MASTER REPURCHASE
AGREEMENT
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September 1996 Version
Dated as of August 09, 2000
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Between Merrill Lynch Government Securities Inc.
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and ML SSG DELAWARE, LLC
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1. Applicability
From time to time the parties hereto may enter into transactions in which
one party ("Seller") agrees to transfer to the other ("Buyer") securities
or other assets ("Securities") against the transfer of funds by Buyer, with
a simultaneous agreement by Buyer to transfer to Seller such Securities at
a date certain or on demand, against the transfer of funds by Seller. Each
such transaction shall be referred to herein as a "Transaction" and, unless
otherwise agreed in writing, shall be governed by this Agreement, including
any supplemental terms or conditions contained in Annex I hereto and in any
other annexes identified herein or therein as applicable hereunder.
2. Definitions
(a) "Act of Insolvency", with respect to any party, (i) the commencement
by such party as debtor of any case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, moratorium,
dissolution, delinquency or similar law, or such party seeking the
appointment or election of a receiver, conservator, trustee, custodian
or similar official for such party or any substantial part of its
property, or the convening of any meeting of creditors for purposes of
commencing any such case or proceeding or seeking such an appointment
or election, (ii) the commencement of any such case or proceeding
against such party, or another seeking such an appointment or
election, or the filing against a party of an application for a
protective decree under the provisions of the Securities Investor
Protection Act of 1970, which (A) is consented to or not timely
contested by such party, (B) results in the entry of an order for
relief, such an appointment or election, the issuance of such a
protective decree or the entry of an order having a similar effect, or
(C) is not dismissed within 15 days, (iii) the making by such party of
a general assignment for the benefit of creditors, or (iv) the
admission in writing by such party of such party's inability to pay
such party's debts as they become due:
(b) "Additional Purchased Securities", Securities provided by Seller to
Buyer pursuant to Paragraph 4 (a) hereof;
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(c) "Buyer's Margin Amount", with respect to any Transaction as of any
date, the amount obtained by application of the Buyer's Margin
Percentage to the Repurchase Price for such Transaction as of such
date;
(d) "Buyer's Margin Percentage", with respect to any Transaction as of any
date, a percentage (which may be equal to the Seller's Margin
Percentage) agreed to by Buyer and Seller or, in the absence of any
such agreement, the percentage obtained by dividing the Market Value
of the Purchased Securities on the Purchase Date by the Purchase Price
on the Purchase Date for such Transaction;
(e) "Confirmation", the meaning specified in Paragraph 3(b) hereof;
(f) "Income", with respect to any Security at any time, any principal
thereof and all interest, dividends or other distributions thereon;
(g) "Margin Deficit", the meaning specified in Paragraph 4(a) hereof;
(h) "Margin Excess", the meaning specified in Paragraph 4(b) hereof;
(i) "Margin Notice Deadline", the time agreed to by the parties in the
relevant Confirmation, Annex I hereto or otherwise as the deadline for
giving notice requiring same-day satisfaction of margin maintenance
obligations as provided in Paragraph 4 hereof (or, in the absence of
any such agreement, the deadline for such purposes established in
accordance with market practice);
(j) "Market Value", with respect to any Securities as of any date, the
price for such Securities on such date obtained from a generally
recognized source agreed to by the parties or the most recent closing
bid quotation from such a source, plus accrued Income to the extent
not included therein (other than any Income credited or transferred
to, or applied to the obligations of, Seller pursuant to Paragraph 5
hereof) as of such date (unless contrary to market practice for such
Securities);
(k) "Price Differential", with respect to any Transaction as of any date,
the aggregate amount obtained by daily application of the Pricing Rate
for such Transaction to the Purchase Price for such Transaction on a
360 day per year basis for the actual number of days during the period
commencing on (and including) the Purchase Date for such Transaction
and ending on (but excluding) the date of determination (reduced by
any amount of such Price Differential previously paid by Seller to
Buyer with respect to such Transaction) ;
(l) "Pricing Rate", the per annum percentage rate for determination of the
Price Differential;
(m) "Prime Rate", the prime rate of U.S. commercial banks as published in
The Wall Street Journal (or, if more than one such rate is published,
the average of such rates);
(n) "Purchase Date", the date on which Purchased Securities are to be
transferred by Seller to Buyer;
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(o) "Purchase Price", (i) on the Purchase Date, the price at which
Purchased Securities are transferred by Seller to Buyer, and (ii)
thereafter, except where Buyer and Seller agree otherwise, such price
increased by the amount of any cash transferred by Buyer to Seller
pursuant to Paragraph 4(b) hereof and decreased by the amount of any
cash transferred by Seller to Buyer pursuant to Paragraph 4(a) hereof
or applied to reduce Seller's obligations under clause (ii) of
Paragraph 5 hereof;
(p) "Purchased Securities", the Securities transferred by Seller to Buyer
in a Transaction hereunder, and any Securities substituted therefor in
accordance with Paragraph 9 hereof. The term "Purchased Securities"
with respect to any Transaction at any time also shall include
Additional Purchased Securities delivered pursuant to Paragraph 4(a)
hereof and shall exclude Securities returned pursuant to Paragraph
4(b) hereof:
(q) "Repurchase Date", the date on which Seller is to repurchase the
Purchased Securities from Buyer, including any date determined by
application of the provisions of Paragraph 3(c) or 11 hereof;
(r) "Repurchase Price", the price at which Purchased Securities are to be
transferred from Buyer to Seller upon termination of a Transaction,
which will be determined in each case (including Transactions
terminable upon demand) as the sum of the Purchase Price and the Price
Differential as of the date of such determination;
(s) "Seller's Margin Amount", with respect to any Transaction as of any
date, the amount obtained by application of the Seller's Margin
Percentage to the Repurchase Price for such Transaction as of such
date;
(t) "Seller's Margin Percentage", with respect to any Transaction as of
any date, a percentage (which may be equal to the Buyer's Margin
Percentage) agreed to by Buyer and Seller or, in the absence of any
such agreement, the percentage obtained by dividing the Market Value
of the Purchased Securities on the Purchase Date by the Purchase Price
on the Purchase Date for such Transaction.
