-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VS0Y3V0RWgS6ri43IwTNqJK+SXX396uYZXcqB3kRZM6RG8WorimRj6iCjlGXgfWU NW9Tlc0Z1Wl8pvMGIu2onQ== 0001041692-02-000015.txt : 20021018 0001041692-02-000015.hdr.sgml : 20021018 20021018180723 ACCESSION NUMBER: 0001041692-02-000015 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20021018 GROUP MEMBERS: ERIC D. HOVDE GROUP MEMBERS: FINANCIAL INSTITUTION PARTNERS III, L.P. GROUP MEMBERS: FINANCIAL INSTITUTION PARTNERS, L.P. GROUP MEMBERS: FINANCIAL INSTITUTION PARTNERS, LTD. GROUP MEMBERS: HOVDE CAPITAL ADVISORS LLC GROUP MEMBERS: HOVDE CAPITAL, L.L.C. GROUP MEMBERS: STEVEN D. HOVDE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FIRST PACTRUST BANCORP INC CENTRAL INDEX KEY: 0001169770 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-78540 FILM NUMBER: 02793206 BUSINESS ADDRESS: STREET 1: 610 BAY BLVD CITY: CHULA VISTA STATE: CA ZIP: 91910 BUSINESS PHONE: 6196911519 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: FINANCIAL INSTITUTION PARTNERS II L P CENTRAL INDEX KEY: 0001041692 IRS NUMBER: 364131559 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 1824 JEFFERSON PLACE NW CITY: WASHINGTON STATE: DC ZIP: 20036 BUSINESS PHONE: 2027758109 MAIL ADDRESS: STREET 1: 1824 JEFFERSON PLACE NW CITY: WASHINGTON STATE: DC ZIP: 20036 SC 13D 1 fptb13d2.txt 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D UNDER THE EXCHANGE ACT OF 1934 First PacTrust Bancorp, Inc. - ------------------------------------------------------------------------------- (Name of Issuer) COMMON STOCK, $.01 PAR VALUE - ------------------------------------------------------------------------------- (Title of Class of Securities) 33589V101 ------------------------------------------------------------------------------- (CUSIP Number) Richard J. Perry, Jr., Esquire Perry & Associates, P.C. 1826 Jefferson Place, N.W. Washington, D.C. 20036 (202) 775-8109 ------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) October 9, 2002 ------------------------------------------------------------------------------- (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 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box.[ ] NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See 240.13d-7(b) 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). Exhibit Index at page 16 Page 1 of 82 2
- ------------------------------------------------------------------------------- CUSIP NUMBER 33589V101 - ------------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY). Financial Institution Partners II, L.P. / 36-4131559 - ------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)X (b) - ------------------------------------------------------------------------------- 3. SEC Use Only - ------------------------------------------------------------------------------- 4. SOURCE OF FUNDS (See Instructions) WC - ------------------------------------------------------------------------------- 5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) AND 2(e) [ ] - ------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Organized: State of Delaware - ------------------------------------------------------------------------------- NUMBER OF 7. SOLE VOTING POWER SHARES BENEFICIALLY OWNED BY 0 EACH ---------------------------------------------------------------- REPORTING 8. SHARED VOTING POWER PERSON WITH 107,850 shares ---------------------------------------------------------------- 9. SOLE DISPOSITIVE POWER 0 ---------------------------------------------------------------- 10. SHARED DISPOSITIVE POWER 107,850 shares ---------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 107,850 shares - ------------------------------------------------------------------------------- 12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES. [ ] - ------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 2.0% - ------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------
Page 2 of 82 3
- ------------------------------------------------------------------------------- CUSIP NUMBER 33589V101 - ------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY). Hovde Capital, L.L.C. / 91-1825712 - ------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)X (b) - ------------------------------------------------------------------------------- 3. SEC Use Only - ------------------------------------------------------------------------------- 4. SOURCE OF FUNDS AF - ------------------------------------------------------------------------------- 5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) AND 2(e). [ ] - ------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Organized: State of Nevada - ------------------------------------------------------------------------------- NUMBER OF 7. SOLE VOTING POWER SHARES BENEFICIALLY OWNED BY 0 EACH ---------------------------------------------------------------- REPORTING 8. SHARED VOTING POWER PERSON WITH(1) 107,850 shares ---------------------------------------------------------------- 9. SOLE DISPOSITIVE POWER 0 ---------------------------------------------------------------- 10. SHARED DISPOSITIVE POWER 107,850 shares ---------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 107,850 shares - ------------------------------------------------------------------------------- 12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES. [ ] - ------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 2.0% - ------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON OO - ------------------------------------------------------------------------------- (1) Of the 107,850 Shares beneficially owned by Hovde Capital, L.L.C., 107,850 are as general partner of Financial Institution Partners II, L.P.
Page 3 of 82 4
- ------------------------------------------------------------------------------- CUSIP NUMBER 33589V101 - ------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY). Financial Institution Partners III, L.P. / 52-2199979 - ------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)X (b) - ------------------------------------------------------------------------------- 3. SEC Use Only - ------------------------------------------------------------------------------- 4. SOURCE OF FUNDS WC - ------------------------------------------------------------------------------- 5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) AND 2(e). [ ] - ------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Organized: State of Delaware - ------------------------------------------------------------------------------- NUMBER OF 7. SOLE VOTING POWER SHARES BENEFICIALLY OWNED BY 0 EACH ---------------------------------------------------------------- REPORTING 8. SHARED VOTING POWER PERSON WITH 105,850 shares ---------------------------------------------------------------- 9. SOLE DISPOSITIVE POWER 0 ---------------------------------------------------------------- 10. SHARED DISPOSITIVE POWER 105,850 shares ---------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 105,850 shares - ------------------------------------------------------------------------------- 12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES. [ ] - ------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 2.0% - ------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------
Page 4 of 82 5
- ------------------------------------------------------------------------------- CUSIP NUMBER 33589V101 - ------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Financial Institution Partners, L.P. / 52-1899611 - ------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)X (b) - ------------------------------------------------------------------------------- 3. SEC Use Only - ------------------------------------------------------------------------------- 4. SOURCE OF FUNDS WC - ------------------------------------------------------------------------------- 5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) AND 2(e). [ ] - ------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Organized: State of Delaware - ------------------------------------------------------------------------------- NUMBER OF 7. SOLE VOTING POWER SHARES BENEFICIALLY OWNED BY 0 EACH ---------------------------------------------------------------- REPORTING 8. SHARED VOTING POWER PERSON WITH 34,000 shares ---------------------------------------------------------------- 9. SOLE DISPOSITIVE POWER 0 ---------------------------------------------------------------- 10. SHARED DISPOSITIVE POWER 34,000 shares ---------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 34,000 shares - ------------------------------------------------------------------------------- 12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES. [ ] - ------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.6% - ------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------- CUSIP NUMBER 33589V101 - ------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Financial Institution Partners, Ltd. / N/A - ------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)X (b) - ------------------------------------------------------------------------------- 3. SEC Use Only - ------------------------------------------------------------------------------- 4. SOURCE OF FUNDS WC - ------------------------------------------------------------------------------- 5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) AND 2(e). [ ] - ------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Organized: Cayman Islands - ------------------------------------------------------------------------------- NUMBER OF 7. SOLE VOTING POWER SHARES BENEFICIALLY OWNED BY 0 EACH ---------------------------------------------------------------- REPORTING 8. SHARED VOTING POWER PERSON WITH 22,300 shares ---------------------------------------------------------------- 9. SOLE DISPOSITIVE POWER 0 ---------------------------------------------------------------- 10. SHARED DISPOSITIVE POWER 22,300 shares ---------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 22,300 shares - ------------------------------------------------------------------------------- 12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES. [ ] - ------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.4% - ------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------
Page 6 of 82 7
- ------------------------------------------------------------------------------- CUSIP NUMBER 33589V101 - ------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Hovde Capital Advisors LLC / 03-0430205 - ------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)X (b) - ------------------------------------------------------------------------------- 3. SEC Use Only - ------------------------------------------------------------------------------- 4. SOURCE OF FUNDS AF - ------------------------------------------------------------------------------- 5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) AND 2(e). [ ] - ------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Organized: State of Delaware - ------------------------------------------------------------------------------- NUMBER OF 7. SOLE VOTING POWER SHARES BENEFICIALLY OWNED BY 0 EACH ---------------------------------------------------------------- REPORTING 8. SHARED VOTING POWER PERSON WITH(4) 162,150 shares ---------------------------------------------------------------- 9. SOLE DISPOSITIVE POWER 0 ---------------------------------------------------------------- 10. SHARED DISPOSITIVE POWER 162,150 shares ---------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 162,150 shares - ------------------------------------------------------------------------------- 12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES. [ ] - ------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 2.0% - ------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON OO - ------------------------------------------------------------------------------- (4) The 162,150 shares beneficially owned by Hovde Capital Advisors LLC are as Investment Manager of Financial Institution Partners III, L.P., Financial Institution Partners, L.P., and Financial Institution Partners, Ltd., the direct owners.
Page 7 of 82 8
- ------------------------------------------------------------------------------- CUSIP NUMBER 33589V101 - ------------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Eric D. Hovde - ------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)X (b) - ------------------------------------------------------------------------------- 3. SEC Use Only - ------------------------------------------------------------------------------- 4. SOURCE OF FUNDS AF - ------------------------------------------------------------------------------- 5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) AND 2(e). [ ] - ------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION USA - ------------------------------------------------------------------------------- NUMBER OF 7. SOLE VOTING POWER SHARES BENEFICIALLY OWNED BY 0 EACH ---------------------------------------------------------------- REPORTING 8. SHARED VOTING POWER PERSON WITH(5) 270,000 Shares ---------------------------------------------------------------- 9. SOLE DISPOSITIVE POWER 0 ---------------------------------------------------------------- 10. SHARED DISPOSITIVE POWER 270,000 Shares ---------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 270,000 Shares - ------------------------------------------------------------------------------- 12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES. [ ] - ------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.1% - ------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN - ------------------------------------------------------------------------------- (5) Of the 270,000 Shares beneficially owned by Eric D. Hovde, 107,850 are as Chairman, Chief Executive Officer, and managing member of Hovde Capital, L.L.C., the General Partner of Financial Institution Partners II, L.P., the direct owner, and 162,150 are as a Managing Member of Hovde Capital Advisors LLC, the Investment Manager of Financial Institution Partners III, L.P., Financial Institution Partners, L.P., and Financial Institution Partners, Ltd., the direct owners.
Page 8 of 82 9
- ------------------------------------------------------------------------------- CUSIP NUMBER 33589V101 - ------------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Steven D. Hovde - ------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)X (b) - ------------------------------------------------------------------------------- 3. SEC Use Only - ------------------------------------------------------------------------------- 4. SOURCE OF FUNDS AF - ------------------------------------------------------------------------------- 5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) AND 2(e) [ ] - ------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION USA - ------------------------------------------------------------------------------- NUMBER OF 7. SOLE VOTING POWER SHARES BENEFICIALLY OWNED BY 0 EACH ---------------------------------------------------------------- REPORTING 8. SHARED VOTING POWER PERSON WITH(6) 270,000 Shares ---------------------------------------------------------------- 9. SOLE DISPOSITIVE POWER 0 ---------------------------------------------------------------- 10. SHARED DISPOSITIVE POWER 270,000 Shares ---------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 270,000 Shares - ------------------------------------------------------------------------------- 12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES. [ ] - ------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.1% - ------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN - ------------------------------------------------------------------------------- (6) Of the 270,000 Shares beneficially owned by Steven D. Hovde, 107,850 are as President, Treasurer, and managing member of Hovde Capital, L.L.C., the General Partner of Financial Institution Partners II, L.P., the direct owner, and 162,150 are as a Managing Member of Hovde Capital Advisors LLC, the Investment Manager of Financial Institution Partners III, L.P., Financial Institution Partners, L.P., and Financial Institution Partners, Ltd., the direct owners.
Page 9 of 82 10 Item 1. Security and Issuer The class of security to which this statement relates is the common stock, $0.01 par value, of First PacTrust Bancorp, Inc. (the "Issuer"). The address of the principal executive offices of the Issuer is 610 Bay Blvd, Chula Vista, CA 91910. Item 2. Identity and Background The persons filing this statement are Financial Institution Partners II, L.P., Financial Institution Partners III, L.P., Financial Institution Partners, L.P., Financial Institution Partners, Ltd. (the "Limited Partnerships"), Hovde Capital, L.L.C. (the "General Partner"), Hovde Capital Advisors LLC (the "Investment Manager"), Eric D. Hovde, and Steven D. Hovde who are collectively referred to herein as the "Reporting Persons." The Limited Partnerships are Delaware limited partnerships (with the exception of Financial Institution Partners, Ltd. which is a Cayman Islands limited partnership) formed for the purpose of investing in, among other things, the equity securities of various financial institutions and financial services companies. Hovde Capital, L.L.C., a Nevada limited liability company, is the general partner of Financial Institution Partners II, L.P. Hovde Capital Advisors LLC, a Delaware limited liability company, is the Investment Manager of Financial Institution Partners III, L.P., Financial Institution Partners, L.P., and Financial Institution Partners, Ltd., the direct owners. Eric D. Hovde and Steven D. Hovde each hold beneficial interests in the Shares through ownership of an interest in, and positions as officers and members of the General Partner and the Investment Manager. Eric D. Hovde and Steven D. Hovde are also directors and executive officers of Hovde Financial, Inc. ("Hovde Financial"). Hovde Financial does not beneficially own any of the Shares. Attached as Schedule 1 hereto and incorporated by reference herein is a list containing the principal business and the address of its principal business and offices for the Limited Partnerships, General Partner and the Investment Manager as well as information required by (a) through (f) of this Item as to each executive officer, director and/or controlling person of the General Partner and Investment Manager who are Reporting Persons. The General Partner controls Financial Institution Partners II, L.P., and the Investment Manager controls Financial Institution Partners III, L.P., Financial Institution Partners, L.P., and Financial Institution Partners, Ltd. None of the Reporting Persons or executive officers, directors or controlling persons of the General Partner or Investment Manager have, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding of any violation with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration Information regarding the source and amount of funds used by the Reporting Persons in acquiring beneficial ownership of their Shares is set forth in Schedule 2 attached hereto and incorporated herein by reference. Item 4. Purpose of Transaction The Reporting Persons have acquired the Shares for investment purposes and as set forth below: Each of the Reporting Persons may independently acquire additional Shares or dispose of some or all of its Shares. The Reporting Persons expect to evaluate on an ongoing basis their investment in the Issuer, and may independently from time to time acquire additional Shares, dispose of Shares or formulate other purposes, plans or proposals regarding the Issuer or the Shares held by the Reporting Persons in addition to those discussed above. Any such acquisitions or dispositions may be made, subject to applicable law, in open market or privately negotiated transactions or otherwise. Except as described above, neither the Reporting Persons nor, to the knowledge of the Reporting Persons, any of the persons named in Schedule 1 hereto have any plans or proposals which relate to or would result in any of the actions or transactions specified in clauses (a) through (j) of Item 4 of Schedule 13D. Page 10 of 82 11 Item 5. Interest in Securities of the Issuer (a), (b) Schedule 3 hereto, which is incorporated by reference herein, sets forth, as of October 18, 2002, information relating to the aggregate number of Shares of the Issuer and the percentage of the outstanding Shares of the Issuer as of such date (based upon information provided by the Issuer, there are 5,290,000 Shares outstanding as of that date) as to each of the Reporting Persons. With respect to the Shares set forth on Schedule 3, by virtue of their control over the Limited Partnerships, all decisions regarding voting and disposition of the Shares beneficially owned by the Limited Partnerships are made by the General Partner or Investment Manager, as applicable, acting through its chief executive officer, president, or managing member. As such, the Limited Partnerships and the General Partner or Investment Manager, as applicable, share voting and investment power with respect to the Shares. Therefore, as a result of their ownership interest in, and positions as members and officers of the General Partner and Investment Manager, Eric D. Hovde and Steven D. Hovde may be deemed to have beneficial ownership of the Shares. Neither the General Partner nor the Investment Manager, their executive officers, or controlling persons beneficially owns any Shares personally or otherwise. (c) Schedule 4 hereto, which is incorporated by reference herein, describes, as of October 18, 2002, transactions in the Shares effected during the past sixty (60) days. (d) None. (e) Not Applicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. None. Page 11 of 82 12 Item 7. Materials to be filed as Exhibits Exhibit A - Consent Agreement pursuant to 17 C.F.R. 13d-1(k)(1)(iii) Exhibit B - Addendum to Banc of America Securities LLC Customer Agreement Exhibit C - Account Agreement between Banc of America Securities LLC and Financial Institution Partners II, L.P. Exhibit D - Prime Broker Agreement between Banc of America Securities LLC and Financial Institution Partners II, L.P. Exhibit E - Partnership Agreement between Banc of America Securities LLC and Financial Institution Partners II, L.P. Exhibit F - Options Agreement between Morgan Stanley & Co. Incorporated and Financial Institution Partners III, L.P. Exhibit G - Customer Prime Broker Agreement between Morgan Stanley Co. Incorporated and Financial Institution Partners III, L.P. Exhibit H - Master Securities Loan Agreement between Morgan Stanley Co. Incorporated and Financial Institution Partners III, L.P. Exhibit I - Account Control Agreement between Morgan Stanley Co. Incorporated and Financial Institution Partners III, L.P. Exhibit J - Options Agreement between Morgan Stanley & Co. Incorporated and Financial Institution Partners, L.P. Exhibit K - Customer Prime Broker Agreement between Morgan Stanley Co. Incorporated and Financial Institution Partners, L.P. Exhibit L - Master Securities Loan Agreement between Morgan Stanley Co. Incorporated and Financial Institution Partners, L.P. Exhibit M - Account Control Agreement between Morgan Stanley Co. Incorporated and Financial Institution Partners, L.P. Exhibit N - Options Agreement between Morgan Stanley & Co. Incorporated and Financial Institution Partners, Ltd. Exhibit O - Customer Prime Broker Agreement between Morgan Stanley Co. Incorporated and Financial Institution Partners, Ltd. Exhibit P - Master Securities Loan Agreement between Morgan Stanley Co. Incorporated and Financial Institution Partners, Ltd. Exhibit Q - Account Control Agreement between Morgan Stanley Co. Incorporated and Financial Institution Partners, Ltd. Signatures After reasonable inquiry and to the best of his/its knowledge and belief, each of the undersigned Reporting Persons certifies that the information set forth in this statement with respect to him/it is true, complete and correct. FINANCIAL INSTITUTION PARTNERS II, L.P., by its General Partner, HOVDE CAPITAL, L.L.C. By: /s/ Richard J. Perry, Jr. ------------------------------------------------- Richard J. Perry, Jr. Its: Secretary HOVDE CAPITAL, L.L.C. By: /s/ Richard J. Perry, Jr. ------------------------------------------------- Richard J. Perry, Jr. Its: Secretary FINANCIAL INSTITUTION PARTNERS III, L.P., by its General Partner, HOVDE CAPITAL, LTD. By: /s/ Richard J. Perry, Jr. ------------------------------------------------- Richard J. Perry, Jr. Its: Secretary FINANCIAL INSTITUTION PARTNERS, L.P., by its General Partner, HOVDE CAPITAL IV, LLC By: /s/ Richard J. Perry, Jr. ------------------------------------------------- Richard J. Perry, Jr. Its: Secretary FINANCIAL INSTITUTION PARTNERS, LTD., by its General Partner, HOVDE CAPITAL OFFSHORE LLC By: /s/ Richard J. Perry, Jr. ------------------------------------------------- Richard J. Perry, Jr. Its: Secretary HOVDE CAPITAL ADVISORS LLC By: /s/ Richard J. Perry, Jr. ------------------------------------------------- Richard J. Perry, Jr. Its: Secretary ERIC D. HOVDE /s/ Eric D. Hovde ------------------------------------------------- STEVEN D. HOVDE /s/ Steven D. Hovde ------------------------------------------------- Dated: 10/18/02 Page 12 of 82 13 Schedule 1 INFORMATION RELATING TO REPORTING PERSONS
Principal Business and Address of Principal Business Name or Principal Office - ---- ------------------------------ Financial Institution Limited partnership formed to Partners II, L.P. make investments primarily in equity securities of financial institutions and financial services companies. 1824 Jefferson Place, N.W. Washington, D.C. 20036 Organized: State of Delaware Hovde Capital, L.L.C. Limited liability company formed to serve as the general partner of Financial Institution Partners II, L.P. 1824 Jefferson Place, N.W. Washington, D.C. 20036 Organized: State of Nevada Financial Institution Limited partnership formed to Partners III, L.P. make investments primarily in equity securities of financial institutions and financial services companies. 1824 Jefferson Place, N.W. Washington, D.C. 20036 Organized: State of Delaware Financial Institution Limited partnership formed to Partners, L.P. make investments primarily in equity securities of financial institutions and financial services companies. 1824 Jefferson Place, N.W. Washington, D.C. 20036 Organized: State of Delaware Financial Institution Cayman Islands Exempted Company formed to Partners, Ltd. make investments primarily in equity securities of financial institutions and financial services companies. Bank of Bermuda (Cayman) Limited 36C Bermuda House, British American Centre Dr. Roy's Drive, P.O. Box 513 GT Georgetown, Grand Cayman, Cayman Islands Organized: Cayman Islands Hovde Capital Advisors LLC Limited liability company and registered investment adviser formed to serve as an investment manager. 1824 Jefferson Place, N.W. Washington, D.C. 20036 Organized: State of Delaware
INFORMATION RELATING TO EXECUTIVE OFFICERS, DIRECTORS AND/OR CONTROLLING PERSONS
NAME PRINCIPAL OCCUPATION ADDRESS BUSINESS ADDRESS CITIZENSHIP - ------- -------------------- ----------- Steven D. Hovde(5) Investment banker U.S. 1629 Colonial Parkway Hovde Financial, Inc. Inverness, Illinois 60067 1629 Colonial Parkway Inverness, Illinois 60067 Investment banking firm Eric D. Hovde (6) Portfolio Manager U.S. 1826 Jefferson Place, N.W. Hovde Capital Advisors LLC Washington, D.C. 20036 1824 Jefferson Place, N.W. Washington, D.C. 20036 Registered Investment Adviser
- ------------------------------------------------------------------------------- (5) Steven D. Hovde is affiliated with the following Reporting Persons: President, Treasurer and Managing Member of Hovde Capital, L.L.C. Managing Member of Hovde Capital Advisors LLC (6) Eric D. Hovde is affiliated with the following Reporting Persons: Chairman, Chief Executive Officer and Managing Member of Hovde Capital, L.L.C. Managing Member of Hovde Capital Advisors LLC Page 13 of 82 14 SCHEDULE 2 The following table sets forth the amount and source of funds used by each Reporting Person in acquiring the Shares beneficially owned by it.
Amount Originally Total Financed/ Source of Name Consideration Current Balance Funds - ------------------------------------------------------------------------------- Financial $1,551,580.35 $0 Working Capital Institution Partners II, L.P. Hovde Capital, $1,551,580.35 $0 Working Capital L.L.C. Of Affiliate Financial $1,522,432.35 $0 Working Capital Institution Partners III, L.P. Financial $ 481,634.00 $0 Working Capital Institution Partners, L.P. Financial $ 319,581.30 $0 Working Capital Institution Partners. Ltd. Hovde Capital $2,323,647.65 $0 Working Capital Advisors LLC Of Affiliates
- ------------------------------------------------------------------------------- Page 14 of 82 15 SCHEDULE 3 The following table sets forth the number and approximate percentage of Shares beneficially owned by each of the Reporting Persons. Each of the Reporting Persons has shared power to vote or to direct the vote and to dispose or to direct the disposition of the Shares of which each of them, respectively, possesses beneficial ownership.
Approximate Name Number of Shares Percentage - ---- ---------------- ----------- Financial Institution 107,850 2.0% Partners II, L.P. Hovde Capital, L.L.C. 107,850 2.0% Financial Institution 105,850 2.0% Partners III, L.P. Financial Institution 34,000 0.6% Partners, L.P. Financial Institution 22,300 0.4% Partners, Ltd. Hovde Capital Advisors LLC 162,150 3.1% Eric D. Hovde 270,000 5.1% Steven D. Hovde 270,000 5.1% - ------------------------------------------------------------------------------- Aggregate Shares Held by 270,000 5.1% Reporting Persons
Page 15 of 82 16 SCHEDULE 4 Description of Transactions in Shares Effected Within 60 Days. The Reporting Persons have effected the following transactions in the Shares within sixty (60) days and all subsequent days up to and including October 18, 2002:
- ------------------------------------------------------------------------------- Transaction Number of Transaction Transaction Broker Date Shares Price Type - ------------------------------------------------------------------------------- Financial 08/23/02 81,850 $14.33 Buy SALI Institution Partners II, L.P. Financial 08/29/02 26,000 $14.56 Buy ANPC Institution Partners II, L.P. Financial 08/23/02 81,850 $14.33 Buy ANPC Institution Partners III, L.P. Financial 08/29/02 24,000 $14.56 Buy ANPC Institution Partners III, L.P. Financial 08/23/02 14,000 $14.33 Buy ANPC Institution Partners, L.P. Financial 10/09/02 20,000 $14.05 Buy ANPC Institution Partners, L.P. Financial 08/23/02 22,300 $14.33 Buy ANPC Institution Partners, Ltd. - -------------------------------------------------------------------------------
EXHIBIT INDEX Page Exhibit A - Consent Agreement to 17 C.F.R. 13d-1(k)(1)(iii) 17 Exhibit B - Addendum to Banc of America Securities LLC 18 Customer Agreement Exhibit C - Customer Agreement between Banc of America 19 Securities LLC and Financial Institution Partners II, L.P. Exhibit D - Prime Broker Agreement between Banc of America 23 Securities LLC and Financial Institution Partners II, L.P. Exhibit E - Partnership Agreement between Banc of America 27 Securities LLC and Financial Institution Partners II, L.P. Exhibit F - Options Agreement between Morgan Stanley & Co. 29 Incorporated and Financial Institution Partners III, L.P. Exhibit G - Customer Prime Broker Agreement between Morgan 30 Stanley Co. Incorporated and Financial Institution Partners III, L.P. Exhibit H - Master Securities Loan Agreement between Morgan 37 Stanley Co. Incorporated and Financial Institution Partners III, L.P. Exhibit I - Account Control Agreement between Morgan Stanley Co. 47 Incorporated and Financial Institution Partners III, L.P. Exhibit J - Options Agreement between Morgan Stanley & Co. 48 Incorporated and Financial Institution Partners, L.P. Exhibit K - Customer Prime Broker Agreement between Morgan 50 Stanley Co. Incorporated and Financial Institution Partners, L.P. Exhibit L - Master Securities Loan Agreement between Morgan 56 Stanley Co. Incorporated and Financial Institution Partners, L.P. Exhibit M - Account Control Agreement between Morgan Stanley Co. 66 Incorporated and Financial Institution Partners, L.P. Exhibit N - Options Agreement between Morgan Stanley & Co. 67 Incorporated and Financial Institution Partners, Ltd. Exhibit O - Customer Prime Broker Agreement between Morgan 68 Stanley Co. Incorporated and Financial Institution Partners, Ltd. Exhibit P - Master Securities Loan Agreement between Morgan 72 Stanley Co. Incorporated and Financial Institution Partners, Ltd. Exhibit Q - Account Control Agreement between Morgan Stanley Co. 82 Incorporated and Financial Institution Partners, Ltd.
- ------------------------------------------------------------------------------- Page 16 of 82 17 EXHIBIT A Consent Agreement Pursuant to 17 C.F.R. 13d-1(k)(1)(iii) Each of the undersigned hereby consents and agrees to the filing on behalf of each of them of the foregoing joint statement on Schedule 13D pursuant to 17 C.F.R. 13d-1(k)(1)(iii) with respect to his/its beneficial ownership of the shares of the Issuer. FINANCIAL INSTITUTION PARTNERS II, L.P., by its General Partner, HOVDE CAPITAL, L.L.C. By: /s/ Richard J. Perry, Jr. ------------------------------------------------- Richard J. Perry, Jr. Its: Secretary HOVDE CAPITAL, L.L.C. By: /s/ Richard J. Perry, Jr. ------------------------------------------------- Richard J. Perry, Jr. Its: Secretary FINANCIAL INSTITUTION PARTNERS III, L.P., by its General Partner, HOVDE CAPITAL, LTD. By: /s/ Richard J. Perry, Jr. ------------------------------------------------- Richard J. Perry, Jr. Its: Secretary FINANCIAL INSTITUTION PARTNERS, L.P., by its General Partner, HOVDE CAPITAL IV, LLC By: /s/ Richard J. Perry, Jr. ------------------------------------------------- Richard J. Perry, Jr. Its: Secretary FINANCIAL INSTITUTION PARTNERS, LTD., by its General Partner, HOVDE CAPITAL OFFSHORE LLC By: /s/ Richard J. Perry, Jr. ------------------------------------------------- Richard J. Perry, Jr. Its: Secretary HOVDE CAPITAL ADVISORS LLC By: /s/ Richard J. Perry, Jr. ------------------------------------------------- Richard J. Perry, Jr. Its: Secretary ERIC D. HOVDE /s/ Eric D. Hovde ------------------------------------------------- STEVEN D. HOVDE /s/ Steven D. Hovde ------------------------------------------------- Dated: 10/18/02 Page 17 of 82 18 EXHIBIT B [ON NATIONSBANC MONTGOMERY SECURITIES LETTERHEAD] January 22, 1998 Richard Perry Hovde Financial, Inc. 1826 Jefferson Place, N.W. Washington, D.C. 20036 Dear Rick, Regarding the customer agreement, the following will serve as an addendum: All margin loans made to you will be governed by standard margin procedures outlined in the customer agreement. In the event NationsBanc Montgomery Securities LLC modifies the terms of our mutually agreed upon pricing agreement, or decides to discontinue, or substantially reduce the level of Prime Brokerage Services to your firm, we will provide thirty days' written notice thereof and on and after the last day of such thirty day notice period, unless such notice related to the modification of our pricing agreement and you accepted the terms of such modification within the thirty day notice period, NationsBanc Montgomery Securities LLC shall have the right to make demand for payment of any debit balance then owing with respect to any of your margin accounts. Glen Dailey Senior Managing Director Page 18 of 82 19 EXHIBIT C CUSTOMER AGREEMENT This agreement sets forth the terms and conditions pursuant to which we, NationsBanc Montgomery Securities LLC, and our successors and assigns, will maintain your account for purchases and sales of "securities and other property," which means, but is not limited to securities, financial instruments, commodities and money of every kind and nature and related contracts and options. This definition includes securities or other property currently or hereafter held, carried or maintained by, or in the possession or control of, us or any of our related entities for any purpose in and for any account now or hereafter opened by you. You understand that, if your account is a cash account, the provisions of paragraphs 18 & 19 are not binding upon you unless you enter into a margin transaction and, if your account is a commodities account, the provisions of paragraph 14 shall not be applicable. 1.APPLICABLE LAW AND REGULATIONS. All transactions in your account shall be subject to all applicable laws and the rules and regulations of all federal, state and self-regulatory agencies, including, but not limited to, the Board of Governors of the Federal Reserve System and the constitution, rules, customs and usages of the exchange or market (and its clearing house) where the transactions are executed. 2.SECURITY INTEREST AND LIEN. All securities or other property which we may at any time be carrying or maintaining for you or which may at any time be in our possession or control for any purpose, including safekeeping, shall be subject to a general lien for the discharge of all of your obligations to us, irrespective of whether or not we have made advances in connection with such securities or other property, and irrespective of the number of accounts you may have with us. 3.DEPOSITS ON CASH TRANSACTIONS. If at any time NationsBanc Montgomery Securities LLC considers it necessary for its protection, it may in its discretion require you to deposit cash or collateral in your account to assure due performance by you of your open contractual commitments. 4.BREACH OR DEFAULT. In the event of any breach by you of any agreement with us, or any default by you in any obligation to us, or should you die or file a petition in bankruptcy or for the appointment of a receiver by or against you, or should we for any reason whatsoever deem it necessary for our protection, we are hereby authorized, at our discretion, to sell any or all of the securities and other property in any of your accounts which may be in our possession or control, or which we may be carrying or maintaining for you (either individually or jointly with others), or to buy-in any securities or other property of which your account or accounts may be short, or to cancel any other standing orders, to close out your account or accounts in whole or in part or in order to close out any commitment made on your behalf. Any such sale, purchase or cancellation may be made according to our judgment and may be made, at our discretion, on the exchange or other market where such business is then usually transacted, or at public auction or at private sale, without advertising the same and without notice to you or to your personal representative, and without prior tender, demand or call of any kind upon you, or upon your personal representative (each of which is expressly waived by you), and we may purchase the whole or any part thereof free from any right of redemption, and you shall remain liable for any deficiency; it being understood that a prior tender, demand, call or notice of any kind shall not be considered a waiver of our right to sell or buy any securities and/or other property held by us, or owed us by you, at any time as hereinbefore provided. Nothing in this agreement shall be construed as relieving you of any obligations imposed by law. 5.FINALITY OF REPORTS. Reports of execution of orders and statements of your accounts shall become conclusive if not objected to in writing, the former within five days, and the latter within ten days, after forwarding by us to you by mail or otherwise. 6.RECEIPT OF TRUTH-IN-LENDING. You hereby acknowledge receipt and review of NationsBanc Montgomery Securities LLC's Truth-In-Lending disclosure statement contained here within. You understand that interest will be charged on any debit balances in accordance with the methods described in that statement or in any amendment or revision thereto which may be provided to you. It is understood and agreed that the interest charge made to your account at the close of one charge period will be compounded, unless paid; that is, the unpaid interest charge for previous periods will be added to the opening balance for the next charge period, thereby becoming part of the principal amount due and bearing like interest. 7.TRANSFERS BETWEEN ACCOUNTS. At any time and from time to time, at our discretion, we may without notice to you apply and/or transfer any or all securities and/or other property of yours interchangeably between any of your accounts. Page 19 of 82 20 8.SELL ORDERS. It is understood and agreed that you will designate any sell order for a short account which you place with us as a "short sale" and hereby authorize us to mark such order as being "short," and when placing with us any order for a long account, will designate it as such and hereby authorize us to mark such order as being "long." Any sell order which you shall designate as being for long account as above provided is for securities then owned by you and, if such securities are not then deliverable by us from any of your accounts, the placing of such order shall constitute a representation by you that it is impracticable for you to then deliver such securities to us but that you will deliver them as soon as it is possible for you to do so without undue inconvenience or expense. 9.AGE, BENEFICIAL INTEREST. If you are an individual, you represent that you are of full legal age, and, in any event not less than eighteen years of age. You further represent that no one except you has an interest in your account with us. 10. OPERATIONAL MATTERS. NationsBanc Montgomery Securities LLC primarily uses banks located in California and New York to issue checks. Also, when we hold securities for your account, dividends and interest are credited on or about the payable date as received. Most of our customers prefer to have these funds held in their accounts, and this will be the procedure which we will follow with your account unless you advise us of an alternative procedure which you would prefer. For example, we could arrange for checks to be sent to you monthly. If you require special arrangements, please bring the matter to our attention. NationsBanc Montgomery Securities LLC's policy is not to receive remuneration for directing orders to particular brokers/ dealers or market centers for execution. Notwithstanding this policy, should NationsBanc Montgomery Securities LLC receive such remuneration on any transaction, appropriate disclosure will be made. 11. CREDIT REPORT. NationsBanc Montgomery Securities LLC may, in its discretion, request an investigative consumer report on you as a credit reference, which report may include information with respect to character, general reputation, personal characteristics and mode of living. In accordance with the Fair Credit Reporting Act, a copy of any such report, if obtained, will be made available to you upon written request. 12. CLEARANCE ACCOUNTS. If NationsBanc Montgomery Securities LLC carries your account as clearing broker by arrangement with another broker through whose courtesy your account has been introduced, then unless NationsBanc Montgomery Securities LLC receives from you a written notice to the contrary, NationsBanc Montgomery Securities LLC shall accept from such other broker, without any inquiry or investigation by us, (i) orders for the purchase and sale of securities and other property on margin or otherwise, and (ii) any other instructions concerning said account. You understand NationsBanc Montgomery Securities LLC shall have no responsibility or liability to you for any acts or omissions of such other broker, its officers, employees or agents. 13. WAIVER, ASSIGNMENT AND NOTICES. No term or provision of this Agreement may be waived or modified unless in writing and signed by the party against whom such waiver or modification is sought to be enforced. NationsBanc Montgomery Securities LLC's failure to insist at any time upon strict compliance with this Agreement or with any of the terms hereunder or any continued course of such conduct on its part shall in no event constitute or be considered a waiver by NationsBanc Montgomery Securities LLC of any of its rights or privileges. This Agreement contains the entire understanding between you and NationsBanc Montgomery Securities LLC concerning the subject matter of this Agreement. You may not assign your rights or obligations hereunder without first obtaining the prior written consent of NationsBanc Montgomery Securities LLC. Notice or other communications, including margin calls, delivered or mailed to the address given below shall, until NationsBanc Montgomery Securities LLC has received notice in writing of a different address, be deemed to have been personally delivered to you. 14. ARBITRATION. - - ARBITRATION IS FINAL AND BINDING ON THE PARTIES. - - THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING THE RIGHT TO JURY TRIAL. - - PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM COURT PROCEEDINGS. - - THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY THE ARBITRATORS IS STRICTLY LIMITED. Page 20 of 82 21 - - THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY. YOU AGREE, AND BY CARRYING AN ACCOUNT FOR YOU, WE AGREE, THAT ALL CONTROVERSIES WHICH MAY ARISE BETWEEN US CONCERNING ANY TRANSACTION OR THE CONSTRUCTION, PERFORMANCE OR BREACH OF THIS OR ANY OTHER AGREEMENT BETWEEN US, WHETHER ENTERED INTO PRIOR, ON, OR SUBSEQUENT TO THE DATE HEREOF, SHALL BE DETERMINED BY ARBITRATION. ANY ARBITRATION UNDER THIS AGREEMENT SHALL BE CONDUCTED ONLY IN THE FORUMS PROVIDED BY THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. OR THE BOARD OF GOVERNORS OF THE NEW YORK STOCK EXCHANGE, INC., AS YOU MAY ELECT. IF YOU DO NOT MAKE SUCH ELECTION BY REGISTERED MAIL ADDRESSED TO NATIONSBANC MONTGOMERY SECURITIES LLC, 600 MONTGOMERY STREET, SAN FRANCISCO, CA 94111, ATTENTION: LEGAL DEPARTMENT, AND RECEIVED WITHIN FIVE DAYS AFTER DEMAND BY US THAT YOU MAKE SUCH ELECTION, THEN NATIONSBANC MONTGOMERY SECURITIES LLC MAY MAKE SUCH ELECTION. THE AWARD OF THE ARBITRATORS, OR OF THE MAJORITY OF THEM, SHALL BE FINAL, AND JUDGMENT UPON ANY AWARD RENDERED BY THE ARBITRATORS MAY BE ENTERED IN ANY COURT HAVING JURISDICTION THEREOF. No person shall bring a putative or certified class action to arbitration, nor seek to enforce any pre-dispute arbitration agreement against any person who has initiated in court a putative class action or who is a member of a putative class who has not opted out of the class with respect to any claims encompassed by the putative class action until: (i) the class certification is denied; (ii) the class is decertified; or (iii) the customer is excluded from the class by the court. Such forbearance to enforce an agreement to arbitrate shall not constitute a waiver of any rights under this agreement except to the extent stated herein. 15. NEW YORK LAW TO GOVERN. This Agreement and its enforcement shall be governed by the laws of the State of New York (without regard to any principles of conflicts of law) and its provisions shall be continuous; shall cover individually and collectively all accounts which you may open or reopen with us, and shall inure to the benefit of our present organization, and any successor organization, irrespective of any change or changes at any time in the personnel thereof, for any cause whatsoever, and of the assigns of our present organization or any successor organization, and shall be binding upon you, and/or your estate, executors, administrators, heirs and assigns. 16. PARTIAL UNENFORCEABILITY. If any provision herein is or should become inconsistent with any present or future law, rule or regulation of any sovereign government or a regulatory body having jurisdiction over the subject matter of this Agreement or is held to be invalid, void or unenforceable by reason of any law, rule, administrative order or judicial decision, such provision shall be deemed to be rescinded or modified in accordance with any such law, rule, regulation, order or decision. In all other respects, this Agreement shall continue and remain in full force and effect. 17. LIMIT ORDERS. NationsBanc Montgomery Securities LLC reserves the right to not accept from customers limit orders in NASDAQ or over-the-counter securities in which it acts as a market maker. 18. MARGIN IN MARGIN ACCOUNTS (NOT APPLICABLE TO CASH ACCOUNTS). You hereby agree to maintain such margin in your margin account as NationsBanc Montgomery Securities LLC may in its discretion require and you agree to pay forthwith on demand any debit balance owing with respect to any of your margin accounts, and if not paid this shall be a breach of this Agreement and NationsBanc Montgomery Securities LLC may take such action as it considers necessary for its protection in accordance with this Agreement. You understand that, even if NationsBanc Montgomery Securities LLC has a policy of giving customers notice of a margin deficiency, NationsBanc Montgomery Securities LLC is not obligated to request additional margin from you, and there may be circumstances where NationsBanc Montgomery Securities LLC will liquidate securities and/or other property in your account without notice to you. You will be charged interest on your debit balance which if not paid at the close of an interest period will be added to the opening balance for the next interest period. Please consult the attached disclosure statement for an outline of NationsBanc Montgomery Securities LLC's interest policies. Page 21 of 82 22 CASH/MARGIN 19. CUSTOMER'S CONSENT TO LOAN OR PLEDGE OF SECURITIES AND OTHER PROPERTY (NOT APPLICABLE TO CASH ACCOUNTS). You hereby authorize NationsBanc Montgomery Securities LLC to lend either to itself or to others any securities and other property held by NationsBanc Montgomery Securities LLC in your margin account and to carry all such property in its general loans and such property may be pledged, repledged, hypothecated or rehypothecated, without notice to you, either separately or in common with other such property for any amounts due to NationsBanc Montgomery Securities LLC thereon or for a greater sum, and NationsBanc Montgomery Securities LLC shall have no obligation to retain a like amount of similar property in its possession and control. BY SIGNING THIS AGREEMENT YOU ACKNOWLEDGE THAT THE SECURITIES IN YOUR MARGIN ACCOUNT MAY BE LOANED TO NATIONSBANC MONTGOMERY SECURITIES LLC OR LOANED OUT TO OTHERS AND THAT YOU HAVE RECEIVED AND REVIEWED A COPY OF THIS AGREEMENT. THIS AGREEMENT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE AT PAGES 2-3 AT PARAGRAPH 14. IF JOINT ACCOUNT BOTH PARTIES MUST SIGN. Persons signing on behalf of others please indicate title or capacity in which you have signed. Financial Institution Partners II, L.P. - --------------------------------------------------- (Typed or Printed Name) By: Hovde Capital, L.L.C., general partner By: Richard J. Perry, Jr., Secretary - --------------------------------------------------- (Signature) /s/ Richard J. Perry, Jr. - --------------------------------------------------- (Signature) 1824 Jefferson Place, N.W. - --------------------------------------------------- (Mailing Address) Washington DC 20036 - --------------------------------------------------- (City) (State) (Zip) 2/4/98 - --------------------------------------------------- (Date) Acct. No:____________________________________________ Page 22 of 82 23 EXHIBIT D NationsBanc Montgomery Securities LLC PRIME BROKER AGREEMENT In accordance with the requirements set forth in the January 25, 1994 No-Action Letter of the Division of Market Regulation of the Securities and Exchange Commission (the "No-Action Letter"), NationsBanc Montgomery Securities LLC ("NMS"), a North Carolina corporation, and each Customer on whose behalf this agreement has been executed ("Customer"), hereby agree as follows. 1. As of October 3, 1994 or such later date when the No-Action Letter shall become effective, this Agreement shall apply to all transactions in which NMS is given up as the prime broker for Customer; i.e. transactions executed for Customer by one or more executing brokers (each, an "Executing Broker"), which transactions are submitted to NMS for clearance and settlement. 2. If Customer is the beneficial owner of an account managed by an Investment Advisor registered with the Securities and Exchange Commission under the Investment Advisors Act of 1940 or such other authorized agent, attorney in fact or third party ("Investment Advisor"), then this Agreement has been executed on Customer's behalf by such Investment Advisor. Each Customer on whose behalf this Agreement has been executed is named on Schedule A hereto, as such Schedule may be modified from time to time. Investment Advisor represents and warrants that it has on file written authorization to execute agreements on behalf of each Customer named on Schedule A and shall indemnify and hold NMS harmless from any claim or claims arising from Investment Advisor's unauthorized execution of this Agreement on any such Customer's behalf. 3. All Executing Brokers through whom Customer or Investment Advisor, as the case may be, is initially authorized to execute prime brokerage transactions are identified on Schedule B hereto. Prior to entering into a prime brokerage transaction with an Executing Broker not identified on Schedule B. Customer or Investment Advisor shall state in a writing sent via facsimile to NMS that it desires to do so and confirm with NMS that a prime brokerage agreement has been executed- between NMS and such Executing Broker. Upon execution of a prime brokerage agreement between NMS and such Executing Broker, Schedule B hereto shall be deemed automatically amended to include such Executing Broker and, only thereafter, may Customer execute prime brokerage transactions with such Executing Broker pursuant to this Agreement. 4. Customer or Investment Advisor, as the case may be, will promptly notify NMS of each transaction executed by an Executing Broker on Customer's behalf, no later than the close of business on trade date. At a minimum, such notice will include the security involved, the number of shares or units, the price per share or unit, whether the transaction was a long or short sale or a purchase, the Executing Broker and the Executing Broker's commission. Page 23 of 82 24 5. On the next business day following trade date, NMS will send to Customer, or if requested in writing, to Investment Advisor, notification confirming the details of each transaction executed by Executing Broker on Customer's behalf, based upon the information provided to NMS by Customer or Investment Advisor. Such notification will include all information required for a confirmation pursuant to Rule 10b-10 under the Securities Exchange Act of 1934 ("Rule 10b-10"), except the capacity of the executing broker, an average price designation, and, in principal trades, the reported trade price and the difference between that price and the net price to Customer, if this information has not been provided to NMS by Customer or Investment Advisor. In addition, the notification will disclose any transaction-based charges imposed by NMS and any commission charged by Executing Broker. 6. NMS will settle transactions on Customer's behalf, unless, during the time permitted for disaffirmations under the agreement then in effect between NMS and Executing Broker, NMS disaffirms all unsettled transactions of Customer that NMS determines to disaffirm in good faith and in accordance with reasonable commercial standards. NMS will promptly send to Customer or Investment Advisor, as applicable, a notice of cancellation of all disaffirmed transactions to offset any notifications sent previously. NMS shall not be responsible for the clearance and settlement of transactions that it disaffirms. Rather, Customer shall be responsible and liable solely to Executing Broker(s) for the clearance and settlement of such transactions. 7. Without limiting the generality of the foregoing, if Customer is the beneficial owner of an account managed by an Investment Advisor registered under the Investment Advisor's Act of 1940, NMS, in its sole and absolute discretion, may elect not to settle prime brokerage transactions on behalf of Customer if Customer fails to maintain in its account with NMS minimum net equity of at least $250,000 in cash or securities with a ready market as defined in Rule 15c3-l(c)(11) under the Securities Exchange Act of 1934. Otherwise, if Customer is not the beneficial owner of an account managed by an Investment Advisor registered under the Investment Advisor's Act of 1940, NMS, in its sole and absolute discretion, may elect not to settle prime brokerage transactions on behalf of Customer if Customer fails to maintain in its account with NMS minimum net equity of at least $1,000,000 in cash or securities with a ready market as defined in Rule 15c3-l(c)(11) under the Securities Exchange Act of 1934. 8. Furthermore, in the event net equity in Customer's account with NMS falls below the minimum amount set forth in the No-Action Letter, Customer shall have until 12:00 noon of the fifth business day following the date on which net equity fell below the minimum amount to restore net equity to the level required in the No-Action Letter. If Customer fails to restore net equity to the required level, NMS shall notify each Executing Broker, by the same day's close of business, that NMS is no longer acting as Prime Broker for Customer. As of the day following such notice, NMS may not accept any prime brokerage transactions commenced on behalf of Customer. Page 24 of 82 25 9. So long as this Agreement is in effect, NMS will be responsible to ensure that all transactions which it has affirmed and not subsequently disaffirmed, and is obligated to clear, are cleared between NMS and Customer, and accordingly, appear on NMS's books in either a cash or margin account for Customer and conform to Regulation T promulgated by the Board of Governors of the Federal Reserve System and applicable self-regulatory organization margin requirements. 10.Customer may instruct, in a writing separate from the prime brokerage agreement between Customer and Executing Broker, Executing Broker to send confirmations of transactions, as required by Rule l0b-10, to Customer in care of NMS. Confirmations received by NMS on Customer's behalf are available to Customer without charge, promptly upon request. The parties acknowledge that providing such an instruction is not a condition to entering into this Agreement, nor shall Customer be charged differential fees or otherwise receive incentives for providing such an instruction. 