HomeMy WebLinkAboutDocumentation_Miscellaneous_Tab 5_10/26/1995 Memorandum
To: Bill C. Kascavelis, Finance Director DICTATED BUT NOT READ TO
From: Thomas G. Bradford, Village Manager ��
Date: August 11, 1995 EXPEDITE.
Subject: SB 2090; Legislation Mandating Investment Policies by
Local Governments by October 1, 1995
Attached hereto, please find a copy of an article appearing in
the June/July 1995 issue of Quality Cities . Apparently, this new
legislation requires that written investment policies be adopted
by local governments on or before October 1, 1995, by their
governing bodies . Therefore, in order to give you sufficient
time to draft such written investment policies and to have the
same reviewed by the Finance & Administration Committee of the
Village Council sufficiently prior to the October 1 , 1995,
deadline, I have taken steps to see that this information is
provided to you as soon as possible .
Please begin working on such a written policy immediately,
coordinating as may be needed with the Village Attorney and
others that may be needed in order to do so in a manner that
meets the requirements of SB 2090, while giving the Village the
flexibility needed to maximize return on investments in keeping
with the level of risk allowable by SB 2090 and palatable to the
Village Council of Tequesta.
Should you have any questions in regard to this matter, please
feel free to contact me.
TGB/krb
Attachment
c: John C. Randolph, Village Attorney, w/attachment
4.
State Passes Legislation Mandating Investment Policies
by Local Governments
by Dick Dowdy
In direct response to the in- Scope - Policies will pertain actions In which the proceeds
vestment crisis in Orange to only those funds in excess of will be used to provide liquidity.
County. California and other those required to meet short- Maturity and Uquidity Re-
reported investment losses by term expenses. It will not per- gairements—Policies to promote
some local governments in taro to pension, trust or bond investments that enable units of
Florida, the Florida Legislature funds where there are other local government to meet day to
passed CS/SB 2090(CS/HB existing policies or indentures day liquidity.Therefore, as far as
1795) on May 4. 1995. Sen. in effect. possible, investments will be
Rossin and Rep. Klein were the Investment Objectives— made in accordance with
primary sponsors of this legisla- Policies to include safety of known/anticipated cash needs
tion. which originally called for a capital, liquidity of funds and and cash-flow requirements.
state investment commission to investment income, in that or- Portfolio Composition—
oversee state and local govern- der of importance. Policies shall include provisions
ment investment practices, and Performance Measurement for investments, limits on secu-
a prohibition of certain types of —Policies shall include appro- rity issues, security issuers, and
investment instruments such as priate performance measures security maturities. Guidelines
derivatives. Many of the more according to the size and nature will correspond to the unit of
onerous provisions of these bills of a government's public funds. local government's size and na-
were worked out with the spon- Ethics—Policies to include ture of public funds.
sors by various local government the Prudent Person's Rule; "In- Risk&Diversification—
interests including the FGFOA. vestments should be made with Policies should maintain practi-
For the last several years. the judgment and care, under cir- cable diversification of invest-
FGFOA Board of Directors has cumstances then prevailing, ment types in order to control
been on record as supporting which persons of prudence. the risk of loss resulting from
state legislation requiring local discretion, and intelligence ex- overconcentration of assets in a
governments to adopt written ercise in the management of specific maturity. issuer, instru-
Investment policies. their own affairs. not for specu- went, dealer or bank. Diversifi-
SH 2090 creates supplemen- lation, but for investment, con- cation guidelines shall be re-
tal provisions that update exist- sidering the probable safety of viewed periodically by appropri-
ing state statutes for cities, their capital as well as the ate investment management
counties, court clerks, school probable income to be derived personnel.
boards and special districts. The from the investment." Authorized Investment In-
new legislation requires written Authorized Investments— stitutions and Dealers—Policies
investment policies be adopted Policies shall list legally autho- should specify the authorized
by local governments on or be- rized investment vehicles. De- securities issuers, banks and
fore October 1. 1995 by their rivatives (defined as a financial dealers from whom the unit of
governing bodies or, in the ab- instrument, the value of which local government is able to pur-
sence of a governing body. its depends on or is derived from chase securities.
principal officer. Fourteen stan- the value of one or more under- Third-Party Custodial Agree-
dards are established for written lying assets or index or asset ments—Policies shall include
investment policies and such values) shall only be used if arrangements for the holding of
policies must be commensurate specifically authorized as part security assets by a third party,
with the nature and size of the of the investment plan and the designating that the held assets
public funds under a local unit of local government's chief and/or collateral are those of the
government's custody. Invest- financial officer has sufficient unit of local government. Securi-
ment policies also are required understanding/expertise to do ties shall not be withdrawn by
to place the highest investment so. Reverse Repurchase Agree- anyone except an authorized
priority on the safety of principal ments (an agreement between staff member of the unit of local
and liquidity. Optimization of an investor and a security government. To ensure that the
investment returns shall be a dealer whereby dealer agrees to 1 custodian will have the required
secondary consideration. buy back the security at a security/money at the conclu-
Listed below is a summary of specified price in the future: the sion of transactions, such trans-
the 14 standards to be ad- market for 'repos" is unregu- actions between a custodian and
dressed in the required written lated and uninsured) will be a broker-dealer involving the
policies: prohibited or limited to trans-
FLORIDA LEAGUE OF CITIES
18
sale or purchase of securities by State Budget-at-a-Glance
transfer of money/security shall
be made on a -delivery vs. pay- SHIP Funding(Affordable
meat" basis. Housing FY 95 $33 million FY 96$79 million
Master Repurchase Agree Florida Recreation and Parks
ment—Policies shall include the Program (FRDAP) FY 95 $ 3 million FY 96 $26 million
requirement of all authorized in •
-
stitutions/dealers involved In re- Urban Forestry Program FY 95 $ 1 million FY 96 $ 0 million
purchase agreement transactions Solid Waste Grant Program FY 95 $ 6 million FY 96 $ 2.8 million
on behalf of the unit of local gov- Aquatic Plant Control Grants
ernment to execute and perform (DEP) FY 95$5.3 million FY 96$11 million
these transactions according to a
Master Repurchase Agreement.
Bid Requirement—Policies (b) S.E.C. registered money municipality, county. special dis-
must specify that after a unit of market funds with the highest trict. school district. clerk of the
local government has analyzed credit quality rating from a na- circuit court. sheriff. property ap-
and selected one or more optimal tionally recognized rating corn- praiser. tax collector, supervisor of
types of investment that the secu- pany_ elections. authority. board. public
rity be competitively bid (when (c) Savings accounts in state- corporation. or any other political
feasible and appropriate). certified qualified public deposi- subdivision of the state. Italics
Internal Controls—Policies tories.' indicate those additional govern-
shall provide for internal controls (d) Certification of Deposits mental entities subject to the
and operational procedures. The (CDs) in state-certified qualified bill's revised definition of"units of
chief financial officer shall estab- public depositories.' local governments." Upon the
lish a written system of internal (e) Direct obligations of the governor's signature. SB 2090
controls and operational prose- U.S. Treasury.• goes into effect on October 1.
dures by January 1. 1996. Poli- (11 Federal Agencies and in- 1995.
cies shall include provisions for strumentalities.'
the review of such internal con- •Shall be invested to match in Note: The new legislation re-
trots by independent auditors as quires written investment policies
art of anyfinancial audit re- vestment maturities with known
pcash needs and anticipated cash be adopted by local governments
quired of the unit of local govern- on or before October 1. 1995 and
ment. Internal controls should be .flow requirements. requires the chief financial officer
designed to prevent the loss of SB 2090 applies to all units of to establish a written system of
funds by fraud, employee error. pp internal controls and operational
misrepresentations by third par- local government. defined as a procedures by January 1, 1996.
ties. or imprudent actions by em-
ployees of the unit of local govern-
ment.
Reporting—Policies shall in- "America's
elude at a minimum annual re- CcrPoration porting of investment results by � t Cb /
the chief financial officer of the
unit of local government. Such . Contract Sweeping `•
•
reports are to include securities in Companies' .
the portfolio by class/type, book .
value. income earned, and market .
value as of date of the report and
are to be made publicly available
for review. i
Alternative Investment
Guidelines—In addition to, or in ' ._ ,
lieu of. the policy guidelines listed •%. . •; v
above, a unit of local government
may invest in the following instru I I __:
ments at prevailing market rates/ a -
prices: ;...
(a) Local Government Surplus
Funds Trust Fund, or any inter- - r I
iiiv
•governmental investment pool -I _')
authorized through the Florida 1
Interlocal Cooperation Act (i.e..
the League's Florida Municipal
Investment Trust). _ ..
QUALITY CITIES —JUNE/JULY 1995
19
Memorandum
To: Finance & Administration Committee Members
From: Thomas G. Bradford, Village Manager 7
Date: October 16, 1995
Subject: Proposed Village Investment Policy; Agenda Item
Attached hereto, please find agenda back-up items that were not
sent with your agenda for your meeting on October 18 relative to
the proposed Tequesta Investment Policy.
TGB/krb
c: Village Council, w/attachment
Bill C. Kascavelis, Director of Finance, w/attachment
RESOLUTION NO.
A RESOLUTION OF THE VILLAGE COUNCIL
OF THE VILLAGE OF TEQUESTA, PALM
BEACH COUNTY, FLORIDA, PROVIDING FOR
THE ADOPTION OF AN INVESTMENT POLICY
FOR THE VILLAGE INVESTMENT
ACTIVITIES IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 218 .415,
FLORIDA STATUTES.
WHEREAS, SECTION 218 .415, Florida Statutes, an act
relating to investment of public funds requiring that
certain investment activity of units of local government
shall be consistent with a written investment plan;
providing for establishment of certain investment
policies which place priority on the safety of principal
and liquidity of funds; providing scope; providing for
investment objectives; providing for performance
measurement; requiring a description of the level of
prudence and ethical standards to be followed; providing
for listing of authorized investments; providing for
establishment of maturity and liquidity requirements;
providing for portfolio composition; providing for
appropriate diversification to minimize risk; providing
for specification of authorized investment institutions
and dealers; providing for third-party custodial
agreements; providing for repurchase agreements;
providing for competitive bidding; providing for
establishment of internal controls and operational
procedures; providing for reports; specifying alternative
investment guidelines to apply where there is no
investment plan, and providing for conformance.
WHEREAS, the Village desires to adopt investment policies
consistent with the provisions of Section 218 .415,
Florida Statutes.
NOW, THEREFORE, BE IT RESOLVED BY THE VILLAGE COUNCIL OF
THE VILLAGE OF TEQUESTA, PALM BEACH, COUNTY, FLORIDA, AS
FOLLOWS :
SECTION 1 . The Village Council of the Village of
Tequesta, Palm Beach County, Florida hereby adopts the
attached "Investment Policy" (Exhibit A) to be followed
as the guideline for Village Officials responsible for
cash management and investment activities of Village
funds .