3. Initiation; Confirmation; Termination
(a) An agreement to enter into a Transaction may be made orally or in
writing at the initiation of either Buyer or Seller. On the Purchase
Date for the Transaction, the Purchased Securities shall be
transferred to Buyer or its agent against the transfer of the Purchase
Price to an account of Seller.
(b) Upon agreeing to enter into a Transaction hereunder, Buyer or Seller
(or both), as shall be agreed, shall promptly deliver to the other
party a written confirmation of each Transaction (a "Confirmation").
The Confirmation shall describe the Purchased Securities (including
CUSIP number, if any), identify Buyer and Seller and set forth (i) the
Purchase Date, (ii) the Purchase Price, (iii) the Repurchase Date,
unless the Transaction is to be terminable on demand, (iv) the Pricing
Rate or Repurchase Price applicable to the Transaction, and (v) any
additional terms or conditions of the Transaction not inconsistent
with this Agreement. The Confirmation, together with this Agreement,
shall constitute conclusive evidence of the terms agreed between Buyer
and Seller with respect to the Transaction to which the Confirmation
relates, unless with
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respect to the Confirmation specific objection is made promptly after
receipt thereof. In the event of any conflict between the terms of
such Confirmation and this Agreement, this Agreement shall prevail.
(c) In the case of Transactions terminable upon demand, such demand shall
be made by Buyer or Seller, no later than such time as is customary in
accordance with market practice, by telephone or otherwise on or prior
to the business day on which such termination will be effective. On
the date specified in such demand, or on the date fixed for
termination in the case of Transactions having a fixed term,
termination of the Transaction will be effected by transfer to Seller
or its agent of the Purchased Securities and any Income in respect
thereof received by Buyer (and not previously credited or transferred
to, or applied to the obligations of, Seller pursuant to Paragraph 5
hereof) against the transfer of the Repurchase Price to an account of
Buyer.
4. Margin Maintenance
(a) If at any time the aggregate Market Value of all Purchased Securities
subject to all Transactions in which a particular party hereto is
acting as Buyer is less than the aggregate Buyer's Margin Amount for
all such Transactions (a "Margin Deficit"), then Buyer may by notice
to Seller require Seller in such Transactions, at Seller's option, to
transfer to Buyer cash or additional Securities reasonably acceptable
to Buyer ("Additional Purchased Securities"), so that the cash and
aggregate Market Value of the Purchased Securities, including any such
Additional Purchased Securities, will thereupon equal or exceed such
aggregate Buyer's Margin Amount (decreased by the amount of any Margin
Deficit as of such date arising from any Transactions in which such
Buyer is acting as Seller).
(b) If at any time the aggregate Market Value of all Purchased Securities
subject to all Transactions in which a particular party hereto is
acting as Seller exceeds the aggregate Seller's Margin Amount for all
such Transactions at such time (a "Margin Excess"), then Seller may by
notice to Buyer require Buyer in such Transactions, at Buyer's option,
to transfer cash or Purchased Securities to Seller, so that the
aggregate Market Value of the Purchased Securities, after deduction of
any such cash or any Purchased Securities so transferred, will
thereupon not exceed such aggregate Seller's Margin Amount (increased
by the amount of any Margin Excess as of such date arising from any
Transactions in which such Seller is acting as Buyer).
(c) If any notice is given by Buyer or Seller under subparagraph (a) or
(b) of this Paragraph at or before the Margin Notice Deadline on any
business day, the party receiving such notice shall transfer cash or
Additional Purchased Securities as provided in such subparagraph no
later than the close of business in the relevant market on such day.
If any such notice is given after the Margin Notice Deadline, the
party receiving such notice shall transfer such cash or Securities no
later than the close of business in the relevant market on the next
business day following such notice.
