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Exhibit (h)(3)
STAR BANK, N.A.
MASTER REPURCHASE AGREEMENT
1. APPLICABILITY.
From time to time the parties hereto may enter into transactions in which
Star Bank, N.A., ("Seller") agrees to transfer to the other party to this
Agreement ("Buyer") securities or financial instruments ("Securities") against
the transfer of funds by Buyer, with a simultaneous agreement by Buyer to
transfer to Seller such Securities at a date certain or on demand, against the
transfer of funds by Seller. Each such transaction shall be referred to herein
as a "Transaction" and shall be governed by this Agreement unless otherwise
agreed in writing.
FUNDS HELD PURSUANT TO A TRANSACTION ARE
NOT A DEPOSIT AND THEREFORE ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION.
2. DEFINITIONS.
(a) "Act of Insolvency", with respect to any person, (i) the commencement
by such person as debtor of any case or proceeding under any bankruptcy,
insolvency, reorganization, liquidation, dissolution or similar law, or such
person seeking the appointment of a receiver, trustee, custodian or similar
official for such person or any substantial part of its property, or (ii) the
commencement of any such case or proceeding against such person, or another
seeking such an appointment, which (A) is consented to or not timely contested
by such person, (B) results in the entry of an order for relief, such an
appointment or the entry of an order having a similar effect, or (C) is not
dismissed within 30 days;
(b) "Additional Purchased Securities", securities provided by Seller to
Buyer pursuant to Paragraph 4 hereof;
(c) "Buyer's Margin Amount", with respect to any Transaction as of any
date, an amount equal to 100% of the Purchased Securities;
(d) "Confirmation", the meaning specified in Paragraph 3(b) hereof;
(e) "Income", with respect to any Security at any time, any principal
thereof then payable and all interest;
(f) "Margin Deficit", the meaning specified in Paragraph 4(a) hereof;
(g) "Margin Excess", the meaning specified in Paragraph 4 (b) hereof;
(h) "Market Value", with respect to any Securities as of any date, the
price for such Securities on such date obtained from a generally recognized
source or the most recent closing bid quotation from such a source, plus accrued
Income to the extent not included therein (other than any Income credited or
paid to, or applied to the obligations of, Seller pursuant to Paragraph 5
hereof) as of such date;
(i) "Price Differential", with respect to any Transaction hereunder as of
any date, the aggregate amount obtained by daily application of the Pricing Rate
for such Transaction to the Purchase Price for such Transaction on a 360 day per
year basis for the actual number of days during the period commencing on (and
including) the Purchase Date for such Transaction and ending on (but excluding)
the date of determination (reduced by any amount of such Price Differential
previously paid by Seller to Buyer with respect to such Transaction);
(j) "Pricing Rate", the per annum percentage rate for determination for the
Price Differential;
(k) "Purchase Date", the date on which Securities are transferred by Seller
to Buyer;
(l) "Purchase Price", (i) on the Purchase Date, the price at which
Purchased Securities are transferred by Seller to Buyer, and (ii) thereafter,
such price increased by the amount of any cash paid by Buyer to Seller pursuant
to Paragraph 4 (b) hereof and decreased by the amount of any cash paid by Seller
to Buyer pursuant to Paragraph 4(a) hereof or applied to reduce Seller's
obligations under clause (ii) of Paragraph 5 hereof;
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(m) "Purchased Securities", the U.S. Government and Agency Securities
transferred by Seller to Buyer in a Transaction hereunder, and any Securities
substituted therefor in accordance with Paragraph 9 hereof. The term "Purchased
Securities" with respect to any Transaction at any time also shall include
Additional Purchased Securities pursuant to Paragraph 4 and shall exclude
Securities returned pursuant to Paragraph 4;
(n) "Repurchase Date", the date on which Seller is to repurchase the
Purchased Securities from Buyer, including any date determined by application of
the provisions of Paragraphs 3(c) or 11 hereof;
(o) "Repurchase Price", the price at which Purchased Securities are to be
transferred from Buyer to Seller upon termination of a Transaction, which will
be determined in each case (including transactions terminable upon demand) as
the sum of the Purchase Price and the Price Differential as of the date of such
determination, increased by any amount determined by the application of the
provisions of Paragraph 11 hereof;
(p) "Seller's Margin Amount", with respect to any Transaction as of any
date, the amount obtained by application of a percentage (which may be equal to
the percentage agreed to pursuant to subparagraph (c) of this Paragraph), agreed
to by Buyer and Seller prior to entering into the Transaction, to the Repurchase
Price for such Transaction as of such date.