- 2 -
SECTION 2 . A copy of the Village Investment Policy shall
be provided to all authorized institutions and dealers
conducting business with the Village .
THE FOREGOING RESOLUTION WAS OFFERED BY
Councilmember , who
moved its adoption. The motion was seconded by
Councilmember
and upon being put to a vote, the vote was as follows :
FOR ADOPTION AGAINST ADOPTION
The Mayor thereupon declared the Resolution duly passed
and adopted this day of October, A.D. , 1995
MAYOR OF TEQUESTA
Ron T. Mackail
ATTEST:
Joann Manganiello
Village Clerk
Exhibit "A"
VILLAGE OF TEQUESTA
INVESTMENT POLICY
OCTOBER 1 , 1995
A. SCOPE OF INVESTMENT POLICY
This Investment Policy applies to the investment activities of the Village of
Tequesta, except for the Firefighters' Pension Fund and any other established
local employee pension funds which are subject to the order of the Board of
Trustees of those particular funds. In addition, all other Trust Funds, and
depositories for defeased debt or assets under Bond Trust Indenture
Agreements when controlled by third party custodians and/or money managers
shall be managed outside the scope of this Investment Policy as required by
Florida State Statutes, Section 218.415. All financial assets of other funds,
including the General Fund, Special Revenue Funds, Capital Project Funds, Debt
Service Funds, Enterprise Funds, and other funds that may be created from time
to time, unless specifically exempted by the Village Council, shall be
administered in accordance with the provisions of this Policy.
B. OBJECTIVES OF INVESTMENT POLICY
The purpose of the Investment Policy of the Village of Tequesta is to establish
cash management and investment guidelines for Village officials responsible for
the stewardship of public funds. Specific objectives include:
1 . Safety of principal is the foremost objective of the Investment Policy of
the Village of Tequesta. Each investment transaction shall seek to first
ensure that capital losses are avoided, whether they be from institution
or securities defaults or erosion of market value.
2. The Village's investment portfolio shall remain sufficiently liquid to enable
the Village to meet all operating requirements which may be reasonably
anticipated.
3. The investment program shall seek to maximize the investment returns
given the limitations imposed by maintaining safety of principal and
liquidity.
C. PERFORMANCE MEASURES
The investment portfolio of the Village shall be designed with the objective of
regularly exceeding the weighted average return of three-month U.S. Treasury
Bills (25%) and six-month U.S. Treasury Bills (75%). The investment program
shall seek to augment returns above this threshold, consistent with risk
limitations identified herein and prudent investment principles.
Village of Tequesta - Investment Policy
October 1 , 1995
Page 2 -
D. PRUDENCE AND ETHICS
The standard of prudence to be applied in the context of managing the overall
portfolio by the investment officer for the investment of Village funds shall be
the "Prudent Person Rule" which states:
"Investments shall be made with judgment and care, under
circumstances then prevailing which persons of prudence,
discretion and intelligence exercise in the management of
their own affairs, not for speculation, but for investment,
considering the probable safety of their capital as well as the
probable outcome to be derived."
Any investment officer acting in accordance with the written procedures of this
investment policy and exercising due diligence shall be relieved of personal
responsibility for an individual security's credit risk or market price changes,
provided deviations from expectations are reported in a timely fashion and
appropriate action is taken to control adverse developments.
Employees involved in the investment process shall refrain from personal
business activity that could conflict with proper execution of the investment
program, or which could impair their ability to make impartial investment
decisions. Employees shall disclose to the Village Manager and Village Council
any material financial interest in financial institutions that conduct business with
the Village of Tequesta and shall further disclose any large, personal
financial/investment positions that could be related to the performance of the
Village's portfolio.
E. INVESTMENT SELECTION
The Village of Tequesta shall limit its investments to any of the securities listed
below:
1 . Negotiable direct obligations of, or obligations the principal and interest
of which are unconditionally guaranteed by, the United States
Government at the then prevailing market price for such securities;
2. Obligations of the federal farm credit banks; the Federal Home Loan
Mortgage Corporation, including Federal Home Loan Mortgage
Corporation participation certificates; or the Federal Home Loan Bank or
its district banks or obligations guaranteed by the Government National
Mortgage Association;
Village of Tequesta - Investment Policy
October 1 , 1995
Page 3 -
3. Obligations of the Federal National Mortgage Association, including
Federal National Mortgage Association participation certificates and
mortgage pass-through certificates guaranteed by the Federal National
Mortgage Association;
4. Interest-bearing time deposits or savings accounts in banks organized
under the laws of this state, in national banks organized under the laws
of the United States and doing business and situated in this state, in
savings and loan associations which are under state supervision, or in
federal savings and loan associations located in this state and organized
under federal law and federal supervision, provided that any such
deposits are secured by collateral as may be prescribed by law;
5. Securities of, or other interests in, any open-end or closed-end
management type investment company or investment trust registered
under the Investment Company Act of 1940, as amended from time to
time, provided the portfolio of such investment company or investment
trust is limited to United States Government obligations and to
repurchase agreements fully collateralized by such United States
Government obligations and provided such investment company or
investment trust takes delivery of such collateral either directly or
through an authorized custodian
6. The Local Government Surplus Funds Trust Fund (State Board of
Administration);
7. Short term obligations of corporations organized in the United States
with assets exceeding $500,000,000 if (a) such obligations are rated at
the time of purchase at one of the three highest classifications
established by at least two standard rating services and which mature
not later than 180 days form the date of purchase, (b) such purchases
do not exceed ten percent of the corporation's outstanding obligations.
8. The Florida Counties Investment Trust.
9. EXCLUSIONS: The Village will not invest any funds in derivative
investment products. This includes, but is not limited to,
collateralized mortgage obligations (CMOs), interest-only
(IOs) and principal-only (POs), forwards, futures, currency
and interest rate swaps, options, floaters/inverse floaters,
and caps/floors/collars.
Village of Tequesta - Investment Policy
October 1, 1995
Page 4 -
F. MATURITY AND LIQUIDITY REQUIREMENTS
The Village's portfolio shall be structured to provide the necessary funds to pay
the expenses of the Village in a timely manner. Investments shall be purchased
consistent with a "buy and hold to maturity" philosophy, matching maturities
to anticipated cash flow needs of the Village.
G. PORTFOLIO COMPOSITION
The portfolio shall be designed to provide a balance of short-term and medium-
term maturities designed to meet the liquidity needs of the Village. In addition,
the portfolio shall be diversified with respect to investment instruments and
issuers as follows:
1 . On any given date, at least 80% of the portfolio shall mature within one
year.
2. On any given date, not more than 10% of the portfolio shall mature
beyond five (5) years".
3. No security purchased may have a maturity of greater than five (5) years.
4. Commercial paper shall not exceed 10% of the Village's investment
portfolio.
5. No bank or savings association shall hold more than 50% of the Village
of Tequesta's investment portfolio, exclusive of securities held in
safekeeping as a third party custodian.
H. RISK AND DIVERSIFICATION
In order to reduce the risk of loss from over concentration of assets in a specific
maturity, issuer, instrument, dealer or bank, the investment portfolio shall be
managed to minimize the potential risk from default and changes in market
conditions. The Finance Director shall seek to balance the portfolio among
issues, issuers, maturities, investment vehicles, and financial institutions. The
Finance Director and Village Manager shall review the portfolio periodically to
review the adequacy of the diversification strategy.
Village of Tequesta - Investment Policy
October 1, 1995
Page 5 -
I. AUTHORIZED INVESTMENT INSTITUTIONS AND DEALERS
The Village may purchase securities from any primary dealer in government
securities, a regional broker if they have been in business for 10 years and have
a minimum of $10,000,000 of capital, or a qualified public depository. Broker-
dealers shall be selected using the following criteria:
1 . The institutional and broker qualifications as they relate to both general
and specific product knowledge;
2. The ability to provide value added services;
3. Pricing competitiveness; and
4. The financial strength and stability of the company.
Investments in savings accounts, certificates of deposit or other deposit
accounts in a bank or savings association may be made only in qualified public
depositories as defined by Florida State Statutes Section 280.02.
All authorized institutions and dealers conducting business with the Village shall
be given a copy of the Village's Investment Policy and be required to abide by
the Investment Policy. The broker shall execute a certification acknowledging
receipt of the Investment Policy and agreeing to follow its terms and conditions.
J. THIRD-PARTY CUSTODIAL AGREEMENTS
All investments purchased or collateral obtained as security for investments
purchased under this Policy shall be properly designated as an asset of the
Village and held in safekeeping by a third party custodial bank or savings
association, chartered by the United Sates Government or the State of Florida.
The third party shall be the designated agent of the Village, ensuring that all
assets held on behalf of the Village shall be clearly held and accounted for to
indicate ownership by the Village. No withdrawal of such securities, in whole
or in part, shall be made from safekeeping except as authorized by the Finance
Director.
Village of Tequesta - Investment Policy
October 1, 1995
Page 6 -
The Village shall settle the purchase or sale of securities on a "delivery vs.
payment" basis, if applicable.
K. MASTER REPURCHASE AGREEMENT
All repurchase agreements transacted, must be in compliance with the
requirements of the Master Repurchase Agreement (attached). The Master
Repurchase Agreement shall be supplemented by an Annex which addresses
the issues of permissible purchased securities, delivery, substitution, margin
ratios, margin maintenance and notification of parties.
L. COMPETITIVE BIDDING
For all investment purchases or sales, the Village shall seek multiple quotations
from authorized brokers and financial institutions, when feasible and
appropriate, in order to maximize the performance of the portfolio. Competitive
bids will not be required when:
1 . The security involved is a new issue and can be purchased at auction or
at a preset, initial offering price.
2. The security is available through a direct issue or private placement.
In all cases where competitive bidding is not feasible, the appropriateness and
return of the investment shall be compared to other investments with similar
maturities available in the financial markets.
M. INTERNAL CONTROLS
The Finance Director shall establish a system of internal controls, which shall
be documented in writing. The internal controls shall be reviewed by the
Village Manager periodically and by the Village auditor annually in conjunction
with the annual examination of the financial statements of the Village. The
controls shall be designed to prevent losses of public funds arising from fraud,
employee error, misrepresentation by third parties, unanticipated changes in
financial markets or imprudent actions by employees and officers of the Village
of Tequesta.
Village of Tequesta - Investment Policy
October 1, 1995
Page 7 -
N. REPORTING
The Finance Director shall submit a quarterly investment report to the Village
Manager and the Village Council. The report shall list investments by fund and
type and include a summation of changes from the previous quarter.
