EXHIBIT 99(h) (iii)
ISDA(R)
International Swaps and Derivatives Association, Inc.
2002 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 2002 Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties or otherwise
effective for the purpose of confirming or evidencing those Transactions. This
2002 Master Agreement and the Schedule are together referred to as this "Master
Agreement".
Accordingly, the parties agree as follows:-
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 14 and elsewhere in this Master
Agreement 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, such Confirmation will prevail for the
purpose of the relevant Transaction.
(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement"), and the parties
would not otherwise enter into any Transactions.
2. OBLIGATIONS
(a) GENERAL CONDITIONS.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for value
on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the required
currency. Where settlement is by delivery (that is, other than by payment),
such delivery will be made for receipt on the due date in the manner
customary
for the relevant obligation unless otherwise specified in the relevant
Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to (1)
the condition precedent that no Event of Default or Potential Event of
Default with respect to the other party has occurred and is continuing, (2)
the condition precedent that no Early Termination Date in respect of the
relevant Transaction has occurred or been effectively designated and (3)
each other condition specified in this Agreement to be a condition
precedent for the purpose of this Section 2(a)(iii).
(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 Settlement 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 OF PAYMENTS. 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 which 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
and payment obligation will be determined in respect of all amounts payable on
the same date in the same currency in respect of those Transactions, regardless
of whether such amounts are payable in respect of the same Transaction. The
election may be made in the Schedule or any Confirmation by specifying that
"Multiple Transaction Payment Netting" applies to the Transactions identified as
being subject to the election (in which case clause (ii) above will not apply to
such Transactions). If Multiple Transaction Payment Netting is applicable to
Transactions, it will apply to those Transactions with effect from the starting
date specified in the Schedule or such Confirmation, or, if a starting date is
not specified in the Schedule or such Confirmation, the starting date otherwise
agreed by the parties in writing. 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:-
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(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 to Section
3(f) to be accurate and true unless such failure would not have
occurred but for (I) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, after a Transaction
is entered into (regardless of whether such action is taken or
brought with respect to a party to this Agreement) or (11) a
Change in Tax Law.
(ii) LIABILITY. If:-
(1) X is required by any applicable law, as modified by the practice
of any relevant governmental revenue authority, to make any deduction
or withholding in respect of which X would not be required to pay an
additional amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly against
X,
then, except to the extent Y has satisfied or then satisfies the liability
resulting from such Tax, Y will promptly pay to X the amount of such liability
(including any related liability for interest, but including any related
liability for penalties only if Y has failed to comply with or perform any
agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).
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3. REPRESENTATIONS
Each party makes the representations contained in Sections 3(a), 3(b), 3(c),
3(d), 3(e) and 3(f) and, if specified in the Schedule as applying, 3(g) 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). If any "Additional Representation" is specified in the Schedule or
any Confirmation as applying, the party or parties specified for such Additional
Representation will make and, if applicable, be deemed to repeat such Additional
Representation at the time or times specified for such Additional
Representation.
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organized and validly existing under the laws of the
jurisdiction of its organization 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)).
(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, any of its Credit Support Providers or any of its
applicable Specified Entities any action, suit or
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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.
(g) NO AGENCY. It is entering into this Agreement, including each Transaction,
as principal and not as agent of any person or entity.
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 clause 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.
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(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 it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated, organised, managed and
controlled or considered to have its seat, or where an 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 (subject to Sections
5(c) and 6(e)(iv)) 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
9(h)(i)(2) or (4) required to be made by it if such failure is not remedied
on or before the first Local Business Day in the case of any such payment
or the first Local Delivery Day in the case of any such delivery after, in
each case, notice of such failure is given to the party;
(ii) BREACH OF AGREEMENT; REPUDIATION OF AGREEMENT.
(1) 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 9(h)(i)(2) or (4) 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 within 30 days after notice of such failure is
given to the party; or
(2) the party disaffirms, disclaims, repudiates or rejects, in whole
or in part, or challenges the validity of, this Master Agreement, any
Confirmation executed and delivered by that party or any Transaction
evidenced by such a Confirmation (or
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such action is taken by any person or entity appointed or empowered to
operate it or act on its behalf);
(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, or any
security interest granted by such party or such Credit Support
Provider to the other party pursuant to any such Credit Support
Document, to be in full force and effect for the purpose of this
Agreement (in each 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 (or such action is taken by any
person or entity appointed or empowered to operate it or act on its
behalf);
(iv) MISREPRESENTATION. A representation (other than a representation
under Section 3(e) or 3(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 (other than by failing to make a delivery) under a
Specified Transaction or any credit support arrangement relating to a
Specified Transaction and, after giving effect to any applicable
notice requirement or grace period, such default results in 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 due on the last payment or
exchange date of, or any payment on early termination of, a Specified
Transaction (or, if there is no applicable notice requirement or grace
period, such default continues for at least one Local Business Day);
(3) defaults in making any delivery due under (including any delivery
due on the last delivery or exchange date of) a Specified Transaction
or any credit support arrangement relating to a Specified Transaction
and, after giving effect to
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any applicable notice requirement or grace period, such default
results in a liquidation of, an acceleration of obligations under, or
an early termination of, all transactions outstanding under the
documentation applicable to that Specified Transaction; or
(4) disaffirms, disclaims, repudiates or rejects, in whole or in part,
or challenges the validity of, a Specified Transaction or any credit
support arrangement relating to a Specified Transaction that is, in
either case, confirmed or evidenced by a document or other confirming
evidence executed and delivered by that party, Credit Support Provider
or Specified Entity (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)
where the aggregate principal amount of such agreements or
instruments, either alone or together with the amount, if any,
referred to in clause (2) below, is 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 under such agreements or instruments on the due date for
payment (after giving effect to any applicable notice requirement or
grace period) in an aggregate amount, either alone or together with
the amount, if any, referred to in clause (1) above, of not less than
the applicable Threshold Amount;
(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)(A)
institutes or has instituted against it, by a regulator, supervisor or
any similar official with primary insolvency, rehabilitative or
regulatory jurisdiction over it in the jurisdiction of its
incorporation or organisation or the jurisdiction of its head or home
office, 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
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winding-up or liquidation by it or such regulator, supervisor or
similar official, or (B) 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 such proceeding or petition is instituted or
presented by a person or entity not described in clause (A) above and
either (I) 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 (II) is not dismissed, discharged, stayed
or restrained in each case within 15 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 15 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) above (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, or reorganises,
reincorporates or reconstitutes into or as, another entity and, at the time
of such consolidation, amalgamation, merger, transfer, reorganisation,
reincorporation or reconstitution:-
(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; 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 (subject to Section 5(c))
an Illegality if the event is specified in clause (i) below, a Force Majeure
Event if the event is specified in clause (ii) below, a Tax Event if the event
is specified in clause (iii) below, a Tax Event Upon Merger if the event is
specified in clause (iv) below, and, if specified to be applicable, a Credit
Event Upon Merger if the event is specified pursuant to clause (v) below or an
Additional Termination Event if the event is specified pursuant to clause (vi)
below:-
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(i) ILLEGALITY. After giving effect to any applicable provision, disruption
fallback or remedy specified in, or pursuant to, the relevant Confirmation
or elsewhere in this Agreement, due to an event or circumstance (other than
any action taken by a party or, if applicable, any Credit Support Provider
of such party) occurring after a Transaction is entered into, it becomes
unlawful under any applicable law (including without limitation the laws of
any country in which payment, delivery or compliance is required by either
party or any Credit Support Provider, as the case may be), on any day, or
it would be unlawful if the relevant payment, delivery or compliance were
required on that day (in each case, other than as a result of a breach by
the party of Section 4(b)):-
(1) for the Office through which such party (which will be the
Affected Party) makes and receives payments or deliveries with respect
to such Transaction to perform any absolute or contingent obligation
to make a payment or delivery in respect of such Transaction, 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) for such party or any Credit Support Provider of such party (which
will be the Affected Party) to perform any absolute or contingent
obligation to make a payment or delivery which such party or Credit
Support Provider has under any Credit Support Document relating to
such Transaction, to receive a payment or delivery under such Credit
Support Document or to comply with any other material provision of
such Credit Support Document;
(ii) FORCE MAJEURE EVENT. After giving effect to any applicable provision,
disruption fallback or remedy specified in, or pursuant to, the relevant
Confirmation or elsewhere in this Agreement, by reason of force majeure or
act of state occurring after a Transaction is entered into, on any day:-
(1) the Office through which such party (which will be the Affected
Party) makes and receives payments or deliveries with respect to such
Transaction is prevented from performing any absolute or contingent
obligation to make a payment or delivery in respect of such
Transaction, from receiving a payment or delivery in respect of such
Transaction or from complying with any other material provision of
this Agreement relating to such Transaction (or would be so prevented
if such payment, delivery or compliance were required on that day), or
it becomes impossible or impracticable for such Office so to perform,
receive or comply (or it would be impossible or impracticable for such
Office so to perform, receive or comply if such payment, delivery or
compliance were required on that day); or
(2) such party or any Credit Support Provider of such party (which
will be the Affected Party) is prevented from performing any absolute
or contingent obligation to make a payment or delivery which such
party or Credit Support Provider has under any Credit Support Document
relating to such Transaction, from receiving a payment or delivery
under such Credit Support Document or from complying with any other
material provision of such Credit Support
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Document (or would be so prevented if such payment, delivery or
compliance were required on that day), or it becomes impossible or
impracticable for such party or Credit Support Provider so to perform,
receive or comply (or it would be impossible or impracticable for such
party or Credit Support Provider so to perform, receive or comply if
such payment, delivery or compliance were required on that day),
so long as the force majeure or act of state is beyond the control of such
Office, such party or such Credit Support Provider, as appropriate, and such
Office, party or Credit Support Provider could not, after using all reasonable
efforts (which will not require such party or Credit Support Provider to incur a
loss, other than immaterial, incidental expenses), overcome such prevention,
impossibility or impracticability;
(iii) TAX EVENT. Due to (1) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, after a Transaction is
entered into (regardless of whether such action is taken or brought with
respect to a party to this Agreement) or (2) 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 Settlement Date
(A) 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 9(h)) or (B) 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 9(h)) 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));
(iv) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the next
succeeding Scheduled Settlement 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 9(h)) or (2)
receive a payment from which an amount has been deducted or withheld for or
on account of any 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 (or any substantial part of the assets
comprising the business conducted by it as of the date of this Master
Agreement) to, or reorganising, reincorporating or reconstituting into or
as, another entity (which will be the Affected Party) where such action
does not constitute a Merger Without Assumption;
(v) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is specified
in the Schedule as applying to the party, a Designated Event (as defined
below) occurs with respect to such party, any Credit Support Provider of
such party or any applicable Specified Entity of such party (in each case,
"X') and such Designated Event does not constitute a Merger Without
Assumption, and the creditworthiness of X or, if applicable, the successor,
surviving or transferee entity of X, after taking into account any
applicable Credit Support Document, is materially weaker immediately after
the occurrence of such Designated Event than that of X immediately prior to
the occurrence of such Designated Event (and, in any such event, such party
or its successor, surviving or transferee entity,
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as appropriate, will be the Affected Party). A "Designated Event" with
respect to X means that:-
(1) X consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets (or any substantial part
of the assets comprising the business conducted by X as of the date of
this Master Agreement) to, or reorganises, reincorporates or
reconstitutes into or as, another entity;
(2) any person, related group of persons or entity acquires directly
or indirectly the beneficial ownership of (A) equity securities having
the power to elect a majority of the board of directors (or its
equivalent) of X or (B) any other ownership interest enabling it to
exercise control of X; or
(3) X effects any substantial change in its capital structure by means
of the issuance, incurrence or guarantee of debt or the issuance of
(A) preferred stock or other securities convertible into or
exchangeable for debt or preferred stock or (B) in the case of
entities other than corporations, any other form of ownership
interest; or
(vi) 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 will be as specified for such Additional Termination Event
in the Schedule or such Confirmation).
(c) HIERARCHY OF EVENTS.
(i) An event or circumstance that constitutes or gives rise to an
Illegality or a Force Majeure Event will not, for so long as that is the
case, also constitute or give rise to an Event of Default under Section
5(a)(i), 5(a)(ii)(l) or S(a)(iii)(l) insofar as such event or circumstance
relates to the failure to make any payment or delivery or a failure to
comply with any other material provision of this Agreement or a Credit
Support Document, as the case may be.
(ii) Except in circumstances contemplated by clause (i) above, if an event
or circumstance which would otherwise constitute or give rise to an
Illegality or a Force Majeure Event also constitutes an Event of Default or
any other Termination Event, it will be treated as an Event of Default or
such other Termination Event, as the case may be, and will not constitute
or give rise to an Illegality or a Force Majeure Event.
(iii) If an event or circumstance which would otherwise constitute or give
rise to a Force Majeure Event also constitutes an Illegality, it will be
treated as an Illegality, except as described in clause (ii) above, and not
a Force Majeure Event.
(d) DEFERRAL OF PAYMENTS AND DELIVERIES DURING WAITING PERIOD. If an Illegality
or a Force Majeure Event has occurred and is continuing with respect to a
Transaction, each payment or delivery which would otherwise be required to be
made under that Transaction will be deferred to, and will not be due until:-
12
(i) the first Local Business Day or, in the case of a delivery, the first
Local Delivery Day (or the first day that would have been a Local Business
Day or Local Delivery Day, as appropriate, but for the occurrence of the
event or circumstance constituting or giving rise to that Illegality or
Force Majeure Event) following the end of any applicable Waiting Period in
respect of that Illegality or Force Majeure Event, as the case may be; or
(ii) if earlier, the date on which the event or circumstance constituting
or giving rise to that Illegality or Force Majeure Event ceases to exist
or, if such date is not a Local Business Day or, in the case of a delivery,
a Local Delivery Day, the first following day that is a Local Business Day
or Local Delivery Day, as appropriate.
(e) INABILITY OF HEAD OR HOME OFFICE TO PERFORM OBLIGATIONS OF BRANCH. If (i)
an Illegality or a Force Majeure Event occurs under Section 5(b)(i)( I ) or
5(b)(ii)(1) and the relevant Office is not the Affected Party's head or home
office, (ii) Section 10(a) applies, (iii) the other party seeks performance of
the relevant obligation or compliance with the relevant provision by the
Affected Party's head or home office and (iv) the Affected Party's head or home
office fails so to perform or comply due to the occurrence of an event or
circumstance which would, if that head or home office were the Office through
which the Affected Party makes and receives payments and deliveries with respect
to the relevant Transaction, constitute or give rise to an Illegality or a Force
Majeure Event, and such failure would otherwise constitute an Event of Default
under Section 5(a)(i) or 5(a)(iii)(l) with respect to such party, then, for so
long as the relevant event or circumstance continues to exist with respect to
both the Office referred to in Section 5(b)(i)( 1) or 5(b)(ii)( 1), as the case
may be, and the Affected Party's head or home office, such failure will not
constitute an Event of Default under Section 5(a)(i) or 5(a)(iii)(l).
6. EARLY TERMINATION; CLOSE-OUT NETTING
(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)( I), (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 other than a Force Majeure 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 the other party such other
information about that Termination Event as the other party may reasonably
require. If a Force Majeure Event occurs, each party will, promptly
13
upon becoming aware of it, use all reasonable efforts to notify the other
party, specifying the nature of that Force Majeure Event, and will also
give the other party such other information about that Force Majeure Event
as the other party may reasonably require.
(ii) TRANSFER TO AVOID TERMINATION EVENT. If 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, other than 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 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 of such occurrence is given under
Section 6(b)(i) to avoid that Termination Event.
(iv) Right to Terminate.
(1) If:-
(A) 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
(B) 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,
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 are two Affected Parties, or the Non- affected Party in the case of a
Credit Event Upon Merger or an Additional Termination Event if there is
only one Affected Party may, if the relevant Termination Event is then
continuing, by not more than 20 days notice to the other party, designate a
day not earlier than the day such notice is effective as an Early
Termination Date in respect of all Affected Transactions.
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(2) If at any time an Illegality or a Force Majeure Event has occurred
and is then continuing and any applicable Waiting Period has expired:-
(A) Subject to clause (B) below, either party may, by not more
than 20 days notice to the other party, designate (I) a day not
earlier than the day on which such notice becomes effective as an
Early Termination Date in respect of all Affected Transactions or
(II) by specifying in that notice the Affected Transactions in
respect of which it is designating the relevant day as an Early
Termination Date, a day not earlier than two Local Business Days
following the day on which such notice becomes effective as an
Early Termination Date in respect of less than all Affected
Transactions. Upon receipt of a notice designating an Early
Termination Date in respect of less than all Affected
Transactions, the other party may, by notice to the designating
party, if such notice is effective on or before the day so
designated, designate that same day as an Early Termination Date
in respect of any or all other Affected Transactions.
(B) An Affected Party (if the Illegality or Force Majeure Event
relates to performance by such party or any Credit Support
Provider of such party of an obligation to make any payment or
delivery under, or to compliance with any other material
provision of, the relevant Credit Support Document) will only
have the right to designate an Early Termination Date under
Section 6(b)(iv)(2)(A) as a result of an Illegality under Section
5(b)(i)(2) or a Force Majeure Event under Section 5(b)(ii)(2)
following the prior designation by the other party of an Early
Termination Date, pursuant to Section 6(b)(iv)(2)(A), in respect
of less than all Affected Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under Section
6(a) or 6(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 9(h)(i) 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 will be determined
pursuant to Sections 6(e) and 9(h)(ii).
(d) CALCULATIONS; PAYMENT DATE.
(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 any quotations, market data or information
from internal sources used in making such calculations), (2) specifying
15
(except where there are two Affected Parties) any Early Termination Amount
payable and (3) 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 or market data obtained in determining a
Close-out Amount, the records of the party obtaining such quotation or
market data will be conclusive evidence of the existence and accuracy of
such quotation or market data.
