Distributions and Corporate Actions - GMSLA Provision

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6. Distributions and Corporate Actions

This section deals with the rights of parties with regard to "their" Securities and Collateral while it is "out on loan". In a nutshell:

There is a slight tension between 6.5 and 6.6: while a Borrower is not obliged to vote in a certain way, if it does so and acquires a certain benefit and the Lender requests, it has to pass over that benefit. Best illustrated by way of example:

Under Italian Law a shareholder on the Record Date who does not vote in favour of a proposed merger acquires a "Withdrawal right - Italian Corporate Law" if the merger is approved. The withdrawal right allows a shareholder who abstained or voted against the merger to be cashed out of the equity at a pre-defined price (the weighted average of the closing price of the stock over the last six months).

It is therefore possible that the withdrawal right as a call option over the stock. It is only exercisable if the shareholder does not vote.

In this case the Lender who has lent out over the record date could not (without prior agreement) oblige the Borrower to vote against the merger, but if the Borrower has done so, the Lender can, by request under 6.7, require the Borrower to deliver the proceeds of the withdrawal in lieu of Equivalent Securities.

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