Exhibit 8(f)
SECURITIES LENDING AGENCY AGREEMENT dated as of August 10, 2001 between
QA Advisers LLC ("QA LLC"), a Delaware limited liability company, and,
separately, each investment fund identified on Schedule 1, as it may be amended
by mutual written agreement between QA LLC and each additional fund from time to
time (each a "Fund").
WHEREAS, the Directors or Trustees, as the case may be, of each Fund
have authorized the Fund to lend securities to approved Borrowers; and
WHEREAS, the Directors or Trustees, as the case may be, of each Fund
have appointed QA LLC as the Fund's lending agent and coordinator of the Fund's
securities lending program, subject to the terms and conditions set forth
herein; and
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties hereto agree as follows:
1. Appointment. The Fund appoints QA LLC as its lending agent, and QA
LLC accepts such appointment. QA LLC will act solely as a directed agent of the
Fund hereunder, and QA LLC shall have no duties or responsibilities in respect
of securities lending transactions except those expressly set forth in this
Agreement.
2. Authorizations. The Fund authorizes QA LLC to act as its agent
as set forth in this Section.
2.1 Lending of Available Securities. The Fund authorizes QA LLC to
lend, on the Fund's behalf, those securities ("Available
Securities") which are held in accounts maintained under the
supervision of the Fund's custodian (the "Custodian") or any
sub-custodian (each a "Custody Account"), other than
securities which the Fund's investment adviser (the
"Adviser"), on behalf of the Fund, specifically notifies QA
LLC are not available for lending. The Fund warrants to QA LLC
that it will give appropriate instructions to the Adviser and
the Custodian sufficient to permit QA LLC to arrange and
settle loan transactions on the Fund's behalf as contemplated
by this Agreement.
2.2 Lending to Approved Borrowers. The Fund authorizes the lending
of Available Securities to any one or more of the institutions
approved by the Fund and the Fund's Adviser and listed on
Schedule 2 hereto (each, an "Approved Borrower"). The Fund's
Adviser, on behalf of the Fund, may request that QA LLC change
the Approved Borrowers by delivering an updated Schedule 2 to
QA LLC.
2.3 Securities Loan Agreement. QA LLC is authorized to execute
securities loan agreements ("SLA") as the Fund's agent on a
disclosed basis with Approved Borrowers. The SLA will be in
substantially the form of Schedule 3 annexed hereto. Subject
to the preceding sentence, the Fund hereby authorizes QA LLC
to revise, without notice to the Fund, the terms of any SLA
with any Approved Borrower as QA LLC deems necessary or
appropriate, in its discretion, in order to effect any loan
transaction contemplated hereby or thereby. The Fund agrees to
be
bound by the terms of SLA's entered into by QA LLC with
Approved Borrowers with respect to the Fund's participation in
the securities lending program as though the Fund were itself
a party to all of such agreements. The Fund specifically
approves such form of agreement and agrees, upon request of QA
LLC, to cause the Adviser to promptly furnish to QA LLC the
Fund's financial statements or other documents or information
reasonably requested by QA LLC in order to enable QA LLC to
satisfy reasonable credit and legal requests by Approved
Borrowers in connection with any SLA or loan transaction.
2.4 Lending under Approved Terms. All loans arranged by QA LLC on
behalf of a Fund shall comply with applicable Securities and
Exchange Commission guidelines for securities lending, any
applicable Securities and Exchange Commission exemptive order
and the investment restrictions and/or guidelines for the Fund
and shall be subject to the terms of an SLA substantially
similar to Schedule 3. The Fund may, at the request of the QA
LLC, approve changes to the Approved Terms by delivering an
amended Schedule 3 to QA LLC. QA LLC shall negotiate on behalf
of the Fund with each Approved Borrower all terms of a
securities loan, including the amounts or fees to be received
or paid pursuant to the applicable SLA. QA LLC may prepare a
transactional confirmation in respect of each loan effected
pursuant to a SLA, setting forth the securities borrowed and
the material terms of the loan, and may transmit such
confirmation to the Approved Borrower in accordance with such
SLA. The Fund understands and agrees that the identity of the
Fund will be disclosed by QA LLC to the Approved Borrower in
accordance with the SLA.
2.5 Authorizations by Fund. The Fund authorizes and empowers QA
LLC to execute in the Fund's name all agreements and documents
as may be necessary or appropriate in QA LLC's judgment to
carry out the purposes of this Agreement. It is understood and
agreed that QA LLC is authorized to supply any information
regarding the Fund that is required by an SLA or under
applicable law.
3. Loan of Securities. During the term of any securities loan,
the Fund shall permit the loaned securities to be transferred, pursuant to a
SLA, into the name of an Approved Borrower.
3.1 Limits on Return of Loaned Securities. The Fund acknowledges
that, under the applicable SLA, Approved Borrowers will not be
required to return loaned securities immediately upon receipt
of notice from QA LLC terminating the applicable loan, but
instead will be required to return such loaned securities
within such period of time following such notice which is the
standard settlement period for trades of the loaned securities
entered into on the date of such notice in the principal
market therefor, or from the giving of such notice.
3.2 Recall of Loaned Securities. Upon receiving a notice from the
Adviser that Available Securities which have been lent to an
Approved Borrower should no longer be considered Available
Securities (whether because of the sale of such securities or
otherwise), QA LLC shall notify promptly thereafter the
Approved
Borrower which has borrowed such securities that the loan of
such securities is terminated and that such securities are to
be returned within the time specified by the applicable SLA,
provided that QA LLC may alternatively determine that it is in
the best interests of another lending client of QA LLC to
renew and restate such loan transaction on behalf, and in the
name, of such other lending client and cause to be delivered
to the Fund an equivalent amount of such security from the
assets of such other lending client (in which event such
renewal and restatement of the loan shall constitute separate
transactions between each lending client of QA LLC and the
borrower shall not be construed as a transaction between such
clients.)
3.4 Notification of Sales of Loaned Securities. The Fund
acknowledges its obligation to QA LLC, as applicable, to cause
and require the Adviser to provide notification of any sale of
securities which are out on loan by the close of business, in
the principal market therefor, on trade date of such sale.
3.5 Termination. QA LLC is authorized in its discretion to
terminate any securities loan entered into with an Approved
Borrower without prior notice to the Fund, subject to the
conditions of the relevant SLA. The Adviser, on behalf of a
Fund, may instruct QA LLC to terminate any loan on any date,
subject to the conditions of the relevant SLA. QA LLC agrees
to comply with any such instruction.
3.6 Removal of Approved Borrower. The Fund hereby acknowledges its
obligation to QA LLC, as applicable, to provide notification
of the removal of an Approved Borrower from Schedule 2 and to
deliver a revised Schedule 2 to QA LLC. Once QA LLC has
received notification of the removal of an Approved Borrower
from Schedule 2 QA LLC will terminate all securities loans
entered into with that Approved Borrower, subject to the
conditions of the relevant SLA.
