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Exhibit 9(g)
SECURITIES LENDING AND REVERSE REPURCHASE AGREEMENT SERVICES
CLIENT ADDENDUM
SUB (CUSTODIAN AGREEMENT: JULY 30,1995)
FOREIGN & DOMESTIC SECURITIES
THIS AGREEMENT for securities lending and/or reverse repurchase agreement
services is made, effective as of ______ 19__,by and between THE PARKSTONE GROUP
OF FUNDS ("Principal") and UNION BANK OF CALIFORNIA, NATIONAL ASSOCIATION
("Bank"). This Agreement is an addendum to the Sub Custody Agreement by and
between Principal and Bank dated as of July 30, 1995, ("Sub Custodian Agreement
Foreign & Domestic Securities"). This Addendum supercedes the Addendum to the
Custodian Agreement dated by the parties on October 18,1991 addressing
securities lending activities.
Principal and Bank agree as follows:
I. APPOINTMENT OF BANK; ELIGIBLE COUNTERPARTIES
1. APPOINTMENT OF BANK AS AGENT. Principal hereby authorizes Bank to act as
agent for Principal in securities lending and reverse repurchase agreement
transactions with respect to securities deposited with or held by Bank pursuant
to the Custodian Agreement. Bank's duties and responsibilities shall be only
those set forth in this Agreement and the Custodian Agreement, or as otherwise
agreed to by Bank in writing. Further, Principal authorizes Bank to delegate
Bank's duties as agent hereunder to a sub-agent(s).
2. ELIGIBLE BORROWERS/BUYERS. Bank may lend securities only to such securities
brokers and dealers or other person or entities as are listed in the attached
Exhibit A, as amended from time to time ("Borrowers"), unless and until
otherwise instructed in writing by Principal. Bank may engage in reverse
repurchase agreement transactions on Principal's behalf with only those brokers
and dealers or other person or entities as are listed on the attached Exhibit A,
as amended from time to time ("Buyers"), unless and until otherwise instructed
in writing by Principal. All securities lending transactions and reverse
repurchase agreement transactions entered into by Bank hereunder shall be
entered into pursuant to related agreements between the Borrowers or Buyers, as
the case may be, and Bank on behalf of Principal. Principal's execution of
Exhibits A, B, and C or any amendment to Exhibits A, B, or C shall constitute
Principal's representation and agreement that it has received, read, and
understood the terms of each such agreement in respect of each Borrower or
Buyer, as the case may be, listed thereon. Principal hereby (i) represents and
warrants to Bank (which representations shall be deemed repeated at and as of
all times when this Addendum is in effect) that Principal has the power and
authority, and has taken all necessary action, to enter into this Addendum and
each such agreement, and to perform the obligations of a lender or seller, as
the case may be, under such transactions, and to authorize Bank to execute and
deliver each such agreement on Principal's behalf and to enter into such
transactions and to perform the obligations of a lender or seller, as the case
may be, under such transactions on behalf of Principal, and (ii) authorizes Bank
to execute and deliver each such agreement on Principal's behalf and to enter
into any transaction of a nature contemplated by any such agreement on behalf of
Principal and to perform the obligations of a lender or seller, as the case may
be, under such transactions on behalf of Principal and (iii) has furnished or
will furnish Bank with evidence satisfactory to Bank that Principal has all
necessary authority to enter into this Addendum and each of the transactions
contemplated hereby.
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Bank shall have full unlimited power and authority to perform and each and every
act or thing it may in its discretion deem necessary or appropriate in respect
of any Securities Lending Agreement or Reverse Repurchase Agreement or any
securities loan or any reverse repurchase agreement transaction. Bank shall be
fully protected in engaging in repurchase agreement and securities lending
transactions on behalf of Principal, with respect to any or all securities
deposited with or held by Bank with any one or more of such brokers or dealers
or other person or entities until otherwise instructed in writing by Principal.
II. SECURITIES LENDING TRANSACTIONS
1. LOANS; SECURITIES LOAN AGREEMENT. Principal hereby authorizes Bank, as agent
for Principal, to lend, from time to time in its discretion, securities of
Principal at any time on deposit with or held by Bank. Principal acknowledges
and agrees that any securities lending agreement (each, a "Securities Lending
Agreement") may take the form of a master agreement covering a series of
securities loan transactions between a borrower and Bank as lender on behalf of
Principal and other accounts administered through Bank's Trust Department. There
can be no assurance that the activities of any such other account pursuant to
any such agreement, or by Bank in respect of any such other account, will not
have an adverse effect on Principal or on the rights of Principal in respect of
any securities loan.
Bank shall not in any event be liable to Principal or anyone else in respect of
any delay or failure of any other person (including Borrower or any other
lender) to comply with the provisions of the Securities Lending Agreement unless
such failure is the result of circumstances reasonably likely to result in such
failure and which were known to Bank at the time at which the loan was made.
2. MARKING TO MARKET. Bank's responsibilities in this regard shall be to monitor
the need for additional Collateral, and to use all reasonable efforts to demand
additional Collateral (as defined in the Securities Lending Agreement) in
accordance with the terms of the Securities Lending Agreement in the event
additional Collateral is required under the terms of such Securities Lending
Agreement, and to notify Principal in the event a Borrower has refused to
provide such additional Collateral in accordance with the Securities Lending
Agreement.
