(MULTICURRENCY--CROSS BORDER)
ISDA/(R)/
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of
-------------------------------------- and ---------------------------------
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 (I) 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.
Copyright /(C)/ 1992 by International Swap Dealers Association, Inc.
(b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to
which such change applies unless such other party gives timely notice of a
reasonable objection to such change.
(c) NETTING. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be
made in the Schedule or a Confirmation by specifying that subparagraph (ii)
above will not apply to the Transactions identified as being subject to the
election, together with the starting date (in which case subparagraph (ii) above
will not, or will cease to, apply to such Transactions from such date). This
election may be made separately for different groups of Transactions and will
apply separately to each pairing of Offices through which the parties make and
receive payments or deliveries.
(d) DEDUCTION OR WITHHOLDING FOR TAX.
(i) GROSS-UP. All payments under this Agreement will be made without any
deduction or withholding for or on account of any Tax unless such deduction
or withholding is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, then in effect.
If a party is so required to deduct or withhold, then that party ("X")
will:--
(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required to be
deducted or withheld (including the full amount required to be deducted or
withheld from any additional amount paid by X to Y under this Section 2(d))
promptly upon the earlier of determining that such deduction or withholding is
required or receiving notice that such amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified copy),
or other documentation reasonably acceptable to Y, evidencing such payment to
such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to the
payment to which Y is otherwise entitled under this Agreement, such additional
amount as is necessary to ensure that the net amount actually received by Y
(free and clear of Indemnifiable Taxes, whether assessed against X or Y) will
equal the full amount Y would have received had no such deduction or withholding
been required. However, X will not be required to pay any additional amount to
Y to the extent that it would not be required to be paid but for:--
(A) the failure by Y to comply with or perform
any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d); or
(B) the failure of a representation made by Y pursuant lo Section 3(f)
to be accurate and true unless such failure would not have occurred but for (I)
any action taken by a taxing authority, or brought in a court of competent
jurisdiction, on or after the date on which a Transaction is entered into
(regardless of whether such action is taken or brought with respect to a party
to this Agreement) or (II) a Change in Tax Law.
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(ii) LIABILITY. If:--
(1) X is required by any applicable law, as modified by the practice
of any relevant governmental revenue authority, to make any deduction or
withholding in respect of which X would not be required to pay an additional
amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly against
X,
then, except to the extent Y has satisfied or then satisfies the liability
resulting from such Tax, Y will promptly pay to X the amount of such liability
(including any related liability for interest, but including any related
liability for penalties only if Y has failed to comply with or perform any
agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).
(e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:--
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organised and validly existing under the laws of the
jurisdiction of its organisation or incorporation and, if relevant under
such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to
deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to perform
its obligations under this Agreement and any obligations it has under any
Credit Support Document to which it is a party and has taken all
necessary action to authorise such execution, delivery and performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and performance do
not violate or conflict with any law applicable to it, any provision of
its constitutional documents, any order or judgment of any court or other
agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;
(iv) CONSENTS. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in
full force and effect and all conditions of any such consents have been
complied with; and
(v) OBLIGATIONS BINDING. Its obligations under this Agreement and any Credit
Support Document to which it is a party constitute its legal, valid and
binding obligations, enforceable in accordance with their respective
terms (subject to applicable bankruptcy, reorganisation, insolvency,
moratorium or similar laws affecting creditors' rights generally and
subject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a proceeding
in equity or at law)).
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(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has
occurred and is continuing and no such event or circumstance would occur as
a result of its entering into or performing its obligations under this
Agreement or any Credit Support Document to which it is a party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or
proceeding at law or in equity or before any court, tribunal, governmental
body, agency or official or any arbitrator that is likely to affect the
legality, validity or enforceability against it of this Agreement or any
Credit Support Document to which it is a party or its ability to perform
its obligations under this Agreement or such Credit Support Document.
(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is
identified for the purpose of this Section 3(d) in the Schedule is, as of
the date of the information, true, accurate and complete in every material
respect.
(e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.
(f) PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule
as being made by it for the purpose of this Section 3(f) is accurate and
true.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:--
(i) any forms, documents or certificates relating to taxation specified in the
Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any Confirmation; and
(iii) upon reasonable demand by such other party, any form or document that may
be required or reasonably requested in writing in order to allow such other
party or its Credit Support Provider to make a payment under this Agreement or
any applicable Credit Support Document without any deduction or withholding for
or on account of any Tax or with such deduction or withholding at a reduced rate
(so long as the completion, execution or submission of such form or document
would not materially prejudice the legal or commercial position of the party in
receipt of such demand), with any such form or document to be accurate and
completed in a manner reasonably satisfactory to such other party and to be
executed and to be delivered with any reasonably required certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority
that are required to be obtained by it with respect to this Agreement or
any Credit Support Document to which it is a party and will use all
reasonable efforts to obtain any that may become necessary in the future.
(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 lt or in respect of its execution or performance of
this Agreement by a jurisdiction in which it is incorporated,
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organised, managed and controlled, or considered to have its seat, or in
which a branch or office through which it is acting for the purpose of
this Agreement is located ("Stamp Tax Jurisdiction") and will indemnify
the other party against any Stamp Tax levied or imposed upon the other
party or in respect of the other party's execution or performance of this
Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp Tax
Jurisdiction with respect to the other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event
of default (an "Event of Default") with respect to such party:--
(i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when due, any
payment under this Agreement or delivery under Section 2(a)(i) or 2(e)
required to be made by it if such failure is not remedied on or before the
third Local Business Day after notice of such failure is given to the
party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or perform any
agreement or obligation (other than an obligation to make any payment
under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give
notice of a Termination Event or any agreement or obligation under Section
4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party
in accordance with this Agreement if such failure is not remedied on or
before the thirtieth day after notice of such failure is given to the
party;
(iii) CREDIT SUPPORT DEFAULT.
(1) Failure by the party or any Credit Support Provider of such party
to comply with or perform any agreement or obligation to be complied with or
performed by it in accordance with any Credit Support Document if such failure
is continuing after any applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support Document or
the failing or ceasing of such Credit Support Document to be in full force and
effect for the purpose of this Agreement (in either case other than in
accordance with its terms) prior to the satisfaction of all obligations of such
party under each Transaction to which such Credit Support Document relates
without the written consent of the other party; or
(3) the party or such Credit Support Provider disaffirms, disclaims,
repudiates or rejects, in whole or in part, or challenges the validity of, such
Credit Support Document;
(iv) MISREPRESENTATION. A representation (other than a representation under
Section 3(e) or (f)) made or repeated or deemed to have been made or
repeated by the party or any Credit Support Provider of such party in this
Agreement or any Credit Support Document proves to have been incorrect or
misleading in any material respect when made or repeated or deemed to have
been made or repeated;
(v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support Provider
of such party or any applicable Specified Entity of such party (1) defaults
under a Specified Transaction and, after giving effect to any applicable
notice requirement or grace period, there occurs a liquidation of, an
acceleration of obligations under, or an early termination of, that
Specified Transaction, (2) defaults, after giving effect to any applicable
notice requirement or grace period, in making any payment or delivery due
on the last payment, delivery or exchange date of, or any payment on early
termination of, a Specified Transaction (or 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:--
(1) the resulting, surviving or transferee entity fails to assume all
the obligations of such party or such Credit Support Provider under this
Agreement or any Credit Support Document to which it or its predecessor was a
party by operation of law or pursuant to an agreement reasonably satisfactory to
the other party to this Agreement; or
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the performance by such resulting,
surviving or transferee entity of its obligations under this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, a Tax Event if the event is specified in (ii)
below or a Tax Event Upon Merger if the event is specified in (iii) below, and,
if specified to be applicable, a Credit Event
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Upon Merger if the event is specified pursuant to (iv) below or an Additional
Termination Event if the event is specified pursuant to (v) below:--
(i) ILLEGALITY. Due to the adoption of, or any change in, any applicable law
after the date on which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court,
tribunal or regulatory authority with competent jurisdiction of any
applicable law after such date, it becomes unlawful (other than as a
result of a breach by the party of Section 4(b)) for such party (which
will be the Affected Party):--
(1) to perform any absolute or contingent obligation to make a payment
or delivery or to receive a payment or delivery in respect of such Transaction
or to comply with any other material provision of this Agreement relating to
such Transaction; or
(2) to perform, or for any Credit Support Provider of such party to
perform, any contingent or other obligation which the party (or such Credit
Support Provider) has under any Credit Support Document relating to such
Transaction;
(ii) TAX EVENT. Due to (x) any action taken by a 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 Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate,
will be the Affected Party); or
(v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination Event" is
specified in the Schedule or any Confirmation as applying, the
occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which
would otherwise constitute or give rise to an Event of Default also
constitutes an Illegality, it will be treated as an Illegality and will
not constitute an Event of Default.
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6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and
is then continuing, the other party (the "Non-defaulting Party") may, by
not more than 20 days notice to the Defaulting Party specifying the
relevant Event of Default, designate a day not earlier than the day such
notice is effective as an Early Termination Date in respect of all
outstanding Transactions. If, however, "Automatic Early Termination" is
specified in the Schedule as applying to a party, then an Early Termination
Date in respect of all outstanding Transactions will occur immediately upon
the occurrence with respect to such party of an Event of Default specified
in Section 5(a)(vii)(1), (3), (5), (6) or, to the extent analogous thereto,
(8), and as of the time immediately preceding the institution of the
relevant proceeding or the presentation of the relevant petition upon the
occurrence with respect to such party of an Event of Default specified in
Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party will, promptly
upon becoming aware of it, notify the other party, specifying the nature of
that Termination Event and each Affected Transaction and will also give
such other information about that Termination Event as the other party may
reasonably require.
(ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality under Section
5(b)(i)(1) or a Tax Event occurs and there is only one Affected Party, or
if a Tax Event Upon Merger occurs and the Burdened Party is the Affected
Party, the Affected Party will, as a condition to its right to designate an
Early Termination Date under Section 6(b)(iv), use all reasonable efforts
(which will not require such party to incur a loss, excluding immaterial,
incidental expenses) to transfer within 20 days after it gives notice under
Section 6(b)(i) all its rights and obligations under this Agreement in
respect of the Affected Transactions to another of its Offices or
Affiliates so that such Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days after
the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject to
and conditional upon the prior written consent of the other party, which
consent will not be withheld if such other party's policies in effect at
such time would permit it to enter into transactions with the transferee on
the terms proposed.
(iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1) or a Tax
Event occurs and there are two Affected Parties, each party will use all
reasonable efforts to reach agreement within 30 days after notice thereof
is given under Section 6(b)(i) on action to avoid that Termination Event.
(iv) RIGHT TO TERMINATE. If:--
(1) a transfer under Section 6(b)(ii) or an agreement under Section
6(b)(iii), as the case may be, has not been effected with respect to all
Affected Transactions within 30 days after an Affected Party gives notice under
Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger
or an Additional Termination Event occurs, or a Tax Event Upon Merger occurs and
the Burdened Party is not the Affected Party,
either party in the case of an Illegality, the Burdened Party in the case of a
Tax Event Upon Merger, any Affected Party in the case of a Tax Event or an
Additional Termination Event if there is more than one Affected Party, or the
party which is not the Affected Party in the case of a Credit Event Upon Merger
or an Additional Termination Event if there is only one Affected Party may, by
not more than 20 days notice to the other party and provided that the relevant
Termination Event is then
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continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions .
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under Section 6(a)
or (b), the Early Termination Date will occur on the date so designated,
whether or not the relevant Event of Default or Termination Event is then
continuing.
(ii) Upon the occurrence or effective designation of an Early Termination Date,
no further payments or deliveries under Section 2(a)(i) or 2(e) in respect
of the Terminated Transactions will be required to be made, but without
prejudice to the other provisions of this Agreement. The amount, if any,
payable in respect of an Early Termination Date shall be determined
pursuant to Section 6(e).
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable detail,
such calculations (including all relevant quotations and specifying any
amount payable under Section 6(e)) and (2) giving details of the relevant
account to which any amount payable to it is to be paid. In the absence of
written confirmation from the source of a quotation obtained in determining
a Market Quotation, the records of the party obtaining such quotation will
be conclusive evidence of the existence and accuracy of such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect of any Early
Termination Date under Section 6(e) will be payable on the day that notice
of the amount payable is effective (in the case of an Early Termination
Date which is designated or occurs as a result of an Event of Default) and
on the day which is two Local Business Days after the day on which notice
of the amount payable is effective (in the case of an Early Termination
Date which is designated as a result of a Termination Event) Such amount
will be paid together with (to the extent permitted under applicable law)
interest thereon (before as well as after judgment) in the Termination
Currency, from (and including) the relevant Early Termination Date to (but
excluding) the date such amount is paid, at the Applicable Rate. Such
interest will be calculated on the basis of daily compounding and the
actual number of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the
Schedule of a payment measure, either "Market Quotation" or "Loss", and a
payment method, either the "First Method" or the "Second Method". If the
parties fail to designate a payment measure or payment method in the
Schedule, it will be deemed that "Market Quotation" or the "Second Method",
as the case may be, shall apply. The amount, if any, payable in respect of
an Early Termination Date and determined pursuant to this Section will be
subject to any Set-off.
