Interpretation - GMSLA Provision

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GMSLA Anatomy


In a Nutshell Clause 2:

2. Interpretation
2.1. In this agreement:
Act of Insolvency means for either Party:

(a) a general assignment for the benefit of, or entering into a reorganisation, arrangement, or composition with creditors; or
(b) its admission it is unable to pay its debts when due; or
(c) an administrator is appointed over a material part of its business (or it seeks one); or
(d) a bankruptcy petition is filed on it (other than in by reference to Agreement) and is not stayed or dismissed within 30 days; or
(e) its creditors meet to consider a voluntary arrangement between them;

Agency Annex means the Annex to this Agreement under which a Lender to act as an agent lender for Loans;
Alternative Collateral means Collateral with a Market Value equal to delivered Collateral provided by way of substitution under paragraph 5.3;
Applicable Law means all relevant laws, rules, regulations, taxes, practice notes and rulings published in connection with them;
Automatic Early Termination is defined in paragraph 10.1(d);
Base Currency is specified in paragraph 2 of the Schedule;
Business Day means a weekday on which banks and markets are generally open:

(a) For Delivery: where the Securities, Collateral and their Equivalents are to be delivered;
(b) For payments: in the principal financial centre for the relevant currency and where any relevant account designated in the Agreement is situated (or for euro, a day when TARGET operates);
(c) For notices: where the notice is due to be delivered (per Schedule paragraph 3); and
(d) Any other case: in each place stated in Schedule paragraph 6;

Buy-In means an agreement where a transferee who buys in equivalent securities to cover a settlement failure can recover its costs of doing so from a failing transferor;
Cash Collateral means, you know, Collateral in cash;
Close of Business for any business centre is the time of day when banks and settlement systems close;
Collateral means the financial instruments and cash meeting eligibility criteria in paragraph 1 of the Schedule which Borrower has delivered to Lender to collateralise any Loan, as replaced by Alternative Collateral;
Defaulting Party is defined in paragraph 10;
Delivery and deliver means to credit Securities, Collateral or Equivalents to the transferee’s account or as it directs;
Designated Office means the office of a Party specified in paragraph 6 of the Schedule;
Equivalent: securities that are fungible with the securities in question, as long as:

(a) Where the securities are partly paid or have been converted, subdivided, consolidated, made the subject of a takeover, rights of pre-emption, or include rights to receive securities, it includes securities a holder would be entitled after that event (having complied with all formalities) and provided that the party being paid the equivalent amount has given notice and paid the all sums required in time for the holder to exercise its rights.
(b) Where the securities:
(i) have been redeemed, it means the redemption proceeds;
(ii) are subject to a call, it means fungible securities, provided that receiving party thas paid the holder the amounts due in respect of the call;
(iii) are subject to a capitalisation issue, it includes securities allotted by way of bonus on the securities in question;
(iv) are subject to any similar event, it means those securities with (or replaced by) the cash and securities received by the holder in connection with the event.

Income means interest, dividends and similar distributions[1] made under any Securities or Collateral;
Income Record Date means the date by reference to which holders of Securities or Collateral become entitled to Income;
Letter of Credit means an irrevocable, non-negotiable bank letter of credit acceptable to Lender;
Loaned Securities means Securities that are presently out on Loan;
Margin is defined in paragraph 1 of the Schedule.
Market Value means:
(a) Securities: For Securities the mid price market quotation at Close of Business on the previous Business Day

(i) published on a reputable information service chosen by the Lender; or failing that
(ii) derived from a mid price from a dealer chosen by the Lender
(unless either party thinks there’s been an unusual market movement since then, in which case the latest available price) plus:
(iii) accrued Income if not included in the quote.