4. Loan Collateral. For each loan of securities, the Approved
Borrower shall pledge as collateral any of the following items: (a) cash in U.S.
dollars or foreign currency ("Cash Collateral"), or (b) securities issued or
fully guaranteed by the United States government or any agencies or
instrumentalities thereof ("Non-Cash Collateral" and, collectively with Cash
Collateral, "Collateral") having a market value (as determined by QA LLC
pursuant to the applicable SLA) at least equal to the market value of the loaned
securities (as determined by QA LLC pursuant to the applicable SLA).
4.1 Receipt of Collateral. At the commencement of any loan, QA LLC
shall instruct the Approved Borrower to transfer to QA LLC the
required Collateral. Collateral will be received from an
Approved Borrower prior to or simultaneous with delivery of
the securities loaned. If the Approved Borrower does not
provide Collateral to QA LLC, as previously agreed, then QA
LLC will cancel the corresponding loan instruction prior to
delivery.
4.2 Holding and Administration of Collateral.
(a) Cash Collateral. All Cash Collateral shall be
received, held and administered by QA LLC for the
benefit of the Fund in the applicable account
maintained by QA LLC with a Depository for the
purpose of holding loaned securities and Cash
Collateral on behalf of participants in QA LLC's
securities lending program (the "Clearing Account").
"Depository" shall mean: (i) the Depository Trust
Company, and any other securities depository or
clearing agency (and each of their respective
successors and nominees) registered with the U.S.
Securities and Exchange Commission or registered with
or regulated by the applicable foreign equivalent
thereof or otherwise able to act as a securities
depository or clearing agency, (ii) any transnational
depository, (iii) the Federal Reserve book-entry
system for the receiving and delivering of U.S.
Government Securities, and (iv) any other national
system for the receiving and delivering of that
country's government securities. QA LLC is hereby
authorized and directed without obtaining any further
approval from the Fund or the Adviser, to invest and
reinvest all Cash Collateral in an investment listed
in the attached Schedule 4 ("Permitted Investments")
in accordance with Section 5 hereof.
(b) Non-Cash Collateral. All Non-Cash Collateral shall be
received, held and administered by QA LLC for the
benefit of the Fund in the applicable Custody Account
or other account established for the purpose of
holding Non-Cash Collateral.
4.3 Maintenance of Collateral Margin. In respect of loans of
securities entered into on behalf of the Fund, QA LLC will
value on a daily basis, in accordance the applicable SLA, the
loaned securities and all Collateral and, where applicable, QA
LLC shall, in accordance with the provisions of the applicable
SLA, request the Approved Borrower to deliver sufficient
additional Collateral to the Fund to satisfy the applicable
margin requirement. If, as a result of marking-to-market,
Collateral is required to be returned to the Approved Borrower
under the SLA, QA LLC will, without notice to the Fund and
without obtaining any further approval from the Fund, return
such Collateral to the Approved Borrower.
4.4 Substitution of Collateral. The Fund acknowledges and agrees
that, pursuant to any SLA, QA LLC may permit an Approved
Borrower to substitute Collateral of any type specified in
Section 4 hereof during the term of any loan so long as the
required margin in respect of such loan continues to be
satisfied at the time of such substitution.
4.5 Return of Collateral. Upon termination of the loan, QA LLC
shall instruct the Approved Borrower to return the loaned
securities to the applicable Clearing Account. QA LLC will
instruct any custodian or sub-custodian of the Fund, to accept
such return delivery of loaned securities. QA LLC shall
monitor the return of loaned securities. Once QA LLC has
confirmed settlement of the return of the loaned securities,
QA LLC shall effect, on behalf of the Fund, the redemption of
any Permitted Investment, if applicable, and effect the return
of Collateral due the Approved Borrower in accordance with the
Approved Borrower's transfer instructions with respect
thereto, without obtaining any further approval from the Fund.
5. Investment of Cash Collateral. Pursuant to the SLA, the Fund
shall have the right to invest Cash Collateral received in respect of any loan,
subject to an obligation, upon the termination of the loan, to return to the
Borrower the amount of cash initially pledged (as adjusted for any interim
marks-to-market).
5.1 Collateral Investment Direction. The Fund authorizes and
directs QA LLC, subject to oversight by the Adviser, to cause
to be invested, on the Fund's behalf and at the Fund's sole
risk, all Cash Collateral by effecting purchase and sales
and/or subscriptions and redemptions of such Collateral in any
Permitted Investment set forth on Schedule 4 hereto (which may
from time to time be amended in writing by the Fund). QA LLC
shall, where applicable, send timely instructions to the
transfer agent of the Permitted Investment with respect to any
cash transfers required to be completed in conjunction with
any subscription or redemption in a Permitted Investment, and
cause the Adviser and the Custodian to be notified of such
investment. To facilitate QA LLC's ability to effect
investments of Cash Collateral authorized by this Agreement,
the Fund appoints QA LLC as its true and lawful
attorney-in-fact, with full power of substitution and
revocation, in its name, place and stead to take action in the
Fund's name to the extent necessary or desirable to fulfill
the purposes of this Agreement, including, without limitation,
(i) to establish trading accounts in a Fund's name, (ii) to
execute and deliver such contracts and other documents on a
Fund's behalf as QA LLC, in its discretion, deems necessary or
desirable to establish such trading accounts or otherwise to
effect investments on the Fund's behalf that are authorized by
this Agreement, and (iii) to act, in QA LLC's discretion, in
the Fund's name to enforce the Fund's rights and remedies
under such contracts or documents.
5.2 Collateral Investment Risk. Any such investment shall be at
the sole risk of the Fund. Any income or gains and losses from
investing and reinvesting any Cash Collateral delivered by an
Approved Borrower pursuant to a SLA shall be at the Fund's
risk, and the Fund agrees that to the extent any such losses
reduce the amount of cash below the amount required to be
returned to the Approved Borrower upon the termination of any
loan (including any Cash Collateral Fee as defined in the
SLA), the Fund will, on demand of QA LLC, immediately pay or
cause to be paid to such Approved Borrower an equivalent
amount in cash.
6. Borrower Default. In the event of default by an Approved
Borrower with respect to any loan entered into pursuant to a SLA, QA LLC will
take such actions as are set forth in the applicable SLA. In addition, the
following provisions shall apply.
6.1 Replacement of Loaned Securities. If an Approved Borrower
fails, pursuant to the SLA with QA LLC, to return loaned
securities with respect to a loan when due
("Default Event"), then QA LLC shall use the Collateral or the
proceeds of the liquidation of Collateral to purchase for the
affected Fund's account, for settlement in the normal course,
replacement securities of the same issue, type, class and
series as that of the loaned securities ("Buy-In"). QA LLC
shall purchase an amount of replacement securities having a
value equal to the value of the Collateral (as determined
herein). If the cost of fully replacing the loaned securities
is greater than the value of the Collateral (or liquidated
damages calculated under Section 6.2), QA LLC shall be
responsible for using its funds, at its expense, to satisfy
the shortfall, but only to the extent that such shortfall is
not due to any diminution in the value of the Collateral due
to reinvestment risk that is borne by the Fund pursuant to
Section 5 of this Agreement. For purposes of this Section,
value of the Collateral shall be calculated as follows:
6.1.1 Value of Cash Collateral. In the case of loans
collateralized solely by Cash Collateral, the value
of the Collateral shall be the market value of the
investment of such Cash Collateral.
