Framework Contract on the Extension of Loans Backed by the Transfer of Securities

Article 4
Yields from Transferred Securities and
Exercise of Rights Arising Therefrom

(1) If, during the REPO operation life, yields from securities transferred from a debtor to a creditor as part of the REPO operation are paid, a creditor shall be obligated to remit to a  debtor an amount equal to the yield from the transferred securities that the issuer has actually paid to the creditor, upon making all mandatory deductions such as those relating to taxes, fees and transfers imposed directly by law or made on the basis of law. A  creditor shall be obligated to remit this amount to a debtor on the business day following a day on which the yield has been paid.

(2) Save as agreed otherwise by the contracting parties in writing, a creditor shall be entitled – during the REPO operation life – to exercise and shall exercise all the rights arising from securities transferred to him.

Article 5
Transfer of Funds and Securities

(1) Save as agreed otherwise by the contracting parties in writing, all the transfers of funds (payments of founds) between the contracting parties, related to any REPO operation concluded hereunder, shall be executed in SKK.

(2) All the transfers of securities serving as a collateral and retransfers of substitutable securities between the contracting parties, related to any REPO operation concluded hereunder, must be executed at such place where the statutory register of the securities in question is maintained, which is

a) at the CR, or

b) at the SCP.

(3) Save as agreed otherwise by the contracting parties in writing, all the transfers of funds related to any REPO operation concluded hereunder, shall be executed in SKK without any deduction of fees, transfers and taxes, except for mandatory deductions of such fees, transfers and taxes imposed directly by law or on the basis of law. If any of the contracting parties makes an incorrect deduction at the expense of the other contracting party, and save as agreed otherwise by the contracting parties in writing, the contracting party that has incorrectly made the deduction shall pay to the other contracting (aggrieved) party an amount equal to the incorrectly deducted amount so that the other contracting (aggrieved) party finally receives an amount as if the incorrect deduction never occurred. This shall, however, not compromise the procedure for paying yields from transferred securities during the REPO life as per the provision of Article 4(1) hereof.

(4) With regard to trading practice and practical difficulties occurring in connection with a fully concurrent payment of their mutual considerations (counter claims), the contracting parties have agreed that they will not make the transfer (payment) of a  principal amount to a debtor subject to a fully concurrent execution of transfers of securities serving as a collateral and likewise, they will not make the transfer (payment) of due amounts to a creditor subject to a fully concurrent execution of retransfers of substitutable securities – provided that such mutual performance of counter claims by the contracting parties must be made on the same calendar day. The provision of this paragraph shall not be applied, should the parties agree so in writing.

(5) In the event of a written agreement of the contracting parties, the transfer of securities serving as a collateral from a debtor to a creditor shall be made simultaneously with the transfer (payment) of the principal amount by a creditor to a debtor and likewise, the transfer (payment) of the due amount by a debtor to a creditor shall be made concurrently with the retransfer of substitutable securities from a creditor to a debtor.

(6) The contracting parties have undertaken and shall be obligated to provide for due and timely execution of the transfers of securities serving as a collateral and retransfers of substitutable securities in accordance with this framework contract. To this end, they shall be obligated to provide for a due and timely execution of all necessary legal acts, including the drafting and signing all necessary documents, in particular all legal acts and all deeds. Transfers from a debtor to a creditor of securities serving as a  collateral and retransfers of substitutable securities from a  creditor to a debtor must always be executed without curtailing the tradability and transferability of the securities in question and at the same time, without pledging the transferred securities or charging them with any other titles of third persons.

Article 6
Representations of Contracting Parties

(1) Each contracting party has made a legally binding representation on its own behalf to the effect that:

a) it is authorised to conclude this framework contract, conduct REPO operations hereunder and discharge, either directly or through a third person, obligations arising from this framework contract and from REPO operations concluded thereunder;

b) it has duly approved, in accordance with documents and generally applicable legislation governing its legal circumstances and position, the signing of this framework agreement, including the performance of obligations arising therefrom;

c) by signing this framework contract and by performing obligations thereunder, it will neither violate provisions of any generally applicable legislation, nor any other contract, binding on it or relating to its assets;

d) it is and will be a direct party to this framework contract and all REPO operations, unless agreed otherwise by the contracting parties;

e) unless agreed otherwise by the contracting parties, it will not conduct, on the basis of this framework contract, any REPO operations with the other contracting party in its own name and to the account of a third person (e.g. factoring);

