March 17, 1999
Lehman Brothers Financial Products Inc.
3 World Financial Center
New York, NY 10285
Re: Chugach Electric Association, Inc.
Ladies and Gentlemen:
This letter constitutes the opinion of General Counsel for Chugach Electric
Association, Inc., an Alaska electric cooperative ("Chugach"), in connection
with the ISDA Master Agreement, including the Schedule thereto and related
Confirmation (together the "Swap Agreement"), dated as of March 17, 1999,
between Chugach and Lehman Brothers Financial Products Inc., a Delaware
corporation ("Counterparty"). This opinion is rendered to you pursuant to
Section 4(a) of the Swap Agreement and Part 2 of the Schedule to the Swap
Agreement. Capitalized terms used without definition in this opinion have the
meanings given to them in the Swap Agreement.
I.
I have assumed the authenticity of all records, documents and instruments
submitted to us as originals, the genuineness of all signatures, the legal
capacity of natural persons and the conformity to the originals of all records,
documents and instruments submitted to us as copies. I have based my opinion
upon my review of the following records, documents, instruments and certificates
and such additional certificates relating to factual matters as I have deemed
necessary or appropriate for my opinion:
(a) The Swap Agreement;
(b) The Articles of Incorporation of Chugach certified by the Alaska
Commissioner of Commerce and Economic Development as of January 20, 1999;
(c) The Bylaws of Chugach as in effect on the date of this opinion;
(d) All records of the proceedings and actions of the board of directors of
Chugach relating to the transactions contemplated by the Swap Agreement;
and
(e) A Certificate of Compliance relating to Chugach issued by the Alaska
Commissioner of Commerce and Economic Development, dated January 20, 1999.
This opinion is limited to the federal laws of the United States of America and
the laws of the State of Alaska, and I disclaim any opinion as to the laws of
any other jurisdiction. I further disclaim any opinion as to any statute, rule,
regulation, ordinance, order or other promulgation of any regional or local
governmental body or as to any related judicial or administrative opinion.
II.
Based upon the foregoing and our examination of such questions of law as we have
deemed necessary or appropriate for the purpose of our opinion, and subject to
the limitations and qualifications expressed below, it is my opinion that:
1. The Swap Agreement has been duly authorized by all necessary corporate
action on the part of Chugach.
2. Neither the execution and delivery of the Swap Agreement on behalf of
Chugach nor the consummation by Chugach of the swap transaction as provided
in the Swap Agreement conflicts with any provision of the Articles of
Incorporation or Bylaws of the Company.
3. I do not have knowledge of any action, suit or proceeding against Chugach
that is either pending or has been threatened in writing that is likely to
affect the legality, validity or enforceability of the Swap Agreement.
III.
This opinion is rendered to you in connection with the Swap Agreement and is
solely for your benefit. This opinion may not be relied upon by any other
person, firm, corporation or other entity without my (acting as general counsel
of Chugach) prior written consent. I disclaim any obligation to advise you of
any change of law that occurs, or any facts of which we become aware, after the
date of this opinion.
Sincerely,
/s/ Donald W. Edwards
Donald W. Edwards
General Counsel
OFFICER'S CERTIFICATE
The undersigned, Donald W. Edwards, certifies as follows to Heller
Ehrman White & McAuliffe for purposes of the opinion it will render to Lehman
Brothers Financial Products Inc. regarding the ISDA Master Agreement, including
the Schedule thereto, dated as of March 17, 1999, as supplemented by that Swap
Confirmation dated as of March 17, 1999 (as so supplemented, the "Agreement"),
between Chugach Electric Association, Inc. and Lehman Brothers Financial
Products Inc.
1. I am the general counsel of Chugach Electric Association, Inc. (the
"Company"). In that capacity, I am familiar with the matters to which this
certificate relates.
2. The copy of the Articles of Incorporation of the Company as amended April
1998, previously provided to you by the Company, is a true, correct and
complete copy of the Articles of Incorporation of the Company in full force
and effect as of the date of this certificate.
3. The copy of the Bylaws of the Company, as amended April 30, 1998,
previously provided to you by the Company, is a true, correct and complete
copy of the Bylaws of the Company in full force and effect as of the date
of this certificate.
4. I have recently telefaxed to you a resolution of the board of directors of
the Company, adopted at a meeting held on February 22, 1999, approving the
transactions contemplated by the Agreement and authorizing the execution
and delivery of the Agreement. That resolution is in full force and effect
as of the date of this certificate and has not been amended or rescinded.
Each member of the board of directors of the Company was duly elected by
the shareholders or through the filling of vacancies in accordance with
applicable law. The meeting at which the transaction was approved was duly
noticed (or notice was waived) and quorum was present.
5. No proceedings for the dissolution, merger, consolidation or liquidation of
the Company, or for the sale of all or substantially all of its assets is
pending, or to the best of my knowledge, threatened or contemplated by the
Company.
DATED as of March 17, 1999
/s/ Donald W. Edwards
Donald W. Edwards, General Counsel
(Local Currency-Single Jurisdiction)
ISDA
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of March 17, 1999
Lehman Brothers Financial Products Inc. and Chugach Electric Association, Inc.
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:--
1. Interpretation
(a) Definitions. The terms defined in Section 12 and in the Schedule will
have the meanings therein specified for the purpose of this Master
Agreement.
(b) Inconsistency. In the event of any inconsistency between the provisions
of the Schedule and the other provisions of this Master Agreement, the
Schedule will prevail. In the event of any inconsistency between the
provisions of any Confirmation and this Master Agreement (including the
Schedule), such Confirmation will prevail for the purpose of the
relevant Transaction.