3. INITIATION; CONFIRMATION; TERMINATION.
(a) An agreement to enter into a Transaction may be made orally or in
writing at the initiation of either Buyer or Seller, or automatically pursuant
to the terms of any one or more of Buyer's deposit accounts with Seller. On the
Purchase Date for the Transaction, the Purchased Securities shall be held by
Seller or its agent in the manner prescribed in part 450.4 of the Title 17 of
the Code of Federal Regulations, against the crediting of the Purchase Price to
an account of the Seller in immediately available funds.
(b) At the end of the day of initiation of any Transaction hereunder, or at
the end of any other day during which other securities are substituted for
Purchased Securities pursuant to Paragraph 9 hereof, Seller shall promptly
deliver to Buyer a written confirmation of each Transaction (a "Confirmation");
provided, however, that Seller need not send a Confirmation at the end of any
day during which other securities are substituted for Purchased Securities
pursuant to Paragraph 9 hereof unless the substitution results in a change to
issuer, maturity date, par amount or coupon rate specified in the previous
Confirmation, and provided further that Seller need not send a Confirmation with
respect to Transactions or substitutions that occur before January 31, 1988. The
Confirmation shall identify the Buyer and the Seller and shall specify (i) the
Purchase Date, (ii) the Purchase Price, (iii) the Repurchase Date, unless the
Transaction is to be terminable on demand, (iv) the Pricing Rate or Repurchase
Price applicable to the Transaction, (v) the Issuer, maturity date, coupon rate,
par amount and market value of the Purchased Securities, (vi) the CUSIP or
mortgage-backed security pool number, as appropriate, of the Purchased
Securities, and (vii) any additional terms or conditions of the Transaction not
inconsistent with this Agreement. The Confirmation, together with this
Agreement, shall constitute conclusive evidence of the terms agreed between
Buyer and Seller with respect to the Transaction to which the Confirmation
relates, unless with respect to the Confirmation specific objection is made
promptly after receipt thereof. In the event of any conflict between the terms
of such Confirmation and this Agreement, this Agreement shall prevail.
(c) In the case of Transactions terminable upon demand, such demand shall
be made by the Buyer of Seller, no later than such time as is customary in
accordance with market practice, by telephone or otherwise on or prior to the
banking day on which such termination will be effective. On the date of such
demand, or on the date fixed for termination in the case of Transactions having
a fixed term, termination of the Transaction will be effected by transfer to
Seller or its agent of the Purchased Securities and any Income in respect
thereof collected by the Buyer (and not previously credited or paid to, or
applied to the obligations of, Seller pursuant to Paragraph 5
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hereof) against the crediting of the Repurchase Price to an account of the Buyer
in immediately available funds.
4. MARGIN MAINTENANCE
(a) If at any time the aggregate Market Value of all Purchased Securities
subject to all Transactions is less than the aggregate Buyer's Margin Amount for
all such Transactions (a "Margin Deficit"), then Buyer may require Seller, at
Seller's option, to make a cash payment to Buyer or to transfer to Buyer
additional Securities reasonably acceptable to Buyer ("Additional Purchased
Securities"), so that the cash and aggregate Market Value of the Purchased
Securities, including any such Additional Purchased Securities, will thereupon
equal or exceed such aggregate Buyer's Margin Amount.
(b) If at any time the aggregate Market Value of all Purchased Securities
subject to all Transactions exceeds the aggregate Seller's Margin Amount for all
such Transactions at such time (a "Margin Excess"), then Seller may by notice to
Buyer require Buyer, at Buyer's option, to make a cash payment to Seller or to
transfer Purchased Securities to Seller, so that the aggregate Market Value of
the Purchased Securities, after deduction of any such cash or any Purchased
Securities so transferred, will thereupon not exceed such aggregate Seller's
Margin Amount.
(c) Any cash paid or repaid pursuant to this Paragraph shall be attributed
to such Transactions as shall be agreed upon by Buyer and Seller.