Where the assets in question are not trading freely the Parties may agree their Market Value. Failing that, they can ask an mutually acceptable dealer to quote. If they can’t agree on one of those, they can seek an average of Reference Dealer quotations (with a laborious mechanism for figuring our what to include and how to average it). If all else fails the Market Value giving up altogether and falling back on the reasonable determination of the Party originally making the determination).[2]
(b) Letters of credit: for any Letter of Credit, its face value.
(c) Cash: for Cash its face value.
Nominee means an agent a Party appoints to hold its Securities or Collateral or to handle its payments;
Non Cash Collateral means Collateral that isn't cash;
Non-Defaulting Party is defined in Paragraph 10;
Notification Time is defined in Paragraph 1.5 of the Schedule;
Parties (and Party) means Lender and Borrower; Posted Collateral is defined in Paragraph 5.4;
Reference Dealers means four leading dealers in the relevant market chosen by the person determining an Market Value.
Required Collateral Value is defined in Paragraph 5.4;
Sales Tax means any VAT, sales tax or similar Tax;
Settlement Date is the date on which Securities are due to be transferred to Borrower;
Stamp Tax is any stamp, transfer, registration or similar Tax;
Tax means any kind of tax imposed by any taxing authority on any transaction or payment under this Agreement.
2.2 Headings
Headings do not count when interpreting this Agreement.
2.3 Market terminology
Even though we say “borrow”, “lend”, “Collateral”, “Margin” etc. as participants do in the market, Securities “borrowed” or “lent” and “Collateral” provided under this Agreement pass by outright title transfer.
2.4 Currency conversions: Subject to paragraph 11, values stated in other currencies other must be converted into the Base Currency at the spot rate obtained by Lender (or if it is subject to an Event of Default, the Borrower) on the relevant day (or, if it isn’t a Business Day, at the Close of Business on the previous Business Day on which a quotation was available).
2.5 The substitution of the lawful currency in a country will not alter the parties’ obligations under the Agreement or any Loan. Securities will be regarded as equivalent to other securities notwithstanding their redenomination into the new currency or their nominal value changing as a result.
2.6 Modifications etc. to legislation
Any reference in this Agreement to legislation or regulation is to the relevant instrument as updated and in force for the time being.
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2010 GMSLA full text of Clause 2:


2. Interpretation
2.1 In this Agreement:
Act of Insolvency means in relation to either Party:

(a) its making a general assignment for the benefit of, or entering into a reorganisation, arrangement, or composition with creditors; or
(b) its stating in writing that it is unable to pay its debts as they become due; or
(c) its seeking, consenting to or acquiescing in the appointment of any trustee, administrator, receiver or liquidator or analogous officer of it or any material part of its property; or
(d) the presentation or filing of a petition in respect of it (other than by the other Party to this Agreement in respect of any obligation under this Agreement) in any court or before any agency alleging or for the bankruptcy, winding up or insolvency of such Party (or any analogous proceeding) or seeking any reorganisation, arrangement, composition, re adjustment, administration, liquidation, dissolution or similar relief under any present or future statute, law or regulation, such petition not having been stayed or dismissed within 30 days of its filing (except in the case of a petition for winding-up or any analogous proceeding in respect of which no such 30 day period shall apply); or
(e) the appointment of a receiver, administrator, liquidator or trustee or analogous officer of such Party over all or any material part of such Party’s property; or
(f) the convening of any meeting of its creditors for the purpose of considering a voluntary arrangement as referred to in Section 3 of the Insolvency Act 1986 (or any analogous proceeding);

Agency Annex means the Annex to this Agreement published by the International Securities Lending Association and providing for Lender to act as agent for a third party in respect of one or more Loans;
Alternative Collateral means Collateral having a Market Value equal to the Collateral delivered pursuant to paragraph 5 and provided by way of substitution in accordance with the provisions of paragraph 5.3;
Applicable Law means the laws, rules and regulations (including double taxation conventions) of any relevant jurisdiction, including published practice of any government or other taxing authority in connection with such laws, rules and regulations;
Automatic Early Termination has the meaning given in paragraph 10.1(d);
Base Currency means the currency indicated in paragraph Schedule 2 of the Schedule;
Business Day means:

(a) in relation to Delivery in respect of any Loan, a day other than a Saturday or a Sunday on which banks and securities markets are open for business generally in the place(s) where the relevant Securities, Equivalent Securities, Collateral or Equivalent Collateral are to be delivered;
(b) in relation to any payments under this Agreement, a day other than a Saturday or a Sunday on which banks are open for business generally in the principal financial centre of the country of which the currency in which the payment is denominated is the official currency and, if different, in the place where any account designated by the Parties for the making or receipt of the payment is situated (or, in the case of a payment in euro, a day on which TARGET operates);
(c) in relation to a notice or other communication served under this Agreement, any day other than a Saturday or a Sunday on which banks are open for business generally in the place designated for delivery in accordance with paragraph 3 of the Schedule; and
(d) in any other case, a day other than a Saturday or a Sunday on which banks are open for business generally in each place stated in paragraph 6 of the Schedule;

Buy In means any arrangement under which, in the event of a seller or transferor failing to deliver securities to the buyer or transferee, the buyer or transferee of such securities is entitled under the terms of such arrangement to buy or otherwise acquire securities equivalent to such securities and to recover the cost of so doing from the seller or transferor;
Cash Collateral means Collateral taking the form of a transfer of currency;
Close of Business means the time at which the relevant banks, securities settlement systems or depositaries close in the business centre in which payment is to be made or Securities or Collateral is to be delivered;
Collateral means such securities or financial instruments or transfers of currency as are referred to in the table set out under paragraph 1 of the Schedule as being acceptable or any combination thereof as agreed between the Parties in relation to any particular Loan and which are delivered by Borrower to Lender in accordance with this Agreement and shall include Alternative Collateral;
Defaulting Party has the meaning given in paragraph 10;
Delivery in relation to any Securities or Collateral or Equivalent Securities or Equivalent Collateral comprising Securities means:

(a) in the case of Securities held by a Nominee or within a clearing or settlement system, the crediting of such Securities to an account of the Borrower or Lender, as the case may be, or as it shall direct, or,
(b) in the case of Securities otherwise held, the delivery to Borrower or Lender, as the case may be, or as the transferee shall direct of the relevant instruments of transfer, or
(c) by such other means as may be agreed,

and deliver shall be construed accordingly;
Designated Office means the branch or office of a Party which is specified as such in paragraph Schedule 6 of the Schedule or such other branch or office as may be agreed to in writing by the Parties;
Equivalent or equivalent to in relation to any Loaned Securities or Collateral (whether Cash Collateral or Non Cash Collateral) provided under this Agreement means Securities or other property, of an identical type, nominal value, description and amount to particular Loaned Securities or Collateral (as the case may be) so provided. If and to the extent that such Loaned Securities or Collateral (as the case may be) consists of Securities that are partly paid or have been converted, subdivided, consolidated, made the subject of a takeover, rights of pre emption, rights to receive securities or a certificate which may at a future date be exchanged for Securities, the expression shall include such Securities or other assets to which Lender or Borrower (as the case may be) is entitled following the occurrence of the relevant event, and, if appropriate, the giving of the relevant notice in accordance with paragraph 6.7 and provided that Lender or Borrower (as the case may be) has paid to the other Party all and any sums due in respect thereof. In the event that such Loaned Securities or Collateral (as the case may be) have been redeemed, are partly paid, are the subject of a capitalisation issue or are subject to an event similar to any of the foregoing events described in this paragraph, the expression shall have the following meanings:

(a) in the case of redemption, a sum of money equivalent to the proceeds of the redemption;
(b) in the case of a call on partly paid Securities, Securities equivalent to the relevant Loaned Securities or Collateral, as the case may be, provided that Lender shall have paid Borrower, in respect of Loaned Securities, and Borrower shall have paid to Lender, in respect of Collateral, an amount of money equal to the sum due in respect of the call;
(c) in the case of a capitalisation issue, Securities equivalent to the relevant Loaned Securities or Collateral, as the case may be, together with the securities allotted by way of bonus thereon;
(d) in the case of any event similar to any of the foregoing events described in this paragraph, Securities equivalent to the Loaned Securities or the relevant Collateral, as the case may be, together with or replaced by a sum of money or Securities or other property equivalent to that received in respect of such Loaned Securities or Collateral, as the case may be, resulting from such event;

Income means any interest, dividends or other distributions of any kind whatsoever with respect to any Securities or Collateral;
Income Record Date, with respect to any Securities or Collateral, means the date by reference to which holders of such Securities or Collateral are identified as being entitled to payment of Income;
Letter of Credit means an irrevocable, non negotiable letter of credit in a form, and from a bank, acceptable to Lender;
Loaned Securities means Securities which are the subject of an outstanding Loan;
Margin has the meaning specified in paragraph 1 of the Schedule with reference to the table set out therein;
Market Value means:

(a) in relation to the valuation of Securities, Equivalent Securities, Collateral or Equivalent Collateral (other than Cash Collateral or a Letter of Credit):
(i) such price as is equal to the market quotation for the mid price of such Securities, Equivalent Securities, Collateral and/or Equivalent Collateral as derived from a reputable pricing information service reasonably chosen in good faith by Lender; or
(ii) if unavailable the market value thereof as derived from the mid price or rate bid by a reputable dealer for the relevant instrument reasonably chosen in good faith by Lender,
in each case at Close of Business on the previous Business Day, or as specified in the Schedule, unless agreed otherwise or, at the option of either Party where in its reasonable opinion there has been an exceptional movement in the price of the asset in question since such time, the latest available price, plus (in each case):
(iii) the aggregate amount of Income which has accrued but not yet been paid in respect of the Securities, Equivalent Securities, Collateral or Equivalent Collateral concerned to the extent not included in such price,
provided that the price of Securities, Equivalent Securities, Collateral or Equivalent Collateral that are suspended or that cannot legally be transferred or that are transferred or required to be transferred to a government, trustee or third party (whether by reason of nationalisation, expropriation or otherwise) shall for all purposes be a commercially reasonable price agreed between the Parties, or absent agreement, be a price provided by a third party dealer agreed between the Parties, or if the Parties do not agree a third party dealer then a price based on quotations provided by the Reference Dealers. If more than three quotations are provided, the Market Value will be the arithmetic mean of the prices, without regard to the quotations having the highest and lowest prices. If three quotations are provided, the Market Value will be the quotation remaining after disregarding the highest and lowest quotations. For this purpose, if more than one quotation has the same highest or lowest price, then one of such quotations shall be disregarded. If fewer than three quotations are provided, the Market Value of the relevant Securities, Equivalent Securities, Collateral or Equivalent Collateral shall be determined by the Party making the determination of Market Value acting reasonably;
(b) in relation to a Letter of Credit the face or stated amount of such Letter of Credit; and
(c) in relation to Cash Collateral the amount of the currency concerned;

