EXHIBIT 10.8
(BILATERAL FORM - TRANSFER)1 (ISDA AGREEMENTS SUBJECT TO ENGLISH LAW)2
ISDA[r]
International Swaps and Derivatives Association, Inc.
CREDIT SUPPORT ANNEX
to the Schedule to the
ISDA MASTER AGREEMENT
dated as of 15 December 2005
between
THE ROYAL BANK OF SCOTLAND PLC and ARRAN FUNDING LIMITED
("Party A") ("Party B")
This Annex supplements, forms part of, and is subject to, the ISDA Master
Agreement referred to above and is part of its Schedule. For the purposes of
this Agreement, including, without limitation, Sections l(c), 2(a), 5 and 6,
the credit support arrangements set out in this Annex constitute a
Transaction (for which this Annex constitutes the Confirmation).
PARAGRAPH 1. INTERPRETATION
Capitalised terms not otherwise defined in this Annex or elsewhere in this
Agreement have the meanings specified pursuant to Paragraph 10, and all
references in this Annex to Paragraphs are to Paragraphs of this Annex. In
the event of any inconsistency between this Annex and the other provisions of
this Schedule, this Annex will prevail, and in the event of any inconsistency
between Paragraph 11 and the other
-----------------------------
1 This document is not intended to create a charge or other security
interest over the assets transferred under its terms. Persons intending to
establish a collateral arrangement based on the creation of a charge or other
security interest should consider using the ISDA Credit Support Deed (English
law) or the ISDA Credit Support Annex (New York law), as appropriate.
2 This Credit Support Annex has been prepared for use with ISDA Master
Agreements subject to English law. Users should consult their legal advisers
as to the proper use and effect of this form and the arrangements it
contemplates. in particular, users should consult their legal advisers if
they wish to have the Credit Support Annex made subject to a governing law
other than English law or to have the Credit Support Annex subject to a
different governing law than that governing the rest of the ISDA Master
Agreement (e.g.. English law for the Credit Support Annex and New York law
for the rest of the ISDA Master Agreement).
Copyright c 1995 by International Swaps and Derivatives Association, Inc.
provisions of this Annex, Paragraph 11 will prevail. For the avoidance of
doubt, references to "transfer" in this Annex mean, in relation to cash,
payment and, in relation to other assets, delivery.
PARAGRAPH 2. CREDIT SUPPORT OBLIGATIONS
(a) DELIVERY AMOUNT. Subject to Paragraphs 3 and 4, upon a demand made by the
Transferee on or promptly following a Valuation Date, if the Delivery Amount
for that Valuation Date equals or exceeds the Transferor's Minimum Transfer
Amount, then the Transferor will transfer to the Transferee Eligible Credit
Support having a Value as of the date of transfer at least equal to the
applicable Delivery Amount (rounded pursuant to Paragraph 1 l(b)(iii)(D)).
Unless otherwise specified in Paragraph ll(b), the "Delivery Amount"
applicable to the Transferor for any Valuation Date will equal the amount by
which:
(i) the Credit Support Amount
exceeds
(ii) the Value as of that Valuation Date of the Transferor's Credit
Support Balance (adjusted to include any prior Delivery Amount and to
exclude any prior Return Amount, the transfer of which, in either
case, has not yet been completed and for which the relevant Settlement
Day falls on or after such Valuation Date).
(b) RETURN AMOUNT. Subject to Paragraphs 3 and 4, upon a demand made by the
Transferor on or promptly following a Valuation Date, if the Return Amount for
that Valuation Date equals or exceeds the Transferee's Minimum Transfer
Amount, then the Transferee will transfer to the Transferor Equivalent Credit
Support specified by the Transferor in that demand having a Value as of the
date of transfer as close as practicable to the applicable Return Amount
(rounded pursuant to Paragraph 1l(b)(iii)(D)) and the Credit Support Balance
will, upon such transfer, be reduced accordingly. Unless otherwise specified
in Paragraph ll(b), the "Return Amount" applicable to the Transferee for any
Valuation Date will equal the amount by which:
(i) the Value as of that Valuation Date of the Transferor's Credit
Support Balance (adjusted to include any prior Delivery Amount and to
exclude any prior Return Amount, the transfer of which, in either
case, has not yet been completed and for which the relevant
Settlement Day falls on or after such Valuation Date)
exceeds
(ii) the Credit Support Amount.
PARAGRAPH 3. TRANSFERS, CALCULATIONS AND EXCHANGES
(a) TRANSFERS. All transfers under this Annex of any Eligible Credit Support,
Equivalent Credit Support, Interest Amount or Equivalent Distributions shall
be made in accordance with the instructions of the Transferee or Transferor,
as applicable, and shall be made:
(i) in the case of cash, by transfer into one or more bank accounts
specified by the recipient;
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ISDA(R) 1995
(ii) in the case of certificated securities which cannot or which the
parties have agreed will not be delivered by book-entry, by delivery in
appropriate physical form to the recipient or its account accompanied
by any duty executed instruments of transfer, transfer tax stamps and
any other documents necessary to constitute a legally valid transfer of
the transferring party's legal and beneficial title to the recipient;
and
(iii) in the case of securities which the parties have agreed will be
delivered by book-entry, by the giving of written instructions
(including, for the avoidance of doubt, instructions given by telex,
facsimile transmission or electronic messaging system) to the relevant
depository institution or other entity specified by the recipient,
together with a written copy of the instructions to the recipient,
sufficient, if complied with, to result in a legally effective transfer
of the transferring party's legal and beneficial title to the
recipient.
Subject to Paragraph 4 and unless otherwise specified, if a demand for the
transfer of Eligible Credit Support or Equivalent Credit Support is received by
the Notification Time, then the relevant transfer will be made not later than
the close of business on the Settlement Day relating to the date such demand is
received; if a demand is received after the Notification Time, then the
relevant transfer will be made not later than the close of business on the
Settlement Day relating to the day after the date such demand is received.
