SECURITIES LENDING AGENCY CLIENT AGREEMENT
THIS AGREEMENT is made as of the 27th day of March, 1998, by and
between Westcore Trust and each of its Funds listed as Clients on Exhibit 1 to
this Agreement (each a "Client") and PaineWebber Incorporated ("PWI").
Capitalized terms not otherwise defined shall have the meanings set forth in
Section 13.
Each Client and PWI, intending to be legally bound, agree as follows:
1. APPOINTMENT OF PWI; TERMS OF LOANS.
a. (1) Each Client hereby authorizes and appoints PWI, and PWI
agrees to act, as Client's agent to effect Loans of Available Securities to
Eligible Borrowers and to provide related administrative services to Client, all
pursuant to the terms and conditions of this Agreement. No Loan shall be made
if, as a result, more than 30% of any Fund's total assets (as PWI is advised of
such amount by Client from time to time) would be subject to securities loans.
During the term of this Agreement, PWI may from time to time, in its sole
discretion, contact Eligible Borrowers on behalf of any Client and lend
Available Securities belonging to that Client ("Lending Client") to those
Eligible Borrowers.
(2) The initial Eligible Borrowers for each Client are
listed on Exhibit 2 hereto. Exhibit 2 may be amended by PWI from time to time,
PROVIDED, however, that no such amendment adding an Eligible Borrower shall be
effective with respect to any Client unless approved by that Client, and
PROVIDED FURTHER, that PWI shall amend Exhibit 2 to delete any Eligible Borrower
with respect to any Client promptly following written notice from that Client
directing PWI to do so. In connection with the addition of an Eligible
Borrower, at Client's request. PWI shall provide Client with a copy of the most
recent publicly available financial statement of such borrower as furnished by
the Borrower to PWI.
b. Each Loan shall be made pursuant to an agreement ("Borrowing
Agreement") substantially in a form attached as Schedule A hereto or in such
other form as may be approved by from time to time by Client. The form of the
Borrowing Agreement used with respect to a Loan made on behalf of any Client
shall not be amended by PWI in any material respect except with the prior
written consent of that Client. PWI shall disclose fully to Eligible Borrowers
that PWI acts as agent for its clients and not as principal.
c. Each Loan shall be terminable by PWI on behalf of Lending
Client or the Borrower upon notice to the other party. At its sole discretion,
PWI may notify any Borrower of the termination of any Loan at any time. PWI
will notify the Borrower of the termination of any Loan on the same day that it
is directed to terminate the Loan by Lending Client if PWI receives such
direction by the Termination Notice Time on a Business Day; if the direction to
terminate is received by PWI after the Termination Notice Time, PWI will notify
the Borrower of the termination of the Loan on the next Business Day. In the
case of notice by PWI, the termination date so established will be no later
than: (i) in the case of Loans of Government Securities, the same Business Day
as such notice, (ii) in the case of Foreign Securities, the standard settlement
date for trades of the Loaned Securities entered into on the date of such notice
in the principal market for such securities, or (iii) in all other cases, the
third Business Day following such notice.
2. Authority of PWI with Respect to Loans.
a. PWI is hereby authorized:
(1) to make, execute, acknowledge and deliver Borrowing
Agreements and any and all other documents or agreements of transfer and
conveyance and any and all other instruments that may be necessary or
appropriate to effect a transfer of Available Securities to Eligible Borrowers
pursuant to a Borrowing Agreement or to complete any Loan; and
(2) to exercise all of the rights of Lending Client under
the Borrowing Agreement and to do all acts, whether or not expressly authorized,
which it may deem reasonably necessary or proper for the protection of the
Collateral held thereunder.
b. Each Client acknowledges and agrees that:
(1) Client shall direct its Custodian to take such
actions as are necessary or appropriate to enable PWI to perform its obligations
hereunder or under any Borrowing Agreement;
(2) PWI shall have full discretion regarding the selection
of the particular Eligible Borrowers to whom Loans of Available Securities may
be made and as to the selection of the particular Available Securities loaned
pursuant to any Loan;
(3) there is no assurance that Loans will be made at any
time;
(4) PWI may perform securities lending activities for other
clients of PWI, including clients that are, or that are advised or managed by,
its Affiliates, and PWI may allocate securities lending opportunities among any
or all of its clients using such reasonable methods as PWI may follow from time
to time; and
(5) Client waives the right to vote Loaned Securities or to
provide any consent or take any similar action with respect to any Loaned
Securities. Notwithstanding the foregoing, under the terms of the Borrowing
Agreement. Client shall be entitled to receive any payment made in respect of
any consent solicitation with respect to its Loaned Securities.
c. If an installment, call or rights issue becomes payable on,
or in respect of any, Loaned Securities, PWI shall use reasonable efforts to
ensure that any timely instructions from Lending Client are complied with, but
PWI shall not be required to make any payment unless Lending Client has first
provided funds to make such payment.
3. COLLATERAL; RESPONSIBILITIES OF PWI AND CLIENT.
a. Under the terms of each Loan, Borrower shall be required to
transfer to the Client Account, at or before the inception of the Loan.
Eligible Collateral having a Market Value (determined as of the close of trading
on the preceding Business Day) at least equal to 105% of the Market Value of any
Loaned Securities that are Foreign Securities and 102% of all other Loaned
Securities (the "Required Collateral Level").
b. PWI shall determine the Market Value of the Loaned
Securities and the Collateral for each Loan on each Business Day. Under the
terms of each Loan, if at any time the Market Value of the Eligible Collateral
for any Loan decreases to 100% or less of the Market Value of the Loaned
Securities, the Borrower shall be required to transfer to the Client Account, on
or before the next Business Day, additional Eligible Collateral sufficient to
increase the Market Value of the Eligible Collateral to at least the Required
Collateral Level.
c. PWI shall transfer any Collateral received by it with
respect to Loans for that Client to its Client Account. If PWI receives such
Collateral prior to 3:00 p.m., Eastern time (or, in the case of cash Collateral,
5:00 p.m., Eastern time), such transfer shall be made on the same Business Day
that the Collateral is transferred to PWI; if such Collateral received later
than that time, such transfer shall be made on the next Business Day.
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d. Unless otherwise agreed by Client and PWI, PWI shall invest,
or shall arrange for the investment of, all cash Collateral in accordance with
the Investment Guidelines. All investments of cash Collateral shall be for the
account of the Lending Client and shall be solely at the Lending Client's risk.
To the extent consistent with the Investment Guidelines, cash Collateral may be
invested in repurchase agreements with PWI or in investment companies or other
commingled accounts advised or managed by PWI or its Affiliates, and Client
consents to the retention by PWI and its Affiliates of any advisory or other
fees paid by such accounts. If PWI arranges for cash Collateral to be invested
by an investment manager or adviser (other than PWI but including any advisory
Affiliate of PWI) approved in writing by Client, Client will be responsible for
any investment management or advisory fees charged by that investment manager or
adviser.
e. PWI shall give appropriate and timely directions to Lending
Client or its Custodian with respect to the transfer and re-transfer of any and
all Loaned Securities, Collateral maintained in the Client Account and payments,
distributions and proceeds thereon or thereof, and if the Collateral is
maintained in the Client Account, with respect to the payment of any loan
rebates to Borrowers, and each Lending Client will cause its Custodian to timely
execute such directions.
f. In the event of any default by any Borrower in respect of
any Loan, PWI shall be responsible for notifying the Lending Client, and PWI
shall take any and all actions in accordance with the Borrowing Agreement
necessary or appropriate to protect the interest of the Lending Client in
respect of the Loan, including without limitation, liquidating or, if the
Collateral is maintained in the Client Account, directing Lending Client or its
Custodian to liquidate, the Collateral.
g. Except as provided in paragraph (h), PWI shall arrange for
an amount equal to any interest, dividends or other distributions paid on Loaned
Securities to be credited to the appropriate Client Account.
h. Non-cash distributions on Loaned Securities in the nature of
stock splits or stock dividends shall be added to the Loan and become Loaned
Securities; PROVIDED that a Lending Client may, by giving PWI ten (10) Business
Days' notice prior to the date of such non-cash distribution, direct PWI to
request that the Borrower deliver such non-cash distributions to its Client
Account, in which case PWI shall arrange for such non-cash distribution to be
credited to that Client Account as soon as practicable.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS.
a. Each Client represents, warrants and covenants as follows:
(1) this Agreement constitutes the legal, valid and
binding obligation of Client, enforceable against it in accordance with its
terms except as enforcement may be limited by bankruptcy, insolvency or similar
laws, or by equitable principles relating to or limiting Creditors' rights
generally;
(2) the execution, delivery and performance by Client of
this Agreement, execution of each Borrowing Agreement by PWI on behalf of
Client, and PWI's entering into Loans under Borrowing Agreements on behalf of
Client, have been duly and validly authorized by Client, and Loans made in
accordance with the terms hereof will comply with all laws and regulations,
including those of securities regulatory and self-regulatory organizations,
applicable to Client;
(3) Client owns, and will own at the time that any Loan is
outstanding, all Available Securities free and clear of any lien or encumbrance,
and no Available Securities have been, or will at the time of any Loan have
been, sold;
(4) Client has made its own determination as to the tax
treatment of any
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dividends, remuneration or other funds received hereunder;
(5) Client and any party serving as an investment adviser
to Client have approved the lending of the Available Securities, have determined
that each of the Eligible Borrowers, the Eligible Collateral and the Investment
Guidelines (as the same may be amended pursuant to the terms hereof) are
appropriate for Loans by Client hereunder and have directed PWI to comply with
the same, and have determined that lending the Available Securities in
accordance with the terms hereof is an appropriate activity for Client,
consistent with its investment objectives and policies;
(6) the Available Securities are not "plan assets" within
the meaning of ERISA, or if the Available Securities are such plan assets, a
Loan of the Available Securities to an Eligible Borrower would not constitute a
prohibited transaction for purposes of ERISA; and
(7) no Loan of the Available Securities will violate any
statute, regulation, rule, order, judgment or agreement binding on Client or any
of its assets.
b. PWI represents, warrants and covenants to each Client as
follows:
(1) this Agreement constitutes a legal, valid and binding
obligation of PWI, enforceable against it in accordance with its terms except as
enforcement may be limited by bankruptcy, insolvency or similar laws, or by
equitable principles relating to or limiting creditors' rights generally;
(2) the execution, delivery and performance by PWI of this
Agreement and of each Borrowing Agreement, and PWI's entering into Loans under
Borrowing Agreements on behalf of Client, have been duly and validly authorized
by PWI, and Loans made in accordance with the terms hereof will comply with all
laws and regulations relating to the lending of securities and applicable to PWI
as lending agent; and
(3) PWI has the power to execute and deliver this
Agreement, to enter into the transactions contemplated hereby and to perform its
obligations hereunder, and it has taken all necessary action to authorize such
execution, delivery and performance.
c. Each of the above representations and warranties shall be
deemed made and repeated for all purposes at and as of all times when any Loan
entered into under the Borrowing Agreement is outstanding.
d. Each Client and PWI agree that, under the terms of this
Agreement, Client and its investment adviser, if any, retain ultimate authority
with respect to lending Client's securities and have directed PWI to lend
Available Securities in accordance with the terms hereof. Each Client and PWI
further agree that PWI is not, and shall not be considered to be, solely by
virtue of its role hereunder, an investment adviser for Client.
