<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 17, 1999
-------------------------------
IXC Communications, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-20803 74-2644120
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(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
1122 Capital of Texas Highway South, Austin, Texas 78746
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (512) 328-1112
----------------------------
Not applicable
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(Former name or former address, if changed since last report.)
<PAGE> 2
ITEM 5. OTHER EVENTS.
Attached as Exhibit 99.1 is the Schedule 13D filed by IXC on June 17,
1999 with respect to the common stock of PSINet Inc.
Attached as Exhibit 99.2 is the Schedule 13D filed by IXC on June 29,
1999 with respect to the common stock of PSINet Inc.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBITS
99.1 Schedule 13D filed June 17, 1999
99.2 Schedule 13D filed June 29, 1999
2.
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: June 29, 1999
IXC Communications, Inc.
By: /s/ Jeffrey C. Smith
------------------------------
Jeffrey C. Smith,
Senior Vice President, General
Counsel and Secretary
3.
<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)* **
PSINET, INC.
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(Name of Issuer)
Common Stock, $.01 per share par value
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(Title of Class of Securities)
74437C101
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(CUSIP Number)
Jeffrey C. Smith with a copy to:
General Counsel Michael P. Whalen, Esq.
IXC Communications, Inc. Riordan & McKinzie
1122 Capital of Texas Highway South 695 Town Center Drive, Suite 1500
Austin, Texas 78746 Costa Mesa, California 92626
(512) 328-1112 (714) 433-2618
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
June 11, 1999
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [ ].
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copes are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
**Represents the first filing on Schedule 13D with respect to the Issuer's
Common Stock on behalf of IXC Communications Services, Inc. (the direct parent
of IXC Internet Services, Inc.) and IXC Communications, Inc. (the indirect
parent of IXC Internet Services, Inc.)
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
PAGE 1 OF 8
<PAGE> 2
SCHEDULE 13D
CUSIP NO. 74437C101 PAGE 2 of 8 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR IRS. IDENTIFICATION NO. OF ABOVE PERSON
IXC Internet Services, Inc.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO (See Item 3)
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
NUMBER OF -0-
SHARES -------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 10,229,789 (See Item 5)
REPORTING -------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
-0-
-------------------------------------------------------
10 SHARED DISPOSITIVE POWER
10,229,789 (See Item 5)
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,229,789 (See Item 5)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.8%
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14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
PAGE 2 OF 8
<PAGE> 3
SCHEDULE 13D
CUSIP NO. 74437C101 PAGE 3 of 8 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR IRS. IDENTIFICATION NO. OF ABOVE PERSON
IXC Communications Services, Inc.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO (See Item 3)
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES -------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 10,229,789 (See Item 5)
REPORTING -------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
-0-
-------------------------------------------------------
10 SHARED DISPOSITIVE POWER
10,229,789 (See Item 5)
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,229,789 (See Item 5)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.8%
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14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
PAGE 3 OF 8
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SCHEDULE 13D
CUSIP NO. 74437C101 PAGE 4 of 8 PAGES
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1 NAME OF REPORTING PERSON
S.S. OR IRS. IDENTIFICATION NO. OF ABOVE PERSON
IXC Communications, Inc.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO (See Item 3)
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES -------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 10,229,789 (See Item 5)
REPORTING -------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
-0-
-------------------------------------------------------
10 SHARED DISPOSITIVE POWER
10,229,789 (See Item 5)
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,229,789 (See Item 5)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.8%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
PAGE 4 OF 8
<PAGE> 5
Item 1. Security and Issuer.
This Schedule 13D relates to the common stock, par value $.01, CUSIP No.
74437C101 (the "Common Stock"), of PSINet, Inc., a Delaware corporation (the
"Issuer"), having its principal executive offices at 510 Huntmar Park Drive,
Herndon, Virginia, 22070.
Item 2. Identity and Background.
This Schedule 13D is filed by and on behalf of IXC Internet Services,
Inc. ("Internet" ), IXC Communications Services, Inc. and IXC Communications,
Inc. ("IXC"), collectively (the "Filing Persons") each a Delaware corporation
and each having its principal address and principal office at 1122 Capital of
Texas Highway South, Austin, Texas 78746. Internet, the record holder of the
shares of the Issuer's Common Stock, is a wholly owned subsidiary of IXC
Communications Services, Inc., which is a wholly owned subsidiary of IXC, a
leading provider of telecommunications services to long distance and other
telecommunications companies.
During the last five years, none of the Filing Persons have been
convicted in a criminal proceeding (excluding traffic violations and similar
misdemeanors) or were a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or are subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
Internet acquired the Issuer's Common Stock on February 25, 1998
pursuant to an IRU and Stock Purchase Agreement entered into between Internet
and Issuer on July 22, 1997, as amended (the "Purchase Agreement"). Under the
terms of the Purchase Agreement, Internet is providing and will provide to
Issuer noncancellable, indefeasible rights of use ("IRUs") in (i) two fibers in
specified portions of IXC's fiber optic telecommunications system of up to
10,000 equivalent route miles of OC-48 bandwidth and in (ii) capacity of up to
10,000 equivalent route miles of OC-48 bandwidth in such fibers on the Available
System. In consideration of the grant of the IRUs, the Issuer issued to Internet
10,229,778 shares of the Issuer's Common Stock.
Item 4. Purpose of Transaction.
The Issuer's Common Stock was acquired for investment in consideration
of the grant of the IRUs, as described in Item 3.
(a) See Item 6.
(b) Not applicable.
(c) Not applicable.
(d) Pursuant to the Purchase Agreement, so long as Internet owns 95% of
the Common Stock of the Issuer issued under such agreement at the
closing, the Issuer's Chairman shall recommend that (i) the
Issuer's Board of Directors elect Ralph J. Swett to the Issuer's
Board effective as of the closing, for a term to expire in 1998 or
later and that such person be nominated to stand for election with
the other nominated Board members at the Issuer's 1998 annual
meeting (or later annual meeting associated with the expiration of
his term) for a term expiring no earlier than 2000 and for
reelection thereafter at the applicable
PAGE 5 OF 8
<PAGE> 6
annual meetings of the Issuer. At such time as Internet shall cease
to own the requisite amount of the Issuer's Common Stock, a
resignation letter will be executed by such individual and he shall
immediately cease to serve as a member of the Issuer's Board of
Directors.
The forward-purchase contract in connection with the forward sale
of the Issuer's Common Stock as described in Item 6 may result in a
loss of Internet's rights to a Board seat for Mr. Swett.
(e) Not applicable.
(f) Not applicable.
(g) Not applicable.
(h) Not applicable.
(i) Not applicable.
(j) Not applicable.
Item 5. Interest in Securities of The Issuer.
(a) The Filing Persons beneficially own 10,229,789 shares of the
Issuer's Common Stock, or 15.8% of the Issuer's outstanding
Common Stock.
(b) Each of the Filing Persons may be deemed to have shared voting
and shared dispositive power with respect to 10,229,789 shares
of the Issuer's Common Stock.
(c) On June 14, 1999, Merrill Lynch International ("MLI") made a
payment to Internet of $51,963,068.36 under a forward-purchase
contract in connection with the forward sale of the Issuer's
Common Stock as described in Item 6. In addition, as described
in Item 6, Internet has agreed to loan MLI up to 1,500,000
shares of the Issuer's Common Stock, at MLI's discretion.
(d) Not applicable.
(e) Not applicable.
PAGE 6 OF 8
<PAGE> 7
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of The Issuer.
Pursuant to the Purchase Agreement, Internet and IXC have agreed that
they shall not and shall not permit any of IXC's controlled affiliates to,
without the prior approval of the Issuer's board of Directors, (i) acquire or
make any proposal to acquire, directly or indirectly, any securities of the
Issuer or its subsidiaries; (ii) propose a tender offer; (iii) directly or
indirectly solicit proxies or consents or become a participant in a
solicitation; (iv) form, join or in any way participate in a group with respect
to any of the Issuer's voting securities or (v) deposit any voting securities in
a voting trust or subject any voting securities to any arrangement or agreement
with respect to the voting securities. Internet and the Issuer have also entered
into a registration rights agreement, pursuant to which the Issuer has agreed to
register the Issuer's Common Stock issued under the terms of the Purchase
Agreement, upon the occurrence of certain conditions.
On June 11, 1999 Internet and MLI executed documents relating to a
forward-purchase contract in connection with the forward sale of the Issuer's
Common Stock: a Master Agreement (the "Master Agreement"), a copy of which is
attached as Exhibit 2 hereto, and a Securities Loan Agreement (the "Securities
Loan Agreement"), a copy of which is attached as Exhibit 3 hereto. Pursuant to a
Confirmation of OTC Transaction (the "Confirmation"), a copy of which is
attached as Exhibit 4 hereto, MLI and Internet implemented the forward-purchase
arrangement with respect to 1,500,000 shares of the Issuer's Common Stock. The
transaction will be settled in the second quarter of 2002, or sooner upon the
occurrence of certain specified events. Internet may settle in cash or in
shares of the Issuer's Common Stock, at Internet's option. The amount of cash
or number of shares to be paid in settlement will be calculated according to a
formula specified in the Confirmation. See Exhibit 2 and Exhibit 4 for further
details. The Master Agreement allows for implementation of the forward-purchase
contract for additional shares of the Issuer's Common Stock upon the agreement
of Internet and MLI.
Pursuant to the terms of the Securities Loan Agreement, Internet has
agreed to loan MLI upon request up to 1,500,000 shares of the Issuer's Common
Stock (but only while a registration statement covering those shares is
effective). Internet will not have the right to vote any loaned shares during
the term of any such loan. Internet has the right to terminate any such loan
at any time.
Item 7. Material to be Filed as Exhibits.
The Filing Persons file as exhibits the following:
Exhibit 1: Joint Reporting Agreement dated June 15, 1999 among the
Filing Persons.
Exhibit 2: Master Agreement dated as of June 2, 1999 between MLI and
Internet.
Exhibit 3: Securities Loan Agreement dated as of June 2, 1999 between
MLI and Internet.
Exhibit 4: Confirmation of OTC Transaction dated as of June 3, 1999
between MLI and Internet, to be filed via amendment.
PAGE 7 OF 8
<PAGE> 8
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: June 15, 1999 IXC INTERNET SERVICES, INC.
/s/ JAMES F. GUTHRIE
------------------------------------
By: James F. Guthrie
Its: Executive Vice President
and Chief Financial Officer
IXC COMMUNICATIONS SERVICES, INC.
/s/ JAMES F. GUTHRIE
------------------------------------
By: James F. Guthrie
Its: Executive Vice President
and Chief Financial Officer
IXC COMMUNICATIONS, INC.
/s/ JAMES F. GUTHRIE
------------------------------------
By: James F. Guthrie
Its: Executive Vice President
and Chief Financial Officer
PAGE 8 OF 8
<PAGE> 9
EXHIBIT INDEX
Exhibit 1: Joint Reporting Agreement dated June 15, 1999 among the
Filing Persons.
Exhibit 2: Master Agreement dated as of June 2, 1999 between MLI and
Internet.
Exhibit 3: Securities Loan Agreement dated as of June 2, 1999 between
MLI and Internet.
Exhibit 4: Confirmation of OTC Transaction dated as of June 3, 1999
between MLI and Internet, to be filed via amendment.
<PAGE> 10
EXHIBIT 1
JOINT REPORTING AGREEMENT
In consideration of the mutual covenants herein contained, each of the
parties hereto represents to and agrees with the other party as follows:
1. Such party is eligible to file a statement or statements on Schedule
13D pertaining to the Common Stock, $.01 par value, of PSINET, Inc. to which
this agreement is an exhibit, for filing of the information contained herein.
2. Such party is responsible for timely filing of such statement and any
amendments thereto and for the completeness and accuracy of the information
concerning such party contained therein, provided that no such party is
responsible for the completeness or accuracy of the information concerning any
other party making the filing, unless such party knows or has reason to believe
that such information is inaccurate.
3. Such party agrees that such statement is filed by and on behalf of
each such party and that any amendment thereto will be filed on behalf of each
such party.
This Joint Reporting Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original instrument, but
all of such counterparts together shall constitute but one agreement.
Dated: June 15, 1999 IXC INTERNET SERVICES, INC.
/s/ JAMES F. GUTHRIE
------------------------------------
By: James F. Guthrie
Its: Executive Vice President
and Chief Financial Officer
IXC COMMUNICATIONS SERVICES, INC.
/s/ JAMES F. GUTHRIE
------------------------------------
By: James F. Guthrie
Its: Executive Vice President
and Chief Financial Officer
IXC COMMUNICATIONS, INC.
/s/ JAMES F. GUTHRIE
------------------------------------
By: James F. Guthrie
Its: Executive Vice President
and Chief Financial Officer
<PAGE> 11
EXHIBIT 2
(MULTICURRENCY--CROSS BORDER)
ISDA(R)
INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC.
MASTER AGREEMENT
dated as of June 2, 1999
MERRILL LYNCH INTERNATIONAL and IXC INTERNET SERVICES, INC.
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:--
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) INCONSISTENCY. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement"), and the parties
would not otherwise enter into any Transactions.
2. OBLIGATIONS
(a) GENERAL CONDITIONS.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for
value on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the
required currency. Where settlement is by delivery (that is, other than
by payment), such delivery will be made for receipt on the due date in
the manner customary for the relevant obligation unless otherwise
specified in the relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to
(1) the condition precedent that no Event of Default or Potential Event
of Default with respect to the other party has occurred and is
continuing, (2) the condition precedent that no Early Termination Date
in respect of the relevant Transaction has occurred or been effectively
designated and (3) each other applicable condition precedent specified
in this Agreement.
<PAGE> 12
(b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) NETTING. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of Offices through which the parties make and receive
payments or deliveries.
(d) DEDUCTION OR WITHHOLDING FOR TAX.
(i) GROSS-UP. All payments under this Agreement will be made without any
deduction or withholding for or on account of any Tax unless such
deduction or withholding is required by any applicable law, as modified
by the practice of any relevant governmental revenue authority, then in
effect. If a party is so required to deduct or withhold, then that party
("X") will:--
(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required to
be deducted or withheld (including the full amount required to be
deducted or withheld from any additional amount paid by X to Y
under this Section 2(d)) promptly upon the earlier of determining
that such deduction or withholding is required or receiving
notice that such amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified
copy), or other documentation reasonably acceptable to Y,
evidencing such payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to
the payment to which Y is otherwise entitled under this
Agreement, such additional amount as is necessary to ensure that
the net amount actually received by Y (free and clear of
Indemnifiable Taxes, whether assessed against X or Y) will equal
the full amount Y would have received had no such deduction or
withholding been required. However, X will not be required to pay
any additional amount to Y to the extent that it would not be
required to be paid but for:--
(A) the failure by Y to comply with or perform any
agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d);
or
(B) the failure of a representation made by Y pursuant to
Section 3(f) to be accurate and true unless such failure
would not have occurred but for (I) any action taken by a
2
<PAGE> 13
taxing authority, or brought in a court of competent
jurisdiction, on or after the date on which a Transaction
is entered into (regardless of whether such action is
taken or brought with respect to a party to this
Agreement) or (II) a Change in Tax Law.
(ii) LIABILITY. If:--
(1) X is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, to make
any deduction or withholding in respect of which X would not be
required to pay an additional amount to Y under Section
2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly
against X,
then, except to the extent Y has satisfied or then satisfies the
liability resulting from such Tax, Y will promptly pay to X the amount
of such liability (including any related liability for interest, but
including any related liability for penalties only if Y has failed to
comply with or perform any agreement contained in Section 4(a)(i),
4(a)(iii) or 4(d)).
(e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:--
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organized and validly existing under the laws of
the jurisdiction of its organization or incorporation and, if relevant
under such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to
deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to
perform its obligations under this Agreement and any obligations it has
under any Credit Support Document to which it is a party and has taken
all necessary action to authorize such execution, delivery and
performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and performance
do not violate or conflict with any law applicable to it, any provision
of its constitutional documents, any order or judgment of any court or
other agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;
(iv) CONSENTS. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in
full force and effect and all conditions of any such consents have been
complied with; and
(v) OBLIGATIONS BINDING. Its obligations under this Agreement and any
Credit Support Document to
3
<PAGE> 14
which it is a party constitute its legal, valid and binding obligations,
enforceable in accordance with their respective terms (subject to
applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application
(regardless of whether enforcement is sought in a proceeding in equity
or at law)).
(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of Default
or, to its knowledge, Termination Event with respect to it has occurred and is
continuing and no such event or circumstance would occur as a result of its
entering into or performing its obligations under this Agreement or any Credit
Support Document to which it is a party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge, threatened
against it or any of its Affiliates any action, suit or proceeding at law or in
equity or before any court, tribunal, governmental body, agency or official or
any arbitrator that is likely to affect the legality, validity or enforceability
against it of this Agreement or any Credit Support Document to which it is a
party or its ability to perform its obligations under this Agreement or such
Credit Support Document.