(b) CALCULATIONS. All calculations of Value and Exposure for purposes of
Paragraphs 2 and 4(a) will be made by the relevant Valuation Agent as of the
relevant Valuation Time. The Valuation Agent will notify each party (or the
other party, if the Valuation Agent is a party) of its calculations not later
than the Notification Time on the Local Business Day following the applicable
Valuation Date (or, in the case of Paragraph 4(a), following the date of
calculation).
(c) EXCHANGES.
(i) Unless otherwise specified in Paragraph 11, the Transferor may on
any Local Business Day by notice inform the Transferee that it wishes
to transfer to the Transferee Eligible Credit Support specified in
that notice (the "New Credit Support") in exchange for certain
Eligible Credit Support (the "Original Credit Support") specified in
that notice comprised in the Transferor's Credit Support Balance.
(ii) If the Transferee notifies the Transferor that it has consented
to the proposed exchange, (A) the Transferor will be obliged to
transfer the New Credit Support to the Transferee on the first
Settlement Day following the date on which it receives notice (which
may be oral telephonic notice) from the Transferee of its consent and
(B) the Transferee will be obliged to transfer to the Transferor
Equivalent Credit Support in respect of the Original Credit Support
not later than the Settlement Day following the date on which the
Transferee receives the New Credit Support, unless otherwise specified
in Paragraph ll(d) (the "Exchange Date"); provided that the Transferee
will only be obliged to transfer Equivalent Credit Support with a
Value as of the date of transfer as close as practicable to, but in
any event not more than, the Value of the New Credit Support as of
that date.
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3
PARAGRAPH 4. DISPUTE RESOLUTION
(a) DISPUTED CALCULATIONS OR VALUATIONS. If a parly (a "Disputing Party")
reasonably disputes (I) the Valuation Agent's calculation of a Delivery Amount
or a Return Amount or (II) the Value of any transfer of Eligible Credit
Support or Equivalent Credit Support, then:
(1) the Disputing Party will notify the other party and the Valuation
Agent (if the Valuation Agent is not the other party) not later than
the close of business on the Local Business Day following, in the case
of (I) above, the date that the demand is received under Paragraph 2
or, in the case of (II) above, the date of transfer;
(2) in the case of (I) above, the appropriate party will transfer the
undisputed amount to the other party not later than the close of
business on the Settlement Day following the date that the demand is
received under Paragraph 2;
(3) the parties will consult with each other in an attempt to resolve
the dispute; and
(4) if they fail to resolve the dispute by the Resolution Time, then:
(i) in the case of a dispute involving a Delivery Amount or
Return Amount, unless otherwise specified in Paragraph ll(c),
the Valuation Agent will recalculate the Exposure and the
Value as of the Recalculation Date by:
(A) utilising any calculations of that part of the Exposure
attributable to the Transactions that the parties have
agreed are not in dispute;
(B) calculating that part of the Exposure attributable to
the Transactions in dispute by seeking four actual
quotations at mid-market from Reference Market-makers
for purposes of calculating Market Quotation, and
taking the arithmetic average of those obtained;
provided that if four quotations are not available for
a particular Transaction, then fewer than four
quotations may be used for that Transaction, and if no
quotations are available for a particular Transaction,
then the Valuation Agent's original calculations will
be used for the Transaction; and
(C) utilising the procedures specified in Paragraph
ll(e)(ii) for calculating the Value, if disputed, of
the outstanding Credit Support Balance;
(ii) in the case of a dispute involving the Value of any
transfer of Eligible Credit Support or Equivalent Credit
Support, the Valuation Agent will recalculate the Value as of
the date of transfer pursuant to Paragraph ll(e)(ii).
Following a recalculation pursuant to this Paragraph, the Valuation Agent
will notify each party (or the other party, if the Valuation Agent is a
party) as soon as possible but in any event not later than the Notification
Time on the Local Business Day following the Resolution Time. The appropriate
party will, upon demand following such notice given by the Valuation Agent or
a resolution pursuant to (3) above and subject to Paragraph 3(a), make the
appropriate transfer.
ISDA(R)1995
4
(b) NO EVENT OF DEFAULT. The failure by a party to make a transfer of any
amount which is the subject of a dispute to which Paragraph 4(a) applies will
not constitute an Event of Default for as long as the procedures set out in
this Paragraph 4 are being carried out. For the avoidance of doubt, upon
completion of those procedures, Section 5(a)(i) of this Agreement will apply
to any failure by a party to make a transfer required under the final sentence
of Paragraph 4(a) on the relevant due date.
PARAGRAPH 5. TRANSFER OF TITLE, NO SECURITY INTEREST, DISTRIBUTIONS AND INTEREST
AMOUNT
(a) TRANSFER OF TITLE. Each party agrees that all right, title and interest in
and to any Eligible Credit Support, Equivalent Credit Support, Equivalent
Distributions or Interest Amount which it transfers to the other party under
the terms of this Annex shall vest in the recipient free and clear of any liens,
claims, charges or encumbrances or any other interest of the transferring party
or of any third person (other than a lien routinely imposed on all securities in
a relevant clearance system).
(b) NO SECURITY INTEREST. Nothing in this Annex is intended to create or does
create in favour of either party any mortgage, charge, lien, pledge,
encumbrance or other security interest in any cash or other property
transferred by one party to the other party under the terms of this Annex.
(c) DISTRIBUTIONS AND INTEREST AMOUNT
(i) DISTRIBUTIONS. The Transferee will transfer to the Transferor not
later than the Settlement Day following each Distributions Date cash,
securities or other property of the same type, nominal value,
description and amount as the relevant Distributions ("Equivalent
Distributions") to the extent that a Delivery Amount would not be
created or increased by the transfer, as calculated by the Valuation
Agent (and the date of calculation will be deemed a Valuation Date for
this purpose).
(ii) INTEREST AMOUNT. Unless otherwise specified in Paragraph
ll(f)(iii), the Transferee will transfer to the Transferor at the
times specified in Paragraph 1l(f)(ii) the relevant Interest Amount
to the extent that a Delivery Amount would not be created or
increased by the transfer, as calculated by the Valuation Agent (and
the date of calculation will be deemed a Valuation Date for this
purpose).