3. COLLATERAL. Collateral received by Bank in connection with a loan of
securities hereunder shall be held separate and apart from Bank's own funds and
securities. The amount of Collateral (as such term is defined in the Securities
Lending Agreements) transferred to Bank by any Borrower at any time may be an
amount calculated to meet the obligations of such Borrower in respect of any or
all loans to Borrower by Principal and any one or more other clients of Bank,
whether entered into pursuant to the same loan or Securities Lending agreement
or more than one such loan or agreement, and may be an amount calculated net of
amounts of Collateral required at the time to be delivered by Principal and any
one or more such other clients to such Borrower pursuant to any such Securities
Lending Agreements. In addition, the amount of Collateral transferred by Bank to
any Borrower at any time may be an amount calculated to meet the obligations of
Principal and any one or more other clients of Bank to such Borrower in respect
of any or all loans to Borrower, whether entered into pursuant to the same
Securities Lending Agreement or more than one such agreement, and may be an
amount calculated net of amounts of Collateral required at the time to be
delivered by such Borrower to Principal or one or more such other clients
pursuant to any such Securities Lending Agreements. Bank shall in good faith
allocate or reallocate (including without limitation in respect of any return of
Collateral to any Borrower) any Collateral held by it or received by it from any
Borrower among Principal and Bank's clients and in respect of any or all of such
loans in such manner and on such bases as
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Bank in its discretion may from time to time determine, and shall be fully
protected in doing so. As a result of the foregoing, the nature or amount of
Collateral credited to the account of Principal in respect of any Borrower or
any securities loan or loans will vary and may be different from or less than
the nature or amount of Collateral which might have been held by it or credited
to its account if it had entered into such loan or loans directly with such
Borrower or if Bank had entered into such loan or loans with such Borrower as
agent solely for Principal, provided that in no event shall any allocation be
permitted to give rise to the Market Value (as defined in the Securities Lending
Agreement) of the Collateral being less than 100% of the Market Value of the
loaned securities on any particular loan.
Bank may, in its discretion, invest and reinvest any Cash Collateral for the
benefit and at the risk of Principal in investments specified in Exhibit D as it
may be amended from time to time, including, without limitation, The HighMark
Group@ of Funds for which Bank provides investment advice, custody and other
administrative services. Principal acknowledges that Bank shall receive fees
from The HighMark Group of Funds in addition to the fees earned under this
Agreement. Bank may invest any or all of such Cash Collateral in any one or more
of such investments, including any such HighMark Funds, on any basis Bank
determines appropriate. Bank shall be entitled to pay or retain from any amounts
held by Bank on Principal's account from time to time in respect of any
securities loan (i) all Cash Collateral Fees and other sums required to be paid
in accordance with the Securities Lending Agreement, and (ii) Bank's
compensation or other amounts incurred by it or owed to it in respect of its
services in lending securities hereunder.
4. DISTRIBUTIONS ON LOANED SECURITIES. Bank shall pay to or for the account of
Principal, in accordance with Principal's instructions, any amounts it receives
from a Borrower which represent interest, dividends, and other distributions
made with respect to any Loaned Securities (as defined in the Securities Lending
Agreement) and which are credited by Bank to Principal's account.
5. TERM OF LOANS; TERMINATION OF LOANS; DEFAULT. Bank shall have full discretion
to determine the term of any securities lending transaction entered into by Bank
on Principal's behalf hereunder subject to any guidelines provided to it in
writing by the Principal, and shall in no event incur any liability for entering
into any such transaction on behalf of Principal for a term equal to the maximum
available (or permitted pursuant to such guidelines), regardless of any change
in market conditions or in the financial condition of the Borrower or any other
person. Bank may in its discretion terminate any loan of securities pursuant to
the provisions of the Securities Lending Agreement based on such factors as it
in its discretion deems relevant, but shall in no event have any liability for
its failure to take steps to terminate any transaction on any date or at any
time unless instructed by Principal. Bank shall in no event have any
responsibility for taking steps to terminate any securities lending transaction
before its maturity (unless instructed to do so by Principal), regardless of any
change in market conditions or in the financial condition of the Borrower or any
other person. In the event Bank receives actual notice of an Event of Default by
a Borrower under the Securities Lending Agreement, it shall notify Principal
thereof as soon as reasonably practicable and may in its discretion (but shall
in no event be obligated to) exercise any rights or remedies given the Lender
under the Securities Lending Agreement until instructed by Principal otherwise,
provided that Bank shall in no event incur any liability for its exercise or its
failure to exercise any such rights or remedies under any circumstances.
6. Termination of Lending Authority. Principal may terminate Bank's authority to
lend securities by fifteen (15) days' written notice to Bank and may direct Bank
to terminate any
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outstanding securities loans, which Bank shall do in accordance with provisions
of the Securities Lending Agreement. In the event Principal terminates Bank's
authority to lend securities hereunder, the provisions of this Agreement
relating to securities loans, including provisions relating to Bank's
compensation, shall remain in effect with respect to all securities loans
outstanding on the effective date of termination, until termination thereof in
accordance with the Securities Lending Agreement.
III. REVERSE REPURCHASE AGREEMENT TRANSACTIONS
1. REVERSE REPURCHASE AGREEMENT TRANSACTIONS; REVERSE REPURCHASE AGREEMENTS.
Principal hereby authorizes Bank, as agent for Principal, to engage from time to
time, in its discretion, in reverse repurchase agreement transactions with
Buyers with respect to securities of Principal at anytime on deposit with or
held by Bank. Principal acknowledges and agrees that any reverse repurchase
agreement (each a "Master Repurchase Agreement") may take the form of a master
agreement covering a series of reverse repurchase agreement transactions between
a Buyer and Bank as seller on behalf of Principal and other accounts
administered through Bank's Trust Department. There can be no assurance that the
activities of any other such account pursuant to any such agreement, or by Bank
in respect of any such other account, will not have an adverse effect on
Principal or on the rights of Principal with respect to any such reverse
repurchase agreement transaction.
Bank shall not in any event be liable to Principal or anyone else in respect of
any delay or failure of any other person (including any Buyer or any other
seller) to comply with the provisions of the Master Repurchase Agreement unless
such failure is the result of circumstances reasonably likely to result in such
failure and which were known to Bank at the time at which the repurchase
agreement transaction was entered into.