(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.
(f) PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(f) is accurate and true.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:--
(i) any forms, documents or certificates relating to taxation specified
in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any Confirmation;
and
(iii) upon reasonable demand by such other party, any form or document
that may be required or reasonably requested in writing in order to
allow such other party or its Credit Support Provider to make a payment
under this Agreement or any applicable Credit Support Document without
any deduction or withholding for or on account of any Tax or with such
deduction or withholding at a reduced rate (so long as the completion,
execution or submission of such form or document would not materially
prejudice the legal or commercial position of the party in receipt of
such demand), with any such form or document to be accurate and
completed in a manner reasonably satisfactory to such other party and to
be executed and to be delivered with any reasonably required
certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified. as soon as reasonably practicable.
(b) MAINTAIN AUTHORIZATIONS. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
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(c) COMPLY WITH LAWS. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) TAX AGREEMENT. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of such
failure.
(e) PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated, organized, managed and
controlled, or considered to have its seat, or in which a branch or office
through which it is acting for the purpose of this Agreement is located ("Stamp
Tax Jurisdiction") and will indemnify the other party against any Stamp Tax
levied or imposed upon the other party or in respect of the other party's
execution or performance of this Agreement by any such Stamp Tax Jurisdiction
which is not also a Stamp Tax Jurisdiction with respect to the other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or, if
applicable, any Credit Support Provider of such party or any Specified Entity of
such party of any of the following events constitutes an event of default (an
"Event of Default") with respect to such party:--
(i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when due,
any payment under this Agreement or delivery under Section 2(a)(i) or
2(e) required to be made by it if such failure is not remedied on or
before the third Local Business Day after notice of such failure is
given to the party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or perform
any agreement or obligation (other than an obligation to make any
payment under this Agreement or delivery under Section 2(a)(i) or 2(e)
or to give notice of a Termination Event or any agreement or obligation
under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or
performed by the party in accordance with this Agreement if such failure
is not remedied on or before the thirtieth day after notice of such
failure is given to the party;
(iii) CREDIT SUPPORT DEFAULT.
(1) Failure by the party or any Credit Support Provider of such
party to comply with or perform any agreement or obligation to be
complied with or performed by it in accordance with any Credit
Support Document if such failure is continuing after any
applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support Document
or the failing or ceasing of such Credit Support Document to be
in full force and effect for the purpose of this Agreement (in
either case other than in accordance with its terms) prior to the
satisfaction of all obligations of such party under each
Transaction to which such Credit Support Document relates without
the written consent of the other party; or
(3) the party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part, or
challenges the validity of, such Credit Support Document;
(iv) MISREPRESENTATION. A representation (other than a representation
under Section 3(e) or (f)) made or repeated or deemed to have been made
or repeated by the party or any Credit Support Provider of such party in
this Agreement or any Credit Support Document proves to have been
incorrect or misleading in any material respect when made or repeated or
deemed to have been made or repeated;
(v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party
(1) defaults under a Specified Transaction and, after giving effect to
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any applicable notice requirement or grace period, there occurs a
liquidation of, an acceleration of obligations under, or an early
termination of, that Specified Transaction, (2) defaults, after giving
effect to any applicable notice requirement or grace period, in making
any payment or delivery due on the last payment, delivery or exchange
date of, or any payment on early termination of, a Specified Transaction
(or such default continues for at least three Local Business Days if
there is no applicable notice requirement or grace period) or (3)
disaffirms, disclaims, repudiates or rejects, in whole or in part, a
Specified Transaction (or such action is taken by any person or entity
appointed or empowered to operate it or act on its behalf);
(vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default,
event of default or other similar condition or event (however described)
in respect of such party, any Credit Support Provider of such party or
any applicable Specified Entity of such party under one or more
agreements or instruments relating to Specified Indebtedness of any of
them (individually or collectively) in an aggregate amount of not less
than the applicable Threshold Amount (as specified in the Schedule)
which has resulted in such Specified Indebtedness becoming, or becoming
capable at such time of being declared, due and payable under such
agreements or instruments, before it would otherwise have been due and
payable or (2) a default by such party, such Credit Support Provider or
such Specified Entity (individually or collectively) in making one or
more payments on the due date thereof in an aggregate amount of not less
than the applicable Threshold Amount under such agreements or
instruments (after giving effect to any applicable notice requirement or
grace period);
(vii) BANKRUPTCY. The party, any Credit Support Provider of such party
or any applicable Specified Entity of such party:--
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to
pay its debts or fails or admits in writing its inability
generally to pay its debts as they become due; (3) makes a
general assignment, arrangement or composition with or for the
benefit of its creditors; (4) institutes or has instituted
against it a proceeding seeking a judgment of insolvency or
bankruptcy or any other relief under any bankruptcy or insolvency
law or other similar law affecting creditors' rights, or a
petition is presented for its winding-up or liquidation, and, in
the case of any such proceeding or petition instituted or
presented against it, such proceeding or petition (A) results in
a judgment of insolvency or bankruptcy or the entry of an order
for relief or the making of an order for its winding-up or
liquidation or (B) is not dismissed, discharged, stayed or
restrained in each case within 30 days of the institution or
presentation thereof; (5) has a resolution passed for its
winding-up, official management or liquidation (other than
pursuant to a consolidation, amalgamation or merger); (6) seeks
or becomes subject to the appointment of an administrator,
provisional liquidator, conservator, receiver, trustee, custodian
or other similar official for it or for all or substantially all
its assets; (7) has a secured party take possession of all or
substantially all its assets or has a distress, execution,
attachment, sequestration or other legal process levied, enforced
or sued on or against all or substantially all its assets and
such secured party maintains possession, or any such process is
not dismissed, discharged, stayed or restrained, in each case
within 30 days thereafter; (8) causes or is subject to any event
with respect to it which, under the applicable laws of any
jurisdiction, has an analogous effect to any of the events
specified in clauses (1) to (7) (inclusive); or (9) takes any
action in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the foregoing acts; or
(viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or merges with
or into, or transfers all or substantially all its assets to, another
entity and, at the time of such consolidation, amalgamation, merger or
transfer:--
(1) the resulting, surviving or transferee entity fails to assume
all the obligations of such party or such Credit Support Provider
under this Agreement or any Credit Support Document to which it
or its predecessor was a party by operation of law or pursuant to
an agreement reasonably satisfactory to the other party to this
Agreement; or
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the
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other party) to the performance by such resulting, surviving or
transferee entity of its obligations under this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, a Tax Event if the event is specified in (ii)
below or a Tax Event Upon Merger if the event is specified in (iii) below, and,
if specified to be applicable, a Credit Event
Upon Merger if the event is specified pursuant to (iv) below or an Additional
Termination Event if the event is specified pursuant to (v) below:--
(i) ILLEGALITY. Due to the adoption of, or any change in, any applicable
law after the date on which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court,
tribunal or regulatory authority with competent jurisdiction of any
applicable law after such date, it becomes unlawful (other than as a
result of a breach by the party of Section 4(b)) for such party (which
will be the Affected Party):--
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in
respect of such Transaction or to comply with any other material
provision of this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party
to perform, any contingent or other obligation which the party
(or such Credit Support Provider) has under any Credit Support
Document relating to such Transaction;
(ii) TAX EVENT. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on
which a Transaction is entered into (regardless of whether such action
is taken or brought with respect to a party to this Agreement) or (y) a
Change in Tax Law, the party (which will be the Affected Party) will, or
there is a substantial likelihood that it will, on the next succeeding
Scheduled Payment Date (1) be required to pay to the other party an
additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii)
or 6(e)) or (2) receive a payment from which an amount is required to be
deducted or withheld for or on account of a Tax (except in respect of
interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount
is required to be paid in respect of such Tax under Section 2(d)(i)(4)
(other than by reason of Section 2(d)(i)(4)(A) or (B));
(iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the
next succeeding Scheduled Payment Date will either (1) be required to
pay an additional amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has been
deducted or withheld for or on account of any Indemnifiable Tax in
respect of which the other party is not required to pay an additional
amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in either
case as a result of a party consolidating or amalgamating with, or
merging with or into, or transferring all or substantially all its
assets to, another entity (which will be the Affected Party) where such
action does not constitute an event described in Section 5(a)(viii);
(iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is
specified in the Schedule as applying to the party, such party ("X"),
any Credit Support Provider of X or any applicable Specified Entity of X
consolidates or amalgamates with, or merges with or into, or transfers
all or substantially all its assets to, another entity and such action
does not constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate,
will be the Affected Party); or
(v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination Event"
is specified in the Schedule or any Confirmation as applying, the
occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such
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Confirmation).
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.
6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying
the nature of that Termination Event and each Affected Transaction and
will also give such other information about that Termination Event as
the other party may reasonably require.
(ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality under
Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected
Party, or if a Tax Event Upon Merger occurs and the Burdened Party is
the Affected Party, the Affected Party will, as a condition to its right
to designate an Early Termination Date under Section 6(b)(iv), use all
reasonable efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20 days
after it gives notice under Section 6(b)(i) all its rights and
obligations under this Agreement in respect of the Affected Transactions
to another of its Offices or Affiliates so that such Termination Event
ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days
after the notice is given under Section 6(b)(i). Any such transfer by a
party under this Section 6(b)(ii) will be subject to and conditional
upon the prior written consent of the other party, which consent will
not be withheld if such other party's policies in effect at such time
would permit it to enter into transactions with the transferee on the
terms proposed.
(iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1) or
a Tax Event occurs and there are two Affected Parties, each party will
use all reasonable efforts to reach agreement within 30 days after
notice thereof is given under Section 6(b)(i) on action to avoid that
Termination Event.
(iv) RIGHT TO TERMINATE. If:--
(1) a transfer under Section 6(b)(ii) or an agreement under
Section 6(b)(iii), as the case may be, has not been effected with
respect to all Affected Transactions within 30 days after an
Affected Party gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon
Merger or an Additional Termination Event occurs, or a Tax Event
Upon Merger occurs and the Burdened Party is not the Affected
Party,
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either party in the case of an Illegality, the Burdened Party in the
case of a Tax Event Upon Merger, any Affected Party in the case of a Tax
Event or an Additional Termination Event if there is more than one
Affected Party, or the party which is not the Affected Party in the case
of a Credit Event Upon Merger or an Additional Termination Event if
there is only one Affected Party may, by not more than 20 days notice to
the other party and provided that the relevant Termination Event is then
continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date
so designated, whether or not the relevant Event of Default or
Termination Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section
2(a)(i) or 2(e) in respect of the Terminated Transactions will be
required to be made, but without prejudice to the other provisions of
this Agreement. The amount, if any, payable in respect of an Early
Termination Date shall be determined pursuant to Section 6(e).
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable
detail, such calculations (including all relevant quotations and
specifying any amount payable under Section 6(e)) and (2) giving details
of the relevant account to which any amount payable to it is to be paid.
In the absence of written confirmation from the source of a quotation
obtained in determining a Market Quotation, the records of the party
obtaining such quotation will be conclusive evidence of the existence
and accuracy of such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day
that notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event
of Default) and on the day which is two Local Business Days after the
day on which notice of the amount payable is effective (in the case of
an Early Termination Date which is designated as a result of a
Termination Event). Such amount will be paid together with (to the
extent permitted under applicable law) interest thereon (before as well
as after judgment) in the Termination Currency, from (and including) the
relevant Early Termination Date to (but excluding) the date such amount
is paid, at the Applicable Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss," and a payment method,
either the "First Method" or the "Second Method." If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method," as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) EVENTS OF DEFAULT. If the Early Termination Date results from an
Event of Default:--
(1) First Method and Market Quotation. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A) the
sum of the Settlement Amount (determined by the Non-defaulting
Party) in respect of the Terminated Transactions and the
Termination Currency Equivalent of the Unpaid Amounts owing to
the Non-defaulting Party over (B) the Termination Currency
Equivalent of the Unpaid Amounts owing to the Defaulting Party.
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(2) First Method and Loss. If the First Method and Loss apply,
the Defaulting Party will pay to the Non-defaulting Party, if a
positive number, the Non-defaulting Party's Loss in respect of
this Agreement.
(3) Second Method and Market Quotation. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A)
the sum of the Settlement Amount (determined by the
Non-defaulting Party) in respect of the Terminated Transactions
and the Termination Currency Equivalent of the Unpaid Amounts
owing to the Non-defaulting Party less (B) the Termination
Currency Equivalent of the Unpaid Amounts owing to the Defaulting
Party. If that amount is a positive number, the Defaulting Party
will pay it to the Non-defaulting Party; if it is a negative
number, the Non-defaulting Party will pay the absolute value of
that amount to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply,
an amount will be payable equal to the Non-defaulting Party's
Loss in respect of this Agreement. If that amount is a positive
number, the Defaulting Party will pay it to the Non-defaulting
Party; if it is a negative number, the Non-defaulting Party will
pay the absolute value of that amount to the Defaulting Party.
(ii) TERMINATION EVENTS. If the Early Termination Date results from a
Termination Event:--
(1) One Affected Party. If there is one Affected Party, the
amount payable will be determined in accordance with Section
6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4),
if Loss applies, except that, in either case, references to the
Defaulting Party and to the Non-defaulting Party will be deemed
to be references to the Affected Party and the party which is not
the Affected Party, respectively, and, if Loss applies and fewer
than all the Transactions are being terminated, Loss shall be
calculated in respect of all Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties:--
(A) if Market Quotation applies, each party will determine
a Settlement Amount in respect of the Terminated
Transactions, and an amount will be payable equal to (I)
the sum of (a) one-half of the difference between the
Settlement Amount of the party with the higher Settlement
Amount ("X") and the Settlement Amount of the party with
the lower Settlement Amount ("Y") and (b) the Termination
Currency Equivalent of the Unpaid Amounts owing to X less
(II) the Termination Currency Equivalent of the Unpaid
Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the
Transactions are being terminated, in respect of all
Terminated Transactions) and an amount will be payable
equal to one-half of the difference between the Loss of
the party with the higher Loss ("X") and the Loss of the
party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X;
if it is a negative number, X will pay the absolute value of that
amount to Y.
(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will
be subject to such adjustments as are appropriate and permitted by law
to reflect any payments or deliveries made by one party to the other
under this Agreement (and retained by such other party) during the
period from the relevant Early Termination Date to the date for payment
determined under Section 6(d)(ii).
(iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies an
amount recoverable under this Section 6(e) is a reasonable pre-estimate
of loss and not a penalty. Such amount is payable for the loss of
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bargain and the loss of protection against future risks and except as
otherwise provided in this Agreement neither party will be entitled to
recover any additional damages as a consequence of such losses.
7. TRANSFER
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:--
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. CONTRACTUAL CURRENCY
(a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement will
be made in the relevant currency specified in this Agreement for that payment
(the "Contractual Currency"). To the extent permitted by applicable law, any
obligation to make payments under this Agreement in the Contractual Currency
will not be discharged or satisfied by any tender in any currency other than the
Contractual Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting in a reasonable manner and
in good faith in converting the currency so tendered into the Contractual
Currency, of the full amount in the Contractual Currency of all amounts payable
in respect of this Agreement. If for any reason the amount in the Contractual
Currency so received falls short of the amount in the Contractual Currency
payable in respect of this Agreement, the party required to make the payment
will, to the extent permitted by applicable law, immediately pay such additional
amount in the Contractual Currency as may be necessary to compensate for the
shortfall. If for any reason the amount in the Contractual Currency so received
exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount of
such excess.
(b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such party.
The term "rate of exchange" includes, without limitation, any premiums and costs
of exchange payable in connection with the purchase of or conversion into the
Contractual Currency.
(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums payable in respect of this
Agreement.
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(d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be sufficient
for a party to demonstrate that it would have suffered a loss had an actual
exchange or purchase been made.
9. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts (including
by facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable
and may be executed and delivered in counterparts (including by
facsimile transmission) or be created by an exchange of telexes or by an
exchange of electronic messages on an electronic messaging system, which
in each case will be sufficient for all purposes to evidence a binding
supplement to this Agreement. The parties will specify therein or
through another effective means that any such counterpart, telex or
electronic message constitutes a Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. OFFICES; MULTIBRANCH PARTIES
(a) If Section 10(a) is specified in the Schedule as applying, each party that
enters into a Transaction through an Office other than its head or home office
represents to the other party that, notwithstanding the place of booking office
or jurisdiction of incorporation or organization of such party, the obligations
of such party are the same as if it had entered into the Transaction through its
head or home office. This representation will be deemed to be repeated by such
party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a Transaction
will be specified in the relevant
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<PAGE> 23
Confirmation.
11. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document to
which the Defaulting Party is a party or by reason of the early termination of
any Transaction, including, but not limited to, costs of collection.
12. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
(i) if in writing and delivered in person or by courier, on the date it
is delivered;
(ii) if sent by telex, on the date the recipient's answerback is
received;
(iii) if sent by facsimile transmission, on the date that transmission
is received by a responsible employee of the recipient in legible form
(it being agreed that the burden of proving receipt will be on the
sender and will not be met by a transmission report generated by the
sender's facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or
the equivalent (return receipt requested), on the date that mail is
delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received, unless the date of that delivery (or attempted
delivery) or that receipt, as applicable, is not a Local Business Day or
that communication is delivered (or attempted) or received, as
applicable, after the close of business on a Local Business Day, in
which case that communication shall be deemed given and effective on the
first following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United
States District Court located in the Borough of Manhattan in New York
City, if this Agreement is expressed to be governed by the laws of the
State of New York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim
that such Proceedings have been brought in an inconvenient forum and
further waives the right to object, with respect to such Proceedings,
that such court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this
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<PAGE> 24
Agreement is expressed to be governed by English law, the Contracting States, as
defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any
modification, extension or re-enactment thereof for the time being in force) nor
will the bringing of Proceedings in any one or more jurisdictions preclude the
bringing of Proceedings in any other jurisdiction.
(c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any reason any party's
Process Agent is unable to act as such, such party will promptly notify the
other party and within 30 days appoint a substitute process agent acceptable to
the other party. The parties irrevocably consent to service of process given in
the manner provided for notices in Section 12. Nothing in this Agreement will
affect the right of either party to serve process in any other manner permitted
by law.
(d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. DEFINITIONS
As used in this Agreement:--
"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).
"AFFECTED PARTY" has the meaning specified in Section 5(b).
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"APPLICABLE RATE" means:--
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) is respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"BURDENED PARTY" has the meaning specified in Section 5(b).
"CHANGE IN TAX LAW" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
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<PAGE> 25
"CONSENT" includes a consent, approval, action, authorization, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified as
such in this Agreement.
"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"ILLEGALITY" has the meaning specified in Section 5(b).
"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organized, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"LAWFUL" and "UNLAWFUL" will be construed accordingly.
"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.
"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3)
or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and
out-of-pocket expenses referred to under Section 11. A party will determine its
Loss as of the relevant Early Termination Date or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from
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<PAGE> 26
one or more leading dealers in the relevant markets.
"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have been required after that date. For this
purpose, Unpaid Amounts in respect of the Terminated Transaction or group of
Terminated Transactions are to be excluded but, without limitation, any payment
or delivery that would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each applicable condition precedent) after
that Early Termination Date is to be included. The Replacement Transaction would
be subject to such documentation as such party and the Reference Market-maker
may, in good faith, agree. The party making the determination (or its agent)
will request each Reference Market-maker to provide its quotation to the extent
reasonably practicable as of the same day and time (without regard to different
time zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if more
than one quotation has the same highest value or lowest value, then one of such
quotations shall be disregarded. If fewer than three quotations are provided, it
will be deemed that the Market Quotation in respect of such Terminated
Transaction or group of Terminated Transactions cannot be determined.
"NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"NON-DEFAULTING PARTY" has the meaning specified in Section 6(a).
"OFFICE" means a branch or office of a party, which may be such party's head or
home office.
"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"RELEVANT JURISDICTION" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated organized, managed and controlled or considered
to have its seat, (b) where an Office through which the party is acting for
purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through which such payment
is made.
"SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"SET-OFF" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
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<PAGE> 27
"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of:--
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference to any
Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"SPECIFIED ENTITY" has the meaning specified in the Schedule.
"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"STAMP TAX" means any stamp, registration, documentation or similar tax.
"TAX" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"TAX EVENT" has the meaning specified in Section 5(b).
"TAX EVENT UPON MERGER" has the meaning specified in Section 5(b).
"TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"TERMINATION CURRENCY" has the meaning specified in the Schedule.
"TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.
"TERMINATION EVENT" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable,
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<PAGE> 28
a Credit Event Upon Merger or an Additional Termination Event.
"TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market value of that which was (or would have been) required to be
delivered as of the originally scheduled date for delivery, in each case
together with (to the extent permitted under applicable law) interest, in the
currency of such amounts, from (and including) the date such amounts or
obligations were or would have been required to have been paid or performed to
(but excluding) such Early Termination Date, at the Applicable Rate. Such
amounts of interest will be calculated on the basis of daily compounding and the
actual number of days elapsed. The fair market value of any obligation referred
to in clause (b) above shall be reasonably determined by the party obliged to
make the determination under Section 6(e) or, if each party is so obliged, it
shall be the average of the Termination Currency Equivalents of the fair market
values reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
MERRILL LYNCH INTERNATIONAL IXC INTERNET SERVICES, INC.
By: /s/ KAREN CURRIE By: /s/ JAMES F. GUTHRIE
--------------------------------- ----------------------------------
Name: Karen Currie Name: James F. Guthrie
Title: Vice President Title: Executive Vice President
Date: and Chief Financial Officer
Date:
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<PAGE> 29
SCHEDULE
TO THE
MASTER AGREEMENT
DATED AS OF
JUNE 2, 1999
BETWEEN
MERRILL LYNCH INTERNATIONAL
("PARTY A")
AND
IXC INTERNET SERVICES, INC.
("PARTY B")
PART 1
TERMINATION PROVISIONS
In this Agreement:-
(a) "SPECIFIED ENTITY" means in relation to Party A for the purpose of:-
Section 5(a)(v), Not Applicable
Section 5(a)(vi), Not Applicable
Section 5(a)(vii), Not Applicable
Section 5(b)(iv), Not Applicable
in relation to Party B for the purpose of:-
Section 5(a)(v), IXC Communications, Inc.
Section 5(a)(vi), IXC Communications, Inc.
Section 5(a)(vii), IXC Communications, Inc.
Section 5(b)(iv), IXC Communications, Inc.
(b) "SPECIFIED TRANSACTION" will have the meaning specified in Section 14 of
this Agreement.
(c) The "Cross Default" provisions of Section 5(a)(vi) will apply to Party A and
to Party B, provided, however, that with respect to Party B, any default, event
of default or other similar condition that does not result in the acceleration
of Specified Indebtedness in an aggregate amount of not less than the applicable
Threshold Amount shall not be deemed to constitute the occurrence of a Cross
Default under this Agreement, if Party A determines in good faith that such
default, event of default or other similar condition is, in its sole judgement,
not of a material nature.
If such provisions apply:-
"SPECIFIED INDEBTEDNESS" will have the meaning specified in Section 14 of this
Agreement.
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<PAGE> 30
"THRESHOLD AMOUNT" means, in respect of Party A, U.S. $35,000,000 or its
equivalent in other currencies, and in respect of Party B, U.S.$500,000 or its
equivalent in other currencies.
(d) The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(iv) will apply to
Party A and Party B. Notwithstanding Section 5(b)(iv) of this Agreement, "Credit
Event Upon Merger" means that a Designated Event (as defined below) occurs with
respect to a party or its Specified Entity and such action does not constitute
an event described in Section 5(a)(viii) but that, in the reasonable opinion of
the other party, the creditworthiness of the successor, surviving or transferee
entity (which will be the Affected Party) is materially weaker than that of its
predecessor, immediately prior to the occurrence of the Designated Event. For
purposes hereof, a Designated Event means, with respect to a party or its
Specified Entity that, after the Trade Date of a Transaction:
(i) the party consolidates or amalgamates with, or merges with or
into, or transfers all or substantially all its assets (or any
substantial part of the assets comprising the business conducted
by that party as of the Trade Date of that Transaction) to, or
receives all or substantially all the assets and obligations of,
another entity;
(ii) any person or entity acquires directly or indirectly the
beneficial ownership of equity securities having the power to
elect a majority of the board of directors of the party; or
(iii) the party enters into any agreement providing for any of the
foregoing.
(e) The "AUTOMATIC EARLY TERMINATION" provisions of Section 6(a) will not apply
to Party A or to Party B.
(f) PAYMENTS ON EARLY TERMINATION. For the purpose of Section 6(e) of this
Agreement:-
(i) Market Quotation will apply.
(ii) The Second Method will apply.
(g) "TERMINATION CURRENCY" means United States Dollars.
(h) ADDITIONAL TERMINATION EVENTS shall apply as set forth in any Confirmation.
PART 2
TAX REPRESENTATIONS
(a) PAYER REPRESENTATIONS. For the purpose of Section 3(e) of this Agreement,
Party A will make the following representation and Party B will make the
following representation:-
It is not required by any applicable law, as modified by the practice of
any relevant governmental revenue authority, of any Relevant
Jurisdiction to make any deduction or withholding for or on account of
any Tax from any payment (other than interest under Section 2(e),
6(d)(ii) or 6(e) of this Agreement) to be made by it to the other party
under this Agreement. In making this representation, it may rely on (i)
the accuracy of any representations made by the other party pursuant to
Section 3(f) of this Agreement, (ii) the satisfaction of the agreement
contained in Section 4(a)(i) or 4(a)(iii) of this Agreement and the
accuracy and effectiveness of any document provided by the other party
pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement and (iii) the
satisfaction of the agreement of the other party contained in Section
4(d) of this Agreement, provided that it shall not be a breach of this
representation where reliance is placed on clause (ii) and the other
party does not deliver a form or document under Section 4(a)(iii) by
reason of material prejudice to its legal or commercial position.
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<PAGE> 31
(b) PAYEE REPRESENTATIONS. For the purpose of Section 3(f) of this Agreement,
Party A and Party B make the representations specified below:-
(i) The following representation WILL apply to Party A and WILL apply to
Party B:-
It is fully eligible for the benefits of the "Business Profits" or
"Industrial and Commercial Profits" provision, as the case may be, the
"Interest" provision or the "Other Income" provision (if any) of the
Specified Treaty with respect to any payment described in such
provisions and received or to be received by it in connection with this
Agreement and no such payment is attributable to a trade or business
carried on by it through a permanent establishment in the Specified
Jurisdiction.
If such representation applies, then:-
"SPECIFIED TREATY" means with respect to Party A and Party B, convention for the
Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to
Taxes on Income and Capital Gains.
"SPECIFIED JURISDICTION" means with respect to Party A, United States of
America.
"SPECIFIED JURISDICTION" means with respect to Party B, United Kingdom.
PART 3
DOCUMENTS TO BE DELIVERED
(a) Tax forms, documents or certificates to be delivered:
<TABLE>
<CAPTION>
PARTY REQUIRED TO DELIVER DATE BY WHICH TO BE
DOCUMENT FORM/DOCUMENT/CERTIFICATE DELIVERED
- ----------------------------- --------------------------- -------------------------
<S> <C> <C>
Party A/Party B. Any document required or (i) Before the first
reasonably requested to Payment Date under this
allow the other party to Agreement, (ii) prompt-
make payments under this ly upon reasonable demand
Agreement without any by the other party and
deduction or withholding (iii) promptly upon
for or on account of any learning that any such
Tax or with such deduction form previously provided
or withholding at a reduced by the party has become
rate. obsolete or incorrect.
</TABLE>
21
<PAGE> 32
(b) Other Documents to be delivered are:-
<TABLE>
<CAPTION>
PARTY REQUIRED TO FORM/DOCUMENT/ DATE BY WHICH TO BE COVERED BY SECTION
DELIVER DOCUMENT CERTIFICATE DELIVERED 3(d) REPRESENTATION
- ----------------------- ------------------- -------------------- --------------------
<S> <C> <C> <C>
Party A/Party B. Annual audited Promptly after Yes.
financial request.
statements (in the
case of Party A, of
its Credit Support
Provider) prepared
in accordance with
generally accepted
accounting principles
in the country in
which the party is
organized.
Party A/Party B. Quarterly unaudited Promptly after Yes.
financial request.
statements (in the
case of Party A, of
its Credit Support
Provider) prepared
in accordance with
generally accepted
accounting
principles in the
country in which
the party is
organized.
Party A/Party B. A duly executed At or within thirty No.
copy of the Credit days after
Support Document execution hereof.
specified in Part 4
of the Schedule.
Party A/Party B. Certificate or At or promptly Yes.
other documents following the
evidencing the execution of this
authority of the Agreement, and, if
party entering into a Confirmation so
this Agreement or a requires it on or
Confirmation, as before the date set
the case may be. forth therein.
Party B. Opinion of outside At or promptly No.
counsel following the
substantially in execution of this
the form of Exhibit Agreement, and, if
B hereto and a Confirmation so
otherwise in form requires it, on or
and substance before the date
acceptable to Party specified therein.
A.
</TABLE>
22
<PAGE> 33
PART 4
MISCELLANEOUS
(a) ADDRESSES FOR NOTICES: For the purpose of Section 12(a) of this Agreement:-
Address for notices or communications to Party A:-
(For all purposes)
Address: Merrill Lynch International
20 Farringdon Rd., London U.K. EC1M 3NH
Attention: Global Equity Derivatives
Facsimile No.: 171 867 4190 Telephone No.: 171 867 5938
(With copy to)
Address: Merrill Lynch & Co., Inc.
Merrill Lynch World Headquarters
World Financial Center, North Tower, 5th Floor,
250 Vesey Street, New York, New York 10281-1322
Attention: Global Equity Derivatives
Facsimile No.: 212 449-6576 Telephone No.: 212 449-8637
(For all purposes)
Address for notices or communications to Party B:-
Address: IXC Internet Services, Inc.
1122 Capital of Texas Hwy. South
Austin, Texas 78746
Attention: General Counsel
Facsimile No.: 512-328-7902 Telephone No.: 800-847-5705
(With a copy to)
Address: Riordan & McKinzie
695 Town Center Drive
Suite 1500
Costa Mesa, CA 92626
Attention: Michael P. Whalen
Facsimile No.: 714-549-3244 Telephone No.: 714-433-2618
(For all purposes)
(b) PROCESS AGENT.For the purpose of Section 13(c):-
Party A appoints as its Process Agent: Not Applicable.
Party B appoints as its Process Agent: Not Applicable.
(c) OFFICES. The provisions of Section 10(a) will apply to this Agreement.
(d) MULTIBRANCH PARTY. For the purpose of Section 10(c) of this Agreement:
23
<PAGE> 34
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
(e) CALCULATION AGENT. The Calculation Agent is Party A, unless otherwise
specified in a Confirmation in relation to the relevant Transaction.
(f) CREDIT SUPPORT DOCUMENT. Details of any Credit Support Document:-
Party A:- Guarantee of Merrill Lynch & Co., Inc. ("ML & Co.") in the form
attached hereto as Exhibit A.
Party B:- The Credit Support Annex which supplements, forms part of and is
subject to this Agreement and is annexed hereto as Exhibit B.
(g) CREDIT SUPPORT PROVIDER.
Credit Support Provider means in relation to Party A, ML & Co.
Credit Support Provider means in relation to Party B, Not Applicable.
(h) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of New York without reference to choice of
law doctrine.
(i) NETTING OF PAYMENTS. Subparagraph (ii) of Section 2(c) of this Agreement
will not apply to all Transactions under this Agreement following 15 days prior
notice from one party to the other.
(j) "AFFILIATE" will have the meaning specified in Section 14 of this Agreement.
PART 5
OTHER PROVISIONS
(1) TRANSFER. Notwithstanding the provisions of Section 7, Party A may assign
its rights and delegate its obligations under any Transaction, in whole or in
part, to any affiliate (an "Assignee") of ML & Co., effective (the "Effective
Date") upon delivery to Party B of both (a) an executed acceptance and
assumption by the Assignee (an "Assumption") of the transferred obligations of
Party A under the Transaction(s) (the "Transferred Obligations"); and (b) an
executed guarantee (the "Guarantee") of ML & Co., of the Transferred
Obligations. On the Effective Date, (a) Party A shall be released from all
obligations and liabilities arising under the Transferred Obligations; and (b)
the Transferred Obligations shall cease to be Transaction(s) under this
Agreement and shall be deemed to be Transaction(s) under the Master Agreement
between Assignee and Party B, provided that, if at such time Assignee and Party
B have not entered into a Master Agreement, Assignee and Party B shall be deemed
to have entered into an ISDA form of Master Agreement (Multicurrency-Cross
Border) without any Schedule attached thereto.
