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(MULTICURRENCY - CROSS BORDER)
Exhibit K(1)
ISDA(R)
INTERNATIONAL SWAP DEALERS ASSOCIATION, INC.
MASTER AGREEMENT
DATED AS OF AUGUST 10, 2000
MERRILL LYNCH CAPITAL SERVICES, INC. READINGTON HOLDINGS, INC.
("PARTY A") ("PARTY B")
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.
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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)
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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.
(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 taxing authority, or
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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 organised and validly existing under the laws of the
jurisdiction of its organisation 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
authorise 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
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(v) OBLIGATIONS BINDING. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal, valid
and binding obligations, enforceable in accordance with their respective
terms (subject to applicable bankruptcy, reorganisation, 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 Agreement.
(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 AUTHORISATIONS. 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, organised, 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 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
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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. "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 debt 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 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
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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 being
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(e)(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 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.
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6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULTS. 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
institute 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 that 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 of its right to
designate and 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
an 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,
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
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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) int e
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 not 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.
(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-
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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 (1) 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 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:--
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(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 payment 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 of 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 other 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.
(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.
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(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 organisation 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 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.
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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 the 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 be notice to the other change the
address, telex or facsimile number or electronic 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 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) not 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 reasons 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
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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) in 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.
"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.
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"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 organised, 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 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
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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
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.
"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.
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"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, 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
-17-
<PAGE> 19
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
-18-
<PAGE> 20
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 CAPITAL SERVICES, INC. READINGTON HOLDINGS, INC.
By: _________________________ By: ______________________________
Name: Name:
Title: Title:
Date: Date:
19
ISDA(R) 1992
<PAGE> 21
SCHEDULE
TO THE
MASTER AGREEMENT
DATED AS OF AUGUST 10, 2000
BETWEEN
MERRILL LYNCH CAPITAL SERVICES, INC., A CORPORATION
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
("PARTY A")
AND
READINGTON HOLDINGS, INC.
A CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE OF NEW JERSEY
("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), Not Applicable
Section 5(a)(vi), Not Applicable
Section 5(a)(vii), Not Applicable
Section 5(b)(iv), Not Applicable
(b) "SPECIFIED TRANSACTION" will have the meaning specified in Section 14
of this Agreement unless another meaning is specified here: No change from
Section 14.
(c) The "CROSS DEFAULT" provisions of Section 5(a)(vi) will apply to Party
A and to Party B.
If such provisions apply:-
"SPECIFIED INDEBTEDNESS" will have the meaning specified in Section 14 of this
Agreement unless another meaning is specified here: No change from Section 14.
20
<PAGE> 22
"THRESHOLD AMOUNT" means, in respect of Party A, U.S. $100,000,000 or its
equivalent in other currencies, and in respect of Party B, U.S. $5,000,000 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. Section 5(b)(iv) of this Agreement shall be
amended to read as follows: "Credit Event Upon Merger" means that a Designated
Event (as defined below) occurs with respect to a party, any Credit Support
Provider of such party or any Specified Entity of such party and such action
does not constitute an event described in Section 5(a)(viii) but, in the
reasonable opinion of the other party, the creditworthiness of the successor,
surviving or transferee entity, taking into account any applicable Credit
Support Document (in which case the party or its successor or transferee, as
appropriate, 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 that, after the Trade Date of a
Transaction:
(i) the party, any Credit Support Provider of the party or any
Specified Entity of 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 reorganizes,
incorporates, reincorporates, or reconstitutes into or as,
another entity, or another entity consolidates or amalgamates
with, or merges with or into, or transfers all or
substantially all its assets to, or reorganizes, incorporates,
reincorporates, reconstitutes into or as, such party; or
(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, any
Credit Support Provider of the party or any Specified Entity
of the party; or
(iii) the party, any Credit Support Provider of the party or any
Specified Entity of the party enters into any agreement
providing for any of the foregoing.
(e) The "AUTOMATIC EARLY TERMINATION" provision of Section 6(a) will apply
to Party A and will not apply 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 EVENT will apply. The following shall constitute
Additional Termination Events pursuant to Section 5(b)(v) (in which case the
party specified below will be the Affected Party and all Transactions will be
Affected Transactions):
(i) MATERIAL AMENDMENT OR ACTION. Any Operative Document, or the
nature of Party B's business, is amended or modified in any
manner that, in the reasonable judgment of Party A, may have a
materially adverse effect on Party A under this Agreement or
the ability or authority of Party B to perform
21
<PAGE> 23
its obligations under this Agreement and Party A has not
consented to or voted (or abstained or withheld from voting)
in favor of such amendment or modification or waived its right
to do so, in each case whether in or pursuant to this
Agreement or in or pursuant to any other Agreement. In any
such event, Party B shall be the Affected Party.
(ii) CHANGE IN MANAGEMENT OR CONTROL. At any time at which Party B
has engaged an investment manager (the "INVESTMENT MANAGER"),
the Investment Manager: (a) merges or consolidates with
another entity or sells or otherwise transfers its advisory
business, or all or a material portion of its assets and the
surviving or transferee entity is not reasonably acceptable to
Party A; (b) becomes bankrupt; (c) has any of its
registrations, authorizations, licenses, or memberships with
any federal or state governmental or regulatory authority
necessary for purposes of performing its services as
Investment Manager revoked, suspended, terminated, or limited
or qualified in any material way; or (d) ceases to serve as
Investment Manager, and, in any of such events, a replacement
Investment Manager acceptable to Party A is not appointed
within thirty business days; provided, however, that this
paragraph (ii) shall not apply at any time at which the
Investment Manager is Party A or any Affiliate of Party A. In
any such event, Party B shall be the Affected Party.
