EXHIBIT 10.1
(MULTICURRENCY--CROSS BORDER)
ISDA(R)
INTERNATIONAL SWAP DEALERS ASSOCIATION, INC.
MASTER AGREEMENT
DATED AS OF JANUARY 1, 2001
EL PASO MERCHANT ENERGY, L.P. EL PASO PRODUCTION COMPANY
("PARTY A") AND ("PARTY B")
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will
have the meanings therein specified for the purpose of this Master Agreement.
(b) INCONSISTENCY. In the event of any inconsistency between the provisions
of the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmations form a single agreement
between the parties (collectively referred to as this "Agreement"), and the
parties would not otherwise enter into any Transactions.
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.
(b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) NETTING. If on any date amounts would otherwise be payable:
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of Offices through which the parties make and receive
payments or deliveries.
(d) DEDUCTION OR WITHHOLDING FOR TAX.
(i) GROSS-UP. All payments under this Agreement will be made
without any deduction or withholding for or on account of any Tax
unless such deduction or withholding is required by any applicable law,
as modified by the practice of any relevant governmental revenue
authority, then in effect. If a party is so required to deduct or
withhold, then that party ("X") will:
(1) promptly notify the other party ("Y") of such
requirement;
(2) pay to the relevant authorities the full amount
required to be deducted or withheld (including the full amount
required to be deducted or withheld from any additional amount
paid by X to Y under this Section 2(d)) promptly upon the
earlier of determining that such deduction or withholding is
required or receiving notice that such amount has been
assessed against Y;
(3) promptly forward to Y an official receipt (or a
certified copy), or other documentation reasonably acceptable
to Y evidencing such payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in
addition to the payment to which Y is otherwise entitled under
this Agreement, such additional amount as is necessary to
ensure that the net amount actually received by Y (free and
clear of Indemnifiable Taxes, whether assessed against X or Y)
will equal the full amount Y would have received had no such
deduction or withholding been required. However, X will not be
required to pay any additional amount to Y to the extent that
it would not be required to be paid but for:
(A) the failure by Y to comply with or perform
any agreement contained in Section 4(a)(i), 4(a)(iii)
or 4(d); or
-2-
(B) the failure of a representation made by Y
pursuant to Section 3(f) to be accurate and true
unless such failure would not have occurred but for
(I) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or
after the date on which a Transaction is entered into
(regardless of whether such action is taken or
brought with respect to a party to this Agreement) or
(II) a Change in Tax Law.
(ii) LIABILITY. If:
(1) X is required by any applicable law, as modified by
the practice of any relevant governmental revenue authority,
to make any deduction or withholding in respect of which X
would not be required to pay an additional amount to Y under
Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed
directly against X,
then, except to the extent Y has satisfied or then satisfies the
liability resulting from such Tax, Y will promptly pay to X the amount
of such liability (including any related liability for interest, but
including any related liability for penalties only if Y has failed to
comply with or perform any agreement contained in Section 4(a)(i),
4(a)(iii) or 4(d)).
(e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by Law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organized and validly existing under the
laws of the jurisdiction of its organisation or incorporation and, if
relevant under such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any
other documentation relating to this Agreement to which it is a party,
to deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to
perform its obligations under this Agreement and any obligations it has
under any Credit Support Document to which it is a party and has taken
all necessary action to authorise such execution, delivery and
performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and
performance do not violate or conflict with any law applicable to it,
any provision of its constitutional documents, any order or judgment of
any court or other agency of government applicable to it or any of its
assets or any contractual restriction binding on or affecting it or any
of its assets;
-3-
(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)).
(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has occurred
and is continuing and no such event or circumstance would occur as a result of
its entering into or performing its obligations under this Agreement or any
Credit Support Document to which it is a party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding at
law or in equity or before any court, tribunal, governmental body, agency or
official or any arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or any Credit Support Document to
which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule
as being made by it for the purpose of this Section 3(e) is accurate and true.
(f) PAYEE TAX REPRESENTATIONS. Each representation specified in the
Schedule as being made by it for the purpose of this Section 3(f) is accurate
and true.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or,
in certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:
(i) any forms, documents or certificates relating to taxation
specified in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any
Confirmation; and
(iii) upon reasonable demand by such other party, any form or
document that may be required or reasonably requested in writing in
order to allow such other party or its Credit Support Provider to make
a payment under this Agreement or any applicable Credit Support
Document without any deduction or withholding for or on account of any
Tax or with such deduction or withholding at a reduced rate (so long as
the completion, execution or submission of such form or document would
not materially prejudice the legal or commercial position of the party
in receipt of such demand), with any such form or document to be
accurate and completed in a manner reasonably satisfactory to such
other party and to be executed and to be delivered with any reasonably
required certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
-4-
(b) MAINTAIN AUTHORIZATIONS. It will use all reasonable efforts to maintain
in full force and effect all consents of any governmental or other authority
that are required to be obtained by it with respect to this Agreement or any
Credit Support Document to which it is a party and will use all reasonable
efforts to obtain any that may become necessary in the future.
(c) COMPLY WITH LAWS. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) TAX AGREEMENT. It will give notice of any failure of a representation
made by it under Section 3(f) to be accurate and true promptly upon learning of
such failure.
(e) PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated, organised, managed and
controlled, or considered to have its seat, or in which a branch or office
through which it is acting for the purpose of this Agreement is located ("Stamp
Tax Jurisdiction") and will indemnify the other party against any Stamp Tax
levied or imposed upon the other party or in respect of the other party's
execution or performance of this Agreement by any such Stamp Tax Jurisdiction
which is not also a Stamp Tax Jurisdiction with respect to the other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event of
default (an "Event of Default") with respect to such party:
(i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when
due, any payment under this Agreement or delivery under Section 2(a)(i)
or 2(e) required to be made by it if such failure is not remedied on or
before the third Local Business Day after notice of such failure is
given to the party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or
perform any agreement or obligation (other than an obligation to make
any payment under this Agreement or delivery under Section 2 (a)(i) or
2(e) or to give notice of a Termination Event or any agreement or
obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied
with or performed by the party in accordance with this Agreement if
such failure is not remedied on or before the thirtieth day after
notice of such failure is given to the party;
(iii) CREDIT SUPPORT DEFAULT.
