Exhibit 1.2
(MULTICURRENCY-CROSS BORDER)
ISDA-Registered Trademark-
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of April 21, 1999
UBS AG and Conseco, 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 purposes of the relevant Transaction.
(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmation form a single agreement
between the parties (collectively referred to as this "Agreement"), and the
parties would not otherwise enter into any Transactions.
2. OBLIGATIONS
(a) GENERAL CONDITIONS.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of
this Agreement.
(ii) Payments under this Agreement will be made on the due date for
value on that date in the place of the account specified in the
relevant Confirmation or otherwise pursuant to this Agreement, in
freely transferable funds and in the manner customary for payments
in the required currency. Where settlement is by delivery (that
is, other than by payment), such delivery will be made for receipt
on the due date in the manner customary for the relevant
obligation unless otherwise specified in the relevant Confirmation
or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to
(1) the condition precedent that no Event of Default or Potential
Event of Default with respect to the other party has occurred and
is continuing, (2) the condition precedent that no Early
Termination Date in respect of the relevant Transaction has
occurred or been effectively designated and (3) each other
applicable condition precedent specified in this Agreement.
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(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 ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required to
be deducted or withheld (including the full amount required to be
deducted or withheld from any additional amount paid by X to Y
under this Section 2(d)) promptly upon the earlier of determining
that such deduction or withholding is required or receiving notice
that such amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified
copy), or other documentation reasonably acceptable to Y,
evidencing such payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to
the payment to which Y is otherwise entitled under this Agreement,
such additional amount as is necessary to ensure that the net
amount actually received by Y (free and clear of Indemnifiable
Taxes, whether assessed against X or Y) will equal the full amount
Y would have received had no such deduction or withholding been
required. However, X will not be required to pay any additional
amount to Y to the extent that it would not be required to be paid
but for:-
(A) the failure by Y to comply with or perform any agreement
contained in Section 4(a)(i), 4(a)(iii) or 4(d); or
(B) the failure of a representation made by Y pursuant to
Section 3(f) to be accurate and true unless such failure
would not have occurred but for (I) any action taken by a
taxing authority, or 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.
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(ii) LIABILITY. If:-
(1) X is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, to make
any deduction or withholding in respect of which X would not be
required to pay an additional amount to Y under Section
2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly
against X,
then, except to the extent Y has satisfied or then satisfies the
liability resulting from such Tax, Y will promptly pay to X the amount of
such liability (including any related liability for interest, but
including any related liability for penalties only if Y has failed to
comply with or perform any agreement contained in Section 4(a)(i),
4(a)(iii) or 4(d)).
(e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:-
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organised and validly existing under the laws
of the jurisdiction of its organisation or incorporation and, if relevant
under such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to
deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to perform
its obligations under this Agreement and any obligations it has under any
Credit Support Document to which it is a party and has taken all
necessary action to authorise such execution, delivery and performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and performance
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, reorganisation,
insolvency, moratorium or similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).
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(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 parry and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule
as being made by it for the purpose of this Section 3(e) is accurate and true.
(f) PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule
as being made by it for the purpose of this Section 3(f) is accurate and true.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:-
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:-
(i) any forms, documents or certificates relating to taxation
specified in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any Confirmation;
and
(iii) upon reasonable demand by such other party, any form or document
that may be required or reasonably requested in writing in order to allow
such other party or its Credit Support Provider to make a payment under
this Agreement or any applicable Credit Support Document without any
deduction or withholding for or on account of any Tax or with such
deduction or withholding at a reduced rate (so long as the completion,
execution or submission of such form or document would not materially
prejudice the legal or commercial position of the party in receipt of
such demand), with any such form or document to be accurate and completed
in a manner reasonably satisfactory to such other party and to be
executed and to be delivered with any reasonably required certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain
in full force and effect all consents of any governmental or other authority
that are required to be obtained by it with respect to this Agreement or any
Credit Support Document to which it is a party and will use all reasonable
efforts to obtain any that may become necessary in the future.
(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 bligations under this
Agreement or any Credit Support Document to which it is a party.
(d) TAX AGREEMENT. It will give notice of any failure of a representation
made by it under Section 3(f) to be accurate and true promptly upon learning of
such failure.
(e) PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated,
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organized, managed and controlled, or considered to have its seat, or in which a
branch or office through which it is acting for the purpose of this Agreement is
located ("Stamp Tax Jurisdiction") and will indemnify the other party against
any Stamp Tax levied or imposed upon the other party or in respect of the other
party's execution or performance of this Agreement by any such Stamp Tax
Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the
other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event of
default (an "Event of Default") with respect to such party:-
(i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when
due, any payment under this Agreement or delivery under Section 2(a)(i)
or 2(e) required to be made by it if such failure is not remedied on or
before the third Local Business Day after notice of such failure is given
to the party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or
perform any agreement or obligation (other than an obligation to make any
payment under this Agreement or delivery under Section 2(a)(i) or 2(e) or
to give notice of a Termination Event or any agreement or obligation
under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or
performed by the party in accordance with this Agreement if such failure
is not remedied on or before the thirtieth day after notice of such
failure is given to the party;
(iii) CREDIT SUPPORT DEFAULT.
(1) Failure by the party or any Credit Support Provider of such
party to comply with or perform any agreement or obligation to be
complied with or performed by it in accordance with any Credit
Support Document if such failure is continuing after any
applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support Document
or the failing or ceasing of such Credit Support Document to be in
full force and effect for the purpose of this Agreement (in either
case other than in accordance with its terms) prior to the
satisfaction of all obligations of such party under each
Transaction to which such Credit Support Document relates without
the written consent of the other party; or
(3) the party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part, or
challenges the validity of, such Credit Support Document;
(iv) MISREPRESENTATION. A representation (other than a representation
under Section 3(e) or (f)) made or repeated or deemed to have been made
or repeated by the party or any Credit Support Provider of such party in
this Agreement or any Credit Support Document proves to have been
incorrect or misleading in any material respect when made or repeated or
deemed to have been made or repeated.
(v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party
(1) defaults under a Specified Transaction and, after giving effect to
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
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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 Specified 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,
staved or restrained, in each case within 30 days thereafter; (8)
causes or is subject to any event with respect to it which, under
the applicable laws of any jurisdiction, has an analogous effect
to any of the events specified in clauses (1) to (7) (inclusive);
or (9) takes any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the foregoing
acts; or
(viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or merges with
or into, or transfers all or substantially all its assets to, another
entity and, at the time of such consolidation, amalgamation, merger or
transfer:-
(1) the resulting, surviving or transferee entity fails to assume
all the obligations of such party or such Credit Support Provider
under this Agreement or any Credit Support Document to which it or
its predecessor was a party by operation of law or pursuant to an
agreement reasonably satisfactory to the other party to this
Agreement; or
(2) the benefits of any Credit Support Document fail to extend
without the consent of the other party) to the performance by such
resulting, surviving or transferee entity of its obligations under
this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any event specified below constitutes an Illegality if
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
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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 tax authority, or
brought in a court of competent jurisdiction, on or after the date on
which a Transaction is entered into (regardless of whether such action is
taken or brought with respect to a party to this Agreement) or (y) a
Change in Tax Law, the party (which will be the Affected Party) will, or
there is a substantial likelihood that it will, on the next succeeding
Scheduled Payment Date (1) be required to pay to the other party an
additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) or (2) receive a payment from which an amount is required to be
deducted or withheld for or on account of a Tax (except in respect of
interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount
is required to be paid in respect of such Tax under Section 2(d)(i)(4)
(other than by reason of Section 2(d)(i)(4)(A) or (B));
(iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the
next succeeding Scheduled Payment Date will either (1) be required to pay
an additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) or (2) receive a payment from which an amount has been deducted or
withheld for or on account of any Indemnifiable Tax in respect of which
the other party is not required to pay an additional amount (other than
by reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of
a party consolidating or amalgamating with, or merging with or into, or
transferring all or substantially all its assets to, another entity
(which will be the Affected Party) where such action does not constitute
an event described in Section 5(a)(viii);
(iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merge" 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 my 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 is an Illegality and will not constitute an Event
of Default.
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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)(l), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying
the nature of that Termination Event and each Affected Transaction and
will also give such other information about that Termination Event as the
other party may reasonably require.
(ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality under
Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected
Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the
Affected Party, the Affected Party will, as a condition to its right to
designate an Early Termination Date under Section 6(b)(iv), use all
reasonable efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20 days
after it gives notice under Section 6(b)(i) all its rights and
obligations under this Agreement in respect of the Affected Transactions
to another of its Offices or Affiliates so that such Termination Event
ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days after
the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be Subject
to and conditional upon the prior written consent of the other party,
which consent will not be withheld if such other party's policies in
effect at such time would permit it to enter into transactions with the
transferee on the terms proposed.
(iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1)
or a Tax Event occurs and there are two Affected Parties, each party will
use all reasonable efforts to reach agreement within 30 days after notice
thereof is given under Section 6(b)(i) on action to avoid that
Termination Event.
(iv) RIGHT TO TERMINATE. If:-
(1) a transfer under Section 6(b)(ii) or an agreement under
Section 6(b)(iii), as the case may be, has not been effected with
respect to all Affected Transactions within 30 days after an
Affected Party gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon
Merger or an Additional Termination Event occurs, or a Tax Event
Upon Merger occurs and the Burdened Party is not the Affected
Party,
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
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continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date so
designated, whether or not the relevant Event of Default or Termination
Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section 2(a)(i)
or 2(e) in respect of the Terminated Transactions will be required to be
made, but without prejudice to the other provisions of this Agreement.
