Exhibit 99.(h)(v)
SECURITIES LENDING AGENCY AGREEMENT
THIS AGREEMENT is made as of the 15th day of October, 2002, by and between
each investment company identified on Exhibit 1, acting for and on behalf of its
respective series or portfolios as identified on Exhibit I or, in the case of
those investment companies for which no separate series or portfolios are
identified on Exhibit 1, acting for and on behalf of itself (each series,
portfolio or investment company hereinafter referred to as a "Fund"), severally
and not jointly, and UBS PaineWebber Inc., a corporation organized under the
laws of Delaware ("UBSPWI"). Capitalized terms not otherwise defined shall have
the meanings set forth in Section 13.
Each Fund and UBSPWI, intending to be legally bound, agree as follows:
1. APPOINTMENT OF UBSPWI: TERMS OF LOANS.
(a) (i) Each Fund hereby authorizes and appoints UBSPWI, and
UBSPWI agrees to act, as the Fund's agent to effect loans ("Loans") of Available
Securities to Eligible Borrowers, and to provide related administrative services
to the Fund, all pursuant to the terms of this Agreement. During the term of
this Agreement, UBSPWI may from time to time contact Eligible Borrowers on a
Fund's behalf and lend Available Securities to those Eligible Borrowers.
(ii) The initial Eligible Borrowers with respect to each
Fund are listed on Exhibit 2 hereto. UBSPWI may from time to time propose
additional parties to be Borrowers hereunder with respect to any or all of the
Funds, but no such party shall become an Eligible Borrower with respect to any
Fund unless and until that Fund agrees in writing to amend Exhibit 2 to add that
party as an Eligible Borrower. If a Fund declines to approve a party as an
Eligible Borrower, UBSPWI will be responsible for ensuring that no Available
Securities are lent to that party on behalf of that Fund, even though the party
may participate as a borrower in UBSPWI's securities lending program with
respect to other Funds or with respect to other customers of UBSPWI.
(b) Each Loan shall be made pursuant to an agreement ("Borrowing
Agreement") substantially in the form of Exhibit 3 hereto. The form of the
Borrowing Agreement used with respect to a Loan made on behalf of any Fund (a
"Lending Fund") shall not be amended by UBSPWI in any material respect except
with the prior written consent of the Lending Fund. UBSPWI will give prompt
notice of each Loan to the Custodian and shall disclose fully to Eligible
Borrowers that UBSPWI acts as agent for its customers and not as principal.
2
(c) Each Loan shall be terminable by UBSPWI on behalf of the
Lending Fund or the Borrower upon notice to the other party. UBSPWI agrees to
notify the Borrower of the termination of any Loan on the same day that it is
directed to terminate the Loan by the Lending Fund if UBSPWI receives such
direction by 10:00 a.m., Eastern time, on a Business Day, or if the direction to
terminate is received by UBSPWI after that time, on the Business Day following
UBSPWI's receipt of that direction. In addition, UBSPWI shall terminate any
Loans to a Borrower as soon as practicable after (i) receipt by UBSPWI of a
notice of termination of the respective Borrowing Agreement; (ii) receipt of
instructions to delete from Exhibit 2 the Borrower to whom such Loans were made;
(iii) receipt by UBSPWI of notice advising that a Default (as defined in the
applicable Borrowing Agreement) has occurred and is continuing beyond any
applicable grace period; and (iv) whenever UBSPWI, in its sole discretion,
elects to terminate such loans. The termination date so established will be, in
the case of notice by Borrower with respect to Loans Of Foreign Securities, at
least two (2) Business Days after such notice is given and, in the case of
notice by UBSPWI, no later than the earlier of: (i) in the case of Loans of
Government Securities, the same day by 10.00 a.m. or the next Business Day, (ii)
in the case of Foreign Securities, the standard settlement date for trades of
the Loaned Securities entered into on the date of such notice in the principal
market for such securities, or (iii) in all other cases, the third Business Day
following such notice.
2. AUTHORITY OF UBSPWI WITH RESPECT TO LOANS.
(a) UBSPWI is hereby authorized:
(i) to make, execute, acknowledge and deliver Borrowing
Agreements and any and all other documents or agreements of transfer and
conveyance and any and all other instruments that may be necessary or
appropriate to effect a transfer of Available Securities to Eligible Borrowers
pursuant to a Borrowing Agreement or to complete any Loan; and
(ii) to exercise all of the rights of the Lending Fund under
the Borrowing Agreement and to do all acts, whether or not expressly authorized,
which it may deem reasonably necessary or proper for the protection of the
Collateral held thereunder.
(b) Each Fund acknowledges and agrees that:
(i) in order for UBSPWI to perform its responsibilities
under this Agreement and the Borrowing Agreements, it may be necessary for the
Fund to direct its Custodian from time to time to undertake such actions as are
necessary or appropriate to enable UBSPWI to perform its obligations hereunder
and under any such Borrowing Agreements;
(ii) UBSPWI shall have full discretion regarding the
selection of the particular Eligible Borrower(s) to whom Loans of Available
Securities may be made and as to the selection of the particular Available
Securities loaned pursuant to any Loan;
3
(iii) there is no assurance that Loans of Available
Securities will be made at any time;
(iv) UBSPWI may perform securities lending activities for
other clients of UBSPWI;
(v) UBSPWI may allocate securities lending opportunities
among its clients, using such reasonable methods as UBSPWI may follow from time
to time;
(vi) the Fund shall not be entitled to participate in any
particular lending opportunities; and
(vii) each Fund waives the right to vote Loaned Securities or
to provide any consent or take any similar action with respect to any Loaned
Securities unless such Loan has been terminated so as to permit the Lending Fund
to vote, consent, or take such similar action or sell the Loaned Securities or
for any other reason (other than an event of default). Notwithstanding the
foregoing, each Fund shall be entitled, under the terms of each Borrowing
Agreement related, to such Fund's Loaned Securities, to any payment made in
respect of any consent solicitation with respect to such Loaned Securities.
(c) UBSPWI agrees that, when effecting Loans of Available
Securities pursuant to this Agreement and Borrowing Agreements on behalf of any
Fund, it will comply with that Fund's adopted lending procedures, policies,
restrictions or limitations as are in effect from time to time.
(d) If an installment, call or rights issue becomes payable on, or
in respect of any, Loaned Securities, UBSPWI shall use reasonable efforts to
ensure that any timely instructions from the Lending Fund are complied with, but
UBSPWI shall not be required to make any payment unless the Lending Fund has
first provided funds to make such payment.
3. COLLATERAL; CUSTODIAL ACCOUNTS; RESPONSIBILITIES OF UBSPWI.
(a) UBSPWI shall arrange for all Collateral in respect of a Loan to
be transferred to, and held in, the Lending Fund's Custodial Account prior to,
or concurrently with, the transfer of the Available Securities to the
Borrower(s). UBSPWI shall not enter into a Loan on behalf of a Lending Fund
unless, at the inception of the Loan, Borrower shall have transferred to the
Custodial Account Eligible Collateral having a Market Value at least equal to
105% of the Market Value of any Foreign Securities and 102% of all other
securities loaned pursuant to the Loan, as determined as of the close of trading
on the preceding Business Day. Under the terms of each Loan, if the market Value
of the Eligible Collateral decreases at any time to 104% or less with respect to
the Market Value of any Foreign Securities, or to 101% or less with respect to
the Market Value of all other securities, the Borrower shall be required to
transfer into the Lending Fund's Custodial Account additional Eligible
Collateral in an amount sufficient so that the Market Value of the
4
Eligible Collateral is at least equal to 105% of the Market Value of any Foreign
Securities and 102% of the Market Value of all other securities.
(b) UBSPWI agrees that it will, with respect to Collateral and
Loaned Securities;
(i) calculate the Market Value of the Loaned Securities for
each Loan on a daily basis;
(ii) ascertain from the Lending Fund's Custodian the Market
Value of the Eligible Collateral (excluding securities representing investment
of cash Collateral) for each Loan on a daily basis; and
(iii) promptly demand from such Borrower the additional
Collateral necessary to meet the required level of Eligible Collateral in
accordance with the terms of the Borrowing Agreement, and if such Borrower fails
to provide additional Collateral, promptly notify the Fund of such failure and
take any and all actions necessary or appropriate to protect the interest of the
Lending Fund in respect of the Loan.
(c) UBSPWI shall give appropriate and timely directions to the
Lending Fund's Custodian with respect to the transfer and re-transfer to and
from the Custodial Account of any and all Loaned Securities, Collateral and all
payments, distributions and proceeds thereon or thereof. In the event of any
default by any Borrower in respect of any Loan, UBSPWI shall be responsible for
providing notification to the Lending Fund's investment adviser or sub-adviser
to liquidate the Collateral, and UBSPWI shall take any and all actions in
accordance with the Borrowing Agreement necessary or appropriate to protect the
interest of the Lending Fund in respect of the Loan.
(d) Except as provided in paragraph (e), UBSPWI shall pay, to the
extent received by it, or arrange for the Borrower to pay in lieu thereof, into
the Lending Fund's Custodial Account, any interest, dividends or other
distributions paid on Loaned Securities.
(e) Non-cash distributions on Loaned Securities in the nature of
stock splits or stock dividends shall be added to the Loan and become Loaned
Securities; provided that a Fund may, by giving UBSPWI ten (10) Business Days'
notice prior to the date of such non-cash distribution, direct UBSPWI to request
that the Borrower deliver such non-cash distributions to the Lending Fund's
Custodial Account, in which case UBSPWI shall arrange for such non-cash
distribution to be credited to the Fund's account as soon as practicable.
(f) On each date that any loan fees are paid by Borrowers to UBSPWI
in respect of any Loan, UBSPWI shall use its best efforts to pay or arrange for
payment into the Lending Fund's Custodial Account the amount of those loan fees.
5
4. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Each Fund represents, warrants and covenants as follows:
(i) it has the power to execute and deliver this Agreement,
to enter into the transactions contemplated hereby and to perform its
obligations hereunder;
(ii) it has taken all necessary action to authorize such
execution, delivery and performance;
(iii) this Agreement constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms except as
enforcement may be limited by bankruptcy, insolvency or similar laws, or by
equitable principles relating to or limiting creditors' rights generally;
(iv) the execution, delivery and performance by it of this
Agreement will at all times comply with applicable laws and regulations;
(v) the Fund owns, and will own at the time that any Loan
is outstanding, all Available Securities free and clear of any lien or
encumbrance, and no Available Securities have been, or at the time of any Loan
will have been, sold; and
(vi) no Loan of the Fund's Available Securities will violate
any order, judgement or agreement binding on the Fund or any of its assets.