2. MARKING TO MARKET. Bank's responsibilities in this regard shall be to monitor
the need for margin maintenance under the Master Repurchase Agreement, and to
use all reasonable efforts to require margin maintenance in accordance with the
terms of the Master Repurchase Agreement in the event such margin maintenance is
required under the terms of the Master Repurchase Agreement, and to notify
Principal in the event a Buyer has refused to provide such margin maintenance in
accordance with the Master Repurchase Agreement.
3. INVESTMENT OF CASH. Cash received by Bank in connection with reverse
repurchase agreement transactions shall be held separate and apart from Bank's
own funds and securities.
The amount of the Purchase Price or any amount with respect to a Margin Excess
(as such terms are defined in the Master Repurchase Agreements) transferred to
Bank by any Buyer at any time may be an amount calculated to meet the
obligations of such Buyer in respect of any or all sales to Buyer by Principal
and any one or more other clients of Bank, whether entered into pursuant to the
same reverse repurchase agreement transaction or Master Repurchase agreement,
and may be an amount calculated net of amounts of the Repurchase Price (as such
term is defined in the Master Repurchase Agreements) required at the time to be
delivered by Principal and any one or more such other clients to such Buyer
pursuant to any such Master Repurchase Agreements. In addition, the amount of
the Repurchase Price or any amount with respect to a Margin Deficit (as such
term is defined in the Master Repurchase Agreement) transferred by Bank to any
Buyer at any time may be an amount calculated to meet the obligations of
Principal and any one or more other clients of Bank to such Buyer in respect of
any or all sales to such Buyer, whether entered into pursuant to the same Master
Repurchase
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Agreement or more than one such agreement, and may be an amount calculated net
of amounts of the Purchase Price required at the time to be delivered by such
Buyer to Principal or one or more such other clients pursuant to any such Master
Repurchase Agreements. Bank shall in good faith allocate or reallocate
(including without limitation in respect of any payment of any Repurchase Price
to any Buyer) any Purchase Price and any amount with respect to a Margin Excess
held by it or received by it from any Buyer among Principal and Bank's clients
and in respect of any or all of such reverse repurchase agreement transactions
in such manner and on such bases as Bank in its discretion may from time to time
determine, and shall be fully protected in doing so. As a result of the
foregoing, the nature or amount of the Purchase Price and any amount with
respect to a Margin Excess credited to the account of Principal in respect of
any Buyer or any reverse repurchase agreement transaction or transactions will
vary and may be different from or less than the nature or amount of the Purchase
Price and any amount with respect to a Margin Excess which might have been held
by it or credited to its account if it had entered into such reverse repurchase
transaction or transactions directly with such Buyer or if Bank had entered into
such loan or loans with such Buyer as agent solely for Principal in no event,
however, shall any allocation and reallocation be permitted to give rise to the
Margin Amount (as defined in the Master Repurchase Agreement) being less than
100% of the Market Value of the Purchased Securities (as defined in the Master
Repurchase Agreement) on any particular Repurchase Agreement transaction.
Bank may in its discretion invest and reinvest cash received by Bank on behalf
of Principal in connection with reverse repurchase agreement transactions in
investments specified in Exhibit D, as it may be amended from time to time,
including without limitation in any way, The HighMark Group@ of Funds for which
Bank provides investment advice, custody and other administrative services.
Principal acknowledges that Bank shall receive fees from The HighMark Group of
Funds in addition to the fees earned under this Agreement. Bank may invest any
or all of such cash in any one or more of such investments, including such
HighMark Funds, on any basis Bank determines appropriate. Bank shall be entitled
to pay or retain from any amounts held by Bank for Principal's account from time
to time in respect of any reverse repurchase agreement transaction (i) the
Repurchase Price, any amount necessary to correct a Margin Deficit, and other
sums required to be paid in accordance with the Master Repurchase Agreement, and
(ii) Bank's compensation and other amounts incurred by it or owed to it in
respect of services with respect to reverse repurchase agreement transactions
hereunder.
4. DISTRIBUTIONS ON SECURITIES SUBJECT TO REVERSE REPURCHASE AGREEMENTS. Bank
shall pay to or for the account of Principal, in accordance with Principal's
instructions, any amounts received from a Buyer or its agent which represent
interest, dividends or other distributions on Purchased Securities (as such term
is defined in the Master Repurchase Agreement) and which are credited by Bank to
Principal's account.
5. TERM OF REVERSE REPURCHASE AGREEMENT TRANSACTIONS; TERMINATION OF REVERSE
REPURCHASE AGREEMENT TRANSACTIONS; DEFAULT. Bank shall have full discretion to
determine the term of any reverse repurchase agreement transaction entered into
by Bank on Principal's behalf hereunder subject to any guidelines provided to it
in writing by Principal, and shall in no event incur any liability for entering
into any such reverse repurchase agreement transaction on behalf of Principal
for a term equal to the maximum available (or permitted pursuant to such
guidelines), regardless of any change in market conditions or in the financial
condition of the Buyer or any other person. Bank may in its discretion terminate
any reverse repurchase agreement transaction pursuant to the provisions of the
Master Repurchase Agreement based on such factors as it in its discretion deems
relevant, but shall in no event have any liability for its failure
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to terminate any transaction on any date or at any time unless instructed by
Principal. Bank shall in no event have any responsibility for taking steps to
terminate any reverse repurchase agreement transaction before its maturity
(unless instructed to do so by Principal), regardless of any change in market
conditions or in the financial condition of the Buyer or any other person. In
the event Bank receives actual notice of an Event of Default by a Buyer under
the Master Repurchase Agreement, it shall notify Principal thereof as soon as
reasonably practicable and may in its discretion (but shall in no event be
obligated to) exercise any rights or remedies given the Seller under the Master
Repurchase Agreement until instructed by Principal otherwise, provided that Bank
shall in no event incur any liability for its failure to exercise any such
rights or remedies under any circumstances.