(d) Any cash transferred pursuant to this Paragraph shall be attributed to
such Transactions as shall be agreed upon by Buyer and Seller.
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(e) Seller and Buyer may agree, with respect to any or all Transactions
hereunder, that the respective rights of Buyer or Seller (or both)
under subparagraphs (a) and (b) of this Paragraph may be exercised
only where a Margin Deficit or Margin Excess, as the case may be,
exceeds a specified dollar amount or a specified percentage of the
Repurchase Prices for such Transactions (which amount or percentage
shall be agreed to by Buyer and Seller prior to entering into any such
Transactions).
(f) Seller and Buyer may agree, with respect to any or all Transactions
hereunder, that the respective rights of Buyer and Seller under
subparagraphs (a) and (b) of this Paragraph to require the elimination
of a Margin Deficit or a Margin Excess, as the case may be, may be
exercised whenever such a Margin Deficit or Margin Excess exists with
respect to any single Transaction hereunder (calculated without regard
to any other Transaction outstanding under this Agreement).
5. Income Payments
Seller shall be entitled to receive an amount equal to all Income paid or
distributed on or in respect of the Securities that is not otherwise
received by Seller, to the full extent it would be so entitled if the
Securities had not been sold to Buyer. Buyer shall, as the parties may
agree with respect to any Transaction (or, in the absence of any such
agreement, as Buyer shall reasonably determine in its discretion), on the
date such Income is paid or distributed either (i) transfer to or credit to
the account of Seller such Income with respect to any Purchased Securities
subject to such Transaction or (ii) with respect to Income paid in cash,
apply the Income payment or payments to reduce the amount, if any, to be
transferred to Buyer by Seller upon termination of such Transaction. Buyer
shall not be obligated to take any action pursuant to the preceding
sentence (A) to the extent that such action would result in the creation of
a Margin Deficit, unless prior thereto or simultaneously therewith Seller
transfers to Buyer cash or Additional Purchased Securities sufficient to
eliminate such Margin Deficit, or (B) if an Event of Default with respect
to Seller has occurred and is then continuing at the time such Income is
paid or distributed.
6. Security Interest
Although the parties intend that all Transactions hereunder be sales and
purchases and not loans, in the event any such Transactions are deemed to
be loans, Seller shall be deemed to have pledged to Buyer as security for
the performance by Seller of its obligations under each such Transaction,
and shall be deemed to have granted to Buyer a security interest in, all of
the Purchased Securities with respect to all Transactions hereunder and all
Income thereon and other proceeds thereof.
7. Payment and Transfer
Unless otherwise mutually agreed, all transfers of funds hereunder shall be
in immediately available funds. All Securities transferred by one party
hereto to the other party (i) shall be in suitable form for transfer or
shall be accompanied by duly executed instruments of transfer or assignment
in blank and such other documentation as the party receiving possession may
reasonably request, (ii) shall be transferred on the book-entry system of a
Federal Reserve Bank, or (iii) shall be transferred by any other method
mutually acceptable to Seller and Buyer.
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8. Segregation of Purchased Securities
To the extent required by applicable law, all Purchased Securities in the
possession of Seller shall be segregated from other securities in its
possession and shall be identified as subject to this Agreement.
Segregation may be accomplished by appropriate identification on the books
and records of the holder, including a financial or securities
intermediary or a clearing corporation. All of Seller's interest in the
Purchased Securities shall pass to Buyer on the Purchase Date and, unless
otherwise agreed by Buyer and Seller, nothing in this Agreement shall
preclude Buyer from engaging in repurchase transactions with the Purchased
Securities or otherwise selling, transferring, pledging or hypothecating
the Purchased Securities, but no such transaction shall relieve Buyer of
its obligations to transfer Purchased Securities to Seller pursuant to
Paragraph 3, 4 or 11 hereof, or of Buyer's obligation to credit or pay
Income to, or apply Income to the obligations of, Seller pursuant to
Paragraph 5 hereof.
Required Disclosure for Transactions in Which the Seller Retains Custody
of the Purchased Securities
Seller is not permitted to substitute other securities for those subject to
this Agreement and therefore must keep Buyer's securities segregated at all
times, unless in this Agreement Buyer grants Seller the right to substitute
other securities. If Buyer grants the right to substitute, this means that
Buyer's securities will likely be commingled with Seller's own securities
during the trading day. Buyer is advised that, during any trading day that
Buyer's securities are commingled with Seller's securities, they [will]*
[may]** be subject to liens granted by Seller to [its clearing bank]*
[third parties]** and may be used by Seller for deliveries on other
securities transactions. Whenever the securities are commingled, Seller's
ability to resegregate substitute securities for Buyer will be subject to
Seller's ability to satisfy [the clearing]* [any]** lien or to obtain
substitute securities.
* Language to be used under 17 C.F.R. B403.4(e) if Seller is a government
securities broker or dealer other than a financial institution.