(iii) PROHIBITED TRANSACTION. If Party B becomes an "investment
company" required to be registered under the Investment
Company Act of 1940, as amended from time to time (the "1940
ACT"), and for so long as it remains such an entity, as a
result of (i) a transfer or proposed transfer of this
Agreement by Party B pursuant to Sections 7 or 6(b); (ii) any
merger or sale of assets or securities, or proposed merger or
sale of assets or securities, of Party B or of any "affiliated
person" of Party B or any "principal underwriter" of Party B,
or any "affiliated person" of any such "affiliated person" or
any such "principal underwriter"; or (iii) any change or
proposed change in the persons serving as the Investment
Manager or "principal underwriter" of Party B other than a
resignation or removal of Party A as Investment Manager, this
Agreement or any Transaction would, in the reasonable judgment
of Party A, be prohibited by the 1940 Act (including without
limitation Sections 17(a) and 12(d)(3) of the 1940 Act). For
purposes of this Part 1(h)(iii) the terms "affiliated person"
and "principal underwriter" shall have the meanings specified
in Section 2(a)(3) and 2(a)(29) for the 1940 Act,
respectively. In any such event, Party B shall be the Affected
Party.
(iv) PROHIBITED TRANSACTION. If Party B becomes an "investment
company" required to be registered under the 1940 Act, and for
so long as it remains such an entity, as a result of (i) a
transfer or proposed transfer of this Agreement by Party A
pursuant to Sections 7 or 6(b); (ii) any merger or sale of
assets or securities, or proposed merger or sale of assets or
securities, of Party A or of any "affiliated person" of Party
A, or any "affiliated person" of any such "affiliated person";
or (iii) any resignation or removal of any Affiliate of Party
A as the Investment Manager, this Agreement or any Transaction
would, in the reasonable judgment of Party A, be prohibited by
the 1940 Act (including without limitation Sections 17(a) and
12(d)(3) of the
22
<PAGE> 24
1940 Act). For purposes of this Part 1(h)(iv) the terms
"affiliated person" and "principal underwriter" shall have the
meanings specified in Section 2(a)(3) and 2(a)(29) for the
1940 Act, respectively. In any such event, Party A shall be
the Affected Party.
(v) DECLINE IN PARTY B'S AVERAGE CREDIT RATING. At any time, Party
B's Average Credit Rating is at or below AA. In any such
event, Party B shall be the Affected Party.
"AVERAGE CREDIT RATING" means the rating established for Party B by Party A
and/or its Affiliates utilizing the Merrill Lynch composite credit rating
matrix, as determined in accordance with Annex A.
(i) PARTIAL TERMINATION EVENTS. If a Partial Termination Event shall occur with
respect to any Fund, then, upon not less than 5 and not more than 30 days prior
written notice from Party A to Party B, (A) the Notional Amount (as defined in
the 1991 ISDA Definitions, published by the International Swaps and Derivatives
Association, Inc.) of each Transaction outstanding under this Agreement shall be
reduced by the Relevant Portion with respect to such Fund, and (B) Party A shall
calculate an amount as though a Transaction between Party A and Party B under
this Agreement, with a Notional Amount equal to the Relevant Portion with
respect to such Fund and with terms otherwise identical to those of each
outstanding Transaction under this Agreement, were terminated under Section 6 of
this Agreement as a result of a Termination Event, with Party B as the Affected
Party, as of the tenth New York Banking Day following the date on which such
notice is effective. Such amount shall be payable by the party, and at the time
and in the manner, specified in Section 6(b) of this Agreement. Each Transaction
shall remain outstanding, as modified pursuant to clause (A) of this paragraph
(i).
Each of the following events will constitute a "PARTIAL TERMINATION EVENT":
(i) FUND RATING DOWNGRADE. The rating assigned to any Fund, other
than a Merrill Lynch Fund, by A Nationally Recognized
Statistical Rating Organization falls below AAA (or the
comparable rating of any such Nationally Recognized
Statistical Rating Organization) or all such Nationally
Recognized Statistical Rating Organizations cease to rate any
such Fund and, in either case, either (x) such downgrade is
not cured within thirty days or (in the case of a termination
of a rating) a replacement rating agency reasonably
satisfactory to Party A does not assign an equivalent rating
to such Fund, or (y) Party B's investment in such Fund,
whether pursuant to a Custodial Receipt or otherwise, is not
liquidated and replaced within thirty days with an investment
in a Permissible Investment;
(ii) FUND FAILURE TO PAY DIVIDEND. Any Fund, other than a Merrill
Lynch Fund, fails for any reason to make a regular monthly
dividend payment, and, in either case, either (x) such failure
is not cured within five days, or (y) Party B's investment in
such Fund, whether pursuant to a Custodial Receipt or
otherwise, is not liquidated and replaced within thirtydays
with an investment in a Permissible Investment, whether
pursuant to a Custodial Receipt or otherwise;
(iii) FUND TERMINATION. Any Fund, other than a Merrill Lynch Fund,
ceases to exist for any reason (including but not limited to a
merger or a liquidation), and Party B's investment in such
Fund, whether pursuant to a Custodial
23
<PAGE> 25
Receipt or otherwise, is not liquidated and replaced within
thirty days with an investment in a Permissible Investment,
whether pursuant to a Custodial Receipt or otherwise;
(iv) DECLINE IN NET ASSETS. The net assets of any Fund, other than
a Merrill Lynch Fund, as measured by the gross assets of such
Fund less the aggregate amount of the liabilities of the Fund
(including all absolute and contingent liabilities of any
kind) (the "NAV"), declines by more than 20% from any time
during the immediately preceding twelve months, and Party B's
investment in such Fund, whether pursuant to a Custodial
Receipt or otherwise, is not liquidated and replaced within
thirty days with an investment in a Permissible Investment,
whether pursuant to a Custodial Receipt or otherwise; or
(v) DECLINE IN SHARE PRICE. The NAV of any one or more of the
Funds, other than a Merrill Lynch Fund, divided by the number
of then-outstanding shares, is less $1.00, and either (x) such
amount does not increase above $1.00 within three days, or (y)
Party B's investment in such Fund, whether pursuant to a
Custodial Receipt or otherwise, is not liquidated and replaced
within thirty days with an investment in a Permissible
Investment, whether pursuant to a Custodial Receipt or
otherwise;
Party A agrees that it will not interfere with the performance by the Investment
Manager of any obligations the Investment Manager may have to liquidate or
replace an investment in a Fund pursuant to clauses (i) through (v) above.