6. TERMINATION OF AUTHORITY TO ENTER INTO REVERSE REPURCHASE AGREEMENTS.
Principal may terminate Bank's authority to enter into reverse repurchase
agreement transactions by fifteen (15) days' written notice to Bank and may
direct Bank to terminate any outstanding reverse repurchase agreement
transaction, which Bank shall do in accordance with provisions of the Master
Repurchase Agreement. In the event Principal terminates Bank's authority to
enter into reverse repurchase agreement transactions hereunder, the provisions
of this Agreement relating to reverse repurchase agreements, including,
provisions relating to Bank's compensation, shall remain in effect with respect
to all reverse repurchase agreement transactions outstanding on the effective
date of termination, until termination thereof in accordance with the Master
Repurchase Agreement.
IV. GENERAL
1. PRINCIPAL'S REPRESENTATIONS AND WARRANTIES. In addition to any other
representation and warranty of Principal hereunder, Principal represents and
warrants (which representations shall be deemed repeated at and as of all times
when this Addendum is in effect) that:
(a) Lending Principal's securities and/or entering into reverse repurchase
agreement transactions as provided in this Agreement, and the
appointment of Bank as Principal's agent as contemplated hereby, will
not violate any law, regulation, charter, by-law, or other restriction
applicable to Principal.
(b) Principal will not sell any securities subject to this Agreement unless
and until Principal shall have first obtained confirmation from Bank
that the securities Principal intends to sell are not subject to an
outstanding loan or reverse repurchase agreement transaction. Principal
will notify Bank in writing, or cause written notice to be given to
Bank, that Principal intends to sell securities which are subject to
this Agreement, such notice to be provided on or before the second
Business Day immediately prior to the trade date on which Principal
intends to sell such securities.
(c) Principal acknowledges and agrees that there can be no assurance,
during the term of any securities loan or reverse repurchase agreement
transaction, that (notwithstanding any provision of any Securities
Lending Agreement or Master Repurchase Agreement) Principal will be
able to participate in, or the full benefit of, any corporate action,
dividend or principal payment, or any other right or privilege accruing
in respect of any securities subject to any such Agreement. Without
limiting the generality of the foregoing, Principal hereby waives the
right to vote or to provide any consent or to take any similar action
with respect to any securities loaned or which are subject to any
reverse repurchase agreement transaction during the term of such loan,
and/or reverse repurchase agreement transaction.
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By its signature hereunder, Principal acknowledges that it has been apprised of
the fact that:
NOTWITHSTANDING ANY OTHER PROVISION TO THE CONTRARY, IN THE EVENT OF THE DEFAULT
OF A BORROWER AND/OR BUYER, THE PROVISIONS OF THE SECURITIES INVESTOR
PROTECTION ACT OF 1970 MAY NOT PROTECT PRINCIPAL'S ACCOUNT WITH RESPECT
TO SECURITIES LOAN OR REVERSE REPURCHASE AGREEMENT TRANSACTIONS AND IN
SUCH EVENT, THE COLLATERAL DELIVERED TO LENDER IN CONNECTION WITH SUCH
LOANS AND REVERSE REPURCHASE AGREEMENTS MAY BE THE ONLY SOURCE OF
SATISFACTION OF THE BORROWER'S OR BUYER'S OBLIGATIONS IN THE EVENT THE
BORROWER/BUYER FAILS TO RETURN THE LOANED SECURITIES AND OR SECURITIES
SUBJECT TO REVERSE REPURCHASE AGREEMENTS.
2. INSTRUCTIONS OF PRINCIPAL. All instructions of Principal to Bank shall be
provided as set forth in the Custodian Agreement.
Bank shall be entitled to accept and rely on any written instruction Bank
reasonably believes to have been authorized by Principal. Bank shall have no
obligation to act in the absence of instructions. If at anytime the
circumstances require immediate action and Bank endeavors to obtain instructions
from Principal, but is unable to so obtain them, Bank may act and is fully
protected in acting in such manner as it considers appropriate hereunder.
3. REPORTS. Bank shall provide Principal with periodic reports at such intervals
as Principal and Bank should agree, reflecting a schedule of property, statement
of transactions recording principal and income receipts and disbursements,
outstanding loans and reverse repurchase agreements transactions, income, and
schedule of property detailing investments made hereunder.
4. DUTIES OF BANK. Bank's duties and responsibilities shall be only those
expressly set forth in this Agreement, or as otherwise agreed by Bank in
writing. Bank shall not be liable for acting or failing to act in accordance
with the instructions of Principal under this Agreement or otherwise in
accordance with this Agreement or within the scope of its actual or apparent
authority. Bank shall not be required to appear in or defend any legal
proceedings with respect to the property subject to this Agreement unless Bank
has been indemnified to its satisfaction against loss and expense (including
reasonable attorneys' fees). Bank may consult with counsel acceptable to it
concerning its duties and responsibilities under this Agreement, and shall not
be liable for any action taken or not taken on the advice of such counsel.
Principal acknowledges that Bank and its agents, if any, act as agent for other
repurchase agreement and securities lending clients and accordingly, that other
clients' securities may be used prior to Principal's. Principal agrees that each
of Bank and any such agent has full discretion to allocate the use of
Principal's securities as it deems appropriate, and that Bank may make available
securities lending and/or reverse repurchase agreement opportunities to clients
other than Principal for any reason, and that Bank will have no obligation to
make any securities lending and/or reverse repurchase agreement opportunities
available to Principal.
5. EXPENSES; COMPENSATION OF BANK. Principal shall be responsible for payment of
all expenses and charges incurred in connection with the administration of this
Agreement, including
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Bank's compensation for its services hereunder as determined in accordance with
the attached Exhibit E, and Bank may in its discretion charge the assets subject
to this Agreement therefor.
