1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE EXCHANGE ACT OF 1934
(Amendment No. 3)*
EPLUS INC.
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(Name of Issuer)
Common Stock, $.01 Par Value
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(Title of Class of Securities)
294268107
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(CUSIP Number)
Richard J. Perry, Jr., Esquire
Perry & Associates, P.C.
1826 Jefferson Place, N.W.
Washington, D.C. 20036
(202) 775-8109
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(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
December 27, 2002
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box.[ ]
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See 240.13d-7(b) for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Exhibit Index at page 20
Page 1 of 61
2
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CUSIP NUMBER 294268107
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1. NAMES OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS (ENTITIES ONLY).
Hovde Capital Advisors LLC / 03-0430205
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)X
(b)
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3. SEC Use Only
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4. SOURCE OF FUNDS (See Instructions)
AF
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5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) AND 2(e) [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
Organized: State of Delaware
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NUMBER OF 7. SOLE VOTING POWER
SHARES
BENEFICIALLY
OWNED BY 0
EACH ----------------------------------------------------------------
REPORTING 8. SHARED VOTING POWER
PERSON WITH(1)
139,215 shares
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9. SOLE DISPOSITIVE POWER
0
----------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
139,215 shares
----------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
139,215 shares
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12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES. [ ]
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.5%
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14. TYPE OF REPORTING PERSON
OO
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(1) The 139,215 shares beneficially owned by Hovde Capital Advisors LLC are as
Investment Manager to Financial Institution Partners III, L.P., Financial
Institution Partners, L.P., and Financial Institution Partners, Ltd., the direct
owners.
Page 2 of 61
3
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CUSIP NUMBER 294268107
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1. NAME OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS (ENTITIES ONLY).
Financial Institution Partners III, L.P. / 52-2199979
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)X
(b)
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3. SEC Use Only
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4. SOURCE OF FUNDS
WC
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5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) AND 2(e). [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
Organized: State of Delaware
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NUMBER OF 7. SOLE VOTING POWER
SHARES
BENEFICIALLY
OWNED BY 0
EACH ----------------------------------------------------------------
REPORTING 8. SHARED VOTING POWER
PERSON WITH
77,800 shares
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9. SOLE DISPOSITIVE POWER
0
----------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
77,800 shares
----------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
77,800 shares
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12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES. [ ]
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.8%
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14. TYPE OF REPORTING PERSON
PN
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Page 3 of 61
4
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CUSIP NUMBER 294268107
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1. NAME OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS (ENTITIES ONLY)
Financial Institution Partners, L.P. / 52-1899611
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)X
(b)
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3. SEC Use Only
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4. SOURCE OF FUNDS
WC
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5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) AND 2(e). [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
Organized: State of Delaware
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NUMBER OF 7. SOLE VOTING POWER
SHARES
BENEFICIALLY
OWNED BY 0
EACH ----------------------------------------------------------------
REPORTING 8. SHARED VOTING POWER
PERSON WITH
47,215 shares
----------------------------------------------------------------
9. SOLE DISPOSITIVE POWER
0
----------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
47,215 shares
----------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
47,215 shares
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12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES. [ ]
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.5%
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14. TYPE OF REPORTING PERSON
PN
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Page 4 of 61
5
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CUSIP NUMBER 294268107
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1. NAME OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS (ENTITIES ONLY)
Financial Institution Partners, Ltd. / N/A
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)X
(b)
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3. SEC Use Only
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4. SOURCE OF FUNDS
WC
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5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) AND 2(e). [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
Organized: Cayman Islands
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NUMBER OF 7. SOLE VOTING POWER
SHARES
BENEFICIALLY
OWNED BY 0
EACH ----------------------------------------------------------------
REPORTING 8. SHARED VOTING POWER
PERSON WITH
14,200 shares
----------------------------------------------------------------
9. SOLE DISPOSITIVE POWER
0
----------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
14,200 shares
----------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
14,200 shares
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12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES. [ ]
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.1%
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14. TYPE OF REPORTING PERSON
OO
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Page 5 of 61
6
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CUSIP NUMBER 294268107
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1. NAMES OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS (ENTITIES ONLY)
Eric D. Hovde
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)X
(b)
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3. SEC Use Only
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4. SOURCE OF FUNDS
AF
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5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) AND 2(e). [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
USA
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NUMBER OF 7. SOLE VOTING POWER
SHARES
BENEFICIALLY
OWNED BY 32,824 shares
EACH ----------------------------------------------------------------
REPORTING 8. SHARED VOTING POWER
PERSON WITH(2)
588,615 shares
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9. SOLE DISPOSITIVE POWER
32,824 shares
----------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
588,615 shares
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
588,615 shares
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12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES. [ ]
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.5%
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14. TYPE OF REPORTING PERSON
IN
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(2) Of the 621,439 shares beneficially owned by Eric D. Hovde, 383,400 of the
Shares beneficially owned are as managing member of Hovde Capital, L.L.C.,
30,000 of the Shares beneficially owned are as managing member of Hovde
Acquisition II, L.L.C., 19,000 of the Shares beneficially owned are as trustee
for Hovde Financial, Inc. Profit Sharing Plan and Trust, 17,000 of the Shares
beneficially owned are as trustee for The Eric D. Hovde and Steven D. Hovde
Foundation, 32,824 of the Shares beneficially owned are held directly, and
139,215 of the Shares beneficially owned are as are as President, CEO and
Managing Member of Hovde Capital Advisors LLC, the Investment Manager to
Financial Institution Partners III, L.P., Financial Institution Partners, L.P.,
and Financial Institution Partners, Ltd., the direct owners.
Page 6 of 61
7
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CUSIP NUMBER 294268107
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1. NAMES OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS (ENTITIES ONLY)
Steven D. Hovde
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)X
(b)
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3. SEC Use Only
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4. SOURCE OF FUNDS
AF
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5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) AND 2(e) [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
USA
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NUMBER OF 7. SOLE VOTING POWER
SHARES
BENEFICIALLY
OWNED BY 0
EACH ----------------------------------------------------------------
REPORTING 8. SHARED VOTING POWER
PERSON WITH(3)
588,615 shares
----------------------------------------------------------------
9. SOLE DISPOSITIVE POWER
0
----------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
588,615 shares
----------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
588,615 shares
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12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES. [ ]
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.2%
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14. TYPE OF REPORTING PERSON
IN
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(3) Of the 588,615 Shares beneficially owned by Steven D. Hovde, 383,400 of the
Shares beneficially owned are as managing member of Hovde Capital, L.L.C.,
19,000 of the Shares beneficially owned are as trustee for Hovde Financial, Inc.
Profit Sharing Plan and Trust, 30,000 of the Shares beneficially owned are as
managing member of Hovde Acquisition II, L.L.C., 17,000 are as trustee for The
Eric D. Hovde and Steven D. Hovde Foundation, and 139,215 are as the Chairman of
Hovde Capital Advisors LLC, the Investment Manager to Financial Institution
Partners III, L.P., Financial Institution Partners, L.P., and Financial
Institution Partners, Ltd., the direct owners.
Page 7 of 61
8
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CUSIP NUMBER 294268107
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1. NAMES OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS (ENTITIES ONLY)
Financial Institution Partners II, L.P. / 36-4131559
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)X
(b)
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3. SEC Use Only
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4. SOURCE OF FUNDS
WC
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5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) AND 2(e) [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
Organized: State of Delaware
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NUMBER OF 7. SOLE VOTING POWER
SHARES
BENEFICIALLY
OWNED BY 0
EACH ----------------------------------------------------------------
REPORTING 8. SHARED VOTING POWER
PERSON WITH
383,400 shares
----------------------------------------------------------------
10. SOLE DISPOSITIVE POWER
0
----------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
383,400 shares
----------------------------------------------------------------
12. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
383,400 shares
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12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES. [ ]
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
4.0%
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14. TYPE OF REPORTING PERSON
PN
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Page 8 of 61
9
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CUSIP NUMBER 294268107
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1. NAMES OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS (ENTITIES ONLY)
Hovde Capital, L.L.C. / 91-1825712
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)X
(b)
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3. SEC Use Only
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4. SOURCE OF FUNDS
AF
-------------------------------------------------------------------------------
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) AND 2(e) [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
Organized: State of Nevada
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NUMBER OF 7. SOLE VOTING POWER
SHARES
BENEFICIALLY
OWNED BY 0
EACH ----------------------------------------------------------------
REPORTING 8. SHARED VOTING POWER
PERSON WITH(4)
383,400 shares
----------------------------------------------------------------
11. SOLE DISPOSITIVE POWER
0
----------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
383,400 shares
----------------------------------------------------------------
13. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
383,400 shares
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12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES. [ ]
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
4.0%
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14. TYPE OF REPORTING PERSON
OO
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(4) The 383,400 shares beneficially owned by Hovde Capital, L.L.C. are as the
General Partner to Financial Institution Partners II, L.P., the direct owner.
Page 9 of 61
10
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CUSIP NUMBER 294268107
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1. NAMES OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS (ENTITIES ONLY)
Hovde Acquisition II, L.L.C. / 88-0500145
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)X
(b)
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3. SEC Use Only
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4. SOURCE OF FUNDS
WC
-------------------------------------------------------------------------------
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) AND 2(e) [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
Organized: State of Nevada
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NUMBER OF 7. SOLE VOTING POWER
SHARES
BENEFICIALLY
OWNED BY 0
EACH ----------------------------------------------------------------
REPORTING 8. SHARED VOTING POWER
PERSON WITH
30,000 shares
----------------------------------------------------------------
12. SOLE DISPOSITIVE POWER
0
----------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
30,000 shares
----------------------------------------------------------------
14. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
30,000 shares
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12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES. [ ]
-------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.3%
-------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
OO
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Page 10 of 61
11
-------------------------------------------------------------------------------
CUSIP NUMBER 294268107
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1. NAMES OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS (ENTITIES ONLY)
The Eric D. Hovde and Steven D. Hovde Foundation / 52-2107093
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)X
(b)
-------------------------------------------------------------------------------
3. SEC Use Only
-------------------------------------------------------------------------------
4. SOURCE OF FUNDS
WC
-------------------------------------------------------------------------------
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) AND 2(e) [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
Organized: District of Columbia
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NUMBER OF 7. SOLE VOTING POWER
SHARES
BENEFICIALLY
OWNED BY 0
EACH ----------------------------------------------------------------
REPORTING 8. SHARED VOTING POWER
PERSON WITH
17,000 shares
----------------------------------------------------------------
13. SOLE DISPOSITIVE POWER
0
----------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
17,000 shares
----------------------------------------------------------------
15. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
17,000 shares
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12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES. [ ]
-------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.2%
-------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
OO
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Page 11 of 61
12
-------------------------------------------------------------------------------
CUSIP NUMBER 294268107
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1. NAMES OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSONS (ENTITIES ONLY)
Hovde Financial, Inc. Profit Sharing Plan and Trust / 52-1844197
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)X
(b)
-------------------------------------------------------------------------------
3. SEC Use Only
-------------------------------------------------------------------------------
4. SOURCE OF FUNDS
WC
-------------------------------------------------------------------------------
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) AND 2(e) [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
Organized: District of Columbia
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NUMBER OF 7. SOLE VOTING POWER
SHARES
BENEFICIALLY
OWNED BY 0
EACH ----------------------------------------------------------------
REPORTING 8. SHARED VOTING POWER
PERSON WITH
19,000 shares
----------------------------------------------------------------
14. SOLE DISPOSITIVE POWER
0
----------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
19,000 shares
----------------------------------------------------------------
16. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
19,000 shares
-------------------------------------------------------------------------------
12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES. [ ]
-------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.2%
-------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
OO
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Page 12 of 61
13
Item 1. Security and Issuer
The class of security to which this statement relates is the common stock,
par value $0.01 per share (the "Shares"), of ePlus inc. (the "Issuer"). The
address of the principal executive offices of the Issuer is 400 Herndon Parkway,
Herndon, VA 20170.
Item 2. Identity and Background
The persons filing this statement are Financial Institution Partners II,
L.P., Financial Institution Partners III, L.P., Financial Institution Partners,
L.P., Financial Institution Partners, Ltd. (the "Limited Partnerships"), Hovde
Capital, L.L.C. (the "General Partner"), Hovde Capital Advisors LLC (the
"Investment Manager"), Hovde Acquisition II, L.L.C., Hovde Financial, Inc.
Profit Sharing Plan and Trust (the "Plan"), The Eric D. Hovde and Steven D.
Hovde Foundation (the "Foundation"), Eric D. Hovde, and Steven D. Hovde who are
collectively referred to herein as the "Reporting Persons." The Limited
Partnerships are Delaware limited partnerships (with the exception of Financial
Institution Partners, Ltd. which is a Cayman Islands Exempted Company) formed
for the purpose of investing in, among other things, the equity securities of
various financial institutions and financial services companies. Hovde Capital,
L.L.C., a Nevada limited liability company, is the General Partner to Financial
Institution Partners II, L.P., the direct owner. Hovde Capital Advisors LLC, a
Delaware limited liability company, is the Investment Manager to Financial
Institution Partners III, L.P., Financial Institution Partners, L.P., and
Financial Institution Partners, Ltd., the direct owners. The Plan and the
Foundation are trusts organized in the District of Columbia.
Eric D. Hovde and Steven D. Hovde each hold beneficial interests in the
Shares through ownership of an interest in, and positions as officers, members
and/or trustees of the General Partner, the Investment Manager, Hovde
Acquisition II, L.L.C., the Plan and the Foundation. Eric D. Hovde holds
additional beneficial interests in the Shares through Shares owned directly.
Eric D. Hovde and Steven D. Hovde are also directors and executive officers of
Hovde Financial, Inc. ("Hovde Financial"). Hovde Financial does not
beneficially own any of the Shares. Steven D. Hovde disclaims beneficial
ownership of the shares held directly by Eric D. Hovde.
Attached as Schedule 1 hereto and incorporated by reference herein is a
list containing the principal business and the address of its principal business
and offices for the Limited Partnerships, the Plan, the Foundation, the General
Partner, Hovde Acquisition II, L.L.C., and the Investment Manager as well as
information required by (a) through (f) of this Item as to each executive
officer, director and/or controlling person of the General Partner and
Investment Manager who are Reporting Persons. The General Partner controls
Financial Institution Partners II, L.P., the direct owner, and the Investment
Manager controls Financial Institution Partners III, L.P., Financial Institution
Partners, L.P., and Financial Institution Partners, Ltd., the direct owners.
None of the Reporting Persons or executive officers, directors or
controlling persons of the General Partner, the Investment Manager, Hovde
Acquisition II, L.L.C., the Plan or the Foundation have, during the last five
years, been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding of any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
Information regarding the source and amount of funds used by the Reporting
Persons in acquiring beneficial ownership of their Shares is set forth in
Schedule 2 attached hereto and incorporated herein by reference.
Item 4. Purpose of Transaction
On December 27, 2002, the Issuer filed and 8-K announcing a buyback
resulting in a reduction of the Shares outstanding (the "Buyback"). The Buyback,
in combination with the Reporting Persons' acquisition of Shares, resulted in a
greater than one percent increase in the Reporting Persons' beneficial ownership
of the Shares. Although the Reporting Persons' acquisition of Shares did not
independently result in a "material change" as defined in 17 C.F.R. Section
240.13d-2(a), the Reporting Persons are filing this Schedule 13D/A in the event
that the one percent increase in beneficial ownership as a result of the
combination of the Reporting Persons' acquisitions and the Buyback is deemed to
constitute a material change.
The Reporting Persons have acquired the Shares for investment purposes and
as set forth below:
Each of the Reporting Persons may independently acquire additional Shares
or dispose of some or all of its Shares.
The Reporting Persons expect to evaluate on an ongoing basis their
investment in the Issuer, and may independently from time to time acquire
additional Shares, dispose of Shares or formulate other purposes, plans or
proposals regarding the Issuer or the Shares held by the Reporting Persons in
addition to those discussed above. Any such acquisitions or dispositions may be
made, subject to applicable law, in open market or privately negotiated
transactions or otherwise.
Except as described above, neither the Reporting Persons nor, to the
knowledge of the Reporting Persons, any of the persons named in Schedule 1
hereto have any plans or proposals which relate to or would result in any of the
actions or transactions specified in clauses (a) through (j) of Item 4 of
Schedule 13D.
Page 13 of 61
14
Item 5. Interest in Securities of the Issuer
(a), (b) Schedule 3 hereto, which is incorporated by reference herein,
sets forth, as of January 22, 2003, information relating to the aggregate number
of Shares of the Issuer and the percentage of the outstanding Shares of the
Issuer as of such date (based upon information provided by the Issuer, there are
9,556,813 Shares outstanding as of that date) as to each of the Reporting
Persons. With respect to the Shares set forth on Schedule 3, by virtue of its
control over the Limited Partnerships, all decisions regarding voting and
disposition of the Shares beneficially owned by the Limited Partnerships are
made by Investment Manager, acting through its chief executive officer,
president, or managing members. As such, the Limited Partnerships and the
Investment Manager share voting and investment power with respect to the Shares.
Therefore, as a result of their ownership interest in, and positions as officers
and/or managers of the Investment Manager, Eric D. Hovde and Steven D. Hovde may
be deemed to have beneficial ownership of the Shares. Neither the Investment
Manager, nor their executive officers, or controlling persons beneficially owns
any Shares personally or otherwise.
(c) Schedule 4 hereto, which is incorporated by reference herein,
describes, as of January 22, 2003, transactions in the Shares effected during
the past sixty (60) days.
(d) None.
(e) Not Applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
None.
Page 14 of 61
15
Item 7. Materials to be filed as Exhibits
Exhibit A - Consent Agreement pursuant to 17 C.F.R. 13d-1(f)(1)
Exhibit B - (Incorporated by reference to the Schedule 13D filed with the
Securities and Exchange Commission (the "Commission") on March
16, 1999)
Exhibit C - Customer Agreement between NationsBanc Montgomery Securities and
Financial Institution Partners II, L.P. (Incorporated by
reference to the Schedule 13D filed with the Commission on March
16, 1999)
Exhibit D - Prime Broker Agreement between NationsBanc Montgomery Securities
and Financial Institution Partners II, L.P. (Incorporated by
reference to the Schedule 13D filed with the Commission on March
16, 1999)
Exhibit E - Partnership Agreement between NationsBanc Montgomery Securities
and Financial Institution Partners II, L.P. (Incorporated by
reference to the Schedule 13D filed with the Commission on March
16, 1999)
Exhibit F - Customer Agreement between NationsBanc Montgomery Securities and
Eric D. Hovde. (Incorporated by reference to the Schedule 13D
filed with the Commission on March 16, 1999)
Exhibit G - Prime Broker Agreement between NationsBanc Montgomery Securities
and Eric D. Hovde. (Incorporated by reference to the Schedule 13D
filed with the Commission on March 16, 1999)
Exhibit H - Account Agreement between Banc of America Securities LLC and
Hovde Acquisition II, L.L.C.
Exhibit I - Prime Broker Agreement between Banc of America Securities LLC and
Hovde Acquisition II, L.L.C.
Exhibit J - Limited Liability Company Agreement between Banc of America
Securities LLC and Hovde Acquisition II, L.L.C.
Exhibit K - Customer Agreement between NationsBanc Montgomery Securities and
Hovde Financial Inc. Profit Sharing Plan and Trust. (Incorporated
by reference to the Schedule 13D filed with the Commission on
March 16, 1999)
Exhibit L - Prime Broker Agreement between NationsBanc Montgomery Securities
and Hovde Financial Inc. Profit Sharing Plan and Trust.
(Incorporated by reference to the Schedule 13D filed with the
Commission on March 16, 1999)
Exhibit M - Customer Agreement between NationsBanc Montgomery Securities and
The Eric D. Hovde Foundation. (Incorporated by reference to the
Schedule 13D filed with the Commission on May 7, 1999)
Exhibit N - Prime Broker Agreement between NationsBanc Montgomery Securities
and The Eric D. Hovde Foundation. (Incorporated by reference to
the Schedule 13D filed with the Commission on May 7, 1999)
Exhibit O- Customer Agreement between NationsBanc Montgomery Securities and
Financial Institution Partners III L.P. (Incorporated by
reference to the Schedule 13D filed with the Commission on May 5,
2000)
Exhibit P- Prime Broker Agreement between NationsBanc Montgomery Securities
and Financial Institution Partners III, L.P. (Incorporated by
reference to the Schedule 13D filed with the Commission on May 5,
2000)
Exhibit Q- Partnership Agreement between NationsBanc Montgomery Securities
and Financial Institution Partners III, L.P. (Incorporated by
reference to the Schedule 13D filed with the Commission on May 5,
2000)
Exhibit R - Options Agreement between Morgan Stanley & Co. Incorporated and
Financial Institution Partners, L.P.
Exhibit S - Customer Prime Broker Agreement between Morgan Stanley Co.
Incorporated and Financial Institution Partners, L.P.
Exhibit T - Master Securities Loan Agreement between Morgan Stanley Co.
Incorporated and Financial Institution Partners, L.P.
Exhibit U - Account Control Agreement between Morgan Stanley Co. Incorporated
and Financial Institution Partners, L.P.
Exhibit V - Options Agreement between Morgan Stanley & Co. Incorporated and
Financial Institution Partners, Ltd.
Exhibit W - Customer Prime Broker Agreement between Morgan Stanley Co.
Incorporated and Financial Institution Partners, Ltd.
Exhibit X - Master Securities Loan Agreement between Morgan Stanley Co.
Incorporated and Financial Institution Partners, Ltd.
Exhibit Y - Account Control Agreement between Morgan Stanley Co. Incorporated
and Financial Institution Partners, Ltd.
Signatures
After reasonable inquiry and to the best of his/its knowledge and belief,
each of the undersigned Reporting Persons certifies that the information set
forth in this statement with respect to him/it is true, complete and correct.
FINANCIAL INSTITUTION PARTNERS II, L.P., by its General
Partner, HOVDE CAPITAL, L.L.C.
By: /s/ Eric D. Hovde
-------------------------------------------------
Eric D. Hovde
Its: Managing Member
HOVDE CAPITAL, L.L.C.
By: /s/ Eric D. Hovde
-------------------------------------------------
Eric D. Hovde
Its: Managing Member
HOVDE ACQUISITION II, L.L.C.
By: /s/ Eric D. Hovde
-------------------------------------------------
Eric D. Hovde
Its: Managing Member
HOVDE FINANCIAL, INC. PROFIT SHARING PLAN AND TRUST
By: /s/ Eric D. Hovde
-------------------------------------------------
Its: Trustee
THE ERIC D. HOVDE AND STEVEN D. HOVDE FOUNDATION
By: /s/ Eric D. Hovde
-------------------------------------------------
Its: Trustee
FINANCIAL INSTITUTION PARTNERS III, L.P., by its
General Partner, HOVDE CAPITAL, LTD.
By: /s/ Richard J. Perry, Jr.
-------------------------------------------------
Richard J. Perry, Jr.
Its: Secretary
FINANCIAL INSTITUTION PARTNERS, L.P., by its
General Partner, HOVDE CAPITAL IV, LLC
By: /s/ Richard J. Perry, Jr.
-------------------------------------------------
Richard J. Perry, Jr.
Its: Secretary
FINANCIAL INSTITUTION PARTNERS, LTD., by its
General Partner, HOVDE CAPITAL OFFSHORE LLC
By: /s/ Richard J. Perry, Jr.
-------------------------------------------------
Richard J. Perry, Jr.
Its: Secretary
HOVDE CAPITAL ADVISORS LLC
By: /s/ Richard J. Perry, Jr.
-------------------------------------------------
Richard J. Perry, Jr.
Its: Secretary
ERIC D. HOVDE
/s/ Eric D. Hovde
-------------------------------------------------
STEVEN D. HOVDE
/s/ Steven D. Hovde
-------------------------------------------------
Dated: 01/22/03
Page 15 of 61
16
Schedule 1
INFORMATION RELATING TO REPORTING PERSONS
Principal Business and
Address of Principal Business
Name or Principal Office
---- ------------------------------
Financial Institution Limited partnership formed to make
Partners II, L.P. investments primarily in equity securities of
financial institutions and financial services
companies.
1824 Jefferson Place, N.W.
Washington, D.C. 20036
Organized: State of Delaware
Hovde Capital, L.L.C. Limited liability company formed to serve as
the general partner of Financial Institution
Partners II, L.P.
1824 Jefferson Place, N.W.
Washington, D.C. 20036
Organized: State of Nevada
Hovde Acquisition II, L.L.C. Limited liability company formed to make
investments primarily in equity securities of
financial institutions.
1824 Jefferson Place, N.W.
Washington, D.C. 20036
Organized: State of Nevada
Hovde Financial, Inc. Profit Profit sharing plan for employees of Plan and
Sharing Trust Hovde Financial, Inc.
1826 Jefferson Place, N.W.
Washington, D.C. 20036
Organized: District of Columbia
The Eric D. Hovde Foundation Charitable trust formed to further research
regarding and treatment of multiple
sclerosis.
1826 Jefferson Place, N.W.
Washington, D.C. 20036
Organized: District of Columbia
Financial Institution Limited partnership formed to
Partners III, L.P. make investments primarily in equity
securities of financial institutions and
financial services companies.
1824 Jefferson Place, N.W.
Washington, D.C. 20036
Organized: State of Delaware
Financial Institution Limited partnership formed to
Partners, L.P. make investments primarily in equity
securities of financial institutions and
financial services companies.
1824 Jefferson Place, N.W.
Washington, D.C. 20036
Organized: State of Delaware
Financial Institution Cayman Islands Exempted Company formed to
Partners, Ltd. make investments primarily in equity
securities of financial institutions and
financial services companies.
Bank of Bermuda (Cayman) Limited
36C Bermuda House, British American Centre
Dr. Roy's Drive, P.O. Box 513 GT
Georgetown, Grand Cayman, Cayman Islands
Organized: Cayman Islands
Hovde Capital Advisors LLC Limited liability company and registered
investment adviser formed to serve as an
investment manager.
1824 Jefferson Place, N.W.
Washington, D.C. 20036
Organized: State of Delaware
INFORMATION RELATING TO EXECUTIVE OFFICERS, DIRECTORS AND/OR CONTROLLING
PERSONS
NAME PRINCIPAL OCCUPATION
ADDRESS BUSINESS ADDRESS CITIZENSHIP
------- -------------------- -----------
Steven D. Hovde(4) Investment banker U.S.
1629 Colonial Parkway Hovde Financial, Inc.
Inverness, Illinois 60067 1629 Colonial Parkway
Inverness, Illinois 60067
Investment banking firm
Eric D. Hovde (5) Portfolio Manager U.S.
1826 Jefferson Place, N.W. Hovde Capital Advisors LLC
Washington, D.C. 20036 1824 Jefferson Place, N.W.
Washington, D.C. 20036
Registered Investment Adviser
-------------------------------------------------------------------------------
(4) Steven D. Hovde is affiliated with the following Reporting Persons: Chairman
of Hovde Capital Advisors LLC, President & Treasurer of Hovde Capital, L.L.C.;
Executive Vice President, Treasurer of Hovde Acquisition II, L.L.C.; a trustee
of both the Plan and the Foundation.
(5) Eric D. Hovde is affiliated with the following Reporting Persons:
President, Chief Executive Officer and Managing Member of Hovde Capital Advisors
LLC; Chairman and CEO of Hovde Capital, L.L.C.; President & Assistant Treasurer
of Hovde Acquisition II, L.L.C.; a trustee of both the Plan and the Foundation.
Page 16 of 61
17
SCHEDULE 2
The following table sets forth the amount and source of funds used by each
Reporting Person in acquiring the Shares beneficially owned by it.
Amount
Originally
Total Financed/ Source of
Name Consideration Current Balance Funds
-------------------------------------------------------------------------------
Financial $3,319,419.86 $1,725,767.95/ Working Capital/
Institution $0 Margin Account(5)
Partners II, L.P.
Hovde Capital, $3,319,419.86 $1,725,767.95/ Working Capital
L.L.C. $0 of
Affiliate/ Margin
Account of
Affiliate(5)
Eric D. Hovde $5,036,831.55 $140,996.25/ Working Capital
$0 Of Affiliates(6)
Hovde Acquisition, $ 263,778.00 $0 Working Capital
II, L.L.C. $0 Margin Account
Hovde Financial, $ 128,260.64 $64,130.32/ Working Capital
Inc. Profit Sharing $0 Margin Account(7)
Plan and Trust
The Eric D. Hovde $ 143,437.50 $71,718.75/ Working Capital
And Steven D. Hovde $0 Margin Account(8)
Foundation
Financial $ 739,068.00 $92,117.44/ Working Capital
Institution $0 Margin Account(9)
Partners III, L.P.
Financial $ 340,418.99 $0 Working Capital
Institution
Partners, L.P.
Financial $ 102,448.56 $0 Working Capital
Institution
Partners. Ltd.
Hovde Capital $1,181,935.55 $0 Working Capital
Advisors LLC Of Affiliates
Steven D. Hovde $5,036,831.55 $0 Working Capital
Of Affiliates
-------------------------------------------------------------------------------
(5) $1,725,767.95 was originally financed through a margin account with
NationsBanc Montgomery Securities at Federal Funds rate +5/8.
(6) $140,996.25 was originally financed through a margin account with
NationsBanc Montgomery Securities at Federal Funds rate +5/8.
(7) $64,130.32 was originally financed through a margin account with NationsBanc
Montgomery Securities at Federal Funds rate +5/8.
(8) $71,718.75 was originally financed through a margin account with NationsBanc
Montgomery Securities at Federal Funds rate +5/8.
(9) $92,117.44 was originally financed through a margin account with NationsBanc
Montgomery Securities at Federal Funds rate +5/8.
Page 17 of 61
18
SCHEDULE 3
The following table sets forth the number and approximate percentage of
Shares beneficially owned by each of the Reporting Persons. Each of the
Reporting Persons has shared power to vote or to direct the vote and to dispose
or to direct the disposition of the Shares of which each of them, respectively,
possesses beneficial ownership.
Approximate
Name Number of Shares Percentage
---- ---------------- -----------
Financial Institution 383,400 4.0%
Partners II, L.P.
Hovde Capital, L.L.C. 383,400 4.0%
Hovde Acquisition II, L.L.C. 30,000 0.3%
Hovde Financial, Inc. Profit 19,000 0.2%
Sharing Plan and Trust
The Eric D. Hovde Foundation 17,000 0.2%
Financial Institution 77,800 0.8%
Partners III, L.P.
Financial Institution 47,215 0.5%
Partners, L.P.
Financial Institution 14,200 0.1%
Partners, Ltd.
Hovde Capital Advisors LLC 139,215 1.5%
Eric D. Hovde 621,439 6.5%
Steven D. Hovde 588,615 6.2%
-------------------------------------------------------------------------------
Aggregate Shares Held by 621,439 6.5%
Reporting Persons
Page 18 of 61
19
SCHEDULE 4
Description of Transactions in Shares Effected Within 60 Days.
The Reporting Persons have effected the following transactions in the Shares
within sixty (60) days and all subsequent days up to January 17, 2002:
-------------------------------------------------------------------------------
Transaction Number of Transaction Transaction Broker
Date Shares Price Type
-------------------------------------------------------------------------------
Financial 12/04/02 7,900 $7.4575 Buy REDI
Institution
Partners,
L.P.
Financial 12/05/02 1,100 $7.433 Buy REDI
Institution
Partners,
L.P.
Financial 12/06/02 4,300 $7.3885 Buy REDI
Institution
Partners,
L.P.
Financial 12/09/02 6,800 $7.4573 Buy REDI
Institution
Partners,
L.P.
Financial 12/10/02 2,900 $7.446 Buy REDI
Institution
Partners,
L.P.
Financial 12/13/02 815 $7.077399 Buy REDI
Institution
Partners,
L.P.
Financial 12/16/02 6,100 $7.0318 Buy REDI
Institution
Partners,
L.P.
Financial 12/18/02 1,900 $7.001 Buy REDI
Institution
Partners,
L.P.
Financial 12/19/02 4,000 $6.8902 Buy REDI
Institution
Partners,
L.P.
Financial 12/20/02 1,100 $6.9265 Buy REDI
Institution
Partners,
L.P.
Financial 12/23/02 2,200 $6.9144 Buy REDI
Institution
Partners,
L.P.
Financial 12/26/02 1,500 $7.033 Buy REDI
Institution
Partners,
L.P.
Financial 12/27/02 6,300 $7.0222 Buy REDI
Institution
Partners,
L.P.
Financial 12/30/02 300 $7.033 Buy REDI
Institution
Partners,
L.P.
Financial 12/04/02 2,400 $7.4575 Buy REDI
Institution
Partners,
Ltd.
Financial 12/05/02 300 $7.433 Buy REDI
Institution
Partners,
Ltd.
Financial 12/06/02 1,300 $7.3885 Buy WEDB
Institution
Partners,
Ltd.
Financial 12/09/02 2,000 $7.4573 Buy REDI
Institution
Partners,
Ltd.
Financial 12/10/02 1,100 $7.446 Buy REDI
Institution
Partners,
Ltd.
Financial 12/13/02 300 $7.0774 Buy REDI
Institution
Partners,
Ltd.
Financial 12/16/02 1,900 $7.0318 Buy REDI
Institution
Partners,
Ltd.
Financial 12/18/02 600 $7.001 Buy REDI
Institution
Partners,
Ltd.
Financial 12/19/02 1,300 $6.8902 Buy REDI
Institution
Partners,
Ltd.
Financial 12/20/02 300 $6.9265 Buy REDI
Institution
Partners,
Ltd.
Financial 12/23/02 700 $6.9144 Buy REDI
Institution
Partners,
Ltd.
Financial 12/26/02 500 $7.033 Buy REDI
Institution
Partners,
Ltd.
Financial 12/27/02 1,400 $7.0222 Buy REDI
Institution
Partners,
Ltd.
Financial 12/30/02 100 $7.033 Buy REDI
Institution
Partners,
Ltd.
-------------------------------------------------------------------------------
Page 19 of 61
20
EXHIBIT INDEX
Page
Exhibit A- Consent Agreement to 17 C.F.R. 13d-1(f)(1) 21
Exhibit B - [OMITTED - - FILED PURSUANT TO REQUEST
FOR CONFIDENTIAL TREATMENT] (Incorporated by
reference to the Schedule 13D filed with the
Commission on March 16, 1999) (11)
Exhibit C - Customer Agreement between NationsBanc
Montgomery Securities and Financial Institution
Partners II, L.P. (Incorporated by reference to
the Schedule 13D filed with the Commission on
March 16, 1999)
Exhibit D - Prime Broker Agreement between NationsBanc
Montgomery Securities and Financial Institution
Partners II, L.P. (Incorporated by reference to
the Schedule 13D filed with the Commission on
March 16, 1999)
Exhibit E - Partnership Agreement between NationsBanc
Montgomery Securities and Financial Institution
Partners II, L.P. (Incorporated by reference to
the Schedule 13D filed with the Commission on
March 16, 1999)
Exhibit F - Customer Agreement between NationsBanc
Montgomery Securities and Eric D. Hovde
(Incorporated by reference to the Schedule 13D
filed with the Commission on March 16, 1999)
Exhibit G - Prime Broker Agreement between NationsBanc
Montgomery Securities and Eric D. Hovde
(Incorporated by reference to the Schedule 13D
filed with the Commission on March 16, 1999)
Exhibit H - Account Agreement between Banc of America
Securities LLC and Hovde Acquisition II, L.L.C. 22
Exhibit I - Prime Broker Agreement between Banc of America
Securities LLC and Hovde Acquisition II, L.L.C. 24
Exhibit J - Limited Liability Company Agreement between 26
Banc of America Securities LLC and Hovde
Acquisition II, L.L.C.
Exhibit K - Customer Agreement between NationsBanc
Montgomery Securities and Hovde Financial Inc.
Profit Sharing Plan and Trust. (Incorporated by
reference to the Schedule 13D filed with the
Commission on March 16, 1999)
Exhibit L - Prime Broker Agreement between NationsBanc
Montgomery Securities and Hovde Financial Inc.
Profit Sharing Plan and Trust. (Incorporated by
reference to the Schedule 13D filed with the
Commission on March 16, 1999)
Exhibit M - Customer Agreement between NationsBanc Montgomery
Securities and The Eric D. Hovde Foundation.
(Incorporated by reference to the Schedule 13D
filed with the Commission on May 7, 1999)
Exhibit N - Prime Broker Agreement between NationsBanc
Montgomery Securities and The Eric D. Hovde
Foundation. (Incorporated by reference to the
Schedule 13D filed with the Commission on
May 7, 1999)
Exhibit O- Customer Agreement between NationsBanc
Montgomery Securities and Financial Institution
Partners III L.P. (Incorporated by reference to
the Schedule 13D filed with the Commission
on May 4, 2000)
Exhibit P- Prime Broker Agreement between NationsBanc
Montgomery Securities and Financial Institution
Partners III, L.P. (Incorporated by reference to
the Schedule 13D filed with the Commission
on May 4, 2000)
Exhibit Q- Partnership Agreement between NationsBanc
Montgomery Securities and Financial Institution
Partners III, L.P. (Incorporated by reference to
the Schedule 13D filed with the Commission
on May 4, 2000)
Exhibit R - Options Agreement between Morgan Stanley & Co. 27
Incorporated and Financial Institution Partners,
L.P.
Exhibit S - Customer Prime Broker Agreement between Morgan 29
Stanley Co. Incorporated and Financial Institution
Partners, L.P.
Exhibit T - Master Securities Loan Agreement between Morgan 35
Stanley Co. Incorporated and Financial Institution
Partners, L.P.
Exhibit U - Account Control Agreement between Morgan Stanley Co. 45
Incorporated and Financial Institution Partners, L.P.
Exhibit V - Options Agreement between Morgan Stanley & Co. 46
Incorporated and Financial Institution Partners,
Ltd.