O. RESPONSIBILITY
The establishment of the investment policy is the responsibility of the Village
Council. The Finance Director, under the direction of the Village Manager, shall
be responsible for implementing the policy and managing the Village's portfolio
within its guidelines.
P. CASH MANAGEMENT
Except where otherwise provided by the Village Council and State law, the
Finance Director is authorized to pool the cash of various funds to maximize
investment earnings where it is advantageous and prudent to do so.
Investment income will be allocated to the various funds based upon their
respective participation.
BCK/mk
Public Securities Association
40 Broad Street, New York, NY 10004-2373 PER
Telephone (212) 809-7000
MASTER REPURCHASE AGREEMENT
•
Dated as of
Between:
and
1. Applicability
From time to time the parties hereto may enter into transactions in which one party ("Seller") agrees to
transfer to the other ("Buyer") securities of financial instruments ("Securities") against the transfer of funds
by Buyer,with a simultaneous agreement by Buyer to transfer to Seller such Securities at a date certain or on
demand,against the transfer of funds by Seller. Each such transaction shall be referred to herein as a"Transaction"
and shall be governed by this Agreement, including any supplemental terms or conditions contained in Annex
I hereto, unless otherwise agreed in writing.
2. Definitions
(a) Act of Insolvency", with respect to any party, (i) the commencement by such party as debtor of any
case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law, or
such party seeking the appointment of a receiver, trustee, custodian or similar official for such party or any
substantial part of its property, or (ii) the commencement of any such case or proceeding against such party,
or another seeking such an appointment, or the filing against a party of an application for a protective decree
under the provisions of the Securities Investor Protection Act of 1970,which (A) is consented to or not timely
contested py such party, (B) results in the entry of an order for relief, such an appointment, the issuance of
such a protive decree or the entry of an order having a similar effect,or(C)is not dismissed within 15 days,
(iii) the making by a party of a general assignment for the benefit of creditors, or (iv) the admission in writing
by a party f such party's inability to pay such party's debts as they become due;
(b) " itional Purchased Securities", Securities provided by Seller to Buyer pursuant to Paragraph 4(a)
hereof;
(c) "Buyer's Margin Amount", with respect to any Transaction as of any date. the amount obtained by
application of a percentage (which may be equal to the percentage that is agreed to as the Seller's Margin
Amount under subparagraph (q) of this Paragraph), agreed to by Buyer and Seller prior to entering into the
Transaction, to the Repurchase Price for such Transaction as of such date;
(d) "Confirmation", the meaning specified in Paragraph 3(b) hereof;
(e) "Income", with respect to any Security at any time, any principal thereof then payable and all interest,
dividends or other distributions thereon;
(f) "Margin Deficit", the meaning specified in Paragraph 4(a) hereof;
(g) "Margin Excess", the meaning specified in Paragraph 4(b) hereof;
(h) "Market Value", with'respect to any Securities as of any date, the price for such Securities on such
date obtained from a generally recognized source agreed to by the parties or the most recent closing bid
quotation from such a source,plus accrued Income to the extent not included therein (other than any Income
credited or transferred to, or applied to the obligations of, Seller pursuant to Paragraph 5 hereof) as of such
date (unless contrary to market practice for such Securities);
(i) -Price Differential", with respect to any Transaction hereunder as of arty date, the aggregate amount
obtained by daily application of the Pricing Rate for such Transaction to the Purchase Price for such Transaction
on a 360 day per year basis for the actual number of days during the period commencing on (and including)
the Purchase Date for such'tansaction and ending on (but excluding)the date of determination(reduced by .,
any amount of such Price Differential previously paid by Seiler to Buyer with respect to such Ztansactbn);
(j) "Pricing Rate", the per annum percentage rate for determination of the Price Differential;
(k) "Prime Rate", the prime rate of U.S. money center commercial banks as published in The ttiral!Street
Journal;
(1) "Purchase Date", th,: date on wh;ch Purchased Securities a .i transferred by Seller to Buyer;
(m) "Purchase Price", (i) on the Purchase Date, the price at wt.ich Purchased Securities are transferred
by Seller to Buyer, and (ii) thereafter, such price increased by the amount of any cash transferred by Buyer to
Seller pursuant to Paragraph 4(b) hereof and decreased by the amount of any cash transferred by Seller to
Buyer pursuant to Paragraph 4(a) hereof or applied to reduce Seller's obligations under clause (ii)of Paragraph
5 hereof;
(n) "Purchased Securities", the Securities transferred by Seller to Buyer in a Transaction hereunder, and
any Securities substituted therefor in accordance with Paragraph 9 hereof. The term "Purchased Securities"
with respect to any Transaction at any time also shall include Additional Purchased Securities delivered pursuant
to Paragraph 4(a) and shall exclude Securities returned pursuant to Paragraph 4(b);
(o) "Repurchase Date", the date on which Seller is to repurchase the Purchased Securities from Buyer,
including any date determined by application of the provisions of Paragraphs 3(c) or 1,1 hereof;
(p) "Repurchase Price",the price at which Purchased Securities are to be transferred from Buyer to Seller
upon termination of a Transaction, which will be determined in each case (including Transactions terminable
upon demand)as the sum of the Purchase Price and the Price Differential as of the date of such determination,
increased by any amount determined by the application of the provisions of Paragraph 11 hereof;
(q) "Seller's Margin Amount", with respect to any Transaction as of any date, the amount obtained by
application of a percentage (which may be equal to the percentage that is agreed to as the Buyer's Margin
Amount under subparagraph (c) of this Paragraph), agreed to by Buyer and Seller prior to entering into the
Transaction, to the Repurchase Price for such Transaction as of such date.
3. Initiation; Confirmation;Termination
(a) An agreement to enter into a Transaction may be made orally or in writing at the initiation of either
Buyer or Seller. On the Purchase Date for the Transaction, the Purchased Securities shall be transferred to
Buyer or its agent against the transfer of the Purchase Price to an account of Seller.
(b) Upon agreeing to enter into a Transaction hereunder, Buyer or Seller (or both), as shall be agreed,
shall promptly deliver to the other party a written confirmation of each Transaction (a "Confirmation"). The
Confirmation shall describe the Purchased Securities (including CUSIP number, if any), identify Buyer and
Seller and set forth (i) the Purchase Date, (ii) the Purchase Price, (iii) the Repurchase Date, unless the
Transaction is to be terminable on demand, (iv) the Pricing Rate or Repurchase Price applicable to the
Transaction, and (v) any additional terms or conditions of the Transaction not inconsistent with this Agreement.
The Confirmation, together with this Agreement, shall constitute conclusive evidence of the terms agreed
between Buyer and Seller with respect to the Transaction to which the Confirmation relates, unless with respect
to the Confirmation specific objection is made promptly after receipt thereof.In the event of any conflict between
the terms of s,ich Confirmation and this Agreement, this Agreement shall prevail.
(c) 19 the case of Transactions terminable upon demand, such demand shall be made by Buyer or Seller,
no later than such time as is customary in accordance with market practice, by telephone or otherwise on or
prior to the business day on which such termination will be effective. On the date specified in such demand,
or on the hate fixed for termination in the case of Transactions having a fixed term,termination of the Transaction
will be effected by transfer to Seller or its agent of the Purchased Securities and any Income in respect thereof
received by Buyer(and not previously credited or transferred to,or applied to the obligations of, Seller pursuant
to Paragraph 5 hereof) against the transfer of the Repurchase Price to an account of Buyer.
4. Margin Maintenance
(a) if at any time the aggregate Market Value of all Purchased Securities subject to all Transactions in
which a particular party hereto is acting as Buyer is less than the aggregate Buyer's Margin Amount for all
such Transactions(a"Margin Deficit"), then Buyer may by notice to Seller require Seller in such Transactions,
at Seller's option, to transfer to Buyer cash or additional Securities reasonably acceptable
to Buyer ("Additional Purchased Securities"), so that the cash and aggregate Market Value of the Purchased
Securities,including any sup Additional Purchased Securities,will thereupon equal or exceed Such aggregate
Buyer's Margin Amount (decreased by the amount of any Margin Deficit as of such date arising from any
Transactions in which such Buyer is acting as Seger).
(b) tf at any time the aggregate Market Value of all Purchased Securities subject to all Transactions in
which a particular party hereto is acting as Seller exceeds the aggregate Seller's Margin Amount for all such
Transactions at such time (a `Margin Excess"), then Seller may by notice to Buyer require Buyer in such
Transactions, at Buyer's option,to transfer cash or Purchased Securities to Seller, so that the aggregate Market
Value of the Purchased Securities,after deduction of any such cash or any Purchased Securities so transferred,
will thereupon not exceed such aggregate Seller's Margin Amount (increased by the amount of any Margin
Excess as of such date arising from any Transactions in which such Seller is acting as Buyer).
(c) Any cash transferred pursuant to this Paragraph shall be attributed to such Transactions as shall be
agreed upon by Buyer and Seller.
9. Substitution
(a) Seller may, subject to agreement with and acceptance by Buyer, substitute other Securities for any
Purchased Securities. Such substitution shall be made by transfer to Buyer of such other Securities and
transfer t" Seller of such Purchased Securities. After substitution, the s,:hstituted Securities shall be deemed
to be Purchased Securities.
(b) In Transactions in which the Seller retains custody of Purchased Securities, the parties expressly
agree that Buyer shall be deemed, for purposes of subparagraph (a) of this Paragraph, to have agreed to and
accepted in this Agreement substitution by Seller of other Securities for Purchased Securities; provided,
however, that such other Securities shall have a Market Value at least equal to the Market Value of the
Purchased Securities for which they are substituted.
10. Representations
Each of Buyer and Seller represents and warrants to the other that (i) it is duly authorized to execute and
deliver this Agreement, to enter into the Transactions contemplated hereunder and to perform its obligations
hereunder and has taken all necessary action to authorize such execution, delivery and performance, (ii) it
wilt engage in such Transactions as principal (or, if agreed in writing in advance of any Transaction by the other
party hereto, as agent for a disclosed principal). (iii) the person signing this Agreement on its behalf is duly
authorized to do so on its behalf(or on behalf of any such disclosed principal), (iv)it has obtained all authorizations
of any governmental body required in connection with this Agreement and the Transactions hereunder and
such authorizations are in full force and effect and (v) the execution, delivery and performance of this Agreement
and the Transactions hereunder will not violate any law, ordinance, charter, by-law or rule applicable to it or
any agreement by which it is bound or by which any of its assets are affected. On the Purchase Date for any
Transaction Buyer and Seller shall each be deemed to repeat all the foregoing representations made by it.
