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EXHIBIT 10.68
(MULTICURRENCY--CROSS BORDER)
ISDA(R)
International Swaps & Derivatives Association, Inc.
MASTER AGREEMENT
dated as of 1 June 1999
CREDIT SUISSE FINANCIAL PRODUCTS and LAM RESEARCH CORPORATION have entered
and/or anticipate entering into one or more transactions (each a "Transaction")
that are or will be governed by this Master Agreement, which includes the
schedule (the "Schedule"), and the documents and other confirming evidence
(each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:--
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) INCONSISTENCY. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmations form a single agreement
between the parties (collectively referred to as this "Agreement"), and the
parties would not otherwise enter into any Transactions.
2. OBLIGATIONS
(a) GENERAL CONDITIONS.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for value
on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the
required currency. Where settlement is by delivery (that is, other than by
payment), such delivery will be made for receipt on the due date in the
manner customary for the relevant obligation unless otherwise specified in
the relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to
(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.
Copyright(c)1991 by International Swaps & Derivatives Association, Inc.
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(b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) NETTING. If on any date amounts would otherwise be payable:-
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be
made in the Schedule or a Confirmation by specifying that subparagraph (ii)
above will not apply to the Transactions identified as being subject to the
election, together with the starting date (in which case subparagraph (ii)
above will not, or will cease to, apply to such Transactions from such date).
This election may be made separately for different groups of Transactions and
will apply separately to each pairing of Offices through which the parties make
and receive payments or deliveries.
(d) DEDUCTION OR WITHHOLDING FOR TAX.
(i) GROSS-UP. All payments under this Agreement will be made without any
deduction or withholding for or on account of any Tax unless such deduction
or withholding is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, then in effect. If
a party is so required to deduct or withhold, then that party ("X") will:-
(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required to be
deducted or withheld (including the full amount required to be
deducted or withheld from any additional amount paid by X to Y under
this Section 2(d)) promptly upon the earlier of determining that such
deduction or withholding is required or receiving notice that such
amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified copy),
or other documentation reasonably acceptable to Y, evidencing such
payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to the
payment to which Y is otherwise entitled under this Agreement, such
additional amount as is necessary to ensure that the net amount
actually received by Y (free and clear of Indemnifiable Taxes, whether
assessed against X or Y) will equal the full amount Y would have
received had no such deduction or withholding been required. However,
X will not be required to pay any additional amount to Y to the extent
that it would not be required to be paid but for:-
(A) the failure by Y to comply with or perform any agreement
contained in Section 4(a)(i), 4(a)(iii) or 4(d); or
(B) the failure of a representation made by Y pursuant 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, on or after the
date on which a Transaction is entered into (regardless of
whether such action is taken or brought with respect to a party
to this Agreement) or (II) a Change in Tax Law.
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(ii) Liability. If:
(1) X is required by any applicable law, as modified by the practice
of any relevant governmental revenue authority, to make any deduction
or withholding in respect of which X would not be required to pay an
additional amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly against
X.
then, except to the extent Y has satisfied or then satisfies the liability
resulting from such Tax, Y will promptly pay to X the amount of such
liability (including any related liability for interest, but including any
related liability for penalties only if Y has failed to comply with or
perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).
(e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:--
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organised and validly existing under the laws of
the jurisdiction of its organisation or incorporation and, if relevant
under such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to deliver
this Agreement and any other documentation relating to this Agreement that
it is required by this Agreement to deliver and to perform its obligations
under this Agreement and any obligations it has under any Credit Support
Document to which it is a party and has taken all necessary action to
authorise such execution, delivery and performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and performance do
not violate or conflict with any law applicable to it, any provision of its
constitutional documents, any order or judgment of any court or other
agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;
(iv) CONSENTS. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in full
force and effect and all conditions of any such consents have been complied
with; and
(V) OBLIGATIONS BINDING. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal, valid
and binding obligations, enforceable in accordance with their respective
terms (subject to applicable bankruptcy, reorganisation, insolvency,
moratorium or similar laws affecting creditors' rights generally and
subject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a proceeding in
equity or at law)).
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(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has occurred
and is continuing and no such event or circumstance would occur as a result of
its entering into or performing its obligations under this Agreement or any
Credit Support Document to which it is a party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding at
law or in equity or before any court, tribunal, governmental body, agency or
official or any arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or any Credit Support Document to
which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.
(f) PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(f) is accurate and true.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party: --
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs: --
(i) any forms, documents or certificates relating to taxation specified
in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any Confirmation;
and
(iii) upon reasonable demand by such other party, any form or document that
may be required or reasonably requested in writing in order to allow such
other party or its Credit Support Provider to make a payment under this
Agreement or any applicable Credit Support Document without any deduction
or withholding for or on account of any Tax or with such deduction or
withholding at a reduced rate (so long as the completion, execution or
submission of such form or document would not materially prejudice the
legal or commercial position of the party in receipt of such demand), with
any such form or document to be accurate and completed in a manner
reasonably satisfactory to such other party and to be executed and to be
delivered with any reasonably required certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) COMPLY WITH LAWS. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) TAX AGREEMENT. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of such
failure.
(e) PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated,
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organised, managed and controlled, or considered to have its seat, or in which
a branch or office through which it is acting for the purpose of this Agreement
is located ("Stamp Tax Jurisdiction") and will indemnify the other party
against any Stamp Tax levied or imposed upon the other party or in respect of
the other party's execution or performance of this Agreement by any such Stamp
Act Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the
other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) Events of Default. The occurrence at any time with respect to a party,
or, if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event of
default (an "Event of Default") with respect to such party:--
(i) Failure to Pay or Deliver. Failure by the party to make, when
due, any payment under this Agreement or delivery under Section 2(a)(i)
or (2e) 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)1) or
2(e) or to give notice of a Termination Event or any agreement or
obligation under Section 4(a)(i), 4(a)(iii) or 4(d) to be complied with
or performed by the party in accordance with this Agreement if such
failure is not remedied on or before the thirtieth day after notice of
such failure is given to the party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider of such
party to comply with or perform any agreement or obligation to
be complied with or performed by it in accordance with any
Credit Support Document if such failure is continuing after any
applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support
Document or the failing or ceasing of such Credit Support
Document to be in full force and effect for the purpose of this
Agreement (in either case other than in accordance with its
terms) prior to the satisfaction of all obligations of such
party under each Transaction to which such Credit Support
Document relates without the written consent of the other party;
or
(3) the party or such Credit Support Provider disaffirms,
repudiates or rejects, in whole or in part, or challenges the
validity of, such Credit Support Document:
(iv) Misrepresentation. A representation (other than a
representation under Section 3(e) of (f)) made or repeated or deemed to
have been made or repeated by the party or any Credit Support Provider
of such party in this Agreement or any Credit Support Document proves to
have been incorrect or misleading in any material respect when made or
repeated or deemed to have been made or repeated;
(v) Default under Specified Transaction. The party, any Credit
Support Provider of such party or any applicable Specified Entity of
such party (1) defaults under a Specified Transaction and, after giving
effect to any applicable notice requirement or grace period, there
occurs a liquidation of, an acceleration of obligations under, or an
early termination of, that Specified Transaction, (2) defaults, after
giving effect to any applicable notice requirement or grace period, in
making any payment or delivery due on the last payment, delivery or
exchange date of, or any payment on early termination of, a Specified
Transaction (or such default continues for at least three Local Business
Days if there is no applicable notice requirement or grace period) or
(3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a
Specified Transaction (or such action is taken by any person or entity
appointed or empowered to operate it or act on its behalf;
(vi) Cross Default. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default,
event of default or other similar conditions or event (however
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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 as aggregate amount of net less than the applicable
Threshold Amount under such agreement 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 debt 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 of insolvency law or other similar law affecting
creditor's 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 instruction 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 of 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 or, 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 entry 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 extent
(without the consent of the other party) to the performance by such
resulting, surviving or transferee entity of its obligations under
this Agreement.
(b) Termination Events. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any event specified below constitutes an Illegality if
the event is specified in (i) below, a Tax Event if the event is specified in
(ii) below or a Tax Event Upon Merger if the event is specified in (iii) below,
and, if specified to be applicable, a Credit Event
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Upon Merger if the event is specified pursuant to (iv) below or an Additional
Termination Event if the event is specified pursuant to (v) below: --
(i) ILLEGALITY. Due to the adoption of, or any change in, any applicable
law after the date on which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court,
tribunal or regulatory authority with competent jurisdiction of any
applicable law after such date, it becomes unlawful (other than as a result
of a breach by the party of Section 4(b)) for such party (which will be the
Affected Party); --
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in respect of
such Transaction or to comply with any other material provision of
this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party to
perform, any contingent or other obligation which the party (or such
Credit Support Provider) has under any Credit Support Document
relating to such Transaction;
(ii) TAX EVENT. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on which
a Transaction is entered into (regardless of whether such action is taken
or brought with respect to a party to this Agreement) or (y) a Change in
Tax Law, the party (which will be the Affected Party) will, or there is a
substantial likelihood that it will, on the next succeeding Scheduled
Payment Date (1) be required to pay to the other party an additional amount
in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in
respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a
payment from which an amount is required to be deducted or withheld for or
on account of Tax (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) and no additional amount is required to be paid in
respect of such Tax under Section 2(d)(i)(4) (other than by reason of
Section 2(d)(i)(4)(A) or (B));
(iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the next
succeeding Scheduled Payment Date will either (1) be required to pay an
additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) or (2) receive a payment from which an amount has been deducted or
withheld for or on account of any Indemnifiable Tax in respect of which the
other party is not required to pay an additional amount (other than by
reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a
party consolidating or amalgamating with, or merging with or into, or
transferring all or substantially all its assets to, another entity (which
will be the Affected Party) where such action does not constitute an event
described in Section 5(a)(viii);
(iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is specified
in the Schedule as applying to the party, such party ("X"), any Credit
Support Provider of X or any applicable Specified Entity of X consolidates
or amalgamates with, or merges with or into, or transfers all of
substantially all its assets to, another entity and such action does not
constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate, will
be the Affected Party); or
(v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination Event"
is specified in the Schedule or any Confirmation as applying, the
occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).
(e) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.
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6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying the
nature of that Termination Event and such Affected Transaction and will
also give such other information about that Termination Event as the other
party may reasonably require.
(ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality under
Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected
Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the
Affected Party, the Affected Party will, as a condition to its right to
designate an Early Termination Date under Section 6(b)(iv), use all
reasonable efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20 days after
it gives notice under Section 6(b)(i) all its rights and obligations under
this Agreement in respect of the Affected Transactions to another of its
Offices or Affiliates so that such Termination Event ceases to exist.
If the Affected Party is not able to make such transfer it will give notice
to the other party to that effect within such 20 day period, whereupon the
other party may effect such a transfer within 30 days after the notice is
given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject to
and conditional upon the prior written consent of the other party, which
consent will not be withheld if such other party's policies in effect at
such time would permit it to enter into transactions with the transferee on
the terms proposed.
(iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1) or a
Tax Event occurs and there are two Affected Parties, each party will use
all reasonable efforts to reach agreement within 30 days after notice
thereof is given under Section 6(b)(i) on action to avoid that Termination
Event.
(iv) RIGHT TO TERMINATE. If:--
(1) a transfer under Section 6(b)(ii) or an agreement under Section
6(b)(iii), as the case may be, has not been effected with respect to
all Affected Transactions within 30 days after an Affected Party
gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon
Merger or an Additional Termination Event occurs, or a Tax Event Upon
Merger occurs and the Burdened Party is not the Affected Party.
either party in the case of an Illegality, the Burdened Party in the case
of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event
or an Additional Termination Event if there is more than one Affected
Party, or the party which is not the Affected Party in the case of a Credit
Event. Upon Merger or an Additional Termination Event if there is only one
Affected Party may, by not more than 20 days notice to the other party and
provided that the relevant Termination Event is then
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continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date
so designated, whether or not the relevant Event of Default or
Termination Event is then continuing.
(ii) Upon the occurrence of effective designation of an Early
Termination Date, no further payments or deliveries under Section
2(a)(i) or 2(e) in respect of the Terminated Transactions will be
required to be made, but without prejudice to the other provisions of
this Agreement. The amount, if any, payable in respect of an Early
Termination Date shall be determined pursuant to Section 6(e).
