THE
BOND
MARKET
ASSOCIATION
Master Repurchase
Agreement
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September 1996 Version
Dated as of
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Between:
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and
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1. Applicability
From time to time the parties hereto may enter into transactions in
which one party ("Seller") agrees to transfer to the other ("Buyer")
securities or other assets ("Securities") against the transfer of funds
by Buyer, with a simultaneous agreement by Buyer to transfer to Seller
such Securities at a date certain or on demand, against the transfer of
funds by Seller. Each such transaction shall be referred to herein as a
"Transaction" and, unless otherwise agreed in writing, shall be
governed by this Agreement, including any supplemental terms or
conditions contained in Annex I hereto and in any other annexes
identified herein or therein as applicable hereunder.
2. Definitions
(a) "Act of Insolvency", with respect to any party, (i) the
commencement by such party as debtor of any case or proceeding
under any bankruptcy, insolvency, reorganization, liquidation,
moratorium, dissolution, delinquency or similar law, or such
party seeking the appointment or election of a receiver,
conservator, trustee, custodian or similar official for such
party or any substantial part of its property, or the
convening of any meeting of creditors for purposes of
commencing any such case or proceeding or seeking such an
appointment or election, (ii) the commencement of any such
case or proceeding against such party, or another seeking such
an appointment or election, or the filing against a party of
an application for a protective decree under the provisions of
the Securities Investor Protection Act of 1970, which (A) is
consented to or not timely contested by such party, (B)
results in the entry of an order for relief, such an
appointment or election, the issuance of such a protective
decree or the entry of an order having a similar effect, or
(C) is not dismissed within 15 days, (iii) the making by such
party of a general assignment for the benefit of creditors, or
(iv) the admission in writing by such party of such party's
inability to pay such party's debts as they become due;
(b) "Additional Purchased Securities", Securities provided by
Seller to Buyer pursuant to Paragraph 4(a) hereof;
(c) "Buyer's Margin Amount", with respect to any Transaction as of
any date, the amount obtained by application of the Buyer's
Margin Percentage to the Repurchase Price for such Transaction
as of such date;
(d) "Buyer's Margin Percentage", with respect to any Transaction
as of any date, a percentage (which may be equal to the
Seller's Margin Percentage) agreed to by Buyer and Seller or,
in the absence of any such agreement, the percentage obtained
by dividing the Market Value of the Purchased Securities on
the Purchase Date by the Purchase Price on the Purchase Date
for such Transaction;
(e) "Confirmation", the meaning specified in Paragraph 3 (b)
hereof;
(f) "Income", with respect to any Security at any time, any
principal thereof and all interest, dividends or other
distributions thereon;
(g) "Margin Deficit", the meaning specified in Paragraph 4 (a)
hereof (h) "Margin Excess", the meaning specified in Paragraph
4 (b) hereof;
(i) "Margin Notice Deadline", the time agreed to by the parties in
the relevant Confirmation, Annex I hereto or otherwise as the
deadline for giving notice requiring same-day satisfaction of
margin maintenance obligations as provided in Paragraph 4
hereof (or, in the absence of any such agreement, the deadline
for such purposes established in accordance with market
practice);
(j) "Market Value", with respect to any Securities as of any date,
the price for such Securities on such date obtained from a
generally recognized source agreed to by the parties or the
most recent closing bid quotation from such a source, plus
accrued Income to the extent not included therein (other than
any Income credited or transferred to, or applied to the
obligations of, Seller pursuant to Paragraph 5 hereof) as of
such date (unless contrary to market practice for such
Securities);
(k) "Price Differential", with respect to any Transaction as of
any date, the aggregate amount obtained by daily application
of the Pricing Rate for such Transaction to the Purchase Price
for such Transaction on a 360 day per year basis for the
actual number of days during the period commencing on (and
including) the Purchase Date for such Transaction and ending
on (but excluding) the date of determination (reduced by any
amount of such Price Differential previously paid by Seller to
Buyer with respect to such Transaction);
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(l) "Pricing Rate", the per annum percentage rate for
determination of the Price Differential;
(m) "Prime Rate", the prime rate of U.S. commercial banks as
published in The Wall Street Journal (or, if more than one
such rate is published, the average of such rates);
(n) "Purchase Date", the date on which Purchased Securities are to
be transferred by Seller to Buyer;
(o) "Purchase Price", (i) on the Purchase Date, the price at which
Purchased Securities are transferred by Seller to Buyer, and
(ii) thereafter, except where Buyer and Seller agree
otherwise, such price increased by the amount of any cash
transferred by Buyer to Seller pursuant to Paragraph 4 (b)
hereof and decreased by the amount of any cash transferred by
Seller to Buyer pursuant to Paragraph 4 (a) hereof or applied
to reduce Seller's obligations under clause (ii) of Paragraph
5 hereof;
(p) "Purchased Securities", the Securities transferred by Seller
to Buyer in a Transaction hereunder, and any Securities
substituted therefor in accordance with Paragraph 9 hereof.
The term "Purchased Securities" with respect to any
Transaction at any time also shall include Additional
Purchased Securities delivered pursuant to Paragraph 4 (a)
hereof and shall exclude Securities returned pursuant to
Paragraph 4 (b) hereof;
(q) "Repurchase Date", the date on which Seller is to repurchase
the Purchased Securities from Buyer, including any date
determined by application of the provisions of Paragraph 3(c)
or 11 hereof;
(r) "Repurchase Price", the price at which Purchased Securities
are to be transferred from Buyer to Seller upon termination of
a Transaction, which will be determined in each case
(including Transactions terminable upon demand) as the sum of
the Purchase Price and the Price Differential as of the date
of such determination;
(s) "Seller's Margin Amount", with respect to any Transaction as
of any date, the amount obtained by application of the
Seller's Margin Percentage to the Repurchase Price for such
Transaction as of such date;
(t) "Seller's Margin Percentage", with respect to any Transaction
as of any date, a percentage (which may be equal to the
Buyer's Margin Percentage) agreed to by Buyer and Seller or,
in the absence of any such agreement, the percentage obtained
by dividing the Market Value of the Purchased Securities on
the Purchase Date by the Purchase Price on the Purchase Date
for such Transaction.
3. Initiation; Confirmation; Termination
(a) An agreement to enter into a Transaction may be made orally or
in writing at the initiation of either Buyer or Seller. On the
Purchase Date for the Transaction, the
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Purchased Securities shall be transferred to Buyer or its
agent against the transfer of the Purchase Price to an account
of Seller.
(b) Upon agreeing to enter into a Transaction hereunder, Buyer or
Seller (or both), as shall be agreed, shall promptly deliver
to the other party a written confirmation of each Transaction
(a "Confirmation"). The Confirmation shall describe the
Purchased Securities (including CUSIP number, if any),
identify Buyer and Seller and set forth (i) the Purchase Date,
(ii) the Purchase Price, (iii) the Repurchase Date, unless the
Transaction is to be terminable on demand, (iv) the Pricing
Rate or Repurchase Price applicable to the Transaction, and
(v) any additional terms or conditions of the Transaction not
inconsistent with this Agreement. The Confirmation, together
with this Agreement, shall constitute conclusive evidence of
the terms agreed between Buyer and Seller with respect to the
Transaction to which the Confirmation relates, unless with
respect to the Confirmation specific objection is made
promptly after receipt thereof. In the event of any conflict
between the terms of such Confirmation and this Agreement,
this Agreement shall prevail.
(c) In the case of Transactions terminable upon demand, such
demand shall be made by Buyer or Seller, no later than such
time as is customary in accordance with market practice, by
telephone or otherwise on or prior to the business day on
which such termination will be effective. On the date
specified in such demand, or on the date fixed for termination
in the case of Transactions having a fixed term, termination
of the Transaction will be effected by transfer to Seller or
its agent of the Purchased Securities and any Income in
respect thereof received by Buyer (and not previously credited
or transferred to, or applied to the obligations of, Seller
pursuant to Paragraph 5 hereof) against the transfer of the
Repurchase Price to an account of Buyer.
4. Margin Maintenance
(a) If at any time the aggregate Market Value of all Purchased
Securities subject to all Transactions in which a particular
party hereto is acting as Buyer is less than the aggregate
Buyer's Margin Amount for all such Transactions (a "Margin
Deficit"), then Buyer may by notice to Seller require Seller
in such Transactions, at Seller's option, to transfer to Buyer
cash or additional Securities reasonably acceptable to Buyer
("Additional Purchased Securities"), so that the cash and
aggregate Market Value of the Purchased Securities, including
any such Additional Purchased Securities, will thereupon equal
or exceed such aggregate Buyer's Margin Amount (decreased by
the amount of any Margin Deficit as of such date arising from
any Transactions in which such Buyer is acting as Seller).