(1) Failure by the party or any Credit Support Provider
of such party to comply with or perform any agreement or
obligation to be complied with or performed by it in
accordance with any Credit Support Document if such failure is
continuing after any applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support
Document or the failing or ceasing of such Credit Support
Document to be in full force and effect for the purpose of
this Agreement (in either case other than in accordance with
its terms) prior to the satisfaction of all obligations of
such party under each Transaction to which such Credit Support
Document relates without the written consent of the other
party; or
(3) the party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part, or
challenges the validity of, such Credit Support Document;
(iv) MISREPRESENTATION. A representation (other than a
representation under Section 3(e) or (f)) made or repeated or deemed to
have been made or repeated by the party or any Credit Support Provider
of such
-5-
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
described) in respect of such party, any Credit Support Provider of
such party or any applicable Specified Entity of such party under one
or more agreements or instruments relating to Specified Indebtedness of
any of them (individually or collectively) in an aggregate amount of
not less than the applicable Threshold Amount (as specified in the
Schedule) which has resulted in such Specified Indebtedness becoming,
or becoming capable at such time of being declared, due and payable
under such agreements or instruments, before it would otherwise have
been due and payable or (2) a default by such party, such Credit
Support Provider or such Specified Entity (individually or
collectively) in making one or more payments on the due date thereof in
an aggregate amount of not less than the applicable Threshold Amount
under such agreements or instruments (after giving effect to any
applicable notice requirement or grace period);
(vii) BANKRUPTCY. The party, any Credit Support Provider of such
party or any applicable Specified Entity of such party:
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to
pay its debts or fails or admits in writing its inability
generally to pay its debts as they become due; (3) makes a
general assignment, arrangement or composition with or for the
benefit of its creditors; (4) institutes or has instituted
against it a proceeding seeking a judgment of insolvency or
bankruptcy or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors'
rights, or a petition is presented for its winding-up or
liquidation, and, in the case of any such proceeding or
petition instituted or presented against it, such proceeding
or petition (A) results in a judgment of insolvency or
bankruptcy or the entry of an order for relief or the making
of an order for its winding-up or liquidation or (B) is not
dismissed, discharged, stayed or restrained in each case
within 30 days of the institution or presentation thereof; (5)
has a resolution passed for its winding-up, official
management or liquidation (other than pursuant to a
consolidation, amalgamation or merger); (6) seeks or becomes
subject to the appointment of an administrator, provisional
liquidator, conservator, receiver, trustee, custodian or other
similar official for it or for all or substantially all its
assets; (7) has a secured party take possession of all or
substantially all its assets or has a distress, execution
attachment, sequestration or other legal process levied,
enforced or sued on or against all or substantially all its
assets and such secured party maintains possession, or any
such process is not dismissed, discharged, stayed or
restrained, in each case within 30 days thereafter; (8) causes
or is subject to any event with respect to it which, under the
applicable laws of any jurisdiction, has an analogous effect
to any of the events specified in clauses (1) to (7)
(inclusive); or (9) takes any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in,
any of the foregoing acts; or
(viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or merges with
or into, or transfers all or substantially all its assets to, another
entity and, at the time of such consolidation, amalgamation, merger or
transfer:
-6-
(1) the resulting, surviving or transferee entity fails
to assume all the obligations of such party or such Credit
Support Provider under this Agreement or any Credit Support
Document to which it or its predecessor was a party by
operation of law or pursuant to an agreement reasonably
satisfactory to the other party to this Agreement; or
(2) the benefits of any Credit Support Document fail to
extend (without the consent of the other party) to the
performance by such resulting, surviving or transferee entity
of its obligations under this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any event specified below constitutes an Illegality if
the event is specified in (i) below, a Tax Event if the event is specified in
(ii) below or a Tax Event Upon Merger if the event is specified in (iii) below,
and, if specified to be applicable, a Credit Event Upon Merger if the event is
specified pursuant to (iv) below or an Additional Termination Event if the event
is specified pursuant to (v) below:
(i) ILLEGALITY. Due to the adoption of, or any change in, any
applicable law after the date on which a Transaction is entered into,
or due to the promulgation of, or any change in, the interpretation by
any court, tribunal or regulatory authority with competent jurisdiction
of any applicable law after such date, it becomes unlawful (other than
as a result of a breach by the party of Section 4(b)) for such party
(which will be the Affected Party):
(1) to perform any absolute or contingent obligation to
make a payment or delivery or to receive a payment or delivery
in respect of such Transaction or to comply with any other
material provision of this Agreement relating to such
Transaction; or
(2) to perform, or for any Credit Support Provider of
such party to perform, any contingent or other obligation
which the party (or such Credit Support Provider) has under
any Credit Support Document relating to such Transaction;
(ii) TAX EVENT. Due to (x) any action taken by a taxing authority,
or brought in a court of competent jurisdiction, on or after the date
on which a Transaction is entered into (regardless of whether such
action is taken or brought with respect to a party to this Agreement)
or (y) a Change in Tax Law, the party (which will be the Affected
Party) will, or there is a substantial likelihood that it will, on the
next succeeding Scheduled Payment Date (1) be required to pay to the
other party an additional amount in respect of an Indemnifiable Tax
under Section 2(d)(i)(4) (except in respect of interest under Section
2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount
is required to be deducted or withheld for or on account of a Tax
(except in respect of interest under Section 2(e), 6(d)(ii) or 6(e))
and no additional amount is required to be paid in respect of such Tax
under Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A)
or (B));
(iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the
next succeeding Scheduled Payment Date will either (1) be required to
pay an additional amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has
been deducted or withheld for or on account of any Indemnifiable Tax in
respect of which the other party is not required to pay an additional
amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in
either case as a result of a party consolidating or amalgamating with,
or merging with or into, or transferring all or substantially all its
assets to, another entity (which will be the Affected Party) where such
action does not constitute an event described in Section 5(a)(viii);
(iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is
specified in the Schedule as applying to the party, such party ("X"),
any Credit Support Provider of X or any applicable Specified Entity of
X consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and
such action does not constitute an event described in Section
5(a)(viii) but the creditworthiness of the resulting, surviving or
transferee entity is materially weaker than that of X, such
-7-
Credit Support Provider or such Specified Entity, as the case may be,
immediately prior to such action (and, in such event, X or its
successor or transferee, as appropriate, will be the Affected Party);
or
(v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination
Event" is specified in the Schedule or any Confirmation as applying,
the occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which
would otherwise constitute or give rise to an Event of Default also constitutes
an Illegality, it will be treated as an Illegality and will not constitute an
Event of Default.