(c) Single Agreement. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmations form a single
agreement between the parties (collectively referred to as this
"Agreement"), and the parties would not otherwise enter into any
Transactions.
2. Obligations
(a) General Conditions.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for
value on that date in the place of the account specified in the
relevant Confirmation or otherwise pursuant to this Agreement, in
freely transferable funds and in the manner customary for payments in
the required currency. Where settlement is by delivery (that is, other
than by payment), such delivery will be made for receipt on the due
date in the manner customary for the relevant obligation unless
otherwise specified in the relevant Confirmation or elsewhere in this
Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject
to (1) the condition precedent that no Event of Default or Potential
Event of Default with respect to the other party has occurred and is
continuing,(2) the condition precedent that no Early Termination Date
in respect of the relevant Transaction has occurred or been
effectively designated and (3) each other applicable condition
precedent specified in this Agreement.
(b) Change of Account. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five
Local Business Days prior to the scheduled date for the payment or
delivery to which such change applies unless such other party gives
timely notice of a reasonable objection to such change.
(c) Netting. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of branches or offices through which the parties make
and receive payments or deliveries.
(d) Default Interest; Other Amounts. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. Representations
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered
into) that:
(a) Basic Representations.
(i) Status. It is duly organised and validly existing under the
laws of the jurisdiction of its organisation or incorporation and, if
relevant under such laws, in good standing;
(ii) Powers. It has the power to execute this Agreement and any
other documentation relating to this Agreement to which it is a party,
to deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to
perform its obligations under this Agreement and any obligations it
has under any Credit Support Document to which it is a party and has
taken all necessary action to authorise such execution, delivery and
performance;
(iii)No Violation or Conflict. Such execution, delivery and
performance do not violate or conflict with any law applicable to it,
any provision of its constitutional documents, any order or judgment
of any court or other agency of government applicable to it or any of
its assets or any contractual restriction binding on or affecting it
or any of its assets;
(iv) Consents. All governmental and other consents that are
required to have been obtained by it with respect to this Agreement or
any Credit Support Document to which it is a party have been obtained
and are in full force and effect and all conditions of any such
consents have been complied with; and
(v) Obligations Binding. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal,
valid and binding obligations, enforceable in accordance with their
respective terms (subject to applicable bankruptcy, reorganisation,
insolvency, moratorium or similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).
(b) Absence of Certain Events. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has occurred
and is continuing and no such event or circumstance would occur as a result of
its entering into or performing its obligations under this Agreement or any
Credit Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding at
law or in equity or before any court, tribunal, governmental body, agency or
official or any arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or any Credit Support Document to
which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
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 any
forms, documents or certificates specified in the Schedule or any Confirmation
by the date specified in the Schedule or such Confirmation or, if none is
specified, as soon as reasonably practicable.
(b) Maintain Authorisations. It will use all reasonable efforts to maintain
in full force and effect all consents of any governmental or other authority
that are required to be obtained by it with respect to this Agreement or any
Credit Support Document to which it is a party and will use all reasonable
efforts to obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
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 in event of
default (an "Event of Default") with respect to such party:--
(i) Failure to Pay or Deliver. Failure by the party to make, when due,
any payment under this Agreement or delivery under Section 2(a)(i) or 2(d)
required to be made by it if such failure is not remedied on or before the
third Local Business Day after notice of such failure is given to the
party;
(ii) Breach of Agreement. Failure by the party to comply with or
perform any agreement or obligation (other than an obligation to make any
payment under this Agreement or delivery under Section 2(a)(i) or 2(d) or
to give notice of a Termination Event or any agreement or obligation under
Section 4(a)) to be complied with or performed by the party in accordance
with this Agreement if such failure is not remedied on or before the
thirtieth day after notice of such failure is given to the party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider of such party
to comply with or perform any agreement or obligation to be complied with
or performed by it in accordance with any Credit Support Document if such
failure is continuing after any applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support Document or
the failing or ceasing of such Credit Support Document to be in full force
and effect for the purpose of this Agreement (in either case other than in
accordance with its terms) prior to the satisfaction of all obligations of
such party under each Transaction to which such Credit Support Document
relates without the written consent of the other party; or
(3) the party or such Credit Support Provider disaffirms, disclaims,
repudiates or rejects, in whole or in part, or challenges the validity of,
such Credit Support Document;
(iv) Misrepresentation. A representation made or repeated or deemed to
have been made or repeated by the party or any Credit Support Provider of
such party in this Agreement or any Credit Support Document proves to have
been incorrect or misleading in any material respect when made or repeated
or deemed to have been made or repeated;
(v) Default under Specified Transaction. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party (1)
defaults under a Specified Transaction and, after giving effect to any
applicable notice requirement or grace period, there occurs a liquidation
of, an acceleration of obligations under, or an early termination of, that
Specified Transaction, (2) defaults, after giving effect to any applicable
notice requirement or grace period, in making any payment or delivery due
on the last payment, delivery or exchange date of, or any payment on early
termination of, a Specified Transaction (or such default continues for at
least three Local Business Days if there is no applicable notice