5. STATEMENTS; RECORDS. PWI shall maintain current and accurate
records of the Loans as required by applicable regulations and shall provide
each Client with monthly statements detailing all deliveries and receipts of
Loaned Securities and Collateral, all transactions in the Client Account made at
the direction of PWI, all fees received and income earned from the Collateral
and Loaned Securities, all fees and other amounts paid to each Borrower or
others, and such other information as Client may reasonably request all on a
Fund-by-Fund basis.
6. COMPENSATION OF PWI. In consideration of the services to be
provided by PWI hereunder, PWI shall be entitled to compensation as set forth in
Exhibit 4. PWI is hereby authorized to charge such compensation and
reimbursements against and collect the same from the revenues derived from
securities
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lending activities or to direct the Custodian to pay PWI such compensation and
reimbursements on a monthly basis, within 10 business days after the end of each
month. The fees paid to PWI hereunder are solely in consideration of securities
lending services rendered by it and are in addition to any other fees or
compensation to which it may be entitled for services rendered for Client under
other agreements.
7. MODIFICATION AND TERMINATION OF AGREEMENT.
a. This Agreement is a continuing agreement and shall remain in
full force and effect until terminated in accordance with this Section. This
Agreement may be modified or terminated with respect to any Client at any time
upon mutual written agreement of PWI and that Client, expressly referring to
this Agreement and indicating an intention to effect such modification or
termination. This Agreement also may be terminated at any time by PWI or any
Client upon ninety (90) days prior written notice to the other party.
b. Following any termination of this Agreement but only with
respect to the Client or Clients with respect to which such termination is
effective, PWI shall:
(1) immediately cease making new Loans;
(2) terminate, as promptly as possible, any outstanding
Loans, but shall continue to administer any such outstanding Loans as necessary
to effect their termination, including, without limitation, (A) the return to
Borrowers of Collateral on Loans as to which Loaned Securities are returned to
PWI or to the Client Account and as to which the Borrower is not in default, and
(B) the coordination of the liquidation of Collateral, all in the manner and on
the terms permitted under the Borrowing Agreements and deemed necessary or
appropriate by PWI; and
(3) remit and deliver, or arrange for remittance and
delivery, to the Client Account all securities, earnings and other items due to
each Lending Client.
c. Regardless of any agreement as to, or the receipt of any
notice of, termination and the cessation of lending, this Agreement shall not
entirely terminate with respect to any Lending Client until all Loans have been
closed, all Collateral liquidated or returned, all deliveries and remittances
due the Client have been made, and all final reports required hereunder have
been made.
8. STANDARD OF CARE; INDEMNIFICATION.
a. Subject to the requirements of ERISA with respect to Loans
involving "plan assets" within the meaning of ERISA, PWI shall not be liable for
any loss or damage suffered or incurred by any Client in connection with any
Loan or the administration and operation of PWI's securities lending program,
whether or not resulting from any act or omission to act hereunder or otherwise,
unless and except to the extent such loss or damage has been determined by a
final judgment or order of a court of competent jurisdiction to have arisen out
of PWl's own gross negligence or willful misconduct. Notwithstanding anything
in this Agreement to the contrary, PWI shall not be liable to any Client for any
consequential, special or indirect losses or damages which the Client may incur
or suffer by or as a consequence of PWI's performance of, or failure to perform,
the services to be provided hereunder, whether or not the likelihood of such
losses or damages was known by PWI, nor shall PWI be liable for any losses or
damages resulting from PWI's having complied with the Investment Guidelines or
with any other directions from, or requirements of, the Client.
b. PWI shall not be liable to any Client for any investment
losses with respect to cash Collateral that comply with the Collateral
Guidelines. Each Client authorizes PWI to charge the Client Account for any
amounts payable by such Client pursuant to this Section 8(b).
-5-
c. Client shall indemnify PWI and hold it harmless from and
against any and all liability, loss, damages and claims, including attorneys'
fees and all other expenses reasonably incurred in its defense, to which PWI
shall be subjected by reason of its actions, or failure to act, in either case
taken in good faith pursuant to this Agreement, except that this indemnity shall
not apply: to the extent that PWI's actions or failure to act resulted from
PWI's negligence or willful misconduct.
9. GOVERNING LAW; JURISDICTION. This Agreement shall be construed
in accordance with the laws of the State of New York without giving effect to
the conflict of laws principles thereof.
10. MISCELLANEOUS.
a. If Exhibit 1 specifies that a party identified thereon as a
Client is acting on behalf of one or more of its portfolios, series, sub-trusts
or sub-accounts (each, a "portfolio") that are also identified on Exhibit 1,
each such portfolio shall be deemed to be a Client for all purposes under this
Agreement.
b. Notwithstanding any other provision of this Agreement, the
parties agree that, if more than one Client (including any portfolio) is
identified on Exhibit 1:
(1) the relationships and agreements set forth in this
Agreement between each Client and PWI shall be several, separate and distinct
from those between any other Client and PWI, to the same effect as if that
Client had executed a separate agreement in the form hereof with PWI; and
(2) the assets and liabilities of each Client are separate
and distinct from the assets and liabilities of each other Client, and no Client
shall be liable or shall be charged for any debt, obligation or liability of any
other Client under this Agreement.
c. With respect to each Client that is a business trust, notice
is hereby given that this instrument is executed on behalf of the trustees of
Client as trustees and not individually and that the obligations of this
instrument are not binding upon any of the trustees or shareholders of Client
individually but are binding solely upon the assets and property of Client. The
names "Westcore Trust" and "Trustees of Westcore Trust" refer respectively to
the Trust created and the Trustees as trustees but not individually or
personally, acting from time to time under an Amended and Restated Declaration
of Trust dated November 19, 1987, which is hereby referred to and a copy of
which is on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of
"Westcore Trust" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, shareholders, or
representatives of the Trust personally, but bind only the Trust Property, and
all persons dealing with any class of shares of the Trust must look solely to
the Trust Property belonging to such class for the enforcement of any claims
against the Trust.
d. In the event any provision of this Agreement shall be held
illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining provisions of this Agreement, and this Agreement shall be
construed and enforced as if such illegal or invalid provision had never been
contained herein.
e. This Agreement (including the exhibits and schedules
attached hereto) constitutes the entire agreement between the parties and
supersedes any prior agreements between the parties with respect to the subject
matter hereof. This Agreement shall not be assigned by either party without the
prior written consent of the other party.
11. NOTICES. All notices, reports and statements shall be mailed,
sent by express delivery service, or facsimile transmitted to the parties at the
following addresses and facsimile telephone numbers and
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shall be effective upon receipt thereof:
TO PWI:
Address:
PaineWebber Incorporated
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Global Portfolio Lending
Fax: (000) 000-0000
TO CLIENT:
Address: Westcore Trust
Xxxxx 0000
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Treasurer
Fax: (000) 000-0000
12. SECURITIES INVESTORS PROTECTION ACT OF 1970 NOTICE.
EACH CLIENT IS HEREBY ADVISED AND ACKNOWLEDGES THAT THE PROVISIONS OF
THE SECURITIES INVESTOR PROTECTION ACT OF 1970 MAY NOT PROTECT CLIENT WITH
RESPECT TO THE LOAN OF SECURITIES HEREUNDER AND THAT, THEREFORE, THE COLLATERAL
DELIVERED TO CLIENT MAY CONSTITUTE THE ONLY SOURCE OF SATISFACTION OF BORROWER'S
OBLIGATION IN THE EVENT THE BORROWER FAILS TO RETURN THE SECURITIES.
13. DEFINITIONS. For the purposes hereof:
a. "Affiliate" shall mean any entity which controls, is
controlled by, or is under common control with another entity.
b. "Available Securities" shall mean with respect to any Client
and on any date, those securities held or maintained in its Client Account,
other than those securities that Client has designated by written notice to PWI
as not being available for Loans.
c. "Borrower" shall mean, with respect to any Loan, the party
that is a borrower under a Borrowing Agreement.
d. "Borrowing Agreement" shall have the meaning set forth in
Section 1.
e. "Business Day" shall mean any day other than a day on which
the New York Stock Exchange, Inc. is closed for trading; PROVIDED, however, that
for purposes of the notice required to terminate any Loan, "Business Day" shall
have the meaning established under the related Borrowing Agreement.
f. "Client Account" shall mean, with respect to any Client, the
account specified in Exhibit 3.