** Language to be used under 17 C.F.R. B403.5(d) if Seller is a financial
institution.
9. Substitution
(a) Seller may, subject to agreement with and acceptance by Buyer,
substitute other Securities for any Purchased Securities. Such
substitution shall be made by transfer to Buyer of such other
Securities and transfer to Seller of such Purchased Securities. After
substitution, the substituted Securities shall be deemed to be
Purchased Securities.
(b) In Transactions in which Seller retains custody of Purchased
Securities, the parties expressly agree that Buyer shall be deemed,
for purposes of subparagraph (a) of this Paragraph, to have agreed to
and accepted in this Agreement substitution by Seller of other
Securities for Purchased Securities: provided, however, that such
other Securities shall have a Market Value at least equal to the
Market Value of the Purchased Securities for which they are
substituted.
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10. Representations
Each of Buyer and Seller represents and warrants to the other that (i) it
is duly authorized to execute and deliver this Agreement, to enter into
Transactions contemplated hereunder and to perform its obligations
hereunder and has taken all necessary action to authorize such execution,
delivery and performance, (ii) it will engage in such Transactions as
principal (or, if agreed in writing, in the form of an annex hereto or
otherwise, in advance of any Transaction by the other party hereto, as
agent for a disclosed principal), (iii) the person signing this Agreement
on its behalf is duly authorized to do so on its behalf (or on behalf of
any such disclosed principal), (iv) it has obtained all authorizations of
any governmental body required in connection with this Agreement and the
Transactions hereunder and such authorizations are in full force and
effect and (v) the execution, delivery and performance of this Agreement
and the Transactions hereunder will not violate any law, ordinance,
charter, bylaw or rule applicable to it or any agreement by which it is
bound or by which any of its assets are affected. On the Purchase Date for
any Transaction Buyer and Seller shall each be deemed to repeat all the
foregoing representations made by it.
11. Events of Default
In the event that (i) Seller fails to transfer or Buyer fails to purchase
Purchased Securities upon the applicable Purchase Date, (ii) Seller fails
to repurchase or Buyer fails to transfer Purchased Securities upon the
applicable Repurchase Date, (iii) Seller or Buyer fails to comply with
Paragraph 4 hereof, (iv) Buyer fails, after one business day's notice, to
comply with Paragraph 5 hereof, (v) an Act of Insolvency occurs with
respect to Seller or Buyer, (vi) any representation made by Seller or
Buyer shall have been incorrect or untrue in any material respect when
made or repeated or deemed to have been made or repeated, or (vii) Seller
or Buyer shall admit to the other its inability to, or its intention not
to, perform any of its obligations hereunder (each an "Event of Default"):
(a) The nondefaulting party may, at its option (which option shall be
deemed to have been exercised immediately upon the occurrence of an
Act of Insolvency), declare an Event of Default to have occurred
hereunder and, upon the exercise or deemed exercise of such option,
the Repurchase Date for each Transaction hereunder shall, if it has
not already occurred, be deemed immediately to occur (except that, in
the event that the Purchase Date for any Transaction has not yet
occurred as of the date of such exercise or deemed exercise, such
Transaction shall be deemed immediately canceled). The nondefaulting
party shall (except upon the occurrence of an Act of Insolvency) give
notice to the defaulting party of the exercise of such option as
promptly as practicable.
(b) In all Transactions in which the defaulting party is acting as Seller,
if the nondefaulting party exercises or is deemed to have exercised
the option referred to in subparagraph (a) of this Paragraph, (i) the
defaulting party's obligations in such Transactions to repurchase all
Purchased Securities, at the Repurchase Price therefor on the
Repurchase Date determined in accordance with subparagraph (a) of this
Paragraph, shall thereupon become immediately due and payable, (ii)
all Income paid after such exercise or deemed exercise shall be
retained by the nondefaulting party and applied to the aggregate
unpaid Repurchase Prices and any other amounts owing by the defaulting
party hereunder, and (iii) the defaulting party shall immediately
deliver to the nondefaulting party any Purchased Securities subject to
such Transactions then in the defaulting party's possession or
control.
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(c) In all Transactions in which the defaulting party is acting as Buyer,
upon tender by the nondefaulting party of payment of the aggregate
Repurchase Prices for all such Transactions, all right, title and
interest in and entitlement to all Purchased Securities subject to
such Transactions shall be deemed transferred to the nondefaulting
party, and the defaulting party shall deliver all such Purchased
Securities to the nondefaulting party.