Exhibit W - Customer Prime Broker Agreement between Morgan 47
Stanley Co. Incorporated and Financial Institution
Partners, Ltd.
Exhibit X - Master Securities Loan Agreement between Morgan 51
Stanley Co. Incorporated and Financial Institution
Partners, Ltd.
Exhibit Y - Account Control Agreement between Morgan Stanley Co. 61
Incorporated and Financial Institution Partners, Ltd.
-------------------------------------------------------------------------------
Page 20 of 61
21
EXHIBIT A
Consent Agreement Pursuant to 17 C.F.R. 13d-1(k)(1)(iii)
Each of the undersigned hereby consents and agrees to the filing on behalf
of each of them of the foregoing joint statement on Schedule 13D pursuant to 17
C.F.R. 13d-1(k)(1)(iii) with respect to his/its beneficial ownership of the
shares of the Issuer.
FINANCIAL INSTITUTION PARTNERS II, L.P., by its General
Partner, HOVDE CAPITAL, L.L.C.
By: /s/ Eric D. Hovde
-------------------------------------------------
Eric D. Hovde
Its: Managing Member
HOVDE CAPITAL, L.L.C.
By: /s/ Eric D. Hovde
-------------------------------------------------
Eric D. Hovde
Its: Managing Member
HOVDE ACQUISITION II, L.L.C.
By: /s/ Eric D. Hovde
-------------------------------------------------
Eric D. Hovde
Its: Managing Member
HOVDE FINANCIAL, INC. PROFIT SHARING PLAN AND TRUST
By: /s/ Eric D. Hovde
-------------------------------------------------
Its: Trustee
THE ERIC D. HOVDE AND STEVEN D. HOVDE FOUNDATION
By: /s/ Eric D. Hovde
-------------------------------------------------
Its: Trustee
FINANCIAL INSTITUTION PARTNERS III, L.P., by its
General Partner, HOVDE CAPITAL, LTD.
By: /s/ Richard J. Perry, Jr.
-------------------------------------------------
Richard J. Perry, Jr.
Its: Secretary
FINANCIAL INSTITUTION PARTNERS, L.P., by its
General Partner, HOVDE CAPITAL IV, LLC
By: /s/ Richard J. Perry, Jr.
-------------------------------------------------
Richard J. Perry, Jr.
Its: Secretary
FINANCIAL INSTITUTION PARTNERS, LTD., by its
General Partner, HOVDE CAPITAL OFFSHORE LLC
By: /s/ Richard J. Perry, Jr.
-------------------------------------------------
Richard J. Perry, Jr.
Its: Secretary
HOVDE CAPITAL ADVISORS LLC
By: /s/ Richard J. Perry, Jr.
-------------------------------------------------
Richard J. Perry, Jr.
Its: Secretary
ERIC D. HOVDE
/s/ Eric D. Hovde
-------------------------------------------------
STEVEN D. HOVDE
/s/ Steven D. Hovde
-------------------------------------------------
Dated: 01/22/03
Page 21 of 61
22
EXHIBIT H
BANC OF AMERICA SECURITIES LLC ACCOUNT AGREEMENT
MONTGOMERY DIVISION
This agreement sets forth the terms and conditions pursuant to which we, Banc of
America Securities LLC (BAS), will maintain my Account for purchases and sales
of Securities and Other Property (as defined below). I understand that, if my
Account is a cash account, the provisions of paragraphs 24 & 25 are not binding
upon me unless I enter into a margin transaction, and if my Account is a
commodities account, the provisions of paragraph 16 shall not be applicable.
I agree to notify BAS promptly in writing of any change in information that I
supplied when opening my Account including, but no limited to, change of
address, change in investment objectives, and change in financial circumstances.
Among other things, I represent that , except as disclosed to BAS in writing,
neither I nor any member of my immediate family is (1) a director, 10%
beneficial owner, policy making officer or otherwise and "affiliate" (as defined
in Rule 144 under the Securities Act of 1933, as amended) of a publicly-traded
company or (2) affiliated with or employed by a securities exchange or
corporation of which an exchange controls the majority of the capital stock, or
a securities broker or dealer, or any bank, thrift institution, trust company,
insurance company, investment fund, including a registered investment company,
or any corporation, firm or individual engaged in the business of dealing as
broker or principal in securities, bills of exchange, acceptances or other forms
of commercial paper. If I or a member of my immediate family become so employed,
I shall notify BAS promptly in writing. I represent that I am of the age of
majority according to the laws of my state of residence. I represent that no one
other than me (and to the extent community property stands in my Account, my
spouse) and any other persons signing this Agreement has an interest in my
Account.
1. TRANSACTIONS WITH AND BY AFFILIATES. Certain securities and other
assetsincluding, but not limited to, municipal, government and money market
securities purchased or sold by me through BAS, may be purchased from or sold to
an affiliate of BAS which may act as underwriter, broker, dealer or placement
agent for such securities and assets. BAS' bank or thrift affiliates may be
lenders to issuers of securities that BAS underwrites, in which case the
proceeds of offerings underwritten by BAS may be used for repayment of such
loans. Please refer to the disclosure documents relating to the securities for
additional information.
2. SPIC COVERAGE. BAS is a member of the Securities Investor Protection
Corporation ("SIPC") through which customer accounts are protected in the event
of the firm's insolvency up to $500,000, including a maximum of $100,000 for
free cash balances. BAS has contracted with an outside insurance carrier to
provide up to $99.5 million of additional customer protection in the event of
BAS's insolvency or liquidation. Neither SIPC nor the additional coverage is the
same as or a substitute for FDIC deposit insurance, and they do not protect
against declines in the market value of your securities or other holdings.
3. AUTHORIZATION TO OPEN CASH ACCOUNT. I request that BAS open a Cash Account
for me. I appoint BAS as my agent for the purposes of buying and selling
securities in my Cash Account. I authorize BAS to open or close my Account, to
place and withdraw orders and to take such other actions to protect itself in
the event I breach any of my obligations. I understand that BAS may accept
orders from me for execution by BAS or others. I acknowledge that BAS reserves
the right in its sole discretion to refuse or restrict my orders. If at any time
BAS considers it necessary for its protection. It may in its discretion require
me to deposit cash or collateral in my Account to assure due performance by me
of my open contractual commitments. I authorize BAS to act upon my instructions
or those of my attorney-in-fact, designated by me on a form acceptable to BAS,
given by telephone or telegraph, orally, or by facsimile transmission or by any
electronic service that provides access to BAS and agree that BAS may act upon
and shall incur no liability in acting upon any such instructions as reasonably
understood by BAS, provided such instructions reasonable appear genuine to BAS.
I agree that this Agreement covers any and all transactions heretofore executed
for my Account by BAS.
4. ORDERS, DELIVERIES AND SETTLEMENTS. I will not buy any security through my
Cash Account unless there are, or by Settlement Date there will be, sufficient
funds in my Account to make full cash payment, and I do not contemplate selling
such security before making such payment. Deposits will be credited to my
Account subject to collection. In giving orders to sell, I agree that all
"short" sale orders will be designated as "short" and all "long" sale orders
will be designated as "long". I will not sell any security designated as "long"
through my Cash Account unless I then own the security and it is either on
deposit with BAS or by (1) day before the Settlement Date can and will be
delivered (including any securities received as a result of dividends, splits or
similar events) to BAS in good deliverable form, and the placing of such a
"long" order shall constitute a representation by me that will deliver such
security to BAS at least one (1) day before the Settlement Date. Unless I
specifically instruct otherwise, BAS will treat all orders as market orders to
be executed under current market conditions. I understand that when securities
can be traded in more than one marketplace, in the absence of my specific
instructions, BAS may use its discretion in selecting the markets in which to
enter the order. I will not ask BAS to sell control or restricted securities,
as defined by the federal securities laws, unless I have disclosed to BAS in
writing that such securities are control or restricted securities and unless I
am authorized to engage in such a sale under applicable law. In connection with
a sale of control or restricted securities, I agree to provide BAS with such
notices, information, legal opinions, certifications or other assurances as BAS
may request. I understand that BAS may in its sole discretion decline to
execute any securities transaction for my Account. If I fail to timely deliver
securities sold in good deliverable form or to deposit timely the total purchase
price of securities purchased as provided by applicable law BAS may, in its
sole discretion and WITH OR WITHOUT NOTICE OR DEMAND, take such steps as BAS
deems appropriate either to complete or to liquidate the transaction, and I
shall pay to BAS, UPON DEMAND, all expenses and losses incurred by BAS in
connection therewith. Furthermore, BAS will be entitled to retain any gain or
profit resulting from its actions after my failure to timely deliver or pay for
securities.
If I elect to settle all transactions through my designated transaction account
("transaction account") with an affiliated bank (Bank), I agree that on
Settlement Date BAS may debit my transaction account for payment for securities
purchased and credit my transaction account with the proceeds from the sale of
securities. I agree to have sufficient funds available in my transaction
account on Settlement Date for all securities purchased for my Account. I also
agree that on Settlement Date BAS my withdraw securities from my designated
safekeeping account ("safekeeping account") maintained at the Bank to cover the
sales of securities made by me through BAS and deposit fully paid for securities
I purchase through BAS in my safekeeping account. I hereby authorize the Bank
to rely on a copy of this agreement as authority for the Bank to make such
transactions.
BAS reserves the right to go directly to the sponsor of any mutual fund or Unit
Investment Trust for purchases. I understand that in these instances, the
sponsor will confirm directly with me.
BAS reserves the right to not accept limit orders in NASDAQ or over-the-counter
securities in which it acts as a market maker.
5. WRITTEN CONFIRMATION; COMMUNICATIONS. Confirmations of transactions and
statements of my Account shall be conclusive as to me if not objected to by me
in writing within five (5) days (or such other period as required by law) after
the date on which such confirmations of transactions and statements are received
by me from BAS. The absence of my objection shall constitute an acceptance by
me of the terms and conditions of such transactions. Communications may be sent
to me at the address set forth when I opened my Account or at such other address
as I instruct in writing. All communications so sent, whether by mail,
telegraph, facsimile transmission, overnight courier, messenger or otherwise,
shall be deemed received by me personally, whether actually received or not, as
of the earlier of the date they are received by me or the business day following
the day they are dispatched to me. I agree to waive all claims resulting from
failure to receive such communications.
6. FEES AND CHARGES. BAS may charge commissions and other fees for execution of
transactions to purchase and sell Securities and Other Property, and I agree to
pay such commissions and fees at BAS' then prevailing rates. I also understand
that such commissions and fee rates may be changed from time to time without
notice to me and I agree to be bound thereby. I will also pay BAS' fees for any
special services that I request or that are required by law.
7. INFORMATION DISCLOSURE. I hereby authorize BAS to disclose information to
others and receive information from others, including credit bureaus or other
agencies, about me, my Account or my Account transactions (1) if the purpose is
to establish or maintain my Account or to complete transactions, (2) in response
to government agency or exchange regulations or pursuant to inquiries or court
orders or as otherwise provided by law or valid legal process, and (3) in any
suit, action or other proceeding in which disclosure is necessary or appropriate
in BAS' judgment to protect its interests. Pursuant to Rule 14b-1 under the
Securities Exchange Act of 1934, BAS may disclose my name, address, and
securities positions to requesting companies in which I am a shareholder unless
I send written objection to BAS.
8. DEFINITION OF SECURITIES AND OTHER PROPERTY. Securities and Other Property
shall include, but not be limited to, money, instruments, commodities, security
entitlements and securities of every kind and nature and all contracts and
actions relating thereto and all proceeds therefrom and all dividends and
interest thereon, whether for present or future delivery, now or hereafter held,
carried or maintained by BAS in or for any of my Accounts, now or hereafter
opened including any Account(s) in which I may have an interest.
9. SECURITY INTEREST. I grant BAS a continuing security interest in, lien on,
and right of set off with respect to, all Securities and Other Property now or
hereafter held or carried by BAS in my Accounts, including any Securities and
Other Property in transit or held by others on behalf of BAS, and in any
transaction or safekeeping accounts or money market funds that I have designated
for BAS to debit and credit in connection with my Account, and all proceeds of
the foregoing, as collateral security for the payment and performance of all my
obligations to BAS, now existing or hereafter arising, whether or not such
obligations arise under this Agreement or any other agreement between us,
together with all expenses of BAS in connection therewith. If I fail to pay or
perform any obligation, or if I am in default, BAS shall have, in addition to
the rights provided herein or by other applicable law, all the rights and
remedies provided to a secured party under the Uniform Commercial Code as then
in effect in the State of New York. In enforcing its security interest, lien or
right of set-off, BAS in its sole discretion, may determine which Securities and
Other Property are to be bought or sold an the order in which they are to be
sold and which contracts are to be closed.
10. TRANSFER. BAS shall have the right to transfer Securities and Other Property
held by BAS from or to my Account whenever BAS, in its sole and absolute
discretion, considers such a transfer necessary for its protection.
11. IMPARTIAL LOTTERY SYSTEM. When BAS holds, on my behalf, bonds, options or
preferred stock in street name or bearer form which are callable in part, I
agree to participate in the impartial lottery allocation system of the called
securities in accordance with the rules of the applicable exchange or
depositories.
12. NON-WAIVER; CHANGE OF TERMS. BAS' failure to insist at any time upon strict
compliance with this Agreement or with any of its terms shall not constitute a
waiver by BAS of any of its rights hereunder. Except as otherwise provided for
herein, no provision of this Agreement shall in any respect be waived or
modified. BAS MAY ADD, DELETE OR AMEND THE TERMS, CONDITIONS AND OTHER
PROVISIONS OF THIS AGREEMENT FROM TIME TO TIME BY WRITTEN NOTICE TO ME. TO the
extent this Agreement is inconsistent with any other agreement governing my
Account or any confirmation of a transaction, this Agreement shall govern.
13. GOVERNING LAW. THIS AGREEMENT AND ITS ENFORCEMENT SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK (without regard to any principles of conflicts of
law) EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN.
14. SEVERABILITY. If any provision or condition of this Agreement shall be held
to be invalid or unenforceable by any court, regulatory or self-regulatory
agency or body or arbitration tribunal, such invalidity or unenforceability
shall attach only to that provision or condition. The validity of the remaining
provisions and conditions shall not be affected thereby, and this Agreement
shall be carried out as if any such invalid or unenforceable provision or
condition were not contained herein.
Page 22 of 61
23
15. LIMITATION ON LIABILITY. I acknowledge and agree that BAS shall not be
liable for any liability, loss, or damage caused directly or indirectly by
events beyond the reasonable control of BAS, including, but not limited to
government restrictions, lockout, natural disaster (including earthquake), riot
or other civil disturbance, exchange or market ruling, suspensions of trading,
war, strike, interruption or other failure of transportation, communication, or
data processing services, or other conditions beyond its control. Further, in
acting hereunder, I acknowledge and agree that Bas shall not be liable for any
loss or other claim for injury with respect to my Account except for its gross
negligence or willful misconduct.
16. ARBITRATION. All disputes hereunder will be submitted to arbitration. I am
aware that:
- ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
- THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING
THE RIGHT TO JURY TRIAL.
- PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM
COURT PROCEEDINGS.
- THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR
LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF
RULINGS BY THE ARBITRATORS IS STRICTLY LIMITED.
- THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS
WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
ARBITRATION AGREEMENT
Any dispute with respect to my Account shall be subject to and governed by the
following ARBITRATION AGREEMENT:
To the extent permitted by law, any controversy arising out of or relating to my
Account, my relationship with BAS or this Agreement or the breach thereof shall
be submitted to arbitration conducted under the Constitution and Rules of the
Board of Governors of the New York Stock Exchange, Inc. or the Code of
Arbitration Procedure of the National Association of Securities Dealers
("NASD"). An arbitration must be commenced by service upon the other party or
parties of a written demand for arbitration or a written notice of intention to
arbitrate, including selection of the arbitration tribunal. If I initiate the
demand for arbitration and do not make such election by registered mail
addressed to BAS at its main office within five (5) days thereafter, then BAS
may make such election on my behalf. If BAS initiates arbitration, it may select
the arbitration tribunal. Judgment upon any award rendered by the arbitrator(s)
shall be final, and may be entered in any court having jurisdiction. This
ARBITRATION AGREEMENT does not constitute a waiver of my right to a judicial
forum in instances in which such a waiver should be void under the applicable
federal or state laws, including the Federal Arbitration Act. The Federal
Arbitration Act will apply to any dispute subject to arbitration under this
ARBITRATION AGREEMENT, notwithstanding any contrary choice of law provision in
this Agreement. I specifically acknowledge and agree that in addition to and
without waiver of this binding ARBITRATION AGREEMENT BAS shall be entitled to
provisional remedies, including the remedies of prejudgment writs of attachment,
or injunction, available in any court having jurisdiction.
No person shall bring a putative or certified class action to arbitration, nor
seek to enforce any pre-dispute arbitration agreement against any person who has
initiated in court a putative class action or who is a member of a putative
class who has not opted out of the class with respect to any claims encompassed
by the putative class action until:
(i) the class certification is denied;
(ii) the class is decertified; or
(iii) the customer is excluded from the class by the court.
Such forbearance to enforce an agreement to arbitrate shall not constitute a
waiver of any rights under this agreement except to the extent stated herein.
17. JOINT ACCOUNTS. In consideration of BAS opening or maintaining an Account
in the names of two or more persons as listed on the Account ("Joint Account
Holders"), the Joint Account Holders jointly and severally agree that their
obligations on the Account and under the Agreement shall be joint and several
and that each of them shall have authority on behalf of the JOINT ACCOUNT to buy
or sell and otherwise deal in stocks, bonds, and other investments; to receive
on behalf of the JOINT ACCOUNT demands, notices, confirmations, reports,
statements of Account and communications of every kind; to receive on behalf of
the JOINT ACCOUNT Securities and Other Property; to make agreements on behalf of
the JOINT ACCOUNT relating to any of the foregoing matters, and to terminate or
modify same or waive any of the provisions thereof; and generally to deal with
BAS on behalf of the JOINT ACCOUNT as fully and completely as if each of them
alone were interested in said JOINT ACCOUNT, all without notice to the other
Joint Account Holders.
BAS is authorized to follow the instructions of any of the Joint Account Holders
in every respect concerning the JOINT ACCOUNT and to make deliveries to any of
the Joint Account Holders or upon his/her instructions, of any or all Securities
and Other Property in the JOINT ACCOUNT and to make payments to any of the Joint
Account Holders, or upon his/her order, of any or all monies at any time or from
time to time in the JOINT ACCOUNT as he/she may order and direct even if such
deliveries and or payments shall be made to him/her personally and not for the
JOINT ACCOUNT. In the event of any such deliveries of Securities or Other
Property or payments of monies to any of the Joint Account Holders as aforesaid,
BAS shall be under no duty or obligation to inquire into the purpose or
propriety of any such demand for delivery of securities and other properties or
payment of monies, and BAS shall not be bound to see to the application or
disposition of any securities and/or monies so delivered or paid to any of the
Joint Account Holders or upon his/her order. The authority hereby conferred
shall remain in force until written notice of the revocation addressed to BAS is
delivered at its main office. In the event that BAS receives inconsistent
instructions from the Joint Account Holders or a court order, BAS may suspend or
close the JOINT ACCOUNT by giving written notice to the Joint Account Holders.
Unless otherwise, indicated in a written notice received by BAS, it is the
express intention of the Joint Account Holders that ownership of the JOINT
ACCOUNT be vested in them as joint tenants with rights of survivorship and not
as tenants in common or as tenants by the entirety. In the event of the death of
either or any of the Joint Account Holders, the entire interest in the JOINT
ACCOUNT shall be vested in the survivor or survivors on the same terms and
conditions as theretofore held, without in any manner releasing the Joint
Account Holders or their estates from the liability provided for in this
Agreement. (NOTE: If the parties do not wish to be joint tenants with rights of
survivorship, they must obtain from BAS the applicable agreement and execute and
deliver that agreement to BAS.)
18. APPLICABLE REGULATIONS. All transactions are subject to the constitution,
rules, customs and usages of the exchange or market and the clearing house, if
any, where executed and to applicable Federal and State laws, and the rules of
any government agency or financial industry self-regulatory organization having
authority with respect thereto.
19. BINDING EFFECT, ASSIGNMENT. This Agreement and its terms shall be binding
upon my heirs, executors, successors, administrators, assigns, committee and
conservator ("successors"). In the event of my death, incompetency, or
disability, whether or not any successors of my estate and property shall have
qualified or been appointed, until BAS has written notice of my death or
incompetence BAS may continue to operate as though I were alive and competent
and BAS may liquidate my Account WITHOUT PRIOR WRITTEN NOTICE TO OR DEMAND upon
my successors. This Agreement shall inure to the benefit of BAS' successors and
assigns, whether by merger, consolidation or otherwise (and BAS may transfer my
Account and this agreement ot any such successors and assigns) WITHOUT NOTICE.
You may not assign your rights or delegate your duties under this Agreement
without BAS' consent. With prior notice to you , BAS may assign or transfer any
or all of its rights and obligations under this Agreement and your Account(s) to
any other direct or indirect wholly owned subsidiary of Bank of America
Corporation that is registered as a broker-dealer under the Securities Exchange
Act of 1934.
20. ALL ACCOUNTS. THIS AGREEMENT SHALL COVER MY RELATIONSHIP WITH BAS, INCLUDING
INDIVIDUALLY AND COLLECTIVELY ALL ACCOUNTS THAT I MAY OPEN OR REOPEN WITH BAS.
CERTAIN ACCOUNTS, SUCH MARGIN ACCOUNTS OR OPTIONS ACCOUNTS OR OPTIONS ACCOUNTS,
ARE SUBJECT TO SEPARATE DOCUMENTATION CONTAINING ADDITIONAL REQUIREMENTS.
21. TERM. This Agreement shall become effective on its acceptance by BAS. I may
close my Account by giving written notice to BAS. BAS may close my Account by
giving me written notice. When my Account is closed, BAS will return to me, or
follow my instructions for the transfer of, any Securities and Other Property
remaining in my Account and will no longer accept orders for transactions after
the date of closing subject to my having satisfied all obligations and paid all
indebtedness owning to BAS.
22. PAYMENT FOR ORDER FLOW POLICY. BAS' policy is that it will not accept
remuneration for directing orders to particular broker/dealers or market centers
for execution. Notwithstanding this policy, should BAS receive such remuneration
on any transaction, appropriate disclosure will be made.
23. RECORDING OF TELEPHONE CONVERSATIONS. ANY OF MY TELEPHONE CONVERSATIONS WITH
BAS MAY BE RECORDED TO ASSURE ACCURACY. I CONSENT TO SUCH RECORDING.
24. MARGIN IN MARGIN ACCOUNTS (NOT APPLICABLE TO CASH ACCOUNTS). I hereby agree
to maintain such margin in my margin and/or good faith account as BAS may in its
discretion require and I agree to pay forthwith on demand any debit balance
owning with respect to any such Account, and if not paid this shall be a breach
of this Agreement and BAS may take such action as it considers necessary for its
protection in accordance with this Agreement. I understand that even if BAS has
a policy of giving customer notice of a margin deficiency, BAS is not obligated
to request additional margin from me, and there may be circumstances where BAS
will liquidate securities and/or other property in my Account without notice to
me. I understand I will be charged interest on my debit balance which if not
paid at the close of interest period will be added to the opening balance for
the next interest period. Consult the attached Truth-In-Lending disclosure
statement for an outline of BAS' interest policies.
25. CONSENT TO LOAN OR PLEDGE SECURITIES AND OTHER PROPERTY (NOT APPLICABLE TO
CASH ACCOUNTS). I hereby authorize BAS to lend either to itself or to others any
Securities and Other Property held by BAS in my margin and/or good faith Account
and to carry all such property in its general loans and such property may be
pledged, repledged, hypothecated or rehypothecated, without notice to me, either
separately or in common with other such property for any amounts due to BAS
thereon or for a greater sum, and BAS shall have no obligation to retain a like
amount of similar property in its possession or control. BY SIGNING THIS
AGREEMENT I ACKNOWLEDGE THAT THE SECURITIES AND OTHER PROPERTY IN MY MARGIN
ACCOUNT MAY BE LOANED TO BAS OR LOANED OUT TO OTHERS AND THAT I HAVE RECEIVED
AND/OR REVIEWED A COPY OF THIS AGREEMENT.
26. RECEIPT OF TRUTH-IN-LENDING. I hereby acknowledge receipt and review of the
attached Truth-In-Lending disclosure statement. I understand that interest will
be charged on any debit balances in accordance with the methods described in
that statement or in any amendment or revision thereto which may be provided to
you. It is understood and agreed that the interest charge made to my Account at
the close of one charge period will be compounded, unless paid; that is, the
unpaid interest charge for previous periods will be added to the opening balance
for the next charge period, thereby becoming part of the principal amount due
bearing like interest.
27. CLEARANCE ACCOUNTS. If BAS carries my Account as clearing broker by
arrangement with another broker through whose courtesy my Account has been
introduced, then unless BAS receives from me a written notice to the contrary,
BAS shall accept from such other broker, without any inquiry or investigation by
BAS, (i) orders for purchase and sale of Securities and Other Property on margin
or otherwise and (ii) any other instructions concerning said Account. I
understand BAS shall have no responsibility or liability to me for any acts or
omission of such other broker, its officers, employees or agents.
28. NOTICES and REDEMPTIONS. Notice or other communications, including margin
calls, delivered or mailed to the address given when opening my Account, until
BAS has received notice in writing of a different address, shall be deemed to
have been personal delivered to me.
I understand that equity securities, fixed income securities, mutual fund shares
and other securities:
-Are NOT insured by the FDIC or any other government entity;
-Are NOT deposits or other obligations of, or guaranteed by Bank of America
Corporation or any of its affiliates (unless explicitly stated otherwise);
-Are subject to investment risks, including possible loss of the principal
amount invested.
I certify that I have read, understand and agree specifically to the terms set
forth in this Agreement including, but not limited to, the Arbitration Agreement
which can be found on page 3 item 16.
X /s/ Hovde Acquisition II, L.L.C.
By: Christopher F. Chase
Its: Secretary
Typed or Printed Name of Investor Typed or Printed Name of Joint Investor
X /s/ Christopher F. Chase 6/27/01
Signature of Investor Date Signature of Joint Investor Date
Page 23 of 61
24
EXHIBIT I
Banc or America Securities LLC
PRIME BROKER AGREEMENT
In accordance with the requirements set forth in the January 25, 1994 No-Action
Letter of the Division of Market Regulation of the Securities and Exchange
Commission (the "No-Action Letter"), Banc or America Securities LLC ("BAS"), a
Delaware limited liability company, and each Customer on whose behalf this
agreement has been executed ("Customer"), hereby agree as follows.
1. This Agreeement shall apply to all transactions in which BAS is
given up as the prime broker for Customer; i.e. transactions
executed for Customer by one or more executing brokers (each, an
"Executing Broker"), which transactions are submitted to BAS for
clearance and settlement.
2. If Customer is the beneficial owner of an account managed by an Investment
Advisor registered with the Securities and Exchange Commission under the
Investment Advisors Act of 1940 or such other authorized agent, attorney-in-
fact or third party ("Investment Advisor"), then this Agreement has been
executed on Customer's behalf by such Investment Advisor. Each Customer on
whose behalf this Agreement has been executed is named on Schedule A hereto,
as such Schedule may be modified from time to time. Investment Advisor
represents and warrants that it has on file written authorization to execute
agreements on behalf of each Customer named on Schedule A and shall
indemnify and hold BAS harmless from any claim or claims arising from
Investment Advisor's unauthorized execution of this Agreement on any such
Customer's behalf.
3. All Executing Brokers through whom Customer or Investment Advisor, as the
case may be, is initially authorized to execute prime brokerage transactions
are identified on Schedule B hereto. Prior to entering into a prime
brokerage transaction with an Executing Broker not identified on Schedule B.
Customer or Investment Advisor shall state in a writing sent via facsimile
to BAS that it desires to do so and confirm with BAS that a prime brokerage
agreement has been executed- between BAS and such Executing Broker. Upon
execution of a prime brokerage agreement between BAS and such Executing
Broker, Schedule B hereto shall be deemed automatically amended to include
such Executing Broker and, only thereafter, may Customer execute prime
brokerage transactions with such Executing Broker pursuant to this
Agreement.
4. Customer or Investment Advisor, as the case may be, will promptly notify BAS
of each transaction executed by an Executing Broker on Customer's behalf, no
later than the close of business on trade date. At a minimum, such notice
will include the security involved, the number of shares or units, the price
per share or unit, whether the transaction was a long or short sale or a
purchase, the Executing Broker and the Executing Broker's commission.
5. On the next business day following trade date, BAS will send to Customer, or
if requested in writing, to Investment Advisor, notification confirming the
details of each transaction executed by Executing Broker on Customer's
behalf, based upon the information provided to BAS by Customer or Investment
Advisor. Such notification will include all information required for a
confirmation pursuant to Rule 10b-10 under the Securities Exchange Act of
1934 ("Rule 10b-10"), except the capacity of the executing broker, an
average price designation, and, in principal trades, the reported trade
price and the difference between that price and the net price to Customer,
if this information has not been provided to BAS by Customer or Investment
Advisor. In addition, the notification will disclose any transaction-based
charges imposed by BAS and any commission charged by Executing Broker.
6. BAS will settle transactions on Customer's behalf, unless, during the time
permitted for disaffirmations under the agreement then in effect between BAS
and Executing Broker, BAS disaffirms all unsettled transactions of Customer
that BAS determines to disaffirm in good faith and in accordance with
reasonable commercial standards. BAS will promptly send to Customer or
Investment Advisor, as applicable, a notice of cancellation of all
disaffirmed transactions to offset any notifications sent previously. BAS
shall not be responsible for the clearance and settlement of transactions
that it disaffirms. Rather, Customer shall be responsible and liable solely
to Executing Broker(s) for the clearance and settlement of such
transactions.
7. Without limiting the generality of the foregoing, if Customer is the
beneficial owner of an account managed by an Investment Advisor registered
under the Investment Advisor's Act of 1940, BAS, in its sole and absolute
discretion, may elect not to settle prime brokerage transactions on behalf
of Customer if Customer fails to maintain in its account with BAS minimum
net equity of at least $250,000 in cash or securities with a ready market as
defined in Rule 15c3-l(c)(11) under the Securities Exchange Act of 1934.
Otherwise, if Customer is not the beneficial owner of an account managed by
an Investment Advisor registered under the Investment Advisor's Act of 1940,
BAS, in its sole and absolute discretion, may elect not to settle prime
brokerage transactions on behalf of Customer if Customer fails to maintain
in its account with BAS minimum net equity of at least $1,000,000 in cash or
securities with a ready market as defined in Rule 15c3-l(c)(11) under the
Securities Exchange Act of 1934.
8. Furthermore, in the event net equity in Customer's account with BAS falls
below the minimum amount set forth in the No-Action Letter, Customer shall
have until 12:00 noon of the fifth business day following the date on which
net equity fell below the minimum amount to restore net equity to the level
required in the No-Action Letter. If Customer fails to restore net equity to
the required level, BAS shall notify each Executing Broker, by the same
day's close of business, that BAS is no longer acting as Prime Broker for
Customer. As of the day following such notice, BAS may not accept any prime
brokerage transactions commenced on behalf of Customer.
9. So long as this Agreement is in effect, BAS will be responsible to ensure
that all transactions which it has affirmed and not subsequently
disaffirmed, and is obligated to clear, are cleared between BAS and
Customer, and accordingly, appear on BAS's books in either a cash or margin
account for Customer and conform to Regulation T promulgated by the Board of
Governors of the Federal Reserve System and applicable self-regulatory
organization margin requirements.
10. Customer may instruct, in a writing separate from the
prime brokerage agreement between Customer and Executing Broker, Executing
Broker to send confirmations of transactions, as required by Rule l0b-10, to
Customer in care of BAS. Confirmations received by BAS on Customer's behalf
are available to Customer without charge, promptly upon request. The parties
acknowledge that providing such an instruction is not a condition to
entering into this Agreement, nor shall Customer be charged differential
fees or otherwise receive incentives for providing such an instruction.
11.BAS is hereby authorized to disclose Customer's name and address to each
Executing Broker identified on Schedule B. as such Schedule may be modified
from time to time, to enable such Executing Broker to establish on its books
an account for Customer to be used in the event transactions are disaffirmed
by BAS.
12. BAS will issue to Customer a statement of account at
least on a quarterly basis. The statement will include all transactions that
occurred during the statement period and the resultant security positions
and money balances.
13. Customer represents and warrants that it is currently in compliance, and
during the term of this Agreement will remain in compliance, with all
applicable requirements of the No-Action Letter, and any supplements or
amendments thereto; including, in particular, the requirement that it
execute an agreement similar to this Agreement with each Executing Broker at
any point in time identified on Schedule B.
14. In the event of an inconsistency between any term or terms of this Agreement
and those of any Cash Account Agreement, Margin Agreement or Clearing
Agreement between the parties, this Agreement shall control to the extent of
such inconsistency.
15. This Agreement may be amended or modified only by BAS
upon prior written notice to Investment Advisor or Customer. Such amendment
or modification shall become effective immediately in the event Customer
continues to accept prime brokerage services from BAS after the date on
which such notice is given.
16. This Agreement may be terminated by either party hereto
upon prior written notice. Any such termination shall not affect Customer's
liabilities and obligations to BAS with respect to transactions executed
prior to such termination.
17. 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 law
principles thereof.
Page 24 of 61
25
18. (a) Arbitration is final and binding on the parties.
(b) The parties are waiving their rights to seek remedies in court,
including the right to a jury trial.
(c) Pre-arbitration discovery is generally more limited than and
different from court proceedings.
(d) The arbitrators' award is not required to include factual findings
or legal reasoning and any party's right to appeal or seek
modifications or rulings by the arbitrators is strictly limited.
(e) The panel of arbitrators will typically include a minority of
arbitrators who were or are affiliated with the securities industry.
ANY CONTROVERSY BETWEEN BAS OR ANY OF ITS AFFILIATES OR ANY OF ITS OR THEIR
PARTNERS, OFFICERS, DIRECTORS OR EMPLOYEES ON THE ONE HAND, AND CUSTOMER AND/OR
INVESTMENT ADVISOR ON THE OTHER HAND, ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE ACCOUNTS ESTABLISHED HEREUNDER, SHALL BE SETTLED BY
ARBITRATION, IN ACCORDANCE WITH THE RULES THEN OBTAINING OF THE NEW YORK STOCK
EXCHANGE, INC. (OR SUCH OTHER ARBITRATION PANEL OR BOARD AS MAY BE REQUIRED BY
LAW). ANY AWARD OF THE ARBITRATORS SHALL BE FINAL, AND JUDGMENT UPON THE AWARD
RENDERED MAY BE ENTERED IN ANY COURT, STATE OR FEDERAL, HAVING JURISDICTION.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement, WHICH IS
ACKNOWLEDGED TO CONTAIN A PRE-DISPUTE ARBITRATION CLAUSE, to be duly executed
and delivered as of the date set forth below.
Hovde Acquisition II, L.L.C.
-----------------------------------------
CUSTOMER OR INVESTMENT ADVISOR ACCEPTED AND AGREED TO:
BANC OF AMERICA
SECURITIES LLC As
Prime Broker
By: /s/ Richard J. Perry, Jr. By:
-----------------------------------------------------------
Richard J. Perry, Jr., COO
-----------------------------------------------------------
Print Name and TitlePrint Name and Title
Date: 6/27/01 Date:
------ -------
Page 25 of 61
26
EXHIBIT J
BANC OF AMERICA SECURITIES LLC Montgomery Division
A Bank of America Company
________________________
ACCOUNT NUMBER
________________________
ACCOUNT NAME
LIMITED LIABILITY ACCOUNT AGREEMENT
Gentlemen:
In consideration of your opening and carrying a limited liability company
account in the name of Hovde Acquisition II, L.L.C.; a duly organized limited
liability company (the "LLC") organized under the laws of the state of Nevada of
which the undersigned is a duly elected or authorized member of the LLC, the
undersigned agrees that each of the following person, to wit:
Eric D. Hovde
-------------------------------- ------------------------
Richard J. Perry, Jr.
-------------------------------- ------------------------
are hereby appointed the authorized agents and attorneys-in-fact of the LLC (the
"Authorized Agents"), and shall have authority on behalf of the LLC, and for its
account and risk, to buy, sell (including short sales), tender, convert,
exchange, trade and otherwise deal in, through you as brokers, stocks, bonds,
options and any other securities (on margin or otherwise) in accordance with
your terms and conditions for the LLC account.
You are authorized to follow the instructions of the Authorized Agents in every
respect concerning said account, and to deliver to them on behalf of the LLC
account all demands, notices, confirmations, reports, statements of accounts,
and communications of every kind; to deliver to them on behalf of the LLC
account money, securities and property of every kind, and to follow the orders
of said Authorized Agents regarding the same. The Authorized Agents are hereby
authorized to execute and deliver on behalf of the LLC account agreements
relating to any of the foregoing matters and to terminate or modify same or
waive any of the provisions thereof; and generally to deal with you on behalf of
the LLC account as fully and completely as if each alone were interested in said
accounts, all without notice to the other or others interested in said account.
This Authorization and indemnity is in addition to, and in no way limits or
restricts, any rights which you have under any other agreement or agreements
between you and the undersigned, or any of them, now existing or hereafter
entered into, and is binding on the LLC and its legal representatives,
successors and assigns. This authorization and indemnity is also a continuing
one and shall remain in full force and effect until revoked by a written notice,
addressed to you and delivered to you at your principal office. No such
revocation shall affect any liability arising out of any transaction initiated
prior to such revocation. The undersigned, jointly and severally agree to
indemnify and hold you harmless from and to pay you promptly on demand any debit
balance in said account, including any loss or debit balance resulting from
transactions initiated prior to receipt of such revocation.