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and
will provide to the other party a statement (1) showing, in reasonable
detail, such calculations (including all relevant quotations and
specifying any amount payable under Section 6(e)) and (2) giving
details of the relevant account to which any amount payable to it is
to be paid. In the absence of written confirmation from the source of
a quotation obtained in determining a Market Quotation, the records of
the party obtaining such quotation will be conclusive evidence of the
existence and accuracy of such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect of any
Early Termination Date under Section 6(c) will be payable on the day
that notice of the amount payable is effective (in the case of an
Early Termination Date which is designated or occurs as a result of an
Event of Default) and on the day which is two Local Business Days
after the day on which notice of the amount payable is effective (in
the case of an Early Termination Date which is designated as a result
of a Termination Event). Such amount will be paid together with (to
the extent permitted under applicable law) interest thereon (before as
well as after judgment) in the Termination Currency, from (and
including) the relevant Early Termination Date to (but excluding) the
date such amount is paid, at the Applicable Rate. Such interest will
be calculated on the basis of daily compounding and the actual number
of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs,
the following provisions shall apply based on the parties' election in the
Schedule of a payment measure, either "Market Quotation" or "Loss", and a
payment method, either the "First Method" or the "Second Method". If the
parties fail to designate a payment measure or payment method in the
Schedule, it will be deemed that "Market quotation" or the "Second method",
as the case may be, shall apply. The amount, if any, payable in respect of
an Early Termination Date and determined pursuant to this Section will be
subject to any Set-off.
(i) EVENTS OF DEFAULT. If the Early Termination Date results from an
Event of Default:--
(1) FIRST METHOD AND MARKET QUOTATION. If the First Method and
market Quotation apply, the Defaulting Party will pay to the
Non-defaulting party the excess, if a positive number, of (A) the
sum of the Settlement Amount (determined by the Non-defaulting
Party) in respect of the Terminated Transactions and the
Termination Currency Equivalent of the Unpaid Amounts owing to
the Non-defaulting Party over (B) the Termination Currency
Equivalent of the Unpaid Amounts owing to the Defaulting Party.
(2) FIRST METHOD AND LOSS. If the First Method and Loss apply,
the Defaulting Party will pay to the Non-defaulting Party, if a
positive number, the Non-defaulting Party's Loss in respect of
this Agreement.
(3) SECOND METHOD AND MARKET QUOTATION. If the Second method and
Market quotation apply, an amount will be payable equal to (A)
the sum of the Settlement Amount (determined by the
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Non-defaulting Party) in respect of the Terminated Transactions and the
Termination Currency Equivalent of the Unpaid Amounts owing to the
Non-defaulting Party less (B) the Termination Currency Equivalent of the
Unpaid Amounts owing to the Defaulting Party. If that amount is a
positive number, the Defaulting Party will pay it to the Non-defaulting
Party: if it is a negative number, the Non-defaulting Party will pay the
absolute value of that amount to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply, an
amount will be payable equal to the Non-defaulting Party's Loss in
respect of this Agreement. If that amount is a positive number, the
Defaulting Party will pay it to the Non-Defaulting Party: if it is a
negative number, the Non-defaulting Party will pay the absolute value of
that amount to the Defaulting Party.
(ii) Termination Events. If the Early Termination Date results from a
Termination Event --
(1) One Affected Party. If there is one Affected Party, the amount
payable will be determined in accordance with Section 6(e)(i)(3), if
Market Quotation applies, or Section 6(e)(i)(4), if Loss applies, except
that, in either case, references to the Defaulting Party and to the
Non-defaulting Party will be deemed to be references to the Affected
Party and the party which is not the Affected Party, respectively, and,
if Loss applies and fewer than all the Transactions are being
terminated. Loss shall be calculated in respect of all Terminated
Transactions.
(2) Two Affected Parties. If there are two Affected Parties: --
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions, and
an amount will be payable equal (I) the sum of (a) one-half of
the difference between the Settlement Amount of the party with
the higher Settlement Amount ("X") and the Settlement Amount of
the party with the lower Settlement Amount ("Y") and (b) the
Termination Currency Equivalent of the Unpaid Amounts owing to X
less than (II) the Termination Currency Equivalent of the Unpaid
Amounts owing 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 to Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will
be subject to such adjustments as are appropriate and permitted by law
to reflect any payments or deliveries made by one party to the other
under this Agreement (and retained by such other party) during the
period from the relevant Early Termination Date to the date for payment
determined under Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation applies an
amount recoverable under this Section 6(e) is a reasonable pre-estimate
of loss and not a penalty. Such amount is payable for the loss of
bargain and the loss of protection against future risks and except as
otherwise provided in this Agreement neither party will be entitled to
recover any additional damages as a consequence of such losses.
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7. TRANSFER
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party except that--
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to another entity (but without prejudice to any
other right or remedy under this Agreement; and
(b) a party may make such a transfer of all or any part of its interest in
any amount payable to it from a Defaulting Party under Section 6(c)
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, except to the extent such tender results in the accrual receipt by the
party to which payment is owed, acting in a reasonable manner and in good faith
in converting the currency so tendered into the Contractual Currency, of the
full amount in the Contractual Currency of all amounts payable in respect of
this Agreement. 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 (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to 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 purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such party.
The term "rate of exchange" includes, without limitation, any premiums and costs
of exchanges payable in connection with the purchase of conversion into the
Contractual Currency.
(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums payable in respect of this
Agreement.
(d) EVIDENCE OF LOSS. For the purpose of this section 8, it will be
sufficient for a party to demonstrate that it would have suffered a loss had an
actual exchange or purchase been made.
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9. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement (and each amendment, modification and waiver in respect
of it) may be executed and delivered in counterparts (including by
facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable and
may be executed and delivered in counterparts (including by facsimile
transmission) or be created by an exchange of telexes or by an exchange of
electronic messages on an electronic messaging system, which in each case
will be sufficient for all purposes to evidence a binding supplement to
this Agreement. The parties will specify therein or through another
effective means that any such counterpart, telex or electronic message
constitutes a Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. OFFICES: MULTIBRANCH PARTIES
(a) If Section 10(a) is specified in the Schedule as applying, each party that
entered into a Transaction through an Office other than its head or home office
represents to the other party that, notwithstanding the place of booking office
or jurisdiction of incorporation or organisation of such party, the obligations
of such party are the same as if it had entered into the Transaction through its
head or home office. This representation will be deemed to be repeated by such
party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a
Transaction will be specified in the relevant Confirmation.
11. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document
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to which the Defaulting Party is a party or by reason of the early termination
of any Transaction, including, but not limited to, costs of collection.
12. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated: --
(i) if in writing and delivered in person or by courier, on the date it
is delivered;
(ii) if sent by telex, on the date the recipient's answerback is received;
(iii) if sent by facsimile transmission, on the date that transmission is
received by a responsible employee of the recipient in legible form (it
being agreed that the burden of proving receipt will be on the sender and
will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or the
equivalent (return receipt requested), on the date that mail is delivered
or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably: --
(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of the State of New
York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an inconvenient forum and further
waives the right to object, with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments 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) 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
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reason any party's Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a substitute process
agent acceptable to the other party. The parties irrevocably consent to service
of process given in the manner provided for notices in Section 12. Nothing in
this Agreement will affect the right of either party to serve process in any
other manner permitted by law.
(d) Waiver of Immunities. Each party irrevocably waives to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds form (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. DEFINITIONS
As used in this Agreement --
"Additional Termination Event" has the meaning specified in Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"Applicable Rate" means: --
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"Burdened Party" has the meaning specified in Section 5(b).
"Change in Tax Law" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
"Consent" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified as
such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
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"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule;
"ILLEGALITY" has the meaning specified in Section 5(b).
"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 of 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 of fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority)
and "LAWFUL" and "UNLAWFUL" will be construed accordingly.
"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.
"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(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 11. A party will determine its
Loss as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.
"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have
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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 such 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 Marker-maker may, in good faith, agree. The
party making the determination (or its agent) will request each Reference
Market-maker to provide its quotation to the extent reasonably practicable as of
the same day and time (without regard to different time zones) on or as soon as
reasonably practicable after the relevant Early Termination Date. The day and
time as of which those quotations are to be obtained will be selected in good
faith by the party obliged to make a determination under Section 6(e), and, if
each party is so obliged, after consultation with the other. If more than three
quotations are provided, the Market Quotation will be the arithmetic mean of the
quotations, without regard to the quotations having the highest and lowest
values. If exactly three such quotations are provided, the Market Quotation will
be the quotation remaining after disregarding the highest and lowest quotations.
For this purpose, if more than one quotation has the same highest value or
lowest value, then one of such quotations shall be disregarded. If fewer than
three quotations are provided, it will be deemed that the Market Quotation in
respect of such Terminated Transaction or group of Terminated Transactions
cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a)
"Office" means a branch or office of a party, which may be such party's head or
home office.
"Potential Event of Default" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a 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.
"Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organised, managed and controlled or considered
to have its seat, (b) where an Office through which the party is acting for
purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through which such payment
is made.
"Scheduled Payment Date" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement
another contract applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"Settlement Amount" means, with respect to a party and any Early Termination
Date, the sum of:--
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive of negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and
(b) such party's Less (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
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"Specified Indebtedness" means, subject to the Schedule, any obligation
(whether present or future, contingent or otherwise, as principal or surety or
otherwise) in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"Stamp Tax" means any stamp, registration, documentation or similar tax.
"Tax" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section 5(b).
"Terminated Transactions" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"Termination Currency" has the meaning specified in the Schedule.
"Termination Currency Equivalent" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(c), be selected in
good faith by that party and otherwise will be agreed by the parties.
"Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market
17
18
value of that which was (or would have been) required to be delivered as of the
originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or would
have been required to have been paid or performed to (but excluding) such Early
Termination Date, at the Applicable Rate. Such amounts of interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b) above
shall be reasonably determined by the party obliged to make the determination
under Section 6(e) or, if each party is so obliged, it shall be the average of
the Termination Currency Equivalents of the fair market values reasonably
determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
CREDIT SUISSE FINANCIAL PRODUCTS LAM RESEARCH CORPORATION
- ---------------------------------- ----------------------------------
(Name of Party) (Name of Party)
By: /s/ EDMOND CURTIN By: [SIG]
------------------------------- -------------------------------
Name: Edmond Curtin Name: Craig Garber
Title: Director - Legal and Title: VP/Treasurer
Compliance Department Date: 6/15/99
Date:
By: /s/ PAUL MANN
----------------------------------
Name: Paul Mann
Title: Vice President - Legal
and Compliance Department
Date:
18
19
SCHEDULE
to the
MASTER AGREEMENT
dated as of 1 June 1999
between
CREDIT SUISSE FINANCIAL PRODUCTS, AND LAM RESEARCH CORPORATION,
an unlimited company incorporated a corporation established
under the laws of England and Wales under the laws of the State
("PARTY A") of Delaware
("PARTY B")
PART 1
TERMINATION PROVISIONS
In this Agreement the following terms shall be given the following meaning.
Unless otherwise specified, references below to "Section" or "Sections" are to
those sections of the Master Agreement dated 1 June 1999 (the "Agreement"):-
(a) SPECIFIED ENTITY. "Specified Entity" means "Affiliates" in relation to Party
A and Party B for the purpose of the "Default under Specified Transaction"
provision Section 5(a)(v).
(b) SPECIFIED TRANSACTION. "Specified Transaction" will have the meaning
specified in Section 14.
(c) CROSS DEFAULT. The "Cross Default" provision Section 5(a)(vi) will apply to
Party A and Party B amended as follows:-
Specified Indebtedness
Instead of the definition in Section 14 of this Agreement, "Specified
Indebtedness" shall mean any obligation (whether present or future,
contingent or otherwise, as principal or surety or otherwise) (a) in
respect of borrowed money, and/or (b) in respect of any Specified
Transaction (except that, for this purpose only, the words "and any
other entity" shall be substituted for the words "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)" where they
appear in the definition of Specified Transaction).
Threshold Amount
"Threshold Amount" means $10,000,000 (including the United States
Dollar equivalent of obligations stated in any other currency or
currency unit).
1
20
(d) CREDIT EVENT UPON MERGER. The "Credit Event Upon Merger" provision Section
5(b)(iv) will apply to Party A and Party B restated as follows:-
"Credit Event Upon Merger" shall mean that a Designated Event (as defined below)
occurs with respect to a party ("X"), and such Designated Event does not
constitute an event described in Section 5(a)(viii) but the creditworthiness of
X or, if applicable, the successor, surviving or transferee entity of X, is
materially weaker than that of X immediately prior to such action (and, in such
event, such party or its successor or transferee, as appropriate, will be the
Affected Party). For purposes hereof, a Designated Event with respect to X means
that, after the Trade Date of the first Transaction between the parties:
(i) 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 execution date hereof) to, or
receives all or substantially all the assets or obligations
of, another entity;
(ii) any person or entity acquires directly or indirectly the
beneficial ownership of equity securities having the power to
elect a majority of the board of directors of X or otherwise
acquires directly or indirectly the power to control the
policy-making decisions of X; or
(iii) X effects any substantial change in its capital structure by
means of the issuance, incurrence or guarantee of debt or the
issuance of preferred stock or other securities convertible
into, or exchangeable for, debt or preferred stock.
(e) AUTOMATIC EARLY TERMINATION. The "Automatic Early Termination" provision of
Section 6(a) will apply to Party A and Party B.
(f) PAYMENTS ON EARLY TERMINATION. For the purpose of Section 6(e), the Second
Method and Market Quotation will apply.
(g) TERMINATION CURRENCY. "Termination Currency" means United States Dollars.
