Section 1. THE SERVICE.
These Sweep Service Terms (the “Service Terms”) set forth the terms under which Customer can have Excess Funds automatically transferred out of an Account at the end of each Business Day and applied in accordance with the Sweep Service option Customer has elected, as described further below (the “Service”). The Service is also subject to the General Provisions of the Treasury Management Terms and Conditions Agreement (the “Agreement”) as if fully incorporated herein and all Applicable Laws. In the event of a conflict between these Service Terms and other terms in the Agreement, these Service Terms shall control. Unless otherwise defined herein, any capitalized terms shall have the meaning as set forth in the Agreement. Any reference to the Agreement herein shall be deemed to include these Service Terms.
“Collected Funds” means those funds that are made available in accordance with Bank’s applicable funds availability schedule less any holds on an Account.
“Excess Funds” means the amount of Collected Funds in the Account(s) designated in the Operational Instructions as of the close of business on any Business Day that exceeds the Target Balance.
“Repurchase Agreement” means an agreement whereby Customer purchases undivided fractional ownership interests in Securities owned by Bank, and Bank agrees to repurchase such Securities at the Repurchase Price.
“Target Balance” means the amount of funds that Customer desires to maintain in an Account in connection with a specific Sweep Service. The Target Balance will be as indicated by Customer in the applicable Operational Instructions, subject to Bank’s approval.
Section 2. REPO Sweep Service.
The FDIC requires that Bank gives its depositors notice of the status of their deposits and transactions in the event of a Bank failure. In all cases, funds in an Account that are not swept to a sweep product prior to the applicable Cutoff Time will be treated as a Deposit with Bank and insured under the applicable FDIC insurance rules and limits (a “Deposit”). The status of funds swept under the terms of Bank’s Repo Sweep Service as described below.
Repo Sweep – Purchase of Securities. The Bank’s Repo Sweep Service option offers Customer a way to invest Excess Funds by entering into an overnight Repurchase Agreement with the Bank as described herein. If there is a balance of Excess Funds after the close of each Business Day, Customer authorizes and directs Bank to transfer the Excess Funds to an account maintained by Bank to hold the Excess Funds (“Investment Account”) to purchase an undivided fractional ownership interests in Bank-owned securities (“Securities”). Bank may invest the Excess Funds in Securities for the benefit of Customer at close of the Business Day (each such day a, “Purchase Date”), pursuant to a Repurchase Agreement requiring Bank to repurchase such Securities for the amount of the Excess Funds used to purchase the Securities plus interest (the “Repurchase Price”) on the next Business Day. The amount of interest paid shall be calculated at a rate as disclosed by Bank to Customer from time to time on each Confirmation (defined below). Bank shall not be obligated to sell an interest in Securities to Customer or otherwise sweep the Excess Funds on any Business Day, even if the balance in the Account exceeds the Target Balance.
Customer may add or remove Accounts from this Repo Sweep Service, or change the Target Balance, by submitting replacement Operational Instructions. Customer’s replacement Operational Instructions shall be effective only after acceptance by Bank with a reasonable time to implement any such changes. Bank, without notice to Customer, shall have the right to increase or decrease the amount of Excess Funds that will be allowed to be invested in Securities. Customer may not transfer or assign its interest in a Repurchase Agreement or the Securities, in whole or in part, without Bank’s prior written consent. Customer may not use its ownership interest in the Securities as collateral security for any other debt.
Repurchase of Securities by Bank. On the next Business Day after the Purchase Date, Bank agrees to repurchase from Customer, and Customer agrees to sell back to Bank, the Securities for the Repurchase Price, at which time the Customer’s interest in and to the Securities shall terminate. Bank shall be entitled to receive an amount equal to all income paid or distributed on or in respect of the Securities that is not otherwise received by the Bank, to the full extent it would be so entitled if the Securities had not been sold to the Customer. The market value of the Securities may change after the Purchase Date, resulting in a situation in which the market value of the Securities has depreciated to a level below the total amount of Bank’s obligations under the Repo Sweep Service. Any such change will not affect Bank’s obligation to repurchase and pay for, nor Customer’s obligation to sell, Customer’s ownership interest in the Securities for the Repurchase Price as provided above. Bank’s general assets may be used to satisfy its repurchase obligation rather than proceeds from the sale of the Securities. In this situation, Customer will become an unsecured creditor of Bank to the extent of the disparity between the market value of the Securities and Bank’s total obligations under the Repo Sweep Service.