The undersigned hereby certify that the members of said LLC are as follows: *
Name Occupation
Hovde Acquisition, L.L.C. Limited Liability Company
------------------------- ------------------------
Name Occupation
------------------------- -----------------------
Name Occupation
------------------------- -----------------------
*or attach signature page(s) of the LLC's Operating Agreement
Name Occupation
------------------------- -----------------------
Name Occupation
------------------------- -----------------------
Name Occupation
------------------------- -----------------------
Name Occupation
------------------------- -----------------------
Name Occupation
------------------------- -----------------------
Name Occupation
------------------------- -----------------------
The undersigned further authorizes you, in the event of death or retirement of
any of the members of said LLC, to take such proceedings, require such papers,
retain such portions or restrict transactions in said account as you may deem
advisable to protect you against any liability, penalty or loss under any
present or future laws or otherwise. It is further agreed that in the event of
the death or retirement of any member of the said LLC the remaining members will
immediately cause you to be notified of such fact.
This Authorization and indemnity and its enforcement shall be governed by the
laws of the State of New York, shall cover individually and collectively all
accounts covered by this agreement and authorization which the undersigned may
open or reopen with you, and shall inure to the benefit of your present
organization, and any successor organization, irrespective of any change or
changes of any kind of the personnel thereof for any cause whatsoever, and of
the assigns of your present organization or any successor organization.
Customer consent to loan or pledge of securities and other property (not
applicable to cash accounts): each of the undersigned has signed the enclosed
Customer's Agreement and Customer's Loan Consent which are intended to cover, in
addition to the provisions hereof, the terms upon which the LLC is to be
carried.
Very truly yours,
Hovde Acquisition, L.L.C.
Dated: 6/26/01 By:/s/ Richard J. Perry, Jr.
-------------- ----------------------------
Managing Member
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EXHIBIT R
MORGAN STANLEY & CO. INCORPORATED
OPTION AGREEMENT
The following sets forth our respective rights and obligations arising from your
handling, purchasing, selling, assigning, exercising and/or endorsing puts
and/or calls, or variations thereof ("options"), for my account. In connection
with such transactions for my account, I agree and represent as follows:
1. I have received from you, have read and understand the brochure entitled
"Characteristics and Risks of Standardized Options" and/or other appropriate
Options Disclosure Documents ("ODD"), including but not limited to the
information therein regarding position limits and exercise limits, the purposes
and risks of transactions in options and the secondary market in options.
2. I agree to pay to you, as you direct, (a) all applicable transaction
fees, charges and premiums, (b) the amount of any trading loss that you may
incur from options transactions executed by you on my behalf and (c) any debit
balance owing with respect to my account(s), and interest and service charges on
any such debit balances at the rates then charged by you, together with your
costs and reasonable attorney's fees incurred in collecting any such debit
balance.
3. In effecting options transactions through you, I am aware of and agree
to be bound by the rules of The Options Clearing Corporation ("OCC"), the
Securities and Exchange Commission, the various securities exchanges and
securities associations, the Board of Governors of the Federal Reserve Board and
other securities self regulatory organizations having jurisdiction over options
transactions. Without limiting the foregoing, I agree not to violate, either
acting by myself (through you as broker or otherwise) or in concert with others,
directly or indirectly, the rules of such organizations regarding position
limits and/or exercise limits. I further expressly authorize you to liquidate
any of my options positions without notice to me and without my consent, in your
sole and absolute discretion, if and when my open positions exceed applicable
position limits so as to reduce such open positions to a level that is in
compliance with such limits or if I fail to fulfill any of my obligations
hereunder or under any other agreement with you. I will bear and be solely
responsible for any losses associated with such a reduction or liquidation.
4. I agree that you shall not be liable for delays in the transmission of
orders or instructions due to the breakdown or failure of transmission or
communication facilities or any other cause beyond your control, including any
mistake, error, negligence or misconduct of a securities exchange, securities
association or clearing house or their officers, directors, employees or agents.
5. (a) I understand that I am fully responsible for taking action to
exercise my option contracts. I hereby agree to waive any and all claims for
damages or loss, which I might have against you because an option was not
exercised. I understand that my options will become worthless if I do not
deliver instructions to exercise by your established exercise cut-off times,
which may be different than exercise cut-off times established by the exchanges,
markets and clearing houses. I am aware that the OCC has established thresholds
for equity and index option contracts whereby all expiring contracts at or above
the appropriate threshold will be automatically exercised unless you, at my
direction, instruct the OCC otherwise.
(b) I understand that you randomly assign exercise notices to all
customers. All American-style (an option that may be exercised at any time)
short option positions are subject to assignment at any time, including
positions established on the same day that exercises are assigned, while
European-style (an option that may be exercised only on a specified exercise
date) short option positions are only subject to assignment upon expiration.
Exercise assignment notices are allocated randomly from among all of your
customers' short option positions, which are subject to exercise. A more
detailed description of Morgan Stanley & Co. Incorporated's Random Method for
allocating assignment notices is available from your account representative upon
request.
6. I represent and warrant to you that (i) options trading is suitable for
me in light of my investment objectives, financial situation, needs, experience
and knowledge, (ii) I am aware and acknowledge that options trading may be
highly speculative and involves a high degree of risk (including without
limitation the risks described in the ODD) and that on certain trading days,
trading may cease with a resultant financial disadvantage to me, (iii) I am
willing and able to evaluate, carry and bear the financial risks attendant to
options trading, and (iv) I understand that you are relying upon these
representations and warranties and the financial and other information that I
have provided or will provide to you. I will promptly notify you of any
significant changes that take place in any information furnished to you,
including my investment objectives, financial situation and/or needs, prior to
effecting any additional opening purchase or sale transactions.
7. CHOICE OF DISPUTE RESOLUTION. ANY DISPUTE THAT I MAY HAVE WITH YOU
ARISING OUT OF, RELATING TO OR IN CONNECTION WITH, YOUR BUSINESS, ANY
TRANSACTION BETWEEN US, OR THIS AGREEMENT, SHALL BE DETERMINED BY ARBITRATION OR
LITIGATION IN COURT AT MY ELECTION. REGARDLESS OF WHETHER I CHOOSE ARBITRATION
OR LITIGATION, WE AGREE TO FOLLOW THE PROCEDURES, AND ABIDE BY THE REQUIREMENTS,
LISTED BELOW:
8. ARBITRATION:
- ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
- THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING THE
RIGHT TO A JURY TRIAL.
- PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM
COURT PROCEEDINGS.
- THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL
REASONING AND ANY PARTY'S RIGHT TO
APPEAL OR TO SEEK MODIFICATION OF RULINGS BY THE ARBITRATORS IS ST RICTLY
LIMITED.
Page 27 of 61
28
THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS
WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
ANY ARBITRATION SHALL BE CONDUCTED IN NEW YORK AND ONLY BEFORE THE NEW YORK
STOCK EXCHANGE, INC., THE AMERICAN STOCK EXCHANGE, INC., THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC., OR ANY OTHER SELF-REGULATORY
ORGANIZATION OF WHICH YOU ARE A MEMBER. I HAVE THE RIGHT TO ELECT ONE OF THE
FOREGOING ORGANIZATIONS, BUT IF I FAIL TO MAKE SUCH ELECTION BY
CERTIFIED LETTER ADDRESSED TO YOU AT YOUR MAIN OFFICE BEFORE THE EXPIRATION OF
TEN DAYS AFTER RECEIPT OF A WRITTEN REQUEST FROM YOU TO MAKE SUCH ELECTION THEN
YOU MAY MAKE SUCH ELECTION. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS
CONSENT BY YOU TO AN AWARD OF PUNITIVE DAMAGES. THE AWARD OF THE ARBITRATORS, OR
THE MAJORITY OF THEM, SHALL BE FINAL, AND JUDGMENT UPON THE AWARD RENDERED MAY
BE ENTERED IN ANY COURT, STATE OR FEDERAL, HAVING JURISDICTION.
NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION,
NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINST ANY PERSON WHO
HAS INITIATED IN COURT A PUTATIVE CLASS ACTION; WHO IS A MEMBER OF A PUTATIVE
CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED
BY THE PUTATIVE CLASS ACTION UNTIL:
(i) THE CLASS CERTIFICATION IS DENIED;
(ii) THE CLASS IS DECERTIFIED; OR
(iii) THE CUSTOMER IS EXCLUDED FROM THE CLASS BY THE COURT. SUCH
FORBEARANCE TO ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER
OR ANY RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN.
9. LITIGATION IN COURT. (A) UNLESS THE PARTIES OTHERWISE AGREE IN WRITING
WHEN ANY DISPUTE ARISES, ANY LITIGATION MUST BE INSTITUTED IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR THE SUPREME COURT OF THE
STATE OF NEW YORK FOR THE COUNTY OF NEW YORK. (B) ANY RIGHT TO TRIAL BY JURY
WITH RESPECT TO ANY CLAIM OR ACTION IS HEREBY WAIVED BY ALL PARTIES TO THIS
AGREEMENT.
10. THIS AGREEMENT, ITS ENFORCEMENT, AND ANY DISPUTE BETWEEN US, WHETHER
ARISING OUT OF OR RELATING TO MY ACCOUNTS OR OTHERWISE, SHALL BE GOVERNED BY THE
LAW OF THE STATE OF NEW YORK, EXCLUDING ITS CONFLICT OF LAW RULES; and its
provisions shall be continuous, shall cover individually and collectively all
accounts which I may open or reopen with you, and shall inure to the benefit of
your present organization and any successor organization, irrespective of any
change or changes at any time in the personnel thereof, for any cause
whatsoever, and of the assigns of your present organization or any successor
organization, and shall be binding upon me, and/or my estate, executors,
administrators, trustees, agents, officers, directors and assigns.
NOTICE: THIS AGREEMENT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE IN PARAGRAPHS 7
AND 8.
Page 28 of 61
29
EXHIBIT S
Morgan Stanley
CUSTOMER PRIME BROKER
ACCOUNT AGREEMENT
Ladies and Gentlemen:
In consideration of Morgan Stanley from time to time accepting an account or
receiving holding or delivering any property of the undersigned, or entering
into any Contract with the undersigned, the undersigned agrees with Morgan
Stanley to the following:
1. DEFINITIONS
"Agreement" means this document along with all executed annexes to this
document.
"Contract" means any contract or agreement between Morgan Stanley and the
undersigned, including securities purchase or sale contracts, agreements to lend
cash or securities, commodity and currency contracts, forward contracts,
repurchase agreements, swap agreements or any other derivative or financial
transaction, without regard to the form of such agreement which may include oral
agreements or agreements confirmed or signed by only one party to the agreement
and agreements entered into or signed by Morgan Stanley on behalf of the
undersigned.
"Collateral" means cash, securities, commodities, other financial assets,
investment property and other property and assets (including all security
entitlements in respect thereof, all income and profits thereon, all dividends,
interest and other payments and distributions with respect thereto and all
proceeds from any of the foregoing) which from time to time may be deposited or
credited to any account of the undersigned with Morgan Stanley, be held or
carried by Morgan Stanley for the undersigned, be due from Morgan Stanley to the
undersigned, or be delivered to or in Morgan Stanley's possession or control for
any purpose, including safekeeping.
"Morgan Stanley" and the "Morgan Stanley Entities" mean, individually or
collectively, as appropriate, Morgan Stanley & Co. Incorporated, MS Securities
Services Inc., Morgan Stanley & Co. International Limited, Prime Dealer Services
Corp., Morgan Stanley Securities Limited, Morgan Stanley Japan Limited, Morgan
Stanley Asia Limited, Morgan Stanley GMBH, Morgan Stanley Market Products Inc.,
Morgan Stanley Capital Group Inc., Morgan Stanley Capital Services Inc., Morgan
Stanley DW Inc., Morgan Stanley, MSDW Asia Securities Products LLC, MSDW Equity
Finance Services (Cayman) Ltd., Morgan Stanley Financial Products Ltd., MSDW
Markets Inc. and their respective successors, parents, subsidiaries, affiliates,
divisions, officers, directors, agents and employees.
"Obligation" means any obligation or liability of a party arising at any time,
whether or not mature or contingent, related to the purchase, sale or loan of
securities, currencies or other instrument, property or assets or under or in
connection with this Agreement or any Contract, including any payment, repayment
or delivery obligation, any obligation relating to any extension of credit or to
pay damages (including costs of cover) and legal and other expenses incurred in
connection with the enforcement of any Contract.
"Prime Brokerage Regulations" means the requirements applicable to prime
brokerage activities set out in the no-action letter of the Securities and
Exchange Commission ("SEC") dated January 25, 1994, as such letter may be
amended, modified or supplemented from time to time, regarding the performance
of prime brokerage services, and any other relevant regulations of the SEC or
other governmental authorities or self-regulatory organizations.
"Undersigned" means each of the individuals or entities, other than Morgan
Stanley, that is a party to this Agreement.
2. APPLICABLE RULES AND REGULATIONS. All transactions under this Agreement shall
be subject to the rules and regulations of all U.S. and, if applicable, non-
U.S., federal, state and local governmental authorities, self-regulatory
organizations, markets and clearing corporations including but not limited to
the Securities & Exchange Commission ("SEC"), New York Stock Exchange ("NYSE")
or National Association of Securities Dealers ("NASD").
3. SHORT AND LONG SALES. The undersigned agrees that when placing any sell
order, the undersigned will appropriately designate it as "long" or as "short."
The undersigned will designate a sale as "long" only if the securities being
sold are securities then owned by the undersigned and such securities are either
in the undersigned's account at Morgan Stanley or will be delivered to Morgan
Stanley as soon as it is possible to do so, without undue inconvenience or
expense to Morgan Stanley.
4. COMPLIANCE WITH PRIME BROKERAGE REGULATORY REQUIREMENTS. The undersigned
hereby acknowledges that it is familiar with the Prime Brokerage Regulations and
with the related provisions in Section 5 of this Agreement, and hereby
undertakes to comply with the Prime Brokerage Regulations as in effect at any
time and with the related provisions of this Agreement. The undersigned will
inform Morgan Stanley promptly if this undertaking is not satisfied. Without
limiting the foregoing, the undersigned agrees that it shall maintain in its
account with Morgan Stanley at all times a minimum net equity in cash and
securities as agreed upon, but in no event less than that required by the Prime
Brokerage Regulations. The undersigned further agrees that, in the event its
account falls below this minimum net equity, it shall bring its account into
compliance in accordance with the Prime Brokerage Regulations.
Page 29 of 61
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5. MORGAN STANLEY AS PRIME BROKER. In connection with any transactions where
Morgan Stanley acts as the undersigned's prime broker:
(a) The undersigned maintains brokerage accounts with a number of other brokers
("Executing Brokers") and, from time to time, will place orders to be executed
by one or more Executing Brokers. The undersigned agrees to give Morgan Stanley
notice of the names of all Executing Brokers with whom the undersigned intends
to place orders (which Executing Brokers must be acceptable to Morgan Stanley).
Morgan Stanley is authorized to enter into a Prime Brokerage Agreement with all
current or future Executing Brokers, to set up an account for the undersigned's
benefit at any Executing Broker and to provide or obtain any information
necessary to establish or maintain a prime brokerage relationship. The
undersigned acknowledges that no order need be accepted by Morgan Stanley as
prime broker from any Executing Broker with which Morgan Stanley has not entered
into a "Prime Brokerage Agreement" with respect to the undersigned's account at
Morgan Stanley. Further, Morgan Stanley reserves the right at any time to place
a limit on the size of transactions executed by any Executing Broker which are
to be settled and cleared by Morgan Stanley as a prime broker. The undersigned
will use its best efforts to assure that such Executing Brokers comply with the
terms set forth in the Prime Brokerage Agreement. The undersigned acknowledges
that as between Morgan Stanley and any Executing Broker, the Executing Broker
will be acting as an agent of the undersigned, not as Morgan Stanley's agent,
for the purpose of carrying out the undersigned's directions with respect to the
purchase, sale and settlement of securities.
b) The undersigned or its representative will advise Morgan Stanley on trade
date of the details of all transactions effected by any Executing Broker on the
undersigned's behalf (the "Trade Data"). Morgan Stanley is authorized to
acknowledge, affirm, settle and clear all such transactions. All such
transactions shall be for the sole account and risk of the undersigned and
Morgan Stanley shall have no responsibility or liability to the undersigned, any
Executing Broker or any other third party. The undersigned agrees to pay all
fees agreed upon and to make any necessary arrangements with the appropriate
Executing Broker concerning the payment of any such fees, including the
deduction of any such amounts from commissions charged by the Executing Brokers.
The undersigned agrees that it is responsible, and liable to Morgan Stanley, and
will indemnify Morgan Stanley, for all costs, losses and fees (including but not
limited to those associated with buy-ins and sell-outs and those resulting from
any Executing Broker's inability to settle a transaction) arising out of the
orders placed by the undersigned with any Executing Broker or any action taken
or not taken by any Executing Broker with respect to the undersigned or its
transactions or accounts.
(c) On the first business day following each transaction, Morgan Stanley shall
send to the undersigned a notification of each trade placed with any Executing
Broker based on information provided to Morgan Stanley by the undersigned. Any
confirmations of trades or advices issued by Morgan Stanley as prime broker
shall indicate the name of the Executing Broker involved and the other
information required by the Prime Brokerage Regulations. If the undersigned has
instructed the Executing Broker to send trade confirmations to the undersigned
in care of Morgan Stanley, Morgan Stanley agrees that the confirmations will be
available to the undersigned without charge upon request to Morgan Stanley.
Reports of the execution of orders and statement of accounts of the undersigned
shall be conclusive and binding if not objected to in writing (the former within
five days and the latter within ten days) after Morgan Stanley's transmittal to
the undersigned by mail, e-mail, facsimile, electronically or any other agreed
means. Communications may be sent to the undersigned at the undersigned's
address of record or in such other manner as the undersigned may hereinafter
provide in writing. All communications sent to such address whether by mail, e-
mail, facsimile, telegraph, messenger, electronic means or otherwise shall be
deemed given to the undersigned personally as of the date sent, whether actually
received or not.
(d) The undersigned understands that transactions will be settled by Morgan
Stanley only if: (i) sufficient funds or securities, as necessary, are
maintained in an account with Morgan Stanley or if the undersigned has made
other arrangements for settlement that are satisfactory to Morgan Stanley; (ii)
the undersigned maintains, and has at the settlement of the transaction, at
least the minimum net equity required by the Prime Brokerage Regulations in its
account with Morgan Stanley and (iii) a condition does not exist that would
require Morgan Stanley to disaffirm on a non-discretionary basis, as defined in
the Securities Industry Association Form 150, paragraph 3. (e). Morgan Stanley's
customer account records may reflect transactions as settled as of the projected
settlement date (sometimes referred to as contractual settlement). Morgan
Stanley does not guarantee settlement, however, and therefore reserves the right
to reverse transaction settlement entries in the event of a settlement failure
caused by events beyond Morgan Stanley's control.
(e) The undersigned agrees to comply with Morgan Stanley's requirements relating
to short sales, including the requirement that no short sale may be effected
through an Executing Broker unless the undersigned has first confirmed with
Morgan Stanley that the securities are available for delivery. Such confirmation
does not guarantee that the securities will be available for delivery on
settlement date or that the securities will be available to support a short sale
for any particular period of time. Accordingly, the short sale may fail on
settlement date or the undersigned may be asked to cover its short sale at
anytime, and undersigned will be responsible for any Obligations that arise
therefrom.
(f) Morgan Stanley is authorized to try to resolve any unmatched trade reports
received from any Executing Broker. However, the undersigned is responsible for
the ultimate resolution of these trades and reports. Morgan Stanley shall have
no responsibility or liability with respect to trade data not correctly
transmitted to it on a timely basis by any person or entity, including but not
limited to DTCC.
(g) In the event the undersigned's account falls below the minimum net equity
required by the Prime Brokerage Regulations, the undersigned authorizes Morgan
Stanley to notify promptly all its Executing Brokers of such event. If the
undersigned fails to bring such account into compliance with the minimum net
equity, the undersigned further agrees that Morgan Stanley may, without notice
to the undersigned, disaffirm, DK or decline to affirm, clear and settle any
transaction effected by an Executing Broker on the undersigned's behalf. Except
as provided in the following paragraph, the undersigned understands that if
Morgan Stanley takes such action with respect to any transaction of the
undersigned, Morgan Stanley shall do so for all transactions of the undersigned
that day. In any such case, Morgan Stanley shall send a cancellation
notification to the undersigned and the undersigned understands that the
undersigned must settle outstanding trades directly with the relevant Executing
Broker and authorizes Morgan Stanley to provide the Executing Broker with any
information necessary to settle such trades. The undersigned further agrees that
Morgan Stanley will not be bound to make any investigation into the facts
surrounding any transaction to which the undersigned is a party and that,
immediately upon notice to the undersigned and, if required, to the Executing
Brokers, Morgan Stanley may cease acting as prime broker for the undersigned.
(h) The undersigned hereby authorizes Morgan Stanley, if its account is managed
on a discretionary basis by an SEC- or state-registered investment adviser,
money manager or other person (an "Adviser"), to commingle its prime brokerage
transactions with those of other accounts of its Adviser ("sub-accounts") for
order placement and clearance in bulk in accordance with other instructions of
the Adviser. The undersigned understands that no part of any transaction may be
allocated to any sub-account where such sub-account's net equity is below the
minimum levels established by the Prime Brokerage Regulations and that, should a
such a net equity deficiency occur in any such sub-account, Morgan Stanley must
disaffirm the entire transaction. The undersigned agrees that, should such an
event occur, its Adviser may resubmit the bulk trade to the Executing Broker so
as to exclude those securities which were originally allocated to the
undersigned's sub-account or, if permissible, re-allocate the entire prime
brokerage transaction to other sub-accounts. The undersigned understands that
such reallocation must be communicated to Morgan Stanley within any required
deadlines.
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6. CURRENCY CONTRACTS. If an authorized representative of the undersigned
initials the box entitled "Additional Provisions Related to Currency Contracts",
which appears at the end of this Agreement, the undersigned, from time to time,
may enter into spot and/or forward currency Contracts with Morgan Stanley in
connection with the settlement of other Contracts or otherwise as the
undersigned shall direct. The undersigned acknowledges that Morgan Stanley is
under no obligation to enter into any currency Contracts with, or on behalf of,
the undersigned, and further agrees to furnish to Morgan Stanley such
documentation to indicate capacity and authority as Morgan Stanley may
reasonably request prior to entering into any such Contracts. Each currency
Contract entered into under this Agreement shall constitute an "FX Transaction",
as such term is defined in the 1998 FX and Currency Option Definitions,
including Annex A thereto, as published by the International Swaps and
Derivatives Association, Inc., EMTA, and The Foreign Exchange Committee (as may
be amended, the "FX Definitions"), and shall be subject to the terms in this
Section 6 as well as those set forth in the "Additional Provisions Related to
Currency Contracts" box. Any confirmation, whether created by an exchange of
telexes, facsimiles, SWIFT messages, or electronic messages on an electronic
messaging or matching system, between Morgan Stanley and the undersigned
relating to an FX Transaction, whether or not it is expressed to be, shall
constitute a confirmation and, unless Morgan Stanley and the undersigned
expressly agree otherwise, will be deemed to incorporate the FX Definitions.
Notwithstanding the foregoing, Morgan Stanley shall have the right to convert
currencies in connection with the exercise of Morgan Stanley's rights under
Section 8 below in such manner as it may determine.
7. SECURITY INTEREST AND LIEN. All Collateral shall be subject to a general lien
and a continuing first priority perfected security interest for the discharge of
all Obligations of the undersigned to Morgan Stanley, irrespective of whether or
not Morgan Stanley has made advances in connection with such Collateral, the
number of accounts the undersigned has with Morgan Stanley or which particular
Morgan Stanley Entity holds such Collateral. The undersigned and Morgan Stanley
each acknowledge and agree that each Morgan Stanley Entity which holds
Collateral does so both for itself and also as an agent and bailee for all other
Morgan Stanley Entities which may be secured parties under any Contract. The
undersigned and Morgan Stanley agree that all Collateral held in or credited to
any account will be treated as financial assets under Article 8 of the Uniform
Commercial Code as in effect in the State of New York (the "UCC") and that any
account maintained by the undersigned with any Morgan Stanley Entity shall be a
securities account under Article 8 of the UCC. In the event of a breach or
default by the undersigned, Morgan Stanley shall have in addition to the rights
and remedies provided in this Agreement, all rights and remedies available to a
secured creditor under the UCC and any other applicable law. All Collateral
delivered to Morgan Stanley shall be free and clear of all prior liens, claims
and encumbrances and the undersigned will not cause or allow any of the
Collateral to be subject to any liens, security interests, mortgages or
encumbrances of any nature other than the security interest created in Morgan
Stanley's favor. Furthermore, Collateral consisting of securities shall be
delivered in good deliverable form (or Morgan Stanley shall have the
unrestricted power to place such securities in good deliverable form) in
accordance with the requirements of the primary market for these securities. The
undersigned shall execute such documents and take such other action as Morgan
Stanley shall reasonably request in order to perfect its rights with respect to
any such Collateral. In addition, the undersigned appoints Morgan Stanley as the
undersigned's attorney-in-fact to act on the undersigned's behalf to sign, seal,
execute and deliver all documents, and do all such acts as may be required, to
realize upon any of Morgan Stanley's rights in the Collateral.
8. RIGHTS OF MORGAN STANLEY. Morgan Stanley is hereby authorized, in its
discretion, to cancel any outstanding orders for the purchase or sale of any
securities, currencies, commodities or other property or asset, or to sell any
or all of the securities, currencies, commodities or other property or asset
which may be in Morgan Stanley's possession or control (either individually or
jointly with others), or to buy any securities, currencies, commodities or other
property or asset of which any account of the undersigned may be short upon: (a)
the undersigned's death or incompetency (if applicable); (b) a breach,
repudiation or default by the undersigned of this Agreement or any other
Contract; (c) any misrepresentation of any statement by the undersigned when
made or deemed to be made or repeated, (d) the failure of the undersigned to
fulfill or discharge any Obligation under this Agreement or any Contract,
including the failure to make a payment on demand or to satisfy margin
requirements,(e) the filing by or against the undersigned of a petition or other
proceeding in bankruptcy, insolvency or for the appointment of a receiver, (f)
the levy of an attachment against any property or asset in any account of the
undersigned (g) the failure by the undersigned to give adequate assurance of due
performance pursuant to this Agreement (h) should you deem it necessary for your
protection, to cancel any outstanding orders for the purchase or sale of any
securities or other property, or to sell any or all of the securities,
currencies and commodities or other property which may be in your possession or
control (either individually or jointly with others), or to buy in any
securities, commodities or other property of which the account or accounts of
the undersigned may be short. Such sale, purchase or cancellation may be made on
any exchange or other market where such business is then usually transacted, or
at public auction or private sale, without advertising or notice of the time or
place of sale to the undersigned, and without prior tender, demand or call of
any kind upon the undersigned, all of which are expressly waived. Morgan Stanley
may purchase the whole or any part thereof free from any right of redemption and
the undersigned shall remain liable to Morgan Stanley for any deficiency; it
being understood that a prior tender, demand or call of any kind from Morgan
Stanley, or prior notice from Morgan Stanley, of the time and place of such sale
or purchase shall not be considered a waiver of Morgan Stanley's right to sell
or buy any securities, commodities, or other property or asset held by Morgan
Stanley, or which the undersigned may owe to Morgan Stanley. In addition, Morgan
Stanley may at any time in connection with its rights under this Section 8
without prior notice to the undersigned apply or transfer any and all Collateral
interchangeably between Morgan Stanley Entities in connection with accounts in
which the undersigned has an interest.
9. ADEQUATE ASSURANCES. If at any time Morgan Stanley has reasonable grounds to
doubt the undersigned's performance of any of the undersigned's Obligations,
Morgan Stanley may demand, and the undersigned shall give within twenty-four
hours or any reasonable shorter period of time Morgan Stanley specifies,
adequate assurance of due performance. The giving of adequate assurance of
performance may require the delivery by the undersigned to Morgan Stanley of
additional Collateral. Any failure by the undersigned to give such adequate
assurance of due performance shall constitute an independent, material default
under the terms of all Contracts and Morgan Stanley may terminate, liquidate or
accelerate any and all Contracts and exercise any right under or with respect to
any security relating to any Contract and any right to net or set off payments
which may arise under any Contract or other agreement or under applicable law.
10. EXPENSES AND OTHER CHARGES. The undersigned agrees to pay Morgan Stanley, or
its designee, the following fees and charges with respect to trading activity:
(a) Morgan Stanley's commissions, markups and other charges with respect to the
execution of transactions, fails, buy-ins, conversion costs or the maintenance
of positions or other related services;
(b) any fees, fines, penalties or other charges imposed by any authority
described in Section 2 of this Agreement or any court or authority of competent
jurisdiction on any account opened or transaction executed for the undersigned,
except any such charges as may be imposed due to Morgan Stanley's gross
negligence or willful misconduct;
with respect to fees or expenses related to securities lending and borrowing
transactions:
(a) upon demand, any debit balance owing with respect to any account of the
undersigned, and interest and service charges on any such debit balance at the
rates then charged by Morgan Stanley; and
(b) any charges with respect to such transactions, including buy-ins, and
applicable taxes or interest on any of the foregoing, together with Morgan
Stanley's costs and reasonable attorney's fees incurred in collecting
any such debit balance.
11. NETTING AND SET OFF RIGHTS. Morgan Stanley shall have the right, at any time
and from time to time, to set off Morgan Stanley's Obligations owed to the
undersigned against the Obligations of the undersigned to Morgan Stanley and to
foreclose on any Collateral for the purpose of satisfying the Obligations of the
undersigned to Morgan Stanley. The undersigned acknowledges that the fulfillment
by Morgan Stanley of its Obligations to the undersigned is contingent upon there
being no breach, repudiation, misrepresentation or default by the undersigned
which has occurred and is continuing under this Agreement or any Contract.
12. MAINTENANCE OF THE UNDERSIGNED'S COLLATERAL. Subject to the applicable rules
of the SEC and other competent authorities, the undersigned acknowledges that
all Collateral now or hereafter in Morgan Stanley's possession or control
(either individually or jointly with others) or deposited to secure the same,
may from time to time and without further notice to the undersigned, be carried
in Morgan Stanley's general accounts and may be pledged, hypothecated or
rehypothecated, separately or in combination with property of others for the sum
due to Morgan Stanley thereon or for a greater sum and without Morgan Stanley's
retaining in its possession a like amount of similar property. Within the limits
of applicable law, rule and regulation, Morgan Stanley is authorized to
lend, to itself or to others Collateral it holds, together with all attendant
rights of ownership (including the right to vote any securities).
13. FAILURE OF DELIVERY. If the undersigned directs Morgan Stanley to make any
delivery of any security, commodity or other property or asset for its account
for any reason and the undersigned fails to deliver that item to Morgan Stanley
in the time, place and manner required, or if Morgan Stanley is unable to borrow
the security, or in the case of a recall, Morgan Stanley is unable to re-borrow
the security, the undersigned authorizes Morgan Stanley to borrow or purchase
that item (or to be deemed to have make such purchase at the market value of the
time of such deemed purchase) in such manner and time as Morgan Stanley in its
sole discretion determines to be commercially reasonable. The undersigned agrees
to be responsible for any consequent loss which Morgan Stanley may suffer and
any related costs, premiums and losses to which Morgan Stanley may be subject.
14. CONFIRMATIONS, STATEMENTS AND OTHER COMMUNICATIONS. Execution reports and
account statements shall be conclusive and binding if not objected to in writing
(the former within five days and the latter within ten days) after transmittal
by Morgan Stanley to the undersigned by mail or otherwise, including by
electronic communication. Morgan Stanley may send communications to the
undersigned's address of record or otherwise as provided to Morgan Stanley in
writing. All communications, whether by mail, facsimile, telegraph, messenger,
electronic means or otherwise, shall be deemed to have been given to the
undersigned personally as of the date sent, whether actually received or not.
15. NO OBLIGATION. The undersigned agrees that Morgan Stanley shall be under no
obligation whatsoever to enter into any Contract with, or on behalf of, the
undersigned.
16. PROVISION OF INFORMATION. From time to time, Morgan Stanley may provide or
make available to the undersigned, or to others acting with or on behalf of the
undersigned,, research, opinions and other information, including portfolio
analyses and reports, regarding securities, commodities, other financial assets,
and market participants or events. The undersigned acknowledges that such
information is provided, unless Morgan Stanley agrees in writing otherwise,
without regard to the undersigned's personal financial situation, investment
objectives or other circumstances and that the provision by Morgan Stanley of
such information to the undersigned, whether sent directly or made readily
accessible, and whether in writing, in electronic form or the subject of a
taping, broadcast or narrowcast, does not imply that any asset or transaction
discussed therein is suitable in light of the undersigned's particular
circumstances. The undersigned agrees that no such information will be the
primary basis of any investment decision by the undersigned. While all
information produced by Morgan Stanley is based on sources believed to be
reliable, the undersigned acknowledges that Morgan Stanley does not guarantee or
warrant the accuracy, reliability or timeliness of such information. Further,
all information and opinions are current only as of the time provided, and are
subject to rapid change without prior notice. The undersigned also acknowledges
that Morgan Stanley may take positions in financial instruments discussed in the
information provided the undersigned (which positions may be inconsistent with
the information provided), may execute transactions for others in those
instruments and may provide investment banking and other services to the issuers
of those instruments. From time to time, Morgan Stanley also may provide or make
available to the undersigned, or to others acting with or on behalf of the
undersigned, information regarding parties that might provide goods or services
to the undersigned, including but not limited to fund administrators
("Vendors"). While all information produced by Morgan Stanley is based on
sources believed to be reliable, the undersigned acknowledges that Morgan
Stanley does not guarantee or warrant the accuracy, reliability or timeliness of
such information, or the quality of goods or services provided by any Vendors.
The undersigned agrees to indemnify and hold Morgan Stanley harmless from and
against any and all losses, claims, damages and liabilities arising out of or
relating to, actions or omissions by the Vendors, Morgan Stanley's provision or
making available of such information, or the undersigned's selection or use of
such Vendors.
17. USE OF THE INTERNET. Undersigned agrees that the Internet is not a secure
network and that any communications transmitted over the Internet may, among
other things, be intercepted or accessed by unauthorized or unintended parties
and may not remain confidential, or that such transmissions may not arrive in a
complete, unaltered or timely manner, and the undersigned assumes the risk
arising therefrom.
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18. RESOLUTION OF DISPUTES. ANY DISPUTE BETWEEN THE UNDERSIGNED AND A MORGAN
STANLEY ENTITY THAT IS REGISTERED AS A BROKER-DEALER WITH THE U.S. SECURITIES
AND EXCHANGE COMMISSION ARISING OUT OF, RELATING TO OR IN CONNECTION WITH MORGAN
STANLEY'S BUSINESS, ANY TRANSACTION BETWEEN US OR THIS AGREEMENT SHALL BE
DETERMINED, AT THE ELECTION OF THE UNDERSIGNED, BY LITIGATION IN A COURT WITH
PROPER JURISDICTION OR BY ARBITRATION. SHOULD THE UNDERSIGNED CHOOSE TO PROCEED
BY ARBITRATION, UNDERSIGNED AND MORGAN
STANLEY AGREE TO FOLLOW THE PROCEDURES, AND ABIDE BY THE REQUIREMENTS, LISTED IN
SECTION 19 BELOW. SHOULD THE UNDERSIGNED CHOOSE TO PROCEED BY LITIGATION,
UNDERSIGNED AND MORGAN STANLEY AGREE TO FOLLOW THE PROCEDURES, AND ABIDE BY THE
REQUIREMENTS, LISTED IN SECTION 20 BELOW.
19. IF THE UNDERSIGNED CHOOSES ARBITRATION, THE UNDERSIGNED ACKNOWLEDGES THAT:
ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING THE
RIGHT TO A JURY TRIAL.
ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM COURT
PROCEEDINGS.
THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL
REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY
THE ARBITRATOR IS STRICTLY LIMITED.
THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO
ARE OR WERE AFFILIATED WITH THE SECURITIES INDUSTRY.
ANY ARBITRATION SHALL BE CONDUCTED ONLY BEFORE THE NEW YORK STOCK EXCHANGE,
INC., THE AMERICAN STOCK EXCHANGE, INC., THE NATIONAL ASSOCIATION OF SECURITIES
DEALERS, INC. OR ANY OTHER U.S. SELF-REGULATORY ORGANIZATION OF WHICH THE
RELEVANT MORGAN STANLEY ENTITY IS A MEMBER. THE UNDERSIGNED
HAS THE RIGHT TO ELECT ONE OF THE FOREGOING ORGANIZATIONS, BUT IF THE
UNDERSIGNED FAILS TO MAKE SUCH ELECTION BY CERTIFIED LETTER ADDRESSED TO THE
RELEVANT MORGAN STANLEY ENTITY AT ITS MAIN OFFICE BEFORE THE EXPIRATION OF TEN
DAYS AFTER RECEIPT OF A WRITTEN REQUEST FROM MORGAN STANLEY TO MAKE SUCH
ELECTION, MORGAN STANLEY MAY MAKE SUCH ELECTION.
THE AWARD OF THE ARBITRATORS, OR THE MAJORITY OF THEM, SHALL BE FINAL AND
JUDGMENT UPON THE AWARD RENDERED MAY BE ENTERED IN ANY STATE OR FEDERAL COURT
HAVING JURISDICTION. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS CONSENT BY
MORGAN STANLEY TO AN AWARD OF PUNITIVE DAMAGES.
NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION, NOR
SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINSTANY PERSON WHO, IF
THE UNDERSIGNED HAS INITIATED IN COURT A PUTATIVE CLASS ACTION, IS A MEMBER OF A
PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS
ENCOMPASSED BY THE PUTATIVE CLASS ACTION UNTIL:
(i) THE CLASS CERTIFICATION IS DENIED;
(ii) THE CLASS IS DECERTIFIED; OR
(iii) THE UNDERSIGNED IS EXCLUDED FROM THE CLASS BY THE COURT. SUCH FORBEARANCE
TO ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY SUCH
RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN.