(2) SET OFF. Without affecting the provisions of this Agreement requiring the
calculation of certain net payment amounts, all payments under this Agreement
will be made without setoff or counterclaim; provided, however, that upon the
designation or deemed designation of any Early Termination Date, in addition to
and not in limitation of any other right or remedy (including any right to
setoff, counterclaim, or otherwise withhold payment) under applicable law:
the non-Defaulting Party or non-Affected Party (in either case,
"X") may set off any sum or obligation (whether or not arising
under this Agreement and whether matured or unmatured) owed or
due by the Defaulting Party or Affected Party (in either case,
"Y") to X against any sum or obligation (whether or not arising
under this Agreement and whether matured or unmatured) owed
24
<PAGE> 35
or due by X or any Affiliate of X (the "Original Obligation") to
Y, and, for this purpose, may convert one currency into another.
Any such setoff shall automatically satisfy and discharge the
Original Obligation to Y and, if the Original Obligation exceeds
the sum or obligation to be set off against, the Original
Obligation shall be novated and replaced by an obligation to pay
Y only the excess of the Original Obligation over such sum or
obligation.
(3) ESCROW. If by reason of the time difference between the cities in which
payments are to be made, it is not possible for simultaneous payments to be made
on any date on which both parties are required to make payments hereunder,
either party may at its option and in its sole discretion notify the other party
that payments on that date are to be made in escrow. In this case deposit of the
payment due earlier on that date shall be made by 2:00 p.m. (local time at the
place for the earlier payment) on that date with an escrow agent selected by the
notifying party, accompanied by irrevocable payment instruction (i) to release
the deposited payment to the intended recipient upon receipt by the escrow agent
of the required deposit of the corresponding payment from the other party on the
same date accompanied by irrevocable payment instructions to the same effect or
(ii) if the required deposit of the corresponding payment is not made on that
same date, to return the payment deposited to the party that paid it in escrow.
The party that elects to have payments made in escrow shall pay the costs of the
escrow arrangements and shall cause those arrangements to provide that the
intended recipient of the payment due to be deposited first shall be entitled to
interest on that deposited payment for each day in the period of its deposit at
the rate offered by the escrow agent for that day for overnight deposits in the
relevant currency in the office where it holds that deposited payment (at 11:00
a.m. local time on that day) if that payment is not released by 5:00 p.m. local
time on the date it is deposited for any reason other than the intended
recipient's failure to make the escrow deposit it is required to make hereunder
in a timely fashion.
(4) ELIGIBLE SWAP PARTICIPANTS. Each party represents to the other that it is an
"eligible swap participant" as such term is defined in Section 35.1(b)(2) of the
Regulations of the Commodity Futures Trading Commission.
(5) NON-RELIANCE. Each party represents to the other party (which representation
will be deemed to be repeated by each party on each date on which a Transaction
is entered into or amended, extended or otherwise modified) that it is acting
for its own account, and has made its own independent decisions to enter into
this Agreement and any Transaction hereunder and as to whether this Agreement
and any Transaction hereunder is appropriate or proper for it based on its own
judgment and upon advice from such advisers as it has deemed necessary. It is
not relying on any communication (written or oral) of the other party as
investment advice or as a recommendation to enter into this Agreement or any
Transaction hereunder, it being understood that information and explanations
related to the terms and conditions of this Agreement and any Transaction
hereunder shall not be considered investment advice or a recommendation to enter
into this Agreement or any Transaction hereunder. No communication (written or
oral) received from the other party shall be deemed to be an assurance or
guarantee as to the expected results of any Transaction hereunder.
(6) The parties agree that the definitions and provisions contained in Annexes 1
to 4 and Section 6 of the EMU Protocol published by the International Swaps and
Derivatives Association, Inc. on 6th May, 1998 are incorporated into and apply
to this Agreement. References in those definitions and provisions to any "ISDA
Master Agreement" will be deemed to be references to this Agreement.
25
<PAGE> 36
Credit Support Annex
ISDA(R)
International Swaps and Derivatives Association, Inc.
CREDIT SUPPORT ANNEX
TO THE SCHEDULE TO THE
ISDA MASTER AGREEMENT
DATED AS OF JUNE 2, 1999
BETWEEN
MERRILL LYNCH INTERNATIONAL IXC INTERNET SERVICES, INC.
("PARTY A") ("PARTY B")
This Annex supplements, forms part of, and is subject to, the above-referenced
Agreement, is part of its Schedule and is a Credit Support Document under this
Agreement with respect to each party.
Accordingly, the parties agree as follows:
PARAGRAPH 1. INTERPRETATION
(a) DEFINITIONS AND INCONSISTENCY. Capitalized terms not otherwise defined
herein or elsewhere in this Agreement have the meanings specified pursuant to
Paragraph 12, and all references in this Annex to Paragraphs are to Paragraphs
of this Annex. In the event of any inconsistency between this Annex and the
other provisions of this Schedule, this Annex will prevail, and in the event of
any inconsistency between Paragraph 13 and the other provisions of this Annex,
Paragraph 13 will prevail.
(b) SECURED PARTY AND PLEDGOR. All references in this Annex to the "Secured
Party" will be to either party when acting in that capacity and all
corresponding references to the Pledgor will be to the other party when acting
in that capacity; provided, however, that if Other Posted Support is held by a
party to this Annex, all references herein to that party as the Secured Party
with respect to that Other Posted Support will be to that party as the
beneficiary thereof and will not subject that support or that party as the
beneficiary thereof to provisions of law generally relating to security
interests and secured parties.
PARAGRAPH 2. SECURITY INTEREST
Each party, as the Pledgor, hereby pledges to the other party, as the Secured
Party, as security for its Obligations and grants to the Secured Party a first
priority continuing security interest in, lien on and right of Set-off against
all Posted Collateral Transferred to or received by the Secured Party hereunder.
Upon the Transfer by the Secured Party to the Pledgor or Posted Collateral, the
security interest and lien granted hereunder on that Posted Collateral will be
released immediately and, to the extent possible, without any further action by
either party.
<PAGE> 37
PARAGRAPH 3. CREDIT SUPPORT OBLIGATIONS
(a) DELIVERY AMOUNT. Subject to Paragraphs 4 and 5, upon demand made by the
Secured Party on or promptly following a Valuation Date, if the Delivery Amount
for that Valuation Date equals or exceeds the Pledgor's Minimum Transfer Amount,
then the Pledgor will Transfer to the Secured Party Eligible Credit Support
having a Value as of the date of Transfer at least equal to the applicable
Delivery Amount (rounded pursuant to Paragraph 13). Unless otherwise specified
in Paragraph 13, the "Delivery Amount" applicable to the Pledgor for any
Valuation Date will equal the amount by which:
(i) the Credit Support Amount
exceeds
(ii) the Value as of that Valuation Date of all Posted Credit Support
held by the Secured Party.
(b) RETURN AMOUNT. Subject to Paragraphs 4 and 5, upon a demand made by the
Pledgor on or promptly following a Valuation Date, if the Return Amount for that
Valuation Date equals or exceeds Secured Party's Minimum Transfer Amount, then
the Secured Party will Transfer to the Pledgor Posted Credit Support specified
by the Pledgor in that demand having a Value as of the date of Transfer as close
as practicable to the applicable Return Amount (rounded pursuant to Paragraph
13). Unless otherwise specified in Paragraph 13, the "Return Amount" applicable
to the Secured Party for any Valuation Date will equal the amount by which:
(i) the Value as of that Valuation Date of all Posted Credit Support
held by the Secured Party
exceeds
(ii) the Credit Support Amount.
"CREDIT SUPPORT AMOUNT" means, unless otherwise specified in Paragraph 13, for
any Valuation Date (i) the Secured Party's Exposure for that Valuation Date plus
(ii) the aggregate of all Independent Amounts applicable to the Pledgor, if any,
minus (iii) all Independent Amounts applicable to the Secured Party, if any,
minus (iv) the Pledgor's Threshold; provided, however, that the Credit Support
Amount will be deemed to be zero whenever the calculation of Credit Support
Amount yields a number less than zero.
PARAGRAPH 4. CONDITIONS PRECEDENT, TRANSFER TIMING, CALCULATIONS AND
SUBSTITUTIONS
(a) CONDITIONS PRECEDENT. Each Transfer obligation of the Pledgor under
Paragraphs 3 and 5 and of the Secured Party under Paragraphs 3, 4(d)(ii), 5 and
6(d) is subject to the conditions precedent that:
(i) no Event of Default, Potential Event of Default or Specified
Condition has occurred and is continuing with respect to the other
party; and
(ii) no Early Termination Date for which any unsatisfied payment
obligations exist has occurred or been designated as the result of an
Event of Default or Specified Condition with respect to the other party.
(b) TRANSFER TIMING. Subject to Paragraphs 4(a) and 5 and unless otherwise
specified, if a demand for the Transfer of Eligible Credit Support or Posted
Credit Support is made by the Notification Time, then the relevant Transfer will
be made not later than the close of business on the next Local Business Day; if
a demand is made after the Notification Time, then the relevant Transfer will be
made not later than the close
2
<PAGE> 38
of business on the second Local Business Day thereafter.
(c) CALCULATIONS. All calculations of Value and Exposure for purposes of
Paragraphs 3 and 6(d) will be made by the Valuation Agent as of the Valuation
Time. The Valuation Agent will notify each party (or the other party, if the
Valuation Agent is a party) of its calculations not later than the Notification
Time on the Local Business Day following the applicable Valuation Date (or in
the case of Paragraph 6(d), following the date of calculation).
(d) SUBSTITUTIONS.
(i) Unless otherwise specified in Paragraph 13, upon notice to the
Second Party specifying the items of Posted Credit Support to be
exchanged, the Pledgor may, on any Local Business Day, Transfer to the
Secured Party substitute Eligible Credit Support (the "Substitute Credit
Support"); and
(ii) subject to Paragraph 4(a), the Secured Party will Transfer to the
Pledgor the items of Posted Credit Support specified by the Pledgor in
its notice not later than the Local Business Day following the date on
which the Secured Party receives the Substitute Credit Support, unless
otherwise specified in Paragraph 13 (the "Substitution Date"); provided
that the Secured Party will only be obligated to Transfer Posted Credit
Support with a Value as of the date of Transfer of that Posted Credit
Support equal to the Value as of that date of the Substitute Credit
Support.
PARAGRAPH 5. DISPUTE RESOLUTION
If a party (a "Disputing Party") disputes (I) the Valuation Agent's calculation
of a Delivery Amount or a Return Amount or (II) the Value of any Transfer of
Eligible Credit Support or Posted Credit Support, then (1) the Disputing Party
will notify the other party and the Valuation Agent (if the Valuation Agent is
not the other party) not later than the close of business on the Local Business
Day following (X) the date that the demand is made under Paragraph 3 in case of
(I) above or (Y) the date that the demand is made under Paragraph 3 in the case
of (I) above or (Y) the date of Transfer in the case of (II) above, (2) subject
to Paragraph 4(a), the appropriate party will Transfer the undisputed amount to
the other party not later than the close of business on the Local Business Day
following (X) the date that the demand is made under Paragraph 3 in the case of
(I) above or (Y) the date of Transfer in the case of (II) above, (3) the parties
will consult with each other in an attempt to resolve the dispute and (4) if
they fail to resolve the dispute by the Resolution Time, then:
(i) In the case of a dispute involving a Delivery Amount or Return
Amount, unless otherwise specified in Paragraph 13, the Valuation Agent
will recalculate the Exposure and the Value as of the Recalculation Date
by:
(A) utilizing any calculations of Exposure for the Transactions
(or Swap Transactions) that the parties have agreed are not in
dispute;
(B) calculating the Exposure for the Transactions (or Swap
Transactions) in dispute by seeking four actual quotations at
mid-market from Reference Market-makers for purposes of
calculating Market Quotation, and taking the arithmetic average
of those obtained; provided that if four quotations are not
available for a particular Transaction (or Swap Transaction),
then fewer than four quotations may be used for that Transaction
(or Swap Transaction); and if no quotations are available for a
particular Transaction (or Swap Transaction), then the Valuation
Agent's original calculations will be used for that Transaction
(or Swap Transaction);
(C) utilizing the procedures specified in Paragraph 13 for
calculating the Value, if
3
<PAGE> 39
disputed, of Posted Credit Support.
(ii) In the case of a dispute involving the Value of any Transfer of
Eligible Credit Support or Posted Credit Support the Valuation Agent
will recalculate the Value as of the date of Transfer pursuant to
Paragraph 13.
Following a recalculation pursuant to this Paragraph, the Valuation Agent will
notify each party (or the other party, if the Valuation Agent is a party) not
later than the Notification Time on the Local Business Day following the
Resolution Time. The appropriate party will, upon demand following that notice
by the Valuation Agent or a resolution pursuant to (3) above and subject to
Paragraphs 4(a) and 4(b), make the appropriate Transfer.
PARAGRAPH 6. HOLDING AND USING POSTED COLLATERAL
(a) CARE OF POSTED COLLATERAL. Without limiting the Secured Party's rights under
Paragraph 6(c), the Secured Party will exercise reasonable care to assure the
safe custody of all Posted Collateral to the extent required by applicable law,
and in any event the Secured Party will be deemed to have exercised reasonable
care if it exercises at least the same degree of care as it would exercise with
respect to its own property. Except as specified in the preceding sentence, the
Secured Party will have no duty with respect to Posted Collateral, including,
without limitation, any duty to collect any Distributions, or enforce or
preserve any rights pertaining thereto.
(b) ELIGIBILITY TO HOLD POSTED COLLATERAL; CUSTODIANS.
(i) GENERAL. Subject to the satisfaction of any conditions specified in
Paragraph 13 for holding Posted Collateral, the Secured Party will be
entitled to hold Posted Collateral or to appoint an agent (a
"Custodian") to hold Posted Collateral for the Secured Party. Upon
notice by the Secured Party to the Pledgor of the appointment of a
Custodian, the Pledgor's obligations to make any Transfer will be
discharged by making the Transfer to that Custodian. The holding of
Posted Collateral by a Custodian will be deemed to be the holding of
that Posted Collateral by the Secured Party for which the Custodian is
acting.
(ii) FAILURE TO SATISFY CONDITIONS. If the Secured Party or its
Custodian fails to satisfy conditions for holding Posted Collateral,
then upon a demand made by the Pledgor, the Secured Party will, not
later than five Local Business Days after the demand, Transfer or cause
its Custodian to Transfer all Posted Collateral held by it to a
Custodian that satisfies those conditions or to the Secured Party if it
satisfies those conditions.
(iii) LIABILITY. The Secured Party will be liable for the acts or
omissions of its Custodian to the same extent that the Secured Party
would be liable hereunder for its own acts or omissions.
(c) USE OF POSTED COLLATERAL. Unless otherwise specified in Paragraph 13 and
without limiting the rights and obligations of the parties under Paragraphs 3,
4(d)(ii), 5, 6(d) and 8, if the Secured Party is not a Defaulting Party or an
Affected Party with respect to a Specified Condition and no Early Termination
Date has occurred or been designated as the result of an Event of Default or
Specified Condition with respect to the Secured Party, then the Secured Party
will, notwithstanding Section 9-207 of the New York Uniform Commercial Code,
have the right to:
(i) sell, pledge, rehypothecate, assign, invest, use, commingle or
otherwise dispose of, or otherwise use in its business any Posted
Collateral it holds, free from any claim or right of any nature
whatsoever of the Pledgor, including any equity or right of redemption
by the Pledgor; and
(ii) register any Posted Collateral in the name of the Secured Party,
its Custodian or a
4
<PAGE> 40
nominee for either.
For purposes of the obligation to Transfer Eligible Credit Support or Posted
Credit Support pursuant to Paragraphs 3 and 5 and any rights or remedies
authorized under this Agreement, the Secured Party will be deemed to continue to
hold all Posted Collateral and to receive Distributions made thereon, regardless
of whether the Secured Party has exercised any rights with respect to any Posted
Collateral pursuant to (i) or (ii) above.
(d) DISTRIBUTIONS AND INTEREST AMOUNT.
(i) DISTRIBUTIONS. Subject to Paragraph 4(a), if the Secured Party
receives or is deemed to receive Distributions on a Local Business Day,
it will Transfer to the Pledgor not later than the following Business
Day any Distributions it receives or is deemed to receive to the extent
that a Delivery Amount would not be created or increased by that
Transfer, as calculated by the Valuation Agent (and the date of
calculation will be deemed to be a Valuation Date for this purpose).
(ii) INTEREST AMOUNT. Unless otherwise specified in Paragraph 13 and
subject to Paragraph 4(a), in lieu of any interest, dividends or other
amounts paid or deemed to have been paid with respect to Posted
Collateral in the form of Cash (all of which may be retained by the
Secured Party), the Secured Party will Transfer to the Pledgor at the
times specified in Paragraph 13 the Interest Amount to the extent that a
Delivery Amount would not be created or increased by that Transfer, as
calculated by the Valuation Agent (and the date of calculation will be
deemed to be a Valuation Date for this purpose). The Interest Amount or
portion thereof not Transferred pursuant to this Paragraph will
constitute Posted Collateral in the form of Cash and will be subject to
the security interest granted under Paragraph 2.