Credit of Repurchase Price and Income. Upon the repurchase of the Securities by Bank, the Account from which the Excess Funds were transferred shall be credited for the amount of Excess Funds plus interest earned on the Repurchase Agreement. The interest earned on the Excess Funds shall accrue and be held for the benefit of Customer in the Bank’s Investment Account and credited to the Account at the end of each calendar month. Any accumulated interest, while held for the benefit of Customer in the Investment Account, shall not be available for reinvestment by Customer, but shall only be so available after credit to the Account at the end of each calendar month. The interest paid by Bank under a Repurchase Agreement is not related to nor equal to the income paid or distributed on or in respect of the Securities.
Although the parties intend that all transactions for Repurchase Agreements hereunder be sales and purchases and not loans In the event that any Repo Sweeps transactions are deemed to be loans, Bank shall be deemed to have pledged to Customer as security for the performance by Bank of Bank’s obligations under each such transaction, and shall be deemed to have granted to Customer a security interest in, that portion of the purchased Securities and income thereon attributable to Customer. The loss of the security interest will leave Customer in the position of a general creditor of Bank for the amount of the disparity.
Confirmation. Upon agreeing to enter into a Transaction hereunder, Bank shall deliver to Customer a written confirmation of each Transaction (a “Confirmation”) via U.S. Mail or other method made available to Customer from time to time. The Confirmation shall describe the 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 Repurchase Agreement is to be terminable on demand, (iv) the rate of interest and Repurchase Price applicable to the Repurchase Agreement, and (v) any additional terms or conditions of the Repurchase Agreement not inconsistent with this Agreement. The Confirmation, together with this these Service Terms, shall constitute conclusive evidence of the terms agreed between Buyer and Seller with respect to the Repurchase Agreement 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. As a standard procedure, daily Repo Sweep Service confirmations will be sent to Customer via mail unless otherwise specified in applicable Operational Instructions.
NOTICE REGARDING DEPOSIT INSURANCE AND INSOLVENCY FOR REPURCHASE AGREEMENT SERVICES; REQUIRED DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS.
CUSTOMER ACKNOWLEDGES THAT IT HAS BEEN ADVISED THAT BANK IS A BANK WITH ITS DEPOSITS INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (“FDIC”) AND EACH REPURCHASE AGREEMENT IS AN OBLIGATION OF THE BANK BUT IT IS NOT A DEPOSIT, AND IT IS NOT INSURED BY THE FDIC OR GUARANTEED BY THE U.S. GOVERNMENT OR ANY AGENCY THEREOF. CUSTOMER FURTHER ACKNOWLEDGES THAT IN THE EVENT OF A FAILURE OF THE BANK THAT CUSTOMER WILL BE THE OWNER OF, OR WILL HAVE A SECURITY INTEREST IN, THE SECURITIES, OR THE SECURITIES WILL BE SOLD UNDER THE TERMS SET FORTH HEREIN TO RE-CREDIT THE AMOUNT OF SUCH SECURITIES TO CUSTOMER. THE CUSTOMER MAY BECOME AN UNSECURED CREDITOR OF THE BANK IF THE MARKET VALUE OF THE SECURITIES FALLS BELOW THE REPURCHASE PRICE.
Custodial Holdings of Underlying Securities. Bank has a contractual custodial agreement with a third-party depository institution (“Custodian”) to maintain the Securities on behalf of Bank. Bank has notified Custodian that the Securities are customer securities for purposes of 17 C.F.R. Part 450. Custodian shall maintain the Securities in an account that is designated for Repo Sweep Service customers of Bank and does not contain proprietary securities of the Bank. Bank has notified Custodian to maintain the Securities free of any lien, charge, or claim of any kind in favor of Custodian or any persons claiming through the Custodian. Custodian shall treat the Purchased Securities as customer securities under 17 C.F.R. Part 450, separate from any other securities held by Custodian for the account of Bank.