(ii) PAYMENT DATE. An Early Termination Amount due in respect of any Early
Termination Date will, together with any amount of interest payable
pursuant to Section 9(h)(ii)(2), be payable (1) on the day on which 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 ( 2 )
on the day which is two Local Business Days after the day on which notice
of the amount payable is effective (or, if there are two Affected Parties,
after the day on which the statement provided pursuant to clause (i) above
by the second party to provide such a statement is effective) in the case
of an Early Termination Date which is designated as a result of a
Termination Event.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the
amount, if any, payable in respect of that Early Termination Date (the "Early
Termination Amount") will be determined pursuant to this Section 6(e) and will
be subject to Section 6(f).
(i) EVENTS OF DEFAULT. If the Early Termination Date results from an Event
of Default, the Early Termination Amount will be an amount equal to (1) the
sum of (A) the Termination Currency Equivalent of the Close-out Amount or
Close-out Amounts (whether positive or negative) determined by the
Non-defaulting Party for each Terminated Transaction or group of Terminated
Transactions, as the case may be, and (B) the Termination Currency
Equivalent of the Unpaid Amounts owing to the Non-defaulting Party less the
Termination Currency Equivalent of the Unpaid Amounts owing to the
Defaulting Party. If the Early Termination 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
the Early Termination Amount to the Defaulting Party.
(ii) TERMINATION EVENTS. If the Early Termination Date results from a
Termination Event:-
(1) ONE AFFECTED PARTY. Subject to clause (3) below, if there is one
Affected Party, the Early Termination Amount will be determined in
accordance with Section 6(e)(i), except that references to the
Defaulting Party and to the Non-defaulting Party will be deemed to be
references to the Affected Party and to the Non-affected Party,
respectively.
(2) TWO AFFECTED PARTIES. Subject to clause (3) below, if there are
two Affected Parties, each party will determine an amount equal to the
Termination Currency Equivalent of the sum of the Close-out Amount or
Close-out Amounts (whether positive or negative) for each Terminated
Transaction or group of Terminated Transactions, as the case may be,
and the Early Termination Amount
16
will be an amount equal to (A) the sum of (I) one-half of the
difference between the higher amount so determined (by party "X') and
the lower amount so determined (by party "Y") and (II) the Termination
Currency Equivalent of the Unpaid Amounts owing to X less (B) the
Termination Currency Equivalent of the Unpaid Amounts owing to Y. If
the Early Termination Amount is a positive number, Y will pay it to X;
if it is a negative number, X will pay the absolute value of the Early
Termination Amount to Y.
(3) MID-MARKET EVENTS. If that Termination Event is an Illegality or a
Force Majeure Event, then the Early Termination Amount will be
determined in accordance with clause (1) or (2) above, as appropriate,
except that, for the purpose of determining a Close-out Amount or
Close-out Amounts, the Determining Party will:-
(A) if obtaining quotations from one or more third parties (or
from any of the Determining Party's Affiliates), ask each third
party or Affiliate (I) not to take account of the current
creditworthiness of the Determining Party or any existing Credit
Support Document and (II) to provide mid-market quotations; and
(B) in any other case, use mid-market values without regard to
the creditworthiness of the Determining Party.
(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date occurs because Automatic Early Termination applies in
respect of a party, the Early Termination Amount will be subject to such
adjustments as are appropriate and permitted by applicable 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) ADJUSTMENT FOR ILLEGALITY OR FORCE MAJEURE EVENT. The failure by a
party or any Credit Support Provider of such party to pay, when due, any
Early Termination Amount will not constitute an Event of Default under
Section 5(a)(i) or 5(a)(iii)(l) if such failure is due to the occurrence of
an event or circumstance which would, if it occurred with respect to
payment, delivery or compliance related to a Transaction, constitute or
give rise to an Illegality or a Force Majeure Event. Such amount will (1)
accrue interest and otherwise be treated as an Unpaid Amount owing to the
other party if subsequently an Early Termination Date results from an Event
of Default, a Credit Event Upon Merger or an Additional Termination Event
in respect of which all outstanding Transactions are Affected Transactions
and (2) otherwise accrue interest in accordance with Section 9(h)(ii)(2).
(v) PRE-ESTIMATE. The parties agree that 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
17
provided in this Agreement, neither party will be entitled to recover any
additional damages as a consequence of the termination of the Terminated
Transactions.
(f) SET-OFF. Any Early Termination Amount payable to one party (the "Payee") by
the other party (the "Payer"), in circumstances where there is a Defaulting
Party or where there is one Affected Party in the case where either a Credit
Event Upon Merger has occurred or any other Termination Event in respect of
which all outstanding Transactions are Affected Transactions has occurred, will,
at the option of the Non-defaulting Party or the Non- affected Party, as the
case may be ("X') (and without prior notice to the Defaulting Party or the
Affected Party, as the case may be), be reduced by its set-off against any other
amounts ("Other Amounts") payable by the Payee to the Payer (whether or not
arising under this Agreement, matured or contingent and irrespective of the
currency, place of payment or place of booking of the obligation). To the extent
that any Other Amounts are so set off, those Other Amounts will be discharged
promptly and in all respects. 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 Amounts (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, in good faith and using commercially reasonable procedures, 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) will be effective to create a charge or other
security interest. This Section 6(f) will be without prejudice and in addition
to any right of set-off, offset, combination of accounts, lien, right of
retention or withholding or similar right or requirement to which any party is
at any time otherwise entitled or subject (whether by operation of law, contract
or otherwise).
7. TRANSFER
Subject to Section 6(b)(ii) and to the extent permitted by applicable law,
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
Early Termination Amount payable to it by a Defaulting Party, together with any
amounts payable on or with respect to that interest and any other rights
associated with that interest pursuant to Sections 8, 9(h) and 11.
Any purported transfer that is not in compliance with this Section 7 will be
void.
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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 good faith and using
commercially reasonable procedures in converting the currency so tendered into
the Contractual Currency, of the full amount in the Contractual Currency of all
amounts payable in respect of this Agreement. If for any reason the amount in
the Contractual Currency so received falls short of the amount in the
Contractual Currency payable in respect of this Agreement, the party required to
make the payment will, to the extent permitted by applicable law, immediately
pay such additional amount in the Contractual Currency as may be necessary to
compensate for the shortfall. If for any reason the amount in the Contractual
Currency so received exceeds the amount in the Contractual Currency payable in
respect of this Agreement, the party receiving the payment will refund promptly
the amount of such excess.
(b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in clause (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purpose of such
judgment or order and the rate of exchange at which such party is able, acting
in good faith and using commercially reasonable procedures 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.
(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, the
indemnities in this Section 8 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. Each of the
parties acknowledges that in entering into this Agreement it has not relied on
any oral or written representation, warranty or other assurance (except as
provided for or referred to in this Agreement) and waives all rights and
remedies which might otherwise be available to it in respect thereof, except
that nothing in this Agreement will limit or exclude any liability of a party
for fraud.
(b) AMENDMENTS. An amendment, modification or waiver in respect of this
Agreement will only be effective if 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 by an exchange of 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 and by electronic messaging system), 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 will 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, by an exchange of
electronic messages on an electronic messaging system or by an exchange of
e-mails, 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,
electronic message or e-mail 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.
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(h) INTEREST AND COMPENSATION.
(i) PRIOR TO EARLY TERMINATION. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant
Transaction:-
(1) INTEREST ON DEFAULTED PAYMENTS. If a party defaults in the
performance of any payment obligation, it will, to the extent
permitted by applicable law and subject to Section 6(c), pay interest
(before as well as after judgment) on the overdue amount to the other
party on demand in the same currency as the overdue amount, for the
period from (and including) the original due date for payment to (but
excluding) the date of actual payment (and excluding any period in
respect of which interest or compensation in respect of the overdue
amount is due pursuant to clause (3)(B) or (C) below), at the Default
Rate.
(2) COMPENSATION FOR DEFAULTED DELIVERIES. If a party defaults in the
performance of any obligation required to be settled by delivery, it
will on demand (A) compensate the other party to the extent provided
for in the relevant Confirmation or elsewhere in this Agreement and
(B) unless otherwise provided in the relevant Confirmation or
elsewhere in this Agreement, to the extent permitted by applicable law
and subject to Section 6(c), pay to the other party interest (before
as well as after judgment) on an amount equal to the fair market value
of that which was required to be delivered in the same currency as
that amount, for the period from (and including) the originally
scheduled date for delivery to (but excluding) the date of actual
delivery (and excluding any period in respect of which interest or
compensation in respect of that amount is due pursuant to clause (4)
below), at the Default Rate. The fair market value of any obligation
referred to above will be determined as of the originally scheduled
date for delivery, in good faith and using commercially reasonable
procedures, by the party that was entitled to take delivery.
(3) INTEREST ON DEFERRED PAYMENTS. If:-
(A) a party does not pay any amount that, but for Section
2(a)(iii), would have been payable, it will, to the extent
permitted by applicable law and subject to Section 6(c) and
clauses (B) and (C) below, pay interest (before as well as after
judgment) on that amount to the other party on demand (after such
amount becomes payable) in the same currency as that amount, for
the period from (and including) the date the amount would, but
for Section 2(a)(iii), have been payable to (but excluding) the
date the amount actually becomes payable, at the Applicable
Deferral Rate;
(B) a payment is deferred pursuant to Section 5(d), the party
which would otherwise have been required to make that payment
will, to the extent permitted by applicable law, subject to
Section 6(c) and for so long as no Event of Default or Potential
Event of Default with respect to that party has occurred and is
continuing, pay interest (before as well as after judgment) on
the amount of the deferred payment to the other party on
21
demand (after such amount becomes payable) in the same currency
as the deferred payment, for the period from (and including) the
date the amount would, but for Section 5(d), have been payable to
(but excluding) the earlier of the date the payment is no longer
deferred pursuant to Section 5(d) and the date during the
deferral period upon which an Event of Default or Potential Event
of Default with respect to that party occurs, at the Applicable
Deferral Rate; or
(C) a party fails to make any payment due to the occurrence of an
Illegality or a Force Majeure Event (after giving effect to any
deferral period contemplated by clause (B) above), it will, to
the extent permitted by applicable law, subject to Section 6(c)
and for so long as the event or circumstance giving rise to that
Illegality or Force Majeure Event continues and no Event of
Default or Potential Event of Default with respect to that party
has occurred and is continuing, pay interest (before as well as
after judgment) on the overdue amount to the other party on
demand in the same currency as the overdue amount, for the period
from (and including) the date the party fails to make the payment
due to the occurrence of the relevant Illegality or Force Majeure
Event (or, if later, the date the payment is no longer deferred
pursuant to Section 5(d)) to (but excluding) the earlier of the
date the event or circumstance giving rise to that Illegality or
Force Majeure Event ceases to exist and the date during the
period upon which an Event of Default or Potential Event of
Default with respect to that party occurs (and excluding any
period in respect of which interest or compensation in respect of
the overdue amount is due pursuant to clause (B) above), at the
Applicable Deferral Rate.
(4) COMPENSATION FOR DEFERRED DELIVERIES. If:-
(A) a party does not perform any obligation that, but for Section
2(a)(iii), would have been required to be settled by delivery;
(B) a delivery is deferred pursuant to Section 5(d); or
(C) a party fails to make a delivery due to the occurrence of an
Illegality or a Force Majeure Event at a time when any applicable
Waiting Period has expired,
the party required (or that would otherwise have been required) to
make the delivery will, to the extent permitted by applicable law and
subject to Section 6(c), compensate and pay interest to the other
party on demand (after, in the case of clauses (A) and (B) above, such
delivery is required) if and to the extent provided for in the
relevant Confirmation or elsewhere in this Agreement.
(ii) EARLY TERMINATION. Upon the occurrence or effective designation of an Early
Termination Date in respect of a Transaction:-
22
(1) UNPAID AMOUNTS. For the purpose of determining an Unpaid Amount in
respect of the relevant Transaction, and to the extent permitted by
applicable law, interest will accrue on the amount of any payment
obligation or the amount equal to the fair market value of any
obligation required to be settled by delivery included in such
determination in the same currency as that amount, for the period from
(and including) the date the relevant obligation was (or would have
been but for Section 2(a)(iii) or 5(d)) required to have been
performed to (but excluding) the relevant Early Termination Date, at
the Applicable Close-out Rate.
(2) INTEREST ON EARLY TERMINATION AMOUNTS. If an Early Termination
Amount is due in respect of such Early Termination Date, that amount
will, to the extent permitted by applicable law, be paid together with
interest (before as well as after judgment) on that amount in the
Termination Currency, for the period from (and including) such Early
Termination Date to (but excluding) the date the amount is paid, at
the Applicable Close-out Rate.
(iii) INTEREST CALCULATION. Any interest pursuant to this Section 9(h) will
be calculated on the basis of daily compounding and the actual number of
days elapsed.
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 and agrees with the other party that, notwithstanding the place of
booking or its jurisdiction of incorporation or organisation, its obligations
are the same in terms of recourse against it as if it had entered into the
Transaction through its head or home office, except that a party will not have
recourse to the head or home office of the other party in respect of any payment
or delivery deferred pursuant to Section 5(d) for so long as the payment or
delivery is so deferred. This representation and agreement will be deemed to be
repeated by each party on each date on which the parties enter into a
Transaction.
(b) If a party is specified as a Multibranch Party in the Schedule, such party
may, subject to clause (c) below, enter into a Transaction through, book a
Transaction in and make and receive payments and deliveries with respect to a
Transaction through any Office listed in respect of that party in the Schedule
(but not any other Office unless otherwise agreed by the parties in writing).
(c) The Office through which a party enters into a Transaction will be the
Office specified for that party in the relevant Confirmation or as otherwise
agreed by the parties in writing, and, if an Office for that party is not
specified in the Confirmation or otherwise agreed by the parties in writing, its
head or home office. Unless the parties otherwise agree in writing, the Office
through which a party enters into a Transaction will also be the Office in which
it books the Transaction and the Office through which it makes and receives
payments and deliveries with respect to the Transaction. Subject to Section
6(b)(ii), neither party may change the Office in which it books the Transaction
or the Office through which it makes and receives payments or deliveries with
respect to a Transaction without the prior written consent of the other party.
23
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,
execution fees and Stamp Tax, incurred by such other party by reason of the
enforcement and protection of its rights under this Agreement or any Credit
Support Document to which the Defaulting Party is a party or by reason of the
early termination of any Transaction, including, but not limited to, costs of
collection.
12. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner described below (except that a notice or
other communication under Section 5 or 6 may not be given by electronic
messaging system or e-mail) to the address or number or in accordance with the
electronic messaging system or e-mail 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 it 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 it is delivered or its
delivery is attempted;
(v) if sent by electronic messaging system, on the date it is received;
or
(vi) if sent by e-mail, on the date it is delivered,
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 will be deemed given and
effective on the first following day that is a Local Business Day.
(b) CHANGE OF DETAILS. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system or e-mail
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
any dispute arising out of or in connection with this Agreement ("Proceedings"),
each party irrevocably:-
24
(i) submits:-
(1) if this Agreement is expressed to be governed by English law, to
(A) the non-exclusive jurisdiction of the English courts if the
Proceedings do not involve a Convention Court and (B) the exclusive
jurisdiction of the English courts if the Proceedings do involve a
Convention Court; or
(2) if this Agreement is expressed to be governed by the laws of the
State of New York, 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;
(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; and
(iii) agrees, to the extent permitted by applicable law, that the bringing
of Proceedings in any one or more jurisdictions will not preclude the
bringing of Proceedings in any other jurisdiction.
(c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent, if
any, specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any reason any party's
Process Agent is unable to act as such, such party will promptly notify the
other party and within 30 days appoint a substitute process agent acceptable to
the other party. The parties irrevocably consent to service of process given in
the manner provided for notices in Section 12(a)(i), 12(a)(iii) or 12(a)(iv).
Nothing in this Agreement will affect the right of either party to serve process
in any other manner permitted by applicable law.
(d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the 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 or order for specific performance or
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 REPRESENTATION" has the meaning specified in Section 3.
"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).
"AFFECTED PARTY" has the meaning specified in Section 5(b).
25
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, Force Majeure Event, Tax Event or Tax Event Upon
Merger, all Transactions affected by the occurrence of such Termination Event
(which, in the case of an Illegality under Section 5(b)(i)(2) or a Force Majeure
Event under Section 5(b)(ii)(2), means all Transactions unless the relevant
Credit Support Document references only certain Transactions, in which case
those Transactions and, if the relevant Credit Support Document constitutes a
Confirmation for a Transaction, that Transaction) 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.
"AGREEMENT" has the meaning specified in Section l(c).
"APPLICABLE CLOSE-OUT RATE" means:-
(a) in respect of the determination of an Unpaid Amount:-
(i) 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;
(ii) in respect of obligations payable or deliverable (or which would have
been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate;
(iii) in respect of obligations deferred pursuant to Section 5(d), if there
is no Defaulting Party and for so long as the deferral period continues,
the Applicable Deferral Rate; and
(iv) in all other cases following the occurrence of a Termination Event
(except where interest accrues pursuant to clause (iii) above), the
Applicable Deferral Rate; and
(b) in respect of an Early Termination Amount:-
(i) for the period from (and including) the relevant Early Termination
Date to (but excluding) the date (determined in accordance with Section
6(d)(ii)) on which that amount is payable:-
(1) if the Early Termination Amount is payable by a Defaulting Party,
the Default Rate;
(2) if the Early Termination Amount is payable by a Non-defaulting
Party, the Non-default Rate; and
(3) in all other cases, the Applicable Deferral Rate; and
26
(ii) for the period from (and including) the date (determined in accordance
with Section 6(d)(ii)) on which that amount is payable to (but excluding)
the date of actual payment:-
(1) if a party fails to pay the Early Termination Amount due to the
occurrence of an event or circumstance which would, if it occurred
with respect to a payment or delivery under a Transaction, constitute
or give rise to an Illegality or a Force Majeure Event, and for so
long as the Early Termination Amount remains unpaid due to the
continuing existence of such event or circumstance, the Applicable
Deferral Rate;
(2) if the Early Termination Amount is payable by a Defaulting Party
(but excluding any period in respect of which clause (1) above
applies), the Default Rate;
(3) if the Early Termination Amount is payable by a Non-defaulting
Party (but excluding any period in respect of which clause (1) above
applies), the Non-default Rate; and
(4) in all other cases, the Termination Rate.
