UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)*
JDS UNIPHASE CORPORATION
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(Name of Issuer)
Common Stock par value $0.001 per share
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(Title of Class of Securities)
466125 10 1
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(CUSIP Number)
Osamu Sato, General Manager/Finance and Accounting Department
6-1, Marunouchi 2-chome,
Chiyoda-ku, Tokyo 100-8322
Japan
81-3-3286-3526
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(Name, Address and Telephone Number of Persons Authorized to
Receive Notices and Communications)
January 27, 2000
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Date of Event which requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box |_|.
Note: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See ss. 240.13d- 7(b) for
other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
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CUSIP No. 466125 10 1
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1. Names of Reporting Persons
I.R.S. Identification Nos. of Above Persons (entities only)
The Furukawa Electric Co., Ltd.
FEJ Holding Inc.
FEJ Sales Inc.
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2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) |_| X
(b) |_|
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3. SEC Use Only
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4. Source of Funds (See Instructions)
WC, OO
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5. Check if Disclosure of Legal Proceedings is Required Pursuant to
Item 2(d) or 2(e).
[__]
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6. Citizenship or Place of Organization
The Furukawa Electric Co., Ltd.: Japan
FEJ Holding Inc.: Canada
FEJ Sales Inc.: Canada
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7. Sole Voting Power
0
- ---------- Number of Shares ----------------------------------------------
Beneficially
8. Owned Shared Voting Power
By 72,367,040
- ---------- Each ----------------------------------------------
Reporting Person
9. With Sole Dispositive Power
0
- ---------- ----------------------------------------------
10. Shared Dispositive Power
72,367,040
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11. Aggregate Amount Beneficially Owned by Each Reporting Person
72,367,040
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12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [_]
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13. Percent of Class Represented by Amount in Row (11)
Approximately 20.244%
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14. Type of Reporting Person (See Instructions)
CO
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Page 1 0f 6
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Amendment No. 2 to Schedule 13D
Item 1. Security and Issuer
This Amendment No. 2 amends the Statement on Schedule 13D (the
"Schedule 13D") jointly filed with the Securities and Exchange Commission on
July 6, 1999 by The Furukawa Electric Co., Ltd., FEJ Holding Inc. ("FEJH") and
FEJ Sales Inc. and subsequently amended on December 1, 1999. This Amendment No.
2 to Schedule 13D relates to shares of common stock, par value $0.001 per share
(the "Common Stock"), of JDS Uniphase Corporation (the "Issuer"). The principal
executive office and mailing address of the Issuer is 163 Baypointe Parkway, San
Jose, CA 95134. All capitalized terms used in this Amendment and not otherwise
defined herein have the meanings ascribed to such terms in the Schedule 13D.
Only those Items that are amended or supplemented are reported herein. Except as
amended and supplemented, the Schedule 13D, including the definitions of terms
not otherwise defined herein, remains in full force and effect.
Item 4. Purpose of Transactions
On January 27, 2000, FEJH entered into an ISDA Master Agreement
with a broker-dealer (the "Dealer"), pursuant to which FEJH may sell up to
3,500,000 shares of the Common Stock to the Dealer and pledge up to
3,500,000 shares of the Common Stock to the Dealer. The principal purpose of
this transaction is to hedge the market risk of a portion of the Exchangeable
Shares held by the Reporting Persons.
Item 6. Contracts, Arrangements, Understanding or Relationships with
Respect to Securities of the Issuer
Pursuant to the ISDA Master Agreement (including the Schedule,
Credit Support Annex and Confirmation thereto), dated as of January 27, 2000,
FEJH may sell up to 3,500,000 shares of the Common Stock to the Dealer and
pledge up to 3,500,000 shares of the Common Stock to the Dealer.
Item 7. Material to be Filed as Exhibits
Exhibit No. Description
- ----------- -----------
1 ISDA Master Agreement, dated as of January 27, 2000, between
FEJH and the Dealer (including the Schedule, Credit Support
Annex and Confirmation thereto) .
2 Irrevocable Authorization and Instruction, dated January 27,
2000, given by FEJH to the Dealer.
Page 2 of 6
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After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: January 27, 2000
THE FURUKAWA ELECTRIC CO., LTD.
By: /s/ Osamu Sato
----------------------------------
Name: Osamu Sato
Title: General Manager/Finance and
Accounting Department
Page 3 of 6
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After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: January 27, 2000
FEJ HOLDING INC.
By: /s/ Osamu Sato
----------------------------------
Name: Osamu Sato
Title: Vice President
Page 4 of 6
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After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: January 27, 2000
FEJ SALES INC.
By: /s/ Jo Kubota
---------------------------------
Name: Jo Kubota
Title: Director
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
1 ISDA Master Agreement, dated as of January 27, 2000, between
FEJH and the Dealer (including the Schedule, Credit Support
Annex and Confirmation thereto).
2 Irrevocable Authorization and Instruction, dated January 27,
2000, given by FEJH to the Dealer.
<PAGE>
EXHIBIT 1
(Multicurrency--Cross Border)
ISDA(R)
International Swaps and Derivatives Association, Inc.
MASTER AGREEMENT
dated as of January 27, 2000
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED and FEJ HOLDING,
INC. have entered and/or anticipate entering into one or more transactions (each
a "Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:--
1. Interpretation
(a) Definitions. The terms defined in Section 14 and in the Schedule will
have the meanings therein specified for the purpose of this Master Agreement.
(b) Inconsistency. In the event of any inconsistency between the
provisions of the Schedule and the other provisions of this Master Agreement,
the Schedule will prevail. In the event of any inconsistency between the
provisions of any Confirmation and this Master Agreement (including the
Schedule), such Confirmation will prevail for the purpose of the relevant
Transaction.
(c) Single Agreement. All Transactions are entered into in reliance on
the fact that this Master Agreement and all Confirmations form a single
agreement between the parties (collectively referred to as this "Agreement"),
and the parties would not otherwise enter into any Transactions.
2. Obligations
(a) General Conditions.
(i) Each party will make each payment or delivery specified in
each Confirmation to be made by it, subject to the other provisions of
this Agreement.
(ii) Payments under this Agreement will be made on the due date
for value on that date in the place of the account specified in the
relevant Confirmation or otherwise pursuant to this Agreement, in
freely transferable funds and in the manner customary for payments in
the required currency. Where settlement is by delivery (that is, other
than by payment), such delivery will be made for receipt on the due
date in the manner customary for the relevant obligation unless
otherwise specified in the relevant Confirmation or elsewhere in this
Agreement.
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(iii) Each obligation of each party under Section 2(a)(i) is
subject to (1) the condition precedent that no Event of Default or
Potential Event of Default with respect to the other party has occurred
and is continuing, (2) the condition precedent that no Early
Termination Date in respect of the relevant Transaction has occurred or
been effectively designated and (3) each other applicable condition
precedent specified in this Agreement.
(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;
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(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
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.
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3. Representations
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:--
(a) Basic Representations.
(i) Status. It is duly organized and validly existing under the laws of
the jurisdiction of its organization or incorporation and, if relevant
under such laws, in good standing;
(ii) Powers. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to
deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to
perform its obligations under this Agreement and any obligations it has
under any Credit Support Document to which it is a party and has taken
all necessary action to authorize such execution, delivery and
performance;
(iii) No Violation or Conflict. Such execution, delivery and
performance do not violate or conflict with any law applicable to it,
any provision of its constitutional documents, any order or judgment of
any court or other agency of government applicable to it or any of its
assets or any contractual restriction binding on or affecting it or any
of its assets;
(iv) Consents. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in
full force and effect and all conditions of any such consents have been
complied with; and
(v) Obligations Binding. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal,
valid and binding obligations, enforceable in accordance with their
respective terms (subject to applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).
(b) Absence of Certain Events. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has occurred
and is continuing and no such event or circumstance would occur as a result of
its entering into or performing its obligations under this Agreement or any
Credit Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding at
law or in equity or before any court, tribunal, governmental body, agency or
official or any arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or any Credit Support Document to
which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d)
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in the Schedule is, as of the date of the information, true, accurate and
complete in every material respect.
(e) Payer Tax Representation. Each representation specified in the
Schedule as being made by it for the purpose of this Section 3(e) is accurate
and true.
(f) Payee Tax Representations. Each representation specified in the
Schedule as being made by it for the purpose of this Section 3(f) is accurate
and true.
4. Agreements
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--
(a) Furnish Specified Information. It will deliver to the other party or,
in certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:--
(i) any forms, documents or certificates relating to taxation
specified in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any
Confirmation; and
(iii) upon reasonable demand by such other party, any form or
document that may be required or reasonably requested in writing in
order to allow such other party or its Credit Support Provider to make
a payment under this Agreement or any applicable Credit Support
Document without any deduction or withholding for or on account of any
Tax or with such deduction or withholding at a reduced rate (so long as
the completion, execution or submission of such form or document would
not materially prejudice the legal or commercial position of the party
in receipt of such demand), with any such form or document to be
accurate and completed in a manner reasonably satisfactory to such
other party and to be executed and to be delivered with any reasonably
required certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified. as soon as reasonably practicable.
(b) Maintain Authorizations. It will use all reasonable efforts to
maintain in full force and effect all consents of any governmental or other
authority that are required to be obtained by it with respect to this Agreement
or any Credit Support Document to which it is a party and will use all
reasonable efforts to obtain any that may become necessary in the future.
(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
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in which it is incorporated, organized, managed and controlled, or considered to
have its seat, or in which a branch or office through which it is acting for the
purpose of this Agreement is located ("Stamp Tax Jurisdiction") and will
indemnify the other party against any Stamp Tax levied or imposed upon the other
party or in respect of the other party's execution or performance of this
Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp Tax
Jurisdiction with respect to the other party.
5. Events of Default and Termination Events
(a) Events of Default. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event of
default (an "Event of Default") with respect to such party:--
(i) Failure to Pay or Deliver. Failure by the party to make,
when due, any payment under this Agreement or delivery under Section
2(a)(i) or 2(e) required to be made by it if such failure is not
remedied on or before the third Local Business Day after notice of such
failure is given to the party;
(ii) Breach of Agreement. Failure by the party to comply with or
perform any agreement or obligation (other than an obligation to make
any payment under this Agreement or delivery under Section 2(a)(i) or
2(e) or to give notice of a Termination Event or any agreement or
obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied
with or performed by the party in accordance with this Agreement if
such failure is not remedied on or before the thirtieth day after
notice of such failure is given to the party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider
of such party to comply with or perform any agreement or
obligation to be complied with or performed by it in
accordance with any Credit Support Document if such failure is
continuing after any applicable grace period has elapsed;
(2) the expiration or termination of such Credit
Support Document or the failing or ceasing of such Credit
Support Document to be in full force and effect for the
purpose of this Agreement (in either case other than in
accordance with its terms) prior to the satisfaction of all
obligations of such party under each Transaction to which such
Credit Support Document relates without the written consent of
the other party; or
(3) the party or such Credit Support Provider
disaffirms, disclaims, repudiates or rejects, in whole or in
part, or challenges the validity of, such Credit Support
Document;
(iv) Misrepresentation. A representation (other than a
representation under Section 3(e) or (f)) made or repeated or deemed to
have been made or repeated by the party or any Credit Support Provider
of such party in this Agreement or any Credit Support Document proves
to have been incorrect or misleading in any material respect when made
or repeated or deemed to have been made or repeated;
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(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 such default continues for at least three Local
Business Days if there is no applicable notice requirement or grace
period) or (3) disaffirms, disclaims, repudiates or rejects, in whole
or in part, a Specified Transaction (or such action is taken by any
person or entity appointed or empowered to operate it or act on its
behalf);
(vi) Cross Default. If "Cross Default" is specified in the
Schedule as applying to the party, the occurrence or existence of (1) a
default, event of default or other similar condition or event (however
described) in respect of such party, any Credit Support Provider of
such party or any applicable Specified Entity of such party under one
or more agreements or instruments relating to Specified Indebtedness of
any of them (individually or collectively) in an aggregate amount of
not less than the applicable Threshold Amount (as specified in the
Schedule) which has resulted in such Specified Indebtedness becoming,
or becoming capable at such time of being declared, due and payable
under such agreements or instruments, before it would otherwise have
been due and payable or (2) a default by such party, such Credit
Support Provider or such Specified Entity (individually or
collectively) in making one or more payments on the due date thereof in
an aggregate amount of not less than the applicable Threshold Amount
under such agreements or instruments (after giving effect to any
applicable notice requirement or grace period);
(vii) Bankruptcy. The party, any Credit Support Provider of such
party or any applicable Specified Entity of such party:--
(1) is dissolved (other than pursuant to a
consolidation, amalgamation or merger); (2) becomes insolvent
or is unable to pay its debts or fails or admits in writing
its inability generally to pay its debts as they become due;
(3) makes a general assignment, arrangement or composition
with or for the benefit of its creditors; (4) institutes or
has instituted against it a proceeding seeking a judgment of
insolvency or bankruptcy or any other relief under any
bankruptcy or insolvency law or other similar law affecting
creditors' rights, or a petition is presented for its
winding-up or liquidation, and, in the case of any such
proceeding or petition instituted or presented against it,
such proceeding or petition (A) results in a judgment of
insolvency or bankruptcy or the entry of an order for relief
or the making of an order for its winding-up or liquidation or
(B) is not dismissed, discharged, stayed or restrained in each
case within 30 days of the institution or presentation
thereof; (5) has a resolution passed for its winding-up,
official management or liquidation (other than pursuant to a
consolidation, amalgamation or merger); (6) seeks or becomes
subject to the appointment of an administrator, provisional
liquidator, conservator, receiver, trustee, custodian or other
similar official for it or for all or substantially all its
assets; (7) has a secured party take possession of all or
substantially all its assets or has a distress, execution,
attachment, sequestration or other legal process levied,
enforced or sued on or against all or substantially all its
assets and such secured party maintains possession, or any
such process is not dismissed, discharged, stayed or
restrained, in each case within 30 days thereafter; (8)
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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 the event is specified in (i) below, a Tax Event if the event is
specified in (ii) below or a Tax Event Upon Merger if the event is specified in
(iii) below, and, if specified to be applicable, a Credit Event Upon Merger if
the event is specified pursuant to (iv) below or an Additional Termination Event
if the event is specified pursuant to (v) below:--
(i) Illegality. Due to the adoption of, or any change in, any
applicable law after the date on which a Transaction is entered into,
or due to the promulgation of, or any change in, the interpretation by
any court, tribunal or regulatory authority with competent jurisdiction
of any applicable law after such date, it becomes unlawful (other than
as a result of a breach by the party of Section 4(b)) for such party
(which will be the Affected Party):--
(1) to perform any absolute or contingent obligation to
make a payment or delivery or to receive a payment or delivery
in respect of such Transaction or to comply with any other
material provision of this Agreement relating to such
Transaction; or
(2) to perform, or for any Credit Support Provider of
such party to perform, any contingent or other obligation
which the party (or such Credit Support Provider) has under
any Credit Support Document relating to such Transaction;
(ii) Tax Event. Due to (x) any action taken by a taxing
authority, or brought in a court of competent jurisdiction, on or after
the date on which a Transaction is entered into (regardless of whether
such action is taken or brought with respect to a party to this
Agreement) or (y) a Change in Tax Law, the party (which will be the
Affected Party) will, or there is a substantial likelihood that it
will, on the next succeeding Scheduled Payment Date (1) be required to
pay to the other party an additional amount in respect of an
Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of
interest under Section
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2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount
is required to be deducted or withheld for or on account of a Tax
(except in respect of interest under Section 2(e), 6(d)(ii) or 6(e))
and no additional amount is required to be paid in respect of such Tax
under Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A)
or (B));
(iii) Tax Event Upon Merger. The party (the "Burdened Party") on
the next succeeding Scheduled Payment Date will either (1) be required
to pay an additional amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has
been deducted or withheld for or on account of any Indemnifiable Tax in
respect of which the other party is not required to pay an additional
amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in
either case as a result of a party consolidating or amalgamating with,
or merging with or into, or transferring all or substantially all its
assets to, another entity (which will be the Affected Party) where such
action does not constitute an event described in Section 5(a)(viii);
(iv) Credit Event Upon Merger. If "Credit Event Upon Merger" is
specified in the Schedule as applying to the party, such party ("X"),
any Credit Support Provider of X or any applicable Specified Entity of
X consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and
such action does not constitute an event described in Section
5(a)(viii) but the creditworthiness of the resulting, surviving or
transferee entity is materially weaker than that of X, such Credit
Support Provider or such Specified Entity, as the case may be,
immediately prior to such action (and, in such event, X or its
successor or transferee, as appropriate, will be the Affected Party);
or
(v) Additional Termination Event. If any "Additional Termination
Event" is specified in the Schedule or any Confirmation as applying,
the occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).