(d) Seller and Buyer may agree, with respect to any or all Transactions
hereunder, that the rights of Buyer or Seller (or both) under subparagraphs (a)
and (b) of this Paragraph may be exercised only where a Margin Deficit or Margin
Excess exceeds a specified dollar amount or a specified percentage of the
Repurchase Price for such Transactions (which amount or percentage shall be
agreed to by Buyer and Seller prior to entering into any such Transactions).
(e) Seller and Buyer may agree, with respect to any or all Transactions
hereunder, that the respective rights of Buyer and Seller under subparagraphs
(a) and (b) of this Paragraph to require the elimination of a Margin Deficit or
a Margin Excess, as the case may be, can be exercised whenever such a Margin
Deficit or Margin Excess exists with respect to any single Transaction hereunder
(calculated without regard to any other Transaction outstanding under this
agreement).
5. INCOME PAYMENTS.
Where a particular Transaction's term extends over an Income payment date
on the Securities subject to the Transaction, an amount equal to such Income
payment or payments with respect to any Purchased Securities subject to such
Transaction shall, on the date such Income is payable, be paid or credited to
the account of Seller.
6. SECURITY INTEREST.
Although the parties intend that all Transactions hereunder be sales and
purchases and not loans, in the event any such Transactions are deemed to be
loans, Seller shall be deemed to have pledged to Buyer as security for the
performance by Seller of its obligations under each such Transaction, and shall
be deemed to have granted to Buyer a security interest in, all of the Purchased
Securities with respect to all Transactions hereunder and all proceeds thereof.
7. PAYMENT AND TRANSFER.
Unless otherwise mutually agreed, all payments hereunder shall be in
immediately available funds. All transfers of securities by one party hereto to
the other party shall be made by Seller or its agent in the manner prescribed in
part 450 of Title 17 of the Code of Federal Regulations.
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8. SEGREGATION OF PURCHASED SECURITIES.
All Purchased Securities in the possession of the Seller shall be
segregated from Seller's securities and shall be identified as subject to this
Agreement. Segregation shall be accomplished as prescribed in Part 450 of Title
17 of the Code of Federal Regulations.
9. SUBSTITUTION.
THE SELLER IS NOT PERMITTED TO SUBSTITUTE OTHER SECURITIES FOR THOSE
SUBJECT TO THIS AGREEMENT AND THEREFORE MUST KEEP THE BUYER'S SECURITIES
SEGREGATED AT ALL TIME, UNLESS IN THIS AGREEMENT THE BUYER GRANTS THE SELLER THE
RIGHT TO SUBSTITUTE OTHER SECURITIES. IF THE BUYER GRANTS THE RIGHT TO
SUBSTITUTE, THIS MEANS THAT THE BUYER'S SECURITIES WILL LIKELY BE COMMINGLED
WITH THE SELLER'S OWN SECURITIES DURING THE TRADING DAY. THE BUYER IS ADVISED,
DURING ANY TRADING DAY THAT THE BUYER'S SECURITIES ARE COMMINGLED WITH THE
SELLER'S SECURITIES, THEY MAY BE SUBJECT TO LIENS GRANTED BY THE SELLER TO THIRD
PARTIES AND MAY BE USED BY THE SELLER FOR DELIVERIES ON OTHER SECURITIES
TRANSACTIONS. WHENEVER THE SECURITIES ARE COMMINGLED, THE SELLER'S ABILITY TO
RESEGREGATE SUBSTITUTE SECURITIES FOR THE BUYER WILL BE SUBJECT TO THE SELLER'S
ABILITY TO SATISFY ANY LIEN OR TO OBTAIN SUBSTITUTE SECURITIES.
10. REPRESENTATIONS.
Each of Buyer and Seller represents and warrants to the other that (i) it
is duly authorized to execute and deliver this Agreement, to enter into the
Transactions contemplated hereunder and to perform its obligations hereunder and
has taken all necessary action to authorize such execution, delivery and
performance, (ii) it will engage in such Transactions as principal (or, if
agreed in writing in advance of any Transaction by the other party hereto, as
agent for a disclosed principal), (iii) the person signing this Agreement on its
behalf is duly authorized to do so on its behalf, (iv) it has obtained all
authorizations of any governmental body required in connection with this
Agreement and the Transactions hereunder and such authorizations are in full
force and effect and (v) the execution, delivery and performance of this
Agreement and the Transactions hereunder will not violate any law, ordinance,
charter, by-law or rule applicable to it or any agreement by which it is bound
or by which any of its assets are affected. On the Purchase Date for any
Transaction Buyer and Seller shall each be deemed to repeat all the foregoing
representations made by it.
