Securities Borrowing Agreement. The Bank shall
deliver to the Lender a Receipt in connection with each loan made hereunder,
prior to settlement of such loan. If instructed by the Client in writing, Bank
will refrain from lending a particular security or from making loans to a
particular Borrower.
4.2 Receipt of Collateral; Approved Investments.
(a) For each loan hereunder the Bank shall (i) initially
receive Cash Collateral equivalent to no less than 102% (105% in the case of
loans of foreign securities denominated in non-U.S. dollars) of the market value
of the securities lent and (ii) thereafter shall request on a daily basis as
necessary additional Collateral, which for Cash Collateral shall be an amount
such that the value of the Cash Collateral in no event be equivalent to less
than 100% of the market value of the Securities lent (as determined in
accordance with the applicable Securities Borrowing Agreement), and the Bank is
hereby authorized and directed, without obtaining any further approval from the
Lender, to invest and reinvest all or substantially all of the Cash Collateral
received in any Approved Investment. The Bank shall credit all Collateral,
Approved Investments and Distributions received with respect to Collateral and
Approved Investments to the Collateral Account and xxxx its books and records to
identify the Lender's ownership thereof as appropriate.
(b) All Approved Investments shall be for the account and risk
of the Lender. To the extent any loss arising out of Approved Investments
results in a deficiency in the amount of Collateral available for return to a
Borrower pursuant to the Securities Borrowing Agreement, the Lender agrees to
pay the Bank on demand cash in an amount equal to such deficiency.
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(c) Except as otherwise provided herein, all Collateral,
Approved Investments and Distributions credited to the Collateral Account shall
be controlled by, and subject only to the instructions of, the Bank, and the
Bank shall not be required to comply with any instructions of the Lender with
respect to the same.
4.3 Distributions on Loaned Securities. Except as provided in the next
sentence, all interests, dividends, and other distributions paid with respect to
loaned Securities shall be credited to the Lender's account on the date such
amounts are delivered by the Borrower to the Bank. 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 applicable loan (and shall be considered to constitute
loaned Securities) as of the date such non-cash distribution is declared payable
whether or not it has been received by the Borrower, provided that any such
addition shall be conditional upon the actual receipt of such non-cash
distribution and may be reversed by the Bank to the extent that such non-cash
distribution is not received.
4.4 Marks to Market. The Bank shall on each Business Day xxxx to market
in U.S. dollars the value of all Securities loaned hereunder and accordingly
receive and release Collateral in accordance with the applicable Securities
Borrowing Agreement.
4.5 Collateral Substitutions. The Bank shall accept substitutions of
Collateral in accordance with the applicable Securities Borrowing Agreement and
shall credit all such substitutions to the Collateral Account, provided however
that unless other Collateral has been mutually agreed upon in writing by the
Bank and the Client, no other Collateral may be substituted for Cash Collateral.
The Bank will not accept Letters of Credit as Collateral hereunder from any
Borrower unless the Securities Borrowing Agreement with such Borrower provides
that in the event of a material adverse change in the financial condition of
any bank issuing a Letter of Credit that serves as Collateral thereunder, the
Borrower will be required to immediately substitute Cash Collateral or
appropriate securities Collateral for such Letter of Credit.
4.6 Termination of Loans. The Bank shall terminate any Securities loan
to a Borrower in accordance with the applicable Securities Borrowing Agreement
as soon as practicable after:
(a) receipt by the Bank of a notice of termination pursuant to
the Securities Borrowing Agreement;
(b) receipt by the Bank of Written Instructions instructing it
to terminate a Securities loan; provided that the Client may require that each
Security must be returned to the Lender by no later than the date which is the
standard settlement date for trades of such Security entered into on the date of
such Written Instruction;
(c) receipt by the Bank of Written Instructions deleting the
Borrower to whom such loan was made from Schedule II hereto;
(d) upon the Bank's becoming aware of the occurrence of any
default pursuant to the applicable Securities Borrowing Agreement requiring
termination of such loan; or
(e) whenever the Bank, in its sole discretion, elects to
terminate such loan.