"CUSTODIAL RECEIPT" has the meaning specified in the Custody Agreement between
United States Trust Company of New York as Custodian and Merck & Co., Inc. as
Depositor.
"FUND" means any of the money market mutual funds in which Party B holds an
investment as of the date of this Agreement, whether pursuant to a Custodial
Receipt or otherwise, and any money market mutual fund in which Party B makes an
investment, whether pursuant to a Custodial Receipt or otherwise, to replace an
investment in a money market mutual fund pursuant to any paragraph of the
definition of Partial Termination Event.
"MERRILL LYNCH FUND" means any Fund for which an Affiliate of Merrill Lynch &
Co., Inc. acts as the investment advisor or sponsor.
"NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION" means any of Standard &
Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc., Moody's
Investors Service, Inc. and Fitch IBCA, Inc.
"PERMISSIBLE INVESTMENT" means an investment, whether pursuant to a Custodial
Receipt or otherwise, in a money market mutual fund that is rated, at the time
of investment, AAA or the equivalent rating by any Nationally Recognized
Statistical Rating Organization.
"RELEVANT PORTION" means, with respect to any Transaction and any Fund, the
amount obtained by multiplying the Notional Amount of such Transaction by the
portion of the net asset value of Party B that consists of an investment in such
Fund, whether pursuant to a Custodial Receipt or otherwise, as of the date of
this Agreement (or, if later, the date on which Party B acquired its investment
in such
24
<PAGE> 26
Fund, whether pursuant to a Custodial Receipt or otherwise) and dividing the
result by the aggregate net asset value of Party B on the date of this Agreement
(or such later date).
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.
(b) PAYEE REPRESENTATIONS. For the purpose of Section 3(f) of this Agreement,
Party A and Party B make the representations specified below:-
(i) Party A is a corporation organized under the laws of the State
of Delaware.
(ii) Party B is a corporation organized under the laws of the State
of New Jersey.
25
<PAGE> 27
PART 3
DOCUMENTS TO BE DELIVERED
(a) Tax forms, documents or certificates to be delivered are:-
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
PARTY REQUIRED TO DELIVER
DOCUMENT FORM/DOCUMENT/CERTIFICATE DATE BY WHICH TO DELIVERED
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Party A/Party B. An executed U.S. Internal Revenue (i) Before the first Payment Date
Service Form W-9 (or any successor under this Agreement, (ii) promptly
thereto). upon reasonable demand by Party A,
and (iii) promptly upon learning
that any such form previously
provided by Party B has become
obsolete or in correct.
------------------------------------------------------------------------------------------------------------------------
</TABLE>
(b) Other documents to be delivered are:-
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
PARTY REQUIRED TO DELIVER FORM/DOCUMENT/ DATE BY WHICH TO BE COVERED BY SECTION 3(D)
DOCUMENT CERTIFICATE DELIVERED REPRESENTATION
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Party A/Party B. Annual audited financial Promptly after request. Yes.
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. Semi-annually unaudited Promptly after request. Yes.
financial 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. Credit Support Document, if Concurrently with the No.
any, specified in Part 4 of execution of this Agreement.
the Schedule, such Credit
Support Document being duly
executed if required.
------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 28
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
PARTY REQUIRED TO DELIVER FORM/DOCUMENT/ DATE BY WHICH TO BE COVERED BY SECTION 3(D)
DOCUMENT CERTIFICATE DELIVERED REPRESENTATION
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Party A/Party B. Certified copies of the Concurrently with the Yes.
resolution(s) of its board of execution of this Agreement.
directors or other documents
authorizing the execution and
delivery of this Agreement.
------------------------------------------------------------------------------------------------------------------------
Party A/Party B. Incumbency Certificate or Concurrently with the Yes.
other documents evidencing the execution of this Agreement
authority of the party or of any other documents
entering into this Agreement executed in connection with
or any other document executed this Agreement.
in connection with this
Agreement.
------------------------------------------------------------------------------------------------------------------------
Party A/Party B. An opinion of counsel with Concurrently with the No.
respect to Party B execution of this Agreement.
substantially in the form
attached hereto as Exhibit B
and otherwise in form and
substance acceptable to Party
A.
------------------------------------------------------------------------------------------------------------------------
Party B. Monthly report showing the Within ____ days following Yes.
calculation of the Average the date as of which the
Credit Rating of Party B, as Average Credit Rating is
provided in Annex A, as of the calculated.
