<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ______)*
TSI INCORPORATED
- -------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, $.10 Par Value
- -------------------------------------------------------------------------------
(Title of Class of Securities)
872876107
- -------------------------------------------------------------------------------
(CUSIP Number)
Patrick J. Hess
University Capital Strategies Group, LLC
408 St. Peter Street, Suite 444
St. Paul, Minnesota 55102
- -------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
March 28, 2000
- -------------------------------------------------------------------------------
(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 Sections240.13d-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 Section240.13d-7 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).
<PAGE>
CUSIP No. 872876107
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------
1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only).
University Capital Strategies Group, LLC
- ------------------------------------------------------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
Not Applicable (a) / /
(b) / /
- ------------------------------------------------------------------------------------------------------------------------------
3. SEC Use Only
- ------------------------------------------------------------------------------------------------------------------------------
4. Source of Funds OO
- ------------------------------------------------------------------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) / /
- ------------------------------------------------------------------------------------------------------------------------------
6. Citizenship or Place of Organization Minnesota
- ------------------------------------------------------------------------------------------------------------------------------
Number of
Shares 7. Sole Voting Power
Beneficially --------------------------------------------------------------------------------------------------------
Owned by
Each 8. Shared Voting Power 675,800 (see Item 5)
Reporting --------------------------------------------------------------------------------------------------------
Person
With 9. Sole Dispositive Power
- ------------------------------------------------------------------------------------------------------------------------------
10. Shared Dispositive Power 675,800 (see Item 5)
- ------------------------------------------------------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned 675,800 (see Item 5)
by Each Reporting Person
- ------------------------------------------------------------------------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares / /
- ------------------------------------------------------------------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11) 5.9%
- ------------------------------------------------------------------------------------------------------------------------------
14. Type of Reporting Person (See Instructions) HC; OO
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ITEM 1. SECURITY AND ISSUER
This Schedule 13D relates to the Common Stock, par value $.10 per share
(the "Common Stock"), of TSI Incorporated, a Minnesota corporation (the
"Company"). The principal executive office of the Company is located at 500
Cardigan Road, Shoreview, MN 55126.
ITEM 2. IDENTITY AND BACKGROUND
(a) This statement is filed by University Capital Strategies Group,
LLC, a Minnesota limited liability company (the "Reporting Person"), with
respect to shares beneficially owned by Global Arbitrage Management Fund Limited
Partnership, a Bermuda limited partnership ("Global"), and NAFCO Arbitrage
Partners, Ltd., a Bermuda company limited by shares ("NAFCO Partners"). The
Reporting Person is the general partner of Global and the holder of a majority
of the outstanding shares of NAFCO Partners.
(b) The address of the principal offices of the Reporting Person is 408
St. Peter Street, Suite 444, St. Paul, Minnesota 55102.
2
<PAGE>
(c) The principal business of the Reporting Person is managing
investments in securities on behalf of Global and NAFCO Partners, primarily in
connection with arbitrage opportunities.
(d) The Reporting Person has not been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) during the
last five years.
(e) The Reporting Person has not been a party to a civil proceeding of
a judicial or administrative body resulting in a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws, or finding any violation with respect to
such laws.
(f) The Reporting Person is a limited liability company organized under
the laws of the State of Minnesota.
Information called for by Items 2-6 of this Schedule 13D concerning the
directors and officers of the Reporting Person is set forth in Exhibit 1
attached hereto and incorporated herein by this reference.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The $8,114,694 and $1,757,079 used by Global and NAFCO Partners,
respectively, to purchase the shares of Common Stock came from the investment
capital of the respective entities and funds borrowed in the ordinary course of
their business activities from margin accounts pursuant to a Master Prime
Brokerage Agreement, a form of which is attached hereto as Exhibit 3. All shares
of Common Stock acquired by Global and NAFCO were purchased in open market
brokerage transactions the ordinary course of business.
ITEM 4. PURPOSE OF TRANSACTION
Global and NAFCO Partners acquired the Common Stock in the ordinary
course of their respective businesses for investment purposes. Global and NAFCO
Partners from time to time evaluate their holdings of securities and, based on
such evaluation, may determine to acquire or dispose of securities of specific
issuers.
Neither the Reporting Person, Global nor NAFCO Partners has any present
plans or intentions that relate to, or would result in, any of the transactions
described in subparagraphs (a) through (j), inclusive, of Item 4 of Schedule
13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) The aggregate number of shares of Common Stock to which this
Schedule 13D relates is 675,800 shares, representing approximately 5.9% of the
11,363,844 shares outstanding as reported in the Company's most recently filed
quarterly report on Form 10-Q filed with the SEC on February 14, 2000 for the
quarter ended December 31, 1999. The Reporting Person may be deemed to have
beneficial ownership of 556,040 shares (approximately 4.9% of the total
outstanding) owned by Global and 119,760 shares (approximately 1.1% of the total
outstanding) owned by NAFCO Partners.
(b) The Reporting Person has shared voting and dispositive power with
respect to the shares of Common Stock owned by Global and NAFCO Partners.
(c ) Exhibit 2 annexed hereto and incorporated herein by reference
lists transactions in the Common Stock by Global and NAFCO Partners during the
last sixty days, including the name, date, amount of shares involved and price
per share. All acquisitions of Common Stock were executed
3
<PAGE>
through market transactions. There were no other transactions in the Common
Stock by the Reporting Persons in the past sixty days.
(d) Not Applicable.
(e) Not Applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER
None.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1-- Information Concerning the Directors and Officers of
University Capital Strategies Group, LLC.
Exhibit 2 -- Acquisitions of shares Common Stock by Global and
NAFCO Partners during the past sixty days.
Exhibit 3 -- Master Prime Brokerage Agreement
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
April 5, 2000
UNIVERSITY CAPITAL STRATEGIES GROUP, LLC
/s/ Patrick J. Hess
- ----------------------------------
Patrick J. Hess, President and CEO
4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
1 Information Concerning the Directors and Officers of
University Capital Strategies Group, LLC
2 Acquisitions of shares Common Stock by Global and NAFCO Partners
during the past sixty days.
3 Master Prime Brokerage Agreement
</TABLE>
<PAGE>
EXHIBIT 1
Information Concerning the Directors and Officers of
University Capital Strategies Group, LLC
The names and present principal occupations of the directors and executive
officers of University Capital Strategies Group, LLC ("UCSG") are set forth
below. During the last five years, none of these individuals has been
convicted in any criminal proceeding (excluding traffic violations and
similar misdemeanors) or has been a party to any civil proceeding of a
judicial or administrative body as a result of which such person 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 violations with respect to such laws. All of the
individuals listed below are citizens of the United States.