20. IF THE UNDERSIGNED CHOOSES LITIGATION IN COURT. (A) UNLESS THE PARTIES
OTHERWISE AGREE IN WRITING WHEN ANY DISPUTE ARISES, LITIGATION MUST BE
INSTITUTED IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK OR THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY.
THE UNDERSIGNED IRREVOCABLY CONSENTS TO THE JURISDICTION OF EITHER OF THOSE
COURTS AND (B) ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR ACTION IS
HEREBY WAIVED BY ALL PARTIES TO THIS AGREEMENT.
21. APPLICABLE LAW AND ENFORCEABILITY. THIS AGREEMENT, ANY CONTRACT, THEIR
ENFORCEMENT AND ANY DISPUTE BETWEEN US, WHETHER ARISING OUT OF OR RELATING TO
THE UNDERSIGNED'S ACCOUNTS OR OTHERWISE, SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK, EXCLUDING ITS CONFLICT OF LAW RULES. The provisions of this
Agreement shall be continuous, shall cover individually and collectively all
accounts which the undersigned may open or reopen with Morgan Stanley and shall
inure to the benefit of Morgan Stanley's present and any successor
organizations, irrespective of any change at any time in the personnel thereof
and of the assigns of Morgan Stanley's present organizations or any successor
organizations. This Agreement shall be binding upon the undersigned and the
estate, executors, administrators, trustees, agents, officers, directors and
assigns of the undersigned.
22. MODIFICATION AND WAIVER. The undersigned agrees that Morgan Stanley may
modify the terms of this Agreement at any time upon prior written notice. If the
modifications are unacceptable, the undersigned agrees to notify Morgan Stanley
in writing within twenty days of the transmittal of such written notice. Morgan
Stanley may then terminate any or all of the undersigned's accounts. The
undersigned also agrees that any transactions or Contracts entered into after
such notification shall be subject to the modifications. The undersigned may not
modify this Agreement without Morgan Stanley's written consent. To the extent
this Agreement is inconsistent with any other agreement between us, the
provisions of this Agreement shall govern. Morgan Stanley's failure to enforce
this Agreement or any of its terms, or any continued course of such conduct on
Morgan Stanley's part, shall not be considered a waiver of any of Morgan
Stanley's rights.
23. AUTHORIZED INSTRUCTIONS. The undersigned authorizes Morgan Stanley to accept
instructions by telephone, tested telex, facsimile transmission, electronic
mail, electronically, in writing or any other method that undersigned and Morgan
Stanley may agree to use. The undersigned also agrees (i) to be bound by all
instructions that Morgan Stanley believes are authorized, regardless of the
means by which those instructions have been transmitted to Morgan Stanley, and
(ii) that Morgan Stanley shall not be liable for any loss, cost or expense for
acting upon instructions that Morgan Stanley believed to be authorized.
24. SEVERABILITY. If any provision of this Agreement is or becomes inconsistent
with any applicable present or future law, rule or regulation, that provision
will be deemed modified or, if necessary, rescinded in order to comply with the
relevant law, rule or regulation. All other provisions of this Agreement will
continue and remain in full force and effect. To the extent that this Agreement
is not enforceable as to any Contract, this Agreement shall remain in full force
and effect and be enforceable in accordance with its terms as to all other
Contracts. To the extent this Agreement contains any provision which is
inconsistent with provisions in any other Contract or agreement between us, or
of which the undersigned is a beneficiary, the provisions of this Agreement
shall control with respect to transactions contemplated hereunder.
25. LENDING OF SECURITIES. Within the limits of applicable law and regulation,
until Morgan Stanley receives written notice of revocation from the undersigned,
Morgan Stanley is hereby authorized to lend, to itself as brokers or to others,
any securities held by Morgan Stanley on margin in its possession or control
together with all attendant rights of ownership (including the right to vote the
securities).
26. EXTRAORDINARY EVENTS. The undersigned agrees that Morgan Stanley will not be
liable for any loss caused, directly or indirectly, by government restrictions,
exchange or market rulings, suspension of trading, war (whether declared or
undeclared), terrorist acts, insurrection, riots, fires, flooding, strikes,
failure of utility services, accidents, adverse weather or other events of
nature (including earthquakes, hurricanes and tornadoes) or other events or
conditions beyond Morgan Stanley's control. In the event that any communications
network, data processing system or computer system Morgan Stanley uses,
regardless of ownership, is rendered inoperable, Morgan Stanley will not be
liable to the undersigned for any loss, liability, claim, damage or expense
resulting, directly or indirectly, from such inoperability.
27. LIMITATION OF LIABILITY. Morgan Stanley shall not be liable in connection
with the execution, clearing, handling, purchasing or selling of securities,
commodities or other property or assets, or other action, except in the event of
gross negligence or willful misconduct on Morgan Stanley's part. The undersigned
acknowledges that certain of its securities may be held outside the United
States by unaffiliated, foreign, agent banks and depositories. Morgan Stanley
shall not be liable to the undersigned for any loss, liability or expense
incurred by the undersigned in connection with these arrangements except to the
extent that any such loss, liability or expense results from Morgan Stanley's
gross negligence or willful misconduct.
28. INDEMNIFICATION. In consideration of Morgan Stanley's carrying one or more
accounts for the undersigned, the undersigned agrees to indemnify and hold
Morgan Stanley harmless from and against any and all losses, claims, damages and
liabilities arising out of or relating to the undersigned's accounts or in
connection with the execution, purchase, sale, assignment, exercise, endorsement
or handling of any transaction therein, or in connection with Morgan Stanley
acting or declining to act as prime broker, except for actions taken or omitted
to be taken by Morgan Stanley which are a result of, or constitute, willful
misconduct or gross negligence. The undersigned also agrees that Morgan Stanley
shall have no responsibility for the undersigned's compliance with any law or
regulation and that Morgan Stanley shall not be liable for delays in the
transmission of orders or instructions due to the breakdown or failure of
transmission or communication facilities or any other cause beyond Morgan
Stanley's control, including any mistake, error, negligence or misconduct of any
exchange, association or clearing house or their respective officers, directors,
employees or agents, nor any failure by any such exchange, association or
clearing house to enforce its rules or regulations.
29. COSTS OF COLLECTION. To the extent permitted by the laws of the State of New
York, the reasonable costs and expenses of collection of any debit balance and
any unpaid deficiency in any account of the undersigned with Morgan Stanley,
including but not limited to attorneys' fees incurred and payable or paid by
Morgan Stanley, shall be payable to Morgan Stanley by the undersigned.
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33
30. ASSIGNMENTS. Undersigned may not assign its rights or obligations under this
Agreement without the express written consent of Morgan Stanley.
31. REPRESENTATIONS AND WARRANTIES. The undersigned hereby represents and
warrants as of the date hereof, which representations and warranties will be
deemed repeated on each date on which a transaction or Contract is effected for
any of the undersigned's accounts, or any securities or other property if
delivered to or from any such account, that:
(a) The undersigned will at all times maintain such securities or other property
or assets in the accounts of the undersigned for margin purposes, as is required
by Morgan Stanley from time to time in Morgan Stanley's sole discretion;
(b) The undersigned will not transact on the basis of, or in reliance on,
material, non-public information.
(c) Except as disclosed in writing to Morgan Stanley, the undersigned is not an
employee of any exchange, or of any corporation of which any exchange owns a
majority of the capital stock, or of a member of any exchange, or of a
securities broker or dealer, or of a bank, trust company, insurance company or
of any corporation, firm or individual engaged in the business of dealing,
either as agent or as principal, in securities, bills of exchange, acceptances
or other forms of commercial paper.
(d) Except as disclosed to Morgan Stanley in writing, the undersigned
continuously represents that it is not (a) an employee benefit plan (hereinafter
an "ERISA Plan"), as defined in Section 3 (3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), subject to Title I of ERISA or
Section 4975 of the Internal Revenue Code of 1986, as amended, or (b) a person
acting on behalf of an ERISA Plan or (c) a person the assets of whom constitute
assets of an ERISA Plan. The undersigned will provide notice to Morgan Stanley
in the event that it is aware that it is in breach of any aspect of this
representation or is aware that with the passing of time, giving of notice or
expiry of any applicable grace period it will breach this representation.
(e) Except as disclosed in writing to Morgan Stanley, the undersigned is not,
and will not be, an affiliate (as defined in Rule 144(a)(1) under the Securities
Act of 1933) of the issuer of any security held in the undersigned's accounts or
sold to or through Morgan Stanley and undertakes to inform Morgan Stanley of any
changes in such representation.
(f) The undersigned has full power and authority to execute and deliver each
Contract and to perform and observe the provisions thereof.
(g) The execution, delivery and performance of each Contract has been or will
be, prior to entering into the Contract, duly authorized by all necessary
internal action and do not or will not contravene any requirement of law or any
contractual restrictions or agreement binding on or affecting the undersigned or
its assets.
(h) Each Contract has been or will be at the time it is entered into properly
executed and delivered by the undersigned and constitutes and will constitute a
legal, valid and binding obligation enforceable in accordance with its terms.
(i) The undersigned will promptly furnish to Morgan Stanley appropriate
financial statements or similar documents upon Morgan Stanley's request and
any other information as Morgan Stanley may reasonably request. Since the
date of the most recent financial statements provided to Morgan Stanley, if
any, there has been no material adverse change in the information set forth
therein, and, if the undersigned is not a natural person, the business,
financial condition, results, operations or prospects of the undersigned.
(j) No one that is not a party to this Agreement has any interest in any account
of the undersigned with Morgan Stanley. The undersigned owns the Collateral
assigned, or to be assigned, to Morgan Stanley under each Contract free and
clear of any lien, claims, encumbrances and transfer restrictions. Upon delivery
of the Collateral to Morgan Stanley or upon the filing of appropriate financing
statements, Morgan Stanley will have, as security for the Obligations of the
undersigned, a perfected first priority security interest in the Collateral. No
further filings or recordings with any governmental body, agency or official are
necessary to create or perfect the security interest in the Collateral.
(k) The undersigned represents to Morgan Stanley that all sales of securities
(other than fully covered options) will be eligible to be marked "long" and that
the undersigned will pay for all the securities purchased in full on trade date
or such later date as Morgan Stanley may permit. Any sell order which the
undersigned shall designate as being long is for securities then owned by the
undersigned. If such securities cannot be delivered by Morgan Stanley from any
account of the undersigned, the placing of such order shall constitute a
representation by the undersigned that the undersigned will deliver them as soon
as it is possible to do so, without undue inconvenience or expense to Morgan
Stanley.
(l) The undersigned acknowledges that it is acting as principal (and not as
agent or in any other capacity, fiduciary or otherwise) for its own account, and
it has made its own independent decisions to enter into this Agreement and
Contracts and as to whether its activities and investments thereunder are
appropriate or proper for it based upon its own judgment and upon advice from
such advisers as it has deemed necessary. It is not relying on any communication
(written or oral) of Morgan Stanley as investment advice or as a recommendation
to enter into any particular transaction; it being understood that information
and explanations related to the terms and conditions of a transaction shall not
be considered investment advice or a recommendation to enter into a transaction.
No communication (written or oral) received from Morgan Stanley shall be deemed
to be an assurance or guarantee as to the expected results of a transaction. It
is capable of assessing the merits of and understanding (on its own behalf or
thorough independent professional advice), and understands and accepts, the
terms, conditions and risks of its transactions, and is capable of assuming, and
assumes, such risks. Morgan Stanley is not acting as a fiduciary for an adviser
to it in any respect, and does not perform any analysis or make any judgment on
any matters pertaining to the suitability of any order or offer any opinion,
judgment or other type of information pertaining to the nature, value, potential
or suitability of any particular transaction.
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32. ACKNOWLEDGMENTS. The undersigned hereby consents and acknowledges that:
(a) The undersigned has received, and agrees to be bound by, Morgan Stanley's
Credit Charge and Margin Information Statement, which is incorporated herein by
reference;
(b) The undersigned has received a copy of this Agreement and has read and
understood its terms; and
(c) All conversations between us may be recorded on tape or otherwise.
NOTICE: THIS AGREEMENT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE
PROXY DISCLOSURE STATEMENT
Under the rules of the Securities and Exchange Commission, we are required, upon
registrant's request, to provide your name, address and security positions to
issuers of securities that you own. The issuer may use this information
exclusively for purposes of corporate communications. _____(Check) IF THIS BOX
IS CHECKED, MORGAN STANLEY WILL DISCLOSE THE NAME AND ADDRESS INFORMATION FOR
THE ACCOUNT ESTABLISHED BY THIS AGREEMENT TO ISSUERS OF SECURITIES WHICH I OWN.
ELECTRONIC TRADE CONFIRMATIONS
X___ (Check) Yes, we would, if available, like to receive electronic
notification of our trade information rather than a mailed, hard copy
confirmation.
DATE: __5/30/02___
Financial Institution Partners, MORGAN STANLEY &
L.P. CO. INCORPORATED,
By Hovde Capital IV, LLC, general on its own behalf
Partner, and on behalf of
by its authorized signatory each Morgan Stanley Entity
/s/ Richard J. Perry, Jr.__
Name: Richard J. Perry, Jr. Name: ___________
Date: 5/9/02 Date: ___________
Title: Manager Title: ___________
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EXHIBIT T
THE
BOND
MARKET
ASSOCIATION
Master Securities Loan Agreement
Between: Dated as of May 30, 2002
PRIME DEALER SERVICES CORP.
and
FINANCIAL INSTITUTION PARTNERS, L.P.
This Agreement sets forth the terms and conditions under which one party
("Lender") may from time to time lend to the other party ("Borrower") certain
securities against a pledge of collateral. Capitalized terms not otherwise
defined herein shall have the meanings provided in Section 26.
The parties hereto agree as follows:
1. Loans of Securities.
1.1. Subject to the terms and conditions of this Agreement, Borrower or Lender
may, from time to time, orally seek to initiate a transaction in which Lender
will lend securities to Borrower. Borrower and Lender shall agree orally on the
terms of each Loan, including the issuer of the securities, the amount of
securities to be lent, the basis of compensation, and the amount of Collateral
to be transferred by Borrower, which terms may be amended during the Loan.
1.2. Notwithstanding any other provision in this Agreement regarding when a Loan
commences, a Loan hereunder shall not occur until the Loaned Securities and the
Collateral therefor have been transferred in accordance with Section 16.
1.3. WITHOUT WAIVING ANY RIGHTS GIVEN TO LENDER HEREUNDER, IT IS UNDERSTOOD AND
AGREED THAT THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION ACT OF 1970 MAY
NOT PROTECT LENDER WITH RESPECT TO LOANED SECURITIES HEREUNDER AND THAT,
THEREFORE, THE COLLATERAL DELIVERED TO LENDER MAY CONSTITUTE THE ONLY SOURCE OF
SATISFACTION OF BORROWER'S OBLIGATIONS IN THE EVENT BORROWER FAILS TO RETURN THE
LOANED SECURITIES.
2. Transfer of Loaned Securities.
2.1. Unless otherwise agreed, Lender shall transfer Loaned Securities to
Borrower hereunder on or before the Cutoff Time on the date agreed to by
Borrower and Lender for the commencement of the Loan.
2.2. Unless otherwise agreed, Borrower shall provide Lender, in each Loan in
which Lender is a Customer, with a schedule and receipt listing the Loaned
Securities. Such schedule and receipt may consist of (a) a schedule provided to
Borrower by Lender and executed and returned by Borrower when the Loaned
Securities are received, (b) in the case of securities transferred through a
Clearing Organization which provides transferors with a notice evidencing such
transfer, such notice, or (c) a confirmation or other document provided to
Lender by Borrower.
3. Collateral.
3.1. Unless otherwise agreed, Borrower shall, prior to or concurrently with the
transfer of the Loaned Securities to Borrower, but in no case later than the
close of business on the day of such transfer, transfer to Lender Collateral
with a market value at least equal to a percentage of the market value of the
Loaned Securities agreed to by Borrower and Lender (which shall be not less than
100% of the market value of the Loaned Securities) (the "Margin Percentage").
3.2. The Collateral transferred by Borrower to Lender, as adjusted pursuant to
Section 8, shall be security for Borrower's obligations in respect of such Loan
and for any other obligations of Borrower to Lender. Borrower hereby pledges
with, assigns to, and grants Lender a continuing first security interest in, and
a lien upon, the Collateral, which shall attach upon the transfer of the Loaned
Securities by Lender to Borrower and which shall cease upon the transfer of the
Loaned Securities by Borrower to Lender. In addition to the rights and remedies
given to Lender hereunder, Lender shall have all the rights and remedies of a
secured party under the New York Uniform Commercial Code. It is understood that
Lender may use or invest the Collateral, if such consists of cash, at its own
risk, but that (unless Lender is a Broker-Dealer) Lender shall, during the term
of any Loan hereunder, segregate Collateral from all securities or other assets
in its possession. Lender may pledge, repledge, hypothecate, rehypothecate,
lend, relend, sell or otherwise transfer the Collateral, or re-register
Collateral evidenced by physical certificates in any name other than Borrower's,
only (a) if Lender is Broker-Dealer or (b) in the event of a Default by
Borrower. Segregation of Collateral may be accomplished by appropriate
identification on the books and records of Lender if it is a "financial
intermediary" or a "clearing corporation" within the meaning of the New York
Uniform Commercial Code.
3.3. Except as otherwise provided herein, upon transfer to Lender of the Loaned
Securities on the day a Loan is terminated pursuant to Section 5, Lender shall
be obligated to transfer the Collateral (as adjusted pursuant to Section 8) to
Borrower no later than the Cutoff Time on such day or, if such day is not a day
on which a transfer of such Collateral may be effected under Section 16, the
next day on which such a transfer may be effected.
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3.4. If Borrower transfers Collateral to Lender, as provided in Section 3.1, and
Lender does not transfer the Loaned Securities to Borrower, Borrower shall have
the absolute right to the return of the Collateral; and if Lender transfers
Loaned Securities to Borrower and Borrower does not transfer Collateral to
Lender as provided in Section 3.1, Lender shall have the absolute right to the
return of the Loaned Securities.
3.5. Borrower may, upon reasonable notice to Lender (taking into account all
relevant factors, including industry practice, the type of Collateral to be
substituted and the applicable method of transfer), substitute Collateral for
Collateral securing any Loan or Loans; provided, however, that such substituted
Collateral shall (a) consist only of cash, securities or other property that
Borrower and Lender agreed would be acceptable Collateral prior to the Loan or
Loans and (b) have a market value such that the aggregate market value of such
substituted Collateral, together with all other Collateral for Loans in which
the party substituting such Collateral is acting as Borrower, shall equal or
exceed the agreed upon Margin Percentage of the market value of the Loaned
Securities. Prior to the expiration of any letter of credit supporting
Borrower's obligations hereunder, Borrower shall, no later than the Cutoff Time
on the date such letter of credit expires, obtain an extension of the expiration
of such letter of credit or replace such letter of credit by providing Lender
with a substitute letter of credit in an amount at least equal to the amount of
the letter of credit for which it is substituted.
3.6. Lender acknowledges that, in connection with Loans of Government Securities
and as otherwise permitted by applicable law, some securities provided by
Borrower as Collateral under this Agreement may not be guaranteed by the United
States.
4. Fees for Loan.
4.1. Unless otherwise agreed, (a) Borrower agrees to pay Lender a loan fee (a
"Loan Fee"), computed daily on each Loan to the extent such Loan is secured by
Collateral other than cash, based on the aggregate par value (in the case of
Loans of Government Securities) or the aggregate market value (in the case of
all other Loans) of the Loaned Securities on the day for which such Loan Fee is
being computed, and (b) Lender agrees to pay Borrower a fee or rebate (a "Cash
Collateral Fee") on Collateral consisting of cash, computed daily based on the
amount of cash held by Lender as Collateral, in the case of each of the Loan Fee
and the Cash Collateral Fee at such rates as Borrower and Lender may agree.
Except as Borrower and Lender may otherwise agree (in the event that cash
Collateral is transferred by clearing house funds or otherwise), Loan Fees shall
accrue from and including the date on which the Loaned Securities are
transferred to Borrower to, but excluding, the date on which such Loaned
Securities are returned to Lender, and Cash Collateral Fees shall accrue from
and including the date on which the cash Collateral is transferred to Lender to,
but excluding, the date on which such cash Collateral is returned to Borrower.
4.2. Unless otherwise agreed, any Loan Fee or Cash Collateral Fee payable
hereunder shall be payable:
(a) in the case of any Loan of securities other than Government Securities,
upon the earlier of (i) the fifteenth day of the month following the calendar
month in which such fee was incurred or (ii) the termination of all Loans
hereunder (or, if a transfer of cash in accordance with Section 16 may not be
effected on such fifteenth day or the day of such termination, as the case may
be, the next day on which such a transfer may be effected); and
(b) in the case of any Loan of Government Securities, upon the termination of
such Loan.
Notwithstanding the foregoing, all Loan Fees shall be payable by Borrower
immediately in the event of a Default hereunder by Borrower and all Cash
Collateral Fees shall be payable immediately by Lender in the event of a Default
by Lender.
5. Termination of the Loan. Unless otherwise agreed, (a) Borrower may
terminate a Loan on any Business Day by giving notice to Lender and transferring
the Loaned Securities to Lender before the Cutoff Time on such Business Day, and
(b) Lender may terminate a Loan on a termination date established by notice
given to Borrower prior to the close of business on a Business Day. The
termination date established by a termination notice given by Lender to Borrower
shall be a date no earlier than the standard settlement date for trades of the
Loaned Securities entered into on the date of such notice, which date shall,
unless Borrower and Lender agree to the contrary, be (i) in the case of
Government Securities, the next Business Day following such notice and (ii) in
the case of all other securities, the third Business Day following such notice.
Unless otherwise agreed, Borrower shall, on or before the Cutoff Time on the
termination date of a Loan, transfer the Loaned Securities to Lender; provided,
however, that upon such transfer by Borrower, Lender shall transfer the
Collateral (as adjusted pursuant to Section 8) to Borrower in accordance with
Section 3.3.
6. Rights of Borrower in Respect of the Loaned Securities. Except as set forth
in Sections 7.1 and 7.2 and as otherwise agreed by Borrower and Lender, until
Loaned Securities are required to be redelivered to Lender upon termination of a
Loan hereunder, Borrower shall have all of the incidents of ownership of the
Loaned Securities, including the right to transfer the Loaned Securities to
others. Lender hereby waives the right to vote, or to provide any consent or to
take any similar action with respect to, the Loaned Securities in the event that
the record date or deadline for such vote, consent or other action falls during
the term of the Loan.
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7. Dividends, Distributions, Etc.
7.1. Lender shall be entitled to receive all distributions made on or in respect
of the Loaned Securities which are not otherwise received by Lender, to the full
extent it would be so entitled if the Loaned Securities had not been lent to
Borrower, including, but not limited to: (a) cash and all other property, (b)
stock dividends, (c) securities received as a result of split ups of the Loaned
Securities and distributions in respect thereof, (d) interest payments, and (e)
all rights to purchase additional securities.
7.2. Any cash distributions made on or in respect of the Loaned Securities,
which Lender is entitled to receive pursuant to Section 7.1, shall be paid by
the transfer of cash to Lender by Borrower, on the date any such distribution is
paid, in an amount equal to such cash distribution, so long as Lender is not in
Default at the time of such payment. Non-cash distributions received by Borrower
shall be added to the Loaned Securities on the date of distribution and shall be
considered such for all purposes, except that if the Loan has terminated,
Borrower shall forthwith transfer the same to Lender.
7.3. Borrower shall be entitled to receive all cash distributions made on or in
respect of non-cash Collateral which are not otherwise received by Borrower, to
the full extent it would be so entitled if the Collateral had not been
transferred to Lender. Any distributions of cash made on or in respect of such
Collateral which Borrower is entitled to receive hereunder shall be paid by the
transfer of cash to Borrower by Lender, on the date any such distribution is
paid, in an amount equal to such cash distribution, so long as Borrower is not
in Default at the time of such payment.
7.4. (a) Unless otherwise agreed, if (i) Borrower is required to make a payment
(a "Borrower Payment") with respect to cash distributions on Loaned Securities
under Sections 7.1 and 7.2 ("Securities Distributions"), or (ii) Lender is
required to make a payment (a "Lender Payment") with respect to cash
distributions on Collateral under Section 7.3 ("Collateral Distributions"), and
(iii) Borrower or Lender, as the case may be ("Payor"), shall be required by law
to collect any withholding or other tax, duty, fee, levy or charge required to
be deducted or withheld from such Borrower Payment or Lender Payment ("Tax"),
then Payor shall (subject to subsections (b) and (c) below), pay such additional
amounts as may be necessary in order that the net amount of the Borrower Payment
or Lender Payment received by the Lender or Borrower, as the case may be
("Payee"), after payment of such Tax equals the net amount of the Securities
Distribution or Collateral Distribution that would have been received if such
Securities Distribution or Collateral Distribution had been paid directly to the
Payee.
(b) No additional amounts shall be payable to a Payee under subsection (a)
above to the extent that Tax would have been imposed on a Securities
Distribution or Collateral Distribution paid directly to the Payee.
(c) No additional amounts shall be payable to a Payee under subsection (a)
above to the extent that such Payee is entitled to an exemption from, or
reduction in the rate of, Tax on a Borrower Payment or Lender Payment subject to
the provision of a certificate or other documentation, but has failed timely to
provide such certificate or other documentation.
(d) Each party hereto shall be deemed to represent that, as of the commencement
of any Loan hereunder, no Tax would be imposed on any cash distribution paid to
it with respect to (i) Loaned Securities subject to a Loan in which it is acting
as Lender or (ii) Collateral for any Loan in which it is acting as Borrower,
unless such party has given notice to the contrary to the other party hereto
(which notice shall specify the rate at which such Tax would be imposed). Each
party agrees to notify the other of any change that occurs during the term of a
Loan in the rate of any Tax that would be imposed on any such cash distributions
payable to it.
7.5. To the extent that, under the provisions of Sections 7.1 through 7.4 (a) a
transfer of cash or other property by Borrower would give rise to a Margin
Excess (as defined in Section 8.3 below) or (b) a transfer of cash or other
property by Lender would give rise to a Margin Deficit (as defined in Section
8.2 below), Borrower or Lender (as the case may be) shall not be obligated to
make such transfer of cash or other property in accordance with such Sections,
but shall in lieu of such transfer immediately credit the amounts that would
have been transferable under such Sections to the account of Lender or Borrower
(as the case may be).
8. Mark to Market.
8.1. Borrower shall daily mark to market any Loan hereunder and in the event
that at the close of trading on any Business Day the market value of the
Collateral for any Loan to Borrower shall be less than 100% of the market value
of all the outstanding Loaned Securities subject to such Loan, Borrower shall
transfer additional Collateral no later than the close of the next Business Day
so that the market value of such additional Collateral, when added to the market
value of the other Collateral for such Loan, shall equal 100% of the market
value of the Loaned Securities.
8.2. In addition to any rights of Lender under Section 8.1, in the event that at
the close of trading on any Business Day the aggregate market value of all
Collateral for Loans by Lender shall be less than the Margin Percentage of the
market value of all the outstanding Loaned Securities subject to such Loans (a
"Margin Deficit"), Lender may, by notice to Borrower, demand that Borrower
transfer to Lender additional Collateral so that the market value of such
additional Collateral, when added to the market value of all other Collateral
for such Loans, shall equal or exceed the agreed upon Margin Percentage of the
market value of the Loaned Securities. Unless otherwise agreed, such transfer is
to be made no later than the close of the next Business Day following the day of
Lender's notice to Borrower.
8.3. In the event that at the close of trading on any Business Day the market
value of all Collateral for Loans to Borrower shall be greater than the Margin
Percentage of the market value of all the outstanding Loaned Securities subject
to such Loans (a "Margin Excess"), Borrower may, by notice to Lender, demand
that Lender transfer to Borrower such amount of the Collateral selected by
Borrower so that the market value of the Collateral for such Loans, after
deduction of such amounts, shall thereupon not exceed the Margin Percentage of
the market value of the Loaned Securities. Unless otherwise agreed, such
transfer is to be made no later than the close of the next Business Day
following the day of Borrower's notice to Lender.
8.4. Borrower and Lender may agree, with respect to one or more Loans hereunder,
to mark the values to market pursuant to Sections 8.2 and 8.3 by separately
valuing the Loaned Securities lent and the Collateral given in respect thereof
on a Loan-by-Loan basis.
8.5. Borrower and Lender may agree, with respect to any or all Loans hereunder,
that the respective rights of Lender and Borrower under Sections 8.2 and 8.3 may
be exercised only where a Margin Excess or Margin Deficit exceeds a specified
dollar amount or a specified percentage of the market value of the Loaned
Securities under such Loans (which amount or percentage shall be agreed to by
Borrower and Lender prior to entering into any such Loans).
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9. Representations. Each party to this Agreement hereby makes the following
representations and warranties, which shall continue during the term of any Loan
hereunder:
9.1. Each party hereto represents and warrants that (a) it has the power to
execute and deliver this Agreement, to enter into the Loans contemplated hereby
and to perform its obligations hereunder; (b) it has taken all necessary action
to authorize such execution, delivery and performance; and (c) this Agreement
constitutes a legal, valid and binding obligation enforceable against it in
accordance with its terms.
9.2. Each party hereto represents and warrants that the execution, delivery and
performance by it of this Agreement and each Loan hereunder will at all times
comply with all applicable laws and regulations including those of applicable
regulatory and self-regulatory organizations.
9.3. Each party hereto represents and warrants that it has not relied on the
other for any tax or accounting advice concerning this Agreement and that it has
made its own determination as to the tax and accounting treatment of any Loan
and any dividends, remuneration or other funds received hereunder.
9.4. Borrower represents and warrants that it is acting for its own account.
Lender represents and warrants that it is acting for its own account unless it
expressly specifies otherwise in writing and complies with Section 10.3(b).
9.5. Borrower represents and warrants that (a) it has, or will have at the time
of transfer of any Collateral, the right to grant a first security interest
therein subject to the terms and conditions hereof, and (b) it (or the person to
whom it relends the Loaned Securities) is borrowing or will borrow the Loaned
Securities (except for Loaned Securities that qualify as "exempted securities"
under Regulation T of the Board of Governors of the Federal Reserve System) for
the purpose of making delivery of such securities in the case of short sales,
failure to receive securities required to be delivered, or as otherwise
permitted pursuant to Regulation T as in effect from time to time.
9.6. Lender represents and warrants that it has, or will have at the time of
transfer of any Loaned Securities, the right to transfer the Loaned Securities
subject to the terms and conditions hereof.
10. Covenants.
10.1. Each party hereto agrees and acknowledges that (a) each Loan hereunder
is a "securities contract," as such term is defined in Section 741(7) of Title
11 of the United States Code (the "Bankruptcy Code"), (b) each and every
transfer of funds, securities and other property under this Agreement and each
Loan hereunder is a "settlement payment" or a "margin payment," as such terms
are used in Sections 362(b)(6) and 546(e) of the Bankruptcy Code, and (c) the
rights given to Borrower and Lender hereunder upon a Default by the other
constitute the right to cause the liquidation of a securities contract and the
right to set off mutual debts and claims in connection with a securities
contract, as such terms are used in Sections 555 and 362(b)(6) of the Bankruptcy
Code. Each party hereto further agrees and acknowledges that if a party hereto
is an "insured depository institution," as such term is defined in the Federal
Deposit Insurance Act, as amended ("FDIA"), then each Loan hereunder is a
"securities contract" and "qualified financial contract," as such terms are
defined in the FDIA and any rules, orders or policy statements thereunder.
10.2. Borrower agrees to be liable as principal with respect to its
obligations hereunder.
10.3. Lender agrees either (a) to be liable as principal with respect to its
obligations hereunder or (b) to execute and comply fully with the provisions of
Annex I (the terms and conditions of which Annex are incorporated herein and
made a part hereof).
10.4. Promptly upon (and in any event within seven (7) Business Days after)
demand by Lender, Borrower shall furnish Lender with Borrower's most recent
publicly-available financial statements and any other financial statements
mutually agreed upon by Borrower and Lender. Unless otherwise agreed, if
Borrower is subject to the requirements of Rule 17a-5(c) under the Exchange Act,
it may satisfy the requirements of this Section by furnishing Lender with its
most recent statement required to be furnished to customers pursuant to such
Rule.
10.5. Except to the extent required by applicable law or regulation or as
otherwise agreed, Borrower and Lender agree that Loans hereunder shall in no
event be "exchange contracts" for purposes of the rules of any securities
exchange and that Loans hereunder shall not be governed by the buy-in or similar
rules of any such exchange, registered national securities or other self-
regulatory organization.
11. Events of Default. All Loans hereunder may, at the option of the
nondefaulting party exercised by notice to the defaulting party (which option
shall be deemed to have been exercised even if no notice is given, immediately
upon the occurrence of an event specified in subsection 11.5 below), be
terminated immediately upon the occurrence of any one or more of the following
events (individually, a "Default"):
11.1. if any Loaned Securities shall not be transferred to Lender upon
termination of the Loan as required by Section 5;
11.2. if any Collateral shall not be transferred to Borrower upon
termination of the Loan as required by Sections 3.3 and 5;
11.3. if either party shall fail to transfer Collateral as required by
Section 8;
11.4. if either party (i) shall fail to transfer to the other party amounts
in respect of distributions required to be transferred by Section 7, (ii) shall
have received notice of such failure from the non-defaulting party, and (iii)
shall not have cured such default by the Cutoff Time on the next day after such
notice on which a transfer of cash may be effected in accordance with Section
16;
11.5. if (i) either party shall commence as debtor any case or proceeding
under any bankruptcy, insolvency, reorganization, liquidation, dissolution or
similar law, or seek the appointment of a receiver, conservator, trustee,
custodian or similar official for such party or any substantial part of its
property, (ii) any such case or proceeding shall be commenced against either
party, or another shall seek such an appointment, or any application shall be
filed against either party for a protective decree under the provisions of the
Securities Investor Protection Act of 1970, which (A) is consented to or not
timely contested by such party, (B) results in the entry of an order for relief,
such an appointment, the issuance of such a protective decree or the entry of an
order having a similar effect, or (C) is not dismissed within 15 days, (iii)
either party shall make a general assignment for the benefit of creditors, or
(iv) either party shall admit in writing its inability to pay its debts as they
become due;
11.6. if either party shall have been suspended or expelled from membership
or participation in any national securities exchange or registered national
securities association of which it is a member or other self-regulatory
organization to whose rules it is subject or if it is suspended from dealing in
securities by any federal or state government agency thereof;
11.7. if either party shall have its license, charter, or other
authorization necessary to conduct a material portion of its business withdrawn,
suspended or revoked by any applicable federal or state government or agency
thereof;
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11.8. if any representation made by either party in respect of this
Agreement or any Loan or Loans hereunder shall be incorrect or untrue in any
material respect during the term of any Loan hereunder;
11.9. if either party notifies the other, orally or in writing, of its
inability to or its intention not to perform its obligations hereunder or
otherwise disaffirms, rejects or repudiates any of its obligations hereunder; or
11.10. if either party (i) shall fail to perform any material obligation
under this Agreement not specifically set forth in clauses 11.1 through 11.9
above, including but not limited to the payment of fees as required by Section
4, and the payment of transfer taxes as required by Section 14, (ii) shall have
received notice of such failure from the non-defaulting party and (iii) shall
not have cured such failure by the Cutoff Time on the next day after such notice
on which a transfer of cash may be effected under Section 16.
12. Lender's Remedies. Upon the occurrence of a Default under Section 11
entitling Lender to terminate all Loans hereunder, Lender shall have the right
(without further notice to Borrower), in addition to any other remedies provided
herein or under applicable law, (a) to purchase a like amount of Loaned
Securities ("Replacement Securities") in the principal market for such
securities in a commercially reasonable manner, (b) to sell any Collateral in
the principal market for such Collateral in a commercially reasonable manner and
(c) to apply and set off the Collateral and any proceeds thereof (including any
amounts drawn under a letter of credit supporting any Loan) against the payment
of the purchase price for such Replacement Securities and any amounts due to
Lender under Sections 4, 7, 14 and 17. In the event Lender shall exercise such
rights, Borrower's obligation to return a like amount of the Loaned Securities
shall terminate. Lender may similarly apply the Collateral and any proceeds
thereof to any obligation of Borrower under this Agreement, including Borrower's
obligations with respect to distributions paid to Borrower (and not forwarded to
Lender) in respect of Loaned Securities. In the event that (i) the purchase
price of Replacement Securities (plus all other amounts, if any, due to Lender
hereunder) exceeds (ii) the amount of the Collateral, Borrower shall be liable
to Lender for the amount of such excess together with interest thereon at a rate
equal to (A) in the case of purchases of Foreign Securities, LIBOR, (B) in the
case of purchases of any other securities (or other amounts, if any, due to
Lender hereunder), the Federal Funds Rate or (C) such other rate as may be
specified in Schedule B, in each case as such rate fluctuates from day to day,
from the date of such purchase until the date of payment of such excess. As
security for Borrower's obligation to pay such excess, Lender shall have, and
Borrower hereby grants, a security interest in any property of Borrower then
held by or for Lender and a right of setoff with respect to such property and
any other amount payable by Lender to Borrower. The purchase price of
Replacement Securities purchased under this Section 12 shall include, and the
proceeds of any sale of Collateral shall be determined after deduction of,
broker's fees and commissions and all other reasonable costs, fees and expenses
related to such purchase or sale (as the case may be). In the event Lender
exercises its rights under this Section 12, Lender may elect in its sole
discretion, in lieu of purchasing all or a portion of the Replacement Securities
or selling all or a portion of the Collateral, to be deemed to have made,
respectively, such purchase of Replacement Securities or sale of Collateral for
an amount equal to the price therefor on the date of such exercise obtained from
a generally recognized source or the most recent closing bid quotation from such
a source. Subject to Section 19, upon the satisfaction of all obligations
hereunder, any remaining Collateral shall be returned to Borrower.