4.7 Securities Loan Fee. The Bank shall receive any applicable
Securities Loan Fee paid by Borrowers pursuant to the Securities Borrowing
Agreement and credit all such amounts received to the Collateral Account.
4.8 The Borrower's Financial Condition. The Bank has delivered to the
Lender each of the Borrower's most recent statements that have been made
available to the Bank pursuant to the Securities Borrowing Agreements. The Bank
shall promptly deliver to the Client all statements and financial information
subsequently delivered to the Bank and required to be furnished to the Bank
under the Securities Borrowing Agreements.
4.9 Transfer Taxes and Necessary Costs. All transfer taxes and
necessary costs with respect to the transfer of the loaned Securities by the
Lender to the Borrower and the Borrower to the Lender upon the termination of
the loan shall be paid by the Borrower in accordance with the applicable
Securities Borrowing Agreement.
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4.10 Borrower Default Indemnification. If, at the time of a default by
a Borrower with respect to a loan hereunder (within the meaning of the
applicable Securities Borrowing Agreement), some or all of the loaned Securities
under such loan have not been returned by the Borrower, subject to the terms of
this Agreement, the Bank shall indemnify Lender against the failure of the
Borrower as follows:
(a) The Bank shall purchase a number of Securities of the same
issuer and class as the loaned Securities equal to the number of such unreturned
loaned Securities ("Replacement Securities"), to the extent that such
Replacement Securities are available on the open market. Such Replacement
Securities shall be purchased by applying the proceeds of the Collateral with
respect to such loan to the purchase of such Replacement Securities. 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 the Bank's expense.
The cost of the purchase of Replacement Securities shall include all costs, fees
and expenses (including, without limitation, attorneys' fees) incurred in
connection with any purchase of Replacement Securities; and the value of
proceeds of the Collateral shall be calculated less any costs, fees and expenses
(including, without limitation, attorneys' fees) incurred in connection with
selling or otherwise realizing on such Collateral.
(b) If and to the extent that it is impossible or commercially
impracticable for the Bank to purchase Replacement Securities pursuant to
Paragraph (a) hereof, the Bank shall credit to the Lender's account an amount
equal to the Market Value of the unreturned loaned Securities for which
Replacement Securities are not purchased, determined as of the close of trading
on the business day that the Bank as agent of the Lender, in its sole
discretion, either applies the proceeds of any Collateral with respect to such
loan to the purchase of any Replacement Securities or elects to treat any loaned
Securities as having been purchased by the Borrower, pursuant to the applicable
Securities Borrowing Agreement.
(c) Any credits required under Paragraph (b) 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 Paragraph (b), such credits shall be made at the
Bank's expense.
(d) The Bank shall be subrogated to all rights of Lender
against Borrower in respect of any amounts paid by Bank pursuant to the
provisions of this Section; provided, however, that until such time as all
obligations of Borrower to Lender have been irrevocably paid in full, the Bank
shall not be entitled to take action to enforce such rights and any amounts
received by or distributable to the Bank on account of such rights shall be paid
or distributed to Lender.
4.11 Bank's Obligation. Except as specifically set forth herein, or in
any applicable Securities Borrowing Agreement, the Bank shall have no duty or
obligation to take action to effect payment by a Borrower of any amounts owed by
such Borrower pursuant to the Securities Borrowing Agreement.
5. Concerning the Bank.
5.1 Standard of Care: Indemnification.
(a) It is expressly understood and agreed that in exercising
its rights and performing its obligations hereunder, the Bank owes no fiduciary
duty to the Lender. The Bank shall not be liable for any costs, expenses,
damages, liabilities or claims (including reasonable attorneys and accountants
fees) incurred by the Lender, except to the extent those costs, expenses,
damages, liabilities or claims result from the Bank's material breach of this
Agreement or the Bank's negligence, willful misconduct, bad faith, or reckless
disregard of its obligations and duties hereunder.