f) it has obtained all official (administrative) authorisations (licenses) and consents needed for the conclusion of this framework contract or for conducting REPO operations hereunder and such authorisations are still valid. If a contracting party is not able to directly perform some of the obligations arising herefrom and from REPO operations concluded hereunder in a due and timely fashion, it will provide, subject to the other contracting party’s consent, for their performance via a  third person authorised for so doing. At the same time it will be obligated to supply to the contracting other party the details of this person and information on obligations to be performed by the third party;

g) transfers from a debtor to a creditor of securities serving as a collateral and retransfers of substitutable securities from a  creditor to a debtor must always be executed without curtailing the tradability and transferability of the securities in question and at the same time, without pledging the transferred securities or charging them with any other titles of third persons.

(2) The contracting parties have, independently of each other, made binding representations (affirmations) on their own behalf, and for the benefit of the other contracting party, to apply for the whole effective period of this contract and over the whole life of obligations arising therefrom, and they have assumed full responsibility for the authenticity, completeness and accuracy of such representations. Each of the parties has undertaken to give forthwith to the other contracting party a precise written notice of any changed circumstance that could influence, even in a very negligible way, any of the binding representations as per paragraph 1 of this Article. Such a notice shall take effect when it is delivered to the other contracting party. By the time such a notice is effectively delivered, any binding representation of any of the contracting parties as per paragraph 1 of this Article shall be treated as continuously and fully valid. Without a detailed notice in accordance with the previous sentence being effected, any binding representation of any of the contracting parties as per paragraph 1 of this Article shall fully apply to every single REPO operation concluded hereunder, whilst, pursuant to § 36 of the Civil Code, the contracting parties shall deem any such binding representations to be replicated as from the day of concluding the particular REPO operation.

Article 7
Defaults and Termination of Framework Contract

(1) The occurrence or continuation and/or re occurrence of any of the circumstances mentioned hereinafter shall qualify as a grave breach of obligations or an impossibility to perform the obligations of contracting parties hereunder. Such circumstances shall namely include cases where:

a) on the day of extending a loan a creditor does not make a due transfer (payment) of the principal amount to a debtor or a  debtor does not make a due transfer of securities serving as a  collateral to a creditor, or

b) on the maturity date a debtor does not duly remit (pay) the amount due to a creditor, or a creditor does not make a due retransfer of substitutable securities to a debtor, or

c) any of the contracting parties is wound up with liquidation, or

d) any of the contracting parties files a petition with the court for arrangement or for the issuance of a similar decision to the contracting party’s benefit, and/or if a bankruptcy petition is granted in respect of the assets of one of the contracting parties or if the court rejects an insolvency petition in respect of the assets of one of the contracting parties solely because of their insufficient amount, or

e) at any point of time during the effective period hereof, any representation of the contracting parties made under Article 6 hereof turns out to be or becomes, even if only partially, untrue or not reflecting reality, or

f) any of the contracting parties, who, at the time of concluding this contract, was a member of the BCPB, ceases to be such; or if a license for transferring securities in the CR, possessed by any of the contracting parties, is withdrawn from them or ceases in another way; or if an authorisation (license) for trading in securities in the Slovak Republic, possessed by any of the contracting parties, is withdrawn from them or ceases in another way, or

g) a creditor does not perform his obligation as per Article 4(1) hereof, despite receiving a debtor’s written notice of such obligation, and does not even do so within an extended term provided to him by the debtor, or

h) any of the contracting parties does not meet, duly and in time, or otherwise breaches any other obligation arising herefrom, or from any REPO operation concluded hereunder, and this party does not meet the outstanding or otherwise defaulted obligation and does not even remove the consequences of such a breach, within an adequately extended period of 30 calendar days from the day on which the other contracting party has advised them of such non-performance or another default.

(2) If a grave breach of obligations or impossibility to perform obligations hereunder occurs in any of the ways mentioned in paragraph 1 of this Article, a contracting party that has neither breached the obligations, nor has become unable to perform obligations hereunder on any of the grounds listed in paragraph 1 hereof, shall have the right to give forthwith a written notice of termination of this framework contract on its full scope. The denunciation of this framework contract shall cause all individual REPO agreements concluded thereunder to be denounced in effect – regardless of whether or not it is explicitly mentioned in the notice of termination of the framework contract.