13. Borrower's Remedies. Upon the occurrence of a Default under Section 11
entitling Borrower to terminate all Loans hereunder, Borrower shall have the
right (without further notice to Lender), in addition to any other remedies
provided herein or under applicable law, (a) to purchase a like amount of
Collateral ("Replacement Collateral") in the principal market for such
Collateral in a commercially reasonable manner, (b) to sell a like amount of the
Loaned Securities in the principal market for such securities in a commercially
reasonable manner and (c) to apply and set off the Loaned Securities and any
proceeds thereof against (i) the payment of the purchase price for such
Replacement Collateral (ii) Lender's obligation to return any cash or other
Collateral and (iii) any amounts due to Borrower under Sections 4, 7 and 17. In
such event, Borrower may treat the Loaned Securities as its own and Lender's
obligation to return a like amount of the Collateral shall terminate; provided,
however, that Lender shall immediately return any letters of credit supporting
any Loan upon the exercise or deemed exercise by Borrower of its termination
rights under Section 11. Borrower may similarly apply the Loaned Securities and
any proceeds thereof to any other obligation of Lender under this Agreement,
including Lender's obligations with respect to distributions paid to Lender (and
not forwarded to Borrower) in respect of Collateral. In the event that (i) the
sales price received from such Loaned Securities is less than (ii) the purchase
price of Replacement Collateral (plus the amount of any cash or other Collateral
not replaced by Borrower and all other amounts, if any, due to Borrower
hereunder), Lender shall be liable to Borrower for the amount of any such
deficiency, together with interest on such amounts at a rate equal to (A) in the
case of Collateral consisting of Foreign Securities, LIBOR, (B) in the case of
Collateral consisting of any other securities (or other amounts due, if any, to
Borrower hereunder), the Federal Funds Rate or (C) such other rate as may be
specified in Schedule B in each case as such rate fluctuates from day to day,
from the date of such sale until the date of payment of such deficiency. As
security for Lender's obligation to pay such deficiency, Borrower shall have and
Lender hereby grants, a security interest in any property of Lender then held by
or for Borrower and a right of setoff with respect to such property and any
other amount payable by Borrower to Lender. The purchase price of any
Replacement Collateral purchased under this Section 13 shall include, and the
proceeds of any sale of Loaned Securities shall be determined after deduction
of, broker's fees and commissions and all other reasonable costs, fees and
expenses related to such purchase or sale (as the case may be). In the event
Borrower exercises its rights under this Section 13, Borrower may elect in its
sole discretion, in lieu of purchasing all or a portion of the Replacement
Collateral or selling all or a portion of the Loaned Securities, to be deemed to
have made, respectively, such purchase of Replacement Collateral or sale of
Loaned Securities for an amount equal to the price therefor on the date of such
exercise obtained from a generally recognized source or the most recent closing
bid quotation from such a source. Subject to Section 19, upon the satisfaction
of all Lender's obligations hereunder, any remaining Loaned Securities (or
remaining cash proceeds thereof) shall be returned to Lender. Without limiting
the foregoing, the parties hereto agree that they intend the Loans hereunder to
be loans of securities. If, however, any Loan is deemed to be a loan of money by
Borrower to Lender, then Borrower shall have, and Lender shall be deemed to have
granted, a security interest in the Loaned Securities and the proceeds thereof.
14. Transfer Taxes. All transfer taxes with respect to the transfer of the
Loaned Securities by Lender to Borrower and by Borrower to Lender upon
termination of the Loan shall be paid by Borrower.
15. Market Value.
15.1. Unless otherwise agreed, if the principal market for the securities to
be valued is a national securities exchange in the United States, their market
value shall be determined by their last sale price on such exchange on the
preceding Business Day or, if there was no sale on that day, by the last sale
price on the next preceding Business Day on which there was a sale on such
exchange, all as quoted on the Consolidated Tape or, if not quoted on the
Consolidated Tape, then as quoted by such exchange.
15.2. Except as provided in Section 15.3 or 15.4 or as otherwise agreed, if
the principal market for the securities to be valued is the over-the-counter
market, their market value shall be determined as follows. If the securities are
quoted on the National Association of Securities Dealers Automated Quotations
System ("NASDAQ"), their market value shall be the closing sale price on NASDAQ
on the preceding Business Day or, if the securities are issues for which last
sale prices are not quoted on NASDAQ, the closing bid price on such day. If the
securities to be valued are not quoted on NASDAQ, their market value shall be
the highest bid quotation as quoted in any of The Wall Street Journal, the
National Quotation Bureau pink sheets, the Salomon Brothers quotation sheets,
quotations sheets of registered market makers and, if necessary, dealers'
telephone quotations on the preceding Business Day. In each case, if the
relevant quotation did not exist on such day, then the relevant quotation on the
next preceding Business Day in which there was such a quotation shall be the
market value.
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15.3. Unless otherwise agreed, if the securities to be valued are Government
Securities, their market value shall be the average of the bid and ask prices as
quoted on Prophesy at 3:30 P.M. New York time on the Business Day preceding the
date on which such determination is made. If the securities are not so quoted on
such day, their market value shall be determined as of the next preceding
Business Day on which they were so quoted. If the securities to be valued are
Government Securities that are not quoted on Prophesy, their market value shall
be determined as of the close of business on the preceding Business Day in
accordance with market practice for such securities.
15.4. Unless otherwise agreed, if the securities to be valued are Foreign
Securities, their market value shall be determined as of the close of business
on the preceding Business Day in accordance with market practice in the
principal market for such securities.
15.5. Unless otherwise agreed, the market value of a letter of credit shall
be the undrawn amount thereof.
15.6. All determinations of market value under Sections 15.1, 15.2, 15.3,
and 15.4 shall include, where applicable, accrued interest to the extent not
already included therein (other than any interest transferred to the other party
pursuant to Section 7), unless market practice with respect to the valuation of
such securities in connection with securities loans is to the contrary. All
determinations of market value that are required to be made at the close of
trading on any Business Day pursuant to Section 8 or otherwise hereunder shall
be made as if being determined at the commencement of trading on the next
Business Day. The determinations of market value provided for in this Section 15
shall apply for all purposes under this Agreement, except for purposes of
Sections 12 and 13.
16. Transfers.
16.1. All transfers of securities hereunder shall by be (a) physical
delivery of certificates representing such securities together with duly
executed stock and bond transfer powers, as the case may be, with signatures
guaranteed by a bank or a member firm of the New York Stock Exchange, Inc., (b)
transfer on the books of a Clearing Organization, or (c) such other means as
Borrower and Lender may agree. In every transfer of securities hereunder, the
transferor shall take all steps necessary (i) to effect a "transfer" under
Section 8-313 of the New York Uniform Commercial Code or, where applicable,
under any U.S. federal regulation governing transfers of securities and (ii) to
provide the transferee with comparable rights under any applicable foreign law
or regulation.
16.2. All transfers of cash Collateral hereunder shall be by (a) wire
transfer in immediately available, freely transferable funds or (b) such other
means as Borrower and Lender may agree. All other transfers of cash hereunder
shall be made in accordance with the preceding sentence or by delivery of a
certified or official bank check representing next-day New York Clearing House
Funds.
16.3. All transfers of a letter of credit from Borrower to Lender shall be
made by physical delivery to Lender of an irrevocable letter of credit issued by
a "bank" as defined in Section 3(a)(6)(A)-(C) of the Exchange Act. Transfer of a
letter of credit from Lender to Borrower shall be made by causing such letter of
credit to be returned or by causing the amount of such letter of credit to be
reduced to the amount required after such transfer.
16.4. A transfer of securities, cash or letters of credit may be effected
under this Section 16 on any day except (a) a day on which the transferee is
closed for business at its address set forth in Schedule A hereto or (b) a day
on which a Clearing Organization or wire transfer system is closed, if the
facilities of such Clearing Organization or wire transfer system are required to
effect such transfer.
17. Contractual Currency.
17.1. Borrower and Lender agree that: (a) any payment in respect of a
distribution under Section 7 shall be made in the currency in which the
underlying distribution of cash was made; (b) any return of cash shall be made
in the currency in which the underlying transfer of cash was made and (c) any
other payment of cash in connection with a Loan under this Agreement shall be in
the currency agreed upon by Borrower and Lender in connection with such Loan
(the currency established under clause (a), (b) or (c) hereinafter referred to
as the "Contractual Currency"). Notwithstanding the foregoing, the payee of any
such payment may, at its option, accept tender thereof in any other currency;
provided, however, that, to the extent permitted by applicable law, the
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 in 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. [INTENTIONALLY DELETED]
19. Single Agreement. Borrower and Lender acknowledge that, and have entered
into this Agreement in reliance on the fact that, all Loans hereunder constitute
a single business and contractual relationship and have been entered into in
consideration of each other. Accordingly, Borrower and Lender hereby agree that
payments, deliveries and other transfers made by either of them in respect of
any Loan shall be deemed to have been made in consideration of payments,
deliveries and other transfers in respect of any other Loan hereunder, and the
obligations to make any such payment, deliveries and other transfers may be
applied against each other and netted. In addition, Borrower and Lender
acknowledge that, and have entered into this Agreement in reliance on the fact
that, all Loans hereunder have been entered into in consideration of each other.
Accordingly, Borrower and Lender hereby agree that (a) each shall perform all of
its obligations in respect of each Loan hereunder, and that a default in the
performance of any such obligation by Borrower or by Lender (the "Defaulting
Party") in any Loan hereunder shall constitute a default by the Defaulting Party
under all such Loans hereunder, and (b) the non-defaulting party shall be
entitled to set off claims and apply property held by it in respect of any Loan
hereunder against obligations owing to it in respect of any other Loan with the
Defaulting Party.
20. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
21. Waiver. The failure of a party to this Agreement to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. All waivers in
respect of a Default must be in writing.
22. 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.
Page 40 of 61
41
23. Notices and Other Communications. Unless another address is specified in
writing by the respective party to whom any notice or other communication is to
be given hereunder, all such notices or communications shall be in writing or
confirmed in writing and delivered at the respective addresses set forth in
Schedule A attached hereto. All notices shall be effective upon actual receipt,
provided, however, that if any notice shall be received by a party on a day on
which such party is not open for business at its office located at the address
set forth in Schedule A, such notice shall be deemed to have been received by
such party at the opening of business on the next day on which such party is
open for business at such address.
24. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
24.1. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT
SITTING IN NEW YORK CITY, AND ANY APPELLATE COURT FROM ANY SUCH COURT, SOLELY
FOR THE PURPOSE OF ANY SUIT, ACTION OR PROCEEDING BROUGHT TO ENFORCE ITS
OBLIGATIONS HEREUNDER OR RELATING IN ANY WAY TO THIS AGREEMENT OR ANY LOAN
HEREUNDER AND (B) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT AND ANY RIGHT OF JURISDICTION ON ACCOUNT OF ITS PLACE OF
RESIDENCE OR DOMICILE.
24.2. EACH PARTY HERETO IRREVOCABLY WAIVES ANY RIGHT THAT IT MAY HAVE TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
25. Miscellaneous. This Agreement supersedes any other agreement between the
parties hereto concerning loans of securities between Borrower and Lender. This
Agreement shall not be assigned by either party without the prior written
consent of the other party and any attempted assignment without such consent
shall be null and void. Subject to the foregoing, this Agreement shall be
binding upon and shall ensure to the benefit of Borrower and Lender and their
respective heirs, representatives, successors and assigns. This Agreement may be
terminated by either party upon 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 signed by the party against whom
enforcement is sought. The parties hereto acknowledge and agree that, in
connection with this Agreement and each Loan hereunder, time is of the essence.
Each provision and agreement herein shall be treated as separate and independent
from any other provision herein and shall be enforceable notwithstanding the
unenforceability of any such other provision or agreement.
26. Definitions. For the purposes hereof:
26.1. "Broker-Dealer" shall mean any person that is a broker (including a
municipal securities broker), dealer, municipal securities dealer, government
securities broker or government securities dealer as defined in the Exchange
Act, regardless of whether the activities of such person are conducted in the
United States or otherwise require such person to register with the Securities
and Exchange Commission or other regulatory body.
26.2. "Business Day" shall mean, with respect to any Loan hereunder, a day
on which regular trading occurs in the principal market for the Loaned
Securities subject to such Loan, provided, however, that for purposes of Section
15, such term shall mean a day on which regular trading occurs in the principal
market for the securities whose value is being determined. Notwithstanding the
foregoing, (i) for purposes of Section 8, "Business Day" shall mean any day on
which regular trading occurs in the principal market for any Loaned Securities
or for any securities Collateral under any outstanding Loan hereunder and "next
Business Day" shall mean the next day on which a transfer of Collateral may be
effected in accordance with Section 16; and (ii) in no event shall a Saturday or
Sunday be considered a Business Day.
26.3. "Clearing Organization" shall mean The Depository 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.
26.4. "Collateral" shall mean, whether now owned or hereafter acquired and
to the extent permitted by applicable law, (a) any property which Borrower and
Lender agree shall be acceptable collateral prior to the Loan and which is
transferred to Lender pursuant to Section 3 or 8 (including as collateral, for
definitional purposes, any letters of credit mutually acceptable to Lender and
Borrower), (b) any property substituted therefor pursuant to Section 3.5, (c)
all accounts in which such property is deposited and all securities and the like
in which any cash collateral is invested or reinvested, and (d) any proceeds of
any of the foregoing. For purposes of return of Collateral by Lender or purchase
or sale of securities pursuant to Section 12 or 13, such term shall include
securities of the same issuer, class and quantity as the Collateral initially
transferred by Borrower to Lender.
26.5. "Customer" shall mean any person that is a customer of Borrower under
Rule 15c3-3 under the Exchange Act or any comparable regulation of the Secretary
of the Treasury under Section 15C of the Exchange Act (to the extent that
Borrower is subject to such Rule or comparable regulation).
26.6. "Cutoff Time" shall mean a time on a Business Day by which a transfer
of cash, securities or other property must be made by Borrower or Lender to the
other, as shall be agreed by Borrower and Lender in Schedule B or otherwise
orally or in writing or, in the absence of any such agreement, as shall be
determined in accordance with market practice.
26.7. "Default" shall have the meaning assigned in Section 11.
26.8. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
26.9. "Federal Funds Rate" shall mean the rate of interest (expressed as an
annual rate), as published in Federal Reserve Statistical Release H.15(519) or
any publication substituted therefor, charged for federal funds (dollars in
immediately available funds borrowed by banks on an overnight unsecured basis)
on that day or, if that day is not a banking day in New York City, on the next
preceding banking day.
26.10. "Foreign Securities" shall mean, unless otherwise agreed, securities
that are principally cleared and settled outside the United States.
26.11. "Government Securities" shall mean government securities as defined in
Section 3(a)(42)(A)-(C) of the Exchange Act.
26.12. "LIBOR" shall mean for any date, the offered rate for deposits in U.S.
dollars for a period of three months which appears on the Reuters Screen LIBO
page as of 11:00 A.M., London time, on such date (or, if at least two such rates
appear, the arithmetic mean of such rates).
26.13. "Loan" shall mean a loan of securities hereunder.
26.14. "Loaned Security" shall mean any security which is a security as
defined in the Exchange Act, transferred in a Loan hereunder until such security
(or an identical security) is transferred back to Lender hereunder, except that,
if any new or different security shall be exchanged for any Loaned Security by
recapitalization, merger, consolidation or other corporate action, such new or
different security shall, effective upon such exchange, be deemed to become a
Loaned Security in substitution for the former Loaned Security for which such
exchange is made. For purposes of return of Loaned Securities by Borrower or
purchase or sale of securities pursuant to Section 12 or 13, such term shall
include securities of the same issuer, class and quantity as the Loaned
Securities, as adjusted pursuant to the preceding sentence.
26.15. "Plan" shall mean (a) any "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974 which is
subject to Part 4 of Subtitle B of Title I of such Act; (b) any "plan" as
defined in Section 4975(e)(1) of the Internal Revenue Code of 1986 or (c) any
entity the assets of which are deemed to be assets of any such "employee benefit
plan" or "plan" by reason of the Department of Labor's plan asset regulation, 29
C.F.R. Section 2510.3-101.
Prime Dealer Services FINANCIAL INSTITUTION
Corp. PARTNERS, L.P.
BY: HOVDE CAPITAL IV, LLC,
GENERAL PARTNER
By: By: /s/ Richard J. Perry, Jr.
Name: [SIG_NAME1] Name: Richard J. Perry, Jr. [SIG
Title: [SIG_POSITION1] Title: Manager
Page 41 of 61
42
Schedule A
NAMES AND ADDRESSES FOR COMMUNICATIONS
Prime Dealer Services Corp.
1221 Avenue of the Americas
New York, NY 10020
Attention: Ms. Kathleen Mooney, Vice President
Tel.: (212) 762-5101
Fax: (212) 762-9519
Financial Institution Partners, L.P.
1824 Jefferson Place, NW
Washington, DC 20036
Attention: Jeffrey Kashdin
Tel.: (202) 822-8117
Fax: (202) 822-8365
Schedule B
DEFINED TERMS AND SUPPLEMENTAL PROVISIONS
Cutoff Time(s)
ANNEX II
Supplemental Terms and Conditions
The following Supplemental Terms and Conditions (the "Supplement") supplement
and amend the Master Securities Loan Agreement (the "Agreement") dated between
Prime Dealer Services Corp. and :
1. The phrase "and for any other obligation of Borrower to Lender" shall be
deleted from the first sentence of Section 3.2 of the Agreement. The words
"securities intermediary" shall be inserted after the words "financial
intermediary" in the last sentence of Section 3.2.
2. The term "substituted Collateral" in first sentence of Section 3.5 of the
Agreement after the phrases "provided however that such" and "the aggregate
market value of such", shall be changed to "substitute Collateral" in both
instances, and the phrase "(or other Collateral acceptable to Lender)" shall be
inserted after the words "substitute letter of credit" in the last sentence of
such Section.
3. The phrase "market or" shall be inserted after the words "based on the
aggregate" in first sentence of Section 4.1 of the Agreement and the phrase "as
agreed" shall be inserted after the words "par value" in the first sentence of
such Section.
4. The word "such" shall be inserted after the phrase "by the transfer of" in
the first sentence of Section 7.2 of the Agreement and the phrase "in an amount
equal to such cash distribution," shall be deleted from the first sentence of
such Section.
5. The word "such" shall be inserted after the phrase "by the transfer of" in
second sentence of Section 7.3 of the Agreement and the phrase, "in an amount
equal to such cash distribution," shall be deleted from the second sentence of
such Section.
6. The sentence "Non-cash distributions received by Lender shall be added to
the Collateral on the date of distribution and shall be considered such for all
purposes, except that if the Loan has terminated, Lender shall forthwith
transfer the same to Borrower," shall be inserted at the end of Section 7.3 of
the Agreement.
7. The phrase "Subject to Section 7.4 (d)," shall be inserted at the beginning
of Section 9.3 of the Agreement.
8. The phrase "and such suspension or expulsion shall have a material effect
on such parties' ability to perform hereunder" shall be inserted at the end of
Section 11(f) of the Agreement.
9. Unless otherwise agreed, the Margin Percentage shall be as follows:
(a)US and Canadian exchange traded equity securities: 100%
(b)Non-US and Non-Canadian exchange traded equity securities: 100%
(c) All fixed income securities: 100%
10. When Borrower gives other than cash Collateral, Fees shall be calculated in
accordance with Section 4, except that Fees shall be based on the Market Value
of Loaned Securities plus accrued and unpaid interest to the extent accrued
interest is not included in the market value of the Loaned Securities.
11. The second sentence in Section 5 ("Termination of Loan") is hereby deleted
and restated as follows:
"The termination date established by a termination notice given by Lender
to Borrower shall be a date no earlier than the standard settlement date for
trades of the Loaned Securities entered into on the date of such notice, which
date shall, unless Borrower and Lender agree to the contrary, be (i) in the case
of Government Securities, the next Business Day following such notice and (ii)
in the case of all other securities, the number of Business Days in the standard
securities settlement cycle in the United States as defined in Rule 15c6-1 under
the Securities Exchange Act of 1934 (currently three days) following such
notice."
12. THIS SUPPLEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PRINCIPLES THEREOF.
Except as otherwise set forth herein, the Agreement shall remain unchanged and
in full force and effect. From and after the date hereof, any reference to the
Agreement shall be a reference to the Agreement as amended hereby.
Prime Dealer Services FINANCIAL INSTITUTION
Corp. PARTNERS, L.P.
BY: HOVDE CAPITAL IV, LLC,
GENERAL PARTNER
By: By: /s/ Richard J. Perry, Jr.
Name: [SIG_NAME1] Name: Richard J. Perry, Jr. [SIG
Title: [SIG_POSITION1] Title: Manager
Page 42 of 61
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ANNEX III
Supplemental Terms and Conditions
The following Supplemental Terms and Conditions (the "Supplement")
supplement and amend the Master Securities Loan Agreement (the "Agreement")
dated as of between Prime Dealer Services Corp. ("Lender") and ("Borrower")
unless otherwise defined in Section 11.1 below, capitalized terms used herein
shall have the meanings assigned in the Agreement.
1. Collateral and Mark to Market.
1.1 Notwithstanding anything to the contrary in the Agreement, in
connection with any Loan in which Lender is not a Customer, Borrower and Lender
may agree, as provided in Section 10.2 hereof, that the market value of the
Collateral, if any, transferred by Borrower to Lender, upon initial transfer and
for purposes of any mark to market or similar provision of the Agreement, shall
be equal to a percentage of the market value of the Loaned Securities that is
less than 100%; provided, however, that in the event that the writing or other
confirmation evidencing such agreement does not set out such percentage with
respect to any such Loan, such percentage shall not, for purposes of any mark to
market or similar provision of the Agreement, be less than the percentage that
is obtained by dividing (i) the market value of the Collateral required to be
transferred by Borrower to Lender with respect to such Loan at the commencement
of the Loan by (ii) the market value of the Loaned Securities required to be
transferred by Lender to Borrower at the commencement of the Loan.
1.2 The Collateral transferred by Borrower to Lender under the Agreement,
as well as any other property transferred by Borrower to Lender or any of
Lender's Affiliates as security for any other obligations or liabilities of
Borrower to Lender or any of Lender's Affiliates, shall be security for any and
all obligations or liabilities of Borrower with respect to the Agreement, for
any Loan and for any other agreement or transaction between Lender or any
Affiliate of Lender and Borrower, now existing or hereafter arising.
2. Permitted Purpose.
2.1 Notwithstanding anything to the contrary in the Agreement, with
respect to any Loan of an Equity Security, Borrower and Lender may agree, as
provided in Section 10.2 hereof, that Borrower shall not be deemed to have made
any representation or warranty to Lender regarding the purpose for which
Borrower is borrowing or will borrow the Loaned Security, including without
limitation any representation or warranty regarding the use of the Loaned
Security by it (or the person to whom it relends the Loaned Security) for the
purpose of making delivery of such security in the case of a short sale, failure
to receive securities required to be delivered or otherwise. By entering into
any such agreement, Lender shall be deemed to have represented and warranted to
Borrower (which representation and warranty shall be deemed to be repeated on
each day during the term of such Loan) that Lender is either (i) an "exempted
borrower" within the meaning of Regulation T or (ii) a member of a national
securities exchange or a broker or dealer registered with the Securities and
Exchange Commission that is entering into such Loan to finance its activities as
a market maker or an underwriter.
2.2 Notwithstanding anything to the contrary in the Agreement, with
respect to any Loan of a security that is not an Equity Security, Borrower shall
not be deemed to have made any representation or warranty to Lender regarding
the purpose for which Borrower is borrowing or will borrow the Loaned Security,
including without limitation any representation or warranty regarding the use of
the Loaned Security by it (or the person to whom it relends the Loaned Security)
for the purpose of making delivery of such security in the case of a short sale,
failure to receive securities required to be delivered or otherwise.
3. Termination and Rights in Respect of Collateral. Notwithstanding anything
to the contrary in the Agreement, if under the Agreement Lender may pledge,
repledge, hypothecate, rehypothecate, lend, relend, sell or otherwise transfer
the Collateral, or re-register Collateral evidenced by physical certificates in
any name other than Borrower's:
(a) Borrower may not terminate a Loan, if the Collateral for such Loan includes
securities other than Government Securities, except on a termination date
established by notice given to Lender prior to the close of business on a
Business Day; the date established by such termination notice given by Borrower
to Lender shall be a date no earlier than the standard settlement date for
trades of such Collateral entered into on the date of such notice, which date
shall, unless Borrower and Lender agree to the contrary, be the third Business
Day following such notice; and
(b) Borrower waives the right to vote, or to provide any consent or take any
similar action with respect to, any Collateral in the event that the record date
or deadline for such vote, consent or other action falls during the term of a
Loan and such Collateral is not required to be returned to Borrower pursuant to
any substitution, mark to market or similar provision of the Agreement.
4. Dividends, Distributions, Etc.
4.1 Notwithstanding anything to the contrary in the Agreement, Borrower
shall be entitled to receive all distributions made on or in respect of
Collateral transferred to Lender which are not otherwise received by Borrower,
to the full extent it would be so entitled if such Collateral had not been
transferred to Lender, including, but not limited to (a) cash and all other
property, (b) stock dividends, (c) securities received as a result of split ups
of such Collateral and distributions in respect thereof, (d) interest payments,
and (e) all rights to purchase additional securities.
4.2 Any cash distributions made on or in respect of Collateral, which
Borrower is entitled to receive pursuant to Section 4.1 hereof, shall be treated
in accordance with the Agreement. Non-cash distributions received by Lender
shall be added to the Collateral on the date of distribution and shall be
considered such for all purposes, except that if each Loan secured by such
Collateral has terminated, Lender shall forthwith transfer the same to Borrower.
5. Transfer. Notwithstanding anything to the contrary in the Agreement, all
transfers by either Borrower or Lender of Loaned Securities or Collateral
consisting of "financial assets" (within the meaning of the New York Uniform
Commercial Code) thereunder shall be by (a) in the case of certificated
securities, physical delivery of certificates representing such securities
together with duly executed stock and bond transfer powers, as the case may be,
with signatures guaranteed by a bank or a member firm of the New York Stock
Exchange, Inc., (b) registration of an uncertificated security in the
transferee's name by the issuer of such uncertificated security, (c) the
crediting by a securities intermediary of such financial assets to the
transferee's securities account maintained with such securities intermediary, or
(d) such other means as Borrower and Lender may agree. For the avoidance of
doubt, the parties agree and acknowledge that the term "securities", as used in
the Agreement and herein, shall include any "security entitlements" with respect
to such securities (within the meaning of the New York Uniform Commercial Code),
and that the terms "financial intermediary" and "clearing corporation", as used
in the Agreement, shall mean a "securities intermediary" (within the meaning of
the New York Uniform Commercial Code).
6. Representations and Warranties. Each of the parties hereto (and, in the
case of a party acting as agent in accordance with the terms of the Agreement,
each of its principals) represents and warrants that (a) it has full power and
authority to execute and deliver this Supplement and to enter into any Loan
contemplated by the Agreement and to perform its obligations thereunder, as
supplemented or amended herein; (b) it has taken all necessary action to
authorize such execution, delivery and performance; and (c) this Supplement
constitutes a legal, valid and binding obligation, enforceable against it in
accordance with its terms and the terms of the Agreement.
7. Events of Default.
7.1 In addition to any events of default set forth in the Agreement, the
occurrence of one or more of the following shall constitute an event of default
under the Agreement:
(i) if either party fails to perform any covenant or obligation required to be
performed by it hereunder or if any representation made by either party in
respect hereof shall be incorrect or untrue in any material respect during the
term of any Loan under the Agreement, as supplemented or amended herein;
provided, however, that to the extent that Section 4 hereof supplements and
amends any provisions in the Agreement governing the rights of Borrower in
respect of distributions on Collateral, any such failure under Section 4 hereof
shall constitute an event of default only after the expiration of the notice
period, if any, specified in the Agreement with respect to the occurrence of an
event of default for such a failure; or
(ii) (ii) if Borrower defaults or fails to perform with respect to any
indebtedness to Lender or any Affiliate of Lender or any other agreement or
transaction between Lender or any Affiliate of Lender and Borrower, now or
hereafter arising.
7.2 In addition to the remedies in events of default set forth in the
Agreement, an event of default with respect to Borrower under the Agreement
shall constitute an event of default (howsoever described) under all other
agreements and transactions between Lender or any Affiliate of Lender and
Borrower and, upon any event of default with respect to Borrower, Lender and any
Affiliate of Lender shall be entitled to:
(i) cancel and otherwise liquidate and close out any transaction under any
other agreement or transaction between Lender or any Affiliate of Lender and
Borrower without prior notice to Borrower or any other party, whereupon
Borrower, as the case may be, shall be liable to Lender or the Affiliate of
Lender, as the case may be, for any resulting loss, damage, cost and expense,
including loss equal to the amount Lender or the Affiliate of Lender, as the
case may be, would have to pay to enter into replacement transactions (whether
or not Lender or the Affiliate of Lender, as the case may be, enters into any
such replacement transactions) and any damages resulting to Lender or any
Affiliate of Lender from entering into or terminating hedge transactions with
respect thereto; and
(ii) set off any obligation under any transaction under any agreement between
Lender or any Affiliate of Lender and Borrower (including any Loan under this
Agreement), including any payment or delivery obligation, of Lender or the
Affiliate of Lender, as the case may be, to Borrower against any obligation
under any transaction under any agreement between Lender and Borrower (including
any Loan under this Agreement), including any payment or delivery obligation, of
Borrower to Lender or the Affiliate of Lender, as the case may be.
8. Transfer Taxes. Unless otherwise agreed, all transfer taxes with respect
to the transfer of Collateral by Borrower to Lender and by Lender to Borrower
upon termination of the Loan or pursuant to any substitution, mark to market or
similar provision of the Agreement shall be paid by Borrower.
9. APPLICABLE LAW. THIS SUPPLEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
Page 43 of 61
44
10. Definitions and Interpretations.
10.1 Notwithstanding anything to the contrary in the Agreement, the following
terms shall have the following meanings for purposes of this Supplement.
"Affiliate" shall mean, in relation to any person, (i) any entity
controlled, directly or indirectly, by the person; (ii) any entity that
controls, directly or indirectly, the person; or (iii) any entity directly or
indirectly under common control with the person. For purposes of this
definition, "control" of any entity or person means ownership of a majority of
the voting power of the entity or person.
"Collateral" shall have the meaning specified in the Agreement, except that, if
any new or different security shall be exchanged for any Collateral by
recapitalization, merger, consolidation or other corporate action, such new or
different security shall, effective upon such exchange, be deemed to become
Collateral in substitution for the former Collateral for which such exchange is
made.
"Customer" shall mean any person that is a customer of Borrower under Rule 15c3-
3 under the Exchange Act or any comparable regulation of the Secretary of the
Treasury under Section 15C of the Exchange Act (to the extent that Borrower is
subject to such rule or comparable regulation).
"Equity Security" shall mean any security other than a "non-equity security", as
defined in Regulation T.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Government Securities" shall mean "government securities" as defined in Section
3(a)(42)(A)-(C) of the Exchange Act.
"Plan" shall mean (i) any "employee benefit plan" as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974 which is subject to Part 4
of Subtitle B of Title I of such Act; (ii) any "plan" as defined in Section
4975(e)(1) of the Internal Revenue Code of 1986; or (iii) 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.
"Regulation T" shall mean Regulation T of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
10.2 Any agreement between the parties pursuant to Section 1.1 or
Section 2.1 shall be made (i) in writing, (ii) orally, if confirmed promptly in
writing or through any system that compares Loans and in which Borrower and
Lender are participants, or (iii) in such other manner as may be agreed by the
parties in writing.
11. Notwithstanding anything contained in the Agreement, Lender and
Borrower agree that in effecting Loans transfers between Lender's Account and
Borrower's Account are intended to be, and shall be deemed to be, simultaneous.
Notwithstanding the foregoing, if Lender has failed to deliver the Loaned
Securities to Borrower's Account or Borrower has failed to deliver the
Collateral to Lender's Account by the applicable Cutoff time for such Loan, then
no Loan shall have occurred and Borrower (in the case of Lender's failure to
deliver) or Lender (in the case of Borrower's failure to deliver), shall have
the absolute right to the return of the Collateral or Loaned Securities, as the
case may be. Until such Collateral or Loaned Securities are redelivered to
either Borrower (in the case of Lender's failure to deliver) or Lender (in the
case of Borrower's failure to deliver), the party that failed to deliver such
Collateral or Loaned Securities shall hold such securities in escrow for the
other party and shall be required to pay to such party interest based on the
market value of the Collateral or Loaned Securities, as the case may be, (i) in
the case of foreign securities, at the LIBOR rate and (ii) in the case of any
other securities, at the Federal Funds Rate, for each day that such redelivery
obligation remains outstanding. For purposes of this Paragraph 11, the
following terms shall have the following meanings:
"Lender's Account" shall mean the account maintained by Lender for the deposit
of Collateral with respect to each Loan and, for such purposes, Lender's Account
shall be deemed to be a "securities account" within the meaning of the New York
Uniform Commercial Code. For purposes of this Amendment, Lender's Account shall
include any account for the deposit of cash in connection therewith.
"Borrower's Account" shall mean the account maintained by Borrower for the
deposit of Loaned Securities with respect to each Loan and, for such purposes,
Borrower's Account shall be deemed to be a "securities account" within the
meaning of the New York Uniform Commercial Code. For purposes of this
Amendment, Borrower's Account shall include any account for the deposit of cash
in connection therewith.
Except as otherwise set forth herein, the Agreement shall remain
unmodified and in full force and effect. From and after the date hereof, any
reference to the Agreement shall be a reference to the Agreement as supplemented
and amended hereby.
Prime Dealer Services FINANCIAL INSTITUTION
Corp. PARTNERS, L.P.
BY: HOVDE CAPITAL IV, LLC,
GENERAL PARTNER
By: By: /s/ Richard J. Perry, Jr.
Name: [SIG_NAME1] Name: Richard J. Perry, Jr. [SIG
Title: [SIG_POSITION1] Title: Manager
Page 44 of 61
45
EXHIBIT U
Account Control Agreement, dated as of , among Morgan Stanley & Co.,
Incorporated ("MS&Co."), Prime Dealer Services Corp. ("PDS") and ("Customer").
Unless otherwise defined herein, capitalized terms used herein shall have the
meanings assigned in the Master Securities Loan Agreement dated (the "Master
Securities Loan Agreement").
PREAMBLE:
1. MS&Co., in its capacity as securities intermediary ("Intermediary") has
established one or more securities accounts in the name of (the "Account").
2. PDS may, from time to time, lend securities to Customer pursuant to the
Master Securities Loan Agreement.
3. Customer wishes to provide for the Account and all or a portion of the
assets credited to the Account (the "Additional Collateral"), in addition to any
other Collateral transferred by Customer to PDS, to serve as Collateral in
connection with one or more Loans or other obligations under the Master
Securities Loan Agreement.
4. PDS, Customer and MS&Co. (in its individual capacity and as Intermediary)
are entering into this Agreement to provide for the control of the Additional
Collateral by PDS and to perfect the security interest of PDS therein.
TERMS:
Section 1. The Account. All parties agree that the Account is a "securities
account" within the meaning of Article 8 of the Uniform Commercial Code of the
State of New York (the "UCC") and that all property held by Intermediary in the
Account will be treated as financial assets under the UCC. Intermediary will
not agree with any third party to comply with entitlement orders or other
directions concerning the Collateral held in the Account originated by any third
party without the prior written consent of PDS and Customer.
Section 2. Collateral. Notwithstanding anything to the contrary in the Master
Securities Loan Agreement, in addition to Collateral transferred by Customer to
PDS pursuant to Section 16 of the Master Securities Loan Agreement and Section 5
of Annex III thereto, Additional Collateral held by MS&Co. in the Account shall
constitute Collateral for purposes of the Master Securities Loan Agreement,
subject to the security interest and all other rights of PDS as Lender
thereunder. In such event, notwithstanding anything to the contrary in the
Master Securities Loan Agreement, such Additional Collateral shall, except as
provided below in Section 7, be deemed to be "transferred" by Borrower to Lender
for purposes of the Master Securities Loan Agreement concurrently with the
transfer of such other Collateral by Borrower to Lender and shall be deemed to
be "transferred" by Lender to Borrower for purposes of the Master Securities
Loan Agreement concurrently with the transfer of such other Collateral by Lender
to Borrower.
Section 3. Subordination of Lien. The security interest in favor of PDS in the
Account and financial assets credited thereto is subject and subordinate to the
prior payment of all indebtedness of Customer to Intermediary, as such may exist
from time to time, including fees and commissions, and to any security interest
or lien in favor of Intermediary on the Account and to any right of Intermediary
to close out open positions in the Account. In no event will PDS have any right
to exercise any remedies in respect of the Account until such time as all
Customer's obligations to Intermediary have been satisfied in full.
Section 4. Control. Subject to the provisions of Section 3, Intermediary will
comply with entitlement orders originated by PDS concerning the Account and any
financial assets credited thereto without further consent by Customer. Subject
to the foregoing, Intermediary may also comply with entitlement orders or other
directions concerning the Account originated by Customer, or its authorized
representatives, until such time as PDS delivers a written notice to
Intermediary that PDS is thereby exercising exclusive control over the Account.
Such notice may be referred to herein as the "Notice of Exclusive Control."
After Intermediary receives the Notice of Exclusive Control and has had
reasonable opportunity to comply, it will cease complying with entitlement
orders or other directions concerning the Account originated by Customer or its
representatives.
Section 5. Amendment. This Agreement may not be amended or otherwise modified
except in writing signed by all the parties hereto.