(h) ADDITIONAL TERMINATION EVENT. The following shall be an Additional
Termination Event with respect to Party B for the purposes of this Agreement
with Party B as the sole Affected Party:-.
Party B fails to maintain, as reasonably determined by Party A, a Cash
Balance of USD75,000,000.
For the purpose of this Additional Termination Event "Cash Balance" shall be
defined as being the sum of cash and cash equivalents as reported in Party B's
last filed quarterly unaudited or annually audited accounts and for the
avoidance of doubt "Cash Balance" shall not include restricted cash as reported
in Party B's last filed quarterly unaudited or annually audited accounts.
2
21
PART 2
TAX REPRESENTATIONS
(a) PAYER TAX REPRESENTATIONS. For the purpose of Section 3(e), Party A and
Party B each makes the following representation:
It is not required by any applicable law, as modified by the practice
of any relevant governmental revenue authority, of any Relevant
Jurisdiction to make any deduction or withholding for or on account of
any Tax from any payment (other than interest under Section 2(e),
6(d)(ii) or 6(e)) to be made by it to the other party under this
Agreement. In making this representation, it may rely on:
(i) the accuracy of any representation made by the other party
pursuant to Section 3(f);
(ii) the satisfaction of the agreement of the other party contained
in Section 4(a)(i) or 4(a)(iii) and the accuracy and
effectiveness of any document provided by the other party
pursuant to Section 4(a)(i) or 4(a)(iii); and
(iii) the satisfaction of the agreement of the other party contained
in Section 4(d);
provided that it shall not be a breach of this representation where
reliance is placed on clause (ii), and the other party does not deliver
a form or document under Section 4(a)(iii) by reason of material
prejudice to its legal or commercial position.
(b) PAYEE TAX REPRESENTATIONS. For the purpose of Section 3(f),
(i) Party A represents that (A) it is entering into each
Transaction in the ordinary course of its trade as, and is, a
recognised U.K. bank and (B) it will bring into account
payments made and received in respect of each Transaction in
computing its income for United Kingdom tax purposes.
(ii) Party B makes no Payee Tax Representations.
3
22
PART 3
AGREEMENT TO DELIVER DOCUMENTS
Each party agrees to deliver the following documents as applicable:-
(a) For the purpose of Section 4(a)(i), tax forms, documents or certificates to
be delivered are:-
PARTY REQUIRED TO FORM/DOCUMENT/ DATE BY WHICH
DELIVER DOCUMENTS CERTIFICATE TO BE DELIVERED
Not Applicable Not Applicable Not Applicable
(b) For the purpose of Section 4(a)(ii), other documents to be delivered are:-
PARTY REQUIRE TO FORM/DOCUMENT/ DATE BY WHICH COVERED BY
DELIVER DOCUMENT CERTIFICATE TO BE DELIVERED SECTION 3(d)
REPRESENTATION
Party A and Party B Evidence reasonably Upon execution of this Yes
satisfactory to the Agreement and, if
other party as to the requested, upon
names, true signatures execution of any
and authority of the Confirmation
officers or officials
signing this Agreement
or any Confirmation on
its behalf.
Party A and Party B A copy of the annual Upon request, as soon Yes
report for such party as publicly available
containing audited or
certified financial
statements for the most
recently ended
financial year
4
23
PART 4
MISCELLANEOUS
(a) ADDRESSES FOR NOTICES. For the purpose of Section 12(a):-
(i)(1) Address for notices or communications to Party A (other than by
facsimile):-
Office: London
Address: One Cabot Square Attention: (1) Co-Heads of Global Trading;
London E14 4QJ (2) Managing Director -
England Operations Department;
(3) Director - Legal Department
Telex No.: 264521 Answerback: CSFINP G
(For all purposes.)
(2) For the purpose of facsimile notices or communications under this
Agreement (other than a notice or communication under Section 5 or 6):-
Facsimile No.: 0171 888 2686
Attention: Director - Legal Department
Telephone number for oral confirmation of receipt of facsimile in
legible form: 0171 888 2028 Designated responsible employee for the
purposes of Section 12(a)(iii): Senior Legal Secretary
(ii) Address for notices or communications to Party B:-
Office:
Address: Lam Research Corporation Attention: Craig Garber
4650 Cushing Parkway
Fremont, California
94538-6470
Telephone No.: (i) (510) 659-0200 Facsimile No.: (510) 572-1586
(ii) (510) 572-1875
(For all purposes.)
(b) PROCESS AGENT. For the purpose of Section 13(c):-
Party A appoints as its Process Agent:- CSFP Capital, Inc., Eleven Madison
Avenue, New York, NY 10010 (Attention: Director, Legal and Compliance
Department)
(c) OFFICES. The provisions of Section 10(a) will apply to this Agreement.
5
24
(d) MULTIBRANCH PARTY. For the purpose of Section 10(c):-
Party A is a Multibranch Party and may act through its London Office as
specified in Paragraph (a) above and through its Tokyo Office specified in
Exhibit 1 attached hereto.
Party B is not a Multibranch Party.
(e) CALCULATION AGENT. The Calculation Agent is Party A unless otherwise agreed
in a Confirmation in relation to the relevant Transaction.
(f) CREDIT SUPPORT DOCUMENT. Details of any Credit Support Document: Not
applicable.
(g) 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.
(h) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of New York without reference to choice of
law doctrine.
(i) NETTING OF PAYMENTS. Section 2(c)(ii) of this Agreement will not apply to
any Transactions from the date of this Agreement.
(j) AFFILIATE. Affiliate will have the meaning specified in Section 14.
6
25
PART 5
OTHER PROVISIONS
(a) DEFINITIONS. Unless otherwise specified in a Confirmation or this Agreement,
this Agreement and each Transaction between the parties are subject to the 1991
ISDA Definitions as published by the International Swap Dealers Association,
Inc. (the "Definitions"), and will be governed in all relevant respects by the
provisions set forth in the Definitions, without regard to any amendment to the
Definitions subsequent to the date hereof. The provisions of the Definitions are
incorporated by reference in and shall be deemed a part of this Agreement,
except that references in the Definitions to a "Swap Transaction" shall be
deemed references to a "Transaction" for purposes of this Agreement. In the
event of any inconsistency between the provisions of this Agreement and the
Definitions, this Agreement will prevail.
(b) CONFIRMATIONS. Each Confirmation shall be substantially in the form of one
of the Exhibits to the Definitions or in such other form as the parties may
agree.
(c) INDEPENDENT RELIANCE. Except as provided in Section 3 of this Agreement,
Party A and Party B each represents to the other that it is entering into this
Agreement and will enter into each Transaction in reliance upon such tax,
accounting, regulatory, legal, and financial advice as it deems necessary and
not upon any view expressed by the other.
(d) CHANGE OF ACCOUNT. Section 2(b) of this Agreement is hereby amended by the
addition of the following after the word "delivery" in the first line thereof:-
"to another account in the same legal and tax jurisdiction as the
original account"
(e) ESCROW PAYMENTS. If (whether by reason of the time difference between the
cities in which payments are to be made or otherwise) it is not possible for
simultaneous payments to be made on any date on which both parties are required
to make payments hereunder, either party may at its option and in its sole
discretion notify the other party that payments on that date are to be made in
escrow. In this case deposit of the payment due earlier on that date shall be
made by 2.00 p.m. (local time at the place for the earlier payment) on that date
with an escrow agent selected by the notifying party, accompanied by irrevocable
payment instructions (i) to release the deposited payment to the intended
recipient upon receipt by the escrow agent of the required deposit of the
corresponding payment from the other party on the same date accompanied by
irrevocable payment instructions to the same effect or (ii) if the required
deposit of the corresponding payment is not made on that same date, to return
the payment deposited to the party that paid it into escrow. The party that
elects to have payments made in escrow shall pay all costs of the escrow
arrangements.
(f) SET-OFF. Without affecting the provisions of this Agreement requiring the
calculation of certain net payment amounts, all payments under this Agreement
will be made without set-off or counterclaim; provided, however, that upon the
designation of any Early Termination Date, in addition to and not in limitation
of any other right or remedy (including any right to set-off, counterclaim, or
otherwise withhold payment) under applicable law:
the Non-defaulting Party or the party that is not the Affected Party
(in either case, "X") may, without prior notice to any person, set off
any sum or obligation (under this Agreement, whether matured or
unmatured and irrespective of the currency, place of payment or booking
office of the sum or obligation) owed by the Defaulting Party or
Affected Party (in either case, "Y") to X or to any Affiliate of X,
against any sum or obligation (under this Agreement, whether matured or
unmatured and irrespective of the currency, place of payment or booking
office of the sum or obligation) owed by X or any Affiliate of X to Y,
and, for this purpose, may convert one currency into another. If any
sum or obligation is unascertained, X may in good faith estimate that
sum or obligation and set off in respect of that estimate, subject to X
or Y, as the case may be, accounting to the other party when such sum
or obligation is ascertained.
Nothing in this Agreement shall be effective or deemed to create any charge
under English law.
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26
(g) NEGATIVE INTEREST RATES. Party A and Party B agree that:
(i) if, with respect to a Calculation Period for a Transaction, a party
("X") is obligated to pay a Floating Amount that is a negative number
(either by reason of a negative Floating Rate or the subtraction of a
Spread from the Floating Rate), the Floating Amount with respect to X
for that Calculation Period will be deemed to be zero, and the other
party ("Y") will pay to X the absolute value of the negative Floating
Amount, in addition to any amounts otherwise owed by Y to X, on the
Payment Date such Floating Amount would have been payable if it had
been a positive number. Any amounts paid by Y to X pursuant to this
provision will be paid to such account as X may designate (unless Y
gives timely notice of a reasonable objection to such designation) in
the currency in which that Floating Amount would have been paid if it
had been a positive number (and without regard to the currency in which
Y is otherwise obligated to make payments).
(ii) if with respect to one or more Compounding Periods for a Transaction
for which "Compounding" or "Flat Compounding" is specified to be
applicable, the Compounding Period Amount, the Basic Compounding Period
Amount or the Additional Compounding Period Amount is a negative number
(either by reason of a negative Floating Rate or by the subtraction of
a Spread from the Floating Rate), then the Floating Amount for the
Calculation Period in which that Compounding Period or those
Compounding Periods occur will be either the sum of all the Compounding
Period Amounts, or the sum of all Basic Compounding Period Amounts and
all Additional Compounding Period Amounts in that Calculation Period
(whether positive or negative). If such sum is a negative number,
subparagraph (i) of this provision shall apply in respect of such
Floating Amount.
(h) WAIVER OF RIGHT TO TRIAL BY JURY. Each party waives, to the fullest extent
permitted by applicable law, any right it may have to a trial by jury in respect
of any suit, action or proceeding relating to this Agreement or any Credit
Support Document. Each party (i) certifies that no representative, agent or
attorney of the other party or any Credit Support Provider has represented,
expressly or otherwise, that such other party would not, in the event of such a
suit action or proceeding, seek to enforce the foregoing waiver and (ii)
acknowledges that it and the other party have been induced to enter into this
Agreement and provide for any Credit Support Document, as applicable, by, among
other things, the mutual waivers and certifications in this Section.
(i) ADDITIONAL AGREEMENT. Section 4 of the Agreement is hereby amended in
respect of Party A and Party B by the addition of the following:-
"(f) Upon any amendment to the U.S. Dollar amount referenced under
Section 6.01(e) of the Credit Agreement dated as of April 13, 1998
between Party B, ABN Amro Bank, N.V., San Francisco International
Branch, as agent for the Lenders and the Lenders thereto (which, as of
the date of execution hereof consist of Deutsche Bank A.G., New York
Branch, Bank of America National Trust and Savings Association, The
Industrial Bank of Japan, BankBoston, N.A. and Union Bank of
California, N.A.) (the "Credit Agreement"), where such an amendment
shall be an increase to the U.S. Dollar amount referenced thereto, (i)
Party B shall notify Party A (Attention:- Director, Credit Risk
Management, Credit Suisse First Boston, Eleven Madison Avenue, New
York, NY 10010) of any such amendment together with such documentary
evidence reasonably requested by Party A to illustrate such an
amendment; and (ii) Party A and Party B shall enter into good faith
negotiations to amend this Agreement such that the Threshold Amount as
referenced under Part 1(c) of the Schedule to this Agreement shall be
amended to reflect the new U.S. Dollar amount referenced under Section
6.01(e) of the Credit Agreement, provided, however, that any such
amendment to the Threshold Amount hereunder shall not exceed any other
threshold amount applicable to Party B for cross default or cross
acceleration purposes, howsoever described, in any of its other
third-party agreements."
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EXHIBIT 1
(1) Address for notices or communications to Party A's Tokyo Office (other
than by facsimile):-
Address: JT Mori Building Attention: (1) Head of Operations
Shiroyama Hills (2) Head of Legal Department
4-3-1 Toranomon
Minato - ku, Tokyo 105-6027
Japan
Telex: J28559 Answerback: FCSFBTKB
(only with respect to Transactions through that Office.)