(3) A written notice of termination as per paragraph 2 of this Article shall take effect on the day of its delivery to the other contracting party. At the time the notice becomes effective:

a) the maturity of obligations shall be accelerated, and as a  result any REPO operations concluded hereunder shall immediately fall due and, on the effective date of the notice of termination, any due amounts shall have to be paid and any retransfers of substitutable securities shall have to be made without compromising the rights of a contracting party who is the obligee as per c);

b) the amount of the contracting parties’ counter claims that arise from any of the REPO operations concluded hereunder and have not yet been, even if only partially, settled by not later than the effective date of the notice of termination shall be determined (calculated) as of the effective date of the notice of termination as the sum of:

1. market prices of all securities that have been transferred to contracting parties and have not yet been, even if only partially, settled (through the retransfer of substitutable securities, and/or the settlement as per Article 3(8) hereof) as of the effective date of the notice of termination, and
2. the principal amount that has been extended to contracting parties and has not yet been, even if only partially, settled (repaid) by not later than the effective date of the notice of termination, and
3. all interest accrued from the principal amount as per item 2 of this subparagraph, and/or other interest that has not yet been, even if only partially, settled (repaid) by not later than the effective date of the notice of termination, and
4. contractual penalties as per Article 8 hereof that has not yet been, even if only partially, settled (repaid) by not later than the effective date of the notice of termination;

c) the contracting parties’ counter claims, determined (calculated) in accordance with section b) of this paragraph, shall be summed up. In accordance with the last sentence of Article 3(8) hereof, an obligor (the party whose obligations exceed his claims) must then pay the difference (net), if any, of counter claims determined in this way, to the other party within 5 business days following the day of advising the obligor of the calculated difference (net) of counter claims, save as agreed otherwise by the parties. Such a contractually agreed claim for the payment of a determined difference (net) of counter claims shall in itself constitute a separate title arising from the breach of obligations hereunder that resulted in voiding this contract by way of its denunciation as per paragraph 2 of this Article, whereas an obligee (the contracting party whose claims exceed its obligations) shall have the right to not retransfer substitutable securities worth of a difference (net) of counter claims up until this difference (net amount) is settled, and

d) a party who has breached obligations or has become unable to perform obligations hereunder, and in so doing gave rise to the denunciation of this contract, shall be obligated to cover on behalf of the other party any actual costs associated with the denunciation of the contract and accelerated maturity (termination) of REPO operations concluded thereunder. This shall, however, not compromise the contracting parties’ title to damages, or their claims pursuant to Article 8 hereof or generally applicable legislation;

e) this framework contract shall become null and void. However, even after such termination, the provisions of this framework contract shall continuously apply to the settlement of such mutual relations of contracting parties that have arisen in connection with this contract and have not yet been settled on the date of its voiding at the latest, for example the settlement of mutual relations as per sections b), c) and d) of this paragraph. These provisions shall be equally binding in respect of the handling of legal responsibilities of contracting parties that have arisen in connection with this contract.

(4) Each of the contracting parties, who has breached obligations or has become unable to perform obligations hereunder in any of the ways described in paragraph 1 of this Article, has undertaken to give forthwith a precise written notice of this to the other party.

(5) If – at the time of voiding this framework contract on the grounds other than the denunciation as per paragraph 2 of this Article – one or several REPO operations concluded hereunder have not yet been, even if only partially, settled, the procedure as per paragraphs 3 and 4 of this Article shall also be applied in settling such REPO operations. The voiding of this framework contract on such other grounds shall automatically make all individual REPO agreements concluded thereunder null and void.

Article 8
Contractual Penalties

(1) If any of the contracting parties breaches this framework contract or an individual REPO agreement concluded thereunder by failing to execute a due and timely transfer of securities serving as a collateral, retransfer of substitutable securities, and/or remittance (payment) of a principal amount, due amount or other monies to the other contracting party, such party shall be obligated, at the other contracting party’s written request, to pay to the other contracting party a contractual penalty in the amount as agreed hereunder.

(2) A contractual penalty agreed for each (including a just commenced) day of delay shall amount to 0.01% of an agreed basis comprising:

a) the principal, amounts due or other monies (funds to be transferred) that failed to be settled (paid) duly and in time, in cases where a default on the settlement (payment) of funds is involved;

b) the amount of funds that was or was to be paid in consideration for the transfer of securities serving as a  collateral that failed to be executed duly and in time or the retransfer of substitutable securities, in cases where a default on the transfer of securities is involved.

