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Exhibit 99.b.9.b
SECURITIES LENDING AUTHORIZATION AGREEMENT
Between
AMERICAN AADVANTAGE MILEAGE FUND
and
STATE STREET BANK AND TRUST COMPANY
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TABLE OF CONTENTS
PAGE
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. APPOINTMENT OF STATE STREET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. SECURITIES TO BE LOANED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. BORROWERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
5. SECURITIES LOAN AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6. LOANS OF AVAILABLE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
7. DISTRIBUTIONS ON AND VOTING RIGHTS WITH RESPECT TO
LOANED SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8. COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
9. INVESTMENT OF CASH COLLATERAL AND COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
10. FEE DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
11. RECORDKEEPING AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
12. STANDARD OF CARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
13. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
14. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
15. CONTINUING AGREEMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
16. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
17. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
18. SECURITIES INVESTORS PROTECTION ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
19. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
20. MODIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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EXHIBITS AND SCHEDULES
EXHIBIT 4.1
EXHIBIT 4.2
EXHIBIT 5.1
EXHIBIT 5.2
EXHIBIT 5.3
SCHEDULE A
SCHEDULE B
SCHEDULE 8.1
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SECURITIES LENDING AUTHORIZATION AGREEMENT
Agreement dated the ____ day of ______________, 19__ between AMERICAN
AADVANTAGE MILEAGE FUNDS, a registered management investment company organized
and existing under the laws of Massachusetts (the "Client"), and STATE STREET
BANK AND TRUST COMPANY, a Massachusetts trust company ("State Street"), setting
forth the terms and conditions under which State Street is authorized to act on
behalf of the Client with respect to the lending of certain securities of the
Client held by State Street as trustee, agent or custodian.
This Agreement shall constitute a separate and discrete agreement
between State Street and each of the series of shares of the Client listed on
Schedule B to this Agreement, as it may be amended by the parties, and no
series of shares of the Client shall be responsible or liable for any of the
obligations of any other series of shares of the Client under this Agreement or
otherwise.
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) "Available Securities" means the securities of the Client
that are available for Loans pursuant to Section 3.
(b) "Borrower" means any of the entities to which Available
Securities may be loaned under a Securities Loan Agreement, as described in
Section 4.
(c) "Collateral" means collateral delivered by a Borrower to
secure its obligations under a Securities Loan Agreement.
(d) "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.
(e) "Loan" means a loan of Available Securities to a
Borrower.
(f) "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
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deemed to become a Loaned Security in substitution for the former Loaned
Security for which such exchange was made.
(g) "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.
(h) "Securities Loan Agreement" means the agreement between a
Borrower and State Street (on behalf of the Client) that governs Loans, as
described in Section 5.
(i) "Replacement Securities" means securities of the same
issuer, class and denomination as Loaned Securities.
2. Appointment of State Street. The Client 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. The Client agrees that State
Street is acting as a fully disclosed agent and not as principal in connection
with the securities lending program. State Street may take action as agent of
the Client on an undisclosed or a disclosed basis.
3. Securities to be Loaned. State Street acts or will act as agent,
trustee or custodian of certain securities owned by the Client. All of the
Client's securities held by State Street as agent, trustee or custodian for
each portfolio as set forth on Schedule B hereto, shall be subject to this
securities lending program and constitute Available Securities hereunder,
except those securities which the Client or the Investment Manager specifically
identifies in notices to State Street as not being Available Securities.
Notwithstanding the foregoing, State Street shall loan no more than thirty
three and one third percent (33 1/3%) of the market value of each portfolio's
total assets, including the aggregate value of all Loans hereunder to Borrowers
with respect to each portfolio. In the absence of any such notice identifying
specific securities, State Street shall have no authority or responsibility for
determining whether any of the Client's securities should be excluded from the
lending program.