(b) UBSPWI represents, warrants and covenants to each Fund as
follows:
(i) it has the power to execute and deliver this Agreement,
to enter into the transactions contemplated hereby and to perform its
obligations hereunder;
(ii) it has taken all necessary action to authorize such
execution, delivery and performance;
(iii) this Agreement constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms except as
enforcement may be limited by bankruptcy, insolvency or similar laws, or by
equitable principles relating to or limiting creditors' rights generally;
(iv) the execution, delivery and performance by it of this
Agreement will at all times comply with applicable laws and regulations; and
(v) the execution, delivery and performance by UBSPWI of
each Borrowing Agreement, and UBSPWI's entering into Loans under Borrowing
6
Agreements on behalf of each Fund, have been duly and validly authorized by
UBSPWI, and Loans made in accordance with the terms hereof will comply with all
laws and regulations relating to the lending of securities and applicable to
UBSPWI.
(c) Each of the above representations and warranties shall be
deemed made and repeated for all purposes at and as of all times when any Loan
entered into under the Borrowing Agreement is outstanding.
(d) Each Fund and UBSPWI agree that, under the terms of this
Agreement, the Fund and its investment adviser retain ultimate authority with
respect to lending the Fund's securities and have directed UBSPWI to lend
Available Securities in accordance with the terms hereof. Each Fund and UBSPWI
further agree that UBSPWI is not, and shall not be considered to be, solely by
virtue of its role hereunder, an investment adviser for the Fund.
5. STATEMENTS; RECORDS. UBSPWI shall maintain current and accurate
records of the Loans as required by applicable regulations and shall provide
each Fund with monthly statements detailing all deliveries and receipts of
Loaned Securities and Collateral, all transactions in the Custodial Account made
at the direction of UBSPWI, all fees received and income earned from the
Collateral and Loaned Securities, all fees and other amounts paid to each
Borrower or others, and such other information as the Fund may reasonably
request. UBSPWI shall promptly forward to each Fund any financial information
that it receives from each Eligible Borrower.
6. COMPENSATION OF UBSPWI. In consideration of the services to be
provided by UBSPWI hereunder, UBSPWI shall be entitled to the following
compensation:
(a) In connection with each Loan effected hereunder, UBSPWI shall
receive a fee (the "Agency Fee") equal to 25% of (i) the net revenue generated
from the investment of Collateral to the extent that the Loan is collateralized
by cash (less any Cash Collateral Fee paid or payable by Lender to a Borrower
with respect to the Loan), or (ii) the Loan Fee payable by the Borrower to the
extent that the Loan is collateralized by Government Securities or Letters of
Credit.
(b) Each month, UBS Global Asset Management (US) Inc. ("UBSGAM")
shall generate a Security Lending Payment Authorization form that will be signed
by two (2) authorized officers of UBSGAM (the "Authorization form"), which will
set forth the amount of the Agency Fee that each Fund owes UBSPWI for service
rendered during the previous month. Each Fund hereby agrees to cause its
Custodian to pay UBSPWI the amount of the Agency Fee set forth on the
Authorization Form for all Loans effected during the previous month by the 10th
business day of each month.
7
7. MODIFICATION AND TERMINATION OF AGREEMENT.
(a) This Agreement is a continuing agreement and shall remain in
full force and effect until terminated in accordance with this Section. This
Agreement may be modified or terminated with respect to any Fund at any time
upon mutual written agreement of UBSPWI and that Fund, expressly referring to
this Agreement and indicating an intention to effect such modification or
termination. This Agreement also may be terminated at any time by UBSPWI or any
Fund upon three days prior written notice to the other party.
(b) This Agreement also shall terminate with respect to all Funds
in the event that:
(i) UBSPWI 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 UBSPWI or any substantial part of its
property;
(ii) any such case or proceeding shall be commenced against
UBSPWI or another shall seek such an appointment, which
(A) is consented to or not contested within 15 days by
UBSPWI;
(B) results in the entry of an order for relief, such
an appointment, or the entry of an order having a similar effect against UBSPWI,
or
(C) is not dismissed within 15 days;
(iii) UBSPWI shall make a general assignment for the benefit
of creditors;
(iv) UBSPWI shall admit in writing its inability to pay its
debts as they become due.
(c) Following any termination of this Agreement but only with
respect to the Fund or Funds with respect to which such termination is
effective, UBSPWI shall:
(i) immediately cease making new Loans;
(ii) terminate, as promptly as possible, any outstanding
Loans, but shall continue to administer any such outstanding Loans as necessary
to effect their termination, including, without limitation, (A) the return to
Borrowers of Collateral on Loans as to which Loaned Securities are returned to
UBSPWI and the Borrower is not in default, and (B) the coordination of the
liquidation of Collateral, all in the manner and on the terms permitted under
the Borrowing Agreements and deemed necessary or appropriate by UBSPWI; and
8
(iii) remit and deliver, or arrange for remittance and
delivery, to each Fund's Custodial Account all securities, earnings and other
items due to each Fund.
(d) Regardless of any agreement as to, or the receipt of any notice
of, termination and the cessation of lending, this Agreement shall not entirely
terminate with respect to any Lending Fund until all Loans have been closed, all
Collateral liquidated or returned, all deliveries and remittances due the Fund
have been made, and all final reports required hereunder have been made.
(e) Notwithstanding the foregoing provisions of this Section 7, the
provisions of Section 8 hereof shall survive any termination of this Agreement
and shall continue to be of full force and effect.
8. LIABILITY OF UBSPWI.
(a) UBSPWI shall be liable for, and shall indemnify and hold
harmless each Lending Fund from and against, any direct and foreseeable losses
and expenses sustained or incurred by such Fund and resulting from (i) the
failure of UBSPWI to monitor the value of Loaned Securities against Eligible
Collateral and to timely request additional Collateral as required under the
terms of this Agreement, (ii) the failure of UBSPWI to promptly terminate any
Loan once it has been requested to do so by a Lending Fund, (iii) the failure of
UBSPWI to promptly forward to any Borrower any voting instructions received from
a Lending Fund, (iv) the entering into of a Loan on behalf of a Lending Fund
with any Borrower other than an Eligible Borrower, (v) mistakes or errors by
UBSPWI with respect to instructions regarding the transfer or retransfer of
Loaned Securities, Collateral, interest, dividends or other distributions to or
from a Lending Fund Custodial Account and (vi) the failure of UBSPWI to notify
each Lending Fund of any material change of which it becomes aware in the
creditworthiness of any Eligible Borrower.
(b) With respect to any Loan, UBSPWI shall indemnify and hold
harmless each Lending Fund for the failure of any Borrower to remit to the
Lending Fund's Custodial Account when due any interest, dividends or other
distributions paid on Loaned Securities. With respect to any distribution in the
form of cash, UBSPWI shall promptly remit to the Lending Fund's Custodial
Account the full amount of such cash distribution. With respect to distributions
in the form of securities, UBSPWI shall, at its option, either deliver promptly
to the Lending Fund's Custodial Account securities identical in type and amount
to the securities distributed, or remit to the Lending Fund's Custodial Account
cash in an amount equal to the value of the distribution on the date of
distribution as determined in good faith by UBSPWI.
(c) UBSPWI shall not be liable to any Fund for any investment
losses with respect to cash Collateral. If at any time that cash Collateral for
a Loan is to be returned to a Borrower pursuant to a Borrowing Agreement, the
Market Value of such Collateral, as invested or reinvested, is insufficient to
return to the Borrower the full amount of
9
the cash Collateral required to be returned plus any and all rebate fees or
other amounts due and owing to the Borrower in respect of the Loan, the Lending
Fund shall be solely responsible for such deficiency, and the Lending Fund
hereby agrees to pay an amount equal to such deficiency to the Borrower.
9. GOVERNING LAW; JURISDICTION. This Agreement shall be construed in
accordance with the laws of the State of New York without giving effect to the
conflict of laws principles thereof.
10. MISCELLANEOUS.
(a) The relationships and agreements set forth in this Agreement
between each Fund and UBSPWI shall be several, separate and distinct from those
between any other Fund (including any Funds that are series or portfolios of the
same investment company) and UBSPWI, to the same effect as if that Fund had
executed a separate agreement in the form hereof with UBSPWI. The parties agree
that the assets and liabilities of each Fund are separate and distinct from the
assets and liabilities of each other Fund, and notwithstanding any other
provision of this Agreement, no Fund shall be liable or shall be charged for any
debt, obligation or liability of any other Fund under this Agreement. Notice is
hereby given that this instrument is executed on behalf of the trustees of the
Fund as trustees and not individually and that the obligations of this
instrument are not binding upon any of the trustees or shareholders of the Fund
individually but are binding upon the assets and property of the Fund.
(b) in the event any provision of this Agreement shall be held
illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining provisions of this Agreement, and this Agreement shall be
construed and enforced as if such illegal or invalid provision had never been
contained herein.
(c) This Agreement constitutes the entire agreement between the
parties and supersedes any prior agreements between the parties with respect to
the subject matter hereof. This Agreement shall not be assigned by either party
without the prior written consent of the other party.
11. NOTICES. All notices, reports and statements shall be mailed, sent by
express delivery service, or facsimile transmitted to the parties at the
following addresses and facsimile telephone numbers and shall be effective upon
receipt thereof:
TO UBSPWI:
Address:
UBS PaineWebber Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Global Portfolio Lending
10
Fax: (000) 000-0000
TO EACH FUND:
Address: [Name of Fund]
c/o UBS Global Asset Management (US) Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxx Xxxxxxxx
Fax (000) 000-0000
12. SECURITIES INVESTORS PROTECTION ACT OF 1970 NOTICE.
EACH FUND IS HEREBY ADVISED AND ACKNOWLEDGES THAT THE PROVISIONS OF THE
SECURITIES INVESTOR PROTECTION ACT OF 1970 MAY NOT PROTECT THE FUND WITH RESPECT
TO THE LOAN OF SECURITIES HEREUNDER AND THAT, THEREFORE, THE COLLATERAL
DELIVERED TO THE FUND MAY CONSTITUTE THE ONLY SOURCE OF SATISFACTION OF
BORROWER'S OBLIGATION IN THE EVENT THE BORROWER FAILS TO RETURN THE SECURITIES.
13. DEFINITIONS. For the purposes hereof:
1 "Affiliate" shall mean any entity which controls, is controlled by, or is
under common control with another entity.
2 "Available Securities" shall mean with respect to any Fund and on any
date, those securities held or maintained in the Fund's Custodial Account that
the Fund has designated as being available for Loan pursuant to Section 1.
3 "Borrower" shall mean, with respect to any Loan, the party that is a
borrower under a Borrowing Agreement.
4 "Borrowing Agreement" shall have the meaning set forth in Section 1.
5 "Business Day" shall mean any day other than a day on which the New York
Stock Exchange, Inc. is closed for trading; PROVIDED, HOWEVER, that for purposes
of the notice required to terminate any Loan, "Business Day" shall have the
meaning established under the related Borrowing Agreement.
6 "Collateral" shall mean all securities and other items of property
pledged as collateral for a Loan.
7 "Custodian" shall mean, with respect to any Fund, the entity identified
as such in Exhibit 4.
