FORM OF MASTER SECURITIES LOAN AGREEMENT
BETWEEN: DATED AS OF ____________
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ SECURITIES CORPORATION
AND
LUCKYGOLD 18A LIMITED
This Agreement sets forth the terms and conditions under which one
party ("Lender") may, from time to time, lend to the other party ("Borrower")
certain securities against a pledge of collateral. Capitalized terms not
otherwise defined herein shall have the meanings provided in Section 26.
The parties hereto agree as follows:
1. Loans of Securities.
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1.1 Subject to the terms and conditions of this Agreement,
Borrower or Lender may, from time to time, orally initiate a transaction in
which Lender will lend securities to Borrower. Borrower and Lender shall agree
orally on the terms of each Loan, including the issuer of the securities, the
amount of securities to be lent, the basis of compensation, and the amount of
Collateral to be transferred by Borrower, which terms may be amended during the
Loan.
1.2 Notwithstanding any other provision in this Agreement
regarding when a Loan commences, a Loan hereunder shall not occur until the
Loaned Securities and the Collateral therefor have been transferred in
accordance with Section 16.
1.3 WITHOUT WAIVING ANY RIGHTS GIVEN TO LENDER HEREUNDER, IT IS
UNDERSTOOD AND AGREED THAT THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION
ACT OF 1970 MAY NOT PROTECT LENDER WITH RESPECT TO LOANED SECURITIES HEREUNDER
AND THAT, THEREFORE, THE COLLATERAL DELIVERED TO LENDER MAY CONSTITUTE THE ONLY
SOURCE OF SATISFACTION OF BORROWER'S OBLIGATIONS IN THE EVENT BORROWER FAILS TO
RETURN THE LOANED SECURITIES.
2. Transfer of Loaned Securities.
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2.1 Unless otherwise agreed, Lender shall transfer Loaned
Securities to Borrower hereunder on or before the Cutoff Time on the date agreed
to by Borrower and Lender for the commencement of the Loan.
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2.2 Unless otherwise agreed, Borrower shall provide Lender, in
each Loan in which Lender is a Customer, with a schedule and receipt listing the
Loaned Securities. Such schedule and receipt may consist of (a) a schedule
provided to Borrower by Lender and executed and returned by Borrower when the
Loaned Securities are received, (b) in the case of securities transferred
through a Clearing Organization which provides transferors with a notice
evidencing such transfer, such notice, or (c) a confirmation or other document
provided to Lender by Borrower.
3. Collateral.
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3.1 Unless otherwise agreed, Borrower shall, prior to or
concurrently with the transfer of the Loaned Securities to Borrower, but in no
case later than the close of business on the day of such transfer, transfer to
Lender Collateral with a market value at least equal to the percentage of the
market value of the Loaned Securities agreed to by Borrower and Lender (which
shall be not less than 100% of the market value of the Loaned Securities) (the
"Margin Percentage").
3.2 The Collateral transferred by Borrower to Lender, as
adjusted pursuant to Section 8, shall be security for Borrower's obligations in
respect of such Loan, and for any other obligations of Borrower to Lender.
Borrower hereby pledges with, assigns to, and grants Lender a continuing first
security interest in, and a lien upon, the Collateral, which shall attach upon
the transfer of the Loaned Securities by Lender to Borrower and which shall
cease upon the transfer of the Loaned Securities by Borrower to Lender. In
addition to the rights and remedies given to Lender hereunder, Lender shall have
all the rights and remedies of a secured party under the New York Uniform
Commercial Code. It is understood that Lender may use or invest the Collateral,
if such consists of cash, at its own risk, but that (unless Lender is a Broker-
Dealer) Lender shall, during the term of any Loan hereunder, segregate
Collateral from all securities or other assets in its possession. Lender may
pledge, repledge, hypothecate, rehypothecate, lend, relend, sell or otherwise
transfer the Collateral, or re-register Collateral evidenced by physical
certificates in any name other than Borrower's, only (a) if Lender is Broker-
Dealer or (b) in the event of a Default by Borrower. Segregation of Collateral
may be accomplished by appropriate identification on the books and records of
Lender if it is a "financial intermediary" or a "clearing corporation" within
the meaning of the New York Uniform Commercial Code.
3.3 Except as otherwise provided herein, upon transfer to Lender
of the Loaned Securities on the day a loan is terminated pursuant to Section 5,
Lender shall be obligated to transfer the Collateral (as adjusted pursuant to
Section 8) to Borrower no later than the Cutoff Time on such day or, if such day
is not a day on which a transfer of such Collateral may be effected under
Section 16, the next day on which such a transfer may be effected.