11. EVENTS OF DEFAULT.
In the event that (i) Seller fails to repurchase or Buyer fails to deliver
Purchased Securities upon the applicable Repurchase Date, (ii) Seller or Buyer
fails, after one business day's notice, to comply with Paragraph 4 hereof, (iii)
Buyer fails to comply the Paragraph 5 hereof, (iv) an Act of Insolvency occurs
with respect to Seller or Buyer, (v) any representation made by Seller or Buyer
shall prove to have been incorrect or untrue in any material respect when made
or repeated or deemed to have been made or repeated, or (vi) Seller or Buyer
shall admit to the other its inability to, or its intention not to, perform any
of its obligations hereunder (each an "Event of Default");
(a) At the option of the nondefaulting party, exercised by written 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 Act of
Insolvency), the Repurchase Date for each Transaction hereunder shall be deemed
immediately to occur.
(b) In all Transactions in which the defaulting party is Seller, if Buyer
exercises or is deemed to have exercised the option referred to in subparagraph
(a) of this paragraph, (i) Seller's obligations hereunder to repurchase all
Purchased Securities in such Transactions shall thereupon become immediately due
and payable, (ii) to the extent permitted by applicable law, the
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Repurchase Price with respect to each such Transaction shall be increased by the
aggregate amount obtained by daily application of the Pricing Rate for such
Transaction to the Repurchase Price for such Transaction as of the Repurchase
Date as determined pursuant to subparagraph (a) of this Paragraph (decreased as
of any day by (A) any amounts retained by Buyer with respect to such Repurchase
Price pursuant to clause (iii) of this subparagraph, (B) any proceeds from the
sale of Purchased Securities pursuant to subparagraph (d)(i) of this paragraph,
and (C) any amounts credited to the account of Seller pursuant to subparagraph
(e) of this paragraph) on a 360 day per year basis for the actual number of days
during the period from the date of the Event of Default giving rise to such
option to the date of payment of the Repurchase Price as so increased, (iii) all
Income paid after such exercise or deemed exercise shall be paid to Buyer and
applied to the aggregate unpaid Repurchase Prices owed by Seller, and (iv)
Seller shall immediately deliver to Buyer any Purchased Securities subject to
such Transactions then in Seller's possession.
(c) In all Transactions in which the defaulting party is Buyer, upon tender
by Seller of payment of the aggregate Repurchase Prices for all such
Transactions, Buyer's right, title and interest in all Purchased Securities
subject to such Transaction shall be deemed transferred to Seller, and Buyer
shall deliver all such Purchased Securities to Seller.
(d) After one business day's notice to the defaulting party (which notice
need not be given if an Act of Insolvency shall have occurred, and which may be
the notice given under subparagraph (a) of this paragraph or the notice given
under clause (ii) of the first sentence of this Paragraph), the nondefaulting
party may;
(i) as to Transactions in which the defaulting party is Seller, (A)
immediately sell, in a recognized market at such price or prices, as Buyer may
reasonably deem satisfactory, any or all Purchased Securities subject to such
Transactions and apply the proceeds thereof to the aggregate unpaid repurchase
Prices owing by Seller or (B) in its sole discretion elect, in lieu of selling
all or a portion of such Purchased Securities, to give Seller credit for such
Purchased Securities in an amount equal to the price therefor on such date,
obtained from a generally recognized source of the most recent closing bid
quotation from such a source, against the aggregate unpaid Repurchase Price; and
(ii) as to Transactions in which the defaulting party is Buyer, (A)
purchase securities ("Replacement Securities") of the same class and amount as
any Purchased Securities that are not delivered by Buyer to Seller as required
hereunder or (B) in its sole discretion elect, in lieu of purchasing Replacement
Securities, to be deemed to have purchased Replacement Securities at the price
therefor on such date, obtained from a generally recognized source or the most
recent closing bid quotation from such a source.
(e) As to Transactions in which the defaulting party is Buyer, Buyer shall
remain liable to Seller (i) with respect to Purchased Securities, for any excess
of the price paid (or deemed paid) by Seller for Replacement Securities therefor
over the Repurchase Price for such Purchased Securities and (ii) with respect to
Additional Purchased Securities, for the price paid (or deemed paid) by Seller
for the Replacement Securities therefor. In addition, Buyer shall be liable to
Seller for interest on such remaining liability with respect to each such
purchase (or deemed purchase) until paid in full by Buyer. Such interest shall
be at a rate equal to the Pricing Rate.