(c) Event of Default and Illegality. If an event or circumstance which
would otherwise constitute or give rise to an Event of Default also constitutes
an Illegality, it will be treated as an Illegality and will not constitute an
Event of Default.
6. Early Termination
(a) Right to Terminate Following Event of Default. If at any time an
Event of Default with respect to a party (the "Defaulting Party") has occurred
and is then continuing, the other party (the "Non-defaulting Party") may, by not
more than 20 days notice to the Defaulting Party specifying the relevant Event
of Default, designate a day not earlier than the day such notice is effective as
an Early Termination Date in respect of all outstanding Transactions. If,
however, "Automatic Early Termination" is specified in the Schedule as applying
to a party, then an Early Termination Date in respect of all outstanding
Transactions will occur immediately upon the occurrence with respect to such
party of an Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6)
or, to the extent analogous thereto, (8), and as of the time immediately
preceding the institution of the relevant proceeding or the presentation of the
relevant petition upon the occurrence with respect to such party of an Event of
Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto,
(8).
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(b) Right to Terminate Following Termination Event.
(i) Notice. If a Termination Event occurs, an Affected Party
will, promptly upon becoming aware of it, notify the other party,
specifying the nature of that Termination Event and each Affected
Transaction and will also give such other information about that
Termination Event as the other party may reasonably require.
(ii) Transfer to Avoid Termination Event. If either an Illegality
under Section 5(b)(i)(1) or a Tax Event occurs and there is only one
Affected Party, or if a Tax Event Upon Merger occurs and the Burdened
Party is the Affected Party, the Affected Party will, as a condition to
its right to designate an Early Termination Date under Section
6(b)(iv), use all reasonable efforts (which will not require such party
to incur a loss, excluding immaterial, incidental expenses) to transfer
within 20 days after it gives notice under Section 6(b)(i) all its
rights and obligations under this Agreement in respect of the Affected
Transactions to another of its Offices or Affiliates so that such
Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days
after the notice is given under Section 6(b)(i). Any such transfer by a
party under this Section 6(b)(ii) will be subject to and conditional
upon the prior written consent of the other party, which consent will
not be withheld if such other party's policies in effect at such time
would permit it to enter into transactions with the transferee on the
terms proposed.
(iii) Two Affected Parties. If an Illegality under Section
5(b)(i)(1) or a Tax Event occurs and there are two Affected Parties,
each party will use all reasonable efforts to reach agreement within 30
days after notice thereof is given under Section 6(b)(i) on action to
avoid that Termination Event.
(iv) Right to Terminate. If:--
(1) a transfer under Section 6(b)(ii) or an agreement
under Section 6(b)(iii), as the case may be, has not been
effected with respect to all Affected Transactions within 30
days after an Affected Party gives notice under Section
6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event
Upon Merger or an Additional Termination Event occurs, or a
Tax Event Upon Merger occurs and the Burdened Party is not the
Affected Party,
either party in the case of an Illegality, the Burdened Party in the
case of a Tax Event Upon Merger, any Affected Party in the case of a
Tax Event or an Additional Termination Event if there is more than one
Affected Party, or the party which is not the Affected Party in the
case of a Credit Event Upon Merger or an Additional Termination Event
if there is only one Affected Party may, by not more than 20 days
notice to the other party and provided that the relevant Termination
Event is then continuing, designate a day not earlier than the day such
notice is effective as an Early Termination Date in respect of all
Affected Transactions.
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(c) Effect of Designation.
(i) If notice designating an Early Termination Date is given
under Section 6(a) or (b), the Early Termination Date will occur on the
date so designated, whether or not the relevant Event of Default or
Termination Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section
2(a)(i) or 2(e) in respect of the Terminated Transactions will be
required to be made, but without prejudice to the other provisions of
this Agreement. The amount, if any, payable in respect of an Early
Termination Date shall be determined pursuant to Section 6(e).
(d) Calculations.
(i) Statement. On or as soon as reasonably practicable following
the occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable
detail, such calculations (including all relevant quotations and
specifying any amount payable under Section 6(e)) and (2) giving
details of the relevant account to which any amount payable to it is to
be paid. In the absence of written confirmation from the source of a
quotation obtained in determining a Market Quotation, the records of
the party obtaining such quotation will be conclusive evidence of the
existence and accuracy of such quotation.
(ii) Payment Date. An amount calculated as being due in respect
of any Early Termination Date under Section 6(e) will be payable on the
day that notice of the amount payable is effective (in the case of an
Early Termination Date which is designated or occurs as a result of an
Event of Default) and on the day which is two Local Business Days after
the day on which notice of the amount payable is effective (in the case
of an Early Termination Date which is designated as a result of a
Termination Event). Such amount will be paid together with (to the
extent permitted under applicable law) interest thereon (before as well
as after judgment) in the Termination Currency, from (and including)
the relevant Early Termination Date to (but excluding) the date such
amount is paid, at the Applicable Rate. Such interest will be
calculated on the basis of daily compounding and the actual number of
days elapsed.
(e) Payments on Early Termination. If an Early Termination Date occurs,
the following provisions shall apply based on the parties' election in the
Schedule of a payment measure, either "Market Quotation" or "Loss," and a
payment method, either the "First Method" or the "Second Method." If the parties
fail to designate a payment measure or payment method in the Schedule, it will
be deemed that "Market Quotation" or the "Second Method," as the case may be,
shall apply. The amount, if any, payable in respect of an Early Termination Date
and determined pursuant to this Section will be subject to any Set-off.
(i) Events of Default. If the Early Termination Date results from
an Event of Default:--
(1) First Method and Market Quotation. If the First
Method and Market Quotation apply, the Defaulting Party will
pay to the Non-defaulting Party the excess, if a positive
number, of (A) the sum of the Settlement Amount (determined by
the Non-defaulting Party) in respect of the Terminated
Transactions and the Termination Currency Equivalent of the
Unpaid Amounts owing to the Non-defaulting Party over (B) the
Termination Currency Equivalent of the Unpaid Amounts owing to
the Defaulting Party.
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(2) First Method and Loss. If the First Method and Loss
apply, the Defaulting Party will pay to the Non-defaulting
Party, if a positive number, the Non-defaulting Party's Loss
in respect of this Agreement.
(3) Second Method and Market Quotation. If the Second
Method and Market Quotation apply, an amount will be payable
equal to (A) the sum of the Settlement Amount (determined by
the Non-defaulting Party) in respect of the Terminated
Transactions and the Termination Currency Equivalent of the
Unpaid Amounts owing to the Non-defaulting Party less (B) the
Termination Currency Equivalent of the Unpaid Amounts owing to
the Defaulting Party. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party; if
it is a negative number, the Non-defaulting Party will pay the
absolute value of that amount to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and
Loss apply, an amount will be payable equal to the
Non-defaulting Party's Loss in respect of this Agreement. If
that amount is a positive number, the Defaulting Party will
pay it to the Non-defaulting Party; if it is a negative
number, the Non-defaulting Party will pay the absolute value
of that amount to the Defaulting Party.
(ii) Termination Events. If the Early Termination Date results
from a Termination Event:--
(1) One Affected Party. If there is one Affected Party,
the amount payable will be determined in accordance with
Section 6(e)(i)(3), if Market Quotation applies, or Section
6(e)(i)(4), if Loss applies, except that, in either case,
references to the Defaulting Party and to the Non-defaulting
Party will be deemed to be references to the Affected Party
and the party which is not the Affected Party, respectively,
and, if Loss applies and fewer than all the Transactions are
being terminated, Loss shall be calculated in respect of all
Terminated Transactions.
(2) Two Affected Parties. If there are two Affected
Parties:--
(A) if Market Quotation applies, each party
will determine a Settlement Amount in respect of the
Terminated Transactions, and an amount will be
payable equal to (I) the sum of (a) one-half of the
difference between the Settlement Amount of the party
with the higher Settlement Amount ("X") and the
Settlement Amount of the party with the lower
Settlement Amount ("Y") and (b) the Termination
Currency Equivalent of the Unpaid Amounts owing to X
less (II) the Termination Currency Equivalent of the
Unpaid Amounts owing to Y; and
(B) if Loss applies, each party will determine
its Loss in respect of this Agreement (or, if fewer
than all the Transactions are being terminated, in
respect of all Terminated Transactions) and an amount
will be payable equal to one-half of the difference
between the Loss of the party with the higher Loss
("X") and the Loss of the party with the lower Loss
("Y").
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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:--
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest
in any amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. Contractual Currency
(a) Payment in the Contractual Currency. Each payment under this
Agreement will be made in the relevant currency specified in this Agreement for
that payment (the "Contractual Currency"). To the extent permitted by applicable
law, any obligation to make payments under this Agreement in the Contractual
Currency will not be discharged or satisfied by any tender in any currency other
than the Contractual Currency, except to the extent such tender results in the
actual receipt by the party to which payment is owed, acting in a reasonable
manner and in good faith in converting the currency so tendered into the
Contractual Currency, of the full amount in the Contractual Currency of all
amounts payable in respect of this Agreement. If for any reason the amount in
the Contractual Currency so received falls short of the amount in the
Contractual Currency payable in respect of this Agreement, the party required to
make the payment will, to the extent permitted by applicable law, immediately
pay such additional amount in the Contractual Currency as may be necessary to
compensate for the shortfall. If for any reason the amount in the Contractual
Currency so received exceeds the amount in the Contractual Currency payable in
respect of this Agreement, the party receiving the payment will refund promptly
the amount of such excess.
(b) Judgments. To the extent permitted by applicable law, if any judgment
or order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any
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amount owing in respect of this Agreement, (ii) for the payment of any amount
relating to any early termination in respect of this Agreement or (iii) in
respect of a judgment or order of another court for the payment of any amount
described in (i) or (ii) above, the party seeking recovery, after recovery in
full of the aggregate amount to which such party is entitled pursuant to the
judgment or order, will be entitled to receive immediately from the other party
the amount of any shortfall of the Contractual Currency received by such party
as a consequence of sums paid in such other currency and will refund promptly to
the other party any excess of the Contractual Currency received by such party as
a consequence of sums paid in such other currency if such shortfall or such
excess arises or results from any variation between the rate of exchange at
which the Contractual Currency is converted into the currency of the judgment or
order for the purposes of such judgment or order and the rate of exchange at
which such party is able, acting in a reasonable manner and in good faith in
converting the currency received into the Contractual Currency, to purchase the
Contractual Currency with the amount of the currency of the judgment or order
actually received by such party. The term "rate of exchange" includes, without
limitation, any premiums and costs of exchange payable in connection with the
purchase of or conversion into the Contractual Currency.
(c) Separate Indemnities. To the extent permitted by applicable law,
these indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums payable in respect of this
Agreement.
(d) Evidence of Loss. For the purpose of this Section 8, it will be
sufficient for a party to demonstrate that it would have suffered a loss had an
actual exchange or purchase been made.
9. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the
rights, powers, remedies and privileges provided in this Agreement are
cumulative and not exclusive of any rights, powers, remedies and privileges
provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and waiver
in respect of it) may be executed and delivered in counterparts
(including by facsimile transmission), each of which will be deemed an
original.
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(ii) The parties intend that they are legally bound by the terms
of each Transaction from the moment they agree to those terms (whether
orally or otherwise). A Confirmation shall be entered into as soon as
practicable and may be executed and delivered in counterparts
(including by facsimile transmission) or be created by an exchange of
telexes or by an exchange of electronic messages on an electronic
messaging system, which in each case will be sufficient for all
purposes to evidence a binding supplement to this Agreement. The
parties will specify therein or through another effective means that
any such counterpart, telex or electronic message constitutes a
Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any right,
power or privilege in respect of this Agreement will not be presumed to operate
as a waiver, and a single or partial exercise of any right, power or privilege
will not be presumed to preclude any subsequent or further exercise, of that
right, power or privilege or the exercise of any other right, power or
privilege.
(g) Headings. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. Offices; Multibranch Parties
(a) If Section 10(a) is specified in the Schedule as applying, each party
that enters into a Transaction through an Office other than its head or home
office represents to the other party that, notwithstanding the place of booking
office or jurisdiction of incorporation or organization of such party, the
obligations of such party are the same as if it had entered into the Transaction
through its head or home office. This representation will be deemed to be
repeated by such party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and
receives payments or deliveries for the purpose of a Transaction without the
prior written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a Transaction
will be specified in the relevant Confirmation.
11. Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document to
which the Defaulting Party is a party or by reason of the early termination of
any Transaction, including, but not limited to, costs of collection.
12. Notices
(a) Effectiveness. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
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(i) if in writing and delivered in person or by courier, on the
date it is delivered;
(ii) if sent by telex, on the date the recipient's answerback is
received;
(iii) if sent by facsimile transmission, on the date that
transmission is received by a responsible employee of the recipient in
legible form (it being agreed that the burden of proving receipt will
be on the sender and will not be met by a transmission report generated
by the sender's facsimile machine);
(iv) if sent by certified or registered mail (airmail, if
overseas) or the equivalent (return receipt requested), on the date
that mail is delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that
electronic message is received, unless the date of that delivery (or
attempted delivery) or that receipt, as applicable, is not a Local
Business Day or that communication is delivered (or attempted) or
received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given
and effective on the first following day that is a Local Business Day.
(b) Change of Addresses. Either party may by notice to the other change
the address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) Jurisdiction. With respect to any suit, action or proceedings
relating to this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this
Agreement is expressed to be governed by English law, or to the
non-exclusive jurisdiction of the courts of the State of New York and
the United States District Court located in the Borough of Manhattan in
New York City, if this Agreement is expressed to be governed by the
laws of the State of New York; and
(ii) waives any objection which it may have at any time to the
laying of venue of any Proceedings brought in any such court, waives
any claim that such Proceedings have been brought in an inconvenient
forum and further waives the right to object, with respect to such
Proceedings, that such court does not have any jurisdiction over such
party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) Service of Process. Each party irrevocably appoints the Process Agent
(if any) specified opposite its name in the Schedule to receive, for it and on
its behalf, service of process in any Proceedings. If for any reason any party's
Process Agent is unable to act as such, such party will
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promptly notify the other party and within 30 days appoint a substitute process
agent acceptable to the other party. The parties irrevocably consent to service
of process given in the manner provided for notices in Section 12. Nothing in
this Agreement will affect the right of either party to serve process in any
other manner permitted by law.
(d) Waiver of Immunities. Each party irrevocably waives, to the fullest
extent permitted by applicable law, with respect to itself and its revenues and
assets (irrespective of their use or intended use), all immunity on the grounds
of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. Definitions
As used in this Agreement:--
"Additional Termination Event" has the meaning specified in Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"Applicable Rate" means:--
(a) in respect of obligations payable or deliverable (or which would have
been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of
either party from and after the date (determined in accordance with Section
6(d)(ii)) on which that amount is payable, the Default Rate;
(c) is respect of all other obligations payable or deliverable (or which
would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the
Non-default Rate; and
(d) in all other cases, the Termination Rate.
"Burdened Party" has the meaning specified in Section 5(b).
"Change in Tax Law" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
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"consent" includes a consent, approval, action, authorization, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified as
such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"Event of Default" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"Indemnifiable Tax" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organized, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"law" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"lawful" and "unlawful" will be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.
"Loss" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a
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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 Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have been required after that date. For this
purpose, Unpaid Amounts in respect of the Terminated Transaction or group of
Terminated Transactions are to be excluded but, without limitation, any payment
or delivery that would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each applicable condition precedent) after
that Early Termination Date is to be included. The Replacement Transaction would
be subject to such documentation as such party and the Reference Market-maker
may, in good faith, agree. The party making the determination (or its agent)
will request each Reference Market-maker to provide its quotation to the extent
reasonably practicable as of the same day and time (without regard to different
time zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if more
than one quotation has the same highest value or lowest value, then one of such
quotations shall be disregarded. If fewer than three quotations are provided, it
will be deemed that the Market Quotation in respect of such Terminated
Transaction or group of Terminated Transactions cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Office" means a branch or office of a party, which may be such party's head or
home office.
19
<PAGE>
"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.
"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.
20
<PAGE>
"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 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
21
<PAGE>
required to have been paid or performed to (but excluding) such Early
Termination Date, at the Applicable Rate. Such amounts of interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b) above
shall be reasonably determined by the party obliged to make the determination
under Section 6(e) or, if each party is so obliged, it shall be the average of
the Termination Currency Equivalents of the fair market values reasonably
determined by both parties.
22
<PAGE>
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, PIERCE, FENNER FEJ HOLDING, INC.
& SMITH INCORPORATED (Name of Party)
(Name of Party)
By: /s/ Elizabeth Murphy By: /s/ Osamu Sato
------------------------------ ---------------------------------
Name: Elixabeth Murphy Name: Osamu Sato
Title: Authorized Signatory Title: Vice President
Date: Date:
<PAGE>
MULTICURRENCY - CROSS BORDER
SCHEDULE
to the
Master Agreement
dated as of January 27, 2000
between
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
("Party A")
and
FEJ HOLDING INC.
("Party B")
Part 1
Termination Provisions
In this Agreement:-
(a) "Specified Entity" means in relation to Party A for the purpose of:-
Section 5(a)(v), Not Applicable
Section 5(a)(vi), Not Applicable
Section 5(a)(vii), Not Applicable
Section 5(b)(iv), Not Applicable
in relation to Party B for the purpose of:-
Section 5(a)(v), 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.
"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. $35,000,000 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. Notwithstanding Section 5(b)(iv) of this
Agreement, "Credit Event Upon Merger" means that a Designated Event (as defined
below) occurs with respect to a party, any Credit Support Provider of such party
or any
<PAGE>
applicable Specified Entity of such party and such action does not
constitute an event described in Section 5(a)(viii) but that, in the reasonable
opinion of the other party, the creditworthiness of the successor, surviving or
transferee entity taking into account any 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
applicable 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 receives all or
substantially all the assets and obligations of, another
entity;
(ii) any person or entity acquires directly or indirectly the
beneficial ownership of equity securities having the power to
elect a majority of the board of directors of the party, any
Credit Support Provider of the party or any applicable
Specified Entity of the party; or
(iii) the party, any Credit Support Provider of the party or any
applicable 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 not
apply to either Party A or 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 not apply.
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) he following representation will apply to Party A and to Party
B:-
<PAGE>
It is fully eligible for the benefits of the "Business Profits" or
"Industrial and Commercial Profits" provision, as the case may be, the
"Interest" provision or the "Other Income" provision (if any) of the
Specified Treaty with respect to any payment described in such
provisions and received or to be received by it in connection with this
Agreement and no such payment is attributable to a trade or business
carried on by it through a permanent establishment in the Specified
Jurisdiction.
If such representation applies, then:-
"Specified Treaty" means with respect to Party A, the income tax convention
between the United States and Canada.
"Specified Jurisdiction" means with respect to Party A, Canada.
"Specified Treaty" means with respect to Party B, the income tax convention
between the United States and Canada.
"Specified Jurisdiction" means with respect to Party B, the United States.
(ii) The following representation will not apply to Party A and
will not apply to Party B:-
Each payment received or to be received by it in connection with this
Agreement will be effectively connected with its conduct of a trade or
business in the Specified Jurisdiction.
If such representation applies, then:-
"Specified Jurisdiction" means with respect to Party A, Not Applicable.
"Specified Jurisdiction" means with respect to Party B, Not Applicable.
(iii) Other Payee Representations:- None.
Part 3
Documents to be delivered
For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each party
agrees to deliver the following documents as applicable:-
(a) Tax forms, documents or certificates to be delivered are:-
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------- ------------------------------------ --------------------------------
Party required to deliver document Form/Document/Certificate Date by which to be delivered
- -------------------------------------- ------------------------------------ --------------------------------
Party A/Party B Any document required or (i) Before the first Payment
reasonably requested to allow the Date under this Agreement,
other party to make payments under (ii) promptly upon reasonable
this Agreement without any demand by the other party, and
deduction or withholding for or on (iii) promptly upon learning
account of any Tax or with such that any such form previously
deduction or withholding at a provided by the party has
reduced rate, including but not become obsolete or incorrect.
limited to Internal Revenue
Service Form W-8 BEN (or successor
form)
- -------------------------------------- ------------------------------------ --------------------------------
</TABLE>
<PAGE>
(b) Other documents to be delivered are:-
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------- ---------------------------- ----------------------------- ------------------------
Party required to Form/Document/ Date by which to be Covered by Section
deliver document Certificate delivered 3(d) Representation
- ------------------------- ---------------------------- ----------------------------- ------------------------
Party A/Party B. Annual audited financial Promptly after request. Yes.
statements (in the case of
Party A, of Merrill Lynch
& Co., Inc.) prepared in
accordance with generally
accepted accounting
principles in the country
in which the party is
organized.
- ------------------------- ---------------------------- ----------------------------- ------------------------
- ------------------------- ---------------------------- ----------------------------- ------------------------
Party A/Party B. Certificate or other At or promptly following Yes.
documents evidencing the execution of this
authority of the party Agreement, and, if a
entering into this Confirmation or any other
Agreement or any other document executed in
document executed in connection with this
connection with this Agreement so requires it,
Agreement, as the case may on or before the date set
be. forth therein (unless prior
evidence of authority has
been provided and remains
valid and correct).
- ------------------------- ---------------------------- ----------------------------- ------------------------
- ------------------------- ---------------------------- ----------------------------- ------------------------
Party A/Party B. A duly executed copy of Concurrently with execution No.
the Credit Support of this Agreement.
Document, if any,
specified in Part 4 of the
Schedule.
- ------------------------- ---------------------------- ----------------------------- ------------------------
- ------------------------- ---------------------------- ----------------------------- ------------------------
Party B. Opinion of counsel with At or promptly following No.
respect to Party B execution of this
substantially in the form Agreement, and, if a
of Exhibit B hereto and Confirmation or any other
otherwise in form and document executed in
substance acceptable to connection with this
Party A. Agreement so requires it,
on or before the date set
forth therein.
- ------------------------- ---------------------------- ----------------------------- ------------------------
</TABLE>
<PAGE>
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, Pierce, Fenner & Smith Incorporated
222 Broadway, 16th Floor
New York, NY 10038
Attention: Litigation Department
Facsimile No.: 212 670-4522 Telephone No.: 212 670-0350
(For all purposes)
With a copy to:
Address: Merrill Lynch & Co., Inc.
Merrill Lynch World Headquarters
World Financial Center, North Tower, 5th Floor
250 Vesey Street, New York, New York 10281-1322
Attention: Global Equity Derivatives
Facsimile No.: 212 449-6576 Telephone No.: 212 449-8637
Address for notices or communications to Party B:-
Address: FEJ Holding Inc., 9902 49th Street, P.O. Box 939,
Yellowknife, NWT, Canada
Attention: Assistant Manager
Facsimile No.: (03)3286-3709 Telephone No.: (03)3286-3526
(For all purposes)
With a copy to:
Address: The Furukawa Electric Co., Ltd.
6-1, Marunouchi 2-chome
Chiyoda-ku, Tokyo 100-8322, Japan
Attention: General Affairs Department
Facsimile No.: (03) 3286-3919 Telephone No.: (03) 3286-3039
(b) Process Agent. For the purpose of Section 13(c):-
Party A appoints as its Process Agent: Merrill Lynch, Pierce, Fenner &
Smith Incorporated
222 Broadway, 16th Floor
New York, NY 10038
U.S.A.
Attention: Litigation Department
Party B appoints as its Process Agent: CT Corporation
111 Eighth Avenue, 13th Floor
New York, NY 10011
(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:
<PAGE>
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
(e) Calculation Agent. The Calculation Agent is Party A, unless otherwise
specified in a Confirmation in relation to the relevant Transaction.
(f) Credit Support Document. Details of any Credit Support Document:-
Party A:- Not Applicable.
Party B:- (i) The Credit Support Annex with Paragraph 13
substantially in the form attached hereto as Exhibit B which
supplements, forms a part of and is subject to this Agreement.
(ii) That certain representation letter (the "Representation
Letter") issued by Furukawa Electric Co., Ltd. ("Furukawa
Electric") in favor of Party A dated, January 27, 2000.
(g) Credit Support Provider.
Credit Support Provider means in relation to Party A, Not Applicable.
Credit Support Provider means in relation to Party B, Furukawa Electric (until
such time that it is released from all of its obligations under the
Representation Letter in accordance with its terms).