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g. "Collateral" shall mean all securities and other items of
property pledged as collateral for a Loan.
h. "Collateral Guidelines" shall mean, with respect to any
Client, the guidelines for Eligible Collateral and for the investment of cash
Collateral set forth in Exhibit 5.
i. "Custodian" shall mean, with respect to any Client, the
entity identified as such in Exhibit 3.
j. "Eligible Borrower" shall mean, with respect to any Client
and on any date, any entity to which Available Securities may be loaned on
behalf of that Client, as listed in Exhibit 2, as the same may be amended from
time to time by PWI.
k. "Eligible Collateral" shall mean, with respect to any
Lending Client and subject to such limitations as are specified in the
Collateral Guidelines. Collateral consisting of (i) cash; (ii) Government
Securities; (iii) Letters of Credit; and (iv) such other securities, instruments
or investment property specified in the Collateral Guidelines.
l. "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as the same may now or hereafter be amended.
m. "Foreign Securities" shall mean securities that are
denominated in a currency other than United States dollars and that are
principally cleared and settled outside of the United States.
n. "Government Securities" shall mean government securities as
defined in Section 3(a)(42)(A)-(C) of the Securities Exchange Act of 1934, as
amended.
o. "Lending Client" shall have the meaning set forth in Section
1.
p. "Letter of Credit" shall mean an irrevocable, unconditional,
stand-by letter of credit, in form and substance satisfactory to the Lending
Client, issued by a bank (not affiliated with the Borrower under the related
Loan) listed in the Collateral Guidelines.
q. "Loan" shall mean a loan of Available Securities pursuant to
this Agreement.
r. "Loaned Securities" shall mean, with respect to any Loan,
the securities loaned by PWI on behalf of a Lending Client.
s. "Market Value" shall have the meaning assigned in the
applicable Borrowing Agreement.
t. "Required Collateral Level" shall have the meaning set forth
in Section 3(a).
u. "Termination Notice Time" shall mean: (i) with respect to a
direction by Client to PWI to terminate a Loan of Foreign or Government
Securities, 9:45 a.m., Eastern time, on a Business Day; and (ii) with respect to
a direction by Client to PWI to terminate any other Loan, 11:30 a.m., Eastern
time, on a Business Day.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereto duly authorized effective as of
the day and year first above written.
PAINWEBBER INCORPORATED
BY: /s/ Xxxxxx X. Xxxxxxxx
-------------------------
NAME: Xxxxxx X. Xxxxxxxx
TITLE: First Vice President
EACH CLIENT LISTED ON EXHIBIT 1
BY: /s/ Xxxxxxx X. Xxxxxxx
----------------------------
NAME: Xxxxxxx X. Xxxxxxx
--------------------------
TITLE: President
-------------------------
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EXHIBIT 1
(LISTING OF CLIENTS)
Westcore Small-Cap Opportunity Fund
Westcore MIDCO Growth Fund
Westcore Blue Chip Fund
Westcore Growth and Income Fund
Westcore Intermediate-Term Bond Fund
Westcore Long-Term Bond Fund
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EXHIBIT 2
(ELIGIBLE BORROWERS)
The Following list of Eligible Borrowers applies to all Clients:
ELIGIBLE BORROWER
ABN Amro (USA) Inc.
Bear Xxxxxxx & Co. Inc.
BT Securities Corp.
CIBC Wood Xxxxx
XX First Boston Corp.
Daiwa Securities Inc.
Xxxx Xxxxxx Xxxxxxxx Inc.
Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corp.
Dresdner Securities (USA) Inc.
Deutsche Bank
Xxxxxxx Sachs & Co.
Xxxxxx Securities Inc.
Xxxxxx Brothers Inc.
Xxxxxxx Xxxxx & Co.
Xxxxxx Xxxxxxx Group Inc.
Nomura Securities International
PaineWebber Inc.
Prudential Securities, Inc.
Salomon Brothers Inc.
Spear, Leeds & Xxxxxxx
Swiss Bank Corp Capital Markets Inc.
Xxxxx Xxxxxx Inc.
UBS Securities Inc.
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EXHIBIT 3
(CLIENT ACCOUNT AND CUSTODIAN INFORMATION)
The following are the Client Accounts and, where applicable, the Custodian for
each Client:
Client Account Name of Custodian
-------------- -----------------
The Bank of New York
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EXHIBIT 4
(COMPENSATION SCHEDULE)
PWI Fee: 30% of the Spread (if cash Collateral) or of the Fee Paid By Borrower
(if non-cash Collateral)
Method of Calculation - Example:
Cash Collateral
---------------
Annual Investment Rate 8%
Annual Rate of Rebate to Borrower (negotiated) 6%
Spread 2%
Income
Days Income on PWI to
Loan Size Open Investment* Rebate Spread Fee Client
--------- ---- ----------- ------ ------ --- ------
$500,000 8 $888.89 $666.67 $222.22 $66.67 $155.55
*Formula: Loan Value x Annual Investment Rate x # Days Open
-------------------------------------------------
360
Non-Cash Collateral
-------------------
Annual Borrower Fee Rate (negotiated) 1.5%
Income
Days Fee Paid by PWI to
Loan Size Open Borrower** Fee Client
--------- ---- ---------- --- ------
$500,000 8 $166.66 $50.00 $116.66
** Computation: Loan Value x Annual Fee Rate x # Days Open
------------------------------------------
360
In addition, each Client will reimburse PWI for all clearing corporation,
transit or other transactional costs and expenses incurred by PWI and agreed to
by Client in connection with the transfer or re-transfer of Loaned Securities or
Collateral to or from the Client Account.
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EXHIBIT 5
(COLLATERAL GUIDELINES)
1. For each Lending Client, Collateral shall be held (check appropriate box):
/ /1 by PWI for the account of Lending Client;
/X/ in the Client Account.
2. For each Client, Eligible Collateral shall include:
A. Cash in the following currencies:
Yes No
--- --
(i) U.S. Dollars /X/ / /4
(ii) Other:___________ / /5 /X/
B. Government Securities /X/ / /8
C. Letters of Credit /X/ / /10
Letters of credit may be issued
by the following banks:
Banks that have been approved by Client
---------------------------------------
D. Other investments, as follows: / /11 / /12
See Attached
____________________________
____________________________
____________________________
3. For each Client, cash Collateral may be invested in as follows:
____________________________
____________________________
____________________________
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ATTACHMENT E
PERMITTED TYPES OF COLLATERAL
Any of the following may constitute collateral for loans:
1. Cash (which may be reinvested in accordance with the investment
guidelines set forth below);
2. Securities issued or guaranteed by the United States government
or any agency or instrumentality thereof ("U.S. government securities"); or
3. Irrevocable letters of credit in favor of PaineWebber issued by
banks that are independent of the relevant borrowers and that have been
approved by Client.
INVESTMENT GUIDELINES FOR CASH COLLATERAL
Cash collateral may be invested in accordance with these guidelines.
"Portfolio," as used in these guidelines means the cash collateral received by
PaineWebber for securities loans to a particular Fund within Westcore Trust
(i.e., the requirements below apply on a Fund-by-Fund basis).
MATURITY STRUCTURE
The maximum final maturity of any one security will be 13 months; at least 20%
of the portfolio will have a maturity of 1 day. Commercial paper will have a
maximum maturity of 270 days; repurchase agreements will have a maximum maturity
of 7 days.
PERMISSIBLE INVESTMENTS
Maximum %
of Portfolio Special Instructions
------------ --------------------
Asset-Backeds 2(a)7 eligible 50% bond funds only
Bankers Acceptances 25%
Certificates of Deposit 50%
Commercial Paper 100%
Euro Time Deposits 50%
Funding Agreements - 7 day put 35%
Repurchase Agreements (Treasury only) 100% 101% minimum collateralization
U.S. Corporate Debt Securities 50%
U.S. Treasuries and Agencies 100%
Money Market Funds 100%
Yankee Debt 25% bond funds only
QUALITY
Securities with maturities greater than one year must have a minimum credit
rating of "AA" or its equivalent as rated by any nationally recognized
statistical rating organizations ("NRSROs") from which it receives a rating.
Securities with maturities less than one year must have a minimum credit rating
of "A1," "P1" or its equivalent as rated by any NRSROs from which it receives a
rating. List of eligible issuers (or, for Asset Backed securities, sponsors) of
each type of investment described above must be approved in advance by Denver
Investment Advisors ("DIA").
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DIVERSIFICATION
The maximum amount that any portfolio can invest or hold in the securities of
any single issuer, other than U.S. Treasuries and Agencies, is 1.5% of the value
of the total assets of the related Fund.
All securities must be U.S. dollar denominated. All securities domestic only,
except that Euro Time Deposits, Yankee Bankers' Acceptances, Yankee Certificates
of Deposit and Yankee Debt (including commercial paper) are permitted for Funds
other than Blue Chip Fund but will not aggregate more than 50% of any portfolio.
Unless PaineWebber is otherwise notified by DIA, all foreign securities must be
held in custody by the relevant Fund's U.S. custodian without the use of a
foreign sub-custodian or securities depository.
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SCHEDULE A
(FORM(S) OF BORROWING AGREEMENT)
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SECURITIES LOAN AGREEMENT
(BORROWER)
SECURITIES LOAN AGREEMENT dated as of _____________, 199_, by and between
PAINEWEBBER INCORPORATED, as agent for the Accounts (in such capacity and not in
its individual capacity, PaineWebber Incorporated is hereinafter referred to as
"Lender"), and ______________ ("Borrower") setting forth the terms and
conditions under which Lender, on behalf of one or more Accounts identified in
accordance with Section 1.3 may, from time to time, arrange for loans to
Borrower of certain securities held in the Accounts against a pledge of
collateral. References to Lender in this Agreement refer only to Lender in its
representative capacity as agent for the Accounts and in no case shall be
construed so as to render Lender liable as principal. Capitalized terms not
otherwise defined herein shall have the meanings provided in Section 29.
Lender and Borrower, intending to be legally bound, agree as follows:
1. LOANS OF SECURITIES.
1.1 Subject to the terms and conditions of this Agreement, either
party hereto may, from time to time, orally seek to initiate a transaction
whereby Lender will lend securities to Borrower (each, a "Loan"). The
parties shall agree orally on the terms of each Loan, which shall be subject
to the terms and conditions of this Agreement and which shall include: (a)
the date of commencement of the Loan ("Loan Commencement Date"); (b) a
description (including the identity of the issuer) and the amount of the
Loaned Securities; (c) the account to which the Loaned Securities are to be
transferred; (d) the terms of compensation (including any applicable rebate);
(e) the types of Collateral acceptable for the Loan; and (f) the account or
accounts to which the cash and non-cash Collateral for the Loan are to be
transferred. These terms may be amended during the term of the Loan upon
mutual agreement of the parties, provided that any amendment is consistent
with the terms of this Agreement.