11.NMS is hereby authorized to disclose Customer's name and address to each Executing Broker identified on Schedule B. as such Schedule may be modified from time to time, to enable such Executing Broker to establish on its books an account for Customer to be used in the event transactions are disaffirmed by NMS. 12.NMS will issue to Customer a statement of account at least on a quarterly basis. The statement will include all transactions that occurred during the statement period and the resultant security positions and money balances. 13.Customer represents and warrants that it is currently in compliance, and during the term of this Agreement will remain in compliance, with all applicable requirements of the No-Action Letter, and any supplements or amendments thereto; including, in particular, the requirement that it execute an agreement similar to this Agreement with each Executing Broker at any point in time identified on Schedule B. 14.In the event of an inconsistency between any term or terms of this Agreement and those of any Cash Account Agreement, Margin Agreement or Clearing Agreement between the parties, this Agreement shall control to the extent of such inconsistency. 15.This Agreement may be amended or modified only by NMS upon prior written notice to Investment Advisor or Customer. Such amendment or modification shall become effective immediately in the event Customer continues to accept prime brokerage services from NMS after the date on which such notice is given. 16.This Agreement may be terminated by either party hereto upon prior written notice. Any such termination shall not affect Customer's liabilities and obligations to NMS with respect to transactions executed prior to such termination. 17.This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the conflict of law principles thereof. Page 25 of 82 26 18. (a) Arbitration is final and binding on the parties. (b) The parties are waiving their rights to seek remedies in court, including the right to a jury trial. (c) Pre-arbitration discovery is generally more limited than and different from court proceedings. (d) The arbitrators' award is not required to include factual findings or legal reasoning and any party's right to appeal or seek modifications or rulings by the arbitrators is strictly limited. (e) The panel of arbitrators will typically include a minority of arbitrators who were or are affiliated with the securities industry. ANY CONTROVERSY BETWEEN NMS OR ANY OF ITS AFFILIATES OR ANY OF ITS OR THEIR PARTNERS, OFFICERS, DIRECTORS OR EMPLOYEES ON THE ONE HAND, AND CUSTOMER AND/OR INVESTMENT ADVISOR ON THE OTHER HAND, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACCOUNTS ESTABLISHED HEREUNDER, SHALL BE SETTLED BY ARBITRATION, IN ACCORDANCE WITH THE RULES THEN OBTAINING OF THE NEW YORK STOCK EXCHANGE, INC. (OR SUCH OTHER ARBITRATION PANEL OR BOARD AS MAY BE REQUIRED BY LAW). ANY AWARD OF THE ARBITRATORS SHALL BE FINAL, AND JUDGMENT UPON THE AWARD RENDERED MAY BE ENTERED IN ANY COURT, STATE OR FEDERAL, HAVING JURISDICTION. IN WITNESS WHEREOF, the parties hereto have caused this Agreement, WHICH IS ACKNOWLEDGED TO CONTAIN A PRE-DISPUTE ARBITRATION CLAUSE, to be duly executed and delivered as of the date set forth below. Financial Institution Partners II, L.P. - ----------------------------------------- CUSTOMER OR INVESTMENT ADVISOR ACCEPTED AND AGREED TO: NATIONSBANC MONTGOMERY By: HOVDE CAPITAL, L.L.C., general partner SECURITIES LLC AS PRIME BROKER By: /s/ Richard J. Perry, Jr. By: /s/ Glen Dailey - ----------------------------------------- ------------------------- Richard J. Perry, Jr., Secretary Senior Managing Director - ----------------------------------------- ---------------------------- Print Name and Title Print Name and Title Date: 2/4/98 Date: 2/5/98 ------ ------- Page 26 of 82 27 EXHIBIT E NationsBanc Montgomery Securities LLC ________________________________ ACCOUNT NUMBER ________________________________ ACCOUNT NAME PARTNERSHIP AGREEMENT Ladies and Gentlemen: In consideration of your opening and carrying a partnership account in the name of Financial Institution Partners II, L.P. a duly organized partnership (the "Partnership") of which each of the undersigned is a general partner, the undersigned jointly and severally agree that each of the following persons, to wit: Eric D. Hovde Steven D. Hovde - -------------------------------- -------------------------------- Richard J. Perry, Jr. - -------------------------------- -------------------------------- are hereby appointed the authorized agents and attorneys-in-fact of the Partnership (the "Authorized Agents"), and shall have authority on behalf of the Partnership, and for its account and risk, to buy, sell (including short sales), tender, convert, exchange, trade and otherwise deal in, through you as brokers, stocks, bonds, options and any other securities (on margin or otherwise) in accordance with your terms and conditions for the Partnership account. You are authorized to follow the instructions of the Authorized Agents in every respect concerning said account, and to deliver to them on behalf of the Partnership account all demands, notices, confirmations, reports, statements of accounts, and communications of every kind; to deliver to them on behalf of the Partnership account money, securities and property of every kind, and to follow the orders of said Authorized Agents regarding the same. The Authorized Agents are hereby authorized to execute and deliver on behalf of the Partnership account agreements relating to any of the foregoing matters and to terminate or modify same or waive any of the provisions thereof; and generally to deal with you on behalf of the Partnership account as fully and completely as if each alone were interested in said accounts, all without notice to the other or others interested in said account. This Authorization and indemnity is in addition to, and in no way limits or restricts, any rights which you have under any other agreement or agreements between you and the undersigned, or any of them, now existing or hereafter entered into, and is binding on the Partnership and its legal representatives, successors and assigns. This authorization and indemnity is also a continuing one and shall remain in full force and effect until revoked by a written notice, addressed to you and delivered to you at your principal office in San Francisco. No such revocation shall affect any liability arising out of any transaction initiated prior to such revocation. The undersigned, jointly and severally agree to indemnify and hold you harmless from and to pay you promptly on demand any debit balance in said account, including any loss or debit balance resulting from transactions initiated prior to receipt of such revocation. The undersigned hereby certify that the general and/or limited partners of said Partnership are as follows: * Name N/A Occupation ------------------------- ------------------------ Name Occupation ------------------------- ------------------------ Name Occupation ------------------------- ------------------------ *or attach signature page(s) of partnership Page 27 of 82 28 Name Occupation ------------------------- ------------------------ Name Occupation ------------------------- ------------------------ Name Occupation ------------------------- ------------------------ Name Occupation ------------------------- ------------------------ Name Occupation ------------------------- ------------------------ Name Occupation ------------------------- ------------------------ Name Occupation ------------------------- ------------------------ Name Occupation ------------------------- ------------------------ Name Occupation ------------------------- ------------------------ The undersigned further authorizes you, in the event of death or retirement of any of the general and/or limited partners of said Partnership, to take such proceedings, require such papers, retain such portions or restrict transactions in said account as you may deem advisable to protect you against any liability, penalty or loss under any present or future laws or otherwise. It is further agreed that in the event of the death or retirement of any member of the said Partnership the remaining members will immediately cause you to be notified of such fact. This Authorization and indemnity and its enforcement shall be governed by the laws of the State of New York, shall cover individually and collectively all accounts covered by this agreement and authorization which the undersigned may open or reopen with you, and shall inure to the benefit of your present organization, and any successor organization, irrespective of any change or changes of any kind of the personnel thereof for any cause whatsoever, and of the assigns of your present organization or any successor organization. Customer consent to loan or pledge of securities and other property (not applicable to cash accounts): each of the undersigned has signed the enclosed Customer's Agreement and Customer's Loan Consent which are intended to cover, in addition to the provisions hereof, the terms upon which the Partnership is to be carried. Very truly yours, HOVDE CAPITAL, L.L.C. Dated: 2/4/98 By: /s/ Richard J. Perry, Jr. General Partner(s) _______________________________ _______________________________ Page 28 of 82 29 EXHIBIT F MORGAN STANLEY & CO. INCORPORATED OPTION AGREEMENT The following sets forth our respective rights and obligations arising from your handling, purchasing, selling, assigning, exercising and/or endorsing puts and/or calls, or variations thereof ("options"), for my account. In connection with such transactions for my account, I agree and represent as follows: 1. I have received from you, have read and understand the brochure entitled "Characteristics and Risks of Standardized Options" and/or other appropriate Options Disclosure Documents ("ODD"), including but not limited to the information therein regarding position limits and exercise limits, the purposes and risks of transactions in options and the secondary market in options. 2. I agree to pay to you, as you direct, (a) all applicable transaction fees, charges and premiums, (b) the amount of any trading loss that you may incur from options transactions executed by you on my behalf and (c) any debit balance owing with respect to my account(s), and interest and service charges on any such debit balances at the rates then charged by you, together with your costs and reasonable attorney's fees incurred in collecting any such debit balance. 3. In effecting options transactions through you, I am aware of and agree to be bound by the rules of The Options Clearing Corporation ("OCC"), the Securities and Exchange Commission, the various securities exchanges and securities associations, the Board of Governors of the Federal Reserve Board and other securities self regulatory organizations having jurisdiction over options transactions. Without limiting the foregoing, I agree not to violate, either acting by myself (through you as broker or otherwise) or in concert with others, directly or indirectly, the rules of such organizations regarding position limits and/or exercise limits. I further expressly authorize you to liquidate any of my options positions without notice to me and without my consent, in your sole and absolute discretion, if and when my open positions exceed applicable position limits so as to reduce such open positions to a level that is in compliance with such limits or if I fail to fulfill any of my obligations hereunder or under any other agreement with you. I will bear and be solely responsible for any losses associated with such a reduction or liquidation. 4. I agree that you shall not be liable for delays in the transmission of orders or instructions due to the breakdown or failure of transmission or communication facilities or any other cause beyond your control, including any mistake, error, negligence or misconduct of a securities exchange, securities association or clearing house or their officers, directors, employees or agents. 5. (a) I understand that I am fully responsible for taking action to exercise my option contracts. I hereby agree to waive any and all claims for damages or loss, which I might have against you because an option was not exercised. I understand that my options will become worthless if I do not deliver instructions to exercise by your established exercise cut-off times, which may be different than exercise cut-off times established by the exchanges, markets and clearing houses. I am aware that the OCC has established thresholds for equity and index option contracts whereby all expiring contracts at or above the appropriate threshold will be automatically exercised unless you, at my direction, instruct the OCC otherwise. (b) I understand that you randomly assign exercise notices to all customers. All American-style (an option that may be exercised at any time) short option positions are subject to assignment at any time, including positions established on the same day that exercises are assigned, while European-style (an option that may be exercised only on a specified exercise date) short option positions are only subject to assignment upon expiration. Exercise assignment notices are allocated randomly from among all of your customers' short option positions, which are subject to exercise. A more detailed description of Morgan Stanley & Co. Incorporated's Random Method for allocating assignment notices is available from your account representative upon request. Page 29 of 82 30 6. I represent and warrant to you that (i) options trading is suitable for me in light of my investment objectives, financial situation, needs, experience and knowledge, (ii) I am aware and acknowledge that options trading may be highly speculative and involves a high degree of risk (including without limitation the risks described in the ODD) and that on certain trading days, trading may cease with a resultant financial disadvantage to me, (iii) I am willing and able to evaluate, carry and bear the financial risks attendant to options trading, and (iv) I understand that you are relying upon these representations and warranties and the financial and other information that I have provided or will provide to you. I will promptly notify you of any significant changes that take place in any information furnished to you, including my investment objectives, financial situation and/or needs, prior to effecting any additional opening purchase or sale transactions. 7. CHOICE OF DISPUTE RESOLUTION. ANY DISPUTE THAT I MAY HAVE WITH YOU ARISING OUT OF, RELATING TO OR IN CONNECTION WITH, YOUR BUSINESS, ANY TRANSACTION BETWEEN US, OR THIS AGREEMENT, SHALL BE DETERMINED BY ARBITRATION OR LITIGATION IN COURT AT MY ELECTION. REGARDLESS OF WHETHER I CHOOSE ARBITRATION OR LITIGATION, WE AGREE TO FOLLOW THE PROCEDURES, AND ABIDE BY THE REQUIREMENTS, LISTED BELOW: 8. ARBITRATION: - - ARBITRATION IS FINAL AND BINDING ON THE PARTIES. - - THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING THE RIGHT TO A JURY TRIAL. - - PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM COURT PROCEEDINGS. - - THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY THE ARBITRATORS IS ST RICTLY LIMITED. - - THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY. ANY ARBITRATION SHALL BE CONDUCTED IN NEW YORK AND ONLY BEFORE THE NEW YORK STOCK EXCHANGE, INC., THE AMERICAN STOCK EXCHANGE, INC., THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC., OR ANY OTHER SELF-REGULATORY ORGANIZATION OF WHICH YOU ARE A MEMBER. I HAVE THE RIGHT TO ELECT ONE OF THE FOREGOING ORGANIZATIONS, BUT IF I FAIL TO MAKE SUCH ELECTION BY CERTIFIED LETTER ADDRESSED TO YOU AT YOUR MAIN OFFICE BEFORE THE EXPIRATION OF TEN DAYS AFTER RECEIPT OF A WRITTEN REQUEST FROM YOU TO MAKE SUCH ELECTION THEN YOU MAY MAKE SUCH ELECTION. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS CONSENT BY YOU TO AN AWARD OF PUNITIVE DAMAGES. THE AWARD OF THE ARBITRATORS, OR THE MAJORITY OF THEM, SHALL BE FINAL, AND JUDGMENT UPON THE AWARD RENDERED MAY BE ENTERED IN ANY COURT, STATE OR FEDERAL, HAVING JURISDICTION. NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION, NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINST ANY PERSON WHO HAS INITIATED IN COURT A PUTATIVE CLASS ACTION; WHO IS A MEMBER OF A PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED BY THE PUTATIVE CLASS ACTION UNTIL: (i) THE CLASS CERTIFICATION IS DENIED; (ii) THE CLASS IS DECERTIFIED; OR (iii) THE CUSTOMER IS EXCLUDED FROM THE CLASS BY THE COURT. SUCH FORBEARANCE TO ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OR ANY RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN. 9. LITIGATION IN COURT. (A) UNLESS THE PARTIES OTHERWISE AGREE IN WRITING WHEN ANY DISPUTE ARISES, ANY LITIGATION MUST BE INSTITUTED IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR THE SUPREME COURT OF THE STATE OF NEW YORK FOR THE COUNTY OF NEW YORK. (B) ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR ACTION IS HEREBY WAIVED BY ALL PARTIES TO THIS AGREEMENT. 10. THIS AGREEMENT, ITS ENFORCEMENT, AND ANY DISPUTE BETWEEN US, WHETHER ARISING OUT OF OR RELATING TO MY ACCOUNTS OR OTHERWISE, SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, EXCLUDING ITS CONFLICT OF LAW RULES; and its provisions shall be continuous, shall cover individually and collectively all accounts which I may open or reopen with you, and shall inure to the benefit of your present organization and any successor organization, irrespective of any change or changes at any time in the personnel thereof, for any cause whatsoever, and of the assigns of your present organization or any successor organization, and shall be binding upon me, and/or my estate, executors, administrators, trustees, agents, officers, directors and assigns. NOTICE: THIS AGREEMENT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE IN PARAGRAPHS 7 AND 8. Page 30 of 82 31 EXHIBIT G Morgan Stanley CUSTOMER PRIME BROKER ACCOUNT AGREEMENT Ladies and Gentlemen: In consideration of Morgan Stanley from time to time accepting an account or receiving holding or delivering any property of the undersigned, or entering into any Contract with the undersigned, the undersigned agrees with Morgan Stanley to the following: 1. DEFINITIONS "Agreement" means this document along with all executed annexes to this document. "Contract" means any contract or agreement between Morgan Stanley and the undersigned, including securities purchase or sale contracts, agreements to lend cash or securities, commodity and currency contracts, forward contracts, repurchase agreements, swap agreements or any other derivative or financial transaction, without regard to the form of such agreement which may include oral agreements or agreements confirmed or signed by only one party to the agreement and agreements entered into or signed by Morgan Stanley on behalf of the undersigned. "Collateral" means cash, securities, commodities, other financial assets, investment property and other property and assets (including all security entitlements in respect thereof, all income and profits thereon, all dividends, interest and other payments and distributions with respect thereto and all proceeds from any of the foregoing) which from time to time may be deposited or credited to any account of the undersigned with Morgan Stanley, be held or carried by Morgan Stanley for the undersigned, be due from Morgan Stanley to the undersigned, or be delivered to or in Morgan Stanley's possession or control for any purpose, including safekeeping. "Morgan Stanley" and the "Morgan Stanley Entities" mean, individually or collectively, as appropriate, Morgan Stanley & Co. Incorporated, MS Securities Services Inc., Morgan Stanley & Co. International Limited, Prime Dealer Services Corp., Morgan Stanley Securities Limited, Morgan Stanley Japan Limited, Morgan Stanley Asia Limited, Morgan Stanley GMBH, Morgan Stanley Market Products Inc., Morgan Stanley Capital Group Inc., Morgan Stanley Capital Services Inc., Morgan Stanley DW Inc., Morgan Stanley, MSDW Asia Securities Products LLC, MSDW Equity Finance Services (Cayman) Ltd., Morgan Stanley Financial Products Ltd., MSDW Markets Inc. and their respective successors, parents, subsidiaries, affiliates, divisions, officers, directors, agents and employees. "Obligation" means any obligation or liability of a party arising at any time, whether or not mature or contingent, related to the purchase, sale or loan of securities, currencies or other instrument, property or assets or under or in connection with this Agreement or any Contract, including any payment, repayment or delivery obligation, any obligation relating to any extension of credit or to pay damages (including costs of cover) and legal and other expenses incurred in connection with the enforcement of any Contract. "Prime Brokerage Regulations" means the requirements applicable to prime brokerage activities set out in the no-action letter of the Securities and Exchange Commission ("SEC") dated January 25, 1994, as such letter may be amended, modified or supplemented from time to time, regarding the performance of prime brokerage services, and any other relevant regulations of the SEC or other governmental authorities or self-regulatory organizations. "undersigned" means each of the individuals or entities, other than Morgan Stanley, that is a party to this Agreement. 2. APPLICABLE RULES AND REGULATIONS. All transactions under this Agreement shall be subject to the rules and regulations of all U.S. and, if applicable, non- U.S., federal, state and local governmental authorities, self-regulatory organizations, markets and clearing corporations including but not limited to the Securities & Exchange Commission ("SEC"), New York Stock Exchange ("NYSE") or National Association of Securities Dealers ("NASD"). 3. SHORT AND LONG SALES. The undersigned agrees that when placing any sell order, the undersigned will appropriately designate it as "long" or as "short." The undersigned will designate a sale as "long" only if the securities being sold are securities then owned by the undersigned and such securities are either in the undersigned's account at Morgan Stanley or will be delivered to Morgan Stanley as soon as it is possible to do so, without undue inconvenience or expense to Morgan Stanley. 4. COMPLIANCE WITH PRIME BROKERAGE REGULATORY REQUIREMENTS. The undersigned hereby acknowledges that it is familiar with the Prime Brokerage Regulations and with the related provisions in Section 5 of this Agreement, and hereby undertakes to comply with the Prime Brokerage Regulations as in effect at any time and with the related provisions of this Agreement. The undersigned will inform Morgan Stanley promptly if this undertaking is not satisfied. Without limiting the foregoing, the undersigned agrees that it shall maintain in its account with Morgan Stanley at all times a minimum net equity in cash and securities as agreed upon, but in no event less than that required by the Prime Brokerage Regulations. The undersigned further agrees that, in the event its account falls below this minimum net equity, it shall bring its account into compliance in accordance with the Prime Brokerage Regulations. Page 31 of 82 32 5. MORGAN STANLEY AS PRIME BROKER. In connection with any transactions where Morgan Stanley acts as the undersigned's prime broker: (a) The undersigned maintains brokerage accounts with a number of other brokers ("Executing Brokers") and, from time to time, will place orders to be executed by one or more Executing Brokers. The undersigned agrees to give Morgan Stanley notice of the names of all Executing Brokers with whom the undersigned intends to place orders (which Executing Brokers must be acceptable to Morgan Stanley). Morgan Stanley is authorized to enter into a Prime Brokerage Agreement with all current or future Executing Brokers, to set up an account for the undersigned's benefit at any Executing Broker and to provide or obtain any information necessary to establish or maintain a prime brokerage relationship. The undersigned acknowledges that no order need be accepted by Morgan Stanley as prime broker from any Executing Broker with which Morgan Stanley has not entered into a "Prime Brokerage Agreement" with respect to the undersigned's account at Morgan Stanley. Further, Morgan Stanley reserves the right at any time to place a limit on the size of transactions executed by any Executing Broker which are to be settled and cleared by Morgan Stanley as a prime broker. The undersigned will use its best efforts to assure that such Executing Brokers comply with the terms set forth in the Prime Brokerage Agreement. The undersigned acknowledges that as between Morgan Stanley and any Executing Broker, the Executing Broker will be acting as an agent of the undersigned, not as Morgan Stanley's agent, for the purpose of carrying out the undersigned's directions with respect to the purchase, sale and settlement of securities. b) The undersigned or its representative will advise Morgan Stanley on trade date of the details of all transactions effected by any Executing Broker on the undersigned's behalf (the "Trade Data"). Morgan Stanley is authorized to acknowledge, affirm, settle and clear all such transactions. All such transactions shall be for the sole account and risk of the undersigned and Morgan Stanley shall have no responsibility or liability to the undersigned, any Executing Broker or any other third party. The undersigned agrees to pay all fees agreed upon and to make any necessary arrangements with the appropriate Executing Broker concerning the payment of any such fees, including the deduction of any such amounts from commissions charged by the Executing Brokers. The undersigned agrees that it is responsible, and liable to Morgan Stanley, and will indemnify Morgan Stanley, for all costs, losses and fees (including but not limited to those associated with buy-ins and sell-outs and those resulting from any Executing Broker's inability to settle a transaction) arising out of the orders placed by the undersigned with any Executing Broker or any action taken or not taken by any Executing Broker with respect to the undersigned or its transactions or accounts. (c) On the first business day following each transaction, Morgan Stanley shall send to the undersigned a notification of each trade placed with any Executing Broker based on information provided to Morgan Stanley by the undersigned. Any confirmations of trades or advices issued by Morgan Stanley as prime broker shall indicate the name of the Executing Broker involved and the other information required by the Prime Brokerage Regulations. If the undersigned has instructed the Executing Broker to send trade confirmations to the undersigned in care of Morgan Stanley, Morgan Stanley agrees that the confirmations will be available to the undersigned without charge upon request to Morgan Stanley. Reports of the execution of orders and statement of accounts of the undersigned shall be conclusive and binding if not objected to in writing (the former within five days and the latter within ten days) after Morgan Stanley's transmittal to the undersigned by mail, e-mail, facsimile, electronically or any other agreed means. Communications may be sent to the undersigned at the undersigned's address of record or in such other manner as the undersigned may hereinafter provide in writing. All communications sent to such address whether by mail, e-mail, facsimile, telegraph, messenger, electronic means or otherwise shall be deemed given to the undersigned personally as of the date sent, whether actually received or not. (d) The undersigned understands that transactions will be settled by Morgan Stanley only if: (i) sufficient funds or securities, as necessary, are maintained in an account with Morgan Stanley or if the undersigned has made other arrangements for settlement that are satisfactory to Morgan Stanley; (ii) the undersigned maintains, and has at the settlement of the transaction, at least the minimum net equity required by the Prime Brokerage Regulations in its account with Morgan Stanley and (iii) a condition does not exist that would require Morgan Stanley to disaffirm on a non-discretionary basis, as defined in the Securities Industry Association Form 150, paragraph 3. (e). Morgan Stanley's customer account records may reflect transactions as settled as of the projected settlement date (sometimes referred to as contractual settlement). Morgan Stanley does not guarantee settlement, however, and therefore reserves the right to reverse transaction settlement entries in the event of a settlement failure caused by events beyond Morgan Stanley's control. (e) The undersigned agrees to comply with Morgan Stanley's requirements relating to short sales, including the requirement that no short sale may be effected through an Executing Broker unless the undersigned has first confirmed with Morgan Stanley that the securities are available for delivery. Such confirmation does not guarantee that the securities will be available for delivery on settlement date or that the securities will be available to support a short sale for any particular period of time. Accordingly, the short sale may fail on settlement date or the undersigned may be asked to cover its short sale at anytime, and undersigned will be responsible for any Obligations that arise therefrom. (f) Morgan Stanley is authorized to try to resolve any unmatched trade reports received from any Executing Broker. However, the undersigned is responsible for the ultimate resolution of these trades and reports. Morgan Stanley shall have no responsibility or liability with respect to trade data not correctly transmitted to it on a timely basis by any person or entity, including but not limited to DTCC. (g) In the event the undersigned's account falls below the minimum net equity required by the Prime Brokerage Regulations, the undersigned authorizes Morgan Stanley to notify promptly all its Executing Brokers of such event. If the undersigned fails to bring such account into compliance with the minimum net equity, the undersigned further agrees that Morgan Stanley may, without notice to the undersigned, disaffirm, DK or decline to affirm, clear and settle any transaction effected by an Executing Broker on the undersigned's behalf. Except as provided in the following paragraph, the undersigned understands that if Morgan Stanley takes such action with respect to any transaction of the undersigned, Morgan Stanley shall do so for all transactions of the undersigned that day. In any such case, Morgan Stanley shall send a cancellation notification to the undersigned and the undersigned understands that the undersigned must settle outstanding trades directly with the relevant Executing Broker and authorizes Morgan Stanley to provide the Executing Broker with any information necessary to settle such trades. The undersigned further agrees that Morgan Stanley will not be bound to make any investigation into the facts surrounding any transaction to which the undersigned is a party and that, immediately upon notice to the undersigned and, if required, to the Executing Brokers, Morgan Stanley may cease acting as prime broker for the undersigned. (h) The undersigned hereby authorizes Morgan Stanley, if its account is managed on a discretionary basis by an SEC- or state-registered investment adviser, money manager or other person (an "Adviser"), to commingle its prime brokerage transactions with those of other accounts of its Adviser ("sub-accounts") for order placement and clearance in bulk in accordance with other instructions of the Adviser. The undersigned understands that no part of any transaction may be allocated to any sub-account where such sub-account's net equity is below the minimum levels established by the Prime Brokerage Regulations and that, should a such a net equity deficiency occur in any such sub-account, Morgan Stanley must disaffirm the entire transaction. The undersigned agrees that, should such an event occur, its Adviser may resubmit the bulk trade to the Executing Broker so as to exclude those securities which were originally allocated to the undersigned's sub-account or, if permissible, re-allocate the entire prime brokerage transaction to other sub-accounts. The undersigned understands that such reallocation must be communicated to Morgan Stanley within any required deadlines. 6. CURRENCY CONTRACTS. If an authorized representative of the undersigned initials the box entitled "Additional Provisions Related to Currency Contracts", which appears at the end of this Agreement, the undersigned, from time to time, may enter into spot and/or forward currency Contracts with Morgan Stanley in connection with the settlement of other Contracts or otherwise as the undersigned shall direct. The undersigned acknowledges that Morgan Stanley is under no obligation to enter into any currency Contracts with, or on behalf of, the undersigned, and further agrees to furnish to Morgan Stanley such documentation to indicate capacity and authority as Morgan Stanley may reasonably request prior to entering into any such Contracts. Each currency Contract entered into under this Agreement shall constitute an "FX Transaction", as such term is defined in the 1998 FX and Currency Option Definitions, including Annex A thereto, as published by the International Swaps and Derivatives Association, Inc., EMTA, and The Foreign Exchange Committee (as may be amended, the "FX Definitions"), and shall be subject to the terms in Page 32 of 82 33 this Section 6 as well as those set forth in the "Additional Provisions Related to Currency Contracts" box. Any confirmation, whether created by an exchange of telexes, facsimiles, SWIFT messages, or electronic messages on an electronic messaging or matching system, between Morgan Stanley and the undersigned relating to an FX Transaction, whether or not it is expressed to be, shall constitute a confirmation and, unless Morgan Stanley and the undersigned expressly agree otherwise, will be deemed to incorporate the FX Definitions. Notwithstanding the foregoing, Morgan Stanley shall have the right to convert currencies in connection with the exercise of Morgan Stanley's rights under Section 8 below in such manner as it may determine. 7. SECURITY INTEREST AND LIEN. All Collateral shall be subject to a general lien and a continuing first priority perfected security interest for the discharge of all Obligations of the undersigned to Morgan Stanley, irrespective of whether or not Morgan Stanley has made advances in connection with such Collateral, the number of accounts the undersigned has with Morgan Stanley or which particular Morgan Stanley Entity holds such Collateral. The undersigned and Morgan Stanley each acknowledge and agree that each Morgan Stanley Entity which holds Collateral does so both for itself and also as an agent and bailee for all other Morgan Stanley Entities which may be secured parties under any Contract. The undersigned and Morgan Stanley agree that all Collateral held in or credited to any account will be treated as financial assets under Article 8 of the Uniform Commercial Code as in effect in the State of New York (the "UCC") and that any account maintained by the undersigned with any Morgan Stanley Entity shall be a securities account under Article 8 of the UCC. In the event of a breach or default by the undersigned, Morgan Stanley shall have in addition to the rights and remedies provided in this Agreement, all rights and remedies available to a secured creditor under the UCC and any other applicable law. All Collateral delivered to Morgan Stanley shall be free and clear of all prior liens, claims and encumbrances and the undersigned will not cause or allow any of the Collateral to be subject to any liens, security interests, mortgages or encumbrances of any nature other than the security interest created in Morgan Stanley's favor. Furthermore, Collateral consisting of securities shall be delivered in good deliverable form (or Morgan Stanley shall have the unrestricted power to place such securities in good deliverable form) in accordance with the requirements of the primary market for these securities. The undersigned shall execute such documents and take such other action as Morgan Stanley shall reasonably request in order to perfect its rights with respect to any such Collateral. In addition, the undersigned appoints Morgan Stanley as the undersigned's attorney-in-fact to act on the undersigned's behalf to sign, seal, execute and deliver all documents, and do all such acts as may be required, to realize upon any of Morgan Stanley's rights in the Collateral. 8. RIGHTS OF MORGAN STANLEY. Morgan Stanley is hereby authorized, in its discretion, to cancel any outstanding orders for the purchase or sale of any securities, currencies, commodities or other property or asset, or to sell any or all of the securities, currencies, commodities or other property or asset which may be in Morgan Stanley's possession or control (either individually or jointly with others), or to buy any securities, currencies, commodities or other property or asset of which any account of the undersigned may be short upon: (a) the undersigned's death or incompetency (if applicable); (b) a breach, repudiation or default by the undersigned of this Agreement or any other Contract; (c) any misrepresentation of any statement by the undersigned when made or deemed to be made or repeated, (d) the failure of the undersigned to fulfill or discharge any Obligation under this Agreement or any Contract, including the failure to make a payment on demand or to satisfy margin requirements,(e) the filing by or against the undersigned of a petition or other proceeding in bankruptcy, insolvency or for the appointment of a receiver, (f) the levy of an attachment against any property or asset in any account of the undersigned (g) the failure by the undersigned to give adequate assurance of due performance pursuant to this Agreement (h) should you deem it necessary for your protection, to cancel any outstanding orders for the purchase or sale of any securities or other property, or to sell any or all of the securities, currencies and commodities or other property which may be in your possession or control (either individually or jointly with others), or to buy in any securities, commodities or other property of which the account or accounts of the undersigned may be short. Such sale, purchase or cancellation may be made on any exchange or other market where such business is then usually transacted, or at public auction or private sale, without advertising or notice of the time or place of sale to the undersigned, and without prior tender, demand or call of any kind upon the undersigned, all of which are expressly waived. Morgan Stanley may purchase the whole or any part thereof free from any right of redemption and the undersigned shall remain liable to Morgan Stanley for any deficiency; it being understood that a prior tender, demand or call of any kind from Morgan Stanley, or prior notice from Morgan Stanley, of the time and place of such sale or purchase shall not be considered a waiver of Morgan Stanley's right to sell or buy any securities, commodities, or other property or asset held by Morgan Stanley, or which the undersigned may owe to Morgan Stanley. In addition, Morgan Stanley may at any time in connection with its rights under this Section 8 without prior notice to the undersigned apply or transfer any and all Collateral interchangeably between Morgan Stanley Entities in connection with accounts in which the undersigned has an interest. 9. ADEQUATE ASSURANCES. If at any time Morgan Stanley has reasonable grounds to doubt the undersigned's performance of any of the undersigned's Obligations, Morgan Stanley may demand, and the undersigned shall give within twenty-four hours or any reasonable shorter period of time Morgan Stanley specifies, adequate assurance of due performance. The giving of adequate assurance of performance may require the delivery by the undersigned to Morgan Stanley of additional Collateral. Any failure by the undersigned to give such adequate assurance of due performance shall constitute an independent, material default under the terms of all Contracts and Morgan Stanley may terminate, liquidate or accelerate any and all Contracts and exercise any right under or with respect to any security relating to any Contract and any right to net or set off payments which may arise under any Contract or other agreement or under applicable law. 10. EXPENSES AND OTHER CHARGES. The undersigned agrees to pay Morgan Stanley, or its designee, the following fees and charges with respect to trading activity: (a) Morgan Stanley's commissions, markups and other charges with respect to the execution of transactions, fails, buy-ins, conversion costs or the maintenance of positions or other related services; (b) any fees, fines, penalties or other charges imposed by any authority described in Section 2 of this Agreement or any court or authority of competent jurisdiction on any account opened or transaction executed for the undersigned, except any such charges as may be imposed due to Morgan Stanley's gross negligence or willful misconduct; with respect to fees or expenses related to securities lending and borrowing transactions: (a) upon demand, any debit balance owing with respect to any account of the undersigned, and interest and service charges on any such debit balance at the rates then charged by Morgan Stanley; and (b) any charges with respect to such transactions, including buy-ins, and applicable taxes or interest on any of the foregoing, together with Morgan Stanley's costs and reasonable attorney's fees incurred in collecting any such debit balance. 11. NETTING AND SET OFF RIGHTS. Morgan Stanley shall have the right, at any time and from time to time, to set off Morgan Stanley's Obligations owed to the undersigned against the Obligations of the undersigned to Morgan Stanley and to foreclose on any Collateral for the purpose of satisfying the Obligations of the undersigned to Morgan Stanley. The undersigned acknowledges that the fulfillment by Morgan Stanley of its Obligations to the undersigned is contingent upon there being no breach, repudiation, misrepresentation or default by the undersigned which has occurred and is continuing under this Agreement or any Contract. 12. MAINTENANCE OF THE UNDERSIGNED'S COLLATERAL. Subject to the applicable rules of the SEC and other competent authorities, the undersigned acknowledges that all Collateral now or hereafter in Morgan Stanley's possession or control (either individually or jointly with others) or deposited to secure the same, may from time to time and without further notice to the undersigned, be carried in Morgan Stanley's general accounts and may be pledged, hypothecated or rehypothecated, separately or in combination with property of others for the sum due to Morgan Stanley thereon or for a greater sum and without Morgan Stanley's retaining in its possession a like amount of similar property. Within the limits of applicable law, rule and regulation, Morgan Stanley is authorized to lend, to itself or to others Collateral it holds, together with all attendant rights of ownership (including the right to vote any securities). Page 33 of 82 34 13. FAILURE OF DELIVERY. If the undersigned directs Morgan Stanley to make any delivery of any security, commodity or other property or asset for its account for any reason and the undersigned fails to deliver that item to Morgan Stanley in the time, place and manner required, or if Morgan Stanley is unable to borrow the security, or in the case of a recall, Morgan Stanley is unable to reborrow the security, the undersigned authorizes Morgan Stanley to borrow or purchase that item (or to be deemed to have make such purchase at the market value of the time of such deemed purchase) in such manner and time as Morgan Stanley in its sole discretion determines to be commercially reasonable. The undersigned agrees to be responsible for any consequent loss which Morgan Stanley may suffer and any related costs, premiums and losses to which Morgan Stanley may be subject. 14. CONFIRMATIONS, STATEMENTS AND OTHER COMMUNICATIONS. Execution reports and account statements shall be conclusive and binding if not objected to in writing (the former within five days and the latter within ten days) after transmittal by Morgan Stanley to the undersigned by mail or otherwise, including by electronic communication. Morgan Stanley may send communications to the undersigned's address of record or otherwise as provided to Morgan Stanley in writing. All communications, whether by mail, facsimile, telegraph, messenger, electronic means or otherwise, shall be deemed to have been given to the undersigned personally as of the date sent, whether actually received or not. 15. NO OBLIGATION. The undersigned agrees that Morgan Stanley shall be under no obligation whatsoever to enter into any Contract with, or on behalf of, the undersigned. 16. PROVISION OF INFORMATION. From time to time, Morgan Stanley may provide or make available to the undersigned, or to others acting with or on behalf of the undersigned,, research, opinions and other information, including portfolio analyses and reports, regarding securities, commodities, other financial assets, and market participants or events. The undersigned acknowledges that such information is provided, unless Morgan Stanley agrees in writing otherwise, without regard to the undersigned's personal financial situation, investment objectives or other circumstances and that the provision by Morgan Stanley of such information to the undersigned, whether sent directly or made readily accessible, and whether in writing, in electronic form or the subject of a taping, broadcast or narrowcast, does not imply that any asset or transaction discussed therein is suitable in light of the undersigned's particular circumstances. The undersigned agrees that no such information will be the primary basis of any investment decision by the undersigned. While all information produced by Morgan Stanley is based on sources believed to be reliable, the undersigned acknowledges that Morgan Stanley does not guarantee or warrant the accuracy, reliability or timeliness of such information. Further, all information and opinions are current only as of the time provided, and are subject to rapid change without prior notice. The undersigned also acknowledges that Morgan Stanley may take positions in financial instruments discussed in the information provided the undersigned (which positions may be inconsistent with the information provided), may execute transactions for others in those instruments and may provide investment banking and other services to the issuers of those instruments. From time to time, Morgan Stanley also may provide or make available to the undersigned, or to others acting with or on behalf of the undersigned, information regarding parties that might provide goods or services to the undersigned, including but not limited to fund administrators ("Vendors"). While all information produced by Morgan Stanley is based on sources believed to be reliable, the undersigned acknowledges that Morgan Stanley does not guarantee or warrant the accuracy, reliability or timeliness of such information, or the quality of goods or services provided by any Vendors. The undersigned agrees to indemnify and hold Morgan Stanley harmless from and against any and all losses, claims, damages and liabilities arising out of or relating to, actions or omissions by the Vendors, Morgan Stanley's provision or making available of such information, or the undersigned's selection or use of such Vendors. 17. USE OF THE INTERNET. Undersigned agrees that the Internet is not a secure network and that any communications transmitted over the Internet may, among other things, be intercepted or accessed by unauthorized or unintended parties and may not remain confidential, or that such transmissions may not arrive in a complete, unaltered or timely manner, and the undersigned assumes the risk arising therefrom. 18. RESOLUTION OF DISPUTES. ANY DISPUTE BETWEEN THE UNDERSIGNED AND A MORGAN STANLEY ENTITY THAT IS REGISTERED AS A BROKER-DEALER WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION ARISING OUT OF, RELATING TO OR IN CONNECTION WITH MORGAN STANLEY'S BUSINESS, ANY TRANSACTION BETWEEN US OR THIS AGREEMENT SHALL BE DETERMINED, AT THE ELECTION OF THE UNDERSIGNED, BY LITIGATION IN A COURT WITH PROPER JURISDICTION OR BY ARBITRATION. SHOULD THE UNDERSIGNED CHOOSE TO PROCEED BY ARBITRATION, UNDERSIGNED AND MORGAN STANLEY AGREE TO FOLLOW THE PROCEDURES, AND ABIDE BY THE REQUIREMENTS, LISTED IN SECTION 19 BELOW. SHOULD THE UNDERSIGNED CHOOSE TO PROCEED BY LITIGATION, UNDERSIGNED AND MORGAN STANLEY AGREE TO FOLLOW THE PROCEDURES, AND ABIDE BY THE REQUIREMENTS, LISTED IN SECTION 20 BELOW. 19. IF THE UNDERSIGNED CHOOSES ARBITRATION, THE UNDERSIGNED ACKNOWLEDGES THAT: ARBITRATION IS FINAL AND BINDING ON THE PARTIES. THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING THE RIGHT TO A JURY TRIAL. ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM COURT PROCEEDINGS. THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY THE ARBITRATOR IS STRICTLY LIMITED. THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO ARE OR WERE AFFILIATED WITH THE SECURITIES INDUSTRY. ANY ARBITRATION SHALL BE CONDUCTED ONLY BEFORE THE NEW YORK STOCK EXCHANGE, INC., THE AMERICAN STOCK EXCHANGE, INC., THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. OR ANY OTHER U.S. SELF-REGULATORY ORGANIZATION OF WHICH THE RELEVANT MORGAN STANLEY ENTITY IS A MEMBER. THE UNDERSIGNED HAS THE RIGHT TO ELECT ONE OF THE FOREGOING ORGANIZATIONS, BUT IF THE UNDERSIGNED FAILS TO MAKE SUCH ELECTION BY CERTIFIED LETTER ADDRESSED TO THE RELEVANT MORGAN STANLEY ENTITY AT ITS MAIN OFFICE BEFORE THE EXPIRATION OF TEN DAYS AFTER RECEIPT OF A WRITTEN REQUEST FROM MORGAN STANLEY TO MAKE SUCH ELECTION, MORGAN STANLEY MAY MAKE SUCH ELECTION. THE AWARD OF THE ARBITRATORS, OR THE MAJORITY OF THEM, SHALL BE FINAL AND JUDGMENT UPON THE AWARD RENDERED MAY BE ENTERED IN ANY STATE OR FEDERAL COURT HAVING JURISDICTION. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS CONSENT BY MORGAN STANLEY TO AN AWARD OF PUNITIVE DAMAGES. NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION, NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINST ANY PERSON WHO, IF THE UNDERSIGNED HAS INITIATED IN COURT A PUTATIVE CLASS ACTION, IS A MEMBER OF A PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED BY THE PUTATIVE CLASS ACTION UNTIL: (i) THE CLASS CERTIFICATION IS DENIED; (ii) THE CLASS IS DECERTIFIED; OR (iii) THE UNDERSIGNED IS EXCLUDED FROM THE CLASS BY THE COURT. SUCH FORBEARANCE TO ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY SUCH RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN. 20. IF THE UNDERSIGNED CHOOSES LITIGATION IN COURT. (A) UNLESS THE PARTIES OTHERWISE AGREE IN WRITING WHEN ANY DISPUTE ARISES, LITIGATION MUST BE INSTITUTED IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY. THE UNDERSIGNED IRREVOCABLY CONSENTS TO THE JURISDICTION OF EITHER OF THOSE COURTS AND (B) ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR ACTION IS HEREBY WAIVED BY ALL PARTIES TO THIS AGREEMENT. Page 34 of 82 35 21. APPLICABLE LAW AND ENFORCEABILITY. THIS AGREEMENT, ANY CONTRACT, THEIR ENFORCEMENT AND ANY DISPUTE BETWEEN US, WHETHER ARISING OUT OF OR RELATING TO THE UNDERSIGNED'S ACCOUNTS OR OTHERWISE, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCLUDING ITS CONFLICT OF LAW RULES. The provisions of this Agreement shall be continuous, shall cover individually and collectively all accounts which the undersigned may open or reopen with Morgan Stanley and shall inure to the benefit of Morgan Stanley's present and any successor organizations, irrespective of any change at any time in the personnel thereof and of the assigns of Morgan Stanley's present organizations or any successor organizations. This Agreement shall be binding upon the undersigned and the estate, executors, administrators, trustees, agents, officers, directors and assigns of the undersigned. 22. MODIFICATION AND WAIVER. The undersigned agrees that Morgan Stanley may modify the terms of this Agreement at any time upon prior written notice. If the modifications are unacceptable, the undersigned agrees to notify Morgan Stanley in writing within twenty days of the transmittal of such written notice. Morgan Stanley may then terminate any or all of the undersigned's accounts. The undersigned also agrees that any transactions or Contracts entered into after such notification shall be subject to the modifications. The undersigned may not modify this Agreement without Morgan Stanley's written consent. To the extent this Agreement is inconsistent with any other agreement between us, the provisions of this Agreement shall govern. Morgan Stanley's failure to enforce this Agreement or any of its terms, or any continued course of such conduct on Morgan Stanley's part, shall not be considered a waiver of any of Morgan Stanley's rights. 23. AUTHORIZED INSTRUCTIONS. The undersigned authorizes Morgan Stanley to accept instructions by telephone, tested telex, facsimile transmission, electronic mail, electronically, in writing or any other method that undersigned and Morgan Stanley may agree to use. The undersigned also agrees (i) to be bound by all instructions that Morgan Stanley believes are authorized, regardless of the means by which those instructions have been transmitted to Morgan Stanley, and (ii) that Morgan Stanley shall not be liable for any loss, cost or expense for acting upon instructions that Morgan Stanley believed to be authorized. 24. SEVERABILITY. If any provision of this Agreement is or becomes inconsistent with any applicable present or future law, rule or regulation, that provision will be deemed modified or, if necessary, rescinded in order to comply with the relevant law, rule or regulation. All other provisions of this Agreement will continue and remain in full force and effect. To the extent that this Agreement is not enforceable as to any Contract, this Agreement shall remain in full force and effect and be enforceable in accordance with its terms as to all other Contracts. To the extent this Agreement contains any provision which is inconsistent with provisions in any other Contract or agreement between us, or of which the undersigned is a beneficiary, the provisions of this Agreement shall control with respect to transactions contemplated hereunder. 25. LENDING OF SECURITIES. Within the limits of applicable law and regulation, until Morgan Stanley receives written notice of revocation from the undersigned, Morgan Stanley is hereby authorized to lend, to itself as brokers or to others, any securities held by Morgan Stanley on margin in its possession or control together with all attendant rights of ownership (including the right to vote the securities). 26. EXTRAORDINARY EVENTS. The undersigned agrees that Morgan Stanley will not be liable for any loss caused, directly or indirectly, by government restrictions, exchange or market rulings, suspension of trading, war (whether declared or undeclared), terrorist acts, insurrection, riots, fires, flooding, strikes, failure of utility services, accidents, adverse weather or other events of nature (including earthquakes, hurricanes and tornadoes) or other events or conditions beyond Morgan Stanley's control. In the event that any communications network, data processing system or computer system Morgan Stanley uses, regardless of ownership, is rendered inoperable, Morgan Stanley will not be liable to the undersigned for any loss, liability, claim, damage or expense resulting, directly or indirectly, from such inoperability. 27. LIMITATION OF LIABILITY. Morgan Stanley shall not be liable in connection with the execution, clearing, handling, purchasing or selling of securities, commodities or other property or assets, or other action, except in the event of gross negligence or willful misconduct on Morgan Stanley's part. The undersigned acknowledges that certain of its securities may be held outside the United States by unaffiliated, foreign, agent banks and depositories. Morgan Stanley shall not be liable to the undersigned for any loss, liability or expense incurred by the undersigned in connection with these arrangements except to the extent that any such loss, liability or expense results from Morgan Stanley's gross negligence or willful misconduct. 28. INDEMNIFICATION. In consideration of Morgan Stanley's carrying one or more accounts for the undersigned, the undersigned agrees to indemnify and hold Morgan Stanley harmless from and against any and all losses, claims, damages and liabilities arising out of or relating to the undersigned's accounts or in connection with the execution, purchase, sale, assignment, exercise, endorsement or handling of any transaction therein, or in connection with Morgan Stanley acting or declining to act as prime broker, except for actions taken or omitted to be taken by Morgan Stanley which are a result of, or constitute, willful misconduct or gross negligence. The undersigned also agrees that Morgan Stanley shall have no responsibility for the undersigned's compliance with any law or regulation and that Morgan Stanley shall not be liable for delays in the transmission of orders or instructions due to the breakdown or failure of transmission or communication facilities or any other cause beyond Morgan Stanley's control, including any mistake, error, negligence or misconduct of any exchange, association or clearing house or their respective officers, directors, employees or agents, nor any failure by any such exchange, association or clearing house to enforce its rules or regulations. Page 35 of 82 36 29. COSTS OF COLLECTION. To the extent permitted by the laws of the State of New York, the reasonable costs and expenses of collection of any debit balance and any unpaid deficiency in any account of the undersigned with Morgan Stanley, including but not limited to attorneys' fees incurred and payable or paid by Morgan Stanley, shall be payable to Morgan Stanley by the undersigned. 30. ASSIGNMENTS. Undersigned may not assign its rights or obligations under this Agreement without the express written consent of Morgan Stanley. 