11. Events of Default
In the event that (i) Seller fails to repurchase or Buyer fails to transfer Purchased Securities upon the
applicable Repurchase Date,(ii)Seller or Buyer fails,after one business day's notice,to comply with Paragraph
4 hereof, (iii) Buyer fails to comply with Paragraph 5 hereof, (iv) an Act of Insolvency occurs with respect to
Seller or Buyer, (v) any representation made by Seller or Buyer shall have been incorrect or untrue in any
material respect when made or repeated or deemed to have been made or repeated, or (vi) Seller or Buyer
shall admit to the other its inability to, or its intention not to, perform any of its obligations hereunder (each an
"Event of Default"):
(a) At the option of the nondefautting party,exercised by written 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
Act of Insolvency), the Repurchase Date for each Transaction hereunder shall be deemed immediately to
occur.
(b) In all Transactions in which the defaulting party is acting as Seller, if the nondefaulting party exercises
or is deemed to have exercised the option referred to in subparagraph (a) of this Paragraph. (i) the defaulting
party's obligations hereunder to repurchase all Purchased Securities in such Transactions shall thereupon
become im ediately due and payable, (ii) to the extent permitted by applicable law, the Repurchase Price
with respectto each such Transaction shall be increased by the aggregate amount obtained by daily application
of (x) the greater of the Pricing Rate for such Transaction or the Prime Rate to (y) the Repurchase Price for
such Tra • n as of the Repurchase Date as determined pursuant to subparagraph (a) of this Paragraph
(deae as of any day by (A) any amounts retained by the nondefaulting party with respect to such
Repurchase Price pursuant to clause (iii) of this subparagraph, (B) any proceeds from the sale of Purchased
Securities pursuant to subparagraph (d)(i) of this Paragraph, and (C) any amounts credited to the account of
the defaulting party pursuant to subparagraph (e)of this Paragraph)on a 360 day per year basis for the actual
number of days during the period from and including the date of the Event of Default giving rise to such option
to but excluding the date of payment of the Repurchase Price as so increased. (iii) all Income paid after such
exercise or deemed exercise shall be retained by the nondefaulting party and applied to the aggregate unpaid
Repurchase Prices owed by the defaulting party, and (iv) the defaulting party shall immediately deliver to the
nondefaulting party any Purchased Securities subject to such Transactions then in the defaulting party's possession.
(c) In all Transactions in which the defaulting party is acting as Buyer, upon tender by the nondefautting
party of payment of the aggregate Repurchase Prices for all such Transactions, the defaulting party's right,
title and interest in all Purchased Securities subject to such Transactions shall be deemed transferred to the
nondefautting party, and the defaulting party shall deliver all such Purchased Securities to the nondefautting
PanY
(d) After one business day's notice to the defaulting party (which notice need not be given it an Act of
Insolvency shall have occurred, and which may be the notice given under subparagraph (a) of this Paragraph •
or the notice referred to in clause (ii) of the first sentence of this Paragraph), the nondefaulting party may:
(i) as to Transactions in which the defaulting party is acting as Seiler, (A) immediately sell, in a
recognized market at such price or prices as the nondefaulting party may reasonably deem satisfactory, =
any or all Purchased Securities subject to such Transactions and apply the proceeds thereof to the
aggregate unpaid Repurchase Prices and any other amounts owing by the defaulting party hereunder .
(d) Seller and Buyer may agree, with respect to any or all Transactions hereunder, that the respective
rights of Buyer or Seller (or both) under subparagraphs (a) and (b) of this Paragraph may be exercised only
where a Margin Deficit or Margin Excess exceeds a specified dollar amount or a specified percentage of the
Repurchase Prices for such TrArsactions (which amount or percentage shall be agreed to by Buyer and Seller
prior to entering into any such Transactions).
(e) Seller and Buyer may agree, with respect to any or all Transactions hereunder, that the respective
rights of Buyer and Seller under subparagraphs (a) and (b) of this Paragraph to require the elimination of a
Margin Deficit or a Margin Excess, as the case may be. may be exercised whenever such a Margin Deficit or
Margin Excess exists with respect to any single Transaction hereunder(calculated without regard to any other
Transaction outstanding under this Agreement).
5. Income Payments
Where a particular Transaction's term extends over an Income payment date on the Securities subject to
that Transaction, Buyer shall, as the parties may agree with respect to such Transaction (or, in the absence of
any agreement, as Buyer shall reasonably determine in its discretion), on the date such Income is payable
either () transfer to or credit to the account of Seller an amount equal to such Income payment or payments
with respect to any Purchased Securities subject to such Transaction or (iu) apply the'Income payment or
payments to reduce the amount to be transferred to Buyer by Seller upon termination of the Transaction. Buyer
shall not be obligated to take any action pursuant to the preceding sentence to the extent that such action
would result in the creation of a Margin Deficit, unless prior thereto or simultaneously therewith Seller transfers
to Buyer cash or Additional Purchased Securities sufficient to eliminate such Margin Deficit.
6. Security Interest
Although the parties intend that all Transactions hereunder be sales and purchases and not loans, in the
event any such Transactions are deemed to be loans, Seller shall be deemed to have pledged to Buyer as
security for the performance by Seller of its obligations under each such Transaction, and shall be deemed to
have granted to Buyer a security interest in, all of the Purchased Securities with respect to all Transactions
hereunder and all proceeds thereof.
7. Payment and Transfer
Unless otherwise mutually agreed,all transfers of funds hereunder shall be in immediately available funds.
All Securities transferred by one party hereto to the other party (i) shall be in suitable form for transfer or shall
be accompanied by duly executed instruments of transfer or assignment in blank and such other documentation
as the party receiving possession may reasonably request, (ii) shall be transferred on the book-entry system
of a Federal Reserve Bank, or(iii) shall be transferred by any other method mutually acceptable to Seller and
Buyer. As used herein with respect to Securities, "transfer" is intended to have the same meaning as when
used in Section 8-313 of the New York Uniform Commercial Code or,where applicable,in any federal regulation
governing transfers of the Securities.
8. Segregation of Purchased Securities
To th extent required by applicable law, all Purchased Securities in the possession of Seller shall be
segregated.from other securities in its possession and shall be identified as subject to this Agreement. Segregation
may be accomplished by appropriate identification on the books and records of the holder, including a financial
intermedaIj or a clearing corporation. Trite to all Purchased Securities shall pass to Buyer and, unless otherwise
agreed uyer and Seller, nothing in this Agreement shall preclude Buyer from engaging in repurchase
transactions with the Purchased Securities or otherwise pledging or hypothecating the Purchased Securities,
but no such transaction shall relieve Buyer of its obligations to transfer Purchased Securities to Seller pursuant
to Paragraphs 3, 4 or 11 hereof, or of Buyer's obligation to credit or pay Income to, or apply Income to the
obligations of, Seller pursuant to Paragraph 5 hereof.
Required Disclosure for Transactions In Which the Seller Retains Custody
of the Purchased Securities
Seller is not permitted to substitute other securities for those subject to this Agreement and
therefore must keep Buyer's securities segregated at all times, unless in this Agreement Buyer
grants Seller the right to substitute other securities. If Buyer grants the right to substitute,this means
that Buyer's securities will likely be commingled with Seller's own securities during the trading day.
Buyer is advised that, during any trading day that Buyer's securities are commingled with Seller's
securities, they (will• (may]" be subject to liens granted by Seller to fits clearing bankr (third
parties]" and may be used by Seller for deliveries on other securities transactions. Whenever the
securities are commingled, Seller's ability to resegregate substitute securities for Buyer will be
subject to Seller's ability to satisfy (the clearing]' (any)•• lien or to obtain substitute securities.
'language b oe used under t 7 CAR.403.4(e)1 SOMr is a Qovertvnsnt sacultia broker or dealer ott+ef than a Handal inatltution.
"Language to be used under 17 C.F.R l.S(d)it Seller is a Handal nstitution.
or(B) in its sole discretion elect, in lieu of selling all or a portion of such Purchased Securities, to give the
defaulting party credit for such Purchased Securities in an amount equal to the price therefor on such
date, obtained from a generally recognized source or the most recent closing bid quotation from such a
source, against the aggregate unpaid Repurchase Prices and any other amounts owing by the defaulting
party hereunder; and
(ii) as to Transactions in which the defaulting party is acting as Buyer, (A) purchase securities
("Replacement Securities") of the same class and amount as any Purchased Securities that are not
delivered by the defaulting party to the nondefaulting party as required hereunder or (B) in its sole
discretion elect, in lieu of purchasing Replacement Securities, to be deemed to have purchased Replacement
Securities at the price therefor on such date. obtained from a generally recognized source or the most
recent closing bid quotation from such a source.
(e) As to Transactions in which the defaulting party is acting as Buyer, the defaulting party shall be liable
to the nondefautting party(i)with respect to Purchased Securities(other than Additional Purchased Securities),
for any excess of the price paid (or deemed paid) by the nondefautting party for Replacement Securities
therefor over the Repurchase Price for such Purchased Securities and(ii)with respect to Additional Purchased
Securities, for the price paid (or deemed paid) by the nondefautting party for the Replacement Securities
therefor. In addition,the defaulting party shall be liable to the nondefaulting party for interest on such remaining
liability with respect to each such purchase (or deemed purchase) of Replacement Securities from the date
of such purchase (or deemed purchase) until paid in full by Buyer. Such interest shall be at a rate equal to the
greater of the Pricing Rate for such Transaction or the Prime Rate.
(f) For purposes of this Paragraph 11, the Repurchase Price for each Transaction hereunder in respect
of which the defaulting party is acting as Buyer shall not increase above the amount of such Repurchase Price
for such Transaction determined as of the date of the exercise or deemed exercise by the nondefaulting party
of its option under subparagraph (a)of this Paragraph.
(g)The defaulting party shall be liable to the nondefaulting party for the amount of all reasonable legal or
other expenses incurred by the nondefaulting party in connection with or as a consequence of an Event of
Default, together with interest thereon at a rate equal to the greater of the Pricing Rate for the relevant
Transaction or the Prime Rate.
(h) The nondefaulting party shall have. in addition to its rights hereunder, any rights otherwise available
to it under any other agreement or applicable law.
12. Single Agreement
Buyer and Seller acknowledge that, and have entered hereinto and will enter into each Transaction
hereunder in consideration of and in reliance upon the fact that. all Transactions hereunder constitute a single
business and contractual relationship and have been made in consideration of each other. Accordingly, each
of Buyer and Seller agrees (i) to perform all of its obligations in respect of each Transaction hereunder, and
that a default in the performance of any such obligations shall constitute a default by it in respect of all
Transactions hereunder, (ii) that each of them shall be entitled to set off claims and apply property held by
them in respect of any Transaction against obligations owing to them in respect of any other Transactions
hereunder';and (iii) that payments, deliveries and other transfers made by either of them in respect of any
Transaction shall be deemed to have been made in consideration of payments, deliveries and other transfers
in respectf any other Transactions hereunder. and the obligations to make any such payments, deliveries
and other,ransfers may be applied against each other and netted.