No Substitution. Bank is not permitted to substitute other securities for Securities subject to this Repo Sweep Service. However, Bank is authorized to replace Securities from time to time and at such times as Bank, in its sole discretion, determines is necessary to ensure that Customer does not hold Securities that have matured. Such replacement will entail the substitution of the identified Security prior to its scheduled maturity and for the simultaneous substitution of a new Security to Customer for the remaining maturity. The new sale will be described in a Confirmation to Customer.
3. Loan Sweep.
If Customer has an eligible line of credit with Bank (“LOC”), the Loan Sweep Service allows Customer to direct Bank to initiate Repayment Transactions and/or Overdraft Coverage Transactions, each as defined below. Repayment Transactions allow for the reduction of interest expense by automatically applying Excess Funds from the Account to pay down Customer’s LOC. Overdraft Coverage Transactions can help eliminate costly overdraft charges by drawing from the LOC to fund daily clearings in the Account.
Funds that have been swept out of Customer’s Account will be used to reduce the balance on the LOC; funds remaining in the Account are Deposits and insured under the applicable FDIC insurance rules and limits.
If the LOC matures, Bank will only make Repayment Transactions until the outstanding balance has been paid in full, and Bank will not be required to initiate any Overdraft Coverage Transaction.
Customer represents and warrants to Bank that the individual establishing the Loan Sweep Service on behalf of Customer is authorized to incur debt and borrow money on Customer’s behalf. The terms of the Credit Agreement are made a part of the Loan Sweep Service by reference.
Section 4. Loan & Investment Sweep Bundle.
Customer understands and agrees that in the event Customer subscribes to both Repo Sweep Service and Loan Sweep Service with respect to the same Account (“Loan & Repo Sweep Bundle”), the Loan Sweep will take precedence and only after the principal balance of the LOC has been reduced to $0 will any Excess Funds be applied to Repo Sweep Transactions which shall be executed as set forth in Section 2 of these Service Terms above. Customer is hereby advised that Bank only offers the Loan & Repo Sweep Bundle with specific loan types.
Section 5. TERMINATION.
The authority granted to Bank by Customer to conduct Transactions and provide the services under these Service Terms and any Repurchase Agreement shall continue until the termination of these Service Terms or termination of the Agreement. In addition to either party’s rights of termination under the terms of the Agreement, these Service Terms may be terminated by either party immediately by giving prior notice in writing to the other party. Notice is effective upon receipt; provided, however, that Bank shall have a reasonable amount of time to act on such notice. Additionally, the Loan Sweep Service shall immediately and automatically terminate without notice if (i) the Credit Agreement has been terminated, (ii) Customer has closed the LOC, or (iii) Bank has demanded payment under the Credit Agreement. Upon termination of this Agreement, Bank shall transfer all of Customer’s uncredited interest due to Customer’s Account. Any Repurchase Agreement in effect at the time notice of termination is provided by either party shall remain in effect until it reaches maturity. Upon termination of the Repo Sweep Service, unless otherwise directed in the written notice of termination, Bank, as agent for Customer, shall forthwith sell all of Customer’s investments which Bank is holding and credit the proceeds to Customer’s Account.
Section 6. Limitation of Liability.
In addition to Bank’s limits on liability as set forth in the General Provisions, Bank shall not be liable for any failure or delay in sweeping funds or failure to draw funds from a LOC that isn’t due to Bank’s negligence, such as a Force Majeure Event, and shall not be liable for loss of any interest income or payment of interest from such failure or delay, or for any increased interest due on a LOC due to failure or delay in making any sweep to make a payment on a LOC. In the event of Bank’s negligence, Bank’s maximum liability to customer shall be limited to the amount of interest that either: (i) would have been earned if Bank swept any Excess Funds into a Repurchase Agreement, or (ii) the amount of interest due on a LOC if Bank had swept the Excess Funds to pay the LOC.
Section 7. GENERAL TERMS.
By enrolling in the Service, Customer appoints Bank, and Bank hereby accepts appointment, to act as Customer’s agent, subject to these Service Terms, for the purpose of transferring to or from Customer's Account(s), Customer's LOC, and/or Customer’s Sweep Investment Account, amounts necessary to ensure that the applicable Target Balance or such other mutually agreed amounts are maintained in the Account. The Sweep Services may be limited to certain types of Accounts, as determined by Bank from time to time. Customer may have access to reporting with respect to the Sweep Services, as designated in the applicable Operational Instructions.