(b) If at any time the aggregate Market Value of all Purchased
Securities subject to all Transactions in which a particular
party hereto is acting as Seller exceeds the aggregate
Seller's Margin Amount for all such Transactions at such time
(a "Margin Excess"), then Seller may by notice to Buyer
require Buyer in such Transactions, at Buyer's option, to
transfer cash or Purchased Securities to Seller, so that the
4 o September 1996 o Master Repurchase Agreement
aggregate Market Value of the Purchased Securities, after
deduction of any such cash or any Purchased Securities so
transferred, will thereupon not exceed such aggregate Seller's
Margin Amount (increased by the amount of any Margin Excess as
of such date arising from any Transactions in which such
Seller is acting as Buyer).
(c) If any notice is given by Buyer or Seller under subparagraph
(a) or (b) of this Paragraph at or before the Margin Notice
Deadline on any business day, the party receiving such notice
shall transfer cash or Additional Purchased Securities as
provided in such subparagraph no later than the close of
business in the relevant market on such day. If any such
notice is given after the Margin Notice Deadline, the party
receiving such notice shall transfer such cash or Securities
no later than the close of business in the relevant market on
the next business day following such notice.
(d) Any cash transferred pursuant to this Paragraph shall be
attributed to such Transactions as shall be agreed upon by
Buyer and Seller.
(e) Seller and Buyer may agree, with respect to any or all
Transactions hereunder, that the respective rights of Buyer or
Seller (or both) under subparagraphs (a) and (b) of this
Paragraph may be exercised only where a Margin Deficit or
Margin Excess, as the case may be, exceeds a specified dollar
amount or a specified percentage of the Repurchase Prices for
such Transactions (which amount or percentage shall be agreed
to by Buyer and Seller prior to entering into any such
Transactions).
(f) Seller and Buyer may agree, with respect to any or all
Transactions hereunder, that the respective rights of Buyer
and Seller under subparagraphs (a) and (b) of this Paragraph
to require the elimination of a Margin Deficit or a Margin
Excess, as the case may be, may be exercised whenever such a
Margin Deficit or Margin Excess exists with respect to any
single Transaction hereunder (calculated without regard to any
other Transaction outstanding under this Agreement).
5. Income Payments
Seller shall be entitled to receive an amount equal to all Income paid
or distributed on or in respect of the Securities that is not otherwise
received by Seller, to the full extent it would be so entitled if the
Securities had not been sold to Buyer. Buyer shall, as the parties may
agree with respect to any Transaction (or, in the absence of any such
agreement, as Buyer shall reasonably determine in its discretion), on
the date such Income is paid or distributed either (i) transfer to or
credit to the account of Seller such Income with respect to any
Purchased Securities subject to such Transaction or (ii) with respect
to Income paid in cash, apply the Income payment or payments to reduce
the amount, if any, to be transferred to Buyer by Seller upon
termination of such Transaction. Buyer shall not be obligated to take
any action pursuant to the preceding sentence (A) to the extent that
such action would result in the creation of a Margin Deficit, unless
prior thereto or simultaneously therewith Seller transfers to Buyer
cash or Additional Purchased Securities sufficient to eliminate such
Margin Deficit, or
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(B) if an Event of Default with respect to Seller has occurred and is
then continuing at the time such Income is paid or distributed.
6. Security Interest
Although the parties intend that all Transactions hereunder be sales
and purchases and not loans, in the event any such Transactions are
deemed to be loans, Seller shall be deemed to have pledged to Buyer as
security for the performance by Seller of its obligations under each
such Transaction, and shall be deemed to have granted to Buyer a
security interest in, all of the Purchased Securities with respect to
all Transactions hereunder and all Income thereon and other proceeds
thereof.
7. Payment and Transfer
Unless otherwise mutually agreed, all transfers of funds hereunder
shall be in immediately available funds. All Securities transferred by
one party hereto to the other party (i) shall be in suitable form for
transfer or shall be accompanied by duly executed instruments of
transfer or assignment in blank and such other documentation as the
party receiving possession may reasonably request, (ii) shall be
transferred on the book-entry system of a Federal Reserve Bank, or
(iii) shall be transferred by any other method mutually acceptable to
Seller and Buyer.
8. Segregation of Purchased Securities
To the extent required by applicable law, all Purchased Securities in
the possession of Seller shall be segregated from other securities in
its possession and shall be identified as subject to this Agreement.
Segregation may be accomplished by appropriate identification on the
books and records of the holder, including a financial or securities
intermediary or a clearing corporation. All of Seller's interest in the
Purchased Securities shall pass to Buyer on the Purchase Date and,
unless otherwise agreed by Buyer and Seller, nothing in this Agreement
shall preclude Buyer from engaging in repurchase transactions with the
Purchased Securities or otherwise selling, transferring, pledging or
hypothecating the Purchased Securities, but no such transaction shall
relieve Buyer of its obligations to transfer Purchased Securities to
Seller pursuant to Paragraph 3, 4 or 11 hereof, or of Buyer's
obligation to credit or pay Income to, or apply Income to the
obligations of, Seller pursuant to Paragraph 5 hereof.
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Required Disclosure for Transactions in Which the Seller
Retains Custody of the Purchased Securities
Seller is not permitted to substitute other securities for those subject to this
Agreement and therefore must keep Buyer's securities segregated at all times,
unless in this Agreement Buyer grants Seller the right to substitute other
securities. If Buyer grants the right to substitute, this means that Buyer's
securities will likely be commingled with Seller's own securities during the
trading day. Buyer is advised that, during any trading day that Buyer's
securities are commingled with Seller's securities, they [will]* [may]** be
subject to liens granted by Seller to [its clearing bank] * [third parties] **
and may be used by Seller for deliveries on other securities transactions.
Whenever the securities are commingled, Seller's ability to resegregate
substitute securities for Buyer will be subject to Seller's ability to satisfy
[the clearing]* [any]** lien or to obtain substitute securities.
* Language to be used under 17 ▇.▇▇. B403.4(e) if Seller is a government
securities broker or dealer other than a financial institution.
** Language to be used under 17 ▇.▇▇. B403.5(d) if Seller is a financial
institution.
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9. Substitution
(a) Seller may, subject to agreement with and acceptance by Buyer,
substitute other Securities for any Purchased Securities. Such
substitution shall be made by transfer to Buyer of such other
Securities and transfer to Seller of such Purchased
Securities. After substitution, the substituted Securities
shall be deemed to be Purchased Securities.
(b) In Transactions in which Seller retains custody of Purchased
Securities, the parties expressly agree that Buyer shall be
deemed, for purposes of subparagraph (a) of this Paragraph, to
have agreed to and accepted in this Agreement substitution by
Seller of other Securities for Purchased Securities; provided,
however, that such other Securities shall have a Market Value
at least equal to the Market Value of the Purchased Securities
for which they are substituted.
10. Representations
Each of Buyer and Seller represents and warrants to the other that (i)
it is duly authorized to execute and deliver this Agreement, to enter
into Transactions contemplated hereunder and to perform its obligations
hereunder and has taken all necessary action to authorize such
execution, delivery and performance, (ii) it will engage in such
Transactions as principal (or, if agreed in writing, in the form of an
annex hereto or otherwise, in advance of any Transaction by the other
party hereto, as agent for a disclosed principal), (iii) the person
signing this Agreement on its behalf is duly authorized to do so on its
behalf (or on behalf of any such disclosed principal), (iv) it has
obtained all authorizations of any governmental body required in
connection with this Agreement and the Transactions hereunder and such
authorizations are in full force and effect and (v) the execution,
delivery and performance of this
September 1996 o Master Repurchase Agreement o 7
Agreement and the Transactions hereunder will not violate any law,
ordinance, charter, bylaw or rule applicable to it or any agreement by
which it is bound or by which any of its assets are affected. On the
Purchase Date for any Transaction Buyer and Seller shall each be deemed
to repeat all the foregoing representations made by it.