(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 unless one party has given 15 days
prior notice to the other, in which case subparagraph (ii) of Section 2(c) will
cease to apply to all Transactions, or groups of Transactions (as specified in
such notice), with effect from the date specified in such notice.
(j) "Affiliate" will have the meaning specified in Section 14 of this
Agreement.
Part 5
Other Provisions
(1) Set-Off. Without affecting the provisions of this Agreement requiring
the calculation of certain net payment amounts, all payments under this
Agreement will be made without setoff or counterclaim; provided, however, that
upon the designation or deemed designation of any Early Termination Date, in
addition to and not in limitation of any other right or remedy (including any
right to setoff, counterclaim, or otherwise withhold payment) under applicable
law:
the non-Defaulting Party or non-Affected Party (in either case, "X")
may set off any sum or obligation (whether or not arising under this
Agreement and whether matured or unmatured) owed or due by the
Defaulting Party or Affected Party (in either case, "Y") to X against
any sum or obligation (whether or not arising under this Agreement and
whether matured or unmatured) owed or due by X (the "Original
Obligation") to Y, and, for this purpose, may convert one currency into
another. Any such setoff shall automatically satisfy and discharge the
Original Obligation to Y and, if the Original Obligation exceeds the
sum or obligation to be set off against, the Original Obligation shall
be novated and replaced by an obligation to pay Y only the excess of
the Original Obligation over such sum or obligation.
(2) Transfer. Notwithstanding the provisions of Section 7, Party A may
assign and delegate its rights and obligations under any Transaction to any
subsidiary (an "Assignee") of Merrill Lynch & Co., Inc. ("ML & Co.") effective
(the "Effective Date") upon delivery to Party B of a Guarantee of the
obligations of such subsidiary substantially in the form of Exhibit A hereto and
of an executed acceptance and assumption by the Assignee (an "Assumption") of
the transferred obligations of Party A under the Transaction(s) (the
"Transferred
<PAGE>
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.
(3) Non-reliance. Each party represents to the other party (which
representation will be deemed to be repeated by each party on each date on which
a Transaction is entered into or amended, extended or otherwise modified) that
it is acting for its own account, and has made its own independent decisions to
enter into this Agreement and any Transaction hereunder and as to whether this
Agreement and any Transaction hereunder is appropriate or proper for it based on
its own judgment and upon advice from such advisors as it has deemed necessary.
It is not relying on any communication (written or oral) of the other party as
investment advice or as a recommendation to enter into this 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.
(4) Bond Options. With effect from the date hereof, any transaction which
is a bond option into which the parties may enter or may have entered into prior
to the date hereof, in respect of which the Confirmation fails by its terms
expressly to exclude the application of this Agreement, shall (to the extent not
otherwise provided for in this Agreement) be deemed to incorporate the terms of
and shall be governed by and be subject to this Agreement (in substitution for
any existing terms, if any, whether express or implied) and, for the purposes
thereof, shall be deemed to be a Transaction.
(5) Consent to Recording. The parties agree that each may electronically
record all telephone conversations between 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.
(6) Equivalency. For the purposes of disclosure pursuant to the Interest
Act (Canada), the yearly rate of interest to which any rate of interest payable
under this Agreement, which is to be calculated on any basis other than a full
calendar year, is equivalent may be determined by multiplying such rate by a
fraction the numerator of which is the number of days in the calendar year in
which the period for which interest at such rate is payable ends and the
denominator of which is the number of days comprising such other basis.
(7) Eligible Swap Participants. Each party represents to the other that
it is an "eligible swap participant" as such term is defined in Section
35.1(b)(2) of the Regulations of the Commodities Futures Trading Commission.
<PAGE>
(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
ISDA MASTER AGREEMENT
dated as of January 27, 2000
between
MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED FEJ HOLDING, INC.
- --------------------------------- 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.
<PAGE>
Paragraph 2. Security Interest
Each party, as the Pledgor, hereby pledges to the other party, as the Secured
Party, as security for its Obligations and grants to the Secured Party a first
priority continuing security interest in, lien on and right of Set-off against
all Posted Collateral Transferred to or received by the Secured Party hereunder.
Upon the Transfer by the Secured Party to the Pledgor or Posted Collateral, the
security interest and lien granted hereunder on that Posted Collateral will be
released immediately and, to the extent possible, without any further action by
either party.
Paragraph 3. Credit Support Obligations
(a) Delivery Amount. Subject to Paragraphs 4 and 5, upon demand made by
the Secured Party on or promptly following a Valuation Date, if the Delivery
Amount for that Valuation Date equals or exceeds the Pledgor's Minimum Transfer
Amount, then the Pledgor will Transfer to the Secured Party Eligible Credit
Support having a Value as of the date of Transfer at least equal to the
applicable Delivery Amount (rounded pursuant to Paragraph 13). Unless otherwise
specified in Paragraph 13, the "Delivery Amount" applicable to the Pledgor for
any Valuation Date will equal the amount by which:
(i) the Credit Support Amount
exceeds
(ii) the Value as of that Valuation Date of all Posted Credit
Support held by the Secured Party.
(b) Return Amount. Subject to Paragraphs 4 and 5, upon a demand made by
the Pledgor on or promptly following a Valuation Date, if the Return Amount for
that Valuation Date equals or exceeds Secured Party's Minimum Transfer Amount,
then the Secured Party will Transfer to the Pledgor Posted Credit Support
specified by the Pledgor in that demand having a Value as of the date of
Transfer as close as practicable to the applicable Return Amount (rounded
pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the
"Return Amount" applicable to the Secured Party for any Valuation Date will
equal the amount by which:
(i) the Value as of that Valuation Date of all Posted Credit Support
held by the Secured Party
exceeds
(ii) the Credit Support Amount.
"Credit Support Amount" means, unless otherwise specified in Paragraph 13, for
any Valuation Date (i) the Secured Party's Exposure for that Valuation Date plus
(ii) the aggregate of all Independent Amounts applicable to the Pledgor, if any,
minus (iii) all Independent Amounts applicable to the Secured Party, if any,
minus (iv) the Pledgor's Threshold; provided, however, that the Credit Support
Amount will be deemed to be zero whenever the calculation of Credit Support
Amount yields a number less than zero.
Paragraph 4. Conditions Precedent, Transfer Timing, Calculations and
Substitutions
(a) Conditions Precedent. Each Transfer obligation of the Pledgor under
Paragraphs 3 and 5 and of the Secured Party under Paragraphs 3,
4(d)(ii), 5 and 6(d) is subject to the conditions precedent that:
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(i) no Event of Default, Potential Event of Default or Specified
Condition has occurred and is continuing with respect to the other
party; and
(ii) no Early Termination Date for which any unsatisfied payment
obligations exist has occurred or been designated as the result of an
Event of Default or Specified Condition with respect to the other
party.
(b) Transfer Timing. Subject to Paragraphs 4(a) and 5 and unless otherwise
specified, if a demand for the Transfer of Eligible Credit Support or
Posted Credit Support is made by the Notification Time, then the
relevant Transfer will be made not later than the close of business on
the next Local Business Day; if a demand is made after the
Notification Time, then the relevant Transfer will be made not later
than the close 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 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:
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(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
(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.
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(ii) Failure to Satisfy Conditions. If the Secured Party or its
Custodian fails to satisfy conditions for holding Posted Collateral,
then upon a demand made by the Pledgor, the Secured Party will, not
later than five Local Business Days after the demand, Transfer or
cause its Custodian to Transfer all Posted Collateral held by it to a
Custodian that satisfies those conditions or to the Secured Party if
it satisfies those conditions.
(iii) Liability. The Secured Party will be liable for the acts or
omissions of its Custodian to the same extent that the Secured Party
would be liable hereunder for its own acts or omissions.
(c) Use of Posted Collateral. Unless otherwise specified in Paragraph 13
and without limiting the rights and obligations of the parties under Paragraphs
3, 4(d)(ii), 5, 6(d) and 8, if the Secured Party is not a Defaulting Party or an
Affected Party with respect to a Specified Condition and no Early Termination
Date has occurred or been designated as the result of an Event of Default or
Specified Condition with respect to the Secured Party, then the Secured Party
will, notwithstanding Section 9-207 of the New York Uniform Commercial Code,
have the right to:
(i) sell, pledge, rehypothecate, assign, invest, use, commingle or
otherwise dispose of, or otherwise use in its business any Posted
Collateral it holds, free from any claim or right of any nature
whatsoever of the Pledgor, including any equity or right of redemption
by the Pledgor; and
(ii) register any Posted Collateral in the name of the Secured Party,
its Custodian or a nominee for either.
For purposes of the obligation to Transfer Eligible Credit Support or Posted
Credit Support pursuant to Paragraphs 3 and 5 and any rights or remedies
authorized under this Agreement, the Secured Party will be deemed to continue to
hold all Posted Collateral and to receive Distributions made thereon, regardless
of whether the Secured Party has exercised any rights with respect to any Posted
Collateral pursuant to (i) or (ii) above.
(d) Distributions and Interest Amount.
(i) Distributions. Subject to Paragraph 4(a), if the Secured Party
receives or is deemed to receive Distributions on a Local Business
Day, it will Transfer to the Pledgor not later than the following
Business Day any Distributions it receives or is deemed to receive to
the extent that a Delivery Amount would not be created or increased by
that Transfer, as calculated by the Valuation Agent (and the date of
calculation will be deemed to be a Valuation Date for this purpose).
(ii) Interest Amount. Unless otherwise specified in Paragraph 13 and
subject to Paragraph 4(a), in lieu of any interest, dividends or other
amounts paid or deemed to have been paid with respect to Posted
Collateral in the form of Cash (all of which may be retained by the
Secured Party), the Secured Party will Transfer to the Pledgor at the
times specified in Paragraph 13 the Interest Amount to the extent that
a Delivery Amount would not be created or increased by that Transfer,
as calculated by the Valuation Agent (and the date of calculation will
be deemed to be a Valuation Date for this purpose). The Interest
Amount or portion thereof not Transferred pursuant to this Paragraph
will constitute Posted Collateral in the form of Cash and will be
subject to the security interest granted under Paragraph 2.
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Paragraph 7. Events of Default
For purposes of Section 5(a)(iii)(1) of this Agreement, an Event of Default will
exist with respect to a party if:
(i) that party fails (or fails to cause its Custodian) to make,
when due, any Transfer of Eligible Collateral, Posted Collateral or
the Interest Amount, as applicable, required to be made by it and that
failure continues for two Local Business Days after notice of that
failure is given to that party;
(ii) that party fails to comply with any restriction or
prohibition specified in this Annex with respect to any of the rights
specified in Paragraph 6(c) and that failure continues for five Local
Business Days after notice of that failure is given to that party; or
(iii) that party fails to comply with or perform any agreement or
obligation other than those specified in Paragraphs 7(i) and 7(ii) and
that failure continues for 30 days after notice of that failure is
given to that party.
Paragraph 8. Certain Rights and Remedies
(a) Secured Party's Rights and Remedies. If at any time (1) an Event of
Default or Specified Condition with respect to the Pledgor has occurred and is
continuing or (2) an Early Termination Date has occurred or been designated as
the result of an Event of Default or Specified Condition with respect to the
Pledgor, then, unless the Pledgor has paid in full all of its Obligations that
are then due, the Secured Party may exercise one or more of the following rights
and remedies:
(i) all rights and remedies available to a secured party under
applicable law with respect to 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.
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(b) Pledgor's Rights and Remedies. If at any time an Early Termination
Date has occurred or been designated as the result of an Event of Default or
Specified Condition with respect to the Secured Party, then (except in the case
of an Early Termination Date relating to less than all Transactions (or Swap
Transactions) where the Secured Party has paid in full all of its obligations
that are then due under Section 6(e) of this Agreement):
(i) the Pledgor may exercise all rights and remedies available
to a Pledgor under applicable law with respect to Posted Collateral
held by the Secured Party;
(ii) the Pledgor may exercise any other rights and remedies
available to the Pledgor under the terms of Other Posted Support, if
any;
(iii) the Secured Party will be obligated immediately to Transfer
all Posted Collateral and the Interest Amount to the Pledgor; and
(iv) to the extent that Posted Collateral or the Interest Amount
is not so Transferred pursuant to (iii) above, the Pledgor may:
(A) Set-off any amounts payable by the Pledgor with
respect to any Obligations against any Posted Collateral or
the Cash equivalent of any Posted Collateral held by the
Secured Party (or any obligation of the Secured Party to
Transfer that Posted Collateral); and
(B) to the extent that the Pledgor does not Set-off under
(iv)(A) above, withhold payment of any remaining amounts
payable by the Pledgor with respect to any Obligations, up to
the Value of any remaining Posted Collateral held by the
Secured Party, until that Posted Collateral is Transferred to
the Pledgor.
(c) Deficiencies and Excess Proceeds. The Secured Party will Transfer to
the Pledgor any proceeds and Posted Credit Support remaining after liquidation,
Set-off and/or application under Paragraphs 8(a) and 8(b) after satisfaction in
full of all amounts payable by the Pledgor with respect to any Obligations; the
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;
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(iii) upon the Transfer of any Eligible Collateral to the Secured
Party under the terms of this Annex, the Secured Party will have a
valid and perfected first priority security interest therein (assuming
that any central clearing corporation or any third-party financial
intermediary or other entity not within the control of the Pledgor
involved in the Transfer of that Eligible Collateral gives the notices
and takes the action required of it under applicable law for
perfection of that interest); and
(iv) the performance by it of its obligations under this Annex will
not result in the creation of any security interest, lien or other
encumbrance on any Posted Collateral other than the security interest
and lien granted under Paragraph 2.
Paragraph 10. Expenses
(a) General. Except as otherwise provided in Paragraphs 10(b) and 10(c),
each party will pay its own costs and expenses in connection with performing its
obligations under this Annex and neither party will be liable for any costs and
expenses incurred by the other party in connection herewith.