1.2 Each Loan shall be evidenced by Lender's books and records
pertaining to such loans, as maintained by Lender in the regular course of
its business, which shall represent presumptive evidence thereof except for
manifest error or willful misconduct. Lender shall send Borrower monthly
statements of outstanding Loans showing Loan activity. Borrower agrees to
examine such statements promptly and to advise Lender of any errors or
exceptions. Borrower's failure to so advise Lender within ten (10) days after
delivery of any such statement shall be deemed to be Borrower's admission of
the accuracy and correctness of the contents thereof, and Borrower shall be
fully bound thereby. The foregoing shall not be construed to prevent the
parties hereto from mutually agreeing to amend or correct such statements if
there has been manifest error in the preparation of the statements.
1.3 Lender shall, periodically or when a material change in Lender's
Accounts takes place, furnish to the Borrower a list of Accounts on whose
behalf Lender is authorized to effect Loans as agent. With respect to any
Loan, the identity of the Account shall be promptly furnished to Borrower
upon its request or upon the occurrence of a Default involving such Account,
provided, however, that Lender shall furnish such identity automatically with
respect to any Loan of the assets of any ERISA Plan.
1.4 Notwithstanding anything to the contrary contained in this
Agreement with respect to when a Loan commences, a Loan hereunder shall not
occur until the Loaned Securities and the Collateral therefor have been
transferred in accordance with Section 16.
1.5 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
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EVENT BORROWER FAILS TO RETURN THE LOANED SECURITIES.
2. TRANSFER OF LOANED SECURITIES.
2.1 On the Loan Commencement Date (but in no event prior to the
transfer to the account or accounts designated by Lender of Collateral in the
amount required pursuant to Section 3), Lender shall arrange for the transfer
of the Loaned Securities to Borrower.
2.2 Borrower agrees that the completion of a transfer of Loaned
Securities to it pursuant to a Loan shall constitute its acceptance and
receipt thereof, and each such acceptance and receipt shall be deemed to
constitute a representation by Borrower that, as of the date of such
transfer, (a) all representations and warranties by Borrower herein are true
and correct, as if made on and as of such date, (b) no Default hereunder has
occurred and is continuing, and (c) except as otherwise theretofore disclosed
to Lender in writing, there has been no material adverse change in the
financial condition or business of Borrower or any direct or indirect parent
of Borrower since the date of the most recent financial statements of
Borrower provided to Lender hereunder and that, where Borrower is a
registered broker-dealer under the Exchange Act, it is in compliance with
Rule 15c3-1 thereunder.
3. TRANSFER OF COLLATERAL.
3.1 Prior to, or concurrently with, the transfer of the Loaned
Securities to Borrower. Borrower shall transfer to the account or accounts
designated by Lender, Collateral having a Market Value in an amount equal to
the Required Value.
3.2 The Collateral transferred by Borrower to the account or accounts
designated by Lender in respect of any Loan, 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 hereunder, and Borrower hereby pledges,
assigns and grants to Lender, as agent for the Account, a continuing first
priority security interest in, and a lien upon, the Collateral, which shall
attach upon the transfer of the Loaned Securities to Borrower and which shall
cease with respect to any item of Collateral upon its being re-transferred to
Borrower. In addition to all the rights and remedies given to Lender as
agent hereunder, Lender, as agent for the Account, shall have all the rights
and remedies of a secured party under the UCC.
3.3 Lender may transfer or arrange for the transfer of the Collateral
for any Loan to the related Account and the Account may use or invest the
Collateral, if such Collateral consists of cash, at the risk, and for the
benefit, of the Account, which shall bear all losses with respect thereto.
If the Collateral consists of securities, an Account that is a securities
broker or dealer may pledge, repledge, hypothecate, rehypothecate, lend,
relend, sell or otherwise transfer the Collateral and commingle the
Collateral with other collateral or with its own assets. Borrower
irrevocably appoints Lender as its attorney-in-fact for the purpose of doing
or performing any act or thing (including, without limitation, executing any
document) and taking all other steps as may be required to enable Lender or
the Account to transfer any Collateral to a third party or to otherwise
realize upon any Collateral.
3.4 Provided that Borrower is not in Default hereunder, upon the
transfer to the account or accounts designated by Lender of all Loaned
Securities in respect of a Loan and the payment of all Loan Fees due upon
termination of such Loan, Lender shall transfer (or cause the related Account
to transfer) to Borrower the Collateral relating to such Loan. Lender's sole
obligation to Borrower in respect of the Collateral is to return or arrange
for the return of such to Borrower pursuant to this Section 3.4 and Section
5.4.
3.5 If Borrower transfers Collateral in respect of a Loan to the
account or accounts designated by Lender and Lender does not transfer or
arrange for the transfer of the Loaned Securities to Borrower, Borrower
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shall have the absolute right to the immediate return of the Collateral; and if
Lender transfers or arranges for the transfer of Loaned Securities to Borrower
and Borrower does not transfer Collateral to the account or accounts designated
by Lender as required under Section 3.1, Lender shall have the absolute right to
the immediate return of the Loaned Securities.
3.6 Borrower may, upon reasonable notice to Lender and with Lender's
consent (which shall not be unreasonably withheld), substitute Collateral for
Collateral securing any Loan; PROVIDED, HOWEVER, that such substituted
Collateral shall: (a) consist only of cash, securities or other property
that would be acceptable Collateral in accordance with this Agreement; and
(b) have a Market Value that, when added to the Market Value of the remaining
Collateral for such Loan, is equal to or in excess of the Required Value.
Substituted Collateral shall constitute Collateral for all purposes hereunder.
3.7 Collateral shall be allocated to Loans as follows:
3.7.1 Except as provided in the following sentence, Collateral
transferred by Borrower in connection with a specific Loan shall be allocated
to such Loan; provided, that if Collateral is received on the same day for
more than one Loan, the Lender shall arrange for the allocation of such
Collateral to each Loan then being made so that each such Loan is secured by
not less than the Required Value of Collateral acceptable for such Loan. Any
Collateral received with respect to a Loan in excess of the Required Value
for such Loan may be held as collateral security for all Loans made to
Borrower at any time without being allocated to any one Loan or, in the sole
discretion of Lender, may be allocated at any time to any Loan or Loans then
outstanding hereunder. All allocations of Collateral shall be marked in
Lender's books and records, which shall be presumptive evidence of such
allocations.
3.7.2 Lender shall have the right, at its sole election, at any time
and from time to time, to allocate or reallocate any Collateral delivered
pursuant to the terms hereof to or among any outstanding Loan or Loans.
3.7.3 It is expressly understood and agreed by the parties hereto that
no allocation of Collateral to any Loan or liabilities due to any Account
pursuant to the terms hereof shall in any way affect the ability of Lender to
apply such Collateral to the satisfaction of any obligation of Borrower
hereunder upon any Default hereunder, regardless of the Loan or Account to
which such obligation relates, and that all Collateral at any time given
hereunder shall constitute collateral security for all the Borrower's
obligations to Lender or the Accounts hereunder without distinction of any
kind and upon any Default hereunder may be applied to any such obligation or
obligations as Lender in its sole discretion may elect.
3.8 No later than seven days prior to the scheduled expiration date
of any Letter of Credit supporting Borrower's obligations hereunder, Borrower
shall deliver 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 or other acceptable Collateral in an amount at least equal to the
amount of the Letter of Credit for which it is substituted.
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4. LOAN AND CASH COLLATERAL FEES.
4.1 With respect to any Loan for which the Collateral consists of
Government Securities or Letters of Credit and with respect to such other
Loans as may be agreed upon by the parties, Borrower shall pay Lender a Loan
Fee ("Loan Fee") based on the par value of those Loaned Securities which are
debt instruments and on the Market Value at the time of the Loan of those
Loaned Securities which are equity securities, as adjusted by any subsequent
marks to market pursuant to Section 8, from the Loan Commencement Date to,
but not including, the earlier of the date that securities identical to the
Loaned Securities are returned to Lender upon a termination of the Loan or
the date that securities identical to the Loaned Securities are purchased for
the account of Lender pursuant to Section 12. The rate of the Loan Fee
applicable to all Loaned Securities for any particular day shall be the rate
agreed upon by the parties prior to and from time to time during each Loan.
All such accrued Loan Fees shall be paid by the Borrower to Lender, as agent
for the Account, by the earlier of (a) the tenth Business Day of the calendar
month next following the calendar month during which such Loan Fees accrued
and (b) the date as of which this Agreement is terminated.
4.2 Unless otherwise agreed, with respect to any Loan as to which the
Collateral consists of cash, the Lender's compensation shall consist of the
right to use and invest the cash Collateral in accordance with Section 3.3.
In consideration of the right to use and invest any such cash Collateral, the
Lender agrees to pay the borrower a cash collateral fee (the "Cash Collateral
Fee") computed daily for each Loan and based on the amount of Cash Collateral
delivered with respect to Such Loan. The amount of the Cash Collateral Fee
shall be computed from the Loan Commencement Date to, but not including, the
earlier of the date that securities identical to the Loaned Securities are
returned to the account or accounts designated by Lender upon a termination
of the Loan and the date that securities identical to the Loaned Securities
are purchased for the account of Lender pursuant to Section 12. The amount
of the Cash Collateral Fee for any particular day shall be computed by
multiplying (a) the amount of Cash Collateral by (b) the annual Cash
Collateral Fee rate agreed upon by the parties prior to and from time to time
during each Loan and (c) by the fraction 1/360. All accrued Cash Collateral
Fees shall be paid by the Lender to the Borrower or its agent by the earlier
of (a) the tenth Business Day following the receipt by the Lending Agent from
the Borrower of an invoice in the calendar month next following the calendar
month during which such Cash Collateral Fees accrued and (b) the date as of
which this Agreement is terminated.
