2018 Global Master Securities Lending Agreement (Pledge Version)
A Jolly Contrarian owner’s manual
Clause 5 in a Nutshell™
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Clause 5 in full
5.1 Delivery of Collateral on commencement of Loan: Subject to the other provisions of this paragraph 5, Borrower undertakes to deliver Collateral to the relevant Secured Accounts so that in respect of each Loan the condition precedent specified in paragraph 3.2(b) is satisfied.
5.2 Deliveries through securities settlement systems generating automatic payments: Unless otherwise agreed between the Parties, where any Securities or Equivalent Securities are transferred through a book entry transfer or settlement system which automatically generates a payment or Delivery, or obligation to pay or deliver, against the transfer of such Securities, then such automatically generated payment, Delivery or obligation shall be treated as a payment or Delivery by the transferee to the transferor, and except to the extent that it is applied to discharge an obligation of the transferee to effect payment or Delivery, the Party so treated as receiving such payment or Delivery shall cause to be made to the other Party for value the same day either, where such transfer is a payment, an irrevocable payment in the amount of such transfer or, where such transfer is a Delivery, an irrevocable Delivery of Securities (or other property, as the case may be) Equivalent to such property.
5.3 Marking to Market of Collateral during the currency of a Loan: Unless otherwise agreed between the Parties:
- 5.3(a) the aggregate Market Value of the Posted Collateral in respect of all outstanding Loans and, as of the relevant Settlement Date or any earlier time agreed between the Parties for the Delivery of Collateral with respect to any Unsettled Loans, such Unsettled Loans, shall equal the aggregate of:
- 5.3(a)(i) the Market Values of Securities Equivalent to the Loaned Securities; plus
- 5.3(a)(ii) all amounts (if any) due and payable by Borrower under this Agreement but which are unpaid; plus
- 5.3(a)(iii) if agreed between the Parties and if the Income Record Date has occurred in respect of any Securities Equivalent to Loaned Securities, the amount or Market Value of Income payable in respect of such Equivalent Securities in respect of such Loans; plus
- 5.3(a)(iv) if agreed between the Parties, any amounts which have accrued pursuant to paragraph 7
- (the Required Collateral Value);
- 5.3(b) if on any Business Day the aggregate Market Value of the Posted Collateral exceeds the Required Collateral Value applicable on that day, Lender shall in the manner provided by the Control Agreement instruct Custodian to transfer to Borrower from the relevant Secured Account by Close of Business on the relevant Business Day Posted Collateral having a Market Value at the date of transfer as close as practicable to (but not exceeding) the amount of the excess;
- 5.3(c) if on any Business Day the aggregate Market Value of the Posted Collateral falls below the Required Collateral Value applicable on that day, Borrower shall in the manner provided by the Control Agreement deliver and, in the case of Cash Collateral, transfer into the relevant Secured Account by Close of Business on the relevant Business Day, such further Collateral having a Market Value as at the date of transfer as close as practicable to (but not less than) the amount of the deficiency; and
- 5.3(d) each Party agrees that any transfer of Collateral into or out of the Secured Accounts will be effected only in accordance with the Control Agreement.
5.4 Instructions relating to the Required Collateral Value and responsibility for the Custodian:
- 5.4(a) Unless otherwise agreed, no later than the Notification Time on each Business Day:
- 5.4(a)(i) each Party will notify the other Party of its determination of the Required Collateral Value; and
- 5.4(a)(ii) each Party shall notify the Custodian in accordance with the terms of the Control Agreement of the Required Collateral Value so determined by it.
- 5.4(b) Borrower will be liable for the acts or omissions of Custodian to the same extent that Borrower would be liable hereunder for its own acts or omissions and any such act or omission of Custodian will be deemed to be the act or omission of Borrower for purposes of Paragraph 10.1. Lender will not be liable for the acts or omissions of Custodian.
- 5.4(c) Any obligation of Lender to instruct Custodian to transfer Posted Collateral to Borrower will be deemed satisfied by Lender sending appropriate instructions to Custodian in accordance with the terms of the Control Agreement. For the avoidance of doubt, Lender will bear no liability for any failure by Custodian to comply with such instructions and no failure by the Custodian to transfer Posted Collateral to Borrower under this Agreement will constitute an Event of Default with respect to Lender.
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