PARAGRAPH 7. EVENTS OF DEFAULT
For purposes of Section 5(a)(iii)(1) of this Agreement, an Event of Default will
exist with respect to a party if:
(i) that party fails (or fails to cause its Custodian) to make, when
due, any Transfer of Eligible Collateral, Posted Collateral or the
Interest Amount, as applicable, required to be made by it and that
failure continues for two Local Business Days after notice of that
failure is given to that party;
(ii) that party fails to comply with any restriction or prohibition
specified in this Annex with respect to any of the rights specified in
Paragraph 6(c) and that failure continues for five Local Business Days
after notice of that failure is given to that party; or
(iii) that party fails to comply with or perform any agreement or
obligation other than those specified in Paragraphs 7(i) and 7(ii) and
that failure continues for 30 days after notice of that failure is given
to that party.
PARAGRAPH 8. CERTAIN RIGHTS AND REMEDIES
(a) SECURED PARTY'S RIGHTS AND REMEDIES. If at any time (1) an Event of Default
or Specified Condition with respect to the Pledgor has occurred and is
continuing or (2) an Early Termination Date has occurred or been designated as
the result of an Event of Default or Specified Condition with respect to the
Pledgor, then, unless the Pledgor has paid in full all of its Obligations that
are then due, the Secured Party may exercise one or more of the following rights
and remedies:
(i) all rights and remedies available to a secured party under
applicable law with respect to
5
<PAGE> 41
Posted Collateral held by the Secured Party;
(ii) any other rights and remedies available to the Secured Party under
the terms of Other Posted Support, if any;
(iii) the right to Set-off any amounts payable by the Pledgor with
respect to any Obligations against any Posted Collateral or the Cash
equivalent of any Posted Collateral held by the Secured Party (or any
obligation of the Secured Party to Transfer that Posted Collateral); and
(iv) the right to liquidate any Posted Collateral held by the Secured
Party through one or more public or private sales or other dispositions
with such notice, if any, as may be required under applicable law, free
from any claim or right of any nature whatsoever of the Pledgor,
including any equity or right of redemption by the Pledgor (with the
Secured Party having the right to purchase any or all of the Posted
Collateral to be sold) and to apply the proceeds (or the Cash equivalent
thereof) from the liquidation of the Posted Collateral to any amounts
payable by the Pledgor with respect to any Obligations in that order as
the Secured Party may elect.
Each party acknowledges and agrees that Posted Collateral in the form of
securities may decline speedily in value and is of a type customarily sold on a
recognized market, and, accordingly, the Pledgor is not entitled to prior notice
of any sale of that Posted Collateral by the Secured Party, except any notice
that is required under applicable law and cannot be waived.
(b) PLEDGOR'S RIGHTS AND REMEDIES. If at any time an Early Termination Date has
occurred or been designated as the result of an Event of Default or Specified
Condition with respect to the Secured Party, then (except in the case of an
Early Termination Date relating to less than all Transactions (or Swap
Transactions) where the Secured Party has paid in full all of its obligations
that are then due under Section 6(e) of this Agreement):
(i) the Pledgor may exercise all rights and remedies available to a
Pledgor under applicable law with respect to Posted Collateral held by
the Secured Party;
(ii) the Pledgor may exercise any other rights and remedies available to
the Pledgor under the terms of Other Posted Support, if any;
(iii) the Secured Party will be obligated immediately to Transfer all
Posted Collateral and the Interest Amount to the Pledgor; and
(iv) to the extent that Posted Collateral or the Interest Amount is not
so Transferred pursuant to (iii) above, the Pledgor may:
(A) Set-off any amounts payable by the Pledgor with respect to
any Obligations against any Posted Collateral or the Cash
equivalent of any Posted Collateral held by the Secured Party (or
any obligation of the Secured Party to Transfer that Posted
Collateral); and
(B) to the extent that the Pledgor does not Set-off under (iv)(A)
above, withhold payment of any remaining amounts payable by the
Pledgor with respect to any Obligations, up to the Value of any
remaining Posted Collateral held by the Secured Party, until that
Posted Collateral is Transferred to the Pledgor.
(c) DEFICIENCIES AND EXCESS PROCEEDS. The Secured Party will Transfer to the
Pledgor any proceeds and Posted Credit Support remaining after liquidation,
Set-off and/or application under Paragraphs 8(a) and 8(b) after satisfaction in
full of all amounts payable by the Pledgor with respect to any Obligations; the
6
<PAGE> 42
Pledgor in all events will remain liable for any amounts remaining unpaid after
any liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b).
(d) FINAL RETURNS. When no amounts are or thereafter may become payable by the
Pledgor with respect to any Obligations (except for any potential liability
under Section 2(d) of this Agreement), the Secured Party will Transfer to the
Pledgor all Posted Credit Support and the Interest Amount, if any.
PARAGRAPH 9. REPRESENTATIONS
Each party represents to the other party (which representation will be deemed to
be repeated as of each date on which it, as the Pledgor, Transfers Eligible
Collateral) that:
(i) it has the power to grant a security interest in and lien on any
Eligible Collateral it Transfers as the Pledgor and has taken all
necessary actions to authorize the granting of that security interest
and lien;
(ii) it is the sole owner of or otherwise has the right to Transfer all
Eligible Collateral it Transfers to the Secured Party hereunder, free
and clear of any security interest, lien, encumbrance or other
restrictions other than the security interest and lien granted under
Paragraph 2;
(iii) upon the Transfer of any Eligible Collateral to the Secured Party
under the terms of this Annex, the Secured Party will have a valid and
perfected first priority security interest therein (assuming that any
central clearing corporation or any third-party financial intermediary
or other entity not within the control of the Pledgor involved in the
Transfer of that Eligible Collateral gives the notices and takes the
action required of it under applicable law for perfection of that
interest); and
(iv) the performance by it of its obligations under this Annex will not
result in the creation of any security interest, lien or other
encumbrance on any Posted Collateral other than the security interest
and lien granted under Paragraph 2.
PARAGRAPH 10. EXPENSES
(a) GENERAL. Except as otherwise provided in Paragraphs 10(b) and 10(c), each
party will pay its own costs and expenses in connection with performing its
obligations under this Annex and neither party will be liable for any costs and
expenses incurred by the other party in connection herewith.
(b) POSTED CREDIT SUPPORT. The Pledgor will promptly pay when due all taxes,
assessments or charges of any nature that are imposed with respect to Posted
Credit support held by the Secured Party upon becoming aware of the same,
regardless of whether any portion of that Posted Credit Support is subsequently
disposed of under Paragraph 6(c), except for those taxes, assessments and
charges that result from the exercise of the Secured Party's rights under
Paragraph 6(c).
(c) LIQUIDATION/APPLICATION OF POSTED CREDIT SUPPORT. All reasonable costs and
expenses incurred by or on behalf of the Secured Party or the Pledgor in
connection with the liquidation and/or application of any Posted Credit Support
under Paragraph 8 will be payable, on demand and pursuant to the Expenses
Section of this Agreement, by the Defaulting Party or, if there is no Defaulting
Party, equally by the parties.
PARAGRAPH 11. MISCELLANEOUS
(a) DEFAULT INTEREST. A Secured Party that fails to make, when due, any Transfer
of Posted Collateral or the Interest Amount will be obliged to pay the Pledgor
(to the extent permitted under applicable law) an amount equal to interest at
the Default Rate multiplied by the Value of the items of property that were
7
<PAGE> 43
required to be Transferred, from (and including) the date that the Posted
Collateral or Interest Amount was required to be Transferred to (but excluding)
the date of Transfer of that Posted Collateral or Interest Amount. This interest
will be calculated on the basis of daily compounding and the actual number of
days elapsed.
(b) FURTHER ASSURANCES. Promptly following a demand made by a party, the other
party will execute, deliver, file and record any financing statement, specific
assignment or other document and take any other action that may be necessary or
desirable and reasonably requested by that party to create, preserve, perfect or
validate any security interest or lien granted under Paragraph 2, to enable that
party to exercise or enforce its rights under this Annex with respect to Posted
Credit Support or an Interest Amount or to effect or document a release of a
security interest on Posted Collateral or an Interest Amount.
(c) FURTHER PROTECTION. The Pledgor will promptly give notice to the Secured
Party of, and defend against, any suit, action, proceeding or lien that involves
Posted Credit Support Transferred by the Pledgor or that could adversely affect
the security interest and lien granted by it under Paragraph 2, unless that
suit, action, proceeding or lien results from the exercise of the Secured
Party's rights under Paragraph 6(c).
(d) GOOD FAITH AND COMMERCIALLY REASONABLE MANNER. Performance of all
obligations under this Annex, including, but not limited to, all calculations,
valuations and determinations made by either party, will be made in good faith
and in a commercially reasonable manner.
(e) DEMANDS AND NOTICES. All demands and notices given by a party under this
Annex will be made as specified in the Notices Section of this Agreement, except
as otherwise provided in Paragraph 13.
(f) SPECIFICATIONS OF CERTAIN MATTERS. Anything referred to in this Annex as
being specified in Paragraph 13 also may be specified in one or more
Confirmations or other documents and this Annex will be construed accordingly.
PARAGRAPH 12. DEFINITIONS
As used in this Annex:--
"CASH" means the lawful currency of the United States of America.
"CREDIT SUPPORT AMOUNT" has the meaning specified in Paragraph 3.
"CUSTODIAN" has the meaning specified in Paragraphs 6(b)(i) and 13.
"DELIVERY AMOUNT" has the meaning specified in Paragraph 3(a).
"DISPUTING PARTY" has the meaning specified in Paragraph 5.
"DISTRIBUTIONS" means, with respect to Posted Collateral other than Cash, all
principal, interest and other payments and distributions of cash or other
property with respect thereto, regardless of whether the Secured Party has
disposed of that Posted Collateral under Paragraph 6(c). Distributions will not
include any item of property acquired by the Secured Party upon any disposition
or liquidation of Posted Collateral or, with respect to any Posted Collateral in
the form of Cash, any distributions on that collateral, unless otherwise
specified herein.
"ELIGIBLE COLLATERAL" means, with respect to a party, the items, if any,
specified as such for that party in Paragraph 13.
"ELIGIBLE CREDIT SUPPORT" means Eligible Collateral and Other Eligible Support.
8
<PAGE> 44
"EXPOSURE" means for any Valuation Date or other date for which Exposure is
calculated and subject to Paragraph 5 in the case of a dispute, the amount, if
any, that would be payable to a party that is the Secured Party by the other
party (expressed as a positive number) or by a party that is the Secured Party
to the other party (expressed as a negative number) pursuant to Section
6(e)(ii)(2)(A) of this Agreement as if all Transactions (or Swap Transactions)
were being terminated as of the relevant Valuation Time; provided that Market
Quotation will be determined by the Valuation Agent using its estimates at
mid-market of the amounts that would be paid for Replacement Transactions (as
that term is defined in the definition of "Market Quotation").
"INDEPENDENT AMOUNT" means, with respect to party, the amount specified as such
for that party in Paragraph 13; if no amount is specified, zero.
"INTEREST AMOUNT" means, with respect to an Interest Period, the aggregate sum
of the amounts of interest calculated for each day in that Interest Period on
the principal amount of Posted Collateral in the form of Cash held by the
Secured Party on that day, determined by the Secured Party for each such day as
follows:
(x) the amount of Cash on that day; multiplied by
(y) the Interest Rate in effect for that day; divided by
(z) 360.
"INTEREST PERIOD" means the period from (and including) the last Local Business
Day on which an Interest Amount was Transferred (or, if no Interest Amount has
yet been Transferred, the Local Business Day on which Posted Collateral in the
form of Cash was Transferred to or received by the Secured Party) to (but
excluding) the Local Business Day on which the current Interest Amount is to be
Transferred.
"INTEREST RATE" means the rate specified in Paragraph 13.
"LOCAL BUSINESS DAY," unless otherwise specified in Paragraph 13, has the
meaning specified in the Definitions Section of this Agreement, except that
references to a payment in clause (b) thereof will be deemed to include a
Transfer under this Annex.
"MINIMUM TRANSFER AMOUNT" means, with respect to a party, the amount specified
as such for that party in Paragraph 13; if no amount is specified, zero.
"NOTIFICATION TIME" has the meaning specified in Paragraph 13.
"OBLIGATIONS" means, with respect to a party, all present and future obligations
of that party under this Agreement and any additional obligations specified for
that party in Paragraph 13.
"OTHER ELIGIBLE SUPPORT" means, with respect to a party, the items, if any,
specified as such for that party in Paragraph 13.
"OTHER POSTED SUPPORT" means all Other Eligible Support Transferred to the
Secured Party that remains in effect for the benefit of that Secured Party.
"PLEDGOR" means either party, when that party (i) receives a demand for or is
required to Transfer Eligible Credit Support under Paragraph 3(a) or (ii) has
Transferred Eligible Credit Support under Paragraph 3(a).
"POSTED COLLATERAL" means all Eligible Collateral, other property,
Distributions, and all proceeds thereof that have been Transferred to or
received by the Secured Party under this Annex and not Transferred to the
9
<PAGE> 45
Pledgor pursuant to Paragraph 3(b), 4(d)(ii) or 6(d)(i) or released by the
Secured Party under Paragraph 8. Any Interest Amount or portion thereof not
Transferred pursuant to Paragraph 6(d)(ii) will constitute Posted Collateral in
the form of Cash.
"POSTED CREDIT SUPPORT" means Posted Collateral and Other Posted Support.
"RECALCULATION DATE" means the Valuation Date that gives rise to the dispute
under Paragraph 5; provided, however, that if a subsequent Valuation Date occurs
under Paragraph 3 prior to the resolution of the dispute, then the
"Recalculation Date" means the most recent Valuation Date under Paragraph 3.
"RESOLUTION TIME" has the meaning specified in Paragraph 13.
"RETURN AMOUNT" has the meaning specified in Paragraph 3(b).
"SECURED PARTY" means either party, when that party (i) makes a demand for or is
entitled to receive Eligible Credit Support under Paragraph 3(a) or (ii) holds
or is deemed to hold Posted Credit Support.
"SPECIFIED CONDITION" means, with respect to a party, any event specified as
such for that party in Paragraph 13.
"SUBSTITUTE CREDIT SUPPORT" has the meaning specified in Paragraph 4(d)(i).
"SUBSTITUTION DATE" has the meaning specified in Paragraph 4(d)(ii).
"THRESHOLD" means, with respect to a party, the amount specified as such for
that party in Paragraph 13; if no amount is specified, zero.
"TRANSFER" means, with respect to any Eligible Credit Support, Posted Credit
Support or Interest Amount, and in accordance with the instructions of the
Secured Party, Pledgor or Custodian, as applicable:
(i) in the case of Cash, payment or delivery by wire transfer into one
or more bank accounts specified by the recipient;
(ii) in the case of certificated securities that cannot be paid or
delivered by book-entry, payment or delivery in appropriate physical
form to the recipient or its account accompanied by any duly executed
instruments of transfer, assignments in blank, transfer tax stamps and
any other documents necessary to constitute a legally valid transfer to
the recipient;
(iii) in the case of securities that can be paid or delivered in
book-entry, the giving of written instruments to the relevant depository
institution or other entity specified by the recipient, together with a
written copy thereof to the recipient, sufficient if complied with to
result in a legally effective transfer of the relevant interest to the
recipient; and
(iv) in the case of Other Eligible Support or Other Posted Support, as
specified in Paragraph 13.
"VALUATION AGENT" has the meaning specified in Paragraph 13.
"VALUATION DATE" means each date specified in or otherwise determined pursuant
to Paragraph 13.
"VALUATION PERCENTAGE" means, for any item of Eligible Collateral, the
percentage specified in Paragraph 13.
10
<PAGE> 46
"VALUATION TIME" has the meaning specified in Paragraph 13.
"VALUE" means for any Valuation Date or other date for which Value is
calculated, and subject to Paragraph 5 in the case of a dispute, with respect
to:
(i) Eligible Collateral or Posted Collateral that is:
(A) Cash, the amount thereof; and
(B) a security, the bid price obtained by the Valuation Agent
multiplied by the applicable Valuation Percentage, if any;
(ii) Posted Collateral that consists of items that are not specified as
Eligible Collateral, zero; and
(iii) Other Eligible Support and Other Posted Support, as specified in
Paragraph 13.
PARAGRAPH 13. ELECTIONS AND VARIABLES
(a) SECURITY INTEREST FOR "OBLIGATIONS". The term "OBLIGATIONS" as used in this
Annex includes the following additional obligations: Not Applicable.
(b) CREDIT SUPPORT OBLIGATIONS.