____ day of each month.
------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 29
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:-
Address: Merrill Lynch World Headquarters
World Financial Center, North Tower, 22nd Floor,
250 Vesey Street, New York, New York 10281-1322
Attention: Swap Group
Facsimile No.: 212 449-1788 Telephone No.: 212 449-0371
(For all purposes)
Additionally, a copy of all notices pursuant to Sections 5, 6 and 7 as well as
any changes to Party B's address, telephone number or facsimile number should be
sent to:
CICG Counsel
Merrill Lynch World Headquarters, World Financial Center,
North Tower, 12th Floor
250 Vesey Street, New York, New York 10281-1312
Attention: Swaps Legal
Facsimile No.: 212 449-6993
Address for notices or communications to PARTY B:-
Address: One Merck Drive, Whitehouse Station, NJ 08889
Attention: Robert Underwood
Telex No.: N/A Answerback: N/A
Facsimile No.: (908) 423-1501 Telephone No.: (908) 423-3853
(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:
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
(e) CALCULATION AGENT. The Calculation Agent is Party A.
28
<PAGE> 30
(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 A and Party B: - The Credit Support Annex hereto, which supplements, forms
a part of, and is subject to this Agreement.
(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 apply to all Transactions under this Agreement.
(j) "AFFILIATE" will have the meaning specified in Section 14 of this Agreement.
29
<PAGE> 31
PART 5
OTHER PROVISIONS
(1) OBLIGATIONS. Section 2(a)(iii) is hereby amended by deleting it in its
entirety and replacing it with the following:
"(iii) Each obligation of each party under Section 2(a)(i) is subject
to (1) the condition precedent that no Event of Default,
Potential Event of Default with respect to the other party or
Incipient Illegality 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."
(2) REPRESENTATIONS.
(a) Section 3(a)(iii) is hereby amended by inserting the words
"Operative Documents, investment policies or guidelines, procedures, or
restrictions" immediately following the word "documents,".
(b) Section 3(d) is hereby amended by adding in the third line thereof
after the word "respect" and before the period:
"or, in the case of financial statements, a fair presentation
of the financial condition of the relevant party".
(c) For purposes of Section 3 the following shall be added immediately
following paragraph (f) thereto:
"(g) It is an "eligible swap participant" within the meaning
CFTC Regulation 35.1(b)(2).
(h) It has entered into this Agreement (including each
Transaction evidenced hereby) in conjunction with its line of
business (including financial intermediation services) or the
financing of its business.
(i) It is entering into this Agreement, any Credit Support
Document to which it is a party, each Transaction and any
other documentation relating to this Agreement or any
Transaction as principal (and not a agent or in any other
capacity, fiduciary or otherwise).
(j) NON-RELIANCE. Except as otherwise expressly agreed by the
parties to this Agreement or any of its affiliates, 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 advisors
as it has deemed necessary. It is not relying on
30
<PAGE> 32
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.
(3) ADDITIONAL REPRESENTATIONS OF PARTY B. If and For so long as Party B is an
"investment company" required to register under the 1940 Act, Party B represents
to Party A (which representations will be deemed to be made on the date it
becomes an investment company and shall be deemed to be repeated at all times
thereafter until the termination of this Agreement), it being understood,
however, that no breach of any such representation shall be deemed to occur as a
result of any action by the Investment Manager, so long as the Investment
Manager is an Affiliate of Party A, or any other action by Party A or any of its
Affiliates under the Transaction Documents:
(a) With respect to this Agreement and each Transaction, it will
maintain, and be in full compliance with, all Operative Documents; and
this Agreement and each Transaction is, and will be, authorized and
permissible transactions and investments thereunder.
(b) It will comply with all applicable provisions of the 1940 Act, and
any applicable rules, regulations, interpretations, guidelines,
procedures and policies of the Securities and Exchange Commission.
(c) Except as permitted under any agreement between Party A and any of
its Affiliates and Party B and any of its Affiliates, no proposal has
been made and no actions taken by Party B, Investment Manager or the
holders of Party B's outstanding voting securities to submit to the
holders of Party B's outstanding voting securities any proposed change
to or modification of (i) Party B's classification under Section 5 of
the 1940 Act; (ii) Party B's investment restrictions, policies or
guidelines or any Operative Document; (iii) the nature of Party B's
business; or (iv) any matter requiring the vote of the holders of Party
B's voting securities under Section 13 of the 1940 Act which could
adversely materially affect this Agreement, any Transaction hereunder,
or the authority of Party B to enter into this Agreement, any
Transaction, or any transaction similar in nature to a Specified
Transaction.
(4) ADDITIONAL AGREEMENTS.
(a) NOTICE OF CERTAIN EVENTS. Each Party ("X") will provide the other
("Y"), promptly upon becoming aware of the same, with written notice
of: (i) any Potential Event of Default, Event of Default, Termination
Event, or event or condition that, with the giving of notice or the
passage of time or both, could constitute an Event of Default or
Termination Event with respect to X; (ii) any pending or threatened
litigation, action, claim, or proceeding which could adversely affect
the ability of X to perform its obligations under this Agreement, any
Transaction, or (in the case of Party B) any Operative Document; or
(iii) any other facts or developments that could adversely affect the
status of X or the Investment Manager with respect to this Agreement.
(b) NOTICE OF INCIPIENT ILLEGALITY. If an Incipient Illegality occurs
with respect to X, X will, promptly upon becoming aware of it, notify Y
thereof, specifying the nature of the
31
<PAGE> 33
Incipient Illegality and giving such other information about the
Incipient Illegality as Y may reasonably require.
(5) OBLIGATIONS RELATING TO REPRESENTATIONS.
(a) Each party covenants that it will not take any action during the
term of this Agreement that might render any of its representations and
warranties in this Agreement (including this Schedule) untrue,
incorrect or incomplete, and if any event or condition should occur
that would render any of such representations and warranties untrue,
incorrect or incomplete with respect to a party, such party will
immediately give written notice thereof to the other party.
(b) The representations and agreements in this Schedule will be deemed
representations and agreements for all purposes of this Agreement,
including without limitation Sections 3, 4, 5(a)(ii) and 5(a)(iv), and
will be deemed to be made and repeated at the times specified therein
and herein.
(6) 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 upon the date (the
"Effective Date") on which Party A has delivered to Party B both (a) an executed
acceptance and assumption by the Assignee of the transferred obligations of
Party A under the Transaction(s) (the "Transferred Obligations"); and (b) an
executed guarantee of ML & Co., of the Transferred Obligations, substantially in
the form of Exhibit A hereto, provided that no such assignment may be made if
the assignee would not be an entity, formed under the laws of the United States
or a state thereof, subject to the U.S. Bankruptcy Code, the Federal Deposit
Insurance Act or any other insolvency regime that provides at least the same
degree of legal certainty as to the enforceability of termination, netting and
collateral rights with respect to swaps transactions as the U.S. Bankruptcy
Code, and would not subject either party to any increased tax indemnity
obligations or tax withholding 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.
(7) METHOD OF NOTICE. Section 12(a)(ii) of the Master Agreement is deleted in
its entirety.
(8) DEFINITIONS. Section 14 is hereby amended by adding the following
definitions in their appropriate alphabetical order:
"INCIPIENT ILLEGALITY" means, with respect to either party, (a) (1) the
enactment by any legislative body with competent jurisdiction over such
party of legislation which, if adopted as law, would render unlawful,
or (2) in the case of Party B, a proposed amendment, change, or
modification to any Operative Document that would, in either case,
reasonably be expected to have a material adverse effect on (i) the
performance by such party of any absolute or contingent obligation to
make a payment or to receive a payment in respect of a Transaction or
the compliance by such party with any other material provision of this
Agreement relating to such Transaction, or (ii) the performance by such
party or any Credit Support Provider of such party of any contingent or
other obligation which such party (or such Credit Support Provider) has
under any Credit Support Document relating to such Transaction, (b) any
assertion in any
32
<PAGE> 34
proceeding, forum, or action by such party, in respect of such party,
or in respect of any entity located or organized under the laws of the
jurisdiction in which such party is located or organized, to the effect
that performance under this Agreement or similar agreements is
unlawful, or (c) the occurrence with respect to such party or any
Credit Support Provider of such party of any event that constitutes an
Illegality.
"OPERATIVE DOCUMENTS" means the Amended and Restated Articles of
Incorporation and the By Laws and the investment policies, procedures,
restrictions, or guidelines of Party B, the then-current disclosure
document of Party B, the investment management or investment advisory
agreement by and between Party B and the Investment Manager and the
Trading Authorization, if any.
"TRADING AUTHORIZATION" means the Power of Attorney or other
authorization document granted by Party B issued in favor of the
Investment Manager authorizing the Investment Manager to act on behalf
of Party B.
(9) APPOINTMENT OF AN INVESTMENT MANAGER. Party B may, at any time in accordance
with the Shareholders Agreement, appoint a person or entity that is a registered
investment advisor under the Investment Advisers Act of 1940 (which may be an
Affiliate of Party A) to act as the Investment Manager and Party B may grant the
Investment Manager full discretionary power and authority to make investment
decisions for, in the name of, and on behalf of, Party B, including without
limitation the power and authority to enter into Transactions as the agent and
for the account of Party B and to advise and direct Party B to enter into
Transactions and to execute and deliver Confirmations in connection therewith.
Party B shall deliver to Party A a copy of the investment management agreement
with such Investment Manager and, if a Trading Authorization is delivered in
connection with such appointment, the Trading Authorization promptly upon its
appointment of the Investment Manager. In connection with Party B's entering
into any Transactions hereunder, Party A will be entitled to rely conclusively
upon any request, instruction, certificate, opinion, or other document furnished
to Party A by an employee or agent of the Investment Manager in connection with
this Agreement and the Transactions as though such request, instruction,
certificate, opinion, or other document was given by Party B, until such time as
Party B affirmatively, and upon written notice to Party A, revokes, terminates,
or modifies such authorization.
(10) SETOFF. 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 in addition
to any rights of setoff a party may have as a matter of law or otherwise upon
the designation or deemed designation of any Early Termination Date:
(a) the non-Defaulting Party or non-Affected Party (in either
case, "X") may without prior notice set off any sum or
obligation (whether or not arising under this Agreement,
whether or not matured, whether or not contingent and
regardless of the currency, place of payment or booking office
of the obligation) 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,
whether or not matured, whether or not contingent and
regardless of the currency, place of payment or booking office
of the obligation) owed or due by X or any Affiliate of X (the
"Original Obligation") to Y. 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
33
<PAGE> 35
obligation to pay Y only the excess of the Original Obligation
over such sum or obligation.
(b) For the purposes of cross-currency set-off, X may convert any
obligation to another currency at a market rate determined by
X.
(c) If an obligation is unascertained, X may in good faith
estimate that obligation and set off in respect of the
estimate, subject to the relevant party accounting to the
other when the obligation is ascertained.
(11) WAIVER OF JURY TRIAL. Each party hereby irrevocably waives any and all
right to trial by jury with respect to any legal proceeding arising out of or
relating to this Agreement or any Transaction contemplated hereunder.