(b) Posted Credit Support. The Pledgor will promptly pay when due all
taxes, assessments or charges of any nature that are imposed with respect to
Posted Credit Support held by the Secured Party upon becoming aware of the same,
regardless of whether any portion of that Posted Credit Support is subsequently
disposed of under Paragraph 6(c), except for those taxes, assessments and
charges that result from the exercise of the Secured Party's rights under
Paragraph 6(c).
(c) Liquidation/Application of Posted Credit Support. All reasonable
costs and expenses incurred by or on behalf of the Secured Party or the Pledgor
in connection with the liquidation and/or application of any Posted Credit
Support under Paragraph 8 will be payable, on demand and pursuant to the
Expenses Section of this Agreement, by the Defaulting Party or, if there is no
Defaulting Party, equally by the parties.
Paragraph 11. Miscellaneous
(a) Default Interest. A Secured Party that fails to make, when due, any
Transfer of Posted Collateral or the Interest Amount will be obliged to pay the
Pledgor (to the extent permitted under applicable law) an amount equal to
interest at the Default Rate multiplied by the Value of the items of property
that were required to be Transferred, from (and including) the date that the
Posted Collateral or Interest Amount was required to be Transferred to (but
excluding) the date of Transfer of that Posted Collateral or Interest Amount.
This interest will be calculated on the basis of daily compounding and the
actual number of days elapsed.
(b) Further Assurances. Promptly following a demand made by a party, the
other party will execute, deliver, file and record any financing statement,
specific assignment or other document and take any other action that may be
necessary or desirable and reasonably requested by that party to create,
preserve, perfect or validate any security interest or lien granted under
Paragraph 2, to enable that party to exercise or enforce its rights under this
Annex with respect to Posted Credit Support or an Interest Amount or to effect
or document a release of a security interest on Posted Collateral or an Interest
Amount.
(c) Further Protection. The Pledgor will promptly give notice to the
Secured Party of, and defend against, any suit, action, proceeding or lien that
involves Posted Credit Support Transferred by the Pledgor or that could
adversely affect the security interest and lien granted by it
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under Paragraph 2, unless that suit, action, proceeding or lien results from the
exercise of the Secured Party's rights under Paragraph 6(c).
(d) Good Faith and Commercially Reasonable Manner. Performance of all
obligations under this Annex, including, but not limited to, all calculations,
valuations and determinations made by either party, will be made in good faith
and in a commercially reasonable manner.
(e) Demands and Notices. All demands and notices given by a party under
this Annex will be made as specified in the Notices Section of this Agreement,
except as otherwise provided in Paragraph 13.
(f) Specifications of Certain Matters. Anything referred to in this Annex
as being specified in Paragraph 13 also may be specified in one or more
Confirmations or other documents and this Annex will be construed accordingly.
Paragraph 12. Definitions
As used in this Annex:--
"Cash" means the lawful currency of the United States of America.
"Credit Support Amount" has the meaning specified in Paragraph 3.
"Custodian" has the meaning specified in Paragraphs 6(b)(i) and 13.
"Delivery Amount" has the meaning specified in Paragraph 3(a).
"Disputing Party" has the meaning specified in Paragraph 5.
"Distributions" means, with respect to Posted Collateral other than Cash, all
principal, interest and other payments and distributions of cash or other
property with respect thereto, regardless of whether the Secured Party has
disposed of that Posted Collateral under Paragraph 6(c). Distributions will not
include any item of property acquired by the Secured Party upon any disposition
or liquidation of Posted Collateral or, with respect to any Posted Collateral in
the form of Cash, any distributions on that collateral, unless otherwise
specified herein.
"Eligible Collateral" means, with respect to a party, the items, if any,
specified as such for that party in Paragraph 13.
"Eligible Credit Support" means Eligible Collateral and Other Eligible Support.
"Exposure" means for any Valuation Date or other date for which Exposure is
calculated and subject to Paragraph 5 in the case of a dispute, the amount, if
any, that would be payable to a party that is the Secured Party by the other
party (expressed as a positive number) or by a party that is the Secured Party
to the other party (expressed as a negative number) pursuant to Section
6(e)(ii)(2)(A) of this Agreement as if all Transactions (or Swap Transactions)
were being terminated as of the relevant Valuation Time; provided that Market
Quotation will be determined by the Valuation Agent using its estimates at
mid-market of the amounts that would be paid for Replacement Transactions (as
that term is defined in the definition of "Market Quotation").
"Independent Amount" means, with respect to party, the amount specified as such
for that party in Paragraph 13; if no amount is specified, zero.
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"Interest Amount" means, with respect to an Interest Period, the aggregate sum
of the amounts of interest calculated for each day in that Interest Period on
the principal amount of Posted Collateral in the form of Cash held by the
Secured Party on that day, determined by the Secured Party for each such day as
follows:
(x) the amount of Cash on that day; multiplied by
(y) the Interest Rate in effect for that day; divided by
(z) 360.
"Interest Period" means the period from (and including) the last Local Business
Day on which an Interest Amount was Transferred (or, if no Interest Amount has
yet been Transferred, the Local Business Day on which Posted Collateral in the
form of Cash was Transferred to or received by the Secured Party) to (but
excluding) the Local Business Day on which the current Interest Amount is to be
Transferred.
"Interest Rate" means the rate specified in Paragraph 13.
"Local Business Day," unless otherwise specified in Paragraph 13, has the
meaning specified in the Definitions Section of this Agreement, except that
references to a payment in clause (b) thereof will be deemed to include a
Transfer under this Annex.
"Minimum Transfer Amount" means, with respect to a party, the amount specified
as such for that party in Paragraph 13; if no amount is specified, zero.
"Notification Time" has the meaning specified in Paragraph 13.
"Obligations" means, with respect to a party, all present and future obligations
of that party under this Agreement and any additional obligations specified for
that party in Paragraph 13.
"Other Eligible Support" means, with respect to a party, the items, if any,
specified as such for that party in Paragraph 13.
"Other Posted Support" means all Other Eligible Support Transferred to the
Secured Party that remains in effect for the benefit of that Secured Party.
"Pledgor" means either party, when that party (i) receives a demand for or is
required to Transfer Eligible Credit Support under Paragraph 3(a) or (ii) has
Transferred Eligible Credit Support under Paragraph 3(a).
"Posted Collateral" means all Eligible Collateral, other property,
Distributions, and all proceeds thereof that have been Transferred to or
received by the Secured Party under this Annex and not Transferred to the
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
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esolution of the dispute, then the "Recalculation Date" means the most recent
Valuation Date under Paragraph 3.
"Resolution Time" has the meaning specified in Paragraph 13.
"Return Amount" has the meaning specified in Paragraph 3(b).
"Secured Party" means either party, when that party (i) makes a demand for or is
entitled to receive Eligible Credit Support under Paragraph 3(a) or (ii) holds
or is deemed to hold Posted Credit Support.
"Specified Condition" means, with respect to a party, any event specified as
such for that party in Paragraph 13.
"Substitute Credit Support" has the meaning specified in Paragraph 4(d)(i).
"Substitution Date" has the meaning specified in Paragraph 4(d)(ii).
"Threshold" means, with respect to a party, the amount specified as such for
that party in Paragraph 13; if no amount is specified, zero.
"Transfer" means, with respect to any Eligible Credit Support, Posted Credit
Support or Interest Amount, and in accordance with the instructions of the
Secured Party, Pledgor or Custodian, as applicable:
(i) in the case of Cash, payment or delivery by wire transfer
into one or more bank accounts specified by the recipient;
(ii) in the case of certificated securities that cannot be paid or
delivered by book-entry, payment or delivery in appropriate physical
form to the recipient or its account accompanied by any duly executed
instruments of transfer, assignments in blank, transfer tax stamps and
any other documents necessary to constitute a legally valid transfer
to the recipient;
(iii) in the case of securities that can be paid or delivered in
book-entry, the giving of written instruments to the relevant
depository institution or other entity specified by the recipient,
together with a written copy thereof to the recipient, sufficient if
complied with to result in a legally effective transfer of the
relevant interest to the recipient; and
(iv) in the case of Other Eligible Support or Other Posted Support, as
specified in Paragraph 13.
"Valuation Agent" has the meaning specified in Paragraph 13.
"Valuation Date" means each date specified in or otherwise determined pursuant
to Paragraph 13.
"Valuation Percentage" means, for any item of Eligible Collateral, the
percentage specified in Paragraph 13.
"Valuation Time" has the meaning specified in Paragraph 13.
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"Value" means for any Valuation Date or other date for which Value is
calculated, and subject to Paragraph 5 in the case of a dispute, with respect
to:
(i) Eligible Collateral or Posted Collateral that is:
(A) Cash, the amount thereof; and
(B) a security, the bid price obtained by the Valuation
Agent multiplied by the applicable Valuation Percentage, if
any;
(ii) Posted Collateral that consists of items that are not specified
as Eligible Collateral, zero; and
(iii) Other Eligible Support and Other Posted Support, as specified in
Paragraph 13.
Paragraph 13. Elections and Variables
(a) Security Interest for "Obligations". The term "Obligations" as used
in this Annex includes the following additional obligations: Not
Applicable.
(b) Credit Support Obligations.
(i) Delivery amount, Return Amount and Credit Support Amount.
(A) "Delivery Amount" has the meaning specified in
Paragraph 3(a).
(B) "Return Amount" has the meaning specified in
Paragraph 3(b).
(C) "Credit Support Amount" means, for any Valuation Date (i)
the Secured Party's Exposure for that Valuation Date
plus (ii) the aggregate of all Independent Amounts
applicable to the Pledgor, if any, minus (iii) the
Pledgor's Threshold; provided, however, that (x) in
the case where the sum of the Independent Amounts
applicable to the Pledgor exceeds zero, the Credit
Support Amount will not be less than the sum of all
Independent Amounts applicable to the Pledgor and (y)
in all other cases, the Credit Support Amount will be
deemed to be zero whenever the calculation of Credit
Support Amount yields an amount less than zero.
(ii) Eligible Collateral. The following items will qualify as
"Eligible Collateral":
Valuation
Percentage
(A) Cash; 100%
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(B negotiable debt obligations issued by the U.S. 98%
Treasury Department having an outstanding
maturity of not more than one year;
(C) negotiable debt obligations issued by the U.S. 98%
Treasury Department having an outstanding
maturity of more than one year but not more than
ten years; and
(D) negotiable debt obligations issued by the U.S. 95%
Treasury Department having an outstanding
maturity of more than ten years.
(E) any other collateral mutually acceptable to the as specified
parties as may be provided in the Confirmation for in the
the relevant Transaction Confirmation
for the
relevant
Transaction.
(iii) Other Eligible Support. There shall be no "Other Eligible
Support" for either Party A or Party B.
(iv) Thresholds.
(A) "Independent Amount" for Party B means, with respect
to an individual Transaction, the amount, if any,
specified in the Confirmation for such Transaction,
and the aggregate of the Independent Amounts for all
outstanding Transactions shall be the aggregate of
the amounts, if any, specified in the Confirmations
for all such outstanding Transactions.
(B) "Threshold" for the Pledgor means zero.
(C) "Minimum Transfer Amount" means, with respect to a
party, $100,000; provided, that if an Event of
Default has occurred and is continuing with respect
to Party B, the Minimum Transfer Amount with respect
to Party B shall be zero.
(D) "Rounding". The Delivery Amount and the Return Amount
will be rounded up and down respectively to the
nearest integral multiple of $10,000.
(c) Valuation and Timing.
(i) "Valuation Agent" means the Secured Party.
13
<PAGE>
(ii) "Valuation Date" means (a) the Trade Date of each Transaction,
if either party has an Independent Amount greater than zero
for that Transaction, (b) each Friday of the relevant calendar
month (or if such day is not a Local Business Day then the
immediately preceding Local Business Day) and (c) each other
Local Business Day designated as a Valuation Date by notice
given by one party to the other no later than the Notification
Time on the Local Business Day before the Valuation Date so
designated.
(iii) "Valuation Time" means the close of business in the city of
the Valuation Agent on the Local Business Day preceding the
Valuation Date or date of calculation, as applicable; provided
that the calculations of Value and Exposure will be made as of
approximately the same time on the same date.
(iv) "Notification Time" means by 10:00 a.m., New York time, on a
Local Business Day.
(d) Conditions Precedent and Secured Party's Rights and Remedies. Each of
the following Termination Events will be a "Specified Condition" for
the Pledgor if the Pledgor is an Affected Party with respect to such
Termination Event:
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 does not need to obtain the Secured
Party's consent for any substitution pursuant to Paragraph
4(d).
(f) Dispute Resolution.
(i) "Resolution Time" means 1:00 p.m., New York time, on the fifth
Local Business Day following the date on which notice is given
that gives rise to a dispute under Paragraph 5.
(ii) "Value." For the purpose of Paragraph 5(i)(C) and 5(ii), the
Value of Eligible Collateral other 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
14
<PAGE>
the Valuation Agent multiplied by the applicable Valuation
Percentage or (y) if no quotations are available from such
principal market makers on the relevant date, the arithmetic
mean of the closing bid prices on the next preceding date
multiplied by the applicable Valuation Percentage plus (ii)
the accrued interest on such security (except to the extent
Transferred to a party pursuant to any applicable provision of
this Agreement or included in the applicable price referred to
in (i) of this clause) as of such date.
(iii) "Alternative." Not Applicable.
(g) Holding and Using Posted Collateral.
(i) "Eligibility to Hold Posted Collateral; Custodians." Secured
Party and its Custodian will be entitled to hold Posted
Collateral pursuant to Paragraph 6(b), provided that the
following conditions applicable to it are satisfied:
(1) The Secured Party: The Secured Party is not a
Defaulting Party; and
(2) The Custodian: The Custodian is either: (a) a wholly
owned, direct or indirect, Affiliate of the Secured
Party or (b) a bank or trust company located in the
State of New York having total assets of at least US
$10,000,000,000.
