EXHIBIT (h)(5)
SECURITIES LENDING AGENCY AGREEMENT
Between
INVESTORS BANK & TRUST COMPANY
And
XXXXXX XXXXXX FUNDS II
SECURITIES LENDING AGENCY AGREEMENT
AGREEMENT, dated as of September 15, 2003, between Xxxxxx Xxxxxx Funds II,
a Massachusetts business trust (the "Lender"), on behalf of the series listed on
Schedule I as such Schedule I may be amended by mutual agreement of the parties
from time to time (the "Portfolios"), and Investors Bank & Trust Company, a
trust company organized and existing under the laws of the Commonwealth of
Massachusetts (the "Bank").
WHEREAS, the Bank currently acts as custodian for securities held by it in
the Account (as defined below) from time to time on behalf of the Lender; and
WHEREAS, the Lender desires to appoint the Bank as its agent for the
purpose of lending securities in the Account as more fully set forth below; and
WHEREAS, the Bank has agreed to act as the Lender's agent for such purpose
pursuant to the terms hereof;
NOW, THEREFORE, for and in consideration of the mutual promises set forth
herein, the parties hereto agree as follows:
1. Definitions.
Whenever used in this Agreement, unless the context otherwise requires, the
following words shall have the meanings set forth below. Capitalized terms used
but not defined herein shall have the meaning assigned to them in the applicable
Securities Borrowing Agreement.
1.1 "Account" shall mean the custodial account or accounts established and
maintained by the Bank on behalf of the Lender for the safekeeping of securities
and monies received by the Bank from time to time.
1.2 "Approved Investment" shall mean any type of security, participation or
interest in property in which Cash Collateral may be invested or reinvested, as
set forth on Schedule II hereto (which may be amended from time to time to add
additional Approved Investments with the written consent of the Bank and the
Lender, or to delete any Approved Investment at the written direction of the
Lender).
1.3 "Authorized Person" shall be any officer of the Lender and any other
person, whether or not any such person is an officer or employee of the Lender,
duly authorized by resolutions of the Board of Trustees of the Lender to give
Oral and/or Written Instructions on behalf of the Lender, such persons to be
designated in a Certificate which contains a specimen signature of such person.
1.4 "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry
system for receiving and delivering Government Securities (as defined herein),
its successors and nominees, as described in Section (b)(2) of Rule 17f-4 under
the 0000 Xxx.
1.5 "Borrower" shall mean any entity named on Schedule III hereto (as such
Schedule may be amended from time to time to add additional Borrowers with the
written consent of the Bank and the Lender, or to delete any Borrower at the
written direction of the Lender). The Lender will promptly notify the Bank if at
any time:
(a) any potential Borrower which is a broker-dealer registered under
the Securities Exchange Act of 1934 (the "1934 Act"), a broker-dealer exempted
from registration under Section 15(a)(1) of the 1934 Act as a dealer of exempted
Government Securities, or a bank, has discretionary authority or control with
respect to the investment of any Securities available for Loan, or
(b) any potential Borrower not described in clause (a) above is a party
who is with respect to the Lender in such a position that a loan would be
considered a conflict of interest under applicable law.
If the Lender provides such notice, the Bank shall take appropriate action to
prevent the Lender from engaging in a Loan with any potential Borrower so
identified by the Lender. The Bank shall be entitled to rely upon such notices
from the Lender (and the absence of such notices) in its operation of this
securities lending program.
1.6 "Cash Collateral" shall mean either fed funds or New York Clearing
House funds, as applicable for a particular loan of Securities.
1.7 "Certificate" shall mean any notice, instruction, schedule or other
instrument in writing, authorized or required by this Agreement to be given to
the Bank, which is actually received by the Bank and signed on behalf of the
Lender by an Authorized Person or a person reasonably believed by the Bank to be
an Authorized Person.
1.8 "Collateral" shall mean Cash Collateral unless the Bank and the Lender
have agreed in writing to additional collateral, including Government Securities
and Letters of Credit.
1.9 "Collateral Account" shall mean a segregated account established and
maintained by the Bank for the purpose of holding Collateral, including Cash
Collateral, and Approved Investments, interest, dividends and other payments and
distributions received with respect to Collateral and Approved Investments
("Distributions"), and any Securities Loan Fee paid by Borrowers in connection
with Securities loans hereunder.
1.10 "Depository" shall mean the Depository Trust Company, Participant's
Trust Company, Euroclear, and any other securities depository or clearing agency
(and their respective successors and nominees) authorized under applicable law
or regulation to act as a securities depository or clearing agency, including
any foreign securities depository approved by the Lender.
1.11 "Government Security" shall mean book-entry Treasury securities (as
defined in Subpart 0 of Treasury Department Circular No. 300, 31 C.F.R. 306) and
any other securities issued or fully guaranteed by the United States government
or any agency or instrumentality of the United States government.
1.12 "Letter of Credit" shall mean a clean, unconditional and irrevocable
letter of credit in favor of the Bank as agent for the Lender issued by a bank
named on Schedule IV hereto as may be amended from time to time to add
additional banks by the written consent of the parties hereto, or to delete any
Bank at the written direction of the Lender.