The amount, if any, payable in respect of an Early Termination Date shall
be determined pursuant to Section 6(e).
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable detail,
such calculations (including all relevant quotations and specifying any
amount payable under Section 6(e)) and (2) giving details of the relevant
account to which any amount payable to it is to be paid. In the absence
of written confirmation from the source of a quotation obtained in
determining a Market Quotation, the records of the party obtaining such
quotation will be conclusive evidence of the existence and accuracy of
such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day that
notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event,
of Default) and on the day which is two Local Business Days after the day
on which notice of the amount payable is effective (in the case of an
Early Termination Date which is designated as a result of a Termination
Event). Such amount will be paid together with (to the extent permitted
under applicable law) interest thereon (before as well as after judgment)
in the Termination Currency, from (and including) the relevant Early
Termination Date to (but excluding) the date such amount is paid, at the
Applicable Rate. Such interest will be calculated on the basis of daily
compounding and the actual number of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) EVENTS OF DEFAULT. If the Early Termination Date results from an
Event of Default:-
(1) First Method and Market Quotation. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A) the
sum of the Settlement Amount (determined by the Non-defaulting
Party) in respect of the Terminated Transactions and the
Termination Currency Equivalent of the Unpaid Amounts owing to the
Non-defaulting Party over (B) the Termination Currency Equivalent
of the Unpaid Amounts owing to the Defaulting Party.
(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
9
Non-defaulting Party) in respect of the Terminated Transactions
and the Termination Currency Equivalent of the Unpaid Amounts
owing to the Non-defaulting Party less (B) the Termination
Currency Equivalent of the Unpaid Amounts owing to the Defaulting
Party. If that amount is a positive number, the Defaulting Party
will pay it to the Non-defaulting Party; if it is a negative
number, the Non-defaulting Party will pay the absolute value of
that amount to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply,
an amount will be payable equal to the Non-defaulting Party's Loss
in respect of this Agreement. If that amount is a positive number,
the Defaulting Party will pay it to the Non-defaulting Party; if
it is a negative number, the Non-defaulting Party will pay the
absolute value of that amount to the Defaulting Party.
(ii) TERMINATION EVENTS. If the Early Termination Date results from a
Termination Event:-
(1) ONE AFFECTED PARTY. If there is one Affected Party, the
amount payable will be determined in accordance with Section
6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if
Loss applies, except that, in either case, references to the
Defaulting Party and to the Non-defaulting Party will be deemed to
be references to the Affected Party and the party which is not the
Affected Party, respectively, and, if Loss applies and fewer than
all the Transactions are being terminated, Loss shall be
calculated in respect of all Terminated Transactions.
(2) TWO AFFECTED PARTIES. If there are two Affected Parties:-
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions,
and an amount will be payable equal to (I) the sum of (a)
one-half of the difference between the Settlement Amount of
the party with the higher Settlement Amount ("X") and the
Settlement Amount of the party with the lower Settlement
Amount ("Y") and (b) the Termination Currency Equivalent of
the Unpaid Amounts owing to X less (II) the Termination
Currency Equivalent of the Unpaid Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the
Transactions are being terminated, in respect of all
Terminated Transactions) and an amount will be payable equal
to one-half of the difference between the Loss of the party
with the higher Loss ("X") and the Loss of the party with the
lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if
it is a negative number, X will pay the absolute value of that
amount to Y.
(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will be
subject to such adjustments as are appropriate and permitted by law to
reflect any payments or deliveries made by one party to the other under
this Agreement (and retained by such other party) during the period from
the relevant Early Termination Date to the date for payment determined
under Section 6(d)(ii).
(iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies
an amount recoverable under this Section 6(e) is a reasonable
pre-estimate of loss and not a penalty. Such amount is payable for the
loss of 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.
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7. TRANSFER
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:-
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in
any amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. CONTRACTUAL CURRENCY
(a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement
will be made in the relevant currency specified in this Agreement for that
payment (the "Contractual Currency"). To the extent permitted by applicable law,
any obligation to make payments under this Agreement in the Contractual Currency
will not be discharged or satisfied by any tender in any currency other than the
Contractual Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting in a reasonable manner and
in good faith in converting the currency so tendered into the Contractual
Currency, of the full amount in the Contractual Currency of all amounts payable
in respect of this Agreement. If for any reason the amount in the Contractual
Currency so received falls short of the amount in the Contractual Currency
payable in respect of this Agreement, the party required to make the payment
will, to the extent permitted by applicable law, immediately pay such additional
amount in the Contractual Currency as may be necessary to compensate for the
shortfall. If for any reason the amount in the Contractual Currency so received
exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount of
such excess.
(b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such party.
The term "rate of exchange" includes, without limitation, any premiums and costs
of exchange payable in connection with the purchase of or conversion into the
Contractual Currency.
(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums payable in respect of this
Agreement.
(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.
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9. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts (including
by facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable
and may be executed and delivered in counterparts (including by facsimile
transmission) or be created by an exchange of telexes or by an exchange
of electronic messages on an electronic messaging system, which in each
case will be sufficient for all purposes to evidence a binding supplement
to this Agreement. The parties will specify therein or through another
effective means that any such counterpart, telex or electronic message
constitutes a Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power
or privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. OFFICES; MULTIBRANCH PARTIES
(a) If Section 10(a) is specified in the Schedule as applying, each party
that enters into a Transaction through an Office other than its head or home
office represents to the other party that, notwithstanding the place of booking
office or jurisdiction of incorporation or organisation of such party, the
obligations of such party are the same as if it had entered into the Transaction
through its head or home office. This representation will be deemed to be
repeated by such party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a Transaction
will be specified in the relevant Confirmation.
11. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document
12
to which the Defaulting Party is a party or by reason of the early termination
of any Transaction, including, but not limited to, costs of collection.
12. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:-
(i) if in writing and delivered in person or by courier, on the date
it is delivered;
(ii) if sent by telex, on the date the recipient's answerback is
received;
(iii) if sent by facsimile transmission, on the date that transmission
is received by a responsible employee of the recipient in legible form
(it being agreed that the burden of proving receipt will be on the sender
and will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or
the equivalent (return receipt requested), on the date that mail is
delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that
electronic message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating
tothis 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 ▇▇▇ ▇▇▇▇ 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
13
reason any party's Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a substitute process
agent acceptable to the other party. The parties irrevocably consent to service
of process given in the manner provided for notices in Section 12. Nothing in
this Agreement will affect the right of either party to serve process in any
other manner permitted by law.
(d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest
extent permitted by applicable law, with respect to itself and its revenues and
assets (irrespective of their use or intended use), all immunity on the grounds
of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. DEFINITIONS
As used in this Agreement:-
"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).
"AFFECTED PARTY" has the meaning specified in Section 5(b).
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"APPLICABLE RATE" means:-
(a) in respect of obligations payable or deliverable (or which would have
been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of
either party from and after the date (determined in accordance with Section
6(d)(ii)) on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which
would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the
Non-default Rate; and
(d) in all other cases, the Termination Rate.
"BURDENED PARTY" has the meaning specified in Section 5(b).
"CHANGE IN TAX LAW" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
"CONSENT" includes a consent, approval, action, authorisation, 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 l% per annum.
14
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"ILLEGALITY" has the meaning specified in Section 5(b).
"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"LAWFUL" and "UNLAWFUL" will be construed accordingly.
"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and. if
different. in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.
"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3)
or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and
out-of-pocket expenses referred to under Section 11. A party will determine its
Loss as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.
"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have
15
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 (with regard to different time zones) on or as soon as
reasonably practicable after the relevant Early Termination Date. The day and
time as of which those quotations are to be obtained will be selected in good
faith by the party obliged to make a determination under Section 6(e), and, if
each party is so obliged, after consultation with the other. If more than three
quotations are provided, the Market Quotation will be the arithmetic mean of the
quotations, without regard to the quotations having the highest and lowest
values. If exactly three such quotations are provided, the Market Quotation will
be the quotation remaining after disregarding the highest and lowest quotations.
For this purpose, if more than one quotation has the same highest value or
lowest value, then one of such quotations shall be disregarded. If fewer than
three quotations are provided, it will be deemed that the Market Quotation in
respect of such Terminated Transaction or group of Terminated Transactions
cannot be determined.
"NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"NON-DEFAULTING PARTY" has the meaning specified in Section 6(a).
"OFFICE" means a branch or office of a party, which may be such party's head or
home office.
"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"RELEVANT JURISDICTION" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organised, 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.
16
"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 (of any Credit Support Provider of such other parry or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"STAMP TAX" means any stamp, registration, documentation or similar tax.
"TAX" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"TAX EVENT" has the meaning specified in Section 5(b).
"TAX EVENT UPON MERGER" has the meaning specified in Section 5(b).
"TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"TERMINATION CURRENCY" has the meaning specified in the Schedule.
"TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in 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
17
value of that which was (or would have been) required to be delivered as of the
originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or would
have been required to have been paid or performed to (but excluding) such Early
Termination Date, at the Applicable Rate. Such amounts of interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b) above
shall be reasonably determined by the party obliged to make the determination
under Section 6(e) or, if each party is so obliged, it shall be the average of
the Termination Currency Equivalents of the fair market values reasonably
determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
UBS AG CONSECO, INC.