(i) EVENTS OF DEFAULT. If the Early Termination Date results from an Event of
Default:--
(1) First Method and Market Quotation. If the First Method and Market
Quotation apply, the Defaulting Party will pay to the Non-defaulting Party the
excess, if a positive number, of (A) the sum of the Settlement Amount
(determined by the Non-defaulting Party) in respect of the Terminated
Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing
to the Non-defaulting Party over (B) the Termination Currency Equivalent of the
Unpaid Amounts owing to the Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply, the
Defaulting Party will pay to the Non-defaulting Party, if a positive number, the
Non-defaulting Party's Loss in respect of this Agreement.
(3) Second Method and Market Quotation. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A) the sum of the
Settlement Amount (determined by the
9
Non-defaulting Party) in respect of the Terminated Transactions and the
Termination Currency Equivalent of the Unpaid Amounts owing to the Non-
defaulting Party less (B) the Termination Currency Equivalent of the Unpaid
Amounts owing to the Defaulting Party. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party; if it is a negative
number, the Non-defaulting Party will pay the absolute value of that amount to
the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply, an
amount will be payable equal to the Non-defaulting Party's Loss in respect of
this Agreement. If that amount is a positive number, the Defaulting Party will
pay it to the Non-defaulting Party; if it is a negative number, the Non-
defaulting Party will pay the absolute value of that amount to the Defaulting
Party.
(ii) TERMINATION EVENTS. If the Early Termination Date results from a
Termination Event:--
(1) One Affected Party. If there is one Affected Party, the amount
payable will be determined in accordance with Section 6(e)(i)(3), if Market
Quotation applies, or Section 6(e)(i)(4), if Loss applies, except that, in
either case, references to the Defaulting Party and to the Non-defaulting Party
will be deemed to be references to the Affected Party and the party which is not
the Affected Party, respectively, and, if Loss applies and fewer than all the
Transactions are being terminated, Loss shall be calculated in respect of all
Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties:--
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions, and an amount will
be payable equal to (I) the sum of (a) one-half of the difference between the
Settlement Amount of the party with the higher Settlement Amount ("X") and the
Settlement Amount of the party with the lower Settlement Amount ("Y") and (b)
the Termination Currency Equivalent of the Unpaid Amounts owing to X less (II)
the Termination Currency Equivalent of the Unpaid Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss in respect of
this Agreement (or, if fewer than all the Transactions are being terminated, in
respect of all Terminated Transactions) and an amount will be payable equal to
one-half of the difference between the Loss of the party with the higher Loss
("X") and the Loss of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if it
is a negative number, X will pay the absolute value of that amount to Y.
(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early Termination
Date occurs because "Automatic Early Termination" applies in respect of a party,
the amount determined under this Section 6(e) will be subject to such
adjustments as are appropriate and permitted by law to reflect any payments or
deliveries made by one party to the other under this Agreement (and retained by
such other party) during the period from the relevant Early Termination Date to
the date for payment determined under Section 6(d)(ii).
(iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies an amount
recoverable under this Section 6(e) is a reasonable pre-estimate of loss and not
a penalty. Such amount is payable for the loss of bargain and the loss of
protection against future risks and except as otherwise provided in this
Agreement neither party will be entitled to recover any additional damages as a
consequence of such losses.
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7. TRANSFER
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:--
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of
all or substantially all its assets to, another entity (but without
prejudice to any other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. CONTRACTUAL CURRENCY
(a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement
will be made in the relevant currency specified in this Agreement for that
payment (the "Contractual Currency"). To the extent permitted by
applicable law, any obligation to make payments under this Agreement in the
Contractual Currency will not be discharged or satisfied by any tender in
any currency other than the Contractual Currency, except to the extent such
tender results in the actual receipt by the party to which payment is owed,
acting in a reasonable manner and in good faith in converting the currency
so tendered into the Contractual Currency, of the full amount in the
Contractual Currency of all amounts payable in respect of this Agreement.
lf 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
hy such party as a consequence of sums paid in such other currency if such
shortfall or such excess arises or results from any variation between the
rate of exchange at which the Contractual Currency is converted into the
currency of the judgment or order for the purposes of such judgment or
order and the rate of exchange at which such party is able, acting in a
reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with
the amount of the currency of the judgment or order actually received by
such party. The term "rate of exchange" includes, without
limitation, any premiums and costs of exchange payable in connection with
the purchase of or conversion into the Contractual Currency.
(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and
independent causes of action, will apply notwithstanding any indulgence
granted by the party to which any payment is owed and will not be affected
by judgment being obtained or claim or proof being made for any other sums
payable in respect of this Agreement.
(d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be sufficient
for a party to demonstrate that it would have suffered a loss had an actual
exchange or purchase been made.
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9. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and
supersedes all oral communication and prior writings with respect thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing
evidenced by a facsimile transmission) and executed by each of the parties
or confirmed by an exchange of telexes or electronic messages on an
electronic messaging system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive
the termination of any Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative
and not exclusive of any rights, powers, remedies and privileges provided
by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement (and each amendment, modification and waiver in respect of
it) may be executed and delivered in counterparts (including by facsimile
transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable
and may be executed and delivered in counterparts (including by facsimile
transmission) or be created by an exchange of telexes or by an exchange of
electronic messages on an electronic messaging system, which in each case
will be sufficient for all purposes to evidence a binding supplement to
this Agreement. The parties will specify therein or through another
effective means that any such counterpart, telex or electronic message
constitutes a Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege
will not be presumed to preclude any subsequent or further exercise, of
that right, power or privilege or the exercise of any other right, power or
privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken
into consideration in interpreting this Agreement.
10. OFFICES; MULTIBRANCH PARTIES
(a) If Section 10(a) is specified in the Schedule as applying, each party that
enters into a Transaction through an Office other than its head or home
office represents to the other party that, notwithstanding the place of
booking office or jurisdiction of incorporation or organisation of such
party, the obligations of such party are the same as if it had
entered into the Transaction through its head or home office. This
representation will be deemed to be repeated by such party on each date on
which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such Multi
branch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office
through which it makes and receives payments or deliveries with respect to
a Transaction will be specified in the relevant Confirmation.
11. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document
12
to which the Defaulting Party is a party or by reason of the early termination
of any Transaction, including, but not limited to, costs of collection.
12. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice
or other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
(i) if in writing and delivered in person or by courier, on the date it is
delivered;
(ii) if sent by telex, on the date the recipient's answerback is received;
(iii) if sent by facsimile transmission, on the date that transmission is
received by a responsible employee of the recipient in legible form (it being
agreed that the burden of proving receipt will be on the sender and will not be
met by a transmission report generated by the sender's facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or the
equivalent (return receipt requested), on the date that mail is delivered
or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic message
is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details
at which notices or other communications are to be given to it.
13. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this Agreement is
expressed to be governed by English law, or to the non-exclusive jurisdiction of
the courts of the State of New York and the United States District Court located
in the Borough of Manhattan in New York City, if this Agreement is expressed to
be governed by the laws of the State of New York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that such
Proceedings have been brought in an inconvenient forum and further waives the
right to object, with respect to such Proceedings, that such court does not have
any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments ▇▇▇ ▇▇▇▇ or any modification, extension or re-
enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on
its behalf, service of process in any Proceedings. If for any
13
reason any party's Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a substitute
process agent acceptable to the other party. The parties irrevocably
consent to service of process given in the manner provided for notices in
Section 12. Nothing in this Agreement will affect the right of either party
to serve process in any other manner permitted by law.
(d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and
assets (irrespective of their use or intended use), all immunity on the
grounds of sovereignty or other similar grounds from (i) suit, (ii)
jurisdiction of any court, (iii) relief by way of injunction, order for
specific performance or for recovery of property, (iv) attachment of its
assets (whether before or after judgment) and (v) execution or enforcement
of any judgment to which it or its revenues or assets might otherwise be
entitled in any Proceedings in the courts of any jurisdiction and
irrevocably agrees, to the extent permitted by applicable law, that it will
not claim any such immunity in any Proceedings.
14. DEFINITIONS
As used in this Agreement:--
"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).
"AFFECTED PARTY" has the meaning specified in Section 5(b).
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"APPLICABLE RATE" means:--
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section
6(d)(ii)) on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-
default Rate; and
(d) in all other cases, the Termination Rate.
"BURDENED PARTY" has the meaning specified in Section 5(b).
"CHANGE IN TAX LAW" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
"CONSENT" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified as
such in this Agreement.
"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
14
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"ILLEGALITY" has the meaning specified in Section 5(b).
"LNDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"LAWFUL" and "UNLAWFUL" will be construed accordingly.
"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.
"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(l) or (3)
or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and out-
of-pocket expenses referred to under Section 11. A party will determine its
Loss as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.
"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference Market-
maker to enter into a transaction (the "Replacement Transaction") that would
have the effect of preserving for such party the economic equivalent of any
payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have
15
been required after that date. For this purpose, Unpaid Amounts in respect of
the Terminated Transaction or group of Terminated Transactions are to be
excluded but, without limitation, any payment or delivery that would, but for
the relevant Early Termination Date, have been required (assuming satisfaction
of each applicable condition precedent) after that Early Termination Date is to
be included. The Replacement Transaction would be subject to such documentation
as such party and the Reference Market-maker may, in good faith, agree. The
party making the determination (or its agent) will request each Reference
Market-maker to provide its quotation to the extent reasonably practicable as
of the same day and time (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 ▇▇▇▇▇▇ Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"RELEVANT JURISDICTION" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organised, managed and controlled or considered
to have its seat, (b) where an Office through which the party is acting for
purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through which such payment
is made.
"SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"SET-OFF" means set-off, offset, combination of accounts. right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of:--
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of
Terminated Transactions for which a Market Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference to
any Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not
(in the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"SPECIFIED ENTITY" has the meaning specified in the Schedule.
16
"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"STAMP TAX" means any stamp, registration, documentation or similar tax.
"TAX" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"TAX EVENT" has the meaning specified in Section 5(b).
"TAX EVENT UPON MERGER" has the meaning specified in Section 5(b).
"TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"TERMINATION CURRENCY" has the meaning specified in the Schedule.
"TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.
"TERMINATION EVENT" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market
17
value of that which was (or would have been) required to be delivered as of the
originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or would
have been required to have been paid or performed to (but excluding) such Early
Termination Date, at the Applicable Rate. Such amounts of interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b) above
shall be reasonably determined by the party obliged to make the determination
under Section 6(e) or, if each party is so obliged, it shall be the average of
the Termination Currency Equivalents of the fair market values reasonably
determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
--------------------------------------- ------------------------------------
(Name of Party) (Name of Party)
By: ----------------------------------- By: --------------------------------
Name: Name:
Title: Title:
Date: Date:
18
EXECUTION
COPY
SCHEDULE
TO THE
MASTER AGREEMENT
dated as of December 20, 1996
between
▇▇▇▇▇▇ GUARANTY TRUST and KANSAS ELECTRIC
COMPANY OF NEW YORK POWER COOPERATIVE, INC.
("▇▇▇▇▇▇") (the "Counterparty")
PART 1
TERMINATION PROVISIONS
In this Agreement:-
(1) "Specified Entity" shall not apply.
(2) "Specified Transaction" will have the meaning specified in Section 14.
(3) Cross Default to Specified Indebtedness. From the date of execution of
this Agreement to and immediately preceding the assignment set forth in
Part (5) Section (10) of this Schedule on December 18, 1997 (the "Closing
Date") the provisions of Section 5(a)(vi) shall apply to ▇▇▇▇▇▇ and the
Counterparty and, for such purpose:
(a) "Specified Indebtedness" will have the meaning specified in Section 14,
except that in the case of the Counterparty, Specified Indebtedness shall
consist solely of such indebtedness of the Kansas Electric Power Cooperative,
Inc. (the "Cooperative") that is guaranteed by the United States of America (or
an instrumentality thereof); and
(b) "Threshold Amount" means, with respect to ▇▇▇▇▇▇, an amount equal to 3% of
shareholders' equity as shown in the most recent audited annual financial
statements of ▇.▇. ▇▇▇▇▇▇ & Co. Incorporated, and, with respect to the
Counterparty, $5,000,000, or its equivalent in any other currency or currencies.