<TABLE>
<CAPTION>
Direct or
Indirect
Present Principal Beneficial
Position with Occupation or Ownership
Name UCSG Employment Address in UCSG
---- ---- ---------- ------- -------
<S> <C> <C> <C> <C>
Patrick J. Hess Director, UCSG 408 St. Peter Street 36.25%
President and CEO St. Paul, MN 55102
of UCSG
Michael P. McCormick Director, UCSG 408 St. Peter Street 36.25%
Secretary St. Paul, MN 55102
Kenneth F. Gudorf Director President, Agio 601 Second Avenue S. 5%
Capital Corp. Minneapolis, MN 55402
Gregory Herrick Director Self Employed 2650 W. Stonecrop Rd. 20%
P.O. Box 6291
Jackson, WY 83002
John R. Nagel Director Self Employed 1446 Westwood Drive 2.5%
Minnetrista, MN 55364
</TABLE>
<PAGE>
EXHIBIT 2
Acquisitions of Shares of Common Stock by Global
and NAFCO Partners During the Past Sixty Days
<TABLE>
<CAPTION>
Date of Transaction Number of Shares Price per Share Aggregate Price
-------------------- ---------------- --------------- ---------------
<S> <C> <C> <C>
February 1, 2000 36,663 14.6562 537,340.26
February 8, 2000 3,250 14.6250 47,531.25
February 9, 2000 2,425 14.6250 35,465.63
February 10, 2000 25,000 14.5625 364,062.50
February 14, 2000 33,330 14.6875 489,534.38
February 18, 2000 1,167 14.5000 16,921.50
February 22, 2000 900 14.5000 13,050.00
March 28, 2000 2,250 14.8170 33,395.63
March 28, 2000 14,775 14.8750 219,778.13
------ ----------
119,760 1,757,079.26
January 26, 2000 5,000 14.1250 70,625.00
January 27, 2000 26,000 14.3125 372,125.00
January 28, 2000 9,000 14.3125 128,812.50
January 31, 2000 34,300 14.3340 491,656.20
February 1, 2000 73,337 14.6562 1,074,841.74
February 3, 2000 3,000 14.5000 43,500.00
February 4, 2000 10,000 14.4687 144,687.00
February 8, 2000 9,750 14.6250 142,593.75
February 9, 2000 7,275 14.6250 106,396.88
February 10, 2000 75,000 14.5625 1,092,187.50
February 14, 2000 66,670 14.6875 979,215.63
February 18, 2000 1,200 14.5192 17,423.04
February 18, 2000 2,333 14.5000 33,828.50
February 22, 2000 2,700 14.5000 39,150.00
February 23, 2000 34,000 14.5000 493,000.00
February 23, 2000 100,000 14.5000 1,450,000.00
March 28, 2000 12,750 14.8380 189,241.88
March 28, 2000 83,725 14.8750 1,245,409.38
------ ------------
556,040 8,114,693.98
</TABLE>
<PAGE>
___________ 1998
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
========================================================
MASTER PRIME BROKERAGE
AGREEMENT
========================================================
<PAGE>
Exhibit 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Clause Page
<S> <C>
PART A: INTRODUCTION..........................................................................................1
1. Interpretation............................................................................................1
2. Scope of Agreement: Single Agreement......................................................................1
PART B: TRANSACTIONS, PAYMENTS AND DELIVERIES.................................................................2
3. Transactions, Payments and Deliveries.....................................................................2
PART C: FINANCING ARRANGEMENTS................................................................................2
4. Provision of Cash Finance and Securities Finance..........................................................2
5. Securities and Cash Accounts..............................................................................3
PART C: MARGIN................................................................................................4
6. Margin Requirement: Margin Specification..................................................................4
7. Obligation to maintain minimum Aggregate Credit Balance...................................................4
8. Margin Deficits...........................................................................................5
PART D: CASH AND SECURITIES...................................................................................5
9. Payment and Delivery......................................................................................5
10. Charged Securities.......................................................................................8
11. Dividends, Securities Events and voting rights...........................................................9
PART E: TERMINATION..........................................................................................11
12. Events of Default.......................................................................................11
13. Close-out...............................................................................................12
14. Tax Event...............................................................................................13
PART F: GENERAL..............................................................................................14
15. Interest and Fees.......................................................................................14
16. Reports and Valuation...................................................................................15
17. Representations and Warranties..........................................................................15
18. Use of name of Prime Broker.............................................................................17
19. Notices and Other Communications +......................................................................17
20. Agreement...............................................................................................18
21. Non-assignability; Termination..........................................................................18
22. Governing Law...........................................................................................18
23. No Waivers, etc.........................................................................................19
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
-------------------
(continued)
<TABLE>
<S> <C>
24. Waiver of Immunity......................................................................................19
25. Confidentiality.........................................................................................19
26. Recording...............................................................................................19
27. Force Majeure...........................................................................................20
SCHEDULE 1.......................................................................................................21
Definitions
SCHEDULE 2.......................................................................................................28
Jurisdictions in which Charged Securities are to be delivered
SCHEDULE 3 ......................................................................................................29
Particulars of Counterparty's agent for service of process
</TABLE>
ii
<PAGE>
THIS MASTER PRIME BROKERAGE AGREEMENT is made on _________________ 1998
BETWEEN
LEHMAN BROTHERS INTERNATIONAL (EUROPE), incorporated under the laws of England
and Wales with unlimited liability, of One Broadgate, London EC2M 7HA, United
Kingdom (the PRIME BROKER) and ________________________________________ of
________________________________ (the COUNTERPARTY).
WHEREAS
(A) The Prime Broker through its Prime Brokerage Division provides financing,
settlement and other services to its customers for the purposes of and in
connection with the acquisition, holding and disposal by such customers of
securities and the effecting by such customers of transactions in derivatives.
(B) This Agreement sets out the terms under which the Prime Broker will provide
those services to the Counterparty and the arrangements which will apply in
connection with those services.
IT IS AGREED AS FOLLOWS
PART A: INTRODUCTION
1. INTERPRETATION
1.1. This Agreement is to be interpreted in accordance with Schedule 1.
2. SCOPE OF AGREEMENT: SINGLE AGREEMENT
2.1. This Agreement, which constitutes this document and all Product
Annexes, shall apply (save where the parties agree otherwise) in respect of all
Transactions entered into between the parties and all Transactions between the
Counterparty and a Third Party which the Counterparty requests the Prime Broker
to settle on the Counterparty's behalf, and in respect of all related matters
referred to in this Agreement.
2.2. All Transactions and arrangements contemplated by this Agreement are
entered into in reliance on the fact that this document and all Product Annexes
and settlement requests, acknowledgements, instructions and confirmations form a
single agreement between the parties, and the parties would not otherwise enter
into any Transaction or arrangements contemplated by this Agreement.
Page 1
<PAGE>
PART B: TRANSACTIONS, PAYMENTS AND DELIVERIES
3. TRANSACTIONS, PAYMENTS AND DELIVERIES
3.1. Wherever the Counterparty wishes the Prime Broker to enter into a
Transaction, or to settle a Transaction on the Counterparty's behalf, or to make
or receive any other delivery or payments to, from or on behalf of the
Counterparty, it shall issue a request to the Prime Broker to do so, in the
manner specified in the relevant Product Annex. The terms of the relevant
Product Annex shall apply, in addition to other terms of this Agreement, in
relation to any Transaction, payment, delivery or other arrangements entered
into or made in consequence of such a request.
PART C: FINANCING ARRANGEMENTS
4. PROVISION OF CASH FINANCE AND SECURITIES FINANCE
CASH FINANCE
4.1. The Prime Broker may at its discretion -
(a) provide financing to the Counterparty;
(b) discharge any money obligation of the Counterparty under or in
connection with a Transaction.
4.2. Except to the extent that cash of the relevant currency is for the time
being credited to a Cash Account and available for the purpose, the discharge by
the Prime Broker of a money obligation of the Counterparty under clause 4.1(b)
shall for the purposes of this Agreement be treated as a loan by the Prime
Broker to the Counterparty of the sum discharged.
4.3. Subject to the terms of this Agreement and in particular to clause 13
(netting and close-out on default), any loan to the Counterparty under clause
4.1 or 4.2 shall give rise to an obligation of the Counterparty to repay to the
Prime Broker the amount lent together with fees and interest thereon as agreed
between the Counterparty and the Prime Broker at such time or times as may have
been agreed or, in default of such agreement, on demand.
SECURITIES FINANCE
4.4. The Prime Broker may -
(a) advance securities to the Counterparty;
(b) discharge any obligation of the Counterparty to deliver
securities under or in connection with a Transaction.
4.5. Except to the extent that securities of the description and amount in
question are for the time being credited to a Securities Account and available
for the purpose, the discharge by the Prime Broker under clause 4.4(b) of an
obligation of the Counterparty to deliver Securities shall
Page 2
<PAGE>
for the purposes of this Agreement be treated as an advance by the Prime Broker
to the Counterparty of the Securities so delivered.
4.6. Subject to the terms of this Agreement and in particular to clause 13
(netting and close-out on default), any such advance of securities to the
Counterparty shall give rise to an obligation of the Counterparty to deliver
Equivalent Securities together with fees and interest thereon to the Prime
Broker at such time or times as may have been agreed or, in default of such
agreement, on demand, and to make such payments as are provided by clause 11
with respect to Income on such securities.
4.7. Unless otherwise agreed, any borrowing of cash or securities, or any
repos or reverse repos of securities, entered into by the Prime Broker with
third parties for the purpose of making cash or securities available under this
Agreement shall be entered into by the Prime Broker as principal and the
Counterparty shall have no rights or obligations under any such transactions.
4.8. The terms of this clause 4 may be supplemented by those of any Product
Annex and by any terms which may be agreed between the Prime Broker and the
Counterparty in relation to any Transaction.
5. SECURITIES AND CASH ACCOUNTS
5.1. The Prime Broker shall open and maintain one or more Cash Accounts and
one or more Securities Accounts.