----------------------------------- ------------------------------------------
(Name of Party) (Name of Party)
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------- ------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Legal Counsel Title: Senior Vice President,
Date: April 21, 1999 Chief Accounting Officer
and Treasurer
Date: April 21, 1999
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
Title: Associate Director
Date: April 21, 1999
SCHEDULE
to the Master Agreement
dated as of April 21, 1999
between
UBS AG, a bank organized and CONSECO, Inc. a corporation
under the laws of Switzerland organized under the laws of the
State of Indiana
("Party A") ("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), Any Affiliate of Party A
Section 5(a)(vi), NONE
Section 5(a)(vii), NONE
Section 5(b)(iv), NONE
and in relation to Party B for the purpose of:
Section 5(a)(v), NONE
Section 5(a)(vi), NONE
Section 5(a)(vii), NONE
Section 5(b)(iv), NONE
(b) "Specified Transaction" will have the meaning specified in Section 14
of this Agreement and shall also include any Additional Specified Transactions.
As used herein, Additional Specified Transaction means repurchase agreements,
reverse repurchase agreements, securities lending agreements, forward contracts,
precious metals transactions, letters of credit reimbursement obligations and
indebtedness for borrowed money (whether or not evidenced by a note or similar
instrument) now existing or hereafter entered into between a 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),
(c) The "Cross Default" provisions of Section 5(a)(vi) f this Agreement,
as modified below, will apply to Party A and to Party B. Section 5(a)(vi) of
this Agreement is hereby amended by the addition of the following at the end
thereof:
"provided, however, that notwithstanding the foregoing, an Event of
Default shall not occur under either (1) or (2) above if, as demonstrated to the
reasonable satisfaction of the other party, (a) the event or condition referred
to in (1) or the failure to pay referred to in (2) is a failure to pay caused by
an error or omission of an administrative or operational nature; and (b) funds
were available to such party to enable it to make the relevant payment when due;
and (c) such relevant
1
payment is made within three Business Days following
receipt of written notice from an interested party of such failure to pay."
If such provisions apply:
"Specified Indebtedness" means any obligation (whether present or
future, contingent or otherwise, as principal or surety or otherwise) for the
payment or repayment of any money.
"Threshold Amount" means:
(i) with respect to Party A , or any Specified Entity, an amount
equal to 2% of shareholders' equity (howsoever described) of
Party A or the relevant Specified Entity as shown on the most
recent annual audited financial statements of Party A or the
relevant Specified Entity and
(ii) with respect to Party B, an amount equal to 2% of shareholders'
equity (howsoever described) of Party B as shown on the most
recent annual audited financial statements of Party B.
(d) The "Credit Event Upon Merger" provisions of Section 5(b)(iv) will
apply to Party A and Party B, amended as follows:
"Credit Event Upon Merger' shall mean that a Designated Event (as
defined below) occurs with respect to a party, any Credit Support Provider of
the party or any applicable Specified Entity (any such party or entity, "X"),
and such Designated Event does not constitute an event described in Section
5(a)(viii) but the creditworthiness of X, or, if applicable, the successor,
surviving or transferee entity of X, is materially weaker than that of X
immediately prior to such event. In any such case the Affected Party shall be
the party with respect to which, or with respect to the Credit Support Provider
or Specified Entity of which, the Designated Event occurred, or, if applicable,
the successor, surviving or transferee entity of such party. For purposes
hereof, a Designated Event means that, after the date hereof:
(i) X consolidates, amalgamates with or merges with or into, or
transfers all or substantially all its assets to, or receives all
or substantially all the assets or obligations of, another
entity; or
(ii) any person or entity acquires directly or indirectly the
beneficial ownership of equity securities having the power to
elect a majority of the board of directors of X or otherwise
acquires directly or indirectly the power to control the
policy-making decisions of X."
(e) The "Automatic Early Termination" provision of Section 6(a) will not
apply to 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 one of the currencies in which payments
are required to be made pursuant to a Confirmation in respect of a Terminated
Transaction selected by the Non-Defaulting Party or the Non-Affected Party, as
the case may be, or, in the circumstances where there are two Affected Parties,
as agreed between the parties or, failing such agreement, if
2
the currency so selected is not freely available, the Termination Currency shall
be U.S. Dollars.
(h) "Additional Termination Event" will apply to Party A and Party B.
The following shall constitute an Additional Termination Event: At any time the
rating issued by Standard & Poor's Ratings Services, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. ("S&P") or Duff & ▇▇▇▇▇▇ Ratings Co. ("Duff &
▇▇▇▇▇▇"), with respect to the long-term unsecured, unsubordinated debt
securities ("Debt Securities") of either Party A or Party B is below BB+ in the
case of S&P or Duff & ▇▇▇▇▇▇. If one of the foregoing credit rating agencies
ceases to be in the business of rating Debt Securities and such business is not
continued by a successor or assign of such agency (the "Discontinued Agency"),
Party A and Party B shall jointly and in good faith (i) select a credit rating
agency in substitution thereof and (ii) agree on the rating level issued by such
substitute agency that is equivalent to the ratings specified herein of the
Discontinued Agency, whereupon such substitute agency and equivalent rating
shall replace the Discontinued Agency and the rating level thereof for the
purposes of this Agreement. If at any time, all of the agencies specified have
become Discontinued Agencies and Party A and Party B have not previously agreed
in good faith on at least one agency and equivalent rating in substitution for
the Discontinued Agency and the applicable rating thereof, the foregoing shall
cease to constitute an Additional Termination Event.
Part 2
Tax Representations
(i) Payer Tax Representation. For the purpose of Section 3(e), Party A and
Party B hereby 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)) to
be made by it to the other party under this Agreement. In making this
representation, it may rely on: (A) the accuracy of any representation
made by the other party pursuant to Section 3(f); (B) the satisfaction
of the agreement of the other party contained in Section 4(a)(i) or
4(a)(iii) and the accuracy and effectiveness of any document provided
by the other party pursuant to Section 4(a)(i) or 4(a)(iii); and (C)
the satisfaction of the agreement of the other party contained in
Section 4(d); provided that it shall not be a breach of this
representation where reliance is placed on clause (B) 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.
(ii) Payee Tax Representations. For the purpose of Section 3(f), Party A
makes the representation(s) specified below:
(A) The following representation will apply with respect to each
Transaction effectuated by an Office of Party A not located in
the United States of America and the Office of Party B which is
located in the United States of America:
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.
3
If such representation applies, then:
"Specified Treaty" means, with respect to a Transaction, the tax
treaty applicable between the United States of America and
Switzerland; and
"Specified Jurisdiction" means the United States of America.
Party A is a 'financial institution' and a 'non-U.S. branch of a
foreign person' as those terms are used in section
1.1441-4(a)(3)(ii) of United States Treasury Regulations (as
contained in Treasury Decision 8734 (October 6, 1997) ("TD
8734")), and Party A is a 'foreign person' as that term is used
in section 1.6041-4(a)(4) of TD 8734.
(B) The following representation will apply with respect to each
Transaction effectuated between an Office of Party A and an
Office of Party B located in the United States of America in both
cases:
Each payment received or to be received by Party A in connection
with this Agreement will be effectively connected with its
conduct of a trade or business in the United States of America.
(iii) Payee Tax Representations. For the purpose of Section 3(f), Party B
makes the representation(s) specified below:
(A) It is a corporation duly organized and incorporated under the
laws of the State of Indiana and is not a foreign corporation for
United States tax purposes.
Part 3
Agreement to Deliver Documents
For the purpose of Sections 3(d), 4(a)(i) and 4(a)(ii) of this Agreement, each
party agrees to deliver the following documents:
(a) Tax forms, documents or certificates to be delivered are:
Each party agrees to complete, accurately and in a manner reasonably
satisfactory to the other party (or any Specified Entity of the other party),
and to execute, arrange for any required certification of, and deliver to the
other party (or such Specified Entity) (or to such government or taxing
authority as the other party (or such Specified Entity) reasonably directs), any
form or document that may be required or reasonably requested in order to allow
the other party (or such Specified Entity) to make a payment under this
Agreement (or a Credit Support Document of the other party or a Specified Entity
thereof) without any deduction or withholding for or on account of any Tax or
with such deduction or withholding at a reduced rate, promptly upon the earlier
of (i) reasonable demand by the other party (or such Specified Entity) and (ii)
learning that the form or document is required.
4
(b) Other documents to be delivered are:
Party required Covered by
to deliver Date by which to Section 3(d)
document Form/Document/Certificate be delivered Representation
Party A and Evidence of the authority and On or before Yes
Party B true signatuares of each official execution of this
or representative signing this Agreement and, if
Agreement or, as the case may requested by the
be, a Confirmation, on its other party each
behalf. Confirmation
forming a part of
this Agreement.
Party B Certified copy of the resolution On or before Yes
of Party B's Board of Directors execution of this
(or equivalent authorizing Agreement.
documentation) authorizing the
execution and delivery of this
Agreement and each
Confirmation and performance
of its obligation hereunder.
Party B Opinion of Party B's legal On or before Yes
counsel in a form satisfactory execution of this
to Party A regarding (inter alia) Agreement.
the power and authority of
Party B to enter into this
Agreement and Transactions
hereunder.
Party A Tax forms 1001 and 4224 On or before Yes
execution of this
Agreement.