(d) If the nondefaulting party exercises or is deemed to have exercised
the option referred to in subparagraph (a) of this Paragraph, the
nondefaulting party, without prior notice to the defaulting party,
may:
(i) as to Transactions in which the defaulting party is acting as
Seller, (A) immediately sell, in a recognized market (or
otherwise in a commercially reasonable manner) at such price or
prices as the nondefaulting party may reasonably deem
satisfactory, any or all Purchased Securities subject to such
Transactions and apply the proceeds thereof to the aggregate
unpaid Repurchase Prices and any other amounts owing by the
defaulting party hereunder or (B) in its sole discretion elect,
in lieu of selling all or a portion of such Purchased Securities,
to give the defaulting party credit for such Purchased Securities
in an amount equal to the price therefor on such date, obtained
from a generally recognized source or the most recent closing bid
quotation from such a source, against the aggregate unpaid
Repurchase Prices and any other amounts owing by the defaulting
party hereunder; and
(ii) as to Transactions in which the defaulting party is acting as
Buyer, (A) immediately purchase, in a recognized market (or
otherwise in a commercially reasonable manner) at such price or
prices as the nondefaulting party may reasonably deem
satisfactory, securities ("Replacement Securities") of the same
class and amount as any Purchased Securities that are not
delivered by the defaulting party to the nondefaulting party as
required hereunder or (B) in its sole discretion elect, in lieu
of purchasing Replacement Securities, to be deemed to have
purchased Replacement Securities at the price therefor on such
date, obtained from a generally recognized source or the most
recent closing offer quotation from such a source.
Unless otherwise provided in Annex I, the parties acknowledge and
agree that (1) the Securities subject to any Transaction hereunder
are instruments traded in a recognized market, (2) in the absence of
a generally recognized source for prices or bid or offer quotations
for any Security, the nondefaulting party may establish the source
therefor in its sole discretion and (3) all prices, bids and offers
shall be determined together with accrued Income (except to the
extent contrary to market practice with respect to the relevant
Securities).
(e) As to Transactions in which the defaulting party is acting as Buyer,
the defaulting party shall be liable to the nondefaulting party for
any excess of the price paid (or deemed paid) by the nondefaulting
party for Replacement Securities over the Repurchase Price for the
Purchased Securities replaced thereby and for any amounts payable by
the defaulting party under Paragraph 5 hereof or otherwise hereunder.
(f) For purposes of this Paragraph 11, the Repurchase Price for each
Transaction hereunder in respect of which the defaulting party is
acting as Buyer shall not increase above the
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amount of such Repurchase Price for such Transaction determined as of
the date of the exercise or deemed exercise by the nondefaulting
party of the option referred to in subparagraph (a) of this Paragraph.
(g) The defaulting party shall be liable to the nondefaulting party for
(i) the amount of all reasonable legal or other expenses incurred by
the nondefaulting party in connection with or as a result of an Event
of Default, (ii) damages in an amount equal to the cost (including all
fees, expenses and commissions) of entering into replacement
transactions and entering into or terminating hedge transactions in
connection with or as a result of an Event of Default, and (iii) any
other loss, damage, cost or expense directly arising or resulting from
the occurrence of an Event of Default in respect of a Transaction.
(h) To the extent permitted by applicable law, the defaulting party shall
be liable to the nondefaulting party for interest on any amounts owing
by the defaulting party hereunder, from the date the defaulting party
becomes liable for such amounts hereunder until such amounts are (i)
paid in full by the defaulting party or (ii) satisfied in full by the
exercise of the nondefaulting party's rights hereunder. Interest on
any sum payable by the defaulting party to the nondefaulting party
under this Paragraph 11 (h) shall be at a rate equal to the greater of
the Pricing Rate for the relevant Transaction or the Prime Rate.
(i) The nondefaulting party shall have, in addition to its rights
hereunder, any rights otherwise available to it under any other
agreement or applicable law.
12. Single Agreement
Buyer and Seller acknowledge that, and have entered hereinto and will
enter into each Transaction hereunder in consideration of and in reliance
upon the fact that, all Transactions hereunder constitute a single
business and contractual relationship and have been made in consideration
of each other. Accordingly, each of Buyer and Seller agrees (i) to perform
all of its obligations in respect of each Transaction hereunder, and that
a default in the performance of any such obligations shall constitute a
default by it in respect of all Transactions hereunder, (ii) that each of
them shall be entitled to set off claims and apply property held by them
in respect of any Transaction against obligations owing to them in respect
of any other Transactions hereunder and (iii) that payments, deliveries
and other transfers made by either of them in respect of any Transaction
shall be deemed to have been made in consideration of payments, deliveries
and other transfers in respect of any other Transactions hereunder, and
the obligations to make any such payments, deliveries and other transfers
may be applied against each other and netted.
13. Notices and Other Communications
Any and all notices, statements, demands or other communications hereunder
may be given by a party to the other by mail, facsimile, telegraph,
messenger or otherwise to the address specified in Annex II hereto, or so
sent to such party at any other place specified in a notice of change of
address hereafter received by the other. All notices, demands and requests
hereunder may be made orally, to be confirmed promptly in writing, or by
other communication as specified in the preceding sentence.
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14. Entire Agreement; Severability
This Agreement shall supersede any existing agreements between the parties
containing general terms and conditions for repurchase transactions. Each
provision and agreement herein shall be treated as separate and
independent from any other provision or agreement herein and shall be
enforceable notwithstanding the unenforceability of any such other
provision or agreement.