Initially, the Custodian for the Secured Party is: Merrill Lynch,
Pierce, Fenner & Smith, Inc.
(ii) "Use of Posted Collateral" The provisions of Paragraph 6 (c)
will apply.
(h) Distributions and Interest Amount.
(i) "Interest Rate." The Interest Rate will be the rate per annum
equal to the overnight Federal Funds Rate for each day Cash is
held by the Secured Party as reported in Federal Reserve
Publication H.15-519; provided, that if the Client Money Opt
Out Letter attached to this Agreement is applicable pursuant
to the rules of the Securities and Futures Authority of the
United Kingdom and has not been executed or is rescinded or
otherwise not in effect, the Interest Rate during such period
will be the Fed Fund's Rate minus fifty basis points.
(ii) "Transfer of Interest Amount." The Transfer of the Interest
Amount will be made on the last Local Business Day of each
calendar month, or on any Local Business Day that Posted
Collateral in the form of Cash is Transferred to the Pledgor
pursuant to Paragraph 3(b).
15
<PAGE>
(iii) "Alternative to Interest Amount." Not Applicable.
(i) Additional Representations. 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) Miscellaneous. Good Faith and Commercially Reasonable Manner.
Paragraph 11(d) shall be deleted in its entirety and replaced with the
following:
(d) Good Faith and Commercially Reasonable Manner. Exercise of
all rights and 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. The respective obligations of the
parties under this Annex shall be of the essence of the Agreement and
shall be strictly observed in accordance with the terms of this Annex.
(n) Other Provisions.
(i) Agreement as to Single Secured Party and Pledgor. Party A and
Party B agree that, notwithstanding anything to the contrary
in the recital to this Annex, Paragraph 1(b) or Paragraph 2 or
the definitions in Paragraph 12, (a) the term "Secured Party"
as used in this Annex means only Party A, (b) the term
"Pledgor" as used in this Annex means only Party B, (c) only
Party B makes the pledge and grant in Paragraph 2, the
acknowledgment in the final sentence of Paragraph 8(a) and the
representations in Paragraph 9 and (d) only Party B will be
required to make Transfers of Eligible Credit Support
hereunder. Party A and Party B further agree that,
notwithstanding anything to the contrary in the recital to
this Annex or Paragraph 7, this Annex will constitute a Credit
Support Document only with respect to Party B, and the Events
of Default in Paragraph 7 will apply only to Party B.
(ii) FIRREA. Party B, if an FDIC-insured depository institution,
represents that (i) this Annex has been executed and delivered
by a duly appointed
16
<PAGE>
or elected and authorized officer of Party B of the level of
vice president or higher and (ii) Party B has taken all
necessary action to authorize the execution, delivery and
performance of this Annex.
(iii) Posted Collateral. The definition of Posted Collateral shall
also include any and all accounts in which Cash collateral is
held.
17
<PAGE>
[COUNTERPARTY EXECUTES ONLY IF MLI IS A PARTY]
Merrill Lynch International
Global Equity Derivatives
Debt and Equity Markets Group
20 Farringdon Road
P.O. Box 293
London EC1M3NH
Telephone: 0171-772-1000
[____INSERT_DATE____]
[MERRILL LYNCH LOGO]
Dear Sirs:
THE SECURITIES AND FUTURES AUTHORITY ("SFA") CLIENT MONEY AND OTHER ASSET RULES
(THE "CLIENT MONEY RULES")
In accordance with rule 4-52 of the above and as a result of you being treated
as a non-private customer, any money received from you and held by us in respect
of the ISDA Master Agreement dated as of ______ between you and Merrill Lynch
International and any transactions thereunder (called "client money") will not
be subject to the protections conferred by the above Client Money Rules. As a
consequence of this, your money will not be segregated from the money of Merrill
Lynch International and will be used by Merrill Lynch International in the
course of our investment business and you will therefore rank as a general
creditor of Merrill Lynch International.
Please sign the attached copy letter to consent to the treatment of your money
outside of the Client Money Rules and return it to the above address.
Yours faithfully
MERRILL LYNCH INTERNATIONAL
Signed: __________________________ Name:_______________________________
Title: ___________________________ Date:_______________________________
I/WE HAVE READ AND UNDERSTOOD THE NOTICE AND CONSENT TO MY/OUR MONEY BEING
TREATED OUTSIDE THE CLIENT MONEY RULES.
[__INSERT_CLIENT_NAME_]
Signed: __________________________ Name:_______________________________
Title: ___________________________ Date:_______________________________
<PAGE>
[LOGO OF MERRILL LYNCH]
Dated: January 27, 2000 ML Ref:
To: FEJ Holding Inc. ("Counterparty" or "FEJH")
9902 49th Street, P.O. Box 939
Yellowknife, NWT, Canada
Attention: Assistant Manager
Telephone: (813) 3286-3709 Fax: (813) 3286-3526
From: Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPFS")
tel: (212) 449-8675
fax: (212) 449-2697
- --------------------------------------------------------------------------------
Dear Sir / Madam:
The purpose of this letter agreement (this "Confirmation") is to confirm the
terms and conditions of the above referenced Share Transaction entered into
between Counterparty and MLPFS on the Trade Date specified below (the
"Transaction"). This Confirmation constitutes a "Confirmation" as referred to in
the Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
supplemented by the 1998 Supplement, the "Swap Definitions") and in the 1996
ISDA Equity Derivatives Definitions (the "Equity Definitions", and together with
the Swap Definitions, the "Definitions"), in each case as published by the
International Swaps and Derivatives Association, Inc., are incorporated into
this Confirmation. In the event of any inconsistency between the Swap
Definitions and the Equity Definitions, the Equity Definitions will govern. In
the event of any inconsistency between this Confirmation and the Agreement (as
defined below) or the Definitions, the terms of this Confirmation shall govern.
This Confirmation supplements, forms part of, and is subject to, the Master
Agreement (including the Schedule thereto (the "ISDA Schedule") and the Credit
Support Annex thereto (the "Credit Support Annex")), dated as of January 27,
2000, as amended and supplemented from time to time (the "Agreement"), between
you and us. All provisions contained in the Agreement govern this Confirmation
except as expressly modified below.
The terms of the particular Transaction to which this Confirmation relates are
as follows:
General Terms:
- --------------
Trade Date: January 27, 2000
Valuation Date: August 28, 2000
Seller: Counterparty
Buyer: MLPFS
Shares: The common stock, USD 0.001 par value per share, of JDS
Uniphase Corporation (Security Symbol: JDSU).
Issuer: JDS Uniphase Corporation, a Delaware corporation
<PAGE>
Number of Shares: 3.5 million, as may be reduced in the manner set forth
opposite the caption, "Hedging Period."
Initial Equity Level: The volume weighted average price per share at which
Buyer executed sales and purchases of Shares in the
open market during the initial Hedging Period as set
forth opposite the caption "Hedging Period."
Floor Price: The USD price per share equal to 99.38% of the Initial
Equity Level.
Cap Price: The USD price per share equal to 100.75% of the Initial
Equity Level.
Final Equity Level: With respect to any Averaging Date, the closing price
per Share at the Valuation Time on such Averaging
Date.
Settlement Date: Three Exchange Business Days after the Valuation Date.
Notional Amount: the US dollar amount, as determined by the Calculation
Agent, equal to the product of the Initial Equity Level
and the Number of Shares.
Initial Payment Date: The date three Exchange Business Days after the
Effective Date.
Initial Payment Amount: An amount in USD equal to an amount in USD equal to
96.5% of the Notional Amount.
Settlement Currency: USD
Exchange: Nasdaq National Market
Related Exchange: Any exchange(s) on which options contracts related to
the Shares are principally traded.
Business Days: New York
Initial Hedging Period:
- -----------------------
Hedging Period: During the period (the "Hedging Period") commencing
on the Trade Date and ending on the earlier to occur
of (x) the tenth Exchange Business Day following the
Trade Date (the "Cut-Off Date") and (y) the Exchange
Business Day on which MLPFS completes the sale of the
full Number of Shares (such earlier date, the "Last
Hedging Date") MLPFS will make a good faith effort to
sell the full Number of Shares in unsolicited
brokerage transactions. On the Last Hedging Date,
MLPFS shall provide written notice (a "Final Pricing
Notice") to Counterparty in substantially the form of
Exhibit A, of the Initial Equity Level, Floor Price,
Cap Price, Effective Date, Initial Payment Date and
Initial Payment Amount. If MLPFS does not sell the
full Number of Shares by the 4:00 p.m. close of
trading on the Exchange on the Cut-Off Date, MLPFS
shall notify Counterparty in the Final Pricing Notice
that the Number of Shares shall be reduced to such
number as MLPFS has sold in accordance with this
paragraph. MLPFS' calculations shall be reasonable
and conclusive and binding absent manifest error.
Effective Date: The Exchange Business Day following the Last Hedging
Date.
Initial Payment: On the Initial Payment Date MLPFS will purchase and
hold in escrow for Counterparty Zero-coupon U.S.
Treasury securities maturing on August 17, 2000
("Treasuries") with an aggregate purchase price
(including fees and
2
<PAGE>
commissions) that is equal to the Initial Payment
Amount at a purchase price of such Treasuries equal
to 97.10% (expressed as a percentage of par);
provided, that, in lieu of purchasing any fractional
Treasuries, MLPFS shall deposit in escrow an amount
of cash equal to the principal amount of such
fractional Treasuries. Purchase of such Treasuries
and deposit of any such cash shall be made by 10:00
a.m. (local time at the place for payment) on that
date. The proceeds of such Treasuries together with
such cash shall be held in escrow and shall be
released to the Counterparty upon the delivery of
Shares to MLPFS pursuant to the provisions set forth
opposite the caption "Delivery of the Number of
Shares to be Delivered" on the earlier of (A) the
Settlement Date or (B) any Early Termination Date
under the Agreement (the "Release Date").
Upon release to the Counterparty by MLPFS of such
principal and proceeds on the Release Date, MLPFS
shall have no further payment obligations to
Counterparty hereunder.
Valuation:
- ----------
Valuation Time: At the 4:00 p.m. close of trading on the Exchange.
Averaging Dates: Each of the 20 consecutive Exchange Business Days
ending on and including the Valuation Date.
Averaging Date Market
Disruption: Modified Postponement
Physical Settlement Terms:
- --------------------------
Physical Settlement: On the Settlement Date, Counterparty will deliver to
MLPFS Shares in an amount equal to the Number of
Shares to be Delivered that would constitute Free
Shares in the hands of MLPFS upon delivery to MLPSS.
"Free Shares" means Shares that are not subject to
any condition to or restriction on the ability of the
holder thereof to sell, assign or otherwise transfer
such Shares (or security entitlements in respect
thereof) or to enforce the provisions thereof or of
any document related thereto whether set forth in
such Shares itself or in any document related
thereto, including, without limitation, (i) any
requirement that any sale, assignment or other
transfer or enforcement of such Shares (or security
entitlements in respect thereof) be consented to or
approved by any person, including, without
limitation, the Issuer or any other obligor thereon,
(ii) any limitations on the type or status, financial
or otherwise, of any purchaser, pledgee, assignee or
transferee of such Shares (or security entitlements
in respect thereof), (iii) any requirement of the
delivery of any certificate, consent, agreement,
opinion of counsel, notice or any other document of
any person to the Issuer, any other obligor on or any
registrar or transfer agent for, such Shares (or
security entitlements in respect thereof), prior to
the sale, pledge, assignment or other transfer or
enforcement of such Shares (or security entitlements
in respect thereof) or other item of collateral and
(iv) any registration or qualification requirement or
prospectus delivery requirement for such Shares (or
security entitlements in respect thereof) pursuant to
any federal, state or foreign securities law
(including, without limitation, any such requirement
arising as a result of Rule 144 or Rule 145 under the
Securities Act); except that the required delivery of
any assignment, instruction or entitlement order from
the seller, pledgor, assignor or transferor of such
Shares (or security entitlements in respect thereof),
together with any evidence of the corporate or other
authority of such person, shall not constitute such a
condition or restriction.
3
<PAGE>
Number of Shares
to be Delivered: The number of Shares equal to the sum of the
Averaging Date Share Numbers for each of the
Averaging Dates.
Averaging Date Share
Number: With respect to any Averaging Date, the number of
Shares, as determined by the Calculation Agent, equal
to the product of (i) the amount obtained by
multiplying the Number of Shares by the Multiplier
relating to such Averaging Date and (ii) the fraction
with a numerator equal to one (1) and a denominator
equal to the number of Averaging Dates, provided
that, if the calculation of any Averaging Date Share
Number results in any fractional Share, such
Averaging Date Share Number shall be rounded up to
the next whole number of Shares.
Multiplier: With respect to any Averaging Date, the number, as
determined by the Calculation Agent, pursuant to the
following formula:
a) if the Final Equity Level with respect to
such Averaging Date is less than the Floor
Price, one (1);
b) if the Final Equity Level with respect to
such Averaging Date is less than or equal to
the Cap Price but greater than or equal to
the Floor Price, a number equal to the
quotient obtained by dividing the Floor
Price by the Final Equity Level with respect
to such Averaging Date; and
c) if the Final Equity Level with respect to
such Averaging Date is greater than the Cap
Price, a number equal to the quotient
obtained by dividing the Floor Price by the
Cap Price.
Clearance System(s): The principal domestic clearance system customarily
settling trades on a delivery versus payment basis on
the Shares.
Delivery of Number of
Shares to be Delivered: On the Settlement Date, Counterparty shall satisfy
its delivery obligation by delivering to MLPFS a
number of Free Shares equal to the Number of the
Shares to be Delivered.