11. Events of Default
In the event that (i) Seller fails to transfer or Buyer fails to
purchase Purchased Securities upon the applicable Purchase Date, (ii)
Seller fails to repurchase or Buyer fails to transfer Purchased
Securities upon the applicable Repurchase Date, (iii) Seller or Buyer
fails to comply with Paragraph 4 hereof, (iv) Buyer fails, after one
business day's notice, to comply with Paragraph 5 hereof, (v) an Act of
Insolvency occurs with respect to Seller or Buyer, (vi) any
representation made by Seller or Buyer shall have been incorrect or
untrue in any material respect when made or repeated or deemed to have
been made or repeated, or (vii) Seller or Buyer shall admit to the
other its inability to, or its intention not to, perform any of its
obligations hereunder (each an "Event of Default"):
(a) The nondefaulting party may, at its option (which option shall
be deemed to have been exercised immediately upon the
occurrence of an Act of Insolvency), declare an Event of
Default to have occurred hereunder and, upon the exercise or
deemed exercise of such option, the Repurchase Date for each
Transaction hereunder shall, if it has not already occurred,
be deemed immediately to occur (except that, in the event that
the Purchase Date for any Transaction has not yet occurred as
of the date of such exercise or deemed exercise, such
Transaction shall be deemed immediately canceled). The
nondefaulting party shall (except upon the occurrence of an
Act of Insolvency) give notice to the defaulting party of the
exercise of such option as promptly as practicable.
(b) In all Transactions in which the defaulting party is acting as
Seller, if the nondefaulting party exercises or is deemed to
have exercised the option referred to in subparagraph (a) of
this Paragraph, (i) the defaulting party's obligations in such
Transactions to repurchase all Purchased Securities, at the
Repurchase Price therefor on the Repurchase Date determined in
accordance with subparagraph (a) of this Paragraph, shall
thereupon become immediately due and payable, (ii) all Income
paid after such exercise or deemed exercise shall be retained
by the nondefaulting party and applied to the aggregate unpaid
Repurchase Prices and any other amounts owing by the
defaulting party hereunder, and (iii) the defaulting party
shall immediately deliver to the nondefaulting party any
Purchased Securities subject to such Transactions then in the
defaulting party's possession or control.
(c) In all Transactions in which the defaulting party is acting as
Buyer, upon tender by the nondefaulting party of payment of
the aggregate Repurchase Prices for all such Transactions, all
right, title and interest in and entitlement to all Purchased
Securities subject to such Transactions shall be deemed
transferred to the nondefaulting party,
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and the defaulting party shall deliver all such Purchased
Securities to the nondefaulting party.
(d) If the nondefaulting party exercises or is deemed to have
exercised the option referred to in subparagraph (a) of this
Paragraph, the nondefaulting party, without prior notice to
the defaulting party, may:
(i) as to Transactions in which the defaulting party is
acting as Seller, (A) immediately sell, in a
recognized market (or otherwise in a commercially
reasonable manner) at such price or prices as the
nondefaulting party may reasonably deem satisfactory,
any or all Purchased Securities subject to such
Transactions and apply the proceeds thereof to the
aggregate unpaid Repurchase Prices and any other
amounts owing by the defaulting party hereunder or
(B) in its sole discretion elect, in lieu of selling
all or a portion of such Purchased Securities, to
give the defaulting party credit for such Purchased
Securities in an amount equal to the price therefor
on such date, obtained from a generally recognized
source or the most recent closing bid quotation from
such a source, against the aggregate unpaid
Repurchase Prices and any other amounts owing by the
defaulting party hereunder; and
(ii) as to Transactions in which the defaulting party is
acting as Buyer, (A) immediately purchase, in a
recognized market (or otherwise in a commercially
reasonable manner) at such price or prices as the
nondefaulting party may reasonably deem satisfactory,
securities ("Replacement Securities") of the same
class and amount as any Purchased Securities that are
not delivered by the defaulting party to the
nondefaulting party as required hereunder or (B) in
its sole discretion elect, in lieu of purchasing
Replacement Securities, to be deemed to have
purchased Replacement Securities at the price
therefor on such date, obtained from a generally
recognized source or the most recent closing offer
quotation from such a source.
Unless otherwise provided in Annex I, the parties acknowledge and agree
that (1) the Securities subject to any Transaction hereunder are
instruments traded in a recognized market, (2) in the absence of a
generally recognized source for prices or bid or offer quotations for
any Security, the nondefaulting party may establish the source therefor
in its sole discretion and (3) all prices, bids and offers shall be
determined together with accrued Income (except to the extent contrary
to market practice with respect to the relevant Securities).
September 1996 o Master Repurchase Agreement o 9
(e) As to Transactions in which the defaulting party is acting as
Buyer, the defaulting party shall be liable to the
nondefaulting party for any excess of the price paid (or
deemed paid) by the nondefaulting party for Replacement
Securities over the Repurchase Price for the Purchased
Securities replaced thereby and for any amounts payable by the
defaulting party under Paragraph 5 hereof or otherwise
hereunder.
(f) For purposes of this Paragraph 11, the Repurchase Price for
each Transaction hereunder in respect of which the defaulting
party is acting as Buyer shall not increase above the amount
of such Repurchase Price for such Transaction determined as of
the date of the exercise or deemed exercise by the
nondefaulting party of the option referred to in subparagraph
(a) of this Paragraph.
(g) The defaulting party shall be liable to the nondefaulting
party for (i) the amount of all reasonable legal or other
expenses incurred by the nondefaulting party in connection
with or as a result of an Event of Default, (ii) damages in an
amount equal to the cost (including all fees, expenses and
commissions) of entering into replacement transactions and
entering into or terminating hedge transactions in connection
with or as a result of an Event of Default, and (iii) any
other loss, damage, cost or expense directly arising or
resulting from the occurrence of an Event of Default in
respect of a Transaction.
(h) To the extent permitted by applicable law, the defaulting
party shall be liable to the non-defaulting party for interest
on any amounts owing by the defaulting party hereunder, from
the date the defaulting party becomes liable for such amounts
hereunder until such amounts are (i) paid in full by the
defaulting party or (ii) satisfied in full by the exercise of
the nondefaulting party's rights hereunder. Interest on any
sum payable by the defaulting party to the nondefaulting party
under this Paragraph 11 (h) shall be at a rate equal to the
greater of the Pricing Rate for the relevant Transaction or
the Prime Rate.
(i) The nondefaulting party shall have, in addition to its rights
hereunder, any rights otherwise available to it under any
other agreement or applicable law.
12. Single Agreement
Buyer and Seller acknowledge that, and have entered hereinto and will
enter into each Transaction hereunder in consideration of and in
reliance upon the fact that, all Transactions hereunder constitute a
single business and contractual relationship and have been made in
consideration of each other. Accordingly, each of Buyer and Seller
agrees (i) to perform all of its obligations in respect of each
Transaction hereunder, and that a default in the performance of any
such obligations shall constitute a default by it in respect of all
Transactions hereunder, (ii) that each of them shall be entitled to set
off claims and apply property held by them in respect of any
Transaction against obligations owing to them in respect of any other
Transactions hereunder and (iii) that payments, deliveries and other
transfers made by either of them in respect of any Transaction shall be
deemed to have been made in consideration of payments, deliveries and
other transfers in respect of any other Transactions hereunder, and
10 o September 1996 o Master Repurchase Agreement
the obligations to make any such payments, deliveries and other
transfers may be applied against each other and netted.
13. Notices and Other Communications
Any and all notices, statements, demands or other communications
hereunder may be given by a party to the other by mail, facsimile,
telegraph, messenger or otherwise to the address specified in Annex II
hereto, or so sent to such party at any other place specified in a
notice of change of address hereafter received by the other. All
notices, demands and requests hereunder may be made orally, to be
confirmed promptly in writing, or by other communication as specified
in the preceding sentence.
14. Entire Agreement; Severability
This Agreement shall supersede any existing agreements between the
parties containing general terms and conditions for repurchase
transactions. Each provision and agreement herein shall be treated as
separate and independent from any other provision or agreement herein
and shall be enforceable notwithstanding the unenforceability of any
such other provision or agreement.
15. Non-assignability; Termination
(a) The rights and obligations of the parties under this Agreement
and under any Transaction shall not be assigned by either
party without the prior written consent of the other party,
and any such assignment without the prior written consent of
the other party shall be null and void. Subject to the
foregoing, this Agreement and any Transactions shall be
binding upon and shall inure to the benefit of the parties and
their respective successors and assigns. This Agreement may be
terminated by either party upon giving written notice to the
other, except that this Agreement shall, notwithstanding such
notice, remain applicable to any Transactions then
outstanding.
(b) Subparagraph (a) of this Paragraph 15 shall not preclude a
party from assigning, charging or otherwise dealing with all
or any part of its interest in any sum payable to it under
Paragraph 11 hereof.
16. Governing Law
This Agreement shall be governed by the laws of the State of New York
without giving effect to the conflict of law principles thereof.
17. No Waivers, Etc.
No express or implied waiver of any Event of Default by either party
shall constitute a waiver of any other Event of Default and no exercise
of any remedy hereunder by any party shall constitute a waiver of its
right to exercise any other remedy hereunder. No
September 1996 o Master Repurchase Agreement o 11
modification or waiver of any provision of this Agreement and no
consent by any party to a departure herefrom shall be effective unless
and until such shall be in writing and duly executed by both of the
parties hereto. Without limitation on any of the foregoing, the failure
to give a notice pursuant to Paragraph 4 (a) or 4 (b) hereof will not
constitute a waiver of any right to do so at a later date.