requirement or grace period) or (3) disaffirms, disclaims, repudiates or
rejects, in whole or in part, a Specified Transaction (or such action is
taken by any person or entity appointed or empowered to operate it or act
on its behalf);
(vi) Cross Default. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default, event
of default or other similar condition or event (however described) in
respect of such party, any Credit Support Provider of such party or any
applicable Specified Entity of such party under one or more agreements or
instruments relating to Specified Indebtedness of any of them (individually
or collectively) in an aggregate amount of not less than the applicable
Threshold Amount (as specified in the Schedule) which has resulted in such
Specified Indebtedness becoming, or becoming capable at such time of being
declared, due and payable under such agreements or instruments, before it
would otherwise have been due and payable or (2) a default by such party,
such Credit Support Provider or such Specified Entity (individually or
collectively) in making one or more payments on the due date thereof in an
aggregate amount of not less than the applicable Threshold Amount under
such agreements or instruments (after giving effect to any applicable
notice requirement or grace period);
(vii) Bankruptcy. The party, any Credit Support Provider of such party
or any applicable Specified Entity of such party:--
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to pay
its debts or fails or admits in writing its inability generally to
pay its debts as they become due; (3) makes a general assignment,
arrangement or composition with or for the benefit of its
creditors; (4) institutes or has instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or any
other relief under any bankruptcy or insolvency law or other
similar law affecting creditors' rights, or a petition is
presented for its winding-up or liquidation, and, in the case of
any such proceeding or petition instituted or presented against
it, such proceeding or petition (A) results in a judgment of
insolvency or bankruptcy or the entry of an order for relief or
the making of an order for its winding-up or liquidation or (B) is
not dismissed, discharged, stayed or restrained in each case
within 30 days of the institution or presentation thereof; (5) has
a resolution passed for its winding-up, official management or
liquidation (other than pursuant to a consolidation, amalgamation
or merger); (6) seeks or becomes subject to the appointment of an
administrator, provisional liquidator, conservator, receiver,
trustee, custodian or other similar official for it or for all or
substantially all its assets; (7) has a secured party take
possession of all or substantially all its assets or has a
distress, execution, attachment, sequestration or other legal
process levied, enforced or sued on or against all or
substantially all its assets and such secured party maintains
possession, or any such process is not dismissed, discharged,
stayed or restrained, in each case within 30 days thereafter; (8)
causes or is subject to any event with respect to it which, under
the applicable laws of any jurisdiction, has an analogous effect
to any of the events specified in clauses (1) to (7) (inclusive);
or (9) takes any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the foregoing
acts; or
(viii) Merger Without Assumption. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or merges with or
into, or transfers all or substantially all its assets to, another entity
and, at the time of such consolidation, amalgamation, merger or transfer:
(1) the resulting, surviving or transferee entity fails to assume
all the obligations of such party or such Credit Support Provider under this
Agreement or any Credit Support Document to which it or its predecessor was a
party by operation of law or pursuant to an agreement reasonably satisfactory to
the other party to this Agreement; or
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the performance by such resulting,
surviving or transferee entity of its obligations under this Agreement.
(b) Termination Events. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any event specified below constitutes an Illegality if
the event is specified in (i) below, and, if specified to be applicable, a
Credit Event Upon Merger if the event is specified pursuant to (ii) below or an
Additional Termination Event if the event is specified pursuant to (iii) below:
(i) Illegality. Due to the adoption of, or any change in, any applicable
law after the date on which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court, tribunal or
regulatory authority with competent jurisdiction of any applicable law after
such date, it becomes unlawful (other than as a result of a breach by the party
of Section 4(b)) for such party (which will be the Affected Party):
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in respect of such
Transaction or to comply with any other material provision of this Agreement
relating to such Transaction; or
(2) to perform, or-for any Credit Support Provider of such party
to perform, any contingent or other obligation which the party (or such Credit
Support Provider) has under any Credit Support Document relating to such
Transaction;
(ii) Credit Event Upon Merger. If "Credit Event Upon Merger" is specified
in the Schedule as applying to the party, such party ("X"), any Credit Support
Provider of X or any applicable Specified Entity of X consolidates or
amalgamates with, or merges with or into, or transfers all or substantially all
its assets to, another entity and such action does not constitute an event
described in Section 5(a)(viii) but the creditworthiness of the resulting,
surviving or transferee entity is materially weaker than that of X, such Credit
Support Provider or such Specified Entity, as the case may be, immediately prior
to such action (and, in such event, X or its successor or transferee, as
appropriate, will be the Affected Party); or
(iii) Additional Termination Event. If any "Additional Termination
Event" is specified in the Schedule or any Confirmation as applying, the
occurrence of such event (and, in such event, the Affected Party or Affected
Parties shall be as specified for such Additional Termination Event in the
Schedule or such Confirmation).
(c) Event of Default and Illegality. If an event or circumstance which
would otherwise constitute or give rise to an Event of Default also constitutes
an Illegality, it will be treated as an Illegality and will not constitute an
Event of Default.
6. Early Termination
(a) Right to Terminate Following Event of Default. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) Right to Terminate Following Termination Event.
(i) Notice. If a Termination Event occurs, an Affected Party will, promptly
upon becoming aware of it, notify the other party, specifying the nature of that
Termination Event and each Affected Transaction and will also give such other
information about that Termination Event as the other party may reasonably
require.
(ii) Two Affected Parties. If an Illegality under Section 5(b)(1) occurs
and there are two Affected Parties, each party will use all reasonable efforts
to reach agreement within 30 days after notice thereof is given under Section
6(b)(i) on action to avoid that Termination Event.