Part 4
Miscellaneous
(a) Addresses for Notices. For the purposes of Section 12(a) of this
Agreement:
(i) All notices or communications to Party A shall, with respect to a
particular Transaction, be sent to the address, telex number, or
facsimile number reflected in the Confirmation of that Transaction, and
any notice for purposes of Sections 5 or 6 shall be sent to:
Address: UBS AG, Stamford Branch, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Legal Affairs Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: UBS AG, Legal Services, ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇,
CH-270.3.004.646-4, Switzerland, (Fax) ▇▇▇ ▇ ▇▇▇ ▇▇▇▇
5
(ii) All notices or communications to Party B shall be sent to the
address, or facsimile number reflected below:
Address: Conseco, Inc. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇, CFA
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone No: (▇▇▇) ▇▇▇-▇▇▇▇
Copies to:
▇▇▇▇▇ ▇▇▇▇▇, Treasurer
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇, Phone: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇, General Counsel
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇, Phone: (▇▇▇) ▇▇▇-▇▇▇▇
(b) Process Agent. For the purpose of Section 13(c) of this Agreement:
Party A appoints as its Process Agent: Not Applicable.
Party B appoints as its Process Agent: Not Applicable.
(c) Offices. The provisions of Section 10(a) of this Agreement will
apply to Party A and Party B.
(d) Multibranch Party. For the purpose of Section 10(c) of this Agreement:
(i) Party A is a Multibranch Party and may act through its branches
in any of the following countries: England and Wales and the
United States of America.
(ii) Party B is not a Multibranch Party.
(e) Calculation Agent. The Calculation Agent is Party A, unless an Event
of Default or Potential Event of Default has occurred and is continuing with
respect to Party A or otherwise specified in a Confirmation in relation to the
relevant Transaction, in which case both parties will negotiate in good faith
and appoint a mutually acceptable third party dealer as Calculation Agent. All
determinations by the Calculation Agent are subject to agreement by Party A and
Party B. If the parties are unable to agree on a particular calculation, another
mutually acceptable third-party Calculation Agent which is a dealer in the
relevant market will be appointed.
(f) Credit Support Document. Not Applicable.
(g) Credit Support Provider. Credit Support Provider means: Not Applicable.
(h) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York.
(i) Netting of Payments. Subparagraph (ii) of Section 2(c) of this
Agreement will apply, except the following groups of Transactions: (1) foreign
exchange transactions and currency
6
options, in which case subparagraph (ii) of Section 2(c) of this Agreement will
not apply.
(j) "Affiliate" will have the meaning specified in Section 14 of this
Agreement with respect to Party B and for Party A shall mean any subsidiary
consolidated for financial reporting purposes in the group financial statements
as presented in the annual report of Party A.
Part 5
Other Provisions
(a) Set-off. Without affecting the provisions of the Agreement requiring
the calculation of certain net payment amounts, all payments under this
Agreement will be made without set-off or counterclaim; provided, however, that
upon the designation of any Early Termination Date, in addition to and not in
limitation of any other right or remedy (including any right to set off,
counterclaim, or otherwise withhold payment or any recourse to any Credit
Support Document) under applicable law the Non- defaulting Party or Non-affected
Party (in either case, "X") may without prior notice to any person set off any
sum or obligation (whether or not arising under this Agreement and whether
matured or unmatured, whether or not contingent and irrespective of the
currency, place of payment or booking office of the sum or obligation) owed by
the Defaulting Party or Affected Party (in either case, "Y") to X or any
Affiliate of X against any sum or obligation (whether or not arising under this
Agreement, whether matured or unmatured, whether or not contingent and
irrespective of the currency, place of payment or booking office of the sum or
obligation) owed by X or any Affiliate of X to Y and, for this purpose, may
convert one currency into another at a market rate determined by X. If any sum
or obligation is unascertained, X may in good faith estimate that sum or
obligation using available market input, and set-off in respect of that
estimate, subject to X or Y, as the case may be, accounting to the other party
when such sum or obligation is ascertained. X will give notice to Y of any
set-off effected under this provision.
(b) Representations. Section 3(a) is amended by adding the following
paragraphs (vi), (vii), (viii) and (ix):
(vi) No Agency. It is entering into this Agreement and each
Transaction as principal (and not as agent or in any other capacity,
fiduciary or otherwise).
(vii) Eligible Swap Participant. It is an "eligible swap participant"
as that term is defined by the United States Commodity Futures Trading
Commission in 17 C.F.R.ss.35.1(b)(2) and it has entered into this
Agreement and it is entering into each Transaction in connection with
its line of business (including financial intermediation services) or
the financing of its business; and the material terms of this Agreement
and such Transaction have been individually tailored and negotiated.
(viii) Compliance with Internal Investment Policies. In the case of
Party B, each Transaction entered into under this Agreement will be
entered into in accordance with, and will at all times comply with,
applicable internal investment policies and guidelines from time to
time adopted by Party B; and
(ix) Purpose. In the case of Party B, it has entered into this
Agreement (and it will enter into each Transaction hereunder) in
connection with exchange rate, interest rate or other price exposures
arising in the conduct or financing of its business or in order to
manage its assets or liabilities.
(c) Relationship Between Parties. Each party will be deemed to represent
to the other party
7
on the date on which it enters into a Transaction that (absent a written
agreement between the parties that expressly imposes affirmative obligations to
the contrary for that Transaction):
(i) Non-Reliance. It is cting for its own account, and it has made
its own independent decisions to enter into that Transaction and as to
whether that Transaction is appropriate or proper for it based upon its
own judgment and upon advice from such advisers as it has deemed
necessary. It is not relying on any communication (written or oral) of
the other party as investment advice or as a recommendation to enter
into that Transaction; it being understood that information and
explanations related to the terms and conditions of a Transaction shall
not be considered investment advice or a recommendation to enter into
that 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 that Transaction.
(ii) Assessment and Understanding. It is capable of assessing the
merits of and understanding (on its own behalf or through independent
professional advice), and understands and accepts the terms, conditions
and risks of that Transaction. It is also capable of assuming, and
assumes, the risks of that Transaction.
(iii) Status of Parties. The other party is not acting as a fiduciary
for or an adviser to it in respect of that Transaction.
(d) Waiver of Jury Trial. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY TRANSACTION AND ACKNOWLEDGES THAT THIS WAIVER
IS A MATERIAL INDUCEMENT TO THE OTHER PARTY'S ENTERING INTO THIS AGREEMENT.
(e) Consent to Recording. Each Party (i) consents to the recording of all
telephone conversations between trading, operations and marketing personnel of
the parties and their Affiliates in connection with this Agreement or any
potential Transaction; (ii) agrees to give notice to such personnel of it and
its Affiliates that their calls will be recorded; and (iii) agrees that in any
Proceedings, it will not object to the introduction of such recordings in
evidence on grounds that consent was not properly given.
(f) Scope of Agreement. Upon the effectiveness of this Agreement, unless
otherwise agreed to in writing by the parties to this Agreement with respect to
specific Specified Transactions, all Specified Transactions then outstanding or
any future Specified Transactions between Offices of the parties listed in Part
4(d) shall be subject to the terms hereof, with the exception of any Additional
Specified Transaction, and each such Specified Transaction shall be a
"Transaction" for purposes of this Agreement.
(g) Tax Event. Section 5(b)(ii) of this Agreement is hereby amended by the
deletion of "or there is a substantial likelihood that it will," from line four
thereof.
(h) Agreements. Section 4 of this Agreement is hereby amended by the
addition of Section 4(f) as follows:
"(f) Physical Delivery. In respect of any physically settled
Transactions, it will, at the time of delivery, be the legal and
beneficial owner, free of liens and other encumbrances, of any
securities or commodities it delivers to the other party; and, in
addition, with respect to any breach of this Section 4(f), Section
5(a)(ii) of this Agreement is hereby amended by the insertion of a
period after "Agreement" on the fifth line and the deletion of the
remainder of
8
the Section.
(i) Transactions governed by FRABBA Terms. Any forward rate agreement into
which the parties have entered and in respect of which the confirmation or other
confirming evidence refers to or incorporates the British Bankers' Association
London Interbank Forward Rate Agreements Recommended Terms and Conditions (1985
edition) ("FRABBA Terms") will be governed by this Agreement. Any forward rate
agreement into which the parties may enter and in respect of which the
confirmation or other confirming evidence refers to or incorporates the FRABBA
Terms will be governed by this Agreement in all circumstances except when the
parties expressly agree otherwise. Each such transaction will be deemed to be a
Transaction and each such confirmation or other confirming evidence will be
deemed to constitute a Confirmation for purposes of this Agreement. Sections B,
C and E and clauses 1, 4, 5 and 6 of Section D of the FRABBA Terms are hereby
incorporated by reference in this Agreement. Those Sections are applicable only
to Transactions to which this provision relates and will prevail in the event of
any inconsistency with any other provision of this Agreement. In the event of
any other inconsistency between the FRABBA Terms and this Agreement, this
Agreement will govern. Clauses 2, 3, 7, 8, 9 and 10 of Section D of the FRABBA
Terms are not applicable to any Transactions to which this provision relates.
Part 6
Foreign Exchange Transactions and Currency Options
Notwithstanding anything to the contrary in this Agreement, the following
provisions shall apply with respect to FX Transactions and Currency Options.
Unless otherwise specified by the parties hereof, any "FX Transactions" and
"Currency Options" entered into by such parties shall be deemed to be
Transactions, and Specified Transactions, as the case may be, for the purposes
of this Agreement:
(a) Incorporation of the FX Definitions
The provisions of the 1998 FX and Currency Option Definitions (as
published by the International Swaps and Derivatives Association, Inc.