4.3 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 hereunder by Lender. Cash Collateral Fees shall cease to accrue upon
the occurrence of a Default hereunder by Borrower, and Loan Fees shall cease
to accrue upon the occurrence of a Default hereunder by Lender.
5. TERMINATION OF THE LOAN.
5.1 Each Loan shall be terminable by either party by demand made in
accordance with this Section 5.
5.2 Except with respect to Loans of Foreign Securities, Borrower may
terminate a Loan on any Business Day by giving notice to Lender prior to the
Termination Notice Time and transferring the Loaned Securities to Lender by
the close of business on the corresponding date specified in such notice.
With respect to Loans of Foreign Securities, such termination notice must be
received by Lender before 11:00 a.m., Eastern time, on the second Business
Day preceding the termination date.
5.3 Lender may terminate a Loan on any termination date established
by notice given to Borrower prior to the close of business on any Business
Day. The termination date so established 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
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date shall, unless Borrower and Lender agree to the contrary, be (a) in the case
of Government Securities, at Lender's discretion the same day or the next
Business Day following such notice; (b) in the case of Foreign Securities, the
standard settlement date in the principal market for such securities; or (c) in
all other cases, the third Business Day following such notice.
5.4 On or prior to the termination date of any Loan, Borrower shall
transfer the Loaned Securities to or at the direction of Lender, whereupon
Lender shall transfer, or cause the Account to transfer, the Collateral (as
adjusted pursuant to Section 8) to Borrower pursuant to Section 3.4.
6. RIGHTS OF BORROWER IN RESPECT OF THE LOANED SECURITIES. Until a
Loan is terminated in accordance herewith and except as set forth in Sections
7.1 and 7.2 hereof, Borrower shall have all of the incidents of ownership of
the Loaned Securities, including the right to exercise any rights and
transfer the Loaned Securities to others. Notwithstanding the above, the
Borrower shall remit to the account or accounts as designated by Lender any
payment made to the Borrower in respect of any consent solicitation with
respect to the Loaned Securities.
7. DIVIDENDS, DISTRIBUTIONS. ETC.
7.1 Lender as agent for the Account 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) all property (including cash dividends and all other
distributions of cash or property), (b) stock dividends and bonus issues, (c)
securities received as a result of split-ups of the Loaned Securities and
distributions in respect thereof, (d) interest payments, (e) all rights to
purchase additional securities, and (f) payments upon maturity or other
redemption.
7.2 Any cash distributions made on, or in respect of, the Loaned
Securities, that Lender as agent for the Account is entitled to receive
pursuant to Section 7.1, shall be paid by the transfer by Borrower of cash
(denominated in the currency of issue for the Loaned Securities, unless
otherwise agreed) to the account or accounts designated on the date such cash
distribution is made by the issuer, in an amount equal to such cash
distributions (subject to the provisions of Section 7.4), so long as Lender
is not then in Default. Non-cash distributions received by Borrower in
respect of the Loaned Securities shall be added to the Loaned Securities
(unless otherwise directed by Lender) and shall be considered such for all
purposes, except that if the Loan has terminated, Borrower shall forthwith
deliver the same to Lender.
7.3 (a) 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 by Borrower. Any distributions of cash
made on or in respect of such Collateral which Borrower is entitled to
receive hereunder shall be paid by the transfer of cash (denominated in the
currency of issue of the non-cash Collateral, unless otherwise agreed) by
Lender to Borrower upon the date of receipt by Lender or the Account thereof,
in an amount equal to such cash distribution (subject to the provisions of
Section 7.4), so long as Borrower is not then in Default.
(b) Borrower shall be entitled to receive all non-cash
distributions made on or in respect of non-cash Collateral the payment dates
for which are during the term of the Loan and which are not otherwise
received by Borrower, to the full extent it would be so entitled if the
Collateral had not been transferred by Borrower. Any distributions made on
or in respect of such Collateral which Borrower is entitled to receive
hereunder shall be paid by or at the direction of Lender to Borrower
promptly, so long as Borrower is not in Default at the time of such receipt.
7.4 (a) 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
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required to make a payment (a "Lender Payment") with respect to cash
distributions on Collateral under Section 7.3. ("Collateral Distributions"),
and (ii) Borrower, Lender or their respective custodians, 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 pay such additional amounts
as may be necessary in order that the net amount of the Borrower Payment or
Lender Payment received by 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 could have been received by the Payee if such
Securities Distribution or Collateral Distribution had been paid directly to the
Payee; provided, however, that any Borrower Payment shall also take into account
(and Borrower shall pay such additional amounts as reflect) the value (as
specified in a notice by Lender to Borrower) to the Account of any tax refund or
reclaim to which such Account would otherwise have been entitled had the Loaned
Securities not been loaned.
(b) Each party shall supply to the other notice of such tax
information as may be requested by the other to enable it to effect the
Borrower Payment or Lender Payment in the required amount, computed as per
the immediately preceding paragraphs of this Section 7. Borrower represents
that, as of the Loan Commencement Date, no Tax would be imposed on any cash
distribution paid to it with respect to Collateral for any Loan, unless
Borrower has given notice to the contrary to Lender (specifically the rate at
which such Tax would be imposed), and that Borrower will notify Lender 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 distribution.
7.5 To the extent that, under the provisions of Sections 7.1 through
7.4, a transfer of cash or other property by Borrower would give rise to a
Margin Excess or a transfer of cash or other property by Lender would give
rise to a Margin Deficit, Borrower or Lender, as the case may be, shall not
be obligated to make such transfer but, in lieu thereof, shall immediately
credit the amounts that would have been transferable under such Sections to
the account of Lender or Borrower, as the case may be.
7.6 Borrower and Lender agree that, on the Business Day following the
record date for the cash distribution relating to any Borrower or Lender
Payment, Lender will notify Borrower that Lender will charge or credit (as
appropriate) Borrower's account for such Borrower or Lender Payment on the
date the payment is payable by Borrower or Lender pursuant to Section 7.2 or
7.3 hereof, and Lender will effect such charge or credit on such date;
PROVIDED, HOWEVER, that no failure on the part of Lender to provide such
notice or to effect such charge or credit shall affect the parties'
respective rights and obligations under Section 7.1, 7.2 or 7.3.
8. XXXX TO MARKET MARGIN.
8.1 In the event that at the close of trading on any Business Day the
Market Value of the Collateral for any Loan shall be, in the case of Loaned
Securities that are Foreign Securities, 104% or less of the Market Value of
such Loaned Securities, or in the case of other Loaned Securities, 101% or
less of the Market Value of the Loaned Securities, Borrower shall
immediately, and without notice or demand from Lender, transfer additional
Collateral to the account or accounts designated by Lender so that the Market
Value of such additional Collateral, when added to the Market Value of the
other Collateral for such Loan, shall equal or exceed the Required Value.
8.2 In addition to the rights of Lender under Section 8.1, in the
event that at the close of trading on any Business Day the Market Value of
Collateral for a Loan shall be less than the Required Value (a "Margin
Deficit"), Lender may, by notice (which may be oral) 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 Loan, shall equal or exceed the Required Value. Unless
otherwise agreed, such transfer shall be made in accordance with Lender's
instructions by no later than the close of business on the day of demand if
such demand is made prior to 11:00 a.m. New York time on a Business Day;
otherwise such transfer shall be made on the next Business Day; PROVIDED,
HOWEVER, that any such transfer of additional Collateral comprised of
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Foreign Securities may be made on the next Business Day. If the additional
Collateral to be posted is intended to be through adjustment of a Letter of
Credit previously delivered to Lender as Collateral, Borrower agrees to cause
the issuing bank to amend the original Letter of Credit by delivery of an
amended Letter of Credit to Lender within the applicable time period described
in the preceding sentence.
8.3 In the event that at the close of trading on any Business Day the
Market Value of all Collateral for a Loan shall be greater than the Required
Value (a "Margin Excess"), Borrower may, by notice (which may be oral) 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
Loan, after deduction of such amount, shall not exceed the Required Value.
Unless otherwise agreed, such transfer shall be made in accordance with
Borrower's instructions by no later than 3:00 p.m. New York time on the day
of demand if such demand is made prior to 11:00 a.m. New York time on a
Business Day; otherwise such transfer shall be made on the next Business Day;
PROVIDED, HOWEVER, that any such transfer of Collateral comprised of Foreign
Securities may be made on the next Business Day. If Lender is requested to
return to Borrower a portion of any security constituting Collateral,
Borrower shall, at the oral request of Lender, take all such action as is
necessary to cause such security to be reissued in such denominations as are
required to permit such a partial return, and in such case Lender shall not
be obligated to return Collateral hereunder unless and until such action has
been taken and may make required returns of Collateral hereunder by returning
such securities in such amounts as are, as nearly as practicable. equal to
but not greater than the required return. The return to Borrower of
securities the Market Value of which on the date on which the requirement to
return the same was established was then sufficient to comply with such
requirement of return shall be in full compliance with this Agreement and a
full discharge of Lender's obligation to make such return, notwithstanding
the fact that, at the date of such return the Market Value of any such
securities may have declined. Where Collateral is in the form of a Letter of
Credit, Lender agrees to promptly consent to a reduction in the undrawn
balance of the Letter of Credit sufficient to eliminate the Margin Excess,
provided that Borrower delivers to Lender all amended Letter of Credit within
the time period described in the second sentence of this Section 8.3.
8.4 Borrower and Lender may agree, with respect to one or more Loans
hereunder, to xxxx the values to market pursuant to Sections 8.1 and 8.2 by
valuing the Loaned Securities lent and the Collateral given in respect
thereof on an Account-by-Account basis.
9. REPRESENTATIONS OF THE PARTIES HERETO. The parties hereby make
the following representations and warranties:
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 (in the case
of Lender, solely in its capacity as agent for the Account or Accounts whose
securities are the subject of a Loan or Loans).