(iii) Right to Terminate. If:--
(1) an agreement under Section 6(b)(ii) has not been effected
with respect to all Affected Transactions within 30 days after an Affected Party
gives notice under Section 6(b)(i); or
(2) an Illegality other than that referred to in Section
6(b)(ii), a Credit Event Upon Merger or an Additional Termination Event occurs,
either party in the case of an Illegality, any Affected Party in the
case of an Additional Termination Event if there is more than one
Affected Party, or the party which is not the Affected Party in the
case of a Credit Event Upon Merger or an Additional Termination Event
if there is only one Affected Party may, by not more than 20 days
notice to the other party and provided that the relevant Termination
Event is then continuing, designate a day not earlier than the day such
notice is effective as an Early Termination Date in respect of all
Affected Transactions.
(c) Effect of Designation
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date so
designated, whether or not the relevant Event of Default or Termination Event is
then continuing.
(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section 2(a)(i) or
2(d) in respect of the Terminated Transactions will be required to be made, but
without prejudice to the other provisions of this Agreement. The amount, if any,
payable in respect of an Early Termination Date shall be determined pursuant to
Section 6(e).
(d) Calculations.
(i) Statement. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable
detail, such calculations (including all relevant quotations and
specifying any amount payable under Section 6(e)) and (2) giving
details of the relevant account to which any amount payable to it is to
be paid. In the absence of written confirmation from the source of a
quotation obtained in determining a Market Quotation, the records of
the party obtaining such quotation will be conclusive evidence of the
existence and accuracy of such quotation.
(ii) Payment Date. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day
that notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event
of Default) and on the day which is two Local Business Days after the
day on which notice of the amount payable is effective (.in the case of
an Early Termination Date which is designated as a result of a
Termination Event). Such amount will be paid together with (to the
extent permitted under applicable law) interest thereon (before as well
as after judgment), from (and including) the relevant Early Termination
Date to (but excluding) the date such amount is paid, at the Applicable
Rate. Such interest will be calculated on the basis of daily
compounding and the actual number of days elapsed.
(e) Payments on Early Termination. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) Events of Default. If the Early Termination Date results from an Event
of Default:
(1) First Method and Market Quotation. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the Non-defaulting
Party the excess, if a positive number, of (A) the sum of the Settlement Amount
(determined by the Non-defaulting Party) in respect of the Terminated
Transactions and the Unpaid Amounts owing to the Non-defaulting Party over (B)
the Unpaid Amounts owing to the Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply, the
Defaulting Party will pay to the Non-defaulting Party, if a positive number, the
Non-defaulting Party's Loss in respect of this Agreement.
(3) Second Method and Market Quotation. If the Second Method and Market
Quotation apply, an amount will be payable equal to (A) the sum of the
Settlement Amount (determined by the Non-defaulting Party) in respect of the
Terminated Transactions and the Unpaid Amounts owing to the Non-defaulting Party
less (B) the Unpaid Amounts owing to the Defaulting Party. If that amount is a
positive number, the Defaulting Party will pay it to the Non-defaulting Party;
if it is a negative number, the Nondefaulting Party will pay the absolute value
of that amount to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply,
an amount will be payable equal to the Non-defaulting Party's Loss in respect of
this Agreement. If that amount is a positive number, the Defaulting Party will
pay it to the Non-defaulting Party; if it is a negative number, the
Non-defaulting Party will pay the absolute value of that amount to the
Defaulting Party.
(ii) Termination Events. If the Early Termination Date results from a
Termination Event:
(1) One Affected Party. If there is one Affected Party, the amount
payable will be determined in accordance with Section 6(e)(i)(3),
if Market Quotation applies, or Section 6(e)(i)(4), if Loss
applies, except that, in either case, references to the Defaulting
Party and to the Non-defaulting Party will be deemed to be
references to the Affected Party and the party which is not the
Affected Party, respectively, and, if Loss applies and fewer than
all the Transactions are being terminated Loss shall be calculated
in respect of all Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties:--
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions, and an amount will
be payable equal to (I) the sum of (a) one-half of the difference between the
Settlement Amount of the party with the higher Settlement Amount ("X") and the
Settlement Amount of the party with the lower Settlement Amount ("Y") and (b)
the Unpaid Amounts owing to X less (11) the Unpaid Amounts owing to Y; and
(B.) if Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the Transactions are being
terminated, in respect of all Terminated Transactions) and an amount will be
payable equal to one-half of the difference between the Loss of the party with
the higher Loss ("X") and the Loss of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X;
if it is a negative number, X will pay the absolute value of that amount to Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in respect
of a party, the amount determined under this Section 6(e) will be subject to
such adjustments as are appropriate and permitted by law to reflect any payments
or deliveries made by one party to the other under this Agreement (and retained
by such other party) during the period from the relevant Early Termination Date
to the date for payment determined under
Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation applies an
amount recoverable under this Section 6(e) is a reasonable pre-estimate of loss
and not a penalty. Such amount is payable for the loss of bargain and the loss
of protection against future risks and except as otherwise provided in this
Agreement neither party will be entitled to recover any additional damages as a
consequence of such losses.
7. Transfer
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, & transfer of all or
substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in
any amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts (including by
facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of
each Transaction from the moment they agree to those terms (whether
orally or otherwise). A Confirmation shall be entered into as soon as
practicable and may be executed and delivered in counterparts
(including by facsimile transmission) or be created by an exchange of
telexes or by an exchange of electronic messages on an electronic
messaging system, which in each case will be sufficient for all
purposes to evidence a binding supplement to this Agreement. The
parties will specify therein or through another effective means that
any such counterpart, telex or electronic message constitutes a
Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any right, power
or privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) Headings. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
9. 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,
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.