"APPLICABLE DEFERRAL RATE" means:-
(a) for the purpose of Section 9(h)(i)(3)(A), the rate certified by the
relevant payer to be a rate offered to the payer by a major bank in a relevant
interbank market for overnight deposits in the applicable currency, such bank
to be selected in good faith by the payer for the purpose of obtaining
a representative rate that will reasonably reflect conditions prevailing at the
time in that relevant market;
(b) for purposes of Section 9(h)(i)(3)(B) and clause (a)(iii) of the definition
of Applicable Close-out Rate, the rate certified by the relevant payer to be a
rate offered to prime banks by a major bank in a relevant interbank market for
overnight deposits in the applicable currency, such bank to be selected in good
faith by the payer after consultation with the other party, if practicable, for
the purpose of obtaining a representative rate that will reasonably reflect
conditions prevailing at the time in that relevant market; and
(c) for purposes of Section 9(h)(i)(3)(C) and clauses (a)(iv), (b)(i)(3) and
(b)(ii)(1) of the definition of Applicable Close-out Rate, a rate equal to the
arithmetic mean of the rate determined pursuant to clause (a) above and 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.
"AUTOMATIC EARLY TERMINATION" has the meaning specified in Section 6(a).
"BURDENED PARTY" has the meaning specified in Section S(b)(iv).
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"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 after the parties enter into the relevant
Transaction.
"CLOSE-OUT AMOUNT" means, with respect to each Terminated Transaction or each
group of Terminated Transactions and a Determining Party, the amount of the
losses or costs of the Determining Party that are or would be incurred under
then prevailing circumstances (expressed as a positive number) or gains of the
Determining Party that are or would be realised under then prevailing
circumstances (expressed as a negative number) in replacing, or in providing for
the Determining Party the economic equivalent of, (a) the material terms of that
Terminated Transaction or group of Terminated Transactions, including the
payments and deliveries by the parties under Section 2(a)(i) in respect of that
Terminated Transaction or group of Terminated Transactions that would, but for
the occurrence of the relevant Early Termination Date, have been required after
that date (assuming satisfaction of the conditions precedent in Section
2(a)(iii)) and (b) the option rights of the parties in respect of that
Terminated Transaction or group of Terminated Transactions.
Any Close-out Amount will be determined by the Determining Party (or its agent),
which will act in good faith and use commercially reasonable procedures in order
to produce a commercially reasonable result. The Determining Party may determine
a Close-out Amount for any group of Terminated Transactions or any individual
Terminated Transaction but, in the aggregate, for not less than all Terminated
Transactions. Each Close-out Amount will be determined as of the Early
Termination Date or, if that would not be commercially reasonable, as of the
date or dates following the Early Termination Date as would be commercially
reasonable.
Unpaid Amounts in respect of a Terminated Transaction or group of Terminated
Transactions and legal fees and out-of-pocket expenses referred to in Section 11
are to be excluded in all determinations of Close-out Amounts.
In determining a Close-out Amount, the Determining Party may consider any
relevant information, including, without limitation, one or more of the
following types of information:-
(i) quotations (either firm or indicative) for replacement transactions
supplied by one or more third parties that may take into account the
creditworthiness of the Determining Party at the time the quotation is provided
and the terms of any relevant documentation, including credit support
documentation, between the Determining Party and the third party providing the
quotation;
(ii) information consisting of relevant market data in the relevant market
supplied by one or more third parties including, without limitation, relevant
rates, prices, yields, yield curves, volatilities, spreads, correlations or
other relevant market data in the relevant market; or
(iii) information of the types described in clause (i) or (ii) above from
internal sources (including any of the Determining Party's Affiliates) if that
information is of the same type used by the Determining Party in the regular
course of its business for the valuation of similar transactions.
28
The Determining Party will consider, taking into account the standards and
procedures described in this definition, quotations pursuant to clause (i) above
or relevant market data pursuant to clause (ii) above unless the Determining
Party reasonably believes in good faith that such quotations or relevant market
data are not readily available or would produce a result that would not satisfy
those standards. When considering information described in clause (i), (ii) or
(iii) above, the Determining Party may include costs of funding, to the extent
costs of funding are not and would not be a component of the other information
being utilised. Third parties supplying quotations pursuant to clause (i) above
or market data pursuant to clause (ii) above may include, without limitation,
dealers in the relevant markets, end-users of the relevant product, information
vendors, brokers and other sources of market information.
Without duplication of amounts calculated based on information described in
clause (i), (ii) or (iii) above, or other relevant information, and when it is
commercially reasonable to do so, the Determining Party may in addition consider
in calculating a Close-out Amount any loss or cost incurred in connection with
its terminating, liquidating or re-establishing any hedge related to a
Terminated Transaction or group of Terminated Transactions (or any gain
resulting from any of them).
Commercially reasonable procedures used in determining a Close-out Amount may
include the following:-
(1) application to relevant market data from third parties pursuant to clause
(ii) above or information from internal sources pursuant to clause (iii) above
of pricing or other valuation models that are, at the time of the determination
of the Close-out Amount, used by the Determining Party in the regular course of
its business in pricing or valuing transactions between the Determining Party
and unrelated third parties that are similar to the Terminated Transaction or
group of Terminated Transactions; and
(2) application of different valuation methods to Terminated Transactions or
groups of Terminated Transactions depending on the type, complexity, size or
number of the Terminated Transactions or group of Terminated Transactions.
"CONFIRMATION" has the meaning specified in the preamble.
"CONSENT" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"CONTRACTUAL CURRENCY" has the meaning specified in Section 8(a).
"CONVENTION COURT" means any court which is bound to apply to the Proceedings
either Article 17 of the 0000 Xxxxxxxx Convention on Jurisdiction and the
Enforcement of Judgments in Civil and Commercial Matters or Article 17 of the
1988 Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil
and Commercial Matters.
"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.
29
"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.
"CROSS-DEFAULT" means the event specified in Section 5(a)(vi).
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"DESIGNATED EVENT" has the meaning specified in Section 5(b)(v).
"DETERMINING PARTY" means the party determining a Close-out Amount.
"EARLY TERMINATION AMOUNT" has the meaning specified in Section 6(e).
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"ELECTRONIC MESSAGES" does not include e-mails but does include documents
expressed in markup languages, and "ELECTRONIC MESSAGING SYSTEM" will be
construed accordingly.
"ENGLISH LAW" means the law of England and Wales, and "English" will be
construed accordingly.
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"FORCE MAJEURE EVENT" has the meaning specified in Section 5(b).
"GENERAL BUSINESS DAY" means a day on which commercial banks are open for
general business (including dealings in foreign exchange and foreign currency
deposits).
"ILLEGALITY" has the meaning specified in Section 5(b).
"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority),
and "UNLAWFUL" will be construed accordingly.
30
"LOCAL BUSINESS DAY" means (a) in relation to any obligation under Section
2(a)(i), a General Business Day in the place or places specified in the relevant
Confirmation and a day on which a relevant settlement system is open or
operating as specified in the relevant Confirmation or, if a place or a
settlement system is 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) for the purpose of determining when a Waiting
Period expires, a General Business Day in the place where the event or
circumstance that constitutes or gives rise to the Illegality or Force Majeure
Event, as the case may be, occurs, (c) in relation to any other payment, a
General Business Day 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 and, if that currency does not have a single recognised principal
financial centre, a day on which the settlement system necessary to accomplish
such payment is open, (d) in relation to any notice or other communication,
including notice contemplated under Section 5(a)(i), a General Business Day (or
a day that would have been a General Business Day but for the occurrence of an
event or circumstance which would, if it occurred with respect to payment,
delivery or compliance related to a Transaction, constitute or give rise to an
Illegality or a Force Majeure Event) in the place 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
(e) in relation to Section S(a)(v)(2), a General Business Day in the relevant
locations for performance with respect to such Specified Transaction.
"LOCAL DELIVERY DAY" means, for purposes of Sections 5(a)(i) and 5(d), a day on
which settlement systems necessary to accomplish the relevant delivery are
generally open for business so that the delivery is capable of being
accomplished in accordance with customary market practice, in the place
specified in the relevant Confirmation or, if not so specified, in a location as
determined in accordance with customary market practice for the relevant
delivery.
"MASTER AGREEMENT" has the meaning specified in the preamble.
"MERGER WITHOUT ASSUMPTION" means the event specified in Section 5(a)(viii).
"MULTIPLE TRANSACTION PAYMENT NETTING" has the meaning specified in Section
2(c).
"NON-AFFECTED PARTY" means, so long as there is only one Affected Party, the
other party.
"NON-DEFAULT RATE" means the rate certified by the Non-defaulting Party to be a
rate offered to the Non-defaulting Party by a major bank in a relevant interbank
market for overnight deposits in the applicable currency, such bank to be
selected in good faith by the Non-defaulting Party for the purpose of obtaining
a representative rate that will reasonably reflect conditions prevailing at the
time in that relevant market.
"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.
"OTHER AMOUNTS" has the meaning specified in Section 6(f).
"PAYEE" has the meaning specified in Section 6(f).
31
"PAYER" has the meaning specified in Section 6(f).
"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.
"PROCEEDINGS" has the meaning specified in Section 13(b).
"PROCESS AGENT" has the meaning specified in the Schedule.
"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.
"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.
"SCHEDULE" has the meaning specified in the preamble.
"SCHEDULED SETTLEMENT DATE" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"SPECIFIED ENTITY" has the meaning specified in the Schedule.
"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction
(including an agreement with respect to any such transaction) 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 not
a Transaction under this Agreement but (i) which is a rate swap transaction,
swap option, 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, credit protection transaction, credit swap,
credit default swap, credit default option, total return swap, credit spread
transaction, repurchase transaction, reverse repurchase transaction,
buy/sell-back transaction, securities lending transaction, weather index
transaction or forward purchase or sale of a security, commodity or other
financial instrument or interest (including any option with respect to any of
these transactions) or (ii) which is a type of transaction that is similar to
any transaction referred to in clause (i) above that is currently, or in the
future becomes, recurrently entered into in the financial markets (including
terms and conditions incorporated by reference in such agreement) and which is a
forward, swap, future, option or other derivative on one or more rates,
currencies, commodities, equity securities or other equity instruments, debt
securities or other debt
32
instruments, economic indices or measures of economic risk or value, or other
benchmarks against which payments or deliveries are to be made, (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.
"STAMP TAX JURISDICTION" has the meaning specified in Section 4(e).
"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 an Illegality or a Force Majeure Event, all Affected
Transactions specified in the notice given pursuant to Section 6(b)(iv), (b) if
resulting from any other Termination Event, all Affected Transactions and (c) if
resulting from an Event of Default, all Transactions in effect either
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" means (a) if a Termination Currency is specified in the
Schedule and that currency is freely available, that currency, and (b)
otherwise, euro if this Agreement is expressed to be governed by English law or
United States Dollars if this Agreement is expressed to be governed by the laws
of the State of New York. .
"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 Close-out Amount 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 Force Majeure Event, a Tax Event, a
Tax Event Upon Merger or, if specified to be applicable, a Credit Event Upon
Merger or an Additional Termination Event.
33
"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.
"THRESHOLD AMOUNT" means the amount, if any, specified as such in the Schedule.
"TRANSACTION" has the meaning specified in the preamble.
"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) or due but for Section 5(d)) to such party under Section 2(a)(i) or
2(d)(i)(4) on or prior to such Early Termination Date and which remain unpaid as
at such Early Termination Date, (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) or 5(d)) required to be settled by delivery to such party on
or prior to such Early Termination Date and which has not been so settled as at
such Early Termination Date, an amount equal to the fair market value of that
which was (or would have been) required to be delivered and (c) if the Early
Termination Date results from an Event of Default, a Credit Event Upon Merger or
an Additional Termination Event in respect of which all outstanding Transactions
are Affected Transactions, any Early Termination Amount due prior to such Early
Termination Date and which remains unpaid as of such Early Termination Date, in
each case together with any amount of interest accrued or other compensation in
respect of that obligation or deferred obligation, as the case may be, pursuant
to Section 9(h)(ii)( 1) or (2), as appropriate. The fair market value of any
obligation referred to in clause (b) above will be determined as of the
originally scheduled date for delivery, in good faith and using commercially
reasonable procedures, by the party obliged to make the determination under
Section 6(e) or, if each party is so obliged, it will be the average of the
Termination Currency Equivalents of the fair market values so determined by both
parties.
"WAITING PERIOD" means:-
(a) in respect of an event or circumstance under Section 5(b)(i), other than in
the case of Section 5(b)(i)(2) where the relevant payment, delivery or
compliance is actually required on the relevant day (in which case no Waiting
Period will apply), a period of three Local Business Days (or days that would
have been Local Business Days but for the occurrence of that event or
circumstance) following the occurrence of that event or circumstance; and
(b) in respect of an event or circumstance under Section 5(b)(ii), other than
in the case of Section 5(b)(ii)(2) where the relevant payment, delivery or
compliance is actually required on the relevant day (in which case no Waiting
Period will apply), a period of eight Local Business Days (or days that would
have been Local Business Days but for the occurrence of that event or
circumstance) following the occurrence of that event or circumstance.
34
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:
35
SCHEDULE
TO THE
ISDA(R)
INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC.
2002 MASTER AGREEMENT
dated as of _____________
between PRUDENTIAL GLOBAL FUNDING, INC., a company organized under the laws of
the State of Delaware ("PARTY A") and AIG SERIES TRUST ON BEHALF OF [2010, 2015,
2020, 2025] HIGH WATERMARK FUND ("PARTY B" or the "FUND").
PART 1. TERMINATION PROVISIONS.
(a) "Specified Entity" means in relation to Party A for the
purpose of:-
Section 5(a)(v), Not Applicable
Section 5(a)(vi), Not Applicable
Section 5(a)(vii), Not Applicable
Section 5(b)(iv), Not Applicable
and in relation to Party B for the purpose of:--
Section 5(a)(v), Not Applicable
Section 5(a)(vi), Not Applicable
Section 5(a)(vii), Not Applicable
Section 5(b)(iv), Not Applicable
(b) "SPECIFIED TRANSACTION" will have the meaning specified in
Section 14 of this Agreement; PROVIDED that a new clause (iii)
to clause (a) shall be added before ", (b)" in the second to
last line of such definition as follows: "or (iii) any
financial agreement or accommodation similar to this Agreement
obligating one party to pay the other party at a specified
termination date an amount determined by reference to the
share price attained by such other party's shares".
(c) The "CROSS DEFAULT" provisions of Section 5(a)(vi) will apply
to Party A and to Party B; provided, however, that in relation
to Party A, the provisions of Section 5(a)(vi) shall only
apply in relation to a default, event of default or other
similar condition or event by or in respect of Party A's
Credit Support Provider; and provided further, however, that
in relation to Party B, if, under the provisions of Section
5(a)(vi), a default, event of default or similar condition
occurs, Party B shall have three Business Days to cure the
circumstances giving rise to such default, event of default or
similar condition before such default, event of default or
similar condition shall constitute a basis for a "Cross
Default".
To the extent such provisions apply:--
"SPECIFIED INDEBTEDNESS" will have the meaning specified in
Section 14 of this Agreement; provided that Specified
Indebtedness shall also include any obligations of Party B
arising in respect of margin requirements of the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange or any
successor or similar exchange.
"THRESHOLD AMOUNT" means, as applied to Party A's Credit
Support Provider, U.S. $350,000,000 or its equivalent in
another currency and, as applied to Party B, the lesser of (i)
5% of its net asset value (as determined in accordance with
the constitutive documents of Party B from time to time) and
(ii) U.S. $1,500,000.
(d) The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(v)
will not apply to either Party A or Party B.
(e) THE "AUTOMATIC EARLY TERMINATION" provision of Section 6(a)
will not apply to either Party A or to Party B.
(f) "TERMINATION CURRENCY" means United States Dollars.
(g) ADDITIONAL TERMINATION EVENT will apply. The following will
constitute an Additional Termination Event:
It shall constitute a Termination Event with respect to
Party A (which will be the sole Affected Party) if at any
time (A) either (i) the rating issued by Standard & Poor's
Corporation or its successors ("S&P") and Xxxxx'x Investors
Service, Inc. or its successors ("MOODY'S"), as the case may
be, with respect to the long-term unsecured, unsubordinated
debt securities ("DEBT SECURITIES") of Prudential Financial,
Inc. ("PFI") is issued below or revised downward below "BBB"
(or its equivalent successor rating) by S&P AND is issued
below or revised downward below Baa2 (or its equivalent
successor rating) by Moody's or (ii) either such rating
falls below BBB- (or its equivalent successor rating) by S&P
or Baa3 (or its equivalent successor rating) by Moody's; or
(B) there are no outstanding Debt Securities of PFI that are
rated by at least one of such credit rating agencies or
substitute agency selected pursuant to the provisions of
this paragraph. If any of the foregoing credit rating
agencies ceases to be in the business of rating Debt
Securities and such business is not continued by a successor
or assign of such agency (the "DISCONTINUED AGENCY"), Party
A and Party B shall jointly (A) select a
nationally-recognized credit rating agency in substitution
thereof and (B) agree on the rating level issued by such
substitute agency that is equivalent to the rating specified
herein of the Discontinued Agency, whereupon such substitute
agency and
20
equivalent rating shall replace the Discontinued Agency and
the rating level thereof.
(h) DELETED TERMINATION EVENTS AND EVENTS OF DEFAULT. None of
"Illegality", "Force Majeure Event", "Tax Event" and "Tax
Event Upon Merger" shall be a Termination Event. In addition,
the occurrence of an event described in Section 5(a)(v) shall
not constitute an Event of Default.
(i) CAP ON EARLY TERMINATION AMOUNT PAYABLE BY PARTY A.