6.1.2 Value of Securities Collateral. In the case of loans
collateralized solely by securities Collateral, the
value of the Collateral shall be the market value of
such Collateral.
6.1.3 Valuation Date. The value of the Collateral shall be
determined on the date of the Buy-In (or the payment
made pursuant to Section 6.2 below).
6.1.4 Market Value. Market value shall be determined by QA
LLC, where applicable, based upon prices obtained
from recognized pricing services or dealer price
quotations.
6.1.5 Multiple Forms of Collateral. Where a loan is
collateralized by more than one type of Collateral,
the aggregate market value of Collateral securing
such loan (for the purpose of computing the
indemnity) shall be the sum of the market values for
each relevant type of Collateral.
6.2 Impossibility of Replacement/Liquidated Damages. If QA LLC
determines that a Buy-In is commercially impracticable, QA LLC
shall, in lieu of effecting a Buy-In, pay to the affected Fund
an amount equal to the market value of the loaned securities
determined at the close of business on the date of the Default
Event to be reduced by any shortfall diminution in the
Collateral Value due to reinvestment risk that is borne by the
Fund pursuant to Section 5.
6.3 Replacement of Distributions. In addition to making the
purchases or payments required above, QA LLC shall pay from
the proceeds of Collateral to the Fund the value of all
distributions on the Loaned Securities, the record dates for
which occur before the date that QA LLC executes a Buy-In or
makes the payments to the Fund required pursuant to Section
6.2 and that have not otherwise been credited to the Fund's
Custody Account. For purposes of this Section, the value of
such distributions shall be calculated net of taxes, expenses
or other deductions
that would normally accrue to such distributions. QA LLC shall
use Collateral or the proceeds of such Collateral to the
extent available to make such payments of distributions.
6.4 Collateral not in Possession or Control of QA LLC. If, on the
date of the Default Event by reason of the Fund's request or
actions, QA LLC is not in possession or control of the
Collateral allocated to the defaulted Loan, the Fund shall
promptly cause such Collateral to be transferred to QA LLC for
application against the cost of any Buy-In. In such event, the
replacement provisions of this Section 6 shall not apply, and
the compensation of the Fund shall be limited to the
Collateral Value on the date that Buy-In or replacement
payment may be affected.
6.5 Subrogation and Assignment of Rights in Collateral. In the
event that QA LLC is required to perform or make any payment
under this Section, the Fund agrees that, to the extent of
such performance or payment, QA LLC shall be subrogated to the
Fund, and the Fund shall assign, and be deemed to have
assigned, to QA LLC all of such Fund's rights in, to and
against the Borrower in respect of the related loan, any
Collateral pledged by the Borrower in respect of such loan and
all proceeds of such Collateral. In the event that the Fund
receives or is credited with any payment, benefit or value
from or on behalf of the Borrower in respect of rights to
which QA LLC is subrogated as provided herein, the Fund shall
promptly remit or pay to QA LLC the same (or, where
applicable, its United States dollar equivalent).
7. Income, Corporate Actions and Substitute Payments. Income,
corporate actions and Substitute Payments (as defined in Sections 7.1 and 7.2)
shall be dealt with as provided in this Section 7.
7.1 Income and Related Payments to Borrower. Where Collateral
consists of securities and the Approved Borrower, pursuant to
a SLA, is due to receive an amount equal to the interest or
distribution declared ("Collateral Substitute Payment") in
respect of such Collateral during the term of the related
securities loan, QA LLC shall promptly remit or cause to be
remitted such Collateral Substitute Payment on behalf of the
Fund to the Approved Borrower in accordance with such Approved
Borrower's instructions. QA LLC shall likewise remit, or cause
to be remitted, to any Approved Borrower the applicable Cash
Collateral Fee (as defined in the SLA) when due in accordance
with QA LLC's instructions.
7.2 Income and Related Payments to Fund. QA LLC shall instruct
each Approved Borrower which is a party to a SLA to remit any
payment in-lieu-of the interest or distribution declared on
loaned securities ("Loan Substitute Payment") which is
denominated in a currency other than U.S. dollars to the
Fund's applicable Custody Account, and QA LLC shall receive,
hold and administer the same, for the account of the Fund. QA
LLC shall also instruct each Approved Borrower which is a
party to a SLA to remit any other fees payable on loaned
securities to
QA LLC for the account of the Fund, and QA LLC shall receive,
hold and administer the same for the account of the Fund.
7.3 Corporate Actions and Proxy Rights. The Fund acknowledges
that, with respect to securities which are out on loan over
the applicable record date for such action, unless otherwise
agreed hereto, it will not be entitled to participate in any
dividend reinvestment program or vote any proxies. Corporate
actions will otherwise be processed in accordance with the
SLA.
8. Statements. QA LLC will provide to the Adviser, on the Fund's
behalf, (i) upon request, a daily statement of activity setting forth
information relating to loaned securities, marks-to-market and termination and
(ii) on or about the 7th (seventh) Business Day of each month, a statement
indicating for the preceding calendar month the securities lent by the Fund, the
value of such securities, the identity of the Approved Borrowers, the nature and
amount of Collateral pledged or delivered as security for the loaned securities,
the income received (or loss incurred) from the daily investment of Cash
Collateral, the amounts of any fees or payments paid with respect to each loan
and such other information as the parties hereto may agree to from time to time.
For purposes hereof, "Business Day" means any day on which QA LLC is open for
business in Princeton, New Jersey. QA LLC (unless otherwise instructed by the
Fund) shall instruct any Approved Borrower to remit directly to QA LLC, as
applicable, all amounts and fees due the Fund pursuant to any loan of
securities, which QA LLC shall in turn pay to the Fund.
9. SIPC Coverage. THE PARTIES ACKNOWLEDGE THAT THE PROVISIONS OF
THE SECURITIES INVESTOR PROTECTION ACT OF 1970 MAY NOT PROTECT THE FUND WITH
RESPECT TO THE SECURITIES LOAN TRANSACTION AND THAT, THEREFORE, THE COLLATERAL
DELIVERED BY AN APPROVED BORROWER TO THE FUND MAY CONSTITUTE THE ONLY SOURCE OF
SATISFACTION OF THE OBLIGATION OF THE APPROVED BORROWER IN THE EVENT THE
APPROVED BORROWER (OR ITS AGENT) FAILS TO RETURN THE SECURITIES.
10. Fund Information. The Fund covenants and agrees to promptly
furnish to QA LLC any information regarding the Fund which is necessary to
effect transactions on behalf of the Fund including, but not limited to,
restrictions it wishes to impose with respect to the acceptance of forms of
collateral or lending to any Approved Borrower(s) or any limitations imposed
pursuant to any applicable law, regulation, authority, charter, by-law, statute
or other instrument. QA LLC agrees to comply with such restrictions and
limitations.