PARAGRAPH 6. DEFAULT
If an Early Termination Date is designated or deemed to occur as a result of
an Event of Default in relation to a party, an amount equal to the Value of
the Credit Support Balance, determined as though the Early Termination Date
were a Valuation Date, will be deemed to be an Unpaid Amount due to the
Transferor (which may or may not be the Defaulting Party) for purposes of
Section 6(e). For the avoidance of doubt, if Market Quotation is the
applicable payment measure for purposes of Section 6(e), then the Market
Quotation determined under Section 6(e) in relation to the Transaction
constituted by this Annex will be deemed to be zero, and, if Loss is the
applicable payment measure for purposes of Section 6(e), then the Loss
determined under Section 6(e) in relation to the Transaction will be limited
to the Unpaid Amount representing the Value of the Credit Support Balance.
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PARAGRAPH 7. REPRESENTATION
Each party represents to the other party (which representation will be deemed
to be repeated as of each date on which it transfers Eligible Credit Support,
Equivalent Credit Support or Equivalent Distributions) that it is the sole
owner of or otherwise has the right to transfer all Eligible Credit Support,
Equivalent Credit Support or Equivalent Distributions it transfers to the
other party under this Annex, free and clear of any security interest, lien,
encumbrance or other restriction (other than a lien routinely imposed on all
securities in a relevant clearance system).
PARAGRAPH 8. EXPENSES
Each party will pay its own costs and expenses (including any stamp, transfer
or similar transaction tax or duty payable on any transfer it is required to
make under this Annex) in connection with performing its obligations under
this Annex, and neither party will be liable for any such costs and expenses
incurred by the other party.
PARAGRAPH 9. MISCELLANEOUS
(a) DEFAULT INTEREST. Other than in the case of an amount which is the subject
of a dispute under Paragraph 4(a), if a Transferee fails to make, when due,
any transfer of Equivalent Credit Support, Equivalent Distributions or the
Interest Amount, it will be obliged to pay the Transferor (to the extent
permitted under applicable law) an amount equal to interest at the Default
Rate multiplied by the Value on the relevant Valuation Date of the items of
property that were required to be transferred, from (and including) the date
that the Equivalent Credit Support, Equivalent Distributions or Interest
Amount were required to be transferred to (but excluding) the date of transfer
of the Equivalent Credit Support, Equivalent Distributions or Interest Amount
This interest will be calculated on the basis of daily compounding and the
actual number of days elapsed.
(b) GOOD FAITH AND COMMERCIALLY REASONABLE MANNER. Performance of all
obligations under this Annex, including, but not limited to, all calculations,
valuations and determinations made by either party, will be made in good faith
and in a commercially reasonable manner.
(c) DEMANDS AND NOTICES. All demands and notices given by a party under this
Annex will be given as specified in Section 12 of this Agreement.
(d) SPECIFICATIONS OF CERTAIN MATTERS. Anything referred to in this Annex as
being specified in Paragraph 11 also may be specified in one or more
Confirmations or other documents and this Annex will be construed accordingly.
PARAGRAPH 10. DEFINITIONS
As used in this Annex:
"BASE CURRENCY" means the currency specified as such in Paragraph 11 (a)(i).
ISDA(R) 1995
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"BASE CURRENCY EQUIVALENT" means, with respect to an amount on a Valuation
Date, in the case of an amount denominated in the Base Currency, such Base
Currency amount and, in the case of an amount denominated in a currency other
than the Base Currency (the "Other Currency"), the amount of Base Currency
required to purchase such amount of the Other Currency at the spot exchange
rate determined by the Valuation Agent for value on such Valuation Date.
"CREDIT SUPPORT AMOUNT" means, with respect to a Transferor on a Valuation
Date, (i) the Transferee's Exposure plus (ii) all Independent Amounts
applicable to the Transferor, if any, minus (iii) all Independent Amounts
applicable to the Transferee, if any, minus (iv) the Transferor's Threshold;
provided, however, that the Credit Support Amount will be deemed to be zero
whenever the calculation of Credit Support Amount yields a number less than
zero.
"CREDIT SUPPORT BALANCE" means, with respect to a Transferor on a Valuation
Date, the aggregate of all Eligible Credit Support that has been transferred
to or received by the Transferee under this Annex, together with any
Distributions and all proceeds of any such Eligible Credit Support or
Distributions, as reduced pursuant to Paragraph 2(b), 3(c)(ii) or 6. Any
Equivalent Distributions or Interest Amount (or portion of either) not
transferred pursuant to Paragraph 5(c)(i) or (ii) will form part of the Credit
Support Balance.
"DELIVERY AMOUNT" has the meaning specified in Paragraph 2(a).
"Disputing Party" has the meaning specified in Paragraph 4.
"DISTRIBUTIONS" means, with respect to any Eligible Credit Support comprised
in the Credit Support Balance consisting of securities, all principal,
interest and other payments and distributions of cash or other property to
which a holder of securities of the same type, nominal value, description and
amount as such Eligible Credit Support would be entitled from time to time.
"DISTRIBUTIONS DATE" means, with respect to any Eligible Credit Support
comprised in the Credit Support Balance other than cash, each date on which a
holder of such Eligible Credit Support is entitled to receive Distributions
or, if that date is not a Local Business Day, the next following Local
Business Day.
"ELIGIBLE CREDIT SUPPORT" means, with respect to a party, the items, if any,
specified as such for that party in Paragraph 1l(b)(ii) including, in relation
to any securities, if applicable, the proceeds of any redemption in whole or
in part of such securities by the relevant issuer.
"ELIGIBLE CURRENCY" means each currency specified as such in Paragraph
ll(a)(ii), if such currency is freely available.
"EQUIVALENT CREDIT SUPPORT" means, in relation to any Eligible Credit Support
comprised in the Credit Support Balance, Eligible Credit Support of the same
type, nominal value, description and amount as that Eligible Credit Support.
"EQUIVALENT DISTRIBUTIONS" has the meaning specified in Paragraph 5(c)(i).