8 "Custodial Account" shall mean, with respect to any Fund, the Fund's
account with its Custodian, as specified in Exhibit 4.
9 "Eligible Borrower" shall mean, with respect to any Fund and on any date,
any entity to which Available Securities may be loaned on behalf of that Fund,
as listed in Exhibit 2, as the same may be amended from time to time by UBSPWI
and that Fund.
11
10 "Eligible Collateral" shall mean, with respect to any Lending Fund,
Collateral consisting of (i) cash, (ii) Government Securities having such
maturities or other characteristics as may be specified from time to time by the
Lending Fund in writing; or (iii) if agreed to in writing by the Lending Fund,
Letters of Credit.
11 "Foreign Securities" shall mean securities that are principally cleared
and settled outside of the United States.
12 "Government Securities" shall mean government securities as defined in
Section 3(a) (42) (A) - (C) of the Securities Exchange Act of 1934, as amended.
13 "Lending Fund" shall have the meaning set forth in Section 1.
14 "Letter of Credit" shall mean an irrevocable, unconditional, stand-by
letter of credit, in form and substance satisfactory to the Lending Fund, issued
by a bank (not affiliated with the Borrower under the related Loan) approved in
writing by the Lending Fund and listed on Exhibit 5 hereto.
15 "Loan" shall have the meaning set forth in Section 1.
16 "Loaned Securities" shall mean, with respect to any Loan, the securities
loaned by UBSPWI on behalf of a Lending Fund.
17 "Market Value" shall have the meaning assigned in the applicable
Borrowing Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereto duly authorized effective as of
the day and year first above written.
UBS PAINEWEBBER INC.
BY: /s/ Xxxxxx X. Xxxxxxxx
-----------------------
NAME: Xxxxxx X. Xxxxxxxx
TITLE: Senior Vice President
EACH FUND LISTED ON EXHIBIT 1
BY: /s/ Xxxx Xxxxxxxx
-----------------------
NAME: Xxxx Xxxxxxxx
TITLE Treasurer
12
EXHIBIT 1
LISTING OF FUNDS
FRESCO DOW XXXXX STOXX 50 FUND
FRESCO DOW XXXXX EURO STOXX 50 FUND
13
EXHIBIT 2
ELIGIBLE BORROWERS
Barclays Capital Inc.
Bear, Xxxxxxx & Co. Inc.
Credit Suisse First Boston Corporation
Deutsche Bank Securities Inc.
Xxxxxxx, Xxxxx & Company
ING Barings (U.S.) Securities, Inc.
Xxxxxx Brothers Inc.
Xxxxxxx Xxxxx Xxxxxx Xxxxxx & Xxxxx, Inc.
Xxxxxx Xxxxxxx & Co. Inc.
MS Securities Services, Inc.
Xxxxxxx Xxxxx Barney Inc.
UBS PaineWebber Inc.
UBS Warburg LLC
14
EXHIBIT 3
BORROWING AGREEMENT
SECURITIES LOAN AGREEMENT
(BORROWER)
SECURITIES LOAN AGREEMENT dated as of ________________, 2002, by and
between UBS PAINEWEBBER INC., as agent for the Accounts (in such capacity and
not in its individual capacity, UBS PaineWebber Incorporated is hereinafter
referred to as "Lender"), and _______________, ("Borrower"), setting forth the
terms and conditions under which Lender, on behalf of one or more Accounts
identified in accordance with Section 1.3 may, from time to time, arrange for
loans to Borrower of certain securities held in the Accounts against a pledge of
collateral. References to Lender in this Agreement refer only to Lender in its
representative capacity as agent for the Accounts and in no case shall be
construed so as to render Lender liable as principal. Capitalized terms not
otherwise defined herein shall have the meanings provided in Section 29.
Lender and Borrower, intending to be legally bound, agree as follows:
1. LOANS OF SECURITIES.
1.1 Subject to the terms and conditions of this Agreement, either
party hereto may, from time to time, orally seek to initiate a transaction
whereby Lender will lend securities to Borrower (each, a "Loan"). The parties
shall agree orally on the terms of each Loan, which shall be subject to the
terms and conditions of this Agreement and which shall include: (a) the date of
commencement of the Loan ("Loan Commencement Date"); (b) a description
(including the identity of the issuer) and the amount of the Loaned Securities;
(c) the account to which the Loaned Securities are to be transferred; (d) the
terms of compensation (including any applicable rebate); (e) the types of
Collateral acceptable for the Loan; and (f) the account or accounts to which the
cash and non-cash Collateral for the Loan are to be transferred. These terms may
be amended during the term of the Loan upon mutual agreement of the parties,
provided that any amendment is consistent with the terms of this Agreement.
1.2 Each Loan shall be evidenced by Lender's books and records
pertaining to such loans, as maintained by Lender in the regular course of its
business, which shall represent presumptive evidence thereof except for manifest
error or willful misconduct. Lender shall send Borrower monthly statements of
outstanding Loans showing Loan activity. Borrower agrees to examine such
statements promptly and to advise Lender of any errors or exceptions. Borrower's
failure to so advise Lender within ten (10) days after delivery of any such
statement shall be deemed to be Borrower's admission of the accuracy and
correctness of the contents thereof, and Borrower shall be fully bound thereby.
The foregoing shall not be construed to prevent the parties hereto from mutually
agreeing to amend or correct such statements if there has been manifest error in
the preparation of the statements.
1.3 Lender shall, periodically or when a material change in Lender's
Accounts takes place, furnish to the Borrower a list of Accounts on whose behalf
Lender is authorized to effect Loans as agent. With respect to any Loan, the
identity of the Account shall be promptly furnished to Borrower upon its request
or upon the occurrence of a Default involving such Account, provided, however,
that Lender shall furnish such identity automatically with respect to any Loan
of the assets of any ERISA Plan.
15
1.4 Notwithstanding anything to the contrary contained in this
Agreement with respect to when a Loan commences, a Loan hereunder shall not
occur until the Loaned Securities and the Collateral therefor have been
transferred in accordance with Section 16.
1.5 WITHOUT WAIVING ANY RIGHTS GIVEN TO LENDER HEREUNDER, IT IS
UNDERSTOOD AND AGREED THAT THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION
ACT OF 1970 MAY NOT PROTECT LENDER WITH RESPECT TO LOANED SECURITIES HEREUNDER
AND THAT, THEREFORE, THE COLLATERAL DELIVERED TO LENDER MAY CONSTITUTE THE ONLY
SOURCE OF SATISFACTION OF BORROWER'S OBLIGATIONS IN THE EVENT BORROWER FAILS TO
RETURN THE LOANED SECURITIES.
2. TRANSFER OF LOANED SECURITIES.
2.1 On the Loan Commencement Date (but in no event prior to the
transfer to the account or accounts designated by Lender of Collateral in the
amount required pursuant to Section 3), Lender shall arrange for the transfer of
the Loaned Securities to Borrower.
2.2 Borrower agrees that the completion of a transfer of Loaned
Securities to it pursuant to a Loan shall constitute its acceptance and receipt
thereof, and each such acceptance and receipt shall be deemed to constitute a
representation by Borrower that, as of the date of such transfer, (a) all
representations and warranties by Borrower herein are true and correct, as if
made on and as of such date, (b) no Default hereunder has occurred and is
continuing, and (c) except as otherwise theretofore disclosed to Lender in
writing, there has been no material adverse change in the financial condition or
business of Borrower or any direct or indirect parent of Borrower since the date
of the most recent financial statements of Borrower provided to Lender hereunder
and that, where Borrower is a registered broker-dealer under the Exchange Act,
it is in compliance with Rule 15c3-1 thereunder.
3. TRANSFER OF COLLATERAL.
3.1 Prior to, or concurrently with, the transfer of the Loaned
Securities to Borrower, Borrower shall transfer to the account or accounts
designated by Lender, Collateral having a Market Value in an amount equal to the
Required Value.
3.2 The Collateral transferred by Borrower to the account or accounts
designated by Lender in respect of any Loan, as adjusted pursuant to Section 8,
shall be security for Borrower's obligations in respect of such Loan and for any
other obligations of Borrower hereunder, and Borrower hereby pledges, assigns
and grants to Lender, as agent for the Account, a continuing first priority
security interest in, and a lien upon, the Collateral, which shall attach upon
the transfer of the Loaned Securities to Borrower and which shall cease with
respect to any item of Collateral upon its being re-transferred to Borrower. In
addition to all the rights and remedies given to Lender as agent hereunder,
Lender, as agent for the Account, shall have all the rights and remedies of a
secured party under the UCC.
3.3 Lender may transfer or arrange for the transfer of the Collateral
for any Loan to the related Account and the Account may use or invest the
Collateral, if such Collateral consists of cash, at the risk, and for the
benefit, of the Account, which shall bear all losses with respect thereto. If
the Collateral consists of securities, an Account that is a securities broker or
dealer may pledge, repledge, hypothecate, rehypothecate, lend, relend, sell or
otherwise transfer the Collateral and commingle the Collateral with other
collateral or with its own assets. Borrower irrevocably appoints Lender as its
attorney-in-fact for the purpose of doing or performing any act or thing
(including, without limitation, executing any document) and taking all other
steps as may be required to enable Lender or the Account to transfer any
Collateral to a third party or to otherwise realize upon any Collateral.
3.4 Provided that Borrower is not in Default hereunder, upon the
transfer to the account or accounts designated by Lender of all Loaned
Securities in respect of a Loan and the payment of all Loan Fees due upon
termination of such Loan, Lender shall transfer (or cause the related Account to
transfer) to Borrower the Collateral relating to such Loan. Lender's sole
obligation to Borrower in respect of the Collateral is to return or arrange for
the return of such to Borrower pursuant to this Section 3.4 and Section 5.4.
16
3.5 If Borrower transfers Collateral in respect of a Loan to the
account or accounts designated by Lender and Lender does not transfer or arrange
for the transfer of the Loaned Securities to Borrower, Borrower shall have the
absolute right to the immediate return of the Collateral; and if Lender
transfers or arranges for the transfer of Loaned Securities to Borrower and
Borrower does not transfer Collateral to the account or accounts designated by
Lender as required under Section 3.1, Lender shall have the absolute right to
the immediate return of the Loaned Securities.
3.6 Borrower may, upon reasonable notice to Lender and with Lender's
consent (which shall not be unreasonably withheld), substitute Collateral for
Collateral securing any Loan; PROVIDED, HOWEVER, that such substituted
Collateral shall: (a) consist only of cash, securities or other property that
would be acceptable Collateral in accordance with this Agreement; and (b) have a
Market Value that, when added to the Market Value of the remaining Collateral
for such Loan, is equal to or in excess of the Required Value. Substituted
Collateral shall constitute Collateral for all purposes hereunder.