5.2. The parties agree that:
(a) all cash lent or advanced by the Prime Broker to or on behalf
of the Counterparty shall be debited to a Cash Account in the
appropriate currency;
(b) all cash paid or treated as paid by or on behalf of the
Counterparty to the Prime Broker shall be credited to a Cash Account in
the appropriate currency;
(c) whenever securities are advanced by or on behalf of the Prime
Broker to the Counterparty a debit in respect of the relevant amount of
securities of that description shall be posted to an appropriately
designated Securities Account;
(d) whenever securities are delivered or treated as delivered by
or on behalf of the Counterparty to the Prime Broker a credit in
respect of the relevant amount of securities of that description shall
be posted to an appropriately designated Securities Account;
(e) Charged Securities shall be credited to an appropriately
designated Charged Securities Account.
5.3. For the purposes of this Agreement cash shall be treated as paid to the
Prime Broker by the Counterparty, and securities shall be treated as delivered
to the Prime Broker by the Counterparty, if they are paid or delivered to the
Prime Broker by a Third Party in settlement of a Third Party Transaction.
Page 3
<PAGE>
5.4. The parties agree that -
(a) the Prime Broker may debit to a Cash Account in the
appropriate currency any amount which it is entitled to debit to a Cash
Account under any term of this Agreement;
(b) the Prime Broker may debit to a Securities Account relating to
securities of any description any quantity of securities of the
relevant description which it is entitled to debit to a Securities
Account under any term of this Agreement.
5.5. THE PARTIES AGREE THAT CASH HELD BY THE PRIME BROKER UNDER THIS
AGREEMENT WILL NOT BE HELD AS CLIENT MONEY PURSUANT TO THE FINANCIAL SERVICES
(CLIENT MONEY) REGULATIONS 1991.
PART C: MARGIN
6. MARGIN REQUIREMENT: MARGIN SPECIFICATION
6.1. For the purposes of this Agreement -
(a) the MARGIN REQUIREMENT means an amount expressed in a Base
Currency Value calculated by the Prime Broker from time to time by
reference to the Transactions and Relevant Derivatives Transactions for
the time being outstanding, the balances on the Cash Accounts and the
Market Value of Eligible Securities held on the Securities Accounts in
accordance with the Margin Specification for the time being applicable
to the Counterparty;
(b) the MARGIN SPECIFICATION means a schedule notified by the
Prime Broker to the Counterparty setting out the factors by reference
to which and the manner in which the Margin Requirement is to be
determined.
6.2. The Prime Broker may from time to time at its sole discretion and
without restriction vary the Margin Specification applicable to the Counterparty
by notice to the Counterparty which notice may be oral and confirmed in writing.
Such a notice shall take effect from the time specified in the notice (which may
not be earlier than three Business Days after the time when the notice is
given). FOR THE AVOIDANCE OF DOUBT, THE COUNTERPARTY ACKNOWLEDGES THAT IT WILL
BE BOUND BY ALL VARIATIONS OF THE MARGIN SPECIFICATION ON RECEIPT OF SUCH NOTICE
AND WILL HAVE NO RIGHT TO DISPUTE SUCH VARIATIONS.
7. OBLIGATION TO MAINTAIN MINIMUM AGGREGATE CREDIT BALANCE
7.1. The. Counterparty shall ensure that at all times there is an Aggregate
Credit Balance of an amount not less than the Margin Requirement.
7.2. For the purposes of this Agreement the Aggregate Credit Balance at any
time is the amount obtained by combining the Market Value at that time of:
Page 4
<PAGE>
(a) all credit balances on Cash and Securities Accounts (such
balances being counted as positive items);
(b) all debit balances on Cash and Securities Accounts (such
balances being counted as negative items); and
(c) all Relevant Derivatives Transactions (such values being
positive amounts if they have positive mark-to-market values for the
Counterparty, and negative amounts if they have negative mark-to-market
values for the Counterparty).
The sum of such combination is referred to in this Agreement as the
AGGREGATE CREDIT BALANCE if it is positive and the AGGREGATE DEBIT
BALANCE if it is negative.
7.3. The Counterparty may, with the consent of the Prime Broker, deliver cash or
securities to the Prime Broker for credit to an appropriate Account.
7.4. For the purposes of this Agreement -
(a) if at any time there is an Aggregate Credit Balance of an
amount less than the Margin Requirement, there is a Margin Deficit of
an amount equal to the deficiency;
(b) if at any time there is an Aggregate Debit Balance, there is a
Margin Deficit of an amount equal to the sum of the Aggregate Debit
Balance and the Margin Requirement.
8. MARGIN DEFICITS
8.1. If at any time there is a Margin Deficit the Counterparty shall pay or
transfer to the Prime Broker cash or securities of an aggregate Market Value at
least sufficient to ensure that following such payment or transfer (and the
related alterations to the balances on the cash and/or Securities Accounts and
any consequent change to the Margin Requirement) there will be no Margin
Deficit.
8.2. The Counterparty shall comply with clause 8.1 within the period
specified in the notice and, if no such period is specified, not later than
close of business on the Business Day following that on which the notice is
given.
PART D: CASH AND SECURITIES
9. PAYMENT AND DELIVERY
9.1. Unless otherwise agreed and subject to the terms of this Agreement -
(a) any cash paid, or treated as paid, by the Counterparty to the
Prime Broker pursuant to this Agreement (other than payments which the
Prime Broker is entitled to apply in or towards satisfaction of a debt
owed by the Counterparty to the Prime Broker) shall be repayable by the
Prime Broker to the Counterparty on demand;
Page 5
<PAGE>
(b) the Prime Broker shall be obliged to deliver to the
Counterparty on demand Equivalent Securities in respect of any
securities (other than Charged Securities) delivered, or treated as
delivered, by the Counterparty to the Prime Broker (other than
deliveries which the Prime Broker is entitled to apply in or towards
satisfaction of an obligation of the Counterparty to deliver Equivalent
Securities to the Prime Broker in respect of securities advanced to the
Counterparty).
9.2. The Prime Broker may apply any cash or securities paid or delivered, or
treated as paid or delivered, to the Prime Broker by the Counterparty pursuant
to this Agreement in or towards satisfaction of any amounts owed to the Prime
Broker by the Counterparty (whether or not in the relevant currency) or (as
applicable) any obligation of the Counterparty to deliver securities of the
relevant kind to the Prime Broker.
9.3. In no circumstances shall the Prime Broker be obliged to make any payment
of cash or transfer of Equivalent Securities or Charged Securities to or to the
order of the Counterparty if -
(a) immediately alter that payment or transfer there would be a
Margin Deficit; or
(b) the Prime Broker determines, in its reasonable discretion,
that the cash, Charged Securities, or Equivalent Securities are
required for the discharge of obligations under current or proposed
Transactions or current or proposed Relevant Derivatives Transactions;
or
(c) the Prime Broker determines, in its reasonable discretion,
that the cash or Equivalent Securities are required to be retained in
respect of payments, expenses, obligations or liabilities which may
come to light or which the Prime Broker may suffer or incur in respect
of past Transactions or past Relevant Derivatives Transactions.
9.4. Except in relation to Charged Securities -
(a) all right, title and interest in and to securities and cash
which are delivered or paid, or treated as delivered or paid, by the
Counterparty to the Prime Broker under this Agreement shall pass to the
Prime Broker upon receipt thereof regardless of the purpose of such
delivery;
(b) any reference in this Agreement or in any other agreement or
communication between the parties (however expressed) to the Prime
Broker's obligation to release or redeliver or account for or act in
relation to securities to the Counterparty shall be construed as a
reference to an obligation to redeliver or release or account for or
act in relation to Equivalent Securities.
9.5. Unless otherwise agreed, all cash paid by one party to the other under
this Agreement shall be in immediately available, freely convertible funds of
the relevant currency. All such payments shall be made to the account specified
for payments in that currency (or for any particular payment) by the party which
is to receive the payment. All securities or Equivalent Securities to be
delivered by one party to the other under this Agreement -
Page 6
<PAGE>
(a) shall be in suitable form for transfer and shall be
accompanied by duly executed instruments of transfer or assignment in
blank (where required for transfer) and such other documentation as the
transferee may reasonably request; or
(b) shall be transferred through the book entry system of
Euroclear or Cedel; or
(c) shall be transferred through any other agreed securities
clearance system; or
(d) shall be transferred by any other method mutually acceptable
to the Prime Broker and the Counterparty.
9.6. Partly-paid securities or Equivalent Securities which the Counterparty
intends to deliver to the Prime Broker under this Agreement shall be notified as
such prior to delivery. The Prime Broker may in its absolute discretion refuse
to accept any delivery of securities or Equivalent Securities which are
partly-paid and, if such securities or Equivalent Securities are actually
delivered before the Prime Broker has decided to accept or reject them, the
Counterparty shall not be entitled to require the redelivery of such securities
or Equivalent Securities until such time as the Prime Broker has so decided (and
then only in accordance with the provisions of this Agreement and any relevant
Product Annex).