(12) TELEPHONIC RECORDING. The parties agree that each may electronically record
all telephonic conversations between operational, marketing and trading
personnel in connection with this Agreement and that any such recording may be
submitted in evidence to any court or in any Proceedings for the purpose of
establishing any matters pertinent to any Transaction.
34
<PAGE> 36
Annex A
[Insert description of Average Credit Rating from Investment
Management Agreement]
20
<PAGE> 37
EXHIBIT A
GUARANTEE OF MERRILL LYNCH & CO., INC.
FOR VALUE RECEIVED, receipt of which is hereby acknowledged, MERRILL
LYNCH & Co., INC., a corporation duly organized and existing under the laws of
the State of Delaware ("ML & Co."), hereby unconditionally guarantees to
READINGTON HOLDINGS, INC. (the "Company"), the due and punctual payment of any
and all amounts payable by Merrill Lynch Capital Services, Inc., a corporation
organized under the laws of the State of Delaware ("MLCS"), under the terms of
the Master Agreement between the Company and MLCS, dated as of August 10, 2000
(the "Agreement"), including, in case of default, interest on any amount due,
when and as the same shall become due and payable, whether on the scheduled
payment dates, at maturity, upon declaration of termination or otherwise,
according to the terms thereof. In case of the failure of MLCS punctually to
make any such payment, ML & Co. hereby agrees to make such payment, or cause
such payment to be made, promptly upon demand made by the Company to ML & Co.;
provided, however, that delay by the Company in giving such demand shall in no
event affect ML & Co.'s obligations under this Guarantee. This Guarantee shall
remain in full force and effect or shall be reinstated (as the case may be) if
at any time any payment guaranteed hereunder, in whole or in part, is rescinded
or must otherwise be returned by the Company upon the insolvency, bankruptcy or
reorganization of MLCS or otherwise, all as though such payment had not been
made.
ML & Co. hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Agreement; the absence of any action to enforce the same; any waiver or consent
by the Company concerning any provisions thereof; the rendering of any judgment
against MLCS or any action to enforce the same; or any other circumstances that
might otherwise constitute a legal or equitable discharge of a guarantor or a
defense of a guarantor. ML & Co. covenants that this guarantee will not be
discharged except by complete payment of the amounts payable under the
Agreement. This Guarantee shall continue to be effective if MLCS merges or
consolidates with or into another entity, loses its separate legal identity or
ceases to exist.
ML & Co. hereby waives diligence; presentment; protest; notice of
protest, acceleration, and dishonor; filing of claims with a court in the event
of insolvency or bankruptcy of MLCS; all demands whatsoever, except as noted in
the first paragraph hereof; and any right to require a proceeding first against
MLCS.
ML & Co. hereby certifies and warrants that this Guarantee constitutes
the valid obligation of ML & Co. and complies with all applicable laws.
This Guarantee shall be governed by, and construed in accordance with,
the laws of the State of New York.
This Guarantee may be terminated at any time by notice by ML & Co. to
the Company given in accordance with the notice provisions of the Agreement,
effective upon receipt of such notice by the Company or such later date as may
be specified in such notice; provided, however, that this Guarantee shall
continue in full force and effect with respect to any obligation of MLCS under
the Agreement relating to any Transaction (as defined in the Agreement) entered
into prior to the effectiveness of such notice of termination.
1
<PAGE> 38
This Guarantee becomes effective concurrent with the effectiveness of
the Agreement, according to its terms.
IN WITNESS WHEREOF, ML & Co. has caused this Guarantee to be executed
in its corporate name by its duly authorized representative.
MERRILL LYNCH & CO., INC.
By:
---------------------------------------
Name:
Title:
Date:
---------------------------------------
2
<PAGE> 39
(BILATERAL FORM) (ISDA AGREEMENTS SUBJECT TO NEW YORK LAW ONLY)
ISDA(R)
INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC.
CREDIT SUPPORT ANNEX
to the Schedule to the
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
dated as of . . . . . . . . . . . . . . . . . . . .
between
. . . . . . . . . . . . . . . . . . . . and . . . . . . . . . . . . . . . . . .
("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 of 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.
Copyright (C) 1994 by International Swaps and Derivatives Association, Inc.
ISDA(R)1994
<PAGE> 40
PARAGRAPH 3. CREDIT SUPPORT OBLIGATIONS
(a) DELIVERY AMOUNT. Subject to Paragraphs 4 and 5, upon a 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 the 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
2
ISDA(R) 1994
<PAGE> 41
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 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
Secured 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 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); and
3
ISDA(R) 1994
<PAGE> 42
(C) utilizing the procedures specified in Paragraph 13 for
calculating the Value, if 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 any 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
4
ISDA(R) 1994
<PAGE> 43
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 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 Local
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
5
ISDA(R) 1994
<PAGE> 44
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 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:
6
ISDA(R) 1994
<PAGE> 45
(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
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 representations 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
7
ISDA(R) 1994
<PAGE> 46
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 obligated 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
required to be Transferred, from (and including) the date that 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 made 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.
8
ISDA(R) 1994
<PAGE> 47
"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.
"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 a 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 that 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
9
ISDA(R) 1994
<PAGE> 48
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
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;
10
ISDA(R) 1994
<PAGE> 49
(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 by
book-entry, the giving of written instructions 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.
"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.
11
ISDA(R) 1994
<PAGE> 50
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,
105% of the excess (if any) of (i) the Secured Party's
Exposure for that Valuation Date minus (ii) 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 an amount less then 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. 100%
Treasury Department;
(C) negotiable debt obligations issued by an agency 100%
of the federal government of the United States
of America;
(D) negotiable debt obligations issued by a 100%
corporation having a senior unsecured debt
rating from at least one Nationally Recognized
Rating Agency of "A", or its equivalent or
higher; provided that the aggregate Value of
the obligations of any such corporation
included in Posted Collateral at any time shall
not exceed 10% of the Value of all Posted
Collateral at such time;
</TABLE>
(iii) OTHER ELIGIBLE SUPPORT. There shall be no "Other Eligible
Support" for either Party A or Party B.