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 securities regulatory and self-regulatory organizations (in the
case of Lender, solely in its capacity as agent for the Account or Accounts
whose securities are the subject of a Loan or Loans).
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
(except as expressly provided herein) and 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 all Loans will comply with
the applicable regulations of
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the Board of Governors of the Federal Reserve System governing margin lending
("Margin Regulations") and, without limiting the generality of the foregoing,
that it (or any party to whom it relends the Loaned Securities) is borrowing or
will borrow the Loaned Securities for the purpose of making delivery of such
securities in the case of short sales, failure to receive securities required to
be delivered or other similar situations or as otherwise permitted pursuant to
the applicable Margin Regulations.
9.5 Borrower represents and warrants that it has, or will have at the
time of transfer to the account or accounts designated by Lender of any
Collateral hereunder (other than Letters of Credit), the right to grant to
Lender a first priority security interest therein subject to the terms and
conditions hereof. As to Collateral consisting of Letters of Credit
transferred to the account or accounts designated by Lender hereunder,
Borrower represents and warrants that Lender shall have full unencumbered
title thereto.
9.6 Lender represents and warrants that the Account for which it is
acting in any Loan shall have represented and warranted to it that the Loaned
Securities transferred to Borrower shall be free and clear of any lien or
encumbrance at the time of transfer, and Borrower represents and warrants to
Lender that all Loaned Securities returned hereunder shall be free and clear
of any lien or encumbrance at the time of such return.
9.7 Lender represents and warrants that as to each Account, the
Account has represented and warranted to it that the Account has duly
authorized Lender, as agent, to execute and deliver this Agreement on its
behalf, and to enter into Loans on its behalf.
9.8 Notwithstanding any other provision of this Agreement, each of
the representations and warranties set out in Section 2.2 and in this Section
9 shall be deemed made and repeated for all purposes at the time that any
Loan is made and to be in effect as of all times when Borrower's obligations
with respect to any Loan remain outstanding.
10. COVENANTS.
10.1 Financial information shall be delivered as follows:
10.1.1 If Borrower is not a broker-dealer registered under the Exchange
Act, it covenants as follows: Upon execution of this Agreement, Borrower
shall deliver to the Lender Borrower's and any parent company's most recent
available financial information, including (without limitation) the most
recent available audited and unaudited statements of Borrower's and any
parent company's financial condition that Borrower or such parent company is
required to provide to any Governmental agency or self regulatory body. As
long as any Loan is outstanding under this Agreement, Borrower will promptly
deliver to Lender all such financial information that is subsequently
available, and any other financial information or statements that Lender may
reasonably request.
10.1.2 If Borrower is a broker-dealer registered under the Exchange Act,
it covenants as follows: Upon execution of this Agreement, Borrower shall
deliver to Lender the most recent statements of Borrower required to be
furnished to Borrower's customers by Rule 17a-5(c) and (d) under the Exchange
Act. As long as any Loan is outstanding under this Agreement, Borrower shall
promptly deliver to Lender all such statements subsequently required to be
furnished to Borrower's customers by such Rule (or any successor thereto).
Upon execution of this Agreement, Borrower shall also deliver to Lender
Borrower's and any parent company's most recent financial information
otherwise available to its shareholders, the SEC, or the public as the case
may be, including (without limitation) the most recent available audited and
unaudited statements of Borrower's or any parent company's financial
condition and any report or notice required by Rules 17a-5(a)(2)(i) and (ii)
and 17a-11 under the Exchange Act. As long as any Loan is outstanding under
this Agreement, Borrower will promptly deliver to the Lender all such
financial information that is subsequently available.
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10.2 Borrower shall be liable as principal with respect to its
obligations hereunder.
10.3 Borrower shall at all times in respect of each Loan effected
pursuant hereto maintain Collateral having a Market Value at least equal to
the Required Value.
10.4 Borrower agrees to cause every Letter of Credit delivered by it
and constituting Collateral hereunder to be renewed or replaced by Collateral
(including, without limitation, a renewal or replacement Letter of Credit)
satisfactory to Lender at least seven days prior to the scheduled expiration
date of such Letter of Credit.
10.5 Borrower shall give Lender prompt notice of the occurrence of any
development in the business affairs of Borrower that has resulted in, or
which in Borrower's reasonable judgment could result in, a material adverse
effect on the ability of Borrower to perform its obligations under this
Agreement. Any such notice shall set forth, in reasonable detail, a
description of the event which has occurred and of the action, if any, that
Borrower proposes to take with respect thereto. Borrower will forward to
Lender a copy of any order, decree, determination, instruction or other
written evidence received by it of or with respect to any matter referred to
in the first sentence of this subparagraph 10.5.
10.6 Borrower and Lender hereby agree and acknowledge 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 Borrower or an Account 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.
10.7 Borrower will, from time to time, do and perform any and all acts
and execute any and all further instruments reasonably requested by Lender
more fully to effect the purposes of this Agreement and the pledge of the
Collateral hereunder, including, without limitation, the execution and filing
of financing statements and continuation statements relating to the
Collateral Lender the provisions of the UCC.
10.8 Borrower will notify Lender promptly upon the occurrence of any
change of control with respect to Borrower or if Borrower enters into an
agreement providing for such a change of control. For purposes of this
paragraph, a "change of control" shall occur if Borrower consolidates or
amalgamates with or merges with or into, or transfers all or substantially
all of its assets to another entity, or if any person or entity acquires
directly or indirectly the beneficial ownership of equity securities having
the power to elect a majority of the board of directors of Borrower or
otherwise acquires directly or indirectly the power to control the policy
making decisions of Borrower.
11. EVENTS OF DEFAULT. All Loans between Borrower and Lender 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
Section 11.6 below), be terminated immediately upon the occurrence of any one
or more of the following events (individually, a "Default"):
11.1 Any Loaned Securities shall not be transferred to Lender on the
termination date of the Loan as required by Section 5;
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11.2 Any Collateral shall not be transferred to Borrower as required
by Section 3.5 and Section 5;
11.3 Borrower shall fail to comply with the obligation to replace an
expiring Letter of Credit under Section 10.4 and such default is not cured
within one Business Day after notice of such failure to Borrower;
11.4 Borrower or Lender shall fail to transfer Collateral as required
by Section 8;
11.5 Borrower or Lender shall fail to make the payment of
distributions as required by Section 7 and such default is not cured within
one Business Day after notice of such failure to Borrower or Lender, as the
case may be;
11.6 (a) Lender or Borrower 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 person or any
substantial part of its property, or (b) any such case or proceeding shall be
commenced against Lender or Borrower, or another shall seek such an
appointment, or any application shall be filed against such person for a
protective decree under the provisions of the Securities Investor Protection
Act ("SIPA"), which (i) is consented to or not timely contested by such
party, (ii) 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 (iii) is not dismissed within 15 days, or, (c) Lender or
Borrower shall make a general assignment for the benefit of creditors, or (d)
Lender or Borrower shall admit in writing its inability to pay its debts as
they become due;
11.7 Lender or Borrower shall have been suspended or expelled from
membership or participation in any securities exchange or association or
other self-regulatory organization to whose rules it is subject or if it is
suspended from dealing in securities by any governmental agency or regulatory
body;
11.8 Lender or Borrower shall have its license, charter, or other
authorization necessary to conduct a material portion of its business
withdrawn, suspended or revoked by any applicable government or agency or
regulatory body thereof;
11.9 Any representation made or deemed to be made by a party in
respect of this Agreement or any Loan or Loans made hereunder shall be
incorrect or untrue in any material respect during the term of any Loan
hereunder;
11.10 Borrower or Lender (a) fails to provide to the other party
reasonable assurances of its ability to perform its obligations hereunder or
under any Loan within 24 hours after request therefor is made in good faith
by the requesting party; (b) notifies the other, orally or in writing, of its
inability to or its intention not to perform its obligations hereunder; or
(c) otherwise disaffirms, rejects or repudiates any of its obligations
hereunder;
11.11 Borrower or Lender (a) shall fail to perform any material
obligation under this Agreement not specifically set forth in this Section
11, 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(b) shall have
received notice of such failure from the non-defaulting party, and (c) shall
not have cured such failure by the next day after such notice on which a
transfer of funds, Loaned Securities or Collateral, as the case may be, could
be effected pursuant to Section 16.4 hereof; or
11.12 A party to this Agreement ("X") consolidates or amalgamates with,
or merges into, or transfers all or substantially all of its assets to
another entity and (a) the resulting, surviving or transferee entity has not
assumed all the obligations of X under this Agreement pursuant to an
agreement reasonably satisfactory to the other party or (b) the financial
condition of the resulting, surviving or transferee entity is, in the
judgment of the other party, materially weaker than that of X prior to such
transaction.
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12. LENDER'S REMEDIES.
12.1 If:
(a) any Default shall occur in respect of which Borrower is the
defaulting party; or
(b) Lender becomes obligated to return, or is otherwise deprived of its
rights to, any Loaned Securities after their return to Lender, or Lender is
in any way required to pay their value or any related sum over, as a result
of any bankruptcy, insolvency, liquidation, reorganization, or other
similar proceeding relating to Borrower or pursuant to any legal
requirement, including without limitation any laws relating to so-called
"preferences" or preferential payments,
Lender shall have the right, in addition to any other remedies provided herein
or under applicable law or in equity and without further notice to Borrower:
(a) to purchase, in a commercially reasonable time and manner (taking
into consideration the nature of the market for the Loaned Securities), a
like amount of the Loaned Securities ("Replacement Securities") in the
principal market for such securities; or
(b) to sell any Collateral in the principal market for such Collateral
in a commercially reasonable time and manner (taking into consideration the
nature of the market for the Collateral) or to treat the Loaned Securities
as having been purchased by Borrower at a purchase price equal to the
Market Value thereof on the day of the Default (or on the date of the event
referred to in (b) above, as the case may be); and
(c) to apply and set off the Collateral (including, any amounts drawn
under a Letter of Credit supporting any Loan) and any proceeds thereof
against the payment of the purchase price for any Replacement Securities
and any amounts due Lender under Sections 4, 7, 14 and 17 hereof. Lender
may also 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 Lender exercises such rights, Borrower's obligation to return
a like amount of Loaned Securities shall terminate.