9.7. Securities or Equivalent Securities delivered to the Prime Broker will
not be deemed to have been accepted by the Prime Broker until such time as they
have been transferred into the sole name of the Prime Broker or its nominee.
9.8. Where the Counterparty intends to deliver to the Prime Broker
securities or Equivalent Securities which are Restricted Securities, the
Counterparty shall before such delivery give the Prime Broker written notice of
that intention, specifying the securities or Equivalent Securities concerned and
describing fully the applicable restrictions, prohibitions or impediments. The
Prime Broker may in its absolute discretion refuse to accept any delivery of
securities or Equivalent Securities which are Restricted Securities and, if such
securities are actually delivered before the Prime Broker has decided to accept
or reject them, the Counterparty shall not be entitled to require the redelivery
of such securities until such time as the Prime Broker has so decided (and then
only in accordance with the provisions of this Agreement and any relevant
Product Annex).
9.9. Unless otherwise agreed and subject to clause 11, all cash payable by
one party to the other under this Agreement shall be paid free and clear of, and
without withholding or deduction for, any taxes or duties of whatsoever nature
imposed, levied, collected, withheld or assessed by any authority having power
to tax, unless the withholding or deduction of such taxes or duties is required
by law. In that event, unless otherwise agreed, the paying party shall pay such
additional amounts as will result in the net amounts receivable by the other
party (after taking account of such withholding or deduction) being equal to
such amounts as would have been received by it had no such taxes or duties been
required to be withheld or deducted: provided that no such additional amounts
shall be payable by the Prime Broker in respect of any interest.
9.10. The parties shall execute and deliver all necessary documents and take
all necessary steps to procure that all right, title and interest in any
securities (other than Charged Securities) or
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Equivalent Securities shall upon transfer pass to the party to which the
transfer is being made in accordance with this Agreement, free from all liens,
claims, charges and encumbrances.
9.11. Deliveries of securities or cash payments made under this Agreement may
be subject to the rules, regulations, customs and practices of any payment or
settlement system through which the delivery or payment is made (the SETTLEMENT
RULES) and, where they conflict with the terms of this Agreement, the Settlement
Rules shall prevail.
9.12. Any obligation of the Prime Broker to make a payment of cash or transfer
of securities under this Agreement is an obligation to make such payment or
transfer to the Counterparty and the Prime Broker may decline to give effect to
any request or instruction by the Counterparty to make any such payment or
transfer to, or to the order of, a third party (other than a banker or custodian
for the Counterparty).
10. CHARGED SECURITIES
10.1. Notwithstanding any other provision of this Agreement, the Counterparty
hereby with full title guarantee, as security for the payment of all its
obligations and liabilities to the Prime Broker under this Agreement, charges in
favour of the Prime Broker by way of first fixed charge any securities which the
Counterparty may at any time deliver, or be treated as delivering, to the Prime
Broker (other than any securities which the Prime Broker is entitled to apply in
or towards satisfaction of an obligation of the Counterparty to deliver
Equivalent Securities to the Prime Broker in respect of securities loaned to the
Counterparty) and which are issued in any of the jurisdictions listed in
Schedule 2 (CHARGED SECURITIES). The Counterparty hereby covenants with the
Prime Broker that it will not allow any Security Interest to subsist or be
created over any of the Charged Securities other than the security created in
favour of the Prime Broker under this Agreement.
10.2. The Counterparty hereby irrevocably and by way of security for the
payment by it of the amounts and the performance of its obligations under this
Agreement appoints the Prime Broker as its true and lawful attorney (with full
power to appoint substitutes and to sub-delegate) on behalf of the Counterparty
and in the Counterparty's own name or otherwise, at any time and from time to
time, to sign, seal, deliver and complete all transfers, renunciations, proxies,
mandates, assignments, deeds and documents and do all acts and things which the
Prime Broker may, in its sole and absolute discretion, consider to be necessary
or advisable to perfect or improve its security over the Charged Securities or
to give proper effect to the intent and purposes of this Agreement or to enable
or assist in any way in the exercise of any power of sale of the Charged
Securities (whether arising under this Agreement or implied by statute or
otherwise).
10.3. On the occurrence of an Event of Default and without prior notice to
the Counterparty, the Prime Broker may sell or otherwise dispose (and instruct
any nominee of the Prime Broker to sell or otherwise dispose) of all the title
to and interest in the Charged Securities or (as the Prime Broker may elect and
without prejudice to any later exercise of this power) the whole or part of the
equitable interest divested of the legal title for such consideration (which may
comprise or
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include shares or debentures), upon such terms and generally in such manner as
the Prime Broker may, in its sole and absolute discretion, think fit.
10.4. The provisions of the Law of Property Act 1925 (or any statutory
re-enactment, variation or modification thereof or any law of similar effect in
any jurisdiction) relating to the power of sale conferred by that Act are hereby
varied so that section 103 shall not apply.
10.5. The Prime Broker shall not be liable for any loss or damage occasioned
by any sale or disposal of the Charged Securities (or interest therein) or
arising out of the exercise of or failure to exercise any of its powers under
this power of sale or for any neglect or default to pay any installment or
accept any offer or notify the Counterparty of any such matter or for any other
loss of any nature whatsoever in connection with the Charged Securities.
10.6. All moneys (net of any costs, expenses or losses incurred by the Prime
Broker arising in connection with the exercise of the powers) arising from the
exercise of the powers of the Prime Broker set out above shall be credited to an
appropriate Cash Account.
11. DIVIDENDS, SECURITIES EVENTS AND VOTING RIGHTS
11.1. Subject to clauses 11.2 and 11.3, if on an Income Payment Date in
respect of any securities there is a credit or debit balance on a Securities
Account in respect of those securities the Prime Broker shall, on the date such
Income is paid or distributed by the issuer -
(a) where there is a credit balance on the Securities Account,
credit a Cash Account with a sum equal to (and in the same currency as)
the amount paid by the issuer or, in the case of a distribution by way
of additional securities, credit those additional securities to the
Securities Account;
(b) where there is a debit balance on the Securities Account,
debit a Cash Account with a sum equal to (and in the same currency as)
the amount paid by the issuer or, in the case of a distribution by way
of additional securities, debit those additional securities to the
Securities Account;
11.2. The amount credited under clause 11.1(a) shall not include any amount -
(a) which is deducted or withheld in respect of tax by or on
behalf of the issuer of the securities in question (or would have
fallen to be so withheld or deducted in respect of the securities in
question if the Prime Broker had held such securities at the relevant
date);
(b) which is required to be accounted for to the United Kingdom
Inland Revenue pursuant to Schedule 23A to or (in the case of Charged
Securities) sections 118A to 118K of the Income and Corporation Taxes
Act 1988 in respect of the relevant securities; or
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(c) which is or might be recovered by the Prime Broker or any
other holder of the securities from any relevant taxation authority
outside the United Kingdom in respect of the Income in question;
and shall not exceed the lesser of -
(A) the actual amount initially received in cash by the Prime
Broker from the issuer in respect of the relevant Income (or which
would have been so received if the Prime Broker had held the securities
in question at the relevant date); and
(B) the amount which the Counterparty would have initially
received in cash from the issuer in respect of the Income if the
Counterparty had held the securities in question at the relevant date
net, in either case, of an amount which is or, as the case may be, would have
been held or deducted or withheld in respect of tax by or on behalf of the
issuer. In this clause 11.2 "RELEVANT DATE" means, in relation to any Income,
the date by reference to which the identity is determined of those holders to
whom that Income is paid.
11.3. Where clause 11.1(b) applies and any amount is or might be recoverable
by the Prime Broker or any other holder of the relevant securities from any
relevant taxation authority outside the United Kingdom in respect of the Income
in question the amount debited under clause 11.1(b) shall include an equivalent
amount; provided that to the extent that any amount is actually so recovered by
the Prime Broker an amount equal to that recovered shall be credited to a Cash
Account upon receipt
11.4. The Prime Broker shall inform the Counterparty if the Prime Broker
becomes aware of the occurrence or prospective occurrence of a Securities Event
with respect to any securities credited to a Securities Account.
11.5. Where a Securities Event under which the holder of securities has or is
offered any right or option is to occur with respect to any securities which are
for the time being credited or debited to a Securities Account, the Counterparty
(in the case of securities which are credited to a Securities Account) or the
Prime Broker (in respect of securities which are debited to a Securities
Account) may within a reasonable time before the latest time for the exercise of
the right or option give written notice to the other party that it wishes to
receive in respect of the relevant credit or debit balance Equivalent Securities
in such form as will arise if the right is exercised or, in the case of a right
which may be exercised in more than one manner, is exercised in such manner as
is specified in such written notice.