10. Notices
(a) Effectiveness. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except # that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
(i) if in writing and delivered in person or by courier, on the date it is
delivered;
(ii) if sent by telex, on the date the recipient's answerback is received;
(iii) if sent by facsimile transmission, on the date that transmission is
received by a responsible employee of the recipient in legible form (it being
agreed that the burden of proving receipt will be on the sender and will not be
met by a transmission report generated by the sender's facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or the
equivalent (return receipt requested), on the date that mail is delivered or its
delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) Change of Addresses. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
11. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) Jurisdiction. With respect to any suit, action or proceedings relating
to this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this
Agreement is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if this
Agreement is expressed to be governed by the laws of the State of New York; and
(ii) waives any objection which it may have at any time to the laying
of venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an inconvenient forum and further waives
the right to object, with respect to such Proceedings, that such court does not
have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) Waiver of Immunities. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
12. Definitions
As used in this Agreement:--
"Additional Termination Event" has the meaning specified in Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality, all Transactions affected by the occurrence of such
Termination Event and (b) with respect to any other Termination Event, all
Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"Applicable Rate" means:--
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of
either party from and after the date (determined in accordance with Section
6(d)(ii)) on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which
would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the
Non-default Rate; and
(d) in all other cases, the Termination Rate.
"consent" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified as
such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus I % per annum.
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with Section
6(a) or 6(b)(iii).
"Event of Default" has the meaning specified in Section 5(a) and, if
applicable, in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"law" includes any treaty, law, rule or regulation and "lawful" and "unlawful"
will be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located, (c) in
relation to any notice or other communication, including notice contemplated
under Section 5(a)(i), in the city specified in the address for notice provided
by the recipient and, in the case of a notice contemplated by Section' 2(b), in
the place where the relevant new account is to be located and (d) in relation to
Section 5(a)(v)(2), #in the relevant locations for performance with respect to
such Specified Transaction.
"Loss" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, an amount that party reasonably
determines in good faith to be its total losses and costs (or gain, in which
case expressed as a negative number) in connection with this Agreement or that
Terminated Transaction or group of Terminated Transactions, as the case may be,
including any loss of bargain, cost of funding or, at the election of such party
but without duplication, loss or cost incurred as a result of its terminating,
liquidating, obtaining or reestablishing any hedge or related trading position
(or any gain resulting from any of them). Loss includes losses and costs (or
gains) in respect of any payment or delivery required to have been made
(assuming satisfaction of each applicable condition precedent) on or before the
relevant Early Termination Date and not made, except, so as to avoid
duplication, if Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does
not include a party's legal fees and out-of-pocket expenses referred to under
Section 9. A party will determine its Loss as of the relevant Early Termination
Date, or, if that is not reasonably practicable, as of the earliest date
thereafter as is reasonably practicable. A party may (but need not) determine
its Loss by reference to quotations of relevant rates or prices from one or more
leading dealers in the relevant markets.
"Market Quotation" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have been required after that date. For this
purpose, Unpaid Amounts in respect of the Terminated Transaction or group of
Terminated transactions are to be excluded but, without limitation, any payment
or delivery that would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each applicable condition precedent) after
that Early Termination Date is to be included. The Replacement Transaction would
be subject to such documentation as such party and the Reference Market-maker
may, in good faith, agree. The party making the determination (or its agent)
will request each Reference Market-maker to provide its quotation to the extent
reasonably practicable as of the same day and time (without regard to different
time zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if more
than one quotation has the same highest value or lowest value, then one of such
quotations shall be disregarded. If fewer than three quotations are provided, it
will be deemed that the Market Quotation in respect of such Terminated
Transaction or group of Terminated Transactions cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"Non -defaulting Party" has the meaning specified in Section 6(a).
"Potential Event of Default" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"Scheduled Payment Date" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"Settlement Amount" means, with respect to a party and any Early
Termination Date, the sum of:
(a) the Market Quotations (whether positive or negative) for each Terminated
Transaction or group of Terminated Transactions for which a Market Quotation is
determined; and
(b) such party's Loss (whether positive or negative and without reference
to any Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"Specified Entity" has the meaning specified in the Schedule.
"Specified Indebtedness" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"Terminated Transactions" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"Termination Event" means an Illegality or, if specified to be applicable, a
Credit Event Upon Merger or an Additional Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market value of that which was (or would have been) required to be
delivered as of the originally scheduled date for delivery, in each case
together with (to the extent permitted under applicable law) interest, in the
currency of such amounts, from (and including) the date such amounts or
obligations were or would have been required to have been paid or performed to
(but excluding) such Early Termination Date, at the Applicable Rate. Such
amounts of interest will be calculated on the basis of daily compounding and the
actual number of days elapsed. The fair market value of any obligation referred
to in clause (b) above shall be reasonably determined by the party obliged to
make the determination under Section 6(e) or, if each party is so obliged, it
shall be the average of the fair market values reasonably determined by both
parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
LEHMAN BROTHERS FINANCIAL PRODUCTS CHUGACH ELECTRIC ASSOCIATION,
INC., a Delaware corporation INC., an Alaska not-for-profit incorporated
electric cooperative
By: /s/ Sherri Venakor By: /s/ Eugene N. Bjornstad
Name: Sherri Venakor Name: Eugene N. Bjornstad
Title: Vice President Title: General Manager
Date: March 17, 1999 Date: March 17, 1999
1
(Local Currency--Single Jurisdiction)
ISDA (R)
International Swap Dealers Association, Inc.