12.2 In the event that the purchase price of Replacement Securities,
plus any and all amounts due to Lender hereunder, exceeds the Market Value of
the Collateral on the date the Replacement Securities are purchased, Borrower
shall be liable to Lender for the amount of such excess, together with
interest on such excess at a per annum rate that, in the case of purchases of
Foreign Securities, is equal to LIBOR plus two (2%) percent, and in the case
of purchases of any other securities and all other amounts due to Lender
hereunder, that is equal to the Fed Funds Rate plus two (2%) percent, in each
case as such rates fluctuate from day to day, from the date of such purchase
until the date of payment of such excess. Lender shall have, and Borrower
hereby grants to Lender, as security for Borrower's obligation to pay such
excess, a security interest in any property of Borrower (including, without
limitation, the Collateral) then held by Lender or the Account and a right of
setoff against such property and against any other amount payable by Lender
to Borrower. The purchase price of securities purchased under this Section
12 shall include, and the proceeds of any sale of Collateral shall be
determined after the deduction of, broker's fees, taxes and commissions and
all other reasonable costs, fees and expenses related to such purchase or
sale or to the exercise of Lender's remedies including, without limitation,
reasonable legal fees and expenses. Upon the satisfaction of all obligations
hereunder, any remaining Collateral shall be returned to Borrower.
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13. BORROWER'S REMEDIES.
13.1 In the event of any Default involving Lender or an Account under
Section 11 hereof, Borrower shall have the right, in addition to any other
remedies provided herein or under applicable law or in equity and without
further notice to Lender:
(a) to purchase, in a commercially reasonable time and manner (taking
into consideration the nature of the market for the Collateral), a like
amount of Collateral ("Replacement Collateral") in the principal market for
such Collateral, or
(b) to sell a like amount of Loaned Securities in the principal market
for such Loaned Securities in a commercially reasonable time and manner
(taking, into consideration the nature of the market for the Loaned
Securities) or to treat the Collateral as having been purchased by Lender
at a purchase price equal to the Market Value thereof on the day of the
Default and
(c) to apply and set off the Loaned Securities and any proceeds thereof
against the payment of the purchase price for any Replacement Collateral,
Lender's obligation to return any cash or other Collateral and any amounts
due Lender under Sections 4, 7 and 17 hereof. Borrower may also apply the
Loaned Securities and any proceeds thereof to any other obligation of
Lender or the Account 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 Borrower exercises such rights, Lender's obligation to return
a like amount of Collateral shall terminate; PROVIDED, HOWEVER, that, where
Collateral consists of a Letter of Credit, upon the exercise or deemed exercise
by Borrower of its termination rights under Section 11, Lender shall immediately
return the Letter of Credit to Borrower, and Borrower shall return to Lender the
Loaned Securities or an amount equal to the net proceeds from the sale (or
deemed sale) of the Loaned Securities in the manner described above, reduced by
any other amounts owed by the Account to Borrower.
13.2 In the event that the sales price received from such Loaned
Securities is less than the purchase price of Replacement Collateral (plus
the amount of any cash and the Market Value of any other Collateral not
replaced by Borrower on the date that the Loaned Securities are sold, and all
amounts due to Borrower hereunder), the Account shall be liable to Borrower
for the amount of such deficiency, together with interest on such deficiency
at a per annum rate that, in the case of Collateral consisting of Foreign
Securities, is equal to LIBOR plus two (2%) percent, and in the case of
Collateral consisting of any other securities and all other amounts due to
Borrower hereunder, that is equal to the Fed Funds Rate plus two (2%)
percent, in each case as such rates fluctuate from day to day, from the date
of such sale until the date of payment of such deficiency. Borrower shall
have, and Lender as agent for the Account hereby grants to Borrower, as
security for the Account's obligation to pay such excess, a security interest
in any property of the Account (including, without limitation, the Loaned
Securities) then held by Borrower and a right of setoff against such property
and against any other amount payable by Borrower to Lender in respect of such
Account arising hereunder. The purchase price of any Replacement Collateral
purchased under this Section 13 shall include, and the proceeds of any sale
of any Loaned Securities shall be determined after the deduction of, broker's
fees, taxes and commissions and all other reasonable costs, fees and expenses
related to such purchase or sale or to the exercise of Borrower's remedies
including, without limitation reasonable legal fees and expenses. Upon the
satisfaction of all the Account's obligations hereunder, any remaining Loaned
Securities (or remaining net cash proceeds from sale or deemed sale thereof)
shall be returned to Lender.
14. TRANSFER TAXES AND COSTS. All transfer taxes, stamp duties and
fees and similar charges with respect to any transfers hereunder of Loaned
Securities or Collateral shall be paid by Borrower. Borrower
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covenants and agrees that it shall ensure that this Agreement and all
instruments of transfer in respect of any Loaned Securities or Collateral shall
have been stamped in accordance with all applicable laws.
15. MARKET VALUE.
15.1 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 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 Nasdaq stock market (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 or by any of The Wall Street Journal, the
National Quotation Bureau pink sheets, or a recognized, independent pricing
source chosen by the Lender. If the securities to be valued are Government
Securities, their Market Value shall be the closing bid as quoted by any
recognized, independent pricing service chosen by the Lender or, if not
available from such a service, as quoted in The Wall Street Journal. In each
case, if the relevant quotation did not exist on such day, then the relevant
quotation on the next preceding Business Day on which there was such a
quotation shall be the Market Value.
15.3 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.
15.4 Market Value 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).
15.5 With respect to Collateral consisting of cash, Market Value as of
any date shall be the face amount thereof held by Lender at the time of
determination and, with respect to Collateral consisting of Letters of
Credit, Market Value as of any date shall be the undrawn balance thereof
which Lender may at such time draw thereunder except that if, in the judgment
of Lender, the creditworthiness of the issuer of any Letter of Credit has
been or may be impaired, then, upon notice to Borrower, the Market Value of
such Letter of Credit shall be zero.
15.6 Unless otherwise agreed, where the Loaned Securities in respect
of a Loan are denominated in a currency other than the currency in which the
related Collateral is denominated the currency which shall be applicable for
purposes of determining Market Value shall be the Currency in which the
Collateral is denominated (the "Contractual Currency"), and all Loaned
Security not denominated in the Contractual Currency shall be converted into
a Contractual Currency equivalent based on the most current spot rate of
exchange quoted by the independent source of exchange rates as notified to
Borrower by Lender upon Borrower's request. Such notification may be oral.
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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, (c) transfer on the
books of a financial or securities intermediary in accordance with the UCC or
(d) 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 UCC or any amended version of
Article 8 of the UCC that may hereafter be in effect, with respect to
transfers governed by Revised Article 8, to give the transferee control of
the transferred securities within the meaning of Revised Article 8 Section
8-106; 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 same day funds.
16.3 All transfers of a Letter of Credit from Borrower to Lender shall
be made by physical delivery of the Letter of Credit to Lender. 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 on the signature
page hereof 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. Each transfer of
securities or cash shall be made to the account specified by the party to
whom such transfer is to be made.
17. CONTRACTUAL CURRENCY.
17.1 Unless otherwise agreed, each payment of cash under this
Agreement (except as provided in Section 7.2) shall be made in 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 of 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.
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18. OBLIGATIONS TO BE SEPARATE. Each and every obligation, liability
or undertaking of an Account with respect to any Loan shall be solely an
obligation, liability or undertaking of, and binding upon, the Account for
which such Loan is made and shall be payable solely from the available assets
of such Account. No such obligation, liability or undertaking shall be
binding upon or affect any other Account or, in the case of an Account that
is a portfolio or series of an investment company registered as such under
the Investment Company Act of 1940 be binding, upon or affect any assets of
any other portfolio or series of such investment company. Neither
PaineWebber Incorporated (in its individual capacity) nor any Affiliate
thereof shall have any liability to Borrower whatsoever in respect of any
Loan, it being understood and agreed that Borrower shall have recourse solely
to the Account in the event of the occurrence of a Default involving the
Account.
19. ERISA. If any of the securities transferred to Borrower
hereunder for any Loan have been or shall be obtained, directly or
indirectly, from or using the assets of any Plan, Lender shall so notify
Borrower in writing upon the execution of this Agreement or upon initiation
of the 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, January 23, 1981; as amended, 52 Fed. Reg. 18754, May 19, 1987), or any
successor thereto, unless Borrower certifies that neither it nor any of its
Affiliates is a party-in-interest to the Plan for purposes of ERISA. If a
Loan is to be conducted in accordance with Prohibited Transaction Exemption
81-6, then Borrower represents and warrants to Lender that it is either (a) a
bank subject to federal or state supervision, (b) a broker-dealer registered
under the Exchange Act or (c) exempt from registration under Section 15(a)(1)
of the Exchange Act as a dealer in exempted government securities (as defined
in Section 3(a)(12) of the Exchange Act) and (d) neither it nor any affiliate
(as defined in Prohibited Transaction Exemption 81-6) 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. For purposes hereof, "Plan" shall mean (a)
any "employee benefit plan" as defined in Section 3(3) of ERISA 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.
20. INDEMNIFICATION. Borrower agrees to indemnify and hold harmless
Lender and the Account (including the directors and officers of any Account
which is a corporation or business trust, and the sponsor and fiduciaries of
any Account which is a Plan) from any and all damages, losses, liabilities,
claims, costs and expenses (including attorneys' fees) which Lender or the
Account may incur or suffer arising in any way out of the use by Borrower of
Loaned Securities or any failure of Borrower to deliver Loaned Securities in
accordance herewith or to otherwise comply with the terms of this Agreement,
PROVIDED, HOWEVER, that this indemnification shall extend to consequential
losses or damages only to the extent that the same are caused by Borrower's
gross negligence or willful misconduct.
21. CALCULATIONS. Except as provided in Section 8.1, all
determinations of the Market Value of securities, Collateral, or other
property or amounts for any purpose under this Agreement shall be made in
good faith by Lender.