11.6. A notice given under clause 11.5 by the Counterparty shall not be
effective -
(a) where it refers to a Securities Event which involves the
payment of money by the holder of securities to which it refers, unless
the Counterparty pays to the Prime Broker, for value not later than the
due date of the relevant payment, an amount equal to that becoming due
in respect of the action specified in the notice; or
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(b) if it would cause a Margin Deficit to arise.
11.7. Whenever a call becomes payable in respect of partly-paid securities
which are credited to a Securities Account, the Counterparty shall pay to the
Prime Broker, for value not later than the day on which the call is payable, a
sum equal to that payable in respect of the amount of the securities so
credited.
11.8. Where a Securities Event occurs in relation to securities credited to a
Securities Account and no notice is given under clause 11.5, the Prime Broker
shall credit or debit the Accounts with such postings as would reflect the
taking of such action as the Prime Broker may in its absolute discretion
determine in relation to the Securities Event.
11.9. The Prime Broker agrees that to the extent that it holds securities of
the same description as any securities in respect of which there is a credit
balance on a Securities Account at a time when a right to vote arises in respect
of such securities it shall use its reasonable endeavors to arrange for the
voting rights attached to such securities to be exercised in accordance with
instructions of the Counterparty provided that such instructions are received in
such period as is reasonably necessary for the Prime Broker to exercise such
rights prior to the exercise of such right and that the Prime Broker does not
owe any obligation to procure the exercise of voting rights in respect of those
securities in accordance with the instructions of any other person.
PART E: TERMINATION
12. EVENTS OF DEFAULT
12.1. The occurrence of any of the following events with respect to a party
constitutes an EVENT OF DEFAULT in relation to that party (the DEFAULTING PARTY,
the other party being the NON-DEFAULTING PARTY) -
(a) the Counterparty fails to eliminate a Margin Deficit on the
due date in accordance with clause 8, and the Prime Broker serves a
Default Notice on the Counterparty; or
(b) the party fails to make a payment of cash or delivery of
securities (other than in the circumstances referred to in clause
12.1(a) above) by the due date for such payment or delivery, such
failure not having been remedied within 24 hours following written
notice of such failure given to that party by the other party, and the
Non-Defaulting Party serves a Default Notice on the Defaulting Party;
or
(c) the party fails to comply with or perform any agreement or
obligation (other than an obligation of a kind referred to in clause
12.1(a) or (b) above) to be complied with or performed by the party in
accordance with this Agreement and such failure, if capable of remedy,
is not remedied within 24 hours following written notice of such
failure given to that party by the other party, and the Non-Defaulting
Party serves a Default Notice on the Non-Defaulting Party; or
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(d) an Act of Insolvency occurs with respect to the party and
(except in the case of an Act of Insolvency which is the presentation
of a petition for winding-up or any analogous proceeding or the
appointment of a liquidator or analogous officer of the Defaulting
Party in which case no such notice shall be required) the
non-Defaulting Party serves a Default Notice on the Defaulting Party;
or
(e) any representations made by the party are incorrect or untrue
in any material respect when made or repeated or deemed to have been
made or repeated, and the Non-Defaulting Party serves a Default Notice
on the Defaulting Party; or
(f) the party admits to the other party that it is unable to, or
intends not to, perform any of its obligations under this Agreement,
and the non-Defaulting Party serves a Default Notice on the Defaulting
Party; or
(g) the party is suspended or expelled from membership of or
participation in any securities exchange or association or other self
regulating organization, or suspended from dealing in securities by any
government agency, or any of the assets of the party or the assets of
investors held by, or to the order of, the party are transferred or
ordered to be transferred to a trustee by a regulatory authority
pursuant to any securities regulating legislation, and the
Non-Defaulting Party serves a Default Notice on the Defaulting Party.
13. CLOSE-OUT
13.1. On the occurrence of an Event of Default the following shall
immediately occur -
(a) any obligation of the Prime Broker to use reasonable endeavors
to settle any Third Party Transaction on behalf of the Counterparty
shall cease, and the Prime Broker may inform the Third Party that the
Prime Broker will not settle any such Transaction;
(b) all other outstanding obligations of each party to deliver
securities or Equivalent Securities or to pay cash to the other under
this Agreement shall fall due for performance immediately (and so that
performance of the respective obligations of the parties with respect
to delivery of securities or Equivalent Securities or payment of cash
shall be effected only in accordance with the following provisions of
this clause 13.1);
(c) the Non-Defaulting Party shall establish, as at the
Termination Date, the Default Market Values of all securities,
Equivalent Securities and cash to be delivered or paid by each party
under clause 13.1(b) above;
(d) on the basis of the sums so established, an account shall be
taken (as at the Termination Date) of what is due from each party to
the other under this Agreement (on the basis that each party's claim
against the other in respect of the delivery to it of securities or
Equivalent Securities under this Agreement equals the Default Market
Value thereof) and the sums due from one party shall be set off against
the sums due from the other and only the balance of the account shall
be payable (by the party having the claim valued at the lower amount)
and such balance shall be due and payable on the next
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following Business Day. For the purposes of this calculation, all sums
not denominated in the Base Currency shall be convened into the Base
Currency at the Spot Rate prevailing at the relevant time.
13.2. The provisions of this Agreement constitute a complete statement of the
remedies available to each party in respect of any Event of Default.
13.3. Neither party may claim any sum by way of consequential loss or damage
in the event of a failure by the other party to perform any of its obligations
under this Agreement.
13.4. Each party shall immediately notify the other if an Event of Default,
or an event which, upon the serving of a Default Notice, would be an Event of
Default, occurs in relation to it.
14. TAX EVENT
14.1. This clause 14 shall apply if either party notifies the other that -
(a) any action taken by a taxing authority or brought in a court
of competent jurisdiction (regardless of whether such action is taken
or brought with respect to a party to this Agreement); or
(b) a change in the fiscal or regulatory regime (including, but
not limited to, a change in law or in the general interpretation of law
but excluding any change in any rate of tax), has or will, in the
notifying party's reasonable opinion, have a material adverse effect on
that party in the context of a Transaction.
14.2. If so requested by the other party, the notifying party will furnish
the other with an opinion of a suitably qualified adviser that an event referred
to in clause 14.1(a) or (b) above has occurred and affects the notifying party.
14.3. Where this clause 14 applies, the party giving the notice referred to
in clause 14.1 may, so far as it is within its power to do so and subject to
clause 14.4 below, terminate the Transaction with effect from a date specified
in the notice, not being earlier (unless so agreed by the other party) than 30
days after the date of the notice.
14.4. If the party receiving the notice referred to in clause 14.1 so elects,
it may override that notice by giving a counter-notice to the other party. If a
counter-notice is given, the party which gives the counter-notice will be deemed
to have agreed to indemnify the other party against the adverse effect referred
to in clause 14.1 so far as relates to the relevant Transaction.
14.5. Where a Transaction is terminated as described in this clause 14, the
party which has given the notice to terminate shall indemnify the other party
against any reasonable legal and other professional expenses incurred by the
other party by reason of the termination.
14.6. The amount payable by one party to the other in respect of the
termination of a Transaction under this clause 14 shall be the amount agreed
between the parties or, in default of
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such agreement, an amount calculated by the Prime Broker on the basis of the
calculations set out at clause 13.1 save that only the obligations under the
affected Transaction would be accelerated (calculated as if the Counterparty
were the Defaulting Party).
14.7. This clause 14 is without prejudice to clause 9.8 (obligation to pay
additional amounts if withholding or deduction required); but an obligation to
pay such additional amounts may, where appropriate, be a circumstance which
causes this clause to apply.
14.8. The Counterparty shall indemnify and hold the Prime Broker, its
directors, officers, employees and agents harmless from arid against all Taxes,
expenses, claims, actions, liabilities, costs or proceedings which they may
incur or which arise directly or indirectly in connection with the entering
into, or acting in respect of, this Agreement or any Transaction or as a result
of any dealings with Third Parties pursuant to the terms of this Agreement
and/or any Transaction made hereunder and shall in particular pay any stamp duty
or other transfer tax arising in respect of any Transaction hereunder.