On the Settlement Date, unless (i) Counterparty shall
have otherwise effected the deliveries required
hereby or (ii) the Shares (or security entitlements
in respect thereof) then held by the MLPFS as
Collateral hereunder are not Free Shares, MLPFS shall
take, and the Counterparty irrevocably instructs
MLPFS to take, in whole or partial, as the case may
be, satisfaction of Counterparty's obligations to
deliver Shares (or security entitlements in respect
thereof) to MLPFS on the Settlement Date pursuant
hereto, Shares (or security entitlements in respect
thereof) then held by it as Collateral hereunder
representing the number of Shares (or security
entitlements in respect thereof) required to be
delivered hereunder on the Settlement Date. Upon any
such deemed delivery, MLPFS shall hold such Shares
(or security entitlements in respect thereof)
absolutely and free from any claim or right
whatsoever (including, without limitation, any claim
or right of Counterparty).
Adjustments:
- ------------
Method of Adjustment: In the event of the occurrence of a Potential
Adjustment Event, the Calculation Agent will
determine whether such Potential Adjustment Event has
a diluting or concentrative effect on the theoretical
value of the Shares and, if so, will (i) make the
corresponding adjustment(s), if any, to the Number of
Shares, the Floor Price and the Cap Price and, in any
case, any
4
<PAGE>
other variable relevant to the settlement or payment
terms of this transaction as the Calculation Agent
determines appropriate to account for that diluting
or concentrative effect and (ii) determine the
effective date(s) of the adjustment(s). For the
avoidance of doubt, in connection with the
adjustments made pursuant to the preceding sentence,
if as a result of a Potential Adjustment Event
existing holders of Shares receive a distribution or
dividend of securities (other than Shares) that are
marketable securities (the "Additional Securities"),
then the term "Shares" will mean a basket of Shares
composed of the original Shares and the Additional
Securities and the Transaction will become a Share
Basket Transaction. The Calculation Agent may (but
need not) determine the appropriate adjustment(s) by
reference to any adjustment(s) in respect of such
Potential Adjustment Event made by an options
exchange to options on the relevant Shares traded on
that options exchange.
Extraordinary Events:
- ---------------------
Merger Event: In respect of any relevant Shares, any (i)
reclassification or change of such Shares that
results in a transfer of or an irrevocable commitment
to transfer 50% or more of such Shares outstanding,
(ii) consolidation, amalgamation or merger of the
Issuer with or into another entity (other than a
consolidation, amalgamation or merger in which such
Issuer is the continuing entity and which does not
result in any such reclassification or change of 50%
or more of such Shares Outstanding) or (ii) other
takeover offer for such Shares that results in a
transfer of or an irrevocable commitment to transfer
50% or more of such Shares (other than such Shares
owned or controlled by the offeror), in each case if
the Merger Date is on or before, the final Valuation
Date.
Consequences of Merger Event:
(a) Share-for-Share: Cancellation and Payment; provided however, if the
New Shares are publicly traded on a nationally
recognized exchange or on the Nasdaq National Market,
Alternative Obligation shall apply.
(b) Share-for-Other: Cancellation and Payment.
(c) Share-for-
Combined: Cancellation and Payment; provided however, if any
portion of the consideration for the relevant shares
consists of equity securities that are publicly
traded on a nationally recognized exchange or on
Nasdaq (the "Publicly Traded Securities
Consideration"), Alternative Obligation shall apply
only to that portion of the Transaction corresponding
to the Publicly Traded Securities Consideration.
Notwithstanding anything to the contrary in the
Equity Definitions, the amount payable under this
Transaction upon the occurrence of an Extraordinary
Event shall be calculated by the Calculation Agent in
good faith in accordance with Section 9.7 of the
Equity Definitions using, among other things, the
factors identified in subparagraphs (i), (ii) and
(iii) therein, but without the requirement of
soliciting dealer quotations therefor. The
Calculation Agent may (but need not) determine the
appropriate adjustment to such payable amount by
reference to any adjustment(s) in respect of such
Extraordinary Event made by an options exchange to
options on the relevant Shares traded on that options
exchange.
Nationalization or
Insolvency: Negotiated Close-out
5
<PAGE>
If any Merger Event shall occur that does not result
in a termination of this transaction, the Calculation
Agent shall calculate the adjustments, if any, to be
made to any one or more of the Number of Shares, the
Floor Price, the Cap Price, and any other variable
relevant to the settlement terms of this Agreement,
as the Calculation Agent reasonably determines to be
appropriate to account for such event. The
Calculation Agent may (but need not) determine the
appropriate adjustment to such variables by reference
to any adjustment(s) in respect of such Merger Event
made by an options exchange to options on the
relevant Shares traded on that options exchange.
Additional Termination
Events: If, on any Business Day on or after the twentieth
Business Day following the Trade Date (such twentieth
day, the "Share Collateralization Date"), MLPFS is no
longer able to borrow (or maintain a borrowing of)
Shares in an amount equal to the Number of Shares
(other than failure of MLPFS to receive as Collateral
on or prior to the Share Collateralization Date a
Transfer of Eligible Collateral consisting of Shares
in an amount equal to the Number of Shares due solely
to the gross negligence of MLPFS) ("Loss of Borrow
Event"), MLPFS may, upon not less than three (3)
Business Days' prior notice (the "Notice Period") to
Counterparty, elect to terminate this Transaction;
provided that if, during the Notice Period,
Counterparty lends to MLPFS such amount of Shares
pursuant to the terms of this Agreement, then for so
long as the Shares are so borrowed, MLPFS shall not
terminate this Transaction under this provision. A
Loss of Borrow Event shall constitute an Additional
Termination Event with respect to this Transaction
(with two Affected Parties).
If, for any reason (other than due solely to the
gross negligence of MLPFS), MLPFS fails to receive as
Collateral on or prior to the Share Collateralization
Date a Transfer of Eligible Collateral consisting of
Shares in an amount equal to the Number of Shares (as
described below under the caption "Collateral"), then
MLPFS may elect to immediately terminate this
Transaction, and such failure to receive Shares on or
prior to such date shall constitute an Additional
Termination Event with respect to this Transaction
(with two Affected Parties).
Termination Provisions: The provisions of Part 1(c) (relating to Cross
Default) and Part 1(d) (relating to Credit Event Upon
Merger) of the ISDA Schedule shall not apply to this
Transaction (for all purposes under the Agreement,
including any relevant provisions of the Credit
Support Annex).
Calculation Agent: MLPFS
Non-Reliance: Each party represents to the other party that it is
acting for its own account, and has made its own
independent decisions to enter into this Transaction
and as to whether this Transaction is appropriate or
proper for it based on its own judgment and upon
advice from such advisors as it has deemed necessary.
It is not relying on any communication (written or
oral) of the other party as investment advice or as a
recommendation to enter into this Transaction, it
being understood that information and explanations
related to the terms and conditions of this
Transaction shall not be considered investment advice
or a recommendation to enter into this Transaction.
No communication (written or oral) received from the
other party shall be deemed to be an assurance or
guarantee as to the expected results of this
Transaction.
Governing law: The laws of the State of New York (without reference to
choice of law doctrine)
6
<PAGE>
Collateral:
Supplemental
Collateral
Provisions: (a) Counterparty hereby assigns and pledges to
MLPFS, and grants to MLPFS, as the Secured
Party, security interests in and to, and a
lien upon and right of set-off against, and
transfers to MLPFS, as and by way of a
security interest having priority over all
other security interests, with power of
sale, all of its right, title and interest
in and to (i) the pledged items described in
paragraph (b) below; (ii) all additions to
and substitutions for such pledged items;
(iii) all income, proceeds and collections
received or to be received, or derived or to
be derived, now or any time hereafter
(whether before or after the commencement of
any proceeding under applicable bankruptcy,
insolvency or similar law, by or against
Counterparty, with respect to Counterparty)
from or in connection with such pledged
items (including, without limitation, any
shares of capital stock issued by the Issuer
in respect of any Shares (or security
entitlements in respect thereof)
constituting Collateral or any cash,
securities or other property distributed in
respect of or exchanged for any Shares (or
security entitlements in respect thereof)
constituting Collateral, or into which any
such Shares (or security entitlements in
respect thereof) are converted, in
connection with any Merger Event, and any
security entitlements in respect of any of
the foregoing); and (iv) all powers and
rights now owned or hereafter acquired under
or with respect to such pledged items (such
pledged items, additions, substitutions,
proceeds, collections, powers and rights
being herein collectively called the
"Collateral"). MLPFS shall have all of the
rights, remedies and recourses with respect
to the Collateral afforded a secured party
by the New York Uniform Commercial Code, in
addition to, and not in limitation of, the
other rights, remedies and recourses
afforded to MLPFS by this Agreement.
(b) On or prior to the Trade Date, Counterparty
shall Transfer to MLPFS in pledge hereunder,
and thereafter maintain with MLPFS, Eligible
Collateral consisting of Shares or
Exchangeable Shares exchangeable into
Shares, in an aggregate amount equal to the
Number of Shares.
(c) In the event that the Issuer at any time
issues to Counterparty in respect of any
Eligible Collateral (or security
entitlements in respect thereof)
constituting Collateral hereunder any
additional or substitute shares of capital
stock of any class (or any security
entitlements in respect thereof),
Counterparty shall immediately pledge and
Transfer to MLPFS all such shares and
security entitlements as additional
Collateral hereunder.
(d) The security interests granted hereby with
respect to the Collateral (the "Security
Interests") are granted as security only and
shall not subject MLPFS to, or transfer or
in any way affect or modify, any obligation
or liability of Counterparty or the Issuer
with respect to any of the Collateral or any
transaction in connection therewith.
(e) MLPFS shall have the right to receive and
retain as Collateral hereunder all proceeds
of the Collateral, including without
limitation any dividends or interest, and
Counterparty shall take all such action as
MLPFS shall deem necessary or appropriate to
give effect to such right. All such proceeds
including, without limitation, all dividends
and other payments and distributions that
are received by the Counterparty shall be
received in trust for the benefit of MLPFS
and, if MLPFS so directs, shall be
segregated from other funds of Counterparty
and shall, forthwith upon demand by MLPFS,
be paid over to MLPFS as Collateral in the
same form as received (with any necessary
endorsement). MLPFS shall retain any and all
ordinary cash dividends
7
<PAGE>
received by it hereunder as Collateral to be
used by MLPFS toward satisfaction of
Counterparty's obligations under paragraph
(n) under the caption, "Representations and
Agreements of Counterparty," below.
(f) Certain Additional Definitions. For purposes
of this Transaction, the following terms
shall have the meanings set forth below.
"Eligible Collateral" means (x) Shares, (y)
Exchangeable Shares ("Exchangeable Shares")
of JDS Uniphase Canada Ltd. ("JDSU Canada")
or (z) security entitlements in respect
thereof, provided that Pledgor has good and
marketable title thereto, free of all liens
(other than the Security Interests) and
transfer restrictions (other than the
transfer restrictions imposed by Rule 144 or
Rule 145 (other than Rule 144(d)) under the
Securities Act as a result of such Shares
being held by an affiliate of the Issuer)
and that MLPFS has a valid, first priority
perfected security interest therein, a first
lien thereon and control with respect
thereto.
"Transfer" means, with respect to any
Eligible Collateral, (i) 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; (ii) in the case of securities
that can be paid or delivered in book-entry,
the giving of written instruments to the
relevant depository institution or other
entity specified by the recipient, together
with a written copy thereof to the
recipient, sufficient if complied with to
result in a legally effective transfer of
the relevant interest to the recipient; and
(iii) in the case of Exchangeable Shares
constituting Eligible Collateral, in
addition to the requirements set forth in
clause (i) or (ii) above, as applicable, the
delivery to MLPFS of an irrevocable
instruction and authorization to immediately
tender such Exchangeable Shares for exchange
into Shares (accompanied by any duly
executed instruments and other documents
necessary to effect such exchange). For the
avoidance of doubt, any irrevocable
instruction and authorization under clause
(iii) of the previous sentence shall include
an authorization that MLPFS shall hold the
exclusive authority, to the extent permitted
by applicable law, to cancel or revoke any
instruction to the exchange agent for the
Exchangeable Shares to exchange any
Exchangeable Shares.
(g) Unless an Event of Default shall have
occurred and be continuing and subject to
the limitations under paragraph (i) below,
Counterparty shall have the right, from time
to time, to vote and to give consents,
ratifications and waivers with respect to
the Collateral, and MLPFS shall, upon
receiving a written request from
Counterparty accompanied by a certificate of
an authorized officer of Counterparty
stating that no Event of Default has
occurred and is continuing, deliver to
Counterparty or as specified in such request
such proxies, powers of attorney, consents,
ratifications and waivers in respect of any
of the Collateral that is registered, or
held through a securities intermediary, in
the name of MLPFS or its nominee as shall be
specified in such request and shall be in
form and substance satisfactory to MLPFS.
(h) If an Event of Default shall have occurred
and be continuing, MLPFS shall have the
right, to the extent permitted by law, and
Counterparty shall take all such action as
may be necessary or appropriate to give
8
<PAGE>
effect to such right, to vote and to give
consents, ratifications and waivers, and to
take any other action with respect to any or
all of the Collateral with the same force
and effect as if MLPFS were the absolute and
sole owner thereof.