(2) For the purpose of facsimile notices or communications under this Agreement
to Party A's Tokyo Office (other than a notice or communication under Section 5
or 6):-
Facsimile No.: (03) 5403 4100
Attention: Head of Legal Department
Telephone number for oral confirmation of receipt of facsimile in legible form:
(03) 5403 4106 Designated responsible employee for the purposes of Section
12(a)(iii): Senior Master Agreement Negotiator
With a copy to Party A's London Office.
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COLLATERAL APPENDIX IN RESPECT OF THE CONFIRMATION
OF THE TRANSACTION BETWEEN
CREDIT SUISSE FINANCIAL PRODUCTS
AND
LAM RESEARCH CORPORATION
(REF: 5579880)
This Appendix constitutes a security agreement under Articles 8 and 9 of the
Uniform Commercial Code of the State of New York (the "UCC") with respect to any
Collateral.
1. DEFINITIONS:
1.1 In this Appendix, the following expressions have the following
meanings:
"BANKING DAY" means any day on which commercial banks are open for
business (including dealings in foreign exchange and foreign currency
deposits) in (a) London and New York, and (b) in the case of a Transfer
of Permitted Collateral (i) the location of the account into which such
Transfer is to be made, and (ii) either, in the case of a Transfer of
Cash, the principal financial centre of the currency of such Cash or,
in the case of a Transfer of other Permitted Collateral, the location
of the account out of which such Transfer shall be made and, if
different, the place where the Transfer will be registered (if
applicable);
"CASH" means US Dollars;
"CASH COLLATERAL" means Collateral comprising Cash;
"COLLATERAL" means all the Permitted Collateral Transferred to and held
by or for the Secured Party pursuant to this Appendix together with all
proceeds, distributions, substitutions for and additions to the
foregoing in accordance with this Appendix and which has not been
retransferred to the Pledgor;
"PERMITTED COLLATERAL" means collectively Cash Collateral, US
Government Obligations and such other assets as may from time to time
be acceptable to the Secured Party for the purposes of this Appendix;
"PLEDGOR" means Party B;
"QUASI AGENCY OBLIGATIONS" means the negotiable debt obligations of the
US Government National Mortgage Association, the US Federal National
Mortgage Association, the US Federal Home Loan Mortgage Corporation,
the US Student Loan Marketing Association or a US Federal Home Loan
Bank;
"RELEVANT PERCENTAGE" means, on any date, the percentage appearing
below opposite the relevant Permitted Collateral:
Type of Permitted Collateral Relevant Percentage
---------------------------- -------------------
Cash Collateral 100%
US Government Obligations:
with a Residual Maturity of less than one year 100%
with a Residual Maturity equal to or greater than 1 year but less than 5 years 97%
with a Residual Maturity equal to or greater than 5 years but less than 10 years 95%
Other Permitted Collateral (excluding such percentage as shall from time to time be
US Dollars) specified by the Valuation Agent;
29
"REQUIRED AMOUNT" means, on any date, an amount expressed in US
Dollars, agreed upon (orally or in writing) by the Pledgor and the
Secured Party on such date or, if the Pledgor and the Secured Party are
unable promptly to agree upon an amount on such date, the amount (if
any) determined by the Valuation Agent, which would be payable by the
Pledgor to the Secured Party under Section 6(e)(ii)(1) of the Agreement
if an Early Termination Date were to occur in respect of all
outstanding Transactions on such date as a result of a Termination
Event on the basis that the Secured Party is not the Affected Party and
provided that Market Quotation will be determined by the Valuation
Agent on behalf of the Secured Party using its estimates at mid-market
of the amounts that would be paid for Replacement Transactions (as that
term is defined in the definition of Market Quotation), and provided
that the Required Amount shall be deemed to be zero whenever the
calculation of such amount yields a number less than zero;
"RESIDUAL MATURITY" means, on any date, in respect of any Permitted
Collateral comprising securities, the residual maturity of such
securities as of such date;
"SECURED PARTY" means Party A;
"TRANSFER" OR "TRANSFERRED" means the transfer by one party to the
other party (or its account) of Permitted Collateral:
(a) in the case of Cash, by wire transfer into one or more bank
accounts specified by the recipient;
(b) in the case of Permitted Collateral that cannot be delivered by
book entry, by delivery in appropriate physical form for
transfer and accompanied by duly executed instruments of
transfer in blank and such other documentation as the recipient
of such transfer may at any time reasonably request; or
(c) in the case of Permitted Collateral (other than Cash) that can
be delivered by book entry, by giving written instructions to
a Federal Reserve Bank, or the Euroclear or CEDEL clearing
systems, or any other depositary institution or entity agreed
between the parties, together with a written copy thereof to
the recipient of such Permitted Collateral, which if complied
with would result in a legally effective transfer of the
relevant interest to such recipient; or
(d) by any other method mutually acceptable to the parties;
As used herein, "Transfer" is intended to have the same meaning as when
used in UCC Section 8-313 or, where applicable, in any federal
regulation governing transfers of Permitted Collateral;
"US DOLLARS" AND "US$" means the lawful currency of the United States of
America;
"US GOVERNMENT OBLIGATIONS" means the negotiable debt obligations of
the United States of America issued by the US Treasury Department or
any other agency thereof, or negotiable debt obligations which are
fully guaranteed or guaranteed as to principal and interest by the
United States of America, provided that such obligations shall have a
Residual Maturity as of the date of their Transfer to the Secured Party
of less than ten (10) years, and, for the avoidance of doubt, Quasi
Agency Obligations shall not constitute US Government Obligations;
"VALUATION AGENT" means Party A; and
"VALUE" means on any date:
(a) with respect to US Dollars, the amount thereof;
30
(b) with respect to any US Government Obligations, the bid price
for such US Government Obligations, obtained by the Valuation
Agent and expressed in US Dollars, multiplied by the
applicable Relevant Percentage; and
(c) with respect to any other Permitted Collateral, the fair
market value thereof (expressed in US Dollars) on such date as
determined in any reasonable manner by the Valuation Agent
multiplied by the applicable Relevant Percentage.
1.2 References to Paragraphs are to Paragraphs of this Appendix.
2. GRANT OF SECURITY INTEREST:
2.1 As continuing security for the payment and discharge of all its
obligations under this Transaction and subject to Paragraph 2.2, the
Pledgor, as sole beneficial owner hereby pledges and grants to the
Secured Party a first priority security interest in, lien on, and right
of set-off against, the Collateral and agrees to do all acts and
execute and deliver all documents necessary to ensure that the
Collateral remains at all times subject to the pledge and security
interest referred to in this Paragraph 2.
2.2 Although the parties intend that the Pledgor shall have no continuing
right, title or interest in or to Cash Collateral, in the event that
the Pledgor is deemed to have any right, title or interest therein, the
foregoing Paragraph 2.1 shall apply to such Cash Collateral.
2.3 The rights of the Secured Party with respect to any Cash Collateral
Transferred hereunder shall include, in addition to and without
limiting any other rights provided for in this Appendix, the right on
any terms to use, commingle, sell, pledge, repledge, hypothecate,
assign, or otherwise dispose of such Collateral, provided that no such
transaction shall relieve the Secured Party of its obligations to
return such Collateral pursuant to this Appendix.
2.4 Notwithstanding the foregoing, and pursuant to Paragraph 11(a) hereof,
the Secured Party agrees that it shall not foreclose upon any
Collateral until two Local Business Days after having delivered written
notice to the Pledgor of its intention to exercise such a right under
Paragraph 11(a).
2.5 The Secured Party shall hold all Collateral (other than Cash
Collateral) in a segregated account which identifies the Pledgor as the
owner thereof (subject to the Secured Party's security interest
therein) and the Secured Party shall take all action necessary to
ensure no creditor of the Secured Party obtains any interest whatsoever
therein.
2.6 Any interest or investment proceeds of any Collateral (except as
provided in Paragraph 6.1 hereof) shall be for the account of the
Pledgor and shall accrue to the benefit and in the name of the Pledgor.
2.7 Collateral shall at all times remain the property of the Pledgor,
subject only to the extent of the interest, rights and remedies hereof
of the Secured Party as the pledgee and/or secured party hereof.
3. CONDITIONS PRECEDENT:
Any obligation on the part of the Secured Party to make a Transfer
pursuant to this Appendix is subject to the following conditions
precedent:
no Event of Default, Termination Event and/or any event or condition
that with the giving of notice or passage of time, or both, would
constitute such an Event of Default or Termination Event, has occurred
and is continuing as of the date for such Transfer with the Pledgor as
the Defaulting Party or the Affected Party (as the case may be).
31
4. DELIVERY OF COLLATERAL:
(a) If, on the date at the beginning of each calendar quarter, the
Required Amount exceeds the Value of the Collateral held by the Secured
Party on such a date, the Pledgor shall, if requested by the Secured
Party, Transfer to the Secured Party Permitted Collateral having a
Value equal to such excess (rounded upwards to the nearest integral
multiple of US$250,000) within two (2) Banking Days of such written
request.
(b) If, on any date during each calendar quarter, the price per share of
the common stock of the Pledgor, as reasonably determined by the
Valuation Agent with reference to the NASDAQ closing price on such a
date, falls by twenty-five (25) percent or more below the price per
share of the common stock of the Pledgor as of the Starting Date, then
if so requested by the Secured Party and within two (2) Business Day of
such a written request, the Pledgor shall Transfer to the Secured Party
Permitted Collateral having a Value equal to the Required Amount less
the Value of the Collateral then held by the Secured Party, rounded
upwards to the nearest integral multiple of US$250,000.
For the purpose of this Section 4(b) the "Starting Date" shall be
defined as the date at the beginning of each calendar quarter and if
the Pledgor Transfers Permitted Collateral to the Secured Party under
this Section 4(b) during such a calendar quarter, then the new Starting
Date shall be the date of the latest such Transfer under this Section
4(b).
5. RETURN OF COLLATERAL:
5.1 Where, on the date at the beginning of each calendar quarter, the Value
of Collateral held by the Secured Party exceeds the Required Amount on
such a date, the Secured Party shall, if requested by the Pledgor and
subject to Paragraph 3, Transfer to the Pledgor Collateral having a
Value equal to such excess rounded downwards to the nearest integral
multiple of US$250,000 within two (2) Banking Days of such request.
5.2 The Secured Party may in lieu of returning to the Pledgor any
Collateral comprising securities (as such term is defined in the UCC)
return securities which are fungible (as such term is used in the UCC)
therewith in satisfaction of its obligations under this Paragraph 5.
6. INTEREST ON CASH COLLATERAL:
6.1 Cash Collateral shall accrue interest for the benefit of the Pledgor at
a rate equal to the overnight rate for deposits in US Dollars as
displayed on Telerate page 118 provided that if, for any reason,
Telerate Page 118 shall be unavailable interest shall accrue at such
rate as and be compounded on such days as the Secured Party shall
reasonably determine. Such interest will be compounded on each New York
Business Day and, subject to Paragraph 3, be paid to the Pledgor on any
Local Business Day and shall accrue from the date that the deposit of
such Cash Collateral is confirmed to or to the order of the Secured
Party provided that such interest shall only be paid to the Pledgor to
the extent that such interest when added to the Value of the Collateral
held by the Secured Party, as of the date of such payment, exceeds the
Required Amount in respect of the Pledgor on such date and any such
interest not paid to the Pledgor shall be an accretion to the
Collateral held by the Secured Party.
6.2 Any interest or investment proceeds on any Collateral (other than Cash
Collateral) shall accrue for the benefit of the Pledgor and, subject to
Paragraph 3, be paid to the Pledgor on any Local Business Day, provided
that such interest or investment proceeds shall only be paid to the
Pledgor to the extent that such interest or investment proceeds, when
added to the Value of the Collateral held by the Secured Party, as of
the date of such payment, exceeds the Required Amount in respect of the
Pledgor on such date and any such interest or investment proceeds not
paid to the Pledgor shall be an accretion to the Collateral held by the
Secured Party.
32
7. SUBSTITUTION:
The Pledgor may, with the prior consent of the Secured Party,
substitute existing Collateral. In the event of the Secured Party
granting its consent thereto the Pledgor shall pay all the costs
involved in effecting such substitution and, subject to Paragraph 3,
the Secured Party shall Transfer to the Pledgor the existing Collateral
which is the subject of the substitution as soon as practicable after
the Secured Party shall be satisfied that it has received Permitted
Collateral in replacement therefor having a Value, on the date of
Transfer, not less than that of the Collateral being substituted.
8. RESPONSIBILITY FOR AND CARE OF COLLATERAL:
8.1 Subject to Paragraph 11, all rights and powers conferred on or
exercisable by the registered holder, bearer or legal owner of the
Collateral (excluding Cash Collateral) shall be exercisable by the
Pledgor or as the Pledgor shall direct and the Pledgor shall remain
liable to observe and perform all conditions and obligations in respect
of the Collateral (excluding Cash Collateral). The Secured Party shall,
upon its receiving express and unequivocal instructions from the
Pledgor, take all action necessary on its part to ensure that all such
rights and powers are exercised in accordance with the Pledgor's
instructions, provided that the Secured Party shall not be obliged to
act in accordance with the Pledgor's instructions where: (a) such
instructions involve any expense, and such expense has not been funded
in advance by the Pledgor; or (b) to act in accordance with such
instructions may reduce or in any way prejudice the value of such
Collateral, and provided further that the Secured Party shall otherwise
have no duty with respect to Collateral including, without limitation,
any duty to collect any proceeds or enforce or preserve any rights
pertaining thereto.