"EXCHANGE DATE" has the meaning specified in Paragraph ll(d).
ISDA(R)1995
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"EXPOSURE" means, with respect to a party on a Valuation Date and subject to
Paragraph 4 in the case of a dispute, the amount, if any, that would be payable
to that party by the other party (expressed as a positive number) or by that
party to the other party (expressed as a negative number) pursuant to Section
6(e)(ii)(l) of this Agreement if all Transactions (other than the Transaction
constituted by this Annex) were being terminated as of the relevant Valuation
Time, on the basis that (i) that party is not the Affected Party and (ii) the
Base Currency is the Termination Currency; provided that Market Quotations will
be determined by the Valuation Agent on behalf of that party using its
estimates at mid-market of the amounts that would be paid for Replacement
Transactions (as that term is defined in the definition of "Market Quotation").
"INDEPENDENT AMOUNT" means, with respect to a party, the Base Currency
Equivalent of the amount specified as such for that party in Paragraph 11
(b)(iii)(A); if no amount is specified, zero.
"INTEREST AMOUNT" means, with respect to an Interest Period, the aggregate sum
of the Base Currency Equivalents of the amounts of interest determined for
each relevant currency and calculated for each day in that Interest Period on
the principal amount of the portion of the Credit Support Balance comprised of
cash in such currency, determined by the Valuation Agent for each such day as
follows:
(x) the amount of cash in such currency on that day; multiplied by
(y) the relevant Interest Rate in effect for that day; divided by
(z) 360 (or, in the case of pounds sterling, 365).
"INTEREST PERIOD" means the period from (and including) the last Local
Business Day on which an Interest Amount was transferred (or, if no Interest
Amount has yet been transferred, the Local Business Day on which Eligible
Credit Support or Equivalent Credit Support in the form of cash was
transferred to or received by the Transferee) to (but excluding) the Local
Business Day on which the current Interest Amount is transferred.
"INTEREST RATE" means, with respect to an Eligible Currency, the rate
specified in Paragraph ll(f)(i) for that currency.
"LOCAL BUSINESS DAY", unless otherwise specified in Paragraph ll(h), means:
(i) in relation to a transfer of cash or other property (other than
securities) under this Annex, a day on which commercial banks are
open for business (including dealings in foreign exchange and foreign
currency deposits) in the place where the relevant account is located
and, if different, in the principal financial centre, if any, of the
currency of such payment;
(ii) in relation to a transfer of securities under this Annex, a day
on which the clearance system agreed between the parties for delivery
of the securities is open for the acceptance and execution of
settlement instructions or, if delivery of the securities is
contemplated by other means, a day on which commercial banks are open
for business (including dealings in foreign exchange and foreign
currency deposits) in the place(s) agreed between the parties for
this purpose;
ISDA(R)1995
8
(iii) in relation to a valuation under this Annex, a day on which
commercial banks are open for business (including dealings in foreign
exchange and foreign currency deposits) in the place of location of the
Valuation Agent and in the place(s) agreed between the parties for this
purpose; and
(iv) in relation to any notice or other communication under this Annex,
a day on which commercial banks are open for business (including
dealings in foreign exchange and foreign currency deposits) in the
place specified in the address for notice most recently provided by the
recipient.
"MINIMUM TRANSFER AMOUNT" means, with respect to a party, the amount specified
as such for that party in Paragraph 1l(b)(iii)(C); if no amount is specified,
zero.
"NEW CREDIT SUPPORT" has the meaning specified in Paragraph 3(c)(i).
"NOTIFICATION TIME" has the meaning specified in Paragraph 1l(c)(iv).
"RECALCULATION DATE" means the Valuation Date that gives rise to the dispute
under Paragraph 4; provided, however, that if a subsequent Valuation Date
occurs under Paragraph 2 prior to the resolution of the dispute, then the
"RECALCULATION DATE" means the most recent Valuation Date under Paragraph 2.
"RESOLUTION TIME" has the meaning specified in Paragraph 1l(c)(i).
"RETURN AMOUNT" has the meaning specified in Paragraph 2(b).
"SETTLEMENT DAY" means, in relation to a date, (i) with respect to a transfer
of cash or other property (other than securities), the next Local Business Day
and (ii) with respect to a transfer of securities, the first Local Business
Day after such date on which settlement of a trade in the relevant securities,
if effected on such date, would have been settled in accordance with customary
practice when settling through the clearance system agreed between the parties
for delivery of such securities or, otherwise, on the market in which such
securities are principally traded (or, in either case, if there is no such
customary practice, on the first Local Business Day after such date on which
it is reasonably practicable to deliver such securities).
"THRESHOLD" means, with respect to a party, the Base Currency Equivalent of
the amount specified as such for that party in Paragraph 1l(b)(iii)(B); if no
amount is specified, zero.
"TRANSFEREE" means, in relation to each Valuation Date, the party in respect
of which Exposure is a positive number and, in relation to a Credit Support
Balance, the party which, subject to this Annex, owes such Credit Support
Balance or, as the case may be, the Value of such Credit Support Balance to
the other party.
"TRANSFEROR" means, in relation to a Transferee, the other party.
"VALUATION AGENT" has the meaning specified in Paragraph 1l(c)(i).
"VALUATION DATE" means each date specified in or otherwise determined
pursuant to Paragraph 11(c)(ii).
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"VALUATION PERCENTAGE" means, for any item of Eligible Credit Support, the
percentage specified in Paragraph ll(b)(ii).
"VALUATION TIME" has the meaning specified in Paragraph 1l(c)(iii).
"VALUE" means, for any Valuation Date or other date for which Value is
calculated, and subject to Paragraph 4 in the case of a dispute, with respect
to:
(i) Eligible Credit Support comprised in a Credit Support Balance that
is:
(A) an amount of cash, the Base Currency Equivalent of such
amount multiplied by the applicable Valuation Percentage, if
any; and
(B) a security, the Base Currency Equivalent of the bid price
obtained by the Valuation Agent multiplied by the applicable
Valuation Percentage, if any; and
(ii) items that are comprised in a Credit Support Balance and are not
Eligible Credit Support, zero.