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3.4 If Borrower transfers Collateral to Lender, as provided in
Section 3.1, and Lender does not transfer the Loaned Securities to Borrower,
Borrower shall have the absolute right to the return of the Collateral; and if
Lender transfers Loaned Securities to Borrower and Borrower does not transfer
Collateral to Lender as provided in Section 3.1, Lender shall have the absolute
right to the return of the Loaned Securities.
3.5 Borrower may, upon reasonable notice to Lender (taking into
account all relevant facts, including industry practice, the type of Collateral
to be substituted and the applicable method of transfer), substitute Collateral
for Collateral securing any Loan or Loans; provided, however, that such
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substituted Collateral shall (a) consist only of cash, securities or other
property that Borrower and Lender agreed would be acceptable Collateral prior to
the Loan or Loans and (b) have a market value such that the aggregate market
value of such substituted Collateral, together with all other Collateral for
Loans in which the party substituting such Collateral is acting as Borrower,
shall equal or exceed the agreed upon Margin Percentage of the market value of
the Loaned Securities. Prior to the expiration of any letter of credit
supporting Borrower's obligations hereunder, Borrower shall, no later than the
Cutoff Time on the date such letter of credit expires, obtain an extension of
the expiration of such letter of credit or replace such letter of credit by
providing Lender with a substitute letter of credit in an amount at least equal
to the amount of the letter of credit for which it is substituted.
3.6 Lender acknowledges that, in connection with Loans of
Government Securities and as otherwise permitted by applicable law, some
securities provided by Borrower as Collateral under this Agreement may not be
guaranteed by the United States.
4. Fees for Loan.
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4.1 Unless otherwise agreed, (a) Borrower agrees to pay Lender a
loan fee (a "Loan Fee"), computed daily on each Loan to the extent such Loan is
secured by Collateral other than cash, based on the aggregate market value of
the Loaned Securities on the day for which such Loan Fee is being computed, and
(b) Lender agrees to pay Borrower a fee or rebate (a "Cash Collateral Fee") on
Collateral consisting of cash, computed daily based on the amount of cash held
by Lender as Collateral, in the case of each of the Loan Fee and the Cash
Collateral Fee at such rates Borrower and Lender may agree. Except as Borrower
and Lender may otherwise agree (in the event that cash Collateral is transferred
by clearing house funds or otherwise), Loan Fees shall accrue from and including
the date on which the Loaned Securities are transferred to Borrower to, but
excluding, the date on which the Loaned Securities are returned to Lender, and
Cash Collateral fees shall accrue from and including the date on which the cash
Collateral is transferred to Lender to, but excluding, the date on which such
cash Collateral is returned to Borrower.
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4.2 Unless otherwise agreed, any Loan Fee or Cash Collateral
hereunder shall be payable:
(a) in the case of any Loan of securities other than
Government Securities, upon the earlier of (i) the fifteenth day of the
month following the calendar month in which such fee was incurred or (ii)
the termination of all Loans hereunder (or, if a transfer of cash in
accordance with Section 16 may not be effected on such fifteenth day or the
day of such termination, as the case may be, the next day on which such a
transfer may be effected); and
(b) in the case of any Loan of Government Securities, upon
the termination of such Loan.
Notwithstanding the foregoing, all Loan Fees shall be payable by Borrower
immediately in the event of a Default hereunder by Borrower and all Cash
Collateral Fees shall be payable immediately by Lender in the event of a Default
by Lender.
5. Termination of the Loan. Unless otherwise agreed, (a) Borrower
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may terminate a Loan on any Business Day by giving notice to Lender and
transferring the Loaned Securities to Lender before the Cutoff Time on such
Business Day, and (b) Lender may terminate a Loan on a termination date
established by notice given to Borrower prior to the close of business on a
Business Day. The termination date established by a termination notice given by
Lender to Borrower shall be a date no earlier than the standard settlement date
for trades of the Loaned Securities entered into on the date of such notice,
which date shall, unless Borrower and Lender agree to the contrary, be (i) in
the case of Government Securities, the next Business Day following such notice
and (ii) in the case of all other securities, the third Business Day following
such notice. Unless otherwise agreed, Borrower shall, on or before the Cutoff
Time on the termination date of a Loan, transfer the Loaned Securities to
Lender; provided, however, that upon such transfer by Borrower, Lender shall
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transfer the Collateral (as adjusted pursuant to Section 8) to Borrower in
accordance with Section 3.3.