(3) For the purposes of calculating the contractual penalty amount, contracting parties have agreed on an irrefutable presumption that one year is deemed to be 360 days (annual basis). At the same time, the contracting parties have agreed that the contractual penalty amount calculated in accordance with paragraph 2 of this Article shall be rounded to whole Slovak korunas (hereinafter “SKK”), namely rounded down for amounts up to 50 haliers and rounded up for amounts of and above 50 haliers;

(4) A failure to execute, duly and in time, either the transfer of securities serving as a collateral, retransfer of substitutable securities or remittance (payment) of any monies shall not refer to cases where a contracting party does not execute the transfer because:

a) under Article 5(5) hereof the contracting parties have agreed to concurrently perform their mutual obligations arising from REPO operations concluded hereunder, and obligations (claims) have not been concurrently performed (discharged) by reason other than the other contracting party’s fault, or

b) an objective obstacle beyond a contracting party’s control has occurred (e.g. technical disorder not caused by it) as per § 374 of the Commercial Code, an obstacle that occurred independently of this contracting party’s will and persons acting on its behalf, whilst this objective obstacle makes it completely impossible for the contracting party to discharge (perform) a counter claim (an obligation) and the contracting party does not have any means whatsoever of removing the existing obstacle and the contracting party has forthwith notified, in writing, the other contracting party of the existing obstacle.

(5) Even where this framework contract is made null and void, for example by way of the denunciation as per Article 7(2) hereof, a  contracting party shall be obligated to pay to the other contracting party, at its written request, a contractual penalty in the amount agreed hereunder.

Article 9
Relationship Between Framework Contract and
Individual REPO Agreements

(1) Unless provided otherwise hereunder or unless agreed otherwise by contracting parties in writing, this framework contract and individual REPO agreements concluded under Article 3(1) hereof shall in their entirety constitute a full agreement on (contract of) the extension of a loan backed by the transfer of securities, whereas individual REPO operations and relations arising therefrom shall be considered separately and independently of each other. A  failure to perform any of the obligations in connection with any of the REPO operations concluded hereunder shall, however, be qualified as the breach of an obligation arising from this framework contract as a whole. The denunciation of this framework contract under Article 7(2) triggered by a failure to perform (a  breach of) any of the obligations shall in its effect mean the denunciation of this framework contract as a whole in respect to all REPO operations concluded thereunder. Likewise, the voiding of this framework contract on any other grounds shall cause all individual REPO agreements concluded thereunder to become null and void.

(2) This framework contract, including its Annexes, shall form an integral part of any REPO agreement concluded thereunder. Should there be any unclear points, inaccuracies and differences between the provisions of an individual REPO agreement and the provisions of this framework contract or the Decision of the NBS, the framework contract and the Decision of the NBS shall prevail, and the relevant provisions of the individual REPO agreement shall be disregarded.

Article 10
Form and Serving of Documents

(1) If under this framework contract or generally applicable legislation, a written form is not required for notices (acts) addressed by one contracting party to another and related to this framework contract, the contracting parties shall have the option of making such notices either orally or in writing. Unless provided otherwise hereunder, any oral notice must, however, be forthwith confirmed in writing by the party making it. Contracting parties may deliver their written notices to each other either in person, or via registered mail sent to the other party’s address, or via fax sent to the other party’s address and fax number which, under Annex 3, form an integral part of this framework contract.

(2) Each of the contracting parties shall have the right to unilaterally modify (alter, amend, or fully replace) addresses and fax numbers relating to it in Annex 3. Such modification of Annex 3 shall take effect vis-á-vis the other party on the day following the day of its delivery to the other party. Any such modification of Annex 3 must be signed by an authorised representative of the party in question listed in a valid version of Annex 3 hereto, or by a statutory authority of the party in question, who has signed the framework contract on its behalf.

(3) Written expressions of will sent by fax shall be deemed to be delivered at the time of their technically errorless sending. Registered mail shall be deemed to be delivered on the day of its serving to the addressee, or its deposition in the addressee’s  name at the post office, with a due notice of this being made in accordance with the applicable rules for postal services.

Article 11
Common and Final Provisions

(1) This framework contract has been concluded for an indeterminate period.

(2) If contracting parties make an agreement on a particular REPO operation in accordance with Article 3(1) of this framework contract, this operation shall be deemed as concluded under this framework contract.

