<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. ____)
THE FIRST AUSTRALIA FUND INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK
- --------------------------------------------------------------------------------
(Title of Class of Securities)
318652104
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(CUSIP Number)
Terence S. Leighton, Esq.
One Chase Manhattan Plaza, 42nd Floor
New York, New York 10005
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
February 18, 1999
- --------------------------------------------------------------------------------
(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 Rule 13d-1(e), Rule 13d-1(f) or Rule 13d-1(g), check the
following box |X|
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 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).
(Continued on following pages)
Page 1 of 8 Pages
<PAGE>
SCHEDULE 13D
<TABLE>
<CAPTION>
CUSIP NO. 318652104 PAGE 2 OF 8 PAGES
- ----------------------------- -----------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Mira, L.P.
- -----------------------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [x]
(b) [ ]
- -----------------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- -----------------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
BK, WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) / /
- -----------------------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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</TABLE>
<TABLE>
<S> <C> <C>
7 SOLE VOTING POWER
0
------------------------------------------------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES 2,714,500
BENEFICIALLY ------------------------------------------------------------------------------------------------
OWNED BY 9 SOLE DISPOSITIVE POWER
EACH 0
REPORTING ------------------------------------------------------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
WITH 2,714,500
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,714,500
- -----------------------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / /
- -----------------------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.8%
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14 TYPE OF REPORTING PERSON*
PN
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</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
<TABLE>
<CAPTION>
CUSIP NO. 318652104 PAGE 3 OF 8 PAGES
- ----------------------------- -----------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Zurich Capital Markets Inc.
- -----------------------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [x]
(b) [ ]
- -----------------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- -----------------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
Not applicable - indirect beneficial ownership
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) / /
- -----------------------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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</TABLE>
<TABLE>
<S> <C> <C>
7 SOLE VOTING POWER
0
------------------------------------------------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES 2,714,500
BENEFICIALLY ------------------------------------------------------------------------------------------------
OWNED BY 9 SOLE DISPOSITIVE POWER
EACH 0
REPORTING ------------------------------------------------------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
WITH 2,714,500
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,714,500
- -----------------------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / /
- -----------------------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.8%
- -----------------------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D (CONTINUED) PAGE 4 OF 8 PAGES
Item 1. Security and Issuer.
This statement on Schedule 13D (this "Statement") relates to the Common
Stock (the "Common Stock") of The First Australia Fund Inc. (the "Company"). The
principal executive offices of the Company are located at Gateway Center Three,
100 Mulberry Street, Newark, New Jersey 07102-4077.
Item 2. Identity and Background.
The names of the persons filing this Statement are Mira, L.P. ("Mira")
and Zurich Capital Markets Inc. ("ZCMI"). Mira and ZCMI are sometimes
collectively referred to herein as the "Reporting Persons." Certain information
concerning the directors and executive officers of the corporate Reporting
Persons is set forth on Schedule A attached hereto and incorporated herein by
reference. Any disclosures with respect to persons other than the Reporting
Persons are made on information and belief after making inquiry to the
appropriate party. The business address of each of the Reporting Persons is One
Chase Manhattan Plaza, 42nd Floor, New York, New York 10005.
The principal business of Mira is to purchase and hold investment
securities. The principal business of ZCMI is to develop and provide structured
financial solutions to affiliates of ZCMI as well as third party clients.
During the last five years, none of the Reporting Persons nor any of
the directors and executive officers set forth on Schedule A has been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors).
During the last five years, none of the Reporting Persons nor any of
the directors and executive officers set forth on Schedule A has been a party to
a civil proceeding of a judicial or administrative body of competent
jurisdiction where the result of such proceeding was the imposition of 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.
Mira is a limited partnership organized under the laws of the State of
Delaware. ZCMI is a corporation organized under the laws of the State of
Delaware.
Item 3. Source and Amount of Funds or Other Consideration
Mira paid a total of approximately $20.2 million to purchase the
2,714,500 shares of Common Stock. Mira borrowed approximately $2.4 million of
this amount from the Bank of New York, and the funds borrowed from the Bank of
New York accrue interest at the federal funds rate plus 25 basis points and are
payable on demand. The balance of the funds used to purchase the shares of
Common Stock were derived from Mira's working capital.
Item 4. Purpose of Transaction.
Except as described in this Item 4, none of the Reporting Persons has
any present plans or proposals which relate to, or could result in, any of the
matters referred to in paragraphs (a) through (j), inclusive, of the
instructions to Item 4 of Schedule 13D. The Reporting Persons may, at any time
and from time to time, review or reconsider their position and/or change their
purpose and/or formulate plans or proposals with respect thereto. Consistent
with their investment purpose, the Reporting Persons may engage in
communications with one or more shareholders of the Company, one or more
officers of the Company and/or one or more members of the board of directors of
the Company and/or one or more representatives of the Company regarding the
Company, including but not limited to its operations. The Reporting Persons may
discuss ideas that, if effected, may result in any of the following: the
acquisition by persons of additional Common Stock of the Company, an
extraordinary corporate transaction involving the Company, including but not
limited to the open-ending, liquidation, conduct of a tender offer or other
steps designed to reduce the difference between the market value of the
Company's common stock and the Company's net asset value, and/or changes in
the board of directors or management of the Company.
Although neither Reporting Person has any present plan or proposal to
acquire or dispose of the Common Stock, consistent with its investment purpose,
either Reporting Person at any time and from time to time may acquire additional
Common Stock or dispose of any or all of its Common Stock depending upon an
ongoing evaluation of the investment in the Common Stock, prevailing market
conditions, other investment opportunities, liquidity requirements of the
Reporting Persons and/or other investment considerations.
<PAGE>
SCHEDULE 13D (CONTINUED) PAGE 5 OF 8 PAGES
The Reporting Persons understand that prior purchases of shares of
Common Stock, if any, by persons named in Schedule A to this Statement were made
for the purpose of each such person's personal investment.
Item 5. Interest in Securities of the Issuer.
(a) This Statement on Schedule 13D is being filed to correct certain
information regarding beneficial ownership of the Common Stock included in
the Schedule 13G and subsequent amendments thereto previously filed by Mira
with respect to the Company, and to report the beneficial ownership of ZCMI
in the Company. Mira beneficially owns an aggregate of 2,714,500 shares of
Common Stock, constituting 15.8% of the shares of Common Stock outstanding.
ZCMI, as the general partner of Mira, may be deemed to beneficially own an
aggregate of 2,714,500 shares of Common Stock, constituting 15.8% of the
shares of Common Stock outstanding. Stephen J. Lerner, a director and
executive vice president of ZCMI, beneficially owns 35,182 shares of Common
Stock, constituting .2% of the shares of Common Stock outstanding.
(b) The power to vote and dispose of the 2,714,500 shares of Common
Stock held directly by Mira is shared by Mira and ZCMI, as the general partner
of Mira. Mr. Lerner has sole power to vote and dispose of the 35,182 shares of
Common Stock which he beneficially owns.
(c) There have been no transactions of shares of Common Stock effected
within the past 60 days by Mira, ZCMI or Mr. Lerner.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Except as otherwise expressly disclosed herein, there are no contracts,
arrangements, understandings or relationships (legal or otherwise) among the
persons named in Item 2 hereof or between such persons and any other person with
respect to the Common Stock. The filing of this Schedule shall not be construed
as an admission that a Reporting Person or any other person is a beneficial
owner of any shares of Common Stock for any purpose, including for purposes of
Sections 13, 14 or 16 of the Securities Exchange Act of 1934, as amended.
Item 7. Material to Be Filed as Exhibits
Exhibit A is the Joint Filing Agreement between Mira, L.P. and Zurich
Capital Markets Inc., dated December 1, 1999.
Exhibit B is the Security Agreement executed by Zurich Capital Markets
Inc. in favor of The Bank of New York
Exhibit C is the Securities Clearing Agreement dated as of February 24,
1999 by and between Zurich Capital Markets Inc. and The Bank of New York.
<PAGE>
SCHEDULE 13D (CONTINUED) PAGE 6 OF 8 PAGES
SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, complete and correct.
Dated: December 7, 1999
MIRA, L.P.
By: Zurich Capital Markets Inc.
Its: General Partner
By: /s/ RANDALL K.C. KAU
---------------------------------
Name: Randall K.C. Kau
Title: President
ZURICH CAPITAL MARKETS INC.