1.13 "Loan Ceiling Amount" shall mean, with respect to any Portfolio, the
amount set forth on Schedule V hereto opposite such Portfolio's name, as such
Schedule may be amended from time to time by the Lender, which amendment shall
become effective upon delivery to the Bank.
1.14 "Oral Instructions" shall mean verbal instructions actually received
by the Bank from an Authorized Person or from a person reasonably believed by
the Bank to be an Authorized Person.
1.15 "Rebate" shall mean the amount payable by the Lender to a Borrower (as
set forth in a Receipt) in connection with Securities loans at any time
collateralized by Cash Collateral.
1.16 "Receipt" shall mean an advice or confirmation setting forth the terms
of a particular loan of Securities hereunder, including, without limitation, the
Collateral with respect to such loan.
1.17 "Replacement Securities" shall mean securities of the same issuer,
class and denomination as lent Securities.
1.18 "Securities Borrowing Agreement" shall mean with, respect to any
Borrower, the agreement pursuant to which the Bank lends securities on behalf of
its customers (including the Lender) to such Borrower as may be amended from
time to time.
2
1.19 "Securities Loan Fee" shall mean the amount payable by a Borrower to
the Bank, as agent for the Lender, pursuant to the applicable Securities
Borrowing Agreement in connection with Securities loans, if any, collateralized
by Collateral that is not Cash Collateral.
1.20 "Security" shall mean any Government Securities, non-U.S. securities,
common stock and other equity securities, bonds, debentures, corporate debt
securities, notes, mortgages or other obligations, and any certificates,
warrants or other instruments representing rights to receive, purchase, or
subscribe for the same, or evidencing or representing any other rights or
interests therein, which are available for lending pursuant to Section 2.2 of
this Agreement.
1.21 "Written Instructions" shall mean written communications actually
received by the Bank from an Authorized Person or from a person reasonably
believed by the Bank to be an Authorized Person by letter, memorandum, telegram,
cable, telex, telecopy facsimile, computer, video (CRT) terminal or other
on-line system, or any other method whereby the Bank is able to verify with a
reasonable degree of certainty the identity of the sender of such communications
or the sender is required to provide a password or other identification code.
2. Appointment; Scope of Agency Authority.
2.1 Appointment. The Lender hereby appoints the Bank as its agent to lend
Securities in the Account to Borrowers from time to time as hereinafter set
forth, and the Bank hereby accepts appointment as such agent and agrees to so
act.
2.2 Securities Subject to Lending. Unless the Lender provides otherwise in
writing to the Bank and subject to the next sentence of this Section 2.2, all
individual Securities maintained in the Account shall be available for lending
pursuant to this Agreement. The Bank shall not loan any Securities maintained in
a Portfolio's Account such that, after giving effect to such loan, an amount
greater than that Portfolio's Loan Ceiling Amount will be lent pursuant to this
Agreement. Upon receiving a notice from the Lender that Securities that have
been loaned to a Borrower should no longer be considered available for lending
under this Agreement (whether because of the sale of such securities or
otherwise), the Bank shall terminate the loan of such Securities for the Account
of such Lender by notice to the Borrower or by reallocation in which case the
Bank shall ensure the return of such Securities to the Account of such Lender
and may immediately cause another Fund to loan Securities of the same class and
issuer to the same or a different Borrower.
2.3 Securities Borrowing Agreement. The Lender hereby acknowledges receipt
of a Securities Borrowing Agreement with respect to each Borrower and authorizes
the Bank to lend Securities in the Account to Borrowers pursuant to such
agreements. The Bank shall promptly provide the Lender with copies of any
amendments or changes to such agreements. The Lender may elect to terminate any
Borrower from Schedule III if it opposes the change.
2.4 Loan Opportunities. The Lender acknowledges and agrees that the Bank
shall have the right to decline to make any loans of Securities under any
Securities Borrowing Agreement and to discontinue lending under any Securities
Borrowing Agreement in its sole discretion, provided that the Bank notify the
Lender of its decision to discontinue lending within a reasonable period of time
after such decision is made. The Lender agrees that it shall have no claim
against the Bank based on, or relating to, loans made for other customers or for
the Bank's own account, or loan opportunities refused hereunder, whether or not
the Bank has made fewer or more loans for any other customer or for the Bank's
own account than for the Lender, and whether or not any loan for another
customer or for the Bank's own account, or the opportunity refused, could have
resulted in loans made hereunder. Notwithstanding anything herein to the
contrary, the Bank will allocate securities lending opportunities among its
customers using reasonable and equitable methods established by the Bank from
time to time.
2.5 Use of Book-Entry System and Depositories. The Lender hereby authorizes
the Bank on a continuous and on-going basis, to deposit in the Book-Entry System
and any Depositories all Securities eligible for deposit therein and to utilize
the Book-Entry System and Depositories to the extent possible in connection with
its receipt and delivery of Securities, Collateral, Approved Investments and
monies under this Agreement. Where Securities, Collateral and Approved
Investments eligible for deposit in the Book-Entry System or a Depository are
transferred
3
to the Account, the Bank shall identify as belonging to the Lender a quantity of
securities in a fungible bulk of securities shown on the Bank's account on the
books of the Book-Entry System or the applicable Depository. Securities,
Collateral and Approved Investments deposited in the Book-Entry System or a
Deposit will be represented in accounts which include only assets held by the
Bank for customers, including but not limited to accounts in which the Bank acts
in a fiduciary or agency capacity.