18. Use of Employee Plan Assets
(a) If assets of an employee benefit plan subject to any provision
of the Employee Retirement Income Security Act of 1974
("ERISA") are intended to be used by either party hereto (the
"Plan Party") in a Transaction, the Plan Party shall so notify
the other party prior to the Transaction. The Plan Party shall
represent in writing to the other party that the Transaction
does not constitute a prohibited transaction under ERISA or is
otherwise exempt therefrom, and the other party may proceed in
reliance thereon but shall not be required so to proceed.
(b) Subject to the last sentence of subparagraph (a) of this
Paragraph, any such Transaction shall proceed only if Seller
furnishes or has furnished to Buyer its most recent available
audited statement of its financial condition and its most
recent subsequent unaudited statement of its financial
condition.
(c) By entering into a Transaction pursuant to this Paragraph,
Seller shall be deemed (i) to represent to Buyer that since
the date of Seller's latest such financial statements, there
has been no material adverse change in Seller's financial
condition which Seller has not disclosed to Buyer, and (ii) to
agree to provide Buyer with future audited and unaudited
statements of its financial condition as they are issued, so
long as it is a Seller in any outstanding Transaction
involving a Plan Party.
19. Intent
(a) The parties recognize that each Transaction is a "repurchase
agreement" as that term is defined in Section 101 of Title 11
of the United States Code, as amended (except insofar as the
type of Securities subject to such Transaction or the term of
such Transaction would render such definition inapplicable),
and a "securities contract" as that term is defined in Section
741 of Title 11 of the United States Code, as amended (except
insofar as the type of assets subject to such Transaction
would render such definition inapplicable).
(b) It is understood that either party's right to liquidate
Securities delivered to it in connection with Transactions
hereunder or to exercise any other remedies pursuant to
Paragraph 11 hereof is a contractual right to liquidate such
Transaction as described in Sections 555 and 559 of Title 11
of the United States Code, as amended.
(c) The parties agree and acknowledge that if a party hereto is an
"insured depository institution," as such term is defined in
the Federal Deposit Insurance Act, as amended ("FDIA"), then
each Transaction hereunder is a "qualified financial
12 o September 1996 o Master Repurchase Agreement
contract," as that term is defined in FDIA and any rules,
orders or policy statements thereunder (except insofar as the
type of assets subject to such Transaction would render such
definition inapplicable).
(d) It is understood that this Agreement constitutes a "netting
contract" as defined in and subject to Title IV of the Federal
Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") and each payment entitlement and payment obligation
under any Transaction hereunder shall constitute a "covered
contractual payment entitlement" or "covered contractual
payment obligation", respectively, as defined in and subject
to FDICIA (except insofar as one or both of the parties is not
a "financial institution" as that term is defined in FDICIA).
20. Disclosure Relating to Certain Federal Protections
The parties acknowledge that they have been advised that:
(a) in the case of Transactions in which one of the parties is a
broker or dealer registered with the Securities and Exchange
Commission ("SEC") under Section 15 of the Securities Exchange
Act of 1934 (" 1934 Act"), the Securities Investor Protection
Corporation has the position that the provisions of the
Securities Investor Protection Act of 1970 ("SIPA") do not
protect the other party with respect to any Transaction
hereunder;
(b) in the case of Transactions in which one of the parties is a
government securities broker or a government securities dealer
registered with the SEC under Section 15C of the 1934 Act,
SIPA will not provide protection to the other party with
respect to any Transaction hereunder; and
(c) in the case of Transactions in which one of the parties is a
financial institution, funds held by the financial institution
pursuant to a Transaction hereunder are not a deposit and
therefore are not insured by the Federal Deposit Insurance
Corporation or the National Credit Union Share Insurance Fund,
as applicable.
[Name of Party] [Name of Party]
By: By:
------------------------- -------------------------
Title: Title:
------------------------- -------------------------
Date: Date:
------------------------- -------------------------
September 1996 o Master Repurchase Agreement o 13
Annex I
Supplemental Terms and Conditions
This Annex I forms a part of the Master Repurchase Agreement dated as of
________, 19__ (the "Agreement") between _______________ and ____________.
Capitalized terms used but not defined in this Annex I shall have the meanings
ascribed to them in the Agreement.
1. Other Applicable Annexes. In addition to this Annex I and Annex II, the
following Annexes and any Schedules thereto shall form a part of this
Agreement and shall be applicable thereunder:
[Annex III (International Transactions)]
[Annex IV (Party Acting as Agent)]
[Annex V (Margin for Forward Transactions)]
[Annex VI (Buy/Sell Back Transactions)]
[Annex VII (Transactions Involving Registered Investment Companies)]
14 o September 1996 o Master Repurchase Agreement
Annex II
Names and Addresses for Communications Between Parties
September 1996 o Master Repurchase Agreement o 15
Annex III
International Transactions
This Annex III (including any Schedules hereto) forms a part of the Master
Repurchase Agreement dated as of _________________ 19__, (the "Agreement")
between ______________ and _______________. Capitalized terms used but not
defined in this Annex III shall have the meanings ascribed to them in the
Agreement.
1. Definitions. For purposes of the Agreement and this Annex III:
(a) The following terms shall have the following meanings:
"Base Currency", United States dollars or such other currency
as Buyer and Seller may agree in the Confirmation with respect
to any International Transaction or otherwise in writing;
"Business Day" or "business day":
(i) in relation to any International Transaction which
(A) involves an International Security and (B) is to
be settled through CEDEL, or Euroclear, a day on
which CEDEL or, as the case may be, Euroclear is open
to settle business in the currency in which the
Purchase Price and the Repurchase Price are
denominated;
(ii) in relation to any International Transaction which
(A) involves an International Security and (B) is to
be settled through a settlement system other than
CEDEL or Euroclear, a day on which that settlement
system is open to settle such International
Transaction;
(iii) in relation to any International Transaction which
involves a delivery of Securities not falling within
(i) or (ii) above, a day on which banks are open for
business in the place where delivery of the relevant
Securities is to be effected; and
(iv) in relation to any International Transaction which
involves an obligation to make a payment not falling
within (i) or (ii) above, a day other than a
16 o September 1996 o Master Repurchase Agreement
Saturday or Sunday on which banks are open for
business in the principal financial center of the
country of which the currency in which the payment is
denominated is the official currency and, if
different, in the place where any account designated
by the parties for the making or receipt of the
payment is situated (or, in the case of ECU, a day on
which ECU clearing operates);
"CEDEL", CEDEL Bank, societe anonyme;
"Contractual Currency", the currency in which tile
International Securities subject to any International
Transaction are denominated or such other currency as may be
specified in the Confirmation with respect to any
International Transaction;
"Euroclear", ▇▇▇▇▇▇ Guaranty Trust Company of New York,
Brussels Branch, as operator of the Euroclear System;
"International Security", any Security that (i) is denominated
in a currency other than United States dollars or (ii) is
capable of being cleared through a clearing facility outside
the United States or (iii) is issued by an issuer organized
under the laws of a jurisdiction other than the United States
(or any political subdivision thereof);
"International Transaction", any Transaction involving (i) an
International Security or (ii) a party organized under the
laws of a jurisdiction other than the United States (or any
political subdivision thereof) or having its principal place
of business outside the United States or (iii) a branch or
office outside the United States designated in Annex I by a
party organized under the laws of the United States (or any
political subdivision thereof) as an office through which that
party may act;
"LIBOR", in relation to any sum in any currency, the offered
rate for deposits for such sum in such currency for a period
of three months which appears on the Reuters Screen LIBO page
as of 11:00 A.M., London time, on the date on which it is to
be determined (or, if more than one such rate appears, the
arithmetic mean of such rates);
"Spot Rate", where an amount in one currency is to be
converted into a second currency on any date, the spot rate of
exchange of a comparable amount quoted by a major money-center
bank in the New York interbank market, as agreed by Buyer and
Seller, for the sale by such bank of such second currency
against a purchase by it of such first currency.
(b) Notwithstanding Paragraph 2 of the Agreement, the term "Prime
Rate" shall mean, with respect to any International
Transaction, LIBOR plus a spread, as may be specified in the
Confirmation with respect to any International Transaction or
otherwise in writing.