(i) DELIVERY AMOUNT, RETURN AMOUNT AND CREDIT SUPPORT AMOUNT.
(A) "DELIVERY AMOUNT" has the meaning specified in Paragraph 3(a).
(B) "RETURN AMOUNT" has the meaning specified in Paragraph 3(b).
(C) "CREDIT SUPPORT AMOUNT" means, for any Valuation Date (i) the
Secured Party's Exposure for that Valuation Date plus (ii) the aggregate
of all Independent Amounts applicable to the Pledgor, if any, minus
(iii) the Pledgor's Threshold; provided, however, that (x) in the case
where the sum of the Independent Amounts applicable to the Pledgor
exceeds zero, the Credit Support Amount will not be less than the sum of
all Independent Amounts applicable to the Pledgor and (y) in all other
cases, the Credit Support Amount will be deemed to be zero whenever the
calculation of Credit Support Amount yields an amount less than zero.
(ii) ELIGIBLE COLLATERAL. The following items will qualify as "ELIGIBLE
COLLATERAL":
<TABLE>
<CAPTION>
VALUATION
PERCENTAGE
<S> <C>
(A) Cash; 100%
(B) negotiable debt obligations issued by the U.S. Treasury Department 98%
having an original maturity at issuance of not more than one year;
</TABLE>
11
<PAGE> 47
<TABLE>
<S> <C>
(C) negotiable debt obligations issued by the U.S. Treasury Department 98%
having an original maturity at issuance of more than one year but not
more than ten years;
(D) negotiable debt obligations issued by the U.S. Treasury Department 95%
having an original maturity at issuance of more than ten years;
</TABLE>
(iii) OTHER ELIGIBLE SUPPORT. There shall be no "Other Eligible Support"
for either Party A or Party B.
(iv) THRESHOLDS.
(A) "INDEPENDENT AMOUNT" for Party B means, with respect to each
Transaction, the sum of the following:
(1) zero
(2) any amount specified in a Confirmation for a Transaction
(B) "THRESHOLD" for the Pledgor means zero
(C) "MINIMUM TRANSFER AMOUNT" means, with respect to a party, $100,000;
provided, that if an Event of Default or Specified Condition has
occurred and is continuing with respect to Party B, the Minimum Transfer
Amount with respect to Party B shall be zero.
(D) "ROUNDING". The Delivery Amount and the Return Amount will be
rounded up and down respectively to the nearest integral multiple of
$10,000.
(c) VALUATION AND TIMING.
(i) "VALUATION AGENT" means the Secured Party.
(ii) "VALUATION DATE" means (a) the Trade Date of each Transaction, if
either party has an Independent Amount greater than zero for that
Transaction, (b) each Friday of the relevant calendar month (or if such
day is not a Local Business Day then the immediately preceding Local
Business Day) and (c) each other Local Business Day designated as a
Valuation Date by notice given by one party to the other no later than
the Notification Time on the Local Business Day before the Valuation
Date so designated.
(iii) "VALUATION TIME" means the close of business in the city of the
Valuation Agent on the Local Business Day preceding the Valuation Date
or date of calculation, as applicable; provided that the calculations of
Value and Exposure will be made as of approximately the same time on the
same date.
(iv) "NOTIFICATION TIME" means by 10:00 a.m., New York time, on a Local
Business Day.
(d) CONDITIONS PRECEDENT AND SECURED PARTY'S RIGHTS AND REMEDIES. Each of the
following Termination Events will be a "Specified Condition" for the Pledgor:
12
<PAGE> 48
Credit Event Upon Merger [X]
Illegality [X]
Additional Termination Events (if any) [X]
(e) SUBSTITUTION.
(i) "SUBSTITUTION DATE" has the meaning specified in Paragraph
4(d)(ii).
(ii) "CONSENT." The Pledgor must obtain the Secured Party`s consent
for any substitution pursuant to Paragraph 4(d).
(f) DISPUTE RESOLUTION.
(i) "RESOLUTION TIME" means 1:00 p.m., New York Time, on the next
Local Business Day following the date on which notice is given
that gives rise to a dispute under Paragraph 5.
(ii) "VALUE." For the purpose of Paragraph 5(i)(C) and 5(ii), the
Value of Eligible Collateral other then Cash will be calculated
as follows:
the sum of (i) (x) the arithmetic mean of the closing bid prices
quoted on the relevant date of three nationally recognized
principal market makers (which may include an affiliate of Party
A) for such security chosen by the Valuation Agent multiplied by
the applicable Valuation Percentage or (y) if no quotations are
available from such principal market makers on the relevant
date, the arithmetic mean of the closing bid prices on the next
preceding date multiplied by the applicable Valuation Percentage
plus (ii) the accrued interest on such security (except to the
extent Transferred to a party pursuant to any applicable
provision of this Agreement or included in the applicable price
referred to in (i) of this clause) as of such date.
(iii) "ALTERNATIVE." Not Applicable.
(g) HOLDING AND USING POSTED COLLATERAL.
(i) "ELIGIBILITY TO HOLD POSTED COLLATERAL; CUSTODIANS." Secured
Party and its Custodian will be entitled to hold Posted
Collateral pursuant to Paragraph 6(b), provided that the
following conditions applicable to it are satisfied:
(1) The Secured Party: The Secured Party is not a Defaulting
Party; and
(2) The Custodian: The Custodian is either: (a) an affiliate
of the Secured Party or (b) a bank or trust company
located in the State of New York having total assets of
at least US $10,000,000,000.
Initially, the CUSTODIAN for the Secured Party is: Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
(ii) "USE OF POSTED COLLATERAL" The provisions of Paragraph 6(c) will
apply.
13
<PAGE> 49
(h) DISTRIBUTIONS AND INTEREST AMOUNT.
(i) "INTEREST RATE." The Interest Rate will be the rate per annum
equal to the overnight Federal Funds Rate for each day cash is
held by the Secured Party as reported in Federal Reserve
Publication H.15-519.
(ii) "TRANSFER OF INTEREST AMOUNT." The Transfer of the Interest
Amount will be made on the last Local Business Day of each
calendar month and on any Local Business Day that Posted
Collateral in the form of Cash is Transferred to the Pledgor
pursuant to Paragraph 3(b).
(iii) "ALTERNATIVE TO INTEREST AMOUNT." Not Applicable.
(i) ADDITIONAL REPRESENTATION(S). Not Applicable
(j) "OTHER ELIGIBLE SUPPORT AND OTHER POSTED SUPPORT."
(i) "VALUE" with respect to Other Eligible Support and Other Posted
Support means: Not Applicable.
(ii) "TRANSFER" with respect to Other Eligible Support and Other
Posted Support means: Not Applicable.
(k) DEMANDS AND NOTICES. All demands, specifications and notices made by a
party to this Annex will be made pursuant to the Notices Section of this
Agreement, unless otherwise specified here:
(l) ADDRESSES FOR TRANSFERS. Not Applicable.
(m) OTHER PROVISIONS.
(i) AGREEMENT AS TO SINGLE SECURED PARTY AND PLEDGOR. Party A and
Party B agree that, notwithstanding anything to the contrary in
the recital to this Annex, Paragraph 1(b) or Paragraph 2 or the
definitions in Paragraph 12, (a) the term "Secured Party" as
used in this Annex means only Party A, (b) the term "Pledgor" as
used in this Annex means only Party B, (c) only Party B makes
the pledge and grant in Paragraph 2, the acknowledgment in the
final sentence of Paragraph 8(a) and the representations in
Paragraph 9 and (d) only Party B will be required to make
Transfers of Eligible Credit Support hereunder. Party A and
Party B further agree that, notwithstanding anything to the
contrary in the recital to this Annex or Paragraph 7, this Annex
will constitute a Credit Support Document only with respect to
Party B, and the Events of Default in Paragraph 7 will apply
only to Party B.
14
<PAGE> 50
EXHIBIT 3
[MERRILL LYNCH LOGO]
SECURITIES LOAN AGREEMENT
AGREEMENT dated as of June 2, 1999 between MERRILL LYNCH
INTERNATIONAL, as borrower ("Borrower"), and IXC INTERNET SERVICES, INC., as
lender ("Lender"). This Agreement sets forth the terms and conditions under
which Lender may, from time to time, lend to Borrower certain securities against
a pledge of collateral (each a "transaction" or a "Loan"). Capitalized terms not
otherwise defined herein shall have the meanings provided in Section 13.
Borrower and Lender, as the parties hereto, agree as follows:
1. LOANS OF PSINET INC. COMMON STOCK.
1.1 Subject to the terms and conditions of this Agreement, the
Borrower may, upon delivery of a Borrowing Notice to Lender, initiate a Loan
whereby Lender will lend to Borrower shares of the common stock of PSINet Inc.,
par value $0.01 ("PSINet Shares"), which are fully-paid by Lender. The Borrower
shall specify in the related Borrowing Notice for each Loan the terms of such
Loan, including the number of PSINet Shares to be lent (which shall constitute
Loaned Shares for such Loan) and the amount of Collateral to be credited to
Lender, which terms may be amended during the Loan.
1.2. WITHOUT WAIVING ANY RIGHTS GIVEN TO THE LENDER HEREUNDER, IT IS
UNDERSTOOD AND AGREED THAT THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION
ACT OF 1970 WILL NOT PROTECT THE LENDER WITH RESPECT TO THE LOANED SHARES.
2. DELIVERIES OF LOANED SHARES. Borrower will borrow only those PSINet Shares
that are then held on a fully-paid basis in a securities account maintained by
Borrower for Lender at Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S") ("Lender's Securities Account"). Unless otherwise agreed, Borrower
will accept delivery of the Loaned Shares being borrowed hereunder by causing
such Loaned Shares to be transferred on MLPF&S's books and records from Lender's
Securities Account to a proprietary account of Borrower at MLPF&S on or prior to
the Cutoff Time on the date specified by Borrower in the Borrowing Notice for
the commencement of the Loan (the "Commencement Date").
3. COLLATERAL.
3.1. Borrower shall, prior to or contemporaneous with its receipt of
the Loaned Shares, deliver to Lender cash in an amount of not less than 100% of
the market value of the Loaned Shares, which cash is to be held as Collateral by
Lender in an account to be established by
<PAGE> 51
Borrower in the name of MLPF&S for the benefit of Borrower as secured party
under the Forward Agreement and for the benefit of the Lender as secured party
under this Agreement (the "Collateral Account"). Lender shall not be entitled to
withdraw or invest the Collateral and no interest shall be paid on the
Collateral.
3.2 The Collateral delivered by Borrower to Lender, as adjusted
pursuant to Section 8 below, shall be security for Borrower's obligations in
respect to such Loan by Lender to Borrower. Subject to the first and prior
security interest in, and a lien upon the Collateral, granted to Borrower by
Lender under the Credit Support Annex to the Forward Agreement, Borrower hereby
pledges with, assigns to, and grants Lender a continuing security interest in,
and a lien upon the Collateral, which shall attach upon the delivery of the
Collateral to Lender and which shall cease upon the redelivery of the Collateral
to Borrower.
3.3. Except as provided in Section 13 hereunder, Lender shall be
obligated to return the Collateral to Borrower on termination of the Loan upon
delivery to Lender of the Loaned Shares.
3.4. If on any Business Day, Borrower delivers Collateral, as provided
in Section 3.1 hereunder and the Lender does not deliver the Loaned Shares,
Borrower shall have the absolute right to the return of the Collateral; and if,
on any Business Day, Lender delivers Loaned Shares and Borrower does not deliver
Collateral as provided in Section 3.1. hereunder, Lender shall have the absolute
right to the return of the Loaned Shares.
4. FEES FOR LOAN. It is understood and agreed by Lender that Borrower will not
pay Lender any fee, directly or indirectly, in consideration for borrowing the
Loaned Shares.
5. TERMINATION OF THE LOAN.
5.1. (a) Borrower may terminate a Loan on any Business Day by giving
notice (an "Acceleration Notice") to Lender and transferring the Loaned Shares
to Lender by the Cutoff Time on such Business Day (in such case, the
"Acceleration Date") and (b) Lender may terminate a Loan on any Business Day by
giving an Acceleration Notice to Borrower specifying the Acceleration Date for
such Loan, which shall be a date no earlier than the standard settlement date
for trades of the Loaned Shares entered into on the date of such notice.
Provided that such acceleration does not constitute a Termination Event (as
defined in the Forward Purchase Agreement) under the Forward Purchase Agreement,
Borrower shall, on or before the Cutoff Time on the Acceleration Date specified
by Lender in respect of a Loan, transfer the Loaned Shares to Lender. Upon the
transfer by Borrower of Loaned Shares pursuant to (a) or (b) above, Lender shall
transfer the Collateral (as adjusted pursuant to Section 8) to Borrower on the
applicable Acceleration Date in accordance with Section 3.
5.2. Unless otherwise accelerated pursuant to Section 5.1, on the
Termination Date of a Loan, Borrower shall redeliver to Lender the Loaned Shares
or Equivalent Shares, or cause the Loaned Shares or Equivalent Shares to be
returned to Lender by crediting the Loaned Shares or Equivalent Shares to
Lender's Securities Account; provided, however, that Borrower's obligation
2
<PAGE> 52
to redeliver to Lender the Loaned Shares or Equivalent Shares shall be offset to
the extent that Lender does not elect Cash Settlement (as defined in the Forward
Purchase Agreement) and Lender has an obligation to deliver to Borrower the
Number of Shares to be Delivered (as defined in the Forward Purchase Agreement)
pursuant to, and determined in accordance with, the Forward Purchase Agreement,
in which case, Borrower shall redeliver to Lender such portion of the Loaned
Shares or Equivalent Shares that exceeds the Number of Shares to be Delivered
(the "Excess Collateral Shares").
5.3. In the event that this Agreement is terminated early in
accordance with Section 11 hereof, then Borrower shall be obligated to redeliver
to Lender the Loaned Shares or Equivalent Shares, or to cause the Loaned Shares
or Equivalent Shares to be returned to Lender by crediting the Loaned Shares or
Equivalent Shares to Lender's Securities Account; provided, however, that,
without limiting any other right of setoff of the Borrower, Borrower's
obligation to redeliver to Lender the Loaned Shares or Equivalent Shares shall
be offset to the extent that Lender has an obligation to pay to Borrower amounts
in respect of the early termination of the Forward Purchase Agreement (the
"Early Termination Payment"), in which case, Borrower shall be obligated to
redeliver to Lender such portion of the Loaned Shares or Equivalent Shares that
exceeds the Early Termination Payment (the "Early Termination Excess").
6. RIGHTS OF BORROWER IN RESPECT OF THE LOANED SHARES. Until a Loan is
terminated in accordance herewith and except as provided in Section 7, Borrower
shall have all of the incidents of ownership of the Loaned Shares, including the
right to transfer the Loaned Shares to others. Lender hereby waives the right,
if any, to vote the Loaned Shares during the term of the Loan.
7. DIVIDENDS, DISTRIBUTION, ETC.
7.1. Lender shall be entitled to receive all distributions made on or
in respect of the Loaned Shares the record dates for which are during the term
of the Loan and which are not otherwise received by Lender, to the full extent
it would be so entitled if the Loaned Shares, had not been lent to Borrower,
including, but not limited to: (a) all cash and other property, (b) stock
dividends, (c) securities received as a result of split ups of the Loaned Shares
and distributions in respect thereof, (d) interest payments, and (e) all rights
to purchase additional securities.
7.2. Borrower shall pay Lender an amount of cash equal to any cash
distribution made on or in respect of the Loaned Shares which Lender is entitled
to receive pursuant to Section 7.1 hereof. Such amount shall be paid to Lender
by Borrower upon receipt by Borrower so long as Lender is not in Default at the
time of such receipt. Upon receipt of payment of any such cash dividends,
distributions or interest by Borrower, Borrower shall forthwith pay the same
amount in cash to Lender by crediting such amount to Lender's Securities
Account. Non-cash distributions received by Borrower shall be added to the
Loaned Shares and shall be considered such for all purposes, except that if the
Loan has terminated, Borrower shall forthwith deliver the same to Lender.
8. MARK TO MARKET MARGIN.
3
<PAGE> 53
8.1. Borrower shall daily mark to the market any Loan hereunder and in
the event that at the close of trading on any Business Day the value of all the
Collateral delivered hereunder by Borrower to Lender shall be less than 100% of
the market value of all the outstanding Loaned Shares as determined by Borrower,
Borrower shall deliver additional Collateral to Lender by transferring to or
crediting additional cash to the Collateral Account by the close of the next
Business Day so that the value of the additional Collateral when added to the
value of the Collateral held for Lender in the Collateral Account prior to such
transfer shall equal no less than 100% of the market value of the Loaned Shares.
The Collateral may be delivered as provided in Section 3.1. above.