6. INDEMNIFICATION. Principal shall indemnify, keep indemnified, defend and hold
harmless the Bank and any of its directors, officers, employees or agents
against any cost, expense, damage, loss or liability whatsoever (including
without limitation attorneys' fees and expenses) which may be suffered or
incurred by any of them directly or indirectly as a result of, or in connection
with, or arising out of, this Agreement or any loan of securities or reverse
repurchase agreement transaction involving Principal's securities provided,
however, that Principal shall not indemnify the Bank for any cost, expense,
damage, loss or liability whatsoever which is attributable to the negligence or
intentional misconduct of the Bank or any of its directors, officers, employees
or agents. This provision shall survive any termination of this Agreement and
shall be binding on Principal's successors and assigns.
7. TAX CONSEQUENCES. Bank makes no representations regarding tax treatment by
federal, state, or local authorities of the lending or placing in reverse
repurchase agreements of securities under this Agreement, the receipt of any
income or profit inuring to Principal as the result of receipt of any loan
premium, dividends, interest, distributions or other amounts on securities
loaned and/or the subject of reverse repurchase agreements hereunder, or the
investment by Bank of any Collateral received in connection with such loans or
cash received in connection with such reverse repurchase agreements (including
without limitation the characterization for tax purposes of any such amount as
taxable income.
8. FINANCIAL CONDITION. Upon reasonable request by Bank, and at least annually,
Principal shall provide Bank with its most recent available audited statement of
its financial condition, and its most recent unaudited statement of its
financial condition if more recent than the audited statement. Principal
represents and warrants that to the best of its knowledge and belief such
statement(s) fairly represent its financial condition and net capital as of the
dates of such statements and have been prepared in accordance with generally
accepted accounting principles of the jurisdiction in which Principal is
organized or located, as the case may be. Principal acknowledges and agrees that
Bank may provide Borrowers and Buyers with copies of such financial statements
and that Principal will cooperate with Bank in providing such other financial
information to Borrowers and Buyers as such Borrowers and Buyers may reasonably
request.
9. OTHER BORROWER RELATIONSHIPS. Principal acknowledges and agrees that Bank
may, through its commercial, trust or other departments, be a creditor for its
own account or represent in a fiduciary capacity other Borrowers/Buyers (or its
or their affiliates, creditors or customers) to which securities are loaned or
sold under this Agreement, even though any of such relationships may potentially
be in conflict with those of Principal.
10. TERMINATION. This Agreement may be terminated at any time by either party
upon fifteen (15) days' written notice to the other. In the event of
termination, Bank shall deliver to Principal all funds, securities, and other
property held by it under this Agreement for the account of Principal or to such
other person or persons as Principal shall designate in writing on Exhibit F or
shall continue to hold such property pursuant to the Custodian Agreement;
provided however, that this Agreement shall remain in effect with respect to all
securities loan transactions or reverse repurchase agreement transactions
outstanding on the effective date of termination, until consummation or
completion thereof.
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11. AMENDMENTS. This Agreement may be amended only in writing executed by both
parties. Amendments to any Exhibit or Attachment hereto shall be effective only
if executed by all the parties required to execute the initial
Attachment/Exhibit, and then, only after received by Bank and Principal by the
party to whom notices are to be sent hereunder.
12. NOTICES. All notices hereunder shall be given and deemed received as set
forth in the Custodian Agreement.
13. GOVERNING LAW. The validity, construction, and administration of this
Agreement shall be governed by the laws of the State of California from time to
time in force and effect.
Dated: 9/9/98
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The Parkstone Group of Funds ("PRINCIPAL")
By: /s/ R. Xxxxxxx Xxxxx
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Its: Assistant Secretary
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Dated: 8/4/98
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Union Bank of California, National Association ("BANK")
By: /s/ Xxxxx Xxxxxxx
----------------------------
XXXXX XXXXXXX
Its: V.P. & MANAGER
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EXHIBIT A
BORROWERS/BUYERS
FOR
SECURITIES LENDING/REVERSE REPURCHASE AGREEMENT TRANSACTIONS
ABN Amro Chicago Corp.*
Xxxxxx X. Xxxxxxx & Co. Inc.
BancAmerica Xxxxxxxxx Xxxxxxxx
Barclays Capital Corp.
Bear Xxxxxxx & Co. Inc.
BT Xxxx Xxxxx Inc.
CreditSuisse First Boston Corp.
Xxxx Xxxxxx Xxxxxxxx Inc.
Xxxxxxxxx Xxxxxx & Xxxxxxxx Securities
Dresdner, Kleinwort, Benson, NA, LLC
Fuji Securities Inc.
Xxxxxxx Sachs & Co.
HSBC Securities Inc.
Xxxxxx Bros. Inc.
Merrill, Lynch, Xxxxxx Xxxxxx & Xxxxx Inc.
X.X. Xxxxxx Securities Inc.
Xxxxxx Xxxxxxx & Co. Inc.
Nationsbanc-Xxxxxxxxxx Securities, LLP
Nomura Securities International Inc.
PaineWebber Inc.
Salomon Brothers Inc.
Xxxxx Xxxxxx Inc.
Warburg Xxxxxxx Xxxx LLC
* Not on Federal Reserve Bank's Primary Dealer List
Accepted and agreed:
Date: 9/9/98
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THE PARKSTONE GROUP OF FUNDS
By: /s/ R. Xxxxxxx Xxxxx
----------------------------
Its: Assistant Secretary
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Aug-98
11
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EXHIBIT "D"
UNION BANK OF CALIFORNIA
PERMITTED INVESTMENTS
OF CASH COLLATERAL
IN CONNECTION WITH SECURITIES LENDING
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THE PARKSTONE GROUP OF FUNDS
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Bond Balanced Allocation Large Cap
Limited Maturity Bond Conservative Allocation Mid Cap
Aggressive Allocation Equity Income Small Cap
All investments of cash collateral for the securities lending program will be
subject to the following criteria and additional limits specified by the client:
- Each funds cash collateral investment portfolio should have a least 20%
in overnight availability.