By: /s/ RANDALL K.C. KAU
---------------------------------
Name: Randall K.C. Kau
Title: President
<PAGE>
SCHEDULE 13D (CONTINUED) PAGE 7 OF 8 PAGES
<TABLE>
<CAPTION>
EXHIBIT INDEX
<S> <C>
Exhibit A Joint Filing Agreement between Mira, L.P. and Zurich Capital Markets Inc., dated
December 1, 1999.
Exhibit B Security Agreement executed by Zurich Capital Markets Inc. in favor of The Bank of
New York
Exhibit C Securities Clearing Agreement dated as of February 24, 1999 by and between Zurich
Capital Markets Inc. and The Bank of New York.
</TABLE>
<PAGE>
SCHEDULE 13D (CONTINUED) PAGE 8 OF 8 PAGES
SCHEDULE A
<TABLE>
<CAPTION>
NAME AND OFFICE HELD BUSINESS ADDRESS CITIZENSHIP
<S> <C> <C>
Randall K.C. Kau One Chase Manhattan Plaza United States
Director and President of ZCMI 42nd Floor
New York, New York 10005
Stephen J. Lerner One Chase Manhattan Plaza United States
Director and Senior Vice President of ZCMI 42nd Floor
New York, New York 10005
Scott A. Smith One Chase Manhattan Plaza United States
Director and Managing Director of ZCMI 42nd Floor
New York, New York 10005
Nick Corcoran One Chase Manhattan Plaza Ireland
Chief Financial Officer of ZCMI 42nd Floor
New York, New York 10005
</TABLE>
<PAGE>
EXHIBIT A
JOINT FILING AGREEMENT BETWEEN MIRA, L.P. AND ZURICH CAPITAL MARKETS INC.
WHEREAS, in accordance with Rule 13d-1(k) under the Securities
and Exchange Act of 1934 (the "Act"), only one joint Statement and any
amendments thereto need be filed whenever one or more persons are required to
file such a Statement or any amendments thereto pursuant to Section 13(d) of the
Act with respect to the same securities, provided that said persons agree in
writing that such Statement or any amendments thereto is filed on behalf of each
of them;
NOW, THEREFORE, the parties hereto agree as follows:
Mira, L.P. and Zurich Capital Markets Inc. do hereby agree,
in accordance with Rule 13d-1(k) under the Act, to file a Schedule 13D and all
amendments thereto relating to their ownership of Common Stock of The First
Australia Fund, Inc., and do hereby further agree that said Schedule 13D and all
amendments thereto shall be filed on behalf of each of them.
Dated: December 1, 1999
ZURICH CAPITAL MARKETS INC.
By: /s/ TERENCE S. LEIGHTON
--------------------------
Name: Terence S. Leighton
Title:
MIRA, L.P.
By: /s/ TERENCE S. LEIGHTON
--------------------------
Name: Terence S. Leighton
Title: Vice President
<PAGE>
EXHIBIT B
SECURITY AGREEMENT
One Wall Street, New York, New York , 19
---------- ---
FOR VALUE RECEIVED, and in order to induce THE BANK OF NEW YORK (the
"Bank"), in its discretion, to make loans or otherwise extend credit at any
time, and from time to time to, or at the request of, the undersigned (the
"Debtor"), whether the loans or credit so extended shall be absolute or
contingent, the Debtor hereby grants to the Bank, as security for all present or
future obligations or liabilities of any and all kinds of the Debtor to it,
whether due or to become due, secured or unsecured, absolute or contingent, and
howsoever or whensoever acquired by the Bank, including interest accruing
thereon before or after the commencement of any insolvency, bankruptcy or
reorganization proceeding of the Debtor (whether or not such interest is an
allowable claim in any proceeding and irrespective of the discharge or release
of the Debtor in such proceeding) (all of which are referred to collectively as
the "Obligations"), a security interest in and a lien upon all personal property
and fixtures of the Debtor or in which the Debtor has an interest wherever
located and whether now or hereafter existing or now owned or hereafter acquired
and whether or not subject to the Uniform Commercial Code as in effect in the
State of New York (the "Code"), including but not limited to any property
specified in Schedule A hereto, and also including all interest, dividends and
other distributions thereon paid and payable in cash or in property, and all
replacements and substitutions for, and all accessions and additions to, and all
products and proceeds of, all of the foregoing (all of which are referred to as
the "Collateral").
The Debtor hereby agrees to deliver to the Bank whenever called for by
it such additional collateral security of a kind and of a market value
satisfactory to the Bank, so that there will, at all times, be with the Bank a
margin of security for the payment of all Obligations which shall be
satisfactory to it. In addition to the Bank's security interest in the
Collateral, it shall have, and the Debtor hereby grants to the Bank, a security
interest and a lien for all the Obligations in and upon any personal property of
the Debtor or in which the Debtor may have an interest which is now or may at
any time hereafter come into the possession or control of the Bank, or of any
third party acting on its behalf, whether for the express purpose of being used
by the Bank as collateral security or held in custody or for any other or
different purpose, including such personal property as may be in transit by mail
or carrier for any purpose, or covered or affected by any documents in the
Bank's possession or control, or in the possession or control of any third party
acting on its behalf (said additional personal property is also referred to as
the "Collateral"). The Debtor hereby authorizes the Bank in its discretion, at
any time, whether or not the Collateral is deemed by it adequate, to appropriate
and apply upon any of the Obligations, when due, any of such property of the
Debtor and to charge any of the Obligations against any balance of any account
standing to the credit of the Debtor on the books of the Bank.
Upon failure of the Debtor to pay any Obligation when becoming or made
due, in accordance with its terms, the Bank shall have, in addition to all other
rights and remedies allowed by law, the rights and remedies of a secured party
under the Code and, without limiting the generality of the foregoing, the Bank
may immediately, without demand of performance and without notice of intention
to sell or otherwise dispose of Collateral, or of time or place of sale or other
disposition, or of redemption or other notice or demand whatsoever to the
Debtor, all of which to the extent
<PAGE>
2
permitted by law are hereby expressly waived, and without advertisement, sell at
public or private sale, grant options to purchase or otherwise realize upon, in
the State of New York, or elsewhere, the whole or from time to time any part of
the Collateral upon which the Bank shall have a security interest or lien as
aforesaid, or any interest which the Debtor may have therein. After deducting
from the proceeds of any such sale or other disposition of the Collateral all
expenses (including, but not limited to, reasonable attorneys' fees and expenses
and other expenses as set forth below), the Bank shall apply the remaining
proceeds toward the payment of the Obligations, in such order as the Bank shall
elect, the Debtor remaining liable for any deficiency remaining unpaid after
such application, plus interest thereon. If notice of any sale or other
disposition is required by law to be given, the Debtor hereby agrees that a
notice sent at least five days before the time of any intended public sale or of
the time after which any private sale or other disposition of the Collateral is
to be made, shall be reasonable notice of such sale or other disposition. The
Debtor also agrees to assemble the Collateral at such place or places as the
Bank designates by written notice.
At any such sale or other disposition the Bank or any other person
designated by the Bank may itself purchase the whole or any part of the
Collateral sold, free from any right of redemption on the part of the Debtor,
which right, to the extent permitted by law, is hereby waived and released.
The Bank may, without any notice to the Debtor, in its discretion,
whether or not any of the Obligations are due, in its name or in the name of the
Debtor, demand, sue for, collect and receive any money or property at any time
due, payable or receivable on or on account of or in exchange for, and may
compromise, settle or extend the time of payment of, any of the demands or
obligations represented by any of the Collateral, and may also exchange any of
the Collateral for other property upon the reorganization, recapitalization or
other readjustment of the issuer, maker or other person who is obligated on or
otherwise has liabilities with respect to the Collateral, and in connection
therewith may deposit any of the Collateral with any committee or depositary
upon such terms as the Bank may in its discretion deem appropriate, and the
Debtor does hereby constitute and appoint the Bank the Debtor's true and lawful
attorney to compromise, settle or extend payment of said demands or obligations
and exchange such Collateral as the Debtor might or could do personally; all
without liability or responsibility for action herein authorized and taken or
not taken in good faith. The Bank is entitled at any time in its discretion to
notify an account debtor or the obligor on any instrument to make payment to it,
regardless of whether or not the Debtor had been previously making collections
on the Collateral, and the Bank may take control of any proceeds of any of the
Collateral. Upon request of the Bank, the Debtor shall receive and hold all
proceeds of the Collateral in trust for the Bank and not commingle any
collections with any of its own funds and immediately deliver such collections
to the Bank.