4. Borrowers. The Available Securities may be loaned to any Borrower
identified on the Schedule of Borrowers, as such Schedule may be modified from
time to time by State Street and Client, including without limitation, the
Financial Markets Group of State Street; provided, however, if Available
Securities are loaned to the Financial Markets Group, 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 form time to time in accordance with the provisions hereof
(hereinafter, the "State Street Securities Loan Agreement"). The form of the
State Street Securities Loan Agreement may
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be modified by State Street from time to time, without the consent of the
Client, in order to comply with the requirements of law or any regulatory
authority having jurisdiction over State Street, the Client or the securities
lending program or in any other manner that is not material and adverse to the
interests of the Client.
The Client 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. Client represents that the power granted herein to State Street,
as agent, to lend U.S. Securities owned by Client (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.
The Client further acknowledges that it has granted State Street the
power to effect securities lending transactions with the Financial Markets
Group of 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 Client'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 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 the Financial Markets Group,
State Street hereby covenants and agrees for the benefit of the Client that it
has adopted and implemented procedural safeguards to 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 State
Street to the Financial Markets Group.
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In the event the Client approves lending to borrowers resident in the
United Kingdom, the Client shall complete Part 1 of the document known as a
"MOD-2 form," which is attached hereto as Exhibit 4.2.
In the event that securities lending activity is undertaken through
its London office, State Street becomes subject to additional regulation in the
UK, and State Street is obliged to notify the you of the following matters:
i. State Street shall make available to you established procedures in
accordance with the requirements of the Securities and Futures
Authority for the effective consideration of complaints concerning
State Street's activities carried on in the UK.
ii. Where a liability in one currency is to be matched by an asset in a
different currency, or where an investment transaction relates to an
investment denominated in a currency other than sterling, a movement
of exchange rates may have a separate effect, favorable or
unfavorable, on the gain or loss which would otherwise be experienced
on the investment.
iii. State Street or an affiliate may have an interest that is material to
the investment or transaction concerned and neither State Street nor
any such affiliate shall be obliged to disclose such interest or
account to you for any profits or benefits made or derived by it or
any of its associates from any such transaction.
iv. Any assets which State Street holds in the form of money shall not be
treated by State Street as the Clients' Money as defined by The
Financial Services (Client Money) Regulations 1991 of the United
Kingdom as amended (the "Clients' Money Regulations") and will not be
held in accordance with the Clients' Money Regulations or such other
regulations as shall amend or replace the Clients' Money Regulations
from time to time.
5. Securities Loan Agreements. The Client acknowledges receipt of
State Street's standard forms of Securities Loan Agreements, attached hereto as
Exhibits 5.1, 5.2 and 5.3, and authorizes State Street to enter into loans with
such Borrowers as may be selected by State Street pursuant to agreements
substantially in the form thereof. Each Securities Loan Agreement shall have
such terms and conditions as State Street may negotiate with the Borrower,
however 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 have authority
to make Loans of Available Securities to Borrowers, and to deliver such
securities to Borrowers. State Street shall be responsible for determining
whether any such Loan shall be made, and provided that the terms and conditions
are consistent with the terms and conditions hereof, for negotiating
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and establishing the terms of each such Loan. State Street shall have the
authority to terminate any Loan in its discretion, at any time and without
prior notice to the Client.
The Client 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 the Client's
Available Securities will in fact be loaned to Borrowers. The Client 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.
The Client 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. Upon receiving a notice from the Client 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 use its best
efforts to notify promptly thereafter the Borrower which has borrowed such
securities that the Loan of such securities is terminated and that such
securities are to be returned within the time specified by the applicable
Securities Loan Agreement.
7. Distributions on and Voting Rights with Respect to Loaned
Securities. The Client represents and warrants that it is the 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. Except as
provided in the next sentence, all interest, dividends, and other distributions
paid with respect to Loaned Securities shall be credited to the Client's
custodial account with State Street 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 (and shall be considered to constitute Loaned Securities) as of the
date such non-cash distribution is received by the Borrower; provided that the
Client (or Investment Manager) may, by giving State Street ten (l0) 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 Client's account on
the date it is delivered to State Street.
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The Client acknowledges that it will not be entitled to participate in
any dividend reinvestment program or to vote with respect to securities that
are on loan on the applicable record date for such securities.
The Client also acknowledges that any payments of distributions from
Borrower to the Client are in substitution for the interest or dividend accrued
or paid in respect of Loaned Securities and that the tax treatment of such
payment may differ from the tax treatment of such interest or dividend.
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 Client are complied
with, but State Street shall not be required to make any payment unless the
Client has first delivered funds to State Street with which to make such
payment.
8. Collateral.
(a) Receipt of Collateral. The Client authorizes State Street to
receive and to hold in Client's custodial account with State Street, on the
Client's behalf, Collateral from Borrowers to secure the obligations of
Borrowers with respect to any loan of securities made on behalf of the Client
pursuant to the Securities Loan Agreements. Except as provided in Section 8(c)
hereof, all investments of cash Collateral shall be made in accordance with
Section 9 hereof and shall be for the account and at the risk of the Client.
Concurrently with the delivery of the Loaned Securities to the Borrower under
any Loan, State Street shall receive from the Borrower and shall credit to
Client's custodial account, Collateral in any of the forms listed on Schedule
8.1. Said Schedule may be amended from time to time by State Street with the
prior written approval of the Client. With respect to foreign cash Collateral,
State Street will provide the Client with a multicurrency investment vehicle
through which the foreign cash will be converted to U.S. dollars and invested
pursuant to Section 9 hereof ("MCIV").
The Collateral received shall (i) in the case of Loaned Securities
denominated in United States Dollars or whose primary trading market is located
in the United States or sovereign debt issued by foreign governments, have a
value of 102% of the Market Value of the Loaned Securities, or (ii) in the case
of Loaned Securities which are not denominated in United States Dollars or
whose primary trading market is not located in the United States, have a value
of 105% of the Market Value of the Loaned Securities or (iii) have such other
value as may be applicable in the jurisdiction in which such Loaned Securities
are customarily traded; provided, however, that in the event of the application
of part (iii) above, State Street shall consult with the Client and obtain the
Client's written approval. Thereafter, State Street shall take all such action
as is appropriate in order to protect Client's secured position and interests
with respect to the Collateral under the applicable Securities Lending
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Agreement, including without limitation, taking all action to require the
Borrower to deliver additional Collateral.
State Street shall value all Loaned Securities in accordance with its
customary practice as follows. Pursuant to the terms of the applicable
Securities Loan Agreement, State Street shall, in accordance with State
Street's reasonable and customary practices and prevailing industry practices,
xxxx each Loaned Security and its Collateral to their Market Value each
business day based upon the Market Value of the Collateral and the Loaned
Security at the close of business on the preceding business day employing the
most recently available pricing information, and ensure that each applicable
Securities Loan Agreement shall require each Borrower to deliver additional
Collateral (for a letter of credit Collateral, an additional or replacement
letter of credit) to State Street in accordance with the above percentages in
the event that at the close of business on any business day the Market Value of
the Collateral delivered by such Borrower with respect to a Loaned Security
shall be less than (i) in the case of Loaned Securities denominated in United
States Dollars or whose primary trading market is located in the United States
or sovereign debt issued by foreign governments, 101.5% of the Market Value of
the Loaned Securities or (ii) in the case of Loaned Securities whose primary
trading market is not located in the United States (other than sovereign debt
issued by foreign governments) 104.5% of the Market Value of the Loaned
Securities or (iii) such other xxxx to market level as may be applicable in the
jurisdiction in which such securities are customarily traded; provided,
however, that in the event of the application of part (iii) above, State Street
shall consult with the Client and obtain its prior written approval.
Thereafter, State Street shall take such action as is appropriate with respect
to the Collateral under the applicable Securities Loan Agreement.
(b) 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.
(c) Limitations. State Street shall invest cash Collateral in
accordance with the directions of the Client, including any limitations
established by the Client in a writing identified to this Agreement and
acknowledged in writing by State Street and shall exercise reasonable care,
skill, diligence and prudence in the investment of Collateral. Subject to the
foregoing limits and standard of care, State Street does not assume any market
or investment risk of loss with respect to the currency conversions associated
with the use of MCIV or the investment of cash Collateral. If the value of the
cash Collateral so invested is insufficient to return the rebate fee (i.e., the
return to the Borrower for use of cash Collateral), the full amount of the
Collateral (U.S. dollar or otherwise), or any and all other amounts due to such
Borrower pursuant to the Securities Loan Agreement, the Client shall be solely
responsible for such shortfall and State Street may debit the Client's account.
State Street shall be entitled to charge the Client's accounts for such
shortfall in accordance with Section 9.
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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, subject to the directions of the Client or its Investment
Manager, in short-term instruments, short term investment funds maintained by
State Street and other money market mutual funds.
The Client acknowledges that State Street, in providing MCIV, may
receive additional compensation by managing its interest rate exposure.
The Client 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 its affiliates provide services are not guaranteed
or insured by State Street or any of its affiliates or by the Federal Deposit
Insurance Corporation or any government agency.
The income generated by any investment made pursuant to the preceding
paragraphs of this Section 9 shall be allocated among the Borrower, State
Street, the Client and others, as follows: (a) a portion of such income shall
be paid to the Borrower in accordance with the applicable Securities Loan
Agreement; (b) the balance, if any, shall be split between State Street [as
compensation for its services in connection with this securities lending
program], the Client [as such income shall be credited to the Client's
custodial account], and others. State Street shall be compensated in
accordance with the fee schedule attached hereto as Schedule A.
In the event the income generated by any investment made pursuant to
the first paragraph of this Section 9 does not equal or exceed the amount due
the Borrower (the "rebate fee") in accordance with the agreement between
Borrower and State Street, State Street shall debit the Client's custodial
account by an amount equal to the difference between the net income generated
and the amounts to be paid to the Borrower pursuant to the Securities Loan
Agreement. In the event debits to the Client's custodial 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 of a Loan to a Borrower resident in Canada, which is
made over record date for a dividend reinvestment program ("DRP") and is
secured by cash Collateral, the Borrower shall pay the Client a substitute
payment equal to the full amount of the cash dividend declared, and may pay a
loan premium, the amount of which shall be negotiated by State Street, above
the amount of the cash dividend. Such loan premium shall be allocated between
State Street and the Client 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 and (b) the
remainder of such loan premium shall be credited to the Client's account.
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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 Client 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 promptly to the Client's
custodial account.
The Client acknowledges that in the event that the Client's
participation in securities lending generates income for the Client, State
Street may be required to withhold tax or may claim such tax from the Client as
is appropriate in accordance with applicable law.
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 Schedule may be replaced from time to time by State
Street only with the prior written consent of to the Client. An annual report
with respect to such funds is available to the Client, 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 Client with a statement describing the Loans made, and the income
derived from the Loans, for each day 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.
12. Standard of Care. Subject to the requirements of applicable law,
State Street shall not be liable for any loss or damage, including reasonable
counsel fees and court costs, whether or not resulting from their acts or
omissions to act hereunder or otherwise, unless the loss or damage arises out
of State Street's own negligence. Except for any liability, loss, or expense
arising from or connected with State Street's own negligence or State Street's
obligations under Section 14 hereof, the Client agrees to reimburse and hold
State Street harmless from and against any liability, loss and expense,
including reasonable counsel fees and expenses and court costs, arising in
connection with this Agreement or any Loan or arising from or connected with
claims of any third parties, including any Borrower, from and against all taxes
and other governmental charges, and from and against any out-of-pocket or
incidental expenses. State Street may charge any amounts to which it is
entitled hereunder against the Client's custodial account provided the Client
has given its consent. Without limiting the generality of the foregoing, the
Client agrees: (i) that State Street shall not be responsible for any
statements, representations or warranties which any Borrower makes in
connection with any securities loans hereunder, or for the performance by any
Borrower of
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the terms of a Loan, or any agreement related thereto; (ii) that State Street
shall be fully protected in acting in accordance with the oral or written
instructions of any person reasonable believed by State Street to be authorized
to execute this Agreement on behalf of the Client (an "Authorized Person");
(iii) that in the event of a default by a Borrower under a Loan, State Street
shall be fully protected in acting in its sole discretion in a manner it deems
appropriate; and (iv) that State Street shall not be under any duty or
obligation to take action to effect payment by a Borrower of any amounts owed
by the Borrower pursuant to the Loan Agreement, provided State Street timely
advises the Client of the non-payment by the Borrower of any such amount.
The Client acknowledges that, when lending Gilt securities, there is
intraday settlement exposure from the Borrower's settlement bank. In
particular, Client has daily exposure that the Gilt collateral position backed
by the assured payment from the Borrower's settlement bank is unsecured.
State Street, in determining the Market Value of Securities, including
without limitation, Collateral, may rely upon any 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 the power 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, and
performance by it of this Agreement will at all times comply with all
applicable laws and regulations.
The Client represents and warrants that (a) it has made its own
determination as to the tax treatment of any dividends, remuneration or other
funds received hereunder; and (b) 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 Client 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.
The person executing this Agreement on behalf of the Client represents
that he or she has the authority to execute this Agreement on behalf of the
Client.
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The Client hereby represents to State Street that prior to instructing
State Street to purchase shares of the Navigator Securities Lending Quality
Trust with cash Collateral: (i) its policies generally permit it to engage in
securities lending transactions; (ii) its policies permit it to purchase shares
of the Navigator Securities Lending Quality Trust with cash Collateral; (iii)
its participation in the securities lending program, including the investment
of cash collateral in the Navigator Securities Lending Trust, and the existing
series' thereof, has been approved by a majority of the directors or trustees
that 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 Navigator Securities Lending
Trust, including any series thereof, is in the Client's best interest; and (iv)
its prospectus provides appropriate disclosure concerning its securities
lending activity. The Client acknowledges that on an annualized basis, the
management/trust/custody fee for investing cash Collateral in the Navigator
Securities Lending Prime Portfolio is not more than 10.00 basis points netted
out of yield. The trustee may pay out of the assets of the Portfolio all
reasonable expenses and fees of the Portfolio, including professional fees or
disbursements incurred in connection with the operation of the Portfolio. The
Client acknowledges that on an annualized basis, the management/trust/custody
fee for investing cash Collateral in the Navigator Securities Lending Prime
Portfolio is not more than 10.00 basis points netted out of yield. The trustee
may pay out of the assets of the Portfolio all reasonable expenses and fees of
the Portfolio, including professional fees or disbursements incurred in
connection with the operation of the Portfolio.
The Client 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 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.
14. 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 under such Loan have not been
returned by the Borrower, and subject to the terms of this Agreement, State
Street shall indemnify the Client against the failure of the Borrower as
follows. State Street shall purchase a number of Replacement Securities equal
to the number of such unreturned Loaned 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. Subject
to the Client's obligations pursuant to Section 8 hereof, 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.
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(b) If after the expiration of the customary settlement
period State Street is unable to purchase Replacement Securities pursuant to
Paragraph (a) hereof, State Street shall: (1) credit to the Client's custodial
account an amount 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 against
the unreturned Loaned Securities; or (ii) the next business day following the
day referred to in (i) above, if higher; or (2) notwithstanding the Borrower
marking-to-market and State Street continuing to search for Replacement
Securities, State Street shall apprise the Client of same and at the direction
of the Client, credit the Client's custodial account with an amount equal to
the Market Value of the unreturned Loaned Securities determined as of the close
of business on the date of the Client's direction.