3.7 Collateral shall be allocated to Loans as follows:
3.7.1 Except as provided in the following sentence, Collateral
transferred by Borrower in connection with a specific Loan shall be allocated to
such Loan; provided, that if Collateral is received on the same day for more
than one Loan, the Lender shall arrange for the allocation of such Collateral to
each Loan then being made so that each such Loan is secured by not less than the
Required Value of Collateral acceptable for such Loan. Any Collateral received
with respect to a Loan in excess of the Required Value for such Loan may be held
as collateral security for all Loans made to Borrower at any time without being
allocated to any one Loan or, in the sole discretion of Lender, may be allocated
at any time to any Loan or Loans then outstanding hereunder. All allocations of
Collateral shall be marked in Lender's books and records, which shall be
presumptive evidence of such allocations.
3.7.2 Lender shall have the right, at its sole election, at any time and
from time to time, to allocate or reallocate any Collateral delivered pursuant
to the terms hereof to or among any outstanding Loan or Loans.
3.7.3 It is expressly understood and agreed by the parties hereto that
no allocation of Collateral to any Loan or liabilities due to any Account
pursuant to the terms hereof shall in any way affect the ability of Lender to
apply such Collateral to the satisfaction of any obligation of Borrower
hereunder upon any Default hereunder, regardless of the Loan or Account to which
such obligation relates, and that all Collateral at any time given hereunder
shall constitute collateral security for all the Borrower's obligations to
Lender or the Accounts hereunder without distinction of any kind and upon any
Default hereunder may be applied to any such obligation or obligations as Lender
in its sole discretion may elect.
3.8 No later than seven days prior to the scheduled expiration date of
any Letter of Credit supporting Borrower's obligations hereunder, Borrower shall
deliver an extension of the expiration of such Letter of Credit or replace such
Letter of Credit by providing Lender with a substitute Letter of Credit or other
acceptable Collateral in an amount at least equal to the amount of the Letter of
Credit for which it is substituted.
4. LOAN AND CASH COLLATERAL FEES.
4.1 With respect to any Loan for which the Collateral consists of
Government Securities or Letters of Credit and with respect to such other Loans
as may be agreed upon by the parties, Borrower shall pay Lender a Loan Fee
("Loan Fee") based on the par value of those Loaned Securities which are debt
instruments and on the Market Value at the time of the Loan of those Loaned
Securities which are equity securities, as adjusted by any subsequent marks to
market pursuant to Section 8, from the Loan Commencement Date to, but not
including, the earlier of the date that securities identical to the Loaned
Securities are returned to Lender upon a termination of the Loan or the date
that securities identical to the Loaned Securities are purchased for the account
of Lender pursuant to Section 12. The rate of the Loan Fee applicable to all
Loaned Securities for any particular day shall be the rate agreed upon by the
parties prior to and from time to time during each Loan. All such accrued Loan
Fees shall be paid by the Borrower to Lender, as agent for the Account, by the
earlier of (a) the tenth Business Day of
17
the calendar month next following the calendar month during which such Loan Fees
accrued and (b) the date as of which this Agreement is terminated.
4.2 Unless otherwise agreed, with respect to any Loan as to which the
Collateral consists of cash, the Lender's compensation shall consist of the
right to use and invest the cash Collateral in accordance with Section 3.3. In
consideration of the right to use and invest any such cash Collateral, the
Lender agrees to pay the Borrower a cash collateral fee (the "Cash Collateral
Fee") computed daily for each Loan and based on the amount of Cash Collateral
delivered with respect to such Loan. The amount of the Cash Collateral Fee shall
be computed from the Loan Commencement Date to, but not including, the earlier
of the date that securities identical to the Loaned Securities are returned to
the account or accounts designated by Lender upon a termination of the Loan and
the date that securities identical to the Loaned Securities are purchased for
the account of Lender pursuant to Section 12. The amount of the Cash Collateral
Fee for any particular day shall be computed by multiplying (a) the amount of
Cash Collateral by (b) the annual Cash Collateral Fee rate agreed upon by the
parties prior to and from time to time during each Loan and (c) by the fraction
1/360. All accrued Cash Collateral Fees shall be paid by the Lender to the
Borrower or its agent by the earlier of (a) the tenth Business Day following the
receipt by the Lending Agent from the Borrower of an invoice in the calendar
month next following the calendar month during which such Cash Collateral Fees
accrued and (b) the date as of which this Agreement is terminated.
4.3 Notwithstanding the foregoing, all Loan Fees shall be payable by
Borrower immediately in the event of a Default hereunder by Borrower, and all
Cash Collateral Fees shall be payable immediately by Lender in the Event of a
Default hereunder by Lender. Cash Collateral Fees shall cease to accrue upon the
occurrence of a Default hereunder by Borrower, and Loan Fees shall cease to
accrue upon the occurrence of a Default hereunder by Lender.
5. TERMINATION OF THE LOAN.
5.1 Each Loan shall be terminable by either party by demand made in
accordance with this Section 5.
5.2 Except with respect to Loans of Foreign Securities, Borrower may
terminate a Loan on any Business Day by giving notice to Lender prior to the
Termination Notice Time and transferring the Loaned Securities to Lender by the
close of business on the corresponding date specified in such notice. With
respect to Loans of Foreign Securities, such termination notice must be received
by Lender before 11:00 a.m., Eastern time, on the second Business Day preceding
the termination date.
5.3 Lender may terminate a Loan on any termination date established by
notice given to Borrower prior to the close of business on any Business Day. The
termination date so established shall be a date no earlier than the standard
settlement date for trades of the Loaned Securities entered into on the date of
such notice, which date shall, unless Borrower and Lender agree to the contrary,
be (a) in the case of Government Securities, at Lender's discretion the same day
or the next Business Day following such notice; (b) in the case of Foreign
Securities, the standard settlement date in the principal market for such
securities; or (c) in all other cases, the third Business Day following such
notice.
5.4 On or prior to the termination date of any Loan, Borrower shall
transfer the Loaned Securities to or at the direction of Lender, whereupon
Lender shall transfer, or cause the Account to transfer, the Collateral (as
adjusted pursuant to Section 8) to Borrower pursuant to Section 3.4.
6. RIGHTS OF BORROWER IN RESPECT OF THE LOANED SECURITIES. Until a
Loan is terminated in accordance herewith and except as set forth in Sections
7.1 and 7.2 hereof, Borrower shall have all of the incidents of ownership of the
Loaned Securities, including the right to exercise any voting rights and
transfer the Loaned Securities to others. Notwithstanding the above, the
Borrower shall remit to the account or accounts as designated by Lender any
payment made to the Borrower in respect of any consent solicitation with respect
to the Loaned Securities.
18
7. DIVIDENDS, DISTRIBUTIONS, ETC.
7.1 Lender as agent for the Account shall be entitled to receive all
distributions made on or in respect of the Loaned Securities which are not
otherwise received by Lender, to the full extent it would be so entitled if the
Loaned Securities had not been lent to Borrower, including, but not limited to:
(a) all property (including cash dividends and all other distributions of cash
or property), (b) stock dividends and bonus issues, (c) securities received as a
result of split-ups of the Loaned Securities and distributions in respect
thereof, (d) interest payments, (e) all rights to purchase additional
securities, and (f) payments upon maturity or other redemption.
7.2 Any cash distributions made on, or in respect of, the Loaned
Securities, that Lender as agent for the Account is entitled to receive pursuant
to Section 7.1, shall be paid by the transfer by Borrower of cash (denominated
in the currency of issue for the Loaned Securities, unless otherwise agreed) to
the account or accounts designated on the date such cash distribution is made by
the issuer, in an amount equal to such cash distributions (subject to the
provisions of Section 7.4), so long as Lender is not then in Default. Non-cash
distributions received by Borrower in respect of the Loaned Securities shall be
added to the Loaned Securities (unless otherwise directed by Lender) and shall
be considered such for all purposes, except that if the Loan has terminated,
Borrower shall forthwith deliver the same to Lender.
7.3 (a) Borrower shall be entitled to receive all cash distributions made
on, or in respect of, non-cash Collateral which are not otherwise received by
Borrower, to the full extent it would be so entitled if the Collateral had not
been transferred by Borrower. Any distributions of cash made on or in respect of
such Collateral which Borrower is entitled to receive hereunder shall be paid by
the transfer of cash (denominated in the currency of issue of the non-cash
Collateral, unless otherwise agreed) by Lender to Borrower upon the date of
receipt by Lender or the Account thereof, in an amount equal to such cash
distribution (subject to the provisions of Section 7.4), so long as Borrower is
not then in Default.
(b) Borrower shall be entitled to receive all non-cash distributions
made on or in respect of non-cash Collateral the payment dates for which are
during the term of the Loan and which are not otherwise received by Borrower, to
the full extent it would be so entitled if the Collateral had not been
transferred by Borrower. Any distributions made on or in respect of such
Collateral which Borrower is entitled to receive hereunder shall be paid by or
at the direction of Lender to Borrower promptly, so long as Borrower is not in
Default at the time of such receipt.
7.4 (a) If (i) Borrower is required to make a payment (a "Borrower
Payment") with respect to cash distributions on Loaned Securities under Sections
7.1 and 7.2 ("Securities Distributions") or (ii) Lender is required to make a
payment (a "Lender Payment") with respect to cash distributions on Collateral
under Section 7.3 ("Collateral Distributions"), and (ii) Borrower, Lender or
their respective custodians, as the case may be ("Payor"), shall be required by
law to collect any withholding or other tax, duty, fee, levy or charge required
to be deducted or withheld from such Borrower Payment or Lender Payment ("Tax"),
then Payor shall pay such additional amounts as may be necessary in order that
the net amount of the Borrower Payment or Lender Payment received by Lender or
Borrower, as the case may be ("Payee"), after payment of such Tax equals the net
amount of the Securities Distribution or Collateral Distribution that would have
been received by the Payee if such Securities Distribution or Collateral
Distribution had been paid directly to the Payee; provided, however, that any
Borrower Payment shall also take into account (and Borrower shall pay such
additional amounts as reflect) the value (as specified in a notice by Lender to
Borrower) to the Account of any tax refund or reclaim to which such Account
would otherwise have been entitled had the Loaned Securities not been loaned.
(b) Each party shall supply to the other notice of such tax
information as may be requested by the other to enable it to effect the Borrower
Payment or Lender Payment in the required amount, computed as per the
immediately preceding paragraphs of this Section 7. Borrower represents that, as
of the Loan Commencement Date, no Tax would be imposed on any cash distribution
paid to it with respect to Collateral for any Loan, unless Borrower has given
notice to the contrary to Lender (specifying the rate at which such Tax would be
imposed), and that Borrower will notify Lender of any change that occurs during
the term of a Loan in the rate of any Tax that would be imposed on any such cash
distribution.
7.5 To the extent that, under the provisions of Sections 7.1 through
7.4, a transfer of cash or other property by Borrower would give rise to a
Margin Excess or a transfer of cash or other property by Lender would give rise
to a Margin Deficit, Borrower or Lender, as the case may be, shall not be
obligated to make such transfer
19
but, in lieu thereof, shall immediately credit the amounts that would have been
transferable under such Sections to the account of Lender or Borrower, as the
case may be.
7.6 Borrower and Lender agree that, on the Business Day following the
record date for the cash distribution relating to any Borrower or Lender
Payment, Lender will notify Borrower that Lender will charge or credit (as
appropriate) Borrower's account for such Borrower or Lender Payment on the date
the payment is payable by Borrower or Lender pursuant to Section 7.2 or 7.3
hereof, and Lender will effect such charge or credit on such date; PROVIDED,
HOWEVER, that no failure on the part of Lender to provide such notice or to
effect such charge or credit shall affect the parties' respective rights and
obligations under Section 7.1, 7.2 or 7.3.
8. XXXX TO MARKET MARGIN.
8.1 In the event that at the close of trading on any Business Day the
Market Value of the Collateral for any Loan shall be, in the case of Loaned
Securities that are Foreign Securities, 104% or less of the Market Value of such
Loaned Securities, or in the case of other Loaned Securities, 101% or less of
the Market Value of the Loaned Securities, Borrower shall immediately, and
without notice or demand from Lender, transfer additional Collateral to the
account or accounts designated by Lender so that the Market Value of such
additional Collateral, when added to the Market Value of the other Collateral
for such Loan, shall equal or exceed the Required Value.
8.2 In addition to the rights of Lender under Section 8.1, in the
event that at the close of trading on any Business Day the Market Value of
Collateral for a Loan shall be less than the Required Value (a "Margin
Deficit"), Lender may, by notice (which may be oral) to Borrower, demand that
Borrower transfer to Lender additional Collateral so that the Market Value of
such additional Collateral, when added to the Market Value of all other
Collateral for such Loan, shall equal or exceed the Required Value. Unless
otherwise agreed, such transfer shall be made in accordance with Lender's
instructions by no later than the close of business on the day of demand if such
demand is made prior to 11:00 a.m. New York time on a Business Day; otherwise
such transfer shall be made on the next Business Day; PROVIDED, HOWEVER, that
any such transfer of additional Collateral comprised of Foreign Securities may
be made on the next Business Day. If the additional Collateral to be posted is
intended to be through adjustment of a Letter of Credit previously delivered to
Lender as Collateral, Borrower agrees to cause the issuing bank to amend the
original Letter of Credit by delivery of an amended Letter of Credit to Lender
within the applicable time period described in the preceding sentence.
8.3 In the event that at the close of trading on any Business Day the
Market Value of all Collateral for a Loan shall be greater than the Required
Value (a "Margin Excess"), Borrower may, by notice (which may be oral) to
Lender, demand that Lender transfer to Borrower such amount of the Collateral
selected by Borrower so that the Market Value of the Collateral for such Loan,
after deduction of such amount, shall not exceed the Required Value. Unless
otherwise agreed, such transfer shall be made in accordance with Borrower's
instructions by no later than 3:00 p.m. New York time on the day of demand if
such demand is made prior to 11:00 a.m. New York time on a Business Day;
otherwise such transfer shall be made on the next Business Day; PROVIDED,
HOWEVER, that any such transfer of Collateral comprised of Foreign Securities
may be made on the next Business Day. If Lender is requested to return to
Borrower a portion of any security constituting Collateral, Borrower shall, at
the oral request of Lender, take all such action as is necessary to cause such
security to be reissued in such denominations as are required to permit such a
partial return, and in such case Lender shall not be obligated to return
Collateral hereunder unless and until such action has been taken and may make
required returns of Collateral hereunder by returning such securities in such
amounts as are, as nearly as practicable, equal to but not greater than the
required return. The return to Borrower of securities the Market Value of which
on the date on which the requirement to return the same was established was then
sufficient to comply with such requirement of return shall be in full compliance
with this Agreement and a full discharge of Lender's obligation to make such
return, notwithstanding the fact that, at the date of such return the Market
Value of any such securities may have declined. Where Collateral is in the form
of a Letter of Credit, Lender agrees to promptly consent to a reduction in the
undrawn balance of the Letter of Credit sufficient to eliminate the Margin
Excess, provided that Borrower delivers to Lender an amended Letter of Credit
within the time period described in the second sentence of this Section 8.3.
20
8.4 Borrower and Lender may agree, with respect to one or more Loans
hereunder, to xxxx the values to market pursuant to Sections 8.1 and 8.2 by
valuing the Loaned Securities lent and the Collateral given in respect thereof
on an Account-by-Account basis.
9. REPRESENTATIONS OF THE PARTIES HERETO. The parties hereby make the
following representations and warranties:
9.1 Each party hereto represents and warrants that (a) it has the
power to execute and deliver this Agreement, to enter into the Loans
contemplated hereby and to perform its obligations hereunder; (b) it has taken
all necessary action to authorize such execution, delivery and performance; and
(c) this Agreement constitutes a legal, valid and binding obligation enforceable
against it in accordance with its terms (in the case of Lender, solely in its
capacity as agent for the Account or Accounts whose securities are the subject
of a Loan or Loans).
9.2 Each party hereto represents and warrants that the execution,
delivery and performance by it of this Agreement and each Loan hereunder will at
all times comply with all applicable laws and regulations including those of
applicable securities regulatory and self-regulatory organizations (in the case
of Lender, solely in its capacity as agent for the Account or Accounts whose
securities are the subject of a Loan or Loans).
9.3 Each party hereto represents and warrants that it has not relied
on the other for any tax or accounting advice concerning this Agreement (except
as expressly provided herein) and has made its own determination as to the tax
and accounting treatment of any Loan and any dividends, remuneration or other
funds received hereunder.
9.4 Borrower represents and warrants that all Loans will comply with
the applicable regulations of the Board of Governors of the Federal Reserve
System governing margin lending ("Margin Regulations") and, without limiting the
generality of the foregoing, that it (or any party to whom it relends the Loaned
Securities) is borrowing or will borrow the Loaned Securities for the purpose of
making delivery of such securities in the case of short sales, failure to
receive securities required to be delivered or other similar situations or as
otherwise permitted pursuant to the applicable Margin Regulations.
9.5 Borrower represents and warrants that it has, or will have at the
time of transfer to the account or accounts designated by Lender of any
Collateral hereunder (other than Letters of Credit), the right to grant to
Lender a first priority security interest therein subject to the terms and
conditions hereof. As to Collateral consisting of Letters of Credit transferred
to the account or accounts designated by Lender hereunder, Borrower represents
and warrants that Lender shall have full unencumbered title thereto.
9.6 Lender represents and warrants that the Account for which it is
acting in any Loan shall have represented and warranted to it that the Loaned
Securities transferred to Borrower shall be free and clear of any lien or
encumbrance at the time of transfer, and Borrower represents and warrants to
Lender that all Loaned Securities returned hereunder shall be free and clear of
any lien or encumbrance at the time of such return.
9.7 Lender represents and warrants that as to each Account, the
Account has represented and warranted to it that the Account has duly authorized
Lender, as agent, to execute and deliver this Agreement on its behalf, and to
enter into Loans on its behalf.
9.8 Notwithstanding any other provision of this Agreement, each of the
representations and warranties set out in Section 2.2 and in this Section 9
shall be deemed made and repeated for all purposes at the time that any Loan is
made and to be in effect as of all times when Borrower's obligations with
respect to any Loan remain outstanding.
10. COVENANTS.
10.1 Financial information shall be delivered as follows:
10.1.1 If Borrower is not a broker-dealer registered under the Exchange
Act, it covenants as follows: Upon execution of this Agreement, Borrower shall
deliver to the Lender Borrower's and any parent company's
21
most recent available financial information, including (without limitation) the
most recent available audited and unaudited statements of Borrower's and any
parent company's financial condition that Borrower or such parent company is
required to provide to any governmental agency or self regulatory body. As long
as any Loan is outstanding under this Agreement, Borrower will promptly deliver
to Lender all such financial information that is subsequently available, and any
other financial information or statements that Lender may reasonably request.
10.1.2 If Borrower is a broker-dealer registered under the Exchange Act,
it covenants as follows: Upon execution of this Agreement, Borrower shall
deliver to Lender the most recent statements of Borrower required to be
furnished to Borrower's customers by Rule 17a-5(c) and (d) under the Exchange
Act. As long as any Loan is outstanding under this Agreement, Borrower shall
promptly deliver to Lender all such statements subsequently required to be
furnished to Borrower's customers by such Rule (or any successor thereto). Upon
execution of this Agreement, Borrower shall also deliver to Lender Borrower's
and any parent company's most recent financial information otherwise available
to its shareholders, the SEC, or the public, as the case may be, including
(without limitation) the most recent available audited and unaudited statements
of Borrower's or any parent company's financial condition and any report or
notice required by Rules 17a-5(a) (2) (i) and (ii) and 17a-11 under the Exchange
Act. As long as any Loan is outstanding under this Agreement, Borrower will
promptly deliver to the Lender all such financial information that is
subsequently available.
10.2 Borrower shall be liable as principal with respect to its
obligations hereunder.
10.3 Borrower shall at all times in respect of each Loan effected
pursuant hereto maintain Collateral having a Market Value at least equal to the
Required Value.
10.4 Borrower agrees to cause every Letter of Credit delivered by it
and constituting Collateral hereunder to be renewed or replaced by Collateral
(including, without limitation, a renewal or replacement Letter of Credit)
satisfactory to Lender at least seven days prior to the scheduled expiration
date of such Letter of Credit.
10.5 Borrower shall give Lender prompt notice of the occurrence of any
development in the business affairs of Borrower that has resulted in, or which
in Borrower's reasonable judgment could result in, a material adverse effect on
the ability of Borrower to perform its obligations under this Agreement. Any
such notice shall set forth, in reasonable detail, a description of the event
which has occurred and of the action, if any, that Borrower proposes to take
with respect thereto. Borrower will forward to Lender a copy of any order,
decree, determination, instruction or other written evidence received by it of
or with respect to any matter referred to in the first sentence of this
subparagraph 10.5.
10.6 Borrower and Lender hereby agree and acknowledge that (a) each
Loan hereunder is a "securities contract," as such term is defined in Section
741(7) of Title 11 of the United States Code (the "Bankruptcy Code"), (b) each
and every transfer of funds, securities and other property under this Agreement
and each Loan hereunder is a "settlement payment" or a "margin payment," as such
terms are used in Sections 362(b)(6) and 546(e) of the Bankruptcy Code, and (c)
the rights given to Borrower and Lender hereunder upon a Default by the other
constitute the right to cause the liquidation of a securities contract and the
right to set off mutual debts and claims in connection with a securities
contract, as such terms are used in Sections 555 and 362(b) (6) of the
Bankruptcy Code. Each party hereto further agrees and acknowledges that if
Borrower or an Account is an "insured depository institution," as such term is
defined in the Federal Deposit Insurance Act, as amended ("FDIA"), then each
Loan hereunder is a "securities contract" and "qualified financial contract," as
such terms are defined in the FDIA and any rules, orders or policy statements
thereunder.
10.7 Borrower will, from time to time, do and perform any and all acts
and execute any and all further instruments reasonably requested by Lender more
fully to effect the purposes of this Agreement and the pledge of the Collateral
hereunder, including, without limitation, the execution and filing of financing
statements and continuation statements relating to the Collateral under the
provisions of the UCC.
10.8 Borrower will notify Lender promptly upon the occurrence of any
change of control with respect to Borrower or if Borrower enters into an
agreement providing for such a change of control. For purposes of this
paragraph, a "change of control" shall occur if Borrower consolidates or
amalgamates with or merges with or into, or transfers all or substantially all
of its assets to another entity, or if any person or entity acquires directly
22
or indirectly the beneficial ownership of equity securities having the power to
elect a majority of the board of directors of Borrower or otherwise acquires
directly or indirectly the power to control the policy making decisions of
Borrower.
11. EVENTS OF DEFAULT. All Loans between Borrower and Lender may, at
the option of the non-defaulting party exercised by notice to the defaulting
party (which option shall be deemed to have been exercised, even if no notice is
given, immediately upon the occurrence of an event specified in Section 11.6
below), be terminated immediately upon the occurrence of any one or more of the
following events (individually, a "Default"):
11.1 Any Loaned Securities shall not be transferred to Lender on the
termination date of the Loan as required by Section 5;
11.2 Any Collateral shall not be transferred to Borrower as required by
Section 3.5 and Section 5;
11.3 Borrower shall fail to comply with the obligation to replace an
expiring Letter of Credit under Section 10.4 and such default is not cured
within one Business Day after notice of such failure to Borrower;
11.4 Borrower or Lender shall fail to transfer Collateral as required
by Section 8;
11.5 Borrower or Lender shall fail to make the payment of distributions
as required by Section 7 and such default is not cured within one Business Day
after notice of such failure to Borrower or Lender, as the case may be;
11.6 (a) Lender or Borrower shall commence as debtor any case or proceeding
under any bankruptcy, insolvency, reorganization, liquidation, dissolution or
similar law, or seek the appointment of a receiver, conservator, trustee,
custodian or similar official for such person or any substantial part of its
property, or (b) any such case or proceeding shall be commenced against Lender
or Borrower, or another shall seek such an appointment, or any application shall
be filed against such person for a protective decree under the provisions of the
Securities Investor Protection Act ("SIPA"), which (i) is consented to or not
timely contested by such party, (ii) results in the entry of an order for
relief, such an appointment, the issuance of such a protective decree or the
entry of an order having a similar effect, or (iii) is not dismissed within 15
days, or (c) Lender or Borrower shall make a general assignment for the benefit
of creditors, or (d) Lender or Borrower shall admit in writing its inability to
pay its debts as they become due;
11.7 Lender or Borrower shall have been suspended or expelled from
membership or participation in any securities exchange or association or other
self-regulatory organization to whose rules it is subject or if it is suspended
from dealing in securities by any governmental agency or regulatory body;
11.8 Lender or Borrower shall have its license, charter, or other
authorization necessary to conduct a material portion of its business withdrawn,
suspended or revoked by any applicable government or agency or regulatory body
thereof;
11.9 Any representation made or deemed to be made by a party in respect
of this Agreement or any Loan or Loans made hereunder shall be incorrect or
untrue in any material respect during the term of any Loan hereunder;
11.10 Borrower or Lender (a) fails to provide to the other party
reasonable assurances of its ability to perform its obligations hereunder or
under any Loan within 24 hours after request therefor is made in good faith by
the requesting party; (b) notifies the other, orally or in writing, of its
inability to or its intention not to perform its obligations hereunder; or (c)
otherwise disaffirms, rejects or repudiates any of its obligations hereunder;
11.11 Borrower or Lender (a) shall fail to perform any material
obligation under this Agreement not specifically set forth in this Section 11,
including but not limited to the payment of fees as required by Section 4, and
the payment of transfer taxes as required by Section 14, (b) shall have received
notice of such failure from the
23
non-defaulting party, and (c) shall not have cured such failure by the next day
after such notice on which a transfer of funds, Loaned Securities or Collateral,
as the case may be, could be effected pursuant to Section 16.4 hereof; or
11.12 A party to this Agreement ("X") consolidates or amalgamates with,
or merges into, or transfers all or substantially all of its assets to, another
entity and (a) the resulting, surviving or transferee entity has not assumed all
the obligations of X under this Agreement pursuant to an agreement reasonably
satisfactory to the other party or (b) the financial condition of the resulting,
surviving or transferee entity is, in the judgment of the other party,
materially weaker than that of X prior to such transaction.
12. LENDER'S REMEDIES.
12.1 If:
(a) any Default shall occur in respect of which Borrower is the
defaulting party; or
(b) Lender becomes obligated to return, or is otherwise deprived of
its rights to, any Loaned Securities after their return to Lender, or
Lender is in any way required to pay their value or any related sum over,
as a result of any bankruptcy, insolvency, liquidation, reorganization, or
other similar proceeding relating to Borrower or pursuant to any legal
requirement, including without limitation any laws relating to so-called
"preferences" or preferential payments,
Lender shall have the right, in addition to any other remedies provided herein
or under applicable law or in equity and without further notice to Borrower:
(a) to purchase, in a commercially reasonable time and manner (taking
into consideration the nature of the market for the Loaned Securities), a
like amount of the Loaned Securities ("Replacement Securities") in the
principal market for such securities; or
(b) to sell any Collateral in the principal market for such Collateral
in a commercially reasonable time and manner (taking into consideration the
nature of the market for the Collateral) or to treat the Loaned Securities
as having been purchased by Borrower at a purchase price equal to the
Market Value thereof on the day of the Default (or on the date of the event
referred to in (b) above, as the case may be); and
(c) to apply and set off the Collateral (including any amounts drawn
under a Letter of Credit supporting any Loan) and any proceeds thereof
against the payment of the purchase price for any Replacement Securities
and any amounts due Lender under Sections 4, 7, 14 and 17 hereof. Lender
may also apply the Collateral and any proceeds thereof to any other
obligation of Borrower under this Agreement, including Borrower's
obligations with respect to distributions paid to Borrower (and not
forwarded to Lender) in respect of Loaned Securities.
In the event that Lender exercises such rights, Borrower's obligation to return
a like amount of Loaned Securities shall terminate.
12.2 In the event that the purchase price of Replacement Securities,
plus any and all amounts due to Lender hereunder, exceeds the Market Value of
the Collateral on the date the Replacement Securities are purchased, Borrower
shall be liable to Lender for the amount of such excess, together with interest
on such excess at a per annum rate that, in the case of purchases of Foreign
Securities, is equal to LIBOR plus two (2%) percent, and in the case of
purchases of any other securities and all other amounts due to Lender hereunder,
that is equal to the Fed Funds Rate plus two (2%) percent, in each case as such
rates fluctuate from day to day, from the date of such purchase until the date
of payment of such excess. Lender shall have, and Borrower hereby grants to
Lender, as security for Borrower's obligation to pay such excess, a security
interest in any property of Borrower (including, without limitation, the
Collateral) then held by Lender or the Account and a right of setoff against
such property and against any other amount payable by Lender to Borrower. The
purchase price of securities purchased under this Section 12 shall include, and
the proceeds of any sale of Collateral shall be determined after the deduction
of, broker's fees, taxes and commissions and all other reasonable costs, fees
and expenses related to
24
such purchase or sale or to the exercise of Lender's remedies including, without
limitation, reasonable legal fees and expenses. Upon the satisfaction of all
obligations hereunder, any remaining Collateral shall be returned to Borrower.
13. BORROWER'S REMEDIES.
13.1 In the event of any Default involving Lender or an Account under
Section 11 hereof, Borrower shall have the right, in addition to any other
remedies provided herein or under applicable law or in equity and without
further notice to Lender:
(a) to purchase, in a commercially reasonable time and manner (taking
into consideration the nature of the market for the Collateral), a like
amount of Collateral ("Replacement Collateral") in the principal market for
such Collateral; or
(b) to sell a like amount of Loaned Securities in the principal market
for such Loaned Securities in a commercially reasonable time and manner
(taking into consideration the nature of the market for the Loaned
Securities) or to treat the Collateral as having been purchased by Lender
at a purchase price equal to the Market Value thereof on the day of the
Default; and
(c) to apply and set off the Loaned Securities and any proceeds
thereof against the payment of the purchase price for any Replacement
Collateral, Lender's obligation to return any cash or other Collateral and
any amounts due Lender under Sections 4, 7 and 17 hereof. Borrower may also
apply the Loaned Securities and any proceeds thereof to any other
obligation of Lender or the Account under this Agreement, including
Lender's obligations with respect to distributions paid to Lender (and not
forwarded to Borrower) in respect of Collateral.
In the event that Borrower exercises such rights, Lender's obligation to return
a like amount of Collateral shall terminate; PROVIDED, HOWEVER, that, where
Collateral consists of a Letter of Credit, upon the exercise or deemed exercise
by Borrower of its termination rights under Section 11, Lender shall immediately
return the Letter of Credit to Borrower, and Borrower shall return to Lender the
Loaned Securities or an amount equal to the net proceeds from the sale (or
deemed sale) of the Loaned Securities in the manner described above, reduced by
any other amounts owed by the Account to Borrower.
13.2 In the event that the sales price received from such Loaned Securities is
less than the purchase price of Replacement Collateral (plus the amount of any
cash and the Market Value of any other Collateral not replaced by Borrower on
the date that the Loaned Securities are sold, and all amounts due to Borrower
hereunder), the Account shall be liable to Borrower for the amount of such
deficiency, together with interest on such deficiency at a per annum rate that,
in the case of Collateral consisting of Foreign Securities, is equal to LIBOR
plus two (2%) percent, and in the case of Collateral consisting of any other
securities and all other amounts due to Borrower hereunder, that is equal to the
Fed Funds Rate plus two (2%) percent, in each case as such rates fluctuate from
day to day, from the date of such sale until the date of payment of such
deficiency. Borrower shall have, and Lender as agent for the Account hereby
grants to Borrower, as security for the Account's obligation to pay such excess,
a security interest in any property of the Account (including, without
limitation, the Loaned Securities) then held by Borrower and a right of setoff
against such property and against any other amount payable by Borrower to Lender
in respect of such Account arising hereunder. The purchase price of any
Replacement Collateral purchased under this Section 13 shall include, and the
proceeds of any sale of any Loaned Securities shall be determined after the
deduction of, broker's fees, taxes and commissions and all other reasonable
costs, fees and expenses related to such purchase or sale or to the exercise of
Borrower's remedies including, without limitation, reasonable legal fees and
expenses. Upon the satisfaction of all the Account's obligations hereunder, any
remaining Loaned Securities (or remaining net cash proceeds from sale or deemed
sale thereof) shall be returned to Lender.
14. TRANSFER TAXES AND COSTS. All transfer taxes, stamp duties and
fees and similar charges with respect to any transfers hereunder of Loaned
Securities or Collateral shall be paid by Borrower. Borrower covenants and
agrees that it shall ensure that this Agreement and all instruments of transfer
in respect of any Loaned Securities or Collateral shall have been stamped in
accordance with all applicable laws.
25
15. MARKET VALUE.
15.1 If the principal market for the securities to be valued is a
national securities exchange in the United States, their Market Value shall be
determined by their last sale price on such exchange on the preceding Business
Day or, if there was no sale on that day, by the last sale price on the next
preceding Business Day on which there was a sale on such exchange, all as quoted
on the consolidated tape or if not quoted on the consolidated tape, then as
quoted by such exchange.
15.2 If the principal market for the securities to be valued is the
over-the-counter market, their Market Value shall be determined as follows. If
the securities are quoted on the Nasdaq stock market (Nasdaq), their Market
Value shall be the closing sale price on Nasdaq on the preceding Business Day
or, if the securities are issues for which last sale prices are not quoted on
Nasdaq, the closing bid price on such day. If the securities to be valued are
not quoted on Nasdaq, their Market Value shall be the highest bid quotation as
quoted in or by any of The Wall Street Journal, the National Quotation Bureau
pink sheets, or a recognized, independent pricing source chosen by the Lender.
If the securities to be valued are Government Securities, their Market Value
shall be the closing bid as quoted by any recognized, independent pricing
service chosen by the Lender or, if not available from such a service, as quoted
in The Wall Street Journal. In each case, if the relevant quotation did not
exist on such day, then the relevant quotation on the next preceding Business
Day on which there was such a quotation shall be the Market Value.
15.3 Unless otherwise agreed, if the securities to be valued are
Foreign Securities, their Market Value shall be determined as of the close of
business on the preceding Business Day in accordance with market practice in the
principal market for such securities.
15.4 Market Value shall include, where applicable, accrued interest to
the extent not already included therein (other than any interest transferred to
the other party pursuant to Section 7).
15.5 With respect to Collateral consisting of cash, Market Value as of
any date shall be the face amount thereof held by Lender at the time of
determination and, with respect to Collateral consisting of Letters of Credit,
Market Value as of any date shall be the undrawn balance thereof which Lender
may at such time draw thereunder except that if, in the judgment of Lender, the
creditworthiness of the issuer of any Letter of Credit has been or may be
impaired, then, upon notice to Borrower, the Market Value of such Letter of
Credit shall be zero.
15.6 Unless otherwise agreed, where the Loaned Securities in respect of
a Loan are denominated in a currency other than the currency in which the
related Collateral is denominated, the currency which shall be applicable for
purposes of determining Market Value shall be the currency in which the
Collateral is denominated (the "Contractual Currency"), and any Loaned Security
not denominated in the Contractual Currency shall be converted into a
Contractual Currency equivalent based on the most current spot rate of exchange
quoted by the independent source of exchange rates as notified to Borrower by
Lender upon Borrower's request. Such notification may be oral.
16. TRANSFERS.
16.1 All transfers of securities hereunder shall be by (a) physical
delivery of certificates representing such securities together with duly
executed stock and bond transfer powers, as the case may be, with signatures
guaranteed by a bank or a member firm of the New York Stock Exchange, Inc., (b)
transfer on the books of a Clearing Organization, (c) transfer on the books of a
financial or securities intermediary in accordance with the UCC or (d) such
other means as Borrower and Lender may agree. In every transfer of securities
hereunder, the transferor shall take all steps necessary (i) to effect a
"transfer" under Section 8-313 of the UCC or any amended version of Article 8 of
the UCC that may hereafter be in effect, with respect to transfers governed by
Revised Article 8, to give the transferee control of the transferred securities
within the meaning of Revised Article 8 Section 8-106; and (ii) to provide the
transferee with comparable rights under any applicable foreign law or
regulation.
26
16.2 All transfers of cash Collateral hereunder shall be by (a) wire
transfer in immediately available, freely transferable funds or (b) such other
means as Borrower and Lender may agree. All other transfers of cash hereunder
shall be made in accordance with the preceding sentence or by delivery of same
day funds.
16.3 All transfers of a Letter of Credit from Borrower to Lender shall
be made by physical delivery of the Letter of Credit to Lender. Transfer of a
Letter of Credit from Lender to Borrower shall be made by causing such Letter of
Credit to be returned or by causing the amount of such Letter of Credit to be
reduced to the amount required after such transfer.
16.4 A transfer of securities, cash or Letters of Credit may be
effected under this Section 16 on any day except (a) a day on which the
transferee is closed for business at its address set forth on the signature page
hereof or (b) a day on which a Clearing Organization or wire transfer system is
closed, if the facilities of such Clearing Organization or wire transfer system
are required to effect such transfer. Each transfer of securities or cash shall
be made to the account specified by the party to whom such transfer is to be
made.
17. CONTRACTUAL CURRENCY.
17.1 Unless otherwise agreed, each payment of cash under this Agreement
(except as provided in Section 7.2) shall be made in the Contractual Currency.
Notwithstanding the foregoing, the payee of any such payment may, at its option,
accept tender thereof in any other currency; PROVIDED, HOWEVER, that, to the
extent permitted by applicable law, the obligation of the payor to make such
payment will be discharged only to the extent of the amount of Contractual
Currency that such payee may, consistent with normal banking procedures,
purchase with such other currency (after deduction of any premium and costs of
exchange) on the banking day next succeeding its receipt of such currency.
17.2 If for any reason the amount of the Contractual Currency received
under Section 17.1, including amounts received after conversion of any recovery
under any judgment or order expressed in a currency other than the Contractual
Currency, falls short of the amount in the Contractual Currency due in respect
of this Agreement, the party required to make the payment will (unless a Default
has occurred and such party is the non defaulting party), as a separate and
independent obligation and to the extent permitted by applicable law,
immediately pay such additional amount in the Contractual Currency as may be
necessary to compensate for the shortfall.
17.3 If for any reason the amount in the Contractual Currency received
under Section 17.1 exceeds the amount in the Contractual Currency due in respect
of this Agreement, then the party receiving the payment will (unless a Default
has occurred and such party is the non-defaulting party) refund promptly the
amount of such excess.
18. OBLIGATIONS TO BE SEPARATE. Each and every obligation, liability
or undertaking of an Account with respect to any Loan shall be solely an
obligation, liability or undertaking of, and binding upon, the Account for which
such Loan is made and shall be payable solely from the available assets of such
Account. No such obligation, liability or undertaking shall be binding upon or
affect any other Account or, in the case of an Account that is a portfolio or
series of an investment company registered as such under the Investment Company
Act of 1940, be binding upon or affect any assets of any other portfolio or
series of such investment company. Neither PaineWebber Incorporated (in its
individual capacity) nor any Affiliate thereof shall have any liability to
Borrower whatsoever in respect of any Loan, it being understood and agreed that
Borrower shall have recourse solely to the Account in the event of the
occurrence of a Default involving the Account.
19. ERISA. If any of the securities transferred to Borrower hereunder
for any Loan have been or shall be obtained, directly or indirectly, from or
using the assets of any Plan, Lender shall so notify Borrower in writing upon
the execution of this Agreement or upon initiation of the Loan under Section
1.1. If Lender so notifies Borrower, then Borrower and Lender shall conduct the
Loan in accordance with the terms and conditions of Department of Labor
Prohibited Transaction Exemption 81-6 (46 Fed. Reg. 7527, January 23, 1981; as
amended, 52 Fed. Reg. 18754, May 19, 1987), or any successor thereto, unless
Borrower certifies that neither it nor any of its Affiliates is a
party-in-interest to the Plan for purposes of ERISA. If a Loan is to be
conducted in accordance with Prohibited Transaction Exemption 81-6, then
Borrower represents and warrants to Lender that it is either (a) a bank subject
to federal or state supervision, (b) a broker-dealer registered under the
Exchange Act or (c) exempt from registration under Section
27
15(a)(1) of the Exchange Act as a dealer in exempted government securities (as
defined in Section 3(a)(12) of the Exchange Act) and (d) neither it nor any
affiliate (as defined in Prohibited Transaction Exemption 81-6) of Borrower has
any discretionary authority or control with respect to the investment of the
assets of the Plan involved in the Loan or renders investment advice (within the
meaning of 29 C.F.R. Section 2510.3-21(c)) with respect to the assets of the
Plan involved in the Loan. For purposes hereof, "Plan" shall mean (a) any
"employee benefit plan" as defined in Section 3(3) of ERISA which is subject to
Part 4 of Subtitle B of Title I of such Act; (b) any "plan" as defined in
Section 4975(e)(1) of the Internal Revenue Code of 1986; or (c) any entity the
assets of which are deemed to be assets of any such "employee benefit plan" or
"plan" by reason of the Department of Labor's plan asset regulation, 29 C.F.R.
Section 2510.3-101.
20. INDEMNIFICATION. Borrower agrees to indemnify and hold harmless
Lender and the Account (including the directors and officers of any Account
which is a corporation or business trust, and the sponsor and fiduciaries of any
Account which is a Plan) from any and all damages, losses, liabilities, claims,
costs and expenses (including attorneys' fees) which Lender or the Account may
incur or suffer arising in any way out of the use by Borrower of Loaned
Securities or any failure of Borrower to deliver Loaned Securities in accordance
herewith or to otherwise comply with the terms of this Agreement, PROVIDED,
HOWEVER, that this indemnification shall extend to consequential losses or
damages only to the extent that the same are caused by Borrower's gross
negligence or willful misconduct.
21. CALCULATIONS. Except as provided in Section 8.1, all
determinations of the Market Value of securities, Collateral, or other property
or amounts for any purpose under this Agreement shall be made in good faith by
Lender.
22. LIMITATION OF LIABILITY. With respect to each Account that has
represented to the Lender that it is a business trust, notice is hereby given
that this instrument is executed by Lender as agent on behalf of the Trustees of
each such Account as Trustees and not individually and that the obligations of
such Account under this instrument are not binding upon any of the Trustees or
shareholders of such Account individually but are binding only upon the assets
and property of each such Account.
23. APPLICABLE LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York without giving effect to
the conflict of laws principles thereof. Borrower hereby irrevocably consents to
the exclusive jurisdiction of any state or Federal court located in New York,
New York, and consents that all service of process shall be sent by (a) same-day
messenger service, or (b) nationally recognized overnight courier service
directed to Borrower at Borrower's address set forth below for notices, and
service so made will be deemed to be completed (a) at the time of deposit with
the messenger service or (b) on the Business Day after deposit with such
courier; provided, that nothing contained in this Agreement will prevent Lender
from bringing any action, enforcing any award or judgment or exercising any
rights against Borrower individually, against any security or against any
property of Borrower within any other county, state or nation. Lender and
Borrower agree that the venue provided above is the most convenient forum for
both Lender and Borrower, and Borrower waives any objection to venue and any
objection based on a more convenient forum in any action instituted under this
Agreement.