31. REPRESENTATIONS AND WARRANTIES. The undersigned hereby represents and warrants as of the date hereof, which representations and warranties will be deemed repeated on each date on which a transaction or Contract is effected for any of the undersigned's accounts, or any securities or other property if delivered to or from any such account, that: (a) The undersigned will at all times maintain such securities or other property or assets in the accounts of the undersigned for margin purposes, as is required by Morgan Stanley from time to time in Morgan Stanley's sole discretion; (b) The undersigned will not transact on the basis of, or in reliance on, material, non-public information. (c) Except as disclosed in writing to Morgan Stanley, the undersigned is not an employee of any exchange, or of any corporation of which any exchange owns a majority of the capital stock, or of a member of any exchange, or of a securities broker or dealer, or of a bank, trust company, insurance company or of any corporation, firm or individual engaged in the business of dealing, either as agent or as principal, in securities, bills of exchange, acceptances or other forms of commercial paper. (d) Except as disclosed to Morgan Stanley in writing, the undersigned continuously represents that it is not (a) an employee benefit plan (hereinafter an "ERISA Plan"), as defined in Section 3 (3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), subject to Title I of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended, or (b) a person acting on behalf of an ERISA Plan or (c) a person the assets of whom constitute assets of an ERISA Plan. The undersigned will provide notice to Morgan Stanley in the event that it is aware that it is in breach of any aspect of this representation or is aware that with the passing of time, giving of notice or expiry of any applicable grace period it will breach this representation. (e) Except as disclosed in writing to Morgan Stanley, the undersigned is not, and will not be, an affiliate (as defined in Rule 144(a)(1) under the Securities Act of 1933) of the issuer of any security held in the undersigned's accounts or sold to or through Morgan Stanley and undertakes to inform Morgan Stanley of any changes in such representation. (f) The undersigned has full power and authority to execute and deliver each Contract and to perform and observe the provisions thereof. (g) The execution, delivery and performance of each Contract has been or will be, prior to entering into the Contract, duly authorized by all necessary internal action and do not or will not contravene any requirement of law or any contractual restrictions or agreement binding on or affecting the undersigned or its assets. (h) Each Contract has been or will be at the time it is entered into properly executed and delivered by the undersigned and constitutes and will constitute a legal, valid and binding obligation enforceable in accordance with its terms. (i) The undersigned will promptly furnish to Morgan Stanley appropriate financial statements or similar documents upon Morgan Stanley's request and any other information as Morgan Stanley may reasonably request. Since the date of the most recent financial statements provided to Morgan Stanley, if any, there has been no material adverse change in the information set forth therein, and, if the undersigned is not a natural person, the business, financial condition, results, operations or prospects of the undersigned. (j) No one that is not a party to this Agreement has any interest in any account of the undersigned with Morgan Stanley. The undersigned owns the Collateral assigned, or to be assigned, to Morgan Stanley under each Contract free and clear of any lien, claims, encumbrances and transfer restrictions. Upon delivery of the Collateral to Morgan Stanley or upon the filing of appropriate financing statements, Morgan Stanley will have, as security for the Obligations of the undersigned, a perfected first priority security interest in the Collateral. No further filings or recordings with any governmental body, agency or official are necessary to create or perfect the security interest in the Collateral. (k) The undersigned represents to Morgan Stanley that all sales of securities (other than fully covered options) will be eligible to be marked "long" and that the undersigned will pay for all the securities purchased in full on trade date or such later date as Morgan Stanley may permit. Any sell order which the undersigned shall designate as being long is for securities then owned by the undersigned. If such securities cannot be delivered by Morgan Stanley from any account of the undersigned, the placing of such order shall constitute a representation by the undersigned that the undersigned will deliver them as soon as it is possible to do so, without undue inconvenience or expense to Morgan Stanley. (l) The undersigned acknowledges that it is acting as principal (and not as agent or in any other capacity, fiduciary or otherwise) for its own account, and it has made its own independent decisions to enter into this Agreement and Contracts and as to whether its activities and investments thereunder are appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of Morgan Stanley as investment advice or as a recommendation to enter into any particular transaction; it being understood that information and explanations related to the terms and conditions of a transaction shall not be considered investment advice or a recommendation to enter into a transaction. No communication (written or oral) received from Morgan Stanley shall be deemed to be an assurance or guarantee as to the expected results of a transaction. It is capable of assessing the merits of and understanding (on its own behalf or thorough independent professional advice), and understands and accepts, the terms, conditions and risks of its transactions, and is capable of assuming, and assumes, such risks. Morgan Stanley is not acting as a fiduciary for an adviser to it in any respect, and does not perform any analysis or make any judgment on any matters pertaining to the suitability of any order or offer any opinion, judgment or other type of information pertaining to the nature, value, potential or suitability of any particular transaction. 32. ACKNOWLEDGMENTS. The undersigned hereby consents and acknowledges that: (a) The undersigned has received, and agrees to be bound by, Morgan Stanley's Credit Charge and Margin Information Statement, which is incorporated herein by reference; (b) The undersigned has received a copy of this Agreement and has read and understood its terms; and (c) All conversations between us may be recorded on tape or otherwise. NOTICE: THIS AGREEMENT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE PROXY DISCLOSURE STATEMENT Under the rules of the Securities and Exchange Commission, we are required, upon registrant's request, to provide your name, address and security positions to issuers of securities that you own. The issuer may use this information exclusively for purposes of corporate communications. _____(Check) IF THIS BOX IS CHECKED, MORGAN STANLEY WILL DISCLOSE THE NAME AND ADDRESS INFORMATION FOR THE ACCOUNT ESTABLISHED BY THIS AGREEMENT TO ISSUERS OF SECURITIES WHICH I OWN. ELECTRONIC TRADE CONFIRMATIONS X (Check) Yes, we would, if available, like to receive electronic notification of our trade information rather than a mailed, hard copy confirmation. DATE: __5/9/02___ Financial Institution Partners, MORGAN STANLEY & III, L.P. CO. INCORPORATED, By Hovde Capital, Ltd., general on its own behalf Partner, and on behalf of by its authorized signatory each Morgan Stanley Entity /s/ Richard J. Perry, Jr. - --------------------------- Name: Richard J. Perry, Jr. Name: Date: 5/9/02 Date: Title: Secretary Title: Page 36 of 82 37 EXHIBIT H THE BOND MARKET ASSOCIATION Master Securities Loan Agreement Between: Dated as of May 2, 2002 PRIME DEALER SERVICES CORP. and FINANCIAL INSTITUTION PARTNERS III, L.P. This Agreement sets forth the terms and conditions under which one party ("Lender") may from time to time lend to the other party ("Borrower") certain securities against a pledge of collateral. Capitalized terms not otherwise defined herein shall have the meanings provided in Section 26. The parties hereto agree as follows: 1. Loans of Securities. 1.1. Subject to the terms and conditions of this Agreement, Borrower or Lender may, from time to time, orally seek to initiate a transaction in which Lender will lend securities to Borrower. Borrower and Lender shall agree orally on the terms of each Loan, including the issuer of the securities, the amount of securities to be lent, the basis of compensation, and the amount of Collateral to be transferred by Borrower, which terms may be amended during the Loan. 1.2. Notwithstanding any other provision in this Agreement regarding when a Loan commences, a Loan hereunder shall not occur until the Loaned Securities and the Collateral therefor have been transferred in accordance with Section 16. 1.3. WITHOUT WAIVING ANY RIGHTS GIVEN TO LENDER HEREUNDER, IT IS UNDERSTOOD AND AGREED THAT THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION ACT OF 1970 MAY NOT PROTECT LENDER WITH RESPECT TO LOANED SECURITIES HEREUNDER AND THAT, THEREFORE, THE COLLATERAL DELIVERED TO LENDER MAY CONSTITUTE THE ONLY SOURCE OF SATISFACTION OF BORROWER'S OBLIGATIONS IN THE EVENT BORROWER FAILS TO RETURN THE LOANED SECURITIES. 2. Transfer of Loaned Securities. 2.1. Unless otherwise agreed, Lender shall transfer Loaned Securities to Borrower hereunder on or before the Cutoff Time on the date agreed to by Borrower and Lender for the commencement of the Loan. 2.2. Unless otherwise agreed, Borrower shall provide Lender, in each Loan in which Lender is a Customer, with a schedule and receipt listing the Loaned Securities. Such schedule and receipt may consist of (a) a schedule provided to Borrower by Lender and executed and returned by Borrower when the Loaned Securities are received, (b) in the case of securities transferred through a Clearing Organization which provides transferors with a notice evidencing such transfer, such notice, or (c) a confirmation or other document provided to Lender by Borrower. 3. Collateral. 3.1. Unless otherwise agreed, Borrower shall, prior to or concurrently with the transfer of the Loaned Securities to Borrower, but in no case later than the close of business on the day of such transfer, transfer to Lender Collateral with a market value at least equal to a percentage of the market value of the Loaned Securities agreed to by Borrower and Lender (which shall be not less than 100% of the market value of the Loaned Securities) (the "Margin Percentage"). 3.2. The Collateral transferred by Borrower to Lender, as adjusted pursuant to Section 8, shall be security for Borrower's obligations in respect of such Loan and for any other obligations of Borrower to Lender. Borrower hereby pledges with, assigns to, and grants Lender a continuing first security interest in, and a lien upon, the Collateral, which shall attach upon the transfer of the Loaned Securities by Lender to Borrower and which shall cease upon the transfer of the Loaned Securities by Borrower to Lender. In addition to the rights and remedies given to Lender hereunder, Lender shall have all the rights and remedies of a secured party under the New York Uniform Commercial Code. It is understood that Lender may use or invest the Collateral, if such consists of cash, at its own risk, but that (unless Lender is a Broker-Dealer) Lender shall, during the term of any Loan hereunder, segregate Collateral from all securities or other assets in its possession. Lender may pledge, repledge, hypothecate, rehypothecate, lend, relend, sell or otherwise transfer the Collateral, or re-register Collateral evidenced by physical certificates in any name other than Borrower's, only (a) if Lender is Broker-Dealer or (b) in the event of a Default by Borrower. Segregation of Collateral may be accomplished by appropriate identification on the books and records of Lender if it is a "financial intermediary" or a "clearing corporation" within the meaning of the New York Uniform Commercial Code. 3.3. Except as otherwise provided herein, upon transfer to Lender of the Loaned Securities on the day a Loan is terminated pursuant to Section 5, Lender shall be obligated to transfer the Collateral (as adjusted pursuant to Section 8) to Borrower no later than the Cutoff Time on such day or, if such day is not a day on which a transfer of such Collateral may be effected under Section 16, the next day on which such a transfer may be effected. 3.4. If Borrower transfers Collateral to Lender, as provided in Section 3.1, and Lender does not transfer the Loaned Securities to Borrower, Borrower shall have the absolute right to the return of the Collateral; and if Lender transfers Loaned Securities to Borrower and Borrower does not transfer Collateral to Lender as provided in Section 3.1, Lender shall have the absolute right to the return of the Loaned Securities. 3.5. Borrower may, upon reasonable notice to Lender (taking into account all relevant factors, including industry practice, the type of Collateral to be substituted and the applicable method of transfer), substitute Collateral for Collateral securing any Loan or Loans; provided, however, that such substituted Collateral shall (a) consist only of cash, securities or other property that Borrower and Lender agreed would be acceptable Collateral prior to the Loan or Loans and (b) have a market value such that the aggregate market value of such substituted Collateral, together with all other Collateral for Loans in which the party substituting such Collateral is acting as Borrower, shall equal or exceed the agreed upon Margin Percentage of the market value of the Loaned Securities. Prior to the expiration of any letter of credit supporting Borrower's obligations hereunder, Borrower shall, no later than the Cutoff Time on the date such letter of credit expires, obtain an extension of the expiration of such letter of credit or replace such letter of credit by providing Lender with a substitute letter of credit in an amount at least equal to the amount of the letter of credit for which it is substituted. 3.6. Lender acknowledges that, in connection with Loans of Government Securities and as otherwise permitted by applicable law, some securities provided by Borrower as Collateral under this Agreement may not be guaranteed by the United States. 4. Fees for Loan. 4.1. Unless otherwise agreed, (a) Borrower agrees to pay Lender a loan fee (a "Loan Fee"), computed daily on each Loan to the extent such Loan is secured by Collateral other than cash, based on the aggregate par value (in the case of Loans of Government Securities) or the aggregate market value (in the case of all other Loans) of the Loaned Securities on the day for which such Loan Fee is being computed, and (b) Lender agrees to pay Borrower a fee or rebate (a "Cash Collateral Fee") on Collateral consisting of cash, computed daily based on the amount of cash held by Lender as Collateral, in the case of each of the Loan Fee and the Cash Collateral Fee at such rates as Borrower and Lender may agree. Except as Borrower and Lender may otherwise agree (in the event that cash Collateral is transferred by clearing house funds or otherwise), Loan Fees shall accrue from and including the date on which the Loaned Securities are transferred to Borrower to, but excluding, the date on which such Loaned Securities are returned to Lender, and Cash Collateral Fees shall accrue from and including the date on which the cash Collateral is transferred to Lender to, but excluding, the date on which such cash Collateral is returned to Borrower. Page 37 of 82 38 4.2. Unless otherwise agreed, any Loan Fee or Cash Collateral Fee payable hereunder shall be payable: (a) in the case of any Loan of securities other than Government Securities, upon the earlier of (i) the fifteenth day of the month following the calendar month in which such fee was incurred or (ii) the termination of all Loans hereunder (or, if a transfer of cash in accordance with Section 16 may not be effected on such fifteenth day or the day of such termination, as the case may be, the next day on which such a transfer may be effected); and (b) in the case of any Loan of Government Securities, upon the termination of such Loan. Notwithstanding the foregoing, all Loan Fees shall be payable by Borrower immediately in the event of a Default hereunder by Borrower and all Cash Collateral Fees shall be payable immediately by Lender in the event of a Default by Lender. 5. Termination of the Loan. Unless otherwise agreed, (a) Borrower may terminate a Loan on any Business Day by giving notice to Lender and transferring the Loaned Securities to Lender before the Cutoff Time on such Business Day, and (b) Lender may terminate a Loan on a termination date established by notice given to Borrower prior to the close of business on a Business Day. The termination date established by a termination notice given by Lender to Borrower shall be a date no earlier than the standard settlement date for trades of the Loaned Securities entered into on the date of such notice, which date shall, unless Borrower and Lender agree to the contrary, be (i) in the case of Government Securities, the next Business Day following such notice and (ii) in the case of all other securities, the third Business Day following such notice. Unless otherwise agreed, Borrower shall, on or before the Cutoff Time on the termination date of a Loan, transfer the Loaned Securities to Lender; provided, however, that upon such transfer by Borrower, Lender shall transfer the Collateral (as adjusted pursuant to Section 8) to Borrower in accordance with Section 3.3. 6. Rights of Borrower in Respect of the Loaned Securities. Except as set forth in Sections 7.1 and 7.2 and as otherwise agreed by Borrower and Lender, until Loaned Securities are required to be redelivered to Lender upon termination of a Loan hereunder, Borrower shall have all of the incidents of ownership of the Loaned Securities, including the right to transfer the Loaned Securities to others. Lender hereby waives the right to vote, or to provide any consent or to take any similar action with respect to, the Loaned Securities in the event that the record date or deadline for such vote, consent or other action falls during the term of the Loan. 7. Dividends, Distributions, Etc. 7.1. Lender shall be entitled to receive all distributions made on or in respect of the Loaned Securities which are not otherwise received by Lender, to the full extent it would be so entitled if the Loaned Securities had not been lent to Borrower, including, but not limited to: (a) cash and all other property, (b) stock dividends, (c) securities received as a result of split ups of the Loaned Securities and distributions in respect thereof, (d) interest payments, and (e) all rights to purchase additional securities. 7.2. Any cash distributions made on or in respect of the Loaned Securities, which Lender is entitled to receive pursuant to Section 7.1, shall be paid by the transfer of cash to Lender by Borrower, on the date any such distribution is paid, in an amount equal to such cash distribution, so long as Lender is not in Default at the time of such payment. Non-cash distributions received by Borrower shall be added to the Loaned Securities on the date of distribution and shall be considered such for all purposes, except that if the Loan has terminated, Borrower shall forthwith transfer the same to Lender. 7.3. Borrower shall be entitled to receive all cash distributions made on or in respect of non-cash Collateral which are not otherwise received by Borrower, to the full extent it would be so entitled if the Collateral had not been transferred to Lender. Any distributions of cash made on or in respect of such Collateral which Borrower is entitled to receive hereunder shall be paid by the transfer of cash to Borrower by Lender, on the date any such distribution is paid, in an amount equal to such cash distribution, so long as Borrower is not in Default at the time of such payment. 7.4. (a) Unless otherwise agreed, if (i) Borrower is required to make a payment (a "Borrower Payment") with respect to cash distributions on Loaned Securities under Sections 7.1 and 7.2 ("Securities Distributions"), or (ii) Lender is required to make a payment (a "Lender Payment") with respect to cash distributions on Collateral under Section 7.3 ("Collateral Distributions"), and (iii) Borrower or Lender, as the case may be ("Payor"), shall be required by law to collect any withholding or other tax, duty, fee, levy or charge required to be deducted or withheld from such Borrower Payment or Lender Payment ("Tax"), then Payor shall (subject to subsections (b) and (c) below), pay such additional amounts as may be necessary in order that the net amount of the Borrower Payment or Lender Payment received by the Lender or Borrower, as the case may be ("Payee"), after payment of such Tax equals the net amount of the Securities Distribution or Collateral Distribution that would have been received if such Securities Distribution or Collateral Distribution had been paid directly to the Payee. (b) No additional amounts shall be payable to a Payee under subsection (a) above to the extent that Tax would have been imposed on a Securities Distribution or Collateral Distribution paid directly to the Payee. Page 38 of 82 39 (c) No additional amounts shall be payable to a Payee under subsection (a) above to the extent that such Payee is entitled to an exemption from, or reduction in the rate of, Tax on a Borrower Payment or Lender Payment subject to the provision of a certificate or other documentation, but has failed timely to provide such certificate or other documentation. (d) Each party hereto shall be deemed to represent that, as of the commencement of any Loan hereunder, no Tax would be imposed on any cash distribution paid to it with respect to (i) Loaned Securities subject to a Loan in which it is acting as Lender or (ii) Collateral for any Loan in which it is acting as Borrower, unless such party has given notice to the contrary to the other party hereto (which notice shall specify the rate at which such Tax would be imposed). Each party agrees to notify the other of any change that occurs during the term of a Loan in the rate of any Tax that would be imposed on any such cash distributions payable to it. 7.5. To the extent that, under the provisions of Sections 7.1 through 7.4 (a) a transfer of cash or other property by Borrower would give rise to a Margin Excess (as defined in Section 8.3 below) or (b) a transfer of cash or other property by Lender would give rise to a Margin Deficit (as defined in Section 8.2 below), Borrower or Lender (as the case may be) shall not be obligated to make such transfer of cash or other property in accordance with such Sections, but shall in lieu of such transfer immediately credit the amounts that would have been transferable under such Sections to the account of Lender or Borrower (as the case may be). 8. Mark to Market. 8.1. Borrower shall daily mark to market any Loan hereunder and in the event that at the close of trading on any Business Day the market value of the Collateral for any Loan to Borrower shall be less than 100% of the market value of all the outstanding Loaned Securities subject to such Loan, Borrower shall transfer additional Collateral no later than the close of the next Business Day so that the market value of such additional Collateral, when added to the market value of the other Collateral for such Loan, shall equal 100% of the market value of the Loaned Securities. 8.2. In addition to any rights of Lender under Section 8.1, in the event that at the close of trading on any Business Day the aggregate market value of all Collateral for Loans by Lender shall be less than the Margin Percentage of the market value of all the outstanding Loaned Securities subject to such Loans (a "Margin Deficit"), Lender may, by notice to Borrower, demand that Borrower transfer to Lender additional Collateral so that the market value of such additional Collateral, when added to the market value of all other Collateral for such Loans, shall equal or exceed the agreed upon Margin Percentage of the market value of the Loaned Securities. Unless otherwise agreed, such transfer is to be made no later than the close of the next Business Day following the day of Lender's notice to Borrower. 8.3. In the event that at the close of trading on any Business Day the market value of all Collateral for Loans to Borrower shall be greater than the Margin Percentage of the market value of all the outstanding Loaned Securities subject to such Loans (a "Margin Excess"), Borrower may, by notice to Lender, demand that Lender transfer to Borrower such amount of the Collateral selected by Borrower so that the market value of the Collateral for such Loans, after deduction of such amounts, shall thereupon not exceed the Margin Percentage of the market value of the Loaned Securities. Unless otherwise agreed, such transfer is to be made no later than the close of the next Business Day following the day of Borrower's notice to Lender. 8.4. Borrower and Lender may agree, with respect to one or more Loans hereunder, to mark the values to market pursuant to Sections 8.2 and 8.3 by separately valuing the Loaned Securities lent and the Collateral given in respect thereof on a Loan-by-Loan basis. 8.5. Borrower and Lender may agree, with respect to any or all Loans hereunder, that the respective rights of Lender and Borrower under Sections 8.2 and 8.3 may be exercised only where a Margin Excess or Margin Deficit exceeds a specified dollar amount or a specified percentage of the market value of the Loaned Securities under such Loans (which amount or percentage shall be agreed to by Borrower and Lender prior to entering into any such Loans). 9. Representations. Each party to this Agreement hereby makes the following representations and warranties, which shall continue during the term of any Loan hereunder: 9.1. Each party hereto represents and warrants that (a) it has the power to execute and deliver this Agreement, to enter into the Loans contemplated hereby and to perform its obligations hereunder; (b) it has taken all necessary action to authorize such execution, delivery and performance; and (c) this Agreement constitutes a legal, valid and binding obligation enforceable against it in accordance with its terms. 9.2. Each party hereto represents and warrants that the execution, delivery and performance by it of this Agreement and each Loan hereunder will at all times comply with all applicable laws and regulations including those of applicable regulatory and self-regulatory organizations. 9.3. Each party hereto represents and warrants that it has not relied on the other for any tax or accounting advice concerning this Agreement and that it has made its own determination as to the tax and accounting treatment of any Loan and any dividends, remuneration or other funds received hereunder. 9.4. Borrower represents and warrants that it is acting for its own account. Lender represents and warrants that it is acting for its own account unless it expressly specifies otherwise in writing and complies with Section 10.3(b). 9.5. Borrower represents and warrants that (a) it has, or will have at the time of transfer of any Collateral, the right to grant a first security interest therein subject to the terms and conditions hereof, and (b) it (or the person to whom it relends the Loaned Securities) is borrowing or will borrow the Loaned Securities (except for Loaned Securities that qualify as "exempted securities" under Regulation T of the Board of Governors of the Federal Reserve System) for the purpose of making delivery of such securities in the case of short sales, failure to receive securities required to be delivered, or as otherwise permitted pursuant to Regulation T as in effect from time to time. 9.6. Lender represents and warrants that it has, or will have at the time of transfer of any Loaned Securities, the right to transfer the Loaned Securities subject to the terms and conditions hereof. 10. Covenants. 10.1. Each party hereto agrees and acknowledges that (a) each Loan hereunder is a "securities contract," as such term is defined in Section 741(7) of Title 11 of the United States Code (the "Bankruptcy Code"), (b) each and every transfer of funds, securities and other property under this Agreement and each Loan hereunder is a "settlement payment" or a "margin payment," as such terms are used in Sections 362(b)(6) and 546(e) of the Bankruptcy Code, and (c) the rights given to Borrower and Lender hereunder upon a Default by the other constitute the right to cause the liquidation of a securities contract and the right to set off mutual debts and claims in connection with a securities contract, as such terms are used in Sections 555 and 362(b)(6) of the Bankruptcy Code. Each party hereto further agrees and acknowledges that if a party hereto is an "insured depository institution," as such term is defined in the Federal Deposit Insurance Act, as amended ("FDIA"), then each Loan hereunder is a "securities contract" and "qualified financial contract," as such terms are defined in the FDIA and any rules, orders or policy statements thereunder. 10.2. Borrower agrees to be liable as principal with respect to its obligations hereunder. 10.3. Lender agrees either (a) to be liable as principal with respect to its obligations hereunder or (b) to execute and comply fully with the provisions of Annex I (the terms and conditions of which Annex are incorporated herein and made a part hereof). 10.4. Promptly upon (and in any event within seven (7) Business Days after) demand by Lender, Borrower shall furnish Lender with Borrower's most recent publicly-available financial statements and any other financial statements mutually agreed upon by Borrower and Lender. Unless otherwise agreed, if Borrower is subject to the requirements of Rule 17a-5(c) under the Exchange Act, it may satisfy the requirements of this Section by furnishing Lender with its most recent statement required to be furnished to customers pursuant to such Rule. 10.5. Except to the extent required by applicable law or regulation or as otherwise agreed, Borrower and Lender agree that Loans hereunder shall in no event be "exchange contracts" for purposes of the rules of any securities exchange and that Loans hereunder shall not be governed by the buy-in or similar rules of any such exchange, registered national securities or other self- regulatory organization. Page 39 of 82 40 11. Events of Default. All Loans hereunder may, at the option of the non- defaulting party exercised by notice to the defaulting party (which option shall be deemed to have been exercised even if no notice is given, immediately upon the occurrence of an event specified in subsection 11.5 below), be terminated immediately upon the occurrence of any one or more of the following events (individually, a "Default"): 11.1. if any Loaned Securities shall not be transferred to Lender upon termination of the Loan as required by Section 5; 11.2. if any Collateral shall not be transferred to Borrower upon termination of the Loan as required by Sections 3.3 and 5; 11.3. if either party shall fail to transfer Collateral as required by Section 8; 11.4. if either party (i) shall fail to transfer to the other party amounts in respect of distributions required to be transferred by Section 7, (ii) shall have received notice of such failure from the non-defaulting party, and (iii) shall not have cured such default by the Cutoff Time on the next day after such notice on which a transfer of cash may be effected in accordance with Section 16; 11.5. if (i) either party shall commence as debtor any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law, or seek the appointment of a receiver, conservator, trustee, custodian or similar official for such party or any substantial part of its property, (ii) any such case or proceeding shall be commenced against either party, or another shall seek such an appointment, or any application shall be filed against either party for a protective decree under the provisions of the Securities Investor Protection Act of 1970, which (A) is consented to or not timely contested by such party, (B) results in the entry of an order for relief, such an appointment, the issuance of such a protective decree or the entry of an order having a similar effect, or (C) is not dismissed within 15 days, (iii) either party shall make a general assignment for the benefit of creditors, or (iv) either party shall admit in writing its inability to pay its debts as they become due; 11.6. if either party shall have been suspended or expelled from membership or participation in any national securities exchange or registered national securities association of which it is a member or other self-regulatory organization to whose rules it is subject or if it is suspended from dealing in securities by any federal or state government agency thereof; 11.7. if either party shall have its license, charter, or other authorization necessary to conduct a material portion of its business withdrawn, suspended or revoked by any applicable federal or state government or agency thereof; 11.8. if any representation made by either party in respect of this Agreement or any Loan or Loans hereunder shall be incorrect or untrue in any material respect during the term of any Loan hereunder; 11.9. if either party notifies the other, orally or in writing, of its inability to or its intention not to perform its obligations hereunder or otherwise disaffirms, rejects or repudiates any of its obligations hereunder; or 11.10. if either party (i) shall fail to perform any material obligation under this Agreement not specifically set forth in clauses 11.1 through 11.9 above, including but not limited to the payment of fees as required by Section 4, and the payment of transfer taxes as required by Section 14, (ii) shall have received notice of such failure from the non-defaulting party and (iii) shall not have cured such failure by the Cutoff Time on the next day after such notice on which a transfer of cash may be effected under Section 16. 12. Lender's Remedies. Upon the occurrence of a Default under Section 11 entitling Lender to terminate all Loans hereunder, Lender shall have the right (without further notice to Borrower), in addition to any other remedies provided herein or under applicable law, (a) to purchase a like amount of Loaned Securities ("Replacement Securities") in the principal market for such securities in a commercially reasonable manner, (b) to sell any Collateral in the principal market for such Collateral in a commercially reasonable manner and (c) to apply and set off the Collateral and any proceeds thereof (including any amounts drawn under a letter of credit supporting any Loan) against the payment of the purchase price for such Replacement Securities and any amounts due to Lender under Sections 4, 7, 14 and 17. In the event Lender shall exercise such rights, Borrower's obligation to return a like amount of the Loaned Securities shall terminate. Lender may similarly apply the Collateral and any proceeds thereof to any obligation of Borrower under this Agreement, including Borrower's obligations with respect to distributions paid to Borrower (and not forwarded to Lender) in respect of Loaned Securities. In the event that (i) the purchase price of Replacement Securities (plus all other amounts, if any, due to Lender hereunder) exceeds (ii) the amount of the Collateral, Borrower shall be liable to Lender for the amount of such excess together with interest thereon at a rate equal to (A) in the case of purchases of Foreign Securities, LIBOR, (B) in the case of purchases of any other securities (or other amounts, if any, due to Lender hereunder), the Federal Funds Rate or (C) such other rate as may be specified in Schedule B, in each case as such rate fluctuates from day to day, from the date of such purchase until the date of payment of such excess. As security for Borrower's obligation to pay such excess, Lender shall have, and Borrower hereby grants, a security interest in any property of Borrower then held by or for Lender and a right of setoff with respect to such property and any other amount payable by Lender to Borrower. The purchase price of Replacement Securities purchased under this Section 12 shall include, and the proceeds of any sale of Collateral shall be determined after deduction of, broker's fees and commissions and all other reasonable costs, fees and expenses related to such purchase or sale (as the case may be). In the event Lender exercises its rights under this Section 12, Lender may elect in its sole discretion, in lieu of purchasing all or a portion of the Replacement Securities or selling all or a portion of the Collateral, to be deemed to have made, respectively, such purchase of Replacement Securities or sale of Collateral for an amount equal to the price therefor on the date of such exercise obtained from a generally recognized source or the most recent closing bid quotation from such a source. Subject to Section 19, upon the satisfaction of all obligations hereunder, any remaining Collateral shall be returned to Borrower. Page 40 of 82 41 13. Borrower's Remedies. Upon the occurrence of a Default under Section 11 entitling Borrower to terminate all Loans hereunder, Borrower shall have the right (without further notice to Lender), in addition to any other remedies provided herein or under applicable law, (a) to purchase a like amount of Collateral ("Replacement Collateral") in the principal market for such Collateral in a commercially reasonable manner, (b) to sell a like amount of the Loaned Securities in the principal market for such securities in a commercially reasonable manner and (c) to apply and set off the Loaned Securities and any proceeds thereof against (i) the payment of the purchase price for such Replacement Collateral (ii) Lender's obligation to return any cash or other Collateral and (iii) any amounts due to Borrower under Sections 4, 7 and 17. In such event, Borrower may treat the Loaned Securities as its own and Lender's obligation to return a like amount of the Collateral shall terminate; provided, however, that Lender shall immediately return any letters of credit supporting any Loan upon the exercise or deemed exercise by Borrower of its termination rights under Section 11. Borrower may similarly apply the Loaned Securities and any proceeds thereof to any other obligation of Lender under this Agreement, including Lender's obligations with respect to distributions paid to Lender (and not forwarded to Borrower) in respect of Collateral. In the event that (i) the sales price received from such Loaned Securities is less than (ii) the purchase price of Replacement Collateral (plus the amount of any cash or other Collateral not replaced by Borrower and all other amounts, if any, due to Borrower hereunder), Lender shall be liable to Borrower for the amount of any such deficiency, together with interest on such amounts at a rate equal to (A) in the case of Collateral consisting of Foreign Securities, LIBOR, (B) in the case of Collateral consisting of any other securities (or other amounts due, if any, to Borrower hereunder), the Federal Funds Rate or (C) such other rate as may be specified in Schedule B in each case as such rate fluctuates from day to day, from the date of such sale until the date of payment of such deficiency. As security for Lender's obligation to pay such deficiency, Borrower shall have and Lender hereby grants, a security interest in any property of Lender then held by or for Borrower and a right of setoff with respect to such property and any other amount payable by Borrower to Lender. The purchase price of any Replacement Collateral purchased under this Section 13 shall include, and the proceeds of any sale of Loaned Securities shall be determined after deduction of, broker's fees and commissions and all other reasonable costs, fees and expenses related to such purchase or sale (as the case may be). In the event Borrower exercises its rights under this Section 13, Borrower may elect in its sole discretion, in lieu of purchasing all or a portion of the Replacement Collateral or selling all or a portion of the Loaned Securities, to be deemed to have made, respectively, such purchase of Replacement Collateral or sale of Loaned Securities for an amount equal to the price therefor on the date of such exercise obtained from a generally recognized source or the most recent closing bid quotation from such a source. Subject to Section 19, upon the satisfaction of all Lender's obligations hereunder, any remaining Loaned Securities (or remaining cash proceeds thereof) shall be returned to Lender. Without limiting the foregoing, the parties hereto agree that they intend the Loans hereunder to be loans of securities. If, however, any Loan is deemed to be a loan of money by Borrower to Lender, then Borrower shall have, and Lender shall be deemed to have granted, a security interest in the Loaned Securities and the proceeds thereof. 14. Transfer Taxes. All transfer taxes with respect to the transfer of the Loaned Securities by Lender to Borrower and by Borrower to Lender upon termination of the Loan shall be paid by Borrower. 15. Market Value. 15.1. Unless otherwise agreed, if the principal market for the securities to be valued is a national securities exchange in the United States, their market value shall be determined by their last sale price on such exchange on the preceding Business Day or, if there was no sale on that day, by the last sale price on the next preceding Business Day on which there was a sale on such exchange, all as quoted on the Consolidated Tape or, if not quoted on the Consolidated Tape, then as quoted by such exchange. 15.2. Except as provided in Section 15.3 or 15.4 or as otherwise agreed, if the principal market for the securities to be valued is the over-the-counter market, their market value shall be determined as follows. If the securities are quoted on the National Association of Securities Dealers Automated Quotations System ("NASDAQ"), their market value shall be the closing sale price on NASDAQ on the preceding Business Day or, if the securities are issues for which last sale prices are not quoted on NASDAQ, the closing bid price on such day. If the securities to be valued are not quoted on NASDAQ, their market value shall be the highest bid quotation as quoted in any of The Wall Street Journal, the National Quotation Bureau pink sheets, the Salomon Brothers quotation sheets, quotations sheets of registered market makers and, if necessary, dealers' telephone quotations on the preceding Business Day. In each case, if the relevant quotation did not exist on such day, then the relevant quotation on the next preceding Business Day in which there was such a quotation shall be the market value. 15.3. Unless otherwise agreed, if the securities to be valued are Government Securities, their market value shall be the average of the bid and ask prices as quoted on Prophesy at 3:30 P.M. New York time on the Business Day preceding the date on which such determination is made. If the securities are not so quoted on such day, their market value shall be determined as of the next preceding Business Day on which they were so quoted. If the securities to be valued are Government Securities that are not quoted on Prophesy, their market value shall be determined as of the close of business on the preceding Business Day in accordance with market practice for such securities. 15.4. Unless otherwise agreed, if the securities to be valued are Foreign Securities, their market value shall be determined as of the close of business on the preceding Business Day in accordance with market practice in the principal market for such securities. 15.5. Unless otherwise agreed, the market value of a letter of credit shall be the undrawn amount thereof. 15.6. All determinations of market value under Sections 15.1, 15.2, 15.3, and 15.4 shall include, where applicable, accrued interest to the extent not already included therein (other than any interest transferred to the other party pursuant to Section 7), unless market practice with respect to the valuation of such securities in connection with securities loans is to the contrary. All determinations of market value that are required to be made at the close of trading on any Business Day pursuant to Section 8 or otherwise hereunder shall be made as if being determined at the commencement of trading on the next Business Day. The determinations of market value provided for in this Section 15 shall apply for all purposes under this Agreement, except for purposes of Sections 12 and 13. Page 41 of 82 42 16. Transfers. 16.1. All transfers of securities hereunder shall by be (a) physical delivery of certificates representing such securities together with duly executed stock and bond transfer powers, as the case may be, with signatures guaranteed by a bank or a member firm of the New York Stock Exchange, Inc., (b) transfer on the books of a Clearing Organization, or (c) such other means as Borrower and Lender may agree. In every transfer of securities hereunder, the transferor shall take all steps necessary (i) to effect a "transfer" under Section 8-313 of the New York Uniform Commercial Code or, where applicable, under any U.S. federal regulation governing transfers of securities and (ii) to provide the transferee with comparable rights under any applicable foreign law or regulation. 16.2. All transfers of cash Collateral hereunder shall be by (a) wire transfer in immediately available, freely transferable funds or (b) such other means as Borrower and Lender may agree. All other transfers of cash hereunder shall be made in accordance with the preceding sentence or by delivery of a certified or official bank check representing next-day New York Clearing House Funds. 16.3. All transfers of a letter of credit from Borrower to Lender shall be made by physical delivery to Lender of an irrevocable letter of credit issued by a "bank" as defined in Section 3(a)(6)(A)-(C) of the Exchange Act. Transfer of a letter of credit from Lender to Borrower shall be made by causing such letter of credit to be returned or by causing the amount of such letter of credit to be reduced to the amount required after such transfer. 16.4. A transfer of securities, cash or letters of credit may be effected under this Section 16 on any day except (a) a day on which the transferee is closed for business at its address set forth in Schedule A hereto or (b) a day on which a Clearing Organization or wire transfer system is closed, if the facilities of such Clearing Organization or wire transfer system are required to effect such transfer. 17. Contractual Currency. 17.1. Borrower and Lender agree that: (a) any payment in respect of a distribution under Section 7 shall be made in the currency in which the underlying distribution of cash was made; (b) any return of cash shall be made in the currency in which the underlying transfer of cash was made and (c) any other payment of cash in connection with a Loan under this Agreement shall be in the currency agreed upon by Borrower and Lender in connection with such Loan (the currency established under clause (a), (b) or (c) hereinafter referred to as the "Contractual Currency"). Notwithstanding the foregoing, the payee of any such payment may, at its option, accept tender thereof in any other currency; provided, however, that, to the extent permitted by applicable law, the obligation of the payor to make such payment will be discharged only to the extent of the amount of Contractual Currency that such payee may, consistent with normal banking procedures, purchase with such other currency (after deduction of any premium and costs of exchange) on the banking day next succeeding its receipt of such currency. 17.2. If for any reason the amount in the Contractual Currency received under Section 17.1, including amounts received after conversion of any recovery under any judgment or order expressed in a currency other than the Contractual Currency, falls short of the amount in the Contractual Currency due in respect of this Agreement, the party required to make the payment will (unless a Default has occurred and such party is the non-defaulting party) as a separate and independent obligation and to the extent permitted by applicable law, immediately pay such additional amount in the Contractual Currency as may be necessary to compensate for the shortfall. 17.3. If for any reason the amount in the Contractual Currency received under Section 17.1 exceeds the amount in the Contractual Currency due in respect of this Agreement, then the party receiving the payment will (unless a Default has occurred and such party is the non-defaulting party) refund promptly the amount of such excess. Page 42 of 82 43 18. [INTENTIONALLY DELETED] 19. Single Agreement. Borrower and Lender acknowledge that, and have entered into this Agreement in reliance on the fact that, all Loans hereunder constitute a single business and contractual relationship and have been entered into in consideration of each other. Accordingly, Borrower and Lender hereby agree that payments, deliveries and other transfers made by either of them in respect of any Loan shall be deemed to have been made in consideration of payments, deliveries and other transfers in respect of any other Loan hereunder, and the obligations to make any such payment, deliveries and other transfers may be applied against each other and netted. In addition, Borrower and Lender acknowledge that, and have entered into this Agreement in reliance on the fact that, all Loans hereunder have been entered into in consideration of each other. Accordingly, Borrower and Lender hereby agree that (a) each shall perform all of its obligations in respect of each Loan hereunder, and that a default in the performance of any such obligation by Borrower or by Lender (the "Defaulting Party") in any Loan hereunder shall constitute a default by the Defaulting Party under all such Loans hereunder, and (b) the non-defaulting party shall be entitled to set off claims and apply property held by it in respect of any Loan hereunder against obligations owing to it in respect of any other Loan with the Defaulting Party. 20. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF. 21. Waiver. The failure of a party to this Agreement to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. All waivers in respect of a Default must be in writing. 22. Remedies. All remedies hereunder and all obligations with respect to any Loan shall survive the termination of the relevant Loan, return of Loaned Securities or Collateral and termination of this Agreement. 23. Notices and Other Communications. Unless another address is specified in writing by the respective party to whom any notice or other communication is to be given hereunder, all such notices or communications shall be in writing or confirmed in writing and delivered at the respective addresses set forth in Schedule A attached hereto. All notices shall be effective upon actual receipt, provided, however, that if any notice shall be received by a party on a day on which such party is not open for business at its office located at the address set forth in Schedule A, such notice shall be deemed to have been received by such party at the opening of business on the next day on which such party is open for business at such address. 24. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. 24.1. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK CITY, AND ANY APPELLATE COURT FROM ANY SUCH COURT, SOLELY FOR THE PURPOSE OF ANY SUIT, ACTION OR PROCEEDING BROUGHT TO ENFORCE ITS OBLIGATIONS HEREUNDER OR RELATING IN ANY WAY TO THIS AGREEMENT OR ANY LOAN HEREUNDER AND (B) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT AND ANY RIGHT OF JURISDICTION ON ACCOUNT OF ITS PLACE OF RESIDENCE OR DOMICILE. 24.2. EACH PARTY HERETO IRREVOCABLY WAIVES ANY RIGHT THAT IT MAY HAVE TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 25. Miscellaneous. This Agreement supersedes any other agreement between the parties hereto concerning loans of securities between Borrower and Lender. This Agreement shall not be assigned by either party without the prior written consent of the other party and any attempted assignment without such consent shall be null and void. Subject to the foregoing, this Agreement shall be binding upon and shall ensure to the benefit of Borrower and Lender and their respective heirs, representatives, successors and assigns. This Agreement may be terminated by either party upon written notice to the other, subject only to fulfillment of any obligations then outstanding. This Agreement shall not be modified, except by an instrument in writing signed by the party against whom enforcement is sought. The parties hereto acknowledge and agree that, in connection with this Agreement and each Loan hereunder, time is of the essence. Each provision and agreement herein shall be treated as separate and independent from any other provision herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement. 26. Definitions. For the purposes hereof: 26.1. "Broker-Dealer" shall mean any person that is a broker (including a municipal securities broker), dealer, municipal securities dealer, government securities broker or government securities dealer as defined in the Exchange Act, regardless of whether the activities of such person are conducted in the United States or otherwise require such person to register with the Securities and Exchange Commission or other regulatory body. 26.2. "Business Day" shall mean, with respect to any Loan hereunder, a day on which regular trading occurs in the principal market for the Loaned Securities subject to such Loan, provided, however, that for purposes of Section 15, such term shall mean a day on which regular trading occurs in the principal market for the securities whose value is being determined. Notwithstanding the foregoing, (i) for purposes of Section 8, "Business Day" shall mean any day on which regular trading occurs in the principal market for any Loaned Securities or for any securities Collateral under any outstanding Loan hereunder and "next Business Day" shall mean the next day on which a transfer of Collateral may be effected in accordance with Section 16; and (ii) in no event shall a Saturday or Sunday be considered a Business Day. 26.3. "Clearing Organization" shall mean The Depository Trust Company, or, if agreed to by Borrower and Lender, such other clearing agency at which Borrower (or Borrower's agent) and Lender (or Lender's agent) maintain accounts, or a book-entry system maintained by a Federal Reserve Bank. 26.4. "Collateral" shall mean, whether now owned or hereafter acquired and to the extent permitted by applicable law, (a) any property which Borrower and Lender agree shall be acceptable collateral prior to the Loan and which is transferred to Lender pursuant to Section 3 or 8 (including as collateral, for definitional purposes, any letters of credit mutually acceptable to Lender and Borrower), (b) any property substituted therefor pursuant to Section 3.5, (c) all accounts in which such property is deposited and all securities and the like in which any cash collateral is invested or reinvested, and (d) any proceeds of any of the foregoing. For purposes of return of Collateral by Lender or purchase or sale of securities pursuant to Section 12 or 13, such term shall include securities of the same issuer, class and quantity as the Collateral initially transferred by Borrower to Lender. 26.5. "Customer" shall mean any person that is a customer of Borrower under Rule 15c3-3 under the Exchange Act or any comparable regulation of the Secretary of the Treasury under Section 15C of the Exchange Act (to the extent that Borrower is subject to such Rule or comparable regulation). 26.6. "Cutoff Time" shall mean a time on a Business Day by which a transfer of cash, securities or other property must be made by Borrower or Lender to the other, as shall be agreed by Borrower and Lender in Schedule B or otherwise orally or in writing or, in the absence of any such agreement, as shall be determined in accordance with market practice. 26.7. "Default" shall have the meaning assigned in Section 11. 26.8. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 26.9. "Federal Funds Rate" shall mean the rate of interest (expressed as an annual rate), as published in Federal Reserve Statistical Release H.15(519) or any publication substituted therefor, charged for federal funds (dollars in immediately available funds borrowed by banks on an overnight unsecured basis) on that day or, if that day is not a banking day in New York City, on the next preceding banking day. 26.10. "Foreign Securities" shall mean, unless otherwise agreed, securities that are principally cleared and settled outside the United States. 26.11. "Government Securities" shall mean government securities as defined in Section 3(a)(42)(A)-(C) of the Exchange Act. 26.12. "LIBOR" shall mean for any date, the offered rate for deposits in U.S. dollars for a period of three months which appears on the Reuters Screen LIBO page as of 11:00 A.M., London time, on such date (or, if at least two such rates appear, the arithmetic mean of such rates). 26.13. "Loan" shall mean a loan of securities hereunder. 26.14. "Loaned Security" shall mean any security which is a security as defined in the Exchange Act, transferred in a Loan hereunder until such security (or an identical security) is transferred back to Lender hereunder, except that, if any new or different security shall be exchanged for any Loaned Security by recapitalization, merger, consolidation or other corporate action, such new or different security shall, effective upon such exchange, be deemed to become a Loaned Security in substitution for the former Loaned Security for which such exchange is made. For purposes of return of Loaned Securities by Borrower or purchase or sale of securities pursuant to Section 12 or 13, such term shall include securities of the same issuer, class and quantity as the Loaned Securities, as adjusted pursuant to the preceding sentence. 26.15. "Plan" shall mean (a) any "employee benefit plan" as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 which is subject to Part 4 of Subtitle B of Title I of such Act; (b) any "plan" as defined in Section 4975(e)(1) of the Internal Revenue Code of 1986 or (c) any entity the assets of which are deemed to be assets of any such "employee benefit plan" or "plan" by reason of the Department of Labor's plan asset regulation, 29 C.F.R. Section 2510.3-101. Prime Dealer Services FINANCIAL INSTITUTION Corp. PARTNERS III, L.P. By: Hovde Capital, Ltd., General Partner By: By: /s/ Richard J. Perry, Jr. Name: [SIG_NAME1] Name: Richard J. Perry, Jr. [SIG Title: [SIG_POSITION1] Title: Secretary Page 43 of 82 44 Schedule A NAMES AND ADDRESSES FOR COMMUNICATIONS Prime Dealer Services Corp. 1221 Avenue of the Americas New York, NY 10020 Attention: Ms. Kathleen Mooney, Vice President Tel.:(212) 762-5101 Fax: (212) 762-9519 Financial Institution Partners III, L.P. 1824 Jefferson Place, NW Washington, DC 20036 Tel.: Mr. Jeffrey Kashdin & Mr. Richard J. Perry, Jr. Fax: (202) 775-8365 Schedule B DEFINED TERMS AND SUPPLEMENTAL PROVISIONS Cutoff Time(s) ANNEX II Supplemental Terms and Conditions The following Supplemental Terms and Conditions (the "Supplement") supplement and amend the Master Securities Loan Agreement (the "Agreement") dated between Prime Dealer Services Corp. and : 1. The phrase "and for any other obligation of Borrower to Lender" shall be deleted from the first sentence of Section 3.2 of the Agreement. The words "securities intermediary" shall be inserted after the words "financial intermediary" in the last sentence of Section 3.2. 