15. Non-assignability; Termination
(a) The rights and obligations of the parties under this Agreement and
under any Transaction shall not be assigned by either party without
the prior written consent of the other party, and any such assignment
without the prior written consent of the other party shall be null and
void. Subject to the foregoing, this Agreement and any Transactions
shall be binding upon and shall inure to the benefit of the parties
and their respective successors and assigns. This Agreement may be
terminated by either party upon giving written notice to the other,
except that this Agreement shall, notwithstanding such notice, remain
applicable to any Transactions then outstanding.
(b) Subparagraph (a) of this Paragraph 15 shall not preclude a party from
assigning, charging or otherwise dealing with all or any part of its
interest in any sum payable to it under Paragraph 11 hereof.
16. Governing Law
This Agreement shall be governed by the laws of the State of New York
without giving effect to the conflict of law principles thereof.
17. No Waivers, Etc.
No express or implied waiver of any Event of Default by either party shall
constitute a waiver of any other Event of Default and no exercise of any
remedy hereunder by any party shall constitute a waiver of its right to
exercise any other remedy hereunder. No modification or waiver of any
provision of this Agreement and no consent by any party to a departure
herefrom shall be effective unless and until such shall be in writing and
duly executed by both of the parties hereto. Without limitation on any of
the foregoing, the failure to give a notice pursuant to Paragraph 4 (a) or
4 (b) hereof will not constitute a waiver of any right to do so at a later
date.
18. Use of Employee Plan Assets
(a) If assets of an employee benefit plan subject to any provision of the
Employee Retirement Income Security Act of 1974 ("ERISA") are intended
to be used by either party hereto (the "Plan Party") in a Transaction,
the Plan Party shall so notify the other party prior to the
Transaction. The Plan Party shall represent in writing to the other
party that the Transaction does not constitute a prohibited
transaction under ERISA or is otherwise exempt therefrom, and the
other party may proceed in reliance thereon but shall not be required
so to proceed.
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(b) Subject to the last sentence of subparagraph (a) of this Paragraph,
any such Transaction shall proceed only if Seller furnishes or has
furnished to Buyer its most recent available audited statement of its
financial condition and its most recent subsequent unaudited statement
of its financial condition.
(c) By entering into a Transaction pursuant to this Paragraph. Seller
shall be deemed (i) to represent to Buyer that since the date of
Seller's latest such financial statements, there has been no material
adverse change in Seller's financial condition which Seller has not
disclosed to Buyer, and (ii) to agree to provide Buyer with future
audited and unaudited statements of its financial condition as they
are issued, so long as it is a Seller in any outstanding Transaction
involving a Plan Party.
19. Intent
(a) The parties recognize that each Transaction is a "repurchase
agreement" as that term is defined in Section 101 of Title 11 of the
United States Code, as amended (except insofar as the type of
Securities subject to such Transaction or the term of such Transaction
would render such definition inapplicable), and a "securities
contract" as that term is defined in Section 741 of Title 11 of the
United States Code, as amended (except insofar as the type of assets
subject to such Transaction would render such definition
inapplicable).
(b) It is understood that either party's right to liquidate Securities
delivered to it in connection with Transactions hereunder or to
exercise any other remedies pursuant to Paragraph 11 hereof is a
contractual right to liquidate such Transaction as described in
Sections 555 and 559 of Title 11 of the United States Code, as
amended.
(c) The parties agree and acknowledge that if a party hereto is an
"insured depository institution," as such term is defined in the
Federal Deposit Insurance Act, as amended ("FDIA"), then each
Transaction hereunder is a "qualified financial contract," as that
term is defined in FDIA and any rules, orders or policy statements
thereunder (except insofar as the type of assets subject to such
Transaction would render such definition inapplicable).
(d) It is understood that this Agreement constitutes a "netting contract"
as defined in and subject to Title IV of the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA") and each payment
entitlement and payment obligation under any Transaction hereunder
shall constitute a "covered contractual payment entitlement" or
"covered contractual payment obligation", respectively, as defined in
and subject to FDICIA (except insofar as one or both of the parties is
not a "financial institution" as that term is defined in FDICIA).
20. Disclosure Relating to Certain Federal Protections
The parties acknowledge that they have been advised that:
(a) in the case of Transactions in which one of the parties is a broker or
dealer registered with the Securities and Exchange Commission ("SEC")
under Section 15 of the Securities Exchange Act of 1934 ("1934 Act"),
the Securities Investor Protection
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<PAGE>
Corporation has taken the position that the provisions of the
Securities Investor Protection Act of 1970 ("SIPN") do not protect
the other party with respect to any Transaction hereunder:
(b) in the case of Transactions in which one of the parties is a
government securities broker or a government securities dealer
registered with the SEC under Section 15C of the 1934 Act, SIPA will
not provide protection to the other party with respect to any
Transaction hereunder; and
(c) in the case of Transactions in which one of the parties is a financial
institution, funds held by the financial institution pursuant to a
Transaction hereunder are not a deposit and therefore are not insured
by the Federal Deposit Insurance Corporation or the National Credit
Union Share Insurance Fund, as applicable.