6. Rights of Borrower in Respect of the Loaned Securities. Except
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as set forth in Sections 7.1 and 7.2 and as otherwise agreed by Borrower and
Lender, until Loaned Securities are required to be redelivered to Lender upon
termination of a Loan hereunder, Borrower shall have all of the incidents of
ownership of the Loaned Securities, including the right to transfer the Loaned
Securities to others. Lender hereby waives the right to vote, or to provide any
consent or to take any similar action with respect to, the Loaned Securities in
the event that the record date or deadline for such vote, consent or other
action falls during the term of the Loan. In addition, notwithstanding Sections
7.1 and 7.2, Lender hereby waives the right to receive any distribution made on
or in respect of the Loaned Securities to the extent that Lender, to become
entitled to such distribution, is required to cast a vote, provide
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a consent or take any other act on in the respect to which Lender has waived its
rights under this Section 6.
7. Dividends, Distributions, Etc.
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7.1 Lender shall be entitled to receive all distributions made
on or in respect of the Loaned Securities which are not otherwise received by
Lender, to the full extent it would be so entitled if the Loaned Securities had
not been lent to Borrower, including, but not limited to: (a) cash and all
other property, (b) stock dividends, (c) securities received as a result of
split ups of the Loaned Securities and distributions in respect thereof, (d)
interest payments, and (e) all rights to purchase additional securities.
7.2 Any cash distributions made on or in respect of the Loaned
Securities, which Lender is entitled to receive pursuant to Section 7.1, shall
be paid by the transfer of cash to Lender by Borrower on the date any such
distribution is paid in an amount equal to such cash distribution so long as
Lender is not in Default at the time of such payment Non-cash distributions
received by Borrower shall be added to the Loaned Securities on the date of
distribution and shall be considered such for all purposes, except that if the
Loan has terminated, Borrower shall forthwith transfer the same to Lender.
7.3 Borrower shall be entitled to receive all cash distributions
made on or in respect of non-cash Collateral which are not otherwise received by
Borrower, to the full extent it would be so entitled if the Collateral had not
been transferred to Lender. Any distributions of cash made on or in respect of
such Collateral which Borrower is entitled to receive hereunder shall be paid by
the transfer of cash to Borrower by Lender, on the date any such distribution is
paid, in an amount equal to such cash distribution so long as Borrower is not in
Default at the time of such payment.
7.4 (a) Unless otherwise agreed, if (i) Borrower is required
to make a payment (a "Borrower Payment") with respect to cash
distributions on Loaned Securities under Sections 7.1 and 7.2
("Securities Distributions"), or (ii) Lender is required to make a
payment (a "Lender Payment") with respect to cash distributions on
Collateral under Section 7.3 ("Collateral Distributions"), and (iii)
Borrower or Lender, as the case may be ("Payor"), shall be required by
law to collect any withholding or other tax, duty, fee, levy or charge
required to be deducted or withheld from such Borrower Payment or
Lender Payment ("Tax"), then Payor shall (subject to subsections (b)
and (c) below), pay such additional amounts as may be necessary in
order that the net amount of the Borrower Payment or Lender Payment
received by the Lender or Borrower, as the case may be ("Payee"),
after payment of such Tax equals the net amount of the Securities
Distribution or
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Collateral Distribution that would have been received if such
Securities Distribution or Collateral Distribution had been paid
directly to the Payee.
(b) No additional amounts shall be payable to a Payee under
subsection (a) above to the extent that Tax would have been imposed on a
Securities Distribution or Collateral Distribution paid directly to the
Payee.
(c) No additional amounts shall be payable to a Payee under
subsection (a) above to the extent that such payee is entitled to an
exemption from, or reduction in the rate of Tax on a Borrower Payment or
Lender Payment subject to the provision of a certificate or other
documentation, but has failed timely to provide such certificate or other
documentation.
(d) Each party hereto shall be deemed to represent that, as of
the commencement of any Loan hereunder, no Tax would be imposed on any cash
distribution paid to it with respect to (i) Loaned Securities subject to a
Loan in which it is acting as Lender or (ii) Collateral for any Loan in
which it is acting as Borrower, unless such party has given notice to the
contrary to the other party hereto (which notice shall specify the rate at
which Tax would be imposed). Each party agrees to notify the other of any
change that occurs during the term of a Loan in the rate of any Tax that
would be imposed on any such cash distributions payable to it.
7.5 To the extent that, under the provisions of Section 7.1
through 7.4(a) a transfer of cash or other property by Borrower would give rise
to a Margin Excess (as defined in Section 8.3 below) or (b) a transfer of cash
or other property by Lender would give rise to a Margin Deficit (as defined in
Section 8.2 below), Borrower or Lender (as the case may be) shall not be
obligated to make such transfer of cash or other property in accordance with
such Sections, but shall in lieu of such transfer immediately credit the amounts
that would have been transferable under such Sections to the account of Lender
of Borrower (as the case may be).
8. ▇▇▇▇ to Market.