(iv) THRESHOLDS.
<PAGE> 51
(A) "INDEPENDENT AMOUNT" means, for Party A and Party B, with
respect to each Transaction, zero (unless a different amount
is specified in the Confirmation of that Transaction as that
party's Independent Amount).
(B) "THRESHOLD" means with respect to Party A, the amounts set
out below determined on the basis of the highest rating
assigned by a Nationally Recognized Rating Agency to the long
term, unsecured and unsubordinated debt of ML & Co., provided
that if an Event of Default or Specified Condition has
occurred and is continuing with respect to Party A, the
Threshold with respect to Party A means zero:
<TABLE>
<CAPTION>
NATIONALLY RECOGNIZED
RATING AGENCY THRESHOLD
<S> <C>
A and Above Infinity
A- USD 25,000,000
Below A- Zero
</TABLE>
"THRESHOLD" means, with respect to Party B, infinity.
The term "Nationally Recognized Rating Agency" means each of the
following rating agencies: Standard & Poor's Rating Services, Moody's
Investors Services, Duff & Phelps Credit Rating Co., and Fitch IBCA,
and shall include any successor to such rating agency.
(C) "MINIMUM TRANSFER AMOUNT" means, with respect to a party, US
$100,000; provided, that if an Event of Default or Specified Condition
has occurred and is continuing with respect to a party, the Minimum
Transfer Amount with respect to such party 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 US
$10,000.
(c) VALUATION AND TIMING.
(i) "VALUATION AGENT" means, for purposes of Paragraph 3 and 5,
the party making the demand under Paragraph 3; for the purpose
of Paragraph 4(d)(ii), the Secured Party receiving the
Substitute Credit Support; and for purposes of Paragraph 6(d),
the Secured Party receiving or deemed to receive the
Distributions or the Interest Amount, as applicable.
(ii) "VALUATION DATE" means each Thursday (or if such day is not a
Local Business Day then the immediately preceding Local
Business Day).
(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 10:00 a.m., New York time, on a
Local Business Day.
(d) CONDITIONS PRECEDENT AND SECURED PARTY'S RIGHTS AND REMEDIES. For purposes
of Paragraph 8(a), each Termination Event will constitute a Specified Condition
with respect to Pledgor, if
<PAGE> 52
the Pledgor fails to pay when due any amount payable by it in connection with an
Early Termination Date designated in connection with that Termination Event. For
all other purposes of this Annex, each Termination Event specified below with
respect to a party will be a "SPECIFIED CONDITION" for that party.
Credit Event Upon Merger [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 may substitute Eligible Credit Support
pursuant to Paragraph 4(d) without consent from the Secured
Party.
(f) DISPUTE RESOLUTION.
(i) "RESOLUTION TIME" means 1:00 p.m., New York time, on the first
Local Business Day following the date on which notice of the
dispute is given under Paragraph 5.
(ii) "VALUE." For the purpose of Paragraph 5(i)(C) and 5(ii), the
Value of Eligible Collateral other than 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." As long
as the conditions set forth in clause (A) below are satisfied,
Party A shall be entitled to hold Posted Collateral pursuant
to Paragraph 6(b). As long as the condition set forth in
clause (B) below are satisfied, any Custodian for Party A
shall be entitled to hold Posted Collateral pursuant to
Paragraph 6(b).
(A) Party A: (a) The long-term, unsecured, unsubordinated debt
ratings of ML & Co. are at least BBB+ (in the case of S&P) and
Baa1 (in the case of Moody's) and (b) Party A is not a
Defaulting Party.
(B) The Custodian: The Custodian is either: (a) a wholly
owned, direct or indirect, Affiliate of ML & Co. 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.
<PAGE> 53
Initially, the CUSTODIAN for Party A is: Merrill Lynch, Pierce
Fenner & Smith, Inc.
Party B shall be entitled to hold Posted Collateral pursuant
to paragraph 6(b). As long as the conditions set forth below
are satisfied, any Custodian for Party B shall be entitled to
hold Posted Collateral pursuant to Paragraph 6(b).
The Custodian: The Custodian is 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 Party B is: State Street Bank and
Trust Co.
(ii) "USE OF POSTED COLLATERAL" The provisions of Paragraph 6(c)
will apply to Party A and Party B.
(h) DISTRIBUTIONS AND INTEREST AMOUNT.
(i) "INTEREST RATE." The Interest Rate will be the rate per annum
equal to the overnight Federal Funds Rate (the "Fed 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 first 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.
(l) ADDRESSES FOR TRANSFERS. Not Applicable.
(m) OTHER PROVISIONS.
POSTED COLLATERAL. The definition of Posted Collateral shall also
include any and all accounts in which Cash Collateral is held.
<PAGE> 54
[MERRILL LYNCH LOGO]
COVER STATEMENT
CLIENT/COUNTERPARTY RELATIONSHIP
Dear Client/Counterparty:
Merrill Lynch is pleased to provide the attached statement of Generic
Risks Associated with Over-the-Counter Derivative Transactions under this Cover
Statement that concerns, among other things, the nature of our relationship with
you in the context of such transactions. This statement was developed for our
new and our ongoing client/counterparties in response to suggestions that OTC
derivative dealers consider taking steps to ensure that market participants
utilizing OTC derivatives understand their risk exposures and the nature of
their relationships with dealers before they enter into OTC derivative
transactions.