Section 6. Choice of Law. This Agreement (including without limitation all
rights and obligations with respect to the Account) shall be governed by and
construed in accordance with the law of the State of New York.
Section 7. Interpretation. Dividends and other distributions on Additional
Collateral shall be credited to the Account in accordance with the customary
practices of Intermediary, and PDS shall have no obligation with respect thereto
under Section 7.3 of the Master Securities Loan Agreement and Sections 4.1 and
4.2 of Annex II thereto.
SIGNATURES:
PRIME DEALER SERVICES CORP.
By: ___________________
Name: [SIG_NAME1]
Title:
FINANCIAL INSTITUTION PARTNERS, L.P.
BY: HOVDE CAPITAL IV, LLC, GENERAL PARTNER
By: /s/ Richard J. Perry, Jr.__
Name: Richard J. Perry, Jr. [SIG
Title: Manager
MORGAN STANLEY & CO. INCORPORATED,
[INDIVIDUALLY AND AS INTERMEDIARY]
By: ________
Name: [SIG_NAME1]
Title:
Page 45 of 61
46
EXHIBIT V
MORGAN STANLEY & CO. INCORPORATED
OPTION AGREEMENT
The following sets forth our respective rights and obligations arising from your
handling, purchasing, selling, assigning, exercising and/or endorsing puts
and/or calls, or variations thereof ("options"), for my account. In connection
with such transactions for my account, I agree and represent as follows:
1. I have received from you, have read and understand the brochure entitled
"Characteristics and Risks of Standardized Options" and/or other appropriate
Options Disclosure Documents ("ODD"), including but not limited to the
information therein regarding position limits and exercise limits, the purposes
and risks of transactions in options and the secondary market in options.
2. I agree to pay to you, as you direct, (a) all applicable transaction
fees, charges and premiums, (b) the amount of any trading loss that you may
incur from options transactions executed by you on my behalf and (c) any debit
balance owing with respect to my account(s), and interest and service charges on
any such debit balances at the rates then charged by you, together with your
costs and reasonable attorney's fees incurred in collecting any such debit
balance.
3. In effecting options transactions through you, I am aware of and agree
to be bound by the rules of The Options Clearing Corporation ("OCC"), the
Securities and Exchange Commission, the various securities exchanges and
securities associations, the Board of Governors of the Federal Reserve Board and
other securities self regulatory organizations having jurisdiction over options
transactions. Without limiting the foregoing, I agree not to violate, either
acting by myself (through you as broker or otherwise) or in concert with others,
directly or indirectly, the rules of such organizations regarding position
limits and/or exercise limits. I further expressly authorize you to
liquidate any of my options positions without notice to me and without my
consent, in your sole and absolute discretion, if and when my open positions
exceed applicable position limits so as to reduce such open positions to a level
that is in compliance with such limits or if I fail to fulfill any of my
obligations hereunder or under any other agreement with you. I will bear and be
solely responsible for any losses associated with such a reduction or
liquidation.
4. I agree that you shall not be liable for delays in the transmission of
orders or instructions due to the breakdown or failure of transmission or
communication facilities or any other cause beyond your control, including any
mistake, error, negligence or misconduct of a securities exchange, securities
association or clearing house or their officers, directors, employees or agents.
5. (a) I understand that I am fully responsible for taking action to
exercise my option contracts. I hereby agree to waive any and all claims for
damages or loss, which I might have against you because an option was not
exercised. I understand that my options will become worthless if I do not
deliver instructions to exercise by your established exercise cut-off times,
which may be different than exercise cut-off times established by the exchanges,
markets and clearing houses. I am aware that the OCC has established thresholds
for equity and index option contracts whereby all expiring contracts at or above
the appropriate threshold will be automatically exercised unless you, at my
direction, instruct the OCC otherwise.
(b) I understand that you randomly assign exercise notices to all
customers. All American-style (an option that may be exercised at any time)
short option positions are subject to assignment at any time, including
positions established on the same day that exercises are assigned, while
European-style (an option that may be exercised only on a specified exercise
date) short option positions are only subject to assignment upon expiration.
Exercise assignment notices are allocated randomly from among all of your
customers' short option positions, which are subject to exercise. A more
detailed description of Morgan Stanley & Co. Incorporated's Random Method for
allocating assignment notices is available from your account representative upon
request.
6. I represent and warrant to you that (i) options trading is suitable for
me in light of my investment objectives, financial situation, needs, experience
and knowledge, (ii) I am aware and acknowledge that options trading may be
highly speculative and involves a high degree of risk (including without
limitation the risks described in the ODD) and that on certain trading days,
trading may cease with a resultant financial disadvantage to me, (iii) I am
willing and able to evaluate, carry and bear the financial risks attendant to
options trading, and (iv) I understand that you are relying upon these
representations and warranties and the financial and other information that I
have provided or will provide to you. I will promptly notify you of any
significant changes that take place in any information furnished to you,
including my investment objectives, financial situation and/or needs, prior to
effecting any additional opening purchase or sale transactions.
7. CHOICE OF DISPUTE RESOLUTION. ANY DISPUTE THAT I MAY HAVE WITH YOU
ARISING OUT OF, RELATING TO OR IN CONNECTION WITH, YOUR BUSINESS, ANY
TRANSACTION BETWEEN US, OR THIS AGREEMENT, SHALL BE DETERMINED BY ARBITRATION OR
LITIGATION IN COURT AT MY ELECTION. REGARDLESS OF WHETHER I CHOOSE ARBITRATION
OR LITIGATION, WE AGREE TO FOLLOW THE PROCEDURES, AND ABIDE BY THE REQUIREMENTS,
LISTED BELOW:
8. ARBITRATION:
- ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
- THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING
THE RIGHT TO A JURY TRIAL.
- PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM
COURT PROCEEDINGS.
- THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL
REASONING AND ANY PARTY'S RIGHT TO
APPEAL OR TO SEEK MODIFICATION OF RULINGS BY THE ARBITRATORS IS ST RICTLY
LIMITED.
- THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS
WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
ANY ARBITRATION SHALL BE CONDUCTED IN NEW YORK AND ONLY BEFORE THE NEW YORK
STOCK EXCHANGE, INC., THE AMERICAN STOCK EXCHANGE, INC., THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC., OR ANY OTHER SELF-REGULATORY
ORGANIZATION OF WHICH YOU ARE A MEMBER. I HAVE THE RIGHT TO ELECT ONE OF THE
FOREGOING ORGANIZATIONS, BUT IF I FAIL TO MAKE SUCH ELECTION BY CERTIFIED LETTER
ADDRESSED TO YOU AT YOUR MAIN OFFICE BEFORE THE EXPIRATION OF TEN DAYS AFTER
RECEIPT OF A WRITTEN REQUEST FROM YOU TO MAKE SUCH ELECTION THEN YOU MAY MAKE
SUCH ELECTION. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS CONSENT BY YOU TO
AN AWARD OF PUNITIVE DAMAGES. THE AWARD OF THE ARBITRATORS, OR THE MAJORITY OF
THEM, SHALL BE FINAL, AND JUDGMENT UPON THE AWARD RENDERED MAY BE ENTERED IN ANY
COURT, STATE OR FEDERAL, HAVING JURISDICTION.
NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION,
NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINST ANY PERSON WHO
HAS INITIATED IN COURT A PUTATIVE CLASS ACTION; WHO IS A MEMBER OF A PUTATIVE
CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED
BY THE PUTATIVE CLASS ACTION UNTIL:
(i) THE CLASS CERTIFICATION IS DENIED;
(ii) THE CLASS IS DECERTIFIED; OR
(iii) THE CUSTOMER IS EXCLUDED FROM THE CLASS BY THE COURT. SUCH
FORBEARANCE TO ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER
OR ANY RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN.
9. LITIGATION IN COURT. (A) UNLESS THE PARTIES OTHERWISE AGREE IN WRITING
WHEN ANY DISPUTE ARISES, ANY LITIGATION MUST BE INSTITUTED IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR THE SUPREME COURT OF THE
STATE OF NEW YORK FOR THE COUNTY OF NEW YORK. (B) ANY RIGHT TO TRIAL BY JURY
WITH RESPECT TO ANY CLAIM OR ACTION IS HEREBY WAIVED BY ALL PARTIES TO THIS
AGREEMENT.
10. THIS AGREEMENT, ITS ENFORCEMENT, AND ANY DISPUTE BETWEEN US, WHETHER
ARISING OUT OF OR RELATING TO MY ACCOUNTS OR OTHERWISE, SHALL BE GOVERNED BY THE
LAW OF THE STATE OF NEW YORK, EXCLUDING ITS CONFLICT OF LAW RULES; and its
provisions shall be continuous, shall cover individually and collectively all
accounts which I may open or reopen with you, and shall inure to the benefit of
your present organization and any successor organization, irrespective of any
change or changes at any time in the personnel thereof, for any cause
whatsoever, and of the assigns of your present organization or any successor
organization, and shall be binding upon me, and/or my estate, executors,
administrators, trustees, agents, officers, directors and assigns.
NOTICE: THIS AGREEMENT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE IN PARAGRAPHS 7
AND 8.
Page 46 of 61
47
EXHIBIT W
Morgan Stanley
CUSTOMER PRIME BROKER
ACCOUNT AGREEMENT
Ladies and Gentlemen:
In consideration of Morgan Stanley from time to time accepting an account or
receiving holding or delivering any property of the undersigned, or entering
into any Contract with the undersigned, the undersigned agrees with Morgan
Stanley to the following:
1. DEFINITIONS
"Agreement" means this document along with all executed annexes to this
document.
"Contract" means any contract or agreement between Morgan Stanley and the
undersigned, including securities purchase or sale contracts, agreements to lend
cash or securities, commodity and currency contracts, forward contracts,
repurchase agreements, swap agreements or any other derivative or financial
transaction, without regard to the form of such agreement which may include oral
agreements or agreements confirmed or signed by only one party to the agreement
and agreements entered into or signed by Morgan Stanley on behalf of the
undersigned.
"Collateral" means cash, securities, commodities, other financial assets,
investment property and other property and assets (including all security
entitlements in respect thereof, all income and profits thereon, all dividends,
interest and other payments and distributions with respect thereto and all
proceeds from any of the foregoing) which from time to time may be deposited or
credited to any account of the undersigned with Morgan Stanley, be held or
carried by Morgan Stanley for the undersigned, be due from Morgan Stanley to the
undersigned, or be delivered to or in Morgan Stanley's possession or control for
any purpose, including safekeeping.
"Morgan Stanley" and the "Morgan Stanley Entities" mean, individually or
collectively, as appropriate, Morgan Stanley & Co. Incorporated, MS Securities
Services Inc., Morgan Stanley & Co. International Limited, Prime Dealer Services
Corp., Morgan Stanley Securities Limited, Morgan Stanley Japan Limited, Morgan
Stanley Asia Limited, Morgan Stanley GMBH, Morgan Stanley Market Products Inc.,
Morgan Stanley Capital Group Inc., Morgan Stanley Capital Services Inc., Morgan
Stanley DW Inc., Morgan Stanley, MSDW Asia Securities Products LLC, MSDW Equity
Finance Services (Cayman) Ltd., Morgan Stanley Financial Products Ltd., MSDW
Markets Inc. and their respective successors, parents, subsidiaries, affiliates,
divisions, officers, directors, agents and employees.
"Obligation" means any obligation or liability of a party arising at any time,
whether or not mature or contingent, related to the purchase, sale or loan of
securities, currencies or other instrument, property or assets or under or in
connection with this Agreement or any Contract, including any payment, repayment
or delivery obligation, any obligation relating to any extension of credit or to
pay damages (including costs of cover) and legal and other expenses incurred in
connection with the enforcement of any Contract.
"Prime Brokerage Regulations" means the requirements applicable to prime
brokerage activities set out in the no-action letter of the Securities and
Exchange Commission ("SEC") dated January 25, 1994, as such letter may be
amended, modified or supplemented from time to time, regarding the performance
of prime brokerage services, and any other relevant regulations of the SEC or
other governmental authorities or self-regulatory organizations.
"Undersigned" means each of the individuals or entities, other than Morgan
Stanley, that is a party to this Agreement.
2. APPLICABLE RULES AND REGULATIONS. All transactions under this Agreement shall
be subject to the rules and regulations of all U.S. and, if applicable, non-
U.S., federal, state and local governmental authorities, self-regulatory
organizations, markets and clearing corporations including but not limited to
the Securities & Exchange Commission ("SEC"), New York Stock Exchange ("NYSE")
or National Association of Securities Dealers ("NASD").
3. SHORT AND LONG SALES. The undersigned agrees that when placing any sell
order, the undersigned will appropriately designate it as "long" or as "short."
The undersigned will designate a sale as "long" only if the securities being
sold are securities then owned by the undersigned and such securities are either
in the undersigned's account at Morgan Stanley or will be delivered to Morgan
Stanley as soon as it is possible to do so, without undue inconvenience or
expense to Morgan Stanley.
4. COMPLIANCE WITH PRIME BROKERAGE REGULATORY REQUIREMENTS. The undersigned
hereby acknowledges that it is familiar with the Prime Brokerage Regulations and
with the related provisions in Section 5 of this Agreement, and hereby
undertakes to comply with the Prime Brokerage Regulations as in effect at any
time and with the related provisions of this Agreement. The undersigned will
inform Morgan Stanley promptly if this undertaking is not satisfied. Without
limiting the foregoing, the undersigned agrees that it shall maintain in its
account with Morgan Stanley at all times a minimum net equity in cash and
securities as agreed upon, but in no event less than that required by the Prime
Brokerage Regulations. The undersigned further agrees that, in the event its
account falls below this minimum net equity, it shall bring its account into
compliance in accordance with the Prime Brokerage Regulations.
5. MORGAN STANLEY AS PRIME BROKER. In connection with any transactions where
Morgan Stanley acts as the undersigned's prime broker:
(a) The undersigned maintains brokerage accounts with a number of other brokers
("Executing Brokers") and, from time to time, will place orders to be executed
by one or more Executing Brokers. The undersigned agrees to give Morgan Stanley
notice of the names of all Executing Brokers with whom the undersigned intends
to place orders (which Executing Brokers must be acceptable to Morgan Stanley).
Morgan Stanley is authorized to enter into a Prime Brokerage Agreement with all
current or future Executing Brokers, to set up an account for the undersigned's
benefit at any Executing Broker and to provide or obtain any information
necessary to establish or maintain a prime brokerage relationship. The
undersigned acknowledges that no order need be accepted by Morgan Stanley as
prime broker from any Executing Broker with which Morgan Stanley has not entered
into a "Prime Brokerage Agreement" with respect to the undersigned's account at
Morgan Stanley. Further, Morgan Stanley reserves the right at any time to place
a limit on the size of transactions executed by any Executing Broker which are
to be settled and cleared by Morgan Stanley as a prime broker. The undersigned
will use its best efforts to assure that such Executing Brokers comply with the
terms set forth in the Prime Brokerage Agreement. The undersigned acknowledges
that as between Morgan Stanley and any Executing Broker, the Executing Broker
will be acting as an agent of the undersigned, not as Morgan Stanley's agent,
for the purpose of carrying out the undersigned's directions with respect to the
purchase, sale and settlement of securities.
b) The undersigned or its representative will advise Morgan Stanley on trade
date of the details of all transactions effected by any Executing Broker on the
undersigned's behalf (the "Trade Data"). Morgan Stanley is authorized to
acknowledge, affirm, settle and clear all such transactions. All such
transactions shall be for the sole account and risk of the undersigned and
Morgan Stanley shall have no responsibility or liability to the undersigned, any
Executing Broker or any other third party. The undersigned agrees to pay all
fees agreed upon and to make any necessary arrangements with the appropriate
Executing Broker concerning the payment of any such fees, including the
deduction of any such amounts from commissions charged by the Executing Brokers.
The undersigned agrees that it is responsible, and liable to Morgan Stanley, and
will indemnify Morgan Stanley, for all costs, losses and fees (including but not
limited to those associated with buy-ins and sell-outs and those resulting from
any Executing Broker's inability to settle a transaction) arising out of the
orders placed by the undersigned with any Executing Broker or any action taken
or not taken by any Executing Broker with respect to the undersigned or its
transactions or accounts.
(c) On the first business day following each transaction, Morgan Stanley shall
send to the undersigned a notification of each trade placed with any Executing
Broker based on information provided to Morgan Stanley by the undersigned. Any
confirmations of trades or advices issued by Morgan Stanley as prime broker
shall indicate the name of the Executing Broker involved and the other
information required by the Prime Brokerage Regulations. If the undersigned has
instructed the Executing Broker to send trade confirmations to the undersigned
in care of Morgan Stanley, Morgan Stanley agrees that the confirmations will be
available to the undersigned without charge upon request to Morgan Stanley.
Reports of the execution of orders and statement of accounts of the undersigned
shall be conclusive and binding if not objected to in writing (the former within
five days and the latter within ten days) after Morgan Stanley's transmittal to
the undersigned by mail, e-mail, facsimile, electronically or any other agreed
means. Communications may be sent to the undersigned at the undersigned's
address of record or in such other manner as the undersigned may hereinafter
provide in writing. All communications sent to such address whether by mail, e-
mail, facsimile, telegraph, messenger, electronic means or otherwise shall be
deemed given to the undersigned personally as of the date sent, whether actually
received or not.
Page 47 of 61
48
(d) The undersigned understands that transactions will be settled by Morgan
Stanley only if: (i) sufficient funds or securities, as necessary, are
maintained in an account with Morgan Stanley or if the undersigned has made
other arrangements for settlement that are satisfactory to Morgan Stanley; (ii)
the undersigned maintains, and has at the settlement of the transaction, at
least the minimum net equity required by the Prime Brokerage Regulations in its
account with Morgan Stanley and (iii) a condition does not exist that would
require Morgan Stanley to disaffirm on a non-discretionary basis, as defined in
the Securities Industry Association Form 150, paragraph 3. (e). Morgan Stanley's
customer account records may reflect transactions as settled as of the projected
settlement date (sometimes referred to as contractual settlement). Morgan
Stanley does not guarantee settlement, however, and therefore reserves the right
to reverse transaction settlement entries in the event of a settlement failure
caused by events beyond Morgan Stanley's control.
(e) The undersigned agrees to comply with Morgan Stanley's requirements relating
to short sales, including the requirement that no short sale may be effected
through an Executing Broker unless the undersigned has first confirmed with
Morgan Stanley that the securities are available for delivery. Such confirmation
does not guarantee that the securities will be available for delivery on
settlement date or that the securities will be available to support a short sale
for any particular period of time. Accordingly, the short sale may fail on
settlement date or the undersigned may be asked to cover its short sale at
anytime, and undersigned will be responsible for any Obligations that arise
therefrom.
(f) Morgan Stanley is authorized to try to resolve any unmatched trade reports
received from any Executing Broker. However, the undersigned is responsible for
the ultimate resolution of these trades and reports. Morgan Stanley shall have
no responsibility or liability with respect to trade data not correctly
transmitted to it on a timely basis by any person or entity, including but not
limited to DTCC.
(g) In the event the undersigned's account falls below the minimum net equity
required by the Prime Brokerage Regulations, the undersigned authorizes Morgan
Stanley to notify promptly all its Executing Brokers of such event. If the
undersigned fails to bring such account into compliance with the minimum net
equity, the undersigned further agrees that Morgan Stanley may, without notice
to the undersigned, disaffirm, DK or decline to affirm, clear and settle any
transaction effected by an Executing Broker on the undersigned's behalf. Except
as provided in the following paragraph, the undersigned understands that if
Morgan Stanley takes such action with respect to any transaction of the
undersigned, Morgan Stanley shall do so for all transactions of the undersigned
that day. In any such case, Morgan Stanley shall send a cancellation
notification to the undersigned and the undersigned understands that the
undersigned must settle outstanding trades directly with the relevant Executing
Broker and authorizes Morgan Stanley to provide the Executing Broker with any
information necessary to settle such trades. The undersigned further agrees that
Morgan Stanley will not be bound to make any investigation into the facts
surrounding any transaction to which the undersigned is a party and that,
immediately upon notice to the undersigned and, if required, to the Executing
Brokers, Morgan Stanley may cease acting as prime broker for the undersigned.
(h) The undersigned hereby authorizes Morgan Stanley, if its account is managed
on a discretionary basis by an SEC- or state-registered investment adviser,
money manager or other person (an "Adviser"), to commingle its prime brokerage
transactions with those of other accounts of its Adviser ("sub-accounts") for
order placement and clearance in bulk in accordance with other instructions of
the Adviser. The undersigned understands that no part of any transaction may be
allocated to any sub-account where such sub-account's net equity is below the
minimum levels established by the Prime Brokerage Regulations and that, should a
such a net equity deficiency occur in any such sub-account, Morgan Stanley must
disaffirm the entire transaction. The undersigned agrees that, should such an
event occur, its Adviser may resubmit the bulk trade to the Executing Broker so
as to exclude those securities which were originally allocated to the
undersigned's sub-account or, if permissible, re-allocate the entire prime
brokerage transaction to other sub-accounts. The undersigned understands that
such reallocation must be communicated to Morgan Stanley within any required
deadlines.
6. CURRENCY CONTRACTS. If an authorized representative of the undersigned
initials the box entitled "Additional Provisions Related to Currency Contracts",
which appears at the end of this Agreement, the undersigned, from time to time,
may enter into spot and/or forward currency Contracts with Morgan Stanley in
connection with the settlement of other Contracts or otherwise as the
undersigned shall direct. The undersigned acknowledges that Morgan Stanley is
under no obligation to enter into any currency Contracts with, or on behalf of,
the undersigned, and further agrees to furnish to Morgan Stanley such
documentation to indicate capacity and authority as Morgan Stanley may
reasonably request prior to entering into any such Contracts. Each currency
Contract entered into under this Agreement shall constitute an "FX Transaction",
as such term is defined in the 1998 FX and Currency Option Definitions,
including Annex A thereto, as published by the International Swaps and
Derivatives Association, Inc., EMTA, and The Foreign Exchange Committee (as may
be amended, the "FX Definitions"), and shall be subject to the terms in this
Section 6 as well as those set forth in the "Additional Provisions Related to
Currency Contracts" box. Any confirmation, whether created by an exchange of
telexes, facsimiles, SWIFT messages, or electronic messages on an electronic
messaging or matching system, between Morgan Stanley and the undersigned
relating to an FX Transaction, whether or not it is expressed to be, shall
constitute a confirmation and, unless Morgan Stanley and the undersigned
expressly agree otherwise, will be deemed to incorporate the FX Definitions.
Notwithstanding the foregoing, Morgan Stanley shall have the right to convert
currencies in connection with the exercise of Morgan Stanley's rights under
Section 8 below in such manner as it may determine.
7. SECURITY INTEREST AND LIEN. All Collateral shall be subject to a general lien
and a continuing first priority perfected security interest for the discharge of
all Obligations of the undersigned to Morgan Stanley, irrespective of whether or
not Morgan Stanley has made advances in connection with such Collateral, the
number of accounts the undersigned has with Morgan Stanley or which particular
Morgan Stanley Entity holds such Collateral. The undersigned and Morgan Stanley
each acknowledge and agree that each Morgan Stanley Entity which holds
Collateral does so both for itself and also as an agent and bailee for all other
Morgan Stanley Entities which may be secured parties under any Contract. The
undersigned and Morgan Stanley agree that all Collateral held in or credited to
any account will be treated as financial assets under Article 8 of the Uniform
Commercial Code as in effect in the State of New York (the "UCC") and that any
account maintained by the undersigned with any Morgan Stanley Entity shall be a
securities account under Article 8 of the UCC. In the event of a breach or
default by the undersigned, Morgan Stanley shall have in addition to the rights
and remedies provided in this Agreement, all rights and remedies available to a
secured creditor under the UCC and any other applicable law. All Collateral
delivered to Morgan Stanley shall be free and clear of all prior liens, claims
and encumbrances and the undersigned will not cause or allow any of the
Collateral to be subject to any liens, security interests, mortgages or
encumbrances of any nature other than the security interest created in Morgan
Stanley's favor. Furthermore, Collateral consisting of securities shall be
delivered in good deliverable form (or Morgan Stanley shall have the
unrestricted power to place such securities in good deliverable form) in
accordance with the requirements of the primary market for these securities. The
undersigned shall execute such documents and take such other action as Morgan
Stanley shall reasonably request in order to perfect its rights with respect to
any such Collateral. In addition, the undersigned appoints Morgan Stanley as the
undersigned's attorney-in-fact to act on the undersigned's behalf to sign, seal,
execute and deliver all documents, and do all such acts as may be required, to
realize upon any of Morgan Stanley's rights in the Collateral.
8. RIGHTS OF MORGAN STANLEY. Morgan Stanley is hereby authorized, in its
discretion, to cancel any outstanding orders for the purchase or sale of any
securities, currencies, commodities or other property or asset, or to sell any
or all of the securities, currencies, commodities or other property or asset
which may be in Morgan Stanley's possession or control (either individually or
jointly with others), or to buy any securities, currencies, commodities or other
property or asset of which any account of the undersigned may be short upon: (a)
the undersigned's death or incompetency (if applicable); (b) a breach,
repudiation or default by the undersigned of this Agreement or any other
Contract; (c) any misrepresentation of any statement by the undersigned when
made or deemed to be made or repeated, (d) the failure of the undersigned to
fulfill or discharge any Obligation under this Agreement or any Contract,
including the failure to make a payment on demand or to satisfy margin
requirements,
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49
(e) the filing by or against the undersigned of a petition or other proceeding
in bankruptcy, insolvency or for the appointment of a receiver, (f) the levy of
an attachment against any property or asset in any account of the undersigned
(g) the failure by the undersigned to give adequate assurance of due performance
pursuant to this Agreement (h) should you deem it necessary for your protection,
to cancel any outstanding orders for the purchase or sale of any securities or
other property, or to sell any or all of the securities, currencies and
commodities or other property which may be in your possession or control (either
individually or jointly with others), or to buy in any securities, commodities
or other property of which the account or accounts of the undersigned may be
short. Such sale, purchase or cancellation may be made on any exchange or other
market where such business is then usually transacted, or at public auction or
private sale, without advertising or notice of the time or place of sale to the
undersigned, and without prior tender, demand or call of any kind upon the
undersigned, all of which are expressly waived. Morgan Stanley may purchase the
whole or any part thereof free from any right of redemption and the undersigned
shall remain liable to Morgan Stanley for any deficiency; it being understood
that a prior tender, demand or call of any kind from Morgan Stanley, or prior
notice from Morgan Stanley, of the time and place of such sale or purchase shall
not be considered a waiver of Morgan Stanley's right to sell or buy any
securities, commodities, or other property or asset held by Morgan Stanley, or
which the undersigned may owe to Morgan Stanley. In addition, Morgan Stanley may
at any time in connection with its rights under this Section 8 without prior
notice to the undersigned apply or transfer any and all Collateral
interchangeably between Morgan Stanley Entities in connection with accounts in
which the undersigned has an interest.
9. ADEQUATE ASSURANCES. If at any time Morgan Stanley has reasonable grounds to
doubt the undersigned's performance of any of the undersigned's Obligations,
Morgan Stanley may demand, and the undersigned shall give within twenty-four
hours or any reasonable shorter period of time Morgan Stanley specifies,
adequate assurance of due performance. The giving of adequate assurance of
performance may require the delivery by the undersigned to Morgan Stanley of
additional Collateral. Any failure by the undersigned to give such adequate
assurance of due performance shall constitute an independent, material default
under the terms of all Contracts and Morgan Stanley may terminate, liquidate or
accelerate any and all Contracts and exercise any right under or with respect to
any security relating to any Contract and any right to net or set off payments
which may arise under any Contract or other agreement or under applicable law.
10. EXPENSES AND OTHER CHARGES. The undersigned agrees to pay Morgan Stanley, or
its designee, the following fees and charges with respect to trading activity:
(a) Morgan Stanley's commissions, markups and other charges with respect to the
execution of transactions,
fails, buy-ins, conversion costs or the maintenance of positions or other
related services;
(b) any fees, fines, penalties or other charges imposed by any authority
described in Section 2 of this Agreement or any court or authority of competent
jurisdiction on any account opened or transaction executed for the undersigned,
except any such charges as may be imposed due to Morgan Stanley's gross
negligence or willful misconduct;
with respect to fees or expenses related to securities lending and borrowing
transactions:
(a) upon demand, any debit balance owing with respect to any account of the
undersigned, and interest and service charges on any such debit balance at the
rates then charged by Morgan Stanley; and
(b) any charges with respect to such transactions, including buy-ins, and
applicable taxes or interest on any of the foregoing, together with Morgan
Stanley's costs and reasonable attorney's fees incurred in collecting
any such debit balance.
11. NETTING AND SET OFF RIGHTS. Morgan Stanley shall have the right, at any time
and from time to time, to set off Morgan Stanley's Obligations owed to the
undersigned against the Obligations of the undersigned to Morgan Stanley and to
foreclose on any Collateral for the purpose of satisfying the Obligations of the
undersigned to Morgan Stanley. The undersigned acknowledges that the fulfillment
by Morgan Stanley of its Obligations to the undersigned is contingent upon there
being no breach, repudiation, misrepresentation or default by the undersigned
which has occurred and is continuing under this Agreement or any Contract.
12. MAINTENANCE OF THE UNDERSIGNED'S COLLATERAL. Subject to the applicable rules
of the SEC and other competent authorities, the undersigned acknowledges that
all Collateral now or hereafter in Morgan Stanley's possession or control
(either individually or jointly with others) or deposited to secure the same,
may from time to time and without further notice to the undersigned, be carried
in Morgan Stanley's general accounts and may be pledged, hypothecated or re-
hypothecated, separately or in combination with property of others for the sum
due to Morgan Stanley thereon or for a greater sum and without Morgan Stanley's
retaining in its possession a like amount of similar property. Within the limits
of applicable law, rule and regulation, Morgan Stanley is authorized to lend, to
itself or to others Collateral it holds, together with all attendant rights of
ownership (including the right to vote any securities).
13. FAILURE OF DELIVERY. If the undersigned directs Morgan Stanley to make any
delivery of any security, commodity or other property or asset for its account
for any reason and the undersigned fails to deliver that item to Morgan Stanley
in the time, place and manner required, or if Morgan Stanley is unable to borrow
the security, or in the case of a recall, Morgan Stanley is unable to re-borrow
the security, the undersigned authorizes Morgan Stanley to borrow or purchase
that item (or to be deemed to have make such purchase at the market value of the
time of such deemed purchase) in such manner and time as Morgan Stanley in its
sole discretion determines to be commercially reasonable. The undersigned agrees
to be responsible for any consequent loss which Morgan Stanley may suffer and
any related costs, premiums and losses to which Morgan Stanley may be subject.
14. CONFIRMATIONS, STATEMENTS AND OTHER COMMUNICATIONS. Execution reports and
account statements shall be conclusive and binding if not objected to in writing
(the former within five days and the latter within ten days) after transmittal
by Morgan Stanley to the undersigned by mail or otherwise, including by
electronic communication. Morgan Stanley may send communications to the
undersigned's address of record or otherwise as provided to Morgan Stanley in
writing. All communications, whether by mail, facsimile, telegraph, messenger,
electronic means or otherwise, shall be deemed to have been given to the
undersigned personally as of the date sent, whether actually received or not.
15. NO OBLIGATION. The undersigned agrees that Morgan Stanley shall be under no
obligation whatsoever to enter into any Contract with, or on behalf of, the
undersigned.
16. PROVISION OF INFORMATION. From time to time, Morgan Stanley may provide or
make available to the undersigned, or to others acting with or on behalf of the
undersigned,, research, opinions and other information, including portfolio
analyses and reports, regarding securities, commodities, other financial assets,
and market participants or events. The undersigned acknowledges that such
information is provided, unless Morgan Stanley agrees in writing otherwise,
without regard to the undersigned's personal financial situation, investment
objectives or other circumstances and that the provision by Morgan Stanley of
such information to the undersigned, whether sent directly or made readily
accessible, and whether in writing, in electronic form or the subject of a
taping, broadcast or narrowcast, does not imply that any asset or transaction
discussed therein is suitable in light of the undersigned's particular
circumstances. The undersigned agrees that no such information will be the
primary basis of any investment decision by the undersigned. While all
information produced by Morgan Stanley is based on sources believed to be
reliable, the undersigned acknowledges that Morgan Stanley does not guarantee or
warrant the accuracy, reliability or timeliness of such information. Further,
all information and opinions are current only as of the time provided, and are
subject to rapid change without prior notice. The undersigned also acknowledges
that Morgan Stanley may take positions in financial instruments discussed in the
information provided the undersigned (which positions may be inconsistent with
the information provided), may execute transactions for others in those
instruments and may provide investment banking and other services to the issuers
of those instruments. From time to time, Morgan Stanley also may provide or make
available to the undersigned, or to others acting with or on behalf of the
undersigned, information regarding parties that might provide goods or services
to the undersigned, including but not limited to fund administrators
("Vendors"). While all information produced by Morgan Stanley is based on
sources believed to be reliable, the undersigned acknowledges that Morgan
Stanley does not guarantee or warrant the accuracy, reliability or timeliness of
such information, or the quality of goods or services provided by any Vendors.
The undersigned agrees to indemnify and hold Morgan Stanley harmless from and
against any and all losses, claims, damages and liabilities arising out of or
relating to, actions or omissions by the Vendors, Morgan Stanley's provision or
making available of such information, or the undersigned's selection or use of
such Vendors.
17. USE OF THE INTERNET. Undersigned agrees that the Internet is not a secure
network and that any communications transmitted over the Internet may, among
other things, be intercepted or accessed by unauthorized or unintended parties
and may not remain confidential, or that such transmissions may not arrive in a
complete, unaltered or timely manner, and the undersigned assumes the risk
arising therefrom.
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50
18. RESOLUTION OF DISPUTES. ANY DISPUTE BETWEEN THE UNDERSIGNED AND A MORGAN
STANLEY ENTITY THAT IS REGISTERED AS A BROKER-DEALER WITH THE U.S. SECURITIES
AND EXCHANGE COMMISSION ARISING OUT OF, RELATING TO OR IN CONNECTION WITH MORGAN
STANLEY'S BUSINESS, ANY TRANSACTION BETWEEN US OR THIS AGREEMENT SHALL BE
DETERMINED, AT THE ELECTION OF THE UNDERSIGNED, BY LITIGATION IN A COURT WITH
PROPER JURISDICTION OR BY ARBITRATION. SHOULD THE UNDERSIGNED CHOOSE TO PROCEED
BY ARBITRATION, UNDERSIGNED AND MORGAN
STANLEY AGREE TO FOLLOW THE PROCEDURES, AND ABIDE BY THE REQUIREMENTS, LISTED IN
SECTION 19 BELOW. SHOULD THE UNDERSIGNED CHOOSE TO PROCEED BY LITIGATION,
UNDERSIGNED AND MORGAN STANLEY AGREE TO FOLLOW THE PROCEDURES, AND ABIDE BY THE
REQUIREMENTS, LISTED IN SECTION 20 BELOW.
19. IF THE UNDERSIGNED CHOOSES ARBITRATION, THE UNDERSIGNED ACKNOWLEDGES THAT:
ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING THE
RIGHT TO A JURY TRIAL.
ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM COURT
PROCEEDINGS.
THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL
REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY
THE ARBITRATOR IS STRICTLY LIMITED.
THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO
ARE OR WERE AFFILIATED WITH THE SECURITIES INDUSTRY.
ANY ARBITRATION SHALL BE CONDUCTED ONLY BEFORE THE NEW YORK STOCK EXCHANGE,
INC., THE AMERICAN STOCK EXCHANGE, INC., THE NATIONAL ASSOCIATION OF SECURITIES
DEALERS, INC. OR ANY OTHER U.S. SELF-REGULATORY ORGANIZATION OF WHICH THE
RELEVANT MORGAN STANLEY ENTITY IS A MEMBER. THE UNDERSIGNED HAS THE RIGHT TO
ELECT ONE OF THE FOREGOING ORGANIZATIONS, BUT IF THE UNDERSIGNED FAILS TO MAKE
SUCH ELECTION BY CERTIFIED LETTER ADDRESSED TO THE RELEVANT MORGAN STANLEY
ENTITY AT ITS MAIN OFFICE BEFORE THE EXPIRATION OF TEN DAYS AFTER RECEIPT OF A
WRITTEN REQUEST FROM MORGAN STANLEY TO MAKE SUCH ELECTION, MORGAN STANLEY MAY
MAKE SUCH ELECTION.
THE AWARD OF THE ARBITRATORS, OR THE MAJORITY OF THEM, SHALL BE FINAL AND
JUDGMENT UPON THE AWARD RENDERED MAY BE ENTERED IN ANY STATE OR FEDERAL COURT
HAVING JURISDICTION. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS CONSENT BY
MORGAN STANLEY TO AN AWARD OF PUNITIVE DAMAGES.
NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION, NOR
SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINSTANY PERSON WHO, IF
THE UNDERSIGNED HAS INITIATED IN COURT A PUTATIVE CLASS ACTION, IS A MEMBER OF A
PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS
ENCOMPASSED BY THE PUTATIVE CLASS ACTION UNTIL:
(i) THE CLASS CERTIFICATION IS DENIED;
(ii) THE CLASS IS DECERTIFIED; OR
(iii) THE UNDERSIGNED IS EXCLUDED FROM THE CLASS BY THE COURT. SUCH FORBEARANCE
TO ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY SUCH
RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN.
20. IF THE UNDERSIGNED CHOOSES LITIGATION IN COURT. (A) UNLESS THE PARTIES
OTHERWISE AGREE IN WRITING WHEN ANY DISPUTE ARISES, LITIGATION MUST BE
INSTITUTED IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK OR THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY.