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8.1 Borrower shall daily ▇▇▇▇ to market any Loan hereunder and
in the event that at the close of trading on any Business Day the market value
of the Collateral for any Loan to Borrower shall be less than 100% of the market
value of all the outstanding Loaned Securities, subject to such Loan, Borrower
shall transfer additional Collateral no later than the close of the next
Business Day so that the market value of such additional Collateral, when added
to market value of the other Collateral for such Loan, shall equal 100% of the
market value of the Loaned Securities.
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8.2 In addition to any rights of Lender under Section 8.1, in
the event that at the close of trading on any Business Day the aggregate market
value of all Collateral for Loans by Lender shall be less than the Margin
Percentage of the market value of all the outstanding Loaned Securities subject
to such Loans (a "Margin Deficit"), Lender may, by notice to Borrower, demand
that Borrower transfer to Lender additional Collateral so that the market value
of such additional Collateral, when added to the market value of all other
Collateral for such Loans, shall equal or exceed the agreed upon Margin
Percentage of the market value of the Loaned Securities. Unless otherwise
agreed, such transfer is to be made no later than the close of the next Business
Day following the day of Lender's notice to Borrower.
8.3 In the event that at the close of trading on any Business
Day the market value of all the Collateral for Loans to Borrower shall be
greater than the Margin Percentage of the market value of all the outstanding
Loaned Securities subject to such Loans (a "Margin Excess"), Borrower may, by
notice to Lender, demand that the Lender transfer to Borrower such amount of the
Collateral selected by Borrower so that the market value of Collateral for such
Loans, after deduction of such amounts, shall thereupon not exceed the Margin
Percentage of the market value of the Loaned Securities. Unless otherwise
agreed, such transfer is to be made no later than the close of the next Business
Day following the day of Borrower's notice to Lender.
8.4 Borrower and Lender may agree, with respect to one or more
Loans hereunder, to ▇▇▇▇ the values to market pursuant to Sections 8.2 and 8.3
by separately valuing the Loaned Securities lent and the Collateral given in
respect thereof on a Loan-by-Loan basis.
8.5 Borrower and Lender may agree, with respect to any or all
Loans hereunder, that the respective rights of Lender and Borrower under
Sections 8.2 and 8.3 may be exercised only where a Margin Excess or Margin
Deficit exceeds a specified dollar amount or a specified percentage of the
market value of the Loaned Securities under such Loans (which amount or
percentage shall be agreed to by Borrower and Lender prior to entering into any
such Loans).
9. Representations. Each party to this Agreement hereby makes the
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following representations and warranties, which shall continue during the term
of any Loan hereunder.
9.1 Each party hereto represents and warrants that (a) it has
the power to execute and deliver this Agreement, to enter into the Loans
contemplated hereby and to perform its obligations hereunder; (b) it has taken
all necessary action to authorize such execution, delivery and performance; and
(c) this Agreement constitutes a legal, valid and binding obligation enforceable
against it in accordance with its terms.
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9.2 Each party hereto represents and warrants that the
execution, delivery and performance by it of this Agreement and each Loan
hereunder will at all times comply with all applicable laws and regulations
including those of applicable regulatory and self-regulatory organizations.
9.3 Each party hereto represents and warrants that it has not
relied on the other for any tax or accounting advice concerning this Agreement
and that it has made its own determination as to the tax and accounting
treatment of any Loan and any dividends, remuneration or other funds received
hereunder.
9.4 Borrower represents and warrants that it is acting for its
own account. Lender represents and warrants that it is acting for its own
account unless it expressly specifies otherwise in writing and complies with
Section 10.3(b).
9.5 Borrower represents and warrants that (a) it has, or will
have at the time of transfer of any Collateral, the right to grant a first
security interest therein subject to the terms and conditions hereof, and (b) it
(or the person to whom it relends the Loaned Securities) is borrowing or will
borrow the Loaned Securities (except for Loaned Securities that qualify as
"exempted securities" under Regulation T of the Board of Governors of the
Federal Reserve System) for the purpose of making delivery of such securities in
the case of short sales, failure to receive securities required to be delivered,
or as otherwise permitted pursuant to Regulation T as in effect from time to
time.
9.6 Lender represents and warrants that it has, or will have at
the time of transfer of any Loaned Securities, the right to transfer the Loaned
Securities subject to the terms and conditions hereof.