(the Emerging Markets Traders Association and the Foreign Exchange
Committee) (the "1998 FX Definitions") are hereby incorporated in their
entirety and shall (unless, in relation to a particular Transaction, as
otherwise specified in the relevant Confirmation) apply to any FX
Transaction or Currency Option entered into by the parties hereto. In
relation to any such FX Transaction or Currency Option and in the event
of any inconsistency between the provisions of the 1998 FX Definitions
and the provisions of the 1992 ISDA FX and Currency Option Definitions as
published by the International Swaps and Derivatives Association, Inc.
(the "1992 FX Definitions"), the 1998 FX Definitions shall prevail (such
1992 FX Definitions and 1998 FX Definitions collectively referred to
herein as the "FX Definitions").
The provisions of the 1992 FX Definitions are hereby incorporated herein
in their entirety and shall in relation to a particular Transaction if so
specified in the relevant Confirmation, apply to such FX Transaction or
Currency Option entered into by the parties hereto. In relation to any
such FX Transaction or Currency Option and in the event of any
inconsistency between the provisions of the 1992 FX Definitions and
provisions of the 1998 FX Definitions, the 1992 FX Definitions shall
prevail. In the event of any inconsistency between the provisions of: (i)
the 1992 FX Definitions and/or the 1998 FX Definitions and (ii) this Part
6 of the Schedule, this Part 6 will prevail.
9
(b) Amendments to the FX Definitions
The following amendments are made to the FX Definitions:
With respect to all FX Transactions and Currency Options:
Section 1.2 of the 1992 FX Definitions is hereby amended by adding
the following new sub-section "(c)":
"Currency" means money denominated in the lawful currency of any
country or any "composite currency" such as the European Currency
Unit."
With respect to all Currency Options:
A. Section 2.2 of the 1992 FX Definitions is amended by the addition
of the following definitions with respect to Currency Options:
"Call Option" means a Currency Option entitling, but not
obligating, the Buyer to purchase from the Seller at the Strike
Price a specified quantity of the Call Currency;
"Put Option" means a Currency Option entitling, but not
obligating, the Buyer to sell to the Seller at the Strike Price a
specified quantity of the Put Currency.
B. Section 2.2(k) of the 1992 FX Definitions is amended by the
deletion of the word "facsimile," in the third line thereof.
(c) Foreign Exchange Contract Netting Agreement
This Agreement supersedes and cancels the terms of all Foreign Exchange
contract(s) and/or netting agreement(s) ("the Prior Agreement(s)") entered into
between the parties. Such Prior Agreement(s) shall cease to have effect as of
the date of this Master Agreement but without prejudice to any rights and
liabilities which may have arisen under the Prior Agreement(s) prior to the date
hereof and which have not been replaced by this Agreement.
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.
UBS AG CONSECO, INC.
PARTY A PARTY B
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------- -----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Legal Counsel Title: Senior Vice President,
Date: April 21, 1999 Chief Accounting Officer
and Treasurer
Date: April 21, 1999
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
Title: Associate Director
Date: April 21, 1999
10
CONFIRMATION
Date: June 29, 1999
To: Conseco, Inc. ("Party B")
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Senior Vice President and Treasurer
Phone: (317) ▇▇▇- ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
From: UBS AG, London Branch ("Party A")
Re: Equity Forward Confirmation
Reference Number: _____________
The purpose of this communication is to confirm the terms and conditions of the
forward transaction (the "Transaction") entered into between us on the Trade
Date specified below. This communication constitutes a "Confirmation" as
referred to in the 1992 ISDA Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (the "Swap
Definitions") and the 1996 ISDA Equity Derivatives Definitions (the Equity
Definitions and, together with the Swap Definitions, the "Definitions"), each 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 the Definitions and this
Confirmation, this Confirmation will govern.
This Confirmation supplements, forms part of, and is subject to, the ISDA Master
Agreement dated as of April 21, 1999 (the "Agreement") between Party B and Party
A. All provisions contained in the Agreement govern this confirmation except as
expressly modified below.
The terms of the Transaction to which this Confirmation relates are as follows:
General
-------
Type of Transaction : Share Forward Transaction
Trade Date : June 29, 1999 (time of execution available upon
request)
Effective Date : The Closing Date (if any) under the Purchase
Agreement
Termination Date : December 15, 1999, as it may be extended as
provided elsewhere in this Confirmation, or if
such day is not an Exchange Business Day, the next
succeeding day that is an Exchange Business Day
Buyer : Party B
Seller : Party A
Shares : Common Stock of Conseco, Inc. (Symbol: CNC)
Initial Number
of Shares : The number of Purchased Shares (as defined in the
Purchase Agreement)
Current Number
of Shares : At any time, the Initial Number of Shares less the
aggregate Number of Terminated Shares at that
time, determined as of the end of the most recent
Business Day
Number of
Terminated Shares : In respect of any early termination hereunder,
(i) the proceeds, net of Commission, of Party A's
sales of Purchased Shares pursuant to Party B's
Direction to Sell divided by (ii) the Forward
Price Per Share
Forward Price
per Share : The Purchase Price (as defined in the Purchase
Agreement)
Total Forward Price : At any time, the Current Number of Shares at that
time multiplied by the Forward Price per Share
Direction to Sell : As defined in the Purchase Agreement
Averaging Period : As defined under Settlement Terms, below
Purchase Agreement : The Purchase Agreement among Party A, Party B and
WDR, dated as of June 29, 1999
Purchased Shares : The Shares sold by Party B to WDR pursuant to the
Purchase Agreement and immediately transferred by
WDR to Party A
WDR : Warburg Dillon Read LLC, which shall serve as
Party A's selling agent in respect of Party A's
sales of Shares
Exchange : New York Stock Exchange
Related Exchange : Any exchange on which options with respect to the
Shares are traded
Calculation Agent : Party A, subject to Section 4(e) of the Schedule
to the Agreement
Clearance System : The Depository Trust Company
Commission : $ 0.05 per Share, for each Share (as defined in
the Purchase Agreement) sold by Party A.
Parallel Termination : If the Purchase Agreement is terminated for any
reason before the purchase and sale of the
Purchased Shares contemplated therein is
consummated, this Confirmation and the Transaction
hereby confirmed shall likewise be terminated, and
neither party shall have any further obligation
hereunder.
Dividend Payment
----------------
Dividend Amount
Payer : Party A
Dividend Amount
Payee : Party B
Dividend Payment
Dates : The Floating Rate Payer Payment Date for each
Calculation Period during which an Applicable
Dividend is paid by Party B, provided that if an
Applicable Dividend is paid by Party B after the
termination of the Transaction, the Dividend
Payment Date in respect of that dividend shall be
the second Business Day after receipt thereof by
Party A
Dividend Amount : The per-share amount of an Applicable Dividend
multiplied by the aggregate number of Purchased
Shares, Payment Shares and Make- whole Shares of
which Party A or its nominee is the record holder
on the record date for such Applicable Dividend
(after giving effect to any sales of Purchased
Shares, Payment Shares or Make-whole Shares that
are settled on the record date)
3
Applicable Dividend : Each dividend paid in respect of the Shares the
ex-dividend date of which occurs during the
Dividend Period
Dividend Period : The period from and including the second Exchange
Business Day before the Effective Date to and
including the Termination Date or any Early End
Date on which the Transaction (or such portion of
the Transaction as remains after any previous
terminations in part) is terminated in whole,
provided that if Party A holds Payment Shares
or Make-whole Shares after such termination, the
Dividend Period shall be extended until Party A
has disposed of all such Shares
Floating Rate Payments
-----------------------
Floating Rate Payer : Party B
Floating Rate Payee : Party A
Initial Notional
Amount : The Total Forward Price on the Effective Date
Current Notional
Amount : At any time, the Total Forward Price at that time,
provided that for this purpose the Current Number
of Shares shall be reduced in respect of each sale
by Party A of Purchased Shares in the Averaging
Period by a number equal to the net proceeds of
such sale divided by the Forward Price per Share,
and provided further that no reduction (whether in
respect of a sale of Shares in the Averaging
Period or otherwise) shall take effect until Party
A has received the net proceeds of such sale.
Final Calculation
Period : The last day of the final Calculation Period
shall be the date on which Party A has received
the net proceeds of all sales of Purchased Shares
during the Averaging Period.
Floating Amount : For any day in a Calculation Period, the result of
multiplying (i) the Current Notional Amount on
that day by (ii) the sum of the Floating Rate for
that Calculation Period and the Spread by (iii)
the Floating Rate Day Count Fraction
4
Floating Rate Option : USD-LIBOR-BBA
Designated Maturity : 1 month
Spread : plus 0.65%
Floating Rate for
Initial Calculation
Period : To be determined by Party A two London Banking
Days before the Effective Date and advised to
Party B
Floating Rate Day
Count Fraction : 1/360 for each day in the Calculation Period. (See
"Daily Basis" below)
Reset Dates : The first day of each Calculation Period
Floating Rate Payer
Payment Dates : Monthly, on the calendar date corresponding to the
Closing Date, and on the Termination Date, subject
to adjustment in accordance with the Business Day
Convention specified below.
Business Day
Convention : Modified Following
Daily Basis : Floating Amounts hereunder shall be calculated on
a daily basis and paid on each Floating Rate Payer
Payment Date.
Settlement Terms
----------------
Settlement : The Transaction will be physically settled;
provided, however, that Party B may elect to
require that the Transaction be net share settled
by giving an irrevocable notice to Party A no
later than ten Exchange Business Days before the
Termination Date.
Settlement Date : Three Clearance System Business Days after the
Termination Date
Physical Settlement : If the Transaction is to be physically settled, on
the Settlement Date the Seller shall deliver to
the Buyer the Current Number of Shares at
5
the Termination Date against payment in
immediately available U.S. funds by the Buyer to
the Seller of an amount equal to the Total Forward
Price.