11. Tax Treatment. The Fund acknowledges that the tax treatment of
Substitute Payments may differ from the tax treatment of the interest or
dividend to which such payment relates and that the Fund has made its own
determination as to the tax treatment of any securities loan transactions
undertaken pursuant to this Agreement and of any dividends, distributions,
remuneration or other funds received hereunder. The Fund also acknowledges that,
to the extent that either the Fund or the Approved Borrower is a non-U.S.
resident, QA LLC may be required to withhold tax on amounts payable to or by the
Fund pursuant to a securities loan and may at any time claim from the Fund any
shortfall in the amount QA LLC so withheld.
12. Responsibility of QA LLC. Subject to the requirements of
applicable law, QA LLC shall not be liable with respect to any losses incurred
by the Fund in connection with this securities lending program or under any
provision hereof, except to the extent that such losses result from its willful
misfeasance, bad faith, gross negligence or reckless disregard in the
performance of its duties under this Agreement. QA LLC shall not be liable for
losses, costs, expenses or liabilities caused by or resulting from the acts or
omissions of the Fund or of any agent or third party custodian of the Fund. QA
LLC shall not be responsible for any special, punitive, indirect or
consequential damages, whether or not QA LLC has been apprised of the likelihood
of such damages.
13. Fund Indemnity. The Fund hereby indemnifies QA LLC (which, for
purposes of this paragraph shall include its respective officers, directors,
partners, managers, employees and agents) from and against any and all claims,
damages, liabilities, losses, costs or expenses (including the reasonable fees
and expenses of counsel) incurred, suffered or sustained by QA LLC, which
directly or indirectly arise from performance of this Agreement or any
transaction effected pursuant to a SLA, except to the extent that such claims,
damages, liabilities, losses, costs or expenses were caused solely by the
willful misfeasance, bad faith, gross negligence or reckless disregard of QA
LLC. This indemnity shall survive the termination of this Agreement and the
resignation or removal of QA LLC as agent.
14. Representations and Warranties. Each party represents and
warrants to the other that (i) it has due authority to enter into and perform
this Agreement and any transactions contemplated thereby; (ii) the execution and
performance of this Agreement and any transaction contemplated thereby has been
duly authorized by all necessary action, corporate or otherwise, and does not
violate any law, regulation, charter, by-law or other instrument, restriction or
provision applicable to it; and (iii) this Agreement constitutes such party's
legal, valid and binding obligation enforceable in accordance with its terms. In
addition, the Fund represents that: (a) any loan authorized hereunder and the
performance of this Agreement in respect of such loan is authorized by the
prospectus and other constitutive documents of the Fund (including any limits as
to the aggregate amount of authorized lending under such documents); and (b) as
to any securities lent at any time and from time to time on behalf of the Fund,
the Fund shall be the owner thereof with clear title thereto and no lien, charge
or encumbrance upon such securities shall exist.
15. Non-Exclusivity of Agency Service and Similar Matters. The
Fund acknowledges that QA LLC, acting on behalf of other accounts, may effect
transactions with or for the same institutions to which loans of securities may
be made hereunder, which transactions may give rise to potential conflict of
interest situations. The Fund further acknowledges that QA LLC may engage in
securities lending transactions as agent for other lenders. Lending
opportunities among Borrowers shall be allocated at the discretion of QA LLC in
an equitable manner.
16. Force Majeure. QA LLC 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; governmental actions; or inability to obtain labor,
material, equipment or transportation. Without limiting the foregoing, QA LLC
shall not be responsible for economic, political or investment risks incurred
through the Fund's participation in this securities lending program.
17. Reliance on Fund Communications. QA LLC shall be entitled to
conclusively rely upon any certification, notice or other communication
(including by telephone (if promptly confirmed in writing), telex, facsimile,
telegram or cable) reasonably believed by it to be genuine and correct and to
have been signed or sent by or on behalf of an approved person ("Approved
Person") of the party sending such certification, notice or other communication.
Set forth in Schedule 5 hereto is a list of Approved Persons for each of the
parties hereto, which list may be amended by any party from time to time upon
notice to the other parties. No provision of this Agreement shall require QA LLC
to expend or risk its own funds in the performance of its duties hereunder. QA
LLC reserves the right to notify the Fund of any restrictions (self-imposed or
otherwise) concerning its activities worldwide. QA LLC and the Fund shall each
have the right to consult with counsel with respect to their respective rights
and duties hereunder and shall not be liable for actions taken or not taken in
reliance on such advice.
18. Compensation. The basis of QA LLC's compensation for its
activities hereunder and in respect of any loan is set forth in Schedule 6
hereto. QA LLC shall notify the Fund, on or about the 7th (seventh) day of each
month, of the amount of fees due QA LLC hereunder and, promptly upon receipt of
such notice, the Fund shall effect the requisite payment to QA LLC in
immediately available funds of U.S. dollars.
19. Termination. This Agreement may be terminated at any time by
either party upon 30 days' prior written notice to the other party; provided
that the Fund's indemnification shall survive any such termination.
20. Action on Termination. It is agreed that (a) upon receipt of
notice of termination, no further loans shall be made hereunder by QA LLC and
(b) QA LLC shall, within a reasonable time after termination of this Agreement,
terminate any and all outstanding loans. The provisions hereof shall continue in
full force and effect in all other respects until all loans have been terminated
and all obligations satisfied as herein provided.
21. Notices. All notices, demands and other communications
hereunder shall be in writing and delivered or transmitted (as the case may be)
by registered mail, facsimile, telex, courier, or be effected by telephone
promptly confirmed in writing and delivered or transmitted as aforesaid, to the
intended recipient in accordance with Schedule 7 hereto. Notices shall be
effective upon receipt.
22. Governing Law and Jurisdiction. This agreement shall be
governed by and construed in accordance with the laws of the State of New York
without reference to conflict of law provisions thereof. The parties hereto
hereby irrevocably consent to the exclusive jurisdiction of (and waive dispute
of venue in) the courts of the State of New York and the federal courts located
in New York City in the Borough of Manhattan.
23. Entire Agreement. This Agreement supersedes any other
agreement between the parties hereto concerning loans of securities owned by the
Fund. This Agreement constitutes the entire understanding of the parties hereto
with respect to the subject matter hereof. This Agreement together with any
other written agreements between the parties entered into concurrently with this
Agreement contain the entire agreement between the parties with respect to the
transactions contemplated hereby and supersede all previous oral or written
negotiations, commitments and understandings related thereto.
24. Assignment. This Agreement shall not be assigned by any party
without the prior written consent of the other party.
25. Capitalized Terms. Capitalized terms not otherwise defined
herein shall have the meanings provided in the SLA.
26. Amendment. This Agreement may not be amended or modified in
any respect, without the written agreement of both parties.