8.2. In the event that at the close of trading on any Business Day
Borrower determines that the value of the Collateral delivered hereunder by
Borrower to the Collateral Account is greater than 100% of the market value of
all the outstanding Loaned Shares, Borrower may reduce the amount of the
Collateral held in the Collateral Account by transferring from or debiting the
amount of such excess from the Collateral Account so that the value of the
Collateral then held in the Collateral Account equals no less than 100% of the
market value of the Loaned Shares. The Collateral may be delivered as provided
in Section 3.1. above.
8.3. The values of the Loaned Shares and the Collateral may be marked
to market pursuant to Sections 8, 1. and 8.2 above by valuing in the aggregate
all Loaned Shares lent by Lender and Collateral given in respect thereof by
Borrower.
9. REPRESENTATIONS. The parties hereby make the following representations and
warranties, which shall continue during the term of any Loan hereunder:
9.1 Each party hereto represents and warrants that (a) such party has
the power (i) to execute and deliver this Agreement, (ii) to enter into the
Loans contemplated hereby and (iii) to perform such party's obligations
hereunder; (b) such party has taken all necessary action to authorize such
execution, delivery and performance; and (c) this Agreement constitutes a legal,
valid and binding obligation enforceable against such party in accordance with
its terms.
9.2 Each party hereto represents and warrants that it has made its own
determination as to the tax treatment of any dividends, remuneration or other
funds received hereunder.
9.3 Borrower represents and warrants that (a) it is a corporation duly
organized and validly existing under the laws of England and Wales, (b) it has,
or will have at the time of delivery of any Collateral, the right to grant a
first and prior perfected security interest therein (to the extent that such a
security interest can be granted in cash) subject to the terms and conditions
hereof, and (c) it (or the party to whom it relends the Loaned Shares) is
borrowing or will borrow the Loaned Shares for the purpose of making delivery of
such securities in the case of short sales, failure to receive securities
required to be delivered, or as otherwise permitted pursuant to Regulation U of
the Board of Governors of the Federal Reserve System.
9.4 Lender warrants and represents with respect to all Loaned Shares
transferred by it to the Borrower pursuant to this Agreement that, upon such
transfer, such Loaned Shares shall be
4
<PAGE> 54
free of any and all claims, liens, charges or other encumbrances in favor of
third parties. The Loaned Shares shall, on or prior to the Commencement Date of
the Loan relating to such Loaned Shares, be freely transferable and tradable,
subject only to the requirement that sales by the Borrower be made pursuant to a
registration statement that shall have been declared effective by the Securities
and Exchange Commission in connection with the public offering of PSI Net, Inc.
Common Stock, including such Loaned Shares, and Lender hereby agrees to furnish
Borrower with copies of a current prospectus, appropriately supplemented, to be
used in connection with the disposition of the Loaned Shares by Lender.
9.5 Lender represents and warrants that (a) that it has, or will have
at the time of delivery of any Loaned Shares, the right to deliver the Loaned
Shares subject to terms and conditions hereof, and (b) no Loaned Shares
delivered to Borrower hereunder for any Loan have been or shall be deemed to
have been obtained, directly or indirectly, from or using the assets of any Plan
(which term means (1) any "employee benefit plan" as defined in Section 3 of the
Employee Retirement Income Security Act of 1974, as amended, or (2) any "plan"
as defined in Section 4975(e) (1) of the Internal Revenue Code of 1954, as
amended), if Borrower or any affiliate of Borrower has discretionary authority
or control with respect to the assets of such Plan or renders investment advice
(within the meaning of 29 C.F.R Section 2510.3(c)) with respect to the
investment of the assets of such Plan.
9.6 Each party shall on the date of delivery of Loaned Shares to
Borrower and on the date of return of Loaned Shares to Lender, be deemed to
repeat and reaffirm, as the date of such delivery or return, the foregoing
representatives made by it.
10. COVENANTS.
10.1 Each party agrees that this Agreement and the Loans made
hereunder shall be "securities contracts" for purposes of the Bankruptcy Code
and any bankruptcy proceeding thereunder. Notwithstanding anything to the
contrary contained in this Agreement, it is the intention of the parties hereto
that this Agreement be treated and construed as an agreement meeting the
requirements of Section 1058 of the Internal Revenue Code of 1954, as amended.
10.2 Each party agrees to be liable as principal with respect to its
obligations hereunder.
10.3 The Lender shall, if it is a party to this Agreement as a Plan or
a trustee of a Plan, so notify Borrower upon the execution of this Agreement. If
the Lender so notifies Borrower, Borrower shall promptly notify the Lender
whether Borrower or any of its affiliates has discretionary authority or control
with respect to the assets of the Lender or of such (as the case may be) or
renders investment advice within the meaning of 29 C.F.R. Section 2510.3-21(c)
with respect to the investment of the assets of the Lender or of such Plan (as
the case may be). If the Lender notifies Borrower that it is a party to this
Agreement as a plan or a trustee of Plan, Borrower and Lender shall comply with
the requirements of the Exemption published by the United States Department of
Labor at 46 Fed. Reg. 7527.
5
<PAGE> 55
11. EARLY TERMINATION.
11.1 All Loans between Borrower and Lender may (at the option of the
non-defaulting party, exercised by notice to the defaulting party) be terminated
upon the occurrence of any one or more of the following events (each, a
"Default"):
(a) if any Loaned Shares shall not be delivered to Borrower on
the specified Commencement Date of a Loan;
(b) if any Loaned Shares shall not be delivered to Lender on the
specified Termination Date of a Loan;
(c) if any Collateral shall not be delivered to Borrower on the
specified Termination Date of a Loan;
(d) if either party shall fail to deliver or return Collateral as
the case may be, required by Section 8 hereof; and
(e) if either party shall fail to make the payment of
distributions as required by Section 7 hereof and such
default is not cured within one Business Day of notice of
such failure to Borrower or Lender, as the case may be.
11.2 All Loans between Borrower and Lender will be terminated upon the
designation of an Early Termination Event in respect of any Event of Default or
Termination Event (each as defined in the Forward Purchase Agreement) (a "Cross
Default").
11.3 Upon the occurrence of any Default or Cross Default, any required
payments or deliveries hereunder shall be made on the Early Termination Date (as
defined in the Forward Purchase Agreement).
12. TRANSFER TAXES. All transfer taxes with respect to the transfer of the
Loaned Shares by Lender to Borrower and by Borrower to Lender upon termination
of the Loan shall be paid by Borrower.
13. DEFINITIONS. For the purpose hereof:
13.1 "Business Day" shall mean any day recognized as a settlement day
by the New York Stock Exchange, Inc.
13.2 "Borrowing Notice" shall mean the Borrowing Notice delivered to
Lender by Borrower substantially in the form of Exhibit A hereto.
13.3 "Cutoff Time" shall mean 4:00 p.m. in the City of New York.
6
<PAGE> 56
13.4 "Forward Purchase Agreement" shall mean the ISDA Master
Agreement, dated as of June 2, 1999, including the Schedule and all annexes
thereto and the Confirmation dated June 3, 1999 relating to shares of PSINet
Inc., between Merrill Lynch International ("MLI"), acting through its agent,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Lender, pursuant to
which MLI has agreed to purchase from Lender and Lender has agreed to deliver
the Number of Shares to be Delivered to MLI.
13.5 "Loan" shall mean a loan of securities hereunder.
13.6 "Loaned Shares" shall mean any shares of PSINet Inc., par value
$0.01 per share, which are delivered in connection with a Loan hereunder until
Borrower credits the Lender's account or the certificate for such security (or
identical security) is transferred or delivered to the Lender's Securities
Account or otherwise accepted back by the Lender hereunder or until the security
shall be replaced by purchase, except that, if any new or different security
shall be exchanged for any Loaned Shares by recapitalization, merger,
consolidation or other corporate action, such new or different security shall,
effective upon such exchange, be deemed to become a Loaned Share in substitution
for each former Loaned Share for which such exchange was made. For the avoidance
of doubt, the Loaned Shares shall be subject to adjustment from time to time so
as to have the same meaning as the "Shares" in the Forward Purchase Agreement.
13.7 "Equivalent Shares" means, with respect to any Loaned Shares,
shares of the same issue, class and series as such Loaned Shares or the
equivalent in the event of any reorganization, merger or other action by the
issuer of such Loaned Shares.
13.8 "Termination Date" shall mean the Settlement Date (as defined in
the Forward Purchase Agreement), unless otherwise specified in the related
Borrowing Notice or Termination Notice for a Loan.
14. MARKET VALUE
14.1. Unless otherwise agreed, if the principal market for the
securities to be valued is a national securities exchange, their market value
shall be determined for all purposes by their last sale price on the next
preceding day on which there was a sale on any such exchange, Consolidated Tape,
then as quoted by any such exchange.
14.2 Unless otherwise agreed, if the principal market for the
securities to be valued is the over-the counter market, their market value shall
be determined as follows. If the securities are quoted on the Nasdaq Stock
Market ("Nasdaq"), their market value shall be the closing sale price on Nasdaq,
on the preceding Business Day or, if the securities are issues for which last
sale prices are not quoted on Nasdaq, the closing bid price on such date. If the
securities to be valued are not quoted on Nasdaq, their market value shall be
the highest bid quotations as quoted in any of The Wall Street Journal, the
National Quotation Bureau pink sheets, the Salomon Brothers quotation sheets,
quotation sheets of registered market makers and, if necessary, dealers'
telephone quotations on the preceding Business Day. In each case, if the
relevant quotation did
7
<PAGE> 57
not exist on each day, then the relevant quotation on the next preceding day in
which there was such a quotation shall be the market value.
15. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed wholly within such state, without reference to its conflicts
of laws principles or rules.
16. WAIVER. The failure of either party to insist upon strict adherence to that
party of the right thereafter to insist upon strict adherence to that term of
any other term of this Agreement. All waivers in respect of a Default must be in
writing.
17. REMEDIES. All remedies hereunder shall survive the termination of the Loan,
return of Excess Collateral Shares or the Early Termination Excess, as
applicable, and termination of this Agreement.
18. MISCELLANEOUS. This Agreement supersedes any other agreement between the
parties concerning loans of securities between the parties hereto. This
Agreement shall not be assigned by either party without the prior written
consent of the other party. Subject to the foregoing, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, representatives, successors and assigns. This Agreement shall
not be modified, except by an instrument in writing signed by the party against
whom enforcement is sought.
MERRILL LYNCH INTERNATIONAL
By: /s/ KAREN CURRIE
--------------------------------
Name: Karen Currie
Title: Vice President
IXC INTERNET SERVICES, INC.
By: /s/ JAMES F. GUTHRIE
--------------------------------
Name: James F. Guthrie
Title: Executive Vice President
and Chief Financial Officer
8
<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)* **
PSINET INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, $.01 per share par value
- --------------------------------------------------------------------------------
(Title of Class of Securities)
74437C101
- --------------------------------------------------------------------------------
(CUSIP Number)
Jeffrey C. Smith with a copy to:
General Counsel Michael P. Whalen, Esq.
IXC Communications, Inc. Riordan & McKinzie
1122 Capital of Texas Highway South 695 Town Center Drive, Suite 1500
Austin, Texas 78746 Costa Mesa, California 92626
(512) 328-1112 (714) 433-2618
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
June 11, 1999
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [ ].
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copes are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
**Represents the first amended Schedule 13D with respect to the Issuer's
Common Stock on behalf of IXC Communications Services, Inc. (the direct parent
of IXC Internet Services, Inc.) and IXC Communications, Inc. (the indirect
parent of IXC Internet Services, Inc.)
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
PAGE 1 OF 3
<PAGE> 2
This filing amends the Schedule 13D (the "Schedule 13D") filed by IXC
Internet Services, Inc., IXC Communications Services, Inc. and IXC
Communications, Inc. on June 17, 1999 with respect to the Issuer's Common
Stock. All terms not otherwise defined herein have the meanings ascribed in the
Schedule 13D.
This amendment files the confirmation of OTC Transaction as an exhibit.
Item 7. Material to be Filed as Exhibits.
The Filing Persons file as exhibits the following:
Exhibit 1: Joint Reporting Agreement dated June 15, 1999 among the
Filing Persons.*
Exhibit 2: Master Agreement dated as of June 2, 1999 between MLI and
Internet.*
Exhibit 3: Securities Loan Agreement dated as of June 2, 1999 between
MLI and Internet.*
Exhibit 4: Confirmation of OTC Transaction dated as of June 3, 1999
between MLI and Internet.
* Previously filed as an exhibit of the same number to the Schedule 13D filed on
June 17, 1999.
PAGE 2 OF 3
<PAGE> 3
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: June 25, 1999 IXC INTERNET SERVICES, INC.
/s/ JAMES F. GUTHRIE
------------------------------------
By: James F. Guthrie
Its: Executive Vice President
and Chief Financial Officer
IXC COMMUNICATIONS SERVICES, INC.
/s/ JAMES F. GUTHRIE
------------------------------------
By: James F. Guthrie
Its: Executive Vice President
and Chief Financial Officer
IXC COMMUNICATIONS, INC.
/s/ JAMES F. GUTHRIE
------------------------------------
By: James F. Guthrie
Its: Executive Vice President
and Chief Financial Officer
PAGE 3 OF 3
<PAGE> 4
EXHIBIT INDEX
Exhibit 1: Joint Reporting Agreement dated June 15, 1999 among the
Filing Persons.*
Exhibit 2: Master Agreement dated as of June 2, 1999 between MLI and
Internet.*
Exhibit 3: Securities Loan Agreement dated as of June 2, 1999 between
MLI and Internet.*
Exhibit 4: Confirmation of OTC Transaction dated as of June 3, 1999
between MLI and Internet.
* Previously filed as an exhibit of the same number to the Schedule 13D filed on
June 17, 1999.
<PAGE> 5
EXHIBIT 4
[MERRILL LYNCH LOGO]
CONFIRMATION OF OTC TRANSACTION
DATED: JUNE 3, 1999 ML REF: 998688
TO: IXC INTERNET SERVICES, INC. ("COUNTERPARTY")
ATTENTION: JAMES F. GUTHRIE
Telephone: 800-847-5705 Fax: 512-328-7902
FROM: MERRILL LYNCH INTERNATIONAL ("MLI")
Tel: (212) 449-8675
Fax: (212) 449-2697
Dear Sir / Madam,
The purpose of this letter agreement (this "Confirmation") is to confirm the
terms and conditions of the above referenced transaction entered into between
Counterparty and MLI, through its agent Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPFS"), on the Trade Date specified below (the "Transaction").
This Confirmation constitutes a "Confirmation" as referred to in the Master
Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
supplemented by the 1998 Supplement, the "Swap Definitions") and in the 1996
ISDA Equity Derivatives Definitions (the "Equity Definitions", and together with
the Swap Definitions, the "Definitions"), in each case as published by the
International Swaps and Derivatives Association, Inc., are incorporated into
this Confirmation. In the event of any inconsistency between the Swap
Definitions and the Equity Definitions, the Equity Definitions will govern. In
the event of any inconsistency between this Confirmation and the Agreement (as
defined below) or the Definitions, the terms of this Confirmation shall govern.
1. This Confirmation supplements, forms part of, and is subject to, the Master
Agreement (including the Schedule thereto and the Credit Support Annex ("CSA")
incorporated therein), dated as of June 2, 1999, as amended and supplemented
from time to time (the "Agreement"), between you and us. All provisions
contained in the Agreement govern this Confirmation except as expressly modified
below.
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
GENERAL TERMS:
Trade Date: **********, 1999
Termination Date: **********, 2002 (or if not an Exchange Business
Day, the next succeeding Exchange
Business Day).
Seller: Counterparty
Buyer: MLI
Shares: The common stock of PSINet Inc. (Symbol: PSIX)
* Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT".
1
<PAGE> 6
Number of Shares: 1,500,000
Floor Price: **********
Cap Price: **********
Final Price: The closing price per Share on the Exchange at the
Valuation Time on the Valuation Date.
Initial Payment
Amount: MLI shall pay to Counterparty on the Initial
Payment Date USD 51,963,068.36
Initial Payment
Date: June 14, 1999; provided, however, that if an
executed copy of this Confirmation is not received
by MLI on or prior to such date, then, subject to
Section 7(d) of this Confirmation, the Initial
Payment Date will be the day on which MLI receives
an executed copy of this Confirmation from
Counterparty, unless such day is not an Exchange
Business Day or such executed Confirmation is
received after 1:30 p.m. local time in New York on
such day, in which case the Initial Payment Date
will be the next succeeding Exchange Business Day.
Settlement
Currency: USD
Exchange: NASDAQ
Related Exchange: Any exchange on which options contracts related to
the Shares are principally traded.
Business Days: New York
VALUATION:
Valuation Time: At the close of trading in respect of regular
trading hours on the Exchange, without regard to
any extended trading hours on the Exchange, if any.