Net Share Settlement : If the Transaction is to be net share settled, the
following provisions shall apply (subject to
"Termination on Satisfaction in Full," below):
(a) If the Forward Price per Share is less than
the Final Price, on the Settlement Date Party A
shall deliver to Party B the number of whole
Shares equal to (i) the product of (A) the Current
Number of Shares at the close of trading on the
Exchange on the Termination Date multiplied by (B)
the amount by which the Forward Price per Share is
less than the Final Price, divided by (ii) the
Final Price, plus cash in lieu of any fractional
Share.
(b) If the Forward Price per Share is greater than
the Final Price, on the Settlement Date Party B
shall deliver to Party A the number of whole
Shares (the "Payment Shares") equal to (i) the
product of (A) the Current Number of Shares at the
close of trading on the Exchange on the
Termination Date multiplied by (B) the amount by
which the Forward Price per Share is greater than
the Final Price, divided by (ii) the Final Price,
plus cash in lieu of any fractional Share.
(c) If the Forward Price per Share is equal to the
Final Price, no delivery shall be made by either
Party A or Party B.
Final Price : (a) If on the first day of the Averaging Period
Party A holds Purchased Shares in a number greater
than or equal to one-half the Current Number of
Shares at that time, the volume-weighted average
price at which Party A sells its entire holding of
the Purchased Shares during the Averaging Period,
less Commission, provided that if Party A is
unable to sell its entire holding in a
commercially reasonable manner, the Final Price
shall be the volume-weighted average price at
which Party A sells the number of Purchased Shares
that it is able to sell during the Averaging
Period in a commercially reasonable manner, or
(b) if on the first day of the Averaging Period
Party A holds Purchased Shares in a number less
than one-half the Current Number
6
of Shares at that time, then the Transaction shall
be bifurcated into Transactions 1 and 2, where
Transaction 1 comprises that portion of the
Current Number of Shares equal to the number of
Purchased Shares then held by Party A and
Transaction 2 comprises the remainder of the
Current Number of Shares. The Final Price for
purposes of the settlement of Transaction 1 shall
be the volume-weighted average sale price at which
Party A sells its Purchased Shares during the
Averaging Period, and the Final Price for purposes
of the settlement of Transaction 2 shall be the
arithmetic average of the Relevant Prices on all
Averaging Dates.
Averaging Period : The period from and including the ninth Exchange
Business Day immediately preceding the Termination
Date to and including the Termination Date
Relevant Price : With respect to any Averaging Date , the closing
price of a Share on such Averaging Date, as
reported by the Exchange
Averaging Dates : The Exchange Business Days in the Averaging Period
Averaging Date
Market Disruption : Modified Postponement, and for this purpose the
Transaction shall be deemed to be a Share
Transaction.
Valuation Date : The Termination Date
Extension for
Residual Shares : If Party A is unable to sell in a commercially
reasonable manner its entire holding of the
Purchased Shares during the Averaging Period,
Party A shall so notify Party B, and settlement of
the Transaction shall proceed, except with respect
to the Purchased Shares not sold. The Termination
Date of the Transaction shall be postponed until
the earliest date on which all such unsold
Purchased Shares (the "Residual Shares") have been
sold or until January 17, 2000, whichever first
occurs. A new Averaging Period ("Supplemental
Averaging Period") shall commence on the Exchange
Business Day following the last day of the
Averaging Period, and net share settlement shall
apply (provided that the Conditions for Net Share
Settlement are met during the Supplemental
Averaging Period).
7
The Final Price for purposes of settlement shall
be the volume-weighted average price at which
Residual Shares are sold during the Supplemental
Averaging Period. For purposes of floating rate
payments, a supplemental Calculation Period shall
run from the last day of the final Calculation
Period to the date on which Party A has received
the net proceeds of all sales of Residual Shares
made during the Supplemental Averaging Period.
Conditions on Net
Share Settlement : If Party B elects to have the Transaction
net-share settled, the following conditions must
be met at all times during the Averaging Period:
(i) the Registration Statement shall be effective,
(ii) Party B shall have filed all reports and any
definitive proxy or information statements
required to be filed by Party B pursuant to
Section 13(a), 13(c) or 15(d) of the Securities
Exchange Act of 1934, (iii) no stop order or any
order preventing or suspending the use of any
prospectus relating to the Registered Shares or
suspending the qualification of the Registered
Shares for offering or sale in any jurisdiction
shall have been issued and shall continue in
effect, (iv) no notice by Party B to Party A
pursuant to Section 3(f) of the Purchase Agreement
shall have been given and remain in effect, (v)
Party B shall not be in possession of material
non-public information relating to Party B, (vi)
any Shares deliverable to Party A shall have been
authorized for listing on the Exchange, and (vii)
if Party A is delivering Shares to Party B, (1) no
issuer or third-party tender offer shall be in
effect in respect of the Shares on the Settlement
Date, and no issuer tender offer shall have been
in effect within the ten business days preceding
the Settlement Date, and (2) net share settlement
of the Transaction shall not constitute or cause a
violation of Rule 102 of Regulation M under the
Securities Exchange Act of 1934. If any of the
foregoing conditions are not met at all required
times, physical settlement shall apply to the
relevant termination.
Registration Statement: The registration statement and any additional
registration statements filed by Party B with the
Securities and Exchange Commission on Form S-3,
registering the Purchased Shares, the Payment
Shares or the Make-whole Shares, as amended and
supplemented from time to time
8
Registered Shares : All Shares registered under the Registration
Statement
Make-Whole
Provisions : If Party A receives Payment Shares pursuant to net
share settlement, whether incident to an early
termination in part or in whole or final
settlement, and if within ten Exchange Business
Days after the Settlement Date Party A resells all
or any portion of the Payment Shares in
commercially reasonable market transactions and
the net proceeds received by Party A upon the
resale of such shares exceeds the product of the
number of Payment Shares multiplied by the Final
Pric (the "Settlement Amount") (or if less than
all of the Payment Shares are sold, the applicable
pro rata portion of the Settlement Amount), Party
A shall promptly refund in cash such difference to
Party B. If such net proceeds are less than the
Settlement Amount (or if less than all the Payment
Shares are sold, the applicable pro rata portion
of the Settlement Amount), Party B shall pay in
cash or (subject to the satisfaction of the
Conditions on Net Share Settlement) additional
Shares such difference (the "Make-whole Amount")
to Party A promptly after receipt of notice
thereof. If Party B elects to pay the Make-Whole
Amount in additional Shares, Party B shall deliver
to Party A the number of whole Shares (the
"Make-whole Shares") equal to (i) the Make-whole
Amount divided by (ii) the closing price of the
Shares as reported on the Exchange on the Exchange
Business Day immediately preceding the day of
delivery of such Shares. If within ten Exchange
Business Days after delivery of the Make-whole
Shares to Party A, Party A resells all or any
portion of such Shares in commercially reasonable
market transactions and the net proceeds received
by Party A from the resale of Make-whole Shares
exceed or are less than the Make-whole Amount (or
if less than all of the Make-whole Shares are
sold, the applicable portion of the Make-whole
Amount), Party A shall pay to Party B any such
excess in cash and Part B shall pay to Party A any
additional Make-whole Amount in cash. In
calculating the net proceeds from the resale of
any Payment Shares or Make-whole Shares, the
Commission shall be deducted from the proceeds. In
determining when the ten Exchange Business Days
referred to above in relation to resales by Party
A of Payment Shares or Make-whole Shares have
elapsed, Exchange Business Days occurring during
any period when Party A is required to suspend
sales of the Shares
9
pursuant to a notice given by Party B under
Section 3(f) of the Purchase Agreement, and
Exchange Business Days on which a Market
Disruption Event occurs, shall be disregarded.
Deficiency of
Registered Shares : If there is an insufficient number of Registered
Shares to enable Party B to satisfy its obligation
to Party A to deliver Registered Shares as Payment
Shares or Make-whole Shares, the Transaction shall
be cash-settled to the extent of the deficiency,
and Party B, in addition to delivering such
Registered Shares as it has, shall pay to Party A
on the Settlement Date (in the case of Payment
Shares) or on the date of delivery (in the case of
Make-whole Shares) an amount in immediately
available U.S. funds equal to the Settlement
Amount or the Make-whole Amount, as the case may
be, less the product of the number of Registered
Shares delivered by Party B times the Final Price
(in the case of Payment Shares) or the closing
price of the Shares as reported on the Exchange on
the Exchange Business Day immediately preceding
the day of delivery of such Registered Shares (in
the case of Make-whole Shares).
Settlement Disruption : If a Settlement Disruption Event prevents delivery
of Shares (whether pursuant to physical settlement
or net share settlement) on the Settlement Date,
then the Settlement Date will be the first
succeeding day on which delivery of the Shares can
take place through the relevant Clearance System
unless a Settlement Disruption Event prevents
settlement on each of the 10 relevant Clearance
System Business Days immediately following the
original date, that, but for the Settlement
Disruption Event, would have been the Settlement
Date. In that case (a) if such Shares can be
delivered in any other commercially reasonable
manner, then the Settlement Date will be the first
day on which settlement of a sale of Shares
executed on the 10th relevant Clearance System
Business Day customarily would take place using
such other commercially reasonable manner of
delivery (which other manner of delivery will be
deemed the relevant Clearance System for the
purposes of delivery of the relevant Shares), and
(b) if such Shares cannot be delivered in any
other commercially reasonable manner, then the
Settlement Date will be postponed until delivery
can be effected through the relevant Clearance
System or in any other commercially reasonable
manner.