THE UNDERSIGNED IRREVOCABLY CONSENTS TO THE JURISDICTION OF EITHER OF THOSE
COURTS AND (B) ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR ACTION IS
HEREBY WAIVED BY ALL PARTIES TO THIS AGREEMENT.
21. APPLICABLE LAW AND ENFORCEABILITY. THIS AGREEMENT, ANY CONTRACT, THEIR
ENFORCEMENT AND ANY DISPUTE BETWEEN US, WHETHER ARISING OUT OF OR RELATING TO
THE UNDERSIGNED'S ACCOUNTS OR OTHERWISE, SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK, EXCLUDING ITS CONFLICT OF LAW RULES. The provisions of this
Agreement shall be continuous, shall cover individually and collectively all
accounts which the undersigned may open or reopen with Morgan Stanley and shall
inure to the benefit of Morgan Stanley's present and any successor
organizations, irrespective of any change at any time in the personnel thereof
and of the assigns of Morgan Stanley's present organizations or any successor
organizations. This Agreement shall be binding upon the undersigned and the
estate, executors, administrators, trustees, agents, officers, directors and
assigns of the undersigned.
22. MODIFICATION AND WAIVER. The undersigned agrees that Morgan Stanley may
modify the terms of this Agreement at any time upon prior written notice. If the
modifications are unacceptable, the undersigned agrees to notify Morgan Stanley
in writing within twenty days of the transmittal of such written notice. Morgan
Stanley may then terminate any or all of the undersigned's accounts. The
undersigned also agrees that any transactions or Contracts entered into after
such notification shall be subject to the modifications. The undersigned may not
modify this Agreement without Morgan Stanley's written consent. To the extent
this Agreement is inconsistent with any other agreement between us, the
provisions of this Agreement shall govern. Morgan Stanley's failure to enforce
this Agreement or any of its terms, or any continued course of such conduct on
Morgan Stanley's part, shall not be considered a waiver of any of Morgan
Stanley's rights.
23. AUTHORIZED INSTRUCTIONS. The undersigned authorizes Morgan Stanley to accept
instructions by telephone, tested telex, facsimile transmission, electronic
mail, electronically, in writing or any other method that undersigned and Morgan
Stanley may agree to use. The undersigned also agrees (i) to be bound by all
instructions that Morgan Stanley believes are authorized, regardless of the
means by which those instructions have been transmitted to Morgan Stanley, and
(ii) that Morgan Stanley shall not be liable for any loss, cost or expense for
acting upon instructions that Morgan Stanley believed to be authorized.
24. SEVERABILITY. If any provision of this Agreement is or becomes inconsistent
with any applicable present or future law, rule or regulation, that provision
will be deemed modified or, if necessary, rescinded in order to comply with the
relevant law, rule or regulation. All other provisions of this Agreement will
continue and remain in full force and effect. To the extent that this Agreement
is not enforceable as to any Contract, this Agreement shall remain in full force
and effect and be enforceable in accordance with its terms as to all other
Contracts. To the extent this Agreement contains any provision which is
inconsistent with provisions in any other Contract or agreement between us, or
of which the undersigned is a beneficiary, the provisions of this Agreement
shall control with respect to transactions contemplated hereunder.
25. LENDING OF SECURITIES. Within the limits of applicable law and regulation,
until Morgan Stanley receives written notice of revocation from the undersigned,
Morgan Stanley is hereby authorized to lend, to itself as brokers or to others,
any securities held by Morgan Stanley on margin in its possession or control
together with all attendant rights of ownership (including the right to vote the
securities).
26. EXTRAORDINARY EVENTS. The undersigned agrees that Morgan Stanley will not be
liable for any loss caused, directly or indirectly, by government restrictions,
exchange or market rulings, suspension of trading, war (whether declared or
undeclared), terrorist acts, insurrection, riots, fires, flooding, strikes,
failure of utility services, accidents, adverse weather or other events of
nature (including earthquakes, hurricanes and tornadoes) or other events or
conditions beyond Morgan Stanley's control. In the event that any communications
network, data processing system or computer system Morgan Stanley uses,
regardless of ownership, is rendered inoperable, Morgan Stanley will not be
liable to the undersigned for any loss, liability, claim, damage or expense
resulting, directly or indirectly, from such inoperability.
27. LIMITATION OF LIABILITY. Morgan Stanley shall not be liable in connection
with the execution, clearing, handling, purchasing or selling of securities,
commodities or other property or assets, or other action, except in the event of
gross negligence or willful misconduct on Morgan Stanley's part. The undersigned
acknowledges that certain of its securities may be held outside the United
States by unaffiliated, foreign, agent banks and depositories. Morgan Stanley
shall not be liable to the undersigned for any loss, liability or expense
incurred by the undersigned in connection with these arrangements except to the
extent that any such loss, liability or expense results from Morgan Stanley's
gross negligence or willful misconduct.
28. INDEMNIFICATION. In consideration of Morgan Stanley's carrying one or more
accounts for the undersigned, the undersigned agrees to indemnify and hold
Morgan Stanley harmless from and against any and all losses, claims, damages and
liabilities arising out of or relating to the undersigned's accounts or in
connection with the execution, purchase, sale, assignment, exercise, endorsement
or handling of any transaction therein, or in connection with Morgan Stanley
acting or declining to act as prime broker, except for actions taken or omitted
to be taken by Morgan Stanley which are a result of, or constitute, willful
misconduct or gross negligence. The undersigned also agrees that Morgan Stanley
shall have no responsibility for the undersigned's compliance with any law or
regulation and that Morgan Stanley shall not be liable for delays in the
transmission of orders or instructions due to the breakdown or failure of
transmission or communication facilities or any other cause beyond Morgan
Stanley's control, including any mistake, error, negligence or misconduct of any
exchange, association or clearing house or their respective officers, directors,
employees or agents, nor any failure by any such exchange, association or
clearing house to enforce its rules or regulations.
29. COSTS OF COLLECTION. To the extent permitted by the laws of the State of New
York, the reasonable costs and expenses of collection of any debit balance and
any unpaid deficiency in any account of the undersigned with Morgan Stanley,
including but not limited to attorneys' fees incurred and payable or paid by
Morgan Stanley, shall be payable to Morgan Stanley by the undersigned.
30. ASSIGNMENTS. Undersigned may not assign its rights or obligations under this
Agreement without the express written consent of Morgan Stanley.
31. REPRESENTATIONS AND WARRANTIES. The undersigned hereby represents and
warrants as of the date hereof, which representations and warranties will be
deemed repeated on each date on which a transaction or Contract is effected for
any of the undersigned's accounts, or any securities or other property if
delivered to or from any such account, that:
(a) The undersigned will at all times maintain such securities or other property
or assets in the accounts of the undersigned for margin purposes, as is required
by Morgan Stanley from time to time in Morgan Stanley's sole discretion;
(b) The undersigned will not transact on the basis of, or in reliance on,
material, non-public information.
(c) Except as disclosed in writing to Morgan Stanley, the undersigned is not an
employee of any exchange, or of any corporation of which any exchange owns a
majority of the capital stock, or of a member of any exchange, or of a
securities broker or dealer, or of a bank, trust company, insurance company or
of any corporation, firm or individual engaged in the business of dealing,
either as agent or as principal, in securities, bills of exchange, acceptances
or other forms of commercial paper.
(d) Except as disclosed to Morgan Stanley in writing, the undersigned
continuously represents that it is not (a) an employee benefit plan (hereinafter
an "ERISA Plan"), as defined in Section 3 (3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), subject to Title I of ERISA or
Section 4975 of the Internal Revenue Code of 1986, as amended, or (b) a person
acting on behalf of an ERISA Plan or (c) a person the assets of whom constitute
assets of an ERISA Plan. The undersigned will provide notice to Morgan Stanley
in the event that it is aware that it is in breach of any aspect of this
representation or is aware that with the passing of time, giving of notice or
expiry of any applicable grace period it will breach this representation.
(e) Except as disclosed in writing to Morgan Stanley, the undersigned is not,
and will not be, an affiliate (as defined in Rule 144(a)(1) under the Securities
Act of 1933) of the issuer of any security held in the undersigned's accounts or
sold to or through Morgan Stanley and undertakes to inform Morgan Stanley of any
changes in such representation.
(f) The undersigned has full power and authority to execute and deliver each
Contract and to perform and observe the provisions thereof.
(g) The execution, delivery and performance of each Contract has been or will
be, prior to entering into the Contract, duly authorized by all necessary
internal action and do not or will not contravene any requirement of law or any
contractual restrictions or agreement binding on or affecting the undersigned or
its assets.
(h) Each Contract has been or will be at the time it is entered into properly
executed and delivered by the undersigned and constitutes and will constitute a
legal, valid and binding obligation enforceable in accordance with its terms.
(i) The undersigned will promptly furnish to Morgan Stanley appropriate
financial statements or similar documents upon Morgan Stanley's request and
any other information as Morgan Stanley may reasonably request. Since the
date of the most recent financial statements provided to Morgan Stanley, if
any, there has been no material adverse change in the information set forth
therein, and, if the undersigned is not a natural person, the business,
financial condition, results, operations or prospects of the undersigned.
(j) No one that is not a party to this Agreement has any interest in any account
of the undersigned with Morgan Stanley. The undersigned owns the Collateral
assigned, or to be assigned, to Morgan Stanley under each Contract free and
clear of any lien, claims, encumbrances and transfer restrictions. Upon delivery
of the Collateral to Morgan Stanley or upon the filing of appropriate financing
statements, Morgan Stanley will have, as security for the Obligations of the
undersigned, a perfected first priority security interest in the Collateral. No
further filings or recordings with any governmental body, agency or official are
necessary to create or perfect the security interest in the Collateral.
(k) The undersigned represents to Morgan Stanley that all sales of securities
(other than fully covered options) will be eligible to be marked "long" and that
the undersigned will pay for all the securities purchased in full on trade date
or such later date as Morgan Stanley may permit. Any sell order which the
undersigned shall designate as being long is for securities then owned by the
undersigned. If such securities cannot be delivered by Morgan Stanley from any
account of the undersigned, the placing of such order shall constitute a
representation by the undersigned that the undersigned will deliver them as soon
as it is possible to do so, without undue inconvenience or expense to Morgan
Stanley.
(l) The undersigned acknowledges that it is acting as principal (and not as
agent or in any other capacity, fiduciary or otherwise) for its own account, and
it has made its own independent decisions to enter into this Agreement and
Contracts and as to whether its activities and investments thereunder are
appropriate or proper for it based upon its own judgment and upon advice from
such advisers as it has deemed necessary. It is not relying on any communication
(written or oral) of Morgan Stanley as investment advice or as a recommendation
to enter into any particular transaction; it being understood that information
and explanations related to the terms and conditions of a transaction shall not
be considered investment advice or a recommendation to enter into a transaction.
No communication (written or oral) received from Morgan Stanley shall be deemed
to be an assurance or guarantee as to the expected results of a transaction. It
is capable of assessing the merits of and understanding (on its own behalf or
thorough independent professional advice), and understands and accepts, the
terms, conditions and risks of its transactions, and is capable of assuming, and
assumes, such risks. Morgan Stanley is not acting as a fiduciary for an adviser
to it in any respect, and does not perform any analysis or make any judgment on
any matters pertaining to the suitability of any order or offer any opinion,
judgment or other type of information pertaining to the nature, value, potential
or suitability of any particular transaction.
32. ACKNOWLEDGMENTS. The undersigned hereby consents and acknowledges that:
(a) The undersigned has received, and agrees to be bound by, Morgan Stanley's
Credit Charge and Margin Information Statement, which is incorporated herein by
reference;
(b) The undersigned has received a copy of this Agreement and has read and
understood its terms; and
(c) All conversations between us may be recorded on tape or otherwise.
NOTICE: THIS AGREEMENT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE
PROXY DISCLOSURE STATEMENT
Under the rules of the Securities and Exchange Commission, we are required, upon
registrant's request, to provide your name, address and security positions to
issuers of securities that you own. The issuer may use this information
exclusively for purposes of corporate communications. _____(Check) IF THIS BOX
IS CHECKED, MORGAN STANLEY WILL DISCLOSE THE NAME AND ADDRESS INFORMATION FOR
THE ACCOUNT ESTABLISHED BY THIS AGREEMENT TO ISSUERS OF SECURITIES WHICH I OWN.
ELECTRONIC TRADE CONFIRMATIONS
(Check) Yes, we would, if available, like to receive electronic
notification of our trade information rather than a mailed, hard copy
confirmation.
DATE: __5/17/02___
Financial Institution Partners, MORGAN STANLEY &
Ltd. CO. INCORPORATED,
By Hovde Capital Offshore LLC, general on its own behalf
Partner, and on behalf of
by its authorized signatory each Morgan Stanley Entity
/s/ Richard J. Perry, Jr.
Name: Richard J. Perry, Jr. Name: ___________
Date: 5/17/02 Date: ___________
Title: Manager Title: ___________
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EXHIBIT X
THE
BOND
MARKET
ASSOCIATION
Master Securities Loan Agreement
Between: Dated as of May 2, 2002
PRIME DEALER SERVICES CORP.
and
FINANCIAL INSTITUTION PARTNERS, LTD.
This Agreement sets forth the terms and conditions under which one party
("Lender") may from time to time lend to the other party ("Borrower") certain
securities against a pledge of collateral. Capitalized terms not otherwise
defined herein shall have the meanings provided in Section 26.
The parties hereto agree as follows:
1. Loans of Securities.
1.1. Subject to the terms and conditions of this Agreement, Borrower or Lender
may, from time to time, orally seek to initiate a transaction in which Lender
will lend securities to Borrower. Borrower and Lender shall agree orally on the
terms of each Loan, including the issuer of the securities, the amount of
securities to be lent, the basis of compensation, and the amount of Collateral
to be transferred by Borrower, which terms may be amended during the Loan.
1.2. Notwithstanding any other provision in this Agreement regarding when a Loan
commences, a Loan hereunder shall not occur until the Loaned Securities and the
Collateral therefor have been transferred in accordance with Section 16.
1.3. WITHOUT WAIVING ANY RIGHTS GIVEN TO LENDER HEREUNDER, IT IS UNDERSTOOD AND
AGREED THAT THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION ACT OF 1970 MAY
NOT PROTECT LENDER WITH RESPECT TO LOANED SECURITIES HEREUNDER AND THAT,
THEREFORE, THE COLLATERAL DELIVERED TO LENDER MAY CONSTITUTE THE ONLY SOURCE OF
SATISFACTION OF BORROWER'S OBLIGATIONS IN THE EVENT BORROWER FAILS TO RETURN THE
LOANED SECURITIES.
2. Transfer of Loaned Securities.
2.1. Unless otherwise agreed, Lender shall transfer Loaned Securities to
Borrower hereunder on or before the Cutoff Time on the date agreed to by
Borrower and Lender for the commencement of the Loan.
2.2. Unless otherwise agreed, Borrower shall provide Lender, in each Loan in
which Lender is a Customer, with a schedule and receipt listing the Loaned
Securities. Such schedule and receipt may consist of (a) a schedule provided to
Borrower by Lender and executed and returned by Borrower when the Loaned
Securities are received, (b) in the case of securities transferred through a
Clearing Organization which provides transferors with a notice evidencing such
transfer, such notice, or (c) a confirmation or other document provided to
Lender by Borrower.
3. Collateral.
3.1. Unless otherwise agreed, Borrower shall, prior to or concurrently with the
transfer of the Loaned Securities to Borrower, but in no case later than the
close of business on the day of such transfer, transfer to Lender Collateral
with a market value at least equal to a percentage of the market value of the
Loaned Securities agreed to by Borrower and Lender (which shall be not less than
100% of the market value of the Loaned Securities) (the "Margin Percentage").
3.2. The Collateral transferred by Borrower to Lender, as adjusted pursuant to
Section 8, shall be security for Borrower's obligations in respect of such Loan
and for any other obligations of Borrower to Lender. Borrower hereby pledges
with, assigns to, and grants Lender a continuing first security interest in, and
a lien upon, the Collateral, which shall attach upon the transfer of the Loaned
Securities by Lender to Borrower and which shall cease upon the transfer of the
Loaned Securities by Borrower to Lender. In addition to the rights and remedies
given to Lender hereunder, Lender shall have all the rights and remedies of a
secured party under the New York Uniform Commercial Code. It is understood that
Lender may use or invest the Collateral, if such consists of cash, at its own
risk, but that (unless Lender is a Broker-Dealer) Lender shall, during the term
of any Loan hereunder, segregate Collateral from all securities or other assets
in its possession. Lender may pledge, repledge, hypothecate, rehypothecate,
lend, relend, sell or otherwise transfer the Collateral, or re-register
Collateral evidenced by physical certificates in any name other than Borrower's,
only (a) if Lender is Broker-Dealer or (b) in the event of a Default by
Borrower. Segregation of Collateral may be accomplished by appropriate
identification on the books and records of Lender if it is a "financial
intermediary" or a "clearing corporation" within the meaning of the New York
Uniform Commercial Code.
3.3. Except as otherwise provided herein, upon transfer to Lender of the Loaned
Securities on the day a Loan is terminated pursuant to Section 5, Lender shall
be obligated to transfer the Collateral (as adjusted pursuant to Section 8) to
Borrower no later than the Cutoff Time on such day or, if such day is not a day
on which a transfer of such Collateral may be effected under Section 16, the
next day on which such a transfer may be effected.
3.4. If Borrower transfers Collateral to Lender, as provided in Section 3.1, and
Lender does not transfer the Loaned Securities to Borrower, Borrower shall have
the absolute right to the return of the Collateral; and if Lender transfers
Loaned Securities to Borrower and Borrower does not transfer Collateral to
Lender as provided in Section 3.1, Lender shall have the absolute right to the
return of the Loaned Securities.
3.5. Borrower may, upon reasonable notice to Lender (taking into account all
relevant factors, including industry practice, the type of Collateral to be
substituted and the applicable method of transfer), substitute Collateral for
Collateral securing any Loan or Loans; provided, however, that such substituted
Collateral shall (a) consist only of cash, securities or other property that
Borrower and Lender agreed would be acceptable Collateral prior to the Loan or
Loans and (b) have a market value such that the aggregate market value of such
substituted Collateral, together with all other Collateral for Loans in which
the party substituting such Collateral is acting as Borrower, shall equal or
exceed the agreed upon Margin Percentage of the market value of the Loaned
Securities. Prior to the expiration of any letter of credit supporting
Borrower's obligations hereunder, Borrower shall, no later than the Cutoff Time
on the date such letter of credit expires, obtain an extension of the expiration
of such letter of credit or replace such letter of credit by providing Lender
with a substitute letter of credit in an amount at least equal to the amount of
the letter of credit for which it is substituted.
3.6. Lender acknowledges that, in connection with Loans of Government Securities
and as otherwise permitted by applicable law, some securities provided by
Borrower as Collateral under this Agreement may not be guaranteed by the United
States.
4. Fees for Loan.
4.1. Unless otherwise agreed, (a) Borrower agrees to pay Lender a loan fee (a
"Loan Fee"), computed daily on each Loan to the extent such Loan is secured by
Collateral other than cash, based on the aggregate par value (in the case of
Loans of Government Securities) or the aggregate market value (in the case of
all other Loans) of the Loaned Securities on the day for which such Loan Fee is
being computed, and (b) Lender agrees to pay Borrower a fee or rebate (a "Cash
Collateral Fee") on Collateral consisting of cash, computed daily based on the
amount of cash held by Lender as Collateral, in the case of each of the Loan Fee
and the Cash Collateral Fee at such rates as Borrower and Lender may agree.
Except as Borrower and Lender may otherwise agree (in the event that cash
Collateral is transferred by clearing house funds or otherwise), Loan Fees shall
accrue from and including the date on which the Loaned Securities are
transferred to Borrower to, but excluding, the date on which such Loaned
Securities are returned to Lender, and Cash Collateral Fees shall accrue from
and including the date on which the cash Collateral is transferred to Lender to,
but excluding, the date on which such cash Collateral is returned to Borrower.
4.2. Unless otherwise agreed, any Loan Fee or Cash Collateral Fee payable
hereunder shall be payable:
(a) in the case of any Loan of securities other than Government Securities,
upon the earlier of (i) the fifteenth day of the month following the calendar
month in which such fee was incurred or (ii) the termination of all Loans
hereunder (or, if a transfer of cash in accordance with Section 16 may not be
effected on such fifteenth day or the day of such termination, as the case may
be, the next day on which such a transfer may be effected); and
(b) in the case of any Loan of Government Securities, upon the termination of
such Loan.
Notwithstanding the foregoing, all Loan Fees shall be payable by Borrower
immediately in the event of a Default hereunder by Borrower and all Cash
Collateral Fees shall be payable immediately by Lender in the event of a Default
by Lender.
5. Termination of the Loan. Unless otherwise agreed, (a) Borrower may
terminate a Loan on any Business Day by giving notice to Lender and transferring
the Loaned Securities to Lender before the Cutoff Time on such Business Day, and
(b) Lender may terminate a Loan on a termination date established by notice
given to Borrower prior to the close of business on a Business Day. The
termination date established by a termination notice given by Lender to Borrower
shall be a date no earlier than the standard settlement date for trades of the
Loaned Securities entered into on the date of such notice, which date shall,
unless Borrower and Lender agree to the contrary, be (i) in the case of
Government Securities, the next Business Day following such notice and (ii) in
the case of all other securities, the third Business Day following such notice.
Unless otherwise agreed, Borrower shall, on or before the Cutoff Time on the
termination date of a Loan, transfer the Loaned Securities to Lender; provided,
however, that upon such transfer by Borrower, Lender shall transfer the
Collateral (as adjusted pursuant to Section 8) to Borrower in accordance with
Section 3.3.
6. Rights of Borrower in Respect of the Loaned Securities. Except as set forth
in Sections 7.1 and 7.2 and as otherwise agreed by Borrower and Lender, until
Loaned Securities are required to be redelivered to Lender upon termination of a
Loan hereunder, Borrower shall have all of the incidents of ownership of the
Loaned Securities, including the right to transfer the Loaned Securities to
others. Lender hereby waives the right to vote, or to provide any consent or to
take any similar action with respect to, the Loaned Securities in the event that
the record date or deadline for such vote, consent or other action falls during
the term of the Loan.
7. Dividends, Distributions, Etc.
7.1. Lender shall be entitled to receive all distributions made on or in respect
of the Loaned Securities which are not otherwise received by Lender, to the full
extent it would be so entitled if the Loaned Securities had not been lent to
Borrower, including, but not limited to: (a) cash and all other property, (b)
stock dividends, (c) securities received as a result of split ups of the Loaned
Securities and distributions in respect thereof, (d) interest payments, and (e)
all rights to purchase additional securities.
7.2. Any cash distributions made on or in respect of the Loaned Securities,
which Lender is entitled to receive pursuant to Section 7.1, shall be paid by
the transfer of cash to Lender by Borrower, on the date any such distribution is
paid, in an amount equal to such cash distribution, so long as Lender is not in
Default at the time of such payment. Non-cash distributions received by Borrower
shall be added to the Loaned Securities on the date of distribution and shall be
considered such for all purposes, except that if the Loan has terminated,
Borrower shall forthwith transfer the same to Lender.
7.3. Borrower shall be entitled to receive all cash distributions made on or in
respect of non-cash Collateral which are not otherwise received by Borrower, to
the full extent it would be so entitled if the Collateral had not been
transferred to Lender. Any distributions of cash made on or in respect of such
Collateral which Borrower is entitled to receive hereunder shall be paid by the
transfer of cash to Borrower by Lender, on the date any such distribution is
paid, in an amount equal to such cash distribution, so long as Borrower is not
in Default at the time of such payment.
7.4. (a) Unless otherwise agreed, if (i) Borrower is required to make a payment
(a "Borrower Payment") with respect to cash distributions on Loaned Securities
under Sections 7.1 and 7.2 ("Securities Distributions"), or (ii) Lender is
required to make a payment (a "Lender Payment") with respect to cash
distributions on Collateral under Section 7.3 ("Collateral Distributions"), and
(iii) Borrower or Lender, as the case may be ("Payor"), shall be required by law
to collect any withholding or other tax, duty, fee, levy or charge required to
be deducted or withheld from such Borrower Payment or Lender Payment ("Tax"),
then Payor shall (subject to subsections (b) and (c) below), pay such additional
amounts as may be necessary in order that the net amount of the Borrower Payment
or Lender Payment received by the Lender or Borrower, as the case may be
("Payee"), after payment of such Tax equals the net amount of the Securities
Distribution or Collateral Distribution that would have been received if such
Securities Distribution or Collateral Distribution had been paid directly to the
Payee.
(b) No additional amounts shall be payable to a Payee under subsection (a)
above to the extent that Tax would have been imposed on a Securities
Distribution or Collateral Distribution paid directly to the Payee.
(c) No additional amounts shall be payable to a Payee under subsection (a)
above to the extent that such Payee is entitled to an exemption from, or
reduction in the rate of, Tax on a Borrower Payment or Lender Payment subject to
the provision of a certificate or other documentation, but has failed timely to
provide such certificate or other documentation.
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(d) Each party hereto shall be deemed to represent that, as of the commencement
of any Loan hereunder, no Tax would be imposed on any cash distribution paid to
it with respect to (i) Loaned Securities subject to a Loan in which it is acting
as Lender or (ii) Collateral for any Loan in which it is acting as Borrower,
unless such party has given notice to the contrary to the other party hereto
(which notice shall specify the rate at which such Tax would be imposed). Each
party agrees to notify the other of any change that occurs during the term of a
Loan in the rate of any Tax that would be imposed on any such cash distributions
payable to it.
7.5. To the extent that, under the provisions of Sections 7.1 through 7.4 (a) a
transfer of cash or other property by Borrower would give rise to a Margin
Excess (as defined in Section 8.3 below) or (b) a transfer of cash or other
property by Lender would give rise to a Margin Deficit (as defined in Section
8.2 below), Borrower or Lender (as the case may be) shall not be obligated to
make such transfer of cash or other property in accordance with such Sections,
but shall in lieu of such transfer immediately credit the amounts that would
have been transferable under such Sections to the account of Lender or Borrower
(as the case may be).
8. Mark to Market.
8.1. Borrower shall daily mark to market any Loan hereunder and in the event
that at the close of trading on any Business Day the market value of the
Collateral for any Loan to Borrower shall be less than 100% of the market value
of all the outstanding Loaned Securities subject to such Loan, Borrower shall
transfer additional Collateral no later than the close of the next Business Day
so that the market value of such additional Collateral, when added to the market
value of the other Collateral for such Loan, shall equal 100% of the market
value of the Loaned Securities.
8.2. In addition to any rights of Lender under Section 8.1, in the event that at
the close of trading on any Business Day the aggregate market value of all
Collateral for Loans by Lender shall be less than the Margin Percentage of the
market value of all the outstanding Loaned Securities subject to such Loans (a
"Margin Deficit"), Lender may, by notice to Borrower, demand that Borrower
transfer to Lender additional Collateral so that the market value of such
additional Collateral, when added to the market value of all other Collateral
for such Loans, shall equal or exceed the agreed upon Margin Percentage of the
market value of the Loaned Securities. Unless otherwise agreed, such transfer is
to be made no later than the close of the next Business Day following the day of
Lender's notice to Borrower.
8.3. In the event that at the close of trading on any Business Day the market
value of all Collateral for Loans to Borrower shall be greater than the Margin
Percentage of the market value of all the outstanding Loaned Securities subject
to such Loans (a "Margin Excess"), Borrower may, by notice to Lender, demand
that Lender transfer to Borrower such amount of the Collateral selected by
Borrower so that the market value of the Collateral for such Loans, after
deduction of such amounts, shall thereupon not exceed the Margin Percentage of
the market value of the Loaned Securities. Unless otherwise agreed, such
transfer is to be made no later than the close of the next Business Day
following the day of Borrower's notice to Lender.
8.4. Borrower and Lender may agree, with respect to one or more Loans hereunder,
to mark the values to market pursuant to Sections 8.2 and 8.3 by separately
valuing the Loaned Securities lent and the Collateral given in respect thereof
on a Loan-by-Loan basis.
8.5. Borrower and Lender may agree, with respect to any or all Loans hereunder,
that the respective rights of Lender and Borrower under Sections 8.2 and 8.3 may
be exercised only where a Margin Excess or Margin Deficit exceeds a specified
dollar amount or a specified percentage of the market value of the Loaned
Securities under such Loans (which amount or percentage shall be agreed to by
Borrower and Lender prior to entering into any such Loans).
9. Representations. Each party to this Agreement hereby makes the following
representations and warranties, which shall continue during the term of any Loan
hereunder:
9.1. Each party hereto represents and warrants that (a) it has the power to
execute and deliver this Agreement, to enter into the Loans contemplated hereby
and to perform its obligations hereunder; (b) it has taken all necessary action
to authorize such execution, delivery and performance; and (c) this Agreement
constitutes a legal, valid and binding obligation enforceable against it in
accordance with its terms.
9.2. Each party hereto represents and warrants that the execution, delivery and
performance by it of this Agreement and each Loan hereunder will at all times
comply with all applicable laws and regulations including those of applicable
regulatory and self-regulatory organizations.
9.3. Each party hereto represents and warrants that it has not relied on the
other for any tax or accounting advice concerning this Agreement and that it has
made its own determination as to the tax and accounting treatment of any Loan
and any dividends, remuneration or other funds received hereunder.
9.4. Borrower represents and warrants that it is acting for its own account.
Lender represents and warrants that it is acting for its own account unless it
expressly specifies otherwise in writing and complies with Section 10.3(b).
9.5. Borrower represents and warrants that (a) it has, or will have at the time
of transfer of any Collateral, the right to grant a first security interest
therein subject to the terms and conditions hereof, and (b) it (or the person to
whom it relends the Loaned Securities) is borrowing or will borrow the Loaned
Securities (except for Loaned Securities that qualify as "exempted securities"
under Regulation T of the Board of Governors of the Federal Reserve System) for
the purpose of making delivery of such securities in the case of short sales,
failure to receive securities required to be delivered, or as otherwise
permitted pursuant to Regulation T as in effect from time to time.
9.6. Lender represents and warrants that it has, or will have at the time of
transfer of any Loaned Securities, the right to transfer the Loaned Securities
subject to the terms and conditions hereof.
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10. Covenants.
10.1. Each party hereto agrees and acknowledges that (a) each Loan hereunder
is a "securities contract," as such term is defined in Section 741(7) of Title
11 of the United States Code (the "Bankruptcy Code"), (b) each and every
transfer of funds, securities and other property under this Agreement and each
Loan hereunder is a "settlement payment" or a "margin payment," as such terms
are used in Sections 362(b)(6) and 546(e) of the Bankruptcy Code, and (c) the
rights given to Borrower and Lender hereunder upon a Default by the other
constitute the right to cause the liquidation of a securities contract and the
right to set off mutual debts and claims in connection with a securities
contract, as such terms are used in Sections 555 and 362(b)(6) of the Bankruptcy
Code. Each party hereto further agrees and acknowledges that if a party hereto
is an "insured depository institution," as such term is defined in the Federal
Deposit Insurance Act, as amended ("FDIA"), then each Loan hereunder is a
"securities contract" and "qualified financial contract," as such terms are
defined in the FDIA and any rules, orders or policy statements thereunder.
10.2. Borrower agrees to be liable as principal with respect to its
obligations hereunder.
10.3. Lender agrees either (a) to be liable as principal with respect to its
obligations hereunder or (b) to execute and comply fully with the provisions of
Annex I (the terms and conditions of which Annex are incorporated herein and
made a part hereof).
10.4. Promptly upon (and in any event within seven (7) Business Days after)
demand by Lender, Borrower shall furnish Lender with Borrower's most recent
publicly-available financial statements and any other financial statements
mutually agreed upon by Borrower and Lender. Unless otherwise agreed, if
Borrower is subject to the requirements of Rule 17a-5(c) under the Exchange Act,
it may satisfy the requirements of this Section by furnishing Lender with its
most recent statement required to be furnished to customers pursuant to such
Rule.
10.5. Except to the extent required by applicable law or regulation or as
otherwise agreed, Borrower and Lender agree that Loans hereunder shall in no
event be "exchange contracts" for purposes of the rules of any securities
exchange and that Loans hereunder shall not be governed by the buy-in or similar
rules of any such exchange, registered national securities or other self-
regulatory organization.
11. Events of Default. All Loans hereunder may, at the option of the
nondefaulting party exercised by notice to the defaulting party (which option
shall be deemed to have been exercised even if no notice is given, immediately
upon the occurrence of an event specified in subsection 11.5 below), be
terminated immediately upon the occurrence of any one or more of the following
events (individually, a "Default"):
11.1. if any Loaned Securities shall not be transferred to Lender upon
termination of the Loan as required by Section 5;
11.2. if any Collateral shall not be transferred to Borrower upon
termination of the Loan as required by Sections 3.3 and 5;
11.3. if either party shall fail to transfer Collateral as required by
Section 8;
11.4. if either party (i) shall fail to transfer to the other party amounts
in respect of distributions required to be transferred by Section 7, (ii) shall
have received notice of such failure from the non-defaulting party, and (iii)
shall not have cured such default by the Cutoff Time on the next day after such
notice on which a transfer of cash may be effected in accordance with Section
16;
11.5. if (i) either party shall commence as debtor any case or proceeding
under any bankruptcy, insolvency, reorganization, liquidation, dissolution or
similar law, or seek the appointment of a receiver, conservator, trustee,
custodian or similar official for such party or any substantial part of its
property, (ii) any such case or proceeding shall be commenced against either
party, or another shall seek such an appointment, or any application shall be
filed against either party for a protective decree under the provisions of the
Securities Investor Protection Act of 1970, which (A) is consented to or not
timely contested by such party, (B) results in the entry of an order for relief,
such an appointment, the issuance of such a protective decree or the entry of an
order having a similar effect, or (C) is not dismissed within 15 days, (iii)
either party shall make a general assignment for the benefit of creditors, or
(iv) either party shall admit in writing its inability to pay its debts as they
become due;
11.6. if either party shall have been suspended or expelled from membership
or participation in any national securities exchange or registered national
securities association of which it is a member or other self-regulatory
organization to whose rules it is subject or if it is suspended from dealing in
securities by any federal or state government agency thereof;
11.7. if either party shall have its license, charter, or other
authorization necessary to conduct a material portion of its business withdrawn,
suspended or revoked by any applicable federal or state government or agency
thereof;
11.8. if any representation made by either party in respect of this
Agreement or any Loan or Loans hereunder shall be incorrect or untrue in any
material respect during the term of any Loan hereunder;
11.9. if either party notifies the other, orally or in writing, of its
inability to or its intention not to perform its obligations hereunder or
otherwise disaffirms, rejects or repudiates any of its obligations hereunder; or
11.10. if either party (i) shall fail to perform any material obligation
under this Agreement not specifically set forth in clauses 11.1 through 11.9
above, including but not limited to the payment of fees as required by Section
4, and the payment of transfer taxes as required by Section 14, (ii) shall have
received notice of such failure from the non-defaulting party and (iii) shall
not have cured such failure by the Cutoff Time on the next day after such notice
on which a transfer of cash may be effected under Section 16.
12. Lender's Remedies. Upon the occurrence of a Default under Section 11
entitling Lender to terminate all Loans hereunder, Lender shall have the right
(without further notice to Borrower), in addition to any other remedies provided
herein or under applicable law, (a) to purchase a like amount of Loaned
Securities ("Replacement Securities") in the principal market for such
securities in a commercially reasonable manner, (b) to sell any Collateral in
the principal market for such Collateral in a commercially reasonable manner and
(c) to apply and set off the Collateral and any proceeds thereof (including any
amounts drawn under a letter of credit supporting any Loan) against the payment
of the purchase price for such Replacement Securities and any amounts due to
Lender under Sections 4, 7, 14 and 17. In the event Lender shall exercise such
rights, Borrower's obligation to return a like amount of the Loaned Securities
shall terminate. Lender may similarly apply the Collateral and any proceeds
thereof to any obligation of Borrower under this Agreement, including Borrower's
obligations with respect to distributions paid to Borrower (and not forwarded to
Lender) in respect of Loaned Securities. In the event that (i) the purchase
price of Replacement Securities (plus all other amounts, if any, due to Lender
hereunder) exceeds (ii) the amount of the Collateral, Borrower shall be liable
to Lender for the amount of such excess together with interest thereon at a rate
equal to (A) in the case of purchases of Foreign Securities, LIBOR, (B) in the
case of purchases of any other securities (or other amounts, if any, due to
Lender hereunder), the Federal Funds Rate or (C) such other rate as may be
specified in Schedule B, in each case as such rate fluctuates from day to day,
from the date of such purchase until the date of payment of such excess. As
security for Borrower's obligation to pay such excess, Lender shall have, and
Borrower hereby grants, a security interest in any property of Borrower then
held by or for Lender and a right of setoff with respect to such property and
any other amount payable by Lender to Borrower. The purchase price of
Replacement Securities purchased under this Section 12 shall include, and the
proceeds of any sale of Collateral shall be determined after deduction of,
broker's fees and commissions and all other reasonable costs, fees and expenses
related to such purchase or sale (as the case may be). In the event Lender
exercises its rights under this Section 12, Lender may elect in its sole
discretion, in lieu of purchasing all or a portion of the Replacement Securities
or selling all or a portion of the Collateral, to be deemed to have made,
respectively, such purchase of Replacement Securities or sale of Collateral for
an amount equal to the price therefor on the date of such exercise obtained from
a generally recognized source or the most recent closing bid quotation from such
a source. Subject to Section 19, upon the satisfaction of all obligations
hereunder, any remaining Collateral shall be returned to Borrower.