Notwithstanding anything to the contrary in Sections 6(d) and
6(e) of the Master Agreement and except as provided in Section
5 of the Confirmation, in the event that an Early Termination
Amount is at any time due from Party A to Party B, such Early
Termination Amount shall not exceed the Early Termination Cap,
determined as follows:
Early Termination Cap = max ((HW * (1 + R)-n + FUNDEX * HW *
ANNUITYFACTOR - NAV), (0.0010 * HW *
ANNUITYFACTOR))
Where
1) "HW" is the aggregate for all
Share Classes of the following
amount calculated for each
Share Class: the product
obtained by multiplying (A)
the then current Protected
Share Price for such Share
Class times (B) the Share
Number for such Share Class on
the Early Termination Date,
2) "R" is the market-value-
weighted arithmetic average
yield of the Treasury Zeroes
and the Agency Zeroes on an
effective annual basis,
3) "n" is the number of years
(including any fraction of a
year) remaining until the
scheduled Protection
Termination Date,
4) "FUNDEX" is the Fund's
Defeased Expense Ratio on the
Early Termination Date,
5) "ANNUITYFACTOR" is the present
value of $1 per year paid
monthly for n years at
interest rate r, and
6) "NAV" equals Fund NAV
(excluding any value
attributable to the Agreement)
as of the Early Termination
Date.
21
PART 2. TAX REPRESENTATIONS.
[Intentionally Omitted]
PART 3. AGREEMENT TO DELIVER DOCUMENTS.
For the purpose of Section 4(a), each party agrees to deliver the
following documents, as applicable:--
(a) Tax forms, documents or certificates to be delivered are:--
Upon execution of this Agreement and the Confirmation, Party A and Party B shall
each deliver to the other an executed IRS Form W-9 Request for Taxpayer
Identification Number and Certification.
(b) Other documents to be delivered are:-
22
PARTY REQUIRED TO DATE BY WHICH COVERED BY 3(d)
DELIVER DOCUMENT DOCUMENT TO BE DELIVERED REPRESENTATION
---------------- -------- --------------- --------------
(a) Party A (i) Officer's Certificate Upon execution of this Yes
certifying the adoption Agreement and the first
of resolutions by the Confirmation of a Transaction
Board of Directors of and, if requested by Party B,
Party A authorizing Party as soon as practicable after
A to enter into put execution of any subsequent
agreements obligating Confirmation of any Transaction
Party A to pay at
termination an amount
determined by reference
to the share price
attained by the
counterparty's shares.
(ii) Incumbency Certificate Upon execution of this Yes
signed by an authorized Agreement and the first
officer certifying the Confirmation of a Transaction
names, true signatures and, if requested by Party B,
and authority of those as soon as practicable after
officers signing this execution of any subsequent
Agreement and any Confirmation of any Transaction
Confirmation and any
other documents delivered
or to be delivered in
connection with such
Agreement
(iii) Officer's Certificate Upon execution and delivery of Yes
certifying (i) that the this Agreement and the
Chief Executive Officer Confirmation of the first
of PFI, or his authorized Transaction between the
designee, has approved parties and, if requested by
the execution and Party B, as soon as
delivery of the Guaranty practicable after execution of
of PFI and (ii) no any subsequent Confirmation of
further corporate action any Transaction
is necessary in
connection with entering
into, executing or
delivering the Guaranty
of PFI.
(iv) Incumbency Certificate Upon execution and delivery of Yes
signed by an authorized this Agreement and the
officer certifying the Confirmation of the first
name, true signature and Transaction between the
authority of the officer parties and, if requested by
signing the Guaranty of Party B, as soon as
PFI practicable after execution of
any subsequent Confirmation of
any Transaction
23
(v) Guaranty duly executed by Upon execution of this Yes
PFI in the form of Agreement
Exhibit II attached
hereto
(vi) Most current audited Upon request by Party B Yes
financial statements and
quarterly unaudited
financial statements of
Party A
24
(b) Party B (i) Officer's Certificate Upon execution of this Yes
certifying the adoption Agreement and the first
of resolutions by the Confirmation of a Transaction
Board of Directors of and, if requested by Party A,
Party B authorizing Party as soon as practicable after
B to enter into, execute execution of any subsequent
and deliver interest Confirmation of any Transaction
rate, currency exchange
and other types of swap
agreements.
(ii) Incumbency Certificate Upon execution of this Yes
signed by an authorized Agreement and the first
officer certifying the Confirmation of a Transaction,
names, true signatures and, if requested by Party A,
and authority of those as soon as practicable after
officers signing this execution of any subsequent
Agreement and any Confirmation of any Transaction
Confirmation and any
other documents delivered
or to be delivered in
connection with this
Agreement
(iii) An Opinion of Counsel of Upon execution of this Yes
Party B substantially in Agreement
the form of Exhibit III
attached hereto
(iv) Letter of Indemnity. Upon execution of this Yes
Agreement.
(v) Copy of the Custodian
Agreement.
(vi) Copy of Investment Advisory
and Management Agreement and
SubAdvisory Agreement
25
PART 4. MISCELLANEOUS.
(a) ADDRESSES FOR NOTICES AND MODIFICATIONS TO NOTICE PROVISIONS.
Addresses for notices to the parties are as provided in
Exhibit IV attached hereto. Unless otherwise set forth in this
paragraph, notice shall take effect in accordance with the
provisions of Section 12(a) and this paragraph if such notice
is directed to the primary contacts for notices to such party
(as identified in Exhibit IV or pursuant to updated notice
details provided in accordance with the Agreement).
Notwithstanding any provision to the contrary in Section
12(a), (i) a notice or other communication under Section 5 or
6 may be given by e-mail, (ii) a notice or other communication
sent by e-mail will be effective upon the earlier to occur of
(A) delivery of such e-mail as contemplated by Section
12(a)(vi) and (B) transmission of such e-mail by the party
giving notice, provided that the fact of transmission of such
e-mail (and a summary of the contents thereof) have been
provided (prior to the close of business on the date of such
transmission) by means of either (I) a telephone conversation
with either the primary contact OR the secondary contact for
notices to such -- party (as identified in Exhibit IV or
pursuant to updated notice details provided in accordance with
the Agreement) or (II) a message left for each of the primary
contact AND the secondary contact on a voicemail system (or
similar --- messaging system or service) that explicitly
identifies such primary contact or secondary contact, as
applicable, as the person for whom such message is being
recorded, and (iii) a notice or other communication sent by
facsimile transmission will be effective upon the earlier to
occur of (A) receipt of such facsimile transmission as
contemplated by Section 12(a)(iii) and (B) transmission of
such facsimile by the party giving notice, provided that the
fact of transmission of such facsimile (and a summary of the
contents thereof) have been provided (prior to the close of
business on the date of such transmission) by means of either
(I) a telephone conversation with either the primary contact
OR the secondary contact for notices to such party (as
identified in Exhibit IV or pursuant to -- updated notice
details provided in accordance with the Agreement) or (II) a
message left for each of the primary contact AND the secondary
contact on a voicemail system (or similar messaging system or
service) that explicitly --- identifies such primary contact
or secondary contact, as applicable, as the person for whom
such message is being recorded.
(b) PROCESS AGENT. For the purpose of Section 13(c):--
Party A appoints as its Process Agent: Not Applicable
Party B appoints as its Process Agent: Not Applicable
(c) OFFICES; MULTIBRANCH PARTY.
(i) The provisions of Section 10(a) will be applicable.
(ii) For the purpose of Section 10(c):-- Party A is not a
Multibranch Party.
Party B is not a Multibranch Party.
(d) CALCULATION AGENT. None.
26
(e) CREDIT SUPPORT DOCUMENT. Details of any Credit Support
Document, each of which are incorporated by reference in, and
made part of, this Agreement (unless provided otherwise in a
Confirmation) as if set forth in full in this Agreement.--
(i) Guaranty dated the date hereof by PFI in favor of Party
B as beneficiary thereof.
(f) CREDIT SUPPORT PROVIDER.
(i) Credit Support Provider means in relation to Party A,
PFI.
(ii) Credit Support Provider means in relation to Party B:
None
(g) GOVERNING LAW. This Agreement and each Confirmation will be
governed by, and construed and enforced in accordance with,
the law of the State of New York (without reference to its
choice of law doctrine).
(h) Multiple Transaction Netting. Will Not Apply. Commencing Date:
Not Applicable
(i) NO AGENCY. The provisions of Section 3(g) will apply to Party
A and Party B.
PART 5. OTHER PROVISIONS.
(a) REPRESENTATIONS REGARDING POWER. Section 3(a)(ii) is hereby
amended by: (i) deleting in the fourth line thereof after the
word "party" the word "and" and replacing it with ", it"; and
(ii) adding in the fifth line thereof after the word
"performance" and before the semicolon the words ", the
individual(s) executing and delivering this Agreement and any
other documentation (including any Credit Support Document)
relating to this Agreement to which it is a party or that it
is required to deliver are duly empowered and authorized to do
so, and it has duly executed and delivered this Agreement and
any Credit Support Document to which it is a party".
(b) ACCURACY OF SPECIFIED INFORMATION. Section 3(d) is hereby
amended by adding in the third line thereof after the word
"respect" and before the period the words "or, in the case of
audited or unaudited financial statements, a fair presentation
of the financial condition of the relevant party".
(c) EVENTS OF DEFAULT.
(i) Failure to Pay or Deliver, as specified in Section
5(a)(i) of this Agreement, shall not be an Event of
Default in respect of Party A unless the Credit Support
Provider has also failed to pay or deliver to Party B
any amounts owed under the Credit Support Document
referred to in Part 4(e)(i) of this Schedule and such
failure has not been remedied on or before the third
Business Day after notice of such Failure to Pay or
Deliver is given to Credit Support Provider by Party B.
(ii) Section 5(a)(ii)(1) (BREACH OF AGREEMENT; REPUDIATION OF
AGREEMENT) is amended to read as follows:
"(1) Failure by the party to comply with or perform
any agreement or obligation (other than an obligation
to make any payment under this
27
Agreement or delivery under Section 2(a)(i) or
9(h)(i)(2) or (4) 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 within 5
Business Days after notice of such failure is given
to the party; provided that if such failure relates
to a covenant of Party B set forth in Sections 9 or
10 or in Appendix A of the Confirmation (as defined
in the Schedule), then such failure must be remedied
within 1 Business Day after the breach of such
covenant (whether or not notice of such breach has
been received from Party A)."
(iii) Section 5(a)(vi)(2) (CROSS-DEFAULT) is amended by
deleting the phrase ", either alone or together with the
amount, if any, referred to in clause (1) above,"
(d) PAYMENTS ON EARLY TERMINATION DUE TO AN EVENT OF DEFAULT.
a. The first line of Section 6(e)(i) shall be amended to
read as follows: "(i) EVENTS OF DEFAULT. If the Early
Termination Date results from an Event of Default with
respect to which Party A is the Defaulting Party, the
Early ... "
b. The first clause of the last sentence of Section 6(e)(i)
shall be amended to read as follows: "If the Early
Termination Amount calculated in connection with the
preceding sentence is a positive number,"
c. At the end of Section 6(e)(i) the following text shall
be added: "If the Early Termination Date results from an
Event of Default with respect to which Party B is the
Defaulting Party, then notwithstanding any other
provision of this Agreement, Schedule or any
Confirmation, the obligation of Party A to make any
payments whatsoever shall immediately terminate."
(e) TRANSFER. Section 7 is hereby amended to read as follows:-
Subject to Section 6(b)(ii) and to the extent permitted by
applicable law, 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) Subject to Section 5(a)(viii), Party A 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, or reorganization,
incorporation, reincorporation or reconstitution into or as
another entity (but without prejudice to any other right or
remedy under this Agreement); provided that, after giving
effect to such consolidation, amalgamation, merger, transfer,
reorganization, incorporation, reincorporation or
reconstitution, the surviving entity shall be an Affiliate of
PFI or its successor;
(b) a party may make such a transfer of all or any part of its
interest in any Early Termination Amount payable to it by a
Defaulting Party, together with any amounts payable on or with
respect to that interest and any other rights associated with
that interest pursuant to Sections 8, 9(h) and 11; and
(c) in addition to, and not in lieu of, the preceding transfer
rights, Party A may transfer this Agreement, any of its
interests or obligations in or under this Agreement, or one or
more Transactions to any of Party A's Affiliates, upon at
least 60 days' prior written notice to Party B, provided that:
(i) if such transfer is to an entity other than The
28
Prudential Insurance Company of America or Credit Support
Provider, prior to or contemporaneously with such transfer,
Party B is furnished with a Guaranty of Credit Support
Provider of such transferee's obligations in substantially the
form of the Guaranty of Credit Support Provider specified in
this Agreement; (ii) Party B will not, as a result of such
transfer, be required to pay to the transferee under Section
2(d)(i)(4) (except in respect of interest under Section 9(h) )
greater than the amount in respect of which Party B would have
been required to pay to Party A in the absence of such
transfer; (iii) the transferee will not, as a result of such
transfer, be required to withhold or deduct on account of a
Tax under Section 2(d)(i) (except in respect of interest under
Section 9(h)) on the next succeeding Scheduled Payment Date an
amount in excess of that which Party A would have been
required to so withhold or deduct on the next succeeding
Scheduled Payment Date in the absence of such transfer unless
the transferee would be required to make additional payments
pursuant to Section 2(d)(i)(4) corresponding to such excess;
and (iv) an Event of Default or a Termination Event does not
occur as a result of such transfer. With respect to the
results described in Clauses (ii) and (iii) above, Party A
will cause the transferee to make, and Party B will make, such
reasonable Payer Tax Representations and Payee Tax
Representations as may be mutually agreed upon by the
transferee and Party B in order to permit such parties to
determine that such results will not occur upon or after the
transfer.
Any purported transfer that is not in compliance with this
Section 7 will be void at the outset.
(f) ADDITIONAL REPRESENTATIONS. For the purpose of Section 3 of
this Agreement, the following will constitute an Additional
Representation (which shall be deemed given on the date on
which this Agreement is executed and on each date on which a
Confirmation is entered into under this Agreement):
(i) Party A and Party B each represents and warrants to the
other, which representation will be deemed to be
repeated at the time of entering into this Agreement and
each Transaction, that it is an "eligible contract
participant" under, and as defined in, the Commodity
Exchange Act, as amended and was not formed solely for
the purpose of constituting an "eligible contract
participant."
(ii) Party B represents and warrants to Party A that the
investments and other transactions contemplated by this
Agreement and any Confirmation hereunder are not in
violation of any law, regulation, rule or order to which
Party B is subject (including, without limitation, the
Investment Company Act of 1940, as amended, and the
Investment Advisers Act of 1940, as amended).
(g) ADDITIONAL AGREEMENTS. Section 4 of the Agreement is amended
by adding the additional covenants set forth below:
The Fund agrees to conduct its activities in a manner such
that neither Party A nor any Credit Support Provider of Party
A will be required to register under, or will otherwise be
subject to the requirements of, any applicable securities or
similar law, rule or regulation (including, without
limitation, the Commodity Exchange Act and the Investment
Advisers Act) by reason of entering into and performing its
obligations under this Agreement or, if applicable, the
Guaranty of PFI.
(h) RELATIONSHIP BETWEEN PARTIES. EACH OF PARTY A AND PARTY B
REPRESENTS AS FOLLOWS:
29
(i) NON-RELIANCE. It is acting for its own account, and it
has made its own independent decisions to enter into
that Transaction and as to whether that Transaction is
appropriate or proper for it based upon its own judgment
and upon advice from such advisers as it has deemed
necessary. It is not relying on any communication
(written or oral) of the other party as investment
advice or as a recommendation to enter into that
Transaction; it being understood that information and
explanations related to the terms and conditions of a
Transaction shall not be considered investment advice or
a recommendation to enter into that Transaction. In
connection with the execution of this Agreement, it is
not relying upon any representation except those set
forth in this Agreement and the related Confirmation or
as acknowledged in any other agreements delivered
substantially simultaneously herewith, provided for use
in the Prospectus and Registration Statement. It has
consulted with its own legal, regulatory, tax, business,
investment, financial and accounting advisors to the
extent that it has deemed necessary. It has not received
from the other party any assurance or guarantee as to
the expected results of that Transaction.
(ii) EVALUATION AND UNDERSTANDING. It is capable of
evaluating and understanding (on its own behalf or
through independent professional advice), and
understands and accepts, the terms, conditions and risks
of that Transaction. It is also capable of assuming, and
assumes, the financial and other risks of that
Transaction.
(iii) STATUS OF PARTIES. The other party is not acting as a
fiduciary or an adviser for it in respect of that
Transaction.
PART 6. ADDITIONAL REPRESENTATIONS AND WARRANTIES RELATING TO THE FUND. The
Fund hereby represents and warrants to Party A (which representations
shall constitute Additional Representations for purposes of Section 3
of this Agreement and shall be deemed given on the date on which this
Agreement is executed and on each date on which a Confirmation is
entered into under this Agreement) that:
(a) The Fund (i) is a statutory trust duly organized, validly
existing and in good standing under the laws of the State of
Delaware; (ii) has the power and authority, and the legal
right to own its assets and to transact the business in which
it is engaged; (iii) is duly qualified to do business and is
in good standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business
requires such qualification except where the failure to so
qualify would not have a material adverse effect on the Fund's
ability to perform its obligations under this Agreement; and
(iv) is in compliance with all applicable law and the
requirements of its Declaration of Trust except where
non-compliance would not have a material adverse effect on the
Fund's ability to perform its obligations under this Agreement
or the validity or enforceability of this Agreement.
(b) The execution, delivery and performance of this Agreement by
the Fund will not require the creation or imposition of any
lien or encumbrance on any of its property, assets or revenues
pursuant to any such requirement of law or contractual
obligation or undertaking, except where such violation would
not have a material adverse effect on the Fund's ability to
perform its obligations under this Agreement or the validity
or enforceability of this Agreement.
30
(c) To the extent of Party B's knowledge after reasonable inquiry,
no litigation or proceeding of or before any arbitrator or
governmental authority is pending by or against the Fund or
against any of its properties or revenues (i) asserting the
invalidity of unenforceability of this Agreement, (ii) seeking
to prevent the consummation of any of the transactions
contemplated by this Agreement, or (iii) seeking any
determination or ruling that would materially and adversely
affect (A) the Fund's ability to perform its obligations under
this Agreement, or (B) the validity or enforceability of this
Agreement.
(d) The Fund is duly registered with the Securities and Exchange
Commission as an open-end, diversified management investment
company under the Investment Company Act and the Fund has been
operated in compliance in all material respects with the
Investment Company Act and the rules and regulations
thereunder.