6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event
of Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(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)(l) 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.
-8-
(iv) RIGHT TO TERMINATE. If:
(1) a transfer under Section 6(b)(ii) or an agreement
under Section 6(b)(iii), as the case may be, has not been
effected with respect to all Affected Transactions within 30
days after an Affected Party gives notice under Section
6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit
Event Upon Merger or an Additional Termination Event occurs,
or a Tax Event Upon Merger occurs and the Burdened Party is
not the Affected Party,
either party in the case of an Illegality, the Burdened Party in the
case of a Tax Event Upon Merger, any Affected Party in the case of a
Tax Event or an Additional Termination Event if there is more than one
Affected Party, or the party which is not the Affected Party in the
case of a Credit Event Upon Merger or an Additional Termination Event
if there is only one Affected Party may, by not more than 20 days
notice to the other party and provided that the relevant Termination
Event is then continuing, designate a day not earlier than the day such
notice is effective as an Early Termination Date in respect of all
Affected Transactions.
(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.
-9-
(i) EVENTS OF DEFAULT. If the Early Termination Date results from
an Event of Default:
(1) First Method and Market Quotation. If the First
Method and Market Quotation apply, the Defaulting Party will
pay to the Non-defaulting Party the excess, if a positive
number, of (A) the sum of the Settlement Amount (determined by
the Non-defaulting Party) in respect of the Terminated
Transactions and the Termination Currency Equivalent of the
Unpaid Amounts owing to the Non-defaulting Party over (B) the
Termination Currency Equivalent of the Unpaid Amounts owing to
the Defaulting Party.
(2) First Method and Loss. If the First Method and Loss
apply, the Defaulting Party will pay to the Non-defaulting
Party, if a positive number, the Non-defaulting Party's Loss
in respect of this Agreement.
(3) Second Method and Market Quotation. If the Second
Method and Market Quotation apply, an amount will be payable
equal to (A) the sum of the Settlement Amount (determined by
the Non-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.
-10-
(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies
in respect of a party, the amount determined under this Section 6(e)
will be subject to such adjustments as are appropriate and permitted by
law to reflect any payments or deliveries made by one party to the
other under this Agreement (and retained by such other party) during
the period from the relevant Early Termination Date to the date for
payment determined under Section 6(d)(ii).
(iv) PRE-ESTIMATE. The parties agree that if Market Quotation
applies an amount recoverable under this Section 6(e) is a reasonable
pre-estimate of loss and not a penalty. Such amount is payable for the
loss of bargain and the loss of protection against future risks and
except as otherwise provided in this Agreement neither party will be
entitled to recover any additional damages as a consequence of such
losses.
7. TRANSFER
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in
any amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. CONTRACTUAL CURRENCY
(a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement
will be made in the relevant currency specified in this Agreement for that
payment (the "Contractual Currency"). To the extent permitted by applicable law,
any obligation to make payments under this Agreement in the Contractual Currency
will not be discharged or satisfied by any tender in any currency other than the
Contractual Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting in a reasonable manner and
in good faith in converting the currency so tendered into the Contractual
Currency, of the full amount in the Contractual Currency of all amounts payable
in respect of this Agreement. If for any reason the amount in the Contractual
Currency so received falls short of the amount in the Contractual Currency
payable in respect of this Agreement, the party required to make the payment
will, to the extent permitted by applicable law, immediately pay such additional
amount in the Contractual Currency as may be necessary to compensate for the
shortfall. If for any reason the amount in the Contractual Currency so received
exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount of
such excess.
(b) JUDGMENTS. To the extent permitted by applicable law, if any judgment
or order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any 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.
-11-
The term "rate of exchange" includes, without limitation, any premiums and costs
of exchange payable in connection with the purchase of or conversion into the
Contractual Currency.
(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed, and will not be affected by judgment being
obtained or claim or proof being made for any other sums payable in respect of
this Agreement.
(d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be
sufficient for a party to demonstrate that it would have suffered a loss had an
actual exchange or purchase been made.
9. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts (including
by facsimile transmission), each of which will be deemed an original.
(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
-12-
had entered into the Transaction through its head or home office. This
representation will be deemed to be repeated by such party on each date on which
a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a Transaction
will be specified in the relevant Confirmation.
11. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document to
which the Defaulting Party is a party or by reason of the early termination of
any Transaction, including, but not limited to, costs of collection.
12. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:
(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 answer back is
received;
(iii) if sent by facsimile transmission, on the date that
transmission is received by a responsible employee of the recipient in
legible form (it being agreed that the burden of proving receipt will
be on the sender and will not be met by a transmission report generated
by the sender's facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas)
or the equivalent (return receipt requested), on the date that mail is
delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that
electronic message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating
to this Agreement ("Proceedings"), each party irrevocably:
-13-
(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 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;
-14-
(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 1% per annum.
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"ILLEGALITY" has the meaning specified in Section 5(b).
"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"lawful" and "unlawful" will be construed accordingly.
"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial center, 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.
-15-
"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 been required after that date. For this
purpose, Unpaid Amounts in respect of the Terminated Transaction or group of
Terminated Transactions are to be excluded but, without limitation, any payment
or delivery that would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each applicable condition precedent) after
that Early Termination Date is to be included. The Replacement Transaction would
be subject to such documentation as such party and the Reference Market-maker
may, in good faith, agree. The party making the determination (or its agent)
will request each Reference Market-maker to provide its quotation to the extent
reasonably practicable as of the same day and time (without regard to different
time zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if more
than one quotation has the same highest value or lowest value, then one of such
quotations shall be disregarded. If fewer than three quotations are provided, it
will be deemed that the Market Quotation in respect of such Terminated
Transaction or group of Terminated Transactions cannot be determined.
"NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"NON-DEFAULTING PARTY" has the meaning specified in Section 6(a).
"OFFICE" means a branch or office of a party, which may be such party's head or
home office.
"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
-16-
"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.
"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"STAMP TAX" means any stamp, registration, documentation or similar tax.
"TAX" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"TAX EVENT" has the meaning specified in Section 5(b).
"TAX EVENT UPON MERGER" has the meaning specified in Section 5(b).
"TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"TERMINATION CURRENCY" has the meaning specified in the Schedule.
-17-
"TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.
"TERMINATION EVENT" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market value of that which was (or would have been) required to be
delivered as of the originally scheduled date for delivery, in each case
together with (to the extent permitted under applicable law) interest, in the
currency of such amounts, from (and including) the date such amounts or
obligations were or would have been 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.
EL PASO MERCHANT ENERGY, L.P. EL PASO PRODUCTION COMPANY
("Party A") ("Party B")
----------------------------- --------------------------
(Name of Party) (Name of Party)
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------- -----------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President, Title:
Managing Director, Date:
and Controller
Date:
-18-
SCHEDULE
TO THE
ISDA MASTER AGREEMENT
(MULTICURRENCY-CROSS BORDER)
DATED AS OF JANUARY 1, 2001
BETWEEN
EL PASO MERCHANT ENERGY, L.P.
A LIMITED PARTNERSHIP ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
("PARTY A")
AND
EL PASO PRODUCTION COMPANY
A CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
("PARTY B")
PART 1
TERMINATION PROVISIONS
In this Agreement:
(a) "SPECIFIED ENTITY" means in relation to Party A for
the purpose of:
Section 5(a)(v): Not Applicable
Section 5(a)(vi): Not Applicable
Section 5(a)(vii): Not Applicable
Section 5(b)(iv): Not Applicable
in relation to Party B for the purpose of
Section 5(a)(v): Not Applicable
Section 5(a)(vi): Not Applicable
Section 5(a)(vii): Not Applicable
Section 5(b)(iv): Not Applicable
(b) "SPECIFIED TRANSACTION" will have the meaning
specified in Section 14 of this Agreement.
(c) The "CROSS DEFAULT" provisions of Section 5(a)(vi) of
this Agreement will not apply to Party A or Party B.
(d) The "CREDIT EVENT UPON MERGER" provisions of Section
5(b)(iv) of this Agreement will apply to Party A and
will apply to Party B; provided however, that the
phrase "materially weaker" means (i) the unsecured,
senior, long-term indebtedness of the resulting,
surviving or transferee entity is rated less than
investment grade by either Standard & Poor's Rating
Group or ▇▇▇▇▇'▇ Investor Service, Inc., or (ii) if
no such ratings exist, the Policies (as defined
below) in effect at the time, of the non-Affected
Party, would cause such non-Affected Party, solely as
a result of a change in the nature, character,
identity or condition of the Affected Party from its
state (as a party to the Agreement) prior to such
consolidation, amalgamation, merger or transfer, to
decline to make an extension of credit to, or enter
into a Transaction with, the resulting, surviving or
transferee entity. For purposes of this definition,
"Policies" means a party's (1) internal credit limits
applicable
1
to individual entities, (2) other limits on
conducting business with entities domiciled in
certain jurisdictions or engaging in certain
activities, or (3) internal restrictions on
conducting business with entities with whom such
party has had prior adverse business relations.
(e) The "AUTOMATIC EARLY TERMINATION" provision of
Section 6(a) of this Agreement will not apply to
Party A and will not apply to Party B.
(f) PAYMENTS ON EARLY TERMINATION. For the purpose of
Section 6(e) of this Agreement:
(i) Market Quotation will apply; and
(ii) The Second Method will apply.
(g) "TERMINATION/CONTRACTUAL CURRENCY" means United
States Dollars.
(h) "ADDITIONAL TERMINATION EVENT" will apply. The
following shall constitute an Additional Termination
Event:
"MATERIAL ADVERSE CHANGE" The occurrence of a
Material Adverse Change (as hereinafter defined) with
respect to a party ("X") (which will be the Affected
Party). "Material Adverse Change" means a reduction
in the rating of X's or X's Credit Support Provider's
unsecured, long term, senior indebtedness not
supported by third party credit enhancement by
Standard & Poor's Corporation or its successor
("S&P") to below "BBB-", or by ▇▇▇▇▇'▇ Investors
Service, Inc. or its successor ("Moody's") to below
"Baa3".
PART 2
TAX REPRESENTATIONS
(a) PAYER TAX REPRESENTATION. For the purpose of Section
3(e) of this Agreement, each of Party A and Party B
will make the following representation:
It is not required by any applicable law, as modified
by the practice of any relevant governmental revenue
authority, of any Relevant Jurisdiction to make any
deduction or withholding for or on account of any Tax
from any payment (other than interest under Section
2(e), 6(d)(ii) or 6(e) of this Agreement) to be made
by it to the other party under this Agreement. In
making this representation, it may rely on (i) the
accuracy of any representations made by the other
party pursuant to Section 3(f) of this Agreement,
(ii) the satisfaction of the other party contained in
Section 4(a)(i) or 4(a)(iii) of this Agreement and
the accuracy and effectiveness of any document
provided by the other party pursuant to Section
4(a)(i) or 4(a)(iii) of this Agreement and (iii) the
satisfaction of the agreement of the other party
contained in Section 4(d) of this Agreement, provided
that it shall not be a breach of this representation
where reliance is placed on clause (ii) herein and
the other party does not deliver a form or document
under Section 4(a)(iii) by reason of material
prejudice to its legal or commercial position.
(b) PAYEE TAX REPRESENTATIONS. For the purpose of Section
3(f) of this Agreement, Party A and Party B make the
representation(s) specified below, if any:
PARTY A: Party A is a limited partnership organized
under the laws of the State of Delaware and is a
resident of the United States of America and its U.S.
taxpayer identification number is ▇▇-▇▇▇▇▇▇▇.
2
PARTY B: is a corporation organized under the laws of
the State of Delaware and is a resident of the United
States of America and its U.S. taxpayer
identification number is ▇▇-▇▇▇▇▇▇▇
3
PART 3
AGREEMENT TO DELIVER DOCUMENTS
For the purpose of Section 4(a) of this Agreement, each party agrees to deliver
the following documents, as applicable:
Covered by
Party required to Date by which Section 3(d)
deliver document Form/Document/Certificate to be delivered Representation
---------------- ------------------------- --------------- --------------
Party A and Certified incumbency certificate or other evidence of At execution of this Yes
Party B authority and specimen signatures with respect to each Master Agreement
Party, its Credit Support Provider (if any), and their
respective signatories.
Party A and A certified copy of a resolution adopted by the Board of At execution of this Yes
Party B Directors of each Party authorising the execution and Master Agreement
delivery of this Master Agreement and each Confirmation
Party A and A copy of the annual report of the party (or, if Upon request. Yes
Party B applicable, any Credit Support Provider) containing
audited consolidated financial statements for such
fiscal year certified by independent public accountants
and prepared in accordance with generally accepted
accounting principles consistently applied.
Party A and Such other documents as the other may reasonably request. Upon request No
Party B
4
PART 4
MISCELLANEOUS
(a) ADDRESSES FOR NOTICES. For the purpose of Section
12(a) of this Agreement:
PARTY A: ADDRESS FOR CONFIRMATIONS OR NOTICES:
Address: El Paso Merchant Energy, L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Risk Management (Derivative
Confirmations Only)
Contract Services-Financial (All
Other Documentation)
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇ (Derivative
Confirmations Only)
(▇▇▇) ▇▇▇-▇▇▇▇ (All Other
Documentation)
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇ (Derivative
Confirmations Only)
(▇▇▇) ▇▇▇-▇▇▇▇ (All Other
Documentation)
PARTY B: ADDRESS FOR CONFIRMATIONS OR NOTICES:
Address:
El Paso Production Company
Four ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) PROCESS AGENT. For the purpose of Section 13(c) of
this Agreement:
Party A's Process Agent: Not Applicable.
Party B's Process Agent: Not Applicable.
If a party becomes organized outside the United
States of America, then such party shall, irrevocably
appoint an agent for service of process in the United
States of America reasonably satisfactory to the
other party and provide the other party with a copy
of such agent's written acceptance of such
appointment.
(c) OFFICES. The provisions of Section 10(a) of this
Agreement will apply to this Agreement.
(d) MULTIBRANCH PARTY. Neither Party A nor Party B is a
Multibranch Party.
(e) CALCULATION AGENT. The Calculation Agent is Party A;
however, if Party A is the Defaulting Party, the
Calculation Agent shall be Party B (or any designated
third party mutually agreed to by the parties) until
such time as Party A is no longer a Defaulting Party.
In the event a calculation or determination is
disputed by Party B, the parties shall first endeavor
to resolve such dispute. If the parties are unable to
resolve such dispute within a commercially reasonable
time, the parties shall mutually select a dealer in
the applicable commodity to act as Calculation Agent
with respect to the issue in dispute.
(f) CREDIT SUPPORT DOCUMENT(s): None.
5
(g) CREDIT SUPPORT PROVIDER(s): None.
(h) GOVERNING LAW. This Agreement and each Transaction
will be governed by and construed in accordance with
the laws of the State of
New York, without reference
to choice of law doctrine.
(i) JURISDICTION. Section 13(b) of this Agreement is
hereby deleted in its entirety and replaced with the
following:
ARBITRATION Any controversy or claim arising out of
or relating to this Agreement or the breach of shall
be settled by arbitration by three arbitrators in
Houston, Texas, in accordance with the American
Arbitration Association Commercial Arbitration rules.
Judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction
thereof. The prevailing party shall be entitled to
its reasonable attorneys' fees. Any monetary award
shall accrue interest from the date of the breach to
the date of any judgment entered on the award at the
prime commercial rate charged on the date of the
breach by Citibank, N.A.
New York,
New York, plus two
(2) percent or at the maximum legal rate, whichever
is less. If a party files a complaint in any court
with respect to any matter subject to arbitration
hereunder, the defendant in such court action shall
be entitled to recover its reasonable attorneys' fees
in connection with the court action. This arbitration
provision shall survive termination of this
Agreement.
(j) NETTING. Section 2(c)(ii) will not apply and
therefore the netting specified in Section 2(c) of
this Agreement will apply across all Transactions
with effect from the date of this Agreement. The
Calculation Agent shall notify the parties of the
amounts of such netted payments (which notice may be
made by telephone). Notwithstanding the foregoing and
the netting of payments pursuant hereto, each party
will provide the other party with separate invoices
and documentation covering each Transaction
sufficient to permit the other party to comply with
its internal accounting and record keeping procedures
concerning individual Transactions.
(k) "AFFILIATE" will have the meaning specified in
Section 14 of this Agreement.