- No more than 5% of the total portfolio may be invested in any single
issuer with the exception of U.S. Government securities #1 below, U.S.
Agencies, #2 below or Reverse Repo, #10 below.
- The pool must have no assets whose final maturity exceeds thirteen (13)
months.
- The pools weighted average maturity shall not exceed 30 days.
BANK IS AUTHORIZED TO INVEST CASH COLLATERAL ON BEHALF OF LENDER IN INVESTMENTS,
WHICH AT THE TIME OF PURCHASE, MAY CONSIST OF THE FOLLOWING:
1. Securities issued by or fully guaranteed as to principal and interest
by the United States Government. Maximum maturity five years, except
when used as collateral in a repurchase transaction.
2. Securities issued by agencies, instrumentality's, sponsored agencies or
enterprises of the United States Government. This specifically includes
pass through certificates and collateralized mortgage obligations.
Maximum maturity five years, except when used as collateral in a
repurchase transaction.
3. Securities issued by or fully guaranteed by international organizations
(supernationals) so long as the are rated Al or P1 or AAA or equivalent
by at least one nationally recognized Rating Agency and are eligible
for transfer in the Federal Reserve Bank of New York book-entry system
or settle through DTC. Maximum Maturity three years. Maximum exposure
per issuer 5% of portfolio at the time of purchase.
4. Deposits in, notes of, bankers acceptances of, or letters of credits
issued by banks with minimum assets of two billion U.S. dollars (or
U.S. dollar equivalent), which banks short term deposits are rated Al
or P1 or equivalent by at least one nationally recognized Rating
Agency. Those with a maturity of one year or greater must be rated at
least "A-" or equivalent by at least one rating agency. This category
includes both "Yankee" and "Euro" paper. Maximum exposure per issuer 5%
of portfolio at the time of purchase.
5. Commercial Paper and variable rate master notes rated at least Al or P1
or equivalent by at least one nationally recognized Rating Agency when
maturity is less than seven (7) days. For purchases longer
12
than seven (7) days, ratings must be Al or P1 or equivalent by two
nationally recognized Rating Agencies. Maximum maturity 270 days. This
may include Section 4(2) or unregistered commercial paper. Maximum
exposure per issuer 5% of portfolio at the time of purchase. Maximum
portfolio exposure shall not exceed 50% at time of purchase.
6. Asset Backed Securities rated a least AAA or equivalent by at least one
nationally recognized Rating Agency. Maximum exposure per issuer 5% of
portfolio at the time of purchase. Maximum total exposure 25% of
portfolio at time of purchase.
7. Mortgage Backed Securities rated at least AAA or equivalent by at least
one nationally recognized Rating Agency. Maximum exposure per issuer 5%
of portfolio at the time of purchase. Maximum total exposure 25% of
portfolio at time of purchase
8. Corporate Obligations, both with and without credit enhancements (with
the exception of CP). Those with a maturity of less than or equal to
one year may be judged upon the corporations short term rating, and
must be rated Al or P1 or equivalent by at least one Rating Agency.
Those with a maturity greater than one year must be rated at least A-
or equivalent by one nationally recognized Rating Agency. This may
include 144a (private placement) corporate obligations. Maximum
exposure per issuer 5% of portfolio at the time of purchase. Maximum
total exposure shall not exceed 25% at time of purchase.
9. Sovereign debt of foreign governments rated at least Al or P1, AAA or
equivalent by at least one nationally recognized Rating Agency. Maximum
exposure per issuer 5% of portfolio at the time of purchase. Maximum
total exposure 25% of portfolio at time of purchase.
10. Reverse Repurchase Agreements with primary government securities
dealers or with counterparties whose short term debt is rated at least
Al or P1 or equivalent by at least one nationally recognized Rating
Agency. Collateral securing a reverse repurchase agreement is limited
to the securities and/or instruments that are defined as permitted
investments in this policy. Collateral must be delivered to either the
Union Bank of California or a third party custodian acceptable to the
Bank. Collateral level must be at least 102% and marked to market on a
daily basis. Maximum exposure per counterparty for "Term" Repo is the
greater of $10 million or 25% at time of purchase. No exposure limit on
"Overnight" Repo.
11. Shares of Registered Investment Companies or STIF's. Funds must
comprise investment vehicles whose criteria match those outlined within
the policies of permitted investments of securities lending cash
collateral. All ratings criteria that apply to the direct investment of
cash collateral apply to the investments within the funds. Maximum
total exposure shall not exceed 10% at time of purchase.
GENERAL PROVISIONS:
CREDIT RATINGS. With the exception of "full faith and credit" securities of the
United States Government (e.g. Treasury issues, GNMA's) and securities issued by
agencies, instrumentality's, sponsored agencies or enterprises of the United
States Government, minimum credit ratings are defined for securities eligible
for cash collateral reinvestment. In connection with those defined credit
ratings, the following explanations apply:
a) Rating Agencies: The term "rating agencies" means Standard &
Poor's, Xxxxx'x, Fitch's rating Service, Duff & Xxxxxx, Xxxxxxxx
BankWatch, and International Bank Credit Analyst.
b) High Quality: For short term debt the term "high quality" means:
Al (S&P), P1 (Xxxxx'x), F1 (Fitch's), D1 (D&P), TBWl (Xxxxxxxx'x)
and Al (IBCA), or better. For long term debt the term "high
quality" means: A- or better. If the applicable credit rating
applies to the issuer in general, as opposed to the specific
issue, then the rating agencies rating for the issuer
13
short term debt will apply to the securities or obligations that
have less than one year to maturity at the time of purchase. The
issuers long term debt rating will apply if the security or
obligation has a remaining maturity greater than one year at the
time of purchase.
c) Credit Rating Downgrades: A downgrade in credit rating does not
by itself require immediate liquidation of the security, but does
require prompt review and recommendation by the Investment
Manager regarding the desirability of selling the investment if
the time to maturity exceeds seven days. The customer will be
contacted in the event of a downgrade and asked for specific
written instructions.