After the Closing Date, the "Cross Default" provisions of Section 5(a)(vi) will
not apply to ▇▇▇▇▇▇ or the Counterparty.
-2-
(4) "Termination Currency" means United States Dollars.
(5) The "Credit Event Upon Merger" provisions of Section 5(b)(iv) will not
apply to ▇▇▇▇▇▇ or the Counterparty.
(6) The "Automatic Early Termination" provisions of Section 6(a) will not apply
to ▇▇▇▇▇▇ or the Counterparty.
(7) For purposes of computing amounts payable on early termination:
(a) Market Quotation will apply to this Agreement; and
(b) The Second Method will apply to this Agreement.
(8) Section 5(a)(iv), Section 5(a)(v), Section 5(b)(ii) and Section 5(b)(iii)
of the Agreement are hereby deleted.
(9) (i) Section 5(a)(viii) shall not apply with respect to the Counterparty.
(ii) From the date of execution of this Agreement to the Closing Date,
Sections 5(a)(ii) and (vi) shall not apply with respect to the
Counterparty.
(10) ADDITIONAL TERMINATION EVENTS. Section 5(b) of the Agreement is amended by
adding the following Additional Termination Events:
(a) FAILURE TO ISSUE CERTIFICATES. It shall constitute a Termination
Event if the Rural Electric Cooperative Grantor Trust (KEPCO) Series
1997 fails to issue its Series 1997 Certificates (the "Certificates")
as contemplated in the Trust Agreement (as defined below) by means of
a registered public offering or private placement (in accordance with
an exemption from the registration requirements of the Securities Act
of 1933, as amended) of such Certificates and in such case the
Counterparty shall be the Affected Party;
(b) FAILURE TO DEPOSIT NOTES. It shall constitute a Termination Event with
respect to the Counterparty if on the Effective Date of the
Transaction, the National Rural Utilities Cooperative Finance
Corporation fails to deposit, or cause to be deposited, into the Trust
the Notes (as defined in the Trust Agreement) bearing the guarantee
endorsement of the United States of America acting through the
Administrator of the Rural Utility Service, in which instance the
Counterparty (or the Cooperative on behalf of the Counterparty) shall
be the Affected Party.
-3-
PART 2
TAX REPRESENTATIONS
REPRESENTATIONS OF ▇▇▇▇▇▇
(1) Payer Tax Representation. For the purpose of Section 3(e) of this
Agreement, ▇▇▇▇▇▇ hereby makes the following representation:
(i) It is not required by any applicable law, as modified by the practice
of any relevant governmental revenue authority, of any Relevant Jurisdiction to
make any deduction or withholding for or on account of any Tax from any payment
(other than interest under Section 2(e), 6(d)(ii) or 6(e)) to be made by it to
the Counterparty under this Agreement. In making this representation, it may
rely on:
(a) the accuracy of any representations made by the Counterparty
pursuant to Section 3(f);
(b) the satisfaction of the agreement of the Counterparty contained
in Section 4(a)(i) or 4(a)(iii) and the accuracy and effectiveness of any
document provided by the Counterparty pursuant to Section 4(a)(i) or 4(a)(iii);
and
(c) the satisfaction of the agreement of the Counterparty contained
in Section 4(d);
provided that it shall not be a breach of this representation where reliance is
placed on clause (b) and the Counterparty does not deliver a form or document
under Section 4(a)(iii) by reason of material prejudice to its legal or
commercial position.
(2) PAYEE TAX REPRESENTATIONS. For the purpose of Section 3(f) of this
Agreement, ▇▇▇▇▇▇ represents that it is a banking corporation organized
under the laws of the State of New York and is not a foreign corporation
within the meaning of Section 7701(a)(5) of the United States Internal
Revenue Code.
REPRESENTATIONS OF THE COUNTERPARTY
(1) Payer Tax Representation. For the purpose of Section 3(e) of this
Agreement, the Counterparty hereby makes 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
-4-
Section 2(e), 6(d)(ii) or 6(e)) to be made by it to ▇▇▇▇▇▇ under this
Agreement. In making this representation, it may rely on:
(a) the accuracy of any representation made by ▇▇▇▇▇▇ pursuant to Section 3(f);
(b) the satisfaction of the agreement of ▇▇▇▇▇▇ contained in Section 4(a)(i) or
4(a)(iii) and the accuracy and effectiveness of any document provided by
▇▇▇▇▇▇ pursuant to Section 4(a)(i) or 4(a)(iii); and
(c) the satisfaction of the agreement of ▇▇▇▇▇▇ contained in Section 4(d);
provided that it shall not be a breach of this representation where
reliance is placed on clause (b) and ▇▇▇▇▇▇ does not deliver a form or
document under Section 4(a)(iii) by reason of material prejudice to its
legal or commercial position.
(2) Payee Tax Representations. For the purpose of Section 3(f) of this
Agreement, the Counterparty represents that it is a corporation organized
under the laws of Kansas.
PART 3
AGREEMENT TO DELIVER DOCUMENTS
For the purpose of Sections 4(a)(i) and (ii), each party agrees to deliver the
following documents, as applicable:
(1) ▇▇▇▇▇▇ will, on demand, deliver a certificate (or, if available, the
current authorized signature book of ▇▇▇▇▇▇) specifying the names, title
and specimen signatures of the persons authorized to execute this Agreement
and each Confirmation on its behalf.
(2) ▇▇▇▇▇▇ will, upon execution of this Agreement, deliver an opinion of
counsel of ▇▇▇▇▇▇ substantially in the form attached hereto as Exhibit A
and covering such other matters as the Counterparty may reasonably request.
(3) The Counterparty will, on demand, deliver a certificate (or, if available,
the current authorized signature book of the Counterparty) specifying the
names, title and specimen signatures of the persons authorized to execute
this Agreement and each Confirmation on its behalf.
(4) The Counterparty will upon execution of this Agreement deliver (i) a fully
executed Trust Agreement dated as of December 20, 1996 among the National
Rural Utilities
-5-
Cooperative Finance Corporation ("CFC"), the Kansas Electric Power
Cooperative, Inc. and The First National Bank of Chicago, as Trustee (the
"Trustee") of Rural Electric Cooperative Grantor Trust (KEPCO) Series 1997
(the "Trust Agreement"), (ii) the First Amendment to Loan Guarantee and
Servicing Agreement dated as of December 20, 1996 among the United States
of America, acting through the Administrator of the Rural Utilities
Service, the Cooperative, CFC and the Trustee and (iii) the First Amendment
to Loan Agreement dated as of December 20, 1996 between CFC and the
Cooperative.
(5) The Counterparty will, upon execution of this Agreement, deliver on an
opinion of counsel of the Counterparty dated on or before such Trade Date
substantially in the form of Exhibit B hereto and covering such other
matters as ▇▇▇▇▇▇ may reasonably request;
(6) The Counterparty will, upon execution of this Agreement, deliver certified
copies of all action taken by the Counterparty to authorize the execution,
delivery and performance of this Agreement and the Confirmation(s) and such
other documents and other papers as ▇▇▇▇▇▇ may reasonably request.
(7) The Counterparty shall no later than the Effective Date of the Transaction,
deliver confirmation of deposit into the Trust (as defined in the Trust
Agreement) of the Notes.
(8) The Counterparty shall deliver to ▇▇▇▇▇▇ as soon as available and in any
event within 90 days after the end of each fiscal year of the Counterparty,
a statement of assets and liabilities of the Counterparty together with an
audit report thereon issued by independent public accountants of nationally
recognized standing; and
(9) The Counterparty shall deliver to ▇▇▇▇▇▇ as soon as available and in any
event within 60 days after the end of each fiscal quarter of each fiscal
year of the Counterparty, an unaudited statement of assets and liabilities
of the Counterparty, including a disclosure of Total Assets, as of the end
of such period, all consistently prepared (subject to normal year-end
adjustments) in accordance with generally accepted accounting principles.
Each of the foregoing documents, other than the opinions to be delivered
pursuant to paragraphs (2) and (5) and the financial statements delivered
pursuant to paragraphs (8) and (9) above, is covered by the representation
contained in Section 3(d) of this Agreement. The Counterparty represents that
the financial statements delivered pursuant to paragraph (8) or (9) above fairly
present, in accordance with generally accepted accounting principles, except as
otherwise expressly noted therein, its financial position and results of
operations as of the dates and for the period covered thereby.
-6-
PART 4
MISCELLANEOUS
(1) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of New York without reference to
choice of law doctrine.
(2) NOTICES.
(a) In connection with Section 12(a), all notices to ▇▇▇▇▇▇ shall, with respect
to any particular Transaction, be sent to the address, telex number or
facsimile number specified in the relevant Confirmation and any notice for
purposes of Sections 5 or 6 of the Agreement shall be sent to the address
or telex number specified below:
▇▇▇▇▇▇ Guaranty Trust Company of New York
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Global Swaps Units
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) In connection with Section 12(a), all notices to the Counterparty
shall, with respect to any particular Transaction, be sent to the address,
telex number or facsimile number specified in the relevant Confirmation and
any notice for purposes of Sections 5 or 6 of the Agreement shall be sent
to the address or telex number specified below:
In the case of notices to the Cooperative:
KANSAS ELECTRIC POWER COOPERATIVE, INC.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Executive Vice President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
In the case of notices to the Trustee:
RURAL ELECTRIC COOPERATIVE GRANTOR TRUST
(KEPCO) SERIES 1997
c/o The First National Bank of Chicago
as Trustee
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
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Attention: Corporate Trust Administration
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(3) NETTING OF PAYMENTS. Section 2(c) of this Agreement is hereby deleted.
(4) OFFICES; MULTIBRANCH PARTY. For purposes of Section 10:
(a) Section 10(a) will apply; and
(b) For the purpose of Section 10(c):
(i) ▇▇▇▇▇▇ is a Multibranch Party and may act through its London and
New York Offices.
(ii) The Counterparty is not a Multibranch Party.
(5) CREDIT SUPPORT DOCUMENTS.
With respect to the Counterparty the following documents shall constitute
Credit Support Documents:
(i) Note 1 and Note 2 from the Cooperative in the original principal
amounts of $11,075,000 and $51,340,000, respectively, issued in
connection with the Loan (as defined in the Trust Agreement) and
bearing the guarantee endorsement of the United States of America
acting through the Administrator of the Rural Utilities Service;
and
(ii) The Trust Agreement.
With respect to ▇▇▇▇▇▇ the Credit Support Annex attached hereto as Annex I
shall be a Credit Support Document.
(6) CREDIT SUPPORT PROVIDER.
The United States of America acting through the Administrator of the Rural
Utilities Service shall be the Credit Support Provider with respect to the
Counterparty.
-8-
PART 5
OTHER PROVISIONS
(1) ISDA DEFINITIONS. Reference is hereby made to the 1991 ISDA Definitions
(the "ISDA Definitions") each as published by the International Swaps and
Derivatives Association, Inc., which are hereby incorporated by reference
herein. Any terms used and not otherwise defined herein which are
contained in the ISDA Definitions shall have the meaning set forth therein.
(2) SCOPE OF AGREEMENT. Notwithstanding anything contained in this Agreement
to the contrary, any transaction which may otherwise constitute a
"Specified Transaction" for purposes of this Agreement which has been or
will be entered into between the parties shall constitute a "Transaction"
which is subject to, governed by, and construed in accordance with the
terms of this Agreement, unless the Confirmation expressly provides
otherwise.
(3) INCONSISTENCY. In the event of any inconsistency between any of the
following documents, the relevant document first listed below shall govern:
(i) a Confirmation; (ii) the Schedule and "Paragraph 13 - Elections &
Variables" to the ISDA Credit Support Annex (as applicable); (iii) the ISDA
Definitions; and (iv) the printed form of ISDA Master Agreement and ISDA
Credit Support Annex (as applicable).
(4) CREDIT ENHANCEMENT. In the event that the long term, unsecured and
unsubordinated indebtedness of ▇▇▇▇▇▇ shall cease to be rated at least Aa3
by ▇▇▇▇▇'▇ and AA- by S&P, or such indebtedness ceases to be rated by
▇▇▇▇▇'▇ and S&P (such event being referred to herein as a "▇▇▇▇▇▇ Credit
Event"), ▇▇▇▇▇▇'▇ obligations under each Transaction subject to the terms
of the Agreement shall be collateralized on the terms and subject to the
conditions set forth in this Agreement and the Credit Support Annex
attached hereto as Annex I.