Merrill Lynch ("we") are providing to you and your organization ("you")
the attached statement of Generic Risks Associated with Over-the-Counter
Derivative Transactions in order to identify, in general terms, certain of the
principal risks associated with individually negotiated over-the-counter ("OTC")
derivative transactions. The attached statement does not purport to identify the
nature of the specific market or other risks associated with a particular
transaction.
Before entering into an OTC derivative transaction, you should ensure
that you fully understand the terms of the transaction, relevant risk factors,
the nature and extent of your risk of loss and the nature of the contractual
relationship into which you are entering. You should also carefully evaluate
whether the transaction is appropriate for you in light of your experience,
objectives, financial resources, and other relevant circumstances and whether
you have the operational resources in place to monitor the associated risks and
contractual obligations over the term of the transaction. If you are acting as a
financial adviser or agent, you should evaluate these considerations in light of
the circumstances applicable to your principal and the scope of your authority.
If you believe you need assistance in evaluating and understanding the
terms or risks of a particular OTC derivative transaction, you should consult
appropriate advisers before entering into the transaction.
Unless we have expressly agreed in writing to act as your adviser with
respect to a particular OTC derivative transaction pursuant to terms and
conditions specifying the nature and scope of our advisory relationship, we are
acting in the capacity of an arm's length contractual counterparty to you in
connection with the transaction and not as your financial adviser or fiduciary.
Accordingly, unless we have so agreed to act as your adviser, you should not
regard transaction proposals, suggestions or other written or oral
communications from us as recommendations or advice or as expressing our view as
to whether a particular transaction is appropriate for you or meets your
financial objectives.
Finally, we and/or our affiliates may from time to time take
proprietary positions and/or make a market in instruments identical or
economically related to OTC derivative transactions entered into with you, or
may have an investment banking or other commercial relationship with and access
to information from the issuer(s) of securities, financial instruments, or other
interests underlying OTC derivative transactions entered into with you. We may
also undertake proprietary activities, including hedging transactions related to
the initiation or termination of an OTC derivative transaction with you, that
may adversely affect the market price, rate index or other market factor(s)
underlying an OTC derivative transaction entered into with you and consequently
the value of the transaction.
<PAGE> 55
[MERRILL LYNCH LOGO]
GENERIC RISKS ASSOCIATED WITH
OVER-THE-COUNTER DERIVATIVE TRANSACTIONS
OTC derivative transactions, like other financial transactions, involve a
variety of significant risks. The specific risks presented by a particular OTC
derivative transaction necessarily depend upon the terms of the transaction and
your circumstances. In general, however, all OTC derivative transactions involve
some combination of market risk, credit risk, funding risk and operational risk.
MARKET RISK is the risk that the value of a transaction will be
adversely affected by fluctuations in the level or volatility of or
correlation or relationship between one or more market prices, rates or
indices or other market factors or by illiquidity in the market for the
relevant transaction or in a related market.
CREDIT RISK is the risk that a counterparty will fail to perform its
obligations to you when due.
FUNDING RISK is the risk that, as a result of mismatches or delays in
the timing of cash flows due from or to your counterparties in OTC
derivative transactions or related hedging, trading, collateral or
other transactions, you or your counterparty will not have adequate
cash available to fund current obligations.
OPERATIONAL RISK is the risk of loss to you arising from inadequacies
in or failures of your internal systems and controls for monitoring and
quantifying the risks and contractual obligations associated with OTC
derivative transactions, for recording and valuing OTC derivative and
related transactions, or for detecting human error, systems failure or
management failure.
There may be other significant risks that you should consider based on the terms
of a specific transaction. Highly customized OTC derivative transactions in
particular may increase liquidity risk and introduce other significant risk
factors of a complex character. Highly leveraged transactions may experience
substantial gains or losses in value as a result of relatively small changes in
the value or level of an underlying or related market factor.
Because the price and other terms on which you may enter into or terminate an
OTC derivative transaction are individually negotiated, these may not represent
the best price or terms available to you from other sources.
In evaluating the risks and contractual obligations associated with a particular
OTC derivative transaction, you should also consider that an OTC derivative
transaction may be modified or terminated only by mutual consent of the original
parties and subject to agreement on individually negotiated terms. Accordingly,
it may not be possible for you to modify, terminate or offset your obligations
or your exposure to the risks associated with a transaction prior to its
scheduled termination date.
<PAGE> 56
Similarly, while market makers and dealers generally quote prices or terms for
entering into or terminating OTC derivative transactions and provide indicative
or mid-market quotations with respect to outstanding OTC derivative
transactions, they are generally not contractually obligated to do so. In
addition, it may not be possible to obtain indicative or mid-market quotations
for an OTC derivative transaction from a market maker or dealer that is not a
counterparty to the transaction. Consequently, it may also be difficult for you
to establish an independent value for an outstanding OTC derivative transaction.
You should not regard your counterparty's provision of a valuation or indicative
price at your request as an offer to enter into or terminate the relevant
transaction at that value or price, unless the value or price is identified by
the counterparty as firm or binding.
This brief statement does not purport to disclose all of the risks and other
material considerations associated with OTC derivative transactions. You should
not construe this generic disclosure statement as business, legal, tax or
accounting advice or as modifying applicable law. You should consult your own
business, legal, tax and accounting advisers with respect to proposed OTC
derivative transactions and you should refrain from entering into any OTC
derivative transaction unless you have fully understood the terms and risks of
the transaction, including the extent of your potential risk of loss.