3. Representations and Warranties.
3.1 Lender's Representations. The Lender hereby represents and warrants to
the Bank, which representations and warranties shall be deemed to be continuing
and to be reaffirmed on any day that a Securities loan hereunder is outstanding,
that:
(a) This Agreement and the use of the Approved Investments has been
approved and will be reapproved annually by the Board of Trustees of the Lender
as being in the best interests of shareholders of the Lender; this Agreement is,
and each Securities loan and Approved Investment will be, legally and validly
entered into by the Lender, does not, and will not, violate any statute,
regulation, rule, order or, judgment binding on the Lender, or any provision of
the Lender's agreement and declaration of trust or by-laws, or any material
agreement binding on the Lender or affecting its property, and is enforceable
against the Lender in accordance with its terms, except as may be limited by
bankruptcy, insolvency or similar laws, or by equitable principles relating to
or limiting creditors rights generally;
(b) The person executing this Agreement and all Authorized Persons
acting on behalf of the Lender has and have been duly and properly authorized to
do so;
(c) It is lending Securities as principal for its own account
and it will not transfer, assign or encumber its interest in, or rights with
respect to, any securities loans; and
(d) All Securities subject to lending pursuant to Section 2.2 of this
Agreement are free and clear of all liens, claims, security interests and
encumbrances and no such Security subject to lending has been sold. The Lender
shall promptly delete from the list referenced in Section 2.2 hereof any and all
Securities which are no longer subject to the representations contained in this
sub-paragraph (d).
3.2 Bank's Representations. The Bank hereby represents and warrants to the
Lender, which representations and warranties shall be deemed to be continuing
and to be reaffirmed on any day that a Securities loan hereunder is outstanding,
that:
(a) This Agreement is legally and validly entered into by the Bank,
does not and will not, violate any statute, regulation, rule, order or, judgment
binding on the Bank, or any provision of the Bank's charter or by-laws, or any
agreement binding on the Bank or affecting its property, and is enforceable
against the Bank in accordance with its terms, except as may be limited by
bankruptcy, insolvency or similar laws, or by equitable principles relating to
or limiting creditors rights generally;
(b) The person executing this Agreement on behalf of the Bank and all
persons acting on the Bank's behalf pursuant to this Agreement has and have been
duly and properly authorized to do so;
(c) The Bank has taken all necessary action to authorize such execution
and delivery of this Agreement and the performance of its obligations hereunder;
and
(d) The execution, delivery and performance by the Bank of this
Agreement will at all times comply with all applicable laws and regulations.
4
4. Securities Lending Transactions.
4.l Loan Initiation. From time to time the Bank may lend Securities to
Borrowers and deliver such Securities against receipt of Collateral in
accordance with the applicable Securities Borrowing Agreement. The Bank shall
deliver to the Lender a Receipt in connection with each loan made hereunder,
prior to settlement of such loan.
4.2 Receipt of Collateral; Approved Investments.
(a) For each loan hereunder the Bank shall (i) initially receive (a)
Collateral equivalent to no less than 102% of the market value of the Securities
lent in the case of lent Securities denominated in U.S. Dollars or whose primary
trading market is located in the United States or sovereign debt issued by
foreign governments, or (b) Collateral equivalent to no less than 105% of the
market value of the Securities lent in the case of lent Securities that are not
denominated in U.S. Dollars or whose primary trading market is not located in
the United States, and (ii) thereafter shall request on a daily basis as
necessary additional Collateral, (a) which in the case of lent Securities
denominated in U.S. Dollars or whose primary trading market is located in the
United States or sovereign debt issued by foreign governments, shall be an
amount such that the value of the Cash Collateral in no event be equivalent to
less than 101.5% of the market value of the Securities lent (as determined in
accordance with the applicable Securities Borrowing Agreement), and (b) which in
the case of other types of lent Securities, shall be an amount such that the
value of the Collateral in no event be equivalent to less than 104.5% of the
market value of the Securities lent (as determined in accordance with the
applicable Securities Borrowing Agreement). The Bank is hereby authorized and
directed, without obtaining any further approval from the Lender, to invest and
reinvest all or substantially all of the Cash Collateral received in any
Approved Investment. The Bank shall credit all Collateral, Approved Investments
and Distributions received with respect to Collateral and Approved Investments
to the Collateral Account and xxxx its books and records to identify the
Lender's ownership thereof as appropriate.
(b) All Approved Investments shall be for the account and risk of the
Lender. To the extent any loss arising out of Approved Investments results in a
deficiency in the amount of Collateral available for return to a Borrower
pursuant to the Securities Borrowing Agreement, the Lender agrees to pay the
Bank on demand cash in an amount equal to such deficiency.
(c) Except as otherwise provided herein, all Collateral, Approved
Investments and Distributions credited to the Collateral Account shall be
controlled by, and subject only to the instructions of, the Bank, and the Bank
shall not be required to comply with any instructions of the Lender with respect
to the same.
(d) Subject to any agreed upon limits imposed by the Lender in writing
on the investment of Collateral, the Bank does not assume any market or
investment risk of loss with respect to the investment of Cash Collateral.
Subject to the foregoing, the Bank shall exercise reasonable care, skill,
diligence and prudence in the administration and investment of Collateral. If
the income from the Collateral so invested is insufficient to pay the Rebate,
the Lender and the Bank shall share the responsibility for making up the amount
of the shortfall in accordance with the fee split as may be agreed to in writing
by the parties hereto from time to time. The parties hereto agree that the Bank
does not have investment discretion over the Collateral.
4.3 Distributions on Loaned Securities. Except as provided in the next
sentence, all interests, dividends, and other distributions paid with respect to
loaned Securities shall be credited to the Lender's Account on the date such
amounts are delivered by the Borrower to the Bank. Any non-cash distribution on
loaned Securities which is in the nature of a stock split or a stock dividend
shall be added to the applicable loan (and shall be considered to constitute
loaned Securities) as of the date such non-cash distribution is received by the
Borrower.
4.4 Marks to Market. The Bank shall on each Business Day xxxx to market in
U.S. dollars the value of all Securities loaned hereunder and all Collateral and
accordingly receive and release Collateral in accordance with the applicable
Securities Borrowing Agreement.
4.5 Collateral Substitutions. The Bank shall accept substitutions of
Collateral in accordance with the applicable Securities Borrowing Agreement and
shall credit all such substitutions to the Collateral Account; provided,
however, that unless other Collateral has been mutually agreed upon in writing
by the Bank and the Lender, no other Collateral may be substituted for Cash
Collateral.
5
4.6 Termination of Loans. The Bank shall terminate any Securities loan to a
Borrower in accordance with the applicable Securities Borrowing Agreement as
soon as practicable (but in any event within three business days after notice by
the Fund) after:
(a) receipt by the Bank of a notice of termination pursuant to the
Securities Borrowing Agreement;
(b) receipt by the Bank of Written Instructions instructing it to
terminate a Securities loan;
(c) receipt by the Bank of Written Instructions deleting the Borrower
to whom such loan was made from Schedule III hereto;
(d) upon the Bank's becoming aware of the occurrence of any default
pursuant to the applicable Securities Borrowing Agreement requiring termination
of such loan; or
(e) whenever the Bank, in its sole discretion, elects to terminate such
loan.
4.7 Securities Loan Fee. The Bank shall receive any applicable Securities
Loan Fee paid by Borrowers pursuant to the Securities Borrowing Agreement and
credit all such amounts received to the Collateral Account.
4.8 The Borrower's Financial Condition. The Bank has delivered to the
Lender each of the Borrower's most recent statements that have been made
available to the Bank pursuant to the Securities Borrowing Agreements. The Bank
shall promptly deliver to the Lender (i) all statements and financial
information subsequently delivered to the Bank and required to be furnished to
the Bank under the Securities Borrowing Agreements and (ii) all statements and
financial information regarding the Borrowers reasonably requested by the
Lender.
4.9 Transfer Taxes and Necessary Costs. All transfer taxes and necessary
costs with respect to the transfer of the loaned Securities by the Lender to the
Borrower and the Borrower to the Lender upon the termination of the loan shall
be paid, and each Securities Borrowing Agreement shall require such taxes and
costs to be paid, by the Borrower.
4.10 Remedies Upon Default. In the event of any default by a Borrower under
the applicable Securities Borrowing Agreement, the Bank shall use its best
efforts to pursue, on behalf of the Lender, any remedies that the Bank or the
Lender may have under the applicable Securities Borrowing Agreement.
4.11 Return of Collateral. The Collateral shall be returned to the Borrower
at the termination of the loan upon the return of the lent Securities by the
Borrower in accordance with the applicable Securities Borrowing Agreement.
4.12 Bank's Obligation. Except as specifically set forth herein, or in any
applicable Securities Borrowing Agreement, the Bank shall have no duty or
obligation to take action to effect payment by a Borrower of any amounts owed by
such Borrower pursuant to the Securities Borrowing Agreement.
5. Concerning the Bank.
5.1 Standard of Care: Indemnification.
(a) It is expressly understood and agreed that in exercising its rights
and performing its obligations hereunder, the Bank owes no fiduciary duty to the
Lender. The Bank shall not be liable for any costs, expenses, damages,
liabilities or claims (including attorneys and accountants fees) incurred by the
Lender, except those costs, expenses, damages, liabilities or claims arising out
of the negligence, willful misconduct, bad faith, willful misfeasance or
nonfeasance on the part of, or reckless disregard of its obligations and duties
hereunder by, the Bank or any party to whom the Bank delegates any of its duties
hereunder or a breach by the Bank of the terms of this Agreement. The Bank shall
have no obligation hereunder for costs, expenses, damages, liabilities or claims
(including reasonable attorneys and accountants fees), which are sustained or
incurred by reason of any action or inaction by the Book-Entry System or any
Depository or their respective successors or nominees. In no event shall
6
the Bank be liable for special, punitive or consequential damages, arising under
or in connection with this Agreement, even if previously informed of the
possibility of such damages.
(b) The Lender agrees to indemnify the Bank and to hold it harmless
from and against any and all costs, expenses, damages, liabilities or claims,
including reasonable fees and expenses of counsel, which the Bank may sustain or
incur or which may be asserted against the Bank by reason of or as a result of
any action taken or omitted by the Bank in connection with or arising out of the
Bank's operating under and in compliance with this Agreement, except those
costs, expenses, damages, liabilities or claims arising out of the Bank's
negligence, willful misconduct, bad faith, willful misfeasance or nonfeasance,
or reckless disregard of its obligations and duties hereunder. The foregoing
indemnity shall be a continuing obligation of the Lender, its successors and
assigns, notwithstanding the termination of any loans hereunder or of this
Agreement. Actions taken or omitted in reasonable reliance upon Oral or Written
Instructions, any Certificate, or upon any information, order, indenture, stock
certificate, power of attorney, assignment, affidavit or other instrument
reasonably believed by the Bank to be genuine or bearing the signature of a
person or persons reasonably believed by the Bank to be genuine or bearing the
signature of a person or persons reasonably believed to be authorized to sign,
countersign or execute the same, shall be presumed to have been taken or omitted
in good faith.
(c) The Bank shall indemnify and hold harmless the Lender from and
against any and all loss, liability, costs, damages, actions, claims and
expenses, including reasonable fees and expenses of counsel, that the Lender may
sustain or incur or which may be asserted against the Lender arising out of the
the Bank's negligence, willful misconduct, bad faith, misfeasance or nonfeasance
or the reckless disregard of its obligations and duties hereunder.
(d) If at the time of a default by a Borrower with respect to a loan
hereunder, some or all of the lent Securities under such loan have not been
returned by the Borrower, and subject to the terms of this Agreement, the Bank
shall indemnify the Lender against the failure of the Borrower as follows:
(i) The Bank shall purchase a number of Replacement Securities
equal to the number of such unreturned lent Securities, to the extent that such
Replacement Securities are available on the open market. Such Replacement
Securities shall be purchased by applying the proceeds of the Collateral with
respect to such loan to the purchase of such Replacement Securities. Subject to
the Lender obligations set forth in Section 5.3 and 5.7 hereof, if and to the
extent that such proceeds are insufficient or the Collateral is unavailable, the
purchase of such Replacement Securities shall be made at the Bank's expense.
(ii) If the Bank is unable to purchase Replacement Securities
pursuant to paragraph (i) above, the Bank shall credit to the Lender's account
an amount equal to the market value of the unreturned lent Securities for which
Replacement Securities are not so purchased, determined as of the earlier of (i)
the first day on which the Bank was required to make a demand for additional
Collateral from the Borrower (and the Bank failed to make such demand or such
demand did not result in the delivery of such additional Collateral) or (ii) the
first day on which the lent Securities were not returned as required by the
terms of the applicable loan.
(iii) In addition to making the purchases or credits required by
paragraphs (i) and (ii) hereof, the Bank shall credit to the Lender's account
the value of all distributions on the lent Securities (not otherwise credited to
the Lender's accounts with the Bank), the record dates for which occur before
the date that the Bank purchases Replacement Securities pursuant to paragraph
(i) or credits the Lender's account pursuant to paragraph (ii).
(iv) Any credits required under paragraphs (i), (ii) or (iii)
hereof shall be made by application of the proceeds of the Collateral (if any)
that remains after the purchase of Replacement Securities pursuant to paragraph
(i). If and to the extent that the Collateral is unavailable or the value of the
proceeds of the remaining Collateral is less than the value of the sum of the
credits required to be made under Paragraphs (i), (ii) or (iii), such credits
shall be made at the Bank's expense.
(v) If after application of paragraphs (i) through (iv) hereof,
additional Collateral remains or any previously unavailable Collateral becomes
available or any additional amounts owed by the Borrower
7
with respect to such loan are received from the Borrower, the Bank shall apply
the proceeds of such Collateral or such additional amounts first to reimburse
itself for any amounts expended by the Bank pursuant to paragraphs (i) through
(iv) above, and then to credit to the Lender's account all other amounts owed by
the Borrower to the Lender with respect to such loan under the applicable
Securities Borrowing Agreement.
(vi) In the event that the Bank is required to make any payment
and/or incur any loss or expense under this Section, the Bank shall, to the
extent of such payment, loss, or expense, be subrogated to, and succeed to, all
of the rights of the Lender against the Borrower under the applicable Securities
Borrowing Agreement.
5.2 No Obligation to Inquire. Without limiting the generality of the
foregoing, the Bank shall be under no obligation to inquire into, and shall not
be liable for, the validity of the issue of any Securities at any time held in
the Account.
5.3 Advances, Overdrafts and Indebtedness; Security Interest.
(a) The Bank may, in its sole discretion, advance funds on behalf of
the Lender in order to pay to Borrowers any Rebates or to return to Borrowers
Cash Collateral to which they are entitled pursuant to the applicable Securities
Borrowing Agreement. The Bank may also, in its sole discretion and as a matter
of bookkeeping convenience, credit the Account with interest, dividends or other
distributions payable on Securities prior to its actual receipt of final payment
therefor and the Lender agrees that such bookkeeping credits may also be
reflected on its books, and otherwise, as "immediately available" or "same day"
funds or by some similar characterization. Notwithstanding any such credit or
characterization, all such credits shall be conditional upon the Bank's actual
receipt of final payment and may be reversed by the Bank to the extent that
final payment is not received. If the Bank, in its sole discretion, permits the
Lender to use funds credited to the Account prior to receipt by the Bank of
final payment thereof, the Lender shall nonetheless continue to bear the risk
of, and liability for, the Bank's non-receipt of final payment in full.
(b) The Lender agrees to repay the Bank on demand the amount of any
advance or credit described in Section 5.3(a) above or any other amount owed by
the Lender hereunder plus accrued interest at a rate per annum (based on a
360-day year for the actual number of days involved) as agreed to by the parties
in writing from time to time. In order to secure repayment of any credit,
advance, overdraft or other indebtedness of the Lender to the Bank arising
hereunder, the Lender hereby agrees that the Bank shall have a continuing lien
and security interest, to the extent of any such amounts owing, in and to all
assets now or hereafter held in the Account and the Collateral Account, which is
then in the Bank's possession or control or in the possession or control of any
third party acting on the Bank's behalf. In this regard, the Bank shall be
entitled to charge any amounts owed to the Bank hereunder against any balance of
account standing to the credit of the Lender on the Bank's books and, without
limiting the foregoing, to all the rights and remedies of a pledgee under common
law and a secured party under the Massachusetts Uniform Commercial Code and/or
any other applicable laws and/or regulations as then in effect.
(c) The rights and obligations of the Bank and the rights and
obligations of the Lender under this Section are absolute and unconditional
whether or not the Bank would be entitled to indemnification pursuant to Section
5.l(b) hereof.
(d) For all purposes of this Agreement, payment with respect to a
transaction will not be "final" until the Bank shall have received immediately
available funds which under applicable law or rule are irreversible, which are
not subject to any security interest, levy or other encumbrance, and which are
specifically applicable, or deemed by the Bank to be specifically applicable, to
such transaction. A debit by the Bank to any other account of the Lender
maintained by the Bank or to an account of any third party to whom or for whose
account Securities have been delivered shall not constitute final payment to the
extent that such debit creates an overdraft or does not otherwise result in the
receipt by the Bank of immediately available, irreversible and unencumbered
funds.
5.4 Advice of Counsel. The Bank may, with respect to questions of law,
apply for and obtain the advice and opinion of counsel and shall be fully
protected with respect to anything done or omitted by it in good faith in
conformity with such advice or opinion.
8
5.5 No Collection Obligations. Except as set forth in Section 5.1(d) above,
Bank shall be under no obligation or duty to take action to effect collection of
any amounts payable in respect of Securities or Approved Investments if such
Securities or Approved Investments are in default, or if payment is refused
after due demand and presentation.
5.6 Pricing Methods. The Bank is authorized to utilize any recognized
pricing information service or any other means of valuation specified in the
applicable Securities Borrowing Agreement ("Pricing Methods") in order to
perform its valuation responsibilities with respect to loaned Securities,
Collateral and Approved Investments.
5.7 Agent's Fee. In connection with each Securities loan hereunder the
Lender shall pay to the Bank a fee equal to 40% of (a) net realized income
derived from Approved Investments, plus (b) any Securities Loan Fee paid or
payable by the Borrower, minus (c) any Rebate paid by the Bank to the Borrower.
The Bank is authorized, on a monthly basis, to charge its fee and any other
amounts owed by the Lender hereunder against the Account and/or Collateral
Account.
5.8 Reliance On Certificates and Instructions. The Bank shall be entitled
to rely upon any Certificate, any information contained on any Schedule hereto
as may be amended in accordance with the terms hereof, and Written or Oral
Instruction actually received by the Bank and reasonably believed by the Bank to
be duly authorized and delivered. The Lender agrees to forward to the Bank
Written Instructions confirming Oral Instructions in such manner so that such
Written Instructions are received by the Bank by the close of business of the
same day that such Oral Instructions are given to the Bank. The Lender agrees
that the fact that such confirming Written Instructions are not received on a
timely basis or that contrary instructions are received by the Bank shall in no
way affect the validity or enforceability of the transactions authorized by the
Lender. The Bank will use reasonable efforts to report any subsequently received
contrary instructions. In this regard, the records of the Bank shall be presumed
to reflect accurately any Oral Instructions given by an Authorized Person or a
person reasonably believed by the Bank to be an Authorized Person.
5.9 Confidentiality. The Bank may not disclose or supply any information
regarding the Account or any non-public information obtained hereunder regarding
any Lender unless required by any law or governmental regulation now or
hereafter in effect or requested to do so by the Lender; provided that Bank may
disclose or supply information regarding the Account as necessary in the sole
discretion of the Bank in order to facilitate (without identifying the Lender or
any Portfolio), effect or continue any loans hereunder. The parties agree that a
breach of this provision would irreparably damage the other party and
accordingly agree that each of them is entitled, in addition to all other
remedies at law or in equity to an injunction or injunctions without bond or
other security to prevent breaches of this provision.
5.10 Statements. The Bank will at least daily furnish the Lender with
statements relating to loans hereunder and Collateral.
5.11 Force Majeure. Neither the Bank nor the Lender shall 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 acts of God,
earthquakes, fires, floods, storms or other disturbances of nature, epidemics,
strikes, riots, nationalization, expropriation, currency restrictions, acts of
war, civil war or terrorism, insurrection, nuclear fusion, fission or radiation,
the interruption, loss or malfunction of utilities, transportation, the
unavailability of energy sources and other similar happenings or events except
as results from the negligence of such party or any party to whom such party
delegates its duties hereunder.
5.12 No Implied Duties.
(a) The Bank shall have no duties or responsibilities whatsoever except
such duties and responsibilities as are specifically set forth in this Agreement
and in the applicable Securities Borrowing Agreement, and no covenant or
obligation shall be implied against the Bank in connection with this Agreement.
9
(b) The Lender shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied against the Lender in
connection with this Agreement.
6. Termination. This Agreement may be terminated by either party upon delivery
to the other party of a written notice specifying the date of such termination,
which shall be not less than 60 days after the date of receipt of such notice.
Notwithstanding any such termination, this Agreement shall continue in full
force and effect with respect to all loans of Securities outstanding on the date
of termination.
7. Miscellaneous.
7.1 Exclusivity. Prior to the termination of this Agreement or notice of
termination of this Agreement, the Lender agrees that it shall not enter into
any other agreement with any third party whereby such third party is permitted
to make loans on behalf of the Lender of any securities held by the Bank in the
Account from time to time.
7.2 Certificates. The Lender agrees to furnish to the Bank a new
Certificate in the event that any present Authorized Person ceases to be an
Authorized Person or in the event that any other Authorized Persons are
appointed and authorized. Until such new Certificate is received, the Bank shall
be fully protected in acting upon Oral Instructions or signatures of the present
Authorized Persons.
7.3 Notices.
(a) Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Bank, shall be sufficiently given if
addressed to the Bank and received by it at its offices at 000 Xxxxxxxxx Xxxxxx,
X.X. Xxx 0000, Xxxxxx, Xxxxxxxxxxxxx 00000-0000, Attention: Securities Lending
Department, with a copy to: Xxxx X. Xxxxx, General Counsel, or at such other
place as the Bank may from time to time designate in writing.
(b) Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Lender shall be sufficiently given if
addressed to the Lender and received by it at its offices at c/o CDC IXIS Asset
Management Services, Inc., 000 Xxxxxxxx Xxxxxx, Xxxxxx, XX 00000, Attention:
Fund Administration Department Head, with a copy to: General Counsel, or at such
other place as the Lender may from time to time designate in writing.
7.4 Cumulative Rights and No Waiver. Each and every right granted to a
party hereunder or under any other document delivered hereunder or in connection
herewith, or allowed it by law or equity, shall be cumulative and may be
exercised from time to time. No failure on the part of a party to exercise, and
no delay in exercising, any right will operate as a waiver thereof, nor will any
single or partial exercise by a party of any right preclude any other or future
exercise thereof or the exercise of any other right.
7.5 Severability. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligationsshall not in any way be affected or impaired thereby, and if any
provision is inapplicable to any person or circumstances, it shall nevertheless
remain applicable to all other persons and circumstances.
7.6 Amendments. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties.
7.7 Successors and Assigns. This Agreement shall extend to and shall be
binding upon the parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by either party
without the written consent of the other.
7.8 Governing Law; Consent to Jurisdiction. This Agreement shall be
construed in accordance with the laws of the Commonwealth of Massachusetts
without regard to conflict of laws principles thereof. The Lender hereby
consents to the jurisdiction of a state or federal court situated in Boston,
Massachusetts in connection with any dispute arising hereunder.
10
7.9 No Third Party Beneficiaries. In performing hereunder, the Bank is
acting solely on behalf of the Lender and no contractual or service relationship
shall be deemed to be established hereby between the Bank and any other person.
7.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
7.11 SIPA Notice. THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION ACT
OF 1970 MAY NOT PROTECT THE LENDER WITH RESPECT TO LOANS HEREUNDER AND,
THEREFORE, THE COLLATERAL DELIVERED TO THE BANK AS AGENT FOR THE LENDER MAY
CONSTITUTE THE ONLY SOURCE OF SATISFACTION OF A BORROWER'S OBLIGATION IN THE
EVENT SUCH BORROWER FAILS TO RETURN THE LOANED SECURITIES.
7.12 Portfolios. This Agreement is an agreement entered into between the
Bank and the Lender with respect to each Portfolio. With respect to any
obligation of the Lender on behalf of any Portfolio arising out of this
Agreement, the Bank shall look for payment or satisfaction of such obligation
solely to the assets of the Portfolio to which such obligation relates as though
the Bank had separately contracted with the Lender by separate written
instrument with respect to each Portfolio. Furthermore, unless the context
otherwise requires, any reference in this Agreement to any actions to be taken
by the Lender shall be deemed to refer to the Lender acting on behalf of one or
more of its Portfolios, any reference to the assets of the Lender shall be
deemed to refer only to assets of the applicable Portfolio, and any duty or
obligation of the Bank hereunder to the Lender shall be deemed to refer to
duties and obligations with respect to such individual Portfolios. In the event
that the Lender establishes one or more additional Portfolios with respect to
which the Lender wishes to employ the Bank to act as securities lending agent
hereunder, the Lender shall notify the Bank in writing. Upon written acceptance
by the Bank, such Portfolio shall become subject to the provisions of this
Agreement to the same extent as the existing Portfolios, except to the extent
that such provisions (including those relating to the compensation and expenses
payable by the Lender and its Portfolios) may be modified with respect to each
additional Portfolio in writing by the Lender and the Bank at the time of the
addition of the Portfolio.
7.13 Trust Notice. A copy of the Agreement and Declaration of Trust
establishing the Lender is on file with the Secretary of State of The
Commonwealth of Massachusetts, and notice is hereby given that this Agreement is
executed on behalf of the Lender by the officers of the Lender as officers and
not individually and that the obligations of or arising out of this Agreement
are not binding upon any of the trustees, officers or shareholders individually
but are binding only upon the assets and property belonging respectively to each
Portfolio.
[Remainder of Page Intentionally Left Blank]
11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officers, thereunto duly authorized and
their respective corporate seals to be hereunto affixed, as of the day and year
first above written.
XXXXXX XXXXXX FUNDS II
By: /s/ Xxxxxxxx X. Xxxxxxxxx
-----------------------------------------
Title: Xxxxxxxx X. Xxxxxxxxx
Treasurer
INVESTORS BANK & TRUST COMPANY
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------
Title: Xxxxxx X. Xxxxxx
Managing Director
12
Schedule I
Portfolios
Series of Xxxxxx Xxxxxx Funds II covered under this Agreement:
Xxxxxx Xxxxxx High Income Fund
Xxxxxx Xxxxxx Strategic Income Fund
Xxxxxx Xxxxxx Limited Term U.S. Government Fund
Xxxxxx Xxxxxx Municipal Income Fund
Schedule II
Approved Investments
Bank Obligations
Time Deposits and Bankers Acceptances with Domestic and Foreign Banks
including Offshore Time Deposits. All Banks obligations will have a short
term rating of X-0, X-0, or P-1 from Fitch, S & P or Moody's at time of
purchase.
Money Market Funds
Institutional Money Market Funds that meet the requirements of sections
(c)(2), (c)(3) and (c)(4) of Rule 2a-7 under the Investment Company Act and
that have assets greater than $500 million, including, without limitation,
the Merrimac Cash Fund series of Merrimac Funds*.
Repurchase Agreements
Collateral held by IBT or a third party sub-custodian. Collateralized at a
minimum of 102%. Eligible collateral includes US Government Securities. The
following are acceptable counterparties.
Bear Xxxxxxx & Co, Inc.
CS First Boston Corporation
Xxxxxxx Xxxxx & Co.
Xxxxxx Brothers, Inc.
Xxxxxxx Xxxxx Government Securities
Xxxxxx Xxxxxxx & Co., Inc.
Prudential Securities, Inc.
UBS, Inc.
Commercial Paper
Must be rated A-1 by S&P or P-1 by Moody's at time of purchase.
Other
Mutual funds or other pooled investment vehicles managed by Xxxxx & Xxxx
Asset Management to the extent permitted by applicable law or SEC exemptive
relief.
GENERAL
All investments will be US Dollar denominated.
The final maturity for any security/issue will be one year or less.
All investments will be in compliance with Investment Company Act of 1940.
By:________________________________
Title:_____________________________
Date:______________________________
--------
* The Bank acts as investment advisor to and serves as custodian, administrator
and transfer agent of the Merrimac Funds.
Schedule III
Approved Borrowers
Bank of America Securities LLC
Bear, Xxxxxxx Securities Corp.
Credit Suisse First Boston Corporation (includes DLJ Securities Corp.)
Deutsche Bank Securities Inc.
Xxxxxxx, Xxxxx & Co.
ING Barings, LLC
Xxxxxx Brothers Inc.
XX Xxxxxx Securities Inc.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx, Inc.
Xxxxxx Xxxxxxx & Co. (includes Xxxxxx Xxxxxxx Securities Services Inc.)
Prudential Securities, Inc.
Xxxxxxx Xxxxx Barney Inc.
UBS Inc. (includes UBS Warburg Inc. and UBS PaineWebber, Inc.)
By:________________________________
Title:_____________________________
Date:______________________________
Schedule IV
Letter of Credit Banks
[Please Provide]
Schedule V
Loan Ceiling Amounts
Xxxxxx Xxxxxx High Income Fund 33 1/3%
Xxxxxx Xxxxxx Strategic Income Fund 33 1/3%
Xxxxxx Xxxxxx Limited Term U.S. Government Fund 33 1/3%
Xxxxxx Xxxxxx Municipal Income Fund 33 1/3%