27. Waiver. No provision of this Agreement may be waived, without
the written agreement of both parties. No waiver by one party of any obligation
of the other hereunder shall be considered a waiver of any other obligation of
such party. 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.
28. Remedies. All remedies hereunder shall survive the termination
of this Agreement.
29. Severability. In the event any provision of this Agreement is
adjudicated to be void, illegal, invalid, or unenforceable, the remaining terms
and provisions of this Agreement shall not be affected thereby, and each of such
remaining terms and provisions shall be valid and enforceable to the fullest
extent permitted by law, unless a party demonstrates by a preponderance of the
evidence that the invalidated provision was an essential economic term of the
Agreement.
30. Further Assurances. Each party hereto shall execute and
deliver such other documents or agreements as may be necessary or desirable for
the implementation of this Agreement and the consummation of the transactions
contemplated hereby.
31. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which taken
together shall be deemed one and the same instrument.
32. Headings. The headings of sections herein are included solely
for convenience and shall have no effect on the meaning of this Agreement.
33. Separate Agreement. Execution of the Agreement by more than
one Fund shall not create any contractual or other obligation between or among
such Fund and the Agreement shall constitute a separate agreement between QA LLC
and each Fund. Every reference to Fund
shall be construed to be a reference solely to the particular Fund that is a
party to the relevant Transaction. Each of the parties agrees that under no
circumstances shall any rights, obligations, remedies or liabilities of a
particular Fund, or with respect to Transactions to which a particular Fund is a
party, be deemed to constitute rights, obligations, remedies or liabilities
applicable to any other Fund or to Transactions to which other Funds are
parties, and QA LLC shall have no right to set off claims of any Fund against
property or liabilities of any other Fund. All Transactions are entered into in
reliance on the fact that this Agreement constitutes a separate agreement
between QA LLC and each Fund.
34. Additional Parties. QA LLC agrees that additional entities may
be added as a Fund to this Agreement from time to time upon written notice to QA
LLC as to the prospective inclusion of such additional Fund and the written
consent of QA LLC to the addition of such Fund.
35. Business Trust. With respect to a Fund which is a business
trust, QA LLC acknowledges and agrees that this Agreement is executed by such
Fund on behalf of the trustees of such Fund as trustees and not individually;
and no trustee, shareholder, officer, employee or agent of such business trust
shall be held to any personal liability, nor shall resort be had to their
property for the satisfaction of the Fund's obligations under this Agreement,
and such obligations are binding only upon the assets and property of such Fund.
36. Series Funds. The parties acknowledge that the Fund may be an
investment company, whose assets may be allocated to two or more series. In such
case, QA LLC agrees to seek satisfaction of all obligations of such Fund
hereunder solely out of the assets of the series on whose behalf the
Transaction(s) giving to the obligations was entered into. If the Fund
establishes two or more series, the Fund shall so indicate on Schedule 1 or
otherwise give notice thereof and identify such series, and from such time the
liability of such series shall be limited as set forth above, as though and to
the same extent as if such series was a separate and distinct Fund hereunder.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
in its name and behalf as of the day and year first set forth above.
EACH FUND LISTED ON SCHEDULE 1
By:
-------------------------------------
Name: Xxxxx X. Xxxxx
Title: President of each Registered U.S.
Investment Company (or each series
thereof), and Executive Vice President
of the Mercury Funds, Inc., Mercury
Master Trust, and Mercury VI Funds, Inc.
QA ADVISERS LLC AS AGENT
By:
-------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxxx
Title: Secretary
SCHEDULE I
Fund Custodian
CBA Money Fund State Street Bank & Trust Company
CMA Money Fund State Street Bank & Trust Company
Corporate High Yield Fund, Inc. Chase Manhattan Bank
Corporate High Yield Fund II, Inc. State Street Bank & Trust Company
Corporate High Yield Fund III, Inc. State Street Bank & Trust Company
Debt Strategies Fund, Inc. The Bank of New York
Financial Institutions Series Trust The Bank of New York
Summit Cash Reserves Fund
Global Financial Services Master Trust Xxxxx Brothers Xxxxxxxx & Co.
Xxxxxxx Xxxxx Global Financial Services Fund, Inc.
Mercury Global Holdings Fund, Inc. Chase Manhattan Bank
Mercury Master Trust Xxxxx Brothers Xxxxxxxx & Co.
Mercury Master US Large Cap Portfolio
Mercury Master US Small Cap Growth Portfolio
Mercury Master Pan-European Growth Portfolio
Mercury Master International Portfolio
Mercury Master Global Balanced Portfolio
Mercury Master Select Growth Portfolio
Mercury Funds, Inc. Xxxxx Brothers Xxxxxxxx & Co.
Mercury US Large Cap Fund
Mercury US Small Cap Growth Fund
Mercury Pan-European Growth Fund
Mercury International Fund
Mercury Global Balanced Fund
Mercury Select Growth Fund
Mercury QA Equity Series, Inc. Chase Manhattan Bank
Mercury QA Large Cap Core Fund
Mercury QA Large Cap Value Fund
Mercury QA Large Cap Growth Fund
Mercury QA Mid Cap Fund
Mercury QA Small Cap Fund
Mercury QA International Fund
Mercury QA Strategy Series, Inc. Chase Manhattan Bank
Mercury QA Strategy Growth & Income Fund
Mercury QA Strategy Long-Term Growth Fund
Mercury QA Strategy All-Equity Fund
SCHEDULE I
Fund Custodian
Mercury VI Funds, Inc. Xxxxx Brothers Xxxxxxxx & Co.
Mercury Large Cap Growth Focus Fund
Mercury V.I. Pan European Growth Fund
Master Basic Value Trust The Bank of New York
Xxxxxxx Xxxxx Basic Value Fund, Inc.
Mercury Basic Value Fund, Inc.
Master Focus Twenty Trust The Bank of New York
Xxxxxxx Xxxxx Focus Twenty Fund, Inc.
Mercury Focus Twenty Fund, Inc.
Master Internet Strategies Trust Xxxxx Brothers Xxxxxxxx & Co.
Xxxxxxx Xxxxx Internet Strategies Fund, Inc.
Mercury Internet Strategies Fund, Inc.
Master Large Cap Series Trust Xxxxx Brothers Xxxxxxxx & Co.
Master Large Cap Growth Portfolio
Master Large Cap Value Portfolio
Master Large Cap Core Portfolio
Xxxxxxx Xxxxx Large Cap Series Funds, Inc. Xxxxx Brothers Xxxxxxxx & Co.
Xxxxxxx Xxxxx Large Cap Value Fund
Xxxxxxx Xxxxx Large Cap Core Fund
Xxxxxxx Xxxxx Large Cap Growth Fund
Mercury Large Cap Series Funds, Inc. Xxxxx Brothers Xxxxxxxx & Co.
Mercury Large Cap Value Fund
Mercury Large Cap Core Fund
Mercury Large Cap Growth Fund
Master Mid Cap Growth Trust The Bank of New York
Xxxxxxx Xxxxx Mid Cap Growth Fund, Inc.
Mercury Xxxxx Mid Cap Growth Fund, Inc.
Master Premier Growth Trust The Bank of New York
Xxxxxxx Xxxxx Premier Growth Fund, Inc.
Mercury Premier Growth Fund, Inc.
Master Senior Floating Rate Trust The Bank of New York
Xxxxxxx Xxxxx Senior Floating Rate Fund II, Inc.
Mercury Senior Floating Rate Fund, Inc.
Master Small Cap Value Trust The Bank of New York
Xxxxxxx Xxxxx Small Cap Value Fund, Inc.
Mercury Small Cap Value Fund, Inc.
SCHEDULE I
Fund Custodian
Master US High Yield Trust State Street Bank & Trust Company
Xxxxxxx Xxxxx U.S. High Yield Fund, Inc.
Mercury U.S. High Yield Fund, Inc.
Xxxxxxx Xxxxx Balanced Capital Fund, Inc. The Bank of New York
Xxxxxxx Xxxxx Xxxx Fund, Inc. State Street Bank & Trust Company
Core Bond Portfolio
High Income Portfolio
Intermediate Term Portfolio
Xxxxxxx Xxxxx Developing Capital Markets Fund, Inc. Xxxxx Brothers Xxxxxxxx & Co.
Xxxxxxx Xxxxx Disciplined Equity Fund, Inc. Chase Manhattan Bank
Xxxxxxx Xxxxx Dragon Fund, Inc. Xxxxx Brothers Xxxxxxxx & Co.
Xxxxxxx Xxxxx Emerging Markets Debt Fund, Inc. Xxxxx Brothers Xxxxxxxx & Co.
Xxxxxxx Xxxxx Equity Income Fund State Street Bank & Trust Company
Xxxxxxx Xxxxx EuroFund, Inc. Xxxxx Brothers Xxxxxxxx & Co.
Xxxxxxx Xxxxx Focus Value Fund, Inc. Chase Manhattan Bank
Xxxxxxx Xxxxx Fundamental Growth Fund, Inc. Chase Manhattan Bank
Xxxxxxx Xxxxx Global Allocation Fund, Inc. Xxxxx Brothers Xxxxxxxx & Co.
Xxxxxxx Xxxxx Global Bond Fund for Investment & Retirement State Street Bank & Trust Company
Xxxxxxx Xxxxx Global Growth Fund, Inc. State Street Bank & Trust Company
Xxxxxxx Xxxxx Global SmallCap Fund, Inc. Xxxxx Brothers Xxxxxxxx & Co.
Xxxxxxx Xxxxx Global Technology Fund, Inc. Xxxxx Brothers Xxxxxxxx & Co.
Xxxxxxx Xxxxx Global Value Fund, Inc. Xxxxx Brothers Xxxxxxxx & Co.
Xxxxxxx Xxxxx Growth Fund State Street Bank & Trust Company
Xxxxxxx Xxxxx Healthcare Fund, Inc. Chase Manhattan Bank
Xxxxxxx Xxxxx High Income Municipal Bond Fund, Inc. The Bank of New York
Xxxxxxx Xxxxx International Equity Fund Xxxxx Brothers Xxxxxxxx & Co.
Xxxxxxx Xxxxx Latin America Fund, Inc. Xxxxx Brothers Xxxxxxxx & Co.
Xxxxxxx Xxxxx Municipal Bond Fund, Inc. The Bank of New York
National Portfolio
Insured Portfolio
Limited Maturity Portfolio
Xxxxxxx Xxxxx Natural Resources Trust The Bank of New York
Xxxxxxx Xxxxx Pacific Fund, Inc. Xxxxx Brothers Xxxxxxxx & Co.
Xxxxxxx Xxxxx Ready Assets Trust The Bank of New York
Xxxxxxx Xxxxx Retirement Series Trust The Bank of New York
Xxxxxxx Xxxxx Retirement Reserves Money Fund
SCHEDULE I
Fund Custodian
Xxxxxxx Xxxxx Senior Floating Rate Fund, Inc. The Bank of New York
Xxxxxxx Xxxxx Series Fund, Inc. The Bank of New York
Xxxxxxx Xxxxx Balanced Capital Strategy Portfolio
Xxxxxxx Xxxxx Capital Stock Portfolio
Xxxxxxx Xxxxx Core Bond Strategy Portfolio
Xxxxxxx Xxxxx Fundamental Growth Stock Portfolio
Xxxxxxx Xxxxx Global Allocation Strategy Portfolio
Xxxxxxx Xxxxx High Yield Portfolio
Xxxxxxx Xxxxx Intermediate Government Bond Portfolio
Xxxxxxx Xxxxx Money Reserve Portfolio
Xxxxxxx Xxxxx Natural Resources Portfolio
Xxxxxxx Xxxxx Xxxxx-Term Global Income Fund, Inc. Chase Manhattan Bank
Xxxxxxx Xxxxx Xxxxx-Term U.S. Government Fund, Inc. The Bank of New York
Xxxxxxx Xxxxx U.S. Government Mortgage Fund The Bank of New York
Xxxxxxx Xxxxx Utilities & Telecommunications Fund, Inc. Chase Manhattan Bank
Xxxxxxx Xxxxx Variable Series Funds, Inc. The Bank of New York
Xxxxxxx Xxxxx American Balanced Fund
Xxxxxxx Xxxxx Basic Value Focus Fund
Xxxxxxx Xxxxx Core Bond Focus Fund
Xxxxxxx Xxxxx Developing Capital Markets Focus Fund
Xxxxxxx Xxxxx Domestic Money Market Fund
Xxxxxxx Xxxxx Focus Twenty Select Fund
Xxxxxxx Xxxxx Fundamental Growth Focus Fund
Xxxxxxx Xxxxx Global Bond Focus Fund
Xxxxxxx Xxxxx Global Growth Focus Fund
Xxxxxxx Xxxxx Global Allocation Focus Fund
Xxxxxxx Xxxxx Government Bond Fund
Xxxxxxx Xxxxx High Current Income Fund
Xxxxxxx Xxxxx Index 500 Portfolio
Xxxxxxx Xxxxx International Equity Focus Fund
Xxxxxxx Xxxxx Large Cap Core Focus Fund
Xxxxxxx Xxxxx Large Cap Value Focus Fund
Xxxxxxx Xxxxx Natural Resources Focus Fund
Xxxxxxx Xxxxx Reserve Assets Fund
Xxxxxxx Xxxxx Small Cap Value Focus Fund
Xxxxxxx Xxxxx Utilities & Telecommunications Focus Fund
Xxxxxxx Xxxxx World Income Fund, Inc. State Street Bank & Trust Company
SCHEDULE I
Fund Custodian
Quantitative Master Series Trust Chase Manhattan Bank
Master Aggregate Bond Index Series (ML Trust Company)
Master Enhanced S&P 500 Series (ML Trust Company)
Master Enhanced International Series
Master Extended Market Index Series
Master International (Capitalization Weighted) Index Series
Master International (GDP Weighted) Index Series
Master S&P 500 Index Series
Master Small Cap Index Series
Master Mid Cap Index Series
Xxxxxxx Xxxxx Index Funds, Inc. Chase Manhattan Bank
Xxxxxxx Xxxxx Aggregate Bond Index Fund
Xxxxxxx Xxxxx Extended Market Index Fund
Xxxxxxx Xxxxx International (GDP Weighted) Index Fund
Xxxxxxx Xxxxx Mid Cap Index Fund
Xxxxxxx Xxxxx S&P 500 Index Fund
Xxxxxxx Xxxxx Small Cap Index Fund
Mercury Index Funds, Inc. Chase Manhattan Bank
Mercury Aggregate Bond Index
Mercury International (Capitalization Weighted) Index
Mercury Mid Cap Index Fund
Mercury S&P 500 Index Fund
Mercury Small Cap Index Fund
Senior High Income Portfolio, Inc. The Bank of New York
The Asset Program, Inc. The Bank of New York
Mercury Growth Opportunity Fund
Mercury US Government Securities Portfolio
Xxxxxxx Xxxxx Mid Cap Value Fund
The Corporate Fund Accumulation Program The Bank of New York
The S&P 500(C)Protected Equity Fund, Inc. Chase Manhattan Bank
SCHEDULE 2
Approved Borrowers
1) Banc of America Securities LLC
2) Barclays Capital Inc.
3) Bear, Xxxxxxx Securities Corp.
4) Credit Suisse First Boston Inc.
5) Xxxxxxx Sachs & Co.
6) Xxxxxxx Xxxxx International
7) Xxxxxx Brothers Inc.
8) Xxxxxxx Xxxxx Xxxxxx Xxxxxx & Xxxxx Inc.
9) Xxxxxxx Xxxxx Government Securities
10 Xxxxxxx Xxxxx International
11 Xxxxxx Xxxxxxx Inc.
12 Xxxxxx Xxxxxxx & Co. International Ltd.
13 MS Securities Services Inc.
14 Nomura Securities International Inc.
15 UBS Warburg, LLC
SCHEDULE 3
FORM OF SECURITIES LOAN AGREEMENT
Master Securities
Loan Agreement
Dated as of
-------------------------------------------
Between:
-------------------------------------------
and
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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 com-mences, 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 GIVEN 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.
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 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:
4.2.1 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
4.2.2 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.
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 here-
under 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.
7.4 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 (iii) 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.
7.4.1 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.
7.4.2 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.
7.4.3 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, 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 Borrower and 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.
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 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 (individ-ually, 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 distribu-tions 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 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 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 commer-cially
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.
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 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.
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
(i) 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).
18.3 Borrower and Lender agree that:
18.3.1 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;
18.3.2 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;
18.3.3 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
18.3.4 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.
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
36
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.
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
37
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 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.
38
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 XXXX 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.
(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:
-----------------------
Title:
--------------------
Date:
---------------------
By:
-----------------------
Title:
--------------------
Date:
---------------------
39
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.
(a) 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.
(b) 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
information regarding the financial status of
its with confidential 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.
(c) 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.
(d) 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
A-2
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).
(e) 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 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:
--------------------------------
Title:
-----------------------------
Date:
------------------------------
By:
--------------------------------
Title:
-----------------------------
Date:
------------------------------
A-3
Schedule A
Names and Addresses for Communications.
Schedule B
Defined Terms and Supplemental Provisions
The following terms and conditions (the "Supplemental Terms") supplement and are
a part of the terms and conditions of the Master Securities Loan Agreement (the
"Agreement") between each Lender and Borrower. Execution of this Schedule B by
the parties hereto shall constitute execution and agreement to be bound by the
Agreement, provided, however, that in the event of a conflict between the
Agreement and the provisions of these Supplemental Terms, the provisions of
these Supplemental Terms shall govern. Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Agreement.
Capitalized terms used in the Agreement whose definitions are modified in these
Supplemental Terms shall, for all purposes of the Agreement, be deemed to have
such modified definitions.
Section 3 Collateral
Section 3.1 is deleted and restated as follows:
"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 the Margin Percentage of the market value of the Loaned Securities. The
Margin Percentage shall equal at least the percentage applicable to the
particular type of Loaned Securities specified in Annex I hereto ("Margin
Percentage")."
Section.3.2 is deleted and restated as follows:
"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 all other obligations of Borrower to Lender under this Agreement.
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 Collateral by Borrower to Lender and which shall cease upon
the transfer of the Loaned Securities by Borrower to Lender. The Lender's rights
against the Collateral as provided in this Agreement shall be absolute and
subject to no counterclaim, offset, deduction or defense in favor of the
Borrower. 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, invest or
reinvest the Collateral consisting of cash at its own risk, and may commingle
such Collateral, and the Collateral so converted by such investment, with its
general assets, without any obligation to segregate the Collateral or any
investment thereof. The Lender may not pledge, repledge, hypothecate,
rehypothecate, lend, or relend the Collateral, if such consists of other than
cash. During the term of any Loan, Lender shall, without prejudice to Borrower's
rights, have all incidents of ownership with respect to the Collateral
consisting of cash, including the right to transfer such Collateral consisting
of cash to others. Segregation of Collateral may be accomplished by appropriate
identification on the books and records of Lender's Custodian if it is a
"securities intermediary" or a "clearing corporation" within the meaning of the
New York Uniform Commercial Code."
Section 3 is modified by adding the following language after Section 3.6:
"3.7 Subject to Section 4 of this Agreement, so long as the Lender holds the
Collateral, the Lender shall be entitled to retain and appropriate to its sole
use and ownership all interest and other income and distributions received by it
as a result of investing and reinvesting the Collateral and all net gains
realized upon the sale, retirement or other disposition of such investment less
any Loan Fee or Cash Collateral Fee payable to Borrower under this Agreement.
Lender acknowledges that any investment or reinvestment of Collateral is at its
own risk and shall not affect its obligations to Borrower."
Section 16 Transfers
The parties agree that all transfers required under this agreement to Lender
will be made to Lender's Custodian.
Section 26 Definitions
The following definition shall be added to Section 26:
"Custodian" shall mean the custodian designated by Lender at the initiation of
the Loan, or any successor custodian or subcustodian of Lender's assets
specified by notice from Lender to Borrower."
Section 26.4 is deleted and restated as follows:
"Collateral" shall mean, whether now owned or hereafter acquired, (a) all cash
in a currency acceptable to Lender which is delivered to Lender pursuant to
Sections 3 or 8, (b) any property in which such cash is invested or reinvested
excluding the income or distributions thereon or gains therefrom, (c) any
securities issued or guaranteed by the United States government or issued by
agencies or instrumentalities thereof which may not be guaranteed by the United
States government or by a foreign sovereign acceptable to Lender which are
delivered to Lender pursuant to Sections 3 or 8, including the interest or
distributions thereon or other income therefrom and (d) any property substituted
therefor pursuant to Section 3.5, (e) all accounts in which such property is
deposited and all securities and the like in which any cash collateral is
invested or reinvested. For purposes of return of Collateral by Lender 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 Collateral
initially transferred by Borrower to Lender.
Section 5 Termination of the Loan
Section 5 is amended by adding the following language "later than 5 business
days and no" after the word "no" in the second sentence thereof.
Section 9 Representations
Borrower additionally represents and warrants to Lender as follows:
B-2
The Borrower is duly organized and validly existing in good standing under the
laws of the jurisdiction in which it was organized and as of the date of any
request for a Loan, Borrower is in compliance with Rule 15c3-1 of the SEC under
the Exchange Act.
The Borrower has, and will have at the time of delivery of any Collateral, the
right to grant a security interest in and first lien upon such Collateral,
subject to the terms and conditions hereof; Borrower is borrowing or will borrow
the Loaned Securities for the purpose of making delivery of such securities in
the case of short sales or for its failure to receive securities required to be
delivered to it or as otherwise permitted pursuant to Regulation T, promulgated
by the Board of Governors of the Federal Reserve; and any Collateral delivered
by Borrower to Lender will be delivered free from any lien, charge or other
encumbrances and, in connection with each Loan.
The Borrower represents and warrants the Lender shall have a first priority
perfected security interest in and to all Collateral delivered hereunder.
Indemnification. Borrower agrees to indemnify and hold harmless the Lender from
any and all reasonably foreseeable damages, losses, liabilities, costs and
expenses (including reasonable attorneys' fees and disbursements, transfer taxes
and stamp duties) excluding, any indirect or consequential damages, which such
Lender may incur arising out of the use of the Loaned Securities by Borrower or
any failure of the Borrower to deliver Loaned Securities in accordance herewith
or any failure by Borrower to otherwise comply with the terms of this Agreement
except such as may be caused by the negligence or willful misconduct of the
Lender.
Severability. If any provision of this Agreement is prohibited by or is unlawful
or unenforceable under any applicable law of any jurisdiction, such provision
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
without invalidating the remaining provisions hereof, unless the elimination of
such provision substantially impairs either party's rights or benefits arising
under this Agreement; provided, however, that any such prohibition in any
jurisdiction shall not invalidate such provision in any other jurisdiction.
Separate Agreement. Execution of the Agreement by more than one Lender shall not
create any contractual or other obligation between or among such Lenders and the
Agreement shall constitute a separate agreement between Borrower and each
Lender. Every reference to Lender shall be construed to be a reference solely to
the particular Lender that is a party to the relevant Transaction. Each of the
parties agrees that under no circumstances shall any rights, obligations,
remedies or liabilities of a particular Lender, or with respect to Transactions
to which a particular Lender is a party, be deemed to constitute rights,
obligations, remedies or liabilities applicable to any other Lender or to
Transactions to which other Lenders are parties, and Borrower shall have no
right to set off claims of any Lender against property or liabilities of any
other Lender. All Transactions are entered into in reliance on the fact that
this Agreement constitutes a separate agreement between Borrower and each
Lender.
Additional Parties. Borrower agrees that additional entities may be added as
Lender to this agreement from time to time upon written notice to Borrower, as
to the prospective inclusion of such additional Lender and Borrower's written
consent to the addition of such Lender.
B-3
Xxxxxxx Xxxxx. Borrower acknowledges that notwithstanding any incorporation of
the phrase "Xxxxxxx Xxxxx" in the name of such Lender, such Lender is neither
owned nor controlled by Xxxxxxx Xxxxx & Co., Inc., Xxxxxxx Lynch, Pierce, Xxxxxx
& Xxxxx, Incorporated, Xxxxxxx Xxxxx Derivative Products, Inc. or any affiliate
of the foregoing.
Business Trust. With respect to a Lender which is a business trust, Borrower
acknowledges and agrees that this Agreement is executed by such Lender on behalf
of the trustees of such Lender as trustees and not individually; and no trustee,
shareholder, officer, employee or agent of such business trust shall be held to
any personal liability, nor shall resort be had to their property for the
satisfaction of Lender's obligations under this Agreement, and such obligations
are binding only upon the assets and property of such Lender.
Series Funds. The parties acknowledge that Lender may be an entity, such as an
investment company, whose assets may be allocated to two or more series. In such
case, Borrower agrees to seek satisfaction of all obligations of such a Lender
hereunder solely out of the assets of the series on whose behalf the
Transaction(s) giving to the obligations was entered into. If Lender establishes
two or more series, Lender shall so indicate on Schedule A or otherwise give
notice thereof and identify such series, and from such time the liability of
such series shall be limited as set forth above, as though and to the same
extent as if such series was a separate and distinct Lender hereunder.
IN WITNESS WHEREOF, the parties have executed this Schedule by their duly
authorized officers as of the date hereof.
[ Counterparty Name)
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Severally and not jointly, each registered U.S. Investment Company
and non-U.S. Investment Fund identified on the attached Schedule C
By:
------------------------------------
Name: Xxxxx X. Xxxxx
Title: President of each Registered
U.S. Investment Company and Director of
each non-U.S. Investment Fund identified
on the attached Schedule C
B-4
ANNEX I
--------------------------------------------------------------------------------
Type of Loaned Security Margin Percentage
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Foreign equity and corporate securities 105%
--------------------------------------------------------------------------------
United States equity and corporate securities 102%
--------------------------------------------------------------------------------
United States government and agency securities 102%
--------------------------------------------------------------------------------
Foreign government and agency securities 102%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SCHEDULE 4
PERMITTED INVESTMENTS FOR CASH COLLATERAL
1. In the case of any Fund that is a registered US investment company, any
money market mutual fund advised by Xxxxxxx Xxxxx Investment Managers, L.P. or
Fund Asset Management, L.P.
2. In the case of any Fund that is not a registered US investment company,
[Super Money Market Fund].
3. In the case of each Fund that is a money market fund subject to SEC Rule
2a7, any Series of Xxxxxxx Xxxxx Liquidity Series LLC that is a "Rule 2a-7
Series", as defined in the Limited Liability Company Agreement Thereof.
4. In the case of each other fund, any series of Xxxxxxx Xxxxx Liquidity
Series LLC.
SCHEDULE 5
LIST OF APPROVED PERSON
For the Fund: For QA LLC:
SCHEDULE 6
FEES
For each cash collateralized loan effected hereunder, [ ]% of the difference
between (i) the income earned on the investment of Cash Collateral held with
respect to such loan [(after deduction of any investment management or related
fees for money market fund)] and (ii) the Cash Collateral Fee (as defined in the
applicable SLA) paid to the Approved Borrower in respect of such loan.
For each non-cash collateralized loan effected hereunder, [ ]% of the Loan Fee
(as defined in the applicable SLA) paid by the Approved Borrower with respect to
such loan.
SCHEDULE 7
NOTICES
If to the Fund:
Address
Attn:
Telephone:
Facsimile:
If to QA LLC:
Address:
Telephone:
Facsimile:
B-9