Upon the occurrence of any event or
condition which with the giving of notice or
passage of time or both would qualify as an
"Event of Default" or "Termination Event"
under the Agreement with respect to the
Counterparty being the "Defaulting Party" or
"Affected Party", as the case may be, MLPFS
shall have the right to declare all of
Counterparty's payment obligations due and
payable. In such event, unless (A)
Counterparty shall have otherwise effected
the deliveries required hereby or (B) the
Shares (or security entitlements in respect
thereof) then held by the MLPFS as
Collateral hereunder are not Free Shares,
MLPFS shall take, and the Counterparty
irrevocably instructs MLPFS to take, in
whole or partial, as the case may be,
satisfaction of Counterparty's obligations
to deliver Shares (or security entitlements
in respect thereof) to MLPFS on the
Settlement Date pursuant hereto, Shares (or
security entitlements in respect thereof)
then held by it as Collateral hereunder
representing the number of Shares (or
security entitlements in respect thereof)
required to be delivered hereunder on the
Early Termination Date. Upon any such deemed
delivery, MLPFS shall hold such Shares (or
security entitlements in respect thereof)
absolutely and free from any claim or right
whatsoever (including, without limitation,
any claim or right of Counterparty) in
Shares and may be satisfied by deemed
delivery of Shares held as Collateral.
(i) For purposes of this Transaction, in
addition to the permitted uses of Collateral
provided for in Paragraph 6(c) of the Credit
Support Annex forming a part of the ISDA
Schedule, Counterparty agrees and
acknowledges that, during the period prior
to the Settlement Date (or any Early
Termination Date), MLPFS shall have the
right to borrow from Counterparty Shares
held as Collateral (any such borrowed and
unreturned Shares, "Loaned Shares"). Upon
MLPFS' exercise of such right to borrow
Shares, Counterparty shall not be entitled,
without the prior consent of MLPFS, to
terminate its loan of the Loaned Shares to
MLPFS until the Release Date.
Counterparty further agrees and acknowledges that
MLPFS shall have all of the incidents of ownership of
the Loaned Shares, including the right to transfer
the Loaned Shares to others. Counterparty hereby
waives the right to vote, or to provide any consent
or take any similar action with respect to, the
Loaned Shares in the event that the record date or
deadline for such vote, consent or other action falls
prior to the return of any Loaned Shares.
Counterparty shall be entitled to receive all
distributions made on or in respect of the Loaned
Shares which are not otherwise received by the
Counterparty, to the full extent it would be so
entitled if the Loaned Shares had not been lent to
MLPFS, including, but not limited to: (a) cash and
all other property, (b) stock dividends, (c)
securities received as a result of split ups of the
Loaned Shares and distributions in respect thereof,
(d) interest payments, and (e) all rights to purchase
additional securities. Any cash distributions made on
or in respect of the Loaned Shares, which
Counterparty is entitled to receive pursuant to the
previous sentence, shall be paid by the transfer of
cash to Counterparty by MLPFS, on the date any such
distribution is paid, in an amount equal to such cash
distribution. Non-cash distributions received by
MLPFS shall be added to the Loaned Shares on the date
of distribution.
9
<PAGE>
For the avoidance of doubt and without limiting the
generality of any other provision hereof, the parties
hereto agree and acknowledge as follows:
(i) that any obligation of MLPFS to pay cash
dividends to the Counterparty under the
previous paragraph may be set off against
the corresponding obligations of the
Counterparty to pay to MLPFS an amount with
respect to such dividends under paragraph
(n) under the caption, "Representations and
Agreements of Counterparty" with respect to
such Loaned Shares; and
(ii) on the Settlement Date or any Early
Termination Date, the obligation of MLPFS to
return Loaned Shares (if any) to the
Counterparty may be set off against the
corresponding obligations of the
Counterparty to deliver Free Shares
hereunder.
Independent Amount: Independent Amount with respect to Counterparty and
this Transaction means a number of Shares equal to
the Number of Shares.
Exposure: When calculating Exposure for purposes of determining
the Credit Support Amount under paragraph 3(a) of the
Credit Support Annex, this Transaction will be
disregarded.
Representations and
Agreements Of
Counterparty: Counterparty represents and warrants to, and agrees
with, MLPFS as follows:
(a) Counterparty (i) has such knowledge and
experience in financial and business affairs
as to be capable of evaluating the merits
and risks of entering into the Transaction;
(ii) has consulted with its own legal,
financial, accounting and tax advisors in
connection with the Transaction; (iii) is
entering into the Transaction for a bona
fide business purpose to hedge an existing
position; (iv) acknowledges that in return
for downside protection against a decline in
the market price of the Shares below the
Floor Price, Counterparty is foregoing, in
part, the upside value of an increase in the
market price of the Shares above the Cap
Price; and (v) in exchange for prepayment of
the purchase price under the Transaction,
Counterparty agrees to sell (and physically
deliver) the Shares to MLPFS on the
Settlement Date.
(b) None of Counterparty and any of its
affiliates is in possession of any material
non-public information regarding the Issuer.
The representation and warranty contained in
this paragraph (b) shall be true, correct
and complete on each day of the Hedging
Period, as if such representation and
warranty was made as of such day by
reference to the circumstances then
existing; provided that if such
representation and warranty is not true,
correct and complete on such day,
Counterparty shall instruct MLPFS to refrain
on such date from engaging in hedging
transactions as provided under the caption,
"Initial Hedging Period".
(c) Counterparty has furnished MLPFS with copies
of all material agreements and or contracts
to which it is a party, by which it is
bound, or by which any Collateral is bound,
that relate to any Collateral.
(d) Neither Counterparty nor any person who
would be considered to be the same "person"
(as such term is used in Rule 144(a)(2)
under the Securities Act of 1933, as amended
(the "Securities Act"), has sold any
10
<PAGE>
Shares (or security entitlements in respect
thereof) or hedged (through swaps, options,
short sales or otherwise) any long position
in the Shares (or security entitlements in
respect thereof) during the preceding three
(3) months prior to the Trade Date of this
Transaction except as otherwise listed on
Annex A. Counterparty covenants and agrees
that until the Effective Date, it will not
sell, nor will it permit any person to sell,
Shares without the prior written consent of
MLPFS. For the purposes of the this
paragraph and paragraphs (e) and (h),
Shares, including Deliverable Shares, shall
be deemed to include securities convertible
into or exchangeable or exercisable for
Shares and any other security or instrument
that would be subject to aggregation under
Rule 144(e) under the Securities Act.
(e) As of the Trade Date, Counterparty owns
62,196,040 Shares (the "Deliverable
Shares").
(f) Counterparty does not know or have any
reason to believe that the Company has not
complied with the reporting requirements
contained in Rule 144(c)(1) under the
Securities Act.
(g) As of the date hereof (without giving effect
to the transactions contemplated hereby)
Counterparty is the beneficial owner (as
defined in Rule 13d-3 under the Exchange
Act) of 20.244% of the outstanding
Exchangeable Shares and 0% of the Shares of
the Issuer. Counterparty shall comply with
the reporting and other requirements of
Section 13 of the Exchange Act relating to
this Transaction.
(h) The Shares constituting Collateral are
currently eligible for public resale by the
Counterparty pursuant to Rule 144 under the
Securities Act. Counterparty acknowledges
and agrees that (i) the entering into of
this Confirmation will constitute a sale of
Shares for purposes of Rule 144, (ii)
Counterparty has not taken and will not take
any action that would cause such sale to
exceed the volume limitation of Rule 144(e),
(iii) Counterparty has not taken and will
not take any action that could cause the
sale made pursuant to this Confirmation to
fail to meet all applicable requirements of
Rule 144 and (iv) Counterparty will transmit
a Form 144 for filing with the Securities
and Exchange Commission (the "SEC") as soon
as practicable following the execution of
this Confirmation. Counterparty covenants
that it will send to MLPFS via facsimile a
copy of each Form 144 and each filing under
Section 13 or 16 of the Exchange Act
relating to this Transaction concurrently
with filing or transmission for filing, as
the case may be, of such form to or with the
SEC.
(i) Counterparty is not and has not been the
subject of any civil proceeding of a
judicial or administrative body of competent
jurisdiction that could reasonably be
expected to impair Counterparty's ability to
perform its obligations hereunder.
(j) Counterparty will immediately notify MLPFS
upon obtaining knowledge of the occurrence
of any event that would constitute an Event
of Default, a Potential Event of Default or
a Potential Adjustment Event.
(k) Counterparty is not as of the Trade Date,
and will not as of the Effective Date after
giving effect to the transactions
contemplated hereby, be insolvent.
11
<PAGE>
(l) The parties acknowledge and agree that there
are no other representations, agreements or
other undertakings of the parties in
relation to this Transaction, except as set
forth or incorporated by reference in this
Confirmation or in the Agreement.
(m) The parties hereto intend as follows:
(i) This Transaction to be a
"securities contract" as defined in
Section 741(7) of the Bankruptcy
Code, qualifying for the protection
under Section 555 of the Bankruptcy
Code.
(ii) A party's right to liquidate this
Transaction and to exercise any
other remedies upon the occurrence
of any Event of Default under the
Agreement with respect to the other
party to constitute a "contractual
right" as defined in the Bankruptcy
Code.
(iii) Any cash, securities or other
property provided as performance
assurance, credit, support or
collateral with respect to this
Transaction to constitute "margin
payments" as defined in the
Bankruptcy Code.
(iv) All payments for, under or in
connection with this Transaction,
all payments for the Shares and the
transfer of such Shares to
constitute "settlement payments" as
defined in the Bankruptcy Code.
(v) "Bankruptcy Code" means Title 11 of
the United States Bankruptcy Code.
(vi) Upon the execution of this
Confirmation, this Agreement shall
constitute a "Preliminary
Agreement" within the meaning of
the interpretive letter from the
SEC to Goldman, Sachs & Co. dated
December 20, 1999 (the
"Interpretive Letter") and that,
upon the execution of the Final
Pricing Notice, this Agreement
shall constitute a "Final
Agreement" within the meaning of
the Interpretive Letter.
(n) Counterparty hereby agrees that promptly
following the payment of any cash dividend
with respect to the Shares (but in any case
on or prior to the seventh day immediately
following the date of payment of such cash
dividend), there shall be due and
Counterparty shall pay to MLPFS an amount in
cash equal to the aggregate amount of such
cash dividend per Share multiplied by the
Number of Shares.
Representation of
MLPFS: MLPFS hereby represents that it will conduct its
hedging activities as described under the caption
"Initial Hedging Period" above in accordance with the
Interpretive Letter, it being understood that MLPFS
will introduce into the public market a quantity of
securities of the same class equal to the maximum
number of shares deliverable on settlement of this
Transaction in a manner consistent with the
manner-of-sale conditions described in rule 144(f)
and (g) under the Securities Act.
Interpretation: For purposes of the Equity Definitions, this
Transaction will be deemed to be a Physically-settled
Share Option Transaction with an Exercise Date equal
to the Valuation Date.
12
<PAGE>
Please confirm that the foregoing correctly sets forth the terms of
our agreement by executing the copy of this Confirmation enclosed for that
purpose and returning it to us by facsimile transmission to the Attention of:
Vivian Jackson (Telecopier No. 212 449-2697).
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By: /s/ Elisabeth Murphy
-----------------------------
Name: Elisabeth Murphy
Title: Authorized Signatory
Confirmed as of the date first above written:
FEJ HOLDING INC.
By: /s/ Osamu Sato
------------------------------
Name: Osamu Sato
Title: Vice President
13
<PAGE>
ANNEX A
List of Recent Transactions in Shares
Type of Transaction Counterparty Sale Price Quantity Date
- ------------------- ------------- ---------- --------- --------
Sale under Rule 144 CIBC $218.50 1,815,000 12/1/99
<PAGE>
EXHIBIT 2
IRREVOCABLE AUTHORIZATION AND INSTRUCTION
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPFS")
World Financial Center
North Tower
New York, New York 10281-1305
January 27, 2000
Ladies and Gentlemen:
This is in reference to the prepaid forward contract transaction ML Transaction
Ref. _______ (the "Transaction") entered into between MLPFS and FEJ Holdings
Inc. ("FEJH"), as evidenced by the confirmation (the "Confirmation") dated as of
January 27, 2000. The Confirmation supplements, forms part of, and is subject
to, the ISDA Master Agreement (including the Schedule thereto and the Credit
Support Annex incorporated therein), dated as of January 27, 2000 (the
"Agreement"). The Confirmation requires FEJH to pledge shares of common stock of
JDS Uniphase Corporation (the "JDSU Shares") or shares of Exchangeable Shares of
JDS Uniphase Canada Ltd. ("JDSU Canada") to MLPFS as Collateral. Defined terms
used in this Irrevocable Authorization and Instruction (the "Instruction") and
not otherwise defined shall have the same meanings as stated in the
Confirmation.
In accordance with the terms and conditions of the Confirmation and in order to
effect an exchange of a number of Exchangeable Shares (the "Number of
Exchangeables") pledged to MLPFS (the "Pledged Exchangeables") for the Number of
Shares, FEJH hereby irrevocably authorizes and instructs MLPFS (and any
affiliate of MLPFS to which MLPFS may assign its rights and obligations under
the Agreement pursuant to the terms thereof) to take all necessary actions to
effect a "retraction" of the Number of Exchangeables as set forth in Article 6
of the Provisions Attaching to the Exchangeable Shares (the "Provisions"),
including without limitation: the presentation and submission to the transfer
agent for the Exchangeable Shares of a Retraction Request (as defined in the
Provisions) with respect to the Number of Shares designated in the Confirmation
as of the Trade Date; the designation of a Retraction Date (as defined in the
Provisions); and, to the extent necessary, the partial withdrawal of the
Retraction Request with respect to that number (if any) of Exchangeable Shares
that is in excess of the Number of Shares specified in the Final Pricing Notice.
FEJH agrees and covenants that it will not withdraw or cancel (or cause the
withdrawal or cancelation of) any Retraction Request submitted with respect to
the Pledged Exchangeables at any time prior to the Release Date other than
pursuant to the authority granted and instruction given hereby.
Sincerely yours,
FEJ HOLDINGS INC.
By: /s/ Osamu Sato
------------------------------
Name: Osamu Sato
Title: Vice President
Accepted and agreed:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By: /s/ Elisabeth Murphy
---------------------------
Name: Elisabeth Murphy
Title: Authorized Signatory