The Debtor agrees that the Collateral secures, and further agrees to
pay on demand, all expenses (including, but not limited to, reasonable
attorneys' fees and expenses and costs of any insurance and payment of taxes or
other charges) of, or incidental to, the custody, care, sale or collection of,
or realization upon, any of the Collateral or in any way relating to the
enforcement or protection of the rights of the Bank hereunder, whether or not
litigation is commenced.
The Debtor agrees to mark its books and records as the Bank shall
request in order to reflect the rights of the Bank granted herein, and the Bank
may, in its sole discretion, take possession of the
<PAGE>
3
Collateral at any time, either prior to or subsequent to a default under any of
the Obligations. The Debtor agrees to maintain such insurance on the Collateral
as the Bank may require. The Bank may, without notice to the Debtor, in its
discretion, and for its own benefit lend, use, transfer or repledge to any third
party all or any part of the Collateral by itself or commingled with the
property of others, in bulk or otherwise. The Bank may, without notice to the
Debtor, sell, assign or transfer any of the Obligations and the Bank's rights
and duties hereunder, and may deliver the Collateral, or any part thereof, to
the assignee or transferee of any of the Obligations, who shall become vested
with all the rights, remedies, powers, security interests and liens herein given
to the Bank in respect thereto; and the Bank shall thereafter be relieved and
fully discharged from any liability or responsibility in the premises.
The Bank may, without notice to the Debtor, in its discretion,
transfer, or cause to be transferred, all or any part of the Collateral to its
name, or to the name of its nominee, vote the Collateral so transferred, and
receive income and make or receive collections, including money, thereon and
hold said income and collections as Collateral or apply said income and
collections to any of the Obligations, the manner and distribution of the
application to be made as the Bank shall elect.
Calls for Collateral, demand for payment or notice to the Debtor may be
given verbally or by leaving same at the address given below or any other
address hereafter filed with the Bank, or by mailing same to such address with
the same effect as if delivered personally. Notice given in the manner herein
provided shall be effective whether or not received by the Debtor.
With respect to the Collateral, the Bank shall be under no duty to send
notices, perform services, exercise any rights of collection, enforcement,
conversion or exchange, vote, pay for insurance, taxes or other charges or take
any action of any kind in connection with the management thereof and its only
duty with respect thereto shall be to use reasonable care in its custody and
preservation while in its possession, which shall not include any steps
necessary to preserve, obtain, secure or acquire rights or property against or
from any parties.
The Debtor authorizes the Bank, at the Debtor's expense, to file one or
more financing statements and amendments thereto to perfect the security
interests granted herein, without the Debtor's signature thereon, and the Debtor
agrees to do, file, record, make, execute and deliver all such acts, deeds,
things, agreements, notices, instruments and financing statements as the Bank
may request in order to perfect and enforce the rights of the Bank herein.
If at any time it is necessary in the opinion of counsel to the Bank
that any or all of the securities held as Collateral (the "Pledged Securities")
be registered under the Securities Act of 1933, as amended, or that an indenture
with respect thereto be qualified under the Trust Indenture Act of 1939, as
amended, in order to permit the sale or other disposition of the Pledged
Securities, the Debtor shall at the Bank's request and at the expense of the
Debtor use its best efforts promptly to cause the registration of the Pledged
Securities and the qualification of such indenture and to continue such
registration and qualification under such laws and in such jurisdictions and for
as long as deemed appropriate by the Bank.
<PAGE>
4
The Debtor hereby authorizes the Bank to date this agreement as of the
date of the granting of any Obligation secured hereby and to complete any blank
space herein (including any schedule hereto) according to the terms upon which
said Obligation was granted.
This agreement may not be amended orally or by course of dealing, but
only by a writing signed by an authorized officer of the Bank.
No failure on the part of the Bank to exercise, and no delay in
exercising, any right, remedy or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by the Bank of any right,
remedy or power hereunder preclude any other or future exercise thereof or the
exercise of any other right, remedy or power.
Each and every right, remedy and power hereby granted to the Bank or
allowed it by law or other agreement shall be cumulative and not exclusive of
any other right, remedy or power, and may be exercised by the Bank at any time
and from time to time.
This agreement may be assigned by the Bank and its benefits shall inure
to the successors, indorsees and assigns of the Bank.
This agreement shall be construed and interpreted, and all rights and
obligations hereunder shall be determined, in accordance with the laws of the
State of New York without regard to principles of conflict of laws.
Unless otherwise defined or the text otherwise requires, all terms used
herein shall have the meanings specified in the Code.
Every provision of this agreement is intended to be severable; if any
term or provision of this agreement shall be invalid, illegal or unenforceable
for any reason whatsoever, the validity, legality and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired
thereby.
Any notice to the Bank shall be effective only upon receipt by the Bank
at its banking office set forth above or any other address hereafter specified
by written notice from the Bank to the Debtor.
The Debtor represents and warrants to the Bank that any information
furnished to the Bank regarding the Collateral shall be true and correct on the
date hereof and is complete in all material respects.
IF DEBTOR IS A CORPORATION:
The Debtor represents and warrants that it is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation; that the execution, delivery and performance of this
agreement are within the Debtor's corporate powers and have been duly authorized
by all necessary action of its board of directors and shareholders; and that
each person
<PAGE>
5
executing this agreement has the authority to execute and deliver this agreement
on behalf of the Debtor.
IF DEBTOR IS A LIMITED LIABILITY COMPANY:
The Debtor represents and warrants that it is a limited liability
company duly organized, validly existing and in good standing under the laws of
the state of its organization; that the execution delivery and performance of
this agreement are within the Debtor's company powers and have been duly
authorized by all necessary action of its members; and that each person
executing this agreement has the authority to execute and deliver this agreement
on behalf of the Debtor.
IF DEBTOR IS A PARTNERSHIP:
The Debtor represents and warrants that it is a partnership duly formed
under the laws of the state of its formation; that the execution, delivery and
performance of this agreement are within the Debtor's partnership powers and
have been duly authorized by all necessary action of its partners and do not
contravene the provisions of its partnership agreement; and that each person
executing this agreement has the authority to execute and deliver this agreement
on behalf of the Debtor.
THE DEBTOR SUBMITS TO THE JURISDICTION OF STATE AND FEDERAL COURTS
LOCATED IN THE CITY AND STATE OF NEW YORK IN PERSONAM AND AGREES THAT ALL
ACTIONS AND PROCEEDINGS RELATING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT SHALL
BE LITIGATED ONLY IN SAID COURTS OR IN COURTS LOCATED ELSEWHERE AS THE BANK MAY
SELECT AND THAT SUCH COURTS ARE CONVENIENT FORUMS AND WAIVES PERSONAL SERVICE
UPON IT AND CONSENTS TO SERVICE OF PROCESS OUT OF SAID COURTS BY MAILING A COPY
THEREOF TO IT BY REGISTERED OR CERTIFIED MAIL.
THE DEBTOR AND THE BANK WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION
OR PROCEEDING BASED UPON, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
<PAGE>
By /s/ Terence S. Leighton
Name: Terence S. Leighton
Title: Vice President
Address: One Chase Manhattan Plaza
42nd Floor
New York, NY 10005
- --------------------------------------------------------------------------------
SCHEDULE A
TO
SECURITY AGREEMENT
EXECUTED BY
ZURICH CAPITAL MARKETS INC.
(Name of Debtor)
Property specifically included as "Collateral" for purposes of the within
Security Agreement:
Any and all Securities and other property held in the Account, as these
terms are defined in the Securities Clearing Agreement between the Debtor and
the Bank, and any cash balances held in any cash account maintained by the Bank
in connection therewith.
<PAGE>
EXHIBIT C
SECURITIES CLEARING AGREEMENT
(U.S. SECURITIES)
AGREEMENT, dated as of February 24, 1999, between Zurich Capital
Markets Inc. a corporation ("Customer"), and The Bank of New York ("Bank").
WHEREAS, Customer has requested Bank to act as its clearing agent for
the purpose of receiving and delivering securities, either in definitive form,
through a securities depository or clearing agency or through the Federal
Reserve/Treasury Book-Entry System in furtherance of Customer's business as a
broker/dealer of securities; and
WHEREAS, to induce Bank to act as clearing agent for Customer, Customer
is willing to enter into this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
W I T N E S S E T H:
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the meanings set forth
below:
1. "ACCOUNT" shall mean the clearing account in the name of Customer.
2. "AUTHORIZED PERSON" shall mean any officer of Customer and any other
person duly authorized by Customer to give Bank Instructions on behalf of
Customer, such persons to be designated in a certificate signed by a duly
authorized officer of Customer.