MATURITY LIMITATIONS.
The term "maximum maturity" as used in the policies and applied to the
individual instruments refers to the remaining time to maturity at the time of
purchase, regardless of the term to maturity when originally issued.
MATURITY OF CERTAIN INSTRUMENTS DEFINED.
a) Floating Rate (Variable Rate) Notes. For purposes of these
policies, the maturity of floating rate notes is deemed to be the
next interest reset date provided that the interest rate reset
feature is contained in the terms of the instrument itself. And
that the interest reset rate feature is reasonably expected to
return the price of the security to par or amortized cost on each
reset date.
b) Securities Subject to Unconditional Puts. For the purposes of
these policies, the maturity of the securities subject to an
unconditional put to the original issuer of the security is
deemed to be the next date that the put can be exercised.
CUSTOMER APPROVAL. Where permissive provisions of these policies are
specifically conditioned on "customer approval", that approval must be contained
within the securities lending agreement between the Bank and the customer, or it
must be documented as having been obtained in writing no longer than ten (10)
business days after being given the approval by the customer.
Accepted and agreed upon,
The Parkstone Group of Funds Union Bank of California, NA
By: /s/ R. Xxxxxxx Xxxxx By: /s/ Xxxxx Xxxxxxx
-------------------------- --------------------------
XXXXX XXXXXXX
R. Xxxxxxx Xxxxx/Asst. Sec. V.P. & MANAGER
-------------------------- --------------------------
Printed Name/Title Printed Name/Title
Dated: 9/9/98 Dated: 8/4/98
------- -------
14
--------------------------------------------------------------------------------
EXHIBIT "D"
UNION BANK OF CALIFORNIA
PERMITTED INVESTMENTS
OF CASH COLLATERAL
IN CONNECTION WITH SECURITIES LENDING
--------------------------------------------------------------------------------
THE PARKSTONE GROUP OF FUNDS
----------------------------
U.S. Government Income
All investments of cash collateral for the securities lending program will be
subject to the following criteria and additional limits specified by the client
- Each funds cash collateral investment portfolio should have a least 20%
in overnight availability.
- No more than 5% of the total portfolio may be invested in any single
issuer with the exception of U.S. Government securities #1 below, U.S.
Agencies, #2 below or Reverse Repo, #10 below.
- The pool must have no assets whose final maturity exceeds thirteen (13)
months.
- The pools weighted average maturity shall not exceed 30 days.
BANK IS AUTHORIZED TO INVEST CASH COLLATERAL ON BEHALF OF LENDER IN
INVESTMENTS, WHICH AT THE TIME OF PURCHASE, MAY CONSIST OF THE FOLLOWING:
1. Securities issued by or fully guaranteed as to principal and interest
by the United States Government. Maximum maturity five years, except
when used as collateral in a repurchase transaction.
2. Securities issued by agencies, instrumentality's, sponsored agencies or
enterprises of the United States Government. This specifically includes
pass through certificates and collateralized mortgage obligations.
Maximum maturity five years, except when used as collateral in a
repurchase transaction.
3. Securities issued by or fully guaranteed by international organizations
(supernationals) so long as the are rated Al or P1 or AAA or equivalent
by at least two nationally recognized Rating Agencies and are eligible
for transfer in the Federal Reserve Bank of New York book-entry system
or settle through DTC. Maximum Maturity three years. Maximum exposure
per issuer 5% of portfolio at the time of purchase.
4. Deposits in, notes of, bankers acceptances of, or letters of credits
issued by banks with minimum assets of two billion U.S. dollars (or
U.S. dollar equivalent), which banks short term deposits are rated Al
or P1 or equivalent by at least two nationally recognized Rating
Agencies. Those with a maturity of one year or greater must be rated at
least "A-" or equivalent by at least two rating agencies. This category
includes both" Yankee" and "Euro" paper. Maximum exposure per issuer 5%
of portfolio at the time of purchase.
5. Commercial Paper and variable rate master notes rated at least Al or P1
or equivalent by at least two nationally recognized Rating Agencies.
Maximum maturity 270 days. This may include Section 4(2)
15
or unregistered commercial paper. Maximum exposure per issuer 5% of
portfolio at the time of purchase. Maximum portfolio exposure shall not
exceed 50% at time of purchase.
6. Asset Backed Securities rated a least AAA or equivalent by at least two
nationally recognized Rating Agencies. Maximum exposure per issuer 5%
of portfolio at the time of purchase. Maximum total exposure 25% of
portfolio at time of purchase.
7. Mortgage Backed Securities rated at least AAA or equivalent by at least
two nationally recognized Rating Agencies. Maximum exposure per issuer
5% of portfolio at the time of purchase. Maximum total exposure 25% of
portfolio at time of purchase
8. Corporate Obligations, both with and without credit enhancements (with
the exception of CP). Those with a maturity of less than or equal to
one year may be judged upon the corporations short term rating, and
must be rated Al or P1 or equivalent by at least two Rating Agencies.
Those with a maturity greater than one year must be rated at least A-
or equivalent by at least two Rating Agencies. This may include 144a
(private placement) corporate obligations. Maximum exposure per issuer
5% of portfolio at the time of purchase. Maximum total exposure 25% of
portfolio at time of purchase.
9. Sovereign debt of foreign governments rated at least Al or P1, AAA or
equivalent by at least two nationally recognized Rating Agencies.
Maximum exposure per issuer 5% of portfolio at the time of purchase.