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PARAGRAPH 11. ELECTIONS AND VARIABLES
(A) BASE CURRENCY AND ELIGIBLE CURRENCY.
(i) "BASE CURRENCY" means [ ].
(ii) "ELIGIBLE CURRENCY" means the Base Currency.
"It is agreed by the Parties that where the Credit Support
Amount is transferred in a currency other than Base Currency,
the Valuation Percentage for each item listed as Eligible
Credit Support in Paragraph 11(b)(ii) shall be reduced by a
percentage agreed by the parties and approved by the relevant
rating agency ("ADDITIONAL VALUATION PERCENTAGE"), such
Additional Valuation Percentage being [ ]% or such lower
percentage as agreed by the parties and approved by the
relevant rating agency. For the purpose of this Annex
references to the "relevant ratings agency" shall mean the
rating agency whose Rating Criteria will be used to determine
the amount of Eligible Credit Support that Party A is required
to transfer to Party B following a credit ratings downgrade of
Party A.
(B) CREDIT SUPPORT OBLIGATIONS.
(I) DELIVERY AMOUNT, RETURN AMOUNT AND CREDIT SUPPORT AMOUNT.
(A) "DELIVERY AMOUNT" has the meaning specified in
Paragraph 2(a), except that the words "upon a demand
made by the Transferee" shall be deleted and the word
"that" in the second line of Paragraph 2(a) shall be
replaced with the word "a".
(B) "RETURN AMOUNT" has the meaning as specified in
Paragraph 2(b).
(C) "CREDIT SUPPORT AMOUNT" has the meaning specified under
the relevant definition of Ratings Criteria. In
circumstances where more than one of the Ratings
Criteria apply to Party A, the Credit Support Amount
shall be calculated by reference to the Ratings
Criteria which
11
would result in Party A transferring the greatest
amount of Eligible Credit Support. Under no
circumstances will Party A be required to transfer more
Eligible Credit Support than the greatest amount
calculated in accordance with the Ratings Criteria set
out below.
(II) ELIGIBLE CREDIT SUPPORT. The following items will qualify as
"ELIGIBLE CREDIT SUPPORT" for Party A:
ELIGIBLE CREDIT SUPPORT VALUATION PERCENTAGE
(A) Cash in the Eligible Currency [ ]%
(B) Negotiable debt obligations issued by the U.S. [ ]%
Treasury Department having a residual maturity on
such date of less than 1 year
Negotiable debt obligations issued by the U.S. [ ]%
Treasury Department having a residual maturity on
such date equal to or greater than 1 year but less
than 3 years
(C) Negotiable debt obligations issued by the U.S. [ ]%
Treasury Department having a residual maturity on
such date equal to or greater than 3 years but
less than 5 years
(D) Negotiable debt obligations issued by the U.S. [ ]%
Treasury Department having a residual maturity on
such date equal to or greater than 5 years but
less than 7 years
(E) Negotiable debt obligations issued by the U.S. [ ]%
Treasury Department having a residual maturity on
such date equal to or greater than 7 year but less
than 10 years
(F) Negotiable debt obligations of the United Kingdom [ ]%
having a residual maturity on such date of less
than 1 year
(G) Negotiable debt obligations of the United Kingdom [ ]%
having a residual maturity on such date equal to
or greater than 1 year but less than 3 years
(H) Negotiable debt obligations of the United Kingdom [ ]%
having a residual maturity on such date equal to
or greater than 3 year but less than 5 years
(I) Negotiable debt obligations of the United Kingdom [ ]%
having a residual maturity on such date equal to
or greater than 5 year but less
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than 7 years
(J) Negotiable debt obligations of the United Kingdom [ ]%
with a residual maturity on such date equal to or
greater than 7 years but less than 10 years
(K) Such other credit support as agreed between Party A Such Valuation
and the Rating Agencies from time to time. Percentage as agreed
between Party A and the
Rating Agencies from
time to time in respect
of such Eligible Credit
Support
For the purposes of this Annex, "NEGOTIABLE DEBT
OBLIGATION" shall mean a debt obligation in a stated
principal amount with a non-variable fixed maturity,
which cannot be redeemed by its issuer before its
maturity nor put to the issuer for redemption before
its maturity. It must bear interest on its stated
principal amount at a non-variable fixed rate until
maturity (or, in the case of an obligation with an
original maturity of less than one year, bear no
interest at all).
Where the ratings of the relevant agencies differ with respect
to the same Negotiable Debt Obligation, the lower of the
ratings shall apply.
(III) THRESHOLDS.
(A) "INDEPENDENT AMOUNT" means with respect to Party A and
Party B, [ ].
(B) "THRESHOLD" means with respect to Party A, [ ], and with
respect to Party B, not applicable.
(C) "MINIMUM TRANSFER AMOUNT" means:
(1) with respect to Party A, [ ] provided, that if
(x) an Event of Default with respect to Party A
has occurred and is continuing, or (y) an
Additional Termination Event has occurred in
respect of which Party A is an Affected Party,
the Minimum Transfer Amount with respect to Party
A shall be [ ]; and
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(2) with respect to Party B, [ ].
(D) "ROUNDING". The Delivery Amount and the Return Amount
will be rounded up and down to the nearest integral
multiple of [ ] respectively, provided that the Return
Amount shall never exceed the Credit Support Balance.
(C) VALUATION AND TIMING.
(i) "VALUATION AGENT" means Party A.
(ii) "VALUATION DATE" means each Tuesday, provided that if any such
Tuesday is not a Local Business Day the Valuation Date will not
be such Tuesday but instead the first following day that is a
Local Business Day unless that day falls in the next calendar
month, in which case the Valuation Date will be the first
preceding day that is a Local Business Day.
(iii) "VALUATION TIME" means the close of business on the Local
Business Day immediately preceding the Valuation Date or date
of calculation, as applicable, provided that the calculations
of Value and Exposure will be made as of approximately the same
time on the same date.