10
Settlement
Disruption Event : An event beyond the control of the parties as a
result of which the relevant Clearance System
cannot clear the transfer of Shares
Early Termination
-----------------
Early End Date : Any Exchange Business Day in advance of the
Termination Date on which the Transaction is
terminated, in whole or in part, pursuant to the
terms hereof
Termination on
Satisfaction in Full : If at any time while the Transaction is
outstanding Party A has attained the full amount
(after deducting Commission) of the Total Forward
Price (as adjusted from time to time) through
sales of Purchased Shares pursuant to Directions
to Sell, Payment Shares or Make-whole Shares in
any combination, Party A shall promptly cease all
sales of such Shares and shall promptly notify
Party B accordingly. Upon the giving of such
notice, and notwithstanding any other terms of the
Transaction regarding termination, the Transaction
shall terminate, The Early End Date shall be the
date on which such notice is given, and Party A
shall forthwith deliver to Party B the remaining
Purchased Shares, Payment Shares and Make-whole
Shares that it may be holding (other than Shares
needed to meet delivery requirements resulting
from previous sales), and Party A shall pay to
Party B in cash the amount of any excess that
Party A may have attained over the Total Forward
Price.
Termination on
Direction to Sell : If Party A sells Shares pursuant to a Direction to
Sell given by Party B, the Transaction shall be
terminated on the date of sale (which shall be the
Early End Date) to the extent of the Number of
Terminated Shares. If the Number of Terminated
Shares equals the entire Current Number of Shares
on the date of the Direction to Sell, the
Transaction shall be terminated in whole. If the
Number of Terminated Shares is less than the
entire Current Number of Shares on the date of the
Direction to Sell, the Transaction shall be
terminated in part as to the Number of Terminated
Shares. If the Transaction is terminated in part,
then on the Early End Date the Current Number of
Shares shall
11
be reduced by the Number of Terminated Shares, the
Total Forward Price shall be recalculated using
the Current Number of Shares as so reduced, and
the Transaction, with the Current Number of Shares
and Total Forward Price so reduced, shall continue
to be a Transaction for all purposes of this
Confirmation and the Agreement.
Conditions on
Termination on
Direction to Sell : The early termination of the Transaction or part
thereof is subject to the satisfaction of the
following conditions at all times from the giving
of the Direction to Sell to the consummation of
the early termination: (i) the Registration
Statement shall be effective, (ii) Party B shall
have filed all reports and any definitive proxy or
information statements required to be filed by
Party B pursuant to Section 13(a), 13(c) or 15(d)
of the Securities Exchange Act of 1934, (iii) no
stop order or any order preventing or suspending
the use of any prospectus relating to the
Registered Shares or suspending the qualification
of the Registered Shares for offering or sale in
any jurisdiction shall have been issued and shall
continue in effect, (iv) no notice by Party B to
Party A pursuant to Section 3(f) of the Purchase
Agreement shall have been given and remain in
effect, (v) Party B shall not be in possession of
material non-public information relating to Party
B, (vi) any Shares deliverable to Party A shall
have been authorized for listing on the Exchange,
(vii) the Early End Date shall not fall within the
Averaging Period, and (viii) if Party A is
delivering Shares to Party B, (1) no issuer or
third-party tender offer shall be in effect in
respect of the Shares on the Settlement Date in
respect of the early termination, and no issuer
tender offer shall have been in effect within the
ten business days preceding such Settlement Date,
and (2) net share settlement of the Transaction or
part thereof shall not constitute or cause a
violation of Rule 102 of Regulation M under the
Securities Exchange Act of 1934. If any of the
foregoing conditions are not met at all required
times, the Direction to Sell shall be void and no
early termination shall take place.
Net Share Settlement
on Termination on
Direction to Sell : Any Termination on Direction to Sell shall be net
share settled as follows:
12
(a) If the Forward Price per Share is less than
the Final Price on Early Termination, on the
Settlement Date Party A shall deliver to Party B
the number of whole Shares equal to (i) the
product of (A) the Number of Terminated Shares
multiplied by (B) the amount by which the Forward
Price per Share is less than the Final Price on
Early Termination, divided by (ii) the Final Price
on Early Termination, plus cash in lieu of any
fractional Share.
(b) If the Forward Price per Share is greater
than the Final Price on Early Termination, on the
Settlement Date Party B shall deliver to Party A
the number of whole Shares (the "Payment Shares")
equal to (i) the product of (A) the Number of
Terminated Shares multiplied by (B) the amount by
which the Forward Price per Share is greater than
the Final Price on Early Termination, divided by
(ii) the Final Price on Early Termination, plus
cash in lieu of any fractional Share.
(c) If the Forward Price per Share is equal to
the Final Price on Early Termination, no delivery
shall be made by either Party A or Party B.
Final Price on Early
Termination : The volume-weighted average price at which Party A
sells the number of Purchased Shares that it is
directed to sell, less Commission, provided that
if Party A does not hold that number of Purchased
Shares, Party A shall sell such Purchased Shares
as it does hold and shall also be deemed to have
sold, at the closing price on the Early End Date,
an additional number of Shares equal to the
difference between the number of Purchased Shares
that Party A is directed to sell and the number of
Purchased Shares that Party A then holds, and the
Final Price on Early Termination shall in that
case equal the volume-weighted average price of
Party A's sales of Purchased Shares, less
Commission, and deemed sales of additional Shares.
Early Termination
Settlement Date : All payments and deliveries required to be made
upon the early termination of the Transaction,
whether in whole or in part, shall be made on the
third Clearance System Business Day after the
Early End Date.
13
Make-whole Provisions : The Make-whole Provisions set forth above under
Settlement Terms shall apply to settlements on
early termination.
No Termination
During Call : If Pioneer Financial Services, Inc. calls for
redemption its 6-1/2% Convertible Subordinated
Notes Due 2003 (the "Notes") while the Transaction
is outstanding, Party B may not give Party A a
Direction to Sell, and the Transaction shall not
be terminated in whole or in part, during the
period from and including the day that is one
Business Day before the effective date of the call
to and including the last day on which the Notes
may be tendered for conversion.
No Further
Obligations : Upon the early termination of the Transaction,
whether in whole or in part, and payment of all
amounts due and owing and the making of all
required deliveries to either party hereunder,
neither party shall have any further obligation to
the other party with respect to the Transaction as
a whole, in the case of termination in whole, and
the portion so terminated, in the case of
termination in part.
Breakage Cost : In the case of any early termination on an Early
End Date that is not also a Reset Date, Party A
shall determine whether it has sustained a net
economic cost or a net economic benefit from such
event. If Party A determines that it has sustained
a net economic cost, then (i) if physical
settlement applies, the aggregate amount of such
cost shall be added to the Total Forward Price,
and (ii) if net share settlement applies, the
result of dividing the amount of the cost b the
Number of Terminated Shares shall be subtracted
from the Final Price on Early Termination. If
Party A determines that it has sustained a net
economic benefit, then (iii) if physical
settlement applies, the aggregate amount of such
benefit shall be subtracted from the Total Forward
Price, and (iv) if net share settlement applies,
the result of dividing the amount of the benefit
by the Number of Terminated Shares shall be added
to the Final Price on Early Termination If Party A
determines that it has sustained neither a net
economic cost nor a net economic benefit, then no
such adjustments shall be made. Party A shall
provide to Party B an accounting if any
14
adjustment is made pursuant to this paragraph,
which shall be binding on the parties, absent
demonstrable error.
Predelivery of Shares
---------------------
Requirement to
Predeliver Shares : If the closing price of the Shares on the Exchange
first becomes less than or equal to $15 per share
on a date while the Transaction is outstanding
(the "Threshold Date"), Party A shall notify Party
B of the occurrence of the Threshold Date within
seven Exchange Business Days thereafter, and Party
B shall thereupon issue and predeliver to Party A,
no later than the third Clearance System Business
Day after the date on which Party B receives such
notice, the number of Shares that Party B would be
required to deliver if the Transaction were
terminated in whole on the Threshold Date, net
share settlement applied and the Final Price on
Early Termination were the closing price on the
Threshold Date (the "Predelivered Shares").
Registration of Shares: If the Predelivered Shares are not registered
under the Registration Statement, Party B shall as
promptly as practicable cause such shares to be
registered under the Securities Act of 1933.
Application of Shares : If Party B elects net share settlement at
termination or any early termination, and Party B
is the party required to deliver Shares, Party B's
obligation to deliver Payment Shares and
Make-whole Shares shall be satisfied first out of
the Predelivered Shares, to the extent thereof.
Retention of Shares : Party A shall not sell or otherwise transfer any
Predelivered Shares that it has not applied to the
satisfaction of an obligation of Party B to
deliver Shares.
Return of Shares : If the Transaction is terminated in whole, whether
on the Termination Date or an Early End Date, and
Party A has Predelivered Shares remaining after
all obligations of Party B to deliver Payment
Shares, Make-whole Shares or cash have been
satisfied, Party A shall return such remaining
Predelivered Shares to Party B.
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Dividends : The provisions under Dividend Payment above shall
apply to Predelivered Shares until such time as
they are sold or otherwise transferred as
permitted hereunder, or until they are returned to
Party B.