2. The term "substituted Collateral" in first sentence of Section 3.5 of the Agreement after the phrases "provided however that such" and "the aggregate market value of such", shall be changed to "substitute Collateral" in both instances, and the phrase "(or other Collateral acceptable to Lender)" shall be inserted after the words "substitute letter of credit" in the last sentence of such Section. 3. The phrase "market or" shall be inserted after the words "based on the aggregate" in first sentence of Section 4.1 of the Agreement and the phrase "as agreed" shall be inserted after the words "par value" in the first sentence of such Section. 4. The word "such" shall be inserted after the phrase "by the transfer of" in the first sentence of Section 7.2 of the Agreement and the phrase "in an amount equal to such cash distribution," shall be deleted from the first sentence of such Section. 5. The word "such" shall be inserted after the phrase "by the transfer of" in second sentence of Section 7.3 of the Agreement and the phrase, "in an amount equal to such cash distribution," shall be deleted from the second sentence of such Section. 6. The sentence "Non-cash distributions received by Lender shall be added to the Collateral on the date of distribution and shall be considered such for all purposes, except that if the Loan has terminated, Lender shall forthwith transfer the same to Borrower," shall be inserted at the end of Section 7.3 of the Agreement. 7. The phrase "Subject to Section 7.4 (d)," shall be inserted at the beginning of Section 9.3 of the Agreement. 8. The phrase "and such suspension or expulsion shall have a material effect on such parties' ability to perform hereunder" shall be inserted at the end of Section 11(f) of the Agreement. 9. Unless otherwise agreed, the Margin Percentage shall be as follows: (a)US and Canadian exchange traded equity securities: 100% (b)Non-US and Non-Canadian exchange traded equity securities: 100% (c) All fixed income securities: 100% 10. When Borrower gives other than cash Collateral, Fees shall be calculated in accordance with Section 4, except that Fees shall be based on the Market Value of Loaned Securities plus accrued and unpaid interest to the extent accrued interest is not included in the market value of the Loaned Securities. 11. The second sentence in Section 5 ("Termination of Loan") is hereby deleted and restated as follows: "The termination date established by a termination notice given by Lender to Borrower shall be a date no earlier than the standard settlement date for trades of the Loaned Securities entered into on the date of such notice, which date shall, unless Borrower and Lender agree to the contrary, be (i) in the case of Government Securities, the next Business Day following such notice and (ii) in the case of all other securities, the number of Business Days in the standard securities settlement cycle in the United States as defined in Rule 15c6-1 under the Securities Exchange Act of 1934 (currently three days) following such notice." 12. THIS SUPPLEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF. Except as otherwise set forth herein, the Agreement shall remain unchanged and in full force and effect. From and after the date hereof, any reference to the Agreement shall be a reference to the Agreement as amended hereby. Prime Dealer Services FINANCIAL INSTITUTION Corp. PARTNERS III, L.P. BY: HOVDE CAPITAL, LTD., General Partner By: By: /s/ Richard J. Perry, Jr. Name: [SIG_NAME1] Name: Richard J. Perry, Jr. [SIG Title: [SIG_POSITION1] Title: Secretary Page 44 of 82 45 ANNEX III Supplemental Terms and Conditions The following Supplemental Terms and Conditions (the "Supplement") supplement and amend the Master Securities Loan Agreement (the "Agreement") dated as of between Prime Dealer Services Corp. ("Lender") and ("Borrower") unless otherwise defined in Section 11.1 below, capitalized terms used herein shall have the meanings assigned in the Agreement. 1. Collateral and Mark to Market. 1.1 Notwithstanding anything to the contrary in the Agreement, in connection with any Loan in which Lender is not a Customer, Borrower and Lender may agree, as provided in Section 10.2 hereof, that the market value of the Collateral, if any, transferred by Borrower to Lender, upon initial transfer and for purposes of any mark to market or similar provision of the Agreement, shall be equal to a percentage of the market value of the Loaned Securities that is less than 100%; provided, however, that in the event that the writing or other confirmation evidencing such agreement does not set out such percentage with respect to any such Loan, such percentage shall not, for purposes of any mark to market or similar provision of the Agreement, be less than the percentage that is obtained by dividing (i) the market value of the Collateral required to be transferred by Borrower to Lender with respect to such Loan at the commencement of the Loan by (ii) the market value of the Loaned Securities required to be transferred by Lender to Borrower at the commencement of the Loan. 1.2 The Collateral transferred by Borrower to Lender under the Agreement, as well as any other property transferred by Borrower to Lender or any of Lender's Affiliates as security for any other obligations or liabilities of Borrower to Lender or any of Lender's Affiliates, shall be security for any and all obligations or liabilities of Borrower with respect to the Agreement, for any Loan and for any other agreement or transaction between Lender or any Affiliate of Lender and Borrower, now existing or hereafter arising. 2. Permitted Purpose. 2.1 Notwithstanding anything to the contrary in the Agreement, with respect to any Loan of an Equity Security, Borrower and Lender may agree, as provided in Section 10.2 hereof, that Borrower shall not be deemed to have made any representation or warranty to Lender regarding the purpose for which Borrower is borrowing or will borrow the Loaned Security, including without limitation any representation or warranty regarding the use of the Loaned Security by it (or the person to whom it relends the Loaned Security) for the purpose of making delivery of such security in the case of a short sale, failure to receive securities required to be delivered or otherwise. By entering into any such agreement, Lender shall be deemed to have represented and warranted to Borrower (which representation and warranty shall be deemed to be repeated on each day during the term of such Loan) that Lender is either (i) an "exempted borrower" within the meaning of Regulation T or (ii) a member of a national securities exchange or a broker or dealer registered with the Securities and Exchange Commission that is entering into such Loan to finance its activities as a market maker or an underwriter. 2.2 Notwithstanding anything to the contrary in the Agreement, with respect to any Loan of a security that is not an Equity Security, Borrower shall not be deemed to have made any representation or warranty to Lender regarding the purpose for which Borrower is borrowing or will borrow the Loaned Security, including without limitation any representation or warranty regarding the use of the Loaned Security by it (or the person to whom it relends the Loaned Security) for the purpose of making delivery of such security in the case of a short sale, failure to receive securities required to be delivered or otherwise. 3. Termination and Rights in Respect of Collateral. Notwithstanding anything to the contrary in the Agreement, if under the Agreement Lender may pledge, repledge, hypothecate, rehypothecate, lend, relend, sell or otherwise transfer the Collateral, or re-register Collateral evidenced by physical certificates in any name other than Borrower's: (a) Borrower may not terminate a Loan, if the Collateral for such Loan includes securities other than Government Securities, except on a termination date established by notice given to Lender prior to the close of business on a Business Day; the date established by such termination notice given by Borrower to Lender shall be a date no earlier than the standard settlement date for trades of such Collateral entered into on the date of such notice, which date shall, unless Borrower and Lender agree to the contrary, be the third Business Day following such notice; and (b) Borrower waives the right to vote, or to provide any consent or take any similar action with respect to, any Collateral in the event that the record date or deadline for such vote, consent or other action falls during the term of a Loan and such Collateral is not required to be returned to Borrower pursuant to any substitution, mark to market or similar provision of the Agreement. 4. Dividends, Distributions, Etc. 4.1 Notwithstanding anything to the contrary in the Agreement, Borrower shall be entitled to receive all distributions made on or in respect of Collateral transferred to Lender which are not otherwise received by Borrower, to the full extent it would be so entitled if such Collateral had not been transferred to Lender, including, but not limited to (a) cash and all other property, (b) stock dividends, (c) securities received as a result of split ups of such Collateral and distributions in respect thereof, (d) interest payments, and (e) all rights to purchase additional securities. 4.2 Any cash distributions made on or in respect of Collateral, which Borrower is entitled to receive pursuant to Section 4.1 hereof, shall be treated in accordance with the Agreement. Non-cash distributions received by Lender shall be added to the Collateral on the date of distribution and shall be considered such for all purposes, except that if each Loan secured by such Collateral has terminated, Lender shall forthwith transfer the same to Borrower. 5. Transfer. Notwithstanding anything to the contrary in the Agreement, all transfers by either Borrower or Lender of Loaned Securities or Collateral consisting of "financial assets" (within the meaning of the New York Uniform Commercial Code) thereunder shall be by (a) in the case of certificated securities, physical delivery of certificates representing such securities together with duly executed stock and bond transfer powers, as the case may be, with signatures guaranteed by a bank or a member firm of the New York Stock Exchange, Inc., (b) registration of an uncertificated security in the transferee's name by the issuer of such uncertificated security, (c) the crediting by a securities intermediary of such financial assets to the transferee's securities account maintained with such securities intermediary, or (d) such other means as Borrower and Lender may agree. For the avoidance of doubt, the parties agree and acknowledge that the term "securities", as used in the Agreement and herein, shall include any "security entitlements" with respect to such securities (within the meaning of the New York Uniform Commercial Code), and that the terms "financial intermediary" and "clearing corporation", as used in the Agreement, shall mean a "securities intermediary" (within the meaning of the New York Uniform Commercial Code). 6. Representations and Warranties. Each of the parties hereto (and, in the case of a party acting as agent in accordance with the terms of the Agreement, each of its principals) represents and warrants that (a) it has full power and authority to execute and deliver this Supplement and to enter into any Loan contemplated by the Agreement and to perform its obligations thereunder, as supplemented or amended herein; (b) it has taken all necessary action to authorize such execution, delivery and performance; and (c) this Supplement constitutes a legal, valid and binding obligation, enforceable against it in accordance with its terms and the terms of the Agreement. 7. Events of Default. 7.1 In addition to any events of default set forth in the Agreement, the occurrence of one or more of the following shall constitute an event of default under the Agreement: (i) if either party fails to perform any covenant or obligation required to be performed by it hereunder or if any representation made by either party in respect hereof shall be incorrect or untrue in any material respect during the term of any Loan under the Agreement, as supplemented or amended herein; provided, however, that to the extent that Section 4 hereof supplements and amends any provisions in the Agreement governing the rights of Borrower in respect of distributions on Collateral, any such failure under Section 4 hereof shall constitute an event of default only after the expiration of the notice period, if any, specified in the Agreement with respect to the occurrence of an event of default for such a failure; or (ii) (ii) if Borrower defaults or fails to perform with respect to any indebtedness to Lender or any Affiliate of Lender or any other agreement or transaction between Lender or any Affiliate of Lender and Borrower, now or hereafter arising. 7.2 In addition to the remedies in events of default set forth in the Agreement, an event of default with respect to Borrower under the Agreement shall constitute an event of default (howsoever described) under all other agreements and transactions between Lender or any Affiliate of Lender and Borrower and, upon any event of default with respect to Borrower, Lender and any Affiliate of Lender shall be entitled to: (i) cancel and otherwise liquidate and close out any transaction under any other agreement or transaction between Lender or any Affiliate of Lender and Borrower without prior notice to Borrower or any other party, whereupon Borrower, as the case may be, shall be liable to Lender or the Affiliate of Lender, as the case may be, for any resulting loss, damage, cost and expense, including loss equal to the amount Lender or the Affiliate of Lender, as the case may be, would have to pay to enter into replacement transactions (whether or not Lender or the Affiliate of Lender, as the case may be, enters into any such replacement transactions) and any damages resulting to Lender or any Affiliate of Lender from entering into or terminating hedge transactions with respect thereto; and (ii) set off any obligation under any transaction under any agreement between Lender or any Affiliate of Lender and Borrower (including any Loan under this Agreement), including any payment or delivery obligation, of Lender or the Affiliate of Lender, as the case may be, to Borrower against any obligation under any transaction under any agreement between Lender and Borrower (including any Loan under this Agreement), including any payment or delivery obligation, of Borrower to Lender or the Affiliate of Lender, as the case may be. 8. Transfer Taxes. Unless otherwise agreed, all transfer taxes with respect to the transfer of Collateral by Borrower to Lender and by Lender to Borrower upon termination of the Loan or pursuant to any substitution, mark to market or similar provision of the Agreement shall be paid by Borrower. 9. APPLICABLE LAW. THIS SUPPLEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF. Page 45 of 82 46 10. Definitions and Interpretations. 10.1 Notwithstanding anything to the contrary in the Agreement, the following terms shall have the following meanings for purposes of this Supplement. "Affiliate" shall mean, in relation to any person, (i) any entity controlled, directly or indirectly, by the person; (ii) any entity that controls, directly or indirectly, the person; or (iii) any entity directly or indirectly under common control with the person. For purposes of this definition, "control" of any entity or person means ownership of a majority of the voting power of the entity or person. "Collateral" shall have the meaning specified in the Agreement, except that, if any new or different security shall be exchanged for any Collateral by recapitalization, merger, consolidation or other corporate action, such new or different security shall, effective upon such exchange, be deemed to become Collateral in substitution for the former Collateral for which such exchange is made. "Customer" shall mean any person that is a customer of Borrower under Rule 15c3- 3 under the Exchange Act or any comparable regulation of the Secretary of the Treasury under Section 15C of the Exchange Act (to the extent that Borrower is subject to such rule or comparable regulation). "Equity Security" shall mean any security other than a "non-equity security", as defined in Regulation T. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Government Securities" shall mean "government securities" as defined in Section 3(a)(42)(A)-(C) of the Exchange Act. "Plan" shall mean (i) any "employee benefit plan" as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 which is subject to Part 4 of Subtitle B of Title I of such Act; (ii) any "plan" as defined in Section 4975(e)(1) of the Internal Revenue Code of 1986; or (iii) any entity the assets of which are deemed to be assets of any such "employee benefit plan" or "plan" by reason of the Department of Labor's plan asset regulation, 29 C.F.R. Section 2510.3-101. "Regulation T" shall mean Regulation T of the Board of Governors of the Federal Reserve System, as in effect from time to time. 10.2 Any agreement between the parties pursuant to Section 1.1 or Section 2.1 shall be made (i) in writing, (ii) orally, if confirmed promptly in writing or through any system that compares Loans and in which Borrower and Lender are participants, or (iii) in such other manner as may be agreed by the parties in writing. 11. Notwithstanding anything contained in the Agreement, Lender and Borrower agree that in effecting Loans transfers between Lender's Account and Borrower's Account are intended to be, and shall be deemed to be, simultaneous. Notwithstanding the foregoing, if Lender has failed to deliver the Loaned Securities to Borrower's Account or Borrower has failed to deliver the Collateral to Lender's Account by the applicable Cutoff time for such Loan, then no Loan shall have occurred and Borrower (in the case of Lender's failure to deliver) or Lender (in the case of Borrower's failure to deliver), shall have the absolute right to the return of the Collateral or Loaned Securities, as the case may be. Until such Collateral or Loaned Securities are redelivered to either Borrower (in the case of Lender's failure to deliver) or Lender (in the case of Borrower's failure to deliver), the party that failed to deliver such Collateral or Loaned Securities shall hold such securities in escrow for the other party and shall be required to pay to such party interest based on the market value of the Collateral or Loaned Securities, as the case may be, (i) in the case of foreign securities, at the LIBOR rate and (ii) in the case of any other securities, at the Federal Funds Rate, for each day that such redelivery obligation remains outstanding. For purposes of this Paragraph 11, the following terms shall have the following meanings: "Lender's Account" shall mean the account maintained by Lender for the deposit of Collateral with respect to each Loan and, for such purposes, Lender's Account shall be deemed to be a "securities account" within the meaning of the New York Uniform Commercial Code. For purposes of this Amendment, Lender's Account shall include any account for the deposit of cash in connection therewith. "Borrower's Account" shall mean the account maintained by Borrower for the deposit of Loaned Securities with respect to each Loan and, for such purposes, Borrower's Account shall be deemed to be a "securities account" within the meaning of the New York Uniform Commercial Code. For purposes of this Amendment, Borrower's Account shall include any account for the deposit of cash in connection therewith. Except as otherwise set forth herein, the Agreement shall remain unmodified and in full force and effect. From and after the date hereof, any reference to the Agreement shall be a reference to the Agreement as supplemented and amended hereby. Prime Dealer Services FINANCIAL INSTITUTION Corp. PARTNERS III, L.P. BY: HOVDE CAPITAL, LTD., General Partner By: By: /s/ Richard J. Perry, Jr. Name: [SIG_NAME1] Name: Richard J. Perry, Jr. [SIG Title: [SIG_POSITION1] Title: Secretary Page 46 of 82 47 EXHIBIT I Account Control Agreement, dated as of , among Morgan Stanley & Co., Incorporated ("MS&Co."), Prime Dealer Services Corp. ("PDS") and ("Customer"). Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned in the Master Securities Loan Agreement dated (the "Master Securities Loan Agreement"). PREAMBLE: 1. MS&Co., in its capacity as securities intermediary ("Intermediary") has established one or more securities accounts in the name of (the "Account"). 2. PDS may, from time to time, lend securities to Customer pursuant to the Master Securities Loan Agreement. 3. Customer wishes to provide for the Account and all or a portion of the assets credited to the Account (the "Additional Collateral"), in addition to any other Collateral transferred by Customer to PDS, to serve as Collateral in connection with one or more Loans or other obligations under the Master Securities Loan Agreement. 4. PDS, Customer and MS&Co. (in its individual capacity and as Intermediary) are entering into this Agreement to provide for the control of the Additional Collateral by PDS and to perfect the security interest of PDS therein. TERMS: Section 1. The Account. All parties agree that the Account is a "securities account" within the meaning of Article 8 of the Uniform Commercial Code of the State of New York (the "UCC") and that all property held by Intermediary in the Account will be treated as financial assets under the UCC. Intermediary will not agree with any third party to comply with entitlement orders or other directions concerning the Collateral held in the Account originated by any third party without the prior written consent of PDS and Customer. Section 2. Collateral. Notwithstanding anything to the contrary in the Master Securities Loan Agreement, in addition to Collateral transferred by Customer to PDS pursuant to Section 16 of the Master Securities Loan Agreement and Section 5 of Annex III thereto, Additional Collateral held by MS&Co. in the Account shall constitute Collateral for purposes of the Master Securities Loan Agreement, subject to the security interest and all other rights of PDS as Lender thereunder. In such event, notwithstanding anything to the contrary in the Master Securities Loan Agreement, such Additional Collateral shall, except as provided below in Section 7, be deemed to be "transferred" by Borrower to Lender for purposes of the Master Securities Loan Agreement concurrently with the transfer of such other Collateral by Borrower to Lender and shall be deemed to be "transferred" by Lender to Borrower for purposes of the Master Securities Loan Agreement concurrently with the transfer of such other Collateral by Lender to Borrower. Section 3. Subordination of Lien. The security interest in favor of PDS in the Account and financial assets credited thereto is subject and subordinate to the prior payment of all indebtedness of Customer to Intermediary, as such may exist from time to time, including fees and commissions, and to any security interest or lien in favor of Intermediary on the Account and to any right of Intermediary to close out open positions in the Account. In no event will PDS have any right to exercise any remedies in respect of the Account until such time as all Customer's obligations to Intermediary have been satisfied in full. Section 4. Control. Subject to the provisions of Section 3, Intermediary will comply with entitlement orders originated by PDS concerning the Account and any financial assets credited thereto without further consent by Customer. Subject to the foregoing, Intermediary may also comply with entitlement orders or other directions concerning the Account originated by Customer, or its authorized representatives, until such time as PDS delivers a written notice to Intermediary that PDS is thereby exercising exclusive control over the Account. Such notice may be referred to herein as the "Notice of Exclusive Control." After Intermediary receives the Notice of Exclusive Control and has had reasonable opportunity to comply, it will cease complying with entitlement orders or other directions concerning the Account originated by Customer or its representatives. Section 5. Amendment. This Agreement may not be amended or otherwise modified except in writing signed by all the parties hereto. Section 6. Choice of Law. This Agreement (including without limitation all rights and obligations with respect to the Account) shall be governed by and construed in accordance with the law of the State of New York. Section 7. Interpretation. Dividends and other distributions on Additional Collateral shall be credited to the Account in accordance with the customary practices of Intermediary, and PDS shall have no obligation with respect thereto under Section 7.3 of the Master Securities Loan Agreement and Sections 4.1 and 4.2 of Annex II thereto. SIGNATURES: PRIME DEALER SERVICES CORP. By:___________________ Name: [SIG_NAME1] Title: FINANCIAL INSTITUTION PARTNERS III, L.P. By: /s/ Richard J. Perry, Jr.__ Name: Richard J. Perry, Jr. [SIG Title: Secretary MORGAN STANLEY & CO. INCORPORATED, [INDIVIDUALLY AND AS INTERMEDIARY] By: ________ Name: [SIG_NAME1] Title: Page 47 of 82 48 EXHIBIT J MORGAN STANLEY & CO. INCORPORATED OPTION AGREEMENT The following sets forth our respective rights and obligations arising from your handling, purchasing, selling, assigning, exercising and/or endorsing puts and/or calls, or variations thereof ("options"), for my account. In connection with such transactions for my account, I agree and represent as follows: 1. I have received from you, have read and understand the brochure entitled "Characteristics and Risks of Standardized Options" and/or other appropriate Options Disclosure Documents ("ODD"), including but not limited to the information therein regarding position limits and exercise limits, the purposes and risks of transactions in options and the secondary market in options. 2. I agree to pay to you, as you direct, (a) all applicable transaction fees, charges and premiums, (b) the amount of any trading loss that you may incur from options transactions executed by you on my behalf and (c) any debit balance owing with respect to my account(s), and interest and service charges on any such debit balances at the rates then charged by you, together with your costs and reasonable attorney's fees incurred in collecting any such debit balance. 3. In effecting options transactions through you, I am aware of and agree to be bound by the rules of The Options Clearing Corporation ("OCC"), the Securities and Exchange Commission, the various securities exchanges and securities associations, the Board of Governors of the Federal Reserve Board and other securities self regulatory organizations having jurisdiction over options transactions. Without limiting the foregoing, I agree not to violate, either acting by myself (through you as broker or otherwise) or in concert with others, directly or indirectly, the rules of such organizations regarding position limits and/or exercise limits. I further expressly authorize you to liquidate any of my options positions without notice to me and without my consent, in your sole and absolute discretion, if and when my open positions exceed applicable position limits so as to reduce such open positions to a level that is in compliance with such limits or if I fail to fulfill any of my obligations hereunder or under any other agreement with you. I will bear and be solely responsible for any losses associated with such a reduction or liquidation. 4. I agree that you shall not be liable for delays in the transmission of orders or instructions due to the breakdown or failure of transmission or communication facilities or any other cause beyond your control, including any mistake, error, negligence or misconduct of a securities exchange, securities association or clearing house or their officers, directors, employees or agents. 5. (a) I understand that I am fully responsible for taking action to exercise my option contracts. I hereby agree to waive any and all claims for damages or loss, which I might have against you because an option was not exercised. I understand that my options will become worthless if I do not deliver instructions to exercise by your established exercise cut-off times, which may be different than exercise cut-off times established by the exchanges, markets and clearing houses. I am aware that the OCC has established thresholds for equity and index option contracts whereby all expiring contracts at or above the appropriate threshold will be automatically exercised unless you, at my direction, instruct the OCC otherwise. (b) I understand that you randomly assign exercise notices to all customers. All American-style (an option that may be exercised at any time) short option positions are subject to assignment at any time, including positions established on the same day that exercises are assigned, while European-style (an option that may be exercised only on a specified exercise date) short option positions are only subject to assignment upon expiration. Exercise assignment notices are allocated randomly from among all of your customers' short option positions, which are subject to exercise. A more detailed description of Morgan Stanley & Co. Incorporated's Random Method for allocating assignment notices is available from your account representative upon request. 6. I represent and warrant to you that (i) options trading is suitable for me in light of my investment objectives, financial situation, needs, experience and knowledge, (ii) I am aware and acknowledge that options trading may be highly speculative and involves a high degree of risk (including without limitation the risks described in the ODD) and that on certain trading days, trading may cease with a resultant financial disadvantage to me, (iii) I am willing and able to evaluate, carry and bear the financial risks attendant to options trading, and (iv) I understand that you are relying upon these representations and warranties and the financial and other information that I have provided or will provide to you. I will promptly notify you of any significant changes that take place in any information furnished to you, including my investment objectives, financial situation and/or needs, prior to effecting any additional opening purchase or sale transactions. 7. CHOICE OF DISPUTE RESOLUTION. ANY DISPUTE THAT I MAY HAVE WITH YOU ARISING OUT OF, RELATING TO OR IN CONNECTION WITH, YOUR BUSINESS, ANY TRANSACTION BETWEEN US, OR THIS AGREEMENT, SHALL BE DETERMINED BY ARBITRATION OR LITIGATION IN COURT AT MY ELECTION. REGARDLESS OF WHETHER I CHOOSE ARBITRATION OR LITIGATION, WE AGREE TO FOLLOW THE PROCEDURES, AND ABIDE BY THE REQUIREMENTS, LISTED BELOW: 8. ARBITRATION: - - ARBITRATION IS FINAL AND BINDING ON THE PARTIES. - - THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING THE RIGHT TO A JURY TRIAL. - - PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM COURT PROCEEDINGS. - - THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY THE ARBITRATORS IS ST RICTLY LIMITED. Page 48 of 82 49 THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY. ANY ARBITRATION SHALL BE CONDUCTED IN NEW YORK AND ONLY BEFORE THE NEW YORK STOCK EXCHANGE, INC., THE AMERICAN STOCK EXCHANGE, INC., THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC., OR ANY OTHER SELF-REGULATORY ORGANIZATION OF WHICH YOU ARE A MEMBER. I HAVE THE RIGHT TO ELECT ONE OF THE FOREGOING ORGANIZATIONS, BUT IF I FAIL TO MAKE SUCH ELECTION BY CERTIFIED LETTER ADDRESSED TO YOU AT YOUR MAIN OFFICE BEFORE THE EXPIRATION OF TEN DAYS AFTER RECEIPT OF A WRITTEN REQUEST FROM YOU TO MAKE SUCH ELECTION THEN YOU MAY MAKE SUCH ELECTION. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS CONSENT BY YOU TO AN AWARD OF PUNITIVE DAMAGES. THE AWARD OF THE ARBITRATORS, OR THE MAJORITY OF THEM, SHALL BE FINAL, AND JUDGMENT UPON THE AWARD RENDERED MAY BE ENTERED IN ANY COURT, STATE OR FEDERAL, HAVING JURISDICTION. NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION, NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINST ANY PERSON WHO HAS INITIATED IN COURT A PUTATIVE CLASS ACTION; WHO IS A MEMBER OF A PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED BY THE PUTATIVE CLASS ACTION UNTIL: (i) THE CLASS CERTIFICATION IS DENIED; (ii) THE CLASS IS DECERTIFIED; OR (iii) THE CUSTOMER IS EXCLUDED FROM THE CLASS BY THE COURT. SUCH FORBEARANCE TO ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OR ANY RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN. 9. LITIGATION IN COURT. (A) UNLESS THE PARTIES OTHERWISE AGREE IN WRITING WHEN ANY DISPUTE ARISES, ANY LITIGATION MUST BE INSTITUTED IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR THE SUPREME COURT OF THE STATE OF NEW YORK FOR THE COUNTY OF NEW YORK. (B) ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR ACTION IS HEREBY WAIVED BY ALL PARTIES TO THIS AGREEMENT. 10. THIS AGREEMENT, ITS ENFORCEMENT, AND ANY DISPUTE BETWEEN US, WHETHER ARISING OUT OF OR RELATING TO MY ACCOUNTS OR OTHERWISE, SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, EXCLUDING ITS CONFLICT OF LAW RULES; and its provisions shall be continuous, shall cover individually and collectively all accounts which I may open or reopen with you, and shall inure to the benefit of your present organization and any successor organization, irrespective of any change or changes at any time in the personnel thereof, for any cause whatsoever, and of the assigns of your present organization or any successor organization, and shall be binding upon me, and/or my estate, executors, administrators, trustees, agents, officers, directors and assigns. NOTICE: THIS AGREEMENT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE IN PARAGRAPHS 7 AND 8. Page 49 of 82 50 EXHIBIT K Morgan Stanley CUSTOMER PRIME BROKER ACCOUNT AGREEMENT Ladies and Gentlemen: In consideration of Morgan Stanley from time to time accepting an account or receiving holding or delivering any property of the undersigned, or entering into any Contract with the undersigned, the undersigned agrees with Morgan Stanley to the following: 1. DEFINITIONS "Agreement" means this document along with all executed annexes to this document. "Contract" means any contract or agreement between Morgan Stanley and the undersigned, including securities purchase or sale contracts, agreements to lend cash or securities, commodity and currency contracts, forward contracts, repurchase agreements, swap agreements or any other derivative or financial transaction, without regard to the form of such agreement which may include oral agreements or agreements confirmed or signed by only one party to the agreement and agreements entered into or signed by Morgan Stanley on behalf of the undersigned. "Collateral" means cash, securities, commodities, other financial assets, investment property and other property and assets (including all security entitlements in respect thereof, all income and profits thereon, all dividends, interest and other payments and distributions with respect thereto and all proceeds from any of the foregoing) which from time to time may be deposited or credited to any account of the undersigned with Morgan Stanley, be held or carried by Morgan Stanley for the undersigned, be due from Morgan Stanley to the undersigned, or be delivered to or in Morgan Stanley's possession or control for any purpose, including safekeeping. "Morgan Stanley" and the "Morgan Stanley Entities" mean, individually or collectively, as appropriate, Morgan Stanley & Co. Incorporated, MS Securities Services Inc., Morgan Stanley & Co. International Limited, Prime Dealer Services Corp., Morgan Stanley Securities Limited, Morgan Stanley Japan Limited, Morgan Stanley Asia Limited, Morgan Stanley GMBH, Morgan Stanley Market Products Inc., Morgan Stanley Capital Group Inc., Morgan Stanley Capital Services Inc., Morgan Stanley DW Inc., Morgan Stanley, MSDW Asia Securities Products LLC, MSDW Equity Finance Services (Cayman) Ltd., Morgan Stanley Financial Products Ltd., MSDW Markets Inc. and their respective successors, parents, subsidiaries, affiliates, divisions, officers, directors, agents and employees. "Obligation" means any obligation or liability of a party arising at any time, whether or not mature or contingent, related to the purchase, sale or loan of securities, currencies or other instrument, property or assets or under or in connection with this Agreement or any Contract, including any payment, repayment or delivery obligation, any obligation relating to any extension of credit or to pay damages (including costs of cover) and legal and other expenses incurred in connection with the enforcement of any Contract. "Prime Brokerage Regulations" means the requirements applicable to prime brokerage activities set out in the no-action letter of the Securities and Exchange Commission ("SEC") dated January 25, 1994, as such letter may be amended, modified or supplemented from time to time, regarding the performance of prime brokerage services, and any other relevant regulations of the SEC or other governmental authorities or self-regulatory organizations. "Undersigned" means each of the individuals or entities, other than Morgan Stanley, that is a party to this Agreement. 2. APPLICABLE RULES AND REGULATIONS. All transactions under this Agreement shall be subject to the rules and regulations of all U.S. and, if applicable, non- U.S., federal, state and local governmental authorities, self-regulatory organizations, markets and clearing corporations including but not limited to the Securities & Exchange Commission ("SEC"), New York Stock Exchange ("NYSE") or National Association of Securities Dealers ("NASD"). 3. SHORT AND LONG SALES. The undersigned agrees that when placing any sell order, the undersigned will appropriately designate it as "long" or as "short." The undersigned will designate a sale as "long" only if the securities being sold are securities then owned by the undersigned and such securities are either in the undersigned's account at Morgan Stanley or will be delivered to Morgan Stanley as soon as it is possible to do so, without undue inconvenience or expense to Morgan Stanley. 4. COMPLIANCE WITH PRIME BROKERAGE REGULATORY REQUIREMENTS. The undersigned hereby acknowledges that it is familiar with the Prime Brokerage Regulations and with the related provisions in Section 5 of this Agreement, and hereby undertakes to comply with the Prime Brokerage Regulations as in effect at any time and with the related provisions of this Agreement. The undersigned will inform Morgan Stanley promptly if this undertaking is not satisfied. Without limiting the foregoing, the undersigned agrees that it shall maintain in its account with Morgan Stanley at all times a minimum net equity in cash and securities as agreed upon, but in no event less than that required by the Prime Brokerage Regulations. The undersigned further agrees that, in the event its account falls below this minimum net equity, it shall bring its account into compliance in accordance with the Prime Brokerage Regulations. Page 50 of 82 51 5. MORGAN STANLEY AS PRIME BROKER. In connection with any transactions where Morgan Stanley acts as the undersigned's prime broker: (a) The undersigned maintains brokerage accounts with a number of other brokers ("Executing Brokers") and, from time to time, will place orders to be executed by one or more Executing Brokers. The undersigned agrees to give Morgan Stanley notice of the names of all Executing Brokers with whom the undersigned intends to place orders (which Executing Brokers must be acceptable to Morgan Stanley). Morgan Stanley is authorized to enter into a Prime Brokerage Agreement with all current or future Executing Brokers, to set up an account for the undersigned's benefit at any Executing Broker and to provide or obtain any information necessary to establish or maintain a prime brokerage relationship. The undersigned acknowledges that no order need be accepted by Morgan Stanley as prime broker from any Executing Broker with which Morgan Stanley has not entered into a "Prime Brokerage Agreement" with respect to the undersigned's account at Morgan Stanley. Further, Morgan Stanley reserves the right at any time to place a limit on the size of transactions executed by any Executing Broker which are to be settled and cleared by Morgan Stanley as a prime broker. The undersigned will use its best efforts to assure that such Executing Brokers comply with the terms set forth in the Prime Brokerage Agreement. The undersigned acknowledges that as between Morgan Stanley and any Executing Broker, the Executing Broker will be acting as an agent of the undersigned, not as Morgan Stanley's agent, for the purpose of carrying out the undersigned's directions with respect to the purchase, sale and settlement of securities. b) The undersigned or its representative will advise Morgan Stanley on trade date of the details of all transactions effected by any Executing Broker on the undersigned's behalf (the "Trade Data"). Morgan Stanley is authorized to acknowledge, affirm, settle and clear all such transactions. All such transactions shall be for the sole account and risk of the undersigned and Morgan Stanley shall have no responsibility or liability to the undersigned, any Executing Broker or any other third party. The undersigned agrees to pay all fees agreed upon and to make any necessary arrangements with the appropriate Executing Broker concerning the payment of any such fees, including the deduction of any such amounts from commissions charged by the Executing Brokers. The undersigned agrees that it is responsible, and liable to Morgan Stanley, and will indemnify Morgan Stanley, for all costs, losses and fees (including but not limited to those associated with buy-ins and sell-outs and those resulting from any Executing Broker's inability to settle a transaction) arising out of the orders placed by the undersigned with any Executing Broker or any action taken or not taken by any Executing Broker with respect to the undersigned or its transactions or accounts. (c) On the first business day following each transaction, Morgan Stanley shall send to the undersigned a notification of each trade placed with any Executing Broker based on information provided to Morgan Stanley by the undersigned. Any confirmations of trades or advices issued by Morgan Stanley as prime broker shall indicate the name of the Executing Broker involved and the other information required by the Prime Brokerage Regulations. If the undersigned has instructed the Executing Broker to send trade confirmations to the undersigned in care of Morgan Stanley, Morgan Stanley agrees that the confirmations will be available to the undersigned without charge upon request to Morgan Stanley. Reports of the execution of orders and statement of accounts of the undersigned shall be conclusive and binding if not objected to in writing (the former within five days and the latter within ten days) after Morgan Stanley's transmittal to the undersigned by mail, e-mail, facsimile, electronically or any other agreed means. Communications may be sent to the undersigned at the undersigned's address of record or in such other manner as the undersigned may hereinafter provide in writing. All communications sent to such address whether by mail, e- mail, facsimile, telegraph, messenger, electronic means or otherwise shall be deemed given to the undersigned personally as of the date sent, whether actually received or not. (d) The undersigned understands that transactions will be settled by Morgan Stanley only if: (i) sufficient funds or securities, as necessary, are maintained in an account with Morgan Stanley or if the undersigned has made other arrangements for settlement that are satisfactory to Morgan Stanley; (ii) the undersigned maintains, and has at the settlement of the transaction, at least the minimum net equity required by the Prime Brokerage Regulations in its account with Morgan Stanley and (iii) a condition does not exist that would require Morgan Stanley to disaffirm on a non-discretionary basis, as defined in the Securities Industry Association Form 150, paragraph 3. (e). Morgan Stanley's customer account records may reflect transactions as settled as of the projected settlement date (sometimes referred to as contractual settlement). Morgan Stanley does not guarantee settlement, however, and therefore reserves the right to reverse transaction settlement entries in the event of a settlement failure caused by events beyond Morgan Stanley's control. (e) The undersigned agrees to comply with Morgan Stanley's requirements relating to short sales, including the requirement that no short sale may be effected through an Executing Broker unless the undersigned has first confirmed with Morgan Stanley that the securities are available for delivery. Such confirmation does not guarantee that the securities will be available for delivery on settlement date or that the securities will be available to support a short sale for any particular period of time. Accordingly, the short sale may fail on settlement date or the undersigned may be asked to cover its short sale at anytime, and undersigned will be responsible for any Obligations that arise therefrom. (f) Morgan Stanley is authorized to try to resolve any unmatched trade reports received from any Executing Broker. However, the undersigned is responsible for the ultimate resolution of these trades and reports. Morgan Stanley shall have no responsibility or liability with respect to trade data not correctly transmitted to it on a timely basis by any person or entity, including but not limited to DTCC. (g) In the event the undersigned's account falls below the minimum net equity required by the Prime Brokerage Regulations, the undersigned authorizes Morgan Stanley to notify promptly all its Executing Brokers of such event. If the undersigned fails to bring such account into compliance with the minimum net equity, the undersigned further agrees that Morgan Stanley may, without notice to the undersigned, disaffirm, DK or decline to affirm, clear and settle any transaction effected by an Executing Broker on the undersigned's behalf. Except as provided in the following paragraph, the undersigned understands that if Morgan Stanley takes such action with respect to any transaction of the undersigned, Morgan Stanley shall do so for all transactions of the undersigned that day. In any such case, Morgan Stanley shall send a cancellation notification to the undersigned and the undersigned understands that the undersigned must settle outstanding trades directly with the relevant Executing Broker and authorizes Morgan Stanley to provide the Executing Broker with any information necessary to settle such trades. The undersigned further agrees that Morgan Stanley will not be bound to make any investigation into the facts surrounding any transaction to which the undersigned is a party and that, immediately upon notice to the undersigned and, if required, to the Executing Brokers, Morgan Stanley may cease acting as prime broker for the undersigned. (h) The undersigned hereby authorizes Morgan Stanley, if its account is managed on a discretionary basis by an SEC- or state-registered investment adviser, money manager or other person (an "Adviser"), to commingle its prime brokerage transactions with those of other accounts of its Adviser ("sub-accounts") for order placement and clearance in bulk in accordance with other instructions of the Adviser. The undersigned understands that no part of any transaction may be allocated to any sub-account where such sub-account's net equity is below the minimum levels established by the Prime Brokerage Regulations and that, should a such a net equity deficiency occur in any such sub-account, Morgan Stanley must disaffirm the entire transaction. The undersigned agrees that, should such an event occur, its Adviser may resubmit the bulk trade to the Executing Broker so as to exclude those securities which were originally allocated to the undersigned's sub-account or, if permissible, re-allocate the entire prime brokerage transaction to other sub-accounts. The undersigned understands that such reallocation must be communicated to Morgan Stanley within any required deadlines. Page 51 of 82 52 6. CURRENCY CONTRACTS. If an authorized representative of the undersigned initials the box entitled "Additional Provisions Related to Currency Contracts", which appears at the end of this Agreement, the undersigned, from time to time, may enter into spot and/or forward currency Contracts with Morgan Stanley in connection with the settlement of other Contracts or otherwise as the undersigned shall direct. The undersigned acknowledges that Morgan Stanley is under no obligation to enter into any currency Contracts with, or on behalf of, the undersigned, and further agrees to furnish to Morgan Stanley such documentation to indicate capacity and authority as Morgan Stanley may reasonably request prior to entering into any such Contracts. Each currency Contract entered into under this Agreement shall constitute an "FX Transaction", as such term is defined in the 1998 FX and Currency Option Definitions, including Annex A thereto, as published by the International Swaps and Derivatives Association, Inc., EMTA, and The Foreign Exchange Committee (as may be amended, the "FX Definitions"), and shall be subject to the terms in this Section 6 as well as those set forth in the "Additional Provisions Related to Currency Contracts" box. Any confirmation, whether created by an exchange of telexes, facsimiles, SWIFT messages, or electronic messages on an electronic messaging or matching system, between Morgan Stanley and the undersigned relating to an FX Transaction, whether or not it is expressed to be, shall constitute a confirmation and, unless Morgan Stanley and the undersigned expressly agree otherwise, will be deemed to incorporate the FX Definitions. Notwithstanding the foregoing, Morgan Stanley shall have the right to convert currencies in connection with the exercise of Morgan Stanley's rights under Section 8 below in such manner as it may determine. 7. SECURITY INTEREST AND LIEN. All Collateral shall be subject to a general lien and a continuing first priority perfected security interest for the discharge of all Obligations of the undersigned to Morgan Stanley, irrespective of whether or not Morgan Stanley has made advances in connection with such Collateral, the number of accounts the undersigned has with Morgan Stanley or which particular Morgan Stanley Entity holds such Collateral. The undersigned and Morgan Stanley each acknowledge and agree that each Morgan Stanley Entity which holds Collateral does so both for itself and also as an agent and bailee for all other Morgan Stanley Entities which may be secured parties under any Contract. The undersigned and Morgan Stanley agree that all Collateral held in or credited to any account will be treated as financial assets under Article 8 of the Uniform Commercial Code as in effect in the State of New York (the "UCC") and that any account maintained by the undersigned with any Morgan Stanley Entity shall be a securities account under Article 8 of the UCC. In the event of a breach or default by the undersigned, Morgan Stanley shall have in addition to the rights and remedies provided in this Agreement, all rights and remedies available to a secured creditor under the UCC and any other applicable law. All Collateral delivered to Morgan Stanley shall be free and clear of all prior liens, claims and encumbrances and the undersigned will not cause or allow any of the Collateral to be subject to any liens, security interests, mortgages or encumbrances of any nature other than the security interest created in Morgan Stanley's favor. Furthermore, Collateral consisting of securities shall be delivered in good deliverable form (or Morgan Stanley shall have the unrestricted power to place such securities in good deliverable form) in accordance with the requirements of the primary market for these securities. The undersigned shall execute such documents and take such other action as Morgan Stanley shall reasonably request in order to perfect its rights with respect to any such Collateral. In addition, the undersigned appoints Morgan Stanley as the undersigned's attorney-in-fact to act on the undersigned's behalf to sign, seal, execute and deliver all documents, and do all such acts as may be required, to realize upon any of Morgan Stanley's rights in the Collateral. 8. RIGHTS OF MORGAN STANLEY. Morgan Stanley is hereby authorized, in its discretion, to cancel any outstanding orders for the purchase or sale of any securities, currencies, commodities or other property or asset, or to sell any or all of the securities, currencies, commodities or other property or asset which may be in Morgan Stanley's possession or control (either individually or jointly with others), or to buy any securities, currencies, commodities or other property or asset of which any account of the undersigned may be short upon: (a) the undersigned's death or incompetency (if applicable); (b) a breach, repudiation or default by the undersigned of this Agreement or any other Contract; (c) any misrepresentation of any statement by the undersigned when made or deemed to be made or repeated, (d) the failure of the undersigned to fulfill or discharge any Obligation under this Agreement or any Contract, including the failure to make a payment on demand or to satisfy margin requirements,(e) the filing by or against the undersigned of a petition or other proceeding in bankruptcy, insolvency or for the appointment of a receiver, (f) the levy of an attachment against any property or asset in any account of the undersigned (g) the failure by the undersigned to give adequate assurance of due performance pursuant to this Agreement (h) should you deem it necessary for your protection, to cancel any outstanding orders for the purchase or sale of any securities or other property, or to sell any or all of the securities, currencies and commodities or other property which may be in your possession or control (either individually or jointly with others), or to buy in any securities, commodities or other property of which the account or accounts of the undersigned may be short. Such sale, purchase or cancellation may be made on any exchange or other market where such business is then usually transacted, or at public auction or private sale, without advertising or notice of the time or place of sale to the undersigned, and without prior tender, demand or call of any kind upon the undersigned, all of which are expressly waived. Morgan Stanley may purchase the whole or any part thereof free from any right of redemption and the undersigned shall remain liable to Morgan Stanley for any deficiency; it being understood that a prior tender, demand or call of any kind from Morgan Stanley, or prior notice from Morgan Stanley, of the time and place of such sale or purchase shall not be considered a waiver of Morgan Stanley's right to sell or buy any securities, commodities, or other property or asset held by Morgan Stanley, or which the undersigned may owe to Morgan Stanley. In addition, Morgan Stanley may at any time in connection with its rights under this Section 8 without prior notice to the undersigned apply or transfer any and all Collateral interchangeably between Morgan Stanley Entities in connection with accounts in which the undersigned has an interest. 9. ADEQUATE ASSURANCES. If at any time Morgan Stanley has reasonable grounds to doubt the undersigned's performance of any of the undersigned's Obligations, Morgan Stanley may demand, and the undersigned shall give within twenty-four hours or any reasonable shorter period of time Morgan Stanley specifies, adequate assurance of due performance. The giving of adequate assurance of performance may require the delivery by the undersigned to Morgan Stanley of additional Collateral. Any failure by the undersigned to give such adequate assurance of due performance shall constitute an independent, material default under the terms of all Contracts and Morgan Stanley may terminate, liquidate or accelerate any and all Contracts and exercise any right under or with respect to any security relating to any Contract and any right to net or set off payments which may arise under any Contract or other agreement or under applicable law. 10. EXPENSES AND OTHER CHARGES. The undersigned agrees to pay Morgan Stanley, or its designee, the following fees and charges with respect to trading activity: (a) Morgan Stanley's commissions, markups and other charges with respect to the execution of transactions, fails, buy-ins, conversion costs or the maintenance of positions or other related services; (b) any fees, fines, penalties or other charges imposed by any authority described in Section 2 of this Agreement or any court or authority of competent jurisdiction on any account opened or transaction executed for the undersigned, except any such charges as may be imposed due to Morgan Stanley's gross negligence or willful misconduct; with respect to fees or expenses related to securities lending and borrowing transactions: (a) upon demand, any debit balance owing with respect to any account of the undersigned, and interest and service charges on any such debit balance at the rates then charged by Morgan Stanley; and (b) any charges with respect to such transactions, including buy-ins, and applicable taxes or interest on any of the foregoing, together with Morgan Stanley's costs and reasonable attorney's fees incurred in collecting any such debit balance. 11. NETTING AND SET OFF RIGHTS. Morgan Stanley shall have the right, at any time and from time to time, to set off Morgan Stanley's Obligations owed to the undersigned against the Obligations of the undersigned to Morgan Stanley and to foreclose on any Collateral for the purpose of satisfying the Obligations of the undersigned to Morgan Stanley. The undersigned acknowledges that the fulfillment by Morgan Stanley of its Obligations to the undersigned is contingent upon there being no breach, repudiation, misrepresentation or default by the undersigned which has occurred and is continuing under this Agreement or any Contract. 