3. "BOOK-ENTRY SYSTEM" shall mean the Federal Reserve/Treasury
Book-Entry System for receiving and delivering securities maintained therein,
its successors and nominees.
4. "BULK INPUT INSTRUCTIONS" shall mean instructions delivered to Bank
by bulk input computer tape or electronic file.
5. "BUSINESS DAY" shall mean any day on which Bank and either FRBNY or
the relevant Depository, subcustodian or correspondent bank (as necessary for
the particular transaction involved) is open for business.
6. "COMPUTER TO COMPUTER INSTRUCTIONS" shall mean instructions
delivered to Bank in data format as specified in Bank's computer to computer
communication process specifications (as such specifications may be amended from
time to time).
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2
7. "DEFINITIVE SECURITIES" shall mean Securities issued and sold in the
United States and evidenced by physical certificates whose transfer is effected
by "street" delivery in the relevant market.
8. "DEPOSITORY" shall mean any clearing agency or securities depository
in the United States (including but not limited to The Depository Trust Company)
authorized under applicable law to act as a clearing agency or securities
depository.
9. "DEPOSITORY SECURITIES" shall mean Securities other than FRB
Securities which are cleared through or held by a Depository.
10. "DESEGREGATION INSTRUCTIONS" shall mean Written Instructions
pursuant to which Bank is requested to transfer Securities or cash balances from
a Segregated Account to the Account.
11. "FRB SECURITIES" shall mean Securities maintained in the Book-Entry
System.
12. "FRBNY" shall mean the Federal Reserve Bank of New York.
13. "GSCS" shall mean Government Securities Clearance System for
receiving and delivering Securities pursuant to this Agreement.
14. "INSTRUCTIONS" shall mean Bulk Input Instructions, Computer to
Computer Instructions, Oral Instructions, Remote Clearance Instructions or
Written Instructions.
15. "MARKET VALUE" shall mean the amount as calculated by Bank as the
market value of each Security based on the most recent closing bid price of such
Security, plus accrued interest thereon, as made available to Bank usually the
next Business Day by a pricing information service which Bank uses generally for
pricing Securities.
16. "ORAL INSTRUCTIONS" shall mean verbal instructions.
17. "REMOTE CLEARANCE INSTRUCTIONS" shall mean instructions delivered
to Bank by remote terminal located at Customer's premises linked to Bank's
securities processing systems.
18. "SECURITIES" shall mean FRB Securities, Depository Securities and
Definitive Securities.
19. "SEGREGATED ACCOUNT" shall mean an account or subaccount
established and maintained by Bank in the name of Customer pursuant to the
provisions of this Agreement.
20. "SEGREGATION INSTRUCTIONS" shall mean Written Instructions pursuant
to which Bank is requested to transfer Securities or cash balances from the
Account to a Segregated Account.
21. "WRITTEN INSTRUCTIONS" shall mean instructions in writing,
including facsimile transmissions.
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3
All references to time in this Agreement (including any Schedule) shall
mean the time in effect in New York on the relevant day.
ARTICLE II
CLEARING AGENCY
Section 2.01. APPOINTMENT OF CLEARING AGENT; USE OF AGENTS. Customer
hereby appoints Bank as its clearing agent for the purpose of accepting receipt
and making delivery of Securities. Bank hereby accepts such appointment and
shall act as Customer's clearing agent for the types of Securities as are
mutually agreed from time to time, all of which arrangements shall be subject to
the terms hereof. Bank is authorized and directed to use, to the extent
possible, the Book-Entry System any Depository and any banking institution
located outside of the United States (whether as subcustodian or correspondent)
in connection with its performance hereunder; PROVIDED, in the case of any such
banking institution, that Bank has acted with reasonable care in selecting such
institution in light of prevailing settlement and securities handling practices,
procedures and controls in the relevant market.
Section 2.02. CLEARING ACCOUNT. Bank shall establish and maintain the
Account in which it will hold on behalf of Customer Securities and monies
incidental to clearing Securities. Bank shall maintain accurate records with
respect to each transaction cleared through the Account, and is hereby
authorized to make appropriate debit and credit entries of Securities and monies
in the Account to effect the execution of each Instruction of Customer for the
receipt or delivery of Securities.
Section 2.03. DELIVERY AND PAYMENT RISK. (a) Customer understands that
when Bank is instructed to deliver Definitive or Depository Securities against
payment, delivery of such Securities and receipt of payment therefor may not be
completed simultaneously. Customer assumes all responsibility and liability for
all credit risks associated with Bank's delivery of Definitive and Depository
Securities pursuant to Instructions of Customer, which responsibility and
liability shall continue until final payment in full has been received by Bank.
(b) Bank may, as a matter of bookkeeping convenience, credit the
Account with the proceeds from the sale, redemption or other disposition of
Definitive and Depository Securities prior to its actual receipt of final
payment therefor and Customer agrees that such bookkeeping credits may also be
reflected on its books, and otherwise, as "immediately available" or "same day"
funds or by some other characterization. Notwithstanding any such credit or
characterization, all such credits shall be conditional upon Bank's actual
receipt of final payment and may be reversed by Bank to the extent that final
payment is not received. If Bank, in its sole discretion, permits Customer to
use funds credited to the Account prior to receipt by Bank of final payment
thereof, Customer shall nonetheless continue to bear the risk of, and liability
for, Bank's nonreceipt of final payment in full, and to the extent that final
payment in fall for any Definitive or Depository Securities delivered on any
Business Day is not received by Bank by the close of business on such day,
Customer shall immediately upon demand reimburse Bank for the amount so used in
anticipation of final payment, plus interest thereon from and including the
Business Day such final payment should have been received until such amount is
repaid in full at a rate per annum, equal to (i) prior to demand and for up to
twenty-four (24) hours immediately following demand, as determined in accordance
with
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4
Section 3.03(a) hereof, and (ii) beginning twenty-four (24) hours after demand,
Bank's prime commercial lending rate as publicly announced by Bank to be in
effect from time to time, such rate to be adjusted on the effective date of any
change in such prime commercial lending rate. The rights of Bank and the
obligations of Customer under this Section 2.03(b) are absolute and
unconditional whether or not Bank would be entitled to indemnification pursuant
to Section 4.05 hereof.
(c) For all purposes of this Agreement, payment with respect to a
transaction will not be "final" until Bank shall have received immediately
available funds which under applicable law or rule are irreversible, which are
not subject to any security interest, levy or other encumbrance, and which are
specifically applicable, or deemed by Bank to be specifically applicable, to
such transaction. A debit by Bank to any other account of Customer maintained by
Bank or to an account of any third party to whom or for whose account Securities
have been delivered shall not constitute final payment to the extent that such
debit creates an overdraft or does not otherwise result in the receipt by Bank
of immediately available, irreversible and unencumbered funds.
Section 2.04. SEGREGATION ACCOUNTS; SEGREGATION AND DESEGREGATION
INSTRUCTIONS. (a) Upon Customer's execution and delivery to Bank of such
agreements as Bank shall require, Bank shall establish and maintain for and in
the name of Customer one or more Segregated Accounts for the purpose of
segregating fully paid for Securities of customers of Customer, Securities
subject to repurchase agreements, and for other purposes acceptable to Bank.
Subject to Bank's rights under Article III, Customer shall be entitled to
deliver to Bank a Segregation Instruction to transfer fully paid for Securities
and freely available cash balances into a Segregated Account. Each such
Segregation Instruction shall set forth (i) the specific issue of each Security
including CUSIP number (or other securities identification number acceptable to
Bank, if any), (ii) the Segregated Account into which such Security is to be
transferred, and (iii) the aggregate number of units of such Security to be so
transferred. Customer acknowledges and agrees that its issuance to Bank of a
Segregation Instruction and Bank's compliance therewith shall constitute the
sole means by which Customer shall identify to Bank any Securities as fully paid
for Securities of Customer's customers or Securities subject to repurchase
agreements or other purposes acceptable to Bank. Bank will not have, and will
not assert, any claim or lien against Securities held in a Segregated Account
nor will Bank grant any third party, including any Federal Reserve Bank, any
interest in such Securities.
(b) Customer shall be entitled to deliver to Bank a Desegregation
Instruction to transfer Securities from a Segregated Account to the Account.