PART F: GENERAL
15. INTEREST AND FEES
15.1. Interest shall be payable on credit and debit balances on Cash
Accounts, and the Counterparty shall pay remuneration to the Prime Broker in
respect of Transactions, at such rates, at such times and calculated in such
manner as may have been agreed or, in default of agreement, as may from time to
time be notified by the Prime Broker to the Counterparty, such notification to
take effect three Business Days from the date on which it is given or at such
later time as is specified in the notification.
15.2. Fees shall be payable by the Counterparty to the Prime Broker for the
services provided by the Prime Broker under this Agreement in accordance with
the scale notified to the Counterparty from time to time, any such notification
to take effect three Business Days from the date on which it is given or at such
later time as is specified in the notification.
15.3. If on any date amounts would otherwise be payable in the same currency
by each party to the other under clauses 15.1 and 15.2, then, on such date, each
party's obligations to make payment of any such amount will be automatically
satisfied and discharged and, if the aggregate amount that would otherwise have
been payable by one party exceeds the aggregate amount that would otherwise have
been payable by the other party, replaced by an obligation upon the party by
whom the larger aggregate amount would have been payable to pay to the other
party the excess of the larger aggregate amount over the smaller aggregate
amount.
15.4. Any amount payable by the Counterparty under this Agreement which is
not paid when due shall bear interest from the date on which payment became due
until the date of actual payment at a rate equal to LIBOR plus two per cent or,
if greater, the rate for the time being prescribed as the rate of interest
payable in respect of judgment debts.
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16. REPORTS AND VALUATION
16.1. The Prime Broker shall provide reports to the Counterparty relating to
Transactions and to balances on the Securities and Cash Accounts in such form
and in such manner and with such frequency as the parties may agree.
16.2. Any value ascribed to any Transaction or any securities or Cash in any
report provided by the Prime Broker relates only to the relevant value for the
purpose of the calculation of Margin referred to in Part C above. Such valuation
does not purport to indicate the open market value, or the value which the Prime
Broker may attribute to the Transaction, securities or cash for any other
purpose.
17. REPRESENTATIONS AND WARRANTIES
17.1. Each party represents and warrants to the other that -
(a) it is duly authorized to execute and deliver this Agreement
(including each Product Annex), to enter into the Transactions
contemplated under this Agreement and to perform its obligations under
this Agreement and all Transactions, and has taken all necessary action
to authorize such execution, delivery and performance;
(b) it will engage in this Agreement and all Transactions to which
it is a party as principal (except that the Prime Broker may in
exceptional circumstances act as settlement agent for the Counterparty
in settling Transactions);
(c) the person signing this Agreement (including any Product
Annex) on its behalf is, and any person representing it in entering
into a Transaction will be, duly authorized to do so on its behalf;
(d) it has obtained all authorizations of any governmental or
regulatory body required in connection with this Agreement and the
Transactions contemplated under this Agreement and such authorizations
are in full force and effect;
(e) the execution, delivery and performance of this Agreement and
all Transactions will not violate any law, ordinance, charter, bye-law
or rule applicable to it or any agreement by which it is bound or by
which any of its assets are affected;
(f) it has satisfied itself and will continue to satisfy itself as
to the tax implications of the Transactions contemplated under this
Agreement;
(g) in connection with this Agreement and each Transaction:
(i) it is not relying on any advice (whether written or
oral) of the other party, other than the
representations expressly set out in this Agreement;
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(ii) it has made and will make its own decisions regarding
the entering into of any Transaction based upon its
own judgment and upon advice from such professional
advisers as it has deemed it necessary to consult;
(iii) the other party is not acting as a fiduciary or an
advisor for it and all decisions have been the result
of arms' length negotiations between the parties;
(iv) it understands the terms, conditions and risks
(including, without limitation, tax risks) of each
Transaction and is willing to assume (financially and
otherwise) those risks and it has received no
assurance or guarantee as to the expected performance
or result of any transaction;
(h) at the time it delivers, or is treated as delivering, to the
other party any securities or Equivalent Securities it will
have the full and unqualified right to make such delivery and
that (except in the case of Charged Securities) upon such
delivery the other party will receive all right, title and
interest in and to those securities free of any lien, claim,
charge or encumbrance and such delivery shall not violate or
conflict with any law, treaty, rule, regulation or
determination of any Governmental Authority binding upon it
or, where the party delivering such securities or Equivalent
Securities is the Counterparty, any law, treaty, rule,
regulation or determination of any Governmental Authority
which is binding on the Prime Broker and of which the Prime
Broker has given notice to the Counterparty for the purposes
of this paragraph;
(i) where the Counterparty is not resident in the United Kingdom,
it will at the Prime Broker's request provide any necessary
certificate of non-resident or other appropriate documentation
necessary to minimize the incidence of UK taxation in respect
of income arising in respect of securities that are the
subject of any Transaction.
On the date on which any Transaction is entered into and on each day on which
securities or Equivalent Securities are to be transferred under this Agreement,
each of the parties hereto entering into such Transaction shall each be deemed
to repeat all the foregoing representations. For the avoidance of doubt and
notwithstanding any arrangements which the Counterparty may have with any other
person, the Counterparty will be liable as a principal for its obligations under
this Agreement and each Transaction.
17.2. On the date on which any Transaction is entered into and on each day on
which securities or Equivalent Securities are to be transferred by the
Counterparty to the Prime Broker under this Agreement the Counterparty shall be
deemed to represent and warrant to the Prime Broker that there is no
prohibition, impediment or restriction imposed by virtue of any national or
local law or regulation or by any agreement preventing or restricting dealings
in or transfers of any securities or Equivalent Securities subject to that
Transaction, or which are to be so delivered, other than such as are fully
described in a notice given by the Counterparty to the Prime Broker prior to the
delivery of such securities in accordance with clause 9.8;
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18. USE OF NAME OF PRIME BROKER
18.1. Except with the express prior written agreement of the Prime Broker,
the Counterparty shall not in any advertisement or publication issued or
statement made by it -
(a) use any name or description containing the words "Lehman
Brothers"; or
(b) otherwise indicate that it is carrying on any activity in
association with or by or under the authority of the Prime Broker or of
any company or entity affiliated to or associated with the Prime
Broker.
19. NOTICES AND OTHER COMMUNICATIONS
19.1. Any notice or other communication to be given under this Agreement -
(a) shall be in the English language and, except where expressly
otherwise provided in this Agreement, shall be in writing;
(b) may be given in any manner described in clause 19.2 below;
(c) shall be sent to the party to whom it is to be given by GPL or
at the address or number set out in Schedule 3.
19.2. Any such notice or other communication shall be effective -
(a) if in writing and delivered in person or by courier, at the
time when it is delivered;
(b) if sent by GPL, at the time of transmission;
(c) if sent by telex, at the time when the recipient's answerback
is received;
(d) if sent by facsimile transmission, at the time when the
transmission is received by a responsible employee of the recipient in
legible form (it being agreed that the burden of proving receipt will
be on the sender and will not be met by a transmission report generated
by the sender's facsimile machine);
(e) if sent by certified or registered mail (airmail, if overseas)
or the equivalent (return receipt requested), at the time when that
mail is delivered or its delivery is attempted;
(f) if sent by electronic messaging system, at the time that
electronic message is received;
except that any notice or communication which is received, or delivery of which
is attempted, after close of business on the date of receipt or attempted
delivery or on a day which is not a day on which commercial banks are open for
business in the place where that notice or other communication is to be given
shall be treated as given at the opening of business on the next following day
which is such a day.
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19.3. Either party may by notice to the other change the address, telex or
facsimile number or electronic messaging system details at which notices or
other communications are to be given to it.
19.4. The Prime Broker shall be entitled to rely on, and to treat as genuine,
any requests, instructions, information or other communications reasonably
believed by the Prime Broker to have been made or given by or on behalf of the
Counterparty, notwithstanding that any such communication may afterwards be
found not to have been made or given by or on behalf of the Counterparty.
19.5. Any GPL instructions received by the Prime Broker may be treated as
conclusive both as to content and authority without any further investigation on
the part of the Prime Broker.
20. AGREEMENT
20.1. This Agreement shall supersede any existing agreements between the
parties containing general terms and conditions for Transactions. Each provision
and agreement herein shall be treated as separate from any other provision or
agreement herein and shall be enforceable notwithstanding the unenforceability
of any such other provision or agreement.
20.2. If there is a conflict between the provisions of any Product Annex and
the provisions of this document, the provisions of the Product Annex shall
prevail.