24. WAIVER OF JURY TRIAL; ARBITRATION. EACH OF THE BORROWER AND LENDER
IRREVOCABLY WAIVES ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANY
DOCUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED IN ANY OF SUCH DOCUMENTS. BORROWER AND LENDER ACKNOWLEDGE THAT THE
FOREGOING WAIVER IS KNOWING AND VOLUNTARY. Any dispute or controversy between
the parties relating to or arising out of this Agreement or any Loan shall be
referred to and settled by arbitration pursuant to the Constitution and Rules of
The New York Stock Exchange, Inc., in New York City, New York, except that any
dispute or controversy arising out of an event under Section 11.6 above shall
not be referred to arbitration. Borrower acknowledges that it has read and
understood all the provisions of this Agreement, including the waiver of jury
trial, and has been advised by counsel as necessary or appropriate.
25. WAIVER. The failure of either party to exercise any remedy or to
insist upon strict adherence to any term of this Agreement on any occasion shall
not be considered a waiver or deprive that party of the right
28
thereafter to exercise any of its remedies or to insist upon strict adherence to
that term or any other term of this Agreement. All waivers in respect of a
Default must be in writing.
26. REMEDIES. All remedies hereunder and all obligations with respect
to any Loan shall survive the termination of the relevant Loan, return of Loaned
Securities or Collateral and termination of this Agreement. The parties agree
that, in the event that Lender fails to enforce any of its rights or remedies
hereunder, such rights and remedies may be enforced against Borrower by the
Account.
27. NOTICES AND OTHER COMMUNICATIONS. Except as otherwise provided in
this Agreement, all notices, demands, and other communications hereunder shall
be sufficient if made in writing and delivered or transmitted (as the case may
be) by registered mail, facsimile, telex, or courier, or by telephone promptly
confirmed in writing and delivered or transmitted as aforesaid, to the intended
recipient at the addresses (or to the numbers) set forth on the signature page
hereof. Notices shall be effective upon receipt.
28. MISCELLANEOUS. This Agreement constitutes the entire agreement
between the parties hereto, other than any agreement between the parties that
specifies that it relates specifically to loans of securities of a particular
Account or group of Accounts. This Agreement shall not be assigned by either
party (either directly or indirectly as a result of a merger, consolidation or
other reorganization) without the prior written consent of the other party.
Subject to the foregoing, this Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs,
representatives, successors and assigns. This Agreement may be terminated by
either party upon giving written notice to the other, subject only to
fulfillment of any obligations then outstanding. This Agreement shall not be
modified, except by an instrument in writing specifically referring hereto,
signed by the party against whom enforcement is sought.
29. DEFINITIONS. For the purposes hereof:
29.1 "Account" means, with respect to any Loan, the account for which
Lender is acting as agent in making the Loan.
29.2 "Affiliate" shall mean any entity which controls, is controlled
by, or is under common control with another entity.
29.3 "Bankruptcy Code" shall have the meaning set forth in Section
10.6.
29.4 "Borrower" shall have the meaning set forth in the introduction.
29.5 "Borrower Payment" shall have the meaning set forth in Section
7.4.
29.6 "Business Day" shall mean, with respect to any Loan hereunder,
any day (other than a Saturday or Sunday) recognized as a settlement day in the
principal market in which the Loaned Securities are traded, PROVIDED, HOWEVER,
that for the purposes of computing Market Value in Section 15, "Business Day"
shall mean a day on which regular trading occurs in the principal market for the
securities whose value is being determined. Notwithstanding the foregoing, for
purposes of marking to market in Section 8, "Business Day" shall mean any day
(other than a Saturday or Sunday) (a) on which regular trading occurs in the
principal market for any Loaned Securities or for any Collateral consisting of
securities under any outstanding Loan or (b) on which transfers of cash
Collateral may be effected by Lender and Borrower (or any nominee or agent
thereof).
29.7 "Cash Collateral Fee" shall have the meaning set forth in Section
4.2.
29.8 "Clearing Organization" shall mean The Depository Trust Company,
Participants Trust Company or if agreed to by Borrower and Lender, such other
clearing agency at which Borrower (or Borrower's agent) and Lender (or Lender's
agent) maintain accounts, or a book-entry system maintained by a Federal Reserve
Bank.
29.9 "Collateral" shall mean: (a) all cash, Government Securities and
all other marketable securities or Letters of Credit that Borrower and Lender
agree shall be acceptable as collateral, whether now owned or
29
hereafter acquired, which are transferred to Lender pursuant to Sections 3 or 8;
(b) all accounts in which such property is deposited and all securities,
instruments or other investment property in which any cash collateral is
invested or reinvested; and (c) any payments, distributions and proceeds of the
foregoing. For purposes of the return of Collateral by Lender or purchase or
sale of securities in connection with the exercise of Lender's or Borrower's
remedies, such term shall include securities of the same issuer, class and
quantity as the Collateral initially transferred by Borrower to Lender.
29.10 "Collateral Distributions" shall have the meaning set forth in
Section 7.4.
29.11 "Contractual Currency" shall mean: (a) with respect to any payment
in respect of a distribution under Section 7, the currency in which the
underlying distribution was made; (b) with respect to any return of cash, the
currency in which the underlying transfer of cash was made; (c) with respect to
any other payment of cash in connection with a Loan, United States dollars or
such other currency as may be agreed upon by Borrower and Lender; and (d) for
purposes of determining Market Value of Loaned Securities and Collateral in
respect of a Loan in which the Loaned Securities and the Collateral are
denominated in different currencies, the currency in which the Collateral is
denominated.
29.12 "Default" shall have the meaning set forth in Section 11.
29.13 "Fed Funds Rate" shall mean the rate of interest (expressed as an
annual rate), as published in Federal Reserve Statistical Release H.15(519) or
any publication substituted therefor, charged for federal funds (dollars in
immediately available funds borrowed by banks on an overnight unsecured basis)
on that day or, if that day is not a banking day in New York City, on the next
preceding banking day.
29.14 "ERISA" shall mean the Employee Retirement Income Security Act of
1974.
29.15 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
29.16 "Foreign Securities" shall mean securities that are denominated in
a currency other than United States Dollars and that are principally cleared and
settled outside of the United States.
29.17 "Government Securities" shall mean government securities as
defined in Section 3(a)(42)(A)-(C) of the Exchange Act.
29.18 "Lender" shall have the meaning set forth in the introduction.
29.19 "Lender Payment" shall have the meaning set forth in Section 7.4.
29.20 "Letter of Credit" shall mean an irrevocable, unconditional,
stand-by letter of credit, in form and substance satisfactory to Lender, issued
by a bank (not affiliated with Borrower) which is acceptable to Lender and is
insured by the Federal Deposit Insurance Corporation or is a foreign bank that
has filed an agreement with the Board of Governors of the Federal Reserve System
on Form FR T-2 (or any successor).
29.21 "LIBOR" shall mean for any date, the offered rate for deposits in
U.S. dollars for a period of three months which appears on the Reuters Screen
LIBOR page as of 11:00 A.M., London time, on such date (or, if at least two such
rates appear, the arithmetic mean of such rates).
29.22 "Loan" shall have the meaning set forth in Section 1.1.
29.23 "Loan Fee" shall have the meaning set forth in Section 4.1.
29.24 "Loaned Securities" shall mean any security (as defined in the
Exchange Act) that is transferred in a Loan until such security (or an identical
security) is transferred back to Lender hereunder, except that if any new or
different security shall be exchanged for any Loaned Security by
recapitalization, merger, consolidation or other corporate action, such new or
different security shall, effective upon such exchange, be deemed to become a
Loaned Security in substitution for the former Loaned Security for which such
exchange is made. For purposes of
30
the return of Loaned Securities by Borrower or purchase or sale of securities in
connection with the exercise of Lender's or Borrower's remedies hereunder, such
term shall include securities of the same issuer, class and quantity as the
Loaned Securities, as adjusted pursuant to the preceding sentence.
29.25 "Margin Deficit" and "Margin Excess" shall have the meanings set
forth in Sections 8.2 and 8.3, respectively.
29.26 "Margin Regulations" shall have the meaning set forth in Section
9.4.
29.27 "Market Value" shall mean market value determined in accordance
with Section 15.
29.28 "Plan" shall have the meaning set forth in Section 18.
29.29 "Required Value" shall mean, as of any date of determination, the
following percentage of the Market Value of the Loaned Securities: (a) in the
case of Foreign Securities, 105%; and (b) in the case of all other Loaned
Securities, 102%.
29.30 "Revised Article 8" shall mean the Uniform Commercial Code,
Revised Article 8, Investment Securities (with Conforming and Miscellaneous
Amendments to Articles 1,3,4,5,9 and 10), 1994 Official Text, as incorporated by
reference in 31 C.F.R. Part 357.
29.31 "Securities Distributions" shall have the meaning set forth in
Section 7.4.
29.32 "SIPA" shall have the meaning set forth in Section 11.6.
29.33 "Tax" shall have the meaning set forth in Section 7.4.
29.34 "Termination Notice Time" shall mean, with respect to a notice to
Lender to terminate a Loan: (a) with respect to a Loan of Government Securities,
9:45 a.m., Eastern time, on a Business Day; (b) with respect to a Loan of
Foreign Securities, 11:00 a.m., Eastern time, on the second Business Day
preceding the termination date; and (c) with respect to any other Loan, 11:00
a.m., Eastern time, on a Business Day.
29.35 "Transfer" or "transfer" of cash, securities or Letters of Credit
by Lender to Borrower or by Borrower to Lender shall mean a transfer effected in
accordance with Section 16.
29.36 "UCC" shall mean the Uniform Commercial Code in effect in the
State of New York, as the same may be amended from time to time.
31
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written:
Address for Notices: UBS PAINEWEBBER INC., in
its capacity as agent for Account(s) and
000 Xxxxxxxx Xxxxxx not in its individual capacity
00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
By:
Attn: Global Portfolio Lending ----------------------------------------
Facsimile No.: (000)000-0000 Name:
Telephone No.: (000)000-0000 ----------------------------------------
Title:
----------------------------------------
Address for Notices:
---------------------------------------,
as Borrower
By:
----------------------------------------
Attn: _____________________
Name:
Facsimile No.:
Telephone No.:
----------------------------------------
Title:
----------------------------------------
32
EXHIBIT 4
CUSTODIAL ACCOUNTS
STATE STREET BANK AND TRUST
FUND ACCOUNT NUMBER
---- --------------
FRESCO DOW XXXXX STOXX 50 FUND ZU3A
FRESCO DOW XXXXX EURO STOXX 50 FUND ZU3B
33
EXHIBIT 5
APPROVED ISSUERS OF LETTERS OF CREDIT