10. Covenants.
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10.1 Each party hereto agrees and acknowledges that (a) each Loan
hereunder is a "securities contract," as such term is defined in Section 741(7)
of Title 11 of the United States Code (the "Bankruptcy Code"), (b) each and
every transfer of funds, securities and other property under this Agreement and
each Loan hereunder is a "settlement payment" or a "margin payment," as such
terms are used in Sections 362(b)(6) and 546(e) of the Bankruptcy Code, and (c)
the rights given to Borrower and Lender hereunder upon a Default by the other
constitute the right to cause the liquidation of a securities contract and the
right to set off mutual debts and claims in connection with a securities
contract, as such terms are used in Sections 555 and 362(b)(6) of the Bankruptcy
Code. Each party hereto further agrees and acknowledges that if a party hereto
is an "insured depository institution," as such term is defined in the Federal
Deposit Insurance Act, as amended ("FDIA"), then each Loan hereunder is a
"securities contract" and "qualified financial contract," as such terms are
defined in the FDIA and any rules, orders or policy statements thereunder.
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10.2 Borrower agrees to be liable as principal with respect to
its obligations hereunder.
10.3 Lender agrees either (a) to be liable as principal with
respect to its obligations hereunder or (b) to execute and comply fully with the
provisions of Annex I (the terms and conditions of which Annex are incorporated
herein and made a part hereof).
10.4 Promptly upon (and in any event within seven (7) Business
Days after) demand by Lender, Borrower shall furnish Lender with Borrower's most
recent publicly-available financial statements and any other financial
statements mutually agreed upon by Borrower and Lender. Unless otherwise
agreed, if Borrower is subject to the requirements of Rule 17a-5(c) under the
Exchange Act, it may satisfy the requirements of this Section by furnishing
Lender with its most recent statement required to be furnished to customers
pursuant to such Rule.
10.5 Except to the extent required by applicable law or
regulation or as otherwise agreed, Borrower and Lender agree that loans
hereunder shall in no event be "exchange contracts" for purposes of the rules of
any securities exchange and that Loans hereunder shall not be governed by the
buy-in or similar rules of any such exchange, registered national securities or
other self-regulatory organization.
11. Events of Default. All Loans hereunder may, at the option of the
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non-defaulting party, exercised by notice to the defaulting party (which option
shall be deemed to have been exercised, even if no notice is given, immediately
upon the occurrence of an event specified in subsection (e) below), be
terminated immediately upon occurrence of any one or more of the following
events (individually, a "Default"):
(a) if any Loaned Securities shall not be transferred to
Lender upon termination of the Loan as required by Section 5;
(b) if any Collateral shall not be transferred to Borrower
upon termination of the Loan as required by Sections 3.3 and 5;
(c) if either party shall fail to transfer Collateral as
required by Section 8;
(d) if either (i) shall fail to transfer to the other party
amounts in respect of distributions required to be transferred by Section
7, (ii) shall have received notice of such failure from the non-defaulting
party, and (iii) shall not have cured such default by the Cutoff Time on
the next day after such notice on which a transfer of cash may be effected
in accordance with Section 16;
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(e) if (i) either party shall commence as debtor any case or
proceeding under any bankruptcy, insolvency, reorganization, liquidation,
dissolution or similar law, or seek the appointment of a receiver,
conservator, trustee, custodian or similar official for such party or any
substantial part of its property, (ii) any such case or proceeding shall be
commenced against either party, or another shall seek such an appointment,
or any application shall be filed against either party for a protective
decree under the provisions of the Securities Investor Protection Act of
1970, which (A) is consented to or not timely contested by such party, (B)
results in the entry of an order for relief, such an appointment, the
issuance of such a protective decree or the entry of an order having a
similar effect, or (C) is not dismissed within 15 days, (iii) either party
shall make a general assignment for the benefit of creditors, or (iv)
either party shall admit in writing its inability to pay its debts as they
come due;
(f) if either party shall have been suspended or expelled
from membership or participation in any national securities exchange or
registered national securities association of which it is a member or other
self-regulatory organization to whose rules it is subject or it is
suspended from dealing in securities by any federal or state government
agency thereof;
(g) if either party shall have its license, charter, or
other authorization necessary to conduct a material portion of its business
withdrawn, suspended or revoked by any applicable federal or state
government or agency;
(h) if any representation made by either party in respect of
this Agreement or any Loan or Loans hereunder shall be incorrect or untrue
in any material respect during the term of any Loan hereunder;
(i) if either party notifies the other, orally or in
writing, of its inability to or its intention not to perform its
obligations hereunder or otherwise disaffirms, rejects or repudiates any of
its obligations hereunder; or
(j) if either party (i) shall fail to perform any material
obligation under this Agreement not specifically set forth in clauses (a)
through (i) above, including but not limited to the payment of fees as
required by Section 4, and the payment of transfer taxes as required by
Section 14, (ii) shall have received notice of such failure from the non-
defaulting party and (iii) shall not have cured such failure by the Cutoff
Time on the next day after such notice on which a transfer of cash may be
effected under Section 16.