(iv) "NOTIFICATION TIME" means by [ ], on a Local Business Day.
(D) EXCHANGE DATE has the meaning specified in Paragraph 3(c)(ii).
(E) DISPUTE RESOLUTION.
(i) "RESOLUTION TIME" means [ ], on the Local Business Day following
the date on which notice is given that gives rise to a dispute
under Paragraph 4.
(ii) VALUE. For the purpose of Paragraphs 4(a)(4)(i)(C) and
4(a)(4)(ii), the Value as at the relevant date of calculation
of the outstanding Credit Support Balance or of any transfer of
Eligible Credit Support or Equivalent Credit Support, as the
case may be, will be calculated as follows:
(A) with respect to any Eligible Credit Support or
Equivalent Credit Support comprising securities
("SECURITIES"), the Base Currency Equivalent of the sum
of (a) (x) the last bid price on such date for such
Securities on the principal national securities
exchange on which such Securities are listed,
multiplied by the applicable Valuation Percentage; or
(y) where any Securities are not listed on a national
securities exchange, the bid price for such Securities
quoted as at the close of business on such date by any
principal market maker (which shall not be and shall be
independent from the Valuation Agent) for such
Securities chosen by the Valuation Agent, multiplied by
the applicable Valuation Percentage; or
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(z) if no such bid price is listed or quoted for such
date, the last bid price listed or quoted (as the case
may be), as of the day next preceding such date on
which such prices were available, multiplied by the
applicable Valuation Percentage; plus (b) the accrued
interest where applicable on such Securities (except to
the extent that such interest shall have been paid to
the Transferor pursuant to Paragraph 5(c)(ii) or
included in the applicable price referred to in
subparagraph (a) above) as of such date;
(B) with respect to any Cash, the Base Currency Equivalent
of the amount thereof; and
(C) with respect to any Eligible Credit Support or
Equivalent Credit Support other than Securities and
Cash, the Base Currency Equivalent of the fair market
value thereof on such date, as determined in any
reasonable manner chosen by the Valuation Agent,
multiplied by the applicable Valuation Percentage.
(iii) ALTERNATIVE. The provisions of Paragraph 4 will apply.
(F) DISTRIBUTION AND INTEREST AMOUNT.
(i) INTEREST RATE. The "INTEREST RATE" in relation to the Eligible
Currency will be "XXXXX", which for any day means the overnight
rate as calculated by the Wholesale Market Brokers Association
which appears on Telerate Page 3937 under the heading "Sterling
Overnight Index" in respect of that day, and shall be applied
for purposes of determining the Interest Amount on a
compounding basis.
(ii) TRANSFER OF INTEREST AMOUNT. The transfer of the relevant
Interest Amount will be made on each Valuation Date to the
extent that Party B has earned and received such amount of
interest and that a Delivery Amount would not be created or
increased by that transfer, and on any other Local Business Day
on which Equivalent Credit Support is transferred to the
Transferor pursuant to Paragraph 2(b). Notwithstanding anything
to the contrary in this Agreement, if pursuant to the terms of
this Agreement Party B is required to deduct or withhold an
amount from a payment in respect of the transfer of an Interest
Amount for or on account of any Tax, such Tax shall not
constitute an "Indemnifiable Tax".
(iii) ALTERNATIVE TO INTEREST AMOUNT. The provisions of Paragraph
5(c)(ii) will apply.
(G) ADDRESSES FOR TRANSFERS.
Party A:
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Transfers at any time of any type of asset by Party B to Party A shall
be made to the account or address (as appropriate) most recently
notified for the purpose of this Agreement by Party A to Party B in
relation to such type of asset.
Address for demands and notices:
Party A:
Address: RBS Financial Markets, 000 Xxxxxxxxxxx, Xxxxxx XX0X 0XX
Telephone: x00 00 0000 0000/4761
Facsimile: x00 00 0000 0000
Attention: Global Collateral Management
Email: xxxxxxxxxx@xxxx.xxx
Party B: Bank: [ ]
Sort Code: [ ]
Account No.: [ ]
Account Name: [ ]
Party B:
To be advised
(H) OTHER PROVISIONS.
(i) TRANSFER TIMING
(A) The final paragraph of Paragraph 3(a) shall be deleted
and replaced with the following:
"Subject to Paragraph 4, and unless otherwise
specified, any transfer of Eligible Credit Support or
Equivalent Credit Support (whether by the Transferor
pursuant to Paragraph 2(a) or by the Transferee
pursuant to Paragraph 2(b)) shall be made not later
than the close of business on the Settlement Day."
(B) The definition of Settlement Day in Paragraph 10 shall
be deleted and replaced with the following:
"SETTLEMENT DAY" means, in relation to a Deemed Demand
Date and a transfer of cash the next Local Business
Day.
(C) For the purposes of this Paragraph 11(h)(i):
"DEEMED DEMAND DATE" means, with respect to a
transfer by a party:
(i) in the case of a transfer pursuant to Xxxxxxxxx
0, Xxxxxxxxx 3 or Paragraph 4(a)(2), the relevant
Valuation Date. For the avoidance of doubt, for
the purposes of Paragraph 2 and
16
Paragraph 4(a)(2), the Transferor will be deemed
to receive notice of the demand by the Transferee
to make a transfer of Eligible Credit Support;
and
(ii) in the case of a transfer pursuant to Paragraph
3(c)(ii)(A), the date on which the Transferee has
given its consent to the proposed exchange.
For the avoidance of doubt, on each Deemed Demand Date
the Transferor shall deliver to the Transferee and the
Agent a statement showing the amount of Eligible Credit
Support to be delivered.