8.2 The Pledgor and the Secured Party hereby undertake not to exercise such
rights it may have retained in respect of the Collateral in such a way
as to reduce or prejudice in any way the value of the Collateral.
8.3 The parties acknowledge and agree that upon the Transfer of Collateral
to the Secured Party, or to an agent or custodian to receive and hold
Collateral for or on behalf of the Secured Party, such Collateral will
not necessarily be registered in the Pledgor's name.
9. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS:
The Pledgor represents and warrants that the provisions of Section 3 of
the Agreement apply in full force and effect and, without limiting the
foregoing:
(a) it has the power to enter into the Transaction and to execute
and deliver this Confirmation and perform its obligations
hereunder (including, for the avoidance of doubt, under this
Appendix);
(b) its obligations under the Transaction (including, for the
avoidance of doubt, under this Appendix) constitute its legal,
valid and binding obligations, enforceable in accordance with
their respective terms;
(c) it has taken all necessary action to authorise such entry,
execution, delivery and performance;
(d) such entry, execution, delivery and performance do not violate
or conflict with any applicable law, any provision of its
constituent documents, any order or judgement 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;
(e) it is and, subject to Paragraph 2.2, will at all times be the
sole, lawful and beneficial owner of the Collateral free from
all encumbrances and forms of security interests (except for
the charge or other security interest, howsoever described,
created hereby), and no other person has, or will at any time
have, any proprietary right or interest therein;
33
(f) except for the first priority security interest (howsoever
described) in favour of the Secured Party and subject to
Paragraph 2.2, no person has, (or in the case of
after-acquired Collateral, at the time the Pledgor acquires
rights therein, will have) any right, title, claim or interest
(by way of charge, lien, mortgage, pledge, security interest
(however described) or other encumbrance, or otherwise) in,
against or to the Collateral;
(g) it will not (without the prior written consent of the Secured
Party at any time) sell or agree to sell or otherwise dispose
of, or agree to dispose of, the Collateral; and
(h) it will ensure, so far as it is able, that the Collateral is
and at all times remains free from any restrictions on
transfer.
10. EVENTS OF DEFAULT:
Notwithstanding anything to the contrary in the Agreement, the
occurrence at any time with respect to the Pledgor of any of the
following events constitutes an Event of Default with respect to it for
the purposes of the Agreement:
(a) failure by it to Transfer Permitted Collateral in accordance
with Paragraph 4, if such failure is not remedied within one
Banking Day of written notice of such failure being given to
the Pledgor;
(b) failure by it to comply with or perform any other material
provision required to be complied with or performed by it
which is contained in this Appendix if such failure is not
remedied within three Banking Days of notice of such failure
given to the Pledgor;
(c) the failing or ceasing of any material provision of this
Appendix to be in full force and effect prior to the
satisfaction by the Pledgor of all its obligations to the
Secured Party under the Agreement; or
(d) the Pledgor disaffirms, disclaims, repudiates or rejects, in
whole or in part, or challenges the validity of, any material
part of this Appendix.
11. SECURED PARTY'S RIGHTS AND REMEDIES:
Upon the occurrence and continuance of any Event of Default with
respect to the Pledgor or any Termination Event, the Secured Party may,
to the extent permitted by applicable law, exercise as to all
Collateral then held by the Secured Party the rights and remedies of a
secured party under the UCC and as otherwise provided by law and, in
addition, at its sole option and without notice to or demand upon the
Pledgor, may exercise any or all of the following remedies upon two (2)
Local Business Days written notice to the Pledgor:
(a) set off the Secured Party's obligation to repay any Cash to
the Pledgor, against any amounts owing to the Secured Party by
the Pledgor under this Transaction; and/or
(b) liquidate and apply all or any part of any Collateral other
than Cash in any manner deemed commercially reasonable by the
Secured Party, with the proceeds of such liquidation
constituting Cash Collateral hereunder; and/or
(c) set off the Value of such Collateral against any amounts owing
to the Secured Party by the Pledgor.
12. DELIVERY DEFAULT:
If the Pledgor fails to make, when due, any Transfer of Collateral, it
shall pay to the Secured Party, to the extent permitted under
applicable law, an amount equal to interest at the Default Rate (as
that
34
expression is defined in the Agreement) multiplied by the Value of
the Collateral which was required to be Transferred, from (and
including) the date that such Collateral was required to be Transferred
to (but excluding) the date of the Transfer. This interest will be
calculated on a daily rate by reference to the actual number of days
elapsed.
13. SET-OFF:
Upon the designation or deemed designation of any Early Termination
Date, in addition to and not in limitation of any other right or remedy
(including any right to set-off, counterclaim, or otherwise withhold
payment) under applicable law, the Non-defaulting Party or the party
that is not the Affected Party (in either case, "X") may, without prior
notice to any person, set off any sum or obligation under the Agreement
(including, without limitation this Appendix), whether matured or
unmatured and irrespective of the currency, place of payment or booking
office of the sum or obligation) owed by the Defaulting Party or
Affected Party (in either case, "Y") to X or to any Affiliate of X,
against any sum or obligation under the Agreement (including, without
limitation this Appendix), whether matured or unmatured and
irrespective of the currency, place of payment or booking office of the
sum or obligation) owed by X or any Affiliate of X to Y, and, for this
purpose, may convert one currency into another. If any sum or
obligation is unascertained, X may in good faith estimate that sum or
obligation and set off in respect of that estimate, subject to X or Y,
as the case may be, accounting to the other party when such sum or
obligation is ascertained.
14. SECURITY AND PERFORMANCE ASSURANCE:
For the avoidance of doubt the parties agree that:
(a) Cash Collateral, is not and shall not be deemed to be "client
money" for the purposes of the Financial Services (Client
Money) Regulations 1991 and the Secured Party shall not hold
Cash Collateral as "client money" as contemplated by the
Regulations; and
(b) Collateral constitutes security and performance assurance
without which the Secured Party would not otherwise enter into
and continue any and all Transactions.
15. NOTICES:
Any notice or demand to be given to or made by the Secured Party or the
Pledgor pursuant to this Appendix shall be made in writing as specified
in Section 12 of the Agreement save that such notice or demand:
(a) if given to the Secured Party, shall be given to or made in
accordance with the following details:-
Address: One Cabot Square, London E14 4QJ
Telephone: 0171-888 2502
Facsimile: 0171-888 3866
Telex: 264521 Answerback: CSFINPG
Swift: CSFP GB 2L
Attention: CSFP Operations Settlements
or in accordance with such other details as the Secured Party
may from time to time notify (in accordance with the terms of
this Paragraph 16) to the Pledgor; and
(b) shall be deemed to be effective at the time such written
notice is actually received unless such notice is received on
a day which is not a Banking Day, or after 4.00 p.m. London
time on any Banking Day, in which event such notice shall be
deemed to be effective at 9.00 a.m.
London time on the next succeeding Banking Day.
35
16. DOCUMENTATION AND INCONSISTENCY:
The parties agree to execute a collateral agreement (or such other form
of documentation as Party A deems appropriate) in the form provided by
Party A, subject to good faith negotiation, as an appendix to the
Agreement
36
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
14 June 1999
Lam Research Corporation
4650 Cushing Parkway
Fremont, CA 94538-6470
Attn.: Steve Debenham
Fax.: (510) 572-1628
Credit Suisse Financial Products
One Cabot Square
London E14 4QJ
England
- ------------------------------------------------------------------------------
Dear Sirs,
The purpose of this letter agreement (this "Confirmation") is to confirm the
terms and conditions of the Transaction entered into between Party A and Party B
through the Agent on the Trade Date specified below (the "Transaction"). This
Confirmation constitutes a "Confirmation", as referred to in the Agreement
specified below.
1. The definitions and provisions contained in the 1996 ISDA Equity
Derivatives Definitions (the "1996 Definitions"), as published by the
International Swaps and Derivatives Association, Inc., are incorporated
into this Confirmation. In the event of any inconsistency between those
definitions and provisions and this Confirmation, this Confirmation will
govern.
If Party A and Party B are parties to the 1992 ISDA Master Agreement, (the
"Agreement"), this Confirmation supplements, forms a part of, and is
subject to such Agreement. If Party A and Party B are not yet parties to
the Agreement, Party A and Party B agree to use their best efforts promptly
to negotiate and, in the event of execution, to deliver the Agreement,
including Party A's standard form of Schedule and Addendum relating to
Physical Delivery of Shares attached thereto and made a part thereof, with
such modifications as Party A and Party B shall in good faith agree. Upon
execution and delivery by Party A and Party B of the Agreement, this
Confirmation shall supplement, form a part of, and be subject to such
Agreement. Until Party A and Party B execute and deliver the Agreement,
this Confirmation, including the Collateral Appendix hereto (the
"Collateral Appendix") (together with all other Confirmations of
Transactions previously entered into between Party A and Party B,
notwithstanding anything to the contrary therein) shall supplement, form a
part of, and be subject to the 1992 ISDA Master Agreement as if, on the
Trade Date of the first such Transaction between them, Party A and Party B
had executed that agreement (without any Schedule thereto) and had
specified that the Automatic Early Termination provisions contained in
Section 6(a) of such agreement would apply.
The Agreement and each Confirmation thereunder will be governed by and
construed in accordance with the laws of the State of New York without
reference to choice of law doctrine and each party hereby submits to the
Courts of the State of New York or the federal courts located within the
State of New York.
37
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
Party A and Party B each represents to the other that it has entered into
this Transaction in reliance upon such tax, accounting, regulatory, legal,
and financial advice as it deems necessary and not upon any view expressed
by the other.
IN THIS CONFIRMATION, "PARTY A" MEANS CREDIT SUISSE FINANCIAL PRODUCTS AND
"PARTY B" MEANS LAM RESEARCH CORPORATION AND "AGENT" MEANS CSFP CAPITAL,
INC. SOLELY IN ITS CAPACITY AS AGENT FOR PARTY A AND PARTY B.
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
General Terms:
Trade Date:
Options Style: European
Options Types: (I) Party A purchase of a Put Option, and
(II) Party A sale of a Call Option ("Call Option I") and
(III) Party A purchase of a
Call Option ("Call Option II").
Put Seller/Call Option I
Buyer/Call Option II Seller: Party B
Put Buyer/Call Option I
Seller/Call Option II Buyer: Party A
Shares: Common Stock of Lam Research Corporation
(the "Issuer") par value $0.001
(Bloomberg Reference LRCX; ISIN US5128071082)
Number of Options: In the case of the Put Option,
__________ Options and in the case of each of
Call Option I and Call Option II,
__________ Options.
Option Entitlement: One Share per Option
Put Option Strike Price:
Call Option I Strike Price:
Call Option II Strike Price
Net Premium: Zero
Exchange: NASDAQ National Market System
Related Exchange(s): The exchanges or quotation systems, if any, on
which options or futures
contracts on the Shares are traded or quoted.
-2-
38
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
Clearance System: The Depository Trust Company.
Calculation Agent: Party A, whose determinations and calculations
shall be binding in the absence
of manifest error.
If, in respect of any information published by a third party
(the "Third Party Source"), the Calculation Agent has relied
in good faith upon such information in making any
determinations or calculations herein and that information
is subsequently corrected and the correction is published by
the Third Party Source, or any successor to such Third Party
Source, within thirty (30) days of the original publication
the Calculation Agent shall promptly notify the parties
hereto of (i) that correction and (ii) the amount that is
payable as a result of that correction. The party that
originally either received or retained such amount shall,
not later than three (3) Currency Business Days after the
effectiveness of such notice, pay to the other party the
amount that is payable as a result of that correction
together with the amount which represents the amount equal
to the cost (without proof or evidence of any actual cost)
to the other party of funding that amount for the period
from, and including, the day on which payment originally was
(or was not) made to, but excluding, the day of payment of
the refund or payment resulting from that correction.
Neither the Calculation Agent nor the parties hereto shall be
liable for any foreseeable, consequential, incidental or other
damages or any other additional costs suffered by either party by
virtue of a good faith error or omission made by the Calculation
Agent in reliance on information provided by the Third Party
Source or as a result of a correction by a Third Party Source, or
any successor thereto.
Procedure for Exercise:
Expiration Time: The Valuation Time.
Put Option
Expiration Date: 3 June 2002.
Call Option I
Expiration Date: 3 September 2002.
Call Option II
Expiration Date: 3 September 2002.
Automatic Exercise: Applicable.
Reference Price: The price per Share at the Valuation Time on the Valuation Date; provided,
however, that if the Method of Settlement
-3-
39
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
has been selected by Party B to be either Net Share
Settlement or Net Cash Settlement, in accordance with the
terms of the Method of Settlement Options provision set out
in Appendix A, then the Reference Price shall be the
Termination Price per Share (as such term is defined in
Appendix A hereto).