Merrill Lynch Government Securities Inc. ML SSG DELAWARE, LLC
By: By:
----------------------------------- ---------------------------------
Title: Director Title: Manager
-------------------------------- ------------------------------
Date: 8/9/00 Date: AUGUST 9, 2000
--------------------------------- -------------------------------
<PAGE>
Annex I
Supplemental Terms and Conditions
This Annex I forms a part of the Master Repurchase Agreement dated as of
August 9, 2000 (the "Agreement") between Merrill Lynch Government
Securities Inc. and ML SSG DELAWARE, LLC. Capitalized terms used but not
defined in this Annex I shall have the meanings ascribed to them in the
Agreement.
1. Modification of Section 9 of the Agreement. Effective January 1, 1998,
Section 9 of the Agreement is hereby amended by adding the following
paragraphs:
(c) In the case of any Transaction for which the Repurchase Date is other
than the business day immediately following the Purchase Date and with
respect to the which the Seller does not have any existing right to
substitute substantially the same Securities for the Purchased Securities,
Seller shall have the right, subject to the proviso to this sentence, upon
notice to Buyer, which notice shall be given at or prior to 10 am (New York
time) on such business day, to substitute substantially the same Securities
for any Purchased Securities; provided, however, that Buyer may elect, by
the close of business on the business day notice is received, or by the
close of the next business day if notice is given after 10 am (New York
time) on such day, not to accept such substitution. In the event such
substitution is accepted by Buyer, such substitution shall be made by
Seller's transfer to Buyer of such other Securities and Buyer's transfer to
Seller of such Purchased Securities. In the event Buyer elects not to
accept such substitution, Buyer shall offer Seller the right to terminate
the Transaction.
(d) In the event Seller exercises its right to substitute or terminate
under sub-paragraph (c), Seller shall be obligated to pay to Buyer, by the
close of the business day of such substitution or termination, as the case
may be, an amount equal to (A) Buyer's actual cost (including all fees,
expenses and commissions ) of (i) entering into replacement transactions;
(ii) entering into or terminating hedge transactions; and/or (iii)
terminating transactions or substituting securities in like transactions
with third parties in connection with or as a result of such substitution
or termination, and (B) to the extent Buyer determines not to enter into
replacement transactions, the loss incurred by Buyer directly arising or
resulting from such substitution or termination. The foregoing amounts
shall be solely determined and calculated by Buyer in good faith.
2. Other Applicable Annexes.
In addition to this Annex I and Annex II, the following Annexes (if
applicable) and any Schedules thereto shall form a part of the Agreement
and shall be applicable thereunder:
Yes No
--- ---
Annex III (International Transactions) and Schedule III.A
(International Transactions Relating to Relevant Country) [ ] [ X ]
Annex IV (Party Acting as Agent) and Annex IV-A
(Identification of Principals) [ ] [ X ]
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Yes No
--- ---
Annex V (Margin for Forward Transactions) [ ] [ X ]
Annex VI (Buy/Sell Back Transactions) [ ] [ X ]
Annex VII (Transactions Involving Registered
Investment Companies) and Schedule VII.A
(Supplemental Terms and Conditions of Transactions
Involving Registered Investment Companies) [ ] [ X ]
3. Counterparts.
The Agreement may be executed in any number of counterparts, each of
which counterparts shall be deemed to be an original, and such counterparts
shall constitute but one and the same instrument.
Merrill Lynch Government Securities Inc. ML SSG DELAWARE, LLC
By: By:
----------------------------------- ---------------------------------
Title: Director Title: Manager
-------------------------------- ------------------------------
Date: 8/9/00 Date: AUGUST 9, 2000
--------------------------------- -------------------------------
2
<PAGE>
Annex II
Names and Addresses for Communications Between Parties
Merrill Lynch
Merrill Lynch Government Securities Inc.
Stephanie S. Wolf, Esq.
World Financial Center
North Tower, 12th Floor
New York, NY 10281-1312
(212) 449-3562
RETURN AGREEMENTS TO:
Celia M. Bader or
Barbara H. Ross
Legal Department
World Financial Center
North Tower, 12th Floor
New York, NY 10281-1312
Tel: (212) 449-3480
Tel: (212) 449-0105
Fax: (212) 449-6993
Name of Party: ML SSG DELAWARE, LLC
-----------------------------------------------------------------
Contact: RICHARD A. HARPER, MANAGER
-----------------------------------------------------------------------
Street Address: WORLD FINANCIAL CENTER
----------------------------------------------------------------
City, State, Zip Code: NORTH TOWER, NEW YORK NY 10281-1312
--------------------------------------------------------
Telephone No.: (212) 449-8123
-----------------------------------------------------------------
Fax No.: (212) 449-6993
-----------------------------------------------------------------------
<PAGE>
CONFIRMATION
To: ML SSG Delaware, LLC
Address: World Financial Center
North Tower, 250 Vesey Street
NY, NY 10281-- 1312
Attn: Mr. Macauley Taylor
Telephone: 212-449-7125
Facsimile: 212-449-6993
From: Merrill Lynch Government Securities Inc.