Neither the Client nor the Bank shall have any obligation hereunder for
costs, expenses, damages, liabilities or claims (including reasonable attorneys
and accountants fees), which are sustained or incurred by reason of any action
or inaction by the Book-Entry System or any Depository or their respective
successors or nominees. In no
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event shall either party be liable to the other for special, punitive or
consequential damages, arising under or in connection with this Agreement, even
if previously informed of the possibility of such damages.
(b) The Client on behalf of each Lender agrees to indemnify
the Bank and to hold it harmless from and against any and all costs, expenses,
damages, liabilities or claims (including reasonable fees and expenses of
counsel) which the Bank may sustain or incur or which may be asserted against
the Bank by reason of or as a result of any action taken or omitted by the Bank
in connection with or arising out of the Bank's operating under and in
compliance with this Agreement, except those costs, expenses, damages,
liabilities or claims arising out of the Bank's negligence, bad faith, willful
misconduct, or reckless disregard of its obligations and duties hereunder.
Actions taken or omitted in reasonable reliance upon Oral or Written
Instructions, any Certificate, or upon any information, order, indenture, stock
certificate, power of attorney, assignment, affidavit or other instrument
reasonably believed by the Bank to be genuine or bearing the signature of a
person or persons reasonably believed by the Bank to be genuine or bearing the
signature of a person or persons reasonably believed to be authorized to sign,
countersign or execute the same, shall be presumed to have been taken or omitted
in good faith.
(c) The Bank shall indemnify and hold harmless the Lender, its
Board of Trustees and its agents and Barclays Global Fund Advisors from any and
all loss, liability, costs, damages, actions, and claims ("Loss") to the extent
that any such Loss arises out of the material breach of this Agreement by or
negligent acts or omissions or willful misconduct of the Bank, its officers,
directors or employees or any of its agents or subcustodians in connection with
the securities lending activities undertaken pursuant to this Agreement,
provided that the Bank's indemnification obligation with respect to the acts or
omissions of its subcustodians shall not exceed the indemnification provided by
the applicable subcustodian to the Bank.
5.2 No Obligation to Inquire. Without limiting the generality of the
foregoing, the Bank shall be under no obligation to inquire into, and shall not
be liable for, the validity of the issue of any Securities at any time held in
the Account or Approved Investments held in the Collateral Account.
5.3 Advances, Overdrafts and Indebtedness; Security Interest.
(a) The Bank may, in its sole discretion, (i) advance funds on
behalf of the Lender in order to pay to Borrowers any Rebates with respect to
fixed income securities loans, (ii) with the prior approval of the Client on
behalf of a Lender, advance funds in order to pay to Borrowers any Rebates with
respect to equity securities loans or to return to Borrowers Cash Collateral to
which they are entitled pursuant to the Securities Borrowing Agreement (any such
advance listed in clause (i) of (ii) an "Approved Advance"), or (iii) without
prior approval of the Client on behalf of a Lender, advance funds in order to
pay to Borrowers any Rebates with respect to equity securities loans or to
return to Borrowers Cash Collateral to which they are entitled pursuant to the
Securities Borrowing Agreement (any such advance listed in this clause (iii) a
"Bank Advance") (Approved Advances and Bank Advances hereinafter referred to
collectively as "Advances"). The Bank may also, in its sole discretion, as a
matter of bookkeeping convenience, credit the Account with interest, dividends
or other distributions payable on Securities prior to its actual receipt of
final payment therefor, with the prior approval of the Client on behalf of a
Lender (an "Approved Credit"), or without the prior approval of the Client on
behalf of a Lender (a "Bank Credit") (Approved Credits and Bank Credits
hereinafter referred to collectively as "Credits"). The Client of behalf of each
Lender agrees that such Credits may also be reflected on its books, and
otherwise, as "immediately available" or "same day" funds or by some similar
characterization. Notwithstanding any such Credit or characterization, all
Credits shall be conditional upon the Bank's actual receipt of final payment and
may be reversed by the Bank to the extent that final payment is not received. If
the Bank, in its sole discretion, permits a Lender to use funds credited to the
Account prior to receipt by the Bank of final payment thereof, such Lender shall
nonetheless, continue to bear the risk of, and liability for, the Bank's
non-receipt of final payment in full.
(b) The Client agrees that each Lender shall repay the Bank on
demand the amount of any Advance or Credit described in Section 3(a) above plus
accrued interest at a rate per annum (based on a 360-day year for the actual
number of days involved) as agreed to by the parties from time to time. In order
to secure repayment of any Approved Advance or Approved Credit arising
hereunder, the Client on behalf of each Lender hereby agrees that the Bank shall
have a continuing lien and security interest against each Lender, to the extent
of any such Approved Advance, Approved Credit or interest thereon owing, in and
to all assets now or hereafter held
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in the Account and the Collateral Account of such Lender, which is then in the
Bank's possession or control or in the possession or control of any third party
acting on the Bank's behalf and, without limiting the foregoing, the Bank shall
be entitled to all the rights and remedies of a pledgee under common law and a
secured party under the New York Uniform Commercial Code and/or any other
applicable laws and/or regulations as then in effect. The Bank shall be entitled
to charge any Advance, Credit or interest thereon owing against any balance of
account standing to the credit of a Lender on the Bank's books and against any
cash in the Account of such Lender.
(c) The rights of the Bank and the obligations of the Lender
under this Section are absolute and unconditional whether or not the Bank would
be entitled to indemnification pursuant to Section 5.l(b) hereof.
(d) For all purposes of this Agreement, payment with respect
to a transaction will not be "final" until the Bank shall have received
immediately available funds which under applicable law or rule are irreversible,
which are not subject to any security interest, levy or other encumbrance, and
which are specifically applicable, or deemed by the Bank to be specifically
applicable, to such transaction. A debit by the Bank to any other account of the
Lender maintained by the Bank or to an account of any third party to whom or for
whose account Securities have been delivered shall not constitute final payment
to the extent that such debit creates an overdraft or does not otherwise result
in the receipt by the Bank of immediately available, irreversible and
unencumbered funds.
5.4 Advice of Counsel. The Bank may, with respect to questions of law,
apply for and obtain the advice and opinion of counsel which may be counsel to
the Client, provided that the foregoing shall not be deemed to be a waiver by
the client of any conflict of such counsel.
5.5 No Collection Obligations. The Bank shall be under no obligation or
duty to take action to effect collection of any amounts payable in respect of
Securities or Approved Investments if such Securities or Approved Investments
are in default, or if payment is refused after due demand and presentation.
5.6 Pricing Methods. The Bank is authorized to utilize any recognized
pricing information service or any other means of valuation specified in the
applicable Securities Borrowing Agreement ("Pricing Methods") in order to
perform its valuation responsibilities with respect to loaned Securities,
Collateral and Approved Investments, and the Lender agrees to hold the Bank
harmless from and against any loss or damage suffered or incurred as a result of
errors or omissions of any such Pricing Methods.
5.7 Agent's Fee.
(a) In connection with each Securities loan hereunder, the
Lender shall pay to the Bank a fee as specified below:
(i) If the value of Securities maintained in the Accounts, in the
aggregate, is less than or equal to $15 billion, Bank shall
receive 40% of the fee basis (the "Fee Basis") formed by (i) the
net realized income derived from the investment of Cash
Collateral, plus (ii) any Securities Loan Fee paid by the
Borrower, minus (iii) any Rebate paid to the Borrower, or
(ii) If the value of the Securities maintained in the Accounts, in the
aggregate, exceeds $15 billion, the bank shall receive a fee
equal to the product of the following fraction (the "Blended
Rate") multiplied by the Fee Basis:
{[(1 / (Value of assets in Accounts / 15,000,000,000)] x .40} +
({1 - [1 / (Value of assets in Accounts / 15,000,000,000)]} x .30)
(b) The Bank is authorized on a monthly basis to charge the fee
owed by the Lender under this paragraph against the applicable Collateral
Account. Such fee shall be charged and paid at the end of each month. The
Blended Rate shall be calculated on the first business day of each month based
on the value of the Securities maintained in the Accounts as of the last
business day of the preceding month.
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(c) Examples illustrating the calculation of fees to be paid
by Lender to the Bank appear in Exhibit 1 hereto.
5.8 Reliance On Certificates and Instructions. The Bank shall be
entitled to rely upon any Certificate, any information contained on any Schedule
hereto as may be amended in accordance with the terms hereof, and Written or
Oral Instruction actually received by the Bank and reasonably believed by the
Bank to be duly authorized and delivered. The Client agrees to forward to the
Bank Written Instructions confirming Oral Instructions in such manner so that
such Written Instructions are received by the Bank by the close of business of
the same day that such Oral Instructions are given to the Bank. The Client
agrees that the fact that such confirming Written Instructions are not received
on a timely basis or that contrary instructions are received by the Bank shall
in no way affect the validity or enforceability of the transactions authorized
by the Client. The Bank will use reasonable efforts to report any subsequently
received contrary instructions. In this regard, the records of the Bank shall be
presumed to reflect accurately any Oral Instructions given by an Authorized
Person or a person reasonably believed by the Bank to be an Authorized Person.
5.9 Disclosure of Account Information. The Bank may not disclose or
supply any information regarding the Account unless required by any law or
governmental regulation now or hereafter in effect or requested to do so by
Client; provided that Bank may disclose or supply information regarding the
Account as necessary in the sole discretion of the Bank in order to facilitate,
effect or continue any loans hereunder.
5.10 Statements. The Bank will at least daily furnish the Lender with
statements relating to loans hereunder.
5.11 Force Majeure. Notwithstanding anything to the contrary in this
Agreement, in no event shall a party to this Agreement be liable to the other
party or any third party for losses resulting from (i) any acts of God, fires,
floods, or other disturbances of nature, epidemics, strikes, riots,
nationalization, expropriation, currency restrictions, or insurrection, and (ii)
other happenings or events beyond the reasonable control or anticipation of the
party effected, provided that (A) the effected party has in place appropriate
business resumption procedures, systems and facilities and (B) the effected
party uses its best efforts to avoid or remove the cause of such losses.
5.12 No Implied Duties.
(a) The Bank shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set forth
in this Agreement and in the applicable Securities Borrowing Agreement, and no
covenant or obligation shall be implied against the Bank in connection with this
Agreement.
(b) Neither the Client nor any Lender shall have any duties or
responsibilities whatsoever except such duties and responsibilities as are
specifically set forth in this Agreement, and no covenant or obligation shall be
implied against the Client or any Lender in connection with this Agreement.
6. Termination. This Agreement may be terminated at any time by either party
upon delivery to the other party of a written notice specifying the date of such
termination, which shall be not less than 60 days after the date of receipt of
such notice. Notwithstanding any such notice, this Agreement shall continue in
full force and effect with respect to all loans of Securities outstanding on the
date of termination.
7. Miscellaneous.
7.1 Exclusivity. The Client agrees that it shall not enter into any
other agreement with any third party whereby such third party is permitted to
make loans on behalf of any Lender of any securities held by the Bank in the
Account from time to time.
7.2 Certificates. The Client agrees to furnish to the Bank a new
Certificate in the event that any then present Authorized Person ceases to be an
Authorized Person or in the event that any other Authorized Persons are
appointed and authorized. Until such new Certificate is received, the Bank shall
be fully protected in acting upon Oral Instructions or signatures of the present
Authorized Persons.
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7.3 Notices.
(a) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Bank, shall be sufficiently given
if addressed to the Bank and received by it at its offices at 000 Xxxxxxxxx
Xxxxxx, X.X. Xxx 0000, Xxxxxx, Xxxxxxxxxxxxx 00000-0000, Attention: Securities
Lending Department, with a copy to: Xxxx X. Xxxxx, General Counsel or at such
other place as the Bank may from time to time designate in writing.
(b) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Client shall be sufficiently given
if addressed to the Lender and mailed or delivered to iShares, Inc., Fund
Administration, c/o Barclays Global Fund Advisors, 00 Xxxxxxx Xxxxxx, Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000,xxxx a copy to: Legal Department, or at such other
place as the Client may from time to time designate in writing.