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12. Lender's Remedies. Upon occurrence of a Default under Section 11
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entitling Lender to terminate all Loans hereunder, Lender shall have the right
(without further notice to Borrower), in addition to any other remedies provided
herein or under applicable law, (a) to purchase a like amount of Loaned
Securities ("Replacement Securities") in the principal market for such
securities in a commercially reasonable manner (b) to sell and Collateral in the
principal market for such Collateral in a commercially reasonable manner and (c)
to apply and set off the Collateral and any proceeds thereof (including any
amounts drawn under a letter of credit supporting any Loan) against the payment
of the purchase price for such Replacement Securities and any amounts due to
Lender under Sections 4, 7, 14 and 17. In the event Lender shall exercise such
rights, Borrower's obligation to return a like amount of the Loaned Securities
shall terminate. Lender may similarly apply the Collateral and any proceeds
thereof to any other obligation of Borrower under this Agreement, including
Borrower's obligations with respect to distributions paid to Borrower (and not
forwarded to Lender) in respect of Loaned Securities. In the event that (i) the
purchase price of Replacement Securities (plus all other amounts, if any, due to
Lender hereunder) exceeds (ii) the amount of the Collateral, Borrower shall be
liable to Lender for the amount of such excess together with interest thereon at
a rate equal to (A) in the case of purchases of Foreign Securities, LIBOR, (B)
in the case of purchases of any other securities (or other amounts, if any, due
to Lender hereunder), the Federal Funds Rate or (C) such other rate as may be
specified in Schedule B, in each case as such rate fluctuates from day to day,
from the date of such purchase until the date of payment of such excess. As
security for Borrower's obligation to pay such excess, Lender shall have, and
Borrower hereby grants, a security interest in any property of Borrower then
held by or for Lender and a right of setoff with respect to such property and
any other amount payable by Lender to Borrower. The purchase price of
Replacement Securities purchased under this Section 12 shall include, and the
proceeds of any sale of Collateral shall be determined after deduction of,
broker's fees and commissions and all other reasonable costs, fees and expenses
related to such purchase or sale (as the case may be). In the event Lender
exercises its rights under this Section 12, Lender may elect in its sole
discretion, in lieu of purchasing all or a portion of the Replacement Securities
or selling all or a portion of the Collateral, to be deemed to have made,
respectively, such purchase of Replacement Securities or sale of collateral for
an amount equal to the price therefor on the date of such exercise obtained from
a generally recognized source or the most recent closing bid quotation from such
a source. Subject to Section 19, upon the satisfaction of all obligations
hereunder, any remaining Collateral shall be returned to Borrower.
13. Borrower's Remedies. Upon the occurrence of a Default under
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Section 11 entitling Borrower to terminate all Loans hereunder, Borrower shall
have the right (without further notice to Lender), in addition to any other
remedies provided herein or under applicable law, (a) to purchase a like amount
of Collateral ("Replacement Collateral") in the principal market for such
Collateral in a commercially reasonable manner, (b) to sell a like amount of the
Loaned Securities in
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the principal market for such securities in a commercially reasonable manner and
(c) to apply and set off the Loaned Securities and any proceeds thereof against
(i) the payment of the purchase price for such Replacement Collateral (ii)
Lender's obligation to return any cash or other Collateral and (iii) any amounts
due to Borrower under Sections 4, 7 and 17. In such event, Borrower may treat
the Loaned Securities as its own and Lender's obligation to return a like amount
of the Collateral shall terminate; provided, however, that Lender shall
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immediately return any letters of credit supporting any Loan upon the exercise
or deemed exercise by Borrower of its termination rights under Section 11.
Borrower may similarly apply the Loaned Securities and any proceeds thereof to
any other obligation of Lender under this Agreement, including Lender's
obligations with respect to distributions paid to Lender (and not forwarded to
Borrower) in respect of Collateral. In the event that (i) the sales price
received from such Loaned Securities is less than (ii) the purchase price of
Replacement Collateral (plus the amount of any cash or other Collateral not
replaced by Borrower and all other amounts, if any, due to Borrower hereunder),
Lender shall be liable to Borrower for the amount of any such deficiency,
together with interest on such amounts at a rate equal to (A) in the case of
Collateral consisting of Foreign Securities, LIBOR, (B) in the case of
Collateral consisting of any other securities (or other amounts due, if any, to
Borrower hereunder), the Federal Funds Rate or (C) such other rate as may be
specified in Schedule B, in each case as such rate fluctuates from day to day,
from the date of such sale until the date of payment of such deficiency. As
security for Lender's obligation to pay such deficiency, Borrower shall have,
and Lender hereby grants, a security interest in any property of Lender then
held by or for Borrower and a right of setoff with respect to such property and
any other amount payable by Borrower to Lender. The purchase price of any
Replacement Collateral purchased under this Section 13 shall include, and the
proceeds of any sale of Loaned Securities shall be determined after deduction
of, broker's fees and commissions and all other reasonable costs, fees and
expenses related to such purchase or sale (as the case may be). In the event,
Borrower exercises its rights under this Section 13, Borrower may elect in its
sole discretion, in lieu of purchasing all or a portion of the Replacement
Collateral or selling all or a portion of the Loaned Securities, to be deemed to
have made, respectively, such purchase of Replacement Collateral or sale of
Loaned Securities for an amount equal to the price therefor on the date of such
exercise obtained from a generally recognized source or the most recent closing
bid quotation from such source. Subject to Section 19, upon the satisfaction of
all Lender's obligations hereunder, any remaining Loaned Securities (or
remaining cash proceeds thereof) shall be returned to Lender. Without limiting
the foregoing, the parties hereto agree that they intend the Loans hereunder to
be loans of securities. If, however, any Loan is deemed to be a loan of money by
Borrower to Lender, then Borrower shall have, and Lender shall be deemed to have
granted, a security interest in the Loaned Securities and the proceeds thereof.