Date: August 10, 2000
Subject: Reverse to Maturity Repurchase Transaction
The purpose of this Confirmation is to set forth the terms and conditions of the
repurchase transaction entered into between us on the date referred to below,
pursuant to a Master Repurchase Agreement ("Agreement") dated as of August 9,
2000 between Merrill Lynch Government Securities Inc. ("Buyer") and ML SSG
Delaware, LLC ("Seller"). This Confirmation supersedes and replaces any
previously issued Confirmation of this Transaction. Terms and provisions used
herein but not otherwise defined shall have the meanings ascribed to them in the
Agreement.
1. Purchase Date: August 10, 2000
2. Purchase Securities: 6% U.S. Treasury of 8/15/09
(CUSIP number 9128275N8)
3. Buyer: Merrill Lynch Government Securities Inc.
4. Seller: ML SSG Delaware, LLC
5. Purchase Price: $1,031,675,824
6. Repurchase Date: August 17, 2009
7. Early Termination: The Seller may terminate the transaction
prior to the Repurchase Date upon five
(5) business days prior written notice
to the Buyer.
8. Outstanding Amount: $1,031,675,824 reduced by $29,175,824 on
8/15/00 and further reduced by
$138,888.88 each February 15 and
August 15 thereafter up to and including
August 15, 2009 (See Table I).
1
<PAGE>
9. Repurchase Price: Outstanding Amount plus the Price
Differential as of the Repurchase Date.
10. Pricing Rate First Period: 5.578% for the period from 08/10/00
until 08/15/00.
11. Pricing Rate Other Periods: USD BBA 6-month LIBOR minus 109 basis
points resetting on the 15th day of
February and August using "modified
following business day" convention using
2 day prior rate, for the periods from
08/15/00 through 08/17/09.
12. Price Differential: For the payment due on 02/15/01, the
amount of the Price Differential shall
equal (1,031,675,824) (Pricing Rate
First Period)(5/360)plus (1,002,500,000)
(Pricing Rate Other Periods)(184/360),
plus an additional payment of
$138,888.88.
For all subsequent payments, the Price
Differential shall equal the Pricing
Rate Other Periods multiplied by the
Outstanding Amount on Table I as of such
date, plus an additional payment of
$138,888.88.
13. Payments of Price
Differential: On the 15h day of February and August,
using "modified following business day"
convention, commencing on February 15,
2001
14. Buyer's Margin Percentage: 100%
15. Seller's Margin Percentage: 100%
16. Margin Maintenance: Section 4(a)of the Agreement shall not
apply to Seller as long as Seller
maintains equity capital of at least
$500 million.
17. Additional Collateral Buyer agrees to pledge, transfer and
deliver to Seller and grant Seller a
first priority continuing security
interest in and right of set-off against
Eligible Collateral (as defined below),
having a market value at least equal to
the Required Amount (as defined below),
in order to secure the payment and
performance of Buyer's obligations under
the Agreement, including without
limitation, Section 4(b) the Agreement.
18. Eligible Collateral: "Eligible Collateral" shall mean U.S.
denominated cash, U.S.Treasury
Securities, and any other form of
collateral agreed to between the
parties.
19. Required Amount: "Required Amount" shall mean as of any
date, an amount equal to the Margin
Excess, provided that such amount shall
not be less than USD 250,000,000.
2
<PAGE>
Please confirm that the foregoing sets forth the terms of our agreement by
executing this confirmation and returning it to us.
Merrill Lynch Government Securities, Inc.
By: _____________________________________
Name:
Title:
ML SSG Delaware, LLC
By: _____________________________________
Name:
Title:
<PAGE>
Table I
Date Outstanding Amount
8/10/2000 1,031,675,824.00
8/15/2000 1,002,500,000.00
2/15/2001 1,002,361,111.12
8/15/2001 1,002,222,222.24
2/15/2002 1,002,083,333.36
8/15/2002 1,001,944,444.48
2/15/2003 1,001,805,555.60
8/15/2003 1,001,666,666.72
2/15/2004 1,001,527,777.84
8/15/2004 1,001,388,888.96
2/15/2005 1,001,250,000.08
8/15/2005 1,001,111,111.20
2/15/2006 1,000,972,222.32
8/15/2006 1,000,833,333.44
2/15/2007 1,000,694,444.56
8/15/2007 1,000,555,555.68
2/15/2008 1,000,416,666.80
8/15/2008 1,000,277,777.92
2/15/2009 1,000,138,889.04
8/17/2009 1,000,000,000.00