12. MAINTENANCE OF THE UNDERSIGNED'S COLLATERAL. Subject to the applicable rules of the SEC and other competent authorities, the undersigned acknowledges that all Collateral now or hereafter in Morgan Stanley's possession or control (either individually or jointly with others) or deposited to secure the same, may from time to time and without further notice to the undersigned, be carried in Morgan Stanley's general accounts and may be pledged, hypothecated or rehypothecated, separately or in combination with property of others for the sum due to Morgan Stanley thereon or for a greater sum and without Morgan Stanley's retaining in its possession a like amount of similar property. Within the limits of applicable law, rule and regulation, Morgan Stanley is authorized to lend, to itself or to others Collateral it holds, together with all attendant rights of ownership (including the right to vote any securities). 13. FAILURE OF DELIVERY. If the undersigned directs Morgan Stanley to make any delivery of any security, commodity or other property or asset for its account for any reason and the undersigned fails to deliver that item to Morgan Stanley in the time, place and manner required, or if Morgan Stanley is unable to borrow the security, or in the case of a recall, Morgan Stanley is unable to re-borrow the security, the undersigned authorizes Morgan Stanley to borrow or purchase that item (or to be deemed to have make such purchase at the market value of the time of such deemed purchase) in such manner and time as Morgan Stanley in its sole discretion determines to be commercially reasonable. The undersigned agrees to be responsible for any consequent loss which Morgan Stanley may suffer and any related costs, premiums and losses to which Morgan Stanley may be subject. 14. CONFIRMATIONS, STATEMENTS AND OTHER COMMUNICATIONS. Execution reports and account statements shall be conclusive and binding if not objected to in writing (the former within five days and the latter within ten days) after transmittal by Morgan Stanley to the undersigned by mail or otherwise, including by electronic communication. Morgan Stanley may send communications to the undersigned's address of record or otherwise as provided to Morgan Stanley in writing. All communications, whether by mail, facsimile, telegraph, messenger, electronic means or otherwise, shall be deemed to have been given to the undersigned personally as of the date sent, whether actually received or not. 15. NO OBLIGATION. The undersigned agrees that Morgan Stanley shall be under no obligation whatsoever to enter into any Contract with, or on behalf of, the undersigned. 16. PROVISION OF INFORMATION. From time to time, Morgan Stanley may provide or make available to the undersigned, or to others acting with or on behalf of the undersigned,, research, opinions and other information, including portfolio analyses and reports, regarding securities, commodities, other financial assets, and market participants or events. The undersigned acknowledges that such information is provided, unless Morgan Stanley agrees in writing otherwise, without regard to the undersigned's personal financial situation, investment objectives or other circumstances and that the provision by Morgan Stanley of such information to the undersigned, whether sent directly or made readily accessible, and whether in writing, in electronic form or the subject of a taping, broadcast or narrowcast, does not imply that any asset or transaction discussed therein is suitable in light of the undersigned's particular circumstances. The undersigned agrees that no such information will be the primary basis of any investment decision by the undersigned. While all information produced by Morgan Stanley is based on sources believed to be reliable, the undersigned acknowledges that Morgan Stanley does not guarantee or warrant the accuracy, reliability or timeliness of such information. Further, all information and opinions are current only as of the time provided, and are subject to rapid change without prior notice. The undersigned also acknowledges that Morgan Stanley may take positions in financial instruments discussed in the information provided the undersigned (which positions may be inconsistent with the information provided), may execute transactions for others in those instruments and may provide investment banking and other services to the issuers of those instruments. From time to time, Morgan Stanley also may provide or make available to the undersigned, or to others acting with or on behalf of the undersigned, information regarding parties that might provide goods or services to the undersigned, including but not limited to fund administrators ("Vendors"). While all information produced by Morgan Stanley is based on sources believed to be reliable, the undersigned acknowledges that Morgan Stanley does not guarantee or warrant the accuracy, reliability or timeliness of such information, or the quality of goods or services provided by any Vendors. The undersigned agrees to indemnify and hold Morgan Stanley harmless from and against any and all losses, claims, damages and liabilities arising out of or relating to, actions or omissions by the Vendors, Morgan Stanley's provision or making available of such information, or the undersigned's selection or use of such Vendors. 17. USE OF THE INTERNET. Undersigned agrees that the Internet is not a secure network and that any communications transmitted over the Internet may, among other things, be intercepted or accessed by unauthorized or unintended parties and may not remain confidential, or that such transmissions may not arrive in a complete, unaltered or timely manner, and the undersigned assumes the risk arising therefrom. Page 52 of 82 53 18. RESOLUTION OF DISPUTES. ANY DISPUTE BETWEEN THE UNDERSIGNED AND A MORGAN STANLEY ENTITY THAT IS REGISTERED AS A BROKER-DEALER WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION ARISING OUT OF, RELATING TO OR IN CONNECTION WITH MORGAN STANLEY'S BUSINESS, ANY TRANSACTION BETWEEN US OR THIS AGREEMENT SHALL BE DETERMINED, AT THE ELECTION OF THE UNDERSIGNED, BY LITIGATION IN A COURT WITH PROPER JURISDICTION OR BY ARBITRATION. SHOULD THE UNDERSIGNED CHOOSE TO PROCEED BY ARBITRATION, UNDERSIGNED AND MORGAN STANLEY AGREE TO FOLLOW THE PROCEDURES, AND ABIDE BY THE REQUIREMENTS, LISTED IN SECTION 19 BELOW. SHOULD THE UNDERSIGNED CHOOSE TO PROCEED BY LITIGATION, UNDERSIGNED AND MORGAN STANLEY AGREE TO FOLLOW THE PROCEDURES, AND ABIDE BY THE REQUIREMENTS, LISTED IN SECTION 20 BELOW. 19. IF THE UNDERSIGNED CHOOSES ARBITRATION, THE UNDERSIGNED ACKNOWLEDGES THAT: ARBITRATION IS FINAL AND BINDING ON THE PARTIES. THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING THE RIGHT TO A JURY TRIAL. ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM COURT PROCEEDINGS. THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY THE ARBITRATOR IS STRICTLY LIMITED. THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO ARE OR WERE AFFILIATED WITH THE SECURITIES INDUSTRY. ANY ARBITRATION SHALL BE CONDUCTED ONLY BEFORE THE NEW YORK STOCK EXCHANGE, INC., THE AMERICAN STOCK EXCHANGE, INC., THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. OR ANY OTHER U.S. SELF-REGULATORY ORGANIZATION OF WHICH THE RELEVANT MORGAN STANLEY ENTITY IS A MEMBER. THE UNDERSIGNED HAS THE RIGHT TO ELECT ONE OF THE FOREGOING ORGANIZATIONS, BUT IF THE UNDERSIGNED FAILS TO MAKE SUCH ELECTION BY CERTIFIED LETTER ADDRESSED TO THE RELEVANT MORGAN STANLEY ENTITY AT ITS MAIN OFFICE BEFORE THE EXPIRATION OF TEN DAYS AFTER RECEIPT OF A WRITTEN REQUEST FROM MORGAN STANLEY TO MAKE SUCH ELECTION, MORGAN STANLEY MAY MAKE SUCH ELECTION. THE AWARD OF THE ARBITRATORS, OR THE MAJORITY OF THEM, SHALL BE FINAL AND JUDGMENT UPON THE AWARD RENDERED MAY BE ENTERED IN ANY STATE OR FEDERAL COURT HAVING JURISDICTION. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS CONSENT BY MORGAN STANLEY TO AN AWARD OF PUNITIVE DAMAGES. NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION, NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINSTANY PERSON WHO, IF THE UNDERSIGNED HAS INITIATED IN COURT A PUTATIVE CLASS ACTION, IS A MEMBER OF A PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED BY THE PUTATIVE CLASS ACTION UNTIL: (i) THE CLASS CERTIFICATION IS DENIED; (ii) THE CLASS IS DECERTIFIED; OR (iii) THE UNDERSIGNED IS EXCLUDED FROM THE CLASS BY THE COURT. SUCH FORBEARANCE TO ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY SUCH RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN. 20. IF THE UNDERSIGNED CHOOSES LITIGATION IN COURT. (A) UNLESS THE PARTIES OTHERWISE AGREE IN WRITING WHEN ANY DISPUTE ARISES, LITIGATION MUST BE INSTITUTED IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY. THE UNDERSIGNED IRREVOCABLY CONSENTS TO THE JURISDICTION OF EITHER OF THOSE COURTS AND (B) ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR ACTION IS HEREBY WAIVED BY ALL PARTIES TO THIS AGREEMENT. 21. APPLICABLE LAW AND ENFORCEABILITY. THIS AGREEMENT, ANY CONTRACT, THEIR ENFORCEMENT AND ANY DISPUTE BETWEEN US, WHETHER ARISING OUT OF OR RELATING TO THE UNDERSIGNED'S ACCOUNTS OR OTHERWISE, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCLUDING ITS CONFLICT OF LAW RULES. The provisions of this Agreement shall be continuous, shall cover individually and collectively all accounts which the undersigned may open or reopen with Morgan Stanley and shall inure to the benefit of Morgan Stanley's present and any successor organizations, irrespective of any change at any time in the personnel thereof and of the assigns of Morgan Stanley's present organizations or any successor organizations. This Agreement shall be binding upon the undersigned and the estate, executors, administrators, trustees, agents, officers, directors and assigns of the undersigned. 22. MODIFICATION AND WAIVER. The undersigned agrees that Morgan Stanley may modify the terms of this Agreement at any time upon prior written notice. If the modifications are unacceptable, the undersigned agrees to notify Morgan Stanley in writing within twenty days of the transmittal of such written notice. Morgan Stanley may then terminate any or all of the undersigned's accounts. The undersigned also agrees that any transactions or Contracts entered into after such notification shall be subject to the modifications. The undersigned may not modify this Agreement without Morgan Stanley's written consent. To the extent this Agreement is inconsistent with any other agreement between us, the provisions of this Agreement shall govern. Morgan Stanley's failure to enforce this Agreement or any of its terms, or any continued course of such conduct on Morgan Stanley's part, shall not be considered a waiver of any of Morgan Stanley's rights. 23. AUTHORIZED INSTRUCTIONS. The undersigned authorizes Morgan Stanley to accept instructions by telephone, tested telex, facsimile transmission, electronic mail, electronically, in writing or any other method that undersigned and Morgan Stanley may agree to use. The undersigned also agrees (i) to be bound by all instructions that Morgan Stanley believes are authorized, regardless of the means by which those instructions have been transmitted to Morgan Stanley, and (ii) that Morgan Stanley shall not be liable for any loss, cost or expense for acting upon instructions that Morgan Stanley believed to be authorized. 24. SEVERABILITY. If any provision of this Agreement is or becomes inconsistent with any applicable present or future law, rule or regulation, that provision will be deemed modified or, if necessary, rescinded in order to comply with the relevant law, rule or regulation. All other provisions of this Agreement will continue and remain in full force and effect. To the extent that this Agreement is not enforceable as to any Contract, this Agreement shall remain in full force and effect and be enforceable in accordance with its terms as to all other Contracts. To the extent this Agreement contains any provision which is inconsistent with provisions in any other Contract or agreement between us, or of which the undersigned is a beneficiary, the provisions of this Agreement shall control with respect to transactions contemplated hereunder. 25. LENDING OF SECURITIES. Within the limits of applicable law and regulation, until Morgan Stanley receives written notice of revocation from the undersigned, Morgan Stanley is hereby authorized to lend, to itself as brokers or to others, any securities held by Morgan Stanley on margin in its possession or control together with all attendant rights of ownership (including the right to vote the securities). 26. EXTRAORDINARY EVENTS. The undersigned agrees that Morgan Stanley will not be liable for any loss caused, directly or indirectly, by government restrictions, exchange or market rulings, suspension of trading, war (whether declared or undeclared), terrorist acts, insurrection, riots, fires, flooding, strikes, failure of utility services, accidents, adverse weather or other events of nature (including earthquakes, hurricanes and tornadoes) or other events or conditions beyond Morgan Stanley's control. In the event that any communications network, data processing system or computer system Morgan Stanley uses, regardless of ownership, is rendered inoperable, Morgan Stanley will not be liable to the undersigned for any loss, liability, claim, damage or expense resulting, directly or indirectly, from such inoperability. 27. LIMITATION OF LIABILITY. Morgan Stanley shall not be liable in connection with the execution, clearing, handling, purchasing or selling of securities, commodities or other property or assets, or other action, except in the event of gross negligence or willful misconduct on Morgan Stanley's part. The undersigned acknowledges that certain of its securities may be held outside the United States by unaffiliated, foreign, agent banks and depositories. Morgan Stanley shall not be liable to the undersigned for any loss, liability or expense incurred by the undersigned in connection with these arrangements except to the extent that any such loss, liability or expense results from Morgan Stanley's gross negligence or willful misconduct. 28. INDEMNIFICATION. In consideration of Morgan Stanley's carrying one or more accounts for the undersigned, the undersigned agrees to indemnify and hold Morgan Stanley harmless from and against any and all losses, claims, damages and liabilities arising out of or relating to the undersigned's accounts or in connection with the execution, purchase, sale, assignment, exercise, endorsement or handling of any transaction therein, or in connection with Morgan Stanley acting or declining to act as prime broker, except for actions taken or omitted to be taken by Morgan Stanley which are a result of, or constitute, willful misconduct or gross negligence. The undersigned also agrees that Morgan Stanley shall have no responsibility for the undersigned's compliance with any law or regulation and that Morgan Stanley shall not be liable for delays in the transmission of orders or instructions due to the breakdown or failure of transmission or communication facilities or any other cause beyond Morgan Stanley's control, including any mistake, error, negligence or misconduct of any exchange, association or clearing house or their respective officers, directors, employees or agents, nor any failure by any such exchange, association or clearing house to enforce its rules or regulations. 29. COSTS OF COLLECTION. To the extent permitted by the laws of the State of New York, the reasonable costs and expenses of collection of any debit balance and any unpaid deficiency in any account of the undersigned with Morgan Stanley, including but not limited to attorneys' fees incurred and payable or paid by Morgan Stanley, shall be payable to Morgan Stanley by the undersigned. Page 53 of 82 54 30. ASSIGNMENTS. Undersigned may not assign its rights or obligations under this Agreement without the express written consent of Morgan Stanley. 31. REPRESENTATIONS AND WARRANTIES. The undersigned hereby represents and warrants as of the date hereof, which representations and warranties will be deemed repeated on each date on which a transaction or Contract is effected for any of the undersigned's accounts, or any securities or other property if delivered to or from any such account, that: (a) The undersigned will at all times maintain such securities or other property or assets in the accounts of the undersigned for margin purposes, as is required by Morgan Stanley from time to time in Morgan Stanley's sole discretion; (b) The undersigned will not transact on the basis of, or in reliance on, material, non-public information. (c) Except as disclosed in writing to Morgan Stanley, the undersigned is not an employee of any exchange, or of any corporation of which any exchange owns a majority of the capital stock, or of a member of any exchange, or of a securities broker or dealer, or of a bank, trust company, insurance company or of any corporation, firm or individual engaged in the business of dealing, either as agent or as principal, in securities, bills of exchange, acceptances or other forms of commercial paper. (d) Except as disclosed to Morgan Stanley in writing, the undersigned continuously represents that it is not (a) an employee benefit plan (hereinafter an "ERISA Plan"), as defined in Section 3 (3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), subject to Title I of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended, or (b) a person acting on behalf of an ERISA Plan or (c) a person the assets of whom constitute assets of an ERISA Plan. The undersigned will provide notice to Morgan Stanley in the event that it is aware that it is in breach of any aspect of this representation or is aware that with the passing of time, giving of notice or expiry of any applicable grace period it will breach this representation. (e) Except as disclosed in writing to Morgan Stanley, the undersigned is not, and will not be, an affiliate (as defined in Rule 144(a)(1) under the Securities Act of 1933) of the issuer of any security held in the undersigned's accounts or sold to or through Morgan Stanley and undertakes to inform Morgan Stanley of any changes in such representation. (f) The undersigned has full power and authority to execute and deliver each Contract and to perform and observe the provisions thereof. (g) The execution, delivery and performance of each Contract has been or will be, prior to entering into the Contract, duly authorized by all necessary internal action and do not or will not contravene any requirement of law or any contractual restrictions or agreement binding on or affecting the undersigned or its assets. (h) Each Contract has been or will be at the time it is entered into properly executed and delivered by the undersigned and constitutes and will constitute a legal, valid and binding obligation enforceable in accordance with its terms. (i) The undersigned will promptly furnish to Morgan Stanley appropriate financial statements or similar documents upon Morgan Stanley's request and any other information as Morgan Stanley may reasonably request. Since the date of the most recent financial statements provided to Morgan Stanley, if any, there has been no material adverse change in the information set forth therein, and, if the undersigned is not a natural person, the business, financial condition, results, operations or prospects of the undersigned. (j) No one that is not a party to this Agreement has any interest in any account of the undersigned with Morgan Stanley. The undersigned owns the Collateral assigned, or to be assigned, to Morgan Stanley under each Contract free and clear of any lien, claims, encumbrances and transfer restrictions. Upon delivery of the Collateral to Morgan Stanley or upon the filing of appropriate financing statements, Morgan Stanley will have, as security for the Obligations of the undersigned, a perfected first priority security interest in the Collateral. No further filings or recordings with any governmental body, agency or official are necessary to create or perfect the security interest in the Collateral. (k) The undersigned represents to Morgan Stanley that all sales of securities (other than fully covered options) will be eligible to be marked "long" and that the undersigned will pay for all the securities purchased in full on trade date or such later date as Morgan Stanley may permit. Any sell order which the undersigned shall designate as being long is for securities then owned by the undersigned. If such securities cannot be delivered by Morgan Stanley from any account of the undersigned, the placing of such order shall constitute a representation by the undersigned that the undersigned will deliver them as soon as it is possible to do so, without undue inconvenience or expense to Morgan Stanley. (l) The undersigned acknowledges that it is acting as principal (and not as agent or in any other capacity, fiduciary or otherwise) for its own account, and it has made its own independent decisions to enter into this Agreement and Contracts and as to whether its activities and investments thereunder are appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of Morgan Stanley as investment advice or as a recommendation to enter into any particular transaction; it being understood that information and explanations related to the terms and conditions of a transaction shall not be considered investment advice or a recommendation to enter into a transaction. No communication (written or oral) received from Morgan Stanley shall be deemed to be an assurance or guarantee as to the expected results of a transaction. It is capable of assessing the merits of and understanding (on its own behalf or thorough independent professional advice), and understands and accepts, the terms, conditions and risks of its transactions, and is capable of assuming, and assumes, such risks. Morgan Stanley is not acting as a fiduciary for an adviser to it in any respect, and does not perform any analysis or make any judgment on any matters pertaining to the suitability of any order or offer any opinion, judgment or other type of information pertaining to the nature, value, potential or suitability of any particular transaction. Page 54 of 82 55 32. ACKNOWLEDGMENTS. The undersigned hereby consents and acknowledges that: (a) The undersigned has received, and agrees to be bound by, Morgan Stanley's Credit Charge and Margin Information Statement, which is incorporated herein by reference; (b) The undersigned has received a copy of this Agreement and has read and understood its terms; and (c) All conversations between us may be recorded on tape or otherwise. NOTICE: THIS AGREEMENT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE PROXY DISCLOSURE STATEMENT Under the rules of the Securities and Exchange Commission, we are required, upon registrant's request, to provide your name, address and security positions to issuers of securities that you own. The issuer may use this information exclusively for purposes of corporate communications. _____(Check) IF THIS BOX IS CHECKED, MORGAN STANLEY WILL DISCLOSE THE NAME AND ADDRESS INFORMATION FOR THE ACCOUNT ESTABLISHED BY THIS AGREEMENT TO ISSUERS OF SECURITIES WHICH I OWN. ELECTRONIC TRADE CONFIRMATIONS X___ (Check) Yes, we would, if available, like to receive electronic notification of our trade information rather than a mailed, hard copy confirmation. DATE: __5/30/02___ Financial Institution Partners, MORGAN STANLEY & L.P. CO. INCORPORATED, By Hovde Capital IV, LLC, general on its own behalf Partner, and on behalf of by its authorized signatory each Morgan Stanley Entity /s/ Richard J. Perry, Jr.__ Name: Richard J. Perry, Jr. Name: ___________ Date: 5/9/02 Date: ___________ Title: Manager Title: ___________ Page 55 of 82 56 EXHIBIT L THE BOND MARKET ASSOCIATION Master Securities Loan Agreement Between: Dated as of May 30, 2002 PRIME DEALER SERVICES CORP. and FINANCIAL INSTITUTION PARTNERS, L.P. This Agreement sets forth the terms and conditions under which one party ("Lender") may from time to time lend to the other party ("Borrower") certain securities against a pledge of collateral. Capitalized terms not otherwise defined herein shall have the meanings provided in Section 26. The parties hereto agree as follows: 1. Loans of Securities. 1.1. Subject to the terms and conditions of this Agreement, Borrower or Lender may, from time to time, orally seek to initiate a transaction in which Lender will lend securities to Borrower. Borrower and Lender shall agree orally on the terms of each Loan, including the issuer of the securities, the amount of securities to be lent, the basis of compensation, and the amount of Collateral to be transferred by Borrower, which terms may be amended during the Loan. 1.2. Notwithstanding any other provision in this Agreement regarding when a Loan commences, a Loan hereunder shall not occur until the Loaned Securities and the Collateral therefor have been transferred in accordance with Section 16. 1.3. WITHOUT WAIVING ANY RIGHTS GIVEN TO LENDER HEREUNDER, IT IS UNDERSTOOD AND AGREED THAT THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION ACT OF 1970 MAY NOT PROTECT LENDER WITH RESPECT TO LOANED SECURITIES HEREUNDER AND THAT, THEREFORE, THE COLLATERAL DELIVERED TO LENDER MAY CONSTITUTE THE ONLY SOURCE OF SATISFACTION OF BORROWER'S OBLIGATIONS IN THE EVENT BORROWER FAILS TO RETURN THE LOANED SECURITIES. 2. Transfer of Loaned Securities. 2.1. Unless otherwise agreed, Lender shall transfer Loaned Securities to Borrower hereunder on or before the Cutoff Time on the date agreed to by Borrower and Lender for the commencement of the Loan. 2.2. Unless otherwise agreed, Borrower shall provide Lender, in each Loan in which Lender is a Customer, with a schedule and receipt listing the Loaned Securities. Such schedule and receipt may consist of (a) a schedule provided to Borrower by Lender and executed and returned by Borrower when the Loaned Securities are received, (b) in the case of securities transferred through a Clearing Organization which provides transferors with a notice evidencing such transfer, such notice, or (c) a confirmation or other document provided to Lender by Borrower. 3. Collateral. 3.1. Unless otherwise agreed, Borrower shall, prior to or concurrently with the transfer of the Loaned Securities to Borrower, but in no case later than the close of business on the day of such transfer, transfer to Lender Collateral with a market value at least equal to a percentage of the market value of the Loaned Securities agreed to by Borrower and Lender (which shall be not less than 100% of the market value of the Loaned Securities) (the "Margin Percentage"). 3.2. The Collateral transferred by Borrower to Lender, as adjusted pursuant to Section 8, shall be security for Borrower's obligations in respect of such Loan and for any other obligations of Borrower to Lender. Borrower hereby pledges with, assigns to, and grants Lender a continuing first security interest in, and a lien upon, the Collateral, which shall attach upon the transfer of the Loaned Securities by Lender to Borrower and which shall cease upon the transfer of the Loaned Securities by Borrower to Lender. In addition to the rights and remedies given to Lender hereunder, Lender shall have all the rights and remedies of a secured party under the New York Uniform Commercial Code. It is understood that Lender may use or invest the Collateral, if such consists of cash, at its own risk, but that (unless Lender is a Broker-Dealer) Lender shall, during the term of any Loan hereunder, segregate Collateral from all securities or other assets in its possession. Lender may pledge, repledge, hypothecate, rehypothecate, lend, relend, sell or otherwise transfer the Collateral, or re-register Collateral evidenced by physical certificates in any name other than Borrower's, only (a) if Lender is Broker-Dealer or (b) in the event of a Default by Borrower. Segregation of Collateral may be accomplished by appropriate identification on the books and records of Lender if it is a "financial intermediary" or a "clearing corporation" within the meaning of the New York Uniform Commercial Code. 3.3. Except as otherwise provided herein, upon transfer to Lender of the Loaned Securities on the day a Loan is terminated pursuant to Section 5, Lender shall be obligated to transfer the Collateral (as adjusted pursuant to Section 8) to Borrower no later than the Cutoff Time on such day or, if such day is not a day on which a transfer of such Collateral may be effected under Section 16, the next day on which such a transfer may be effected. Page 56 of 82 57 3.4. If Borrower transfers Collateral to Lender, as provided in Section 3.1, and Lender does not transfer the Loaned Securities to Borrower, Borrower shall have the absolute right to the return of the Collateral; and if Lender transfers Loaned Securities to Borrower and Borrower does not transfer Collateral to Lender as provided in Section 3.1, Lender shall have the absolute right to the return of the Loaned Securities. 3.5. Borrower may, upon reasonable notice to Lender (taking into account all relevant factors, including industry practice, the type of Collateral to be substituted and the applicable method of transfer), substitute Collateral for Collateral securing any Loan or Loans; provided, however, that such substituted Collateral shall (a) consist only of cash, securities or other property that Borrower and Lender agreed would be acceptable Collateral prior to the Loan or Loans and (b) have a market value such that the aggregate market value of such substituted Collateral, together with all other Collateral for Loans in which the party substituting such Collateral is acting as Borrower, shall equal or exceed the agreed upon Margin Percentage of the market value of the Loaned Securities. Prior to the expiration of any letter of credit supporting Borrower's obligations hereunder, Borrower shall, no later than the Cutoff Time on the date such letter of credit expires, obtain an extension of the expiration of such letter of credit or replace such letter of credit by providing Lender with a substitute letter of credit in an amount at least equal to the amount of the letter of credit for which it is substituted. 3.6. Lender acknowledges that, in connection with Loans of Government Securities and as otherwise permitted by applicable law, some securities provided by Borrower as Collateral under this Agreement may not be guaranteed by the United States. 4. Fees for Loan. 4.1. Unless otherwise agreed, (a) Borrower agrees to pay Lender a loan fee (a "Loan Fee"), computed daily on each Loan to the extent such Loan is secured by Collateral other than cash, based on the aggregate par value (in the case of Loans of Government Securities) or the aggregate market value (in the case of all other Loans) of the Loaned Securities on the day for which such Loan Fee is being computed, and (b) Lender agrees to pay Borrower a fee or rebate (a "Cash Collateral Fee") on Collateral consisting of cash, computed daily based on the amount of cash held by Lender as Collateral, in the case of each of the Loan Fee and the Cash Collateral Fee at such rates as Borrower and Lender may agree. Except as Borrower and Lender may otherwise agree (in the event that cash Collateral is transferred by clearing house funds or otherwise), Loan Fees shall accrue from and including the date on which the Loaned Securities are transferred to Borrower to, but excluding, the date on which such Loaned Securities are returned to Lender, and Cash Collateral Fees shall accrue from and including the date on which the cash Collateral is transferred to Lender to, but excluding, the date on which such cash Collateral is returned to Borrower. 4.2. Unless otherwise agreed, any Loan Fee or Cash Collateral Fee payable hereunder shall be payable: (c) in the case of any Loan of securities other than Government Securities, upon the earlier of (i) the fifteenth day of the month following the calendar month in which such fee was incurred or (ii) the termination of all Loans hereunder (or, if a transfer of cash in accordance with Section 16 may not be effected on such fifteenth day or the day of such termination, as the case may be, the next day on which such a transfer may be effected); and (d) in the case of any Loan of Government Securities, upon the termination of such Loan. Notwithstanding the foregoing, all Loan Fees shall be payable by Borrower immediately in the event of a Default hereunder by Borrower and all Cash Collateral Fees shall be payable immediately by Lender in the event of a Default by Lender. 5. Termination of the Loan. Unless otherwise agreed, (a) Borrower may terminate a Loan on any Business Day by giving notice to Lender and transferring the Loaned Securities to Lender before the Cutoff Time on such Business Day, and (b) Lender may terminate a Loan on a termination date established by notice given to Borrower prior to the close of business on a Business Day. The termination date established by a termination notice given by Lender to Borrower shall be a date no earlier than the standard settlement date for trades of the Loaned Securities entered into on the date of such notice, which date shall, unless Borrower and Lender agree to the contrary, be (i) in the case of Government Securities, the next Business Day following such notice and (ii) in the case of all other securities, the third Business Day following such notice. Unless otherwise agreed, Borrower shall, on or before the Cutoff Time on the termination date of a Loan, transfer the Loaned Securities to Lender; provided, however, that upon such transfer by Borrower, Lender shall transfer the Collateral (as adjusted pursuant to Section 8) to Borrower in accordance with Section 3.3. 6. Rights of Borrower in Respect of the Loaned Securities. Except as set forth in Sections 7.1 and 7.2 and as otherwise agreed by Borrower and Lender, until Loaned Securities are required to be redelivered to Lender upon termination of a Loan hereunder, Borrower shall have all of the incidents of ownership of the Loaned Securities, including the right to transfer the Loaned Securities to others. Lender hereby waives the right to vote, or to provide any consent or to take any similar action with respect to, the Loaned Securities in the event that the record date or deadline for such vote, consent or other action falls during the term of the Loan. Page 57 of 82 58 7. Dividends, Distributions, Etc. 7.1. Lender shall be entitled to receive all distributions made on or in respect of the Loaned Securities which are not otherwise received by Lender, to the full extent it would be so entitled if the Loaned Securities had not been lent to Borrower, including, but not limited to: (a) cash and all other property, (b) stock dividends, (c) securities received as a result of split ups of the Loaned Securities and distributions in respect thereof, (d) interest payments, and (e) all rights to purchase additional securities. 7.2. Any cash distributions made on or in respect of the Loaned Securities, which Lender is entitled to receive pursuant to Section 7.1, shall be paid by the transfer of cash to Lender by Borrower, on the date any such distribution is paid, in an amount equal to such cash distribution, so long as Lender is not in Default at the time of such payment. Non-cash distributions received by Borrower shall be added to the Loaned Securities on the date of distribution and shall be considered such for all purposes, except that if the Loan has terminated, Borrower shall forthwith transfer the same to Lender. 7.3. Borrower shall be entitled to receive all cash distributions made on or in respect of non-cash Collateral which are not otherwise received by Borrower, to the full extent it would be so entitled if the Collateral had not been transferred to Lender. Any distributions of cash made on or in respect of such Collateral which Borrower is entitled to receive hereunder shall be paid by the transfer of cash to Borrower by Lender, on the date any such distribution is paid, in an amount equal to such cash distribution, so long as Borrower is not in Default at the time of such payment. 7.4. (a) Unless otherwise agreed, if (i) Borrower is required to make a payment (a "Borrower Payment") with respect to cash distributions on Loaned Securities under Sections 7.1 and 7.2 ("Securities Distributions"), or (ii) Lender is required to make a payment (a "Lender Payment") with respect to cash distributions on Collateral under Section 7.3 ("Collateral Distributions"), and (iii) Borrower or Lender, as the case may be ("Payor"), shall be required by law to collect any withholding or other tax, duty, fee, levy or charge required to be deducted or withheld from such Borrower Payment or Lender Payment ("Tax"), then Payor shall (subject to subsections (b) and (c) below), pay such additional amounts as may be necessary in order that the net amount of the Borrower Payment or Lender Payment received by the Lender or Borrower, as the case may be ("Payee"), after payment of such Tax equals the net amount of the Securities Distribution or Collateral Distribution that would have been received if such Securities Distribution or Collateral Distribution had been paid directly to the Payee. (b) No additional amounts shall be payable to a Payee under subsection (a) above to the extent that Tax would have been imposed on a Securities Distribution or Collateral Distribution paid directly to the Payee. (c) No additional amounts shall be payable to a Payee under subsection (a) above to the extent that such Payee is entitled to an exemption from, or reduction in the rate of, Tax on a Borrower Payment or Lender Payment subject to the provision of a certificate or other documentation, but has failed timely to provide such certificate or other documentation. (d) Each party hereto shall be deemed to represent that, as of the commencement of any Loan hereunder, no Tax would be imposed on any cash distribution paid to it with respect to (i) Loaned Securities subject to a Loan in which it is acting as Lender or (ii) Collateral for any Loan in which it is acting as Borrower, unless such party has given notice to the contrary to the other party hereto (which notice shall specify the rate at which such Tax would be imposed). Each party agrees to notify the other of any change that occurs during the term of a Loan in the rate of any Tax that would be imposed on any such cash distributions payable to it. 7.5. To the extent that, under the provisions of Sections 7.1 through 7.4 (a) a transfer of cash or other property by Borrower would give rise to a Margin Excess (as defined in Section 8.3 below) or (b) a transfer of cash or other property by Lender would give rise to a Margin Deficit (as defined in Section 8.2 below), Borrower or Lender (as the case may be) shall not be obligated to make such transfer of cash or other property in accordance with such Sections, but shall in lieu of such transfer immediately credit the amounts that would have been transferable under such Sections to the account of Lender or Borrower (as the case may be). 8. Mark to Market. 8.1. Borrower shall daily mark to market any Loan hereunder and in the event that at the close of trading on any Business Day the market value of the Collateral for any Loan to Borrower shall be less than 100% of the market value of all the outstanding Loaned Securities subject to such Loan, Borrower shall transfer additional Collateral no later than the close of the next Business Day so that the market value of such additional Collateral, when added to the market value of the other Collateral for such Loan, shall equal 100% of the market value of the Loaned Securities. 8.2. In addition to any rights of Lender under Section 8.1, in the event that at the close of trading on any Business Day the aggregate market value of all Collateral for Loans by Lender shall be less than the Margin Percentage of the market value of all the outstanding Loaned Securities subject to such Loans (a "Margin Deficit"), Lender may, by notice to Borrower, demand that Borrower transfer to Lender additional Collateral so that the market value of such additional Collateral, when added to the market value of all other Collateral for such Loans, shall equal or exceed the agreed upon Margin Percentage of the market value of the Loaned Securities. Unless otherwise agreed, such transfer is to be made no later than the close of the next Business Day following the day of Lender's notice to Borrower. 8.3. In the event that at the close of trading on any Business Day the market value of all Collateral for Loans to Borrower shall be greater than the Margin Percentage of the market value of all the outstanding Loaned Securities subject to such Loans (a "Margin Excess"), Borrower may, by notice to Lender, demand that Lender transfer to Borrower such amount of the Collateral selected by Borrower so that the market value of the Collateral for such Loans, after deduction of such amounts, shall thereupon not exceed the Margin Percentage of the market value of the Loaned Securities. Unless otherwise agreed, such transfer is to be made no later than the close of the next Business Day following the day of Borrower's notice to Lender. 8.4. Borrower and Lender may agree, with respect to one or more Loans hereunder, to mark the values to market pursuant to Sections 8.2 and 8.3 by separately valuing the Loaned Securities lent and the Collateral given in respect thereof on a Loan-by-Loan basis. 8.5. Borrower and Lender may agree, with respect to any or all Loans hereunder, that the respective rights of Lender and Borrower under Sections 8.2 and 8.3 may be exercised only where a Margin Excess or Margin Deficit exceeds a specified dollar amount or a specified percentage of the market value of the Loaned Securities under such Loans (which amount or percentage shall be agreed to by Borrower and Lender prior to entering into any such Loans). Page 58 of 82 59 9. Representations. Each party to this Agreement hereby makes the following representations and warranties, which shall continue during the term of any Loan hereunder: 9.1. Each party hereto represents and warrants that (a) it has the power to execute and deliver this Agreement, to enter into the Loans contemplated hereby and to perform its obligations hereunder; (b) it has taken all necessary action to authorize such execution, delivery and performance; and (c) this Agreement constitutes a legal, valid and binding obligation enforceable against it in accordance with its terms. 9.2. Each party hereto represents and warrants that the execution, delivery and performance by it of this Agreement and each Loan hereunder will at all times comply with all applicable laws and regulations including those of applicable regulatory and self-regulatory organizations. 9.3. Each party hereto represents and warrants that it has not relied on the other for any tax or accounting advice concerning this Agreement and that it has made its own determination as to the tax and accounting treatment of any Loan and any dividends, remuneration or other funds received hereunder. 9.4. Borrower represents and warrants that it is acting for its own account. Lender represents and warrants that it is acting for its own account unless it expressly specifies otherwise in writing and complies with Section 10.3(b). 9.5. Borrower represents and warrants that (a) it has, or will have at the time of transfer of any Collateral, the right to grant a first security interest therein subject to the terms and conditions hereof, and (b) it (or the person to whom it relends the Loaned Securities) is borrowing or will borrow the Loaned Securities (except for Loaned Securities that qualify as "exempted securities" under Regulation T of the Board of Governors of the Federal Reserve System) for the purpose of making delivery of such securities in the case of short sales, failure to receive securities required to be delivered, or as otherwise permitted pursuant to Regulation T as in effect from time to time. 9.6. Lender represents and warrants that it has, or will have at the time of transfer of any Loaned Securities, the right to transfer the Loaned Securities subject to the terms and conditions hereof. 10. Covenants. 10.1. Each party hereto agrees and acknowledges that (a) each Loan hereunder is a "securities contract," as such term is defined in Section 741(7) of Title 11 of the United States Code (the "Bankruptcy Code"), (b) each and every transfer of funds, securities and other property under this Agreement and each Loan hereunder is a "settlement payment" or a "margin payment," as such terms are used in Sections 362(b)(6) and 546(e) of the Bankruptcy Code, and (c) the rights given to Borrower and Lender hereunder upon a Default by the other constitute the right to cause the liquidation of a securities contract and the right to set off mutual debts and claims in connection with a securities contract, as such terms are used in Sections 555 and 362(b)(6) of the Bankruptcy Code. Each party hereto further agrees and acknowledges that if a party hereto is an "insured depository institution," as such term is defined in the Federal Deposit Insurance Act, as amended ("FDIA"), then each Loan hereunder is a "securities contract" and "qualified financial contract," as such terms are defined in the FDIA and any rules, orders or policy statements thereunder. 10.2. Borrower agrees to be liable as principal with respect to its obligations hereunder. 10.3. Lender agrees either (a) to be liable as principal with respect to its obligations hereunder or (b) to execute and comply fully with the provisions of Annex I (the terms and conditions of which Annex are incorporated herein and made a part hereof). 10.4. Promptly upon (and in any event within seven (7) Business Days after) demand by Lender, Borrower shall furnish Lender with Borrower's most recent publicly-available financial statements and any other financial statements mutually agreed upon by Borrower and Lender. Unless otherwise agreed, if Borrower is subject to the requirements of Rule 17a-5(c) under the Exchange Act, it may satisfy the requirements of this Section by furnishing Lender with its most recent statement required to be furnished to customers pursuant to such Rule. 10.5. Except to the extent required by applicable law or regulation or as otherwise agreed, Borrower and Lender agree that Loans hereunder shall in no event be "exchange contracts" for purposes of the rules of any securities exchange and that Loans hereunder shall not be governed by the buy-in or similar rules of any such exchange, registered national securities or other self- regulatory organization. 11. Events of Default. All Loans hereunder may, at the option of the nondefaulting party exercised by notice to the defaulting party (which option shall be deemed to have been exercised even if no notice is given, immediately upon the occurrence of an event specified in subsection 11.5 below), be terminated immediately upon the occurrence of any one or more of the following events (individually, a "Default"): 11.1. if any Loaned Securities shall not be transferred to Lender upon termination of the Loan as required by Section 5; 11.2. if any Collateral shall not be transferred to Borrower upon termination of the Loan as required by Sections 3.3 and 5; 11.3. if either party shall fail to transfer Collateral as required by Section 8; 11.4. if either party (i) shall fail to transfer to the other party amounts in respect of distributions required to be transferred by Section 7, (ii) shall have received notice of such failure from the non-defaulting party, and (iii) shall not have cured such default by the Cutoff Time on the next day after such notice on which a transfer of cash may be effected in accordance with Section 16; 11.5. if (i) either party shall commence as debtor any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law, or seek the appointment of a receiver, conservator, trustee, custodian or similar official for such party or any substantial part of its property, (ii) any such case or proceeding shall be commenced against either party, or another shall seek such an appointment, or any application shall be filed against either party for a protective decree under the provisions of the Securities Investor Protection Act of 1970, which (A) is consented to or not timely contested by such party, (B) results in the entry of an order for relief, such an appointment, the issuance of such a protective decree or the entry of an order having a similar effect, or (C) is not dismissed within 15 days, (iii) either party shall make a general assignment for the benefit of creditors, or (iv) either party shall admit in writing its inability to pay its debts as they become due; 11.6. if either party shall have been suspended or expelled from membership or participation in any national securities exchange or registered national securities association of which it is a member or other self-regulatory organization to whose rules it is subject or if it is suspended from dealing in securities by any federal or state government agency thereof; 11.7. if either party shall have its license, charter, or other authorization necessary to conduct a material portion of its business withdrawn, suspended or revoked by any applicable federal or state government or agency thereof; Page 59 of 82 60 11.8. if any representation made by either party in respect of this Agreement or any Loan or Loans hereunder shall be incorrect or untrue in any material respect during the term of any Loan hereunder; 11.9. if either party notifies the other, orally or in writing, of its inability to or its intention not to perform its obligations hereunder or otherwise disaffirms, rejects or repudiates any of its obligations hereunder; or 11.10. if either party (i) shall fail to perform any material obligation under this Agreement not specifically set forth in clauses 11.1 through 11.9 above, including but not limited to the payment of fees as required by Section 4, and the payment of transfer taxes as required by Section 14, (ii) shall have received notice of such failure from the non-defaulting party and (iii) shall not have cured such failure by the Cutoff Time on the next day after such notice on which a transfer of cash may be effected under Section 16. 12. Lender's Remedies. Upon the occurrence of a Default under Section 11 entitling Lender to terminate all Loans hereunder, Lender shall have the right (without further notice to Borrower), in addition to any other remedies provided herein or under applicable law, (a) to purchase a like amount of Loaned Securities ("Replacement Securities") in the principal market for such securities in a commercially reasonable manner, (b) to sell any Collateral in the principal market for such Collateral in a commercially reasonable manner and (c) to apply and set off the Collateral and any proceeds thereof (including any amounts drawn under a letter of credit supporting any Loan) against the payment of the purchase price for such Replacement Securities and any amounts due to Lender under Sections 4, 7, 14 and 17. In the event Lender shall exercise such rights, Borrower's obligation to return a like amount of the Loaned Securities shall terminate. Lender may similarly apply the Collateral and any proceeds thereof to any obligation of Borrower under this Agreement, including Borrower's obligations with respect to distributions paid to Borrower (and not forwarded to Lender) in respect of Loaned Securities. In the event that (i) the purchase price of Replacement Securities (plus all other amounts, if any, due to Lender hereunder) exceeds (ii) the amount of the Collateral, Borrower shall be liable to Lender for the amount of such excess together with interest thereon at a rate equal to (A) in the case of purchases of Foreign Securities, LIBOR, (B) in the case of purchases of any other securities (or other amounts, if any, due to Lender hereunder), the Federal Funds Rate or (C) such other rate as may be specified in Schedule B, in each case as such rate fluctuates from day to day, from the date of such purchase until the date of payment of such excess. As security for Borrower's obligation to pay such excess, Lender shall have, and Borrower hereby grants, a security interest in any property of Borrower then held by or for Lender and a right of setoff with respect to such property and any other amount payable by Lender to Borrower. The purchase price of Replacement Securities purchased under this Section 12 shall include, and the proceeds of any sale of Collateral shall be determined after deduction of, broker's fees and commissions and all other reasonable costs, fees and expenses related to such purchase or sale (as the case may be). In the event Lender exercises its rights under this Section 12, Lender may elect in its sole discretion, in lieu of purchasing all or a portion of the Replacement Securities or selling all or a portion of the Collateral, to be deemed to have made, respectively, such purchase of Replacement Securities or sale of Collateral for an amount equal to the price therefor on the date of such exercise obtained from a generally recognized source or the most recent closing bid quotation from such a source. Subject to Section 19, upon the satisfaction of all obligations hereunder, any remaining Collateral shall be returned to Borrower. 13. Borrower's Remedies. Upon the occurrence of a Default under Section 11 entitling Borrower to terminate all Loans hereunder, Borrower shall have the right (without further notice to Lender), in addition to any other remedies provided herein or under applicable law, (a) to purchase a like amount of Collateral ("Replacement Collateral") in the principal market for such Collateral in a commercially reasonable manner, (b) to sell a like amount of the Loaned Securities in the principal market for such securities in a commercially reasonable manner and (c) to apply and set off the Loaned Securities and any proceeds thereof against (i) the payment of the purchase price for such Replacement Collateral (ii) Lender's obligation to return any cash or other Collateral and (iii) any amounts due to Borrower under Sections 4, 7 and 17. In such event, Borrower may treat the Loaned Securities as its own and Lender's obligation to return a like amount of the Collateral shall terminate; provided, however, that Lender shall immediately return any letters of credit supporting any Loan upon the exercise or deemed exercise by Borrower of its termination rights under Section 11. Borrower may similarly apply the Loaned Securities and any proceeds thereof to any other obligation of Lender under this Agreement, including Lender's obligations with respect to distributions paid to Lender (and not forwarded to Borrower) in respect of Collateral. In the event that (i) the sales price received from such Loaned Securities is less than (ii) the purchase price of Replacement Collateral (plus the amount of any cash or other Collateral not replaced by Borrower and all other amounts, if any, due to Borrower hereunder), Lender shall be liable to Borrower for the amount of any such deficiency, together with interest on such amounts at a rate equal to (A) in the case of Collateral consisting of Foreign Securities, LIBOR, (B) in the case of Collateral consisting of any other securities (or other amounts due, if any, to Borrower hereunder), the Federal Funds Rate or (C) such other rate as may be specified in Schedule B in each case as such rate fluctuates from day to day, from the date of such sale until the date of payment of such deficiency. As security for Lender's obligation to pay such deficiency, Borrower shall have and Lender hereby grants, a security interest in any property of Lender then held by or for Borrower and a right of setoff with respect to such property and any other amount payable by Borrower to Lender. The purchase price of any Replacement Collateral purchased under this Section 13 shall include, and the proceeds of any sale of Loaned Securities shall be determined after deduction of, broker's fees and commissions and all other reasonable costs, fees and expenses related to such purchase or sale (as the case may be). In the event Borrower exercises its rights under this Section 13, Borrower may elect in its sole discretion, in lieu of purchasing all or a portion of the Replacement Collateral or selling all or a portion of the Loaned Securities, to be deemed to have made, respectively, such purchase of Replacement Collateral or sale of Loaned Securities for an amount equal to the price therefor on the date of such exercise obtained from a generally recognized source or the most recent closing bid quotation from such a source. Subject to Section 19, upon the satisfaction of all Lender's obligations hereunder, any remaining Loaned Securities (or remaining cash proceeds thereof) shall be returned to Lender. Without limiting the foregoing, the parties hereto agree that they intend the Loans hereunder to be loans of securities. If, however, any Loan is deemed to be a loan of money by Borrower to Lender, then Borrower shall have, and Lender shall be deemed to have granted, a security interest in the Loaned Securities and the proceeds thereof. 14. Transfer Taxes. All transfer taxes with respect to the transfer of the Loaned Securities by Lender to Borrower and by Borrower to Lender upon termination of the Loan shall be paid by Borrower. 15. Market Value. 15.1. Unless otherwise agreed, if the principal market for the securities to be valued is a national securities exchange in the United States, their market value shall be determined by their last sale price on such exchange on the preceding Business Day or, if there was no sale on that day, by the last sale price on the next preceding Business Day on which there was a sale on such exchange, all as quoted on the Consolidated Tape or, if not quoted on the Consolidated Tape, then as quoted by such exchange. 15.2. Except as provided in Section 15.3 or 15.4 or as otherwise agreed, if the principal market for the securities to be valued is the over-the-counter market, their market value shall be determined as follows. If the securities are quoted on the National Association of Securities Dealers Automated Quotations System ("NASDAQ"), their market value shall be the closing sale price on NASDAQ on the preceding Business Day or, if the securities are issues for which last sale prices are not quoted on NASDAQ, the closing bid price on such day. If the securities to be valued are not quoted on NASDAQ, their market value shall be the highest bid quotation as quoted in any of The Wall Street Journal, the National Quotation Bureau pink sheets, the Salomon Brothers quotation sheets, quotations sheets of registered market makers and, if necessary, dealers' telephone quotations on the preceding Business Day. In each case, if the relevant quotation did not exist on such day, then the relevant quotation on the next preceding Business Day in which there was such a quotation shall be the market value. Page 60 of 82 61 15.3. Unless otherwise agreed, if the securities to be valued are Government Securities, their market value shall be the average of the bid and ask prices as quoted on Prophesy at 3:30 P.M. New York time on the Business Day preceding the date on which such determination is made. If the securities are not so quoted on such day, their market value shall be determined as of the next preceding Business Day on which they were so quoted. If the securities to be valued are Government Securities that are not quoted on Prophesy, their market value shall be determined as of the close of business on the preceding Business Day in accordance with market practice for such securities. 