PART 7. ADDITIONAL REPRESENTATIONS AND WARRANTIES RELATING TO ADVISER AND
MANAGER. To induce Party A to enter into this Agreement and to enter
into the Transaction, Party B, hereby represents and warrants to Party
A (which representations shall constitute Additional Representations
for purposes of Section 3 of this Agreement and shall be deemed given
on the date on which this Agreement is executed and on each date on
which a Confirmation is entered into under this Agreement) that:
31
(a) (i) The Manager is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware and the Adviser is a limited liability company duly
organized, validly existing and in good standing under the
laws of the State of Delaware, (ii) each of the Manager and
the Adviser has the corporate power and authority, and the
legal right, to own its assets and to transact the business in
which it is engaged, (iii) each of the Manager and the Adviser
is duly qualified to do business and is in good standing under
the laws of each jurisdiction where its ownership or lease of
property or the conduct of its business requires such
qualification except where the failure to so qualify would not
have a material adverse effect on its ability to perform its
obligations under any document or agreement relating to this
Agreement and (iv) each of the Manager and the Adviser is in
compliance with all applicable law and the requirements of its
constitutive documents except where non-compliance would not
have a material adverse effect on its ability to perform its
obligations under any document or agreement relating to this
Agreement.
(b) Each of the Manager and the Adviser has the corporate power
and authority, and the legal right, to execute, deliver and
perform each related document to which it is a party and has
taken all necessary action required by applicable law and the
requirements of its constitutive document to authorize the
execution, delivery and performance of each related document
to which it is a party. Except as has been obtained, no
consent or authorization of, filing with, or other act by or
in respect of, any government authority or any other person or
entity is required in connection with its performance under
any related document to which it is a party.
(c) The performance under any document or agreement relating to
this Agreement by the Manager or the Adviser, as applicable,
will not violate any requirement of law or any of the
Manager's or Adviser's contractual obligations or undertakings
and will not result in, or require, the creation or imposition
of any lien on any of its property, assets or revenues
pursuant to any such requirement of law or contractual
obligation or undertaking except where such violation would
not have a material adverse effect on its ability to perform
its obligations to the Fund related to this Agreement or any
such related document.
(d) To the extent of Party B's knowledge after reasonable inquiry,
no litigation or proceeding of or before any arbitrator or
governmental authority is pending by or against the Manager,
the Adviser or any of their respective properties or revenues
(i) asserting the invalidity or unenforceability of any part
of this Agreement or any document or agreement relating to
this Agreement, (ii) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or by
any document or agreement relating to this Agreement or (iii)
seeking any determination or ruling that would materially and
adversely affect (A) Party B's ability to perform its
obligations under this Agreement or any related document, (B)
the ability of the Manager or the Adviser to perform its
obligations under any related document, or (C) the validity or
enforceability of this Agreement or any related document .
(e) The Manager is duly registered and in good standing with the
Securities and Exchange Commission (the "COMMISSION" or the
"SEC") as an investment adviser under the Investment Advisers
Act, and, to the extent of Party B's knowledge after
reasonable inquiry, there does not exist any proceeding, or
any facts or circumstances the existence of which, in its
reasonable judgment, would lead to any proceeding, which would
adversely affect the Manager's registration or good standing
with the Commission; the Manager is not prohibited by any
provision of the Investment Advisers Act or the Investment
Company Act, or the respective rules and regulations
thereunder, from acting as an investment adviser of the Fund
as contemplated hereunder and under the related documents.
32
(f) The Manager is duly registered in accordance with the
provisions of all other applicable laws and regulations
relating to its business and requiring such registration, and,
to the extent of Party B's knowledge after reasonable inquiry,
there does not exist any proceeding, or any facts or
circumstances the existence of which, in its reasonable
judgment, would lead to any proceeding, which would adversely
affect the Manager's registration under such laws and
regulations.
PART 8. INDEMNIFICATION OF PARTY A/REIMBURSEMENT OF EXPENSES. The Fund agrees
to indemnify Party A as follows:
(a) In addition to any and all rights of reimbursemsent or any
other rights pursuant hereto or under law or equity, the Fund
agrees (i) to pay, or reimburse, Party A for all of its
reasonable out-of-pocket costs and expenses (including,
without limitation, the reasonable fees and disbursements of
its counsel) incurred in connection with the enforcement or
preservation of any rights under this Agreement; (ii) to pay,
indemnify, and hold Party A harmless from any and all
recording and filing fees and any and all liabilities with
respect to, or resulting from any delay in paying, stamp,
excise and other taxes, if any, that may be payable or
determined to be payable in connection with the execution and
delivery of, or consummation or administration of, any of the
transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect
of, this Agreement, and (iii) to pay, indemnify and hold Party
A and its officers, directors, employees and agents (each an
"INDEMNITEE") harmless from and against all reasonable
out-of-pocket liabilities (including penalties), obligations,
losses, damages, actions, suits, demands, claims, judgments,
costs, expenses or disbursements of any kind or nature
whatsoever that arise out of, or in any way relate to or
result from, (A) the transactions contemplated by this
Agreement or (B) any investigation or defense of, or
participation in, any legal proceeding relating to the
execution, delivery, enforcement, performance or
administration of this Agreement (whether or not such
Indemnitee is a party thereto) (all the foregoing in clauses
(i) through (iii) above, collectively, the "INDEMNIFIED
LIABILITIES"); provided that the Fund shall have no obligation
hereunder to any Indemnitee with respect to Indemnified
Liabilities arising from the gross negligence, bad faith or
willful misconduct of Party A or of an Indemnitee.
(b) The indemnity provisions of this Part 8 shall survive the
termination of this Agreement and any related documents.
PART 9. COVENANTS OF THE FUND. The Fund hereby covenants and agrees that
through the Protection Termination Date:
(a) it shall comply with the terms and conditions of this
Agreement and shall provide Party A with written notice
immediately upon becoming aware of any material breach by it
of the provisions of this Agreement;
(b) it shall not, in any way material to its obligations under
this Agreement, amend, supplement or otherwise modify, or
agree to any waiver with respect to any provision of its
constitutive documents or any agreement to which it is a
party, without the prior written consent of Party A, and it
shall provide Party A with a copy of any such amendment,
supplement or waiver of any such document or agreement
promptly after any such amendment, supplement or waiver is
adopted, filed or takes effect;
33
(c) it shall not change the manner in which the general
liabilities of the Fund are allocated among Share Classes of
the Fund or the manner in which the assets of the Fund are
allocated to any Share Class of the Fund, except to address
changes requested in connection with an audit or examination
by independent accountants for the Fund or a regulatory or
self-regulatory examination, review or audit, if such change
would be reasonably likely to have a material impact on Party
A, any holder of a Share or the Fund, without the prior
written consent of Party A;
(d) absent appointment of a successor manager acceptable to Party
A, it shall not terminate the Investment Management Agreement
with Manager or any other investment adviser or terminate the
Adviser Agreement with Adviser or any successor adviser or
sub-adviser to the Fund, or otherwise effect a replacement of
the Manager or Adviser, without the prior written consent of
Party A (which shall not be unreasonably withheld), and, if
the Investment Management Agreement or the Adviser Agreement
with respect to the Fund terminates in accordance with its
terms, it shall enter into an Investment Management Agreement
or Adviser Agreement, as applicable with the successor manager
or adviser or sub-adviser, on terms and conditions
satisfactory to Party A, prior to the effective date of such
termination;
(e) it shall not terminate the Custodian (or any successor), or
otherwise effect a replacement of the Custodian (or any
successor), without the prior written consent of Party A
(which consent shall not be unreasonably withheld), and, if
the Custodian Agreement with respect to the Fund terminates in
accordance with its terms, it shall enter into a Custodian
Agreement with respect to the Fund with the successor
custodian or an affiliate thereof, on terms and conditions
reasonably satisfactory to Party A, prior to the effective
date of such termination;
(f) [Reserved];
(g) within 90 days of the end of the Fund's fiscal year, it shall
provide to Party A the financial statements for the Fund with
respect to such fiscal year, audited by independent public
accountants;
(h) it shall provide to Party A such additional information with
respect to the Fund as Party A may from time to time
reasonably request, and, after the occurrence of an Event of
Default with respect to the Fund, during normal business hours
with reasonable prior notice, allow Party A to inspect, audit
and make copies and abstracts from the Fund's records and to
visit the offices of the Fund for the purpose of examining
such records, internal controls and procedures maintained by
the Fund;
(i) it shall maintain insurance policies covering its liabilities
to its officers, trustees, employees and agents under Article
VII of its Declaration of Trust of the types and in the
amounts as is customary for funds similar to the Fund;
(j) the Fund agrees not to consolidate or amalgamate with, or
merge with or into, or transfer all or substantially all of
its assets to, or to reorganize, reincorporate or reconstitute
into or as, another entity;
(k) other than in connection with the reinvestment of dividends,
it shall not permit the principal underwriter for the Fund to
sell Shares or a Class of Shares when the provisions of the
Confirmation prohibit such sales;
(l) it shall notify Party A in the monthly report delivered to
Party A pursuant to the Confirmation of the use of any
Substitute Valuation Source during the preceding month;
34
(m) prior to filing with the Commission any amendment to the
Registration Statement with respect to any Class of Shares of
the Fund or supplement to the Final Prospectus with respect to
any Class of Shares of the Fund, it shall furnish a copy
thereof to Party A and shall obtain the consent of Party A,
which consent shall not be unreasonably withheld if the impact
is not materially adverse to Party A, to any such filing that,
in its reasonable judgment, would be reasonably likely to have
an adverse impact on Party A's risk under the Agreement, on
the Fund or on the shareholders of the Fund;
(n) it shall notify Party A promptly (i) of any request by the
Commission for an amendment to the Registration Statement with
respect to any Class of Shares or a supplement to the Final
Prospectus with respect to any Class of Shares, (ii) of the
issuance by the Commission of any stop-order suspending the
effectiveness of the Registration Statement with respect to
any Class of Shares or the initiation of any such stop-order
proceeding or (iii) of receipt by the Fund of a notice from or
order of the Commission pursuant to Section 8(e) of the
Investment Company Act with respect to any Registration
Statement with respect to the Fund;
(o) it shall comply, and shall cause the Manager, the Adviser and
other agents of the Fund to comply, in all material respects
with applicable terms and provisions of the Federal Securities
Laws, the Commodity Exchange Act and all other laws, rules and
regulations applicable to the management, operation and
activities of the Fund or of any such agent;
(p) except as provided in this Agreement, it shall not terminate
the Fund prior to the Protection Termination Date; and
(q) it shall not permit or cause to occur any violation of the
investment restrictions or policies identified as
"fundamental" in the Fund's Statement of Additional
Information as filed with the SEC.
PART 10. ADDITIONAL REMEDIES OF PARTY A
(a) After the occurrence and during the continuance of an Event of
Default for which Party B is the Defaulting Party, Party A
shall have the right to deliver to the Custodian/relevant
servicer and the Fund a notice (a "REMEDY NOTICE") that Party
A has elected to effect the additional remedies set forth in
this Part 10. During the period (the "DEFAULT PERIOD") from
and including the effective date of the Remedy Notice to and
excluding the Business Day following the date on which Party A
delivers to the Custodian/relevant servicer and the Fund a
notice that either the Event of Default giving rise to the
Remedy Notice has been cured or Party A has otherwise elected
to withdraw its election to effect the additional remedies set
forth in this Part 10, Party A shall have the right to direct
the investments of Party B's assets by delivering to the
Custodian, pursuant to Section 7 of the Custodian
Agreement/other relevant servicer pursuant to the applicable
provision of the relevant servicer agreement, written
investment instructions from the Manager or Adviser as
described in the next sentence of this subsection (a) or,
under the circumstances described in subsection (b), its owns
instructions in accordance with subsection (b). In the event
that during the Default Period Party A receives written
investment instructions from the Manager or Adviser, Party A
shall promptly forward such instructions to the
Custodian/relevant servicer unless Party A determines that the
execution of such instructions would result in the occurrence
of another Event of Default or would not result in the cure of
the breach causing the Event of Default that gave rise to the
Remedy Notice. Party B will not consent to any changes to the
Custodian Agreement that would affect the rights of Party A
without the consent of Party A.
35
(b) In the event that during a Default Period Party A shall not
have received written investment instructions from the Manager
or Adviser in the format set forth in the Custodian Agreement,
the execution of which would result in the cure of the breach
causing such Event of Default without resulting in the
occurrence of another Event of Default, by 10:00 a.m., New
York City time, on the later of the first day of such Default
Period and the Business Day after the occurrence of such Event
of Default, Party A shall have the right to provide the
Custodian/relevant servicer, with contemporaneous notice to
the Chief Executive Officer and the Chief Financial Officer of
the Fund, with its own investment instructions pursuant to
Section 5 of the Custodian Agreement/other relevant agreement,
subject to the following conditions:
(1) after giving effect to any changes to the
investments of the Fund at the direction of
Party A, the investments of the Fund shall be
Rebalanced and Diversified (in each case, in
accordance with the definitions of such term set
forth in the Confirmation;
(2) any changes made to the investments of the Fund
at the direction of Party A shall be limited to
those that are reasonably necessary to cure the
breach causing such Event of Default;
(3) if such Event of Default arises as a result of
the Fund's failure to be in compliance with the
requirements set forth in Sections 9.A, 9.C,
9.D, 9.E or 9.F of the Confirmation, then the
specific investments causing such Event of
Default shall be sold;
(4) if such Event of Default arises as a result of
the Fund's failure to be in compliance with the
requirements set forth in Section 10 or Appendix
A of the Confirmation and Treasury Zeroes,
Agency Zeroes, Treasury Notes or Cash
Equivalents are required to be sold in order to
cure the breach causing such Event of Default,
the proceeds of such sale shall be reinvested,
to the extent practicable, in Treasury Zeroes or
Agency Zeroes; and
(5) if such Event of Default arises as a result of
the Fund's failure to be in compliance with the
requirements set forth in Section 10 and
Appendix A of the Confirmation and Futures
Contracts are required to be sold in order to
cure the breach causing such Event of Default, a
pro rata portion of each Futures Contract held
by the Fund shall, to the extent practicable, be
sold in the minimum amounts required to cure the
breach causing the Event of Default and the
proceeds of such sales shall be reinvested, to
the extent practicable, in Treasury Zeroes or
Agency Zeroes.
(c) During a Default Period, the Manager and Adviser shall deliver
trade instructions with respect to the assets of the Fund only
through Party A in accordance with this Part 10.
(d) Upon the cure of an Event of Default with respect to which a
Remedy Notice has been given (or the cure of all Events of
Default after a Remedy Notice has been given and before a Cure
Notice has been given), unless another Event of Default has
occurred and is continuing, Party A shall promptly give a Cure
Notice to the Custodian/relevant servicer pursuant to the
Custodian Agreement/other relevant servicing agreement. Other
than after the occurrence and during the continuance of an
Event of Default, Party A shall have no right to direct the
investment of funds or assets held by the Fund.
36
PART 11. FURTHER AGREEMENTS
(a) Liability of Party A. The Fund agrees that neither Party A,
nor any of its officers, trustees/directors or employee shall
be liable or responsible for (except to the extent of its own
or their negligence, willful misconduct or bad faith) the
validity, sufficiency, accuracy or genuineness of any
documents delivered to Party A even if such documents should
in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged. In furtherance and not in
limitation of the foregoing, Party A may accept documents that
appear on their face to be in order, without responsibility
for further investigation (except to the extent that Party A
acted with negligence, willful misconduct or bad faith).
(b) Termination or Absence of Adviser. If at any time the Fund
does not have an adviser acting pursuant to the Adviser
Agreement, the Fund shall cause the Manager to perform the
obligations of the Adviser of the Fund set forth herein.
(c) Each Party acknowledges and agrees that the contents of this
Agreement include non-public, confidential and proprietary
information and agrees to use commercially reasonable efforts
to preserve the confidentiality thereof; provided, however,
that each party shall be able to use such information in
connection with asserting or defending its rights under this
Agreement or to comply with applicable law and with requests
from regulatory entities.
(d) Each party acknowledges and agrees that there shall be no
third party beneficiaries (either express or implied) with
respect to this Agreement.
PART 12. CERTAIN DEFINITIONS
(A) For purposes of this Schedule and the Confirmation, the following terms
shall have the meanings shown below:
(a) "Adviser" means Trajectory Asset Management LLC.
(b) "Custodian" means State Street Bank and Trust Company.
(c) "Federal Securities Laws" means the Securities Act of 1933, the
Securities Exchange Act of 1934, the Xxxxxxxx-Xxxxx Act of 2002, the Investment
Advisers Act of 1940, Title V of the Xxxxx-Xxxxx Bliley Act, each as amended,
any rules adopted by the Securities and Exchange Commission under any of these
statutes, the Bank Secrecy Act as it applies to the Fund, and any rules adopted
thereunder by the Securities and Exchange Commission or the Department of the
Treasury.
(d) "Fund" means Party B.
(e) "Manager" means AIG SunAmerica Asset Management Corp.
(B) It is the intention of the parties hereto that a single Confirmation shall
be entered into under the Agreement for the purpose of documenting a Put
Transaction between the parties. Accordingly, unless otherwise agreed in an
amendment or supplement to this Schedule, references in this Schedule to the
"Confirmation" shall be deemed to be references to a Confirmation of Put
Transaction, between Party A and Party B, of even date herewith. Capitalized
terms used in this Schedule without further definition shall have the meanings
ascribed to such terms in the Confirmation.
37
IN WITNESS WHEREOF the parties have executed this Schedule on the respective
dates specified below with effect from the date specified on the first page of
this document.