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13. Borrower's Remedies. Upon the occurrence of a Default under Section 11
entitling Borrower to terminate all Loans hereunder, Borrower shall have the
right (without further notice to Lender), in addition to any other remedies
provided herein or under applicable law, (a) to purchase a like amount of
Collateral ("Replacement Collateral") in the principal market for such
Collateral in a commercially reasonable manner, (b) to sell a like amount of the
Loaned Securities in the principal market for such securities in a commercially
reasonable manner and (c) to apply and set off the Loaned Securities and any
proceeds thereof against (i) the payment of the purchase price for such
Replacement Collateral (ii) Lender's obligation to return any cash or other
Collateral and (iii) any amounts due to Borrower under Sections 4, 7 and 17. In
such event, Borrower may treat the Loaned Securities as its own and Lender's
obligation to return a like amount of the Collateral shall terminate; provided,
however, that Lender shall immediately return any letters of credit supporting
any Loan upon the exercise or deemed exercise by Borrower of its termination
rights under Section 11. Borrower may similarly apply the Loaned Securities and
any proceeds thereof to any other obligation of Lender under this Agreement,
including Lender's obligations with respect to distributions paid to Lender (and
not forwarded to Borrower) in respect of Collateral. In the event that (i) the
sales price received from such Loaned Securities is less than (ii) the purchase
price of Replacement Collateral (plus the amount of any cash or other Collateral
not replaced by Borrower and all other amounts, if any, due to Borrower
hereunder), Lender shall be liable to Borrower for the amount of any such
deficiency, together with interest on such amounts at a rate equal to (A) in the
case of Collateral consisting of Foreign Securities, LIBOR, (B) in the case of
Collateral consisting of any other securities (or other amounts due, if any, to
Borrower hereunder), the Federal Funds Rate or (C) such other rate as may be
specified in Schedule B in each case as such rate fluctuates from day to day,
from the date of such sale until the date of payment of such deficiency. As
security for Lender's obligation to pay such deficiency, Borrower shall have and
Lender hereby grants, a security interest in any property of Lender then held by
or for Borrower and a right of setoff with respect to such property and any
other amount payable by Borrower to Lender. The purchase price of any
Replacement Collateral purchased under this Section 13 shall include, and the
proceeds of any sale of Loaned Securities shall be determined after deduction
of, broker's fees and commissions and all other reasonable costs, fees and
expenses related to such purchase or sale (as the case may be). In the event
Borrower exercises its rights under this Section 13, Borrower may elect in its
sole discretion, in lieu of purchasing all or a portion of the Replacement
Collateral or selling all or a portion of the Loaned Securities, to be deemed to
have made, respectively, such purchase of Replacement Collateral or sale of
Loaned Securities for an amount equal to the price therefor on the date of such
exercise obtained from a generally recognized source or the most recent closing
bid quotation from such a source. Subject to Section 19, upon the satisfaction
of all Lender's obligations hereunder, any remaining Loaned Securities (or
remaining cash proceeds thereof) shall be returned to Lender. Without limiting
the foregoing, the parties hereto agree that they intend the Loans hereunder to
be loans of securities. If, however, any Loan is deemed to be a loan of money by
Borrower to Lender, then Borrower shall have, and Lender shall be deemed to have
granted, a security interest in the Loaned Securities and the proceeds thereof.
14. Transfer Taxes. All transfer taxes with respect to the transfer of the
Loaned Securities by Lender to Borrower and by Borrower to Lender upon
termination of the Loan shall be paid by Borrower.
15. Market Value.
15.1. Unless otherwise agreed, if the principal market for the securities to
be valued is a national securities exchange in the United States, their market
value shall be determined by their last sale price on such exchange on the
preceding Business Day or, if there was no sale on that day, by the last sale
price on the next preceding Business Day on which there was a sale on such
exchange, all as quoted on the Consolidated Tape or, if not quoted on the
Consolidated Tape, then as quoted by such exchange.
15.2. Except as provided in Section 15.3 or 15.4 or as otherwise agreed, if
the principal market for the securities to be valued is the over-the-counter
market, their market value shall be determined as follows. If the securities are
quoted on the National Association of Securities Dealers Automated Quotations
System ("NASDAQ"), their market value shall be the closing sale price on NASDAQ
on the preceding Business Day or, if the securities are issues for which last
sale prices are not quoted on NASDAQ, the closing bid price on such day. If the
securities to be valued are not quoted on NASDAQ, their market value shall be
the highest bid quotation as quoted in any of The Wall Street Journal, the
National Quotation Bureau pink sheets, the Salomon Brothers quotation sheets,
quotations sheets of registered market makers and, if necessary, dealers'
telephone quotations on the preceding Business Day. In each case, if the
relevant quotation did not exist on such day, then the relevant quotation on the
next preceding Business Day in which there was such a quotation shall be the
market value.
15.3. Unless otherwise agreed, if the securities to be valued are Government
Securities, their market value shall be the average of the bid and ask prices as
quoted on Prophesy at 3:30 P.M. New York time on the Business Day preceding the
date on which such determination is made. If the securities are not so quoted on
such day, their market value shall be determined as of the next preceding
Business Day on which they were so quoted. If the securities to be valued are
Government Securities that are not quoted on Prophesy, their market value shall
be determined as of the close of business on the preceding Business Day in
accordance with market practice for such securities.
15.4. Unless otherwise agreed, if the securities to be valued are Foreign
Securities, their market value shall be determined as of the close of business
on the preceding Business Day in accordance with market practice in the
principal market for such securities.
15.5. Unless otherwise agreed, the market value of a letter of credit shall
be the undrawn amount thereof.
15.6. All determinations of market value under Sections 15.1, 15.2, 15.3,
and 15.4 shall include, where applicable, accrued interest to the extent not
already included therein (other than any interest transferred to the other party
pursuant to Section 7), unless market practice with respect to the valuation of
such securities in connection with securities loans is to the contrary. All
determinations of market value that are required to be made at the close of
trading on any Business Day pursuant to Section 8 or otherwise hereunder shall
be made as if being determined at the commencement of trading on the next
Business Day. The determinations of market value provided for in this Section 15
shall apply for all purposes under this Agreement, except for purposes of
Sections 12 and 13.
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16. Transfers.
16.1. All transfers of securities hereunder shall by be (a) physical
delivery of certificates representing such securities together with duly
executed stock and bond transfer powers, as the case may be, with signatures
guaranteed by a bank or a member firm of the New York Stock Exchange, Inc., (b)
transfer on the books of a Clearing Organization, or (c) such other means as
Borrower and Lender may agree. In every transfer of securities hereunder, the
transferor shall take all steps necessary (i) to effect a "transfer" under
Section 8-313 of the New York Uniform Commercial Code or, where applicable,
under any U.S. federal regulation governing transfers of securities and (ii) to
provide the transferee with comparable rights under any applicable foreign law
or regulation.
16.2. All transfers of cash Collateral hereunder shall be by (a) wire
transfer in immediately available, freely transferable funds or (b) such other
means as Borrower and Lender may agree. All other transfers of cash hereunder
shall be made in accordance with the preceding sentence or by delivery of a
certified or official bank check representing next-day New York Clearing House
Funds.
16.3. All transfers of a letter of credit from Borrower to Lender shall be
made by physical delivery to Lender of an irrevocable letter of credit issued by
a "bank" as defined in Section 3(a)(6)(A)-(C) of the Exchange Act. Transfer of a
letter of credit from Lender to Borrower shall be made by causing such letter of
credit to be returned or by causing the amount of such letter of credit to be
reduced to the amount required after such transfer.
16.4. A transfer of securities, cash or letters of credit may be effected
under this Section 16 on any day except (a) a day on which the transferee is
closed for business at its address set forth in Schedule A hereto or (b) a day
on which a Clearing Organization or wire transfer system is closed, if the
facilities of such Clearing Organization or wire transfer system are required to
effect such transfer.
17. Contractual Currency.
17.1. Borrower and Lender agree that: (a) any payment in respect of a
distribution under Section 7 shall be made in the currency in which the
underlying distribution of cash was made; (b) any return of cash shall be made
in the currency in which the underlying transfer of cash was made and (c) any
other payment of cash in connection with a Loan under this Agreement shall be in
the currency agreed upon by Borrower and Lender in connection with such Loan
(the currency established under clause (a), (b) or (c) hereinafter referred to
as the "Contractual Currency"). Notwithstanding the foregoing, the payee of any
such payment may, at its option, accept tender thereof in any other currency;
provided, however, that, to the extent permitted by applicable law, the
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 in 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. [INTENTIONALLY DELETED]
19. Single Agreement. Borrower and Lender acknowledge that, and have entered
into this Agreement in reliance on the fact that, all Loans hereunder constitute
a single business and contractual relationship and have been entered into in
consideration of each other. Accordingly, Borrower and Lender hereby agree that
payments, deliveries and other transfers made by either of them in respect of
any Loan shall be deemed to have been made in consideration of payments,
deliveries and other transfers in respect of any other Loan hereunder, and the
obligations to make any such payment, deliveries and other transfers may be
applied against each other and netted. In addition, Borrower and Lender
acknowledge that, and have entered into this Agreement in reliance on the fact
that, all Loans hereunder have been entered into in consideration of each other.
Accordingly, Borrower and Lender hereby agree that (a) each shall perform all of
its obligations in respect of each Loan hereunder, and that a default in the
performance of any such obligation by Borrower or by Lender (the "Defaulting
Party") in any Loan hereunder shall constitute a default by the Defaulting Party
under all such Loans hereunder, and (b) the non-defaulting party shall be
entitled to set off claims and apply property held by it in respect of any Loan
hereunder against obligations owing to it in respect of any other Loan with the
Defaulting Party.
20. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
21. Waiver. The failure of a party to this Agreement to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. All waivers in
respect of a Default must be in writing.
22. 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.
23. Notices and Other Communications. Unless another address is specified in
writing by the respective party to whom any notice or other communication is to
be given hereunder, all such notices or communications shall be in writing or
confirmed in writing and delivered at the respective addresses set forth in
Schedule A attached hereto. All notices shall be effective upon actual receipt,
provided, however, that if any notice shall be received by a party on a day on
which such party is not open for business at its office located at the address
set forth in Schedule A, such notice shall be deemed to have been received by
such party at the opening of business on the next day on which such party is
open for business at such address.
24. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
24.1. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT
SITTING IN NEW YORK CITY, AND ANY APPELLATE COURT FROM ANY SUCH COURT, SOLELY
FOR THE PURPOSE OF ANY SUIT, ACTION OR PROCEEDING BROUGHT TO ENFORCE ITS
OBLIGATIONS HEREUNDER OR RELATING IN ANY WAY TO THIS AGREEMENT OR ANY LOAN
HEREUNDER AND (B) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT AND ANY RIGHT OF JURISDICTION ON ACCOUNT OF ITS PLACE OF
RESIDENCE OR DOMICILE.
24.2. EACH PARTY HERETO IRREVOCABLY WAIVES ANY RIGHT THAT IT MAY HAVE TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
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56
25. Miscellaneous. This Agreement supersedes any other agreement between the
parties hereto concerning loans of securities between Borrower and Lender. This
Agreement shall not be assigned by either party without the prior written
consent of the other party and any attempted assignment without such consent
shall be null and void. Subject to the foregoing, this Agreement shall be
binding upon and shall ensure to the benefit of Borrower and Lender and their
respective heirs, representatives, successors and assigns. This Agreement may be
terminated by either party upon 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 signed by the party against whom
enforcement is sought. The parties hereto acknowledge and agree that, in
connection with this Agreement and each Loan hereunder, time is of the essence.
Each provision and agreement herein shall be treated as separate and independent
from any other provision herein and shall be enforceable notwithstanding the
unenforceability of any such other provision or agreement.
26. Definitions. For the purposes hereof:
26.1. "Broker-Dealer" shall mean any person that is a broker (including a
municipal securities broker), dealer, municipal securities dealer, government
securities broker or government securities dealer as defined in the Exchange
Act, regardless of whether the activities of such person are conducted in the
United States or otherwise require such person to register with the Securities
and Exchange Commission or other regulatory body.
26.2. "Business Day" shall mean, with respect to any Loan hereunder, a day
on which regular trading occurs in the principal market for the Loaned
Securities subject to such Loan, provided, however, that for purposes of Section
15, such term shall mean a day on which regular trading occurs in the principal
market for the securities whose value is being determined. Notwithstanding the
foregoing, (i) for purposes of Section 8, "Business Day" shall mean any day on
which regular trading occurs in the principal market for any Loaned Securities
or for any securities Collateral under any outstanding Loan hereunder and "next
Business Day" shall mean the next day on which a transfer of Collateral may be
effected in accordance with Section 16; and (ii) in no event shall a Saturday or
Sunday be considered a Business Day.
26.3. "Clearing Organization" shall mean The Depository 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.
26.4. "Collateral" shall mean, whether now owned or hereafter acquired and
to the extent permitted by applicable law, (a) any property which Borrower and
Lender agree shall be acceptable collateral prior to the Loan and which is
transferred to Lender pursuant to Section 3 or 8 (including as collateral, for
definitional purposes, any letters of credit mutually acceptable to Lender and
Borrower), (b) any property substituted therefor pursuant to Section 3.5, (c)
all accounts in which such property is deposited and all securities and the like
in which any cash collateral is invested or reinvested, and (d) any proceeds of
any of the foregoing. For purposes of return of Collateral by Lender or purchase
or sale of securities pursuant to Section 12 or 13, such term shall include
securities of the same issuer, class and quantity as the Collateral initially
transferred by Borrower to Lender.
26.5. "Customer" shall mean any person that is a customer of Borrower under
Rule 15c3-3 under the Exchange Act or any comparable regulation of the Secretary
of the Treasury under Section 15C of the Exchange Act (to the extent that
Borrower is subject to such Rule or comparable regulation).
26.6. "Cutoff Time" shall mean a time on a Business Day by which a transfer
of cash, securities or other property must be made by Borrower or Lender to the
other, as shall be agreed by Borrower and Lender in Schedule B or otherwise
orally or in writing or, in the absence of any such agreement, as shall be
determined in accordance with market practice.
26.7. "Default" shall have the meaning assigned in Section 11.
26.8. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
26.9. "Federal Funds Rate" shall mean the rate of interest (expressed as an
annual rate), as published in Federal Reserve Statistical Release H.15(519) or
any publication substituted therefor, charged for federal funds (dollars in
immediately available funds borrowed by banks on an overnight unsecured basis)
on that day or, if that day is not a banking day in New York City, on the next
preceding banking day.
26.10. "Foreign Securities" shall mean, unless otherwise agreed, securities
that are principally cleared and settled outside the United States.
26.11. "Government Securities" shall mean government securities as defined in
Section 3(a)(42)(A)-(C) of the Exchange Act.
26.12. "LIBOR" shall mean for any date, the offered rate for deposits in U.S.
dollars for a period of three months which appears on the Reuters Screen LIBO
page as of 11:00 A.M., London time, on such date (or, if at least two such rates
appear, the arithmetic mean of such rates).
26.13. "Loan" shall mean a loan of securities hereunder.
26.14. "Loaned Security" shall mean any security which is a security as
defined in the Exchange Act, transferred in a Loan hereunder until such security
(or an identical security) is transferred back to Lender hereunder, except that,
if any new or different security shall be exchanged for any Loaned Security by
recapitalization, merger, consolidation or other corporate action, such new or
different security shall, effective upon such exchange, be deemed to become a
Loaned Security in substitution for the former Loaned Security for which such
exchange is made. For purposes of return of Loaned Securities by Borrower or
purchase or sale of securities pursuant to Section 12 or 13, such term shall
include securities of the same issuer, class and quantity as the Loaned
Securities, as adjusted pursuant to the preceding sentence.
26.15. "Plan" shall mean (a) any "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974 which is
subject to Part 4 of Subtitle B of Title I of such Act; (b) any "plan" as
defined in Section 4975(e)(1) of the Internal Revenue Code of 1986 or (c) any
entity the assets of which are deemed to be assets of any such "employee benefit
plan" or "plan" by reason of the Department of Labor's plan asset regulation, 29
C.F.R. Section 2510.3-101.
Prime Dealer Services FINANCIAL INSTITUTION
Corp. PARTNERS, LTD.
By: By: /s/ Richard J. Perry, Jr.
Name: [SIG_NAME1] Name: Richard J. Perry, Jr. [SIG
Title: [SIG_POSITION1] Title: Manager of GP
Page 56 of 61
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Schedule A
NAMES AND ADDRESSES FOR COMMUNICATIONS
Prime Dealer Services Corp.
1221 Avenue of the Americas
New York, NY 10020
Attention: Ms. Kathleen Mooney, Vice President
Tel.:(212) 762-5101
Fax: (212) 762-9519
Financial Institution Partners, LTD.
1824 Jefferson Place, NW
Washington, DC 20036
Tel.: (202) 822-8117
Fax: (202) 822-8365
Schedule B
DEFINED TERMS AND SUPPLEMENTAL PROVISIONS
Cutoff Time(s)
ANNEX II
Supplemental Terms and Conditions
The following Supplemental Terms and Conditions (the "Supplement") supplement
and amend the Master Securities Loan Agreement (the "Agreement") dated between
Prime Dealer Services Corp. and :
2. The phrase "and for any other obligation of Borrower to Lender" shall be
deleted from the first sentence of Section 3.2 of the Agreement. The words
"securities intermediary" shall be inserted after the words "financial
intermediary" in the last sentence of Section 3.2.
2. The term "substituted Collateral" in first sentence of Section 3.5 of the
Agreement after the phrases "provided however that such" and "the aggregate
market value of such", shall be changed to "substitute Collateral" in both
instances, and the phrase "(or other Collateral acceptable to Lender)" shall be
inserted after the words "substitute letter of credit" in the last sentence of
such Section.
3. The phrase "market or" shall be inserted after the words "based on the
aggregate" in first sentence of Section 4.1 of the Agreement and the phrase "as
agreed" shall be inserted after the words "par value" in the first sentence of
such Section.
4. The word "such" shall be inserted after the phrase "by the transfer of" in
the first sentence of Section 7.2 of the Agreement and the phrase "in an amount
equal to such cash distribution," shall be deleted from the first sentence of
such Section.
5. The word "such" shall be inserted after the phrase "by the transfer of" in
second sentence of Section 7.3 of the Agreement and the phrase, "in an amount
equal to such cash distribution," shall be deleted from the second sentence of
such Section.
6. The sentence "Non-cash distributions received by Lender shall be added to
the Collateral on the date of distribution and shall be considered such for all
purposes, except that if the Loan has terminated, Lender shall forthwith
transfer the same to Borrower," shall be inserted at the end of Section 7.3 of
the Agreement.
7. The phrase "Subject to Section 7.4 (d)," shall be inserted at the beginning
of Section 9.3 of the Agreement.
8. The phrase "and such suspension or expulsion shall have a material effect
on such parties' ability to perform hereunder" shall be inserted at the end of
Section 11(f) of the Agreement.
9. Unless otherwise agreed, the Margin Percentage shall be as follows:
(a)US and Canadian exchange traded equity securities: 100%
(b)Non-US and Non-Canadian exchange traded equity securities: 100%
(c) All fixed income securities: 100%
10. When Borrower gives other than cash Collateral, Fees shall be calculated in
accordance with Section 4, except that Fees shall be based on the Market Value
of Loaned Securities plus accrued and unpaid interest to the extent accrued
interest is not included in the market value of the Loaned Securities.
11. The second sentence in Section 5 ("Termination of Loan") is hereby deleted
and restated as follows:
"The termination date established by a termination notice given by Lender
to Borrower shall be a date no earlier than the standard settlement date for
trades of the Loaned Securities entered into on the date of such notice, which
date shall, unless Borrower and Lender agree to the contrary, be (i) in the case
of Government Securities, the next Business Day following such notice and (ii)
in the case of all other securities, the number of Business Days in the standard
securities settlement cycle in the United States as defined in Rule 15c6-1 under
the Securities Exchange Act of 1934 (currently three days) following such
notice."
12. THIS SUPPLEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PRINCIPLES THEREOF.
Except as otherwise set forth herein, the Agreement shall remain unchanged and
in full force and effect. From and after the date hereof, any reference to the
Agreement shall be a reference to the Agreement as amended hereby.
Prime Dealer Services FINANCIAL INSTITUTION
Corp. PARTNERS, LTD.
By: By: /s/ Richard J. Perry, Jr.
Name: [SIG_NAME1] Name: Richard J. Perry, Jr. [SIG
Title: [SIG_POSITION1] Title: Manager
Page 57 of 61
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ANNEX III
Supplemental Terms and Conditions
The following Supplemental Terms and Conditions (the "Supplement")
supplement and amend the Master Securities Loan Agreement (the "Agreement")
dated as of between Prime Dealer Services Corp. ("Lender") and ("Borrower")
unless otherwise defined in Section 11.1 below, capitalized terms used herein
shall have the meanings assigned in the Agreement.
1. Collateral and Mark to Market.
1.1 Notwithstanding anything to the contrary in the Agreement, in
connection with any Loan in which Lender is not a Customer, Borrower and Lender
may agree, as provided in Section 10.2 hereof, that the market value of the
Collateral, if any, transferred by Borrower to Lender, upon initial transfer and
for purposes of any mark to market or similar provision of the Agreement, shall
be equal to a percentage of the market value of the Loaned Securities that is
less than 100%; provided, however, that in the event that the writing or other
confirmation evidencing such agreement does not set out such percentage with
respect to any such Loan, such percentage shall not, for purposes of any mark to
market or similar provision of the Agreement, be less than the percentage that
is obtained by dividing (i) the market value of the Collateral required to be
transferred by Borrower to Lender with respect to such Loan at the commencement
of the Loan by (ii) the market value of the Loaned Securities required to be
transferred by Lender to Borrower at the commencement of the Loan.
1.2 The Collateral transferred by Borrower to Lender under the Agreement,
as well as any other property transferred by Borrower to Lender or any of
Lender's Affiliates as security for any other obligations or liabilities of
Borrower to Lender or any of Lender's Affiliates, shall be security for any and
all obligations or liabilities of Borrower with respect to the Agreement, for
any Loan and for any other agreement or transaction between Lender or any
Affiliate of Lender and Borrower, now existing or hereafter arising.
2. Permitted Purpose.
2.1 Notwithstanding anything to the contrary in the Agreement, with
respect to any Loan of an Equity Security, Borrower and Lender may agree, as
provided in Section 10.2 hereof, that Borrower shall not be deemed to have made
any representation or warranty to Lender regarding the purpose for which
Borrower is borrowing or will borrow the Loaned Security, including without
limitation any representation or warranty regarding the use of the Loaned
Security by it (or the person to whom it relends the Loaned Security) for the
purpose of making delivery of such security in the case of a short sale, failure
to receive securities required to be delivered or otherwise. By entering into
any such agreement, Lender shall be deemed to have represented and warranted to
Borrower (which representation and warranty shall be deemed to be repeated on
each day during the term of such Loan) that Lender is either (i) an "exempted
borrower" within the meaning of Regulation T or (ii) a member of a national
securities exchange or a broker or dealer registered with the Securities and
Exchange Commission that is entering into such Loan to finance its activities as
a market maker or an underwriter.
2.2 Notwithstanding anything to the contrary in the Agreement, with
respect to any Loan of a security that is not an Equity Security, Borrower shall
not be deemed to have made any representation or warranty to Lender regarding
the purpose for which Borrower is borrowing or will borrow the Loaned Security,
including without limitation any representation or warranty regarding the use of
the Loaned Security by it (or the person to whom it relends the Loaned Security)
for the purpose of making delivery of such security in the case of a short sale,
failure to receive securities required to be delivered or otherwise.
3. Termination and Rights in Respect of Collateral. Notwithstanding anything
to the contrary in the Agreement, if under the Agreement Lender may pledge,
repledge, hypothecate, rehypothecate, lend, relend, sell or otherwise transfer
the Collateral, or re-register Collateral evidenced by physical certificates in
any name other than Borrower's:
(c) Borrower may not terminate a Loan, if the Collateral for such Loan includes
securities other than Government Securities, except on a termination date
established by notice given to Lender prior to the close of business on a
Business Day; the date established by such termination notice given by Borrower
to Lender shall be a date no earlier than the standard settlement date for
trades of such Collateral entered into on the date of such notice, which date
shall, unless Borrower and Lender agree to the contrary, be the third Business
Day following such notice; and
(d) Borrower waives the right to vote, or to provide any consent or take any
similar action with respect to, any Collateral in the event that the record date
or deadline for such vote, consent or other action falls during the term of a
Loan and such Collateral is not required to be returned to Borrower pursuant to
any substitution, mark to market or similar provision of the Agreement.
4. Dividends, Distributions, Etc.
4.1 Notwithstanding anything to the contrary in the Agreement, Borrower
shall be entitled to receive all distributions made on or in respect of
Collateral transferred to Lender which are not otherwise received by Borrower,
to the full extent it would be so entitled if such Collateral had not been
transferred to Lender, including, but not limited to (a) cash and all other
property, (b) stock dividends, (c) securities received as a result of split ups
of such Collateral and distributions in respect thereof, (d) interest payments,
and (e) all rights to purchase additional securities.
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4.2 Any cash distributions made on or in respect of Collateral, which
Borrower is entitled to receive pursuant to Section 4.1 hereof, shall be treated
in accordance with the Agreement. Non-cash distributions received by Lender
shall be added to the Collateral on the date of distribution and shall be
considered such for all purposes, except that if each Loan secured by such
Collateral has terminated, Lender shall forthwith transfer the same to Borrower.
5. Transfer. Notwithstanding anything to the contrary in the Agreement, all
transfers by either Borrower or Lender of Loaned Securities or Collateral
consisting of "financial assets" (within the meaning of the New York Uniform
Commercial Code) thereunder shall be by (a) in the case of certificated
securities, physical delivery of certificates representing such securities
together with duly executed stock and bond transfer powers, as the case may be,
with signatures guaranteed by a bank or a member firm of the New York Stock
Exchange, Inc., (b) registration of an uncertificated security in the
transferee's name by the issuer of such uncertificated security, (c) the
crediting by a securities intermediary of such financial assets to the
transferee's securities account maintained with such securities intermediary, or
(d) such other means as Borrower and Lender may agree. For the avoidance of
doubt, the parties agree and acknowledge that the term "securities", as used in
the Agreement and herein, shall include any "security entitlements" with respect
to such securities (within the meaning of the New York Uniform Commercial Code),
and that the terms "financial intermediary" and "clearing corporation", as used
in the Agreement, shall mean a "securities intermediary" (within the meaning of
the New York Uniform Commercial Code).
6. Representations and Warranties. Each of the parties hereto (and, in the
case of a party acting as agent in accordance with the terms of the Agreement,
each of its principals) represents and warrants that (a) it has full power and
authority to execute and deliver this Supplement and to enter into any Loan
contemplated by the Agreement and to perform its obligations thereunder, as
supplemented or amended herein; (b) it has taken all necessary action to
authorize such execution, delivery and performance; and (c) this Supplement
constitutes a legal, valid and binding obligation, enforceable against it in
accordance with its terms and the terms of the Agreement.
7. Events of Default.
7.1 In addition to any events of default set forth in the Agreement, the
occurrence of one or more of the following shall constitute an event of default
under the Agreement:
(i) if either party fails to perform any covenant or obligation required to be
performed by it hereunder or if any representation made by either party in
respect hereof shall be incorrect or untrue in any material respect during the
term of any Loan under the Agreement, as supplemented or amended herein;
provided, however, that to the extent that Section 4 hereof supplements and
amends any provisions in the Agreement governing the rights of Borrower in
respect of distributions on Collateral, any such failure under Section 4 hereof
shall constitute an event of default only after the expiration of the notice
period, if any, specified in the Agreement with respect to the occurrence of an
event of default for such a failure; or
(ii) if Borrower defaults or fails to perform with respect to any indebtedness
to Lender or any Affiliate of Lender or any other agreement or transaction
between Lender or any Affiliate of Lender and Borrower, now or hereafter
arising.
7.2 In addition to the remedies in events of default set forth in the
Agreement, an event of default with respect to Borrower under the Agreement
shall constitute an event of default (howsoever described) under all other
agreements and transactions between Lender or any Affiliate of Lender and
Borrower and, upon any event of default with respect to Borrower, Lender and any
Affiliate of Lender shall be entitled to:
(i) cancel and otherwise liquidate and close out any transaction under any
other agreement or transaction between Lender or any Affiliate of Lender and
Borrower without prior notice to Borrower or any other party, whereupon
Borrower, as the case may be, shall be liable to Lender or the Affiliate of
Lender, as the case may be, for any resulting loss, damage, cost and expense,
including loss equal to the amount Lender or the Affiliate of Lender, as the
case may be, would have to pay to enter into replacement transactions (whether
or not Lender or the Affiliate of Lender, as the case may be, enters into any
such replacement transactions) and any damages resulting to Lender or any
Affiliate of Lender from entering into or terminating hedge transactions with
respect thereto; and
(ii) set off any obligation under any transaction under any agreement between
Lender or any Affiliate of Lender and Borrower (including any Loan under this
Agreement), including any payment or delivery obligation, of Lender or the
Affiliate of Lender, as the case may be, to Borrower against any obligation
under any transaction under any agreement between Lender and Borrower (including
any Loan under this Agreement), including any payment or delivery obligation, of
Borrower to Lender or the Affiliate of Lender, as the case may be.
8. Transfer Taxes. Unless otherwise agreed, all transfer taxes with respect
to the transfer of Collateral by Borrower to Lender and by Lender to Borrower
upon termination of the Loan or pursuant to any substitution, mark to market or
similar provision of the Agreement shall be paid by Borrower.
9. APPLICABLE LAW. THIS SUPPLEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
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10. Definitions and Interpretations.
10.1 Notwithstanding anything to the contrary in the Agreement, the following
terms shall have the following meanings for purposes of this Supplement.
"Affiliate" shall mean, in relation to any person, (i) any entity
controlled, directly or indirectly, by the person; (ii) any entity that
controls, directly or indirectly, the person; or (iii) any entity directly or
indirectly under common control with the person. For purposes of this
definition, "control" of any entity or person means ownership of a majority of
the voting power of the entity or person.
"Collateral" shall have the meaning specified in the Agreement, except that, if
any new or different security shall be exchanged for any Collateral by
recapitalization, merger, consolidation or other corporate action, such new or
different security shall, effective upon such exchange, be deemed to become
Collateral in substitution for the former Collateral for which such exchange is
made.
"Customer" shall mean any person that is a customer of Borrower under Rule 15c3-
3 under the Exchange Act or any comparable regulation of the Secretary of the
Treasury under Section 15C of the Exchange Act (to the extent that Borrower is
subject to such rule or comparable regulation).
"Equity Security" shall mean any security other than a "non-equity security", as
defined in Regulation T.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Government Securities" shall mean "government securities" as defined in Section
3(a)(42)(A)-(C) of the Exchange Act.
"Plan" shall mean (i) any "employee benefit plan" as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974 which is subject to Part 4
of Subtitle B of Title I of such Act; (ii) any "plan" as defined in Section
4975(e)(1) of the Internal Revenue Code of 1986; or (iii) 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.
"Regulation T" shall mean Regulation T of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
10.2 Any agreement between the parties pursuant to Section 1.1 or
Section 2.1 shall be made (i) in writing, (ii) orally, if confirmed promptly in
writing or through any system that compares Loans and in which Borrower and
Lender are participants, or (iii) in such other manner as may be agreed by the
parties in writing.
11. Notwithstanding anything contained in the Agreement, Lender and
Borrower agree that in effecting Loans transfers between Lender's Account and
Borrower's Account are intended to be, and shall be deemed to be, simultaneous.
Notwithstanding the foregoing, if Lender has failed to deliver the Loaned
Securities to Borrower's Account or Borrower has failed to deliver the
Collateral to Lender's Account by the applicable Cutoff time for such Loan, then
no Loan shall have occurred and Borrower (in the case of Lender's failure to
deliver) or Lender (in the case of Borrower's failure to deliver), shall have
the absolute right to the return of the Collateral or Loaned Securities, as the
case may be. Until such Collateral or Loaned Securities are redelivered to
either Borrower (in the case of Lender's failure to deliver) or Lender (in the
case of Borrower's failure to deliver), the party that failed to deliver such
Collateral or Loaned Securities shall hold such securities in escrow for the
other party and shall be required to pay to such party interest based on the
market value of the Collateral or Loaned Securities, as the case may be, (i) in
the case of foreign securities, at the LIBOR rate and (ii) in the case of any
other securities, at the Federal Funds Rate, for each day that such redelivery
obligation remains outstanding. For purposes of this Paragraph 11, the
following terms shall have the following meanings:
"Lender's Account" shall mean the account maintained by Lender for the deposit
of Collateral with respect to each Loan and, for such purposes, Lender's Account
shall be deemed to be a "securities account" within the meaning of the New York
Uniform Commercial Code. For purposes of this Amendment, Lender's Account shall
include any account for the deposit of cash in connection therewith.
"Borrower's Account" shall mean the account maintained by Borrower for the
deposit of Loaned Securities with respect to each Loan and, for such purposes,
Borrower's Account shall be deemed to be a "securities account" within the
meaning of the New York Uniform Commercial Code. For purposes of this
Amendment, Borrower's Account shall include any account for the deposit of cash
in connection therewith.
Except as otherwise set forth herein, the Agreement shall remain
unmodified and in full force and effect. From and after the date hereof, any
reference to the Agreement shall be a reference to the Agreement as supplemented
and amended hereby.
Prime Dealer Services FINANCIAL INSTITUTION
Corp. PARTNERS, LTD.
By: By: /s/ Richard J. Perry, Jr.
Name: [SIG_NAME1] Name: Richard J. Perry, Jr. [SIG
Title: [SIG_POSITION1] Title: Manager
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EXHIBIT Y
Account Control Agreement, dated as of , among Morgan Stanley & Co.,
Incorporated ("MS&Co."), Prime Dealer Services Corp. ("PDS") and ("Customer").
Unless otherwise defined herein, capitalized terms used herein shall have the
meanings assigned in the Master Securities Loan Agreement dated (the "Master
Securities Loan Agreement").
PREAMBLE:
1. MS&Co., in its capacity as securities intermediary ("Intermediary") has
established one or more securities accounts in the name of (the "Account").
2. PDS may, from time to time, lend securities to Customer pursuant to the
Master Securities Loan Agreement.
3. Customer wishes to provide for the Account and all or a portion of the
assets credited to the Account (the "Additional Collateral"), in addition to any
other Collateral transferred by Customer to PDS, to serve as Collateral in
connection with one or more Loans or other obligations under the Master
Securities Loan Agreement.
4. PDS, Customer and MS&Co. (in its individual capacity and as Intermediary)
are entering into this Agreement to provide for the control of the Additional
Collateral by PDS and to perfect the security interest of PDS therein.
TERMS:
Section 1. The Account. All parties agree that the Account is a "securities
account" within the meaning of Article 8 of the Uniform Commercial Code of the
State of New York (the "UCC") and that all property held by Intermediary in the
Account will be treated as financial assets under the UCC. Intermediary will
not agree with any third party to comply with entitlement orders or other
directions concerning the Collateral held in the Account originated by any third
party without the prior written consent of PDS and Customer.
Section 2. Collateral. Notwithstanding anything to the contrary in the Master
Securities Loan Agreement, in addition to Collateral transferred by Customer to
PDS pursuant to Section 16 of the Master Securities Loan Agreement and Section 5
of Annex III thereto, Additional Collateral held by MS&Co. in the Account shall
constitute Collateral for purposes of the Master Securities Loan Agreement,
subject to the security interest and all other rights of PDS as Lender
thereunder. In such event, notwithstanding anything to the contrary in the
Master Securities Loan Agreement, such Additional Collateral shall, except as
provided below in Section 7, be deemed to be "transferred" by Borrower to Lender
for purposes of the Master Securities Loan Agreement concurrently with the
transfer of such other Collateral by Borrower to Lender and shall be deemed to
be "transferred" by Lender to Borrower for purposes of the Master Securities
Loan Agreement concurrently with the transfer of such other Collateral by Lender
to Borrower.
Section 3. Subordination of Lien. The security interest in favor of PDS in the
Account and financial assets credited thereto is subject and subordinate to the
prior payment of all indebtedness of Customer to Intermediary, as such may exist
from time to time, including fees and commissions, and to any security interest
or lien in favor of Intermediary on the Account and to any right of Intermediary
to close out open positions in the Account. In no event will PDS have any right
to exercise any remedies in respect of the Account until such time as all
Customer's obligations to Intermediary have been satisfied in full.
Section 4. Control. Subject to the provisions of Section 3, Intermediary will
comply with entitlement orders originated by PDS concerning the Account and any
financial assets credited thereto without further consent by Customer. Subject
to the foregoing, Intermediary may also comply with entitlement orders or other
directions concerning the Account originated by Customer, or its authorized
representatives, until such time as PDS delivers a written notice to
Intermediary that PDS is thereby exercising exclusive control over the Account.
Such notice may be referred to herein as the "Notice of Exclusive Control."
After Intermediary receives the Notice of Exclusive Control and has had
reasonable opportunity to comply, it will cease complying with entitlement
orders or other directions concerning the Account originated by Customer or its
representatives.
Section 5. Amendment. This Agreement may not be amended or otherwise modified
except in writing signed by all the parties hereto.
Section 6. Choice of Law. This Agreement (including without limitation all
rights and obligations with respect to the Account) shall be governed by and
construed in accordance with the law of the State of New York.
Section 7. Interpretation. Dividends and other distributions on Additional
Collateral shall be credited to the Account in accordance with the customary
practices of Intermediary, and PDS shall have no obligation with respect thereto
under Section 7.3 of the Master Securities Loan Agreement and Sections 4.1 and
4.2 of Annex II thereto.
SIGNATURES:
PRIME DEALER SERVICES CORP.
By: ___________________
Name: [SIG_NAME1]
Title:
FINANCIAL INSTITUTION PARTNERS, LTD.
By: /s/ Richard J. Perry, Jr.__
Name: Richard J. Perry, Jr. [SIG
Title: Manager of G.P.
MORGAN STANLEY & CO. INCORPORATED,
[INDIVIDUALLY AND AS INTERMEDIARY]
By: ________
Name: [SIG_NAME1]
Title:
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