SCHEDULE
to the
Master Agreement
dated as of March 17, 1999
between LEHMAN BROTHERS FINANCIAL PRODUCTS INC. ("Party A")
and CHUGACH ELECTRIC ASSOCIATION, INC. ("Party B")
PART 1: Termination Provisions
(a) "Specified Entity" means in relation to Party A for the purpose of:-
Section 5(a)(v) (Default under Specified Transaction), none;
Section 5(a)(vi) (Cross Default), none;
Section 5(a)(vii) (Bankruptcy), none; and
Section 5(b)(ii) (Credit Event Upon Merger), none;
in relation to Party B for the purpose of:-
Section 5(a)(v) (Default under Specified Transaction) none;
Section 5(a)(vi) (Cross Default), none;
Section 5(a)(vii) (Bankruptcy), none; and
Section 5(b)(ii) (Credit Event Upon Merger), none.
(b) "Specified Transaction" will have the meaning specified in Section 12.
(c) The "Cross-Default" provisions of Section 5(a)(vi) will not apply to Party
A and will not apply to Party B.
(d) The "Credit Event Upon Merger" provisions of Section 5(b)(ii) will apply to
Party A will apply to Party B.
(e) The "Automatic Early Termination" provision of Section 6(a) will not apply
to Party A will not apply to Party B.
(f) Payments on Early Termination. For the purpose of Section 6(e):
(i) See part 4 (d)
(g) "Termination Currency" means United States Dollars.
(h) "Additional Termination Event." Additional Termination Event will not
apply.
PART 2: Agreement to Deliver Documents
For the purpose of Section 4(a) of this Agreement, each party agrees to deliver
the following documents:
Tax forms, documents or certificates to be delivered are: none.
Other documents to be delivered are:-
Party required to Form/Document/Certificate Date by Covered by Section 3(d)
deliver document which to be delivered Representation
- --------------------- -------------------------------------------- -------------------------- -----------------------
Party B AnnualReport of Party B thereof containing As soon as available and in Yes
audited, consolidated financial statements any event within 120 days after
certified by independent certified public the end of each fiscal year
accountants and prepared in accordance with of Party B.
generally accepted accounting principles in
the country in which such party is organized
Party B Quarterly Financial Statements of Party B As soon as available and in Yes
containing unaudited, consolidated financial any event within 90 days
statements of such party's fiscal quarter pre- after the end of each of the
pared in accordance with generally accepted first three fiscal quarters
accounting principles in the country in which of each fiscal year of
such party and such Credit Support Provider is Party B
organized
Party B Opinion of counsel substantially in the form Upon execution and delivery No
of Exhibit I hereto of this Agreement
Party A and Certified copies of all corporate authorizations Upon execution and delivery Yes
Party B and any other documents with respect to the of this Agreement
execution, delivery and performance of this
Agreement and any Credit Support Document
Party A and Certificate of authority and specimen signatures Upon execution and delivery Yes
Party B of individuals executing this Agreement any of this Agreement and there-
Credit Support Document and Confirmations after upon request of the
other party
PART 3: Miscellaneous
(a) Address for Notices. For the purpose of Section 10(a)of this Agreement:-
Address for notice or communications to Party A:
Lehman Brothers Financial Products Inc.
3 World Financial Center
New York, NY 10285
Attention: Documentation Group
Telephone No.: (212) 526-1877
Facsimile No.: (212) 526-7097
Address for notice or communications to Party B:
Chugach Electric Association, Inc.
5601 Minnesota Drive
Anchorage, AK 99519-6300
Attention: Evan J. Griffith, Jr.
Telephone No.: (907) 762-4760
Facsimile No.: (907) 762-4514
(b) Calculation Agent. The Calculation Agent is Party A.
(c) Credit Support Document. Details of any Credit Support Document:- Not
applicable.
(d) Credit Support Provider. Credit Support Provider means in relation to Party
A: Not applicable. Credit Support Provider means in relation to Party B:
Not applicable.
(e) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York (without reference to its
conflict of laws doctrine).
(f) Netting of Payments. All amounts payable on the same date, in the same
currency and in respect of the same Transaction shall be netted in
accordance with Section 2(c) of this Agreement. The election contained in
the last paragraph of Section 2(c) of this Agreement shall not apply for
the purposes of this Agreement.
(g) "Affiliate" will have the meaning specified in Section 12 of this Agreement.
PART 4: Other Provisions
(a) Set-off. Any amount (the "Early Termination Amount") payable to one party
(the Payee) by the other party (the Payer) under Section 6(e), in
circumstances where there is a Defaulting Party or one Affected Party in
the case where a Termination Event under Section 5(b)(ii) or (iii) has
occurred, will, at the option of the party ("X") other than the Defaulting
Party or the Affected Party (and without prior notice to the Defaulting
Party or the Affected Party), be reduced by its set-off against any
amount(s) (the "Other Agreement Amount") payable (whether at such time or
in the future or upon the occurrence of a contingency) by the Payee to the
Payer (irrespective of the currency, place of payment or booking office of
the obligation) under any other agreement(s) between the Payee and the
Payer or instrument(s) or undertaking(s) issued or executed by one party
to, or in favor of, the other party (and the Other Agreement Amount will be
discharged promptly and in all respects to the extent it is so set-off). X
will give notice to the other party of any set-off effected under this Part
4(a). For this purpose, either the Early Termination Amount or the Other
Agreement Amount (or the relevant portion of such amounts) may be converted
by X into the currency in which the other is denominated at the rate of
exchange at which such party would be able, acting in a reasonable manner
and in good faith, to purchase the relevant amount of such currency. If an
obligation is unascertained, X may in good faith estimate that obligation
and set-off in respect of the estimate, subject to the relevant party
accounting to the other when the obligation is ascertained. Nothing in this
Part 4(a) shall be effective to create a charge or other security interest.