Each Desegregation Instruction shall set forth (i) the specific issue of each
Security including CUSIP number (or other securities identification number
acceptable to Bank, if any), (ii) an instruction to transfer each such Security
to the Account, and (iii) the aggregate number of units of such Security to be
so transferred. Customer's delivery of a Desegregation Instruction shall
constitute a representation and warranty by Customer to and for the benefit of
Bank that Customer is authorized to issue such Desegregation Instruction and by
so doing to transfer and pledge to Bank the full value of any and all such
Securities. Customer acknowledges and agrees that upon delivery of Securities to
the Account pursuant to a Desegregation Instruction, any and all claims to such
Securities by any third party, including without limitation, claims of or by
customers or counterparties of Customer, are discharged, extinguished, released
and terminated.
<PAGE>
5
(c) On any Business Day that Bank receives Segregation and/or
Desegregation Instructions from Customer, Bank shall issue to Customer an
electronic notification of each Security held in the appropriate Segregated
Account as of the close of such Business Day. Customer shall notify Bank within
twenty-four (24) hours of any material discrepancy between any electronic
notification issued by Bank to Customer hereunder and Customer's record of
Segregated Account positions.
(d) Nothing in this Agreement shall create or give rise to, or be
interpreted or construed as creating or giving rise to, any contractual,
bailment, agency, fiduciary, or relationship of any nature whatsoever between
Bank and any non-party to this Agreement, including without limitation,
customers or counterparties of Customer.
Section 2.05. CLEARANCE INSTRUCTIONS. As mutually agreed, Customer
shall give Bank Instructions to direct it to receive, deliver or transfer
Securities. It is Customer's obligation and responsibility to deliver all such
Instructions in accordance with the procedures, practices and operational
guidelines prescribed by Bank from time to time as to information required,
manner of delivery, timeliness of delivery and otherwise.
Section 2.06. EFFECTIVENESS OF INSTRUCTIONS. Bank shall conclusively
presume that all Instructions (other than Oral and Written Instructions)
received by it hereunder have been duly authorized and delivered and is hereby
irrevocably authorized and directed to act in accordance therewith. Bank shall
be entitled to rely upon any Oral Instructions or Written Instructions received
by it and believed to have been given by an Authorized Person. Customer agrees
to forward to Bank Written Instructions confirming Oral Instructions by the
close of the same Business Day that such Oral Instructions are given to Bank.
Customer agrees that the fact that such confirming Written Instructions are not
received or that contrary instructions are received by Bank shall in no way
affect the validity or enforceability of transactions authorized by Customer.
Bank shall not be liable for failures to execute, or "DKs", due to incorrect,
incomplete, conflicting or untimely Instructions or any other failure by
Customer to comply with the requirements prescribed by Bank from time to time.
Section 2.07. SETTLEMENTS. (a) Transactions in FRB Securities and
Depository Securities will settle in accordance with the rules, procedures and
policies of the Book-Entry System or applicable Depository. Transactions in
Definitive Securities shall be settled in accordance with accepted industry
practices and the standard settlement timeframes for trades in the particular
Definitive Securities in the relevant markets. All Definitive Securities cleared
through Bank must be in good deliverable form.
(b) In order for Bank to complete same-day settlements, Bank must
receive Instructions in accordance with the time frames established by Bank as
set forth in Schedule I. Except as expressly provided in Schedule I, Bank shall
have no obligation to perform same-day settlements.
Section 2.08. SAME-DAY TURNAROUND GUARANTEE. (a) Whenever Bank has been
given proper and timely Instructions both to accept delivery of the types of
Securities identified on Schedule II and to make delivery of those same
Securities, both transactions to settle on the same Business Day,
<PAGE>
6
Bank guarantees to tender for delivery such Securities on such Business Day,
subject to the following provisions and the conditions set forth on Schedule II.
(b) In the event Bank fails to complete a same-day turnaround
transaction on any Security after receiving proper and timely Instructions as
provided hereunder, Bank's sole liability to Customer shall be to make an
interest free overnight loan to Customer if as a result of such failure it is
necessary for Customer to finance overnight such Security. For all purposes
other than the overnight rate of interest, such loan shall be subject to the
provisions of Article III. Bank shall incur no other liability to Customer nor
to any non-party to this Agreement as a result of its failure to complete a
guaranteed same-day turnaround.
(c) Except as expressly provided in Schedule II, Bank shall not be
liable for its failure to complete a same-day turnaround.
Section 2.09. FOREIGN CURRENCY. (a) For the purpose of receiving
non-U.S. Securities, Customer shall provide Bank or its correspondent with
sufficient immediately available funds for all transactions by such time and
date as local conditions (i.e., country of settlement) dictate. As used herein,
"sufficient immediately available funds" shall mean either (i) sufficient United
States currency to purchase the necessary foreign currency, or (ii) sufficient
applicable foreign currency, to cover scheduled purchases. Bank shall provide
Customer with immediately available funds each day which result from the actual
settlement of all sale transactions, based upon advices received by Bank from
its agents and Depositories. Such funds shall be in United States dollars or
such other currency as Customer may specify to Bank.
(b) Bank is authorized and hereby agrees to effect currency exchange
transactions in connection with transactions in non-U.S. Securities, or as
otherwise may be requested by Customer and agreed to by Bank, through customary
banking channels, including with Bank or an affiliate of Bank acting as
principal. All expenses and risks incident to such currency exchange
transactions shall be assumed by Customer, including but not limited to
fluctuations in currency exchange rates.
Section 2.10. FEES. For its services hereunder, Customer agrees to pay
Bank the fees and charges set forth on a Fee Schedule delivered to Customer.
Such fees or charges may be amended or supplemented by Bank from time to time
upon thirty days prior written notice to Customer. Bank is hereby authorized to
deduct the fees and charges payable hereunder from the cash balances in the
Account. Bank shall generally debit the Account in arrears on the fifteenth day
(or next succeeding Business Day) of each month for fees incurred during the
prior month, although Bank reserves the right to debit the Account or to demand
payment simultaneously with clearing any Securities.
Section 2.11. THIRD PARTY CLAIMS. In the event a claim is made against
Bank for interest, penalty or any other amount in accordance with the rules or
regulations of FRBNY, any Depository or any regulatory authority on account of
any action or inaction by Customer and Bank determines such claim is justified
under applicable laws, rules or regulations, Bank shall promptly inform Customer
of such claim. In the event Customer does not settle the claim or pay Bank such
amount within two Business Days after notification of the claim, Bank is
authorized to debit the Account in the amount of such claim.
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7
Section 2.12. CUSTOMER TRAINING; EQUIPMENT. (a) Any computer or other
remote terminal utilized by Customer in connection with this Agreement shall be
provided at Customer's expense and must be fully compatible with GSCS. Customer
assumes all responsibility for maintenance of such terminal and assumes all
liability resulting from any interruption of its ability to deliver Computer to
Computer or Remote Clearance Instructions due to any problem associated with the
terminal not caused by GSCS.
(b) If Bulk Input Instructions are to be delivered by bulk input
computer tape, it must be on computer tape fully compatible with GSCS. Two
separately run original tapes, not merely duplicate tapes, must be delivered to
Bank. Bank will promptly advise an Authorized Person if for any reason Bank is
unable to input such Bulk Input Instructions into GSCS.
ARTICLE III
FINANCING ARRANGEMENTS
Section 3.01. FAIL FINANCING. Subject to the terms of this Agreement,
Bank hereby agrees to make loans to Customer for the purpose of financing failed
deliveries of Securities (each, a "Fail Financing Loan"). Each Fail Financing
Loan shall be in a principal amount not to exceed the Market Value of the
Securities financed thereby and shall be due and payable by 10:00 a.m. on the
next Business Day after the making thereof. In the event that Bank shall have
extended credit to Customer in receiving Securities on its behalf in an amount
greater than the Market Value of the Securities financed hereunder, Customer
agrees as a condition to obtaining such Fail Financing Loan to promptly pay Bank
an amount equal to the difference between the credit so extended and the Market
Value of such Securities or provide Bank with additional collateral acceptable
to Bank. For purposes of this Section 3.01, "DKs" shall not be deemed to be
failed deliveries, and the financing of "DKs" shall be governed by the
provisions of Section 3.02 below. Notwithstanding any of the foregoing, Bank
reserves the right, upon notice to Customer, not to make Fail Financing Loans
secured by certain types of Securities.