15.4. Unless otherwise agreed, if the securities to be valued are Foreign Securities, their market value shall be determined as of the close of business on the preceding Business Day in accordance with market practice in the principal market for such securities. 15.5. Unless otherwise agreed, the market value of a letter of credit shall be the undrawn amount thereof. 15.6. All determinations of market value under Sections 15.1, 15.2, 15.3, and 15.4 shall include, where applicable, accrued interest to the extent not already included therein (other than any interest transferred to the other party pursuant to Section 7), unless market practice with respect to the valuation of such securities in connection with securities loans is to the contrary. All determinations of market value that are required to be made at the close of trading on any Business Day pursuant to Section 8 or otherwise hereunder shall be made as if being determined at the commencement of trading on the next Business Day. The determinations of market value provided for in this Section 15 shall apply for all purposes under this Agreement, except for purposes of Sections 12 and 13. 16. Transfers. 16.1. All transfers of securities hereunder shall by be (a) physical delivery of certificates representing such securities together with duly executed stock and bond transfer powers, as the case may be, with signatures guaranteed by a bank or a member firm of the New York Stock Exchange, Inc., (b) transfer on the books of a Clearing Organization, or (c) such other means as Borrower and Lender may agree. In every transfer of securities hereunder, the transferor shall take all steps necessary (i) to effect a "transfer" under Section 8-313 of the New York Uniform Commercial Code or, where applicable, under any U.S. federal regulation governing transfers of securities and (ii) to provide the transferee with comparable rights under any applicable foreign law or regulation. 16.2. All transfers of cash Collateral hereunder shall be by (a) wire transfer in immediately available, freely transferable funds or (b) such other means as Borrower and Lender may agree. All other transfers of cash hereunder shall be made in accordance with the preceding sentence or by delivery of a certified or official bank check representing next-day New York Clearing House Funds. 16.3. All transfers of a letter of credit from Borrower to Lender shall be made by physical delivery to Lender of an irrevocable letter of credit issued by a "bank" as defined in Section 3(a)(6)(A)-(C) of the Exchange Act. Transfer of a letter of credit from Lender to Borrower shall be made by causing such letter of credit to be returned or by causing the amount of such letter of credit to be reduced to the amount required after such transfer. 16.4. A transfer of securities, cash or letters of credit may be effected under this Section 16 on any day except (a) a day on which the transferee is closed for business at its address set forth in Schedule A hereto or (b) a day on which a Clearing Organization or wire transfer system is closed, if the facilities of such Clearing Organization or wire transfer system are required to effect such transfer. 17. Contractual Currency. 17.1. Borrower and Lender agree that: (a) any payment in respect of a distribution under Section 7 shall be made in the currency in which the underlying distribution of cash was made; (b) any return of cash shall be made in the currency in which the underlying transfer of cash was made and (c) any other payment of cash in connection with a Loan under this Agreement shall be in the currency agreed upon by Borrower and Lender in connection with such Loan (the currency established under clause (a), (b) or (c) hereinafter referred to as the "Contractual Currency"). Notwithstanding the foregoing, the payee of any such payment may, at its option, accept tender thereof in any other currency; provided, however, that, to the extent permitted by applicable law, the obligation of the payor to make such payment will be discharged only to the extent of the amount of Contractual Currency that such payee may, consistent with normal banking procedures, purchase with such other currency (after deduction of any premium and costs of exchange) on the banking day next succeeding its receipt of such currency. 17.2. If for any reason the amount in the Contractual Currency received under Section 17.1, including amounts received after conversion of any recovery under any judgment or order expressed in a currency other than the Contractual Currency, falls short of the amount in the Contractual Currency due in respect of this Agreement, the party required to make the payment will (unless a Default has occurred and such party is the non-defaulting party) as a separate and independent obligation and to the extent permitted by applicable law, immediately pay such additional amount in the Contractual Currency as may be necessary to compensate for the shortfall. 17.3. If for any reason the amount in the Contractual Currency received under Section 17.1 exceeds the amount in the Contractual Currency due in respect of this Agreement, then the party receiving the payment will (unless a Default has occurred and such party is the non-defaulting party) refund promptly the amount of such excess. 18. [INTENTIONALLY DELETED] 19. Single Agreement. Borrower and Lender acknowledge that, and have entered into this Agreement in reliance on the fact that, all Loans hereunder constitute a single business and contractual relationship and have been entered into in consideration of each other. Accordingly, Borrower and Lender hereby agree that payments, deliveries and other transfers made by either of them in respect of any Loan shall be deemed to have been made in consideration of payments, deliveries and other transfers in respect of any other Loan hereunder, and the obligations to make any such payment, deliveries and other transfers may be applied against each other and netted. In addition, Borrower and Lender acknowledge that, and have entered into this Agreement in reliance on the fact that, all Loans hereunder have been entered into in consideration of each other. Accordingly, Borrower and Lender hereby agree that (a) each shall perform all of its obligations in respect of each Loan hereunder, and that a default in the performance of any such obligation by Borrower or by Lender (the "Defaulting Party") in any Loan hereunder shall constitute a default by the Defaulting Party under all such Loans hereunder, and (b) the non-defaulting party shall be entitled to set off claims and apply property held by it in respect of any Loan hereunder against obligations owing to it in respect of any other Loan with the Defaulting Party. 20. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF. 21. Waiver. The failure of a party to this Agreement to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. All waivers in respect of a Default must be in writing. 22. Remedies. All remedies hereunder and all obligations with respect to any Loan shall survive the termination of the relevant Loan, return of Loaned Securities or Collateral and termination of this Agreement. Page 61 of 82 62 23. Notices and Other Communications. Unless another address is specified in writing by the respective party to whom any notice or other communication is to be given hereunder, all such notices or communications shall be in writing or confirmed in writing and delivered at the respective addresses set forth in Schedule A attached hereto. All notices shall be effective upon actual receipt, provided, however, that if any notice shall be received by a party on a day on which such party is not open for business at its office located at the address set forth in Schedule A, such notice shall be deemed to have been received by such party at the opening of business on the next day on which such party is open for business at such address. 24. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. 24.1. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK CITY, AND ANY APPELLATE COURT FROM ANY SUCH COURT, SOLELY FOR THE PURPOSE OF ANY SUIT, ACTION OR PROCEEDING BROUGHT TO ENFORCE ITS OBLIGATIONS HEREUNDER OR RELATING IN ANY WAY TO THIS AGREEMENT OR ANY LOAN HEREUNDER AND (B) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT AND ANY RIGHT OF JURISDICTION ON ACCOUNT OF ITS PLACE OF RESIDENCE OR DOMICILE. 24.2. EACH PARTY HERETO IRREVOCABLY WAIVES ANY RIGHT THAT IT MAY HAVE TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 25. Miscellaneous. This Agreement supersedes any other agreement between the parties hereto concerning loans of securities between Borrower and Lender. This Agreement shall not be assigned by either party without the prior written consent of the other party and any attempted assignment without such consent shall be null and void. Subject to the foregoing, this Agreement shall be binding upon and shall ensure to the benefit of Borrower and Lender and their respective heirs, representatives, successors and assigns. This Agreement may be terminated by either party upon written notice to the other, subject only to fulfillment of any obligations then outstanding. This Agreement shall not be modified, except by an instrument in writing signed by the party against whom enforcement is sought. The parties hereto acknowledge and agree that, in connection with this Agreement and each Loan hereunder, time is of the essence. Each provision and agreement herein shall be treated as separate and independent from any other provision herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement. 26. Definitions. For the purposes hereof: 26.1. "Broker-Dealer" shall mean any person that is a broker (including a municipal securities broker), dealer, municipal securities dealer, government securities broker or government securities dealer as defined in the Exchange Act, regardless of whether the activities of such person are conducted in the United States or otherwise require such person to register with the Securities and Exchange Commission or other regulatory body. 26.2. "Business Day" shall mean, with respect to any Loan hereunder, a day on which regular trading occurs in the principal market for the Loaned Securities subject to such Loan, provided, however, that for purposes of Section 15, such term shall mean a day on which regular trading occurs in the principal market for the securities whose value is being determined. Notwithstanding the foregoing, (i) for purposes of Section 8, "Business Day" shall mean any day on which regular trading occurs in the principal market for any Loaned Securities or for any securities Collateral under any outstanding Loan hereunder and "next Business Day" shall mean the next day on which a transfer of Collateral may be effected in accordance with Section 16; and (ii) in no event shall a Saturday or Sunday be considered a Business Day. 26.3. "Clearing Organization" shall mean The Depository Trust Company, or, if agreed to by Borrower and Lender, such other clearing agency at which Borrower (or Borrower's agent) and Lender (or Lender's agent) maintain accounts, or a book-entry system maintained by a Federal Reserve Bank. 26.4. "Collateral" shall mean, whether now owned or hereafter acquired and to the extent permitted by applicable law, (a) any property which Borrower and Lender agree shall be acceptable collateral prior to the Loan and which is transferred to Lender pursuant to Section 3 or 8 (including as collateral, for definitional purposes, any letters of credit mutually acceptable to Lender and Borrower), (b) any property substituted therefor pursuant to Section 3.5, (c) all accounts in which such property is deposited and all securities and the like in which any cash collateral is invested or reinvested, and (d) any proceeds of any of the foregoing. For purposes of return of Collateral by Lender or purchase or sale of securities pursuant to Section 12 or 13, such term shall include securities of the same issuer, class and quantity as the Collateral initially transferred by Borrower to Lender. 26.5. "Customer" shall mean any person that is a customer of Borrower under Rule 15c3-3 under the Exchange Act or any comparable regulation of the Secretary of the Treasury under Section 15C of the Exchange Act (to the extent that Borrower is subject to such Rule or comparable regulation). 26.6. "Cutoff Time" shall mean a time on a Business Day by which a transfer of cash, securities or other property must be made by Borrower or Lender to the other, as shall be agreed by Borrower and Lender in Schedule B or otherwise orally or in writing or, in the absence of any such agreement, as shall be determined in accordance with market practice. 26.7. "Default" shall have the meaning assigned in Section 11. 26.8. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 26.9. "Federal Funds Rate" shall mean the rate of interest (expressed as an annual rate), as published in Federal Reserve Statistical Release H.15(519) or any publication substituted therefor, charged for federal funds (dollars in immediately available funds borrowed by banks on an overnight unsecured basis) on that day or, if that day is not a banking day in New York City, on the next preceding banking day. 26.10. "Foreign Securities" shall mean, unless otherwise agreed, securities that are principally cleared and settled outside the United States. 26.11. "Government Securities" shall mean government securities as defined in Section 3(a)(42)(A)-(C) of the Exchange Act. 26.12. "LIBOR" shall mean for any date, the offered rate for deposits in U.S. dollars for a period of three months which appears on the Reuters Screen LIBO page as of 11:00 A.M., London time, on such date (or, if at least two such rates appear, the arithmetic mean of such rates). 26.13. "Loan" shall mean a loan of securities hereunder. 26.14. "Loaned Security" shall mean any security which is a security as defined in the Exchange Act, transferred in a Loan hereunder until such security (or an identical security) is transferred back to Lender hereunder, except that, if any new or different security shall be exchanged for any Loaned Security by recapitalization, merger, consolidation or other corporate action, such new or different security shall, effective upon such exchange, be deemed to become a Loaned Security in substitution for the former Loaned Security for which such exchange is made. For purposes of return of Loaned Securities by Borrower or purchase or sale of securities pursuant to Section 12 or 13, such term shall include securities of the same issuer, class and quantity as the Loaned Securities, as adjusted pursuant to the preceding sentence. 26.15. "Plan" shall mean (a) any "employee benefit plan" as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 which is subject to Part 4 of Subtitle B of Title I of such Act; (b) any "plan" as defined in Section 4975(e)(1) of the Internal Revenue Code of 1986 or (c) any entity the assets of which are deemed to be assets of any such "employee benefit plan" or "plan" by reason of the Department of Labor's plan asset regulation, 29 C.F.R. Section 2510.3-101. Prime Dealer Services FINANCIAL INSTITUTION Corp. PARTNERS, L.P. BY: HOVDE CAPITAL IV, LLC, GENERAL PARTNER By: By: /s/ Richard J. Perry, Jr. Name: [SIG_NAME1] Name: Richard J. Perry, Jr. [SIG Title: [SIG_POSITION1] Title: Manager Page 62 of 82 63 Schedule A NAMES AND ADDRESSES FOR COMMUNICATIONS Prime Dealer Services Corp. 1221 Avenue of the Americas New York, NY 10020 Attention: Ms. Kathleen Mooney, Vice President Tel.: (212) 762-5101 Fax: (212) 762-9519 Financial Institution Partners, L.P. 1824 Jefferson Place, NW Washington, DC 20036 Attention: Jeffrey Kashdin Tel.: (202) 822-8117 Fax: (202) 822-8365 Schedule B DEFINED TERMS AND SUPPLEMENTAL PROVISIONS Cutoff Time(s) ANNEX II Supplemental Terms and Conditions The following Supplemental Terms and Conditions (the "Supplement") supplement and amend the Master Securities Loan Agreement (the "Agreement") dated between Prime Dealer Services Corp. and : 1. The phrase "and for any other obligation of Borrower to Lender" shall be deleted from the first sentence of Section 3.2 of the Agreement. The words "securities intermediary" shall be inserted after the words "financial intermediary" in the last sentence of Section 3.2. 2. The term "substituted Collateral" in first sentence of Section 3.5 of the Agreement after the phrases "provided however that such" and "the aggregate market value of such", shall be changed to "substitute Collateral" in both instances, and the phrase "(or other Collateral acceptable to Lender)" shall be inserted after the words "substitute letter of credit" in the last sentence of such Section. 3. The phrase "market or" shall be inserted after the words "based on the aggregate" in first sentence of Section 4.1 of the Agreement and the phrase "as agreed" shall be inserted after the words "par value" in the first sentence of such Section. 4. The word "such" shall be inserted after the phrase "by the transfer of" in the first sentence of Section 7.2 of the Agreement and the phrase "in an amount equal to such cash distribution," shall be deleted from the first sentence of such Section. 5. The word "such" shall be inserted after the phrase "by the transfer of" in second sentence of Section 7.3 of the Agreement and the phrase, "in an amount equal to such cash distribution," shall be deleted from the second sentence of such Section. 6. The sentence "Non-cash distributions received by Lender shall be added to the Collateral on the date of distribution and shall be considered such for all purposes, except that if the Loan has terminated, Lender shall forthwith transfer the same to Borrower," shall be inserted at the end of Section 7.3 of the Agreement. 7. The phrase "Subject to Section 7.4 (d)," shall be inserted at the beginning of Section 9.3 of the Agreement. 8. The phrase "and such suspension or expulsion shall have a material effect on such parties' ability to perform hereunder" shall be inserted at the end of Section 11(f) of the Agreement. 9. Unless otherwise agreed, the Margin Percentage shall be as follows: (a)US and Canadian exchange traded equity securities: 100% (b)Non-US and Non-Canadian exchange traded equity securities: 100% (c) All fixed income securities: 100% 10. When Borrower gives other than cash Collateral, Fees shall be calculated in accordance with Section 4, except that Fees shall be based on the Market Value of Loaned Securities plus accrued and unpaid interest to the extent accrued interest is not included in the market value of the Loaned Securities. 11. The second sentence in Section 5 ("Termination of Loan") is hereby deleted and restated as follows: "The termination date established by a termination notice given by Lender to Borrower shall be a date no earlier than the standard settlement date for trades of the Loaned Securities entered into on the date of such notice, which date shall, unless Borrower and Lender agree to the contrary, be (i) in the case of Government Securities, the next Business Day following such notice and (ii) in the case of all other securities, the number of Business Days in the standard securities settlement cycle in the United States as defined in Rule 15c6-1 under the Securities Exchange Act of 1934 (currently three days) following such notice." 12. THIS SUPPLEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF. Except as otherwise set forth herein, the Agreement shall remain unchanged and in full force and effect. From and after the date hereof, any reference to the Agreement shall be a reference to the Agreement as amended hereby. Prime Dealer Services FINANCIAL INSTITUTION Corp. PARTNERS, L.P. BY: HOVDE CAPITAL IV, LLC, GENERAL PARTNER By: By: /s/ Richard J. Perry, Jr. Name: [SIG_NAME1] Name: Richard J. Perry, Jr. [SIG Title: [SIG_POSITION1] Title: Manager Page 63 of 82 64 ANNEX III Supplemental Terms and Conditions The following Supplemental Terms and Conditions (the "Supplement") supplement and amend the Master Securities Loan Agreement (the "Agreement") dated as of between Prime Dealer Services Corp. ("Lender") and ("Borrower") unless otherwise defined in Section 11.1 below, capitalized terms used herein shall have the meanings assigned in the Agreement. 1. Collateral and Mark to Market. 1.1 Notwithstanding anything to the contrary in the Agreement, in connection with any Loan in which Lender is not a Customer, Borrower and Lender may agree, as provided in Section 10.2 hereof, that the market value of the Collateral, if any, transferred by Borrower to Lender, upon initial transfer and for purposes of any mark to market or similar provision of the Agreement, shall be equal to a percentage of the market value of the Loaned Securities that is less than 100%; provided, however, that in the event that the writing or other confirmation evidencing such agreement does not set out such percentage with respect to any such Loan, such percentage shall not, for purposes of any mark to market or similar provision of the Agreement, be less than the percentage that is obtained by dividing (i) the market value of the Collateral required to be transferred by Borrower to Lender with respect to such Loan at the commencement of the Loan by (ii) the market value of the Loaned Securities required to be transferred by Lender to Borrower at the commencement of the Loan. 1.2 The Collateral transferred by Borrower to Lender under the Agreement, as well as any other property transferred by Borrower to Lender or any of Lender's Affiliates as security for any other obligations or liabilities of Borrower to Lender or any of Lender's Affiliates, shall be security for any and all obligations or liabilities of Borrower with respect to the Agreement, for any Loan and for any other agreement or transaction between Lender or any Affiliate of Lender and Borrower, now existing or hereafter arising. 2. Permitted Purpose. 2.1 Notwithstanding anything to the contrary in the Agreement, with respect to any Loan of an Equity Security, Borrower and Lender may agree, as provided in Section 10.2 hereof, that Borrower shall not be deemed to have made any representation or warranty to Lender regarding the purpose for which Borrower is borrowing or will borrow the Loaned Security, including without limitation any representation or warranty regarding the use of the Loaned Security by it (or the person to whom it relends the Loaned Security) for the purpose of making delivery of such security in the case of a short sale, failure to receive securities required to be delivered or otherwise. By entering into any such agreement, Lender shall be deemed to have represented and warranted to Borrower (which representation and warranty shall be deemed to be repeated on each day during the term of such Loan) that Lender is either (i) an "exempted borrower" within the meaning of Regulation T or (ii) a member of a national securities exchange or a broker or dealer registered with the Securities and Exchange Commission that is entering into such Loan to finance its activities as a market maker or an underwriter. 2.2 Notwithstanding anything to the contrary in the Agreement, with respect to any Loan of a security that is not an Equity Security, Borrower shall not be deemed to have made any representation or warranty to Lender regarding the purpose for which Borrower is borrowing or will borrow the Loaned Security, including without limitation any representation or warranty regarding the use of the Loaned Security by it (or the person to whom it relends the Loaned Security) for the purpose of making delivery of such security in the case of a short sale, failure to receive securities required to be delivered or otherwise. 3. Termination and Rights in Respect of Collateral. Notwithstanding anything to the contrary in the Agreement, if under the Agreement Lender may pledge, repledge, hypothecate, rehypothecate, lend, relend, sell or otherwise transfer the Collateral, or re-register Collateral evidenced by physical certificates in any name other than Borrower's: (c) Borrower may not terminate a Loan, if the Collateral for such Loan includes securities other than Government Securities, except on a termination date established by notice given to Lender prior to the close of business on a Business Day; the date established by such termination notice given by Borrower to Lender shall be a date no earlier than the standard settlement date for trades of such Collateral entered into on the date of such notice, which date shall, unless Borrower and Lender agree to the contrary, be the third Business Day following such notice; and (d) Borrower waives the right to vote, or to provide any consent or take any similar action with respect to, any Collateral in the event that the record date or deadline for such vote, consent or other action falls during the term of a Loan and such Collateral is not required to be returned to Borrower pursuant to any substitution, mark to market or similar provision of the Agreement. 4. Dividends, Distributions, Etc. 4.1 Notwithstanding anything to the contrary in the Agreement, Borrower shall be entitled to receive all distributions made on or in respect of Collateral transferred to Lender which are not otherwise received by Borrower, to the full extent it would be so entitled if such Collateral had not been transferred to Lender, including, but not limited to (a) cash and all other property, (b) stock dividends, (c) securities received as a result of split ups of such Collateral and distributions in respect thereof, (d) interest payments, and (e) all rights to purchase additional securities. 4.2 Any cash distributions made on or in respect of Collateral, which Borrower is entitled to receive pursuant to Section 4.1 hereof, shall be treated in accordance with the Agreement. Non-cash distributions received by Lender shall be added to the Collateral on the date of distribution and shall be considered such for all purposes, except that if each Loan secured by such Collateral has terminated, Lender shall forthwith transfer the same to Borrower. 5. Transfer. Notwithstanding anything to the contrary in the Agreement, all transfers by either Borrower or Lender of Loaned Securities or Collateral consisting of "financial assets" (within the meaning of the New York Uniform Commercial Code) thereunder shall be by (a) in the case of certificated securities, physical delivery of certificates representing such securities together with duly executed stock and bond transfer powers, as the case may be, with signatures guaranteed by a bank or a member firm of the New York Stock Exchange, Inc., (b) registration of an uncertificated security in the transferee's name by the issuer of such uncertificated security, (c) the crediting by a securities intermediary of such financial assets to the transferee's securities account maintained with such securities intermediary, or (d) such other means as Borrower and Lender may agree. For the avoidance of doubt, the parties agree and acknowledge that the term "securities", as used in the Agreement and herein, shall include any "security entitlements" with respect to such securities (within the meaning of the New York Uniform Commercial Code), and that the terms "financial intermediary" and "clearing corporation", as used in the Agreement, shall mean a "securities intermediary" (within the meaning of the New York Uniform Commercial Code). 6. Representations and Warranties. Each of the parties hereto (and, in the case of a party acting as agent in accordance with the terms of the Agreement, each of its principals) represents and warrants that (a) it has full power and authority to execute and deliver this Supplement and to enter into any Loan contemplated by the Agreement and to perform its obligations thereunder, as supplemented or amended herein; (b) it has taken all necessary action to authorize such execution, delivery and performance; and (c) this Supplement constitutes a legal, valid and binding obligation, enforceable against it in accordance with its terms and the terms of the Agreement. 8. Events of Default. 7.1 In addition to any events of default set forth in the Agreement, the occurrence of one or more of the following shall constitute an event of default under the Agreement: (i) if either party fails to perform any covenant or obligation required to be performed by it hereunder or if any representation made by either party in respect hereof shall be incorrect or untrue in any material respect during the term of any Loan under the Agreement, as supplemented or amended herein; provided, however, that to the extent that Section 4 hereof supplements and amends any provisions in the Agreement governing the rights of Borrower in respect of distributions on Collateral, any such failure under Section 4 hereof shall constitute an event of default only after the expiration of the notice period, if any, specified in the Agreement with respect to the occurrence of an event of default for such a failure; or (ii) (ii) if Borrower defaults or fails to perform with respect to any indebtedness to Lender or any Affiliate of Lender or any other agreement or transaction between Lender or any Affiliate of Lender and Borrower, now or hereafter arising. 7.2 In addition to the remedies in events of default set forth in the Agreement, an event of default with respect to Borrower under the Agreement shall constitute an event of default (howsoever described) under all other agreements and transactions between Lender or any Affiliate of Lender and Borrower and, upon any event of default with respect to Borrower, Lender and any Affiliate of Lender shall be entitled to: (iii) cancel and otherwise liquidate and close out any transaction under any other agreement or transaction between Lender or any Affiliate of Lender and Borrower without prior notice to Borrower or any other party, whereupon Borrower, as the case may be, shall be liable to Lender or the Affiliate of Lender, as the case may be, for any resulting loss, damage, cost and expense, including loss equal to the amount Lender or the Affiliate of Lender, as the case may be, would have to pay to enter into replacement transactions (whether or not Lender or the Affiliate of Lender, as the case may be, enters into any such replacement transactions) and any damages resulting to Lender or any Affiliate of Lender from entering into or terminating hedge transactions with respect thereto; and (iv) set off any obligation under any transaction under any agreement between Lender or any Affiliate of Lender and Borrower (including any Loan under this Agreement), including any payment or delivery obligation, of Lender or the Affiliate of Lender, as the case may be, to Borrower against any obligation under any transaction under any agreement between Lender and Borrower (including any Loan under this Agreement), including any payment or delivery obligation, of Borrower to Lender or the Affiliate of Lender, as the case may be. 8. Transfer Taxes. Unless otherwise agreed, all transfer taxes with respect to the transfer of Collateral by Borrower to Lender and by Lender to Borrower upon termination of the Loan or pursuant to any substitution, mark to market or similar provision of the Agreement shall be paid by Borrower. 9. APPLICABLE LAW. THIS SUPPLEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF. Page 64 of 82 65 10. Definitions and Interpretations. 10.2 Notwithstanding anything to the contrary in the Agreement, the following terms shall have the following meanings for purposes of this Supplement. "Affiliate" shall mean, in relation to any person, (i) any entity controlled, directly or indirectly, by the person; (ii) any entity that controls, directly or indirectly, the person; or (iii) any entity directly or indirectly under common control with the person. For purposes of this definition, "control" of any entity or person means ownership of a majority of the voting power of the entity or person. "Collateral" shall have the meaning specified in the Agreement, except that, if any new or different security shall be exchanged for any Collateral by recapitalization, merger, consolidation or other corporate action, such new or different security shall, effective upon such exchange, be deemed to become Collateral in substitution for the former Collateral for which such exchange is made. "Customer" shall mean any person that is a customer of Borrower under Rule 15c3- 3 under the Exchange Act or any comparable regulation of the Secretary of the Treasury under Section 15C of the Exchange Act (to the extent that Borrower is subject to such rule or comparable regulation). "Equity Security" shall mean any security other than a "non-equity security", as defined in Regulation T. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Government Securities" shall mean "government securities" as defined in Section 3(a)(42)(A)-(C) of the Exchange Act. "Plan" shall mean (i) any "employee benefit plan" as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 which is subject to Part 4 of Subtitle B of Title I of such Act; (ii) any "plan" as defined in Section 4975(e)(1) of the Internal Revenue Code of 1986; or (iii) any entity the assets of which are deemed to be assets of any such "employee benefit plan" or "plan" by reason of the Department of Labor's plan asset regulation, 29 C.F.R. Section 2510.3-101. "Regulation T" shall mean Regulation T of the Board of Governors of the Federal Reserve System, as in effect from time to time. 10.2 Any agreement between the parties pursuant to Section 1.1 or Section 2.1 shall be made (i) in writing, (ii) orally, if confirmed promptly in writing or through any system that compares Loans and in which Borrower and Lender are participants, or (iii) in such other manner as may be agreed by the parties in writing. 11. Notwithstanding anything contained in the Agreement, Lender and Borrower agree that in effecting Loans transfers between Lender's Account and Borrower's Account are intended to be, and shall be deemed to be, simultaneous. Notwithstanding the foregoing, if Lender has failed to deliver the Loaned Securities to Borrower's Account or Borrower has failed to deliver the Collateral to Lender's Account by the applicable Cutoff time for such Loan, then no Loan shall have occurred and Borrower (in the case of Lender's failure to deliver) or Lender (in the case of Borrower's failure to deliver), shall have the absolute right to the return of the Collateral or Loaned Securities, as the case may be. Until such Collateral or Loaned Securities are redelivered to either Borrower (in the case of Lender's failure to deliver) or Lender (in the case of Borrower's failure to deliver), the party that failed to deliver such Collateral or Loaned Securities shall hold such securities in escrow for the other party and shall be required to pay to such party interest based on the market value of the Collateral or Loaned Securities, as the case may be, (i) in the case of foreign securities, at the LIBOR rate and (ii) in the case of any other securities, at the Federal Funds Rate, for each day that such redelivery obligation remains outstanding. For purposes of this Paragraph 11, the following terms shall have the following meanings: "Lender's Account" shall mean the account maintained by Lender for the deposit of Collateral with respect to each Loan and, for such purposes, Lender's Account shall be deemed to be a "securities account" within the meaning of the New York Uniform Commercial Code. For purposes of this Amendment, Lender's Account shall include any account for the deposit of cash in connection therewith. "Borrower's Account" shall mean the account maintained by Borrower for the deposit of Loaned Securities with respect to each Loan and, for such purposes, Borrower's Account shall be deemed to be a "securities account" within the meaning of the New York Uniform Commercial Code. For purposes of this Amendment, Borrower's Account shall include any account for the deposit of cash in connection therewith. Except as otherwise set forth herein, the Agreement shall remain unmodified and in full force and effect. From and after the date hereof, any reference to the Agreement shall be a reference to the Agreement as supplemented and amended hereby. Prime Dealer Services FINANCIAL INSTITUTION Corp. PARTNERS, L.P. BY: HOVDE CAPITAL IV, LLC, GENERAL PARTNER By: By: /s/ Richard J. Perry, Jr. Name: [SIG_NAME1] Name: Richard J. Perry, Jr. [SIG Title: [SIG_POSITION1] Title: Manager Page 65 of 82 66 EXHIBIT M Account Control Agreement, dated as of , among Morgan Stanley & Co., Incorporated ("MS&Co."), Prime Dealer Services Corp. ("PDS") and ("Customer"). Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned in the Master Securities Loan Agreement dated (the "Master Securities Loan Agreement"). PREAMBLE: 1. MS&Co., in its capacity as securities intermediary ("Intermediary") has established one or more securities accounts in the name of (the "Account"). 2. PDS may, from time to time, lend securities to Customer pursuant to the Master Securities Loan Agreement. 3. Customer wishes to provide for the Account and all or a portion of the assets credited to the Account (the "Additional Collateral"), in addition to any other Collateral transferred by Customer to PDS, to serve as Collateral in connection with one or more Loans or other obligations under the Master Securities Loan Agreement. 4. PDS, Customer and MS&Co. (in its individual capacity and as Intermediary) are entering into this Agreement to provide for the control of the Additional Collateral by PDS and to perfect the security interest of PDS therein. TERMS: Section 1. The Account. All parties agree that the Account is a "securities account" within the meaning of Article 8 of the Uniform Commercial Code of the State of New York (the "UCC") and that all property held by Intermediary in the Account will be treated as financial assets under the UCC. Intermediary will not agree with any third party to comply with entitlement orders or other directions concerning the Collateral held in the Account originated by any third party without the prior written consent of PDS and Customer. Section 2. Collateral. Notwithstanding anything to the contrary in the Master Securities Loan Agreement, in addition to Collateral transferred by Customer to PDS pursuant to Section 16 of the Master Securities Loan Agreement and Section 5 of Annex III thereto, Additional Collateral held by MS&Co. in the Account shall constitute Collateral for purposes of the Master Securities Loan Agreement, subject to the security interest and all other rights of PDS as Lender thereunder. In such event, notwithstanding anything to the contrary in the Master Securities Loan Agreement, such Additional Collateral shall, except as provided below in Section 7, be deemed to be "transferred" by Borrower to Lender for purposes of the Master Securities Loan Agreement concurrently with the transfer of such other Collateral by Borrower to Lender and shall be deemed to be "transferred" by Lender to Borrower for purposes of the Master Securities Loan Agreement concurrently with the transfer of such other Collateral by Lender to Borrower. Section 3. Subordination of Lien. The security interest in favor of PDS in the Account and financial assets credited thereto is subject and subordinate to the prior payment of all indebtedness of Customer to Intermediary, as such may exist from time to time, including fees and commissions, and to any security interest or lien in favor of Intermediary on the Account and to any right of Intermediary to close out open positions in the Account. In no event will PDS have any right to exercise any remedies in respect of the Account until such time as all Customer's obligations to Intermediary have been satisfied in full. Section 4. Control. Subject to the provisions of Section 3, Intermediary will comply with entitlement orders originated by PDS concerning the Account and any financial assets credited thereto without further consent by Customer. Subject to the foregoing, Intermediary may also comply with entitlement orders or other directions concerning the Account originated by Customer, or its authorized representatives, until such time as PDS delivers a written notice to Intermediary that PDS is thereby exercising exclusive control over the Account. Such notice may be referred to herein as the "Notice of Exclusive Control." After Intermediary receives the Notice of Exclusive Control and has had reasonable opportunity to comply, it will cease complying with entitlement orders or other directions concerning the Account originated by Customer or its representatives. Section 5. Amendment. This Agreement may not be amended or otherwise modified except in writing signed by all the parties hereto. Section 6. Choice of Law. This Agreement (including without limitation all rights and obligations with respect to the Account) shall be governed by and construed in accordance with the law of the State of New York. Section 7. Interpretation. Dividends and other distributions on Additional Collateral shall be credited to the Account in accordance with the customary practices of Intermediary, and PDS shall have no obligation with respect thereto under Section 7.3 of the Master Securities Loan Agreement and Sections 4.1 and 4.2 of Annex II thereto. SIGNATURES: PRIME DEALER SERVICES CORP. By: ___________________ Name: [SIG_NAME1] Title: FINANCIAL INSTITUTION PARTNERS, L.P. BY: HOVDE CAPITAL IV, LLC, GENERAL PARTNER By: /s/ Richard J. Perry, Jr.__ Name: Richard J. Perry, Jr. [SIG Title: Manager MORGAN STANLEY & CO. INCORPORATED, [INDIVIDUALLY AND AS INTERMEDIARY] By: ________ Name: [SIG_NAME1] Title: Page 66 of 82 67 EXHIBIT N MORGAN STANLEY & CO. INCORPORATED OPTION AGREEMENT The following sets forth our respective rights and obligations arising from your handling, purchasing, selling, assigning, exercising and/or endorsing puts and/or calls, or variations thereof ("options"), for my account. In connection with such transactions for my account, I agree and represent as follows: 1. I have received from you, have read and understand the brochure entitled "Characteristics and Risks of Standardized Options" and/or other appropriate Options Disclosure Documents ("ODD"), including but not limited to the information therein regarding position limits and exercise limits, the purposes and risks of transactions in options and the secondary market in options. 2. I agree to pay to you, as you direct, (a) all applicable transaction fees, charges and premiums, (b) the amount of any trading loss that you may incur from options transactions executed by you on my behalf and (c) any debit balance owing with respect to my account(s), and interest and service charges on any such debit balances at the rates then charged by you, together with your costs and reasonable attorney's fees incurred in collecting any such debit balance. 3. In effecting options transactions through you, I am aware of and agree to be bound by the rules of The Options Clearing Corporation ("OCC"), the Securities and Exchange Commission, the various securities exchanges and securities associations, the Board of Governors of the Federal Reserve Board and other securities self regulatory organizations having jurisdiction over options transactions. Without limiting the foregoing, I agree not to violate, either acting by myself (through you as broker or otherwise) or in concert with others, directly or indirectly, the rules of such organizations regarding position limits and/or exercise limits. I further expressly authorize you to liquidate any of my options positions without notice to me and without my consent, in your sole and absolute discretion, if and when my open positions exceed applicable position limits so as to reduce such open positions to a level that is in compliance with such limits or if I fail to fulfill any of my obligations hereunder or under any other agreement with you. I will bear and be solely responsible for any losses associated with such a reduction or liquidation. 4. I agree that you shall not be liable for delays in the transmission of orders or instructions due to the breakdown or failure of transmission or communication facilities or any other cause beyond your control, including any mistake, error, negligence or misconduct of a securities exchange, securities association or clearing house or their officers, directors, employees or agents. 5. (a) I understand that I am fully responsible for taking action to exercise my option contracts. I hereby agree to waive any and all claims for damages or loss, which I might have against you because an option was not exercised. I understand that my options will become worthless if I do not deliver instructions to exercise by your established exercise cut-off times, which may be different than exercise cut-off times established by the exchanges, markets and clearing houses. I am aware that the OCC has established thresholds for equity and index option contracts whereby all expiring contracts at or above the appropriate threshold will be automatically exercised unless you, at my direction, instruct the OCC otherwise. (b) I understand that you randomly assign exercise notices to all customers. All American-style (an option that may be exercised at any time) short option positions are subject to assignment at any time, including positions established on the same day that exercises are assigned, while European-style (an option that may be exercised only on a specified exercise date) short option positions are only subject to assignment upon expiration. Exercise assignment notices are allocated randomly from among all of your customers' short option positions, which are subject to exercise. A more detailed description of Morgan Stanley & Co. Incorporated's Random Method for allocating assignment notices is available from your account representative upon request. 6. I represent and warrant to you that (i) options trading is suitable for me in light of my investment objectives, financial situation, needs, experience and knowledge, (ii) I am aware and acknowledge that options trading may be highly speculative and involves a high degree of risk (including without limitation the risks described in the ODD) and that on certain trading days, trading may cease with a resultant financial disadvantage to me, (iii) I am willing and able to evaluate, carry and bear the financial risks attendant to options trading, and (iv) I understand that you are relying upon these representations and warranties and the financial and other information that I have provided or will provide to you. I will promptly notify you of any significant changes that take place in any information furnished to you, including my investment objectives, financial situation and/or needs, prior to effecting any additional opening purchase or sale transactions. 7. CHOICE OF DISPUTE RESOLUTION. ANY DISPUTE THAT I MAY HAVE WITH YOU ARISING OUT OF, RELATING TO OR IN CONNECTION WITH, YOUR BUSINESS, ANY TRANSACTION BETWEEN US, OR THIS AGREEMENT, SHALL BE DETERMINED BY ARBITRATION OR LITIGATION IN COURT AT MY ELECTION. REGARDLESS OF WHETHER I CHOOSE ARBITRATION OR LITIGATION, WE AGREE TO FOLLOW THE PROCEDURES, AND ABIDE BY THE REQUIREMENTS, LISTED BELOW: 8. ARBITRATION: - - ARBITRATION IS FINAL AND BINDING ON THE PARTIES. - - THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING THE RIGHT TO A JURY TRIAL. - - PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM COURT PROCEEDINGS. - - THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY THE ARBITRATORS IS ST RICTLY LIMITED. - - THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY. ANY ARBITRATION SHALL BE CONDUCTED IN NEW YORK AND ONLY BEFORE THE NEW YORK STOCK EXCHANGE, INC., THE AMERICAN STOCK EXCHANGE, INC., THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC., OR ANY OTHER SELF-REGULATORY ORGANIZATION OF WHICH YOU ARE A MEMBER. I HAVE THE RIGHT TO ELECT ONE OF THE FOREGOING ORGANIZATIONS, BUT IF I FAIL TO MAKE SUCH ELECTION BY CERTIFIED LETTER ADDRESSED TO YOU AT YOUR MAIN OFFICE BEFORE THE EXPIRATION OF TEN DAYS AFTER RECEIPT OF A WRITTEN REQUEST FROM YOU TO MAKE SUCH ELECTION THEN YOU MAY MAKE SUCH ELECTION. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS CONSENT BY YOU TO AN AWARD OF PUNITIVE DAMAGES. THE AWARD OF THE ARBITRATORS, OR THE MAJORITY OF THEM, SHALL BE FINAL, AND JUDGMENT UPON THE AWARD RENDERED MAY BE ENTERED IN ANY COURT, STATE OR FEDERAL, HAVING JURISDICTION. NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION, NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINST ANY PERSON WHO HAS INITIATED IN COURT A PUTATIVE CLASS ACTION; WHO IS A MEMBER OF A PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED BY THE PUTATIVE CLASS ACTION UNTIL: (i) THE CLASS CERTIFICATION IS DENIED; (ii) THE CLASS IS DECERTIFIED; OR (iii) THE CUSTOMER IS EXCLUDED FROM THE CLASS BY THE COURT. SUCH FORBEARANCE TO ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OR ANY RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN. 9. LITIGATION IN COURT. (A) UNLESS THE PARTIES OTHERWISE AGREE IN WRITING WHEN ANY DISPUTE ARISES, ANY LITIGATION MUST BE INSTITUTED IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR THE SUPREME COURT OF THE STATE OF NEW YORK FOR THE COUNTY OF NEW YORK. (B) ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR ACTION IS HEREBY WAIVED BY ALL PARTIES TO THIS AGREEMENT. 10. THIS AGREEMENT, ITS ENFORCEMENT, AND ANY DISPUTE BETWEEN US, WHETHER ARISING OUT OF OR RELATING TO MY ACCOUNTS OR OTHERWISE, SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, EXCLUDING ITS CONFLICT OF LAW RULES; and its provisions shall be continuous, shall cover individually and collectively all accounts which I may open or reopen with you, and shall inure to the benefit of your present organization and any successor organization, irrespective of any change or changes at any time in the personnel thereof, for any cause whatsoever, and of the assigns of your present organization or any successor organization, and shall be binding upon me, and/or my estate, executors, administrators, trustees, agents, officers, directors and assigns. NOTICE: THIS AGREEMENT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE IN PARAGRAPHS 7 AND 8. Page 67 of 82 68 EXHIBIT O Morgan Stanley CUSTOMER PRIME BROKER ACCOUNT AGREEMENT Ladies and Gentlemen: In consideration of Morgan Stanley from time to time accepting an account or receiving holding or delivering any property of the undersigned, or entering into any Contract with the undersigned, the undersigned agrees with Morgan Stanley to the following: 1. DEFINITIONS "Agreement" means this document along with all executed annexes to this document. "Contract" means any contract or agreement between Morgan Stanley and the undersigned, including securities purchase or sale contracts, agreements to lend cash or securities, commodity and currency contracts, forward contracts, repurchase agreements, swap agreements or any other derivative or financial transaction, without regard to the form of such agreement which may include oral agreements or agreements confirmed or signed by only one party to the agreement and agreements entered into or signed by Morgan Stanley on behalf of the undersigned. "Collateral" means cash, securities, commodities, other financial assets, investment property and other property and assets (including all security entitlements in respect thereof, all income and profits thereon, all dividends, interest and other payments and distributions with respect thereto and all proceeds from any of the foregoing) which from time to time may be deposited or credited to any account of the undersigned with Morgan Stanley, be held or carried by Morgan Stanley for the undersigned, be due from Morgan Stanley to the undersigned, or be delivered to or in Morgan Stanley's possession or control for any purpose, including safekeeping. "Morgan Stanley" and the "Morgan Stanley Entities" mean, individually or collectively, as appropriate, Morgan Stanley & Co. Incorporated, MS Securities Services Inc., Morgan Stanley & Co. International Limited, Prime Dealer Services Corp., Morgan Stanley Securities Limited, Morgan Stanley Japan Limited, Morgan Stanley Asia Limited, Morgan Stanley GMBH, Morgan Stanley Market Products Inc., Morgan Stanley Capital Group Inc., Morgan Stanley Capital Services Inc., Morgan Stanley DW Inc., Morgan Stanley, MSDW Asia Securities Products LLC, MSDW Equity Finance Services (Cayman) Ltd., Morgan Stanley Financial Products Ltd., MSDW Markets Inc. and their respective successors, parents, subsidiaries, affiliates, divisions, officers, directors, agents and employees. "Obligation" means any obligation or liability of a party arising at any time, whether or not mature or contingent, related to the purchase, sale or loan of securities, currencies or other instrument, property or assets or under or in connection with this Agreement or any Contract, including any payment, repayment or delivery obligation, any obligation relating to any extension of credit or to pay damages (including costs of cover) and legal and other expenses incurred in connection with the enforcement of any Contract. "Prime Brokerage Regulations" means the requirements applicable to prime brokerage activities set out in the no-action letter of the Securities and Exchange Commission ("SEC") dated January 25, 1994, as such letter may be amended, modified or supplemented from time to time, regarding the performance of prime brokerage services, and any other relevant regulations of the SEC or other governmental authorities or self-regulatory organizations. "Undersigned" means each of the individuals or entities, other than Morgan Stanley, that is a party to this Agreement. 2. APPLICABLE RULES AND REGULATIONS. All transactions under this Agreement shall be subject to the rules and regulations of all U.S. and, if applicable, non- U.S., federal, state and local governmental authorities, self-regulatory organizations, markets and clearing corporations including but not limited to the Securities & Exchange Commission ("SEC"), New York Stock Exchange ("NYSE") or National Association of Securities Dealers ("NASD"). 3. SHORT AND LONG SALES. The undersigned agrees that when placing any sell order, the undersigned will appropriately designate it as "long" or as "short." The undersigned will designate a sale as "long" only if the securities being sold are securities then owned by the undersigned and such securities are either in the undersigned's account at Morgan Stanley or will be delivered to Morgan Stanley as soon as it is possible to do so, without undue inconvenience or expense to Morgan Stanley. 4. COMPLIANCE WITH PRIME BROKERAGE REGULATORY REQUIREMENTS. The undersigned hereby acknowledges that it is familiar with the Prime Brokerage Regulations and with the related provisions in Section 5 of this Agreement, and hereby undertakes to comply with the Prime Brokerage Regulations as in effect at any time and with the related provisions of this Agreement. The undersigned will inform Morgan Stanley promptly if this undertaking is not satisfied. Without limiting the foregoing, the undersigned agrees that it shall maintain in its account with Morgan Stanley at all times a minimum net equity in cash and securities as agreed upon, but in no event less than that required by the Prime Brokerage Regulations. The undersigned further agrees that, in the event its account falls below this minimum net equity, it shall bring its account into compliance in accordance with the Prime Brokerage Regulations. 