(ii) EARLY TERMINATION
Paragraph 6 is deleted in its entirety and replaced with the
following:
"If an Early Termination Date is designated or deemed to occur
in respect of all outstanding Transactions, an amount equal to
the Value (provided that a Valuation Percentage of 100 per
cent. shall be applied for the purposes of determining the
Value of Eligible Credit Support comprised in the Credit
Support Balance) of the Credit Support Balance, determined as
though the Early Termination Date were a Valuation Date, will
be deemed to be an Unpaid Amount due to the Transferor (which
may or may not be the Defaulting Party or the Affected Party as
the case may be) for purposes of Section 6(e). For the
avoidance of doubt, if Market Quotation is the applicable
payment measure for the purposes of Section 6(e), then the
Market Quotation determined under Section 6(e) in relation to
the Transaction constituted by this Annex will be deemed to be
zero, and, if Loss is the applicable payment measure for the
purposes of Section 6(e), then the Loss determined under
Section 6(e) in relation to the Transaction will be limited to
the Unpaid Amount representing the Value of the Credit Support
Balance."
(iii) COSTS OF TRANSFER ON EXCHANGE
Notwithstanding Paragraph 8, the Transferor will be responsible
for, and will reimburse the Transferee for, all transfer and
other taxes and other costs involved in the transfer of
Eligible Credit Support either from the Transferor to the
Transferee or from the Transferee to the Transferor hereto.
(iv) CUMULATIVE RIGHTS
The rights, powers and remedies of the Transferee under this
Annex shall be in addition to all rights, powers and remedies
given to the Transferee by the Agreement or by virtue of any
statute or rule of law, all of which rights, powers and
remedies shall be cumulative and may be exercised successively
or concurrently without impairing the rights of the Transferee
in the Credit Support Balance created pursuant to this Annex.
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(v) SINGLE TRANSFEROR AND SINGLE TRANSFEREE
Party A and Party B agree that, notwithstanding anything to the
contrary in this Annex (including, without limitation, the
recital hereto, Paragraph 2 or the definitions in Paragraph 10)
(a) the term "Transferee" as used in this Annex means only
Party B and (b) the term "Transferor" as used in this Annex
means only Party A.
(vi) "RATINGS CRITERIA" means the criteria used by S&P ("S&P
CRITERIA"), the criteria used by Xxxxx'x ("XXXXX'X CRITERIA")
and the criteria used by Fitch Ratings ("FITCH CRITERIA") for
the purposes of determining the amount of Eligible Credit
Support Party A is required to transfer hereunder following a
Rating Event where Party A has opted to or is required to
transfer Eligible Credit Support in support of its obligations
under the Agreement pursuant to Part 5(c) of the Schedule to
the Agreement.
S&P CRITERIA
For the purposes of this Credit Suport Annex the S&P criteria
comprise the criteria of S&P as at 17 December 2003 "Standard &
Poor's Global Interest Rate and Swap Counterparty Rating
Criteria Expanded" and 26 February 2004 "Global Interest Rate
and Currency Swaps: Calculating the Collateral Required
Amount".
"CREDIT SUPPORT AMOUNT" shall mean with respect to the
Transferor on a Valuation Date the sum of:
(A) the greater of the MTM and zero; and
(B) the product of VB and the aggregate Notional Amounts of
the Transactions,
or such lower amount as may be agreed between Party A and
S&P, provided that the Credit Support Amount shall be deemed
to be zero:
(1) if at any time, (x) the short-term, unsecured and
unsubordinated debt obligations of Party A and, if
applicable, any Credit Support Provider of Party A are
rated at least as high as "A-1" by S&P and (y) the
long-term, unsecured and unsubordinated debt
obligations of Party A and, if applicable, any Credit
Support Provider of Party A are rated at least as high
as "BBB-" by S&P ;
(2) until the date that is 30 calendar days following: the
date of the occurrence of a relevant Initial S&P Rating
Event, or, if earlier, the date of the occurrence of a
relevant Subsequent S&P Rating Event; and
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(3) if at any time any of the measures described in Part
5(c)(i)(B), Part 5(c)(i)(C) and Part 5(c)(i)(D) of the
Schedule to the Agreement is taken or if a transfer or
any other action described in Part 5(c)(ii)(A) of the
Schedule to the Agreement is effected.
For such purposes:
"MTM" means the Transferee's Exposure; and
"VB" means the relevant percentage set out in Table A below.
TABLE A
For the purposes of this Table A, "Average Remaining
Life" means, in respect of any date, the period,
expressed in years (rounded to the nearest quarter)
reflecting the average of the period in respect of each
outstanding Transaction from and including such date to
and including the Termination Date of such Transaction.
19
---------------------------------------------------------------------------------------------
VOLATILITY BUFFER
---------------------------------------------------------------------------------------------
Rating of Party A and, if applicable, Average Average Average
any Credit Support Provider of Party A Remaining Life Remaining Life Remaining Life
of Transaction of Transaction of Transaction
up to 5 years up to 10 up to 30 years
years, but but greater
greater than 5 than 10 years
years
---------------------------------------------------------------------------------------------
The rating by S&P of the short-term [ ]% [ ]% [ ]%
unsecured and unsubordinated debt
obligations of Party A and, if applicable,
any Credit Support Provider of Party
A is equal to "A-2"
---------------------------------------------------------------------------------------------
The rating by S&P of the short-term [ ]% [ ]% [ ]%
unsecured and unsubordinated debt
obligations of Party A and, if applicable,
any Credit Support Provider of Party
A is equal to or lower than "A-3"
---------------------------------------------------------------------------------------------
The rating by S&P of the long-term [ ]% [ ]% [ ]%
unsecured and unsubordinated debt
obligations of Party A and, if applicable,
any Credit Support Provider of Party
A is lower than "BBB-"
---------------------------------------------------------------------------------------------
XXXXX'X CRITERIA
"CREDIT SUPPORT AMOUNT" shall be calculated in accordance with the
meaning specified in Paragraph 10 provided however that the words "plus
the Additional Collateral Amount" shall be added after the words
"Transferee's Exposure" in the second line thereof and provided that
the Credit Support Amount shall be deemed to be zero:
20
(A) if at any time (1) the long-term, unsecured and unsubordinated
debt obligations of Party A and, if applicable, any Credit
Support Provider of Party A are rated at least as high as "A1"
by Xxxxx'x and (2) the short-term, unsecured and unsubordinated
debt obligations of Party A and, if applicable, any Credit
Support Provider of Party A are rated at least as high as
"Prime-1" by Xxxxx'x;
(B) until the date that is the later of (1) the date that is 30
calendar days following the date of the Agreement if the
Initial Xxxxx'x Rating Event occurs prior to the date of the
Agreement; (2) the date that is 30 calendar days following the
date of the Initial Xxxxx'x Rating Event; or (3) the date that
is 10 calendar days following the date of the occurrence of a
relevant Subsequent Xxxxx'x Rating Event; and
(C) if at any time any of the measures described in Part
5(c)(iii)(2), Part 5(c)(iii)(3), Part 5(c)(iii)(4), Part
5(c)(iv)(1)(x), Part 5(c)(iv)(1)(y) or Part 5(c)(iv)(1)(z) of
the Schedule to the Agreement is taken.