Section 3.02. POSITION FINANCING. With the prior agreement of Bank to
provide a credit facility to Customer, Bank may make loans to Customer to
finance its position in Securities (each, a "Position Financing Loan"). Each
Position Financing Loan shall be in a principal amount not to exceed the
Collateral Value thereof (as defined below), and shall be due and payable by
10:00 a.m. on the next Business Day after the making thereof. Customer shall
conduct its business in such a way that the aggregate principal amount
outstanding of all Position Financing Loans shall not exceed the amount set
forth on Schedule III. Although Bank may in its sole discretion make Position
Financing Loans from time to time exceeding such aggregate principal amount as
an accommodation to Customer, Customer shall in no event rely upon Bank to do
so. In the event the principal amount of a Position Financing Loan exceeds the
Collateral Value thereof, Customer agrees as a condition to obtaining such
Position Financing Loan to promptly pay Bank an amount equal to the difference
between such Position Financing Loan and the Collateral Value thereof or provide
Bank with additional collateral acceptable to Bank. Schedule III may be amended
or supplemented by Bank from time to time in its sole discretion by delivery to
Customer of a revised Schedule III, and any such amendment or supplement shall
be effective upon receipt by Customer, unless otherwise stated therein. For
purposes hereof, the "Collateral Value" of a Position Financing Loan shall mean
the
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8
Market Value of the Securities financed thereby minus the applicable Margin
Percent of the Market Value thereof (as set forth on Schedule III).
Section 3.03. INTEREST. Customer agrees to pay Bank interest as
follows:
(a) RATE DETERMINATION. Fail Financing Loans, Position Financing Loans
and any other loans or extensions of credit arising hereunder or in connection
with clearing Securities (collectively, "Loans") shall bear interest at the rate
set by Bank in light of money market conditions, availability of funds and
amount required, such rate to be made available to Customer on request. If Bank
makes Position Financing Loans available to Customer, Fail Financing Loans shall
generally bear interest at the same rate, although Bank reserves the right to
set a different rate in light of money market conditions and availability of
funds as it deems necessary.
(b) PAYMENT OF INTEREST. Customer agrees to pay Bank interest monthly
in arrears, which amount Bank is authorized to debit from the cash balances in
the Account; however, Bank reserves the right to charge interest daily in
arrears.
Section 3.04. COLLATERAL SECURITY. As security for the repayment of
Loans and for the payment of interest thereon and all other Customer obligations
to Bank, Customer hereby grants Bank a security interest in any and all
Securities which may now or hereafter be held in the Account, any and all cash
balances now or hereafter deposited in the Account and such other collateral as
may be agreed (collectively, the "Collateral"). Bank shall be entitled to its
rights as a pledgee under common law and as a secured party under Articles 8 and
9 of the New York Uniform Commercial Code and any and all other applicable laws
and/or regulations as then in effect with respect to the Collateral.
Notwithstanding the interest of any other party in the Collateral, whether
arising from transactions with Customer in Securities or from any other
circumstances, Bank shall have a first and prior lien on the Collateral.
Customer hereby grants Bank the right to foreclose upon the Collateral and to
liquidate the Collateral upon the occurrence of an Event of Default (as defined
in Article IV). Upon receipt from Customer of instructions to deliver any
Security to any subaccount or other account maintained by Bank on behalf of
Customer or to any third party, Bank shall be entitled to hold such Security in
the Account and subject to the security interest in favor of Bank until Bank
determines it has no loans, overdrafts or losses on its books for Customer or
until Bank has received satisfactory collateral for all such loans, overdrafts
or losses and until all money payments are final and irreversible.
Section 3.05. SECURITY AGREEMENT. To further assure Bank of its rights
to the Collateral under this Article III and secure repayment of Customer's
obligations to Bank, Customer agrees to execute and deliver to Bank a Security
Agreement in form and substance acceptable to Bank (the "Security Agreement").
ARTICLE IV
GENERAL CONDITIONS
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9
Section 4.01. REPRESENTATIONS AND WARRANTIES. Customer hereby
represents and warrants to Bank, which representations and warranties shall be
deemed to be continuing and to be reaffirmed upon the delivery to Bank of any
Instructions under Article II:
(a) ORGANIZATION. Customer is duly organized and existing under the
laws of the jurisdiction of its organization, with full power and authority to
carry on its business as now conducted, to enter into this Agreement and the
Security Agreement and to perform its obligations hereunder and thereunder;
(b) BINDING OBLIGATIONS. This Agreement and the Security Agreement have
been duly authorized, executed and delivered by Customer in accordance with all
requisite corporate action and constitute valid and legally binding obligations
of Customer, enforceable in accordance with their respective terms;
(c) COMPLIANCE WITH LAWS. Customer is conducting its business in
compliance with all applicable laws and regulations, both state and federal, and
has obtained all regulatory licenses, approvals and consents necessary to carry
on its business as currently conducted; there is no statute, regulation, rule,
order or judgment binding on Customer and no provision of its charter or
by-laws, nor of any mortgage, indenture, credit agreement or other contract
binding on Customer or affecting its property which would prohibit the execution
or performance by Customer of this Agreement or the Security Agreement;
(d) SECURITY INTEREST. Customer owns the Securities in the Account free
and clear of all liens, claims, security interests and encumbrances (except
those granted herein) or, if the Securities in the Account are owned
beneficially by others, Customer has the right to pledge such Securities to the
extent financed by Bank hereunder, free of any right of redemption or prior
claim by the beneficial owner; Bank's security interest in the Collateral shall
be a first lien and security interest subject to no setoffs, counterclaims or
other liens prior to or on a parity with it in favor of any other party (other
than specific liens granted preferred status by statute) and Customer shall take
any and all additional steps which Bank requires to assure itself of such
priority and status, including notifying third parties or obtaining their
consent to, Bank's security interest; no Securities in the Account are
"securities carried for the account of any customer" within the meaning of Rules
8c-I or 15c2-1 of the Securities Exchange Act of 1934, as amended;
(e) CONDUCT OF BUSINESS. Customer is conducting its business in a
prudent manner and has established and presently maintains audit and compliance
policies and procedures reasonably designed to prevent Customer from incurring
unreasonable or unwarranted risks or speculative exposures in light of its
capital base; and
(f) FINANCIAL POSITION. The annual and interim balance sheets and
income statements of Customer ("Financial Statements") heretofore delivered to
Bank, which are the most recent available, are true and correct, fairly present
the financial position of Customer as of their dates and have been prepared in
accordance with generally accepted accounting principles consistently applied;
there has been no material adverse change in the financial position or business
operations of Customer since the date of the most recent audited Financial
Statements.
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Section 4.02. COVENANTS. Customer covenants with Bank as follows:
(a) DELIVERY OF FINANCIAL STATEMENTS. Customer shall deliver to Bank
promptly as they become available the annual, audited Financial Statements of
Customer, unaudited interim Financial Statements on a quarterly basis, and any
other financial statements which Bank shall reasonably request;
(b) MATERIAL ADVERSE CHANGE. Customer shall notify Bank promptly of any
material adverse change in its position, financial or otherwise, since the date
of the most recent audited Financial Statements;
(c) INSPECTION. Customer shall allow Bank from time to time to visit
its offices, inspect its books and records and discuss Customer's business with
its management and officers, all at reasonable times and with prior notice;
(d) NO ACTIONS IN VIOLATION OF LAW. Customer shall not use the services
provided by Bank hereunder in any manner that is in violation of or will result
in the violation of any law, rule or regulation (including but not limited to,
those of any self-regulatory organization) applicable to Customer or Bank;
(e) CUSTOMER CONFIRMATIONS. Customer shall not issue any confirmation
to any third party with respect to any Security held by Bank in connection with
this Agreement unless and until such Security has been transferred to a
Segregated Account in accordance with this Agreement; and
(f) FEDERAL RESERVE FORM U-1. Upon Bank's request from time to time,
Customer shall execute and deliver a properly completed Federal Reserve Form U-1
(I.E., Statement of Purpose for an Extension of Credit Secured by Margin Stock)
to Bank.
Section 4.03. EVENTS OF DEFAULT. Bank shall have the right to terminate
this Agreement to demand repayment of any Loans and other amounts owing
hereunder and to liquidate any Collateral upon the occurrence of any of the
following events (each, an "Event of Default");
(i) The commencement of a case or other proceeding seeking
liquidation, reorganization or other similar relief with
respect to Customer or its debts under any bankruptcy,
insolvency or similar law or seeking the appointment of a
receiver, trustee, liquidator, conservator, administrator,
custodian or other similar official for Customer or Customer's
property;
(ii) The failure to pay, when due and payable, the principal amount
of any Loan or the failure to pay, when due and payable, any
additional amount owing under Sections 3.01 or 3.02;
(iii) The failure to pay within one (1) Business Day after the same
shall become due and payable the interest on any Loan or any
other amount owing hereunder,
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(iv) The failure to comply with any other provision of this
Agreement, which failure shall continue for thirty (30) days;
or
(v) Any default under the Security Agreement.