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14. Transfer Taxes. All transfer taxes with respect to the transfer
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of the Loaned Securities by Lender to Borrower and by Borrower to Lender upon
termination of the Loan shall be paid by Borrower.
15. Market Value.
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15.1 Unless otherwise agreed, if the principal market for the
securities to be valued is a national securities exchange in the United States,
their market value shall be determined by their last sale price on such exchange
on the preceding Business Day or, if there was no sale on that day, by the last
sale price on the next preceding Business Day on which there was a sale on any
such exchange, all as quoted on the Consolidated Tape or, if not quoted on the
Consolidated Tape, then as quoted by such exchange.
15.2 Except as provided in Section 15.3 or 15.4 or as otherwise
agreed, if the principal market for the securities to be valued is the over-the-
counter market, their market value shall be determined as follows. If the
securities are quoted on the National Association of Securities Dealers
Automated Quotations System ("NASDAQ"), their market value shall be the closing
sale price on NASDAQ on the preceding Business Day or, if the securities are
issues for which last sale prices are not quoted on NASDAQ, the closing bid
price on such day. If the securities to be valued are not quoted on NASDAQ,
their market value shall be the highest bid quotation as quoted in any of The
Wall Street Journal, the National Quotation Bureau pink sheets, the Salomon
Brothers quotations sheets, quotations sheets of registered market makers and,
if necessary, dealers' telephone quotations on the preceding Business Day. In
each case, if the relevant quotation did not exist on such day, then the
relevant quotation on the next preceding Business Day in which there was such a
quotation shall be the market value.
15.3 Unless otherwise agreed, if the securities to be valued are
Government Securities, their market value shall be the average of the bid and
ask prices as quoted on Prophesy at 3:30 P.M. New York time on the Business Day
preceding the date on which such determination is made. If the securities are
not so quoted on such day, their market value shall be determined as of the next
preceding Business Day on which they were so quoted. If the securities to be
valued are Government Securities that are not quoted on Prophesy, their market
value shall be determined as of the close of business on the preceding Business
Day in accordance with market practice for such securities.
15.4 Unless otherwise agreed, if the securities to be valued are
Foreign Securities, their market value shall be determined as of the close of
business on the preceding Business Day in accordance with market practice in the
principal market for such securities.
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15.5 Unless otherwise agreed, the market value of a letter of
credit shall be the undrawn amount thereof.
15.6 All determinations of market value under Sections 15.1,
15.2, 15.3 and 15.4 shall include, where applicable, accrued interest to the
extent not already included therein (other than any interest transferred to the
other party pursuant to Section 7), unless market practice with respect to the
valuation of such securities in connection with securities loans is to the
contrary. All determinations of market value that are required to be made at
the close of trading on any Business Day pursuant to Section 8 or otherwise
hereunder shall be made as if being determined at the commencement of trading on
the next Business Day. The determinations of market value provided for in this
Section 15 shall apply for all purposes under this Agreement, except for
purposes of Section 12 and 13.
16. Transfers.
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16.1 All transfers of securities hereunder shall be by (a)
physical delivery of certificates representing such securities together with
duly executed stock and bond transfer powers, as the case may be, with
signatures guaranteed by a bank or a member firm of the New York Stock Exchange,
Inc., (b) transfer on the books of a Clearing Organization, or (c) such other
means as Borrower and Lender may agree. In every transfer of securities
hereunder, the transferor shall take all steps necessary (i) to effect a
"transfer" under Section 8-313 of the New York Uniform Commercial Code or, where
applicable, under any U.S. federal regulation governing transfers of securities
and (ii) to provide the transferee with comparable rights under any applicable
foreign law or regulation.