(5) SET-OFF. "Set-off" shall, for purposes of this Agreement and any Credit
Support Document, have the meaning set forth in Section 14 and shall
include without limitation the rights in Section 6(f). Section 6 of this
Agreement is modified to include the following additional sub-clause (f):
"(F) SET-OFF. Any amount (the "Early Termination Amount") payable to one
party (the "Payee") by the other party (the "Payer") under Section 6(e), in
circumstances where there is a Defaulting Party or one Affected Party will,
at the option of the party ("X") other than the Defaulting Party or
Affected Party (and without prior notice to same) be reduced by its set-off
against any amount(s) (the "Other Agreement Amount") payable (whether at
such time or in the future or upon the
-9-
occurrence of a contingency) by the Payee to the Payer (irrespective of the
currency, place of payment or booking office of such obligation) under any
other agreement(s) between the Payee and the Payer or instrument(s) or
undertaking(s) issued or executed by one party to, or in favor of, the
other party (and the Other Agreement Amount(s) will be discharged promptly
and in all respects to the extent it is so set-off). X will give notice to
the other party of any set-off effected under this Section 6(f).
For this purpose, either the Early Termination Amount or the Other
Agreement Amount (or the relevant portion of such amounts) may be converted
by X into the currency in which the other is denominated at the rate of
exchange at which such party would be able, acting in a reasonable manner
and in good faith, to purchase the relevant amount of such currency.
If an obligation is unascertained, X may in good faith estimate that
obligation and set-off in respect of the estimate, subject to the relevant
party accounting to the other when the obligation is ascertained.
Nothing in this Section 6(f) shall be effective to create a charge or other
security interest. This Section 6(f) shall be without prejudice and in
addition to any right of set-off otherwise available to a party (whether by
operation of law, contract, or otherwise)."
(6) CALCULATION AGENT. The Calculation Agent will be ▇▇▇▇▇▇.
(7) SEVERABILITY. In the event any one or more of the provisions contained in
this Agreement should be held invalid, illegal, or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. The parties shall endeavor, in good faith negotiations, to
replace the invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
(8) WAIVER OF JURY TRIAL. Each party waives, to the fullest extent permitted
by applicable law, any right it may have to a trial by jury in respect of
any suit, action or proceeding relating to this Agreement or any Credit
Support Document. Each party (i) certifies that no representative, agent
or attorney of the other party or any Credit Support Provider has
represented, expressly or otherwise, that such other party would not, in
the event of such a suit, action or proceeding, seek to enforce the
foregoing waiver and (ii) acknowledges that it and the other party have
been induced to enter into this Agreement and provide for any Credit
Support Document, as applicable, by, among other things, the mutual waivers
and certifications in this Section.
-10-
(9) RIGHT OF ELECTIVE TERMINATION. The Counterparty shall have the right to
terminate the outstanding Transaction hereunder (without regard for the
occurrence of an Event of Default or Termination Event), with the consent
of the Rural Utilities Service and, if the Servicer (as defined in the
Trust Agreement) would be adversely affected thereby, the Servicer, by
delivering to ▇▇▇▇▇▇ (i) 30 day's prior written notice of the
Counterparty's intention to terminate the Transaction on a date designated
by the Counterparty (the "Elective Termination Date") and (ii) on the
Elective Termination Date, payment of the Elective Termination Payment (as
defined below). Any such termination shall be referred to herein as an
"Elective Termination".
Upon an Elective Termination, a payment (the "Elective Termination
Payment") shall be made on the Elective Termination Date. An Elective
Termination Payment shall be calculated as if a Termination Event had
occurred, the Counterparty was an Affected Party and the Elective
Termination Date was an Early Termination Date.
(10) ASSIGNMENT. The parties hereby acknowledge and agree that the
Counterparty's rights and obligations under this Agreement and each
transaction hereunder shall be assigned on or before the Effective Date of
the Transaction to the Rural Electric Cooperative Grantor Trust (KEPCO)
Series 1997 as provided in Section 2.01(c) of the Trust Agreement.
Accordingly, the Kansas Electric Power Cooperative, Inc. shall retain its
right to terminate each transaction hereunder pursuant to Part 5, Section
(9) of this Schedule. Following such assignment:
The Trustee will be the Counterparty under this Agreement, except for the
purposes of the rights and obligations to make and receive payment of
amounts in respect of an "Early Termination Date" determined pursuant to
Section 6(e) of this Agreement and the right to terminate the outstanding
Transaction pursuant to Part 5, Section (9) of this Schedule. As to such
provisions only, the Kansas Electric Power Cooperative, Inc. shall be
deemed the Counterparty; provided, that any payment by ▇▇▇▇▇▇ of an amount
in respect of an Early Termination Date shall be made to the Trustee,
which shall distribute such payment as provided in Section 7.5 of the
Trust Agreement, and ▇▇▇▇▇▇ shall have no responsibility with respect to
such distribution.
▇▇▇▇▇▇'▇ payments under this Agreement will be made without regard to any
condition precedent (including but not limited to an Event of Default or
Potential Event of Default), and ▇▇▇▇▇▇ will not have the right to
terminate any outstanding Transaction with respect to the occurrence of
such events as they relate to the Cooperative.
Kansas Electric Power Cooperative, Inc., to the extent permitted by
applicable law, hereby indemnifies ▇▇▇▇▇▇, and holds ▇▇▇▇▇▇ harmless, from
liabilities in respect of Indemnifiable Taxes, and agrees to pay expenses,
interest at the Default
-11-
Rate and other amounts payable to ▇▇▇▇▇▇ under this Agreement to the
extent that the Trustee has not assumed such obligations and such amounts
are at any time payable under this Agreement.
In addition to such assignment to the Trustee, the parties hereby acknowledge
and agree that the Counterparty's right to terminate the outstanding Transaction
hereunder, pursuant to Part 5, Section (9) of this Schedule, is being assigned
(on a non-exclusive basis with the Cooperative also having the right to
terminate) to the Rural Utilities Service, an agency of the United States
Department of Agriculture, pursuant to Section 4.3 of the "Loan Guarantee
Agreement" (as defined in the Trust Agreement).
(11) BUSINESS PURPOSE REPRESENTATION. ▇▇▇▇▇▇ represents that it has entered
into this Agreement (including each Transaction now or hereafter entered
into in connection herewith) in conjunction with its line of business,
including financial intermediation, or the financing of its business and
not for speculative purposes. The Counterparty represents and warrants
that it has entered into this Agreement (including each Transaction on or
hereafter entered into in connection herewith) to hedge its actual or
expected exposure to changes in interest rates or for other normal business
purposes independent of this Agreement, and not for speculative purposes.
Each party represents that it is an "eligible swap participant" for
purposes of the exemption of swap agreements (17 C.F.R. Section 35.2)
adopted by the Commodity Futures Trading Commission from the exchange
trading and certain other requirements of the Commodity Exchange Act, as in
the case of ▇▇▇▇▇▇, a bank acting on its own behalf, and, in the case of
the Cooperative, a Kansas nonprofit cooperative corporation that meets the
further requirements set forth in 17 C.F.R. Section 35.1.
(12) RELATIONSHIP OF THE PARTIES. Each party represents that in entering into
this Agreement and each Transaction: (i) it is acting as a principal and
not as an agent, (ii) it understands and acknowledges that the other party
has been and will be acting only on an arm's length basis and not as its
agent, broker, advisor or fiduciary in any respect, (iii) it is relying
solely upon its own evaluation of this Agreement and any Transaction
(including the present and future results, consequences, risks and benefits
thereof, whether financial, accounting, tax, legal or otherwise) and upon
active from its own professional advisors, (iv) it understands this
Agreement and the Transactions contemplated hereby and the risks associated
therewith, has determined that those risks are appropriate for it, and is
willing to assume those risks, and (v) it has not relied and will not be
relying upon any evaluation or advice (including any recommendation,
opinion or representation) from the other party or its affiliates or the
representatives or advisors of the other party or its affiliates.
(13) NO RECOURSE TO TRUSTEE. Except for liability for its own negligence or
willful misconduct or as otherwise expressly provided in the Trust
Agreement, ▇▇▇▇▇▇ and the Counterparty hereby agree that (a) this Agreement
and each Transaction to which the Trust is a party will be assigned to and
assumed by the Trustee (as provided in Section 2.01(c) of the
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Trust Agreement) not in its individual capacity but solely as Trustee of
the Rural Electric Cooperative Grantor Trust (KEPCO) Series 1997 under the
Trust Agreement, (b) each of the undertakings and agreements herein made on
the part of the Trust are intended for the purpose of binding the trust
estate created by the Trust Agreement and not as personal undertakings of
the Trustee, and (c) nothing contained herein, in any Confirmation or in
any other document shall be construed to create any liability on the part
of the Trustee, individually, to perform any obligation of the Trust
contained herein, in any Confirmation or in any other document. ▇▇▇▇▇▇ and
the Counterparty hereby expressly waive all liability on the part of the
Trustee except as provided in the preceding sentence and agree that the
Trustee shall under no circumstances be personally liable for the payment
of any amounts due under any Transaction or for any other obligations of
the Trust or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Trustee
under this Agreement, any Confirmation or any other documents except as
provided above.
Please confirm your agreement to the terms of the foregoing Schedule by signing
below.
▇▇▇▇▇▇ GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ ▇▇▇▇ B. V. ▇▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇ B. V. ▇▇▇▇▇▇▇▇
Title: Vice President
KANSAS ELECTRIC POWER
COOPERATIVE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Executive Vice President
EXHIBIT A
[FORM OF ▇▇▇▇▇▇ LEGAL OPINION ISDA MASTER AGREEMENT]
December 20, 1996
Kansas Electric Power Cooperative, Inc.
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Alex. ▇▇▇▇▇ & Sons Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Rural Utilities Service
United States Department of Agriculture
Washington D.C. 20250-1510
The First National Bank of Chicago,
as Trustee
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
National Rural Utilities Cooperative
Finance Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ - ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇'▇ Investors Service, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Standard & Poor's Rating Service
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
This opinion is furnished to you in connection with the ISDA Master Agreement
(the "Agreement") between ▇▇▇▇▇▇ Guaranty Trust Company of New York ("▇▇▇▇▇▇")
and Kansas Electric Power Cooperative, Inc.(the "Counterparty") dated as of
-2-
December 20, 1996. Terms defined in the Agreement and used but not defined
herein have the meanings given to them in the Agreement.
I am Vice President and Assistant General Counsel of ▇▇▇▇▇▇ and have represented
▇▇▇▇▇▇ in connection with the Agreement and the transactions contemplated
thereby. In connection with the delivery of this opinion, I have examined (a)
executed copies of the Agreement and (b) copies, certified or otherwise
identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments, and have conducted such
investigation of fact and law, as I have deemed necessary or appropriate for the
opinions expressed herein. In rendering the opinions expressed below, I have
assumed the due authorization, execution and delivery of the Agreement by each
of the parties thereto other than ▇▇▇▇▇▇ and I have assumed and have not
verified that the signatures (other than signatures of officers of ▇▇▇▇▇▇) on
all documents that I have examined are genuine.
Based on the foregoing, I am of the opinion that:
(1) ▇▇▇▇▇▇ is a banking corporation, duly organized, validly existing and
in good standing under the laws of the State of New York.
(2) ▇▇▇▇▇▇ has full corporate power and authority to execute and deliver
the Agreement and to perform its obligations thereunder and the Agreement has
been duly authorized, executed and delivered by ▇▇▇▇▇▇.
(3) No consents, authorizations or approvals are required for the
execution and delivery by ▇▇▇▇▇▇ of the Agreement and the performance of its
obligations thereunder, and no other action by, and no notice to or filing with,
any governmental authority or regulatory body is required for such execution,
delivery or performance.
(4) The execution, delivery and performance by ▇▇▇▇▇▇ of the Agreement do
not and will not contravene any law or governmental regulation or order
presently binding on ▇▇▇▇▇▇ or its articles of incorporation or bylaws or
contravene any provision of or constitute a default under any indenture,
contract or other instrument to which ▇▇▇▇▇▇ is a party or by which ▇▇▇▇▇▇ is
bound.
(5) The Agreement constitutes the legal, valid and binding obligation of
▇▇▇▇▇▇ enforceable in accordance with its terms (except as enforcement thereof
may be limited by bankruptcy, reorganization, insolvency, moratorium or other
laws affecting the enforcement of creditors' rights generally and by general
equitable principles).
-3-
With respect to clause (5) above, I express no opinion regarding the legality,
validity, binding effect or enforceability of Section 6(e) of the Agreement
insofar as it purports to obligate a party, on termination of the Agreement, to
pay an amount in excess of that measured by the lowest quotation from a
Reference Market-maker. In addition, in connection with any such Early
Termination on the grounds of default, a court might limit the non-defaulting
party's recovery to its actual damages in the circumstances, imposing its own
settlement procedures in lieu of the provisions of Section 6(e) of the
Agreement.