Valuation:
Valuation Time: The close of regular trading on the Exchange.
Valuation Date: In respect of each Option, the relevant Expiration Date.
Settlement Terms:
Settlement Date: The Clearance System Business Day that is three (3) Exchange Business Days after
the Exercise Date; provided, however, that if the Method of
Settlement has been selected by Party B to be Net Cash
Settlement, in accordance with the terms of the Method of
Settlement Options provision set out in Appendix A, then the
Settlement Date shall be the Currency Business Day that is
three (3) Exchange Business Days after the Exercise Date.
Put Option: Physical Settlement; subject to the terms of the Method of Settlement Options
provision set out in Appendix A hereto.
Call Option I: Physical Settlement; subject to the terms of the Method of Settlement Options
provision set out in Appendix A hereto.
Call Option II: Physical Settlement; subject to the terms of the Method of Settlement Options
provision set out in Appendix A hereto.
provided, however, that in respect of Call
Option I and Call Option II, if the
Reference Price is greater than the Call
Option II Strike Price, then (A) any
exercise of Call Option I shall be deemed
to be an automatic exercise of Call Option
II of an equal number of Options with
respect to an equal number of shares and
(B) in order to accomplish settlement
efficiency, both parties will be deemed to
have delivered an equal number of Shares
and in lieu of any payments by Party A of
the Call Option II Strike Price and by
Party B of the Call Option I Strike Price,
Party A will make a single payment to Party
B hereunder in an amount equal to the
product of (i) the number of Options
exercised and (ii) the result of the Call
Option II Strike Price, minus the Call
Option I Strike Price.
Adjustments:
Method of Adjustment: Calculation Agent Adjustment
-4-
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[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
Extraordinary Events:
Consequences of Merger Events:
(a) Share-for-Share: Alternative Obligation
(b) Share-for-Other: Cancellation and Payment
(c) Share-for-Combined: Cancellation and Payment
Nationalization
or Insolvency: Cancellation and Payment
3. Early Termination Option:
3.1 In addition to any other termination rights that Party B may have under the
Agreement, Party B may direct, at its sole option and through the Agent,
that Party A provide to it a quotation representing the amount in U.S.
Dollars (the "Early Termination Amount") that the Calculation Agent
determines that one party should pay to the other in order to terminate
this Transaction (in whole but not in part) on a date selected by Party B
which is prior to the originally scheduled Termination Date (the "Early
Termination Date"). The Early Termination date shall not be less than ten
(10) Business Days after the date of such request if the Method of
Settlement is either Net Cash Settlement or Net Share Settlement and shall
be not less than three (3) Business Days after the date of such request if
the Method of Settlement is Gross Physical Settlement (as such terms are
described in the Termination Settlement Payment Options provisions set out
in Appendix A hereto).
3.2 Upon receipt of the quotation described in paragraph 3.1 above, Party B may
elect, by giving on that day notice to Party A, through the Agent, that
this Transaction be terminated on the Early Termination Date and on the
date that is two (2) Business Days after the Early Termination Date the
party identified by the calculation Agent shall discharge its obligation to
the other party in respect of the Early Termination Amount in accordance
with the appropriate Method of Settlement in accordance with the terms of
the Method of Settlement Options provision set out in Appendix A hereto and
as if the Early Termination Amount were the Net Termination Amount and, for
the purposes of determining the Termination Price per Share, as if the
Early Termination Date were the Expiration Date in respect of each of the
Put Option and Call Option I and Call Option II.
4. Additional Termination Event
For the purposes of this Transaction the following shall be an Additional
Termination Event with respect to Party B with Party B as the sole Affected
Party:-
Party B fails to maintain, as reasonably determined by Party
A, a Cash Balance of USD 75,000,000.
For the purpose of this Additional Termination Event "Cash Balance"
shall be defined as being the sum of cash and cash equivalents as
reported in Party B's last filed quarterly unaudited or annually
audited accounts and, for the avoidance of doubt, Cash Balance shall
not include restricted cash as reported in Party B's last filed
quarterly unaudited or annually audited accounts.
-5-
41
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
5. Matters relating to the Agent:
(a) As a broker-dealer registered with the U.S. Securities and Exchange
Commission ("SEC"), CSFP Capital, Inc., in its capacity as Agent, will
be responsible for (i) effecting this Transaction, (ii) issuing all
required confirmations and statements to Party A and Party B, (iii)
maintaining books and records relating to this Transaction as required
by Rules 17a-3 and 17a-4 under the Securities Exchange Act of 1934
(the "Exchange Act") and (iv) unless otherwise requested by Party B,
receiving, delivering, and safeguarding Party B's funds and any
securities in connection with this Transaction, in compliance with
Rule 15c3-3 under the Exchange Act.
(b) CSFP Capital, Inc. is acting in connection with this Transaction
solely in its capacity as Agent for Party A and Party B pursuant to
instructions from Party A and Party B. CSFP Capital, Inc. shall have
no responsibility or personal liability to Party A or Party B arising
from any failure by Party A or Party B to pay or perform any
obligations hereunder, or to monitor or enforce compliance by Party A
or Party B with any obligation hereunder, including without
limitation, any obligations to maintain collateral. Each of Party A
and Party B agrees to proceed solely against the other to collect or
recover any securities or monies owing to it by the other in
connection with or as a result of this Transaction. CSFP Capital, Inc.
shall otherwise have no liability in respect of this Transaction,
except for its gross negligence or wilful misconduct in performing its
duties as Agent.
(c) Any and all notices, demands, or communications of any kind relating
to this Transaction, including without limitation, any option exercise
notice, between Party A and Party B shall be transmitted in writing
exclusively through Agent at the following address:
CSFP Capital, Inc.
Eleven Madison Avenue
New York, NY 10010
Facsimile No.: (212) 325 8175
Telephone No.: (212) 325 8678
Attention: Ricardo Harewood
(d) The date and time of the Transaction evidenced hereby will be
furnished by the Agent to Party A and Party B upon written request.
(e) The Agent will furnish to Party B upon written request a statement as
to the source and amount of any remuneration received or to be
received by the Agent in connection with the Transaction evidenced
hereby.
(f) Party A and Party B each represents and agrees (i) that this
Transaction is not unsuitable for it in the light of such party's
financial situation, investment objectives and needs and (ii) that it
is entering into this Transaction in reliance upon such tax,
accounting, regulatory, legal and financial advice as it deems
necessary and not upon any view expressed by the other or the Agent.
(g) Party A and Party B each is aware of and agrees to be bound by the
rules of the National Association of Securities Dealers, Inc. ("NASD")
applicable to option trading and is aware of and agrees not to
violate, either alone or in concert with others, the position or
exercise limits established by the NASD.
-6-
42
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
6. U.S. Private Placement Representations:
As this Transaction constitutes, or may constitute, the sale by Party A to
Party B and by Party B to Party A, each through Agent, of a Security or
Securities (as defined in the United States Securities Act of 1933, as
amended (the "Securities Act")), in addition to the representations
contained in Section 3 of the Agreement, each party hereby represents to
the other, to the extent applicable, in accordance with Section 3 of the
Agreement, as follows:
(a) Such party is acquiring such Securities through Agent for its own
account as principal, for investment purposes only, and not with a
view to, or for, resale, distribution or fractionalisation thereof, in
whole or in part, and no other person has a direct or indirect
beneficial interest in any such Securities acquired by such party B
through Agent;
(b) Such party understands that the offer and sale by the other party,
through Agent, of such Securities are intended to be exempt from
registration under the Securities Act, by virtue of Section 4(2)
thereof. In furtherance thereof, such party represents and warrants
that (i) it has the financial ability to bear the economic risk of its
investment and has adequate means of providing for its current needs
and other contingencies, (ii) it is experienced in investing in
options and similar instruments and has determined that such
securities are a suitable investment for it, and (iii) it is an
institution that qualifies as an "accredited investor", as that term
is defined in Regulation D under the Securities Act; and
(c) Such party has been given the opportunity to ask questions of, and
receive answers from, the other party through Agent concerning the
terms and conditions of such Securities and concerning the financial
condition and business operations of that other party and has been
given the opportunity to obtain such additional information necessary
in order for such party to evaluate the merits and risks of purchase
of such Securities to the extent that the other party possesses such
information or can acquire it without unreasonable effort or expense.
Such party hereby acknowledges that it understands and agrees that
disposition of any such Securities is restricted under the Agreement,
the Securities Act and state securities laws. For example, such
Securities have not been registered under the Securities Act or under
the securities laws of certain states and, therefore, cannot be
resold, pledged, assigned or otherwise disposed of unless they have
been registered under the Securities Act and under the applicable laws
of such states or an exemption from such registration is available.
7. Currency Provision:
"U.S. Dollar", "Dollar", "U.S.$", "$" and "USD" each means the lawful
currency of the United States of America.
8. Credit Support
Party A: Inapplicable
Party B: Applicable
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9. Account Details:
Payments to Agent: The Bank of New York
ABA#: 021 000 018
Chips ABA: 001
A/C: CSFP Capital, Inc.
A/C No: 890 - 0361 - 344
Payments to Party A: To be advised
Payments to Party B: To be advised
Deliveries to Agent: Euroclear SA
A/c No. 97699
10. Office:
Party A is acting through its London Office for the purposes of this
Transaction.
Credit Suisse Financial Products is regulated by The Securities and Futures
Authority and has entered into this transaction as principal. The time at which
the above transaction was executed will be notified to Party B (through the
Agent) on request.
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Please confirm that the foregoing correctly sets forth the terms of the
agreement by signing and returning this Confirmation.
Yours faithfully,
CSFP CAPITAL, INC., solely in its capacity as Agent
By: _____________________________
Name:
Title:
Confirmed as of the date first written above:
LAM RESEARCH CORPORATION
By: ________________________________
Name:
Title:
CREDIT SUISSE FINANCIAL PRODUCTS
By: _____________________________
Name:
Title:
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APPENDIX A
to the
CONFIRMATION
of the
TRANSACTION
between
CREDIT SUISSE FINANCIAL PRODUCTS
and
LAM RESEARCH CORPORATION
through
CSFP CAPITAL, INC., solely in its capacity as agent
(CSFP REFERENCE NO. (5579880))
1. Method of Settlement Options:
In respect of the Expiration Date in respect of each Option (whether
pursuant to an Early Termination Date or otherwise designated pursuant to
the terms hereof) Party B shall, at Party B's sole option and discretion,
elect one of the following Settlement Options (each a "Method of
Settlement") in respect of all parts of this Transaction by giving to Party
A, through the Agent, not less than thirty (30) Business Days' notice in
writing (or on such shorter notice as provided in the event of an Early
Termination Date, in accordance with the terms of the Early Termination
Option provision set out above):
(A) Gross Physical Settlement: Unless Party B has specified Net Cash
Settlement or Net Share Settlement in accordance with the terms
hereof, on the Settlement Date, the terms of the Settlement Terms
provision of this Transaction will apply.
(B) Net Cash Settlement: If Party B has specified Net Cash Settlement as
the Method of Settlement, then the Calculation Agent shall determine
the Net Termination Amount (as such term is defined below) and the
identity of the party (the "Payer Party") who owes such Net
Termination Amount to the other (the "Payee Party").
On the Cash Settlement Payment Date the Payer Party shall pay to the
Payee Party, through the Agent, an amount in U.S. Dollars equal to the
Net Termination Amount.
(C) Net Share Settlement: If Party B has specified Net Share Settlement as
the Method of Settlement, then the Calculation Agent shall determine
the Net Termination Amount (as such term is defined below) and the
identity of the party (the "Deliveror") who owes such Net Termination
Amount to the other (the "Deliveree").
On the applicable Settlement Date, the Deliveror shall deliver to the
Deliveree, through the Agent, a number of Shares equal to the quotient
of: (i) the Net Termination Amount; divided by (ii) the Termination
Price per Share (as such term is defined below), rounded down to the
nearest whole number of Shares. The Deliveror shall also pay to the
Deliveree, through the Agent, a sum in U.S. Dollars equivalent to the
cash value of any fractional number of
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Shares not able to be delivered in accordance with the terms of this
provision.
2. Make-whole Provision:
2.1 If the Method of Settlement selected by Party B in accordance with the
Method of Settlement Options set out above is either Net Share Settlement
or Net Cash Settlement then Party A shall provide to the Calculation Agent
and Party B information concerning a hypothetical number of Shares which
Party A reasonably believes to be representative of the number of Shares
that would be held by a recognised derivatives dealer that uses a
proprietary risk management model for option hedging that is based upon
Black-Scholes models and that is substantially similar to the model
employed by Party A in the conduct of its ordinary hedging business (the
"Hypothetical Hedge") and not later than 5:00 p.m. (New York time) on any
of the three (3) Exchange Business Days following the Settlement Date and
on which it would have sold approximately one-third of the Shares
constituting the Hypothetical Hedge, the volume-weighted average sale price
for the Shares as reported on Bloomberg, net of any fees, commissions or
expenses, as described below, (the "Average Sale Price"). On the day that
is two (2) Currency Business Days following the Resale Date Party B shall
pay to Party A, through the Agent, an amount in U.S. Dollars equal to the
product of the number of Shares constituting the Hypothetical Hedge
multiplied by the result of the Termination Price per Share less the
Average Sale Price.