Section 4.04. EFFECTIVENESS OF AGREEMENT. This Agreement shall become
effective upon the delivery to Bank of the following in form satisfactory to
Bank:
(a) AGREEMENTS. Duly executed originals of this Agreement and the
Security Agreement, together with such officer's certificates and opinions of
counsel as to corporate action and the matters set forth in Section 4.01 as Bank
shall request;
(b) FINANCIAL STATEMENTS. The most recent audited and interim unaudited
Financial Statements of Customer, and
(c) CERTIFICATE OF AUTHORIZED PERSONS. Certificate, executed by the
chief executive officer, chief financial officer or other officer of Customer
acceptable to Bank, identifying the Authorized Persons who may give Bank
Instructions hereunder.
Section 4.05. STANDARD OF CARE, INDEMNIFICATION. (a) It is expressly
understood and agreed that in exercising its rights and performing its
obligations hereunder, Bank owes no fiduciary duty to Customer. Bank shall not
be liable for any costs, expenses, damages, liabilities or claims, including
attorney's and accountant's fees (collectively, "Losses") incurred by Customer,
except those Losses arising out of the gross negligence or wilful misconduct of
Bank. Bank shall not be liable for any Losses sustained or incurred by reason of
any action or inaction by FRBNY, any Depository, subcustodian, correspondent or
any of their respective successors or nominees; it being understood that with
respect to any such Losses, Bank shall take appropriate action to recover such
Losses from such third parties, and Bank's sole responsibility and liability to
Customer shall be limited to amounts so received from such third parties
(exclusive of costs and expenses incurred by Bank). In no event will Bank be
liable to Customer or any third party for special, indirect or consequential
damages, or lost profits or loss of business, arising under or in connection
with this Agreement, even if previously informed of the possibility of such
damages and regardless of the form of action.
(b) Customer agrees to indemnify Bank and hold it harmless against any
and all Losses, sustained or incurred by, or which may be asserted against, Bank
as a result of its operating hereunder, including reasonable fees and expenses
of counsel incurred by Bank in a successful defense of claims by Customer,
excepting only those Losses arising from Bank's gross negligence or wilful
misconduct. This indemnity shall be a continuing obligation of Customer, its
successors and assigns, notwithstanding the termination of this Agreement or
Bank ceasing to clear Securities hereunder. Upon written demand from Bank,
Customer agrees to pay promptly amounts owing under this indemnity free and
clear of any right of offset, counterclaim or other deduction asserted by
Customer. Bank's determination of amounts owing hereunder shall be binding.
Customer shall be entitled to an accounting for any amounts owing hereunder, but
this shall not affect Customer's obligation to pay such amounts promptly on
demand.
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Section 4.06. LIMITATION OF LIABILITY. Without limiting the generality
of the foregoing, Bank shall be under no duty or obligation to inquire into, and
shall not be liable for, the validity of any Securities received, delivered or
held by it hereunder, the legality of their purchase or sale, or the propriety
of the amount paid or received upon purchase or sale.
Section 4.07. NO OBLIGATION TO EXTEND CREDIT. Notwithstanding the fact
that Bank from time to time, and whether or not as a regular pattern, makes
Loans to Customer or makes funds available to Customer in anticipation of final
payment for Securities delivered, Bank may at any time decline to continue or
re-extend any such Loan or credit, or any other credit, if Bank in its sole
discretion deems any of such obligations to be insecure, or the risk of
non-payment or non-performance by Customer to be increased.
Section 4.08. FORCE MAJEURE. Bank shall not be liable for any failure
or delay in the performance of its obligations under this Agreement arising out
of or caused, directly or indirectly, by circumstances beyond its control,
including without limitation, any act of God; earthquake; fire; flood; war;
civil or military disturbance; sabotage; epidemic; riot; interruption or
suspension of any communication or wire facilities or services; loss or
malfunction of utilities, transportation, computer (hardware or software) or
communications service; accident; labor dispute; act of civil or military
authority; governmental action or inability to obtain labor, material, equipment
or transportation.
Section 4.09. TERMINATION. (a) This Agreement may be terminated by
either party at any time upon not less than thirty (30) days prior written
notice delivered to the other party specifying the date of termination;
PROVIDED, HOWEVER, that Bank shall be entitled to terminate this Agreement
immediately upon notice to Customer if (i) Bank for any reason determines that
there is or has been a material adverse change in the financial position of
Customer which might expose Bank to potential losses if it continued to act
hereunder or that any Loan is insecure or that the risk of non-payment or
non-performance of any of Customer's obligations hereunder is increased, or (ii)
any representation or warranty made by Customer hereunder is incorrect or
misleading in any material respect when made or repeated; and PROVIDED FURTHER,
that Bank shall be entitled to terminate this Agreement immediately and without
notice upon the occurrence of an Event of Default.
(b) Upon termination of this Agreement and provided that all Loans,
interest thereon and all other amounts due to Bank under this Agreement are paid
in full, Bank shall transfer all Securities and cash balances in the Account as
follows:
(i) if not less than five (5) Business Days prior to the
termination date Customer shall have given Bank Written
Instructions for the delivery of such Securities and cash
balances, then in accordance with such Written Instructions;
and
(ii) if no such Written Instructions have been given by Customer,
then on the termination date, with respect to FRB Securities,
Depository Securities and Non-U.S. Definitive Securities, Bank
may establish a custody account and hold such Securities in
escrow for the benefit of and at the expense of Customer, and
with respect to U.S. Definitive Securities and cash balances,
Bank shall deliver such Definitive Securities and cash
<PAGE>
13
balances (which may be by certified or official bank check) to
Customer at the address provided below.
(c) Customer will upon demand reimburse Bank for all shipping and
insurance costs associated with the foregoing deliveries.
Section 4.10. CUMULATIVE RIGHTS AND NO WAIVER. Each and every right
granted to Bank hereunder or under any other document delivered hereunder or in
connection herewith, or allowed it by law or equity, shall be cumulative and may
be exercised from time to time. No failure on the part of Bank to exercise, and
no delay in exercising, any right will operate as a waiver thereof, nor will any
single or partial exercise by Bank of any right preclude any other or future
exercise thereof or the exercise of any other right.
Section 4.11. SEVERABILITY. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
Section 4.12. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to conflict of laws principles thereof.
Section 4.13. JUDICIAL PROCEEDINGS. Customer hereby consents to the
jurisdiction of a state or federal court situated in New York City, New York in
connection with any dispute arising hereunder. Customer hereby waives its right
to trial by jury in any proceeding brought by Customer involving, directly or
indirectly, any matter in any way arising out of, related to, or connected with,
this Agreement.
Section 4.14. NOTICES. Any notice, demand or other communication
hereunder, other than those given pursuant to Article II, shall be delivered in
writing and shall be effective upon receipt:
If to Customer, at
Zurich Capital Markets Inc.
One Chase Manhattan Plaza - 42nd Floor
New York, NY 10005
If to Bank, at
The Bank of New York
Broker/Dealer Services
One Wall Street - 5th Floor
New York, New York 10286
<PAGE>
14
With a copy to
The Bank of New York
Securities Industry Banking Division
One Wall Street
New York, New York 10286
<PAGE>
15
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
[NAME OF CUSTOMER]
By: /S/ TERENCE S. LEIGHTON
---------------------------
Title: Authorized Signatory
THE BANK OF NEW YORK
By: /S/ PAUL KUNDA
---------------------------
Broker/Dealer Services
Title: Vice President
By: /S/ [ILLEGIBLE]
---------------------------
Securities Industry
Banking Division
Title: Vice President
<PAGE>
SCHEDULE I
TIME DEADLINES FOR RECEIPT OF
SAME DAY SETTLEMENT INSTRUCTIONS
(FRB SECURITIES)
(A) BULK INPUT INSTRUCTIONS: not later than one (1) hour prior to the close of
the Book-Entry System on the date of settlement.
(B) COMPUTER TO COMPUTER INSTRUCTIONS: not later than two (2) minutes prior to
the close of the Book-Entry System on the date of settlement.
(C) ORAL INSTRUCTIONS: are acceptable only if Written Instruction confirming
Oral Instructions are received by 1:00 p.m. on the date of settlement for cash
same day settlements.
(D) REMOTE CLEARANCE INSTRUCTIONS: not later than two (2) minutes prior to the
close of the Book- Entry System on the date of settlement.
(E) REMOTE JOB ENTRY: not later than one (1) hour prior to the close of the
Book-Entry System on the date of settlement.