September 1996 o Master Repurchase Agreement o 17
2. Manner of Transfer. All transfers of International Securities (i) shall
be in suitable form for transfer and accompanied by duly executed
instruments of transfer or assignment in blank (where required for
transfer) and such other documentation as the transferee may reasonably
request, or (ii) shall be transferred through the book-entry system of
Euroclear or CEDEL, or (iii) shall be transferred through any other
agreed securities clearing system or (iv) shall be transferred by any
other method mutually acceptable to Seller and Buyer.
3. Contractual Currency.
(a) Unless otherwise mutually agreed, all funds transferred in
respect of the Purchase Price or the Repurchase Price in any
International Transaction shall be in the Contractual
Currency.
(b) Notwithstanding subparagraph (a) of this Paragraph 3, the
payee of any 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 the 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) for delivery within the customary delivery period
for spot transactions in respect of the relevant currency.
(c) If for any reason the amount in the Contractual Currency so
received, 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 the Agreement,
the party required to make payment shall (unless an Event of
Default has occurred and such party is the nondefaulting
party) as a separate and independent obligation (which shall
not merge with any judgment or any payment or any partial
payment or enforcement of payment) 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.
(d) If for any reason the amount of the Contractual Currency
received by one party hereto exceeds the amount in the
Contractual Currency due such party in respect of the
Agreement, then (unless an Event of Default has occurred and
such party is the nondefaulting party) the party receiving the
payment shall refund promptly the amount of such excess.
4. Notices. Any and all notices, statements, demands or other
communications with respect to International Transactions shall be
given in accordance with Paragraph 13 of the Agreement and shall be in
the English language.
18 o September 1996 o Master Repurchase Agreement
5. Taxes.
(a) Transfer taxes, stamp taxes and all similar costs with respect
to the transfer of Securities shall be paid by Seller.
(b) (i) Unless otherwise agreed, all money payable by one
party (the "Payor") to the other (the "Payee") in
respect of any International Transaction shall be
paid free and clear of, and without holding or
deduction for, any taxes or duties of whatsoever
nature imposed, levied, collected, withheld or
assessed by any authority having power to tax (a
"Tax"), unless the withholding or deduction of such
Tax is required by law. In that event, unless
otherwise agreed, Payor shall pay such additional
amounts as will result in the net amounts receivable
by Payee (after taking account of such withholding or
deduction) being equal to such amounts as would have
been received by Payee had no such Tax been required
to be withheld or deducted; provided that for
purposes of Paragraphs 5 and 6 the term "Tax" shall
not include any Tax that would not have been imposed
but for the existence of any present or former
connection between Payee and the jurisdiction
imposing such Tax other than the mere receipt of
payment from Payor or the performance of Payee's
obligations under an International Transaction. The
parties acknowledge and agree, for the avoidance of
doubt, that the amount of Income required to be
transferred, credited or applied by Buyer for the
benefit of Seller under Paragraph 5 of the Agreement
shall be determined without taking into account any
Tax required to be withheld or deducted from such
Income, unless otherwise agreed.
(ii) In the case of any Tax required to be withheld or
deducted from any money payable to a party hereto
acting as Payee by the other party hereto acting as
Payor, Payee agrees to deliver to Payor (of, if
applicable, to the authority imposing the Tax) any
certificate or document reasonably required by Payor
that would entitle Payee to an exemption from, or
reduction in the rate of, withholding or deduction of
Tax from money payable by Payor to Payee.
(iii) Each party hereto agrees to notify the other party of
any circumstance known or reasonably known to it
(other than a Change of Tax Law, as defined in
Paragraph 6 hereof) that causes a certificate or
document provided by it pursuant to subparagraph (b)
(ii) of this Paragraph to fail to be true.
(iv) Notwithstanding subparagraph (b) (i) of this
Paragraph, no additional amounts shall be payable by
Payor to Payee in respect of an International
Transaction to the extent that such additional
amounts are payable as a result of a failure by Payee
to comply with its obligations under subparagraph (b)
(ii) or (b) (iii) of this Paragraph with respect to
such International Transaction.
September 1996 o Master Repurchase Agreement o 19
6. Tax Event.
(a) This Paragraph 6 shall apply if either party notifies the
other, with respect to a Tax required to be collected by
withholding or deduction, that
(i) any action taken by a taxing authority or brought in
a court of competent jurisdiction after the date an
International Transaction is entered into, regardless
of whether such action is taken or brought with
respect to a party to the Agreement; or
(ii) a change in the fiscal or regulatory regime after the
date an International Transaction is entered into,
(each, a "Change of Tax Law") has or will, in the notifying
party's reasonable opinion, have a material adverse effect on
such party in the context of an International Transaction.
(b) If so requested by the other party, the notifying party will
furnish the other party with an opinion of a suitably
qualified adviser that an event referred to in subparagraph
(a) (i) or (a) (ii) of this Paragraph 6 has occurred and
affects the notifying party.
(c) Where this Paragraph 6 applies, the party giving the notice
referred to in subparagraph (a) above may, subject to
subparagraph (d) below, terminate the International
Transaction effective from a date specified in the notice, not
being earlier (unless so agreed by the other party) than 30
days after the date of such notice, by nominating such date as
the Repurchase Date.
(d) If the party receiving the notice referred to in subparagraph
(a) of this Paragraph 6 so elects, it may override such notice
by giving a counter-notice to the other party. If a
counter-notice is given, the party which gives such
counter-notice will be deemed to have agreed to indemnify the
other party against the adverse effect referred to in
subparagraph (a) of this Paragraph 6 so far as it relates to
the relevant International Transaction and the original
Repurchase Date will continue to apply.
(e) Where an International Transaction is terminated as described
in this Paragraph 6, the party which has given the notice to
terminate shall indemnify the other party against any
reasonable legal and other professional expenses incurred by
the other party by reason of the termination, but the other
party may not claim any sum constituting consequential loss or
damage in respect of a termination in accordance with this
Paragraph 6.
20 o September 1996 o Master Repurchase Agreement
(f) This Paragraph 6 is without prejudice to Paragraph 5 of this
Annex III; but an obligation to pay additional amounts
pursuant to Paragraph 5 of this Annex III may, where
appropriate, be a circumstance which causes this Paragraph 6
to apply.
7. Margin. In the calculation of "Margin Deficit" and "Margin Excess"
pursuant to Paragraph 4 of the Agreement, all sums not denominated in
the Base Currency shall be deemed to be converted into the Base
Currency at the Spot Rate on the date of such calculation.
8. Events of Default.
(a) In addition to the Events of Default set forth in Paragraph 11
of the Agreement, it shall be an additional "Event of Default"
if either party fails, after one business day's notice, to
perform any covenant or obligation required to be performed by
it under this Annex III, including, without limitation, the
payment of taxes or additional amounts as required by
Paragraph 5 of this Annex III.
(b) In addition to the other rights of a nondefaulting party under
Paragraph 11 of the Agreement, following an Event of Default,
the nondefaulting party may, at any time at its option, effect
the conversion of any currency into a different currency of
its choice at the Spot Rate on the date of the exercise of
such option and offset obligations of the defaulting party
denominated in different currencies against each other.
September 1996 o Master Repurchase Agreement o 21
Schedule III.A
International Transactions Relating to [Relevant Country]
This Schedule III.A forms a part of Annex III to the Master Repurchase Agreement
dated as of ____________________,19__ (the "Agreement")
between__________________________ and__________________________. Capitalized
terms used but not defined in this Schedule III.A shall have the meanings
ascribed to them in Annex III.
[Insert provisions applicable to relevant country.]
22 o September 1996 o Master Repurchase Agreement
Annex IV
Party Acting as Agent
This Annex IV forms a part of the Master Repurchase Agreement dated as of
___________________________, 19__ (the "Agreement") between __________________
and __________________. This Annex IV sets forth the terms and conditions
governing all transactions in which a party selling securities or buying
securities, as the case may be ("Agent"), in a Transaction is acting as agent
for one or more third parties (each, a "Principal"). Capitalized terms used but
not defined in this Annex IV shall have the meanings ascribed to them in the
Agreement.
1. Additional Representations. In addition to the representations set
forth in Paragraph 10 of the Agreement, Agent hereby makes the
following representations, which shall continue during the term of any
Transaction: Principal has duly authorized Agent to execute and deliver
the Agreement on its behalf, has the power to so authorize Agent and to
enter into the Transactions contemplated by the Agreement and to
perform the obligations of Seller or Buyer, as the case may be, under
such Transactions, and has taken all necessary action to authorize such
execution and delivery by Agent and such performance by it.