5. MORGAN STANLEY AS PRIME BROKER. In connection with any transactions where Morgan Stanley acts as the undersigned's prime broker: (a) The undersigned maintains brokerage accounts with a number of other brokers ("Executing Brokers") and, from time to time, will place orders to be executed by one or more Executing Brokers. The undersigned agrees to give Morgan Stanley notice of the names of all Executing Brokers with whom the undersigned intends to place orders (which Executing Brokers must be acceptable to Morgan Stanley). Morgan Stanley is authorized to enter into a Prime Brokerage Agreement with all current or future Executing Brokers, to set up an account for the undersigned's benefit at any Executing Broker and to provide or obtain any information necessary to establish or maintain a prime brokerage relationship. The undersigned acknowledges that no order need be accepted by Morgan Stanley as prime broker from any Executing Broker with which Morgan Stanley has not entered into a "Prime Brokerage Agreement" with respect to the undersigned's account at Morgan Stanley. Further, Morgan Stanley reserves the right at any time to place a limit on the size of transactions executed by any Executing Broker which are to be settled and cleared by Morgan Stanley as a prime broker. The undersigned will use its best efforts to assure that such Executing Brokers comply with the terms set forth in the Prime Brokerage Agreement. The undersigned acknowledges that as between Morgan Stanley and any Executing Broker, the Executing Broker will be acting as an agent of the undersigned, not as Morgan Stanley's agent, for the purpose of carrying out the undersigned's directions with respect to the purchase, sale and settlement of securities. b) The undersigned or its representative will advise Morgan Stanley on trade date of the details of all transactions effected by any Executing Broker on the undersigned's behalf (the "Trade Data"). Morgan Stanley is authorized to acknowledge, affirm, settle and clear all such transactions. All such transactions shall be for the sole account and risk of the undersigned and Morgan Stanley shall have no responsibility or liability to the undersigned, any Executing Broker or any other third party. The undersigned agrees to pay all fees agreed upon and to make any necessary arrangements with the appropriate Executing Broker concerning the payment of any such fees, including the deduction of any such amounts from commissions charged by the Executing Brokers. The undersigned agrees that it is responsible, and liable to Morgan Stanley, and will indemnify Morgan Stanley, for all costs, losses and fees (including but not limited to those associated with buy-ins and sell-outs and those resulting from any Executing Broker's inability to settle a transaction) arising out of the orders placed by the undersigned with any Executing Broker or any action taken or not taken by any Executing Broker with respect to the undersigned or its transactions or accounts. (c) On the first business day following each transaction, Morgan Stanley shall send to the undersigned a notification of each trade placed with any Executing Broker based on information provided to Morgan Stanley by the undersigned. Any confirmations of trades or advices issued by Morgan Stanley as prime broker shall indicate the name of the Executing Broker involved and the other information required by the Prime Brokerage Regulations. If the undersigned has instructed the Executing Broker to send trade confirmations to the undersigned in care of Morgan Stanley, Morgan Stanley agrees that the confirmations will be available to the undersigned without charge upon request to Morgan Stanley. Reports of the execution of orders and statement of accounts of the undersigned shall be conclusive and binding if not objected to in writing (the former within five days and the latter within ten days) after Morgan Stanley's transmittal to the undersigned by mail, e-mail, facsimile, electronically or any other agreed means. Communications may be sent to the undersigned at the undersigned's address of record or in such other manner as the undersigned may hereinafter provide in writing. All communications sent to such address whether by mail, e- mail, facsimile, telegraph, messenger, electronic means or otherwise shall be deemed given to the undersigned personally as of the date sent, whether actually received or not. Page 68 of 82 69 (d) The undersigned understands that transactions will be settled by Morgan Stanley only if: (i) sufficient funds or securities, as necessary, are maintained in an account with Morgan Stanley or if the undersigned has made other arrangements for settlement that are satisfactory to Morgan Stanley; (ii) the undersigned maintains, and has at the settlement of the transaction, at least the minimum net equity required by the Prime Brokerage Regulations in its account with Morgan Stanley and (iii) a condition does not exist that would require Morgan Stanley to disaffirm on a non-discretionary basis, as defined in the Securities Industry Association Form 150, paragraph 3. (e). Morgan Stanley's customer account records may reflect transactions as settled as of the projected settlement date (sometimes referred to as contractual settlement). Morgan Stanley does not guarantee settlement, however, and therefore reserves the right to reverse transaction settlement entries in the event of a settlement failure caused by events beyond Morgan Stanley's control. (e) The undersigned agrees to comply with Morgan Stanley's requirements relating to short sales, including the requirement that no short sale may be effected through an Executing Broker unless the undersigned has first confirmed with Morgan Stanley that the securities are available for delivery. Such confirmation does not guarantee that the securities will be available for delivery on settlement date or that the securities will be available to support a short sale for any particular period of time. Accordingly, the short sale may fail on settlement date or the undersigned may be asked to cover its short sale at anytime, and undersigned will be responsible for any Obligations that arise therefrom. (f) Morgan Stanley is authorized to try to resolve any unmatched trade reports received from any Executing Broker. However, the undersigned is responsible for the ultimate resolution of these trades and reports. Morgan Stanley shall have no responsibility or liability with respect to trade data not correctly transmitted to it on a timely basis by any person or entity, including but not limited to DTCC. (g) In the event the undersigned's account falls below the minimum net equity required by the Prime Brokerage Regulations, the undersigned authorizes Morgan Stanley to notify promptly all its Executing Brokers of such event. If the undersigned fails to bring such account into compliance with the minimum net equity, the undersigned further agrees that Morgan Stanley may, without notice to the undersigned, disaffirm, DK or decline to affirm, clear and settle any transaction effected by an Executing Broker on the undersigned's behalf. Except as provided in the following paragraph, the undersigned understands that if Morgan Stanley takes such action with respect to any transaction of the undersigned, Morgan Stanley shall do so for all transactions of the undersigned that day. In any such case, Morgan Stanley shall send a cancellation notification to the undersigned and the undersigned understands that the undersigned must settle outstanding trades directly with the relevant Executing Broker and authorizes Morgan Stanley to provide the Executing Broker with any information necessary to settle such trades. The undersigned further agrees that Morgan Stanley will not be bound to make any investigation into the facts surrounding any transaction to which the undersigned is a party and that, immediately upon notice to the undersigned and, if required, to the Executing Brokers, Morgan Stanley may cease acting as prime broker for the undersigned. (h) The undersigned hereby authorizes Morgan Stanley, if its account is managed on a discretionary basis by an SEC- or state-registered investment adviser, money manager or other person (an "Adviser"), to commingle its prime brokerage transactions with those of other accounts of its Adviser ("sub-accounts") for order placement and clearance in bulk in accordance with other instructions of the Adviser. The undersigned understands that no part of any transaction may be allocated to any sub-account where such sub-account's net equity is below the minimum levels established by the Prime Brokerage Regulations and that, should a such a net equity deficiency occur in any such sub-account, Morgan Stanley must disaffirm the entire transaction. The undersigned agrees that, should such an event occur, its Adviser may resubmit the bulk trade to the Executing Broker so as to exclude those securities which were originally allocated to the undersigned's sub-account or, if permissible, re-allocate the entire prime brokerage transaction to other sub-accounts. The undersigned understands that such reallocation must be communicated to Morgan Stanley within any required deadlines. 6. CURRENCY CONTRACTS. If an authorized representative of the undersigned initials the box entitled "Additional Provisions Related to Currency Contracts", which appears at the end of this Agreement, the undersigned, from time to time, may enter into spot and/or forward currency Contracts with Morgan Stanley in connection with the settlement of other Contracts or otherwise as the undersigned shall direct. The undersigned acknowledges that Morgan Stanley is under no obligation to enter into any currency Contracts with, or on behalf of, the undersigned, and further agrees to furnish to Morgan Stanley such documentation to indicate capacity and authority as Morgan Stanley may reasonably request prior to entering into any such Contracts. Each currency Contract entered into under this Agreement shall constitute an "FX Transaction", as such term is defined in the 1998 FX and Currency Option Definitions, including Annex A thereto, as published by the International Swaps and Derivatives Association, Inc., EMTA, and The Foreign Exchange Committee (as may be amended, the "FX Definitions"), and shall be subject to the terms in this Section 6 as well as those set forth in the "Additional Provisions Related to Currency Contracts" box. Any confirmation, whether created by an exchange of telexes, facsimiles, SWIFT messages, or electronic messages on an electronic messaging or matching system, between Morgan Stanley and the undersigned relating to an FX Transaction, whether or not it is expressed to be, shall constitute a confirmation and, unless Morgan Stanley and the undersigned expressly agree otherwise, will be deemed to incorporate the FX Definitions. Notwithstanding the foregoing, Morgan Stanley shall have the right to convert currencies in connection with the exercise of Morgan Stanley's rights under Section 8 below in such manner as it may determine. 7. SECURITY INTEREST AND LIEN. All Collateral shall be subject to a general lien and a continuing first priority perfected security interest for the discharge of all Obligations of the undersigned to Morgan Stanley, irrespective of whether or not Morgan Stanley has made advances in connection with such Collateral, the number of accounts the undersigned has with Morgan Stanley or which particular Morgan Stanley Entity holds such Collateral. The undersigned and Morgan Stanley each acknowledge and agree that each Morgan Stanley Entity which holds Collateral does so both for itself and also as an agent and bailee for all other Morgan Stanley Entities which may be secured parties under any Contract. The undersigned and Morgan Stanley agree that all Collateral held in or credited to any account will be treated as financial assets under Article 8 of the Uniform Commercial Code as in effect in the State of New York (the "UCC") and that any account maintained by the undersigned with any Morgan Stanley Entity shall be a securities account under Article 8 of the UCC. In the event of a breach or default by the undersigned, Morgan Stanley shall have in addition to the rights and remedies provided in this Agreement, all rights and remedies available to a secured creditor under the UCC and any other applicable law. All Collateral delivered to Morgan Stanley shall be free and clear of all prior liens, claims and encumbrances and the undersigned will not cause or allow any of the Collateral to be subject to any liens, security interests, mortgages or encumbrances of any nature other than the security interest created in Morgan Stanley's favor. Furthermore, Collateral consisting of securities shall be delivered in good deliverable form (or Morgan Stanley shall have the unrestricted power to place such securities in good deliverable form) in accordance with the requirements of the primary market for these securities. The undersigned shall execute such documents and take such other action as Morgan Stanley shall reasonably request in order to perfect its rights with respect to any such Collateral. In addition, the undersigned appoints Morgan Stanley as the undersigned's attorney-in-fact to act on the undersigned's behalf to sign, seal, execute and deliver all documents, and do all such acts as may be required, to realize upon any of Morgan Stanley's rights in the Collateral. 8. RIGHTS OF MORGAN STANLEY. Morgan Stanley is hereby authorized, in its discretion, to cancel any outstanding orders for the purchase or sale of any securities, currencies, commodities or other property or asset, or to sell any or all of the securities, currencies, commodities or other property or asset which may be in Morgan Stanley's possession or control (either individually or jointly with others), or to buy any securities, currencies, commodities or other property or asset of which any account of the undersigned may be short upon: (a) the undersigned's death or incompetency (if applicable); (b) a breach, repudiation or default by the undersigned of this Agreement or any other Contract; (c) any misrepresentation of any statement by the undersigned when made or deemed to be made or repeated, (d) the failure of the undersigned to fulfill or discharge any Obligation under this Agreement or any Contract, including the failure to make a payment on demand or to satisfy margin requirements, Page 69 of 82 70 (e) the filing by or against the undersigned of a petition or other proceeding in bankruptcy, insolvency or for the appointment of a receiver, (f) the levy of an attachment against any property or asset in any account of the undersigned (g) the failure by the undersigned to give adequate assurance of due performance pursuant to this Agreement (h) should you deem it necessary for your protection, to cancel any outstanding orders for the purchase or sale of any securities or other property, or to sell any or all of the securities, currencies and commodities or other property which may be in your possession or control (either individually or jointly with others), or to buy in any securities, commodities or other property of which the account or accounts of the undersigned may be short. Such sale, purchase or cancellation may be made on any exchange or other market where such business is then usually transacted, or at public auction or private sale, without advertising or notice of the time or place of sale to the undersigned, and without prior tender, demand or call of any kind upon the undersigned, all of which are expressly waived. Morgan Stanley may purchase the whole or any part thereof free from any right of redemption and the undersigned shall remain liable to Morgan Stanley for any deficiency; it being understood that a prior tender, demand or call of any kind from Morgan Stanley, or prior notice from Morgan Stanley, of the time and place of such sale or purchase shall not be considered a waiver of Morgan Stanley's right to sell or buy any securities, commodities, or other property or asset held by Morgan Stanley, or which the undersigned may owe to Morgan Stanley. In addition, Morgan Stanley may at any time in connection with its rights under this Section 8 without prior notice to the undersigned apply or transfer any and all Collateral interchangeably between Morgan Stanley Entities in connection with accounts in which the undersigned has an interest. 9. ADEQUATE ASSURANCES. If at any time Morgan Stanley has reasonable grounds to doubt the undersigned's performance of any of the undersigned's Obligations, Morgan Stanley may demand, and the undersigned shall give within twenty-four hours or any reasonable shorter period of time Morgan Stanley specifies, adequate assurance of due performance. The giving of adequate assurance of performance may require the delivery by the undersigned to Morgan Stanley of additional Collateral. Any failure by the undersigned to give such adequate assurance of due performance shall constitute an independent, material default under the terms of all Contracts and Morgan Stanley may terminate, liquidate or accelerate any and all Contracts and exercise any right under or with respect to any security relating to any Contract and any right to net or set off payments which may arise under any Contract or other agreement or under applicable law. 10. EXPENSES AND OTHER CHARGES. The undersigned agrees to pay Morgan Stanley, or its designee, the following fees and charges with respect to trading activity: (a) Morgan Stanley's commissions, markups and other charges with respect to the execution of transactions, fails, buy-ins, conversion costs or the maintenance of positions or other related services; (b) any fees, fines, penalties or other charges imposed by any authority described in Section 2 of this Agreement or any court or authority of competent jurisdiction on any account opened or transaction executed for the undersigned, except any such charges as may be imposed due to Morgan Stanley's gross negligence or willful misconduct; with respect to fees or expenses related to securities lending and borrowing transactions: (a) upon demand, any debit balance owing with respect to any account of the undersigned, and interest and service charges on any such debit balance at the rates then charged by Morgan Stanley; and (b) any charges with respect to such transactions, including buy-ins, and applicable taxes or interest on any of the foregoing, together with Morgan Stanley's costs and reasonable attorney's fees incurred in collecting any such debit balance. 11. NETTING AND SET OFF RIGHTS. Morgan Stanley shall have the right, at any time and from time to time, to set off Morgan Stanley's Obligations owed to the undersigned against the Obligations of the undersigned to Morgan Stanley and to foreclose on any Collateral for the purpose of satisfying the Obligations of the undersigned to Morgan Stanley. The undersigned acknowledges that the fulfillment by Morgan Stanley of its Obligations to the undersigned is contingent upon there being no breach, repudiation, misrepresentation or default by the undersigned which has occurred and is continuing under this Agreement or any Contract. 12. MAINTENANCE OF THE UNDERSIGNED'S COLLATERAL. Subject to the applicable rules of the SEC and other competent authorities, the undersigned acknowledges that all Collateral now or hereafter in Morgan Stanley's possession or control (either individually or jointly with others) or deposited to secure the same, may from time to time and without further notice to the undersigned, be carried in Morgan Stanley's general accounts and may be pledged, hypothecated or re- hypothecated, separately or in combination with property of others for the sum due to Morgan Stanley thereon or for a greater sum and without Morgan Stanley's retaining in its possession a like amount of similar property. Within the limits of applicable law, rule and regulation, Morgan Stanley is authorized to lend, to itself or to others Collateral it holds, together with all attendant rights of ownership (including the right to vote any securities). 13. FAILURE OF DELIVERY. If the undersigned directs Morgan Stanley to make any delivery of any security, commodity or other property or asset for its account for any reason and the undersigned fails to deliver that item to Morgan Stanley in the time, place and manner required, or if Morgan Stanley is unable to borrow the security, or in the case of a recall, Morgan Stanley is unable to re-borrow the security, the undersigned authorizes Morgan Stanley to borrow or purchase that item (or to be deemed to have make such purchase at the market value of the time of such deemed purchase) in such manner and time as Morgan Stanley in its sole discretion determines to be commercially reasonable. The undersigned agrees to be responsible for any consequent loss which Morgan Stanley may suffer and any related costs, premiums and losses to which Morgan Stanley may be subject. 14. CONFIRMATIONS, STATEMENTS AND OTHER COMMUNICATIONS. Execution reports and account statements shall be conclusive and binding if not objected to in writing (the former within five days and the latter within ten days) after transmittal by Morgan Stanley to the undersigned by mail or otherwise, including by electronic communication. Morgan Stanley may send communications to the undersigned's address of record or otherwise as provided to Morgan Stanley in writing. All communications, whether by mail, facsimile, telegraph, messenger, electronic means or otherwise, shall be deemed to have been given to the undersigned personally as of the date sent, whether actually received or not. 15. NO OBLIGATION. The undersigned agrees that Morgan Stanley shall be under no obligation whatsoever to enter into any Contract with, or on behalf of, the undersigned. 16. PROVISION OF INFORMATION. From time to time, Morgan Stanley may provide or make available to the undersigned, or to others acting with or on behalf of the undersigned,, research, opinions and other information, including portfolio analyses and reports, regarding securities, commodities, other financial assets, and market participants or events. The undersigned acknowledges that such information is provided, unless Morgan Stanley agrees in writing otherwise, without regard to the undersigned's personal financial situation, investment objectives or other circumstances and that the provision by Morgan Stanley of such information to the undersigned, whether sent directly or made readily accessible, and whether in writing, in electronic form or the subject of a taping, broadcast or narrowcast, does not imply that any asset or transaction discussed therein is suitable in light of the undersigned's particular circumstances. The undersigned agrees that no such information will be the primary basis of any investment decision by the undersigned. While all information produced by Morgan Stanley is based on sources believed to be reliable, the undersigned acknowledges that Morgan Stanley does not guarantee or warrant the accuracy, reliability or timeliness of such information. Further, all information and opinions are current only as of the time provided, and are subject to rapid change without prior notice. The undersigned also acknowledges that Morgan Stanley may take positions in financial instruments discussed in the information provided the undersigned (which positions may be inconsistent with the information provided), may execute transactions for others in those instruments and may provide investment banking and other services to the issuers of those instruments. From time to time, Morgan Stanley also may provide or make available to the undersigned, or to others acting with or on behalf of the undersigned, information regarding parties that might provide goods or services to the undersigned, including but not limited to fund administrators ("Vendors"). While all information produced by Morgan Stanley is based on sources believed to be reliable, the undersigned acknowledges that Morgan Stanley does not guarantee or warrant the accuracy, reliability or timeliness of such information, or the quality of goods or services provided by any Vendors. The undersigned agrees to indemnify and hold Morgan Stanley harmless from and against any and all losses, claims, damages and liabilities arising out of or relating to, actions or omissions by the Vendors, Morgan Stanley's provision or making available of such information, or the undersigned's selection or use of such Vendors. 17. USE OF THE INTERNET. Undersigned agrees that the Internet is not a secure network and that any communications transmitted over the Internet may, among other things, be intercepted or accessed by unauthorized or unintended parties and may not remain confidential, or that such transmissions may not arrive in a complete, unaltered or timely manner, and the undersigned assumes the risk arising therefrom. Page 70 of 82 71 18. RESOLUTION OF DISPUTES. ANY DISPUTE BETWEEN THE UNDERSIGNED AND A MORGAN STANLEY ENTITY THAT IS REGISTERED AS A BROKER-DEALER WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION ARISING OUT OF, RELATING TO OR IN CONNECTION WITH MORGAN STANLEY'S BUSINESS, ANY TRANSACTION BETWEEN US OR THIS AGREEMENT SHALL BE DETERMINED, AT THE ELECTION OF THE UNDERSIGNED, BY LITIGATION IN A COURT WITH PROPER JURISDICTION OR BY ARBITRATION. SHOULD THE UNDERSIGNED CHOOSE TO PROCEED BY ARBITRATION, UNDERSIGNED AND MORGAN STANLEY AGREE TO FOLLOW THE PROCEDURES, AND ABIDE BY THE REQUIREMENTS, LISTED IN SECTION 19 BELOW. SHOULD THE UNDERSIGNED CHOOSE TO PROCEED BY LITIGATION, UNDERSIGNED AND MORGAN STANLEY AGREE TO FOLLOW THE PROCEDURES, AND ABIDE BY THE REQUIREMENTS, LISTED IN SECTION 20 BELOW. 19. IF THE UNDERSIGNED CHOOSES ARBITRATION, THE UNDERSIGNED ACKNOWLEDGES THAT: ARBITRATION IS FINAL AND BINDING ON THE PARTIES. THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING THE RIGHT TO A JURY TRIAL. ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM COURT PROCEEDINGS. THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY THE ARBITRATOR IS STRICTLY LIMITED. THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO ARE OR WERE AFFILIATED WITH THE SECURITIES INDUSTRY. ANY ARBITRATION SHALL BE CONDUCTED ONLY BEFORE THE NEW YORK STOCK EXCHANGE, INC., THE AMERICAN STOCK EXCHANGE, INC., THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. OR ANY OTHER U.S. SELF-REGULATORY ORGANIZATION OF WHICH THE RELEVANT MORGAN STANLEY ENTITY IS A MEMBER. THE UNDERSIGNED HAS THE RIGHT TO ELECT ONE OF THE FOREGOING ORGANIZATIONS, BUT IF THE UNDERSIGNED FAILS TO MAKE SUCH ELECTION BY CERTIFIED LETTER ADDRESSED TO THE RELEVANT MORGAN STANLEY ENTITY AT ITS MAIN OFFICE BEFORE THE EXPIRATION OF TEN DAYS AFTER RECEIPT OF A WRITTEN REQUEST FROM MORGAN STANLEY TO MAKE SUCH ELECTION, MORGAN STANLEY MAY MAKE SUCH ELECTION. THE AWARD OF THE ARBITRATORS, OR THE MAJORITY OF THEM, SHALL BE FINAL AND JUDGMENT UPON THE AWARD RENDERED MAY BE ENTERED IN ANY STATE OR FEDERAL COURT HAVING JURISDICTION. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS CONSENT BY MORGAN STANLEY TO AN AWARD OF PUNITIVE DAMAGES. NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION, NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINSTANY PERSON WHO, IF THE UNDERSIGNED HAS INITIATED IN COURT A PUTATIVE CLASS ACTION, IS A MEMBER OF A PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED BY THE PUTATIVE CLASS ACTION UNTIL: (i) THE CLASS CERTIFICATION IS DENIED; (ii) THE CLASS IS DECERTIFIED; OR (iii) THE UNDERSIGNED IS EXCLUDED FROM THE CLASS BY THE COURT. SUCH FORBEARANCE TO ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY SUCH RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN. 20. IF THE UNDERSIGNED CHOOSES LITIGATION IN COURT. (A) UNLESS THE PARTIES OTHERWISE AGREE IN WRITING WHEN ANY DISPUTE ARISES, LITIGATION MUST BE INSTITUTED IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY. THE UNDERSIGNED IRREVOCABLY CONSENTS TO THE JURISDICTION OF EITHER OF THOSE COURTS AND (B) ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR ACTION IS HEREBY WAIVED BY ALL PARTIES TO THIS AGREEMENT. 21. APPLICABLE LAW AND ENFORCEABILITY. THIS AGREEMENT, ANY CONTRACT, THEIR ENFORCEMENT AND ANY DISPUTE BETWEEN US, WHETHER ARISING OUT OF OR RELATING TO THE UNDERSIGNED'S ACCOUNTS OR OTHERWISE, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCLUDING ITS CONFLICT OF LAW RULES. The provisions of this Agreement shall be continuous, shall cover individually and collectively all accounts which the undersigned may open or reopen with Morgan Stanley and shall inure to the benefit of Morgan Stanley's present and any successor organizations, irrespective of any change at any time in the personnel thereof and of the assigns of Morgan Stanley's present organizations or any successor organizations. This Agreement shall be binding upon the undersigned and the estate, executors, administrators, trustees, agents, officers, directors and assigns of the undersigned. 22. MODIFICATION AND WAIVER. The undersigned agrees that Morgan Stanley may modify the terms of this Agreement at any time upon prior written notice. If the modifications are unacceptable, the undersigned agrees to notify Morgan Stanley in writing within twenty days of the transmittal of such written notice. Morgan Stanley may then terminate any or all of the undersigned's accounts. The undersigned also agrees that any transactions or Contracts entered into after such notification shall be subject to the modifications. The undersigned may not modify this Agreement without Morgan Stanley's written consent. To the extent this Agreement is inconsistent with any other agreement between us, the provisions of this Agreement shall govern. Morgan Stanley's failure to enforce this Agreement or any of its terms, or any continued course of such conduct on Morgan Stanley's part, shall not be considered a waiver of any of Morgan Stanley's rights. 23. AUTHORIZED INSTRUCTIONS. The undersigned authorizes Morgan Stanley to accept instructions by telephone, tested telex, facsimile transmission, electronic mail, electronically, in writing or any other method that undersigned and Morgan Stanley may agree to use. The undersigned also agrees (i) to be bound by all instructions that Morgan Stanley believes are authorized, regardless of the means by which those instructions have been transmitted to Morgan Stanley, and (ii) that Morgan Stanley shall not be liable for any loss, cost or expense for acting upon instructions that Morgan Stanley believed to be authorized. 24. SEVERABILITY. If any provision of this Agreement is or becomes inconsistent with any applicable present or future law, rule or regulation, that provision will be deemed modified or, if necessary, rescinded in order to comply with the relevant law, rule or regulation. All other provisions of this Agreement will continue and remain in full force and effect. To the extent that this Agreement is not enforceable as to any Contract, this Agreement shall remain in full force and effect and be enforceable in accordance with its terms as to all other Contracts. To the extent this Agreement contains any provision which is inconsistent with provisions in any other Contract or agreement between us, or of which the undersigned is a beneficiary, the provisions of this Agreement shall control with respect to transactions contemplated hereunder. 25. LENDING OF SECURITIES. Within the limits of applicable law and regulation, until Morgan Stanley receives written notice of revocation from the undersigned, Morgan Stanley is hereby authorized to lend, to itself as brokers or to others, any securities held by Morgan Stanley on margin in its possession or control together with all attendant rights of ownership (including the right to vote the securities). 26. EXTRAORDINARY EVENTS. The undersigned agrees that Morgan Stanley will not be liable for any loss caused, directly or indirectly, by government restrictions, exchange or market rulings, suspension of trading, war (whether declared or undeclared), terrorist acts, insurrection, riots, fires, flooding, strikes, failure of utility services, accidents, adverse weather or other events of nature (including earthquakes, hurricanes and tornadoes) or other events or conditions beyond Morgan Stanley's control. In the event that any communications network, data processing system or computer system Morgan Stanley uses, regardless of ownership, is rendered inoperable, Morgan Stanley will not be liable to the undersigned for any loss, liability, claim, damage or expense resulting, directly or indirectly, from such inoperability. 27. LIMITATION OF LIABILITY. Morgan Stanley shall not be liable in connection with the execution, clearing, handling, purchasing or selling of securities, commodities or other property or assets, or other action, except in the event of gross negligence or willful misconduct on Morgan Stanley's part. The undersigned acknowledges that certain of its securities may be held outside the United States by unaffiliated, foreign, agent banks and depositories. Morgan Stanley shall not be liable to the undersigned for any loss, liability or expense incurred by the undersigned in connection with these arrangements except to the extent that any such loss, liability or expense results from Morgan Stanley's gross negligence or willful misconduct. 28. INDEMNIFICATION. In consideration of Morgan Stanley's carrying one or more accounts for the undersigned, the undersigned agrees to indemnify and hold Morgan Stanley harmless from and against any and all losses, claims, damages and liabilities arising out of or relating to the undersigned's accounts or in connection with the execution, purchase, sale, assignment, exercise, endorsement or handling of any transaction therein, or in connection with Morgan Stanley acting or declining to act as prime broker, except for actions taken or omitted to be taken by Morgan Stanley which are a result of, or constitute, willful misconduct or gross negligence. The undersigned also agrees that Morgan Stanley shall have no responsibility for the undersigned's compliance with any law or regulation and that Morgan Stanley shall not be liable for delays in the transmission of orders or instructions due to the breakdown or failure of transmission or communication facilities or any other cause beyond Morgan Stanley's control, including any mistake, error, negligence or misconduct of any exchange, association or clearing house or their respective officers, directors, employees or agents, nor any failure by any such exchange, association or clearing house to enforce its rules or regulations. 29. COSTS OF COLLECTION. To the extent permitted by the laws of the State of New York, the reasonable costs and expenses of collection of any debit balance and any unpaid deficiency in any account of the undersigned with Morgan Stanley, including but not limited to attorneys' fees incurred and payable or paid by Morgan Stanley, shall be payable to Morgan Stanley by the undersigned. 30. ASSIGNMENTS. Undersigned may not assign its rights or obligations under this Agreement without the express written consent of Morgan Stanley. 31. REPRESENTATIONS AND WARRANTIES. The undersigned hereby represents and warrants as of the date hereof, which representations and warranties will be deemed repeated on each date on which a transaction or Contract is effected for any of the undersigned's accounts, or any securities or other property if delivered to or from any such account, that: (a) The undersigned will at all times maintain such securities or other property or assets in the accounts of the undersigned for margin purposes, as is required by Morgan Stanley from time to time in Morgan Stanley's sole discretion; (b) The undersigned will not transact on the basis of, or in reliance on, material, non-public information. (c) Except as disclosed in writing to Morgan Stanley, the undersigned is not an employee of any exchange, or of any corporation of which any exchange owns a majority of the capital stock, or of a member of any exchange, or of a securities broker or dealer, or of a bank, trust company, insurance company or of any corporation, firm or individual engaged in the business of dealing, either as agent or as principal, in securities, bills of exchange, acceptances or other forms of commercial paper. (d) Except as disclosed to Morgan Stanley in writing, the undersigned continuously represents that it is not (a) an employee benefit plan (hereinafter an "ERISA Plan"), as defined in Section 3 (3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), subject to Title I of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended, or (b) a person acting on behalf of an ERISA Plan or (c) a person the assets of whom constitute assets of an ERISA Plan. The undersigned will provide notice to Morgan Stanley in the event that it is aware that it is in breach of any aspect of this representation or is aware that with the passing of time, giving of notice or expiry of any applicable grace period it will breach this representation. (e) Except as disclosed in writing to Morgan Stanley, the undersigned is not, and will not be, an affiliate (as defined in Rule 144(a)(1) under the Securities Act of 1933) of the issuer of any security held in the undersigned's accounts or sold to or through Morgan Stanley and undertakes to inform Morgan Stanley of any changes in such representation. (f) The undersigned has full power and authority to execute and deliver each Contract and to perform and observe the provisions thereof. (g) The execution, delivery and performance of each Contract has been or will be, prior to entering into the Contract, duly authorized by all necessary internal action and do not or will not contravene any requirement of law or any contractual restrictions or agreement binding on or affecting the undersigned or its assets. (h) Each Contract has been or will be at the time it is entered into properly executed and delivered by the undersigned and constitutes and will constitute a legal, valid and binding obligation enforceable in accordance with its terms. (i) The undersigned will promptly furnish to Morgan Stanley appropriate financial statements or similar documents upon Morgan Stanley's request and any other information as Morgan Stanley may reasonably request. Since the date of the most recent financial statements provided to Morgan Stanley, if any, there has been no material adverse change in the information set forth therein, and, if the undersigned is not a natural person, the business, financial condition, results, operations or prospects of the undersigned. (j) No one that is not a party to this Agreement has any interest in any account of the undersigned with Morgan Stanley. The undersigned owns the Collateral assigned, or to be assigned, to Morgan Stanley under each Contract free and clear of any lien, claims, encumbrances and transfer restrictions. Upon delivery of the Collateral to Morgan Stanley or upon the filing of appropriate financing statements, Morgan Stanley will have, as security for the Obligations of the undersigned, a perfected first priority security interest in the Collateral. No further filings or recordings with any governmental body, agency or official are necessary to create or perfect the security interest in the Collateral. (k) The undersigned represents to Morgan Stanley that all sales of securities (other than fully covered options) will be eligible to be marked "long" and that the undersigned will pay for all the securities purchased in full on trade date or such later date as Morgan Stanley may permit. Any sell order which the undersigned shall designate as being long is for securities then owned by the undersigned. If such securities cannot be delivered by Morgan Stanley from any account of the undersigned, the placing of such order shall constitute a representation by the undersigned that the undersigned will deliver them as soon as it is possible to do so, without undue inconvenience or expense to Morgan Stanley. (l) The undersigned acknowledges that it is acting as principal (and not as agent or in any other capacity, fiduciary or otherwise) for its own account, and it has made its own independent decisions to enter into this Agreement and Contracts and as to whether its activities and investments thereunder are appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of Morgan Stanley as investment advice or as a recommendation to enter into any particular transaction; it being understood that information and explanations related to the terms and conditions of a transaction shall not be considered investment advice or a recommendation to enter into a transaction. No communication (written or oral) received from Morgan Stanley shall be deemed to be an assurance or guarantee as to the expected results of a transaction. It is capable of assessing the merits of and understanding (on its own behalf or thorough independent professional advice), and understands and accepts, the terms, conditions and risks of its transactions, and is capable of assuming, and assumes, such risks. Morgan Stanley is not acting as a fiduciary for an adviser to it in any respect, and does not perform any analysis or make any judgment on any matters pertaining to the suitability of any order or offer any opinion, judgment or other type of information pertaining to the nature, value, potential or suitability of any particular transaction. 32. ACKNOWLEDGMENTS. The undersigned hereby consents and acknowledges that: (a) The undersigned has received, and agrees to be bound by, Morgan Stanley's Credit Charge and Margin Information Statement, which is incorporated herein by reference; (b) The undersigned has received a copy of this Agreement and has read and understood its terms; and (c) All conversations between us may be recorded on tape or otherwise. NOTICE: THIS AGREEMENT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE PROXY DISCLOSURE STATEMENT Under the rules of the Securities and Exchange Commission, we are required, upon registrant's request, to provide your name, address and security positions to issuers of securities that you own. The issuer may use this information exclusively for purposes of corporate communications. _____(Check) IF THIS BOX IS CHECKED, MORGAN STANLEY WILL DISCLOSE THE NAME AND ADDRESS INFORMATION FOR THE ACCOUNT ESTABLISHED BY THIS AGREEMENT TO ISSUERS OF SECURITIES WHICH I OWN. ELECTRONIC TRADE CONFIRMATIONS (Check) Yes, we would, if available, like to receive electronic notification of our trade information rather than a mailed, hard copy confirmation. DATE: __5/17/02___ Financial Institution Partners, MORGAN STANLEY & Ltd. CO. INCORPORATED, By Hovde Capital Offshore LLC, general on its own behalf Partner, and on behalf of by its authorized signatory each Morgan Stanley Entity /s/ Richard J. Perry, Jr. Name: Richard J. Perry, Jr. Name: ___________ Date: 5/17/02 Date: ___________ Title: Manager Title: ___________ Page 71 of 82 72 EXHIBIT P THE BOND MARKET ASSOCIATION Master Securities Loan Agreement Between: Dated as of May 2, 2002 PRIME DEALER SERVICES CORP. and FINANCIAL INSTITUTION PARTNERS, LTD. This Agreement sets forth the terms and conditions under which one party ("Lender") may from time to time lend to the other party ("Borrower") certain securities against a pledge of collateral. Capitalized terms not otherwise defined herein shall have the meanings provided in Section 26. The parties hereto agree as follows: 1. Loans of Securities. 1.1. Subject to the terms and conditions of this Agreement, Borrower or Lender may, from time to time, orally seek to initiate a transaction in which Lender will lend securities to Borrower. Borrower and Lender shall agree orally on the terms of each Loan, including the issuer of the securities, the amount of securities to be lent, the basis of compensation, and the amount of Collateral to be transferred by Borrower, which terms may be amended during the Loan. 1.2. Notwithstanding any other provision in this Agreement regarding when a Loan commences, a Loan hereunder shall not occur until the Loaned Securities and the Collateral therefor have been transferred in accordance with Section 16. 1.3. WITHOUT WAIVING ANY RIGHTS GIVEN TO LENDER HEREUNDER, IT IS UNDERSTOOD AND AGREED THAT THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION ACT OF 1970 MAY NOT PROTECT LENDER WITH RESPECT TO LOANED SECURITIES HEREUNDER AND THAT, THEREFORE, THE COLLATERAL DELIVERED TO LENDER MAY CONSTITUTE THE ONLY SOURCE OF SATISFACTION OF BORROWER'S OBLIGATIONS IN THE EVENT BORROWER FAILS TO RETURN THE LOANED SECURITIES. 2. Transfer of Loaned Securities. 2.1. Unless otherwise agreed, Lender shall transfer Loaned Securities to Borrower hereunder on or before the Cutoff Time on the date agreed to by Borrower and Lender for the commencement of the Loan. 2.2. Unless otherwise agreed, Borrower shall provide Lender, in each Loan in which Lender is a Customer, with a schedule and receipt listing the Loaned Securities. Such schedule and receipt may consist of (a) a schedule provided to Borrower by Lender and executed and returned by Borrower when the Loaned Securities are received, (b) in the case of securities transferred through a Clearing Organization which provides transferors with a notice evidencing such transfer, such notice, or (c) a confirmation or other document provided to Lender by Borrower. 3. Collateral. 3.1. Unless otherwise agreed, Borrower shall, prior to or concurrently with the transfer of the Loaned Securities to Borrower, but in no case later than the close of business on the day of such transfer, transfer to Lender Collateral with a market value at least equal to a percentage of the market value of the Loaned Securities agreed to by Borrower and Lender (which shall be not less than 100% of the market value of the Loaned Securities) (the "Margin Percentage"). 3.2. The Collateral transferred by Borrower to Lender, as adjusted pursuant to Section 8, shall be security for Borrower's obligations in respect of such Loan and for any other obligations of Borrower to Lender. Borrower hereby pledges with, assigns to, and grants Lender a continuing first security interest in, and a lien upon, the Collateral, which shall attach upon the transfer of the Loaned Securities by Lender to Borrower and which shall cease upon the transfer of the Loaned Securities by Borrower to Lender. In addition to the rights and remedies given to Lender hereunder, Lender shall have all the rights and remedies of a secured party under the New York Uniform Commercial Code. It is understood that Lender may use or invest the Collateral, if such consists of cash, at its own risk, but that (unless Lender is a Broker-Dealer) Lender shall, during the term of any Loan hereunder, segregate Collateral from all securities or other assets in its possession. Lender may pledge, repledge, hypothecate, rehypothecate, lend, relend, sell or otherwise transfer the Collateral, or re-register Collateral evidenced by physical certificates in any name other than Borrower's, only (a) if Lender is Broker-Dealer or (b) in the event of a Default by Borrower. Segregation of Collateral may be accomplished by appropriate identification on the books and records of Lender if it is a "financial intermediary" or a "clearing corporation" within the meaning of the New York Uniform Commercial Code. 3.3. Except as otherwise provided herein, upon transfer to Lender of the Loaned Securities on the day a Loan is terminated pursuant to Section 5, Lender shall be obligated to transfer the Collateral (as adjusted pursuant to Section 8) to Borrower no later than the Cutoff Time on such day or, if such day is not a day on which a transfer of such Collateral may be effected under Section 16, the next day on which such a transfer may be effected. 3.4. If Borrower transfers Collateral to Lender, as provided in Section 3.1, and Lender does not transfer the Loaned Securities to Borrower, Borrower shall have the absolute right to the return of the Collateral; and if Lender transfers Loaned Securities to Borrower and Borrower does not transfer Collateral to Lender as provided in Section 3.1, Lender shall have the absolute right to the return of the Loaned Securities. 3.5. Borrower may, upon reasonable notice to Lender (taking into account all relevant factors, including industry practice, the type of Collateral to be substituted and the applicable method of transfer), substitute Collateral for Collateral securing any Loan or Loans; provided, however, that such substituted Collateral shall (a) consist only of cash, securities or other property that Borrower and Lender agreed would be acceptable Collateral prior to the Loan or Loans and (b) have a market value such that the aggregate market value of such substituted Collateral, together with all other Collateral for Loans in which the party substituting such Collateral is acting as Borrower, shall equal or exceed the agreed upon Margin Percentage of the market value of the Loaned Securities. Prior to the expiration of any letter of credit supporting Borrower's obligations hereunder, Borrower shall, no later than the Cutoff Time on the date such letter of credit expires, obtain an extension of the expiration of such letter of credit or replace such letter of credit by providing Lender with a substitute letter of credit in an amount at least equal to the amount of the letter of credit for which it is substituted. 3.6. Lender acknowledges that, in connection with Loans of Government Securities and as otherwise permitted by applicable law, some securities provided by Borrower as Collateral under this Agreement may not be guaranteed by the United States. 4. Fees for Loan. 4.1. Unless otherwise agreed, (a) Borrower agrees to pay Lender a loan fee (a "Loan Fee"), computed daily on each Loan to the extent such Loan is secured by Collateral other than cash, based on the aggregate par value (in the case of Loans of Government Securities) or the aggregate market value (in the case of all other Loans) of the Loaned Securities on the day for which such Loan Fee is being computed, and (b) Lender agrees to pay Borrower a fee or rebate (a "Cash Collateral Fee") on Collateral consisting of cash, computed daily based on the amount of cash held by Lender as Collateral, in the case of each of the Loan Fee and the Cash Collateral Fee at such rates as Borrower and Lender may agree. Except as Borrower and Lender may otherwise agree (in the event that cash Collateral is transferred by clearing house funds or otherwise), Loan Fees shall accrue from and including the date on which the Loaned Securities are transferred to Borrower to, but excluding, the date on which such Loaned Securities are returned to Lender, and Cash Collateral Fees shall accrue from and including the date on which the cash Collateral is transferred to Lender to, but excluding, the date on which such cash Collateral is returned to Borrower. 4.2. Unless otherwise agreed, any Loan Fee or Cash Collateral Fee payable hereunder shall be payable: (a) in the case of any Loan of securities other than Government Securities, upon the earlier of (i) the fifteenth day of the month following the calendar month in which such fee was incurred or (ii) the termination of all Loans hereunder (or, if a transfer of cash in accordance with Section 16 may not be effected on such fifteenth day or the day of such termination, as the case may be, the next day on which such a transfer may be effected); and (b) in the case of any Loan of Government Securities, upon the termination of such Loan. Notwithstanding the foregoing, all Loan Fees shall be payable by Borrower immediately in the event of a Default hereunder by Borrower and all Cash Collateral Fees shall be payable immediately by Lender in the event of a Default by Lender. 5. Termination of the Loan. Unless otherwise agreed, (a) Borrower may terminate a Loan on any Business Day by giving notice to Lender and transferring the Loaned Securities to Lender before the Cutoff Time on such Business Day, and (b) Lender may terminate a Loan on a termination date established by notice given to Borrower prior to the close of business on a Business Day. The termination date established by a termination notice given by Lender to Borrower shall be a date no earlier than the standard settlement date for trades of the Loaned Securities entered into on the date of such notice, which date shall, unless Borrower and Lender agree to the contrary, be (i) in the case of Government Securities, the next Business Day following such notice and (ii) in the case of all other securities, the third Business Day following such notice. Unless otherwise agreed, Borrower shall, on or before the Cutoff Time on the termination date of a Loan, transfer the Loaned Securities to Lender; provided, however, that upon such transfer by Borrower, Lender shall transfer the Collateral (as adjusted pursuant to Section 8) to Borrower in accordance with Section 3.3. 6. Rights of Borrower in Respect of the Loaned Securities. Except as set forth in Sections 7.1 and 7.2 and as otherwise agreed by Borrower and Lender, until Loaned Securities are required to be redelivered to Lender upon termination of a Loan hereunder, Borrower shall have all of the incidents of ownership of the Loaned Securities, including the right to transfer the Loaned Securities to others. Lender hereby waives the right to vote, or to provide any consent or to take any similar action with respect to, the Loaned Securities in the event that the record date or deadline for such vote, consent or other action falls during the term of the Loan. 7. Dividends, Distributions, Etc. 7.1. Lender shall be entitled to receive all distributions made on or in respect of the Loaned Securities which are not otherwise received by Lender, to the full extent it would be so entitled if the Loaned Securities had not been lent to Borrower, including, but not limited to: (a) cash and all other property, (b) stock dividends, (c) securities received as a result of split ups of the Loaned Securities and distributions in respect thereof, (d) interest payments, and (e) all rights to purchase additional securities. 7.2. Any cash distributions made on or in respect of the Loaned Securities, which Lender is entitled to receive pursuant to Section 7.1, shall be paid by the transfer of cash to Lender by Borrower, on the date any such distribution is paid, in an amount equal to such cash distribution, so long as Lender is not in Default at the time of such payment. Non-cash distributions received by Borrower shall be added to the Loaned Securities on the date of distribution and shall be considered such for all purposes, except that if the Loan has terminated, Borrower shall forthwith transfer the same to Lender. 7.3. Borrower shall be entitled to receive all cash distributions made on or in respect of non-cash Collateral which are not otherwise received by Borrower, to the full extent it would be so entitled if the Collateral had not been transferred to Lender. Any distributions of cash made on or in respect of such Collateral which Borrower is entitled to receive hereunder shall be paid by the transfer of cash to Borrower by Lender, on the date any such distribution is paid, in an amount equal to such cash distribution, so long as Borrower is not in Default at the time of such payment. 7.4. (a) Unless otherwise agreed, if (i) Borrower is required to make a payment (a "Borrower Payment") with respect to cash distributions on Loaned Securities under Sections 7.1 and 7.2 ("Securities Distributions"), or (ii) Lender is required to make a payment (a "Lender Payment") with respect to cash distributions on Collateral under Section 7.3 ("Collateral Distributions"), and (iii) Borrower or Lender, as the case may be ("Payor"), shall be required by law to collect any withholding or other tax, duty, fee, levy or charge required to be deducted or withheld from such Borrower Payment or Lender Payment ("Tax"), then Payor shall (subject to subsections (b) and (c) below), pay such additional amounts as may be necessary in order that the net amount of the Borrower Payment or Lender Payment received by the Lender or Borrower, as the case may be ("Payee"), after payment of such Tax equals the net amount of the Securities Distribution or Collateral Distribution that would have been received if such Securities Distribution or Collateral Distribution had been paid directly to the Payee. (b) No additional amounts shall be payable to a Payee under subsection (a) above to the extent that Tax would have been imposed on a Securities Distribution or Collateral Distribution paid directly to the Payee. (c) No additional amounts shall be payable to a Payee under subsection (a) above to the extent that such Payee is entitled to an exemption from, or reduction in the rate of, Tax on a Borrower Payment or Lender Payment subject to the provision of a certificate or other documentation, but has failed timely to provide such certificate or other documentation. Page 72 of 82 73 (d) Each party hereto shall be deemed to represent that, as of the commencement of any Loan hereunder, no Tax would be imposed on any cash distribution paid to it with respect to (i) Loaned Securities subject to a Loan in which it is acting as Lender or (ii) Collateral for any Loan in which it is acting as Borrower, unless such party has given notice to the contrary to the other party hereto (which notice shall specify the rate at which such Tax would be imposed). Each party agrees to notify the other of any change that occurs during the term of a Loan in the rate of any Tax that would be imposed on any such cash distributions payable to it. 7.5. To the extent that, under the provisions of Sections 7.1 through 7.4 (a) a transfer of cash or other property by Borrower would give rise to a Margin Excess (as defined in Section 8.3 below) or (b) a transfer of cash or other property by Lender would give rise to a Margin Deficit (as defined in Section 8.2 below), Borrower or Lender (as the case may be) shall not be obligated to make such transfer of cash or other property in accordance with such Sections, but shall in lieu of such transfer immediately credit the amounts that would have been transferable under such Sections to the account of Lender or Borrower (as the case may be). 8. Mark to Market. 8.1. Borrower shall daily mark to market any Loan hereunder and in the event that at the close of trading on any Business Day the market value of the Collateral for any Loan to Borrower shall be less than 100% of the market value of all the outstanding Loaned Securities subject to such Loan, Borrower shall transfer additional Collateral no later than the close of the next Business Day so that the market value of such additional Collateral, when added to the market value of the other Collateral for such Loan, shall equal 100% of the market value of the Loaned Securities. 8.2. In addition to any rights of Lender under Section 8.1, in the event that at the close of trading on any Business Day the aggregate market value of all Collateral for Loans by Lender shall be less than the Margin Percentage of the market value of all the outstanding Loaned Securities subject to such Loans (a "Margin Deficit"), Lender may, by notice to Borrower, demand that Borrower transfer to Lender additional Collateral so that the market value of such additional Collateral, when added to the market value of all other Collateral for such Loans, shall equal or exceed the agreed upon Margin Percentage of the market value of the Loaned Securities. Unless otherwise agreed, such transfer is to be made no later than the close of the next Business Day following the day of Lender's notice to Borrower. 8.3. In the event that at the close of trading on any Business Day the market value of all Collateral for Loans to Borrower shall be greater than the Margin Percentage of the market value of all the outstanding Loaned Securities subject to such Loans (a "Margin Excess"), Borrower may, by notice to Lender, demand that Lender transfer to Borrower such amount of the Collateral selected by Borrower so that the market value of the Collateral for such Loans, after deduction of such amounts, shall thereupon not exceed the Margin Percentage of the market value of the Loaned Securities. Unless otherwise agreed, such transfer is to be made no later than the close of the next Business Day following the day of Borrower's notice to Lender. 8.4. Borrower and Lender may agree, with respect to one or more Loans hereunder, to mark the values to market pursuant to Sections 8.2 and 8.3 by separately valuing the Loaned Securities lent and the Collateral given in respect thereof on a Loan-by-Loan basis. 8.5. Borrower and Lender may agree, with respect to any or all Loans hereunder, that the respective rights of Lender and Borrower under Sections 8.2 and 8.3 may be exercised only where a Margin Excess or Margin Deficit exceeds a specified dollar amount or a specified percentage of the market value of the Loaned Securities under such Loans (which amount or percentage shall be agreed to by Borrower and Lender prior to entering into any such Loans). 9. Representations. Each party to this Agreement hereby makes the following representations and warranties, which shall continue during the term of any Loan hereunder: 9.1. Each party hereto represents and warrants that (a) it has the power to execute and deliver this Agreement, to enter into the Loans contemplated hereby and to perform its obligations hereunder; (b) it has taken all necessary action to authorize such execution, delivery and performance; and (c) this Agreement constitutes a legal, valid and binding obligation enforceable against it in accordance with its terms. 