Other Provisions
----------------
Undirected Sales
of Purchased Shares
by Party A : Party A may sell Purchased Shares in its
discretion without having received a Direction to
Sell from Party B, provided that Party A shall
notify Party B of its intent to make any such sale
sufficiently in advance of such sale to enable
Party B to verify that the Prospectus provided by
Party B for delivery by Party A to offerees and
purchasers of the Shares registered under the
Registration Statement will meet the requirements
of the Securities Act of 1933 at the time of
the intended sales, and to amend such Prospectus
if it will not meet those requirements. Such sales
shall not in any way reduce Party A's obligations
hereunder, including but not limited to its
obligations in regard to scheduled or early
termination.
Commercial
Reasonableness : All sales by Party A of Purchased hares, Payment
Shares and Make-whole Shares shall be made in a
commercially reasonable manner, provided that
undirected sales of Purchased Shares (if any)
shall not be subject to this requirement.
Market Transactions : Party A shall not, and shall cause WDR as its
selling agent not to, sell any Purchased Shares,
Payment Shares or Make-whole Shares otherwise than
in ordinary trading transactions for purposes of
Rule 100 of Regulation M.
Direction to Sell : Party A shall use its best efforts to comply with
a valid Direction to Sell, but shall not be liable
to Party B if Party A is unable, despite its best
efforts, to sell the entire number of Shares
specified in the Direction to Sell.
Registration
Statement Ineffective : If the Registration Statement is declared
effective but does not remain effective until all
Payment and Make-whole Shares have been sold by
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Party A, Party A shall have the right to require
that Party B repurchase any unsold Payment Shares
at a price per share equal to the Final Price and
any unsold Make-whole Shares at an aggregate price
equal to that portion of the Make-whole Amount not
recovered in the net proceeds of prior sales of
Make-whole Shares.
Method of Settlement : All payments of funds and deliveries of Shares
pursuant to scheduled termination and early
termination of the Transaction in whole or in part
shall be made through the Clearance System at the
accounts specified as provided below, on a
delivery versus payment basis.
Adjustments and Extraordinary Events
------------------------------------
Adjustments :
Method of Adjustment : Options Exchange Adjustment; provided that
references in the Equity Definitions to "Strike
Price" shall be deemed to refer to "Notional
Amount" and references to "Number of Options"
shall be deemed to refer to "Current Number of
Shares" herein.
Options Exchange : The Options Clearing Corporation
Consequences of Merger Events:
(a) Share-for-Share : Cancellation and Payment
(b) Share-for-Other : Cancellation and Payment
(c) Share-for-Combined : Cancellation and Payment
Nationalization and Insolvency : Cancellation and Payment
Amendment of the
Equity Definitions : For the purposes of this Transaction, the
Definitions are amended as follows:
(A) A new Section 1.3A is added after Section
1.3:
Section 1.3A. Share Forward Transaction. "Share
Forward
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Transaction" means an OTC equity forward
transaction relating to a single share or other
security.
(B) Section 1.5 is amended to read:
Section 1.5. Share Transaction."Share Transaction"
means a Share Option Transaction, a Share Swap
Transaction, and for the purposes of Article 9, a
Share Forward Transaction.
(C) A new clause (E) is added to Section 9.1(c):
"(E) in respect of a Share Forward Transaction,
the Forward Price per Share and the Current Number
of Shares";
(D) Clause (vi) of Section 9.1(e) is amended
to read:
"(vi) any other similar event that, in the
reasonable judgment of the Calculation Agent, may
have a diluting or concentrative effect on the
theoretical value of the relevant Shares."
Miscellaneous
-------------
Title to Shares : A party delivering Shares or Predelivered Shares
to the other party hereunder represents, warrants
and agrees that (a) it is the legal and beneficial
owner of the Shares it is required to deliver; (b)
it has the right to transfer those Shares; and (c)
it will convey good title to the Shares it is
required to deliver, free from all liens, charges,
equities, preemptive rights or other security
interests or encumbrances whatsoever.
In addition, if the Transaction is net share
settled, Party B represents with respect to any
Payment Shares and Make-whole Shares delivered to
Party A that such Shares will, at the time of
delivery, be duly authorized, validly issued,
fully paid and nonassessable.
Transfer : Neither party may transfer the Transaction, in
whole or in part, without the prior written
consent of the non-transferring party.
Account Details
---------------
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Party A : As provided in separate direction
Party B : As provided in separate direction
Special Provisions
------------------
1. Additional Party B Representations
Party B will be deemed to represent to Party A on the date on which it enters
into this Transaction that:
(a) Party B has a valid business purpose for entering into this Transaction.
(b) Party B is not entering into this Transaction to create actual or apparent
trading activity in the Shares (or any security convertible into or exchangeable
for Shares) or to raise or depress or otherwise manipulate the price of the
Shares (or any security convertible into or exchangeable for Shares).
(c) At the time of Party B's entry into the Transaction no "restricted period"
for purposes of Rule 102 of Regulation M under the Securities Exchange Act of
1934 and no tender offer for Shares (whether by Party B or a third party) is in
effect, and no Party B tender offer has been in effect within the preceding ten
business days.
2. Offeree/Buyer Representations
If the parties enter into a Transaction, or if one party offers to transfer or
transfers the security underlying a Transaction to the other party, in either
case in reliance on Section 4(2) of the Securities Act or Regulation D
thereunder, then the offeree or buyer of the Transaction and/or the offeree or
buyer of the security underlying the Transaction (the "Offeree"), shall make the
following representations, warranties and covenants on and as of the date on
which the Offeree enters into such a Transaction or makes any payment or
delivery relating thereto or to the transfer of the underlying security:
(a) the Offeree is entering into the Transaction for its own account as
principal, for investment purposes only, and not with a view to, or for, resale,
distribution or fractionalization thereof, in whole or in part, and no other
person has a direct or indirect beneficial interest in the Transaction entered
into by the Offeree hereunder;
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(b) the Offeree acknowledges its understanding that the offer and sale of any
Transaction with the other party is intended to be exempt from registration
under the Securities Act, by virtue of Section 4(2) of the Securities Act. In
furtherance thereof, the Offeree represents and warrants to the other party that
(i) it has the financial ability to bear the economic risk of its investment,
and (ii) the Offeree qualifies as an "accredited investor" as that term is
defined under Regulation D under the Securities Act.
(c) the Offeree has been given the opportunity to ask questions of, and receive
answers from, the other party concerning the terms and conditions of the
Transaction and has been given the opportunity to obtain such additional
information necessary in order for the Offeree to evaluate the merits and risks
of the Transaction, to the extent the other party possesses such information or
can acquire it without unreasonable effort or expense, and the Offeree has
determined that the Transaction is a suitabl investment for the Offeree. The
Offeree represents and warrants to the other party that, each time the Offeree
enters into a Transaction with the other party, the Offeree will be able to bear
a loss of its entire investment. The Offeree further understands and agrees that
in circumstances where the Offeree holds a short position, its risk of loss
could be unlimited;
(d) the Offeree represents and warrants that, in effecting a Transaction, it
will not be in possession of any material non-public information with respect to
any security related to a Transaction that, under the U.S. federal securities
laws, it would have to disclose in advance to a party effecting a purchase or
sale with the Offeree of such security;
(e) the Offeree fully understands and agrees that it must bear the economic risk
of the Transaction for the entire time period set forth in the Confirmation; and
the Offeree understands and agrees that disposition of the Transaction is
restricted under the Master Agreement, the Securities Act and state securities
laws. The Offeree understands that the Transaction has not been, and is not
intended to be, registered under the Securities Act or under the securities laws
of certain states and, therefore cannot be resold, pledged, assigned or
otherwise disposed of unless registered under the Securities Act and under the
applicable laws of such states, or an exemption from such registration is
available. The Offeree understands and agrees that the other party is not
obliged to register the Transaction on behalf of the Offeree or to assist the
Offeree in complying with any exemption from registration under the Securities
Act or state securities laws. The Offeree further understands and agrees that
the other party is not, and will not be, obliged under any circumstances to
enter into or arrange a Transaction for the purpose of offsetting a particular
Transaction, but may do so in its discretion; and
(f) nothing contained herein shall require the other party to enter into any
part or all of a Transaction offered by the Offeree. The other party reserves
the right to limit the number and amount of certain Transactions that the
Offeree, acting by itself or as part of a group, may maintain
20
or acquire through or from the other party (or any affiliate of the other party)
at any time.
3. Relationship Between Parties
Each party will be deemed to represent to the other party on the date on which
it enters into a Transaction that (absent a written agreement between the
parties that expressly imposes affirmative obligations to the contrary for that
Transaction):
(a) It is acting for its own account, and it has made its own independent
decisions to enter into that Transaction and as to whether that Transaction is
appropriate or proper for it based upon its own judgement and upon advice from
such advisers as it has deemed necessary. It is not relying on any communication
(written or oral) of the other party as investment advice or as a recommendation
to enter into that Transaction; it being understood that information and
explanations related to the terms and conditions of a Transaction shall not be
considered investment advice or a recommendation to enter into that 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 that Transaction.
(b) It is capable of assessing the merits of and understanding (on its own
behalf or through independent professional advice), and understands and accepts,
the terms, conditions and risks of that Transaction. It is also capable of
assuming, and assumes, the risks of that Transaction.
(c) The other party is not acting as a fiduciary for or an adviser to it in
respect of that Transaction.
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 or by sending to us a letter or telex substantially
similar to this letter, which letter or telex sets forth the material terms of
the Transaction to which this Confirmation relates and indicates your agreement
to those terms.
Yours sincerely,
UBS AG, LONDON BRANCH
By: ______________________ By: _____________________
Name: Name:
Title: Title:
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Confirmed as of the 29th day of June, 1999
CONSECO, INC.
By: ______________________
Name:
Title: