EXHIBIT 10.7
ISDA{reg-trade-▇▇▇▇}
INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC.
CREDIT SUPPORT ANNEX
to the Schedule to the
ISDA MASTER AGREEMENT
dated as of 19 June 2003
between
Barclays Bank PLC and Gracechurch Card Funding (No. 4) PLC.
("PARTY A") ("PARTY B")
This Annex supplements, forms part of, and is subject to, the ISDA Master
Agreement referred to above and is part of its Schedule. For the purposes of
this Agreement, including, without limitation, Sections 1(c), 2(a), 5 and 6,
the credit support arrangements set out in this Annex constitute a Transaction
(for which this Annex constitutes the Confirmation).
PARAGRAPH 1. INTERPRETATION
Capitalised terms not otherwise defined in this Annex or elsewhere in this
Agreement have the meanings specified pursuant to Paragraph 10, and all
references in this Annex to Paragraphs are to Paragraphs of this Annex. In the
event of any inconsistency between this Annex and the other provisions of this
Schedule, this Annex will prevail, and in the event of any inconsistency
between Paragraph 11 and the other provisions of this Annex, Paragraph 11 will
prevail. For the avoidance of doubt, references to "transfer" in this Annex
mean, in relation to cash, payment, and in relation to the assets, delivery.
PARAGRAPH 2. CREDIT SUPPORT OBLIGATIONS
(a) DELIVERY AMOUNT. Subject to Paragraphs 3 and 4, upon a demand made by
the Transferee on or promptly following a Valuation Date, if the Delivery
Amount for that Valuation Date equals or exceeds the Transferor's Minimum
Transfer Amount, then the Transferor will transfer to the Transferee Eligible
Credit Support having a Value as of the date of transfer at least equal to the
applicable Delivery Amount (rounded pursuant to Paragraph 11(b)(iii)(D)).
Unless otherwise specified in Paragraph 11(b), the "Delivery Amount" applicable
to the Transferor for any Valuation Date will equal the amount by which:
(i) the Credit Support Amount
exceeds
(ii) the Value as of that Valuation Date of the Transferor's Credit
Support Balance (adjusted to include any prior Delivery Amount and to
exclude any prior Return Amount, the transfer of which, in each case, has
not yet been completed and for which the relevant Settlement Day falls on
or after such Valuation Date).
(b) RETURN AMOUNT. Subject to Paragraphs 3 and 4, upon a demand made by the
Transferor on or promptly following a Valuation Date, if the Return Amount for
that Valuation Date equals or exceeds the Transferee's Minimum Transfer Amount,
then the Transferee will transfer to the Transferor Equivalent Credit Support
specified by the Transferor in that demand having a Value as of the date of
transfer as close as practicable to the applicable Return Amount (rounded
pursuant to Paragraph 11(b)(iii)(D)) and the Credit Support Balance will, upon
such
transfer, be reduced accordingly. Unless otherwise specified in Paragraph
11(b), the "Return Amount" applicable to the Transferee for any Valuation Date
will equal the amount by which:
(i) the Value as of that Valuation Date of the Transferor's Credit
Support Balance (adjusted to include any prior Delivery Amount and to
exclude any prior Return Amount, the transfer of which, in each case, has
not yet been completed and for which the relevant Settlement Day falls on
or after such Valuation Date).
exceeds
(ii) the Credit Support Amount.
PARAGRAPH 3. TRANSFERS, CALCULATIONS AND EXCHANGES
(a) TRANSFERS. All transfers under this Annex of any Eligible Credit
Support, Equivalent Credit Support, Interest Amount or Equivalent Distributions
shall be made in accordance with the instructions of the Transferee or
Transferor, as applicable, and shall be made:
(i) in the case of cash, by transfer into one or more bank accounts
specified by the recipient;
(ii) in the case of certificated securities which cannot or which the
parties have agreed will not be delivered by book-entry, by delivery in
appropriate physical form to the recipient or its account accompanied by
any duly executed instruments of transfer, transfer tax stamps and any
other documents necessary to constitute a legally valid transfer of the
transferring party's legal and beneficial title to the recipient; and
(iii) in the case of securities which the parties have agreed will be
delivered by book-entry, by the giving of written instructions
(including, for the avoidance of doubt, instructions given by telex,
facsimile transmission or electronic messaging system) to the relevant
depository institution or other entity specified by the recipient,
together with a written copy of the instructions to the recipient,
sufficient, if complied with, to result in a legally effective transfer
of the transferring party's legal and beneficial title to the recipient.
Subject to Paragraph 4 and unless otherwise specified, if a demand for the
transfer of Eligible Credit Support or Equivalent Credit Support is received by
the Notification Time, then the relevant transfer will be made not later than
the close of business on the Settlement Day relating to the date such demand is
received; if a demand is received after the Notification Time, then the
relevant transfer will be made not later than the close of business on the
Settlement Day relating to the day after the date such demand is received.
(b) CALCULATIONS. All calculations of Value and Exposure for purposes of
Paragraphs 2 and 4(a) will be made by the relevant Valuation Agent as of the
relevant Valuation Time. The Valuation Agent will notify each party (or the
other party, if the Valuation Agent is a party) of its calculations not later
than the Notification Time on the Local Business Day following the applicable
Valuation Date (or, in the case of Paragraph 4(a), following the date of
calculation).
(c) EXCHANGES.
(i) Unless otherwise specified in Paragraph 11, the Transferor may on
any Local Business Day by notice inform the Transferee that it wishes to
transfer to the Transferee Eligible Credit Support specified in that
notice (the "New Credit Support") in exchange for certain Eligible Credit
Support (the "Original Credit Support") specified in that notice
comprised in the Transferor's Credit Support Balance.
(ii) If the Transferee notifies the Transferor that it has consented to
the proposed exchange, (A) the Transferor will be obliged to transfer the
New Credit Support to the Transferee on the first Settlement Day
following the date on which it receives notice (which may be oral
telephonic notice) from the Transferee of its consent and (B) the
Transferee will be obliged to transfer to the Transferor Equivalent
Credit Support in respect of the Original Credit Support not later than
the Settlement Day following the date on which the Transferee receives
the New Credit Support, unless otherwise specified in Paragraph 11(d)
(the "Exchange Date"); provided that the Transferee will only be obliged
to transfer Equivalent Credit Support with a Value as of the date of
transfer as close as practicable to, but in any event not more than, the
Value of the New Credit Support as of that date.
PARAGRAPH 4. DISPUTE RESOLUTION
(a) DISPUTED CALCULATIONS OR VALUATIONS. If a party (a "Disputing Party")
reasonably disputes (I) the Valuation Agent's calculation of a Delivery Amount
or a Return Amount or (II) the Value of any transfer of Eligible Credit Support
or Equivalent Credit Support, then:
(1) the Disputing Party will notify the other party and the Valuation
Agent (if the Valuation Agent is not the other party) not later than the
close of business on the Local Business Day following, in the case of (I)
above, the date that the demand is received under Paragraph 2 or, in the
case of (II) above, the date of transfer;
(2) in the case of (I) above, the appropriate party will transfer the
undisputed amount to the other party not later than the close of business
on the Settlement Day following the date that the demand is received
under Paragraph 2;
(3) the parties will consult with each other in an attempt to resolve
the dispute; and
(4) if they fail to resolve the dispute by the Resolution Time. then:
(i) in the case of a dispute involving a Delivery Amount or
Return Amount, unless otherwise specified in Paragraph 11(c), the
Valuation Agent will recalculate the Exposure and the Value as of
the Recalculation Date by:
(A) utilising any calculations of that part of the
Exposure attributable to the Transactions that the parties
have agreed are not in dispute;
(B) calculating that part of the Exposure attributable to
the Transactions in dispute by seeking four actual quotations
at mid-market from Reference Market-makers for purposes of
calculating Market Quotation, and taking the arithmetic
average of those obtained; provided that if four quotations
are not available for a particular Transaction, then fewer
than four quotations may be used for that Transaction, and if
no quotations are available for a particular Transaction,
then the Valuation Agent's original calculations will be used
for the Transaction; and
(C) utilising the procedures specified in Paragraph
11(e)(ii) for calculating the Value, if disputed, of the
outstanding Credit Support Balance;
(ii) in the case of a dispute involving the Value of any transfer
of Eligible Credit Support or Equivalent Credit Support, the
Valuation Agent will recalculate the Value as of the date of
transfer pursuant to Paragraph 11(e)(ii).
Following a recalculation pursuant to this Paragraph, the Valuation Agent will
notify each party (or the other party, if the Valuation Agent is a party) as
soon as possible but in any event not later than the Notification Time on the
Local Business Day following the Resolution Time. The appropriate party will,
upon demand following such notice given the Valuation Agent or resolution
pursuant to (3) above and subject to Paragraph 3(a), make the appropriate
transfer.
(b) NO EVENT OF DEFAULT. The failure by a party to make a transfer of any
amount which is the subject of a dispute to which Paragraph 4(a) applies will
not constitute an Event of Default for as long as the procedures set out in
this Paragraph 4 are being carried out. For the avoidance of doubt, upon
completion of those procedures, Section 5(a)(i) of this Agreement will apply to
any failure by a party to make a transfer required under the final sentence of
Paragraph 4(a) on the relevant due date.
PARAGRAPH 5. TRANSFER OF TITLE, NO SECURITY INTEREST, DISTRIBUTIONS AND
INTEREST AMOUNT
(a) TRANSFER OF TITLE. Each party agrees that all right, title and interest
in and to any Eligible Credit Support, Equivalent Credit Support, Equivalent
Distributions or Interest Amount which it transfers to the other party under
the terms of this Annex shall vest in the recipient free and clear of any
liens, claims, charges or encumbrances or any other interest of the
transferring party or of any third person (other than a lien routinely imposed
on all securities in a relevant clearance system).
(b) NO SECURITY INTEREST. Nothing in this Annex is intended to create or
does create in favour of either party any mortgage, charge, lien, pledge,
encumbrance or other security interest in any cash or other property
transferred by one party to the other party under the terms of this Annex.
(c) DISTRIBUTIONS AND INTEREST AMOUNT.
(i) DISTRIBUTIONS. The Transferee will transfer to the Transferor not
later than the Settlement Day following each Distributions Date cash,
securities or other property of the same type, nominal value, description
and amount as the relevant Distributions ("Equivalent Distributions") to
the extent that a Delivery Amount would not be created or increased by
the transfer, as calculated by the Valuation Agent (and the date of
calculation will be deemed a Valuation Date for this purpose).
(ii) INTEREST AMOUNT. Unless otherwise specified in Paragraph
11(f)(iii), the Transferee will transfer to the Transferor at the times
specified in Paragraph 11(f)(ii) the relevant Interest Amount to the
extent that a Delivery Amount would not be created or increased by the
transfer, as calculated by the Valuation Agent (and the date of
calculation will be deemed a Valuation Date for this purpose).
PARAGRAPH 6. DEFAULT
If any Early Termination Date is designated or deemed to occur as a result of
an Event of Default in relation to a party, an amount equal to the Value of the
Credit Support Balance, determined as though the Early Termination Date were a
Valuation Date, will be deemed to be an Unpaid Amount due to the Transferor
(which may or may not be the Defaulting Party) for purposes of Section 6(e).
For the avoidance of doubt, if Market Quotation is the applicable payment
measure for purposes of Section 6(e), then the Market Quotation determined
under Section 6(e) in relation to the Transaction constituted by this Annex
will be deemed to be zero, and if Loss is the applicable payment measure for
purposes of Section 6(e), then the Loss determined under Section 6(e) in
relation to the Transaction will be limited to the Unpaid Amount representing
the Value of the Credit Support Balance.
PARAGRAPH 7. REPRESENTATION
Each party represents to the other party (which representation will be deemed
to be repeated as of each date on which it transfers Eligible Credit Support,
Equivalent Credit Support or Equivalent Distributions) that is the sole owner
of or otherwise has the right to transfer all Eligible Credit Support,
Equivalent Credit Support or Equivalent Distributions it transfers to the other
party under this Annex, free and clear of any security interest, lien
encumbrance or other restriction (other than lien routinely imposed on all
securities in a relevant clearance system).
PARAGRAPH 8. EXPENSES
Each party will pay its own costs and expenses (including any stamp, transfer,
or similar transaction tax or duty payable on any transfer it is required to
make under this Annex) in connection with performing its obligations under this
Annex, and neither party will be liable for any such costs and expenses
incurred by the other party.
PARAGRAPH 9. MISCELLANEOUS
(a) DEFAULT INTEREST. Other than in the case of an amount which is the
subject of dispute under Paragraph 4(a), if a Transferee fails to make, when
due, any transfer of Equivalent Credit Support, Equivalent Distributions or the
Interest Amount, it will be obliged to pay the Transferor (to the extent
permitted under applicable law) an amount equal to interest at the Default Rate
multiplied by the Value on the relevant Valuation Date of the items of property
that were required to be transferred, from (and including) the date that the
Equivalent Credit Support, Equivalent Distributions or Interest Amount were
required to be transferred to (but excluding) the date of transfer of the
Equivalent Credit Support, Equivalent Distributions or Interest Amount. This
interest will be calculated on the basis of daily compounding and the actual
number of days elapsed.
(b) GOOD FAITH AND COMMERCIALLY REASONABLE MANNER. Performance of all
obligations under this Annex, including, but not limited to, all calculations,
valuations and determinations made by either party, will be made in good faith
and in a commercially reasonable manner.
(c) DEMANDS AND NOTICES. All demands and notices given by a party under this
Annex will be given as specified in Section 12 of this Agreement.
(d) SPECIFICATIONS OF CERTAIN MATTERS. Anything referred to in this Annex as
being specified in Paragraph 11 also may be specified in one or more
Confirmations or other documents and this Annex will be construed accordingly.
PARAGRAPH 10. DEFINITIONS
As used in this Annex:
"Base Currency" means the currency specified as such in Paragraph 11(a)(i).
"Base Currency Equivalent" means, with respect to an amount on a Valuation
Date, in the case of an amount denominated in the Base Currency, such Base
Currency and, in the case of an amount denominated in a currency other than the
Base Currency (the "Other Currency"), the amount of Base Currency required to
purchase such amount of the Other Currency at the spot exchange rate determined
by the Valuation Agent for value on such Valuation Date.
"Credit Support Amount" means, with respect to a Transferor on a Valuation
Date, (i) the Transferee's Exposure plus (ii) all Independent Amounts
applicable to the Transferor, if any, minus (iii) all Independent Amounts
applicable to the Transferee, if any, minus (iv) the Transferor's Threshold;
provided, however, that the Credit Support Amount will be deemed to be zero
whenever the calculation of Credit Support Amount yields a number less than
zero.
"Credit Support Balance" means, with respect to a Transferor on a Valuation
Date, the aggregate of all Eligible Credit Support that has been transferred to
or received by the Transferee under this Annex, together with any Distributions
and all proceeds of any such Eligible Credit Support or Distributions, as
reduced pursuant to Paragraph 2(b), 3(c)(ii) or 6. Any Equivalent
Distributions or Interest Amount (or portion of either) not transferred
pursuant to Paragraph 5(c)(i) or (ii) will form part of the Credit Support
Balance.
"Delivery Amount" has the meaning specified in Paragraph 2(a).
"Disputing Party" has the meaning specified in Paragraph 4.
"Distributions" means, with respect to any Eligible Credit Support comprised
in the Credit Support Balance consisting of securities, all principal, interest
and other payments and distributions of cash or other property to which a
holder of securities of the same type, nominal value, description and amount as
such Eligible Credit Support would be entitled from time to time.
"Distribution Date" means, with respect to any Eligible Credit Support
comprised in the Credit Support Balance other than cash, each date on which a
holder of such Eligible Credit Support is entitled to receive Distributions or,
if that date is not a Local Business Day, the next following Local Business
Day.
"Eligible Credit Support" means, with respect to a party, the items, if any,
specified as such for that party in Paragraph 11(b)(ii) including, in relation
to any securities, if applicable, the proceeds of any redemption in whole or in
party of such securities by the relevant issuer.
"Eligible Currency" means each currency specified as such in Paragraph
11(a)(ii), if such currency is freely available.
"Equivalent Credit Support" means, in relation to any Eligible Credit Support
comprised in the Credit Support Balance, Eligible Credit Support of the same
type, nominal value, description and amount as that Eligible Credit Support.
"Equivalent Distributions" has the meaning specified in Paragraph 5(c)(i).
"Exchange Date" has the meaning specified in Paragraph 11(d).
"Exposure" means, with respect to a party on a Valuation Date and subject to
Paragraph 4 in the case of a dispute, the amount, if any, that would be payable
to that party by the other party (expressed as a positive number) or by that
party to the other party (expressed as a negative number) pursuant to Section
6(e)(ii)(1) of this Agreement if all Transactions (other than the Transaction
constituted by this Annex) were being terminated as of the relevant Valuation
Time, on the basis that (i) that party is not the Affected Party and (ii) the
Base Currency is the Termination Currency; provided that Market Quotations
will be determined by the Valuation Agent on behalf of that party using its
estimates at mid-market of the amounts that would be paid for Replacement
Transactions (as that term is defined in the definition of "Market Quotation").
"Independent Amount" means, with respect to a party, the Base Currency
Equivalent of the amount specified as such for that party in Paragraph
11(b)(iii)(A); if not amount is specified, zero.
"Interest Amount" means, with respect to an Interest Period, the aggregate sum
of the Base Currency Equivalents of the amounts of interest determined for each
relevant currency and calculated for each day in that Interest Period on the
principal amount of the portion of the Credit Support Balance comprised of cash
in such currency, determined by the Valuation Agent for each such day as
follows:
(x) the amount of cash in such currency on that day; multiplied by
(y) the relevant Interest Rate in effect for that day; divided by
(z) 360 (or, in the case of pounds sterling, 365).
"Interest Period" means the period from (and including) the last Local
Business Day on which an Interest Amount was transferred (or, if no Interest
Amount has yet been transferred, the Local Business Day on which Eligible
Credit Support or Equivalent Credit Support in the form of cash was transferred
to or received by the Transferee) to (but excluding) the Local Business Day on
which the current Interest Amount is transferred.
"Interest Rate" means with respect to an Eligible Currency, the rate specified
in Paragraph 11(f)(i) for that currency.
"Local Business Day" , unless otherwise specified in Paragraph 11(h), means:
(i) in relation to a transfer of cash or other property (other than
securities) under this Annex, a day on which commercial banks are open
for business (including dealings in foreign exchange and foreign currency
deposits) in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of
such payment;
(ii) in relation to a transfer of securities under this Annex, a day on
which the clearance system agreed between the parties for delivery of the
securities is open for the acceptance and execution of settlement
instructions or, if delivery of the securities is contemplated by other
means, a day on which commercial banks are open for business (including
dealings in foreign exchange and foreign currency deposits) in the
place(s) agreed between the parties for this purpose.
(iii) in relation to a valuation under this Annex, a day on which
commercial banks are open for business (including dealings in foreign
exchange and foreign currency deposits) in the place of location of the
Valuation Agent and in the place(s) agreed between the parties for this
purpose; and
(iv) in relation to any notice or other communication under this Annex,
a day on which commercial banks are open for business (including dealings
in foreign exchange and foreign currency deposits) in the place specified
in the address for notice most recently provided by the recipient.
"Minimum Transfer Amount" means, with respect to a party, the amount specified
as such for that party in Paragraph 11(b)(iii)(C); if no amount is specified,
zero.
"New Credit Support" has the meaning specified in Paragraph 3(c)(i).
"Notification Time" has the meaning specified in Paragraph 11(c)(iv).
"Recalculation Date" means the Valuation Date that gives rise to the dispute
under Paragraph 4; provided however, that if a subsequent Valuation Date occurs
under Paragraph 2 prior to the resolution of the dispute, then the
"Recalculation Date" means the most recent Valuation Date under Paragraph 2.
"Resolution Time" has the meaning specified in Paragraph 11(c)(i).
"Return Amount" has the meaning specified in Paragraph 2(b).
"Settlement Day" means, in relation to a date, (i) with respect to a transfer
of cash or other property (other than securities), the next Local Business Day
and (ii) with respect to a transfer of securities, the first Local Business Day
after such date on which settlement of a trade in the relevant securities, if
effected on such date, would have been settled in accordance with customary
practice when settling through the clearance system agreed between the parties
for delivery of such securities or, otherwise, on the market in which such
securities are principally traded
(or, in either case, if there is no such customary practice, on the first Local
Business Day after such date on which it is reasonably practicable to deliver
such securities).
"Threshold" means, with respect to a party, the Base Currency Equivalent of
the amount specified as such for that party in Paragraph 11(b)(iii)(B); if no
amount is specified, zero.
"Transferee" means, in relation to each Valuation Date, the party in respect
of which Exposure is a positive number and, in relation to a Credit Support
Balance, the party which, subject to this Annex, owes such Credit Support
Balance or, as the case may be, the Value of such Credit Support Balance to the
other party.
"Transferor" means, in relation to a Transferee, the other party.
"Valuation Agent" has the meaning specified in Paragraph 11(c)(i).
"Valuation Date" means each date specified in or otherwise determined pursuant
to Paragraph 11(c)(ii).
"Valuation Percentage" means, for any item of Eligible Credit Support, the
percentage specified in Paragraph 11(b)(ii).
"Valuation Time" has the meaning specified in Paragraph 11(c)(iii).
"Value" means, for any Valuation Date or other date for which Value is
calculated, and subject to Paragraph 4 in the case of a dispute, with respect
to:
(i) Eligible Credit Support comprised in a Credit Support Balance that
is:
(A) an amount of cash, the Base Currency Equivalent of such
amount multiplied by the applicable Valuation Percentage, if any;
and
(B) a security, the Base Currency Equivalent of the bid price
obtained by the Valuation Agent multiplied by the applicable
Valuation Percentage, if any; and
(ii) items that are comprised in a Credit Support Balance and are not
Eligible Credit Support, zero.
PARAGRAPH 11. ELECTIONS AND VARIABLES
(a) BASE CURRENCY AND ELIGIBLE CURRENCY.
(i) "Base Currency" means GBP.
(i) "Eligible Currency" means the Base Currency and each other currency
specified here: United States Dollars and Euros.
It is agreed by the parties that where the Credit Support Amount is
transferred in a currency other than the Base Currency, the Valuation
Percentage specified in Paragraph 11(b)(ii) shall be reduced by a
percentage agreed by the parties and approved by the relevant rating
agency ("ADDITIONAL VALUATION PERCENTAGE"), such Additional Valuation
Percentage being 6% or such lower percentage as agreed by the parties and
approved by the relevant rating agency. For the purpose of this Annex,
references to the "relevant rating agency" shall mean the rating agency
whose Ratings Criteria will be used to determine the amount of Eligible
Credit Support that Party A is required to transfer to Party B following a
credit ratings downgrade of Party A.
(b) CREDIT SUPPORT OBLIGATIONS.
(i) DELIVERY AMOUNT, RETURN AMOUNT AND CREDIT SUPPORT AMOUNT.
(A) "DELIVERY AMOUNT": Paragraph 2(a) shall apply, except that
the words, "upon a demand made by the Transferee" shall be
deleted and the word "that" on the second line of Paragraph
2(a) shall be replaced with the word "a".
(B) "RETURN AMOUNT" has the meaning as specified in Paragraph
2(b).
(C) "CREDIT SUPPORT AMOUNT" has the meaning specified under the
relevant definition of Ratings Criteria. In circumstances
where more than one of the Ratings Criteria apply to Party A,
the Credit Support Amount shall be calculated by reference to
the Ratings Criteria which would result in Party A
transferring the greatest amount of Eligible Credit Support.
Under no circumstances will Party A be required to transfer
more Eligible Credit Support than the greatest amount
calculated in accordance with the Ratings Criteria set out
below.
(ii) ELIGIBLE CREDIT SUPPORT. The following items will qualify as
"Eligible Credit Support" for Party A:
VALUATION
PERCENTAGE
(A) cash in an Eligible Currency 100%
(B) negotiable debt obligations issued after 18 July 1984 99%
by the U.S. Treasury Department
having a residual maturity on such date of less than
1 year (with local and foreign currency issuer ratings
of ▇▇▇▇▇'▇ Aa2 and S&P AA or above)
(C) negotiable debt obligations issued after 18 July 1984 97%
by the U.S. Treasury Department
having a residual maturity on such date equal to or
greater than 1 year but less than 5 years (with local
and foreign currency issuer ratings of ▇▇▇▇▇'▇ Aa2
and S&P AA or above)
(D) negotiable debt obligations issued after18 July 1984 95%
by the U.S. Treasury Department
having a residual maturity on such date
equal to or greater than 5 years but less than
10 years (with local and foreign currency issuer ratings
of ▇▇▇▇▇'▇ Aa2 and S&P AA or above)
(E) negotiable debt obligations of the Federal 95%
Republic of Germany (with local and foreign currency
issuer ratings of ▇▇▇▇▇'▇ Aa2 and S&P AA
or above) with a residual maturity of less than 10 years
at the date of their transfer to the Secured Party.
(F) negotiable debt obligations of the Republic of France 95%
(with local and foreign currency issuer ratings of
▇▇▇▇▇'▇ Aa2 and S&P AA or above) with
a residual maturity of less than 10 years at the date of
their transfer to the Secured Party.
(G) negotiable debt obligations of Belgium 95%
(with local and foreign currency issuer ratings of
Moody's Aa2 and S&P AA or above) with
a residual maturity of less than 10 years at the date of
their transfer to the Secured Party.
(H) negotiable debt obligations of the United Kingdom 95%
(with local and foreign currency issuer ratings of
Moody's Aa2 and S&P AA or above) with
a residual maturity of less than 10 years at the date of
their transfer to the Secured Party.
(I) negotiable debt obligations of Italy 95%
(with local and foreign currency issuer ratings of
Moody's Aa2 and S&P AA or above) with
a residual Maturity of less than 10 years at the date of
their transfer to the Secured Party.
(J) negotiable debt obligations of the Netherlands 95%
(with local and foreign currency issuer ratings of
Moody's Aa2 and S&P AA or above) with
a residual maturity of less than 10 years at the date of
their transfer to the Secured Party.
(K) negotiable debt obligations of Sweden 95%
(with local and foreign currency issuer ratings of
Moody's Aa2 and S&P AA or above) with
a residual maturity of less than 10 years at the date of
their transfer to the Secured Party.
(L) negotiable debt obligations of the US Government 97%
National Mortgage Association, the US Federal
National Mortgage Association, the US Federal
Home Loan Mortgage Corporation,
the US Student Loans Marketing Association
or a US Federal Home Loan Bank (all entities rated
▇▇▇▇▇'▇ Aa1 and S&P AA+ or above) with
a residual maturity on such date equal to or greater than
1 year but less than 3 years.
(M) negotiable debt obligations of the US Government 90%
National Mortgage Association, the US Federal
National Mortgage Association, the US Federal
Home Loan Mortgage Corporation,
the US Student Loans Marketing Association
or a US Federal Home Loan Bank (all entries rated
▇▇▇▇▇'▇ Aa1 and S&P AA+ or above) with
a residual maturity on such date equal to or greater than
3 years but less than 5 years.
(N) negotiable debt obligations of the US Government 87%
National Mortgage Association, the US Federal
National Mortgage Association, the US Federal
Home Loan Mortgage Corporation,
the US Student Loans Marketing Association
or a US Federal Home Loan Bank (all entries rated
▇▇▇▇▇'▇ Aa1 and S&P AA+ or above) with a
residual maturity on such date equal to or greater than
5 years but less than 7 years.
(O) negotiable debt obligations of the US Government 83%
National Mortgage Association, the US Federal
National Mortgage Association, the US Federal
Home Loan Mortgage Corporation,
the US Student Loans Marketing Association
or a US Federal Home Loan Bank (all entries rated ▇▇▇▇▇'▇
Aa1 and S&P AA+ or above) with a residual
maturity on such date equal to or greater than 7 years but
less than 10 years.
For the avoidance of doubt, where negotiable debt obligations are
rated by only one of the above relevant rating agencies, the rating
applied will be based on the rating of that agency.
Where the ratings of the relevant agencies differ with respect to
the same negotiable debt obligation, the lower of the ratings shall
apply.
(iii)THRESHOLDS.
(A) "INDEPENDENT AMOUNT" means, for Party A and Party B, with
respect to each Transaction, zero.
(B) "THRESHOLD" means, for Party A:
1. infinity, unless (i) Party A: (a) ceases to be rated as high
as Moody's Required Ratings I and/or (b) ceases to be rated
as high as S&P's Required Rating AND (ii) it has not
otherwise complied with Part 5.2(i)(x)(a), (b) or (c) and/or
Part 5.2(ii)(a),(b) and (d) of the Agreement, then its
Threshold shall be zero, or
2. in the event that Party A has complied with Part
5.2(i)(x)(a),(b) or (c) and/or Part 5.2(ii)(a),(b) or (d) of
the Agreement, its Threshold shall continue to be infinity,
unless it (or its successor) ceases to be rated as high as
Moody's Required Ratings II, then its Threshold shall be
zero, until such time as it has complied with Part
5.2(y)(a),(b) or (c).
"THRESHOLD" means, for Party B: infinity
(C) "MINIMUM TRANSFER AMOUNT" means, with respect to Party A and
Party B, GBP100,000; provided, that if (1) an Event of
Default has occurred and is continuing with respect to Party
A, or (2) an Additional Termination Event has occurred in
respect of which Party A is an Affected, the Minimum Transfer
Amount with respect to such party shall be zero.
(D) "ROUNDING". The Delivery Amount and the Return Amount will be
rounded up and down to the nearest integral multiple of
GPB10,000 respectively, subject to the maximum Return Amount
being equal to the Credit Support Balance.
(c) VALUATION AND TIMING.
(i) "VALUATION AGENT" means, Party A in all circumstances.
(ii) "VALUATION DATE" means every day; provided that if such day is not
a Local Business Day then the Valuation Date shall be the preceding
day that is a Local Business Day.
(iii) "VALUATION TIME" means 5.00p.m. New York time on the Local Business
Day immediately preceding the Valuation Date or date of
calculation, as applicable; provided that the calculations of Value
and Exposure will be made as approximately the same time on the
same date.
(iv) "NOTIFICATION TIME" means by 2:00p.m., London time, on a Local
Business Day.
(d) EXCHANGE DATE. "Exchange Date" has the meaning specified in paragraph
3(c)(ii).
(e) DISPUTE RESOLUTION.
(i) "RESOLUTION TIME" means 2:00 p.m., London, on the Local Business
Day following the date on which notice is given that gives rise to
a dispute under Paragraph 4.
(ii) "VALUE". For the purpose of Paragraph 4(a)(4)(i)(C) and
4(a)(4)(ii), the Value of the outstanding Credit Support Balance or
of any transfer of Eligible Credit Support or Equivalent Credit
Support, as the case may be, will be calculated as follows:
For Eligible Credit Support comprised in a Credit Support Balance
that is an amount of cash, the Base Currency Equivalent of such
amount.
(iii) "ALTERNATIVE". The provisions of Paragraph 4 will apply.
(f) DISTRIBUTION AND INTEREST AMOUNT.
(ii) INTEREST RATE. The "INTEREST RATE" will be with respect to the
Base Currency, the overnight rate for such day, as set forth under
the heading "▇▇▇▇▇" on Telerate Page 3937 under the heading
"Sterling Overnight Index" as of 9.00 a.m., London time or any
successor page and if for any
reason Telerate Page 3937 should be unavailable the Interest Rate
shall be such rate as agreed between the parties reflecting the then
prevailing market rate. In the event that the parties agree that
Eligible Credit Support may include currencies other than the Base
Currency, the "INTEREST RATE" with respect to each such currency
shall be such rate as may be agreed between the parties at the time
that it is agreed that Eligible Credit Support may include such
currency.
(ii) "TRANSFER OF INTEREST AMOUNT". The transfer of the Interest Amount
will be made on the first Local Business Day following the end of
each calendar month to the extent that Party B has earned and
received such amount of interest and that a Delivery Amount would
not be created or increased by that transfer, and on any other
Local Business Day on which Equivalent Credit Support is
transferred to the Transferor pursuant to Paragraph 2(b), provided
that Party B shall only be obliged to transfer any Interest Amount
to Party A to the extent that it has received such amount.
(iii) "ALTERNATIVE TO INTEREST AMOUNT". The provisions of Paragraph
5(c)(ii) will apply. For the purposes of calculating the Interest
Amount the amount of interest calculated for each day of the
Interest Period shall, with respect to any Eligible Currency, be
compounded daily.
(iv) INTEREST AMOUNT" The definition of "INTEREST AMOUNT" shall be
deleted and replaced with the following:
"INTEREST AMOUNT" means, with respect to an Interest Period and
each portion of the Credit Support Balance comprised of cash in an
Eligible Currency, the sum of the amounts of interest determined
for each day in that Interest Period by the Valuation Agent as
follows:
(x) the amount of such currency comprised in the Credit Support
Balance at the close of business for general dealings in the
relevant currency on such day (or, if such day is not a Local
Business Day, on the immediately preceding Local Business
Day); multiplied by
(y) the relevant Interest Rate; divided by
(z) 360 (or in the case of Pounds Sterling, 365).
(g) ADDRESSES FOR TRANSFERS.
Party A:
GBP Cash EUR Cash USD Cash
Barclays Bank London Barclays Bank London Barclays Bank PLC
Sort Code 20-00-00 A/c number 44295577 A/C 050035428
A/c number: 50654140 A/c name: Barclays Capital A/c name: Barclays Capital
A/c name: Barclays Capital Ref: Collateral Ref: Collateral
Ref: Collateral
Party B: to be advised
(h) OTHER PROVISIONS.
(I)TRANSFER TIMING
(D) The final paragraph of Paragraph 3(a) shall be deleted and
replaced with the following:
"Subject to Paragraph 4, and unless otherwise specified, any
transfer of Eligible Credit Support or Equivalent Credit
Support (whether by the Transferor pursuant to Paragraph
2(a) or by the Transferee pursuant to Paragraph 2(b)) shall be
made not later than the close of business on the Settlement
Day."
(E) The definition of Settlement Day shall be deleted and
replaced with the following:
"SETTLEMENT DAY" means the next Local Business Day after the
Demand Date
(F) For the purposes of this Paragraph 11(h)(i):
"DEMAND DATE" means, with respect to a transfer by a party.
(i) in the case of a transfer pursuant to ▇▇▇▇▇▇▇▇▇ ▇,
▇▇▇▇▇▇▇▇▇ 3 or Paragraph 4(a)(2), the relevant
Valuation Date. For the avoidance of doubt, for the
purposes of Paragraph 2 and Paragraph 4(a)(2), the
Transferor will be deemed to receive notice of the
demand by the Transferee to make a transfer of Eligible
Credit Support; and
(ii) in the case of a transfer pursuant to Paragraph
3(c)(ii)(A), the date on which the Transferee has
given its consent to the proposed exchange.
for the avoidance of doubt, on each Demand Date the Transferor shall
deliver to the Transferee and the Trustee a statement showing the amount
of Eligible Credit Support to be delivered.
(II) EARLY TERMINATION
The heading for Paragraph 6 shall be deleted and replaced with
"Early Termination" and the following shall be added after the word
"Default" in the first line of Paragraph 6, "or a Termination Event
in relation to all (but not less than all) Transactions".
(III) COSTS OF TRANSFER ON EXCHANGE
Notwithstanding Paragraph 8, the Transferor will be responsible
for, and will reimburse the Transferee for, all transfer and other
taxes and other costs involved in the transfer of Eligible Credit
Support either from the Transferor to the Transferee or from the
Transferee to the Transferor hereto.
(IV) CUMULATIVE RIGHTS
The rights, powers and remedies of the Transferee under this Annex
shall be in addition to all rights, powers and remedies given to
the Transferee by the Agreement or by virtue of any statute or rule
of law, all of which rights, powers and remedies shall be
cumulative and may be exercised successively or concurrently
without impairing the rights of the Transferee in the Credit
Support Balance created pursuant to this Annex.
(V) SINGLE TRANSFEROR AND SINGLE TRANSFEREE
Party A and Party B agree that, notwithstanding anything to the
contrary in this Annex, (including, without limitation, the recital
hereto, Paragraph 2 or the definitions in Paragraph 10), (a) the
term "Transferee" as used in this Annex means only Party B, (b) the
term "Transferor" as used in this Annex means only Party A, (c)
only Party A will be required to make Transfers of Eligible Credit
Support hereunder; and (d) in the calculation of any Credit Support
Amount, where the Transferee's Exposure would be expressed as a
negative number, such Exposure shall be deemed to be zero.
(VI) RATINGS CRITERIA
"RATINGS CRITERIA" means, the criteria used by S&P ("S&P CRITERIA")
and the criteria used by Moody's ("MOODY'S CRITERIA") for the
purposes of determining the amount of Eligible Credit Support Party
A is required to transfer hereunder following a credit ratings
downgrade where
Party A has opted to or is required to transfer Eligible Credit
Support in support of its obligations under the Agreement pursuant
to Part 5.2 of the Agreement.
▇▇▇▇▇'▇ CRITERIA
"CREDIT SUPPORT AMOUNT" shall mean, with respect to a Transferor on
a Valuation Date:
(A) the Transferee's Exposure multiplied by "A" and (B) the product
of "B" multiplied by the sum of the Currency Amount(s) as defined
in the Confirmation for each outstanding Transaction under the
Agreement, where:
(i) "A" means 102% and "B" means 2% if the short-term, unsecured
and unsubordinated debt obligations of Party A (or its
successor) and, if relevant, any Credit Support Provider of
Party A cease to be rated as high as "Prime-1" and "A2" by
Moody's.
(ii) "A" means 102% and "B" means 3% if the short-term, unsecured
and unsubordinated debt obligations of Party A (or its
successor) and, if relevant, any Credit Support Provider of
Party A cease to be rated as high as "Prime-2" and "A3" by
Moody's.
(iii) "A" means 0% and "B" means 0% in all other cases.
S&P CRITERIA
"CREDIT SUPPORT AMOUNT" shall mean with respect to a Transferor on
a Valuation Date the greater of:
(A)
(i) MTM + VB = CR;
(ii) MTM + (VB x 0.1) = BRCR; or
(iii) CR x CM1 x CM2 = CCR
where applicable, and;
(B) 0
If the Transaction under this Agreement is an Interest Rate Swap,
Basis Swap or Currency Swap (as defined in the Confirmation for
each outstanding Transaction under this Agreement), then (A)(i),
(ii) or (iii) will apply respectively.
Where:
"MTM" means Transferees Exposure;
"VB" means the Currency Amount (as defined in the Confirmation for
each outstanding Transaction under this Agreement) times the
relevant percentage set out in Table A below;
"CM1" and "CM2" mean the multiplication factors set out in Table B
below. The currency of each leg of the Transaction will determine
which factor to use for each of CM1 and CM2.
TABLE A
VOLATILITY BUFFER
Counterparty The Group 1, Remaining Term Remaining Term (as defined in the 2000 ISDA Remaining Term (as
Group 2 or (as defined in Definitions) of Transaction up to 10 years, defined in the 2000
Group 3 is the 2000 ISDA but greater than 5 years ISDA Definitions) of
dependent on Definitions) of Transaction more than
the currency Transaction up 10 years
of the to 5 years
Transaction.
The rating by S&P of Party A's Group 1 0.6% 1.05% 1.5%
long-term unsecured, unsubordinated
obligations is at least equal to
"A+"
Group 2 1.05% 1.75% 3.0%
Group 3 1.5% 2.45% 4.5%
The rating by S&P of Party A's Group 1 0.9% 1.10% 1.9%
long-term unsecured, unsubordinated
obligations is equal to "A"
Group 2 1.35% 2.45% 4.5%
Group 3 1.8% 3.15% 6.0%
The rating by S&P of Party A's Group 1 1.2% 2.25% 4.5%
long-term unsecured, unsubordinated
obligations is less than "A"
Group 2 1.5% 3.15% 6.0%
Group 3 2.1% 3.85% 7.5%
Group 1 currencies are: Belgian francs, Deutschemarks, Dutch guilders, Euro, European Currency Units, French franca, Japanese yen,
Swiss francs and U.S. dollars.
Group 2 currencies are: Australian dollars, British pounds sterling, Canadian dollars, Danish kroner,
New Zealand dollars and Swedish kroner.
Group 3 currencies are: Hong Kong dollars, Italian lire and Spanish pesetas.
TABLE B
MULTIPLICATION FACTORS FOR CURRENCY SWAPS
U.S. dollars 1.000
Canadian dollars 1.020
New Zealand dollars 1.020
Australian dollars 1.030
Hong Kong dollars 1.030
Belgian dollars 1.040
British pounds sterling 1.040
Danish kroner 1.040
Dutch gilders 1.040
European Currency Units 1.040
Euro 1.040
French francs 1.040
German marks 1.040
Japanese yen 1.040
Italian lire 1.045
Spanish pesetas 1.045
Swedish kroner 1.045
Swiss francs 1.045
(I) CALCULATIONS.
Paragraph 3(b) of this Annex shall be amended by inserting the
words "and shall provide each party (or the other party, if the
Valuation Agent is a party) with a description in reasonable detail
of how such calculations were made, upon request" after the word
"calculations" in the third line thereof.
(VIII)DEMANDS AND NOTICES.
All demands, specifications and notices under this Annex will be
made pursuant to Section 12 of this Agreement, save than any
demand, specification or notice:
(IX) EXPOSURE.
For the purpose of calculating "Exposure" in Paragraph 10 of the
Annex, the Valuation Agent shall, unless otherwise agreed in
writing by the Rating Agencies, seek two quotations from Reference
Market-makers; provided that if 2 Reference Market-makers are not
available to provide a quotation, then fewer than 2 Reference
Market-makers may be used for such purpose, and if no Reference
Market-makers are available, then the Valuation Agent's estimates
at mid-market will be used. Where more than 1 quotation is
obtained, the quotation representing the greatest amount of
Exposure shall be used by the Valuation Agent.