I am a member of the bar of the State of New York and the opinions expressed
herein are limited to the laws of the State of New York and the Federal laws of
the United States of America.
I am furnishing this letter to you in my capacity as Counsel for ▇▇▇▇▇▇ and this
opinion may not be relied upon by or furnished to any other person without my
prior written consent.
Very truly yours,
EXHIBIT B
[FORM OF LEGAL OPINION]
[LETTERHEAD OF COUNTERPARTY COUNSEL]
December 20, 1996
▇▇▇▇▇▇ Guaranty Trust Company
of New York
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We have represented Kansas Electric Power Cooperative Inc. (the
"Counterparty") and are delivering this opinion in connection with the Master
Agreement dated as of December 20, 1996 (the "Master Agreement") between ▇▇▇▇▇▇
Guaranty Trust Company of New York ("▇▇▇▇▇▇") and the Counterparty.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as we have deemed necessary or appropriate for purposes of this
opinion.
Upon the basis of the foregoing, we are of the opinion that:
(1) The Counterparty is a duly organized, validly existing and in
good standing under the laws of State of Kansas.
(2) The Counterparty has the requisite corporate power and authority
to enter into the Agreement and to perform its obligations thereunder, and
the Agreement has been duly authorized, executed and delivered by the
Counterparty and, assuming due authorization, execution and delivery by
▇▇▇▇▇▇, the Agreement constitutes the valid and binding obligation of the
Counterparty enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditor's rights and to
general equity principles.
(3) The Counterparty is not required to obtain any authorization,
consent, approval, registration, exemption or license from or to file any
registration with any governmental authority as a condition to the validity
of, or for the execution and delivery of, the Agreement or to the
performance by the Counterparty of its obligations thereunder.
-2-
(4) There is no action, suit or proceeding pending against, or to our
knowledge, having made due investigation, threatened against or affecting
the Counterparty before any court or arbitrator or any governmental body,
agency or official in which there is a reasonable possibility of an adverse
decision which could materially adversely affect the ability of the
Counterparty to perform the Agreement or which in any manner questions the
validity of the Agreement.
(5) The execution, delivery and performance of the Agreement by the
Counterparty will not contravene or constitute a default under any
applicable law, regulation, rule, order or judgment of any governmental
authority or under any mortgage, indenture, contract or other undertaking
to which the Counterparty is a party or by which the Counterparty or any of
the Counterparty's property or assets is bound.
Very truly yours,
(BILATERAL FORM) (ISDA AGREEMENTS SUBJECT TO NEW YORK LAW ONLY)
ISDA(R)
International Swaps and Derivatives Association, Inc.
CREDIT SUPPORT ANNEX
to the Schedule to the
.....................................................
dated as of __________________
between
..................................... and .....................................
("Party A") ("Party B")
This Annex supplements, forms part of, and is subject to, the above-referenced
Agreement, is part of its Schedule and is a Credit Support Document under this
Agreement with respect to each party.
Accordingly, the parties agree as follows:--
PARAGRAPH 1. INTERPRETATION
(a) DEFINITIONS AND INCONSISTENCY. Capitalized terms not otherwise defined
herein or elsewhere in this Agreement have the meanings specified pursuant to
Paragraph 12, and all references in this Annex to Paragraphs are to Paragraphs
of this Annex. In the event of any inconsistency between this Annex and the
other provisions of this Schedule, this Annex will prevail, and in the event of
any inconsistency between Paragraph 13 and the other provisions of this Annex,
Paragraph 13 will prevail.
(b) SECURED PARTY AND PLEDGOR. All references in this Annex to the "Secured
Party" will be to either party when acting in that capacity and all
corresponding references to the "Pledgor" will be to the other party when acting
in that capacity; provided, however, that if Other Posted Support is held by a
party to this Annex, all references herein to that party as the Secured Party
with respect to that Other Posted Support will be to that party as the
beneficiary thereof and will not subject that support or that party as the
beneficiary thereof to provisions of law generally relating to security
interests and secured parties.
PARAGRAPH 2. SECURITY INTEREST
Each party, as the Pledgor, hereby pledges to the other party, as the Secured
Party, as security for its Obligations, and grants to the Secured Party a first
priority continuing security interest in, lien on and right of Set-off against
all Posted Collateral Transferred to or received by the Secured Party hereunder.
Upon the Transfer by the Secured Party to the Pledgor of Posted Collateral, the
security interest and lien granted hereunder on that Posted Collateral will be
released immediately and, to the extent possible, without any further action by
either party.
Copyright /(C)/ 1994 by International Swaps and Derivatives Association, Inc.
PARAGRAPH 3. CREDIT SUPPORT OBLIGATIONS
(a) DELIVERY AMOUNT. Subject to Paragraphs 4 and 5, upon a demand made by the
Secured Party on or promptly following a Valuation Date, if the Delivery Amount
for that Valuation Date equals or exceeds the Pledgor's Minimum Transfer Amount,
then the Pledgor will Transfer to the Secured Party Eligible Credit Support
having a Value as of the date of Transfer at least equal to the applicable
Delivery Amount (rounded pursuant to Paragraph 13). Unless otherwise specified
in Paragraph 13, the "DELIVERY AMOUNT" applicable to the Pledgor for any
Valuation Date will equal the amount by which:
(i) the Credit Support Amount
exceeds
(ii) the Value as of that Valuation Date of all Posted Credit Support
held by the Secured Party.
(b) RETURN AMOUNT. Subject to Paragraphs 4 and 5, upon a demand made by the
Pledgor on or promptly following a Valuation Date, if the Return Amount for that
Valuation Date equals or exceeds the Secured Party's Minimum Transfer Amount,
then the Secured Party will Transfer to the Pledgor Posted Credit Support
specified by the Pledgor in that demand having a Value as of the date of
Transfer as close as practicable to the applicable Return Amount (rounded
pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the
"RETURN AMOUNT" applicable to the Secured Party for any Valuation Date will
equal the amount by which:
(i) the Value as of that Valuation Date of all Posted Credit Support
held by the Secured Party
exceeds
(ii) the Credit Support Amount.
"CREDIT SUPPORT AMOUNT" means, unless otherwise specified in Paragraph 13, for
any Valuation Date (i) the Secured Party's Exposure for that Valuation Date plus
(ii) the aggregate of all Independent Amounts applicable to the Pledgor, if any,
minus (iii) all Independent Amounts applicable to the Secured Party, if any,
minus (iv) the Pledgor's Threshold; provided, however, that the Credit Support
Amount will be deemed to be zero whenever the calculation of Credit Support
Amount yields a number less than zero.
PARAGRAPH 4. CONDITIONS PRECEDENT, TRANSFER TIMING, CALCULATIONS AND
SUBSTITUTIONS
(a) CONDITIONS PRECEDENT. Each Transfer obligation of the Pledgor under
Paragraphs 3 and 5 and of the Secured Party under Paragraphs 3, 4(d)(ii), 5
and 6(d) is subject to the conditions precedent that:
(i) no Event of Default, Potential Event of Default or Specified
Condition has occurred and is continuing with respect to the other
party; and
(ii) no Early Termination Date for which any unsatisfied payment
obligations exist has occurred or been designated as the result of an Event
of Default or Specified Condition with respect to the other party.
(b) TRANSFER TIMING. Subject to Paragraphs 4(a) and 5 and unless otherwise
specified, if a demand for the Transfer of Eligible Credit Support or Posted
Credit Support is made by the Notification Time, then the relevant Transfer will
be made not later than the close of business on the next Local Business Day; if
a demand is made after the Notification Time, then the relevant Transfer will be
made not later than the close of business on the second Local Business Day
thereafter.
(c) CALCULATIONS. All calculations of Value and Exposure for purposes of
Paragraphs 3 and 6(d) will be made by the Valuation Agent as of the Valuation
Time. The Valuation Agent will notify each party (or the other party, if the
Valuation Agent is a party) of its calculations not later than the Notification
Time on the Local Business Day following the applicable Valuation Date (or in
the case of Paragraph 6(d), following the date of calculation).
2
(d) SUBSTITUTIONS.
(i) Unless otherwise specified in Paragraph 13, upon notice to the Secured
Party specifying the items of Posted Credit Support to be exchanged, the
Pledgor may, on any Local Business Day, Transfer to the Secured Party
substitute Eligible Credit Support (the "Substitute Credit Support"); and
(ii) subject to Paragraph 4(a), the Secured Party will Transfer to the
Pledgor the items of Posted Credit Support specified by the Pledgor in its
notice not later than the Local Business Day following the date on which
the Secured Party receives the Substitute Credit Support, unless otherwise
specified in Paragraph 13 (the "Substitution Date"); provided that the
Secured Party will only be obligated to Transfer Posted Credit Support with
a Value as of the date of Transfer of that Posted Credit Support equal to
the Value as of that date of the Substitute Credit Support.
PARAGRAPH 5. DISPUTE RESOLUTION
If a party (a "Disputing Party") disputes (I) the Valuation Agent's calculation
of a Delivery Amount or a Return Amount or (II) the Value of any Transfer of
Eligible Credit Support or Posted Credit Support, then (1) the Disputing Party
will notify the other party and the Valuation Agent (if the Valuation Agent is
not the other party) not later than the close of business on the Local Business
Day following (X) the date that the demand is made under Paragraph 3 in the case
of (I) above or (Y) the date of Transfer in the case of (II) above, (2) subject
to Paragraph 4(a), the appropriate party will Transfer the undisputed amount to
the other party not later than the close of business on the Local Business Day
following (X) the date that the demand is made under Paragraph 3 in the case of
(I) above or (Y) the date of Transfer in the case of (II) above, (3) the parties
will consult with each other in an attempt to resolve the dispute and (4) if
they fail to resolve the dispute by the Resolution Time, then:
(i) In the case of a dispute involving a Delivery Amount or Return Amount,
unless otherwise specified in Paragraph 13, the Valuation Agent will
recalculate the Exposure and the Value as of the Recalculation Date by:
(A) utilizing any calculations of Exposure for the Transactions (or
Swap Transactions) that the parties have agreed are not in dispute;
(B) calculating the Exposure for the Transactions (or Swap
Transactions) in dispute by seeking four actual quotations at mid-
market from Reference Market-makers for purposes of calculating Market
Quotation, and taking the arithmetic average of those obtained;
provided that if four quotations are not available for a particular
Transaction (or Swap Transaction), then fewer than four quotations may
be used for that Transaction (or Swap Transaction); and if no
quotations are available for a particular Transaction (or Swap
Transaction), then the Valuation Agent's original calculations will be
used for that Transaction (or Swap Transaction); and
(C) utilizing the procedures specified in Paragraph 13 for calculating
the Value, if disputed, of Posted Credit Support.
(ii) In the case of a dispute involving the Value of any Transfer of
Eligible Credit Support or Posted Credit Support, the Valuation Agent will
recalculate the Value as of the date of Transfer pursuant to Paragraph 13.
Following a recalculation pursuant to this Paragraph, the Valuation Agent will
notify each party (or the other party, if the Valuation Agent is a party) not
later than the Notification Time on the Local Business Day following the
Resolution Time. The appropriate party will, upon demand following that notice
by the Valuation Agent or a resolution pursuant to (3) above and subject to
Paragraphs 4(a) and 4(b), make the appropriate Transfer.
3
PARAGRAPH 6. HOLDING AND USING POSTED COLLATERAL
(a) CARE OF POSTED COLLATERAL. Without limiting the Secured Party's rights
under Paragraph 6(c), the Secured Party will exercise reasonable care to assure
the safe custody of all Posted Collateral to the extent required by applicable
law, and in any event the Secured Party will be deemed to have exercised
reasonable care if it exercises at least the same degree of care as it would
exercise with respect to its own property. Except as specified in the preceding
sentence, the Secured Party will have no duty with respect to Posted Collateral,
including, without limitation, any duty to collect any Distributions, or enforce
or preserve any rights pertaining thereto.
(b) ELIGIBILITY TO HOLD POSTED COLLATERAL; CUSTODIANS.
(i) GENERAL. Subject to the satisfaction of any conditions specified in
Paragraph 13 for holding Posted Collateral, the Secured Party will be
entitled to hold Posted Collateral or to appoint an agent (a "Custodian")
to hold Posted Collateral for the Secured Party. Upon notice by the
Secured Party to the Pledgor of the appointment of a Custodian, the
Pledgor's obligations to make any Transfer will be discharged by making the
Transfer to that Custodian. The holding of Posted Collateral by a
Custodian will be deemed to be the holding of that Posted Collateral by the
Secured Party for which the Custodian is acting.