PRUDENTIAL GLOBAL FUNDING, INC. AIG SERIES TRUST
ON BEHALF OF [2010, 2015, 2020, 2025] HIGH
WATERMARK FUND
BY:_____________________________ BY:_____________________________
NAME: NAME:
TITLE: TITLE:
38
EXHIBIT I
[FORM OF CONFIRMATION]
DATE: ______________, 2004
TO: AIG Series Trust on behalf of [2010, 2015, 2020, 2025] High Watermark
Fund
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx Xxxxx
President
FROM: Xxxx Xxxxxxx
Prudential Global Funding, Inc.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
RE: Lookback Option Agreement between Prudential Global Funding, Inc.,
fully guaranteed by Prudential Financial, Inc., and AIG Series Trust on
behalf of [2010, 2015, 2020, 2025] High Watermark Fund
PGFI Reference No.:_________________
The purpose of this communication (this "CONFIRMATION") is to confirm the terms
and conditions of the Transaction entered into between PRUDENTIAL GLOBAL
FUNDING, INC. ("PARTY A") and AIG SERIES TRUST on behalf of [2010, 2015, 2020,
2025] High Watermark Fund (the "FUND" or "PARTY B") on the Trade Date specified
below (the "TRANSACTION"). This Confirmation, including the appendices hereto,
constitutes a "Confirmation" as referred to in the ISDA Master Agreement
specified below.
The definitions and provisions contained in the 2002 ISDA Equity Derivatives
Definitions (the "EQUITY Definitions"), as published by the International Swaps
and Derivatives Association, Inc., are incorporated into this Confirmation. In
the event of any inconsistency between the Equity Definitions and either the
2002 ISDA Master Agreement dated June__, 2004 between Party A and the Fund and
the Schedule thereto dated June ___, 2004 between Party A and the Fund (the
"SCHEDULE"; such 2002 ISDA Master Agreement as supplemented and amended by the
Schedule, being the "MASTER AGREEMENT") or this Confirmation, the Master
Agreement and Confirmation, respectively, will govern.
This Confirmation supplements, forms a part of, and is subject to, the Master
Agreement
B-1
(this Confirmation and the Master Agreement shall constitute and be referred to
as the "AGREEMENT"). In the event of any inconsistency between this Confirmation
and the Master Agreement, this Confirmation shall govern. Capitalized terms used
in this Confirmation but not defined in the Agreement have the meanings assigned
below.
1. OPTION TERMS. The terms of the particular Transaction to which this
Confirmation relates are as follows.
a. General Terms:
Trade Date: ________________
Option Style: European
Option Type: Put
Seller: Party A
Buyer: Fund
Index: Not Applicable
Number of Options: With respect to
each Share Class, a number
of options equal to the
Share Number for such Share
Class on the Protection
Termination Date.
Strike Price: With respect to each Share
Class, the Strike Price
equals the Protected Share
Price for such Share Class.
Premium: An amount equal to the
Option Fee payable pursuant
to Section 4 of this
Confirmation.
Premium Payment Dates: The Premium will be paid on
dates determined in
accordance with Section 4
of this Confirmation.
Exchange: Not Applicable
Related Exchange(s): Not Applicable
b. Procedures for Exercise:
Expiration Time: 11:59 pm local time
Expiration Date: The Protection Termination
Date
Multiple Exercise: Not Applicable
Maximum Number of Options: Not Applicable
Integral Multiple: Not Applicable
Automatic Exercise: Applicable
Seller's Telephone
Number and Telex and/or
Facsimile Number and Contact
Details for purpose of Giving
Notice: As set forth in Exhibit IV
to the Schedule..
c. Valuation:
Valuation Time: The close of regular
trading on the New York
Stock Exchange on the
Protection Termination
Date.
Valuation Date: The Protection Termination
Date
Averaging Date Disruption: Not Applicable
d. Settlement Terms:
Cash Settlement: Applicable
Settlement Currency: U.S. Dollars
Option Cash Settlement Amount: For purposes of this
Transaction, in lieu of
determining an Option Cash
Settlement Amount in
accordance with the
provisions of the
Agreement, the amount
payable (if any) by Party A
to the Fund upon expiration
of the Options shall be
determined and paid as set
forth in Section 3 of this
Confirmation.
2. DEFINITIONS.
A. Capitalized terms used but not defined elsewhere in this
Confirmation have the following meanings:
1. "Adviser" means Trajectory Asset Management LLC.
2. "Agency Zeroes" shall mean non-callable non-interest
bearing obligations of any one of the following entities
or agencies of the Federal Government of the United
States of America: Federal National Mortgage
Association, Federal Home Loan Mortgage Corporation,
Federal Home Loan Bank, Government National Mortgage
Association, Resolution Funding Corporation; provided,
however, that (A) any such obligations that are rated
less than AAA by S&P or less than Aaa by Moody's at the
time of purchase shall not qualify as "Agency Zeroes"
and (B) any such obligations that are included in the
definition of Cash Equivalents shall be deemed to be
Cash Equivalents instead of Agency Zeroes for purposes
of this Agreement.
3. "Aggregate Notional Amount" means the sum of (A) the
Option Notional Amount plus (B) the aggregate for all
Related Funds of the Related Fund Notional Amount
calculated for each Related Fund.
4. "Bear Xxxxxxx" means the security valuations made
available by The Bear Xxxxxxx Companies, Inc.
5. "Bloomberg" means the financial markets data and
analytics made available by Bloomberg LP or any
successor thereto.
6. "Business Day" means any day on which the New York Stock
Exchange is open for regular trading.
7. "Cash Equivalents" means the following accounts and
short-term securities with remaining maturities of 180
days or less and meeting one of the following criteria
at each time of determination:
a) direct obligations of, and obligations fully
guaranteed as to full and timely payment by the full
faith and credit of, the United States of America,
including Treasury Zeroes, Agency Zeroes and Treasury
Notes; provided that (i) such instruments have been
designated as Cash Equivalents by the Adviser, (ii)
such instruments are not counted as Agency Zeroes,
Treasury Zeroes or Treasury Notes, and (iii) with
respect to Agency Zeroes so designated as Cash
Equivalents, at the time of such designation and at
all times thereafter as such designation remains in
effect, such instruments have been rated at least AAA
by S&P and Aaa by Moody's;
b) demand deposits, time deposits or certificates of
deposit of any depository institution or trust
company incorporated under the laws of the United
States of America or any state thereof, including,
for the avoidance of doubt, accounts maintained at
the Fund's custodian; provided that the commercial
paper or other short-term unsecured debt obligations
of such depository institution or trust company shall
be rated at least A-1 by S&P or P-1 by Moody's;
c) bankers acceptances issued by any depository
institution or trust company referred to in clause
(b) above;
d) commercial paper having a rating of at least A-1 by
S&P or P-1 by Moody's; and e) Repurchase Agreements.
8. "Cash Margin" means, with respect to Futures Contracts,
Long SPX Put Options and Short SPX Call Options held by
the Fund at any Portfolio Valuation Time, the Market
Value of the cash and Cash Equivalents held (i) in a
segregated account by the clearing futures commission
merchants, (ii) in a securities account by a securities
broker-dealer, or (iii) with the Fund's custodian to
margin or secure Futures Contracts or SPX Options (plus
or minus the amount of any receivables or payables,
respectively, associated with variation margin);
provided that any such Cash Equivalent that would not be
permitted to be held as margin by the relevant exchange
will be deemed to have a Market Value of zero for
purposes of determining Cash Margin.
9. "CBOE" means the Chicago Board of Options Exchange or
any successor-in-interest approved for transactions in
Long SPX Put Options and Short SPX Call Options.
10. "CME" means the Chicago Mercantile Exchange or any
successor-in-interest approved for transactions in
Futures Contracts.
11. "Defeased Expense Ratio" means, (x) with respect to each
Share Class, the excess of (A) the Expense Ratio of such
Share Class over (B) 25 basis points, and (y) with
respect to the Fund, the weighted average of the
Defeased Expense Ratio for each Share Class, such
weighting to be based on the Fund NAV attributable to
each Share Class. For example, with respect to the Class
A Shares, the Defeased Expense Ratio is equal to the
excess of the Expense Ratio for Class A Shares (1.65
percent or 165 basis points) over 25 basis points and,
with respect to the Class C Shares, the Defeased Expense
Ratio is equal to the excess of the Expense Ratio for
Class C Shares (2.30 percent or 230 basis points) over
25 basis points.
12. "Effective Date" means the Protection Inception Date.
13. "Expense Ratio" means, (x) with respect to each Share
Class, the expense ratio for such Share Class, reduced
by any voluntary fee waivers or expense reimbursements,
calculated in accordance with the Investment Company Act
of 1940, as amended, and (y) with respect to the Fund,
the weighted average of the Expense Ratio for each Share
Class, such weighting to be based on the Fund NAV
attributable to each Share Class.
14. "Extraordinary Expenses" shall mean any Fund fees and
expenses (including expenses reimbursable to Party A by
the Fund pursuant to this Agreement) that are not
incurred or accrued in the ordinary course of the Fund's
business (including, for example, all costs of defending
or prosecuting any claim, or litigation, to which the
Fund is a party, together with any amounts of judgment,
settlement or indemnification expense incurred by the
Fund or any other non-recurring, non-operating
expenses).
15. "Fund NAV" shall mean on any date of calculation, an
amount (determined, as applicable, in accordance with
the Valuation Methodology) equal to the excess of
a) the sum of:
1) the aggregate Market Value of all Cash
Equivalents held by the Fund (excluding Cash
Equivalents held as Cash Margin) on such date;
2) the aggregate Market Value of all Treasury
Zeroes, Agency Zeroes and Treasury Notes held by
the Fund on such date;
3) the aggregate Cash Margin;
4) the aggregate Market Value of all Long SPX Put
Options and Short SPX Call Options entered into
by the Fund;
5) to the extent not included in the foregoing, an
amount equal to the aggregate amount of interest
and dividend receivables and receivables for
securities sold payable to the Fund;
6) an amount equal to the aggregate amount payable
to the Fund by the Manager pursuant to the
Investment Management Agreement on account of
expenses incurred by the Fund that are subject
to reimbursement by the Manager; and
7) the dollar value of net receivables for the Fund
reflected in the Fund's trial balance, to the
extent not already reflected above.
minus
b) an amount equal to the aggregate amount of the
liabilities allocated to the Fund as reflected in the
Fund's trial balance, including but not limited to
all amounts payable by the Fund in respect of
securities purchased and the amount of debt
(principal plus accrued interest) incurred by the
Fund;
provided, however, that any receivable ascribed to the
Agreement shall be excluded when calculating the Fund NAV.
16. "Futures Contract" means a contract to purchase, for
future delivery, the Standard & Poor's 500 Stock Index
traded on the CME.
17. "Futures Contract Amount" means, with respect to each
Futures Contract, the Market Value of such Futures
Contract determined in accordance with the provisions of
this Confirmation.
18. "Investment Management Agreement" means the Investment
Advisory and Management Agreement dated June 3, 2004
between the Fund and the Manager.
19. "Interactive Data" means FT Interactive Data published
by Interactive Data Corporation or any successor
thereto.
20. "Long SPX Put Options" means an instrument traded on the
CBOE or the CME entitling the option holder to the cash
settlement value (if any) associated with the S&P 500
Index closing below a stated level on a stated future
date or, if
applicable, a futures contract on the S&P 500 Index
closing below a stated price on a stated future date.
21. "Manager" means AIG SunAmerica Asset Management Corp.
22. "Market Value" solely for purposes of this Agreement
shall mean on any Share Valuation Date and with respect
to a particular type of asset, the following amount:
(i) with respect to Cash Equivalents held by the Fund
having a maturity date 60 days or less from such
date, excluding Repurchase Agreements, the value of
such security determined in accordance with the
"amortized cost" method of valuation which method
values an instrument at its cost and assumes a
constant amortization of premium or discount;
(ii) with respect to Cash Equivalents held by the Fund
having a maturity date more than 60 days from such
date, the market value thereof at the close of
trading on such date obtained from Bloomberg,
Interactive Data, Reuters Group PLC, The Bear Xxxxxxx
Companies, Inc. or any pricing source approved by the
Board of Trustees or a Substitute Valuation Source
plus the aggregate amount of accrued and unpaid
interest thereon as of such date;
(iii) with respect to any Cash Equivalents held by the Fund
that are Repurchase Agreements, the initial purchase
price plus accrued interest;
(iv) with respect to any Futures Contract held by the
Fund, the product of (A) the index dollar multiplier
designated by the CME as being in effect on such date
times (B) the price of such Futures Contract at the
close of trading on such date, as published on
Bloomberg or a Substitute Valuation Source times (C)
the number of such Futures Contracts held by the
Fund;
(v) with respect to any Treasury Zero, Agency Zero or
Treasury Note held by the Fund, the market value
thereof at the close of trading on such date obtained
from Bloomberg L.P., Interactive Data Corporation,
Reuters Group PLC, The Bear Xxxxxxx Companies, Inc.
or any pricing source approved by the Board of
Trustees or a Substitute Valuation Source; and
(vi) with respect to any Long SPX Put Option or Short SPX
Call Option held by the Fund, the market value at
close of
regular trading on such date as published on
Bloomberg or a Substitute Valuation Source;
provided, however, that if on any Share Valuation Date the
price or value of any investment held by the Fund is not
determinable as set forth above, the Market Value thereof
shall be determined on such date in such manner as is
determined in good faith by, or under the authority of, the
Board of Trustees of the Fund; and, to the extent not
already provided in (i) through (vi) above, provided further
that (A) with respect to the foregoing instruments (other
than the balances held in demand deposit accounts), to the
extent reflected in the Fund's trial balance, the Market
Value shall be further increased by the Market Value of such
instruments which have been purchased but not yet settled
and decreased by the Market Value of such instruments which
have been sold but not yet settled and (B) the balance of
the demand deposit accounts shall be notionally adjusted
accordingly.
23. "Moody's" means Xxxxx'x Investors Service, Inc. and its
successors and assigns.
24. "Option Fee" has the meaning assigned in Section 4.
25. "Option Notional Amount" means, as of any date of
calculation, the aggregate for all Share Classes of the
following amount calculated for each Share Class: the
product obtained by multiplying the Share Number of such
Share Class on such date times the Protected Share Price
for such Share Class on such date.
26. "Option Settlement Amount" has the meaning assigned in
Section 3.
27. "Portfolio Valuation Time" shall mean, for any Business
Day, as of the close of trading on the New York Stock
Exchange on the immediately preceding Business Day.
28. "Protected Share Price" means, with respect to each
Share Class, the higher of the initial net asset value
for a Share of such Share Class and the Share NAV for a
Share of such Share Class on the Protection Inception
Date. Thereafter, on each date on which Share NAV in
respect of Shares of any such Share Class is calculated
(a "SHARE VALUATION DATE"), the Protected Share Price
with respect to such Share Class shall be reset to equal
the greater of (I) the Share NAV for a Share of such
Share Class on such Share Valuation Date or (II) the
Protected Share Price in respect of such Share Class for
the immediately prior Share Valuation Date less the sum
of (A) the product obtained by multiplying (i) the Share
Distribution Amount recorded on such date if the Share
Valuation Date is an ex-dividend date in respect of
Shares of such Share Class, if any, by (ii) a ratio
equal to the Protected Share Price in respect of such
Share Class on the immediately preceding Share Valuation
Date divided by the sum of (a) Share NAV in respect of
Shares of such Share Class on such Share Valuation Date
and (b) the Share Distribution Amount, if any, declared
on such Share Valuation Date in respect of Shares of
such Share Class, plus (B) Extraordinary Expenses per
Share, if any, accrued on such Share Valuation Date or
paid on such Share Valuation Date (to the extent there
was no prior accrual for such expense).
29. "Protection Inception Date" means, for each Share Class,
the date a Share of such Share Class is first issued.
30. "Protection Termination Date" means August 31, [2010,
2015, 2020, 2025]; PROVIDED, that if such date is not a
Business Day, then the Protection Termination Date shall
be the next succeeding Business Day and, PROVIDED
FURTHER that an earlier Protection Termination Date can
be established in accordance with Section 5.
31. "Related Fund" means a registered investment company
sub-advised by the Adviser and managed by the Manager
that purchases from Party A (or another affiliate of
Prudential Financial, Inc.) an agreement of the kind
described herein providing a high water xxxx type of
guarantee to such company or its shareholders.
32. "Related Fund Notional Amount" means, for each Related
Fund as of any date of calculation, the aggregate for
all share classes of such Related Fund of the following
amount calculated for each share class of such Related
Fund: the product obtained by multiplying the number of
shares of such share class on such date times the
protected (or guaranteed) share price for such share
class on such date.
33. "Repurchase Agreements" means a repurchase transaction
undertaken in accordance with the Fund's policy
regarding repurchase agreements (documented as a
confirmation under a Master Repurchase Agreement in the
form published by The Bond Market Association) pursuant
to which the Fund agrees to purchase, and subsequently
resell within 7 calendar days
following such purchase, securities issued by the U.S.
government or agencies or instrumentalities thereof;
provided that collateral for the repurchase obligation
under any such agreement shall be provided by the party
with the repurchase obligation in an amount equal to at
least 102% of the repurchase price to be paid thereunder
(100% if the collateral is in the form of cash).
34. "Reuters" means the financial markets data and security
valuations made available by Reuters Group PLC.
35. "Share Class" or "Class of Shares" means, with respect
to the Fund, each class of Shares designated in the
Declaration of Trust of AIG Series Trust, a Delaware
statut ory trust and described in the prospectus for the
Fund.
36. "Share Class NAV" means, with respect to any Share Class
on any date, the portion of the Fund NAV on such date
attributable to such Share Class (on the basis of the
Share Number of each Share Class).
37. "Share Distribution" means, in respect of any Share
Class, any distribution or payment by the Fund in
respect of, or allocated to, the Shares of such Share
Class and shall include, without limitation, any
distribution of income, dividends, capital gains, or
principal to the holders of Shares of such Share Class
and any payment out of the Fund's assets of income taxes
or excise taxes allocated to the Shares of such Share
Class.
38. "Share Distribution Amount" means, in respect of a Share
Distribution with respect to any Share Class, an amount
equal to the quotient obtained by dividing the amount of
any such Share Distribution by the Share Number with
respect to such Share Class on the date of such Share
Distribution.
39. "Share NAV" means, with respect to any Share Class as of
any calculation date, the quotient resulting from
dividing the Share Class NAV for such Share Class by the
Share Number for such Share Class on such date.
40. "Share Number" means, with respect to any Share Class as
of any calculation date, the number of outstanding
Shares of such Share Class which are guaranteed under
this Agreement.
41. "Shares" means transferable units of beneficial
interests of the Fund designated in the Declaration of
Trust of AIG Series Trust, a Delaware statutory trust.