Nominee means a nominee or agent appointed by either Party to accept delivery of, hold or deliver Securities, Equivalent Securities, Collateral and/or Equivalent Collateral or to receive or make payments on its behalf;
Non Cash Collateral means Collateral other than Cash Collateral;
Non Defaulting Party has the meaning given in paragraph 10;
Notification Time means the time specified in paragraph Schedule 1.5 of the Schedule;
Parties means Lender and Borrower and Party shall be construed accordingly;
Posted Collateral has the meaning given in paragraph 5.4;
Reference Dealers means, in relation to any Securities, Equivalent Securities, Collateral or Equivalent Collateral, four leading dealers in the relevant securities selected by the Party making the determination of Market Value in good faith;
Required Collateral Value has the meaning given in paragraph 5.4;
Sales Tax means value added tax and any other Tax of a similar nature (including, without limitation, any sales tax of any relevant jurisdiction);
Settlement Date means the date upon which Securities are due to be transferred to Borrower in accordance with this Agreement;
Stamp Tax means any stamp, transfer, registration, documentation or similar Tax;
Tax means any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including interest, penalties and additions thereto) imposed by any government or other taxing authority in respect of any transaction effected pursuant to or contemplated by, or any payment under or in respect of, this Agreement.
2.2 Headings
All headings appear for convenience only and shall not affect the interpretation of this Agreement.
2.3 Market terminology
Notwithstanding the use of expressions such as “borrow”, “lend”, “Collateral”, “Margin” etc. which are used to reflect terminology used in the market for transactions of the kind provided for in this Agreement, title to Securities “borrowed” or “lent” and “Collateral” provided in accordance with this Agreement shall pass from one Party to another as provided for in this Agreement, the Party obtaining such title being obliged to deliver Equivalent Securities or Equivalent Collateral as the case may be.
2.4 Currency conversions
Subject to paragraph 11, for the purposes of determining any prices, sums or values (including Market Value and Required Collateral Value) prices, sums or values stated in currencies other than the Base Currency shall be converted into the Base Currency at the latest available spot rate of exchange quoted by a bank selected by Lender (or if an Event of Default has occurred in relation to Lender, by Borrower) in the London inter bank market for the purchase of the Base Currency with the currency concerned on the day on which the calculation is to be made or, if that day is not a Business Day, the spot rate of exchange quoted at Close of Business on the immediately preceding Business Day on which such a quotation was available.
2.5 The Parties confirm that introduction of and/or substitution (in place of an existing currency) of a new currency as the lawful currency of a country shall not have the effect of altering, or discharging, or excusing performance under, any term of the Agreement or any Loan thereunder, nor give a Party the right unilaterally to alter or terminate the Agreement or any Loan thereunder. Securities will for the purposes of this Agreement be regarded as equivalent to other securities notwithstanding that as a result of such introduction and/or substitution those securities have been redenominated into the new currency or the nominal value of the securities has changed in connection with such redenomination.
2.6 Modifications etc. to legislation
Any reference in this Agreement to an act, regulation or other legislation shall include a reference to any statutory modification or re enactment thereof for the time being in force.
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2. Interpretation

2.1 Definitions
Act of Insolvency
Agency Annex
Alternative Collateral
Applicable Law
Automatic Early Termination
Base Currency
Business Day
Buy In
Cash Collateral
Close of Business
Collateral
Defaulting Party
Delivery
Designated Office
Equivalent or equivalent to
Income
Income Record Date
Letter of Credit
Loaned Securities
Margin
Market Value
Nominee
Non Cash Collateral
Non Defaulting Party
Notification Time
Parties
Posted Collateral
Reference Dealers
Required Collateral Value
Sales Tax
Settlement Date
Stamp Tax
Tax
2.2 Headings
2.3 Market terminology
2.4 Currency conversions
2.5
2.6 Modifications etc. to legislation
  1. Note: this contains significant JC editorialising about what this clause is meant to, but if read literally, does not achieve: See commentary under Income.
  2. Tiresome, I know.