(ii) FAILURE TO SATISFY CONDITIONS. If the Secured Party or its Custodian
fails to satisfy any conditions for holding Posted Collateral, then upon a
demand made by the Pledgor, the Secured Party will, not later than five
Local Business Days after the demand, Transfer or cause its Custodian to
Transfer all Posted Collateral held by it to a Custodian that satisfies
those conditions or to the Secured Party if it satisfies those conditions.
(iii) LIABILITY. The Secured Party will be liable for the acts or omissions
of its Custodian to the same extent that the Secured Party would be liable
hereunder for its own acts or omissions.
(c) USE OF POSTED COLLATERAL. Unless otherwise specified in Paragraph 13 and
without limiting the rights and obligations of the parties under Paragraphs 3,
4(d)(ii), 5, 6(d) and 8, if the Secured Party is not a Defaulting Party or an
Affected Party with respect to a Specified Condition and no Early Termination
Date has occurred or been designated as the result of an Event of Default or
Specified Condition with respect to the Secured Party, then the Secured Party
will, notwithstanding Section 9-207 of the New York Uniform Commercial Code,
have the right to:.
(i) sell, pledge, rehypothecate, assign, invest, use, commingle or
otherwise dispose of, or otherwise use in its business any Posted
Collateral it holds, free from any claim or right of any nature whatsoever
of the Pledgor, including any equity or right of redemption by the Pledgor;
and
(ii) register any Posted Collateral in the name of the Secured Party, its
Custodian or a nominee for either.
For purposes of the obligation to Transfer Eligible Credit Support or Posted
Credit Support pursuant to Paragraphs 3 and 5 and any rights or remedies
authorized under this Agreement, the Secured Party will be deemed to continue to
hold all Posted Collateral and to receive Distributions made thereon, regardless
of whether the Secured Party has exercised any rights with respect to any Posted
Collateral pursuant to (i) or (ii) above.
(d) DISTRIBUTIONS AND INTEREST AMOUNT.
(i) DISTRIBUTIONS. Subject to Paragraph 4(a), if the Secured Party
receives or is deemed to receive Distributions on a Local Business Day, it
will Transfer to the Pledgor not later than the following Local Business
Day any Distributions it receives or is deemed to receive to the extent
that a Delivery Amount would not be created or increased by that Transfer,
as calculated by the Valuation Agent (and the date of calculation will be
deemed to be a Valuation Date for this purpose).
4
(ii) INTEREST AMOUNT. Unless otherwise specified in Paragraph 13 and
subject to Paragraph 4(a), in lieu of any interest, dividends or other
amounts paid or deemed to have been paid with respect to Posted Collateral
in the form of Cash (all of which may be retained by the Secured Party),
the Secured Party will Transfer to the Pledgor at the times specified in
Paragraph 13 the Interest Amount to the extent that a Delivery Amount would
not be created or increased by that Transfer, as calculated by the
Valuation Agent (and the date of calculation will be deemed to be a
Valuation Date for this purpose). The Interest Amount or portion thereof
not Transferred pursuant to this Paragraph will constitute Posted
Collateral in the form of Cash and will be subject to the security interest
granted under Paragraph 2.
PARAGRAPH 7. EVENTS OF DEFAULT
For purposes of Section 5(a)(iii)(1) of this Agreement, an Event of Default will
exist with respect to a party if:
(i) that party fails (or fails to cause its Custodian) to make, when due,
any Transfer of Eligible Collateral, Posted Collateral or the Interest
Amount, as applicable, required to be made by it and that failure continues
for two Local Business Days after notice of that failure is given to that
party;
(ii) that party fails to comply with any restriction or prohibition
specified in this Annex with respect to any of the rights specified in
Paragraph 6(c) and that failure continues for five Local Business Days
after notice of that failure is given to that party; or
(iii) that party fails to comply with or perform any agreement or
obligation other than those specified in Paragraphs 7(i) and 7(ii) and that
failure continues for 30 days after notice of that failure is given to that
party.
PARAGRAPH 8. CERTAIN RIGHTS AND REMEDIES
(a) SECURED PARTY 'S RIGHTS AND REMEDIES. If at any time (1) an Event of
Default or Specified Condition with respect to the Pledgor has occurred and is
continuing or (2) an Early Termination Date has occurred or been designated as
the result of an Event of Default or Specified Condition with respect to the
Pledgor, then, unless the Pledgor has paid in full all of its Obligations that
are then due, the Secured Party may exercise one or more of the following rights
and remedies:
(i) all rights and remedies available to a secured party under applicable
law with respect to Posted Collateral held by the Secured Party;
(ii) any other rights and remedies available to the Secured Party under
the terms of Other Posted Support, if any;
(iii) the right to Set-off any amounts payable by the Pledgor with respect
to any Obligations against any Posted Collateral or the Cash equivalent of
any Posted Collateral held by the Secured Party (or any obligation of the
Secured Party to Transfer that Posted Collateral); and
(iv) the right to liquidate any Posted Collateral held by the Secured
Party through one or more public or private sales or other dispositions
with such notice, if any, as may be required under applicable law, free
from any claim or right of any nature whatsoever of the Pledgor, including
any equity or right of redemption by the Pledgor (with the Secured Party
having the right to purchase any or all of the Posted Collateral to be
sold) and to apply the proceeds (or the Cash equivalent thereof) from the
liquidation of the Posted Collateral to any amounts payable by the Pledgor
with respect to any Obligations in that order as the Secured Party may
elect.
Each party acknowledges and agrees that Posted Collateral in the form of
securities may decline speedily in value and is of a type customarily sold on a
recognized market, and, accordingly, the Pledgor is not entitled to prior notice
of any sale of that Posted Collateral by the Secured Party, except any notice
that is required under applicable law and cannot be waived.
5
(b) PLEDGOR'S RIGHTS AND REMEDIES. If at any time an Early Termination Date
has occurred or been designated as the result of an Event of Default or
Specified Condition with respect to the Secured Party, then (except in the case
of an Early Termination Date relating to less than all Transactions (or Swap
Transactions) where the Secured Party has paid in full all of its obligations
that are then due under Section 6(e) of this Agreement):
(i) the Pledgor may exercise all rights and remedies available to a
pledgor under applicable law with respect to Posted Collateral held by the
Secured Party;
(ii) the Pledgor may exercise any other rights and remedies available to
the Pledgor under the terms of Other Posted Support, if any;
(iii) the Secured Party will be obligated immediately to Transfer all
Posted Collateral and the Interest Amount to the Pledgor; and
(iv) to the extent that Posted Collateral or the Interest Amount is not so
Transferred pursuant to (iii) above, the Pledgor may:
(A) Set-off any amounts payable by the Pledgor with respect to any
Obligations against any Posted Collateral or the Cash equivalent of
any Posted Collateral held by the Secured Party (or any obligation of
the Secured Party to Transfer that Posted Collateral); and
(B) to the extent that the Pledgor does not Set-off under (iv)(A)
above, withhold payment of any remaining amounts payable by the
Pledgor with respect to any Obligations, up to the Value of any
remaining Posted Collateral held by the Secured Party, until that
Posted Collateral is Transferred to the Pledgor.
(c) DEFICIENCIES AND EXCESS PROCEEDS. The Secured Party will Transfer to the
Pledgor any proceeds and Posted Credit Support remaining after liquidation, Set-
off and/or application under Paragraphs 8(a) and 8(b) after satisfaction in full
of all amounts payable by the Pledgor with respect to any Obligations; the
Pledgor in all events will remain liable for any amounts remaining unpaid after
any liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b).
(d) FINAL RETURNS. When no amounts are or thereafter may become payable by the
Pledgor with respect to any Obligations (except for any potential liability
under Section 2(d) of this Agreement), the Secured Party will Transfer to the
Pledgor all Posted Credit Support and the Interest Amount, if any.
PARAGRAPH 9. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated as of each date on which it, as the Pledgor, Transfers Eligible
Collateral) that:
(i) it has the power to grant a security interest in and lien on any
Eligible Collateral it Transfers as the Pledgor and has taken all necessary
actions to authorize the granting of that security interest and lien;
(ii) it is the sole owner of or otherwise has the right to Transfer all
Eligible Collateral it Transfers to the Secured Party hereunder, free and
clear of any security interest, lien, encumbrance or other restrictions
other than the security interest and lien granted under Paragraph 2;
(iii) upon the Transfer of any Eligible Collateral to the Secured Party
under the terms of this Annex, the Secured Party will have a valid and
perfected first priority security interest therein (assuming that any
central clearing corporation or any third-party financial intermediary or
other entity not within the control of the Pledgor involved in the Transfer
of that Eligible Collateral gives the notices and takes the action required
of it under applicable law for perfection of that interest); and
(iv) the performance by it of its obligations under this Annex will not
result in the creation of any security interest, lien or other encumbrance
on any Posted Collateral other than the security interest and lien granted
under Paragraph 2.
6
PARAGRAPH 10. EXPENSES
(a) GENERAL. Except as otherwise provided in Paragraphs 10(b) and 10(c), each
party will pay its own costs and expenses in connection with performing its
obligations under this Annex and neither party will be liable for any costs and
expenses incurred by the other party in connection herewith.
(b) POSTED CREDIT SUPPORT. The Pledgor will promptly pay when due all taxes,
assessments or charges of any nature that are imposed with respect to Posted
Credit Support held by the Secured Party upon becoming aware of the same,
regardless of whether any portion of that Posted Credit Support is subsequently
disposed of under Paragraph 6(c), except for those taxes, assessments and
charges that result from the exercise of the Secured Party's rights under
Paragraph 6(c).
(c) LIQUIDATION/APPLICATION OF POSTED CREDIT SUPPORT. All reasonable costs and
expenses incurred by or on behalf of the Secured Party or the Pledgor in
connection with the liquidation and/or application of any Posted Credit Support
under Paragraph 8 will be payable, on demand and pursuant to the Expenses
Section of this Agreement, by the Defaulting Party or, if there is no Defaulting
Party, equally by the parties.
PARAGRAPH 11. MISCELLANEOUS
(a) DEFAULT INTEREST. A Secured Party that fails to make, when due, any
Transfer of Posted Collateral or the Interest Amount will be obligated to pay
the Pledgor (to the extent permitted under applicable law) an amount equal to
interest at the Default Rate multiplied by the Value of the items of property
that were required to be Transferred, from (and including) the date that Posted
Collateral or Interest Amount was required to be Transferred to (but excluding)
the date of Transfer of that Posted Collateral or Interest Amount. This interest
will be calculated on the basis of daily compounding and the actual number of
days elapsed.
(b) FURTHER ASSURANCES. Promptly following a demand made by a party, the other
party will execute, deliver, file and record any financing statement, specific
assignment or other document and take any other action that may be necessary or
desirable and reasonably requested by that party to create, preserve, perfect or
validate any security interest or lien granted under Paragraph 2, to enable that
party to exercise or enforce its rights under this Annex with respect to Posted
Credit Support or an Interest Amount or to effect or document a release of a
security interest on Posted Collateral or an Interest Amount.
(c) FURTHER PROTECTION. The Pledgor will promptly give notice to the Secured
Party of, and defend against, any suit, action, proceeding or lien that involves
Posted Credit Support Transferred by the Pledgor or that could adversely affect
the security interest and lien granted by it under Paragraph 2, unless that
suit, action, proceeding or lien results from the exercise of the Secured
Party's rights under Paragraph 6(c).
(d) GOOD FAITH AND COMMERCIALLY REASONABLE MANNER. Performance of all
obligations under this Annex, including, but not limited to, all calculations,
valuations and determinations made by either party, will be made in good faith
and in a commercially reasonable manner.
(e) DEMANDS AND NOTICES. All demands and notices made by a party under this
Annex will be made as specified in the Notices Section of this Agreement, except
as otherwise provided in Paragraph 13.
(f) SPECIFICATIONS OF CERTAIN MATTERS. Anything referred to in this Annex as
being specified in Paragraph 13 also may be specified in one or more
Confirmations or other documents and this Annex will be construed accordingly.
7
PARAGRAPH 12. DEFINITIONS
As used in this Annex:--
"CASH" means the lawful currency of the United States of America.
"CREDIT SUPPORT AMOUNT" has the meaning specified in Paragraph 3.
"CUSTODIAN" has the meaning specified in Paragraphs 6(b)(i) and 13.
"DELIVERY AMOUNT" has the meaning specified in Paragraph 3(a).
"DISPUTING PARTY" has the meaning specified in Paragraph 5.
"DISTRIBUTIONS" means with respect to Posted Collateral other than Cash, all
principal, interest and other payments and distributions of cash or other
property with respect thereto, regardless of whether the Secured Party has
disposed of that Posted Collateral under Paragraph 6(c). Distributions will not
include any item of property acquired by the Secured Party upon any disposition
or liquidation of Posted Collateral or, with respect to any Posted Collateral in
the form of Cash, any distributions on that Collateral, unless otherwise
specified herein.