21. NON-ASSIGNABILITY; TERMINATION
21.1. Subject to clause 21.2 below, the rights and obligations of the parties
under this Agreement and under any Transaction shall not be assigned, charged or
otherwise dealt with by either party without the prior written consent of the
other party. Subject to the foregoing, this Agreement and any transactions shall
be binding upon and shall inure to the benefit of the parties and their
respective successors and assigns.
21.2. Clause 21.1 above shall not preclude a party from assigning, charging,
or otherwise dealing with all or any part of its interest in any sum payable to
it under clause 13 above (net sums payable on default) above.
21.3. Either party may terminate this Agreement by giving written notice to
the other, except that this Agreement shall, notwithstanding such notice, remain
applicable to any Transactions then outstanding.
21.4. All remedies under this Agreement shall survive termination in respect
of the relevant Transaction and termination of this Agreement.
22. GOVERNING LAW
22.1. This Agreement shall be governed by and construed in accordance with
the laws of England. The parties hereby irrevocably submit for all purposes of
or in connection with this Agreement and each Transaction to the jurisdiction of
the Courts of England.
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22.2. Nothing in this clause 22 shall limit the right of any party to take
proceedings in the courts of any other country of competent jurisdiction.
21.3 The Counterparty hereby appoints the person identified in Schedule 3 as
its agent to receive on its behalf service of process in such courts. If such
agent ceases to be its agent, the Counterparty shall promptly appoint, and
notify the Prime Broker of the identity of, a new agent in England.
23. NO WAIVERS, ETC.
23.1. No express or implied waiver of any Event of Default by either party
shall constitute a waiver of any other Event of Default and no exercise of any
remedy under this Agreement by any party shall constitute a waiver of its right
to exercise any other remedy under this Agreement. No modification or waiver of
any provision of this Agreement and no consent by any party to a departure from
it shall be effective unless and until such modification, waiver or consent
shall be in writing and duly executed by both of the parties hereto. For the
avoidance of doubt a variation of the Margin Specification pursuant to clause
7.2 shall not be deemed to be a variation of this Agreement. Without limitation
on any of the foregoing, the failure to give a notice pursuant to clause 7 above
(notice of Margin Deficit) will not constitute a waiver of any right to do so at
a later date.
24. WAIVER OF IMMUNITY
24.1. The Counterparty hereby waives, to the fullest extent permitted by
applicable law, all immunity (whether on the basis of sovereignty or otherwise)
from jurisdiction, attachment (both before and after judgment) and execution to
which it might otherwise be entitled in any action or proceeding in the Courts
of England or of any other country or jurisdiction, relating in any way to this
Agreement or any Transaction, and agrees chat it will not raise, claim or cause
to be pleaded any such immunity at or in respect of any such action or
proceeding.
25. CONFIDENTIALITY
25.1. Each party undertakes with the other that it shall use all reasonable
endeavors to keep confidential (and to ensure that its officers, employees,
agents and professional and other advisers keep confidential) any information
which relates to the contents of this Agreement (or any agreement or arrangement
entered into pursuant to this Agreement). Neither party shall use for its own
business purposes or disclose to any third party any such confidential
information without the consent of the other party.
26. RECORDING
26.1. The parties agree that each may without further notice electronically
record all telephone conversations between them.
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27. FORCE MAJEURE
27.1. The Prime Broker shall not be responsible for any losses costs or
damages suffered or incurred by the Counterparty resulting directly or
indirectly from;
(a) any action, omission, suspension of trading, decision or
ruling of any exchange or regulator, governmental or other body or of
any other person which is beyond the Prime Broker's control (including,
without limitation, any floor broker, exchange) dealing or clearing
house error or delay);
(b) any war, strike, lock-out, national disaster, act of
terrorism, delay in postal service or any other delay or inaccuracy in
the transmission of orders or other information, or any breakdown,
failure or malfunction of any telecommunication or computer system;
provided that the Prime Broker shall use reasonable efforts to inform
the Counterparty of the occurrence of any such event.
LEHMAN BROTHERS INTERNATIONAL [NAME OF COUNTERPARTY]
(EUROPE)
By: By:
--------------------------- ------------------------------
Title: Title:
------------------------ ---------------------------
Date: Date:
------------------------- ----------------------------
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SCHEDULE 1
DEFINITIONS
1. In this Agreement the following expressions have the following meanings:
ACCOUNT. A Securities Account and/or a Cash Account as the case requires;
ACT OF INSOLVENCY. Shall occur with respect to a party upon -
(i) its making a general assignment for the benefit of, or
entering into a reorganization, arrangement, or composition
with creditors; or
(ii) its admitting in writing that it is unable to pay its
debts as they become due; or
(iii) its seeking, consenting to or acquiescing in the
appointment of any trustee, administrator, receiver or
liquidator or analogous officer of it or any material part of
its property; or
(iv) the presentation or filing of a petition in respect of it
(other than by the other party to this Agreement in respect of
any obligation under this Agreement) in any court or before
any agency alleging or for the bankruptcy, winding-up or
insolvency of such party (or any analogous proceeding) or
seeking any reorganization, arrangement, composition,
re-adjustment, administration, liquidation, dissolution or
similar relief under any present or future statute, law or
regulation, such petition (except in the case of a petition
for winding-up or any analogous proceeding, in respect of
which no such 30 day period shall apply) not having been
stayed or dismissed within 30 days of its filing; or
(v) the appointment of a receiver, administrator, liquidator
or trustee or analogous officer of such party or over all or
any material part of such party's property;
(vi) the convening of any meeting of its creditors for the
purposes of considering a voluntary arrangement as referred to
in section 3 of the Insolvency Act 1986 (or any analogous
proceeding); or
(vii) any act preparatory to any of (i) - (vi) above;
AGGREGATE CREDIT BALANCE. Has the meaning given in clause 7.2;
AGGREGATE DEBIT BALANCE. Has the meaning given in clause 7.2;
AGREEMENT. This document including the Schedules, together with all Product
Annexes and Confirmations;
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BASE CURRENCY. The currency agreed between the parties to be the Base Currency
or, in the absence of such agreement, US dollars;
BASE CURRENCY VALUE. Means, on any day in relation to a security;
(a) where such security is denominated in Base Currency, the Value
of such security on such day; and
(b) where such security is not denominated in Base Currency, the
equivalent in Base Currency on such day of the Value of such
security converted at the Spot Rate for the previous business
day;
and on any day in relation to a currency the equivalent in Base Currency on such
day of the Value of such currency converted at the Spot Rate for the previous
business day;
BUSINESS DAY. A day on which banks in London and in the centre in which the
principal Exchange for dealing in the relevant securities is situated are open
for a full range of business;
CASH ACCOUNT. An account maintained by the Prime Broker for the recording of
cash balances in accordance with this Agreement;
CHARGED SECURITIES ACCOUNT. An Account for recording Charged Securities held by
the Prime Broker;
CHARGED SECURITIES. Has the meaning given in clause 10;
DEFAULT MARKET VALUE. with respect to any securities on any date:
(i) in the case of securities to be delivered to the Defaulting Party,
(aa) if the non-Defaulting Party has between the occurrence of the
relevant Event of Default and the Default Valuation Time (as
defined below) sold securities forming part of the same issue
and being of an identical type and description to those
securities and in substantially the same amount as those
securities, the net proceeds of sale (after deducting all
reasonable costs, fees and expenses incurred in connection
therewith); and
(bb) failing such sale before the Default Valuation Time, the
Market Value of such securities at the Default Valuation Time;
(ii) in the case of securities to be delivered by the Defaulting Party,
(aa) if the non-Defaulting Party has between the occurrence of the
relevant Event of Default and the Default Valuation Time
purchased securities forming part of the same issue and being
of an identical type and description to those securities and
in substantially the same amount as those securities, the cost
of such purchase
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(including all reasonable costs, fees and expenses incurred in
connection therewith); and
(bb) failing such purchase before the Default Valuation Time, the
amount it would cost to buy such securities at the Default
Valuation Time at the best available offer price therefor (and
where different offer prices are available for different
delivery dates, such offer price in respect of the earliest
available such delivery date) on the most appropriate market,
together with all reasonable costs, fees and expenses that
would be incurred in connection therewith (calculated on the
assumption that the aggregate thereof is the least that could
reasonably be expected to be paid in order to carry out the
Transaction),
in each case as determined by the non-Defaulting Party; and for this purpose the
DEFAULT VALUATION TIME means, with respect to any securities:
(A) if the relevant Event of Default occurs during normal
business hours on a day which is a dealing day in the
most appropriate market for securities of the
relevant description (as determined by the
non-Defaulting Party), the close of business in that
market on the following dealing day;
(B) in any other case, the close of business on the
second dealing day in that market after the day on
which the relevant Event of Default occurs.