(f) For purposes of this Paragraph 11, the Repurchase Price for each
Transaction hereunder in respect of which the defaulting party is Buyer shall
not increase above the amount of such Repurchase Price for such Transaction
shall be determined as of the date of the exercise or deemed exercise by Seller
of its option under subparagraph (a) of this paragraph.
(g) The defaulting party shall be liable to the nondefaulting party for the
amount of all reasonable legal or other expenses incurred by the nondefaulting
party in connection with or as a consequence of any Event of Default, together
with interest thereon at a rate equal to the Pricing Rate.
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12. SINGLE AGREEMENT.
Buyer and Seller acknowledge that, and have entered hereinto and will enter
into each Transaction hereunder in consideration of and in reliance upon the
fact that, all Transactions hereunder constitute a single business and
contractual relationship and have been made in consideration of each other.
Accordingly, each of Buyer and Seller agrees (i) to perform all of this
obligations in respect of each Transaction hereunder, and that a default in the
performance of any such obligations shall constitute a default by it in respect
of all Transactions hereunder, (ii) that each of them shall be entitled to set
off claims and apply property held by them in respect of any Transaction against
obligations owing to them in respect of any other Transactions hereunder and
(iii) that payments, deliveries and other transfers made by either of them in
respect to any Transaction shall be deemed to have been made in consideration of
payments, deliveries and other Transactions hereunder, and the obligations to
make any such payments, deliveries and other transfers may be applied against
each other and netted.
13. NOTICES AND OTHER COMMUNICATIONS.
Unless another address is specified in writing by the respective party to
whom any notice or other communication is to be given hereunder, all such
notices or communications shall be in writing or confirmed in writing and
delivered at the respective addresses set forth in Annex I attached hereto.
14. ENTIRE AGREEMENT; SEVERABILITY.
This Agreement shall supersede any existing agreements between the parties
containing general terms and conditions for repurchase transactions. Each
provision and agreement herein shall be treated as separate and independent from
any other provision or agreement herein and shall be enforceable notwithstanding
the unenforceability of any such other provision or agreement.
15. NON-ASSIGNABILITY; TERMINATION.
The rights and obligations of the parties under this Agreement and under
any Transaction shall not be assigned by either party without the prior written
consent of the other party. Subject to the foregoing, this Agreement and any
Transactions shall be binding upon and shall inure to the benefit of the parties
and their respective successors and assigns. This Agreement may be canceled by
either party upon giving written notice to the other, except that this Agreement
shall, notwithstanding such notice, remain applicable to any Transactions then
outstanding.
16. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Ohio without
giving effect to the conflict of law principles thereof.
17. NO WAIVERS, ETC.
No express or implied waiver of any Event of Default by either party shall
constitute a waiver of any other Event of Default and no exercise of any remedy
hereunder by any party shall constitute a waiver of its right to exercise any
other remedy hereunder. No modification or waiver of any provision of this
Agreement and no consent by any party to a departure herefrom shall be effective
unless and until such shall be in writing and duly executed by both of the
parties hereto. Without limitation on any of the foregoing, the failure to give
a notice pursuant to subparagraphs 4(a) and 4(b) hereof will not constitute a
waiver of any right to do so at a later date.
18. USE OF EMPLOYEE PLAN ASSETS.
If assets of an employee benefit plan subject to any provision of the
Employee Retirement Income Security Act of 1974 ("ERISA") are intended to be
used by either party hereto (the "Plan
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Party") in a Transaction, the Plan Party shall so notify the other party prior
to the Transaction. The Plan Party shall represent in writing to the other party
that the Transaction does not constitute a prohibited transaction under ERISA or
is otherwise exempt therefrom, and the other party may proceed in reliance
thereon but shall not be required so to proceed.
STAR BANK, N.A. OTHER PARTY TO AGREEMENT
("SELLER") ("BUYER"): DOW TARGET VARIABLE FUND LLC
BY: BY:
PRINT NAME: PRINT NAME:
TITLE: TITLE:
DATE DATE
ANNEX I
[Names and Addresses for Communications Between Parties.]
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