"ELIGIBLE COLLATERAL" means, with respect to a party, the items, if any,
specified as such for that party in Paragraph 13.
"ELIGIBLE CREDIT SUPPORT" means Eligible Collateral and Other Eligible Support.
"EXPOSURE" means for any Valuation Date or other date for which Exposure is
calculated and subject to Paragraph 5 in the case of a dispute, the amount, if
any, that would be payable to a party that is the Secured Party by the other
party (expressed as a positive number) or by a party that is the Secured Party
to the other party (expressed as a negative number) pursuant to Section
6(e)(ii)(2)(A) of this Agreement as if all Transactions (or Swap Transactions)
were being terminated as of the relevant Valuation Time; provided that Market
Quotation will be determined by the Valuation Agent using its estimates at mid-
market of the amounts that would be paid for Replacement Transactions (as that
term is defined in the definition of "Market Quotation").
"INDEPENDENT AMOUNT" means, with respect to a party, the amount specified as
such for that party in Paragraph 13; if no amount is specified, zero.
"INTEREST AMOUNT" means, with respect to an Interest Period, the aggregate sum
of the amounts of interest calculated for each day in that Interest Period on
the principal amount of Posted Collateral in the form of Cash held by the
Secured Party on that day, determined by the Secured Party for each such day as
follows:
(x) the amount of that Cash on that day; multiplied by
(y) the Interest Rate in effect for that day; divided by
(z) 360.
"INTEREST PERIOD" means the period from (and including) the last Local Business
Day on which an Interest Amount was Transferred (or, if no Interest Amount has
yet been Transferred, the Local Business Day on which Posted Collateral in the
form of Cash was Transferred to or received by the Secured Party) to (but
excluding) the Local Business Day on which the current Interest Amount is to be
Transferred.
"INTEREST RATE" means the rate specified in Paragraph 13.
"LOCAL BUSINESS DAY", unless otherwise specified in Paragraph 13, has the
meaning specified in the Definitions Section of this Agreement, except that
references to a payment in clause (b) thereof will be deemed to include a
Transfer under this Annex.
8
"MINIMUM TRANSFER AMOUNT" means, with respect to a party, the amount specified
as such for that party in Paragraph 13; if no amount is specified, zero.
"NOTIFICATION TIME" has the meaning specified in Paragraph 13.
"OBLIGATIONS" means, with respect to a party, all present and future obligations
of that party under this Agreement and any additional obligations specified for
that party in Paragraph 13.
"OTHER ELIGIBLE SUPPORT" means, with respect to a party, the items, if any,
specified as such for that party in Paragraph 13.
"OTHER POSTED SUPPORT" means all Other Eligible Support Transferred to the
Secured Party that remains in effect for the benefit of that Secured Party.
"PLEDGOR" means either party, when that party (i) receives a demand for or is
required to Transfer Eligible Credit Support under Paragraph 3(a) or (ii) has
Transferred Eligible Credit Support under Paragraph 3(a).
"POSTED COLLATERAL" means all Eligible Collateral, other property,
Distributions, and all proceeds thereof that have been Transferred to or
received by the Secured Party under this Annex and not Transferred to the
Pledgor pursuant to Paragraph 3(b), 4(d)(ii) or 6(d)(i) or released by the
Secured Party under Paragraph 8. Any Interest Amount or portion thereof not
Transferred pursuant to Paragraph 6(d)(ii) will constitute Posted Collateral in
the form of Cash.
"POSTED CREDIT SUPPORT" means Posted Collateral and Other Posted Support.
"RECALCULATION DATE" means the Valuation Date that gives rise to the dispute
under Paragraph 5; provided, however, that if a subsequent Valuation Date occurs
under Paragraph 3 prior to the resolution of the dispute, then the
"Recalculation Date" means the most recent Valuation Date under Paragraph 3.
"RESOLUTION TIME" has the meaning specified in Paragraph 13.
"RETURN AMOUNT" has the meaning specified in Paragraph 3(b).
"SECURED PARTY" means either party, when that party (i) makes a demand for or is
entitled to receive Eligible Credit Support under Paragraph 3(a) or (ii) holds
or is deemed to hold Posted Credit Support.
"SPECIFIED CONDITION" means, with respect to a party, any event specified as
such for that party in Paragraph 13.
"SUBSTITUTE CREDIT SUPPORT" has the meaning specified in Paragraph 4(d)(i).
"SUBSTITUTION DATE" has the meaning specified in Paragraph 4(d)(ii).
"THRESHOLD" means, with respect to a party, the amount specified as such for
that party in Paragraph 13; if no amount is specified, zero.
"TRANSFER" means, with respect to any Eligible Credit Support, Posted Credit
Support or Interest Amount, and in accordance with the instructions of the
Secured Party, Pledgor or Custodian, as applicable:
(i) in the case of Cash, payment or delivery by wire transfer into one or
more bank accounts specified by the recipient;
(ii) in the case of certificated securities that cannot be paid or
delivered by book-entry, payment or delivery in appropriate physical form
to the recipient or its account accompanied by any duly executed
instruments of transfer, assignments in blank, transfer tax stamps and any
other documents necessary to constitute a legally valid transfer to the
recipient;
(iii) in the case of securities that can be paid or delivered by book-
entry, the giving of written instructions to the relevant depository
institution or other entity specified by the recipient, together with a
written copy thereof to the recipient, sufficient if complied with to
result in a legally effective transfer of the relevant interest to the
recipient; and
(iv) in the case of Other Eligible Support or Other Posted Support, as
specified in Paragraph 13.
9
"VALUATION AGENT" has the meaning specified in Paragraph 13.
"VALUATION DATE" means each date specified in or otherwise determined pursuant
to Paragraph 13.
"VALUATION PERCENTAGE" means, for any item of Eligible Collateral, the
percentage specified in Paragraph 13.
"VALUATION TIME" has the meaning specified in Paragraph 13.
"VALUE" means for any Valuation Date or other date for which Value is calculated
and subject to Paragraph 5 in the case of a dispute, with respect to:
(i) Eligible Collateral or Posted Collateral that is:
(A) Cash, the amount thereof; and
(B) a security, the bid price obtained by the Valuation Agent
multiplied by the applicable Valuation Percentage, if any;
(ii) Posted Collateral that consists of items that are not specified as
Eligible Collateral, zero; and
(iii) Other Eligible Support and Other Posted Support, as specified in
Paragraph 13.
10
EXECUTION COPY
CREDIT SUPPORT ANNEX
TO THE SCHEDULE TO THE
MASTER AGREEMENT
dated as of December 20, 1996
between
and
▇▇▇▇▇▇ GUARANTY TRUST
COMPANY OF NEW YORK KANSAS ELECTRIC POWER COOPERATIVE, INC.
("▇▇▇▇▇▇") (the "Counterparty")
PARAGRAPH 13. ELECTIONS AND VARIABLES
(a) SECURITY INTEREST FOR "OBLIGATIONS". The term "Obligations" as used in
this Annex includes no additional obligations with respect to ▇▇▇▇▇▇ and
the Counterparty.
(b) CREDIT SUPPORT OBLIGATIONS.
(i) Delivery Amount, Return Amount and Credit Support Amount.
(A) "Delivery Amount" will have the meaning specified in
Paragraph 3(a).
(B) "Return Amount" will have the meaning specified in
Paragraph 3(b).
(C) "Credit Support Amount" will have the meaning specified in
Paragraph 3(b).
(ii) Eligible Collateral. The following items will qualify as "Eligible
Collateral":
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▇▇▇▇▇▇ "VALUATION
PERCENTAGE"
(A) Cash [ X ] [100]%
(B) negotiable debt obligations issued by the [ X ] [98]%
U.S. Treasury Department having an
original maturity at issuance of not more
than one year ("Treasury Bills")
(C) negotiable debt obligations issued by the [ X ] [98]%
U.S. Treasury Department having an
original maturity at issuance of more
than one year but not more than ten
years ("Treasury Notes")
(D) negotiable debt obligations issued by the [ X ] [95]%
U.S. Treasury Department having an
original maturity at issuance of more
than ten years ("Treasury Bonds")
(E) Other: Agency Securities having an [ X ] [98]%
original maturity at issuance of not more
than ten years.
Agency Securities having an original
maturity at issuance of more than ten [ X ] [95]%
years.
As used herein, "Agency Securities" means negotiable debt obligations
which are fully guaranteed as to both principal and interest by the
Federal National Mortgage Association, the Government National Mortgage
Corporation or the Federal Home Loan Mortgage Corporation, but
excluding (i) interest only and principal only securities and (ii)
Collateralized Mortgage Obligations, Real Estate Mortgage Investment
Conduits and similar derivative securities.
(iii) OTHER ELIGIBLE SUPPORT. There shall be no "Other Eligible Support"
for either party for purposes of this Annex.
(iv) THRESHOLDS.
(A) "Independent Amount" shall not apply for purposes of this
Annex.
(B) "Threshold" means, if the ratings on senior long term unsecured
unsubordinated debt obligations of ▇▇▇▇▇▇ are less than AA- by
S&P and Aa3 by Moody's, $0, otherwise the terms of this Credit
Support Annex shall not apply.
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"S&P" means Standard & Poor's Ratings Group.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc.
(C) "Minimum Transfer Amount" means $100,000, provided,
however, that if an Event of Default has occurred and is
continuing with respect to the Counterparty, the Minimum
Transfer Amount shall be $0.
(D) Rounding. The Delivery Amount and the Return Amount will be
rounded up and down respectively to the nearest integral
multiple of $10,000.
(c) VALUATION AND TIMING.
(i) "Valuation Agent" means ▇▇▇▇▇▇.
(ii) "Valuation Date" means any Local Business Day.
(iii) "Valuation Time" means the close of business in the city of the
Valuation Agent on the Valuation Date or date of calculation, as
applicable; provided that the calculations of Value and Exposure will be
made as of approximately the same time on the same date.
(iv) "Notification Time" means by 1:00 p.m., New York time, on a Local
Business Day.
(d) CONDITIONS PRECEDENT. With respect to ▇▇▇▇▇▇, an Illegality (if ▇▇▇▇▇▇ is
the Affected Party with respect to such Termination Event) will be a
"Specified Condition". With respect to the Counterparty, an Illegality and
any Additional Termination Event (if the Counterparty is the Affected Party
with respect to such Termination Events) will be a "Specified Condition".
(e) SUBSTITUTION.
(i) "Substitution Date" has the meaning specified in Paragraph 4(d)(ii).
(ii) Consent. The Pledgor must obtain the Secured Party's consent, such
consent not to be unreasonably withheld, for any substitution pursuant to
paragraph 4(d).
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(f) DISPUTE RESOLUTION.
(i) "Resolution Time" means 1:00 p.m., New York time, on the Local
Business Day following the date on which notice is given that gives rise to
a dispute under Paragraph 5.
(ii) Value. For the purpose of Paragraphs 5(i)(C) and 5(ii), the Value of
Posted Credit Support other than Cash will be calculated as follows:
(A) with respect to any Treasury Bills, Treasury Notes, Treasury
Bonds or Agency Securities (referred to herein as "Government
Obligations"), the sum of (I) (x) the mean of the high bid and low
asked prices quoted on such date by any principal market maker for
such Government Obligations chosen by the Disputing Party, or (y) if
no quotations are available from a principal market maker for such
date, the mean of such high bid and low asked prices as of the day,
next preceding such date, on which such quotations were available,
plus (II) the accrued interest on such Government Obligations (except
to the extent Transferred pursuant to any applicable provision of
this Agreement or included in the applicable price referred to in (I)
of this clause (A)) as of such date
(iii) The provisions of Paragraph 5(i) will apply.
(g) HOLDING AND USING POSTED COLLATERAL.
(i) Eligibility to Hold Posted Collateral; Custodians. The Counterparty
will be entitled to hold Posted Collateral itself or through a Custodian
pursuant to Paragraph 6(b), provided that the following conditions
applicable to it are satisfied:
(1) The Counterparty is not a Defaulting Party
(2) The Custodian is a Bank (as defined in the Federal Deposit
Insurance Act) whose rating with respect to its long term
unsecured, unsubordinated indebtedness is at least BBB+ by S&P
or Baa1 by Moody's.
(ii) Use of Posted Collateral. The provisions of Paragraph 6(c) will not
apply to ▇▇▇▇▇▇ or the Counterparty.
(h) DISTRIBUTIONS AND INTEREST AMOUNT.
(i) Interest Rate. The "Interest Rate" will be 0%.