2. Identification of Principals. Agent agrees (a) to provide the other
party, prior to the date on which the parties agree to enter into any
Transaction under the Agreement, with a written list of Principals for
which it intends to act as Agent (which list may be amended in writing
from time to time with the consent of the other party), and (b) to
provide the other party, before the close of business on the next
business day after orally agreeing to enter into a Transaction, with
notice of the specific Principal or Principals for whom it is acting in
connection with such Transaction. If (i) Agent fails to identify such
Principal or Principals prior to the close of business on such next
business day or (ii) the other party shall determine in its sole
discretion that any Principal or Principals identified by Agent are not
acceptable to it, the other party may reject and rescind any
Transaction with such Principal or Principals, return to Agent any
Purchased Securities or portion of the Purchase Price, as the case may
be, previously transferred to the other party and refuse any further
performance under such Transaction, and Agent shall immediately return
to the other party any portion of the Purchase Price or Purchased
Securities, as the case may be, previously transferred to Agent in
connection with such Transaction; provided, however, that (A) the other
party shall promptly (and in any event within one business day) notify
Agent of its determination to reject and rescind such Transaction and
(B) to the extent that any performance was rendered by any party under
any Transaction rejected by the other party, such party shall remain
entitled to any Price Differential or other amounts that would have
been payable to it with respect to such performance if such Transaction
had not been rejected. The other party acknowledges that Agent shall
not have any obligation to provide it with confidential information
regarding the financial status of its Principals; Agent agrees,
however, that it
September 1996 o Master Repurchase Agreement o 23
will assist the other party in obtaining from Agent's Principals such
information regarding the financial status of such Principals as the
other party may reasonably request.
3. Limitation of Agent's Liability. The parties expressly acknowledge that
if the representations of Agent under the Agreement, including this
Annex IV, are true and correct in all material respects during the term
of any Transaction and Agent otherwise complies with the provisions of
this Annex IV, then (a) Agent's obligations under the Agreement shall
not include a guarantee of performance by its Principal or Principals
and (b) the other party's remedies shall not include a right of setoff
in respect of rights or obligations, if any, of Agent arising in other
transactions in which Agent is acting as principal.
4. Multiple Principals.
(a) In the event that Agent proposes to act for more than one
Principal hereunder, Agent and the other party shall elect
whether (i) to treat Transactions under the Agreement as
transactions entered into on behalf of separate Principals or
(ii) to aggregate such Transactions as if they were
transactions by a single Principal. Failure to make such an
election in writing shall be deemed an election to treat
Transactions under the Agreement as transactions on behalf of
separate Principals,
(b) In the event that Agent and the other party elect (or are
deemed to elect) to treat Transactions under the Agreement as
transactions on behalf of separate Principals, the parties
agree that (i) Agent will provide the other party, together
with the notice described in Paragraph 2 (b) of this Annex IV,
notice specifying the portion of each Transaction allocable to
the account of each of the Principals for which it is acting
(to the extent that any such Transaction is allocable to the
account of more than one Principal); (ii) the portion of any
individual Transaction allocable to each Principal shall be
deemed a separate Transaction under the Agreement; (iii) the
margin maintenance obligations of Buyer and Seller under
Paragraph 4 of the Agreement shall be determined on a
Transaction-by-Transaction basis (unless the parties agree to
determine such obligations on a Principal-by-Principal basis);
and (iv) Buyer's and Seller's remedies under the Agreement
upon the occurrence of an Event of Default shall be determined
as if Agent had entered into a separate Agreement with the
other party on behalf of each of its Principals.
(c) In the event that Agent and the other party elect to treat
Transactions under the Agreement as if they were transactions
by a single Principal, the parties agree that (i) Agent's
notice under Paragraph 2(b) of this Annex IV need only
identify the names of its Principals but not the portion of
each Transaction allocable to each Principal's account; (ii)
the margin maintenance obligations of Buyer and Seller under
Paragraph 4 of the Agreement shall, subject to any greater
requirement imposed by applicable law, be determined on an
aggregate basis for all Transactions entered into by Agent on
behalf of any Principal; and (iii) Buyer's and Seller's
remedies upon the occurrence of an Event of Default shall be
determined as if all Principals were a single Seller or Buyer,
as the case may be.
24 o September 1996 o Master Repurchase Agreement
(d) Notwithstanding any other provision of the Agreement
(including, without limitation, this Annex IV), the parties
agree that any Transactions by Agent on behalf of an employee
benefit plan under ERISA shall be treated as Transactions on
behalf of separate Principals in accordance with Paragraph 4
(b) of this Annex IV (and all margin maintenance obligations
of the parties shall be determined on a
Transaction-by-Transaction basis).
5. Interpretation of Terms. All references to "Seller" or "Buyer", as the
case may be, in the Agreement shall, subject to the provisions of this
Annex IV (including, among other provisions, the limitations on Agent's
liability in Paragraph 3 of this Annex IV), be construed to reflect
that (i) each Principal shall have, in connection with any Transaction
or Transactions entered into by Agent on its behalf, the rights,
responsibilities, privileges and obligations of a "Seller" or "Buyer",
as the case may be, directly entering into such Transaction or
Transactions with the other party under the Agreement, and (ii) Agent's
Principal or Principals have designated Agent as their sole agent for
performance of Seller's obligations to Buyer or Buyer's obligations to
Seller, as the case may be, and for receipt of performance by Buyer of
its obligations to Seller or Seller of its obligations to Buyer, as the
case may be, in connection with any Transaction or Transactions under
the Agreement (including, among other things, as Agent for each
Principal in connection with transfers of Securities, cash or other
property and as agent for giving and receiving all notices under the
Agreement). Both Agent and its Principal or Principals shall be deemed
"parties" to the Agreement and all references to a "party" or "either
party" in the Agreement shall be deemed revised accordingly (and any
Act of Insolvency with respect to Agent or any other Event of Default
by Agent under Paragraph 11 of the Agreement shall be deemed an Event
of Default by Seller or Buyer, as the case may be).
September 1996 o Master Repurchase Agreement o 25
Annex V
Margin for Forward Transactions
This Annex V forms a part of the Master Repurchase Agreement dated as of
_____________________________ ,19___ (the "Agreement") between ________________
and ________________________. Capitalized terms used but not defined in this
Annex V shall have the meanings ascribed to them in the Agreement.
1. Definitions. For purposes of the Agreement and this Annex V, the
following terms shall have the following meanings:
"Forward Exposure", the amount of loss a party would incur upon
canceling a Forward Transaction and entering into a replacement
transaction, determined in accordance with market practice or as
otherwise agreed by the parties;
"Forward Transaction", any Transaction agreed to by the parties as to
which the Purchase Date has not yet occurred;
"Net Forward Exposure", the aggregate amount of a party's Forward
Exposure to the other party under all Forward Transactions hereunder
reduced by the aggregate amount of any Forward Exposure of the other
party to such party under all Forward Transactions hereunder;
"Net Unsecured Forward Exposure", a party's Net Forward Exposure
reduced by the Market Value of any Forward Collateral transferred to
such party (and not returned) pursuant to Paragraph 2 of this Annex V.
2. Margin Maintenance.
(a) If at any time a party (the "In-the-Money Party") shall have a
Net Unsecured Forward Exposure to the other party (the
"Out-of-the-Money Party") under one or more Forward
Transactions, the In-the-Money Party may by notice to the
Out-of-the-Money Party require the Out-of-the-Money Party to
transfer to the In-the-Money Party Securities or cash
reasonably acceptable to the In-the-Money-Party (together with
any Income thereon and proceeds thereof, "Forward Collateral")
having a Market Value sufficient to eliminate such Net
Unsecured Forward Exposure. The Out-of-the-Money Party may by
notice to the In-the-Money Party require the In-the-Money
Party to transfer to the Out-of-the-Money Party Forward
Collateral having a Market Value that exceeds the In-the-Money
Party's Net Forward Exposure ("Excess Forward Collateral
Amount"). The rights of the parties under this subparagraph
shall be in addition to their rights under subparagraphs (a)
and (b) of Paragraph 4 and any other provisions of the
Agreement.
26 o September 1996 o Master Repurchase Agreement
(b) The parties may agree, with respect to any or all Forward
Transactions hereunder, that the respective rights of the
parties under subparagraph (a) of this Paragraph may be
exercised only where a Net Unsecured Forward Exposure or
Excess Forward Collateral Amount, as the case may be, exceeds
a specified dollar amount or other specified threshold for
such Forward Transactions (which amount or threshold shall be
agreed to by the parties prior to entering into any such
Forward Transactions).
(c) The parties may agree, with respect to any or all Forward
Transactions hereunder, that the respective rights of the
parties under subparagraph (a) of this Paragraph to require
the elimination of a Net Unsecured Forward Exposure or Excess
Forward Collateral Amount, as the case may be, may be
exercised whenever such a Net Unsecured Forward Exposure or
Excess Forward Collateral Amount exists with respect to any
single Forward Transaction hereunder (calculated without
regard to any other Forward Transaction outstanding
hereunder).