16.2 All transfers of cash Collateral hereunder shall be by (a)
wire transfer in immediately available, freely transferable funds or (b) such
other means as Borrower and Lender may agree. All other transfers of cash
hereunder shall be made in accordance with the preceding sentence or by delivery
of a certified or official bank check representing next-day New York Clearing
House Funds.
16.3 All transfers of a letter of credit from Borrower to Lender
shall be made by physical delivery to Lender of an irrevocable letter of credit
issued by a "bank" as defined in Section 3(a)(6)(A)-(C) of the Exchange Act.
Transfer of a letter of credit from Lender to Borrower shall be made by causing
such letter of credit to be returned or by causing the amount of such letter of
credit to be reduced to the amount required after such transfer.
16.4 A transfer of securities, cash or letters of credit may be
effected under this Section 16 on any day except (a) a day on which the
transferee is closed for business at its address set forth in Schedule A hereto
or (b) a day on which
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a Clearing Organization or wire transfer system is closed, if the facilities of
such Clearing Organization or wire transfer system are required to effect such
transfer.
17. Contractual Currency.
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17.1 Borrower and Lender agree that: (a) any payment in respect
of a distribution under Section 7 shall be made in the currency in which the
underlying distribution of cash was made; (b) any return of cash shall be made
in the currency in which the underlying transfer of cash was made and (c) any
other payment of cash in connection with a Loan under this Agreement shall be in
the currency agreed upon by Borrower and Lender in connection with such Loan
(the currency established under clause (a), (b) or (c) hereinafter referred to
as the "Contractual Currency"). Notwithstanding the foregoing, the payee of any
such payment may, at its option, accept tender thereof in any other currency;
provided, however, that, to the extent permitted by applicable law, the
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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.
18. ERISA. Lender shall, if any of the securities transferred to the
-----
Borrower hereunder for any Loan have been or shall be obtained, directly or
indirectly, from or using the assets of any Plan, so notify Borrower in writing
upon the execution of the Agreement or upon initiation of such Loan under
Section 1.1. If Lender so notifies Borrower, then Borrower and Lender shall
conduct the Loan in accordance with the terms and conditions of Department of
Labor Prohibited Transaction Exemption 81-6 (46 Fed. Reg. 7527, Jan. 23, 1981;
as amended, 52 Fed. Reg. 18754, May 19, 1987), or any successor thereto (unless
Borrower and Lender have agreed prior to entering into a Loan that such Loan
will be conducted in reliance
16
on another exemption, or without relying on any exemption, from the prohibited
transaction provisions of Section 406 of the Employee Retirement Income Security
Act of 1974, as amended, and Section 4975 of the Internal Revenue Case of 1986,
as amended). Without limiting the foregoing and notwithstanding any other
provisions of this Agreement, if the Loan will be conducted in accordance with
Prohibited Transaction Exemption 81-6 then:
(a) Borrower represents and warrants to Lender that it is
either (i) a bank subject to federal or state supervision, (ii) a broker-
dealer registered under the Exchange Act or (iii) exempt from registration
under Section 15(a)(1) of the Exchange Act as a dealer in Government
Securities.
(b) Borrower represents and warrants that, during the term
of any Loan hereunder, neither Borrower nor any affiliate of Borrower has
any discretionary authority or control with respect to the investment of
the assets of the Plan involved in the Loan or renders investment advice
(within the meaning of 29 C.F.R. Section 25 10.3-21(c)) with respect to the
assets of the Plan involved in the Loan. Lender agrees that, prior to or at
the commencement of any Loan hereunder, it will communicate to Borrower
information regarding the Plan sufficient to identify to Borrower any
person or persons that have discretionary authority or control with respect
to the investment of the assets of the Plan involved in the Loan or that
render investment advice (as defined in the preceding sentence) with
respect to the assets of the Plan involved in the Loan. In the event Lender
fails to communicate and keep current during the term of any Loan such
information, Lender rather than Borrower shall be deemed to have made the
representation and warranty in the first sentence of this clause (b).
(c) Borrower and Lender agree that:
(i) the term "Collateral" shall mean cash, securities
issued or guaranteed by the United States government or its agencies
or instrumentalities, or irrevocable bank letters of credit issued by
a person other than Borrower or an affiliate thereof;
(ii) prior to the making of any Loans hereunder,
Borrower shall provide Lender with (A) the most recent available
audited statement of Borrower's financial condition and (B) the most
recent available unaudited statement of Borrower's financial condition
(if more recent than the most recent audited statement), and each Loan
made hereunder shall be deemed a representation by Borrower that there
has been no material adverse change in Borrower's financial condition
subsequent to the date of the latest financial statement or
information furnished in accordance herewith;