42. "Share Valuation Date" shall have the meaning ascribed
to such term in the definition of Protected Share Price.
43. "Short SPX Call Options" means an instrument traded on
the CBOE or CME obligating the account holder to satisfy
the cash settlement obligation (if any) calling, as
applicable, the related Standard & Poor's 500 Index as
traded on the CBOE or, if applicable, the Futures
Contract as traded on the CME from such account.
44. "SPX Options" means Short SPX Call Options and Long SPX
Put Options.
45. "Substitute Valuation Source" means any widely
recognized, reputable source of valuation approved by
the Board of Trustees of the Fund or a committee thereof
and used by the Fund to value its investments.
46. "S&P" means Standard and Poor's Ratings Service, a
division of McGraw Hill Companies, Inc.
47. "Treasury Notes" shall mean obligations denominated as
such and that are non-callable and backed by the full
faith and credit of the United States of America;
provided that (A) any such obligations that are included
within the definition of Treasury Zeroes shall be deemed
to be Treasury Zeroes instead of Treasury Notes for
purposes of this Confirmation and (B) any such
obligations that are included in the definition of Cash
Equivalents shall be deemed to be Cash Equivalents
instead of Treasury Notes for purposes of this
Agreement.
48. "Treasury Zeroes" shall mean (i) non-callable
non-interest bearing obligations of the United States
Treasury backed by the full faith and credit of the
United States of America (including, without limitation,
Certificates of Accrual on Treasury Securities (CATS),
Treasury Investment Growth Receipts (TIGRs), Generic
Treasury Receipts (TRs), and Separate Trading of
Registered Interest and Principal of Securities
(STRIPS)) and (ii) non-callable interest bearing general
obligations of the United States Treasury backed by the
full faith and credit of the United States of America
that have only one payment remaining to be made;
provided that any such obligations that are included in
the definition of Cash Equivalents shall be deemed to be
Cash Equivalents instead of Treasury Zeroes for purposes
of this Agreement.
49. "Valuation Methodology" means that all calculations and
valuations will be made on a basis that assumes that all
acquisitions and dispositions of securities are
accounted for on the trade date.
B. Singular/Plural. Unless the context clearly requires
otherwise, the foregoing terms shall have the foregoing
meanings in both the singular and plural forms.
3. LOOKBACK OPTION SETTLEMENT. On the Protection Termination Date (or, if
applicable, the date of a Party A Optional Termination pursuant to
Section 5.A.2), Party A will pay the Fund an amount (the "OPTION
SETTLEMENT AMOUNT") equal to the aggregate for all Share Classes of the
following amount calculated for each Share Class: the excess, if any,
of (A) the product of (x) the Share Number for such Share Class on the
Protection Termination Date, after giving effect to any redemptions
requested on that Business Day, multiplied times (y) the Protected
Share Price for such Share Class on such date, over (B) the product of
(x) the Share Number for such Share Class on the Protection Termination
Date, after giving effect to any redemptions requested on that Business
Day, multiplied times (y) the Share NAV for such Share Class determined
as of the close of trading on the Protection Termination Date using the
Valuation Methodology. Except in accordance with early terminations
described in Section 5 of this Confirmation or in Section 5 of the
Master Agreement, Party A will make no payments under the Agreement
prior to the scheduled Protection Termination Date.
4. LOOKBACK OPTION FEES. Each month, the Fund shall pay Party A a fee of
0.35% (35 basis points) per annum times the average daily Fund NAV (the
"OPTION FEE"). The Option Fee shall be payable monthly in arrears on or
before the 25th day of the next calendar month.
5. EARLY TERMINATION OF PUT
A. TERMINATION DUE TO SMALL FUND SIZE. If, on the date two
calendar years after the first Protection Inception Date
hereunder (provided that if such date is not a Business Day,
then the next succeeding Business Day following such date)
(the date of such second anniversary, the "FUND SIZE
DETERMINATION DATE"), all of the following conditions are
true:
(I) the Fund NAV either (x) does not exceed $10 million
or (y) during the period from the first Protection
Inception Date to the Fund Size Determination Date,
never exceeded $20 million, and
(II) the sum of (a) the Option Notional Amount and (b) the
Related Fund Notional Amount is less than $400
million,
then this Agreement may be terminated at the option of Party A
or the Fund as follows (with notice of any such termination to
be given by the party effecting such termination not later
than 180 days following the Fund Size Determination Date):
1. OPTIONAL TERMINATION BY THE FUND: The Fund may
terminate this Agreement by giving Party A a notice
specifying a date, which shall not be more than 60
days after the effective date of such notice, on
which the Agreement will terminate. No payments shall
be due by Party A in connection with such
termination. The Fund shall pay the Option Fee
accruing through the date of such termination.
2. PARTY A OPTIONAL TERMINATION: Party A may terminate
this Agreement by giving the Fund a notice (the
"EARLY TERMINATION NOTICE") specifying a date, which
shall be not less than 60 nor more than 120 days
after the effective date of such notice, on which
this Agreement will terminate and Party A will be
obligated only to pay the Fund the Party A Early
Termination Payment Amount on such termination date.
The Fund shall pay the Option Fee accruing through
the date of such termination. Upon receipt of such
notice, the Fund shall Rebalance in accordance with
Appendix A to this Confirmation or shall invest
entirely in Cash Equivalents.
For the purpose of this Section 5.A, the "Party A Early
Termination Payment Amount" shall be determined as follows:
(i) if the Fund was Rebalanced in accordance with this
Confirmation within one Business Day following the effective
date of the notice of termination by Party A under this
Section 5.A, the Party A Early Termination Payment Amount
shall be an amount equal to the Option Settlement Amount
calculated as if the date of termination pursuant to this
Section 5.A was the Protection Termination Date or (ii) if
clause (i) does not apply, then the Party A Early Termination
Payment Amount shall be an amount equal to the Option
Settlement Amount calculated as if the effective date of the
notice of early termination provided by Party A under this
Section 5.A was the Protection Termination Date.
B. TERMINATION FOR LOW INTEREST RATES IN FINAL YEARS.
If all of the following conditions are true as of any Business
Day, then the Fund shall immediately give Party A a notice
(the "LOW INTEREST RATE TERMINATION NOTICE") specifying a
date, which shall be not less than 10 nor more than 90 days
after the effective date of such notice, on which this
Agreement will terminate:
a) the Protection Termination Date is fewer than three
years from the date of calculation, and
b) the Expense Ratio of the Fund (increased by any fee
waivers that can be terminated without the consent of
Party A), exceeds the market value-weighted
arithmetic average yield of the Treasury Zeroes, the
Agency Zeroes and the Treasury Notes held by the
Fund.
On the first Business Day following the occurrence of the
conditions specified in a) and b) above, the Fund shall
Rebalance in accordance with Appendix A of this Confirmation
or shall invest entirely in Cash Equivalents. In connection
with any termination pursuant to this Section 5.B, Party A
will be obligated to pay the Fund only the Low Interest Rate
Termination Payment Amount on the date of such termination and
the Fund shall pay the Option Fee accruing through the date of
such termination.
For the purpose of this Section 5.B, the "Low Interest Rate
Termination Payment Amount" shall be determined as follows:
(i) if the Fund was Rebalanced in accordance with this
Agreement within one Business Day following the effective date
of the notice of termination by the Fund under this Section
5.B, the Low Interest Rate Termination Payment Amount shall be
an amount equal to the Option Settlement Amount calculated as
if the date of termination pursuant to this Section 5.B was
the Protection Termination Date or (ii) if clause (i) does not
apply, then the Low Interest Rate Early Termination Payment
Amount shall be an amount equal to the Option Settlement
Amount calculated as if the effective date of the notice of
early termination provided by Party A under this Section 5.B
was the Protection Termination Date.
C. OPTIONAL TERMINATION BY THE FUND. Upon a determination by the
Board of Directors of the Fund or the shareholders of the Fund
that the Fund shall be terminated and the Shares of the Fund
redeemed in full (other than a termination of the Fund as part
of an exchange offer or similar transaction directly or
indirectly involving a registered investment company or other
fund entity that offers principal protection to the investors
in the shares or other equity interests of such registered
investment company or other fund entity), the Fund may
terminate this Agreement by giving Party A a notice specifying
a date, which shall not be more than 60 days after the
effective date of such notice, on which the Agreement will
terminate. No payments shall be due by Party A in connection
with such termination. The Fund shall pay the Option Fee
accruing through the date of such termination.
6. COVENANTS REGARDING CLOSING FUND TO NEW SHARE PURCHASES. If any of the
following events occur, then the Fund shall immediately provide notice
of each
such occurrence to Party A and, within three Business Days after such
occurrence, the Fund shall stop issuing Shares; provided that Shares
issued to existing shareholders in connection with the automatic
reinvestment of dividends shall be permitted; and provided, further,
that nothing herein shall prevent the Fund from converting Class C
Shares to Class A Shares:
1. NON ZERO VALUATION OF AGREEMENT: The Board of Directors
of the Fund, or any pricing committee or other entity,
individual or group of individuals authorized in the
Declaration of Trust of AIG Series Trust to determine
the Fund NAV determines that the Agreement has a value
other than zero; or
2. OPTION NOTIONAL AMOUNT EXCEEDS PRESCRIBED LIMIT: As of
any Business Day,
a) The Option Notional Amount exceeds $1.0 billion; and
b) Either (i) Party A receives notice from the Fund of
such occurrence and ten (10) Business Days elapse
without Party A agreeing by notice to the Fund to
raise the prescribed limitations set forth in
subparagraph (a) or (ii) Party A does not receive
notice from the Fund of the occurrence of an event
described in subparagraph (a) above within one
Business Day following such occurrence; and
c) Ten (10) Business Days elapse after the occurrence of
the event described in subparagraph (a) above and the
Fund has not obtained a separate guarantor for new
share purchases by the end of such ten-Business Day
period.
3. AGGREGATE OPTION NOTIONAL AMOUNT EXCEEDS PRESCRIBED
LIMIT: As of any Business Day,
a) The Aggregate Notional Amount exceeds $3.0 billion;
and
b) Either (i) Party A receives notice from the Fund of
such occurrence and ten (10) Business Days elapse
without Party A agreeing by notice to the Fund to
raise the prescribed limitations set forth in
subparagraph (a) or (ii) Party A does not receive
notice from the Fund of the occurrence of an event
described in subparagraph (a) above within one
Business Day following such occurrence; and
c) Ten (10) Business Days elapse after the occurrence of
the event described in subparagraph (a) above and the
Fund has not obtained a separate guarantor for new
share purchases by the end of such ten-Business Day
period.
4. LOW INTEREST RATES: If the Expense Ratio of the Fund
(increased by any fee waivers that can be terminated
without the consent of Party A) exceeds the market
value-weighted arithmetic average yield of the Treasury
Zeroes, the Agency Zeroes and the Treasury Notes held by
the Fund.
5. DEFEASANCE TEST IS FAILED: If the defeasance test set
forth in Appendix A prohibits the Fund from holding any
Futures Contracts.
7. COVENANT REGARDING CLOSING FUND TO CERTAIN SHARE CLASSES. If all of the
following conditions are true as of the last day of the second month of
any calendar quarter, then on the first day of the next calendar
quarter (and continuing through the end of such calendar quarter) the
Fund shall stop issuing Shares of Share Classes having an Expense Ratio
greater than 1.85% (185 basis points); provided that Shares of such
Share Classes automatically issued in connection with the reinvestment
of dividends shall be permitted:
a) the Expense Ratio of the Fund exceeds 2.0% (200 basis
points); and
b) more than half of the number of days from the first
Protection Inception Date hereunder to the scheduled
Protection Termination Date have elapsed; and
c) the Fund NAV exceeds $300 million.
8. COVENANT REGARDING PERMISSIBLE SHARE CLASSES. The Fund acknowledges and
agrees that only the following Share Classes shall be permitted to be
issued by it:
A. Class A Shares; provided such shares feature (i) a front-end
load not paid by the Fund, and (ii) a maximum Expense Ratio of
(x) 1.65 percent (165 basis points) unless and until the
conditions described in clause (y) apply, and (y) 1.40 percent
(140 basis points) if the permitted Futures Contract Amount is
zero under the requirements of Appendix A or, during the last
three years prior to the Protection Termination Date, if the
permitted Futures Contract Amount is 0.5 percent (one half of
one percent) or less.
B. Class C Shares; provided such shares feature (i) a load not
paid by the Fund, (ii) a maximum Expense Ratio of (x) 2.30
percent (230 basis points) unless and until the conditions
described in clause (y) apply, and (y) 2.05 percent (205 basis
points) if the permitted Futures Contract Amount is zero under
the requirements of Appendix A or, during the last three years
prior to the Protection Termination Date, if the permitted
Futures Contract Amount is 0.5 percent (one half of one
percent) of Fund NAV or less;
provided further that approximately eight (8) years
(determined in accordance with the standard procedures used by
the Manager) after the issuance of such shares, such shares
convert to Class A shares.
C. Other Share Classes, provided that the maximum Expense Ratio
for such additional share class shall not exceed the maximum
Expense Ratio for the Class C Shares in effect from time to
time; and provided further that the maximum Expense Ratio
shall be automatically reduced to no more than 2.05% (205
basis points) by no later than the date on which the maximum
Expense Ratio applicable to Class C Shares is so reduced; and
provided further that approximately eight (8) years
(determined in accordance with the standard procedures used by
the Manager) after the issuance of such shares, the maximum
Expense Ratio associated with such shares shall not exceed
1.85 percent (185 basis points).
9. COVENANTS REGARDING PERMITTED INVESTMENTS.
A. PERMITTED INVESTMENTS. The Fund shall invest in and hold, only
the following types of investments ("PERMITTED INVESTMENTS"),
PROVIDED however that the amounts of the following investments
that may be held are subject to the provisions of Appendix A
concerning re-balancing and Section 10 concerning
diversification and PROVIDED, FURTHER, that if at any time a
Permitted Investment no longer satisfies any condition
contained in the definition thereof, it shall cease to be a
Permitted Investment and must be immediately sold:
1. Cash Equivalents.
2. Cash Margin.
3. Treasury Zeroes having maturity dates no earlier than
one year prior to the Protection Termination Date and
no later than 5 days prior to the Protection
Termination Date,
4. Treasury Notes having maturities no earlier than one
year prior to the Protection Termination Date and no
later than 5 days prior to the Protection Termination
Date,
5. Agency Zeroes having maturities no earlier than one
year prior to the Protection Termination Date and no
later than 5 days prior to the Protection Termination
Date,
6. Long SPX Put Options, provided that (x) on the trade
date the purchase price thereof does not exceed the
proceeds from SPX Options written and/or sold on the
same day and (y) the expiration date of the option is
prior to the Protection Termination Date,
7. Short SPX Call Options, provided that at no time may
outstanding notional short call exposure exceed long
Futures Contract exposure, and provided further that
the call options must expire prior to the Protection
Termination Date, and
8. Futures Contracts.
B. SEGREGATION OF INVESTMENTS. The assets of the Fund shall be
segregated from the assets of all other series of Related
Funds and the investment of the assets of the Fund shall at
all times satisfy the requirements of this Confirmation
independently of any other such fund.
C. PERMISSIBLE BORROWING. The Fund may borrow cash on an
overnight basis from any of (1) State Street Bank and Trust
Company, under (and subject to the limitations and
circumstances described in) the overdraft line of credit
extended to the Fund by State Street Bank and Trust Company,
(2) American International Group, Inc. and its affiliates
("AIG"), under (and subject to the limitations and
circumstances described in) the line of credit established for
all funds advised by the Manager, (3) Related Funds and other
funds advised by the Manager; provided that, in each case, (a)
such borrowing is consistent with the order issued by the SEC
dated July 9, 2002 and the conditions set forth in the notice
of application issued by the SEC dated June 13, 2002,
including the Fund's procedures for such interfund lending and
is otherwise consistent with requirements and limitations
imposed by the Investment Company Act and (b) such borrowing
is incurred only to cover trade failures or is to be repaid
from known cash flow to the Fund within five days following
the date of such borrowing. No other borrowing by the Fund is
permitted.
D. FUTURES CONTRACT RESTRICTION. No Futures Contract may be
purchased unless (i) at the time of such purchase (and after
giving effect thereto) the Permitted Investments shall have
been Rebalanced and Diversified and (ii) at the time of such
purchase (and after giving effect thereto), the Market Value
of the Cash Equivalents (other than those included in Cash
Margin) plus the amount of Cash Margin is greater than 50% of
the Futures Contract Amount of all Futures Contracts held by
the Fund.
E. OPTIONS RESTRICTION. At the time of initiation of a Long SPX
Put Option and immediately after giving effect to such Long
SPX Put Option, the sum of the underlying contract values for
all Long SPX Put Options entered into by the Fund shall not
exceed two-thirds of the Futures Contract Amount of all
Futures Contracts held by the Fund.
F. INTERMEDIARY RATINGS. An investment that is held through a
custodian, a broker-dealer, a futures commission merchant or
another intermediary or servicer shall be a Permitted
Investment only if the relevant intermediary's
or servicer's short-term unsecured debt obligations or those
of an affiliated entity are rated at least A-1 by S&P or P-1
by Xxxxx'x; provided that, if (i) such an investment is held
by a futures commission merchant that has entered into a
tri-party agreement among such futures commission merchant,
the Fund and the Custodian which provides for a daily sweep of
cash accruing to the Fund's account at the futures commission
merchant and (ii) the Custodian's short-term unsecured debt
obligations meet the ratings criteria specified above in this
Section 9.F, then the requirement that such futures commission
merchant have the minimum ratings specified above in this
Section 9.F shall not be applicable in order for such
investment to be a Permitted Investment.
10. COVENANTS REGARDING DIVERSIFICATION. The Fund shall invest in and
divest of, or shall refrain from investing in or divesting of,
Permitted Investments in accordance with the following provisions, so
that after giving effect to market orders the following conditions are
satisfied (the process of meeting such conditions being referred to as
"INVESTMENT DIVERSIFICATION" and the Fund, after satisfying such
conditions, is referred to as being "DIVERSIFIED"):
1. Diversification of Futures Contracts. At least 80% of
the aggregate Market Value of Futures Contracts will be
comprised of investments in the Futures Contracts
expiring within the next 3 quarters. No Futures Contract
may be entered into if it matures later than 13 months
following the date that the Fund enters into such
contract.