9.2. Each party hereto represents and warrants that the execution, delivery and performance by it of this Agreement and each Loan hereunder will at all times comply with all applicable laws and regulations including those of applicable regulatory and self-regulatory organizations. 9.3. Each party hereto represents and warrants that it has not relied on the other for any tax or accounting advice concerning this Agreement and that it has made its own determination as to the tax and accounting treatment of any Loan and any dividends, remuneration or other funds received hereunder. 9.4. Borrower represents and warrants that it is acting for its own account. Lender represents and warrants that it is acting for its own account unless it expressly specifies otherwise in writing and complies with Section 10.3(b). 9.5. Borrower represents and warrants that (a) it has, or will have at the time of transfer of any Collateral, the right to grant a first security interest therein subject to the terms and conditions hereof, and (b) it (or the person to whom it relends the Loaned Securities) is borrowing or will borrow the Loaned Securities (except for Loaned Securities that qualify as "exempted securities" under Regulation T of the Board of Governors of the Federal Reserve System) for the purpose of making delivery of such securities in the case of short sales, failure to receive securities required to be delivered, or as otherwise permitted pursuant to Regulation T as in effect from time to time. 9.6. Lender represents and warrants that it has, or will have at the time of transfer of any Loaned Securities, the right to transfer the Loaned Securities subject to the terms and conditions hereof. Page 73 of 82 74 10. Covenants. 10.1. Each party hereto agrees and acknowledges that (a) each Loan hereunder is a "securities contract," as such term is defined in Section 741(7) of Title 11 of the United States Code (the "Bankruptcy Code"), (b) each and every transfer of funds, securities and other property under this Agreement and each Loan hereunder is a "settlement payment" or a "margin payment," as such terms are used in Sections 362(b)(6) and 546(e) of the Bankruptcy Code, and (c) the rights given to Borrower and Lender hereunder upon a Default by the other constitute the right to cause the liquidation of a securities contract and the right to set off mutual debts and claims in connection with a securities contract, as such terms are used in Sections 555 and 362(b)(6) of the Bankruptcy Code. Each party hereto further agrees and acknowledges that if a party hereto is an "insured depository institution," as such term is defined in the Federal Deposit Insurance Act, as amended ("FDIA"), then each Loan hereunder is a "securities contract" and "qualified financial contract," as such terms are defined in the FDIA and any rules, orders or policy statements thereunder. 10.2. Borrower agrees to be liable as principal with respect to its obligations hereunder. 10.3. Lender agrees either (a) to be liable as principal with respect to its obligations hereunder or (b) to execute and comply fully with the provisions of Annex I (the terms and conditions of which Annex are incorporated herein and made a part hereof). 10.4. Promptly upon (and in any event within seven (7) Business Days after) demand by Lender, Borrower shall furnish Lender with Borrower's most recent publicly-available financial statements and any other financial statements mutually agreed upon by Borrower and Lender. Unless otherwise agreed, if Borrower is subject to the requirements of Rule 17a-5(c) under the Exchange Act, it may satisfy the requirements of this Section by furnishing Lender with its most recent statement required to be furnished to customers pursuant to such Rule. 10.5. Except to the extent required by applicable law or regulation or as otherwise agreed, Borrower and Lender agree that Loans hereunder shall in no event be "exchange contracts" for purposes of the rules of any securities exchange and that Loans hereunder shall not be governed by the buy-in or similar rules of any such exchange, registered national securities or other self- regulatory organization. 11. Events of Default. All Loans hereunder may, at the option of the nondefaulting party exercised by notice to the defaulting party (which option shall be deemed to have been exercised even if no notice is given, immediately upon the occurrence of an event specified in subsection 11.5 below), be terminated immediately upon the occurrence of any one or more of the following events (individually, a "Default"): 11.1. if any Loaned Securities shall not be transferred to Lender upon termination of the Loan as required by Section 5; 11.2. if any Collateral shall not be transferred to Borrower upon termination of the Loan as required by Sections 3.3 and 5; 11.3. if either party shall fail to transfer Collateral as required by Section 8; 11.4. if either party (i) shall fail to transfer to the other party amounts in respect of distributions required to be transferred by Section 7, (ii) shall have received notice of such failure from the non-defaulting party, and (iii) shall not have cured such default by the Cutoff Time on the next day after such notice on which a transfer of cash may be effected in accordance with Section 16; 11.5. if (i) either party shall commence as debtor any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law, or seek the appointment of a receiver, conservator, trustee, custodian or similar official for such party or any substantial part of its property, (ii) any such case or proceeding shall be commenced against either party, or another shall seek such an appointment, or any application shall be filed against either party for a protective decree under the provisions of the Securities Investor Protection Act of 1970, which (A) is consented to or not timely contested by such party, (B) results in the entry of an order for relief, such an appointment, the issuance of such a protective decree or the entry of an order having a similar effect, or (C) is not dismissed within 15 days, (iii) either party shall make a general assignment for the benefit of creditors, or (iv) either party shall admit in writing its inability to pay its debts as they become due; 11.6. if either party shall have been suspended or expelled from membership or participation in any national securities exchange or registered national securities association of which it is a member or other self-regulatory organization to whose rules it is subject or if it is suspended from dealing in securities by any federal or state government agency thereof; 11.7. if either party shall have its license, charter, or other authorization necessary to conduct a material portion of its business withdrawn, suspended or revoked by any applicable federal or state government or agency thereof; 11.8. if any representation made by either party in respect of this Agreement or any Loan or Loans hereunder shall be incorrect or untrue in any material respect during the term of any Loan hereunder; 11.9. if either party notifies the other, orally or in writing, of its inability to or its intention not to perform its obligations hereunder or otherwise disaffirms, rejects or repudiates any of its obligations hereunder; or 11.10. if either party (i) shall fail to perform any material obligation under this Agreement not specifically set forth in clauses 11.1 through 11.9 above, including but not limited to the payment of fees as required by Section 4, and the payment of transfer taxes as required by Section 14, (ii) shall have received notice of such failure from the non-defaulting party and (iii) shall not have cured such failure by the Cutoff Time on the next day after such notice on which a transfer of cash may be effected under Section 16. 12. Lender's Remedies. Upon the occurrence of a Default under Section 11 entitling Lender to terminate all Loans hereunder, Lender shall have the right (without further notice to Borrower), in addition to any other remedies provided herein or under applicable law, (a) to purchase a like amount of Loaned Securities ("Replacement Securities") in the principal market for such securities in a commercially reasonable manner, (b) to sell any Collateral in the principal market for such Collateral in a commercially reasonable manner and (c) to apply and set off the Collateral and any proceeds thereof (including any amounts drawn under a letter of credit supporting any Loan) against the payment of the purchase price for such Replacement Securities and any amounts due to Lender under Sections 4, 7, 14 and 17. In the event Lender shall exercise such rights, Borrower's obligation to return a like amount of the Loaned Securities shall terminate. Lender may similarly apply the Collateral and any proceeds thereof to any obligation of Borrower under this Agreement, including Borrower's obligations with respect to distributions paid to Borrower (and not forwarded to Lender) in respect of Loaned Securities. In the event that (i) the purchase price of Replacement Securities (plus all other amounts, if any, due to Lender hereunder) exceeds (ii) the amount of the Collateral, Borrower shall be liable to Lender for the amount of such excess together with interest thereon at a rate equal to (A) in the case of purchases of Foreign Securities, LIBOR, (B) in the case of purchases of any other securities (or other amounts, if any, due to Lender hereunder), the Federal Funds Rate or (C) such other rate as may be specified in Schedule B, in each case as such rate fluctuates from day to day, from the date of such purchase until the date of payment of such excess. As security for Borrower's obligation to pay such excess, Lender shall have, and Borrower hereby grants, a security interest in any property of Borrower then held by or for Lender and a right of setoff with respect to such property and any other amount payable by Lender to Borrower. The purchase price of Replacement Securities purchased under this Section 12 shall include, and the proceeds of any sale of Collateral shall be determined after deduction of, broker's fees and commissions and all other reasonable costs, fees and expenses related to such purchase or sale (as the case may be). In the event Lender exercises its rights under this Section 12, Lender may elect in its sole discretion, in lieu of purchasing all or a portion of the Replacement Securities or selling all or a portion of the Collateral, to be deemed to have made, respectively, such purchase of Replacement Securities or sale of Collateral for an amount equal to the price therefor on the date of such exercise obtained from a generally recognized source or the most recent closing bid quotation from such a source. Subject to Section 19, upon the satisfaction of all obligations hereunder, any remaining Collateral shall be returned to Borrower. Page 74 of 82 75 13. Borrower's Remedies. Upon the occurrence of a Default under Section 11 entitling Borrower to terminate all Loans hereunder, Borrower shall have the right (without further notice to Lender), in addition to any other remedies provided herein or under applicable law, (a) to purchase a like amount of Collateral ("Replacement Collateral") in the principal market for such Collateral in a commercially reasonable manner, (b) to sell a like amount of the Loaned Securities in the principal market for such securities in a commercially reasonable manner and (c) to apply and set off the Loaned Securities and any proceeds thereof against (i) the payment of the purchase price for such Replacement Collateral (ii) Lender's obligation to return any cash or other Collateral and (iii) any amounts due to Borrower under Sections 4, 7 and 17. In such event, Borrower may treat the Loaned Securities as its own and Lender's obligation to return a like amount of the Collateral shall terminate; provided, however, that Lender shall immediately return any letters of credit supporting any Loan upon the exercise or deemed exercise by Borrower of its termination rights under Section 11. Borrower may similarly apply the Loaned Securities and any proceeds thereof to any other obligation of Lender under this Agreement, including Lender's obligations with respect to distributions paid to Lender (and not forwarded to Borrower) in respect of Collateral. In the event that (i) the sales price received from such Loaned Securities is less than (ii) the purchase price of Replacement Collateral (plus the amount of any cash or other Collateral not replaced by Borrower and all other amounts, if any, due to Borrower hereunder), Lender shall be liable to Borrower for the amount of any such deficiency, together with interest on such amounts at a rate equal to (A) in the case of Collateral consisting of Foreign Securities, LIBOR, (B) in the case of Collateral consisting of any other securities (or other amounts due, if any, to Borrower hereunder), the Federal Funds Rate or (C) such other rate as may be specified in Schedule B in each case as such rate fluctuates from day to day, from the date of such sale until the date of payment of such deficiency. As security for Lender's obligation to pay such deficiency, Borrower shall have and Lender hereby grants, a security interest in any property of Lender then held by or for Borrower and a right of setoff with respect to such property and any other amount payable by Borrower to Lender. The purchase price of any Replacement Collateral purchased under this Section 13 shall include, and the proceeds of any sale of Loaned Securities shall be determined after deduction of, broker's fees and commissions and all other reasonable costs, fees and expenses related to such purchase or sale (as the case may be). In the event Borrower exercises its rights under this Section 13, Borrower may elect in its sole discretion, in lieu of purchasing all or a portion of the Replacement Collateral or selling all or a portion of the Loaned Securities, to be deemed to have made, respectively, such purchase of Replacement Collateral or sale of Loaned Securities for an amount equal to the price therefor on the date of such exercise obtained from a generally recognized source or the most recent closing bid quotation from such a source. Subject to Section 19, upon the satisfaction of all Lender's obligations hereunder, any remaining Loaned Securities (or remaining cash proceeds thereof) shall be returned to Lender. Without limiting the foregoing, the parties hereto agree that they intend the Loans hereunder to be loans of securities. If, however, any Loan is deemed to be a loan of money by Borrower to Lender, then Borrower shall have, and Lender shall be deemed to have granted, a security interest in the Loaned Securities and the proceeds thereof. 14. Transfer Taxes. All transfer taxes with respect to the transfer of the Loaned Securities by Lender to Borrower and by Borrower to Lender upon termination of the Loan shall be paid by Borrower. 15. Market Value. 15.1. Unless otherwise agreed, if the principal market for the securities to be valued is a national securities exchange in the United States, their market value shall be determined by their last sale price on such exchange on the preceding Business Day or, if there was no sale on that day, by the last sale price on the next preceding Business Day on which there was a sale on such exchange, all as quoted on the Consolidated Tape or, if not quoted on the Consolidated Tape, then as quoted by such exchange. 15.2. Except as provided in Section 15.3 or 15.4 or as otherwise agreed, if the principal market for the securities to be valued is the over-the-counter market, their market value shall be determined as follows. If the securities are quoted on the National Association of Securities Dealers Automated Quotations System ("NASDAQ"), their market value shall be the closing sale price on NASDAQ on the preceding Business Day or, if the securities are issues for which last sale prices are not quoted on NASDAQ, the closing bid price on such day. If the securities to be valued are not quoted on NASDAQ, their market value shall be the highest bid quotation as quoted in any of The Wall Street Journal, the National Quotation Bureau pink sheets, the Salomon Brothers quotation sheets, quotations sheets of registered market makers and, if necessary, dealers' telephone quotations on the preceding Business Day. In each case, if the relevant quotation did not exist on such day, then the relevant quotation on the next preceding Business Day in which there was such a quotation shall be the market value. 15.3. Unless otherwise agreed, if the securities to be valued are Government Securities, their market value shall be the average of the bid and ask prices as quoted on Prophesy at 3:30 P.M. New York time on the Business Day preceding the date on which such determination is made. If the securities are not so quoted on such day, their market value shall be determined as of the next preceding Business Day on which they were so quoted. If the securities to be valued are Government Securities that are not quoted on Prophesy, their market value shall be determined as of the close of business on the preceding Business Day in accordance with market practice for such securities. 15.4. Unless otherwise agreed, if the securities to be valued are Foreign Securities, their market value shall be determined as of the close of business on the preceding Business Day in accordance with market practice in the principal market for such securities. 15.5. Unless otherwise agreed, the market value of a letter of credit shall be the undrawn amount thereof. 15.6. All determinations of market value under Sections 15.1, 15.2, 15.3, and 15.4 shall include, where applicable, accrued interest to the extent not already included therein (other than any interest transferred to the other party pursuant to Section 7), unless market practice with respect to the valuation of such securities in connection with securities loans is to the contrary. All determinations of market value that are required to be made at the close of trading on any Business Day pursuant to Section 8 or otherwise hereunder shall be made as if being determined at the commencement of trading on the next Business Day. The determinations of market value provided for in this Section 15 shall apply for all purposes under this Agreement, except for purposes of Sections 12 and 13. Page 75 of 82 76 16. Transfers. 16.1. All transfers of securities hereunder shall by be (a) physical delivery of certificates representing such securities together with duly executed stock and bond transfer powers, as the case may be, with signatures guaranteed by a bank or a member firm of the New York Stock Exchange, Inc., (b) transfer on the books of a Clearing Organization, or (c) such other means as Borrower and Lender may agree. In every transfer of securities hereunder, the transferor shall take all steps necessary (i) to effect a "transfer" under Section 8-313 of the New York Uniform Commercial Code or, where applicable, under any U.S. federal regulation governing transfers of securities and (ii) to provide the transferee with comparable rights under any applicable foreign law or regulation. 16.2. All transfers of cash Collateral hereunder shall be by (a) wire transfer in immediately available, freely transferable funds or (b) such other means as Borrower and Lender may agree. All other transfers of cash hereunder shall be made in accordance with the preceding sentence or by delivery of a certified or official bank check representing next-day New York Clearing House Funds. 16.3. All transfers of a letter of credit from Borrower to Lender shall be made by physical delivery to Lender of an irrevocable letter of credit issued by a "bank" as defined in Section 3(a)(6)(A)-(C) of the Exchange Act. Transfer of a letter of credit from Lender to Borrower shall be made by causing such letter of credit to be returned or by causing the amount of such letter of credit to be reduced to the amount required after such transfer. 16.4. A transfer of securities, cash or letters of credit may be effected under this Section 16 on any day except (a) a day on which the transferee is closed for business at its address set forth in Schedule A hereto or (b) a day on which a Clearing Organization or wire transfer system is closed, if the facilities of such Clearing Organization or wire transfer system are required to effect such transfer. 17. Contractual Currency. 17.1. Borrower and Lender agree that: (a) any payment in respect of a distribution under Section 7 shall be made in the currency in which the underlying distribution of cash was made; (b) any return of cash shall be made in the currency in which the underlying transfer of cash was made and (c) any other payment of cash in connection with a Loan under this Agreement shall be in the currency agreed upon by Borrower and Lender in connection with such Loan (the currency established under clause (a), (b) or (c) hereinafter referred to as the "Contractual Currency"). Notwithstanding the foregoing, the payee of any such payment may, at its option, accept tender thereof in any other currency; provided, however, that, to the extent permitted by applicable law, the obligation of the payor to make such payment will be discharged only to the extent of the amount of Contractual Currency that such payee may, consistent with normal banking procedures, purchase with such other currency (after deduction of any premium and costs of exchange) on the banking day next succeeding its receipt of such currency. 17.2. If for any reason the amount in the Contractual Currency received under Section 17.1, including amounts received after conversion of any recovery under any judgment or order expressed in a currency other than the Contractual Currency, falls short of the amount in the Contractual Currency due in respect of this Agreement, the party required to make the payment will (unless a Default has occurred and such party is the non-defaulting party) as a separate and independent obligation and to the extent permitted by applicable law, immediately pay such additional amount in the Contractual Currency as may be necessary to compensate for the shortfall. 17.3. If for any reason the amount in the Contractual Currency received under Section 17.1 exceeds the amount in the Contractual Currency due in respect of this Agreement, then the party receiving the payment will (unless a Default has occurred and such party is the non-defaulting party) refund promptly the amount of such excess. 18. [INTENTIONALLY DELETED] 19. Single Agreement. Borrower and Lender acknowledge that, and have entered into this Agreement in reliance on the fact that, all Loans hereunder constitute a single business and contractual relationship and have been entered into in consideration of each other. Accordingly, Borrower and Lender hereby agree that payments, deliveries and other transfers made by either of them in respect of any Loan shall be deemed to have been made in consideration of payments, deliveries and other transfers in respect of any other Loan hereunder, and the obligations to make any such payment, deliveries and other transfers may be applied against each other and netted. In addition, Borrower and Lender acknowledge that, and have entered into this Agreement in reliance on the fact that, all Loans hereunder have been entered into in consideration of each other. Accordingly, Borrower and Lender hereby agree that (a) each shall perform all of its obligations in respect of each Loan hereunder, and that a default in the performance of any such obligation by Borrower or by Lender (the "Defaulting Party") in any Loan hereunder shall constitute a default by the Defaulting Party under all such Loans hereunder, and (b) the non-defaulting party shall be entitled to set off claims and apply property held by it in respect of any Loan hereunder against obligations owing to it in respect of any other Loan with the Defaulting Party. 20. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF. 21. Waiver. The failure of a party to this Agreement to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. All waivers in respect of a Default must be in writing. 22. Remedies. All remedies hereunder and all obligations with respect to any Loan shall survive the termination of the relevant Loan, return of Loaned Securities or Collateral and termination of this Agreement. 23. Notices and Other Communications. Unless another address is specified in writing by the respective party to whom any notice or other communication is to be given hereunder, all such notices or communications shall be in writing or confirmed in writing and delivered at the respective addresses set forth in Schedule A attached hereto. All notices shall be effective upon actual receipt, provided, however, that if any notice shall be received by a party on a day on which such party is not open for business at its office located at the address set forth in Schedule A, such notice shall be deemed to have been received by such party at the opening of business on the next day on which such party is open for business at such address. 24. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. 24.1. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK CITY, AND ANY APPELLATE COURT FROM ANY SUCH COURT, SOLELY FOR THE PURPOSE OF ANY SUIT, ACTION OR PROCEEDING BROUGHT TO ENFORCE ITS OBLIGATIONS HEREUNDER OR RELATING IN ANY WAY TO THIS AGREEMENT OR ANY LOAN HEREUNDER AND (B) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT AND ANY RIGHT OF JURISDICTION ON ACCOUNT OF ITS PLACE OF RESIDENCE OR DOMICILE. 24.2. EACH PARTY HERETO IRREVOCABLY WAIVES ANY RIGHT THAT IT MAY HAVE TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. Page 76 of 82 77 25. Miscellaneous. This Agreement supersedes any other agreement between the parties hereto concerning loans of securities between Borrower and Lender. This Agreement shall not be assigned by either party without the prior written consent of the other party and any attempted assignment without such consent shall be null and void. Subject to the foregoing, this Agreement shall be binding upon and shall ensure to the benefit of Borrower and Lender and their respective heirs, representatives, successors and assigns. This Agreement may be terminated by either party upon written notice to the other, subject only to fulfillment of any obligations then outstanding. This Agreement shall not be modified, except by an instrument in writing signed by the party against whom enforcement is sought. The parties hereto acknowledge and agree that, in connection with this Agreement and each Loan hereunder, time is of the essence. Each provision and agreement herein shall be treated as separate and independent from any other provision herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement. 26. Definitions. For the purposes hereof: 26.1. "Broker-Dealer" shall mean any person that is a broker (including a municipal securities broker), dealer, municipal securities dealer, government securities broker or government securities dealer as defined in the Exchange Act, regardless of whether the activities of such person are conducted in the United States or otherwise require such person to register with the Securities and Exchange Commission or other regulatory body. 26.2. "Business Day" shall mean, with respect to any Loan hereunder, a day on which regular trading occurs in the principal market for the Loaned Securities subject to such Loan, provided, however, that for purposes of Section 15, such term shall mean a day on which regular trading occurs in the principal market for the securities whose value is being determined. Notwithstanding the foregoing, (i) for purposes of Section 8, "Business Day" shall mean any day on which regular trading occurs in the principal market for any Loaned Securities or for any securities Collateral under any outstanding Loan hereunder and "next Business Day" shall mean the next day on which a transfer of Collateral may be effected in accordance with Section 16; and (ii) in no event shall a Saturday or Sunday be considered a Business Day. 26.3. "Clearing Organization" shall mean The Depository Trust Company, or, if agreed to by Borrower and Lender, such other clearing agency at which Borrower (or Borrower's agent) and Lender (or Lender's agent) maintain accounts, or a book-entry system maintained by a Federal Reserve Bank. 26.4. "Collateral" shall mean, whether now owned or hereafter acquired and to the extent permitted by applicable law, (a) any property which Borrower and Lender agree shall be acceptable collateral prior to the Loan and which is transferred to Lender pursuant to Section 3 or 8 (including as collateral, for definitional purposes, any letters of credit mutually acceptable to Lender and Borrower), (b) any property substituted therefor pursuant to Section 3.5, (c) all accounts in which such property is deposited and all securities and the like in which any cash collateral is invested or reinvested, and (d) any proceeds of any of the foregoing. For purposes of return of Collateral by Lender or purchase or sale of securities pursuant to Section 12 or 13, such term shall include securities of the same issuer, class and quantity as the Collateral initially transferred by Borrower to Lender. 26.5. "Customer" shall mean any person that is a customer of Borrower under Rule 15c3-3 under the Exchange Act or any comparable regulation of the Secretary of the Treasury under Section 15C of the Exchange Act (to the extent that Borrower is subject to such Rule or comparable regulation). 26.6. "Cutoff Time" shall mean a time on a Business Day by which a transfer of cash, securities or other property must be made by Borrower or Lender to the other, as shall be agreed by Borrower and Lender in Schedule B or otherwise orally or in writing or, in the absence of any such agreement, as shall be determined in accordance with market practice. 26.7. "Default" shall have the meaning assigned in Section 11. 26.8. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 26.9. "Federal Funds Rate" shall mean the rate of interest (expressed as an annual rate), as published in Federal Reserve Statistical Release H.15(519) or any publication substituted therefor, charged for federal funds (dollars in immediately available funds borrowed by banks on an overnight unsecured basis) on that day or, if that day is not a banking day in New York City, on the next preceding banking day. 26.10. "Foreign Securities" shall mean, unless otherwise agreed, securities that are principally cleared and settled outside the United States. 26.11. "Government Securities" shall mean government securities as defined in Section 3(a)(42)(A)-(C) of the Exchange Act. 26.12. "LIBOR" shall mean for any date, the offered rate for deposits in U.S. dollars for a period of three months which appears on the Reuters Screen LIBO page as of 11:00 A.M., London time, on such date (or, if at least two such rates appear, the arithmetic mean of such rates). 26.13. "Loan" shall mean a loan of securities hereunder. 26.14. "Loaned Security" shall mean any security which is a security as defined in the Exchange Act, transferred in a Loan hereunder until such security (or an identical security) is transferred back to Lender hereunder, except that, if any new or different security shall be exchanged for any Loaned Security by recapitalization, merger, consolidation or other corporate action, such new or different security shall, effective upon such exchange, be deemed to become a Loaned Security in substitution for the former Loaned Security for which such exchange is made. For purposes of return of Loaned Securities by Borrower or purchase or sale of securities pursuant to Section 12 or 13, such term shall include securities of the same issuer, class and quantity as the Loaned Securities, as adjusted pursuant to the preceding sentence. 26.15. "Plan" shall mean (a) any "employee benefit plan" as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 which is subject to Part 4 of Subtitle B of Title I of such Act; (b) any "plan" as defined in Section 4975(e)(1) of the Internal Revenue Code of 1986 or (c) any entity the assets of which are deemed to be assets of any such "employee benefit plan" or "plan" by reason of the Department of Labor's plan asset regulation, 29 C.F.R. Section 2510.3-101. Prime Dealer Services FINANCIAL INSTITUTION Corp. PARTNERS, LTD. By: By: /s/ Richard J. Perry, Jr. Name: [SIG_NAME1] Name: Richard J. Perry, Jr. [SIG Title: [SIG_POSITION1] Title: Manager of GP Page 77 of 82 78 Schedule A NAMES AND ADDRESSES FOR COMMUNICATIONS Prime Dealer Services Corp. 1221 Avenue of the Americas New York, NY 10020 Attention: Ms. Kathleen Mooney, Vice President Tel.:(212) 762-5101 Fax: (212) 762-9519 Financial Institution Partners, LTD. 1824 Jefferson Place, NW Washington, DC 20036 Tel.: (202) 822-8117 Fax: (202) 822-8365 Schedule B DEFINED TERMS AND SUPPLEMENTAL PROVISIONS Cutoff Time(s) ANNEX II Supplemental Terms and Conditions The following Supplemental Terms and Conditions (the "Supplement") supplement and amend the Master Securities Loan Agreement (the "Agreement") dated between Prime Dealer Services Corp. and : 2. The phrase "and for any other obligation of Borrower to Lender" shall be deleted from the first sentence of Section 3.2 of the Agreement. The words "securities intermediary" shall be inserted after the words "financial intermediary" in the last sentence of Section 3.2. 2. The term "substituted Collateral" in first sentence of Section 3.5 of the Agreement after the phrases "provided however that such" and "the aggregate market value of such", shall be changed to "substitute Collateral" in both instances, and the phrase "(or other Collateral acceptable to Lender)" shall be inserted after the words "substitute letter of credit" in the last sentence of such Section. 3. The phrase "market or" shall be inserted after the words "based on the aggregate" in first sentence of Section 4.1 of the Agreement and the phrase "as agreed" shall be inserted after the words "par value" in the first sentence of such Section. 4. The word "such" shall be inserted after the phrase "by the transfer of" in the first sentence of Section 7.2 of the Agreement and the phrase "in an amount equal to such cash distribution," shall be deleted from the first sentence of such Section. 5. The word "such" shall be inserted after the phrase "by the transfer of" in second sentence of Section 7.3 of the Agreement and the phrase, "in an amount equal to such cash distribution," shall be deleted from the second sentence of such Section. 6. The sentence "Non-cash distributions received by Lender shall be added to the Collateral on the date of distribution and shall be considered such for all purposes, except that if the Loan has terminated, Lender shall forthwith transfer the same to Borrower," shall be inserted at the end of Section 7.3 of the Agreement. 7. The phrase "Subject to Section 7.4 (d)," shall be inserted at the beginning of Section 9.3 of the Agreement. 8. The phrase "and such suspension or expulsion shall have a material effect on such parties' ability to perform hereunder" shall be inserted at the end of Section 11(f) of the Agreement. 9. Unless otherwise agreed, the Margin Percentage shall be as follows: (a)US and Canadian exchange traded equity securities: 100% (b)Non-US and Non-Canadian exchange traded equity securities: 100% (c) All fixed income securities: 100% 10. When Borrower gives other than cash Collateral, Fees shall be calculated in accordance with Section 4, except that Fees shall be based on the Market Value of Loaned Securities plus accrued and unpaid interest to the extent accrued interest is not included in the market value of the Loaned Securities. 11. The second sentence in Section 5 ("Termination of Loan") is hereby deleted and restated as follows: "The termination date established by a termination notice given by Lender to Borrower shall be a date no earlier than the standard settlement date for trades of the Loaned Securities entered into on the date of such notice, which date shall, unless Borrower and Lender agree to the contrary, be (i) in the case of Government Securities, the next Business Day following such notice and (ii) in the case of all other securities, the number of Business Days in the standard securities settlement cycle in the United States as defined in Rule 15c6-1 under the Securities Exchange Act of 1934 (currently three days) following such notice." 12. THIS SUPPLEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF. Except as otherwise set forth herein, the Agreement shall remain unchanged and in full force and effect. From and after the date hereof, any reference to the Agreement shall be a reference to the Agreement as amended hereby. Prime Dealer Services FINANCIAL INSTITUTION Corp. PARTNERS, LTD. By: By: /s/ Richard J. Perry, Jr. Name: [SIG_NAME1] Name: Richard J. Perry, Jr. [SIG Title: [SIG_POSITION1] Title: Manager Page 78 of 82 79 ANNEX III Supplemental Terms and Conditions The following Supplemental Terms and Conditions (the "Supplement") supplement and amend the Master Securities Loan Agreement (the "Agreement") dated as of between Prime Dealer Services Corp. ("Lender") and ("Borrower") unless otherwise defined in Section 11.1 below, capitalized terms used herein shall have the meanings assigned in the Agreement. 1. Collateral and Mark to Market. 1.1 Notwithstanding anything to the contrary in the Agreement, in connection with any Loan in which Lender is not a Customer, Borrower and Lender may agree, as provided in Section 10.2 hereof, that the market value of the Collateral, if any, transferred by Borrower to Lender, upon initial transfer and for purposes of any mark to market or similar provision of the Agreement, shall be equal to a percentage of the market value of the Loaned Securities that is less than 100%; provided, however, that in the event that the writing or other confirmation evidencing such agreement does not set out such percentage with respect to any such Loan, such percentage shall not, for purposes of any mark to market or similar provision of the Agreement, be less than the percentage that is obtained by dividing (i) the market value of the Collateral required to be transferred by Borrower to Lender with respect to such Loan at the commencement of the Loan by (ii) the market value of the Loaned Securities required to be transferred by Lender to Borrower at the commencement of the Loan. 1.2 The Collateral transferred by Borrower to Lender under the Agreement, as well as any other property transferred by Borrower to Lender or any of Lender's Affiliates as security for any other obligations or liabilities of Borrower to Lender or any of Lender's Affiliates, shall be security for any and all obligations or liabilities of Borrower with respect to the Agreement, for any Loan and for any other agreement or transaction between Lender or any Affiliate of Lender and Borrower, now existing or hereafter arising. 2. Permitted Purpose. 2.1 Notwithstanding anything to the contrary in the Agreement, with respect to any Loan of an Equity Security, Borrower and Lender may agree, as provided in Section 10.2 hereof, that Borrower shall not be deemed to have made any representation or warranty to Lender regarding the purpose for which Borrower is borrowing or will borrow the Loaned Security, including without limitation any representation or warranty regarding the use of the Loaned Security by it (or the person to whom it relends the Loaned Security) for the purpose of making delivery of such security in the case of a short sale, failure to receive securities required to be delivered or otherwise. By entering into any such agreement, Lender shall be deemed to have represented and warranted to Borrower (which representation and warranty shall be deemed to be repeated on each day during the term of such Loan) that Lender is either (i) an "exempted borrower" within the meaning of Regulation T or (ii) a member of a national securities exchange or a broker or dealer registered with the Securities and Exchange Commission that is entering into such Loan to finance its activities as a market maker or an underwriter. 2.2 Notwithstanding anything to the contrary in the Agreement, with respect to any Loan of a security that is not an Equity Security, Borrower shall not be deemed to have made any representation or warranty to Lender regarding the purpose for which Borrower is borrowing or will borrow the Loaned Security, including without limitation any representation or warranty regarding the use of the Loaned Security by it (or the person to whom it relends the Loaned Security) for the purpose of making delivery of such security in the case of a short sale, failure to receive securities required to be delivered or otherwise. 3. Termination and Rights in Respect of Collateral. Notwithstanding anything to the contrary in the Agreement, if under the Agreement Lender may pledge, repledge, hypothecate, rehypothecate, lend, relend, sell or otherwise transfer the Collateral, or re-register Collateral evidenced by physical certificates in any name other than Borrower's: (e) Borrower may not terminate a Loan, if the Collateral for such Loan includes securities other than Government Securities, except on a termination date established by notice given to Lender prior to the close of business on a Business Day; the date established by such termination notice given by Borrower to Lender shall be a date no earlier than the standard settlement date for trades of such Collateral entered into on the date of such notice, which date shall, unless Borrower and Lender agree to the contrary, be the third Business Day following such notice; and (f) Borrower waives the right to vote, or to provide any consent or take any similar action with respect to, any Collateral in the event that the record date or deadline for such vote, consent or other action falls during the term of a Loan and such Collateral is not required to be returned to Borrower pursuant to any substitution, mark to market or similar provision of the Agreement. 4. Dividends, Distributions, Etc. 4.1 Notwithstanding anything to the contrary in the Agreement, Borrower shall be entitled to receive all distributions made on or in respect of Collateral transferred to Lender which are not otherwise received by Borrower, to the full extent it would be so entitled if such Collateral had not been transferred to Lender, including, but not limited to (a) cash and all other property, (b) stock dividends, (c) securities received as a result of split ups of such Collateral and distributions in respect thereof, (d) interest payments, and (e) all rights to purchase additional securities. Page 79 of 82 80 4.2 Any cash distributions made on or in respect of Collateral, which Borrower is entitled to receive pursuant to Section 4.1 hereof, shall be treated in accordance with the Agreement. Non-cash distributions received by Lender shall be added to the Collateral on the date of distribution and shall be considered such for all purposes, except that if each Loan secured by such Collateral has terminated, Lender shall forthwith transfer the same to Borrower. 5. Transfer. Notwithstanding anything to the contrary in the Agreement, all transfers by either Borrower or Lender of Loaned Securities or Collateral consisting of "financial assets" (within the meaning of the New York Uniform Commercial Code) thereunder shall be by (a) in the case of certificated securities, physical delivery of certificates representing such securities together with duly executed stock and bond transfer powers, as the case may be, with signatures guaranteed by a bank or a member firm of the New York Stock Exchange, Inc., (b) registration of an uncertificated security in the transferee's name by the issuer of such uncertificated security, (c) the crediting by a securities intermediary of such financial assets to the transferee's securities account maintained with such securities intermediary, or (d) such other means as Borrower and Lender may agree. For the avoidance of doubt, the parties agree and acknowledge that the term "securities", as used in the Agreement and herein, shall include any "security entitlements" with respect to such securities (within the meaning of the New York Uniform Commercial Code), and that the terms "financial intermediary" and "clearing corporation", as used in the Agreement, shall mean a "securities intermediary" (within the meaning of the New York Uniform Commercial Code). 6. Representations and Warranties. Each of the parties hereto (and, in the case of a party acting as agent in accordance with the terms of the Agreement, each of its principals) represents and warrants that (a) it has full power and authority to execute and deliver this Supplement and to enter into any Loan contemplated by the Agreement and to perform its obligations thereunder, as supplemented or amended herein; (b) it has taken all necessary action to authorize such execution, delivery and performance; and (c) this Supplement constitutes a legal, valid and binding obligation, enforceable against it in accordance with its terms and the terms of the Agreement. 7. Events of Default. 7.1 In addition to any events of default set forth in the Agreement, the occurrence of one or more of the following shall constitute an event of default under the Agreement: (i) if either party fails to perform any covenant or obligation required to be performed by it hereunder or if any representation made by either party in respect hereof shall be incorrect or untrue in any material respect during the term of any Loan under the Agreement, as supplemented or amended herein; provided, however, that to the extent that Section 4 hereof supplements and amends any provisions in the Agreement governing the rights of Borrower in respect of distributions on Collateral, any such failure under Section 4 hereof shall constitute an event of default only after the expiration of the notice period, if any, specified in the Agreement with respect to the occurrence of an event of default for such a failure; or (ii) if Borrower defaults or fails to perform with respect to any indebtedness to Lender or any Affiliate of Lender or any other agreement or transaction between Lender or any Affiliate of Lender and Borrower, now or hereafter arising. 7.2 In addition to the remedies in events of default set forth in the Agreement, an event of default with respect to Borrower under the Agreement shall constitute an event of default (howsoever described) under all other agreements and transactions between Lender or any Affiliate of Lender and Borrower and, upon any event of default with respect to Borrower, Lender and any Affiliate of Lender shall be entitled to: (i) cancel and otherwise liquidate and close out any transaction under any other agreement or transaction between Lender or any Affiliate of Lender and Borrower without prior notice to Borrower or any other party, whereupon Borrower, as the case may be, shall be liable to Lender or the Affiliate of Lender, as the case may be, for any resulting loss, damage, cost and expense, including loss equal to the amount Lender or the Affiliate of Lender, as the case may be, would have to pay to enter into replacement transactions (whether or not Lender or the Affiliate of Lender, as the case may be, enters into any such replacement transactions) and any damages resulting to Lender or any Affiliate of Lender from entering into or terminating hedge transactions with respect thereto; and (ii) set off any obligation under any transaction under any agreement between Lender or any Affiliate of Lender and Borrower (including any Loan under this Agreement), including any payment or delivery obligation, of Lender or the Affiliate of Lender, as the case may be, to Borrower against any obligation under any transaction under any agreement between Lender and Borrower (including any Loan under this Agreement), including any payment or delivery obligation, of Borrower to Lender or the Affiliate of Lender, as the case may be. 8. Transfer Taxes. Unless otherwise agreed, all transfer taxes with respect to the transfer of Collateral by Borrower to Lender and by Lender to Borrower upon termination of the Loan or pursuant to any substitution, mark to market or similar provision of the Agreement shall be paid by Borrower. 9. APPLICABLE LAW. THIS SUPPLEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF. Page 80 of 82 81 10. Definitions and Interpretations. 10.1 Notwithstanding anything to the contrary in the Agreement, the following terms shall have the following meanings for purposes of this Supplement. "Affiliate" shall mean, in relation to any person, (i) any entity controlled, directly or indirectly, by the person; (ii) any entity that controls, directly or indirectly, the person; or (iii) any entity directly or indirectly under common control with the person. For purposes of this definition, "control" of any entity or person means ownership of a majority of the voting power of the entity or person. "Collateral" shall have the meaning specified in the Agreement, except that, if any new or different security shall be exchanged for any Collateral by recapitalization, merger, consolidation or other corporate action, such new or different security shall, effective upon such exchange, be deemed to become Collateral in substitution for the former Collateral for which such exchange is made. "Customer" shall mean any person that is a customer of Borrower under Rule 15c3- 3 under the Exchange Act or any comparable regulation of the Secretary of the Treasury under Section 15C of the Exchange Act (to the extent that Borrower is subject to such rule or comparable regulation). "Equity Security" shall mean any security other than a "non-equity security", as defined in Regulation T. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Government Securities" shall mean "government securities" as defined in Section 3(a)(42)(A)-(C) of the Exchange Act. "Plan" shall mean (i) any "employee benefit plan" as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 which is subject to Part 4 of Subtitle B of Title I of such Act; (ii) any "plan" as defined in Section 4975(e)(1) of the Internal Revenue Code of 1986; or (iii) any entity the assets of which are deemed to be assets of any such "employee benefit plan" or "plan" by reason of the Department of Labor's plan asset regulation, 29 C.F.R. Section 2510.3-101. "Regulation T" shall mean Regulation T of the Board of Governors of the Federal Reserve System, as in effect from time to time. 10.2 Any agreement between the parties pursuant to Section 1.1 or Section 2.1 shall be made (i) in writing, (ii) orally, if confirmed promptly in writing or through any system that compares Loans and in which Borrower and Lender are participants, or (iii) in such other manner as may be agreed by the parties in writing. 11. Notwithstanding anything contained in the Agreement, Lender and Borrower agree that in effecting Loans transfers between Lender's Account and Borrower's Account are intended to be, and shall be deemed to be, simultaneous. Notwithstanding the foregoing, if Lender has failed to deliver the Loaned Securities to Borrower's Account or Borrower has failed to deliver the Collateral to Lender's Account by the applicable Cutoff time for such Loan, then no Loan shall have occurred and Borrower (in the case of Lender's failure to deliver) or Lender (in the case of Borrower's failure to deliver), shall have the absolute right to the return of the Collateral or Loaned Securities, as the case may be. Until such Collateral or Loaned Securities are redelivered to either Borrower (in the case of Lender's failure to deliver) or Lender (in the case of Borrower's failure to deliver), the party that failed to deliver such Collateral or Loaned Securities shall hold such securities in escrow for the other party and shall be required to pay to such party interest based on the market value of the Collateral or Loaned Securities, as the case may be, (i) in the case of foreign securities, at the LIBOR rate and (ii) in the case of any other securities, at the Federal Funds Rate, for each day that such redelivery obligation remains outstanding. For purposes of this Paragraph 11, the following terms shall have the following meanings: "Lender's Account" shall mean the account maintained by Lender for the deposit of Collateral with respect to each Loan and, for such purposes, Lender's Account shall be deemed to be a "securities account" within the meaning of the New York Uniform Commercial Code. For purposes of this Amendment, Lender's Account shall include any account for the deposit of cash in connection therewith. "Borrower's Account" shall mean the account maintained by Borrower for the deposit of Loaned Securities with respect to each Loan and, for such purposes, Borrower's Account shall be deemed to be a "securities account" within the meaning of the New York Uniform Commercial Code. For purposes of this Amendment, Borrower's Account shall include any account for the deposit of cash in connection therewith. Except as otherwise set forth herein, the Agreement shall remain unmodified and in full force and effect. From and after the date hereof, any reference to the Agreement shall be a reference to the Agreement as supplemented and amended hereby. Prime Dealer Services FINANCIAL INSTITUTION Corp. PARTNERS, LTD. By: By: /s/ Richard J. Perry, Jr. Name: [SIG_NAME1] Name: Richard J. Perry, Jr. [SIG Title: [SIG_POSITION1] Title: Manager Page 81 of 82 82 EXHIBIT Q Account Control Agreement, dated as of , among Morgan Stanley & Co., Incorporated ("MS&Co."), Prime Dealer Services Corp. ("PDS") and ("Customer"). Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned in the Master Securities Loan Agreement dated (the "Master Securities Loan Agreement"). PREAMBLE: 1. MS&Co., in its capacity as securities intermediary ("Intermediary") has established one or more securities accounts in the name of (the "Account"). 2. PDS may, from time to time, lend securities to Customer pursuant to the Master Securities Loan Agreement. 3. Customer wishes to provide for the Account and all or a portion of the assets credited to the Account (the "Additional Collateral"), in addition to any other Collateral transferred by Customer to PDS, to serve as Collateral in connection with one or more Loans or other obligations under the Master Securities Loan Agreement. 4. PDS, Customer and MS&Co. (in its individual capacity and as Intermediary) are entering into this Agreement to provide for the control of the Additional Collateral by PDS and to perfect the security interest of PDS therein. TERMS: Section 1. The Account. All parties agree that the Account is a "securities account" within the meaning of Article 8 of the Uniform Commercial Code of the State of New York (the "UCC") and that all property held by Intermediary in the Account will be treated as financial assets under the UCC. Intermediary will not agree with any third party to comply with entitlement orders or other directions concerning the Collateral held in the Account originated by any third party without the prior written consent of PDS and Customer. Section 2. Collateral. Notwithstanding anything to the contrary in the Master Securities Loan Agreement, in addition to Collateral transferred by Customer to PDS pursuant to Section 16 of the Master Securities Loan Agreement and Section 5 of Annex III thereto, Additional Collateral held by MS&Co. in the Account shall constitute Collateral for purposes of the Master Securities Loan Agreement, subject to the security interest and all other rights of PDS as Lender thereunder. In such event, notwithstanding anything to the contrary in the Master Securities Loan Agreement, such Additional Collateral shall, except as provided below in Section 7, be deemed to be "transferred" by Borrower to Lender for purposes of the Master Securities Loan Agreement concurrently with the transfer of such other Collateral by Borrower to Lender and shall be deemed to be "transferred" by Lender to Borrower for purposes of the Master Securities Loan Agreement concurrently with the transfer of such other Collateral by Lender to Borrower. Section 3. Subordination of Lien. The security interest in favor of PDS in the Account and financial assets credited thereto is subject and subordinate to the prior payment of all indebtedness of Customer to Intermediary, as such may exist from time to time, including fees and commissions, and to any security interest or lien in favor of Intermediary on the Account and to any right of Intermediary to close out open positions in the Account. In no event will PDS have any right to exercise any remedies in respect of the Account until such time as all Customer's obligations to Intermediary have been satisfied in full. Section 4. Control. Subject to the provisions of Section 3, Intermediary will comply with entitlement orders originated by PDS concerning the Account and any financial assets credited thereto without further consent by Customer. Subject to the foregoing, Intermediary may also comply with entitlement orders or other directions concerning the Account originated by Customer, or its authorized representatives, until such time as PDS delivers a written notice to Intermediary that PDS is thereby exercising exclusive control over the Account. Such notice may be referred to herein as the "Notice of Exclusive Control." After Intermediary receives the Notice of Exclusive Control and has had reasonable opportunity to comply, it will cease complying with entitlement orders or other directions concerning the Account originated by Customer or its representatives. Section 5. Amendment. This Agreement may not be amended or otherwise modified except in writing signed by all the parties hereto. Section 6. Choice of Law. This Agreement (including without limitation all rights and obligations with respect to the Account) shall be governed by and construed in accordance with the law of the State of New York. Section 7. Interpretation. Dividends and other distributions on Additional Collateral shall be credited to the Account in accordance with the customary practices of Intermediary, and PDS shall have no obligation with respect thereto under Section 7.3 of the Master Securities Loan Agreement and Sections 4.1 and 4.2 of Annex II thereto. SIGNATURES: PRIME DEALER SERVICES CORP. By: ___________________ Name: [SIG_NAME1] Title: FINANCIAL INSTITUTION PARTNERS, LTD. By: /s/ Richard J. Perry, Jr.__ Name: Richard J. Perry, Jr. [SIG Title: Manager of G.P. MORGAN STANLEY & CO. INCORPORATED, [INDIVIDUALLY AND AS INTERMEDIARY] By: ________ Name: [SIG_NAME1] Title: Page 82 of 82 -----END PRIVACY-ENHANCED MESSAGE-----