(l) PRIOR SWAPS. Party A and Party B have entered into
Swaps and similar agreements ("Existing
Transactions") prior to the execution of this
Agreement which they hereby agree shall be made and
constitute Transactions under this Agreement. These
Existing Transactions shall for all purposes be
Transactions hereunder and shall be subject to all
the terms of this Agreement. The delivery of
documents pursuant to Part 3 of this Schedule shall
not be required in connection with Existing
Transactions. To the extent the terms herein conflict
with the terms of the agreements governing the
Existing Transactions, the terms of this Agreement
shall apply.
PART 5
OTHER PROVISIONS
(a) ABSENCE OF LITIGATION. Section 3(c) of this Agreement
is hereby amended by: (i) adding in the second line
thereof after the word "governmental" the words "or
regulatory" and (ii) adding the words "in any
material respect" immediately prior to the end of the
section.
(b) ACCURACY OF SPECIFIED INFORMATION. Section 3(d) of
this Agreement is hereby amended by adding in the
third line thereof after the word "respect" and
before the period the words "or, in the case of
audited or unaudited financial statements, a
presentation of the financial condition of the
relevant party in accordance with generally accepted
accounting principles, consistently applied."
6
(c) ADDITIONAL REPRESENTATIONS. Section 3 of this
Agreement is hereby amended by adding at the end
thereof the following Subparagraphs (g), (h), (i),
(j) and (k):
(g) LINE OF BUSINESS. It has entered into this
Agreement (including each Transaction
evidenced hereby) in conjunction with its
line of business (including financial
intermediation services) or the financing of
its business.
(h) ELIGIBLE SWAP PARTICIPANT. It constitutes an
"eligible swap participant" as such term is
defined in Rule 35.1(b)(2) of the Commodity
Futures Trading Commission, 17 C.F.R.
Section 35.1(b)(2) (1994).
(i) STANDARDIZATION, CREDITWORTHINESS, AND
TRANSFERABILITY. The economic terms of this
Agreement, any Credit Support Document and
each Transaction have been individually
tailored and negotiated by each party. Each
party has received and reviewed financial
information concerning the other party and
has had a reasonable opportunity to ask
questions of and receive answers and
information from the other party concerning
such other party, this Agreement, such
Credit Support Document, and such
Transaction. The creditworthiness of the
other party was a material consideration to
each Party in entering into or determining
the terms of this Agreement, such Credit
Support Document, and such Transaction. The
transferability of this Agreement, such
Credit Support Document, and such
Transaction is restricted as provided herein
and therein.
(j) NO RELIANCE. In connection with the
negotiation of, the entering into, and the
confirming of the execution of this
Agreement, any Credit Support Document to
which it is a party, and each Transaction:
(i) it is acting as principal (and not as
agent or in any other capacity, fiduciary or
otherwise); (ii) the other party is not
acting as a fiduciary or financial or
investment advisor for it; (iii) it is not
relying upon any representations (whether
written or oral) of the other party other
than the representations expressly set forth
in this Agreement and in such Credit Support
Document; (iv) the other party has not given
to it (directly or indirectly through any
other person) any advice, counsel,
assurance, guarantee, or representation
whatsoever as to the expected or projected
success, profitability, return, performance,
result, effect, consequence, or benefit
(either legal, regulatory, tax, financial,
accounting, or otherwise) of this Agreement,
such Credit Support Document, or such
Transaction; (v) it has consulted with its
own legal, regulatory, tax, business,
investment, financial, and accounting
advisors to the extent it has deemed
necessary, and it has made its own
investment, hedging, and trading decisions
based upon its own judgment and upon any
advice from such advisors as it has deemed
necessary, and not upon any view expressed
by the other party; (vi) all trading
decisions have been the result of arm's
length negotiations between the parties; and
(vii) it is entering into this Agreement,
such Credit Support Document, and such
Transaction with a full understanding of all
of the risks hereof and thereof (economic
and otherwise), and it is capable of
assuming and willing to assume (financially
and otherwise) those risks.
(k) GENERIC RISK DISCLOSURE STATEMENT. Each
party represents to the other that it has
read and understands the "Generic Risks
Associated with Over-the-Counter Derivative
Transactions" statement attached as Exhibit
A to this Agreement.
(d) REFERENCE MARKET-MAKERS. The definition of "Reference
Market-makers" in Section 14 of this Agreement is
hereby amended by: (i) deleting "(a)" from the second
line thereof, (ii) deleting in the fourth line
thereof after the word "credit" the words "and (b) to
the extent practicable, from among such dealers
having an office in the same city" and (iii)
7
replacing such words with the words "or to enter into
transactions similar in nature to Transactions."
(e) DEFINITIONS. This Agreement, each Confirmation, and
each Transaction are subject to the 1991 ISDA
Definitions and the 1992 ISDA FX and Currency Options
Definitions as amended, supplemented, updated,
restated (including the 1993 ISDA Commodity
Derivatives Definitions) (the "Definitions"), each as
published by the International Swaps and Derivatives
Association, Inc. ("ISDA"), and will be governed in
all respects by the Definitions (except that
references to "Swap Transactions" in the Definitions
will be deemed to be references to "Transactions").
The Definitions, as so modified, are incorporated by
reference herein, and made part of, this Agreement
and each Confirmation as if set forth in full in this
Agreement and such Confirmations. In the event of any
inconsistency between the provisions of this
Agreement and the Definitions, this Agreement will
prevail. In the event of any inconsistency between
the provisions of any Confirmation and this Agreement
or the Definitions, such Confirmation will prevail
for the purpose of the relevant Transaction.
(f) SET-OFF. In addition to and not in limitation of any
other right or remedy (including any right to setoff,
counterclaim, or otherwise withhold payment) under
applicable law, the Non-defaulting Party or the
non-Affected Party (in either case, "X") may, at its
option and in its discretion, setoff, against any
amounts owed to the Defaulting Party or Affected
Party (in either case, "Y") in Dollars or any other
currency by X under this Agreement, any amounts owed
in Dollars or any other currency by Y to X under this
Agreement or any other agreement existing between
Party A and Party B. The obligations of Y and X in
respect of such amounts shall be deemed satisfied and
discharged to the extent of any such set-off. For
this purpose, the amounts subject to the set-off may
be converted at the applicable prevailing exchange
rate into the Termination Currency by the
Non-defaulting Party or non-Affected Party. If the
amount of an obligation has not been ascertained, X
may, in good faith, estimate that obligation and
setoff in respect of the estimate, subject to X or Y,
as the case may be, accounting to the other party
when the obligation is ascertained. X will give Y
notice of any setoff effected under this section
provided that failure to give such notice shall not
affect the validity of the setoff. Nothing in this
paragraph shall be deemed to create a charge or other
security interest.
(g) LIMITATION OF RATE. Notwithstanding any provision to
the contrary contained in this Agreement, in no event
shall the Default Rate, Non-default Rate, or
Termination Rate exceed the Highest Lawful Rate. For
purposes hereof, "Highest Lawful Rate" shall mean,
with respect to each party, the maximum non-usurious
interest rate, if any, that at any time or from time
to time may be contracted for, taken, reserved,
charged, or received on the subject indebtedness
under the law applicable to such party which is
presently in effect or, to the extent allowed by law,
may hereafter be in effect and which allows a higher
maximum non-usurious interest rate than applicable
law presently allows.
(h) LIMITATION OF LIABILITY. WITH RESPECT TO CLAIMS UNDER
THIS AGREEMENT, NO PARTY SHALL BE REQUIRED TO PAY OR
BE LIABLE FOR EXEMPLARY, PUNITIVE, INCIDENTAL,
CONSEQUENTIAL, OR INDIRECT DAMAGES (WHETHER OR NOT
ARISING FROM ITS NEGLIGENCE) TO ANY OTHER PARTY
EXCEPT TO THE EXTENT THAT THE PAYMENTS REQUIRED TO BE
MADE PURSUANT TO THIS AGREEMENT ARE DEEMED TO BE SUCH
DAMAGES. IF AND TO THE EXTENT ANY PAYMENT REQUIRED TO
BE MADE PURSUANT TO THIS AGREEMENT IS DEEMED TO
CONSTITUTE LIQUIDATED DAMAGES, THE PARTIES
ACKNOWLEDGE AND AGREE THAT SUCH DAMAGES ARE DIFFICULT
OR IMPOSSIBLE TO DETERMINE AND THAT SUCH PAYMENT IS
INTENDED TO BE A REASONABLE APPROXIMATION OF THE
AMOUNT OF SUCH DAMAGES AND NOT A PENALTY.
8
(i) CONFIDENTIALITY. Any information made available by
one party or its Credit Support Provider to the other
party or its Credit Support Provider (if any) with
respect to this Agreement or any Transaction
hereunder is confidential and shall not be discussed
with or disclosed to any third party, except for such
information (i) as may become generally available to
the public other than as a result of a violation of
this Agreement, (ii) as may be required or
appropriate in response to any summons, subpoena, or
otherwise in connection with any litigation or to
comply with any applicable law, order, regulation, or
ruling, (iii) as may be obtained from a
non-confidential source that disclosed such
information in a manner that did not violate its
obligations to the other party or its Credit Support
Provider (if any) in making such disclosure, or (iv)
as may be furnished to any person or entity
(including, without limitation, that party's
auditors, attorneys, advisors, or financial
institutions) with which the party has a written
agreement or which are otherwise required to keep the
information that is disclosed in confidence.
(j) FULLY-PAID TRANSACTIONS. Notwithstanding the terms of
Section 5 and 6 of this Agreement, if at any time and
so long as one of the parties to this Agreement ("X")
shall have satisfied in full its payment and delivery
obligations under Section 2(a)(i) of this Agreement
and shall at the time have no future payment or
delivery obligations, whether absolute or contingent,
under such Section 2(a)(i), then unless the other
party ("Y") is required pursuant to appropriate
proceedings to return to X or otherwise returns to X
upon demand of X any portion of any such payment or
delivery, the occurrence of an event described in
Section 5(a) of this Agreement with respect to X, any
Credit Support Provider of X or any Specified Entity
of X shall not constitute an Event of Default or a
Potential Event of Default with respect to X as the
Defaulting Party. Notwithstanding the foregoing
sentence, Y shall be entitled to designate an Early
Termination Date pursuant to Section 6 of this
Agreement only as a result of the occurrence of (i)
an Event of Default set forth in Section 5(a)(v) of
this Agreement with respect to X as the Defaulting
party or (ii) a Termination Event set forth in (A)
either Section 5(b)(i) or 5(b)(ii) of this Agreement
with respect to Y as the Affected Party or (B)
Section 5(b)(iii) of this Agreement with respect to Y
as the Burdened Party.
(k) PROCEDURES FOR ENTERING INTO TRANSACTIONS. On or
promptly following the date on which the parties
reach agreement on the terms of a Transaction, as
contemplated by the first sentence of Section
9(e)(ii), Party A will send to Party B a
Confirmation. Party B will promptly thereafter
confirm the accuracy of (in the manner required by
Section 9(e)(ii)), or request the correction of, such
Confirmation (in the later case, indicating how it
believes the terms of such Confirmation should be
correctly stated and such other terms which should be
added to or deleted from such Confirmation to make it
correct). If any disputes shall arise as to whether
an error exists in a Confirmation, the parties shall
resolve the dispute in good faith. If Party B has not
accepted or disputed the Confirmation in the manner
set forth above within two (2) Local Business Days
after it was sent to Party B, the Confirmation shall
be deemed binding as sent, absent manifest error.
(l) RECORDING OF TELEPHONE CONVERSATIONS. Party A and
Party B agree that (i) each may electronically record
all telephone conversations between them relating to
any Transaction, (ii) each waives any further notice
of such monitoring or recording, and agrees to notify
such officers and employees of such monitoring or
recording and to obtain any necessary consent of such
officers and employees and (iii) such recording may
be introduced as evidence of a Transaction.
9
PART 6
ADDITIONAL PROVISIONS FOR
COMMODITY DERIVATIVE TRANSACTIONS
(a) The 2000 Supplement to the 1993 Commodity Derivatives
Definitions, as published by the International Swaps
and Derivatives Association, Inc. (the "Commodity
Definitions"), shall apply, except as otherwise
specified herein or in the relevant Confirmation.
(b) "ADDITIONAL MARKET DISRUPTION EVENTS" shall apply
only if so specified in the relevant Confirmation.
(c) The following "Disruption Fallbacks" specified in
Section 7.5(c) of the Commodity Definitions shall
apply, in the following order, except as otherwise
specified in the relevant Confirmation:
(i) "FALLBACK REFERENCE PRICE" (if the relevant
parties have specified an alternate
Commodity Reference Price in the
Confirmation);
(ii) "NEGOTIATED FALLBACK"; the Relevant Price
will be determined and calculated as set
forth in the definition "COMMODITY-REFERENCE
DEALERS", with each party selecting in good
faith two (2) Reference Dealers in the
relevant market. Section 7.5 of the
Commodity Definitions will apply only if and
to the extent that after each party has
acted in good faith to select the two
Reference Dealers to determine the Relevant
Price as provided above, the Relevant Price
cannot be determined.
(iii) "POSTPONEMENT" with three (3) Commodity
Business Days as the Maximum Days of
Disruption;
(iv) "NO FAULT TERMINATION".
10
EXECUTION PAGE
TO
SCHEDULE
TO THE
ISDA MASTER AGREEMENT
(MULTICURRENCY-CROSS BORDER)
DATED AS OF JANUARY 1, 2001
BETWEEN
EL PASO MERCHANT ENERGY, L.P.
("PARTY A")
AND
EL PASO PRODUCTION COMPANY
("PARTY B")
IN WITNESS WHEREOF, the parties hereto have executed this document as
of the date specified on the first page hereof.
EL PASO MERCHANT ENERGY, L.P.
EL PASO PRODUCTION COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------- -----------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President, Title:
Managing Director, Date:
and Controller
Date:
11
EXHIBIT A
GENERIC RISKS ASSOCIATED WITH OVER-THE-COUNTER DERIVATIVE TRANSACTIONS
OTC derivative transactions, like other financial transactions, involve a
variety of significant risks. The specific risks presented by a particular OTC
derivative transaction necessarily depend upon the terms of the transaction and
your circumstances. In general, however, all OTC derivative transactions involve
some combination of market risk, credit risk, funding risk and operational risk.
Market risk is the risk that the value of a transaction will be adversely
affected by fluctuations in the level or volatility of or correlation or
relationship between one or more market prices, rates or indices or other market
factors or by illiquidity in the market for the relevant transaction or in a
related market.
Credit risk is the risk that a counterparty will fail to perform its obligations
to you when due.
Funding risk is the risk that, as a result of mismatches or delays in the timing
of cash flows due from or to your counterparties in OTC derivative transactions
or related hedging, trading, collateral or other transactions, you or your
counterparty will not have adequate cash available to fund current obligations.
Operational risk is the risk of loss to you arising from inadequacies in or
failures of your internal systems and controls for monitoring and quantifying
the risks and contractual obligations associated with OTC derivative
transactions, for recording and valuing OTC derivative and related transactions,
or for detecting human error, systems failure or management failure.
There may be other significant risks which you should consider based on the
terms of a specific transaction. Highly customized OTC derivative transactions
in particular may increase liquidity risk and introduce other significant risk
factors of a complex character. Highly leveraged transactions may experience
substantial gains or losses in value as a result of relatively small changes in
the value or level of an underlying or related market factor.
Because the price and other terms on which you may enter into or terminate an
OTC derivative transaction are individually negotiated, these may not represent
the best price or terms available to you from other sources.
In evaluating the risks and contractual obligations associated with a particular
OTC derivative transaction, you should also consider that an OTC derivative
transaction may be modified or terminated only by mutual consent of the original
parties and subject to agreement on individually negotiated terms. Accordingly,
it may not be possible for you to modify, terminate or offset your obligations
or your exposure to the risks associated with a transaction prior to its
scheduled termination date.
Similarly, while market makers and dealers generally quote prices or terms for
entering into or terminating OTC derivative transactions and provide indicative
or mid-market quotations with respect to outstanding OTC derivative
transactions, they are generally not contractually obligated to do so. In
addition, it may not be possible to obtain indicative or mid-market quotations
for an OTC derivative transaction from a market maker or dealer that is not a
counterparty to the transaction. Consequently, it may also be difficult for you
to establish an independent value for an outstanding OTC derivative transaction.
You should not regard your counterparty's provision of a valuation or indicative
price at our request as an offer to enter into or terminate the relevant
transaction at that value or price, unless the value or price is identified by
the counterparty as firm or binding.
THIS BRIEF STATEMENT DOES NOT PURPORT TO DISCLOSE ALL THE RISKS AND OTHER
MATERIAL CONSIDERATIONS ASSOCIATED WITH OTC DERIVATIVE TRANSACTIONS. YOU SHOULD
NOT CONSTRUE THIS GENERIC DISCLOSURE STATEMENT AS BUSINESS, LEGAL, TAX OR
ACCOUNTING ADVICE OR AS MODIFYING APPLICABLE LAW. YOU SHOULD CONSULT YOUR OWN
BUSINESS, LEGAL, TAX AND ACCOUNTING ADVISERS WITH RESPECT TO PROPOSED OTC
DERIVATIVE TRANSACTIONS AND YOU SHOULD REFRAIN FROM ENTERING INTO ANY OTC
DERIVATIVE TRANSACTION UNLESS YOU HAVE FULLY UNDERSTOOD THE TERMS AND RISKS OF
THE TRANSACTION, INCLUDING THE EXTENT OF YOUR POTENTIAL RISK OF LOSS.