(c) In addition to making the purchases or credits
required by Paragraphs (a) and (b) hereof, State Street shall credit to the
Client's custodial account the value of all distributions on the Loaned
Securities (not otherwise credited to the Client's accounts with State Street),
the record dates for which occur before the date that State Street purchases
Replacement Securities pursuant to Paragraph (a) or credits the Client's
custodial account pursuant to Paragraph (b).
(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 Client's custodial account all
other amounts owed by the Borrower to the Client 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 Client against the Borrower under the
applicable Securities Loan Agreement.
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(g) The provisions of this Section 14 shall not apply to
losses attributable to war, riot, revolution, acts of government or other
similar causes which could inhibit State Street's ability to transact business.
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 Client and State Street may each at any time terminate
this Agreement upon five (5) business days' written notice to the other to that
effect. The only effects of any such termination of this Agreement will be
that (a) following such termination, no further Loans shall be made hereunder
by State Street on behalf of the Client, 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.
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:
If to Client:
AMR Investment Services, Inc.
0000 Xxxx Xxxxxx Xxxx.
Bldg. MD 5645
Xxxx Xxxxx, Xxxxx 00000
Attention: President
Telephone: (000) 000-0000
If to State Street:
State Street Bank and Trust Company
Global Securities Lending Division
Two International Place, Floor 31
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Client Services
Telephone: (000) 000-0000
or to such other addresses as either party may furnish the other party by
written notice under this section.
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Whenever this Agreement permits or requires the Client to give notice
to, direct, provide information to State Street, such notice, direction, or
information shall be provided to State Street on the Client's behalf by any
individual designated for such purpose by the Client in a written notice to
State Street. (This Agreement shall be considered such a designation of the
person executing the Agreement on the Client's behalf.) After its 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. 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 securities by State Street on
behalf of the Client. 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 Client 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. The Client 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 Client at its address specified in Section 16
hereof. The Client 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.
18. Securities Investors Protection Act of 1970 Notice. CLIENT IS
HEREBY ADVISED AND ACKNOWLEDGES THAT THE PROVISIONS OF THE SECURITIES INVESTOR
PROTECTION ACT OF 1970 MAY NOT PROTECT THE CLIENT WITH RESPECT TO THE LOAN OF
SECURITIES HEREUNDER AND THAT, THEREFORE, THE COLLATERAL DELIVERED TO THE
CLIENT 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.
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19. 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.
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20. Modification. This Agreement shall not be modified, except by an
instrument in writing signed by the party against whom enforcement is sought.
AMERICAN AADVANTAGE MILEAGE FUNDS
Name:
----------------------------
By:
------------------------------
Its:
-----------------------------
STATE STREET BANK AND TRUST COMPANY
Name:
----------------------------
By:
------------------------------
Its:
-----------------------------
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SCHEDULE A
This Schedule is attached to and made part of the Securities Lending
Authorization Agreement, dated the ____ day of _______, 199_ between
AMERICAN AADVANTAGE MILEAGE FUNDS ("Client") 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, including all interest,
dividends and other distributions shall be allocated as follows:
- 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 the attached Securities Lending Authorization
Agreement.
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SCHEDULE B
This Schedule is attached to and made part of the Securities Lending
Authorization Agreement, dated the ____ day of _______, 199_ between
AAMERICAN AADVANTAGE MILEAGE FUNDS ("Client") and STATE STREET BANK AND
TRUST COMPANY ("State Street").
FUND NAMES TAXPAYER IDENTIFICATION NUMBER TAX YEAR END
Balanced Mileage Fund 00-0000000 October 31
Growth and Income Mileage Fund 00-0000000 October 31
International Equity Mileage Fund 00-0000000 October 31
Intermediate Bond Mileage Fund
Limited-Term Income Mileage Fund 00-0000000 October 31