Maximum total exposure 25% of portfolio at time of purchase.
10. Reverse Repurchase Agreements with primary government securities
dealers or with counterparties whose short term debt is rated at least
Al or P1 or equivalent by at least one nationally recognized Rating
Agency. Collateral securing a reverse repurchase agreement is limited
to the securities and/or instruments that are defined as permitted
investments in this policy. Collateral must be delivered to either the
Union Bank of California or a third party custodian acceptable to the
Bank. Collateral level must be at least 102% and marked to market on a
daily basis. Maximum exposure per counterparty for "Term" Repo is the
greater of $10 million or 25% at time of purchase. No exposure limit on
"Overnight" Repo.
11. Shares of Registered Investment Companies or STIF's. Funds must
comprise investment vehicles whose criteria match those outlined within
the policies of permitted investments of securities lending cash
collateral. All ratings criteria that apply to the direct investment of
cash collateral apply to the investments within the funds. Maximum
total exposure 10% of portfolio at time of purchase.
GENERAL PROVISIONS:
CREDIT RATINGS. With the exception of "full faith and credit" securities of the
United States Government (e.g. Treasury issues, GNMA's) and securities issued by
agencies, instrumentality's, sponsored agencies or enterprises of the United
States Government, minimum credit ratings are defined for securities eligible
for cash collateral reinvestment. In connection with those defined credit
ratings, the following explanations apply:
a) Rating Agencies: The term "rating agencies" means Standard &
Poor's, Xxxxx'x, Fitch's rating Service, Duff& Xxxxxx, Xxxxxxxx
BankWatch, and International Bank Credit Analyst.
b) High Quality: For short term debt the term "high quality" means:
Al (S&P), P1 (Xxxxx'x), F1 (Fitch's), D1 (D&P), TBWl (Xxxxxxxx'x)
and Al (IBCA), or better. For long term debt the term "high
quality" means: A- or better. If the applicable credit rating
applies to the issuer in general, as opposed to the specific
issue, then the rating agencies rating for the issuer short term
debt will apply to the securities or obligations that have less
than one year to maturity at the time of purchase. The issuers
long term debt rating will apply if the security or obligation
has a remaining maturity greater than one year at the time of
purchase.
16
c) Credit Rating Downgrades: A downgrade in credit rating does not
by itself require immediate liquidation of the security, but does
require prompt review and recommendation by the Investment
Manager regarding the desirability of selling the investment if
the time to maturity exceeds seven days. The customer will be
contacted in the event of a downgrade and asked for specific
written instructions
MATURITY LIMITATIONS.
The term "maximum maturity" as used in the policies and applied to the
individual instruments refers to the remaining time to maturity at the time of
purchase, regardless of the term to maturity when originally issued.
MATURITY OF CERTAIN INSTRUMENTS DEFINED.
a) Floating Rate (Variable Rate) Notes. For purposes of these
policies, the maturity of floating rate notes is deemed to be the
next interest reset date provided that the interest rate reset
feature is contained in the terms of the instrument itself. And
that the interest reset rate feature is reasonably expected to
return the price of the security to par or amortized cost on each
reset date.
b) Securities Subject to Unconditional Puts. For the purposes of
these policies, the maturity of the securities subject to an
unconditional put to the original issuer of the security is
deemed to be the next date that the put can be exercised.
CUSTOMER APPROVAL. Where permissive provisions of these policies are
specifically conditioned on "customer approval", that approval must be contained
within the securities lending agreement between the Bank and the customer, or it
must be documented as having been obtained in writing no longer than ten (10)
business days after being given the approval by the customer.
Accepted and agreed upon,
The Parkstone Group of Funds Union Bank of California, NA
By: /s/ R. Xxxxxxx Xxxxx By: /s/ Xxxxx Xxxxxxx
----------------------------- -------------------------------
XXXXX XXXXXXX
R. Xxxxxxx Xxxxx/Asst. Sec. V.P. & MANAGER
----------------------------- -------------------------------
Printed Name/Title Printed Name/Title
Dated: 9/9/98 Dated: 8/4/98
------ -------
17
EXHIBIT E
SCHEDULE OF FEES AND CHARGES
The gross revenue generated from securities lending and reverse repurchase
agreement activity will be split as follows:
The Parkstone Funds & The Parkstone Advantage Funds 60%
Union Bank of California, N.A. 40%
Dated: 9/9/98 Dated: 8/4/98
------------- ---------------
The Parkstone Funds ("PRINCIPAL") Union Bank of California, N.A. ("BANK")
By: /s/ R. Xxxxxxx Xxxxx By: /s/ Xxxxx Xxxxxxx
---------------------------- -----------------------------
Its: Assistant Secretary Its: XXXXX XXXXXXX
---------------------------- -----------------------------
V.P. & MANAGER
18
AMENDMENT TO SECURITIES LENDING AND MASTER REPURCHASE AGREEMENT
SERVICES CLIENT ADDENDUM
SCHEDULE 1
The Parkstone Group of Funds designated below shall be eligible for securities
lending and reverse repurchase transactions.
Bond
Balanced Allocation
Small Capitalization
Mid Capitalization
Large Capitalization
Limited Maturity Bond
Aggressive Allocation
Conservative Allocation
Equity Income
U.S. Government Income
Intermediate Government Obligations
THE PARKSTONE GROUP OF FUNDS UNION BANK OF CALIFORNIA, N.A.
/s/ R. Xxxxxxx Xxxxx /s/ Xxxxx Xxxxxxx
------------------------------ --------------------------------
Authorized Signature Authorized Signature
XXXXX XXXXXXX
R. Xxxxxxx Xxxxx/Asst. Sec. V.P. & MANAGER
------------------------------ --------------------------------
Printed Name Title Printed Name/Title
9/9/98 8/4/98
------------------------------ --------------------------------
Dated Dated