(ii) Transfer of Interest Amount. The provisions of Paragraph 6(d)(ii)
will not apply.
-5-
(i) ADDITIONAL REPRESENTATIONS.
None.
(j) OTHER ELIGIBLE SUPPORT AND OTHER POSTED SUPPORT.
(i) "Value" shall have no meaning with respect to Other Eligible Support
and Other Posted Support.
(ii) "Transfer" shall have no meaning with respect to Other Eligible
Support and Other Posted Support.
(k) DEMANDS AND NOTICES.
All demands, specifications and notices made by a party to this Annex will
be made pursuant to the Notices Section of this Agreement, unless otherwise
specified here:
With respect to ▇▇▇▇▇▇:
▇▇▇▇▇▇ Guaranty Trust Company of New York
Attention: Credit Enhancement Administration Group
With respect to the Counterparty:
[Provide address for notices if different from address in Schedule]
(l) OTHER PROVISIONS.
(i) Modification to Paragraph 1: The following subparagraph (b) is
substituted for subparagraph (b) of the Annex:
"(b) SECURED PARTY AND PLEDGOR. All references in this Annex to
the "Secured Party" will be to the Counterparty and all corresponding
references to the "Pledgor" will be to ▇▇▇▇▇▇; provided, however, that if
Other Posted Support is held by a party to this Annex, all references
herein to that party as the Secured Party with respect to that Other
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Posted Support will be to that party as the beneficiary thereof and will
not subject that support or that party as beneficiary thereof to provisions
of law generally relating to security interests and secured parties."
(ii) Modification to Paragraph 2: The following Paragraph 2 is substituted
for Paragraph 2 of this Annex:
"PARAGRAPH 2. SECURITY INTEREST. The Pledgor hereby pledges to
the Secured Party, as security for its Obligations, and grants to the
Secured Party a first priority continuing security interest in, lien on and
right of Set-off against all Posted Collateral Transferred to or received
by the Secured Party hereunder. Upon the Transfer by the Secured Party to
the Pledgor of Posted Collateral, the security interest and lien granted
hereunder on that Posted Collateral will be released immediately and, to
the extent possible, without any further action by either party."
(iii) Modification to Paragraph 9: The following first clause of
Paragraph 9 is substituted for the first clause of this Annex:
"PARAGRAPH 9. REPRESENTATIONS. The Pledgor represents to the
Secured Party (which representations will be deemed to be repeated as of
each date on which it Transfers Eligible Collateral) that:"
(iv) Modifications to Paragraph 12: The following definitions of "Pledgor"
and "Secured Party" are substituted for the definitions of those terms
contained in Paragraph 12 of this Annex:
"PLEDGOR" means ▇▇▇▇▇▇, when that ▇▇▇▇▇▇ (i) receives a demand for
or is required to Transfer Eligible Credit Support under Paragraph 3(a) or
(ii) has Transferred Eligible Credit Support under Paragraph 3(a).
"SECURED PARTY" means the Counterparty, when that party (i) makes
a demand for or is entitled to receive Eligible Credit Support under
Paragraph 3(a) or (ii) holds or is deemed to hold Posted Credit Support.
-7-
Please confirm your agreement to the terms of the foregoing Paragraph 13 by
signing below.
▇▇▇▇▇▇ GUARANTY TRUST COMPANY
OF NEW YORK
/s/ ▇▇▇▇ B. V. ▇▇▇▇▇▇▇▇
By: _______________________________
Name: ▇▇▇▇ B. V. ▇▇▇▇▇▇▇▇
Title: Vice President
KANSAS ELECTRIC POWER COOPERATIVE, INC.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
By: _______________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Executive Vice President
▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ Guaranty SWAP TRANSACTION
Trust Company of
New York
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇
▇▇▇▇▇-▇▇▇▇
Date:
The purpose of this letter agreement is to confirm the terms
and conditions of the Transaction entered into between:
▇▇▇▇▇▇ GUARANTY TRUST COMPANY OF NEW YORK
and
KANSAS ELECTRIC POWER COOPERATIVE, INC.
on the Trade Date and identified by the ▇▇▇▇▇▇ Deal Number specified
below (the "Transaction"). This letter agreement constitutes a
"Confirmation" as referred to in the ISDA Master Agreement specified
below.
The definitions and provisions contained in the 1991 ISDA Definitions
(as published by the International Swap Dealers Association, Inc.) are
incorporated into this Confirmation. In the event of any inconsistency
between those definitions and provisions and this Confirmation, this
Confirmation will govern.
This Confirmation supplements, forms part of, and is subject to, the
ISDA Master Agreement dated as of 20 December 1996, as amended and
supplemented from time to time (the "Agreement"), between ▇▇▇▇▇▇
GUARANTY TRUST COMPANY OF NEW YORK ("▇▇▇▇▇▇") and KANSAS ELECTRIC
POWER COOPERATIVE, INC. (the "Counterparty"). All provisions contained
in the Agreement govern this Confirmation except as expressly modified
below.
The terms of the particular Transaction to which this Confirmation
relates are as follows:
▇▇▇▇▇▇ Deal Number:
Trade Date: 23rd December, 1996
Effective Date: 18 December 1997
A subsidiary of
▇.▇. ▇▇▇▇▇▇ & Co.
Incorporated
▇▇ ▇▇▇▇▇▇
-2-
Termination Date: 4 December 2017, subject to adjustment in
accordance with the Following Business Day
Convention; provided that this Transaction may
be terminated prior to the Maturity Date in
accordance with the provisions of the Agreement.
FIXED AMOUNTS:
Fixed Rate Payer: Counterparty
Notional Amount: As of the Effective Date an amount equal to
US$57,390,000.00, thereafter an amount equal to
the outstanding Principal Balance (as defined in
the Trust Agreement) of the Certificates.
Fixed Rate Payer Payment Dates: Each 4 June and 4 December occurring during the
period commencing on the Effective Date up to,
and including, the Termination Date, subject to
adjustment in accordance with the Following
Business Day Convention and there will be no
adjustment to the Calculation Period.
Fixed Rate: 7.654 percent, subject to adjustment as set
forth below
Fixed Rate Day Count Fraction: 30/360
▇▇ ▇▇▇▇▇▇
-3-
Fixed Rate Payer Adjustment: Subject to the following conditions the
Fixed Rate shall be adjusted as follows:
(i) Upon the sale of the Certificates
pursuant to a public offering
following the Effective Date of the
Registration Statement for the Trust
Certificates pursuant to the
Securities Act of 1933, minus 10
basis points (-0.10%) and
(ii) Upon fulfillment by the Counterparty
of all requirements of the Employee
Retirement Income Security Act of
1974, as amended ("ERISA") so that
the Certificates may be sold without
any limitation to "employee benefit
plans" (as such term is defined in
Section 3(3) of ERISA), minus five
basis points (-0.05%).
▇▇ ▇▇▇▇▇▇
-4-
Floating Amounts:
Floating Rate Payer: ▇▇▇▇▇▇
Notional Amount: As of the Effective Date an amount
equal to US$57,390,000.00, thereafter
an amount equal to the Principal
Balance (as defined in the Trust
Agreement) of the Certificates.
Floating Rate Payer Payment Dates: Each Certificate Interest Payment Date
(as defined in the Trust Agreement).
The Floating Rate Payer Payment Dates
shall be subject to adjustment in
accordance with the Following Business
Day Convention and there will be an
adjustment to the Calculation Period.
Floating Rate: Determined in accordance with the
procedure for establishing the interest
distributable with respect to the
Certificates as set forth in Section
9.1 of the Trust Agreement but in no
case greater than 18% per annum or such
higher rate as ▇▇▇▇▇▇ and the Liquidity
Provider (as defined in the Trust
Agreement) may agree to be the "Maximum
Certificate Rate" under the Trust
Agreement.
Designated Maturity: Initially, Weekly and thereafter shall
be determined in accordance with
Section 9.1 of the Trust Agreement.
Floating Rate Day Count Fraction: Actual/360
Reset Dates: On each Rate Setting Date (as defined
in the Trust Agreement).
▇▇ ▇▇▇▇▇▇
-5-
Business Day: Any day of the year other than (i) Saturday
or Sunday, (ii) a legal public holiday under
5 U.S.C. Section 6103 for the purpose of
statutes relating to pay and leave of
employees or any other day declared to be a
legal public holiday for the purpose of
statutes relating to pay and leave of
employees by federal statute or federal
Executive Order, (iii) any day on wich banks
in the city in which the principal corporate
trust office of the Trustee is located are
required or authorized to remain closed,
(iv) any day on which banks in the city or
cities in which the principal office of the
Remarketing Agent (as defined in the Trust
Agreement), Liquidity Provider (as defined
in the Trust Agreement) and Servicer (as
defined in the Trust Agreement) is located
are required or authorized to remain closed,
(v) and any day that is not a local Business
Day hereunder, and (vi) any day on which the
New York Stock Exchange is closed.
ADDITIONAL DEFINITIONS:
"Certificates" means the certificates issued by the Rural Electric
Cooperative Grantor Trust (KEPCO) Series 1997 pursuant to the Trust
Agreement.
"Trust Agreement" means the Trust Agreement among the National Rural
Utilities Cooperative Finance Corporation, Kansas Electric Power
Cooperative, Inc. and The First National Bank of Chicago, as Trustee, dated
as of December 20, 1996 and as in effect as of the Trade Date.
ACCOUNTS DETAILS
PAYMENTS TO ▇▇▇▇▇▇:
Account for Payments in US Dollars: ▇▇▇▇▇▇ Guaranty Trust Company of New York
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇
▇▇ ▇▇▇▇▇▇
-6-
Floating Amounts:
▇▇▇▇▇▇ Guaranty Trust Company of New York - London Office
ABA Number:
Account Number 670 070 54
Reference: Further credit to Swaps Group Account:
10005035
Please send MT100 cover cable to MGT
London
PAYMENTS TO COUNTERPARTY:
Prior December 18, 1997:
Account for payments in USD: Kansas Electric Power Cooperative, Inc.
Favour: Commerce Bank and Trust, Topeka, Kansas
ABA/Bank No.: 1011 00 728
Account No.: 052191
Reference: KEPCO
After December 18, 1997
Account for payments in USD: The First National Bank of Chicago, as
Trustee for the Rural Electric
Cooperative Grantor Trust (KEPCO)
Series 1997
Favour:
The First National Bank of Chicago
ABA/Bank No.:
071 000 013
Clearing Account No.: 48115377
Reference: Credit Trust No. 19-200112
Attention: ▇. ▇▇▇▇▇▇▇/KEPCO
Offices
(a) The Office of ▇▇▇▇▇▇ for the Transaction is LONDON; and
(b) the Office of the Counterparty for the Transaction is, prior to
December 18, ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ and thereafter CHICAGO, ILLINOIS.
ALL ENQUIRIES REGARDING PAYMENTS AND/OR RATE RESETTINGS ONLY SHOULD BE SENT TO:
▇▇▇▇▇▇ GUARANTY TRUST COMPANY OF NEW YORK
60 VICTORIA ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇▇
-7-
ATTENTION: ▇▇▇▇▇▇ CASE
TELEPHONE: ▇▇ ▇ ▇▇ ▇▇▇ ▇▇▇▇
FACSIMILE: 44 1 71 325 3862/3863
TELEX: 896631 MGT G
CABLE: MORGANBANK
PLEASE QUOTE THE ▇▇▇▇▇▇ DEAL NUMBER INDICATED ABOVE.
ALL ENQUIRIES REGARDING CONFIRMATION SHOULD BE SENT TO:
▇▇▇▇▇▇ GUARANTY TRUST COMPANY OF NEW YORK
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
ATTENTION: ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇
DOCUMENTATION CONTROL GROUP
TELEPHONE: ▇-▇▇▇-▇▇▇-▇▇▇▇
FACSIMILE: ▇-▇▇▇-▇▇▇-▇▇▇▇
PLEASE QUOTE THE ▇▇▇▇▇▇ DEAL NUMBER INDICATED ABOVE.
Each party represents that (i) it is entering into the transaction evidenced
hereby as principal (and not as agent or in any other capacity; (ii) the other
party is not acting as a fiduciary for it; (iii) it is not relying upon any
representations except those expressly set forth in the Agreement or this
Confirmation; (iv) 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; and
(v) it is entering into this transaction with a full understanding of the terms,
conditions and risks thereof and it is capable of and willing to assume those
risks.
▇▇▇▇▇▇ GUARANTY TRUST KANSAS ELECTRIC POWER
COMPANY OF NEW YORK COOPERATIVE, INC.
By: /s/ J.B.V. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇ B. V. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇,
Vice President Executive Vice President and
Chief Executive Officer