(d) The parties may agree, with respect to any or all Forward
Transactions hereunder, that (i) one party shall transfer to
the other party Forward Collateral having a Market Value equal
to a specified dollar amount or other specified threshold no
later than the Margin Notice Deadline on the day such Forward
Transaction is entered into by the parties or (ii) one party
shall not be required to make any transfer otherwise required
to be made under this Paragraph if, after giving effect to
such transfer, the Market Value of the Forward Collateral held
by such party would be less than a specified dollar amount or
other specified threshold (which amount or threshold shall be
agreed to by the parties prior to entering into any such
Forward Transactions).
(e) If any notice is given by a party to the other under
subparagraph (a) of this Paragraph at or before the Margin
Notice Deadline on any business day, the party receiving such
notice shall transfer Forward Collateral as provided in such
subparagraph no later than the close of business in the
relevant market on such business day. If any such notice is
given after the Margin Notice Deadline, the party receiving
such notice shall transfer such Forward Collateral no later
than the close of business in the relevant market on the next
business day.
(f) Upon the occurrence of the Purchase Date for any Forward
Transaction and the performance by the parties of their
respective obligations to transfer cash and Securities on such
date, any Forward Collateral in respect of such Forward
Transaction, together with any Income thereon and proceeds
thereof, shall be transferred by the party holding such
Forward Collateral to the other party; provided, however, that
neither party shall be required to transfer such Forward
Collateral to the other if such transfer would result in the
creation of a Net Unsecured Forward Exposure of the
transferor.
(g) The Pledgor (as defined below) of Forward Collateral may,
subject to agreement with and acceptance by the Pledgee (as
defined below) thereof, substitute other Securities reasonably
acceptable to the Pledgee for any Securities Forward
Collateral. Such
September 1996 o Master Repurchase Agreement o 27
substitution shall be made by transfer to the Pledgee of such
other Securities and transfer to the Pledgor of such
Securities Forward Collateral. After substitution, the
substituted Securities shall constitute Forward Collateral.
3. Security Interest.
(a) In addition to the rights granted to the parties under
Paragraph 6 of the Agreement, each party ("Pledgor") hereby
pledges to the other party ("Pledgee") as security for the
performance of its obligations hereunder, and grants Pledgee,
a security interest in and right of setoff against, any
Forward Collateral and any other cash, Securities or property,
and all proceeds of any of the foregoing, transferred by or on
behalf of Pledgor to Pledgee or due from Pledgee to Pledgor in
connection with the Agreement and the Forward Transactions
hereunder.
(b) Unless otherwise agreed by the parties, a party to whom
Forward Collateral has been transferred shall have the right
to engage in repurchase transactions with Forward Collateral
or otherwise sell, transfer, pledge or hypothecate Forward
Collateral, including in respect of loans or other extensions
of credit to such party that may be in amounts greater than
the Forward Collateral such party is entitled to as security
for obligations hereunder, and that may extend for periods of
time longer than the periods during which such party is
entitled to Forward Collateral as security for obligations
hereunder; provided, however, that no such transaction shall
relieve such party of its obligations to transfer Forward
Collateral pursuant to Paragraph 2 or 4 of this Annex V or
Paragraph 11 of the Agreement.
4. Events of Default.
(a) In addition to the Events of Default set forth in Paragraph 11
of the Agreement, it shall be an additional "Event of Default"
if either party fails, after one business day's notice, to
perform any covenant or obligation required to be performed by
it under Paragraph 2 or any other provision of this Annex.
(b) In addition to the other rights of a nondefaulting party under
Paragraphs 11 and 12 of the Agreement, if the nondefaulting
party exercised or is deemed to have exercised the option
referred to in Paragraph 11 (a) of the Agreement:
(i) The nondefaulting party, without prior notice to the
defaulting party, may (A) immediately sell, in a
recognized market (or otherwise in a commercially
reasonable manner) at such price or prices as the
nondefaulting party may reasonably deem satisfactory,
any or all Forward Collateral subject to any or all
Forward Transactions hereunder and apply the proceeds
thereof to any amounts owing by the defaulting party
hereunder or (B) in its sole discretion elect, in
lieu of selling all or a portion of such Forward
Collateral, to give the defaulting party credit for
such Forward Collateral in an amount equal to the
price therefor on such date, obtained from a
generally recognized source or the most recent
closing bid quotation from such a source, against any
amounts owing by the defaulting party hereunder.
28 o September 1996 o Master Repurchase Agreement
(ii) Any Forward Collateral held by the defaulting party,
together with any Income thereon and proceeds
thereof, shall be immediately transferred by the
defaulting party to the nondefaulting party. The
nondefaulting party may, at its option (which option
shall be deemed to have been exercised immediately
upon the occurrence of an Act of Insolvency), and
without prior notice to the defaulting party, (i)
immediately purchase, in a recognized market (or
otherwise in a commercially reasonable manner) at
such price or prices as the nondefaulting party may
reasonably deem satisfactory, securities
("Replacement Securities") of the same class and
amount as any Securities Forward Collateral that is
not delivered by the defaulting party to the
nondefaulting party as required hereunder or (ii) in
its sole discretion elect, in lieu of purchasing
Replacement Securities, to be deemed to have
purchased Replacement Securities at the price
therefor on such date, obtained from a generally
recognized source or the most recent dosing offer
quotation from such a source, whereupon the
defaulting party shall be liable for the price of
such Replacement Securities together with the amount
of any cash Forward Collateral not delivered by the
defaulting party to the nondefaulting party as
required hereunder.
Unless otherwise provided in Annex I, the parties acknowledge
and agree that (1) the Forward Collateral subject to any
Forward Transaction hereunder are instruments traded in a
recognized market, (2) in the absence of a generally
recognized source for prices or bid quotations for any Forward
Collateral, the nondefaulting party may establish the source
therefor in its sole discretion and (3) all prices and bids
shall be determined together with accrued Income (except to
the extent contrary to market practice with respect to the
relevant Forward Collateral).
5. No Waivers, Etc. Without limitation of the provisions of Paragraph 17
of the Agreement, the failure to give a notice pursuant to subparagraph
(a), (b), (c) or (d) of Paragraph 2 of this Annex V will not constitute
a waiver of any right to do so at a later date.
September 1996 o Master Repurchase Agreement o 29
Annex VI
Buy/Sell Back Transactions
This Annex VI forms a part of the Master Repurchase Agreement dated as of
________________ , 19___ (the "Agreement") between __________________________
and __________________. Capitalized terms used but not defined in this Annex VI
shall have the meanings ascribed to them in the Agreement.
1. In the event of any conflict between the terms of this Annex VI and any
other term of the Agreement, the terms of this Annex VI shall prevail.
2. Each Transaction shall be identified at the time it is entered into and
in the relevant Confirmation as either a Repurchase Transaction or a
Buy/Sell Back Transaction.
3. In the case of a Buy/Sell Back Transaction, the Confirmation delivered
in accordance with Paragraph 3 of the Agreement may consist of a single
document in respect of both of the transfers of funds against
Securities which together form the Buy/Sell Back Transaction or
separate Confirmations may be delivered in respect of each such
transfer.
4. Definitions. The following definitions shall apply to Buy/Sell Back
Transactions:
(a) "Accrued Interest", with respect to any Purchased Securities
subject to a Buy/Sell Back Transaction, unpaid Income that has
accrued during the period from (and including) the issue date
or the last Income payment date (whichever is later) in
respect of such Purchased Securities to (but excluding) the
date of calculation. For these purposes unpaid Income shall be
deemed to accrue on a dally basis from (and including) the
issue date or the last Income payment date (as the case may
be) to (but excluding) the next Income payment date or the
maturity date (whichever is earlier);
(b) "Sell Back Differential", with respect to any Buy/Sell Back
Transaction as of any date, the aggregate amount obtained by
daily application of the Pricing Rate for such Buy/Sell Back
Transaction to the Purchase Price for such Buy/Sell Back
Transaction on a 360 day per year basis (unless otherwise
agreed by the parties for the Transaction) for the actual
number of days during the period commencing on (and including)
the Purchase Date for such Buy/Sell Back Transaction and
ending on (but excluding) the date of determination;
(c) "Sell Back Price", with respect to any Buy/Sell Back
Transaction:
(i) in relation to the date originally specified by the
parties as the Repurchase Date pursuant to Paragraph
2 (q) of the Agreement, the price agreed by the
Parties in relation to such Buy/Sell Back
Transaction, and
30 o September 1996 o Master Repurchase Agreement
(ii) in any other case (including for the purposes of the
application of Paragraph 4 or Paragraph 11 of the
Agreement), the product of the formula (P + D) - (IR
+ C), where -
P = the Purchase Price
D = the Sell Back Differential
IR = the amount of any Income in respect of the Purchased
Securities paid by the issuer on any date falling between
the Purchase Date and the Repurchase Date
C = the aggregate amount obtained by daily application of
the Pricing Rate for such Buy/Sell Back Transaction to
any such Income from (and including) the date of payment
by the issuer to (but excluding) the date of calculation.