Where the amount of any securities sold or purchased as mentioned in (i), (ii)
and (ii)(aa) above is not identical to that of the securities to be valued for
the purposes of this definition, the Default Market Value of those securities
shall be ascertained by dividing the net proceeds of sale or cost of purchase by
the amount of the securities sold or purchased so as to obtain a net unit price
and multiplying that net unit price by the amount of the securities to be
valued.
DEFAULT NOTICE. A written notice served by the Non-Defaulting Party on the
Defaulting Party under clause 12 stating that an event shall be treated as an
Event of Default for the purposes of this Agreement;
ELIGIBLE SECURITY. means at any time a security listed in the Margin
Specification which satisfies all the conditions of the Margin Specification and
which is freely transferable and capable of being freely settled through a
clearance system and ownership of which shall in each case be evidenced by book
entry, without the need for any document of transfer of any kind;
EQUIVALENT SECURITIES. Has the meaning given in paragraph 2 below;
FX TRANSACTION. A contract for the sale of one currency against a purchase of
another currency;
GOVERNMENTAL AUTHORITY. Any government, any state or other political subdivision
thereof and any entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government;
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GPL. Global Prime Link, the data communication system established between the
Prime Broker and the Counterparty for the transmission of data and information
for the purposes of this Agreement;
INCOME. With respect to any securities at any time, all interest, dividends or
other distributions thereon;
INCOME PAYMENT DATE. With respect to any securities, the date on which Income is
paid in respect of such securities, or, in the case of registered securities,
the date by reference to which particular registered holders are identified as
being entitled to payment of Income;
LIBOR. in relation to any sum in any currency, the one-month London Inter-Bank
Offered Rate in respect of that currency as quoted on page 3750 of the Telerate
Service (or such other page as may replace Page 3750 on that service) as of
11:00 am., London time, on the date on which it is to be determined;
MARGIN CALL. A notification given to the Counterparty by the Prime Broker
requiring the Counterparty to eliminate a Margin Deficit;
MARGIN DEFICIT. Has the meaning given in clause 7.3;
MARGIN REQUIREMENT. Has the meaning given in clause 7.1(a);
MARGIN SPECIFICATION. Has the meaning given in clause 7.1(b);
MARKET VALUE.
(a) With respect to any securities or any balance on a Securities Account as of
any time on any date, the price for such securities at such time on such date
obtained from a source selected by the Prime Broker. Where the Prime Broker
determines that both bid and offer prices are available and the relevant
Securities have been credited to the Securities Account, then the bid price
shall be used. Where the Prime Broker determines that both bid and offer prices
are available and the relevant Securities have been debited to the Securities
Account, then the offer price shall be used. Where the Prime Broker determines
that only mid market prices are available, the mid market price will be used for
both credits and debits of the relevant Security. Where different prices are
obtained for different delivery dates, the price so obtainable for the earliest
available such delivery date) (provided that the price of securities that are
suspended shall (for the purposes of calculating an Aggregate Credit Balance or
Aggregate Debit Balance where there is a credit balance on the Securities
Account in respect of those securities) be nil unless the parties otherwise
agree and (for all other purposes) shall be the price of those securities as of
close of business on the dealing day in the relevant market last preceding the
date of suspension). For these purposes any sum in a currency other than the
Base Currency shall be converted into the Base Currency at the Spot Rate
prevailing at the relevant time;
(b) With respect to any Relevant Derivatives Transaction, the mark-to-market
value of that transaction as determined by the Prime Broker in such manner as
may be agreed between the Prime Broker and the Counterparty or provided by the
Margin Specification or, in default of any
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such agreement or provision, in such manner as the Prime Broker may in its
absolute discretion think fit;
PRODUCT ANNEX. A document signed by the parties and expressed to relate to and
form part of this Agreement;
RELEVANT DERIVATIVES TRANSACTION. A derivatives transaction between the Prime
Broker and the Counterparty which in accordance with the Margin Specification
applicable to the Counterparty is to be taken into account in calculating the
Margin Requirement applicable to the Counterparty;
RESTRICTED SECURITIES. Securities which are subject to any prohibition,
impediment or restriction imposed by virtue of any national or local law or
regulation or by any agreement preventing or restricting dealings in or
transfers of such securities;
SECURITIES ACCOUNT. An account maintained by the Prime Broker for the recording
of securities balances in accordance with this Agreement;
SECURITIES EVENT. An event in relation to any securities such as is described in
paragraph 2.3 below;
SECURITIES TRANSACTION. A Transaction for the purchase or sale of securities,
entered into between the Counterparty and a Third Party or a contract for the
notional sale or purchase of securities entered into between the Counterparty
and the Prime Broker;
SECURITY INTEREST. A mortgage, charge, pledge, lien or other encumbrance of any
kind;
SPOT RATE. Where an amount in one currency is to be converted into a second
currency on any date, unless the parties otherwise agree, the spot rate of
exchange quoted by Lehman Brothers Inc for the sale by it of such second
currency against a purchase by it of such first currency;
TAXES. Any present or future tax, duty, levy, impost or charge of a similar
nature payable to or imposed by any supra-national, governmental, federal,
state, provincial, local, governmental, municipal taxing authority, body or
official, of any jurisdiction (together with any related penalties, damages,
fines, surcharges and similar charges);
TERMINATION DATE. The date on which an Event of Default occurs under clause 12;
THIRD PARTY. A person, other than the Prime Broker, who is the counterparty to a
Transaction entered into by the Counterparty;
THIRD PARTY TRANSACTION. A Securities Transaction entered into between the
Counterparty and a Third Party;
TRANSACTION. A transaction for the purchase or sale, or notional purchase or
sale, of securities, or a transaction of any other kind referred to in a Product
Annex.
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2.1 For the purposes of this Agreement securities are "EQUIVALENT" to other
securities if they are (i) of the same issuer, (ii) part of the same issue and
(iii) of an identical type, nominal value, description and (except where
otherwise stated) amount as those other securities.
2.2 Subject to paragraph 2.3 below, "EQUIVALENT SECURITIES" means, in relation
to any securities or any balance on a Securities Account, securities equivalent
to those securities or to the securities represented by that balance.
2.3 In relation to securities (the "RELEVANT SECURITIES") which are partly paid
or have been converted, sub-divided, consolidated, redeemed, made the subject of
a takeover offer, capitalization issue, rights issue or event similar to any of
the foregoing, "EQUIVALENT SECURITIES" means -
(a) in the case of conversion, subdivision or consolidation, securities
equivalent to the securities into which the relevant securities have
been converted, subdivided or consolidated provided that, if
appropriate, notice has been given in accordance with clause 11.5, and
subject to sub-paragraph (i) below;
(b) in the case of redemption, a sum of money equivalent to the proceeds of
the redemption;
(c) in the case of a takeover offer, a sum of money or securities
equivalent to the consideration or alternative consideration of which
one party has given notice to the other in accordance with clause 11.5,
and subject to subparagraph (i) below;
(d) in the case of a call on partly-paid securities, securities equivalent
to the paid-up securities provided that the parry by whom the
Equivalent Securities are receivable has paid to the other party a sum
of money equal to the sum due in respect of the call;
(e) in the case of a capitalization issue, securities equivalent to the
relevant securities together with the securities allotted by way of
bonus thereon;
(f) in the case of a rights issue, securities equivalent to the relevant
securities together with the securities allotted thereon, provided that
the party by whom the Equivalent Securities are receivable has given
notice to the other party in accordance with clause 11.5 and has paid
to the other party all sums due in respect thereof, and subject to
subparagraph (i) below;
(g) if income in the form of securities, or a certificate which may at a
future date be exchanged for securities or an entitlement to acquire
securities is distributed, securities equivalent to the relevant
securities provided that notice has been given in accordance with
clause 11.5, and subject to sub-paragraph (i) below;
(h) in the case of any event similar to any of the foregoing, securities
equivalent to the relevant securities together with or replaced by a
sum of money or securities or other property equivalent to that
received in respect of such securities as a result of that event;
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(i) in the case of any event which occurs in circumstances where clause
11.8 applies, such, or such combination of, securities, money and other
property as is appropriate to reflect the postings made by the Prime
Broker under that clause.
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SCHEDULE 2
JURISDICTIONS IN WHICH CHARGED SECURITIES ARE TO BE DELIVERED
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SCHEDULE 3
PARTICULARS OF COUNTERPARTY'S AGENT FOR SERVICE OF PROCESS
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