EXHIBIT 12
MASTER SECURITIES LOAN AGREEMENT
Dated as of: November 18, 2004
Between: XxXxx Gamma Limited Partnership ("Lender")
and Xxxxxxxxx & Company, Inc. ("Borrower")
1. APPLICABILITY.
From time to time the parties hereto may enter into transactions in which
Lender will lend to Borrower certain Securities (as defined herein)
against a transfer of Collateral (as defined herein). Each such
transaction shall be referred to herein as a "Loan" and, unless otherwise
agreed in writing, shall be governed by this Agreement, including any
supplemental terms or conditions contained in an Annex or Schedule hereto
and in any other annexes identified herein or therein as applicable
hereunder. Capitalized terms not otherwise defined herein shall have the
meanings provided in Section 24.
2. LOANS OF SECURITIES.
2.1 Subject to the terms and conditions of this Agreement, Borrower or
Lender may, from time to time, seek to initiate a transaction in
which Lender will lend Securities to Borrower. Borrower and Lender
shall agree on the terms of each Loan (which terms may be amended
during the Loan), including the issuer of the Securities, the amount
of Securities to be lent, the basis of compensation, the amount of
Collateral to be transferred by Borrower, and any additional terms.
Such agreement shall be confirmed (a) by a schedule and receipt
listing the Loaned Securities provided by Borrower to Lender in
accordance with Section 3.2, (b) through any system that compares
Loans and in which Borrower and Lender are participants, or (c) in
such other manner as may be agreed by Borrower and Lender in
writing. Such confirmation (the "Confirmation"), together with the
Agreement, shall constitute conclusive evidence of the terms agreed
between Borrower and Lender with respect to the Loan to which the
Confirmation relates, unless with respect to the Confirmation
specific objection is made promptly after receipt thereof. In the
event of any inconsistency between the terms of such Confirmation
and this Agreement, this Agreement shall prevail unless each party
has executed such Confirmation.
2.2 Notwithstanding any other provision in this Agreement regarding when
a Loan commences, unless otherwise agreed, a Loan hereunder shall
not occur until the Loaned Securities and the Collateral therefor
have been transferred in accordance with Section 15.
3. TRANSFER OF LOANED SECURITIES.
3.1 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.
3.2 Unless otherwise agreed, Borrower shall provide Lender, for 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.
3.3 Notwithstanding any other provision in this Agreement, 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.
4. COLLATERAL.
4.1 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 Margin Percentage of the Market Value of the Loaned Securities.
4.2 The Collateral transferred by Borrower to Lender, as adjusted
pursuant to Section 9, shall be security for Borrower's obligations
in respect of such Loan and for any other obligations of Borrower to
Lender hereunder. Borrower hereby pledges with, assigns to, and
grants Lender a continuing first priority 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 UCC. The Collateral will be held by Borrower in a
segregated account.
4.3 Except as otherwise provided herein, upon transfer to Lender of the
Loaned Securities on the day a Loan is terminated pursuant to
Section 6, Lender shall be obligated to transfer the Collateral (as
adjusted pursuant to Section 9) 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 15, the next day on
which such a transfer may be effected.
4.4 If Borrower transfers Collateral to Lender, as provided in Section
4.1, 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 4.1, Lender shall have the absolute right to the return of
the Loaned Securities.
4.5 Borrower may, upon reasonable notice to Lender (taking into account
all relevant factors, including industry practice, the type of
Collateral to be substituted, and the applicable method of
transfer), substitute Collateral for Collateral securing any Loan or
Loans; provided, however, that such substituted Collateral shall (a)
consist only of cash, securities or other property that Borrower and
Lender agreed would be acceptable Collateral prior to the Loan or
Loans and (b) have a Market Value such that the aggregate Market
Value of such substituted Collateral, together with all other
Collateral for Loans in which the party substituting such Collateral
is acting as Borrower, shall equal or exceed the agreed upon Margin
Percentage of the Market Value of the Loaned Securities.
4.6 Prior to the expiration of any letter of credit supporting
Borrower's obligations hereunder, Borrower shall, no later than the
Extension Deadline, (a) obtain an extension of the expiration of
such letter of credit, (b) 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, or (c) transfer such other Collateral to Lender as may
be acceptable to Lender.
5. FEES FOR LOAN.
5.1 Unless otherwise agreed, (a) Borrower agrees to pay Lender a loan
fee (a "Loan Fee"), computed daily on each Loan 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 as set forth on Schedule B. Except
as Borrower and Lender may otherwise agree (in the event that cash
Collateral is transferred by clearing house funds or otherwise),
Loan Fees shall accrue from and including the date on which the
Loaned Securities are transferred to Borrower to, but excluding, the
date on which such Loaned Securities are returned to Lender, and
Cash Collateral Fees shall accrue from and including the date on
which the cash Collateral is transferred to Lender to, but
excluding, the date on which such cash Collateral is returned to
Borrower.
5.2 Unless otherwise agreed, any Loan Fee or Cash Collateral Fee payable
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 and (ii) the termination
of all Loans hereunder (or, if a transfer of cash in
accordance with Section 15 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 and at such other times, if any, as
may be customary in accordance with market practice.
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.
6. TERMINATION OF THE LOAN.
6.1 (a) Unless otherwise agreed, either party may terminate a Loan on
a termination date established by notice given to the other
party prior to the Close of Business on a Business Day. The
termination date established by a termination notice shall be
a date no earlier than the standard settlement date that would
apply to a purchase or sale of the Loaned Securities (in the
case of notice given by Lender) or the noncash Collateral
securing the Loan (in the case of a notice given by Borrower)
entered into at the time 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.
(b) Notwithstanding paragraph (a) and unless otherwise agreed,
Borrower may terminate a Loan on any Business Day by giving
notice to Lender and transferring the Loaned Securities to
Lender before the Cutoff Time on such Business Day.
6.2 Unless otherwise agreed, Borrower shall, on or before the Cutoff
Time on the termination date of a Loan, transfer the Loaned
Securities to Lender; provided, however, that upon such transfer by
Borrower, Lender shall transfer the Collateral (as adjusted pursuant
to Section 9) to Borrower in accordance with Section 4.3.
7. RIGHTS IN RESPECT OF LOANED SECURITIES AND COLLATERAL.
7.1 Except as set forth herein and in Sections 8.1 and 8.2 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.
8. DISTRIBUTIONS.
8.1 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.
8.2 Any cash Distributions made on or in respect of the Loaned
Securities, which Lender is entitled to receive pursuant to Section
8.1, 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 that Lender is entitled to
receive pursuant to Section 8.1 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.
8.3 Borrower shall be entitled to receive all 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.
8.4 Any cash Distributions made on or in respect of such Collateral,
which Borrower is entitled to receive pursuant to Section 8.3, 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. Non-cash Distributions that Borrower is entitled to
receive pursuant to Section 8.3 shall be added to the Collateral on
the date of distribution and shall be considered such for all
purposes, except that if each Loan secured by such Collateral has
terminated, Lender shall forthwith transfer the same to Borrower.
8.5 Unless otherwise agreed by the parties:
(a) If (i) Borrower is required to make a payment (a "Borrower
Payment") with respect to cash Distributions on Loaned
Securities under Sections 8.1 and 8.2 ("Securities
Distributions"), or (ii) Lender is required to make a payment
(a "Lender Payment") with respect to cash Distributions on
Collateral under Sections 8.3 and 8.4 ("Collateral
Distributions"), and (iii) Borrower or Lender, as the case may
be ("Payor"), shall be required by law to collect any
withholding or other tax, duty, fee, levy or charge required
to be deducted or withheld from such Borrower Payment or
Lender Payment ("Tax"), then Payor shall (subject to
subsections (b) and (c) below), pay such additional amounts as
may be necessary in order that the net amount of the Borrower
Payment or Lender Payment received by the Lender or Borrower,
as the case may be ("Payee"), after payment of such Tax equals
the net amount of the Securities Distribution or Collateral
Distribution that would have been received if such Securities
Distribution or Collateral Distribution had been paid directly
to the Payee.
(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 such Tax would be imposed). Each party agrees to
notify the other of any change that occurs during the term of
a Loan in the rate of any Tax that would be imposed on any
such cash Distributions payable to it.
8.6 To the extent that, under the provisions of Sections 8.1 through
8.5, (a) a transfer of cash or other property by Borrower would give
rise to a Margin Excess or (b) a transfer of cash or other property
by Lender would give rise to a Margin Deficit, Borrower or Lender
(as the case may be) shall not be obligated to make such transfer of
cash or other property in accordance with such Sections, but shall
in lieu of such transfer immediately credit the amounts that would
have been transferable under such Sections to the account of Lender
or Borrower (as the case may be).
9. XXXX TO MARKET.
9.1 Borrower shall daily xxxx to market any Loan hereunder and in the
event that at the Close of Trading on any Business Day the Market
Value of the Collateral for any Loan to Borrower shall be less than
100% of the Market Value of all the outstanding Loaned Securities
subject to such Loan, Borrower shall transfer additional Collateral
no later than the Close of Business on the next Business Day so that
the Market Value of such additional Collateral, when added to the
Market Value of the other Collateral for such Loan, shall equal 100%
of the Market Value of the Loaned Securities.
9.2 In addition to any rights of Lender under Section 9.1, if at any
time 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 Margin Percentage of the Market Value of the Loaned Securities.
9.3 Subject to Borrower's obligations under Section 9.1, if at any time
the Market Value of all Collateral for Loans to Borrower shall be
greater than the Margin Percentage of the Market Value of all the
outstanding Loaned Securities subject to such Loans (a "Margin
Excess"), Borrower may, by notice to Lender, demand that Lender
transfer to Borrower such amount of the Collateral selected by
Borrower so that the Market Value of the Collateral for such Loans,
after deduction of such amounts, shall thereupon not exceed the
Margin Percentage of the Market Value of the Loaned Securities.
9.4 Borrower and Lender may agree, with respect to one or more Loans
hereunder, to xxxx the values to market pursuant to Sections 9.2 and
9.3 by separately valuing the Loaned Securities lent and the
Collateral given in respect thereof on a Loan-by-Loan basis.
9.5 Borrower and Lender may agree, with respect to any or all Loans
hereunder, that the respective rights of Lender and Borrower under
Sections 9.2 and 9.3 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).
9.6 If any notice is given by Borrower or Lender under Sections 9.2 or
9.3 at or before the Margin Notice Deadline on any day on which a
transfer of Collateral may be effected in accordance with Section
15, the party receiving such notice shall transfer Collateral as
provided in such Section no later than the Close of Business on such
day. If any such notice is given after the Margin Notice Deadline,
the party receiving such notice shall transfer such Collateral no
later than the Close of Business on the next Business Day following
the day of such notice.
10. REPRESENTATIONS.
The parties to this Agreement hereby make the following representations
and warranties, which shall continue during the term of any Loan
hereunder:
10.1 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.
10.2 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.
10.3 Each party hereto represents and warrants that it is acting for its
own account unless it expressly specifies otherwise in writing and
complies with Section 11.1(b).
10.4 Borrower represents and warrants that it has, or will have at the
time of transfer of any Collateral, the right to grant a first
priority security interest therein subject to the terms and
conditions hereof.
10.5 (a) Borrower represents and warrants that it (or the person to whom
it relends the Loaned Securities) is borrowing or will borrow Loaned
Securities that are Equity Securities for the purpose of making
delivery of such Loaned 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.
(b) Borrower and Lender may agree, as provided in Section 23.2, that
Borrower shall not be deemed to have made the representation or
warranty in subsection (a) with respect to any Loan.
10.6 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, and
that it owns the Loaned Securities, free and clear of all liens.
11. COVENANTS.
11.1 Each party agrees to be liable as principal with respect to its
obligations hereunder.
11.2 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.
12. EVENTS OF DEFAULT.
All Loans hereunder may, at the option of the non-defaulting party (which
option shall be deemed to have been exercised immediately upon the
occurrence of an Act of Insolvency), be terminated immediately upon the
occurrence of any one or more of the following events (individually, a
"Default"):
12.1 if any Loaned Securities shall not be transferred to Lender upon
termination of the Loan as required by Section 6;
12.2 if any Collateral shall not be transferred to Borrower upon
termination of the Loan as required by Sections 4.3 and 6;
12.3 if either party shall fail to transfer Collateral as required by
Section 9;
12.4 if either party (a) shall fail to transfer to the other party
amounts in respect of Distributions required to be transferred by
Section 8, (b) shall have been notified of such failure by the other
party prior to the Close of Business on any day, and (c) shall not
have cured such failure by the Cutoff Time on the next day after
such Close of Business on which a transfer of cash may be effected
in accordance with Section 15;
12.5 if an Act of Insolvency occurs with respect to either party;
12.6 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;
12.7 if either party notifies the other 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
12.8 if either party (a) shall fail to perform any material obligation
under this Agreement not specifically set forth in clauses 12.1
through 12.7, above, including but not limited to the payment of
fees as required by Section 5, and the payment of transfer taxes as
required by Section 14, (b) shall have been notified of such failure
by the other party prior to the Close of Business on any day, and
(c) shall not have cured such failure by the Cutoff Time on the next
day after such Close of Business on which a transfer of cash may be
effected in accordance with Section 15.
The non-defaulting party shall (except upon the occurrence of an Act of
Insolvency) give notice as promptly as practicable to the defaulting party
of the exercise of its option to terminate all Loans hereunder pursuant to
this Section 12.
13. REMEDIES.
13.1 Upon the occurrence of a Default under Section 12 entitling Lender
to terminate all Loans hereunder, Lender shall have the right, in
addition to any other remedies provided herein, (a) to purchase a
like amount of Loaned Securities ("Replacement Securities") in the
principal market for such Loaned Securities in a commercially
reasonable manner, (b) to sell any Collateral in the principal
market for such Collateral in a commercially reasonable manner and
(c) to apply and set off the Collateral and any proceeds thereof
(including any amounts drawn under a letter of credit supporting any
Loan) against the payment of the purchase price for
such Replacement Securities and any amounts due to Lender under
Sections 5, 8, 14 and 16. In the event that 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 13.1 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 13.1, 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 last bid quotation from such a
source at the most recent Close of Trading. Subject to Section 17,
upon the satisfaction of all obligations hereunder, any remaining
Collateral shall be returned to Borrower.
13.2 Upon the occurrence of a Default under Section 12 entitling Borrower
to terminate all Loans hereunder, Borrower shall have the right, in
addition to any other remedies provided herein, (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 the
principal market for such Loaned 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 5, 8 and 16. In such event, Borrower may
treat the Loaned Securities as its own and Lender's obligation to
return a like amount of the Collateral shall terminate; provided,
however, that Lender shall immediately return any letters of credit
supporting any Loan upon the exercise or deemed exercise by Borrower
of its termination rights under Section 12. Borrower may similarly
apply the Loaned Securities and any
10
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 13.2 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 13.2, 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 last bid
quotation from such a source at the most recent Close of Trading.
Subject to Section 17, upon the satisfaction of all Lender's
obligations hereunder, any remaining Loaned Securities (or remaining
cash proceeds thereof) shall be returned to Lender.
13.3 Unless otherwise agreed, the parties acknowledge and agree that (a)
the Loaned Securities and any Collateral consisting of Securities
are of a type traded in a recognized market, (b) in the absence of a
generally recognized source for prices or bid or offer quotations
for any security, the non-defaulting party may establish the source
therefor in its reasonable discretion, and (c) all prices and bid
and offer quotations shall be increased to include accrued interest
to the extent not already included therein (except to the extent
contrary to market practice with respect to the relevant
Securities).
13.4 In addition to its rights hereunder, the non-defaulting party shall
have any rights otherwise available to it under any other agreement
or applicable law.
14. TRANSFER TAXES.
All transfer taxes with respect to the transfer of the Loaned Securities
by Lender to Borrower and by Borrower to Lender upon termination of the
Loan and with respect to
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the transfer of Collateral by Borrower to Lender and by Lender to Borrower
upon termination of the Loan or pursuant to Section 4.5 or Section 9 shall
be paid by Borrower.
15. TRANSFERS.
15.1 All transfers by either Borrower or Lender of Loaned Securities or
Collateral consisting of "financial assets" (within the meaning of
the UCC) hereunder shall be by (a) in the case of certificated
securities, 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) registration
of an uncertificated security in the transferee's name by the issuer
of such uncertificated security, (c) the crediting by a Clearing
Organization of such financial assets to the transferee's
"securities account" (within the meaning of the UCC) maintained with
such Clearing Organization, or (d) such other means as Borrower and
Lender may agree.
15.2 All transfers of cash hereunder shall be by (a) wire transfer in
immediately available, freely transferable funds or (b) such other
means as Borrower and Lender may agree.
15.3 All transfers of letters 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. Transfers of letters of credit from Lender to
Borrower shall be made by causing such letters of credit to be
returned or by causing the amount of such letters of credit to be
reduced to the amount required after such transfer.
15.4 A transfer of Securities, cash or letters of credit may be effected
under this Section 15 on any day except (a) a day on which the
transferee is closed for business at its address set forth in
Schedule A hereto or (b) a day on which a Clearing Organization or
wire transfer system is closed, if the facilities of such Clearing
Organization or wire transfer system are required to effect such
transfer.
15.5 For the avoidance of doubt, the parties agree and acknowledge that
the term "securities," as used herein (except in this Section 15),
shall include any "security entitlements" with respect to such
securities (within the meaning of the UCC). In every transfer of
"financial assets" (within the meaning of the UCC) hereunder, the
transferor shall take all steps necessary (a) to effect a delivery
to the transferee under Section 8-301 of the UCC, or to cause the
creation of a security entitlement in favor of the transferee under
Section 8-501 of the UCC, (b) to enable the transferee to obtain
"control" (within the meaning of Section 8-106 of the UCC), and (c)
to provide the transferee with comparable rights under any
applicable foreign law or regulation.
16. CONTRACTUAL CURRENCY.
12
16.1 Borrower and Lender agree that (a) any payment in respect of a
Distribution under Section 8 shall be made in the currency in which
the underlying Distribution of cash was made, (b) any return of cash
shall be made in the currency in which the underlying transfer of
cash was made, and (c) any other payment of cash in connection with
a Loan under this Agreement shall be in the currency agreed upon by
Borrower and Lender in connection with such Loan (the currency
established under clause (a), (b) or (c) hereinafter referred to as
the "Contractual Currency"). Notwithstanding the foregoing, the
payee of any such payment may, at its option, accept tender thereof
in any other currency; provided, however, that, to the extent
permitted by applicable law, the obligation of the payor to make
such payment will be discharged only to the extent of the amount of
Contractual Currency that such payee may, consistent with normal
banking procedures, purchase with such other currency (after
deduction of any premium and costs of exchange) on the banking day
next succeeding its receipt of such currency.
16.2 If for any reason the amount in the Contractual Currency received
under Section 16.1, 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.
16.3 If for any reason the amount in the Contractual Currency received
under Section 16.1 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.
17. SINGLE AGREEMENT.
Borrower and Lender acknowledge that, and have entered into this Agreement
in reliance on the fact that, all Loans hereunder constitute a single
business and contractual relationship and have been entered into in
consideration of each other. Accordingly, Borrower and Lender hereby agree
that payments, deliveries and other transfers made by either of them in
respect of any Loan shall be deemed to have been made in consideration of
payments, deliveries and other transfers in respect of any other Loan
hereunder, and the obligations to make any such payments, deliveries and
other transfers may be applied against each other and netted. In addition,
Borrower and Lender acknowledge that, and have entered into this Agreement
in reliance on the fact that, all Loans hereunder have been entered into
in consideration of each other. Accordingly, Borrower and Lender hereby
agree that (a) each shall perform all of its obligations in respect of
each Loan hereunder, and that a default in the performance of any such
obligation by Borrower or by Lender (the "Defaulting Party") in any Loan
hereunder shall constitute a default by the
13
Defaulting Party under all such Loans hereunder, and (b) the
non-defaulting party shall be entitled to set off claims and apply
property held by it in respect of any Loan hereunder against obligations
owing to it in respect of any other Loan with the Defaulting Party.
18. APPLICABLE LAW.
THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW
PRINCIPLES THEREOF.
19. WAIVER.
The failure of a party to this Agreement to insist upon strict adherence
to any term of this Agreement on any occasion shall not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. All waivers in
respect of a Default must be in writing.
20. SURVIVAL OF REMEDIES.
All remedies hereunder and all obligations with respect to any Loan shall
survive the termination of the relevant Loan, return of Loaned Securities
or Collateral and termination of this Agreement.
21. NOTICES AND OTHER COMMUNICATIONS.
Any and all notices, statements, demands or other communications hereunder
may be given by a party to the other by telephone, mail, facsimile,
e-mail, electronic message, telegraph, messenger or otherwise to the
individuals and at the facsimile numbers and addresses specified with
respect to it in Schedule A hereto, or sent to such party at any other
place specified in a notice of change of number or address hereafter
received by the other party. Any notice, statement, demand or other
communication hereunder will be deemed effective on the day and at the
time on which it is received or, if not received, on the day and at the
time on which its delivery was in good faith attempted; provided, however,
that any notice by a party to the other party by telephone shall be deemed
effective only if (a) such notice is followed by written confirmation
thereof and (b) at least one of the other means of providing notice that
are specifically listed above has previously been attempted in good faith
by the notifying party.
22. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
22.1 EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK
STATE COURT SITTING IN NEW YORK CITY, AND ANY APPELLATE COURT FROM
ANY SUCH COURT, SOLELY FOR THE PURPOSE OF ANY SUIT, ACTION OR
PROCEEDING BROUGHT TO ENFORCE ITS OBLIGATIONS HEREUNDER OR RELATING
IN ANY WAY TO THIS AGREEMENT OR ANY LOAN
14
HEREUNDER AND (B) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY
DO SO, ANY DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH ACTION OR PROCEEDING IN ANY SUCH COURT AND ANY RIGHT OF
JURISDICTION ON ACCOUNT OF ITS PLACE OF RESIDENCE OR DOMICILE.
22.2 EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT THAT IT MAY
HAVE TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
23. MISCELLANEOUS.
23.1 Except as otherwise agreed by the parties, this Agreement supersedes
any other agreement between the parties hereto concerning loans of
Securities between Borrower and Lender. This Agreement shall not be
assigned by either party without the prior written consent of the
other party and any attempted assignment without such consent shall
be null and void. Subject to the foregoing, this Agreement shall be
binding upon and shall inure to the benefit of Borrower and Lender
and their respective heirs, representatives, successors and assigns.
This Agreement may be terminated by either party upon notice to the
other, subject only to fulfillment of any obligations then
outstanding. This Agreement shall not be modified, except by an
instrument in writing signed by the party against whom enforcement
is sought. The parties hereto acknowledge and agree that, in
connection with this Agreement and each Loan hereunder, time is of
the essence. Each provision and agreement herein shall be treated as
separate and independent from any other provision herein and shall
be enforceable notwithstanding the unenforceability of any such
other provision or agreement.
24. DEFINITIONS.
For the purposes hereof:
24.1 "Act of Insolvency" shall mean, with respect to any party, (a) the
commencement by such party as debtor of any case or proceeding under
any bankruptcy, insolvency, reorganization, liquidation, moratorium,
dissolution, delinquency or similar law, or such party's seeking the
appointment or election of a receiver, conservator, trustee,
custodian or similar official for such party or any substantial part
of its property, or the convening of any meeting of creditors for
purposes of commencing any such case or proceeding or seeking such
an appointment or election, (b) the commencement of any such case or
proceeding against such party, or another seeking such an
appointment or election, or the filing against a party of an
application for a protective decree under the provisions of the
Securities Investor Protection Act of 1970, which (i) is consented
to or not timely contested by such party, (ii) results in the entry
of an order for relief, such an appointment or election, the
issuance of such a protective decree or the entry of an
15
order having a similar effect, or (iii) is not dismissed within 15
days, (c) the making by such party of a general assignment for the
benefit of creditors, or (d) the admission in writing by such party
of such party's inability to pay such party's debts as they become
due.
24.2 "Bankruptcy Code" shall have the meaning assigned in Section 25.1
24.3 "Borrower" shall have the meaning assigned in Section 1.
24.4 "Borrower Payment" shall have the meaning assigned in Section
8.5(a).
24.5 "Broker-Dealer" shall mean any person that is a broker (including a
municipal securities broker), dealer, municipal securities dealer,
government securities broker or government securities dealer as
defined in the Exchange Act, regardless of whether the activities of
such person are conducted in the United States or otherwise require
such person to register with the U.S. Securities and Exchange
Commission or other regulatory body.
24.6 "Business Day" shall mean, with respect to any Loan hereunder, a day
on which regular trading occurs in the principal market for the
Loaned Securities subject to such Loan, provided, however, that for
purposes of determining the Market Value of any Securities
hereunder, such term shall mean a day on which regular trading
occurs in the principal market for the Securities whose value is
being determined. Notwithstanding the foregoing, (a) for purposes of
Section 9, "Business Day" shall mean any day on which regular
trading occurs in the principal market for any Loaned Securities or
for any Collateral consisting of Securities under any outstanding
Loan hereunder and "next Business Day" shall mean the next day on
which a transfer of Collateral may be effected in accordance with
Section 15, and (b) in no event shall a Saturday or Sunday be
considered a Business Day.
24.7 "Cash Collateral Fee" shall have the meaning assigned in Section
5.1.
24.8 "Clearing Organization" shall mean (a) The Depository Trust Company,
or, if agreed to by Borrower and Lender, such other "securities
intermediary" (within the meaning of the UCC) at which Borrower (or
Borrower's agent) and Lender (or Lender's agent) maintain accounts,
or (b) a Federal Reserve Bank, to the extent that it maintains a
book-entry system.
24.9 "Close of Business" shall mean the time established by the parties
in Schedule B or otherwise orally or in writing or, in the absence
of any such agreement, as shall be determined in accordance with
market practice.
24.10 "Close of Trading" shall mean, with respect to any Security, the end
of the primary trading session established by the principal market
for such Security on a Business Day, unless otherwise agreed by the
parties.
16
24.11 "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 the
Borrower or an affiliate thereof.
24.12 "Collateral Distributions" shall have the meaning assigned in
Section 8.5(a).
24.13 "Confirmation" shall have the meaning assigned in Section 2.1.
24.14 "Contractual Currency" shall have the meaning assigned in Section
16.1.
24.15 "Customer" shall mean any person that is a customer of Borrower
under Rule 15c3-3 under the Exchange Act or any comparable
regulation of the Secretary of the Treasury under Section 15C of the
Exchange Act (to the extent that Borrower is subject to such Rule or
comparable regulation).
24.16 "Cutoff Time" shall mean a time on a Business Day by which a
transfer of cash, securities or other property must be made by
Borrower or Lender to the other, as shall be agreed by Borrower and
Lender in Schedule B or otherwise orally or in writing or, in the
absence of any such agreement, as shall be determined in accordance
with market practice.
24.17 "Default" shall have the meaning assigned in Section 12.
24.18 "Defaulting Party" shall have the meaning assigned in Section 17.
24.19 "Distribution" shall mean, with respect to any Security at any time,
any distribution made on or in respect of such Security, including,
but not limited to: (a) cash and all other property, (b) stock
dividends, (c) Securities received as a result of split ups of such
Security and distributions in respect thereof, (d) interest
payments, (e) all rights to purchase additional Securities, and (f)
any cash or other consideration paid or provided by the issuer of
such Security in exchange for any vote, consent or the taking of any
similar action in respect of such Security (regardless of whether
the record date for such vote, consent or other action falls during
the term of the Loan). In the event that the holder of a Security is
entitled to elect the type of distribution to be received from two
or more alternatives, such election shall be made by Lender, in the
case of a Distribution in respect of the Loaned Securities, and by
Borrower, in the case of a Distribution in respect of Collateral.
24.20 "Equity Security" shall mean any security (as defined in the
Exchange Act) other than a "nonequity security," as defined in
Regulation T.
24.21 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
24.22 "Extension Deadline" shall mean, with respect to a letter of credit,
the Cutoff Time on the Business Day preceding the day on which the
letter of credit expires.
24.23 "FDIA" shall have the meaning assigned in Section 25.4.
17
24.24 "FDICIA" shall have the meaning assigned in Section 25.5.
24.25 "Federal Funds Rate" shall mean the rate of interest (expressed as
an annual rate), as published in Federal Reserve Statistical Release
H.15(519) or any publication substituted therefor, charged for
federal funds (dollars in immediately available funds borrowed by
banks on an overnight unsecured basis) on that day or, if that day
is not a banking day in New York City, on the next preceding banking
day.
24.26 "Foreign Securities" shall mean, unless otherwise agreed, Securities
that are principally cleared and settled outside the United States.
24.27 "Government Securities" shall mean government securities as defined
in Section 3(a)(42)(A)-(C) of the Exchange Act.
24.28 "Lender" shall have the meaning assigned in Section 1.
24.29 "Lender Payment" shall have the meaning assigned in Section 8.5(a).
24.30 "LIBOR" shall mean for any date, the offered rate for deposits in
U.S. dollars for a period of three months which appears on the
Reuters Screen LIBO page as of 11:00 a.m., London time, on such date
(or, if at least two such rates appear, the arithmetic mean of such
rates).
24.31 "Loan" shall have the meaning assigned in Section 1.
24.32 "Loan Fee" shall have the meaning assigned in Section 5.1.
24.33 "Loaned Security" shall mean any Security transferred in a Loan
hereunder until such Security (or an identical Security) is
transferred back to Lender hereunder, except that, if any new or
different Security shall be exchanged for any Loaned Security by
recapitalization, merger, consolidation or other corporate action,
such new or different Security shall, effective upon such exchange,
be deemed to become a Loaned Security in substitution for the former
Loaned Security for which such exchange is made. For purposes of
return of Loaned Securities by Borrower or purchase or sale of
Securities pursuant to Section 13, such term shall include
Securities of the same issuer, class and quantity as the Loaned
Securities, as adjusted pursuant to the preceding sentence.
24.34 "Margin Deficit" shall have the meaning assigned in Section 9.2.
24.35 "Margin Excess" shall have the meaning assigned in Section 9.3.
24.36 "Margin Notice Deadline" shall mean the time agreed to by the
parties in the relevant Confirmation, Schedule B hereto or otherwise
as the deadline for giving notice requiring same-day satisfaction of
xxxx-to-market obligations as provided in Section 9 hereof (or, in
the absence of any such agreement, the deadline for such purposes
established in accordance with market practice).
18
24.37 "Margin Percentage" shall mean, with respect to any Loan as of any
date, a percentage agreed by Borrower and Lender, which shall be not
less than 100%, unless (a) Borrower and Lender agree otherwise, as
provided in Section 23.2, and (b) Lender is not a Customer.
Notwithstanding the previous sentence, in the event that the writing
or other confirmation evidencing the agreement described in clause
(a) does not set out such percentage with respect to any such Loan,
the Margin Percentage shall not be a percentage less than the
percentage obtained by dividing (i) the Market Value of the
Collateral required to be transferred by Borrower to Lender with
respect to such Loan at the commencement of the Loan by (ii) the
Market Value of the Loaned Securities required to be transferred by
Lender to Borrower at the commencement of the Loan.
24.38 "Market Value" shall have the meaning set forth in Annex I or
otherwise agreed to by Borrower and Lender in writing.
Notwithstanding the previous sentence, in the event that the meaning
of Market Value has not been set forth in Annex I or in any other
writing, as described in the previous sentence, Market Value shall
be determined in accordance with market practice for the Securities,
based on the price for such Securities as of the most recent Close
of Trading obtained from a generally recognized source agreed to by
the parties or the closing bid quotation at the most recent Close of
Trading obtained from such source, plus accrued interest to the
extent not included therein (other than any interest credited or
transferred to, or applied to the obligations of, the other party
pursuant to Section 8, unless market practice with respect to the
valuation of such Securities in connection with securities loans is
to the contrary). If the relevant quotation did not exist at such
Close of Trading, then the Market Value shall be the relevant
quotation on the next preceding Close of Trading at which there was
such a quotation. The determinations of Market Value provided for in
Annex I or in any other writing described in the first sentences of
this Section 24.38 or, if applicable, in the preceding sentence
shall apply for all purposes under this Agreement, except for
purposes of Section 13.
24.39 "Payee" shall have the meaning assigned in Section 8.5(a).
24.40 "Payor" shall have the meaning assigned in Section 8.5(a).
24.41 "Plan" shall mean: (a) any "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974
which is subject to Part 4 of Subtitle B of Title I of such Act; (b)
any "plan" as defined in Section 4975(e)(1) of the Internal Revenue
Code of 1986; or (c) any entity the assets of which are deemed to be
assets of any such "employee benefit plan" or "plan" by reason of
the Department of Labor's plan asset regulation, 29 C.F.R. Section
2510.3-101.
24.42 "Regulation T" shall mean Regulation T of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
19
24.43 "Retransfer" shall mean, with respect to any Collateral, to pledge,
repledge, hypothecate, rehypothecate, lend, relend, sell or
otherwise transfer such Collateral, or to re-register any such
Collateral evidenced by physical certificates in any name other than
Borrower's.
24.44 "Securities" shall mean securities or, if agreed by the parties in
writing, other assets.
24.45 "Securities Distributions" shall have the meaning assigned in
Section 8.5(a).
24.46 "Tax" shall have the meaning assigned in Section 8.5(a).
24.47 "UCC" shall mean the New York Uniform Commercial Code.
25. INTENT.
25.1 The parties recognize that each Loan hereunder is a "securities
contract," as such term is defined in Section 741 of Title 11 of the
United States Code (the "Bankruptcy Code"), as amended (except
insofar as the type of assets subject to the Loan would render such
definition inapplicable).
25.2 It is understood that 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.
25.3 It is understood that 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.
25.4 The parties agree and acknowledge 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 (except insofar as the type
of assets subject to the Loan would render such definitions
inapplicable).
25.5 It is understood that this Agreement constitutes a "netting
contract" as defined in and subject to Title IV of the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") and
each payment obligation under any Loan hereunder shall constitute a
"covered contractual payment entitlement" or "covered contractual
payment obligation," respectively, as defined in and subject to
FDICIA (except insofar as one or both of the parties is not a
"financial institution" as that term is defined in FDICIA).
20
25.6 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 association or other self-regulatory
organization.
26. DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS.
26.1 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.
26.2 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.
(Signature Page Follows)
21
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
LENDER:
By: /s/ Xxxxxxx X. XxXxx
-----------------------------------------------------------
Title: Xxxxxxx X. XxXxx, President and Chief Executive Officer
Date: November 18, 2004
BORROWER:
By: /s/ Xxxxxx Xxxxxxx
-----------------------------------------------------------
Title: Xxxxxx Xxxxxxx, Senior Vice President
Date: November 18, 2004
S-1
ANNEX I
MARKET VALUE
Unless otherwise agreed by Borrower and Lender:
1. If the principal market for the Securities to be valued is a national
securities exchange in the United States, their Market Value shall be
determined by their last sale price on such exchange at the most recent
Close of Trading or, if there was no sale on the Business Day of the most
recent Close of Trading, by the last sale price at the Close of Trading on
the next preceding Business Day on which there was a sale on such
exchange, all as quoted on the Consolidated Tape or, if not quoted on the
Consolidated Tape, then as quoted by such exchange.
2. If the principal market for the Securities to be valued is the
over-the-counter market, and the Securities are quoted on The Nasdaq Stock
Market ("Nasdaq"), their Market Value shall be the last sale price on
Nasdaq at the most recent Close of Trading or, if the Securities are
issues for which last sale prices are not quoted on Nasdaq, the last bid
price at such Close of Trading. If the relevant quotation did not exist at
such Close of Trading, then the Market Value shall be the relevant
quotation on the next preceding Close of Trading at which there was such a
quotation.
3. Except as provided in Section 4 of this Annex, if the principal market for
the Securities to be valued is the over-the-counter market, and the
Securities are not quoted on Nasdaq, their Market Value shall be
determined in accordance with market practice for such Securities, based
on the price for such Securities as of the most recent Close of Trading
obtained from a generally recognized source agreed to by the parties or
the closing bid quotation at the most recent Close of Trading obtained
from such a source. If the relevant quotation did not exist at such Close
of Trading, then the Market Value shall be the relevant quotation on the
next preceding Close of Trading at which there was such a quotation.
4. If the Securities to be valued are Foreign Securities, their Market Value
shall be determined as of the most recent Close of Trading in accordance
with market practice in the principal market for such Securities.
5. The Market Value of a letter of credit shall be the undrawn amount
thereof.
6. All determinations of Market Value under Sections 1 through 4 of this
Annex shall include, where applicable, accrued interest to the extent not
already included therein (other than any interest credited or transferred
to, or applied to the obligations of, the other party pursuant to Section
8 of the Agreement), unless market practice with respect to the valuation
of such Securities in connection with securities loans is to the contrary.
7. The determinations of Market Value provided for in this Annex shall apply
for all purposes under the Agreement, except for purposes of Section 13 of
the Agreement.
Annex I-1
ANNEX II
TERM LOANS
This Annex sets forth additional terms and conditions governing Loans designated
as "Term Loans" in which Lender lends to Borrower a specific amount of Loaned
Securities ("Term Loan Amount") against a pledge of cash Collateral by Borrower
for an agreed upon Cash Collateral Fee until a scheduled termination date
("Termination Date"). Unless otherwise defined, capitalized terms used but not
defined in this Annex shall have the meanings assigned in the Securities Loan
Agreement of which it forms a part (such agreement, together with this Annex and
any other annexes, schedules or exhibits, referred to as the "Agreement").
1. The terms of this Annex shall apply to Loans of Equity Securities only if
they are designated as Term Loans in a Confirmation therefor provided
pursuant to the Agreement and executed by each party, in a schedule to the
Agreement or in this Annex. All Loans of Securities other than Equity
Securities shall be "Term Loans" subject to this Annex, unless otherwise
agreed in a Confirmation or other writing.
2. The Confirmation for a Term Loan shall set forth, in addition to any terms
required to be set forth therein under the Agreement, the Term Loan
Amount, the Cash Collateral Fee and the Termination Date. Lender and
Borrower agree that, except as specifically provided in this Annex, each
Term Loan shall be subject to all terms and conditions of the Agreement,
including, without limitation, any provisions regarding the parties'
respective rights to terminate a Loan.
3. In the event that either party exercises its right under the Agreement to
terminate a Term Loan on a date (the "Early Termination Date") prior to
the Termination Date, Lender and Borrower shall, unless otherwise agreed,
use their best efforts to negotiate in good faith a new Term Loan (the
"Replacement Loan") of comparable or other Securities, which shall be
mutually agreed upon by the parties, with a Market Value equal to the
Market Value of the Term Loan Amount under the terminated Term Loan (the
"Terminated Loan") as of the Early Termination Date. Such agreement shall,
in accordance with Section 2 of this Annex, be confirmed in a new
Confirmation at the commencement of the Replacement Loan and be executed
by each party. Each Replacement Loan shall be subject to the same terms as
the corresponding Terminated Loan, other than with respect to the
commencement date and the identity of the Loaned Securities. The
Replacement Loan shall commence on the date on which the parties agree
which Securities shall be the subject of the Replacement Loan and shall be
scheduled to terminate on the scheduled Termination Date of the Terminated
Loan.
4. Borrower and Lender agree that, except as provided in Section 5 of this
Annex, if the parties enter into a Replacement Loan, the Collateral for
the related Terminated Loan need not be returned to Borrower and shall
instead serve as Collateral for such Replacement Loan.
5. If the parties are unable to negotiate and enter into a Replacement Loan
for some or all of the Term Loan Amount on or before the Early Termination
Date, (a) the party requesting
Annex II-1
termination of the Terminated Loan shall pay to the other party a Breakage
Fee computed in accordance with Section 6 of this Annex with respect to
that portion of the Term Loan Amount for which a Replacement Loan is not
entered into and (b) upon the transfer by Borrower to Lender of the Loaned
Securities subject to the Terminated Loan, Lender shall transfer to
Borrower Collateral for the Terminated Loan in accordance with and to the
extent required under the Agreement, provided that no Default has occurred
with respect to Borrower.
6. For purposes of this Annex, the term "Breakage Fee" shall mean a fee
agreed by Borrower and Lender in the Confirmation or otherwise orally or
in writing. In the absence of any such agreement, the term "Breakage Fee"
shall mean, with respect to Loans of Government Securities, a fee equal to
the sum of (a) the cost to the non-terminating party (including all fees,
expenses and commissions) of entering into replacement transactions and
entering into or terminating hedge transactions in connection with or as a
result of the termination of the Terminated Loan, and (b) any other loss,
damage, cost or expense directly arising or resulting from the termination
of the Terminated Loan that is incurred by the non-terminating party
(other than consequential losses or costs for lost profits or lost
opportunities), as determined by the non-terminating party in a
commercially reasonable manner, and (c) any other amounts due and payable
by the terminating party to the non-terminating party under the Agreement
on the Early Termination Date.
Annex II-2
SCHEDULE A
NAMES AND ADDRESSES FOR COMMUNICATIONS
XxXxx Gamma Limited Partnership
c/o Vector Group Limited
000 X. X. Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. XxXxx
Xxxxxxxxx & Company, Inc.
00000 Xxxxx Xxxxxx Xxxxxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx
Schedule A-1
SCHEDULE B
SUPPLEMENTAL PROVISIONS
A. IDENTIFICATION AND AMOUNT OF LOANED SECURITIES:
Issuer: Vector Group Ltd.
Amount: Up to 3,472,875 shares of common stock of the Issuer
B. COLLATERAL:
Cash in an amount equal to the daily Market Value of the Loaned Securities
C. FEES:
Loan Fee: _____%
Cash Collateral Fee: _____%
At all times, the net of the two fees should result in a net benefit of 25
basis points to be retained by Lender.
Schedule B-1