13. Notices and Other Communications
Unless another address is specified in writing by the respective party to whom any notice or other com-
munication 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 Annex II attached hereto.
14. Entire Agreement; Severability
This Agreement shall supersede any existing agreements between the parties containing general terms
and conditions for repurchale transactions. Each provision and agreement herein shall be treated as separate
and independent from any Qther provision or agreement herein and shall be enforceable notwithstanding the
unenforceabitty of any such other provision or agreement.
•
15. Non-assignability;Termination
The rights and obligations of the parties under this Agreement and under any Transaction shall not be
assigned by either party without the prior wntten consent of the other party. Subject to the foregoing, this,
Agreement and any Transactions shall be binding upon and shall inure to the benefit of the parties and their.
respective successors and assigns. This Agreement may be cancelled by either party upon giving wtitterf
notice to the other, except that this Agreement shall, notwithstanding such notice, remain applicable to dilly,
Transactions then outstanding. '+ +
16. Governing Law
This Agreement shall be governed by the laws of the State of New York without giving effect to the conflict
of law principles thereof.
17. No Waivers, etc.
No express or implied waiver of any Event of Default by either party shall constitute a waiver of any other
Event of Default and no exercise of any remedy hereunder by any party shall constitute a waiver of its right
to exercise any other remedy hereunder. No modification or waiver of any provision of this Agreement and no
consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and
duty executed by both of the parties hereto. Without limitation on any of the foregoing, the failure to give a
notice pursuant to subparagraphs 4(a)or 4(b) hereof will not constitute a waiver of any right to do so at a later
date.
18. Use of Employee Plan Assets
(a) If assets of an employee benefit plan subject to any provision of the Employee Retirement Income
Security Act of 1974("ERISA')are intended to be used by either party hereto(the"Plan Party")in a Transaction,
the Plan Party shall so notify the other party prior to the Transaction. The Plan Party shah represent in writing
to the other party that the Transaction does not constitute a prohibited transaction under ERISA or is otherwise
exempt therefrom, and the other party may proceed in reliance thereon but shall not be required so to proceed.
(b)Subject to the last sentence of subparagraph(a)of this Paragraph,any such Transaction shall proceed
only if Seller furnishes or has furnished to Buyer its most recent available audited statement of its financial
condition and its most recent subsequent unaudited statement of its financial condition.
(c) By entering into a Transaction pursuant to this Paragraph, Seller shall be deemed (i) to represent to
Buyer that since the date of Seller's latest such financial statements, there has been no material adverse
change in Seller's financial condition which Seller has not disclosed to Buyer, and (ii) to agree to provide Buyer
with future audited and unaudited statements of its financial condition as they are issued, so long as it is a
Seller in any outstanding Transaction involving a Plan Party.
19. Intent
(a) The parties recognize that each Transaction is a "repurchase agreement" as that term is defined in
Section 101 of Title 11 of the United States Code, as amended(except insofar as the type of Securities subject
to such Transaction or the term of such Transaction would render such definition inapplicable),and a"securities
contract" as that term is defined in Section 741 of Title 11 of the United States Code, as amended.
(b) It is understood that either party's right to liquidate Securities delivered to it in connection with Transactions
hereunder or to exercise any other remedies pursuant to Paragraph 11 hereof,is a contractual right to liquidate
such Transaction as described in Sections 555 and 559 of Title 11 of the United States Code, as amended.
20. Disclosure Relating to Certain Federal Protections
e parties acknowledge that they have been advised that:
(a) in the case of Transactions in which one of the parties is a broker or dealer registered with the
Securities and Exchange Commission("SEC") under Section 15 of the Securities Exchange Act of 1934
("19 Act"), the Securities Investor Protection Corporation has taken the position that the provisions of
the S. urities investor Protection Act of 1970 ("SIPA") do not protect the other party with respect to any
Transaction hereunder; .
(b) in the case of Transactions in which one of the parties is a government securities broker or a
government securities dealer registered with the SEC under Section 15C of the 1934 Act, SiPA will not
provide protection to the other party with respect to any Transaction hereunder; and
(c) in the case of Transactions in which one of the parties is a financial institution, funds held by the
financial institution pursuant to a Transaction hereunder are not a deposit and therefore are not insured
by the Federal Deposit Insurance Corporation, the Federal Savings and Loan Insurance Corporation or
the National Credit Union Share Insurance Fund, as applicable.
4
(Name of Party) (Name of Party)
By By
Title Title
Date - Date
RESOLUTION NO.
A RESOLUTION OF THE VILLAGE COUNCIL
OF THE VILLAGE OF TEQUESTA, PALM
BEACH COUNTY, FLORIDA, PROVIDING FOR
THE ADOPTION OF AN INVESTMENT POLICY
FOR THE VILLAGE INVESTMENT
ACTIVITIES IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 218 .415,
FLORIDA STATUTES.
WHEREAS, SECTION 218 .415, Florida Statutes, an act
relating to investment of public funds requiring that
certain investment activity of units of local government
shall be consistent with a written investment plan;
providing for establishment of certain investment
policies which place priority on the safety of principal
and liquidity of funds; providing scope; providing for
investment objectives; providing for performance
measurement ; requiring a description of the level of
prudence and ethical standards to be followed; providing
for listing of authorized investments; providing for
establishment of maturity and liquidity requirements;
providing for portfolio composition; providing for
appropriate diversification to minimize risk; providing
for specification of authorized investment institutions
and dealers; providing for third-party custodial
agreements; providing for repurchase agreements;
providing for competitive bidding; providing for
establishment of internal controls and operational
procedures; providing for reports; specifying alternative
investment guidelines to apply where there is no
investment plan, and providing for conformance.
WHEREAS, the Village desires to adopt investment policies
consistent with the provisions of Section 218 .415,
Florida Statutes .
NOW, THEREFORE, BE IT RESOLVED BY THE VILLAGE COUNCIL OF
THE VILLAGE OF TEQUESTA, PALM BEACH, COUNTY, FLORIDA, AS
FOLLOWS:
SECTION 1. The Village Council of the Village of
Tequesta, Palm Beach County, Florida hereby adopts the
attached "Investment Policy" (Exhibit A) to be followed
as the guideline for Village Officials responsible for
cash management and investment activities of Village
funds .
- 2 -
SECTION 2 . A copy of the Village Investment Policy shall
be provided to all authorized institutions and dealers
conducting business with the Village .
THE FOREGOING RESOLUTION WAS OFFERED BY
Councilmember , who
moved its adoption. The motion was seconded by
Councilmember
and upon being put to a vote, the vote was as follows :
FOR ADOPTION AGAINST ADOPTION
The Mayor thereupon declared the Resolution duly passed
and adopted this day of October, A.D. , 1995
MAYOR OF TEQUESTA
Ron T. Mackail
ATTEST:
Joann Manganiello
Village Clerk
Exhibit "A"
VILLAGE OF TEQUESTA
INVESTMENT POLICY
OCTOBER 1 , 1995
A. SCOPE OF INVESTMENT POLICY
This Investment Policy applies to the investment activities of the Village of
Tequesta, except for the Firefighters' Pension Fund and any other established
local employee pension funds which are subject to the order of the Board of
Trustees of those particular funds. In addition, all other Trust Funds, and
depositories for defeased debt or assets under Bond Trust Indenture
Agreements when controlled by third party custodians and/or money managers
shall be managed outside the scope of this Investment Policy as required by
Florida State Statutes, Section 218.415. All financial assets of other funds,
including the General Fund, Special Revenue Funds, Capital Project Funds, Debt
Service Funds, Enterprise Funds, and other funds that may be created from time
to time, unless specifically exempted by the Village Council, shall be
administered in accordance with the provisions of this Policy.
B. OBJECTIVES OF INVESTMENT POLICY
The purpose of the Investment Policy of the Village of Tequesta is to establish
cash management and investment guidelines for Village officials responsible for
the stewardship of public funds. Specific objectives include:
1 . Safety of principal is the foremost objective of the Investment Policy of
the Village of Tequesta. Each investment transaction shall seek to first
ensure that capital losses are avoided, whether they be from institution
or securities defaults or erosion of market value.
2. The Village's investment portfolio shall remain sufficiently liquid to enable
the Village to meet all operating requirements which may be reasonably
anticipated.
3. The investment program shall seek to maximize the investment returns
given the limitations imposed by maintaining safety of principal and
liquidity.
C. PERFORMANCE MEASURES
The investment portfolio of the Village shall be designed with the objective of
regularly exceeding the weighted average return of three-month U.S. Treasury
Bills (25%) and six-month U.S. Treasury Bills (75%). The investment program
shall seek to augment returns above this threshold, consistent with risk
limitations identified herein and prudent investment principles.
Village of Tequesta - Investment Policy
October 1, 1995
Page 2 -
D. PRUDENCE AND ETHICS
The standard of prudence to be applied in the context of managing the overall
portfolio by the investment officer for the investment of Village funds shall be
the "Prudent Person Rule" which states:
"Investments shall be made with judgment and care, under
circumstances then prevailing which persons of prudence,
discretion and intelligence exercise in the management of
their own affairs, not for speculation, but for investment,
considering the probable safety of their capital as well as the
probable outcome to be derived."
Any investment officer acting in accordance with the written procedures of this
investment policy and exercising due diligence shall be relieved of personal
responsibility for an individual security's credit risk or market price changes,
provided deviations from expectations are reported in a timely fashion and
appropriate action is taken to control adverse developments.
Employees involved in the investment process shall refrain from personal
business activity that could conflict with proper execution of the investment
program, or which could impair their ability to make impartial investment
decisions. Employees shall disclose to the Village Manager and Village Council
any material financial interest in financial institutions that conduct business with
the Village of Tequesta and shall further disclose any large, personal
financial/investment positions that could be related to the performance of the
Village's portfolio.
E. INVESTMENT SELECTION
The Village of Tequesta shall limit its investments to any of the securities listed
below:
1 . Negotiable direct obligations of, or obligations the principal and interest
of which are unconditionally guaranteed by, the United States
Government at the then prevailing market price for such securities;
2. Obligations of the federal farm credit banks; the Federal Home Loan
Mortgage Corporation, including Federal Home Loan Mortgage
Corporation participation certificates; or the Federal Home Loan Bank or
its district banks or obligations guaranteed by the Government National
Mortgage Association;
Village of Tequesta - Investment Policy
October 1, 1995
Page 3 -
3. Obligations of the Federal National Mortgage Association, including
Federal National Mortgage Association participation certificates and
mortgage pass-through certificates guaranteed by the Federal National
Mortgage Association;
4. Interest-bearing time deposits or savings accounts in banks organized
under the laws of this state, in national banks organized under the laws
of the United States and doing business and situated in this state, in
savings and loan associations which are under state supervision, or in
federal savings and loan associations located in this state and organized
under federal law and federal supervision, provided that any such
deposits are secured by collateral as may be prescribed by law;
5. Securities of, or other interests in, any open-end or closed-end
management type investment company or investment trust registered
under the Investment Company Act of 1940, as amended from time to
time, provided the portfolio of such investment company or investment
trust is limited to United States Government obligations and to
repurchase agreements fully collateralized by such United States
Government obligations and provided such investment company or
investment trust takes delivery of such collateral either directly or
through an authorized custodian.