This Part 4(a) shall be without prejudice and in addition to any right of
set-off, combination of accounts, lien or other right to which any party is
at any time otherwise entitled (whether by operation of law, contract or
otherwise).
(b) Delivery of Confirmations. For each Transaction entered into hereunder,
Party A shall promptly send to Party B a Confirmation via facsimile
transmission. Party B agrees to respond to such Confirmation within two (2)
Business Days, either confirming agreement thereto or requesting a
correction of any error(s) contained therein. Failure by Party A to send a
Confirmation or of Party B to respond within such period shall not affect
the validity or enforceability of such Transaction. Absent manifest error,
there shall be a presumption that the terms contained in such Confirmation
are the terms of the Transaction.
(c) Bankruptcy. Section 5(a)(vii)(3) of this Agreement is hereby amended by the
substitution of the following therefor:
"(3) sends a notice convening a meeting to propose a
voluntary arrangement of creditors, or any class thereof, or
makes a general assignment, arrangement or composition with or
for the benefit of its creditors, or any class thereof;"
(d) Early Termination: (i) Calculation of Payment. If an Early Termination Date
occurs with respect to the Treasury Rate-Lock Transaction (as defined in
the Confirmation (the "Confirmation") of even date herewith), or if the
Treasury Rate-Lock Transaction is otherwise terminated on any date before
February 13, 2002, then, irrespective of the reason for such occurrence,
the amount, if any, payable by either party to the other party (which shall
then constitute the "Adjustment Amount" for purposes of the Rate-Lock
Transaction) shall be determined in accordance with the following (and, to
the extent relevant, the Early Termination Date shall constitute the
"Determination Date" referred to in the Confirmation):
By mutual agreement
of the parties, in which case the agreed-upon Adjustment Amount will be
paid on the Payment Date and, except for the obligation to pay the
Adjustment Amount, the Treasury Rate-Lock Transaction will terminate on the
Determination Date, with no further rights or obligations of either party;
or
At the election of either party and if, after the relevant determination
is complete, the amount so determined is acceptable to Party B, in its sole
discretion: using the "Second Method" and "Market Quotation", determined by
Party A (as if Party A were the "Non-defaulting Party") as of the
Determination Date, in which case the "Adjustment Amount" for purposes
hereof shall be equal to the "Settlement Amount" that results from
application of the Second Method and Market Quotation, and as so
determined, will be paid on the Payment Date and, except for the obligation
to pay the Adjustment Amount, the Treasury Rate-Lock Transaction will
terminate on the Determination Date, with no further rights or obligations
of either party; or
At Party B's election (to be made in its sole
discretion but subject to the prior written consent of Party A, not to be
unreasonably withheld, as to the identity of the assignee), Party B may, in
lieu of terminating (or permitting the termination of) the Treasury
Rate-Lock Transaction, assign its interest in the Treasury Rate-Lock
Transaction to any other Person willing to accept such assignment and to
assume all obligations of Party B in respect thereof, on the terms and
conditions of this Agreement (including this Schedule) and the related
Confirmation, notwithstanding any other documentation between Party A and
such assignee, all pursuant to documentation reasonably acceptable in form
and substance to the assignee, to Party B and to Party A, in which case the
Treasury Rate-Lock Transaction will not terminate, but will continue as a
contract between Party A and Party B's assignee, and no Adjustment Amount
shall be payable in connection with such assignment.
(ii) Payment Subject to Set-Off. Such amount, if any, as is payable by one party
to the other in respect of an Early Termination Date shall be payable in
accordance with the Section 6 (d) (ii), and shall be subject to any
Set-off.
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(iii)Adjustment for Bankruptcy. In circumstances where an Early Termination
Event occurs because "Automatic Early Termination" applies in respect of a
party, the amount, if any, determined to be payable by either party to the
other party under this Part 4(d) will be subject to such adjustments as are
appropriate and permitted by law to reflect any payments or deliveries made
by one party to the other party under this Agreement (and retained by such
other party) during the period from the relevant Early Termination Date to
the date for payment provided under Section 6(d) (ii).
(iv) Pre-Estimate. The parties agree that the Adjustment Amount provided to be
determined and paid pursuant to this Part 4(d) is a reasonable pre-estimate
of loss and not a penalty. Such amount is payable for the loss of bargain
and the loss of protection against future risks and except as otherwise
provided in this Agreement neither party will be entitled to recover any
additional damages as a consequence of such losses.
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(e) Recording of Conversations. Each party to this Agreement acknowledges and
agrees to the tape recording of conversations between the parties to this
Agreement whether by one or other or both of the parties or their agents,
and that any such tape recordings may be submitted in evidence in any
Proceedings relating to the Agreement.
(f) Credit Assignment Event.