5. When entering into a Buy/Sell Back Transaction the parties shall also
agree on the Sell Back Price and the Pricing Rate to apply in relation
to such Buy/Sell Back Transaction on the scheduled Repurchase Date. The
parties shall record the Pricing Rate in at least one Confirmation
applicable to such Buy/Sell Back Transaction.
6. Termination of a Buy/Sell Back Transaction shall be effected on the
Repurchase Date by transfer to Seller or its agent of Purchased
Securities against the payment by Seller of (i) in a case where the
Repurchase Date is the date originally agreed to by the parties
pursuant to Paragraph 2(q) of the Agreement, the Sell Back Price
referred to in Paragraph 4(c)(i) of this Annex; and (ii) in any other
case, the Sell Back Price referred to in Paragraph 4(c)(ii) of this
Annex.
7. For the avoidance of doubt, the parties acknowledge and agree that the
Purchase Price and the Sell Back Price in Buy/Sell Back transactions
shall include Accrued Interest (except to the extent contrary to market
practice with respect to the Securities subject to such Buy/Sell Back
Transaction, in which event (i) an amount equal to the Purchase Price
plus Accrued Interest to the Purchase Date shall be paid to Seller on
the Purchase Date and shall be used, in lieu of the Purchase Price, for
calculating the Sell Back Differential, (ii) an amount equal to the
Sell Back Price plus the amount of Accrued Interest to the Repurchase
Date shall be paid to Buyer on the Repurchase Date, and (iii) the
formula in Paragraph 4(c)(ii) of this Annex VI shall be replaced by the
formula "(P+AI+D) - (IR+C)", where "AI" equals Accrued Interest to the
Purchase Date).
8. Unless the parties agree in Annex I to the Agreement that a Buy/Sell
Back Transaction is not to be repriced, they shall at the time of
repricing agree on the Purchase Price, the Sell Back Price and the
Pricing Rate applicable to such Transaction.
September 1996 o Master Repurchase Agreement o 31
9. Paragraph 5 of the Agreement shall not apply to Buy/Sell Back
Transactions. Seller agrees, on the date such Income is received, to
pay to Buyer any Income received by Seller in respect of Purchased
Securities that is paid by the issuer on any date falling between the
Purchase Date and the Repurchase Date.
10. References to "Repurchase Price" throughout the Agreement shall be
construed as references to "Repurchase Price or the Sell Back Price, as
the case may be."
11. In 11 of the Agreement, references to the "Repurchase Prices" shall be
construed as references to "Repurchase Prices and Sell Back Prices."
32 o September 1996 o Master Repurchase Agreement
Annex VII
Transactions Involving Registered Investment Companies
This Annex VII (including any Schedules hereto) forms a part of the Master
Repurchase Agreement dated as of _________________ ,19__ (the "Agreement")
between _______________________________ ("Counterparty") and each investment
company identified on Schedule VII.A hereto (as such schedule may be amended
from time to time) acting on behalf of its respective series or portfolios
identified on such Schedule VII.A, or in the case of those investment companies
for which no separate series or portfolios are identified on such Schedule
VII.A, acting for and on behalf of itself (each such series, portfolio or
investment company, as the case may be, hereinafter referred to as a "Fund"). In
the event of any conflict between the terms of this Annex VII and any other term
of the Agreement, the terms of this Annex VII shall prevail. Capitalized terms
used but not defined in this Annex VII shall have the meanings ascribed to them
in the Agreement.
1. Multiple Funds. For any Transaction in which a Fund is acting as Buyer
(or Seller, as the case may be), each reference in the Agreement and
this Annex VII to Buyer (or Seller, as the case may be) shall be deemed
a reference solely to the particular Fund to which such Transaction
relates, as identified to Seller (or Buyer, as the case may be) by the
Fund and as may be specified in the Confirmation therefor. In no
circumstances shall the rights, obligations or remedies of either party
with respect to a particular Fund constitute a right, obligation or
remedy applicable to any other Fund. Specifically, and without
otherwise limiting the scope of this Paragraph: (a) the margin
maintenance obligations of Buyer and Seller specified in Paragraph 4 or
any other provisions of the Agreement and the single agreement
provisions of Paragraph 12 of the Agreement shall be applied based
solely upon Transactions entered into by a particular Fund, (b) Buyer's
and Seller's remedies under the Agreement upon the occurrence of an
Event of Default shall be determined as if each Fund had entered into a
separate Agreement with Counterparty, and (c) Seller and Buyer shall
have no right to set off claims related to Transactions entered into by
a particular Fund against claims related to Transactions entered into
by any other Fund.
2. Margin Percentage. For any Transaction in which a Fund is acting as
Buyer, the Buyer's Margin Percentage shall always be equal to at least
___%, or such other percentage as the parties hereto may from time to
time mutually determine; provided, that in no event shall such
percentage be less than 100%. For any Transaction in which a Fund is
acting as Seller, the Buyer's Margin Percentage shall be such
percentage as the parties hereto may from time to time mutually
determine; provided, that in no event shall such percentage be less
than 100%.
3. Confirmations. Unless otherwise agreed, Counterparty shall promptly
issue a Confirmation to the Fund pursuant to Paragraph 3 of the
Agreement. Upon the transfer of substituted or Additional Purchased
Securities by either party, Counterparty shall promptly provide notice
to the Fund confirming such transfer.
September 1996 o Master Repurchase Agreement o 33
4. Financial Condition. Each party represents that it has delivered the
following financial information to the other party to the Agreement: in
the case of a party that is a registered broker-dealer, its most recent
statements required to be furnished to customers by Rule 17a-5(c) under
the 1934 Act; in the case of a party that is a Fund, its most recent
audited or unaudited financial statements required to be furnished to
its shareholders by Rule 30d-1 under the Investment Company Act of
1940; in the case of any other party, its most recent audited or
unaudited statements of financial condition or other comparable
information concerning its financial condition.
Each party represents that the financial statements or information so
delivered fairly reflect its financial condition and, if applicable,
its net capital ratio, on the date as of which such financial
statements or information were prepared. Each party agrees that it will
make available and deliver to the other party, promptly upon request,
all such financial statements that subsequently are required to be
delivered to its customers or shareholders pursuant to Rule 17a-5(c) or
Rule 30d-l, as the case may be, or, in the case of a party that is
neither a registered broker-dealer nor a Fund, all such financial
information that subsequently becomes available to the public.
Each Fund acknowledges and agrees that it has made an independent
evaluation of the creditworthiness of the other party that is required
pursuant to the Investment Company Act of 1940 or the regulations
thereunder. Each Fund agrees that its agreement to enter into each
Transaction hereunder shall constitute an acknowledgment and agreement
that it has made such an evaluation.
5. Segregation of Purchased Securities. Unless otherwise agreed by the
parties, any transfer of Purchased Securities to a Fund shall be
effected by delivery or other transfer (in the manner agreed upon
pursuant to Paragraph 7 of the Agreement) to the custodian or
subcustodian designated for such Fund in Schedule VII.A hereto
("Custodian") for credit to the Fund's custodial account with such
Custodian. If the party effecting such transfer is the Fund's
Custodian, such party shall, unless otherwise directed by the Fund, (a)
transfer and maintain such Purchased Securities to and in the Fund's
custodial account with such party and (b) so indicate in a notice to
the Fund.
34 o September 1996 o Master Repurchase Agreement
Schedule VII.A
Supplemental Terms and Conditions of Transactions
Involving Registered Investment Companies
This Schedule VII.A forms a part of Annex VII to the Master Repurchase Agreement
dated as of __________________, 19 ___ (the "Agreement") between
_____________________ and ________________________.
Capitalized terms used but not defined in this Schedule VII.A shall have the
meanings ascribed to them in Annex VII.
1. This Agreement is entered into by or on behalf of the following Funds, and
unless otherwise indicated by the appropriate Fund in connection with a
Transaction, the following Custodians are designated to receive transfers
of Purchased Securities on behalf of such Funds for credit to the
appropriate Fund's custodial account:
Name of Fund Custodian
------------ ---------
[ ]. Limitation of Liability. If the Fund is organized as a business trust (or a
series thereof), the parties agree as follows: [insert appropriate language
limiting liability of trustees, officers and others].
THE
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September 1996 o Master Repurchase Agreement o 35