2.2 In addition to the amounts described in paragraph 2.1 above, if the Method
of Settlement selected by Party B in accordance with the Method of
Settlement Options set out above is Net Share Settlement then, within the
three (3) Exchange Business Days immediately following the Settlement Date
(the third such Exchange Business Day being the "Resale Date"), the
Deliveree sells all, or any portion, of the Shares so delivered and the
aggregate proceeds of such sale(s), net of reasonable and customary fees,
commissions and expenses incurred in connection with the offer and sale of
the Shares (including, but without limitation to, the covering of any
over-allotment or short position (syndicate or otherwise)) (the "Net
Proceeds") exceed the Net Termination Amount, the Deliveree will refund in
U.S. Dollars such excess to the Deliveror, through the Agent, on the date
that is two (2) Currency Business Days following the Resale Date, and, if
any of the Shares so delivered remains unsold as of the Resale Date, such
unsold Shares.
2.3 If the Net Proceeds described in paragraph 2.2 above are less than the Net
Termination Amount the Deliveror hereby agrees to indemnify the Deliveree
to the extent of such short-fall by the payment of that short-fall amount
in U.S. Dollars on the date that is two (2) Currency Business Days
following the Resale Date and, if any of the Shares delivered remain
unsold, the Deliveree shall return to the Deliveror on that date such
unsold Shares.
2.4 The Deliveree agrees to make good faith and commercially reasonable efforts
to have sold on or before the Resale Date all of the Shares delivered.
3. Offering Method:
Any Shares to be delivered by Party B to Party A in accordance with the
terms of this Transaction:
(i) shall be delivered pursuant to an effective registration statement
filed or to be filed (a "Registered Offering") pursuant to the
Securities Act of 1933 (the "1933 Act"), subject to Party A's consent
as to the form and substance of the contemplated offering, including
any form of offering documents, which consent shall not be
unreasonably withheld; and
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(ii) shall comply in all material respects with the Registration Procedures
set forth in Appendix B attached hereto.
(iii) provided, however, that Party B has the right (the "Black-out
Right"), at any time following the delivery of Shares to notify Party
A that the then-current prospectus, in Party B's judgement, requires
amendment; provided, further, that in such case (x) Party B shall file
within five (5) Business Days (such fifth Business Day being the
"Refiling Date") of such notification to Party A an appropriate
amendment reasonably satisfactory to Party A; (y) that Party A shall
not use any prior prospectus pending such amendment; and (z) Party A
shall have the right to require the repurchase by Party B upon demand
by Party A of all unsold Shares delivered hereunder at the market
price per Share used to determine the Termination Price per Share,
such repurchase to take place either (a) on the Refiling Date if such
an amendment is not filed within five (5) Business Days as described
above or (b) on the Business Day which is five (5) Business Days
following the Refiling Date if an amendment is filed which is
acceptable to Party A but which cannot be used by Party A for that
period of five (5) Business Days following the Refiling Date.
4. Definitions:
For the purposes of Net Share Settlement and Net Cash Settlement as
described in this Transaction the following terms shall have the meanings
ascribed to them below:
"Net Termination Amount" means, with respect to any Settlement Date,
an amount in U.S. Dollars equal to the sum of:
(i) with respect to the Put Option, the Number of Shares to be
Delivered thereunder in respect of that Settlement Date
multiplied by the difference between the Termination Price
per Share and the Put Strike Price, but in no event less
than zero; and
(ii) with respect to Call Option I, the Number of Shares to be
Delivered thereunder in respect of that Settlement Date
multiplied by the difference between the Termination Price
per Share and the Call Option I Strike Price, but in no
event less than zero; and
(iii) with respect to Call Option II, the Number of Shares to be
Delivered thereunder in respect of that Settlement Date
multiplied by the difference between the Termination Price
per Share and the Call Option II Strike Price, but in no
event less than zero.
"Termination Price
per Share" means the arithmetic mean of the price per Share at
the Valuation Time on each of the five (5) Exchange
Business Days prior to, and including, the relevant
Expiration Date or (if applicable) the
Early Termination Date.
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APPENDIX B
to the
CONFIRMATION
of the
TRANSACTION
between
CREDIT SUISSE FINANCIAL PRODUCTS
and
LAM RESEARCH CORPORATION
through
CSFP CAPITAL, INC., solely in its capacity as agent
(CSFP REFERENCE NO. (5579880))
Unless otherwise agreed in writing by Party A and Party B with respect to
specific sales of Shares by the Selling Agent or specific Shares to be delivered
to the Selling Agent by Party B, the provisions of this Appendix B shall apply
to all Shares in satisfaction of a Party B Net Cash Settlement or Net Share
Settlement Delivery including the resale of the Number of Shares which were
acquired in a transaction not involving any public offering and, in the case of
Net Share Settlement, any additional Shares (collectively, the "Shares").
(a) Party B shall have available, free from pre-emptive rights, out of its
authorised but unissued capital stock, for the purpose of effecting the
payment of any Party B Net Share Settlement Delivery in Shares as provided
in the Confirmation, the full number of shares of capital stock that would
then be issuable with respect to such payment.
(b) There shall be an effective registration statement with respect to such
Shares (the "Registration Statement").
(c) Party B shall have registered or qualified such Shares under such
securities or "blue sky" laws of such States and other jurisdictions in the
United States and Puerto Rico as Party A or any underwriter shall have
reasonably requested, and shall have done any and all other acts and things
as may be reasonably necessary to be done by Party B to enable Party A or
any underwriter to consummate the disposition in such jurisdictions of the
Shares covered by the Registration Statement; provided that Party B shall
not be required to make any filing or take any action as a result of this
paragraph (c) that would required it to qualify as a foreign corporation or
file a general consent to service of process in any jurisdiction.
(d) Party B shall have caused such Shares to be registered with or approved by
such other governmental agencies or authorities in the United States as may
be reasonably necessary to be done by Party B to enable Party A or any
underwriter to consummate the disposition of such Shares.
(e) Party B shall have (i) given Party A and its underwriter(s), if any, and
their respective counsel and accountants, the opportunity to be consulted
during the preparation of all materials filed with the SEC or any other
governmental agency (the "Filed Materials") prior to the first day of such
Final Reference Share Price Pricing Period, (ii) furnished to each of them
copies of all such Filed Materials (and all documents incorporated therein
by reference) sufficiently in advance of filing to provide them with a
reasonable opportunity to review such documents and comment thereon, (iii)
given each of them such opportunities to discuss the business of Party B
with its officers and the independent public accountants who have issued a
report on its financial statement as shall be reasonably necessary, in the
opinion of Party A and such underwriter(s) or their respective counsel, to
conduct a reasonable investigation (within the meaning of the 1933 Act, as
amended) with respect to such Filed Materials, (iv) delivered to Party A
and its underwriter(s), if any, the financial statements of Party B filed
with the SEC, (v) included in such Filed Materials material, furnished to
Party B in writing, which in the reasonable judgement of Party A or its
underwriter(s), if any, subject to the consent of Party B (which shall not
be unreasonably withheld), should be included with respect to Party A,
Party A's underwriter(s) and the "Plan of Distribution", including, without
limitation, language to the effect that the holding by Party A of the
Shares is not to be construed as a recommendation by Party A of the
investment quality thereof and (vi) if requested by Party A, deleted from
such Filed Materials any reference to Party A if in the written opinion of
counsel
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to Party A, in form and substance to Party B, such reference to
Party A by name or otherwise is not required by the 1933 Act or any similar
Federal statute then in force.
(f) Party B shall have furnished to Party A and any underwriter, addressed to
Party A and any such underwriter and dated the first day of the Final
Reference Share Price Pricing Period, (i) an opinion of counsel for Party B
(which opinion may be from internal counsel for Party B) and (ii) a "cold
comfort" letter signed by the independent public accountants who have
issued a report on Party B's financial statements included in such
Registration Statement, covering substantially the same matters with
respect to such Shares and the offering, sale and issuance thereof as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriter(s) in underwritten public offerings of
securities and, in the case of the accountants' letter, such other
financial matters as Party A may have reasonably requested.
(g) Party B shall have complied with all applicable provisions of the 1933 Act
and the 1934 Act, all applicable rules of the SEC and all other applicable
laws, rules and regulations of any governmental or regulatory authority
with respect to such Filing Materials and such Shares and the offering,
sale and issuance thereof.
(h) Party B shall have caused all such Shares to be listed on the Exchange and
on each securities exchange on which Party B has caused similar securities
issued by Party B to be listed.
(i) Party B shall have provided a transfer agent and registrar for such Shares.
(j) Party B shall have taken such other actions as Party A or any underwriter
of such Shares shall have reasonably requested in order to expedite or
facilitate the disposition of such Shares.
(k) Party B shall provide Party A and its underwriter(s), if any, with
indemnity and contribution in form and substance acceptable to Party A
covering the information contained in the Registration Statement or
prospectus and Party A and its underwriter shall provide indemnification
and contribution in form and substance acceptable to Party B covering such
matters relating to information provided to Party B in writing for
inclusion in the Registration Statement. For purposes of this Appendix, the
attached Annex I sets forth a general form of indemnification and
contribution which may be considered by the parties, but both parties
recognise and agree that any form of indemnity ultimately agreed to by the
parties may differ, in part or substantially, from the form and substance
of such Annex I in light of the prevailing circumstances at the time of any
offering.
(l) Party B shall have paid all customary costs and expenses reasonably
incurred in connection with the foregoing, provided, that unless otherwise
agreed, Party A and its underwriter(s) shall be responsible for the fees
and expenses of their respective counsel, accountants and other advisors
(if any).
(m) Party B shall deliver all such registered Shares through the Clearance
System.
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COLLATERAL APPENDIX IN RESPECT OF THE CONFIRMATION
OF THE TRANSACTION BETWEEN
CREDIT SUISSE FINANCIAL PRODUCTS
AND
LAM RESEARCH CORPORATION
through
CSFP CAPITAL, INC., solely in its capacity as agent
(CSFP REFERENCE NO. (5579880))
This Appendix constitutes a security agreement under Articles 8 and 9 of the
Uniform Commercial Code of the State of New York (the "UCC") with respect to any
Collateral.
1. DEFINITIONS:
1.1 In this Appendix, the following expressions have the following meanings:
"BANKING DAY" means any day on which commercial banks are open for business
(including dealings in foreign exchange and foreign currency deposits) in
(a) London and New York, and (b) in the case of a Transfer of Permitted
Collateral (i) the location of the account into which such Transfer is to
be made, and (ii) either, in the case of a Transfer of Cash, the principal
financial centre of the currency of such Cash or, in the case of a Transfer
of other Permitted Collateral, the location of the account out of which
such Transfer shall be made and, if different, the place where the Transfer
will be registered (if applicable);
"CASH" means US Dollars;
"CASH COLLATERAL" means Collateral comprising Cash;
"COLLATERAL" means all the Permitted Collateral Transferred to and held by
or for the Secured Party pursuant to this Appendix together with all
proceeds, distributions, substitutions for and additions to the foregoing
in accordance with this Appendix and which has not been retransferred to
the Pledgor;
"PERMITTED COLLATERAL" means collectively Cash Collateral, US Government
Obligations and such other assets as may from time to time be acceptable to
the Secured Party for the purposes of this Appendix;
"PLEDGOR" means Party B;
"QUASI AGENCY OBLIGATIONS" means the negotiable debt obligations of the US
Government National Mortgage Association, the US Federal National Mortgage
Association, the US Federal Home Loan Mortgage Corporation, the US Student
Loan Marketing Association or a US Federal Home Loan Bank;
"RELEVANT PERCENTAGE" means, on any date, the percentage appearing below
opposite the relevant Permitted Collateral:
Type of Permitted Collateral Relevant Percentage
---------------------------- -------------------
Cash Collateral 100%
US Government Obligations:
with a Residual Maturity of less than one year 100%
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with a Residual Maturity equal to or greater than 1 year but less than 5 years 97%
with a Residual Maturity equal to or greater than 5 years but less than 10 years 95%
Other Permitted Collateral (excluding such percentage as shall from time to time be
US Dollars) specified by the Valuation Agent;
"REQUIRED AMOUNT" means, on any date, an amount expressed in US
Dollars, agreed upon (orally or in writing) by the Pledgor and the
Secured Party on such date or, if the Pledgor and the Secured Party
are unable promptly to agree upon an amount on such date, the amount
(if any) determined by the Valuation Agent, which would be payable by
the Pledgor to the Secured Party under Section 6(e)(ii)(1) of the
Agreement if an Early Termination Date were to occur in respect of all
outstanding Transactions on such date as a result of a Termination
Event on the basis that the Secured Party is not the Affected Party
and provided that Market Quotation will be determined by the Valuation
Agent on behalf of the Secured Party using its estimates at mid-market
of the amounts that would be paid for Replacement Transactions (as
that term is defined in the definition of Market Quotation), and
provided that the Required Amount shall be deemed to be zero whenever
the calculation of such amount yields a number less than zero;
"RESIDUAL MATURITY" means, on any date, in respect of any Permitted
Collateral comprising securities, the residual maturity of such
securities as of such date;
"SECURED PARTY" means Party A;
"TRANSFER" OR "TRANSFERRED" means the transfer by one party to the
other party (or its account) of Permitted Collateral:
(a) in the case of Cash, by wire transfer into one or more bank
accounts specified by the recipient;
(b) in the case of Permitted Collateral that cannot be delivered by
book entry, by delivery in appropriate physical form for transfer
and accompanied by duly executed instruments of transfer in blank
and such other documentation as the recipient of such transfer
may at any time reasonably request; or
(c) in the case of Permitted Collateral (other than Cash) that can be
delivered by book entry, by giving written instructions to a
Federal Reserve Bank, or the Euroclear or CEDEL clearing systems,
or any other depositary institution or entity agreed between the
parties, together with a written copy thereof to the recipient of
such Permitted Collateral, which if complied with would result in
a legally effective transfer of the relevant interest to such
recipient; or
(d) by any other method mutually acceptable to the parties;
As used herein, "Transfer" is intended to have the same meaning as
when used in UCC Section 8-313 or, where applicable, in any federal
regulation governing transfers of Permitted Collateral;
"US DOLLARS" AND "US$" means the lawful currency of the United States
of America;
"US GOVERNMENT OBLIGATIONS" means the negotiable debt obligations of
the United States of America issued by the US Treasury Department or
any other agency thereof, or negotiable debt obligations which are
fully guaranteed or guaranteed as to principal and interest by the
United States of America, provided that such obligations shall have a
Residual Maturity as of the date of their Transfer to the Secured
Party of less than ten (10) years, and, for the avoidance of doubt,
Quasi Agency Obligations shall not constitute US Government
Obligations;
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"VALUATION AGENT" means Party A; and
"VALUE" means on any date:
(a) with respect to US Dollars, the amount thereof;
(b) with respect to any US Government Obligations, the bid price for
such US Government Obligations, obtained by the Valuation Agent
and expressed in US Dollars, multiplied by the applicable
Relevant Percentage; and
(c) with respect to any other Permitted Collateral, the fair market
value thereof (expressed in US Dollars) on such date as
determined in any reasonable manner by the Valuation Agent
multiplied by the applicable Relevant Percentage.