(3) The contracting parties may only terminate this framework contract by way of:

a) a mutual written agreement between themselves. The denunciation of this framework contract on the basis of such a  written agreement shall cause all individual REPO agreements concluded thereunder to be denounced in effect – regardless of whether or not it is explicitly mentioned in the written agreement voiding the framework contract.

or

b) a written notice of termination in accordance with Article 7(2) of this framework contract, or

c) a written notice of termination made by any of the contracting parties on some other grounds or without stating any reason. In that case the notice period shall equal 3 months and shall start to elapse on the first day of the calendar month following a  calendar month of serving the written notice of termination to the other contracting party. If, however, one or several REPO operations concluded hereunder only fall due after the last day of the notice period described in the previous sentence, the notice period shall be extended and shall only end on the maturity date of a REPO operation concluded hereunder that has the longest maturity. Starting from the day of prolonging the notice period described in the previous sentence, no other REPO operations may be concluded hereunder. The denunciation of this framework contract shall cause all individual REPO agreements concluded thereunder to be denounced in effect – regardless of whether or not it is explicitly mentioned in the notice of termination of the framework contract.

(4) The voiding (cessation) of this framework contract in either one of the methods listed in paragraph 3 of this Article or on any other grounds shall not affect either mutual rights and claims of contracting parties as per Articles 7 and 8 hereof, or any other contracting parties’ claims and responsibilities arising in connection with this framework contract pursuant to generally applicable legislation. If – at the time of terminating this framework contract on any grounds – one or several REPO operations concluded hereunder have not yet been, even if only partially, settled, the provisions of this contract shall be binding in respect to the settlement of such mutual relations of contracting parties that had arisen from this framework contract and have not been, even if only partially, settled by the day of its termination.

(5) Any alterations or amendments to this framework contract may only be executed by way of written supplements to be signed by authorised representatives of each of the contracting parties.

(6) None of the contracting parties may either assign or transfer the rights and obligations arising from this framework contract to third persons without a prior written consent of the other contracting party. This framework contract shall also bind legal successors of the contracting parties, should there be any.

(7) Annexes 1, 2 and 3, with which contracting parties have duly acquainted themselves, shall form an integral part hereof.

(8) This framework contract represents a full agreement between contracting parties on the subject thereof and shall replace all the proposals and representations made by the contracting parties so far, as well as oral and written agreements (contracts, arrangements) between the contracting parties to the scope as they relate to the subject thereof.

(9) If one or more of the provisions of this framework contract is or becomes fully or partially invalid or unenforceable, the validity and enforceability of the remaining provisions thereof shall not in any way be affected and impaired thereby. The valid and enforceable provisions shall be severable and distinct from the invalid or unenforceable ones. The contracting parties have undertaken to replace the invalid or unenforceable provisions by such valid and enforceable provisions that would be as close to the purpose of the invalid or unenforceable provisions as possible. The same shall apply in respect of filling in possible gaps in this framework contract, such as any legal relations between contracting parties that had arisen pursuant to this framework contract, but are neither arranged thereby or by generally applicable legislation. Each of the contracting parties undertakes to forthwith negotiate with the other contracting party on written proposals to alter or amend the framework contract made by the other contracting party.

(10) The contracting parties undertake to preferably handle any mutual disputes associated with this framework contract or individual REPO agreements concluded thereunder by mutual negotiation and agreement. Failing to resolve a dispute by negotiation and agreement, any of the contracting parties may refer the case to the appropriate court (in terms of subject matter and locality) or an arbiter, provided that the contracting parties have at least managed to agree on the arbiter.

(11) This framework contract shall be governed by the law of the Slovak Republic. Legal relations between contracting parties arising from this framework contract that are neither arranged thereby or by the Decision of the NBS, shall be governed by the provisions of the Act on the NBS, the Commercial Code, the Civil Code, the Act on Securities, and other generally applicable legislation. To the extent as they relate to this framework contract, the legal relations of contracting parties shall also be governed by the Decision of the NBS No. 4 dated 27 August 1999, Stipulating the Rules of Procedure for the Central Register Maintained by the NBS, which is deemed to be an integral part of this framework contract and which the NBS has provided to a bank and to which Article 1(3&4) hereof applies by analogy.

(12) This framework contract has been made out in four equal counterparts in the Slovak language, of which each contracting party shall receive two.

(13) This framework contract shall come into force and take effect on the day it is signed by both contracting parties.

(14) The contracting parties make representations as to their consent to the effect that this framework contract has not been concluded in any distress, or in otherwise one-sidedly disadvantaged circumstances, they have thoroughly acquainted themselves with this framework contract and understand its contents, they undertake to observe the provisions of this framework contract and that this contract has been made out of their definitive, outspoken, free and true will, in witness whereof they have caused it to be signed by the hands of their representatives.