7.4 Cumulative Rights and No Waiver. Each and every right granted to a
party hereunder or under any other document delivered hereunder or in connection
herewith, or allowed it by law or equity, shall be cumulative and may be
exercised from time to time. No failure on the part of a party to exercise, and
no delay in exercising, any right will operate as a waiver thereof, nor will any
single or partial exercise by a party of any right preclude any other or future
exercise thereof or the exercise of any other right.
7.5 Severability. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or obligations
shall not in any way be affected or impaired thereby, and if any provision is
inapplicable to any person or circumstances, it shall nevertheless remain
applicable to all other persons and circumstances.
7.6 Amendments. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties.
7.7 Successors and Assigns. This Agreement shall extend to and shall be
binding upon the parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by either party
without the written consent of the other.
7.8 Governing Law; Consent to Jurisdiction. This Agreement shall be
construed in accordance with the laws of the State of New York without regard to
conflict of laws principles thereof.
7.9 No Third Party Beneficiaries. In performing hereunder, the Bank is
acting solely on behalf of the Client and, except as specifically provided
herein, no contractual or service relationship shall be deemed to be established
hereby between the Bank and any other person.
7.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
7.11 SIPA Notice. THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION
ACT OF 1970 MAY NOT PROTECT THE LENDER WITH RESPECT TO LOANS HEREUNDER AND,
THEREFORE, THE COLLATERAL DELIVERED TO THE BANK AS AGENT FOR THE LENDER MAY
CONSTITUTE THE ONLY SOURCE OF SATISFACTION OF A BORROWER'S OBLIGATION IN THE
EVENT SUCH BORROWER FAILS TO RETURN THE LOANED SECURITIES.
7.12 Survival of Indemnification. The indemnifications provided by a
party hereunder shall be a continuing obligation of such party, its successors
and assigns, notwithstanding the termination of any loans hereunder or of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officers, thereunto duly authorized and
their respective corporate seals to be hereunto affixed, as of the day and year
first above written.
iSHARES, INC.
By: /s/ Xxxxxxx Xxxxxx
------------------
Name: Xxxxxxx Xxxxxx
Title: Secretary and Treasurer
INVESTORS BANK & TRUST COMPANY
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
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Schedule A
Lenders
Schedule IV
Securities Lending Guidelines
1. The Bank shall only lend securities to "Approved Borrowers" as
designated by Barclays Global Fund Advisors (BGFA).
2. The Bank will make all loans versus acceptable collateral.
3. Collateral may include US Dollars (USD), Letters of Credit (with Banks
approved by BGFA), or US Government Securities as set forth on the
Approved Investment Schedule (Schedule I hereto).
4. The Bank will ensure that each loan will be initially collateralized at
102% for USD-denominated securities and 105% for securities not
denominated in USD, and will request additional collateral on a daily
basis in the event the collateral coverage falls below the applicable
standard.
5. The Bank shall only invest the cash collateral in accordance with the
"Approved Investment" schedule as designated by BGFA.
6. The Bank shall terminate securities loans upon the sale of securities,
upon receipt of written instructions from the Lender, or as otherwise
provided in the Agreement.
7. The Bank shall disburse rebates to the Borrowers in accordance with
this Agreement.
8. The Bank shall collect all dividends, interest payments and other
income on loaned securities.
9. The Bank shall provide periodic reporting to BGFA detailing the
securities on loan, collateral, and cash reinvestment.
Exhibit 1
Fees
The following two examples illustrate the calculation of fees to be paid by
Lender to the Bank:
Example A: Value of Securities in Account as of March 31 = $15,000,000,000
Value of Fee Basis for the month of April = $1,000,000
Fee to be paid to Bank on April 30 = .40 x $1,000,000 = $400,000
Example B: Value of Securities in Account as of March 31 = $30,000,000,000
Value of Fee Basis for the month of April = $2,000,000
Blended Rate = {[1/(30,000,000,000/15,000,000,000)] x .40} +
({1- (1/(30,000,000,000/15,000,000,000)]} x .30) =
.20 + .15 = .35
Fee to be paid to Bank on April 30 = $2,000,000 x .35 = $750,000