6. The Local Government Surplus Funds Trust Fund (State Board of
Administration);
7. Short term obligations of corporations organized in the United States
with assets exceeding $500,000,000 if (a) such obligations are rated at
the time of purchase at one of the three highest classifications
established by at least two standard rating services and which mature
not later than 180 days form the date of purchase, (b) such purchases
do not exceed ten percent of the corporation's outstanding obligations.
8. The Florida Counties Investment Trust.
9. EXCLUSIONS: The Village will not invest any funds in derivative
investment products. This includes, but is not limited to,
collateralized mortgage obligations (CMOs), interest-only
(IOs) and principal-only (POs), forwards, futures, currency
and interest rate swaps, options, floaters/inverse floaters,
and caps/floors/collars.
Village of Tequesta - Investment Policy
October 1, 1995
Page 4 -
F. MATURITY AND LIQUIDITY REQUIREMENTS
The Village's portfolio shall be structured to provide the necessary funds to pay
the expenses of the Village in a timely manner. Investments shall be purchased
consistent with a "buy and hold to maturity" philosophy, matching maturities
to anticipated cash flow needs of the Village.
G. PORTFOLIO COMPOSITION
The portfolio shall be designed to provide a balance of short-term and medium-
term maturities designed to meet the liquidity needs of the Village. In addition,
the portfolio shall be diversified with respect to investment instruments and
issuers as follows:
1 . On any given date, at least 80% of the portfolio shall mature within one
year.
2. On any given date, not more than 10% of the portfolio shall mature
beyond five (5) years'.
3. No security purchased may have a maturity of greater than five (5) years.
4. Commercial paper shall not exceed 10% of the Village's investment
portfolio.
5. No bank or savings association shall hold more than 50% of the Village
of Tequesta's investment portfolio, exclusive of securities held in
safekeeping as a third party custodian.
H. RISK AND DIVERSIFICATION
In order to reduce the risk of loss from over concentration of assets in a specific
maturity, issuer, instrument, dealer or bank, the investment portfolio shall be
managed to minimize the potential risk from default and changes in market
conditions. The Finance Director shall seek to balance the portfolio among
issues, issuers, maturities, investment vehicles, and financial institutions. The
Finance Director and Village Manager shall review the portfolio periodically to
review the adequacy of the diversification strategy.
Village of Tequesta - Investment Policy
October 1, 1995
Page 5 -
I. AUTHORIZED INVESTMENT INSTITUTIONS AND DEALERS
The Village may purchase securities from any primary dealer in government
securities, a regional broker if they have been in business for 10 years and have
a minimum of $10,000,000 of capital, or a qualified public depository. Broker-
dealers shall be selected using the following criteria:
1 . The institutional and broker qualifications as they relate to both general
and specific product knowledge;
2. The ability to provide value added services;
3. Pricing competitiveness; and
4. The financial strength and stability of the company.
Investments in savings accounts, certificates of deposit or other deposit
accounts in a bank or savings association may be made only in qualified public
depositories as defined by Florida State Statutes Section 280.02.
All authorized institutions and dealers conducting business with the Village shall
be given a copy of the Village's Investment Policy and be required to abide by
the Investment Policy. The broker shall execute a certification acknowledging
receipt of the Investment Policy and agreeing to follow its terms and conditions.
J. THIRD-PARTY CUSTODIAL AGREEMENTS
All investments purchased or collateral obtained as security for investments
purchased under this Policy shall be properly designated as an asset of the
Village and held in safekeeping by a third party custodial bank or savings
association, chartered by the United Sates Government or the State of Florida.
The third party shall be the designated agent of the Village, ensuring that all
assets held on behalf of the Village shall be clearly held and accounted for to
indicate ownership by the Village. No withdrawal of such securities, in whole
or in part, shall be made from safekeeping except as authorized by the Finance
Director.
Village of Tequesta - Investment Policy
October 1, 1995
Page 6 -
The Village shall settle the purchase or sale of securities on a "delivery vs.
payment" basis, if applicable.
K. MASTER REPURCHASE AGREEMENT
All repurchase agreements transacted, must be in compliance with the
requirements of the Master Repurchase Agreement (attached). The Master
Repurchase Agreement shall be supplemented by an Annex which addresses
the issues of permissible purchased securities, delivery, substitution, margin
ratios, margin maintenance and notification of parties.
L. COMPETITIVE BIDDING
For all investment purchases or sales, the Village shall seek multiple quotations
from authorized brokers and financial institutions, when feasible and
appropriate, in order to maximize the performance of the portfolio. Competitive
bids will not be required when:
1 . The security involved is a new issue and can be purchased at auction or
at a preset, initial offering price.
2. The security is available through a direct issue or private placement.
In all cases where competitive bidding is not feasible, the appropriateness and
return of the investment shall be compared to other investments with similar
maturities available in the financial markets.
M. INTERNAL CONTROLS
The Finance Director shall establish a system of internal controls, which shall
be documented in writing. The internal controls shall be reviewed by the
Village Manager periodically and by the Village auditor annually in conjunction
with the annual examination of the financial statements of the Village. The
controls shall be designed to prevent losses of public funds arising from fraud,
employee error, misrepresentation by third parties, unanticipated changes in
financial markets or imprudent actions by employees and officers of the Village
of Tequesta.
Village of Tequesta - Investment Policy
October 1, 1995
Page 7 -
N. REPORTING
The Finance Director shall submit a quarterly investment report to the Village
Manager and the Village Council. The report shall list investments by fund and
type and include a summation of changes from the previous quarter.
0. RESPONSIBILITY
The establishment of the investment policy is the responsibility of the Village
Council. The Finance Director, under the direction of the Village Manager, shall
be responsible for implementing the policy and managing the Village's portfolio
within its guidelines.
P. CASH MANAGEMENT
Except where otherwise provided by the Village Council and State law, the
Finance Director is authorized to pool the cash of various funds to maximize
investment earnings where it is advantageous and prudent to do so.
Investment income will be allocated to the various funds based upon their
respective participation.
BCK/mk
Public Securities Association
40 Broad Street, New \rbrk, NY 1 0004-23 73
Telephone (212) 809-7000 PER
MASTER REPURCHASE AGREEMENT
•
Dated as of
Between:
and
1. Applicability
From time to time the parties hereto may enter into transactions in which one party ("Seller") agrees to
transfer to the other ("Buyer") securities or financial instruments ("Securities") against the transfer of funds
by Buyer,with a simultaneous agreement by Buyer to transfer to Seller such Securities at a date certain or on
demand,against the transfer of funds by Seller. Each such transaction shall be referred to herein as a"Transaction"
and shall be governed by this Agreement, including any supplemental terms or conditions contained in Annex
I hereto, unless otherwise agreed in writing.
2. Definitions
(a) "Act of Insolvency", with respect to any party, (i) the commencement by such party as debtor of any
case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law, or
such party seeking the appointment of a receiver, trustee, custodian or similar official for such party or any
substantial part of its property, or (ii) the commencement of any such case or proceeding against such party,
or another seeking such an appointment, or the filing against a party of an application for a protective decree
,,nder the provisions of the Securities Investor Protection Act of 1970, which (A) is consented to or not timely
contested py such party, (B) results in the entry of an order for relief, such an appointment, the issuance of
such a pro tive decree or the entry of an order having a similar effect,or(C)is not dismissed within 15 days,
(iii) the making by a party of a general assignment for the benefit of creditors, or (iv) the admission in writing
by a party At such party's inability to pay such party's debts as they become due:
(b) " itional Purchased Securities", Securities provided by Seller to Buyer pursuant to Paragraph 4(a)
hereof;
(c) "Buyer's Margin Amount", with respect to any Transaction as of any date. the amount obtained by
application of a percentage (which may be equal to the percentage that is agreed to as the Seller's Margin
Amount under subparagraph (q) of this Paragraph), agreed to by Buyer and Seller prior to entering into the
Transaction, to the Repurchase Price for such Transaction as of such date;
(d) "Confirmation", the meaning specified in Paragraph 3(b) hereof;
(e) "Income", with respect to any Security at any time, any principal thereof then payable and all interest,
dividends or other distributions thereon;
(f) "Margin Deficit", the meaning specified in Paragraph 4(a) hereof;
(g) "Margin Excess", the meaning specified in Paragraph 4(b) hereof;
(h) "Market Value", with'respect to any Securities as of any date, the price for such Securities on such
date obtained from a generally recognized source agreed to by the parties or the most recent closing bid
quotation from such a source, plus accrued Income to the extent not included therein (other than any Income
credited or transferred to, or applied to the obligations of, Seller pursuant to Paragraph 5 hereof) as of such
date (unless contrary to market practice for such Securities);
(i) "Price Differential", with respect to any Transaction hereunder as of any date, the aggregate amount
obtained by daily application of the Pricing Rate for such Transaction to the Purchase Price for such Transaction
on a 360 day per year basis for the actual number of days during the period commencing on (and including)
the Purchase Date for such'tansact1on and ending on (but excluding)the date of determination(reduced by
any amount of such Price Differential previously paid by Seller to Buyer with respect to such'TFansaction);
G) "Pricing Rate", the per annum percentage rate for determination of the Price Differential;
(k) "Prime Rate", the prime rate of U.S. money center commercial banks as published in The Mail Street
Journal;
(I) "Purchase Date". th,. date on which Purchased Securities a .i transferred by Seller to Buyer;
(m) "Purchase Price", (i) on the Purchase Date, the price at which Purchased Securities are transferred
by Seller to Buyer, and (ii) thereafter, such price increased by the amount of any cash transferred by Buyer to
Seller pursuant to Paragraph 4(b) hereof and decreased by the amount of any cash transferred by Seller to
Buyer pursuant to Paragraph 4(a)hereof or applied to reduce Seller's obligations under clause (ii)of Paragraph
5 hereof;
(n) "Purchased Securities". the Securities transferred by Seller to Buyer in a Transaction hereunder, and
any Securities substituted therefor in accordance with Paragraph 9 hereof. The term "Purchased Securities"
with respect to any Transaction at any time also shall include Additional Purchased Securities delivered pursuant
to Paragraph 4(a) and shall exclude Securities returned pursuant to Paragraph 4(b);
(o) "Repurchase Date", the date on which Seller is to repurchase the Purchased Securities from Buyer,
including any date determined by application of the provisions of Paragraphs 3(c) or 1,1 hereof;
(p) "Repurchase Price",the price at which Purchased Securities are to be transferred from Buyer to Seller
upon termination of a Transaction, which will be determined in each case (including Transactions terminable
upon demand)as the sum of the Purchase Price and the Price Differential as of the date of such determination,
increased by any amount determined by the application of the provisions of Paragraph 11 hereof;
(q) "Seller's Margin Amount", with respect to any Transaction as of any date, the amount obtained by
application of a percentage (which may be equal to the percentage that is agreed to as the Buyer's Margin
Amount under subparagraph (c) of this Paragraph), agreed to by Buyer and Seller prior to entering into the
Transaction, to the Repurchase Price for such Transaction as of such date.