(F) WRITTEN INSTRUCTIONS: by 1:00 p.m. on the date of settlement for cash same
day settlements.
<PAGE>
2
SCHEDULE I
TIME DEADLINES FOR RECEIPT OF
SAME DAY SETTLEMENT INSTRUCTIONS
(U.S. DEFINITIVE SECURITIES)
(A) BULK INPUT INSTRUCTIONS: not later than 45 minutes prior to the applicable
securities delivery deadline.
(B) COMPUTER TO COMPUTER INSTRUCTIONS: not later than 45 minutes prior to the
applicable securities delivery deadline.
(C) ORAL INSTRUCTIONS: are acceptable only if Written Instructions confirming
Oral instructions are received not later than 45 minutes prior to the applicable
securities delivery deadline.
(D) REMOTE CLEARANCE INSTRUCTIONS: not later than 45 minutes prior to the
applicable securities delivery deadline.
(E) REMOTE JOB ENTRY: not later than 45 minutes prior to the applicable
securities delivery deadline.
(F) WRITTEN INSTRUCTIONS: not later than 45 minutes prior to the applicable
securities delivery deadline.
<PAGE>
3
SCHEDULE I
TIME DEADLINES FOR RECEIPT OF
SAME DAY/NEXT DAY SETTLEMENT INSTRUCTIONS
(DEPOSITORY TRUST COMPANY SECURITIES)
(A) BULK INPUT INSTRUCTIONS: (i) for same day settlements, not later than 2:00
p.m. on the date of settlement (ii) for next-day settlement, not later than 4:00
p.m. on the Business Day prior to the date of settlement.
(B) ORAL INSTRUCTIONS: are acceptable only if Written Instructions confirming
Oral Instructions are received by 1:00 p.m. on the date of settlement for cash
same day settlements.
(C) REMOTE CLEARANCE INSTRUCTIONS: (i) for same day settlements, not later than
1:00 p.m. on the date of settlement, (ii) for next-day settlement, not later
than 4:00 p.m. on the Business Day prior to the date of settlement.
(D) REMOTE JOB ENTRY: (i) for same day settlements, not later than 2:00 p.m. on
the date of settlement, (ii) for next-day settlement, not later than 4:00 p.m.
on the Business Day prior to the date of settlement.
(E) WRITTEN INSTRUCTIONS: (i) for same day settlements, not later than 1:00 p.m.
on the date of settlement (ii) for next-day settlement, not later than 4:00 p.m.
on the Business Day prior to the date of settlement.
<PAGE>
SCHEDULE II
SAME-DAY TURNAROUND GUARANTEE
(FRB SECURITIES)
Bank must receive (as determined below) the FRB Securities at least two
(2) minutes prior to the close of FRBNY for FRB Securities to be delivered
through the Book-Entry System to accounts outside GSCS. Instructions will be
received by Bank and acknowledged by Bank's Communication "Front End" and such
instructions will then be sent to the "GSCS Application" to be validated, time
stamped and queued for outbound delivery. FRB Securities shall be deemed to have
been received by the Account (i) through FRBNY from another participant on the
Book-Entry System at the time the transaction message confirming delivery to
Bank's account at the Book-Entry System is received by the GSCS Application or
(ii) through GSCS from an account of another participant in GSCS at the time the
transaction message confirming delivery into the Account is logged onto GSCS,
which time is printed on Bank's confirmation as the GSCS "Receive Time". FRB
Securities shall be deemed to have been tendered for delivery out of the Account
at the time the transaction message is stamped by FRBNY with its GSCS "Delivery
Time" (x) for delivery to another participant on the Book-Entry System or (y) to
another participant in GSCS. Bank only guarantees turnaround times within GSCS
and is not responsible for delays or processing backlogs on the Book-Entry
System or for the Book-Entry System going down. Transaction messages which do
not reach Bank within the time frames set forth, regardless of when such
transaction messages had been queued by FRBNY for delivery to Bank, are not
covered by the turnaround guarantee.
<PAGE>
2
SCHEDULE II
SAME-DAY TURNAROUND GUARANTEE
(DEPOSITORY TRUST COMPANY SECURITIES)
Same-day turnaround for Depository Trust Company Securities will be
subject to the rules, procedures and policies of DTC and subject to such time
deadlines as Bank may specify from time to time. Bank shall not be liable
hereunder for its failure to complete same-day turnarounds as a result of delays
or processing backlogs at any depository.
<PAGE>
3
SCHEDULE II
SAME-DAY TURNAROUND GUARANTEE
(U.S. DEFINITIVE SECURITIES)
Bank must receive (as determined below) the Definitive Securities in
good deliverable form at least thirty (30) minutes prior to the close of
business by Bank for clearing Definitive Securities (for deliveries within the
downtown financial district in Manhattan, New York City). Bank shall inform
Customer of any changes in the above time. Definitive Securities shall be deemed
received by Bank when accepted at the securities cage window, One Wall Street,
New York, New York 10286 (or such other place hereafter designated by Bank),
which time is stamped on Bank's receipt confirmation. Bank shall be deemed to
have tendered delivery of Definitive Securities at the time they are accepted by
the other clearing bank, which time is customarily stamped on its receipt form.
Bank does not guarantee same-day turnaround of Definitive Securities received
hereunder when the delivery of such Definitive Securities by Bank must be
accompanied by a Bank check representing accrued interest or other payment, but
Bank agrees to use its best efforts to tender for same-day delivery such
Definitive Securities.
<PAGE>
4
SCHEDULE III
POSITION LINE
<TABLE>
<CAPTION>
SECURITY TYPE MARGIN PERCENT
<S> <C>
U.S. treasury securities (i.e., bills, bonds and notes),
under one year to maturity 100.75%
one to three years to maturity 102%
more than three years to maturity 104%
U.S. government agency and US. government
sponsored agency securities (other than mortgage
backed securities) 104%
agency discount notes 104%
mortgage-backed securities 110%
</TABLE>
The Aggregate principal amount of all Position Financing Loans that may
be outstanding at any one time is $0.
ZURICH CAPITAL MARKETS INC.
By: /S/ TERENCE S. LEIGHTON
Title: Authorized Signatory
THE BANK OF NEW YORK
By: /S/ [ILLEGIBLE]
Securities Industry
Banking Division
Title: Vice President
<PAGE>
FEE SCHEDULE
<PAGE>
ZURICH CAPITAL MARKETS, INC.
a. AVERAGE DAILY BOOK-ENTRY TRANSACTIONS
--------------------------------------
FRB and PTC Remote Clearance $4.00 per receive/deliver
Zurich Capital Markets Inc. will be responsible for all FRB and PTC pass-along
fees.
b. REDEMPTION
----------
No charge
c. TRUST RECEIPTS
--------------
$25.00 per receive
$25.00 per deliver
d. DOMESTIC MONEY TRANSFERS (Processed through the clearance terminals)
------------------------
$4.00 per receive of funds $4.00 per deliver of funds
e. SEGREGATION MOVES
-----------------
$ 1.00 per move
f. RESEARCH FEES
-------------
$25.00 per item over six (6) months
No charge under (6) months
g. TRI-PARTY REPURCHASE AGREEMENTS
-------------------------------
Physical Segregations $ 5.00 per issue
FRB Deposits/Withdrawals $30.00 per transaction
Safekeeping Repo $40.00 per transaction
P&I Payments $ 5.00 per issue
h. CASH TRI-PARTY FEES
-------------------
Will be negotiated on a deal by deal basis.
<PAGE>
2
ZURICH CAPITAL MARKETS, INC.
i. MONTHLY MINIMUM
---------------
$5,000,00
j. PHYSICAL PICK-UP AND/OR DELIVERY OUTSIDE FINANCIAL DISTRICT
-----------------------------------------------------------
100% Surcharge to underlying transaction fee
k. INTRADAY OVERDRAFT FEE
----------------------
Customer agrees to pay an intraday overdraft fee equal to the
customer's daylight overdraft indebtedness to the Bank (as determined
by the Bank) multiplied by the Bank's Intraday Overdraft (currently 12
b.p.). The Intraday Overdraft is subject to change immediately upon
notice.
ZURICH CAPITAL MARKETS INC.
BY: /S/ TERENCE S. LEIGHTON
-----------------------------
(SIGNATURE)
TERENCE S. LEIGHTON
-----------------------------
(PLEASE PRINT)
THE BANK OF NEW YORK
BY: /S/ PAUL KUNDA
------------------------------
(SIGNATURE)
PAUL KUNDA
------------------------------
(PLEASE PRINT)