For such purposes "ADDITIONAL COLLATERAL AMOUNT" means with
respect to a Valuation Date the sum (A) the product of A and
the Transferee's Exposure and (B) the product of B and the
current aggregate Notional Amounts of the outstanding
Transactions, where:
(1) "A" means 2% and "B" means the product of
(a) 0.20% (if the Confirmation into which this Annex
is incorporated relates to an interest rate swap
transaction or a basis rate swap transaction); or
(b) 2.0% (if the Confirmation into which this Annex
is incorporated relates to a cross currency
interest rate swap transaction)
and the Average Remaining Life in the event that (x)
the rating by Xxxxx'x of the long-term, unsecured and
unsubordinated debt obligations of Party A and, if
applicable, any Credit Support Provider of Party A is
lower than "A1" but not lower than "A3", or (y) the
rating by Xxxxx'x of the short-term, unsecured and
unsubordinated debt obligations of Party A and, if
applicable, any Credit Support Provider of Party A is
lower than "Prime-1" but not lower than "Prime-2";
(2) "A" means 2% and "B" means the product of
(a) 0.40% (if the Confirmation into which this Annex
is incorporated relates to an interest rate swap
transaction or a basis rate swap transaction); or
(b) 3.0% (if the Confirmation into which this Annex
is incorporated relates to a cross currency
interest rate swap transaction)
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and the Average Remaining Life in the event that (x)
the rating by Xxxxx'x of the long-term, unsecured and
unsubordinated debt obligations of Party A and, if
applicable, any Credit Support Provider of Party A is
lower than "A3", or (y) the short-term, unsecured and
unsubordinated debt obligations of Party A or any
Credit Support Provider of Party A, is below "Prime-2";
and
(3) "A" means 0% and "B" means 0% in all other cases.
Where "AVERAGE REMAINING LIFE" means, in respect of any date,
the period, expressed in years (rounded to the nearest quarter)
reflecting the average of the period in respect of each
outstanding Transaction from and including such date to and
including the Termination Date of such Transaction.
In relation to Part 5(c)(iii)(1) and Part 5(c)(iv)(2) of the
Schedule to the Agreement, Party A will, upon receipt of
reasonable notice (which, for the avoidance of doubt, will be
no less than 30 calendar days) from Xxxxx'x, demonstrate to
Xxxxx'x the calculation by Party A of the Transferee's
Exposure.
FITCH CRITERIA
"CREDIT SUPPORT AMOUNT" shall mean, with respect to the Transferor on
a Valuation Date, the greater of:
(1) zero; and
(2) the sum of:
(x) the Transferee's Exposure; and
(y) the product of (aa) the current aggregate Notional
Amount of the Transactions, and (bb) the Volatility
Cushion,
or such lower amount as Fitch Ratings and Party A may agree, provided
that the Credit Support Amount shall be deemed to be zero:
(A) if at any time (1) the short-term, unsecured and unsubordinated
debt obligations of Party A and, if applicable, any Credit
Support Provider of Party A are rated at least as high as "F1"
by Fitch Ratings and (2) the long-term, unsecured and
unsubordinated debt obligations of Party A and, if applicable,
any Credit Support Provider of Party A are rated at least as
high as "A" by Fitch Ratings;
(B) until the date that is 30 calendar days following the date of
the occurrence of a relevant Initial Fitch Rating Event; and
22
(C) if at any time any of the measures described in Part
5(c)(v)(2), Part 5(c)(v)(3), Part 5(c)(v)(4), Part
5(c)(vi)(1)(aa), Part 5(c)(vi)(1)(bb), Part 5(c)(vi)(1)(cc),
Part 5(c)(vii)(1), Part 5(c)(vii)(2) and Part 5(c)(vii)(3) of
the Schedule to the Agreement is taken.
For such purposes "VOLATILITY CUSHION" means the percentage
determined by Party A in accordance with Appendix 2 to Fitch
Rating's Structured Finance Criteria Report entitled
"Counterparty Risk in Structured Finance Transactions: Swap
Criteria" dated 13th September, 2004.
(vii) CALCULATIONS
Paragraph 3(b) of this Annex shall be amended by inserting the words
"and shall provide each party (or the other party, if the Valuation
Agent is a party) with a description in reasonable detail of how such
calculations were made, upon request" after the word "calculations" in
the third line thereof.
(viii) ANNEX RELATES ONLY TO A CLASS OR SUB-CLASS OF NOTES
The first sentence of the introductory paragraph of this Annex shall be
amended to read as follows:
"This Annex supplements and forms part of and is subject to the
above-referenced ISDA Master Agreement and is part of its Schedule but
only where that ISDA Master Agreement is incorporated into a
confirmation relating to a class or sub-class of notes issued by Party
B pursuant to Party B's $7,500,000,000 Medium Term Note Programme and
the provisions of this Annex shall apply only to the transaction in
respect of the class or sub-class of notes identified in the relevant
confirmation for such transaction."
23
IN WITNESS WHEREOF, the parties have executed and delivered this document as of
the date specified on the first page of this document.
THE ROYAL BANK OF SCOTLAND PLC ARRAN FUNDING LIMITED
------------------------------- ------------------------------------
By: By:
Name: Name:
Title Title
24