3. Initiation; Confirmation;Termination
(a) An agreement to enter into a Transaction may be made orally or in writing at the initiation of either
Buyer or Seller. On the Purchase Date for the Transaction, the Purchased Securities shall be transferred to
Buyer or its agent against the transfer of the Purchase Price to an account of Seller.
(b) Upon agreeing to enter into a Transaction hereunder, Buyer or Seller (or both), as shall be agreed,
shall promptly deliver to the other party a written confirmation of each Transaction (a "Confirmation"). The
Confirmation shall describe the Purchased Securities (including CUSIP number, if any), identify Buyer and
Seller and set forth (i) the Purchase Date, (ii) the Purchase Price, (iii) the Repurchase Date, unless the
Transaction is to be terminable on demand, (iv) the Pricing Rate or Repurchase Price applicable to the
Transaction, and (v)any additional terms or conditions of the Transaction not inconsistent with this Agreement.
The Confirmation, together with this Agreement, shall constitute conclusive evidence of the terms agreed
between Buyer and Seller with respect to the Transaction to which the Confirmation relates, unless with respect
to the Confirmation specific objection is made promptly after receipt thereof. In the event of any conflict between
the terms of such Confirmation and this Agreement, this Agreement shall prevail.
(c) Ir) the case of Transactions terminable upon demand, such demand shall be made by Buyer or Seller,
no later elan such time as is customary in accordance with market practice, by telephone or otherwise on or
prior to the business day on which such termination will be effective. On the date specified in such demand,
or on the Oate fixed for termination in the case of Transactions having a fixed term,termination of the Transaction
will be of cted by transfer to Seller or its agent of the Purchased Securities and any Income in respect thereof
received by Buyer(arid not previously credited or transferred to,or applied to the obligations of, Seller pursuant
to Paragraph 5 hereof) against the transfer of the Repurchase Price to an account of Buyer.
4. Margin Maintenance
(a) tf at any time the aggregate Market Value of all Purchased Securities subject to all Transactions in
which a particular party hereto is acting as Buyer is less than the aggregate Buyer's Margin Amount for all
such Transactions (a"Margin Deficit"), then Buyer may by notice to Seller require Seller in such Transactions,
at Seller's option, to transfer to Buyer cash or additional Securities reasonably acceptable
to Buyer ("Additional Purchased Securities"), so that the cash and aggregate Market Value of the Purchased
Securities, including any such Additional Purchased Securities,will thereupon equal or exceed such aggregate
Buyer's Margin Amount (decreased by the amount of any Margin Deficit as of such date arising from any
Transactions in which such Buyer is acting as Seller),
(b) tf at any time the aggregate Market Value of all Purchased Securities subject to all Transactions in
which a particular party hereto is acting as Seller exceeds the aggregate Seller's Margin Amount for all such
Transactions at such time (a `Margin Excess"), then Seller may by notice to Buyer require Buyer in such
Transactions, at Buyer's option,to transfer cash or Purchased Securities to Seller, so that the aggregate Market
Value of the Purchased Securities,after deduction of any such cash or any Purchased Securities so transferred,
will thereupon not exceed such aggregate Seller's Margin Amount (increased by the amount of any Margin
Excess as of such date arising from any Transactions in which such Seller is sct.ng as Buyer).
(c) Any cash transferred pursuant to this Paragraph shall be attributed to such Transactions as shall be
agreed upon by Buyer and Seller.
9. Substitution
(a) Seller may, subject to agreement with and acceptance by Buyer, substitute other Securities for any
Purchased Securities. Such substitution shall be made by transfer to Buyer of such other Securities and
transfer t^ Seller of such Purchased Securities. After substitution, the s'ibstituted Securities shall be deemed
to be Purchased Securities.
(b) In Transactions in which the Seller retains custody of Purchased Securities, the parties expressly
agree that Buyer shall be deemed. for purposes of subparagraph (a) of this Paragraph, to have agreed to and
accepted in this Agreement substitution by Seller of other Securities for Purchased Securities; provided,
however, that such other Securities shall have a Market Value at least equal to the Market Value of the
Purchased Securities for which they are substituted.
10. Representations
Each of Buyer and Seller represents and warrants to the other that (i) it is duly authorized to execute and
deliver this Agreement, to enter into the Transactions contemplated hereunder and to perform its obligations
hereunder and has taken all necessary action to authorize such execution, delivery and performance, (ii) it
wilt engage in such Transactions as principal (or, if agreed in writing in advance of any Transaction by the other
party hereto, as agent for a disclosed principal), (iii) the person signing this Agreement on its behalf is duty
authorized to do so on its behalf(or on behalf of any such disclosed principal).(iv)it has obtained all authorizations
of any governmental body required in connection with this Agreement and the Transactions hereunder and
such authorizations are in full force and effect and (v) the execution, delivery and performance of this Agreement
and the Transactions hereunder will not violate any law, ordinance, charter, by-law or rule applicable to it or
any agreement by which it is bound or by which any of its assets are affected. On the Purchase Date for any
Transaction Buyer and Seller shall each be deemed to repeat all the foregoing representations made by it.
11. Events of Default
In the event that (i) Seller fails to repurchase or Buyer fails to transfer Purchased Securities upon the
applicable Repurchase Date,(ii)Seller or Buyer fails,after one business day's notice,to comply with Paragraph
4 hereof, (iii) Buyer fails to comply with Paragraph 5 hereof, (iv) an Act of Insolvency occurs with respect to
Seller or Buyer, (v) any representation made by Seller or Buyer shall have been incorrect or untrue in any
material respect when made or repeated or deemed to have been made or repeated, or (vi) Seller or Buyer
shall admit to the other its inability to, or its intention not to, perform any of its obligations hereunder (each an
"Event of Default"):
(a) At the option of the nondefautting party,exercised by written 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
Act of Insolvency), the Repurchase Date for each Transaction hereunder shall be deemed immediately to
occur.
(b) In all Transactions in which the defaulting party is acting as Seller, if the nondefaulting party exercises
or is deemed to have exercised the option referred to in subparagraph (a) of this Paragraph. (i) the defaulting
party's obligations hereunder to repurchase all Purchased Securities in such Transactions shall thereupon
become immediately due and payable, (ii) to the extent permitted by applicable law, the Repurchase Price
with respecto each such Transaction shall be increased by the aggregate amount obtained by daily application
of (x) the greater of the Pricing Rate for such Transaction or the Prime Rate to (y) the Repurchase Price for
such Traction as of the Repurchase Date as determined pursuant to subparagraph (a) of this Paragraph .
(decreas✓ as of any day by (A) any amounts retained by the nondefaulting party with respect to such
Repurchase Price pursuant to clause (iii) of this subparagraph, (B) any proceeds from the sale of Purchased
Securities pursuant to subparagraph (d)(i) of this Paragraph, and (C) any amounts credited to the account of
the defaulting party pursuant to subparagraph (e)of this Paragraph) on a 360 day per year basis for the actual
number of days during the period from and including the date of the Event of Default giving rise to such option
to but excluding the date of payment of the Repurchase Price as so increased, (iii) all Income paid after such
exercise or deemed exercise shall be retained by the nondefaulting party and applied to the aggregate unpaid
Repurchase Prices owed by the defaulting party, and (iv) the defaulting party shall immediately deliver to the
nondefautting party any Purchased Securities subject to such Transactions then in the defaulting parry's possession.
(c) In all Transactions in which the defaulting party is acting as Buyer, upon tender by the nondefaulting
party of payment of the aggregate Repurchase Prices for all such Transactions, the defaulting party's right,
title and interest in all Purchased Securities subject to such Transactions shalt be deemed transferred to the
nondefaulting party, and the defaulting party shall deliver all such Purchased Securities to the nondefaulting
Ill-
(d) After one business day's notice to the defaulting party (which notice need not be given if an Act of
Insolvency shad have occurred, and which may be the notice given under subparagraph (a) of this Paragraph
or the notice referred to in clause (ii) of the first sentence of this Paragraph), the nondefaulting party may:
(i) as to Transactions in which the defaulting party is acting as Seiler. (A) immediately sect, in a
recognized market at such price or prices as the nondefaulting party may reasonably deem satisfactory,
any or all Purchased Securities subject to such Transactions and apply the proceeds thereof to the. .__
aggregate unpaid Repurchase Prices and any other amounts owing by the defaulting party hereunder .
(d) Seller and Buyer may agree, with respect to any or all Transactions hereunder, that the respective
rights of Buyer or Seller (or both) under subparagraphs (a) and (b) of this Paragraph may be exercised only
where a Margin Deficit or Margin Excess exceeds a specified dollar amount or a specified percentage of the
Repurchase Prices for Such Transactions (which amount or percentage shall be agreed to by Buyer and Seller
prior to entering into any such Transactions).
(e) Seller and Buyer may agree, with respect to any or all Transactions hereunder, that the respective
rights of Buyer and Seller under subparagraphs (a) and (b) of this Paragraph to require the elimination of a
Margin Deficit or a Margin Excess, as the case may be. may be exercised whenever such a Margin Deficit or
Margin Excess exists with respect to any single Transaction hereunder(calculated without regard to any other
Transaction outstanding under this Agreement).
5. Income Payments
Where a particular Transaction's term extends over an Income payment date on the Securities subject to
that Transaction. Buyer shall, as the parties may agree with respect to such Transaction (or, in the absence of
any agreement, as Buyer shall reasonably determine in its discretion), on the date such Income is payable
either (I) transfer to or credit to the account of Seller an amount equal to such Income payment or payments
with respect to any Purchased Securities subject to such Transaction or (n) apply the'Income payment or
payments to reduce the amount to be transferred to Buyer by Seller upon termination of the Transaction. Buyer
shall not be obligated to take any action pursuant to the preceding sentence to the extent that such action
would result in the creation of a Margin Deficit,unless prior thereto or simultaneously therewith Seller transfers
to Buyer cash or Additional Purchased Securities sufficient to eliminate such Margin Deficit.