22. LIMITATION OF LIABILITY. With respect to each Account that has
represented to the Lender that it is a business trust, notice is hereby given
that this instrument is executed by Lender as agent on behalf of the Trustees
of each such Account as Trustees and not individually and that the
obligations of such Account under this instrument are not binding upon any of
the Trustees or shareholders of such Account individually but are binding
only upon the assets and property of each such Account.
23. APPLICABLE LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without
giving effect to the conflict of laws principles thereof. Borrower hereby
irrevocably consents to the exclusive jurisdiction of any state or Federal
court located in New York, New York,
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and consents that all service of process shall be sent by (a) same-day messenger
service, or (b) nationally recognized overnight courier service directed to
Borrower at Borrower's address set forth below for notices, and service so made
will be deemed to be completed (a) at the time of deposit with the messenger
service or (b) on the Business Day after deposit with such courier; provided,
that nothing contained in this Agreement will prevent Lender from bringing any
action, enforcing any award or judgment or exercising any rights against
Borrower individually, against any security or against any property of Borrower
within any other county, state or nation. Lender and Borrower agree that the
venue provided above is the most convenient forum for both Lender and Borrower,
and Borrower waives any objection to venue and any objection based on a more
convenient forum in any action instituted under this Agreement.
24. WAIVER OF JURY TRIAL: ARBITRATION. EACH OF THE BORROWER AND
LENDER IRREVOCABLY WAIVES ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANY
DOCUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED IN ANY OF SUCH DOCUMENTS. BORROWER AND LENDER ACKNOWLEDGE THAT
THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY. Any dispute or controversy
between the parties relating to or arising out of this Agreement or any Loan
shall be referred to and settled by arbitration pursuant to the Constitution
and Rules of The New York Stock Exchange, Inc., in New York City, New York,
except that any dispute or controversy arising out of an event under Section
11.6 above shall not be referred to arbitration. Borrower acknowledges that
it has read and understood all the provisions of this Agreement, including
the waiver of jury trial, and has been advised by counsel as necessary or
appropriate.
25. WAIVER. The failure of either party to exercise any remedy or 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 exercise any of its remedies or 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.
26. 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.
The parties agree that, in the event that Lender fails to enforce any of its
rights or remedies hereunder, such rights and remedies may be enforced
against Borrower by the Account.
27. NOTICES AND OTHER COMMUNICATIONS. Except as otherwise provided
in this Agreement, all notices, demands, and other communications hereunder
shall be sufficient if made in writing and delivered or transmitted (as the
case may be) by registered mail, facsimile, telex, or courier, or by
telephone promptly confirmed in writing and delivered or transmitted as
aforesaid, to the intended recipient at the addresses (or to the numbers) set
forth on the signature page hereof. Notices shall be effective upon receipt.
28. MISCELLANEOUS. This Agreement constitutes the entire agreement
between the parties hereto, other than any agreement between the parties that
specifies that it relates specifically to loans of securities of a particular
Account or group of Accounts. This Agreement shall not be assigned by either
party (either directly or indirectly as a result of a merger, consolidation
or other reorganization) without the prior written consent of the other
party. Subject to the foregoing, this Agreement shall be binding upon and
shall enure to the benefit of the parties hereto and their respective heirs,
representatives, successors and assigns. This Agreement may be terminated by
either party upon giving 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 specifically referring hereto,
signed by the party against whom enforcement is sought.
29. DEFINITIONS. For the purposes hereof:
29.1 "Account" means, with respect to any Loan, the account for which
Lender is acting as agent in
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making the Loan.
29.2 "Affiliate" shall mean any entity which controls, is controlled
by, or is under common control with another entity.
29.3 "Bankruptcy Code" shall have the meaning set forth in Section 10.6.
29.4 "Borrower" shall have the meaning set forth in the introduction.
29.5 "Borrower Payment" shall have the meaning set forth in Section 7.4.
29.6 "Business Day" shall mean, with respect to any Loan hereunder,
any day (other than a Saturday or Sunday) recognized as a settlement day in
the principal market in which the Loaned Securities are traded, PROVIDED,
HOWEVER, that for the purposes of computing Market Value in Section 15,
"Business Day" shall mean a day on which regular trading occurs in the
principal market for the securities whose value is being determined.
Notwithstanding the foregoing, for purposes of marking to market in Section
8, "Business Day" shall mean any day (other than a Saturday or Sunday) (a) on
which regular trading occurs in the principal market for any Loaned
Securities or for any Collateral consisting of securities under any
outstanding Loan or (b) on which transfers of cash Collateral may be effected
by Lender and Borrower (or any nominee or agent thereof).
29.7 "Cash Collateral Fee" shall have the meaning set forth in
Section 4.2.
29.8 "Clearing Organization" shall mean The Depository Trust
Company, Participants 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.
29.9 "Collateral" shall mean: (a) all cash, Government Securities and
all other marketable securities or Letters of Credit that Borrower and Lender
agree shall be acceptable as collateral, whether now owned or hereafter
acquired, which are transferred to Lender pursuant to Sections 3 or 8; (b)
all accounts in which such property is deposited and all securities,
instruments or other investment property in which any cash collateral is
invested or reinvested; and (c) any payments, distributions and proceeds of
the foregoing. For purposes of the return of Collateral by Lender or
purchase or sale of securities in connection with the exercise of Lender's or
Borrower's remedies, such term shall include securities of the same issuer,
class and quantity as the Collateral initially transferred by Borrower to
Lender.
29.10 "Collateral Distributions" shall have the meaning set forth in
Section 7.4.
29.11 "Contractual Currency" shall mean: (a) with respect to any
payment in respect of a distribution under Section 7, the currency in which
the underlying distribution was made; (b) with respect to any return of cash,
the currency in which the underlying transfer of cash was made; (c) with
respect to any other payment of cash in connection with a Loan, United States
dollars or such other currency as may be agreed upon by Borrower and Lender;
and (d) for purposes of determining Market Value of Loaned Securities and
Collateral in respect of a Loan in which the Loaned Securities and the
Collateral are denominated in different currencies, the currency in which the
Collateral is denominated.
29.12 "Default" shall have the meaning set forth in Section 11.
29.13 "Fed 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
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day is not a banking day in New York City, on the next preceding banking day.
29.14 "ERISA" shall mean the Employee Retirement Income Security Act of
1974.
29.15 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
29.16 "Foreign Securities" shall mean securities that are denominated
in a currency other than United States Dollars and that are principally
cleared and settled outside of the United States.
29.17 "Government Securities" shall mean government securities as
defined in Section 3(a)(42)(A)-(C) of the Exchange Act.
29.18 "Lender" shall have the meaning set forth in the introduction.
29.19 "Lender Payment" shall have the meaning set forth in Section 7.4.
29.20 "Letter of Credit" shall mean an irrevocable, unconditional,
stand-by letter of credit, in form and substance satisfactory to Lender,
issued by a bank (not affiliated with Borrower) which is acceptable to Lender
and is insured by the Federal Deposit Insurance Corporation or is a foreign
bank that has filed an agreement with the Board of Governors of the Federal
Reserve System on Form FR T-2 (or any successor).
29.21 "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
LIBOR 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).
29.22 "Loan" shall have the meaning set forth in Section 1.1.
29.23 "Loan Fee" shall have the meaning set forth in Section 4.1.
29.24 "Loaned Securities" shall mean any security (as defined in the
Exchange Act) that is transferred in a Loan 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 the return of Loaned Securities
by Borrower or purchase or sale of securities in connection with the exercise
of Lender's or Borrower's remedies hereunder, such term shall include
securities of the same issuer, class and quantity as the Loaned Securities,
as adjusted pursuant to the preceding sentence.
29.25 "Margin Deficit" and "Margin Excess" shall have the meanings set
forth in Sections 8.2 and 8.3, respectively.
29.26 "Margin Regulations" shall have the meaning set forth in
Section 9.4.
29.27 "Market Value" shall mean market value determined in accordance
with Section 15.
29.28 "Plan" shall have the meaning set forth in Section 18.
29.29 "Required Value" shall mean, as of any date of determination, the
following percentage of the Market Value of the Loaned Securities: (a) in the
case of Foreign Securities, 105%; and (b) in the case of all other Loaned
Securities, 102%.
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29.30 "Revised Article 8" shall mean the Uniform Commercial Code,
Revised Article 8, Investment Securities (with Conforming and Miscellaneous
Amendments to Articles 1, 3, 4, 5, 9 and 10), 1994 Official Text, as
incorporated by reference in 31 C.F.R. Part 357.
29.31 "Securities Distributions" shall have the meaning set forth in
Section 7.4.
29.32 "SIPA" shall have the meaning set forth in Section 11.6.
29.33 "Tax" shall have the meaning set forth in Section 7.4.
29.34 "Termination Notice Time" shall mean, with respect to a notice to
Lender to terminate a Loan: (a) with respect to a Loan of Government
Securities, 9:45 a.m., Eastern time on a Business Day; (b) with respect to a
Loan of Foreign Securities, 11:00 a.m., Eastern time on the second Business
Day preceding the termination date; and (c) with respect to any other Loan,
11:00 a.m., Eastern time, on a Business Day.
29.35 "Transfer" or "transfer" of cash, securities or Letters of Credit
by Lender to Borrower or by Borrower to Lender shall mean a transfer effected
in accordance with Section 16.
29.36 "UCC" shall mean the Uniform Commercial Code in effect in the
State of New York, as the same may be amended from time to time.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Address for Notices: PAINEWEBBER INCORPORATED, in
its capacity as agent for Accounts(s)
000 Xxxxxxxx Xxxxxx and not in its individual capacity
00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000 By:
-------------------------------------
Attn: Global Portfolio Lending
Facsimile No.: (000) 000-0000 Name:
Telephone No.: (000) 000-0000 -------------------------------------
Title:
-------------------------------------
Address for Notices: -------------------------------------
as Borrower
--------------------------- By:
--------------------------- -------------------------------------
---------------------------
Name:
Attn: -------------------------------------
----------------------
Title:
Facsimile No.: -------------------------------------
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Telephone No.:
-------------
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