2. Concentration of Zero Coupon Bonds. An Agency Zero may
be purchased only if immediately after giving effect to
the purchase,
a) the Market Value of Agency Zeroes issued by any one
particular government agency will not exceed 10% of
the sum of the Market Value of all Agency Zeroes and
the Market Value of all Treasury Zeroes, and
b) the sum of the Market Values of all Agency Zeroes
will not exceed 25% of the aggregate Market Values of
all Agency Zeroes and Treasury Zeroes;
provided, however, that if there are fewer than sixty (60)
months until the Protection Termination Date and if the Fund
is required by the terms of this Agreement to stop issuing
new Shares (other than Shares issued in connection with the
automatic reinvestment of dividends), then with written
consent of Party A (which may be
withheld in Party A's sole discretion), higher limits for
(a) and (b) above may be established.
3. Concentration of Cash Equivalents. The Market Value of
Cash Equivalents issued by any one obligor and its
affiliates shall not exceed the greater of (i) $500,000
and (ii) 5% of the Market Value of all Cash Equivalents
held by the Fund; provided that instruments backed by
the full faith and credit of the United States of
America may be held in greater concentrations, but that
instruments issued by any single agency or entity of the
United States of America shall be subject to such
limitation (provided that such agencies or entities
shall not be considered affiliates of each other for the
purpose); provided further that obligations of the
Custodian having maturities of three Business Days or
less may be held in concentrations of up to 7% of the
Fund's assets, and provided that, in the final three
Business Days prior to the Protection Termination Date,
or an earlier date in accordance with Section 5 of this
Confirmation, all of the Fund's assets may be invested
in a demand deposit or a savings deposit account of the
Custodian.
4. Concentration of Cash Margin. Cash Margin in the
securities account of a securities broker-dealer shall
not exceed the greater of (i) $100,000 and (ii) 1% of
the Market Value of all cash and Cash Equivalents held
by the Fund.
5. Concentration of Treasury Notes. The par value of
Treasury Notes held by the Fund shall not exceed 50% of
the aggregate value at maturity of all Treasury Zeroes
and Agency Zeroes held by the Fund.
11. COVENANTS REGARDING REPORTS.
By noon on the Business Day next following each day on which the Fund
is Rebalanced, the Fund will cause the Adviser to provide a report to Party A
demonstrating that all investments of the Fund are Permitted Investments, that
the Permitted Investments are Diversified and that the Permitted Investments are
Rebalanced, and providing the information specified in Appendix B hereto and
such other information as may be reasonably requested from time to time by Party
A to protect its rights under the Agreement. Appendix B, is hereby incorporated
into this Confirmation and made a part hereof.
12. OTHER PROVISIONS
A. REBALANCING: The covenants in Appendix A are part of this
Confirmation.
B. CALCULATION AGENT: None.
C. GOVERNING LAW: New York Law
D. ACCOUNT DETAILS:
Payments to Party A: BANK OF NEW YORK
A/C: PRUDENTIAL GLOBAL FUNDING, INC.
ABA #: 000-000-000
ACCOUNT NO.: 8900305509
Payments to The Fund: PLEASE ADVISE
E. OFFICES:
(a) The Office of Party A for the Transaction is New Jersey;
and
(b) The Office of the Fund for the Transaction is AIG,
Harborside Financial Centre, 0000 Xxxxx 0, Xxxxxx Xxxx, Xxx Xxxxxx 00000-0000.
F. BROKER/ARRANGER: No Broker/Arranger is recognized.
G. CONFIDENTIALITY: Each Party acknowledges and agrees that the
contents of this Agreement include non-public, confidential and proprietary
information and agrees to use commercially reasonable efforts to preserve the
confidentiality thereof; provided, however, that each party shall be able to use
such information in connection with asserting or defending its rights under the
Agreement and to comply with applicable law and with requests from regulatory
entities.
We are very pleased to have completed this Transaction with you. Please
confirm your acceptance of the above terms and conditions of the Transaction by
completing and executing the following portion of this document.
Best Regards,
PRUDENTIAL GLOBAL FUNDING, INC.
By: _________________________
Name:
Title:
Telephone No.:
Facsimile No.:
By: _________________________
Name:
Title:
Telephone No.:
Facsimile No.:
Agreed and accepted this ____ day of _______________, 2004.
AIG SERIES TRUST On behalf of [2010, 2015, 2020, 2025] High Watermark Fund
By ________________
Name: Xxxxxx X. Xxxxx
Title: Secretary
APPENDIX A
COVENANTS REGARDING REBALANCING OF ELIGIBLE INVESTMENTS.
A. REQUIRED INVESTING AND DIVESTING. On each Business Day, the Fund shall
invest in and divest Permitted Investments in accordance with the
following provisions, so that after giving effect to market orders the
following conditions are satisfied (the process of meeting such
conditions being referred to as "INVESTMENT REBALANCING" and the Fund,
after satisfying such conditions, is referred to as being
"REBALANCED"):
1. FUTURES CONTRACT CAP: The sum of the Futures Contract
Amounts for all Futures Contracts held by the Fund will not
exceed 85% of the sum of (i) the Market Value of the Cash
Equivalents (excluding Cash Equivalents held as Cash
Margin), plus (ii) the Market Value of Cash Margin, plus
(iii) the Market Value of the Treasury Zeroes, plus (iv) the
Market Value of the Agency Zeroes, plus (v) the Market Value
of the Treasury Notes.
2. [Omitted pursuant to a request for confidential treatment of
information pursuant to Rule 406 under the Securities Act of
1933.]
3. MINIMUM CASH HOLDINGS: The Market Value of Cash Equivalents
shall equal or exceed five percent (5%) of the Fund NAV
(excluding any value attributable to this Agreement and the
Market Value of Cash Margin).
4. [Omitted pursuant to a request for confidential treatment of
information pursuant to Rule 406 under the Securities Act of
1933.]
5. [Omitted pursuant to a request for confidential treatment of
information pursuant to Rule 406 under the Securities Act of
1933.]
6. No Uncovered Puts: The notional value of Long SPX Put
Options shall not exceed the notional value of Futures
Contracts.
7. [Omitted pursuant to a request for confidential treatment of
information pursuant to Rule 406 under the Securities Act of
1933.]
B-1
B. SIGNIFICANT INTRA-DAY DROP IN S&P 500 INDEX. If the S&P 500 Index
value as of any time during regular trading hours of the New York
Stock Exchange on any Business Day declines to a level that is 10% or
more below its value as of the close of trading on the New York Stock
Exchange on the immediately preceding Business Day or as of the time
the Fund was last Rebalanced (whichever is more recent) (the
occurrence of such a condition, an "INTRA-DAY REBALANCING TRIGGER"),
the Fund shall promptly (but in any event not later than one hour
following the occurrence of the Intra-Day Rebalancing Trigger or, if
the Intra-Day Rebalancing Trigger occurs during the last hour of
trading on the New York Stock Exchange on a Business Day, not later
than the first hour of trading on the immediately succeeding Business
Day) submit orders for sales of Futures Contracts so that, after
accounting for such sales, the Fund is Rebalanced.
C. The Fund will cause Adviser to monitor the Fund's investments in
accordance with the provisions of the Agreement.
EXHIBIT II
PRUDENTIAL FINANCIAL, INC. GUARANTY
JUNE ___, 2004
1. GUARANTY. PRUDENTIAL FINANCIAL, INC., a corporation organized and
existing under the laws of the State of New Jersey (herein referred to as
"PFI" ), hereby unconditionally guarantees to AIG SERIES TRUST ("PARTY B") the
payment of all amounts payable by PRUDENTIAL GLOBAL FUNDING, INC. ("PARTY A"),
or by any assignee of Party A which is a direct or indirect affiliate or
subsidiary of Prudential Financial, Inc., under the ISDA Master Agreement dated
as of June __, 2004 between Party A and Party B (the "AGREEMENT") in accordance
with the terms of the Agreement. In case of the failure of Party A punctually to
pay any such amounts, PFI hereby agrees upon written demand by Party B to cause
any such payment to be made promptly in accordance with the Agreement, including
any interest thereon at the Default Rate (as defined in the Agreement) from the
date such payment was due from Party A.
PFI hereby agrees that its obligations under this Guaranty shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Agreement with respect to Party A, the absence of any action to enforce Party
A's obligations under the Agreement, any waiver or consent by Party B with
respect to any provisions thereof or any other circumstances which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
This Guaranty is intended to be a guaranty of payment and not a guaranty of
collection.
PFI shall be subrogated to all rights of Party B against Party A in
respect of any amounts paid by PFI pursuant to the provisions of this Guaranty;
PROVIDED, HOWEVER, that PFI shall not be entitled to enforce or to receive any
payments arising out of, or based upon, such right of subrogation until all
amounts due and payable by Party A under the Agreement shall have been paid in
full.
This Guaranty shall remain in full force and effect until Party B shall
have been indefeasibly paid in full all amounts due it under the Agreement and
until such amounts are not subject to rescission or repayment upon the
bankruptcy, insolvency, reorganization, moratorium, receivership or similar
proceeding affecting Party A.
PFI hereby waives (i) promptness, diligence, presentment, demand of
payment (except as specified herein and in the Agreement), protest and order and
(ii) any requirement that Party B exhaust any right to take any action against
Party A (except as specified herein and in the Agreement) or any other person or
entity before proceeding to exercise any right or remedy against PFI.
2. REPRESENTATIONS. PFI represents to Party B (which representations will
be deemed to be repeated by PFI on each date on which a Transaction (as defined
in the Agreement) is entered into) that:
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organized and validly existing and in good
standing under the laws of the State of New Jersey;
(ii) POWERS. It has the power to execute and deliver this Guaranty and
any other documentation relating to this Guaranty and to perform
its obligations under this Guaranty and has taken all necessary
action to authorize 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 Guaranty 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 Guaranty
constitute its legal, valid and binding obligations, enforceable
in accordance with the terms hereof (subject to applicable
bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application
(regardless of whether enforcement is sought in a proceeding in
equity or at law)).
(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of
Default or, to its knowledge after due inquiry, Termination Event (each
as defined in the Agreement) with respect to it has occurred and is
continuing and no such event or circumstances would occur as a result
of its entering into or performing its obligations under this Guaranty.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge after
due inquiry, threatened against it or any of its Affiliates (as defined
in the Agreement) any action, suit or proceeding at law or in equity or
before any court, tribunal, governmental body, agency or official or
any arbitrator that purports to draw into question, or is likely to
affect, the legality, validity or enforceability against it of this
Guaranty or its ability to perform its obligations under this Guaranty.
(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to Party B and is identified
for the purpose of this Section 2(d) in Part 3 of the Schedule to the
Agreement is, as of the date of the information, true, accurate and
complete in every material respect.
2
3. AGREEMENTS. PFI agrees with Party B that, so long as it has or may have
obligations under this Guaranty:
(a) FURNISH SPECIFIED INFORMATION. It will deliver to Party B any documents
specified in Part 3 of the Schedule to the Agreement, by the date
specified in Part 3 of such Schedule or, if none is specified, as soon
as practicable.
(b) MAINTAIN AUTHORIZATIONS. It will 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 Guaranty and will 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 Guaranty.
(d) STAMP TAX. It agrees to pay any stamp, registration, documentation or
similar tax ("STAMP TAX") levied or imposed upon it or in respect of
its execution or performance of this Guaranty by a jurisdiction in
which it is incorporated, organized, managed and controlled, or
considered to have its seat, or in which a branch or office through
which it is acting for the purpose of this Guaranty is located ("STAMP
TAX JURISDICTION") and will indemnify Party B against any Stamp Tax
levied or imposed upon Party B or in respect of Party B's execution or
performance of the Agreement by any such Stamp Tax Jurisdiction which
is not also a Stamp Tax Jurisdiction with respect to Party B.
4. TAX GROSS-UP. All payments under this Guaranty shall be made subject to
Section 2(d) of the Agreement and such Section is hereby incorporated by
reference herein.
5. ASSIGNMENT. Neither PFI nor Party B may assign its rights or
obligations hereunder to any other person without the prior written consent of
PFI or Party B, as the case may be; PROVIDED, HOWEVER, that (a) Party B may
assign its rights and obligations hereunder to an assignee to which it has
transferred its rights and obligations under and in accordance with the
Agreement and (b) upon at least 60 days' prior written notice to Party B, PFI
may assign its obligations hereunder to The Prudential Insurance Company of
America.
6. GOVERNING LAW. The Guaranty shall be governed by and construed in
accordance with the laws of the State of New York without reference to choice of
law.
PRUDENTIAL FINANCIAL, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
3
EXHIBIT III
[FORM OF OPINION FOR PARTY B]
[LETTERHEAD OF LEGAL COUNSEL FOR PARTY B]
[DATE]
Prudential Global Funding, Inc.
Xxx Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Prudential Financial, Inc.
c/o Prudential Retirement
000 Xxxx Xxxxxx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Ladies and Gentlemen:
We have acted as counsel to ___________________ ("Party B"), a
statutory trust organized under the laws of the State of Delaware. This opinion
is being delivered to you in connection with the execution and delivery by Party
B of the ISDA Master Agreement dated as of ________________, 20___, the Schedule
thereto dated as of ________________, 20___, and the Confirmation under such
ISDA Master Agreement dated as of ________________, 20___, (together, the
"Agreement"), between PRUDENTIAL GLOBAL FUNDING, INC. and Party B. Any
capitalized terms used but not defined herein shall have the respective meanings
specified in the Agreement.
In connection with this opinion, we have examined an executed copy of
the Agreement, and such corporate documents and records of Party B, certificates
of public officials and officers of Party B, and other documents as we have
deemed necessary or appropriate for the purposes of this opinion. In such
opinion, we have assumed the genuineness of all signatures, the authenticity of
all documents submitted to us as originals, the accuracy and completeness of all
certificates and other statements, documents and records reviewed by us and the
conformity to authentic original documents of all documents submitted to us as
certified, conformed, or photostatic copies.
Based upon the foregoing, we are of the opinion that:
1. Party B is a statutory trust duly organized, validly existing, and
in good standing under the laws of the State of Delaware.
2. The execution, delivery, and performance of the Agreement are within
Party B's corporate power, have been duly authorized by all necessary corporate
action, and do not conflict with any provision of Party B's Declaration of Trust
or by-laws or any law, regulation, agreement or order or judgment of any court
or governmental agency applicable to it or to which Party B or its assets are
subject or by which Party B is bound.
3. The Agreement has been duly executed and delivered by Party B and
constitutes legally valid and binding obligations of Party B enforceable
against Party B in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, or other laws affecting the
enforcement of 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).
4. No consent, authorization, license or approval of, or registration
or declaration with, any U.S. federal or New York governmental authority is
required in connection with Party B's execution, delivery, and performance of
the Agreement.
Our opinion is limited solely to the Delaware Statutory Trust Act and
such matters of law under United States federal law and the laws of the State of
New York which in or experience would normally be applicable to the consummation
of the transaction contemplated by the Transaction Documents, as those laws are
in effect as of the date hereof. In addition, as you are aware, we are not
licensed to practice law in the State of Delaware and do not purport to be
experts in the laws of such state, and therefore, our opinion set forth in
paragraph 4 as to Delaware law is based solely on our review of standard
compilations of the version of the Uniform Commercial Code in effect in the
State of Delaware and not upon any other review of the laws of the State of
Delaware, including any case law. We express no opinion with respect to any
other Delaware law or the laws of any other jurisdiction, including but not
limited to, ordinances, regulations or practices of any county, city or other
governmental agency or body within the State of New York.
Our opinions set forth in this letter are based upon the facts in
existence and laws in effect on the date hereof, and we expressly disclaim any
obligation to update our opinions herein, regardless of whether changes in such
facts or laws come to our attention after the delivery hereof.
The Opinions expressed herein are for the exclusive benefit of
Prudential Global Funding, Inc. and Prudential Financial, Inc. This opinion may
not be relied upon in any manner by any other person and may not be disclosed,
quoted or otherwise referred to without our prior written consent.
Very truly yours,
41
EXHIBIT IV
NOTICE DETAILS
PRIMARY CONTACTS: Xxxxxx Xxxxxxx
Vice President and Actuary
Prudential Financial, Inc.
000 Xxxx Xxxxxx Xxxxx
Xxxxxx, XX 00000-0000
Tel: 000-000-0000
Facsimile: 000-000-0000
E-mail: xxxxxx.xxxxxxx@xxxxxxxxxx.xxx
Xxxx Xxxxxxx
Managing Director
Prudential Financial, Inc.
0 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Tel: 000-000-0000
Facsimile: 000-000-0000
E-mail: xxxx.xxxxxxx@xxxxxxxxxx.xxx
SECONDARY CONTACTS: Xxxxx Xxxxxxxxxx
Market Risk Analyst
Prudential Financial, Inc.
000 Xxxx Xxxxxx Xxxxx
Xxxxxx, XX 00000-0000
Tel: 000-000-0000
Facsimile: 000-000-0000
E-mail: xxxxx.xxxxxxxxxx@xxxxxxxxxx.xxx
Xxxxx Xxxxxxx
Manager, Trader Support
Prudential Financial, Inc.
0 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Tel: 000-000-0000
Facsimile: 000-000-0000
E-mail: xxxxx.xxxxxxx@xxxxxxxxxx.xxx
AIG SERIES TRUST ON BEHALF OF THE FUND
PRIMARY CONTACT: Xxxxxx X. Xxxxx
President
AIG Series Trust
Harborside Financial Center
0000 Xxxxx 0
Xxxxxx Xxxx, XX 00000-0000
Tel: 000-000-0000
Facsimile: 000-000-0000
E-mail: xxxxxx@xxxxxxxxxx.xxx
42
SECONDARY CONTACT: Xxxxx Xxxxxx
Treasurer
AIG Series Trust
Harborside Financial Center
0000 Xxxxx 0
Xxxxxx Xxxx, XX 00000-0000
Tel: 000-000-0000
Facsimile: 000-000-0000
E-mail: xxxxxxx@xxxxxxxxxx.xxx
43