(i) If at any time during the term of the Treasury Rate-Lock
Transaction Party B fails to maintain, with at least one of the ratings
agencies set forth below, at least the Assignment Threshold Rating (as
defined below), the rights and obligations of Party A under the
Treasury Rate-Lock Transaction shall automatically, and without further
action by any party, be deemed to have been assigned and delegated to,
and assumed by, Lehman Brothers Special Financing Inc., a Delaware
corporation ("LBSF"), effective on the third Business Day following
notification by Party A to Party B of such assignment and assumption,
and Party B expressly and irrevocably consents to such assignment and
assumption, except that no such assignment and assumption shall occur
at any time after the occurrence of any event of default under any
master agreement between Party A and LBSF. As of and from the effective
date of such assignment and assumption, LBSF shall succeed to all
rights and obligations of Party A under the Treasury Rate-Lock
Transaction.
"Assignment Threshold Rating" means: with respect to Moody's Investors Service
Inc.: (1) long-term senior unsecured debt rating, counterparty rating or
long-term deposit-paying rating of Baa1, (2) financial strength rating of
Baa2, or (3) if neither clause (1) nor clause (2) applies, commercial paper
or short-term rating of P-3. with respect to Standard & Poor's Rating
Group: (1) long-term senior unsecured debt rating, financial programs
rating or certificate of deposit rating of BBB+, (2) claims-paying ability
rating of BBB, or (3) if neither clause (1) nor clause (2) applies,
commercial paper or short-term rating of A-2.
(ii) Party A represents that it has provided separate consideration to LBSF for
the right to assign the Treasury Rate-Lock Transaction to LBSF pursuant to
clause (i) above, and Party B shall not owe to Party A any termination or
other payment upon any such assignment.
(iii)Notwithstanding clause (i) above, no assignment of the Treasury Rate-Lock
Transaction to LBSF shall occur if, before the effective date of the
assignment and assumption described in clause (i), Party B notifies Party A
that Party B agrees to (A) terminate the Treasury Rate-Lock Transaction as
if a Termination Event has occurred and Party B is the Affected Party, or
(B) assign the Treasury Rate-Lock Transaction to a third party on terms
acceptable to Party A and Party B.
(iv) Notwithstanding clauses (i) through (iii) above, no transfer or assignment
payment shall be due to or owing from either Party A or Party B.
(g) Section 3(a) of this Agreement is amended by (i) deleting the word "and" at
the end of clause (iv); (ii) deleting the period at the end of clause (v)
and inserting therein "; and " ; and (iii) by inserting the following
additional representation:
"(vi)Eligible Swap Participant. It is an 'eligible swap participant' as
defined under the regulations of the Commodity Futures Trading
Commission, currently at 17 CFR Section 35.1(b)(2)."
(h) Section 3 is revised so as to add the following Section (e) at the end
thereof:
"(e) Relationship Between Parties. Each party represents to the other party
and will be deemed to represent to the other party on the date on
which it enters into a Transaction that (absent a written agreement
between the parties that expressly imposes affirmative obligations to
the contrary for that Transaction):-
(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 advisors 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. Further, such party 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 an agent,
fiduciary or advisor for it in respect of that Transaction."
(i) Waiver of Right to Trial by Jury. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
AND ALL RIGHTS TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
(j) Conditions to Payment. Section 2 (a)(iii) shall not apply to the payment of
the Adjustment Amount, as defined in the relevant Confirmation, or as
determined pursuant hereto.
Accepted and agreed:
LEHMAN BROTHERS FINANCIAL PRODUCTS INC. CHUGACH ELECTRIC ASSOCIATION, INC.
By: /s/ Sherri Venakor By: /s/ Eugene N. Bjornstad
Name: Sherri Venakor Name: Eugene N. Bjornstad
Title: Vice President Title: General Manager
EXHIBIT I
[PLEASE SEE THE ATTACHED TWO FORMS OF OPINIONS]
SECRETARY'S CERTIFICATE
I, Bruce Davison, [Assistant] Secretary of Chugach Electric
Association, Inc., an Alaska not-for-profit incorporated electric cooperative
(the "Company"), hereby certify pursuant to Part 2(b) of the Schedule, dated as
of March 17, 1999, to the Master Agreement dated as of March 17, 1999, between
the Company and Lehman Brothers Financial Products Inc., a Delaware corportation
("LBFP") (collectively, the "Agreement") (capitalized terms used herein and not
otherwise defined shall have the same meanings assigned to them in the
Agreement):
The following person(s) authorized to execute and deliver the
Agreement and the related Confirmation on behalf of the Company, were, at the
respective times of signing and delivery of the Agreement and such Confirmation,
and are, on and as of the date hereof, the duly appointed officers of the
Company holding the respective offices or titles set forth opposite their names
below, and the signatures set forth opposite their names below are their true
and genuine signatures:
Name Title of Office Signature
Eugene N. Bjornstad General Manager /s/ Eugene N. Bjornstad
Evan J. Griffith, Jr. Executive Manager, /s/ Evan J. Griffith, Jr.
Finance and Energy Supply
IN WITNESS WHEREOF, I have executed this Certificate as
[Assistant] Secretary of the Company this 22nd day of March, 1999.
Name: /s/ Bruce Davison
Bruce Davison
Secretary
I, Dianne Hillemeyer, do hereby certify that Bruce Davison is, on and as of
the date hereof, the duly appointed Secretary of the Company, and the signature
set forth opposite his name below is his true and genuine signature:
Name Title of Office Signature
Bruce Davison Secretary /s/ Bruce Davison
IN WITNESS WHEREOF, I have executed this Certificate as
Exec. Asst. of the Company this 22nd day of March, 1999.
Name: /s/ Dianne Hillemeyer
Name: Dianne Hillemeyer
Title: Executive Assistant