6. Security Interest
Although the parties intend that all Transactions hereunder be sales and purchases and not loans, in the
event any such Transactions are deemed to be loans, Seller shall be deemed to have pledged to Buyer as
security for the performance by Seller of its obligations under each such Transaction, and shall be deemed to
have granted to Buyer a security interest in, all of the Purchased Securities with respect to all Transactions
hereunder and all proceeds thereof.
7. Payment and Transfer
Unless otherwise mutually agreed, all transfers of funds hereunder shall be in immediately available funds.
All Securities transferred by one party hereto to the other party (i)shall be in suitable form for transfer or shall
be accompanied by duly executed instruments of transfer or assignment in blank and such other documentation
as the party receiving possession may reasonably request, (ii) shall be transferred on the book-entry system
of a Federal Reserve Bank, or(iii) shall be transferred by any other method mutually acceptable to Seller and
Buyer. As used herein with respect to Securities, "transfer" is intended to have the same meaning as when
used in Section 8-313 of the New York Uniform Commercial Code or,where applicable,in any federal regulation
governing transfers of the Securities.
8. Segregation of Purchased Securities
To th extent required by applicable law, all Purchased Securities in the possession of Seller shall be
segregated from other securities in its possession and shall be identified as subject to this Agreement.Segregation
may be accomplished by appropriate identification on the books and records of the holder, including a financial
intermediaA' or a clearing corporation. Title to all Purchased Securities shall pass to Buyer and, unless otherwise
agreed by�guyer and Seller, nothing in this Agreement shall preclude Buyer from engaging in repurchase
transactions with the Purchased Securities or otherwise pledging or hypothecating the Purchased Securities,
but no such transaction shall relieve Buyer of its obligations to transfer Purchased Securities to Seller pursuant
to Paragraphs 3, 4 or it hereof, or of Buyer's obligation to credit or pay Income to, or apply Income to the
obligations of. Seller pursuant to Paragraph 5 hereof.
Required Disclosure for Transactions in Which the Seller Retains Custody
of the Purchased Securities
Seller is not permitted to substitute other securities for those subject to this Agreement and
therefore must keep Buyer's securities segregated at all times, unless in this Agreement Buyer
grants Seller the right to substitute other securities. If Buyer grants the right to substitute,this means
that Buyer's securities will Gkety be commingled with Seller's own securities during the trading day.
Buyer is advised that, during any trading day that Buyer's securities are commingled with Seller's
securities, they (will)' (may)" be subject to liens granted by Seller to fits clearing bank)' (third
parties)" and may be used by Seller for deliveries on other securities transactions. Whenever the
securities are commingled, Seller's ability to resegregate substitute securities for Buyer will be
subject to Seller's ability to satisfy (the clearing)• (any)" Gen or to obtain substitute securities.
"Language to be used under 17 C.P.R.1403.41e)i Seller is a govsrrmen1 mutes broker or dealer otr+er tun a Handal institution.
"Language b be used under 17 C.FR§4O3.s(d)if Seller is a financial institution.
or (B) in its sole discretion elect, in lieu of selling all or a portion of such Purchased Securities, to give the
defaulting party credit for such Purchased Securities in an amount equal to the price therefor on such
date, obtained from a generally recognized source or the most recent closing bid quotation from such a
source, against the aggregate unpaid Repurchase Prices and any other amounts owing by the defaulting
party hereunder; and
(ii) as to Transactions in which the defaulting party is acting as Buyer, (A) purchase securities
("Replacement Securities") of the same class and amount as any Purchased Securities that are not
delivered by the defaulting party to the nondefaulting party as required hereunder or (B) in its sole
discretion elect, in lieu of purchasing Replacement Securities, to be deemed to have purchased Replacement
Securities at the price therefor on such date. obtained from a generally recognized source or the most
recent closing bid quotation from such a source.
(e) As to Transactions in which the defaulting party is acting as Buyer, the defaulting party shall be liable
to the nondefaulting party(i)with respect to Purchased Securities(other than Additional Purchased Securities),
for any excess of the price paid (or deemed paid) by the nondefautting party for Replacement Securities
therefor over the Repurchase Price for such Purchased Securities and(ii)with respect to Additional Purchased
Securities, for the price paid (or deemed paid) by the nondefautting party for the Replacement Securities
therefor. In addition,the defaulting party shall be liable to the nondefaulting party for interest on such remaining
liability with respect to each such purchase (or deemed purchase) of Replacement Securities from the date
of such purchase (or deemed purchase) until paid in full by Buyer. Such interest shall be at a rate equal to the
greater of the Pricing Rate for such Transaction or the Prime Rate.
(f) For purposes of this Paragraph 11, the Repurchase Price for each Transaction hereunder in respect
of which the defaulting party is acting as Buyer shall not increase above the amount of such Repurchase Price
for such Transaction determined as of the date of the exercise or deemed exercise by the nondefautting party
of its option under subparagraph (a)of this Paragraph.
(g) The defaulting party shall be liable to the nondefaulting party for the amount of all reasonable legal or
other expenses incurred by the nondefaulting party in connection with or as a consequence of an Event of
Default, together with interest thereon at a rate equal to the greater of the Pricing Rate for the relevant
Transaction or the Prime Rate.
(h) The nondefaulting party shall have. in addition to its rights hereunder, any rights otherwise available
to it under any other agreement or applicable law.
12. Single Agreement
Buyer and Seller acknowledge that, and have entered hereinto and will enter into each Transaction
hereunder in consideration of and in reliance upon the fact that. all Transactions hereunder constitute a single
business and contractual relationship and have been made in consideration of each other. Accordingly, each
of Buyer and Seller agrees (i) to perform all of its obligations in respect of each Transaction hereunder, and
that a default in the performance of any such obligations shall constitute a default by it in respect of all
Transactions hereunder, (ii) that each of them shall be entitied to set off claims and apply property held by
them in respect of any Transaction against obligations owing to them in respect of any other Transactions
hereundert and (iii) that payments, deliveries and other transfers made by either of them in respect of any
Transaction shall be deemed to have been made in consideration of payments, deliveries and other transfers
in respec 'of any other Transactions hereunder. and the obligations to make any such payments, deliveries
and otheriransfers may be applied against each other and netted.
13. Notices and Other Communications
Unless another address is specified in writing by the respective party to whom any notice or other com-
munication 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 Annex II attached hereto.
14. Entire Agreement; Severability
This Agreement shall supersede any existing agreements between the parties containing general terms
and conditions for repurchale transactions. Each provision and agreement herein shall be treated as separate
and independent from any other provision or agreement herein and shall be enforceable notwithstanding the
unenforceability of any such other provision or agreement.
15. Non•assignability; Termination
The rights and obligations of the parties under this Agreement and under any Transaction shall not be
assigned by either party without the prior written consent of the other party. Subject to the foregoing, this,
Agreement and any Transactions shall be binding upon and shall inure to the benefit of the parties and their
respective successors and assigns. This Agreement may be cancelled by either party upon giving writterf
notice to the other, except that this Agreement shall, notwithstanding such notice, remain applicable to any
'
Transactions then outstanding. -
16. Governing Law
This Agreement shall be governed by the laws of the State of New York without giving effect to the conflict
of taw principles thereof.
17. No Waivers, etc.
No express or implied waiver of any Event of Default by either party shall constitute a waiver of any other
Event of Default and no exercise of any remedy hereunder by any party shall constitute a waiver of its right
to exercise any other remedy hereunder. No modification or waiver of any provision of this Agreement and no
consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and
duty executed by both of the parties hereto. Without limitation on any of the foregoing,
notice pursuant to subparagraphs 4(e)or 4(b) hereof will not constitute a waiver of any right to douso attc give latea
r
date.
18. Use of Employee Plan Assets
(a) ff assets of an employee benefit plan subject to any provision of the Employee Retirement Income
Security Act of 1974(`ERISA")are intended to be used by either party hereto(the"Plan Party")in a Transaction,
the Plan Party shall so notify the other party prior to the Transaction. The Plan Party shah represent in writing
to the other party that the Transaction does not constitute a prohibited transaction under ERISA or is otherwise
exempt therefrom,and the other party may proceed in reliance thereon but shall not be required so to proceed.
(b) Subject to the last sentence of subparagraph(a)of this Paragraph,any such Transaction shall proceed
only if Seller furnishes or has furnished to Buyer its most recent available audited statement of its financial
oondirtion and its most recent subsequent unaudited statement of its financial condition.
(c) By entering into a Transaction pursuant to this Paragraph, Seller shall be deemed (i) to represent to
Buyer that since the date of Seller's latest such financial statements, there has been no material adverse
change in Seller's financial condition which Seller has not disclosed to Buyer, and(ii) to agree to provide Buyer
with future audited and unaudited statements of its financial condition as they are issued, so long as it is a
Seller in any outstanding Transaction involving a Plan Party.
19. Intent
(a) The parties recognize that each Transaction is a "repurchase agreement" as that term is defined in
Section 101 of Title 11 of the United States Code, as amended (except insofar as the type of Securities subject
to such Transaction or the term of such Transaction would render such definition inapplicable),and a"securities
contract" as that term is defined in Section 741 of Title 11 of the United States Code, as amended.
(b) tt is understood that either party's right to liquidate Securities delivered to it in connection with Transactions
hereunder or to exercise any other remedies pursuant to Paragraph 11 hereof,is a contractual right to liquidate
such Transaction as described in Sections 555 and 559 of Title 11 of the United States Code, as amended.
20. Disclosure Relating to Certain Federal Protections
Te parties acknowledge that they have been advised that:
(a) in the case of Transactions in which one of the parties is a broker or dealer registered with
Securities and Exchange Commission ("SEC") under Section 15 of the Securities Exchange Act of 1934
("1 Act"), the Securities Investor Protection Corporation has taken the position that the provisions of
the•unties Investor Protection Act of 1970 ("SIPA") do not protect the otherrespect
Transaction hereunder; party with pet to any
(b) in the case of Transactions in which one of the parties is a government securities broker or a
government securuies dealer registered with the SEC under Section 15C of the 1934 Act, SiPA will not
provide protection to the other party with respect to any Transaction hereunder; and
(c) in the case of Transactions in which one of the parties is a financial institution, funds held by the
financial institution pursuant to a Transaction hereunder are not a deposit and therefore are not insured
by the Federal Deposit Insurance Corporation, the Federal Savings and Loan Insurance Corporation or
the National Credit Union Share Insurance Fund, as applicable.
•
(Name of Party) [Name of Party)
BY By
Title
Title
Date ;
Date
c