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