Valuation Date: The Termination Date
SETTLEMENT TERMS: Settlement of this Transaction shall be either Cash
Settlement or Physical Settlement as determined by
Counterparty in writing to MLI no less than ten
(10) Business Days prior to the Termination Date.
In the event MLI is not notified, the settlement
method for this Transaction shall be Physical
Settlement.
Cash Settlement: If Cash Settlement applies, then on the Cash
Settlement Payment Date, Counterparty will pay to
MLI the Cash Settlement Amount.
Cash Settlement
Amount: An amount determined by the Calculation Agent on
the Valuation Date based on the following formula:
a) if the Final Price is less than the Floor Price,
an amount equal to:
Number of Shares x Final Price
b) if the Final Price is less than or equal to the
Cap Price but greater than or equal to the Floor
Price, an amount equal to:
* Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT".
2
<PAGE> 7
Floor Price x Number of Shares
and
c) if the Final Price is greater than the Cap
Price, an amount equal to:
[Floor Price + (Final Price - Cap Price)] x Number
of Shares
Cash Settlement
Payment Date: Three (3) Currency Business Days after the
Valuation Date.
Physical Settlement: If Physical Settlement applies, then on the
Settlement Date, Counterparty will deliver to MLI
the Number of Shares to be Delivered.
Number of Shares
to be Delivered: A number of Shares determined by the Calculation
Agent on the Valuation Date based on the following
formula:
a) if the Final Price is less than the Floor Price,
a number of Shares equal to:
Number of Shares
b) if the Final Price is less than or equal to the
Cap Price but greater than or equal to the Floor
Price, a number of Shares equal to:
Floor Price x Number of Shares
Final Price
and
c) if the Final Price is greater than the Cap
Price, a number of Shares equal to:
<TABLE>
<S> <C>
Floor Price + (Final Price - Cap Price) x Number of Shares
---------------------------------------
Final Price
</TABLE>
Settlement Date: Three (3) Exchange Business Days after the
Valuation Date.
Failure to Deliver: Applicable
Clearance System(s): The principal domestic clearance system customarily
settling trades on a delivery versus payment basis
on the Shares.
ADJUSTMENTS:
Method of Adjustment: In the event of the occurrence of a Potential
Adjustment Event, the Calculation Agent will
determine whether such Potential Adjustment Event
has a diluting or concentrative effect on the
theoretical value of the Shares and, if so, will
(i) make the corresponding adjustment(s), if any,
to the Number of Shares, the Floor Price and the
Cap Price and, in any case, any other variable
relevant to the settlement or payment terms of this
transaction as the Calculation Agent determines
appropriate to account for that diluting or
concentrative effect and (ii) determine the
effective date(s) of the adjustment(s).
3
<PAGE> 8
EXTRAORDINARY EVENTS:
Consequences of Merger Event:
(a) Share-for-Share: Cancellation and Payment; provided, however, if the
New Shares are publicly traded on a United States
national securities exchange or on NASDAQ,
Alternative Obligation shall apply; provided
further that references to an "option" in Section
9.7 of the Equity Definitions shall be deemed to be
references to a "forward".
(b) Share-for-Other: Cancellation and Payment
(c) Share-for-
Combined: Cancellation and Payment; provided, however, if any
portion of the consideration for the relevant
shares consists of equity securities that are
publicly traded on a United States national
securities exchange or on NASDAQ (the "Publicly
Traded Securities Consideration"), Alternative
Obligation shall apply to that portion of the
Transaction corresponding to the Publicly Traded
Securities Consideration; provided further that
references to an "option" in Section 9.7 of the
Equity Definitions shall be deemed to be references
to a "forward".
Notwithstanding anything to the contrary in the
Equity Definitions, the amount payable under this
Transaction upon the occurrence of an Extraordinary
Event shall be calculated by the Calculation Agent
in good faith in accordance with Section 9.7 of the
Equity Definitions using, among other things, the
factors identified in subparagraphs (i), (ii) and
(iii) therein, but without the requirement of
soliciting dealer quotations therefor.
NATIONALIZATION OR
INSOLVENCY: Negotiated Close-out
3. CALCULATION AGENT: MLI, provided that if the Counterparty objects to
any calculation, the parties agree to be bound by
the determination of a leading, independent dealer
in derivative instruments of this type selected by
agreement between the parties, whose fees and
expenses, if any shall be met equally by them both
(the "Substitute Calculation Agent"). If unable to
agree on a Substitute Calculation agent, each party
shall select an independent dealer in derivative
instruments of this type, and such independent
dealers shall agree on a third party, who shall be
deemed to be the Substitute Calculation Agent. The
Calculation Agent or the Substitute Calculation
Agent shall have no liability or responsibility to
the parties for any error or omission in making any
determination in connection with this Transaction.
4. NON-RELIANCE: Each party represents to the other party that it is
acting for its own account, and has made its own
independent decisions to enter into this
Transaction and as to whether this Transaction is
appropriate or proper for it based on its own
judgment and upon advice from such advisors as it
has deemed necessary. It is not relying on any
communication (written or oral) of the other party
as investment advice or as a recommendation to
enter into this Transaction, it being understood
that information and explanations related to the
terms and conditions of this Transaction shall not
be considered investment advice or a recommendation
to enter into this Transaction. No communication
(written or
4
<PAGE> 9
oral) received from the other party shall be deemed
to be an assurance or guarantee as to the expected
results of this Transaction.
5. GOVERNING LAW: The laws of the State of New York (without
reference to choice of law doctrine)
6. COLLATERAL:
Independent Amount: Independent Amount with respect to Counterparty and
this Transaction means a number of Shares equal to
the Number of Shares (the "Pledged Shares").
Eligible Collateral: The Pledged Shares will constitute Eligible
Collateral with respect to this Transaction. In the
event that MLI borrows the Pledged Shares pursuant
to the Securities Loan Agreement dated as of June
2, 1999 between MLI and Counterparty (the
"Securities Loan Agreement"), the Collateral (as
defined in the Securities Loan Agreement) delivered
by MLI to Counterparty pursuant to the Securities
Loan Agreement shall constitute Posted Collateral
for purposes of the CSA; provided, however, that
such Collateral will be disregarded for purposes of
determining the Interest Amount under the CSA.
Exposure: This Transaction will be disregarded for purposes
of determining the Credit Support Amount under the
CSA.
7. ADDITIONAL
TERMINATION EVENTS: The following shall constitute Additional
Termination Events under Section 5(b)(v) of the
Agreement:
(a)(i) MLI is no longer able, or it becomes
more costly, to borrow (or maintain a
borrowing of) Shares in connection with this
Transaction, (ii) MLI notifies Counterparty
of such inability or increased cost; and
(iii) on or before the fifth Exchange
Business Day following such notice,
Counterparty fails to provide, either
directly or indirectly, for a loan to MLI of
either (x) the Pledged Shares, pursuant to,
and in accordance with, the Securities Loan
Agreement or (y) Shares (other than the
Pledged Shares) that are freely tradable in
an amount equal to the Number of Shares, upon
terms consistent with then-applicable law. In
the event that such an agreement is executed
and the Pledged Shares or such other Shares
so borrowed, MLI shall adjust the terms of
this Transaction accordingly (and in its sole
discretion) taking into account the costs
incurred by MLI in borrowing (or maintaining
a borrowing of) the Number of Shares.
(b) At any time after the loan of the Pledged
Shares by Counterparty to MLI pursuant to the
Securities Loan Agreement, Counterparty
demands the return of the Pledged Shares
pursuant to the Securities Loan Agreement
and, at the time of such demand, MLI is not
able, or it is more costly, to borrow (or
maintain a borrowing of) Shares in connection
with this Transaction.
(c) A registration statement, accompanied by
Satisfactory Ancillary Documents, covering
the delivery of the Loaned Shares (as defined
in the Securities Loan Agreement) by MLI in
connection with its hedging activities
relating to this Transaction, is not
effective within 185 days from the Trade Date
of this Transaction.
5
<PAGE> 10
"Satisfactory Ancillary Documents" means an
agreement of PSINet Inc. containing
representations, warranties, covenants and
indemnification provisions substantially
identical to those contained in, as well as
legal opinions and a comfort letter
substantially identical to those delivered in
connection with, the Underwriting Agreement
in respect of 8,000,000 Shares of Common
Stock of PSINet Inc. dated April 28, 1999
between PSINet Inc. and the underwriters
named therein.
(d) on or prior to the fourteenth day
following the Trade Date, (i) Counterparty
fails to execute and deliver to MLI the
Master Agreement including this Confirmation,
the Securities Loan Agreement and the Client
Money Opt Out Letter or (ii) Counterparty
fails to execute and deliver to PSINet Inc. a
letter requesting PSINet Inc. to remove from
the certificates evidencing the Pledged
Shares the legends restricting the transfer
of such Shares.
For purposes of the foregoing Termination Events,
Counterparty will be the Affected Party.
8. REPRESENTATIONS OF
COUNTERPARTY: Counterparty (a) has such knowledge and experience
in financial and business affairs as to be capable
of evaluating the merits and risks of entering into
the Transaction; (b) qualifies as an "accredited
investor" under Regulation D of the Securities Act
of 1933, as amended (the "Securities Act"); (c) has
consulted with its own legal, financial, accounting
and tax advisors in connection with the
Transaction; (d) is entering into the Transaction
for a bona fide business purpose to hedge an
existing position; (e) acknowledges that in return
for downside protection against a decline in the
market price of the Shares below the Floor Price,
Counterparty is foregoing the upside value of an
increase in the market price of the Shares above
the Cap Price; and (f) in exchange for prepayment
of the purchase price under the Transaction,
Counterparty agrees to sell (and physically
deliver) the Shares to MLI on the Settlement Date
(unless Counterparty elects Cash Settlement in the
manner specified herein).
Counterparty has no knowledge of any non-public
material information regarding the Issuer of the
Shares.
Counterparty has furnished MLI with copies of all
material agreements or contracts to which it is a
party, by which it is bound, or by which the
Pledged Shares are bound, that relate to the
Pledged Shares.
The Initial Payment Amount received by Counterparty
will not be used for the purpose of purchasing,
refinancing or carrying margin stock, as defined in
Regulation U promulgated by the Board of Governors
of The Federal Reserve System.
In the event that MLI sells any Pledged Shares
borrowed pursuant to the Securities Loan Agreement,
Counterparty represents and warrants that the
following will be true as of each Representation
Date (defined below): (i) the Registration
Statement of the Issuer of the Shares as filed with
the Securities and Exchange Commission and any
related prospectus (and any supplement thereto)
(the "Registration Statement"), as of its
respective dates, to Counterparty's knowledge, does
not contain any untrue statement of a material fact
or omit to state a material fact required to be
stated therein or necessary to make the
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statements therein not misleading and (ii) since
the respective dates as of which information is
given in the Registration Statement and any such
prospectus (and any supplement thereto), except as
otherwise stated therein, to Counterparty's
knowledge, there has been no material adverse
change in the condition, financial or otherwise, or
in the earnings, business affairs or business
prospects of the Issuer of the Shares and its
subsidiaries considered as one enterprise, whether
or not arising in the ordinary course of business.
"Representation Dates" means: (i) the date on which
Counterparty delivers any prospectus (and any
supplement thereto) under the Registration
Statement, (ii) the date of each sale of Pledged
Shares by MLI; and (iii) the settlement date of
each sale of Pledged Shares by MLI.
Counterparty was not or will not be insolvent at
the time this Transaction was consummated, and was
not or will not be rendered insolvent or will not
be insolvent as a result thereof. Counterparty has
not engaged or will not engage in any business or
transaction with MLI after which the property
remaining with Counterparty was or will be
unreasonably small in relation to its business. At
the time of any transfer to or for the benefit of
MLI, Counterparty did not intend or will not intend
to incur, and did not incur or will not incur,
debts that were beyond the ability of Counterparty
to pay as they mature.
Counterparty has not received from PSINet Inc.
notice of exercise by PSINet Inc. of its purchase
rights under the IRU and Stock Purchase Agreement
dated July 22, 1997, in respect of the Shares
subject to this Transaction and the option of
PSINet Inc. to exercise such right under the letter
from Counterparty to PSINet Inc. dated May 31, 1999
has expired.
Neither Counterparty nor any person attributable to
Counterparty for purposes of Rule 144 under the
Securities Act ("Rule 144") has sold any Shares
during the preceding three (3) months prior to the
Trade Date of this Transaction and Counterparty
covenants and agrees that, until a registration
statement is effective with respect to the delivery
of the Loaned Shares and MLI has notified
Counterparty that it has delivered all of the
Loaned Shares pursuant thereto, it will not sell,
nor will it permit any person attributable to it
for purposes of Rule 144 to sell, Shares without
the prior consent of MLI.
9. ACKNOWLEDGEMENTS: The parties hereto intend for:
(i) This Transaction to be a "securities contract"
as defined in Section 741(7) of the Bankruptcy
Code, qualifying for the protection under Section
555 of the Bankruptcy Code.
(ii) A party's right to liquidate this Transaction
and to exercise any other remedies upon the
occurrence of any Event of Default under the
Agreement with respect to the other party to
constitute a "contractual right" as defined in the
Bankruptcy Code.
(iii) Any cash, securities or other property
provided as performance assurance, credit, support
or collateral with respect to this Transaction to
constitute "margin payments" as defined in the
Bankruptcy Code.
(iv) All payments for, under or in connection with
this Transaction, all payments for the Shares and
the transfer of such Shares to constitute
"settlement payments" as defined in the Bankruptcy
Code.
(v) "Bankruptcy Code" means Title 11 of the United
States Code.
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10. TAX TREATMENT: MLI and Counterparty hereby agree to treat, for
United States Federal, state and local tax
purposes, this Transaction as a pre-paid forward
contract, which does not constitute, in whole or in
part, indebtedness, pursuant to which MLI is
obligated to purchase and Counterparty is obligated
to deliver the Number of Shares to be Delivered
(subject to Counterparty's right to elect Cash
Settlement). Notwithstanding the foregoing, as used
herein, the term "forward contract" does not mean a
"forward contract" as referred to in either Section
101(49)(B)(iii) of the Bankruptcy Code or Section
1259(d)(1) of the Internal Revenue Code of 1986, as
amended.
11. INDEMNIFICATION: Counterparty agrees to indemnify MLI and its
Affiliates and their respective directors,
officers, employees, agents and controlling persons
(MLI and each such person being an "Indemnified
Party") from and against any and all losses,
claims, damages and liabilities, joint or several,
to which such Indemnified Party may become subject
under any applicable federal or state law or
otherwise, and related to or arising out of any of
the transactions contemplated by this Confirmation,
and will reimburse any Indemnified Party for all
expenses (including reasonable counsel fees and
expenses) as they are incurred in connection with
the investigation of, preparation for or defense or
settlement of any pending or threatened claim or
any action or proceeding arising therefrom, whether
or not such Indemnified Party is a party and
whether or not such claim, action or proceeding is
initiated or brought by or on behalf of
Counterparty. Counterparty will not be liable under
the foregoing indemnification provision to the
extent that any loss, claim, damage, liability or
expense is found in a nonappealable judgment by a
court to have resulted from MLI's willful
misconduct or gross negligence. The provisions of
this Section 11 shall survive any termination of
the Agreement or completion of the transactions
contemplated by this Confirmation.
12. INTERPRETATION: For purposes of the Equity Definitions, this
Transaction will be deemed to be a
Physically-settled Share Option Transaction if
Physical Settlement applies and a Cash-settled
Share Option Transaction if Cash Settlement
applies, in either case with an Exercise Date equal
to the Valuation Date.
13. AGENCY: Counterparty understands and agrees that MLPFS will
act as its agent with respect to this Transaction.
MLPFS is acting hereunder solely in its capacity as
agent for MLI and Counterparty pursuant to
instructions from MLI and Counterparty. MLPFS shall
not be liable to MLI or Counterparty as a result of
any failure by MLI or Counterparty to pay or
perform any obligation hereunder. Each of MLI and
Counterparty agrees to proceed solely against the
other or any Credit Support Provider to collect or
recover any amount owing to it or enforce any of
its rights in connection with or as a result of the
Transaction.
MLI is regulated by The Financial Services
Authority and has entered into this Transaction as
principal.
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Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us by facsimile transmission to the Attention of: Rich Ledee
(Telecopier No. 212 449-2697).
Very truly yours,
MERRILL LYNCH INTERNATIONAL
By: /s/ KAREN CURRIE
------------------------------------
Name: Karen Currie
Title:
Confirmed as of the date first above written:
IXC INTERNET SERVICES, INC.
By: /s/ JAMES F. GUTHRIE
------------------------------------
Name: James F. Guthrie
Title: Executive Vice President and
Chief Financial Officer
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