1.2 References to Paragraphs are to Paragraphs of this Appendix.
2. GRANT OF SECURITY INTEREST:
2.1 As continuing security for the payment and discharge of all its obligations
under this Transaction and subject to Paragraph 2.2, the Pledgor, as sole
beneficial owner hereby pledges and grants to the Secured Party a first
priority security interest in, lien on, and right of set-off against, the
Collateral and agrees to do all acts and execute and deliver all documents
necessary to ensure that the Collateral remains at all times subject to the
pledge and security interest referred to in this Paragraph 2.
2.2 Although the parties intend that the Pledgor shall have no continuing
right, title or interest in or to Cash Collateral, in the event that the
Pledgor is deemed to have any right, title or interest therein, the
foregoing Paragraph 2.1 shall apply to such Cash Collateral.
2.3 The rights of the Secured Party with respect to any Cash Collateral
Transferred hereunder shall include, in addition to and without limiting
any other rights provided for in this Appendix, the right on any terms to
use, commingle, sell, pledge, repledge, hypothecate, assign, or otherwise
dispose of such Collateral, provided that no such transaction shall relieve
the Secured Party of its obligations to return such Collateral pursuant to
this Appendix.
2.4 Notwithstanding the foregoing, and pursuant to Paragraph 11(a) hereof, the
Secured Party agrees that it shall not foreclose upon any Collateral until
two Local Business Days after having delivered written notice to the
Pledgor of its intention to exercise such a right under Paragraph 11(a).
2.5 The Secured Party shall hold all Collateral (other than Cash Collateral) in
a segregated account which identifies the Pledgor as the owner thereof
(subject to the Secured Party's security interest therein) and the Secured
Party shall take all action necessary to ensure no creditor of the Secured
Party obtains any interest whatsoever therein.
2.6 Any interest or investment proceeds of any Collateral (except as provided
in Paragraph 6.1 hereof) shall be for the account of the Pledgor and shall
accrue to the benefit and in the name of the Pledgor.
2.7 Collateral shall at all times remain the property of the Pledgor, subject
only to the extent of the interest, rights and remedies hereof of the
Secured Party as the pledgee and/or secured party hereof.
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3. CONDITIONS PRECEDENT:
Any obligation on the part of the Secured Party to make a Transfer pursuant
to this Appendix is subject to the following conditions precedent:
no Event of Default, Termination Event and/or any event or condition
that with the giving of notice or passage of time, or both, would
constitute such an Event of Default or Termination Event, has occurred
and is continuing as of the date for such Transfer with the Pledgor as
the Defaulting Party or the Affected Party (as the case may be).
4. DELIVERY OF COLLATERAL:
(a) If, on the date at the beginning of each calendar quarter, the
Required Amount exceeds the Value of the Collateral held by the
Secured Party on such a date, the Pledgor shall, if requested by the
Secured Party, Transfer to the Secured Party Permitted Collateral
having a Value equal to such excess (rounded upwards to the nearest
integral multiple of US$250,000) within two (2) Banking Days of such
written request.
(b) If, on any date during each calendar quarter, the price per share of
the common stock of the Pledgor, as reasonably determined by the
Valuation Agent with reference to the NASDAQ closing price on such a
date, falls by twenty-five (25) percent or more below the price per
share of the common stock of the Pledgor as of the Starting Date, then
if so requested by the Secured Party and within two (2) Business Day
of such a written request, the Pledgor shall Transfer to the Secured
Party Permitted Collateral having a Value equal to the Required Amount
less the Value of the Collateral then held by the Secured Party,
rounded upwards to the nearest integral multiple of US$250,000.
For the purpose of this Section 4(b) the "Starting Date" shall be
defined as the date at the beginning of each calendar quarter and if
the Pledgor Transfers Permitted Collateral to the Secured Party under
this Section 4(b) during such a calendar quarter, then the new
Starting Date shall be the date of the latest such Transfer under this
Section 4(b).
5. RETURN OF COLLATERAL:
5.1 Where, on the date at the beginning of each calendar quarter, the Value of
Collateral held by the Secured Party exceeds the Required Amount on such a
date, the Secured Party shall, if requested by the Pledgor and subject to
Paragraph 3, Transfer to the Pledgor Collateral having a Value equal to
such excess rounded downwards to the nearest integral multiple of
US$250,000 within two (2) Banking Days of such request.
5.2 The Secured Party may in lieu of returning to the Pledgor any Collateral
comprising securities (as such term is defined in the UCC) return
securities which are fungible (as such term is used in the UCC) therewith
in satisfaction of its obligations under this Paragraph 5.
6. INTEREST ON CASH COLLATERAL:
6.1 Cash Collateral shall accrue interest for the benefit of the Pledgor at a
rate equal to the overnight rate for deposits in US Dollars as displayed on
Telerate page 118 provided that if, for any reason, Telerate Page 118 shall
be unavailable interest shall accrue at such rate as and be compounded on
such days as the Secured Party shall reasonably determine. Such interest
will be compounded on each New York Business Day and, subject to Paragraph
3, be paid to the Pledgor on any Local Business Day and shall accrue from
the date that
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the deposit of such Cash Collateral is confirmed to or to the
order of the Secured Party provided that such interest shall only be paid
to the Pledgor to the extent that such interest when added to the Value of
the Collateral held by the Secured Party, as of the date of such payment,
exceeds the Required Amount in respect of the Pledgor on such date and any
such interest not paid to the Pledgor shall be an accretion to the
Collateral held by the Secured Party.
6.2 Any interest or investment proceeds on any Collateral (other than Cash
Collateral) shall accrue for the benefit of the Pledgor and, subject to
Paragraph 3, be paid to the Pledgor on any Local Business Day, provided
that such interest or investment proceeds shall only be paid to the Pledgor
to the extent that such interest or investment proceeds, when added to the
Value of the Collateral held by the Secured Party, as of the date of such
payment, exceeds the Required Amount in respect of the Pledgor on such date
and any such interest or investment proceeds not paid to the Pledgor shall
be an accretion to the Collateral held by the Secured Party.
7. SUBSTITUTION:
The Pledgor may, with the prior consent of the Secured Party, substitute
existing Collateral. In the event of the Secured Party granting its consent
thereto the Pledgor shall pay all the costs involved in effecting such
substitution and, subject to Paragraph 3, the Secured Party shall Transfer
to the Pledgor the existing Collateral which is the subject of the
substitution as soon as practicable after the Secured Party shall be
satisfied that it has received Permitted Collateral in replacement therefor
having a Value, on the date of Transfer, not less than that of the
Collateral being substituted.
8. RESPONSIBILITY FOR AND CARE OF COLLATERAL:
8.1 Subject to Paragraph 11, all rights and powers conferred on or exercisable
by the registered holder, bearer or legal owner of the Collateral
(excluding Cash Collateral) shall be exercisable by the Pledgor or as the
Pledgor shall direct and the Pledgor shall remain liable to observe and
perform all conditions and obligations in respect of the Collateral
(excluding Cash Collateral). The Secured Party shall, upon its receiving
express and unequivocal instructions from the Pledgor, take all action
necessary on its part to ensure that all such rights and powers are
exercised in accordance with the Pledgor's instructions, provided that the
Secured Party shall not be obliged to act in accordance with the Pledgor's
instructions where: (a) such instructions involve any expense, and such
expense has not been funded in advance by the Pledgor; or (b) to act in
accordance with such instructions may reduce or in any way prejudice the
value of such Collateral, and provided further that the Secured Party shall
otherwise have no duty with respect to Collateral including, without
limitation, any duty to collect any proceeds or enforce or preserve any
rights pertaining thereto.
8.2 The Pledgor and the Secured Party hereby undertake not to exercise such
rights it may have retained in respect of the Collateral in such a way as
to reduce or prejudice in any way the value of the Collateral.
8.3 The parties acknowledge and agree that upon the Transfer of Collateral to
the Secured Party, or to an agent or custodian to receive and hold
Collateral for or on behalf of the Secured Party, such Collateral will not
necessarily be registered in the Pledgor's name.
9. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS:
The Pledgor represents and warrants that the provisions of Section 3 of the
Agreement apply in full force and effect and, without limiting the
foregoing:
(a) it has the power to enter into the Transaction and to execute and
deliver this Confirmation and perform its obligations hereunder
(including, for the avoidance of doubt, under this Appendix);
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(b) its obligations under the Transaction (including, for the avoidance of
doubt, under this Appendix) constitute its legal, valid and binding
obligations, enforceable in accordance with their respective terms;
(c) it has taken all necessary action to authorise such entry, execution,
delivery and performance;
(d) such entry, execution, delivery and performance do not violate or
conflict with any applicable law, any provision of its constituent
documents, any order or judgement 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;
(e) it is and, subject to Paragraph 2.2, will at all times be the sole,
lawful and beneficial owner of the Collateral free from all
encumbrances and forms of security interests (except for the charge or
other security interest, howsoever described, created hereby), and no
other person has, or will at any time have, any proprietary right or
interest therein;
(f) except for the first priority security interest (howsoever described)
in favour of the Secured Party and subject to Paragraph 2.2, no person
has, (or in the case of after-acquired Collateral, at the time the
Pledgor acquires rights therein, will have) any right, title, claim or
interest (by way of charge, lien, mortgage, pledge, security interest
(however described) or other encumbrance, or otherwise) in, against or
to the Collateral;
(g) it will not (without the prior written consent of the Secured Party at
any time) sell or agree to sell or otherwise dispose of, or agree to
dispose of, the Collateral; and
(h) it will ensure, so far as it is able, that the Collateral is and at
all times remains free from any restrictions on transfer.
10. EVENTS OF DEFAULT:
Notwithstanding anything to the contrary in the Agreement, the occurrence
at any time with respect to the Pledgor of any of the following events
constitutes an Event of Default with respect to it for the purposes of the
Agreement:
(a) failure by it to Transfer Permitted Collateral in accordance with
Paragraph 4, if such failure is not remedied within one Banking Day of
written notice of such failure being given to the Pledgor;
(b) failure by it to comply with or perform any other material provision
required to be complied with or performed by it which is contained in
this Appendix if such failure is not remedied within three Banking
Days of notice of such failure given to the Pledgor;
(c) the failing or ceasing of any material provision of this Appendix to
be in full force and effect prior to the satisfaction by the Pledgor
of all its obligations to the Secured Party under the Agreement; or
(d) the Pledgor disaffirms, disclaims, repudiates or rejects, in whole or
in part, or challenges the validity of, any material part of this
Appendix.
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11. SECURED PARTY'S RIGHTS AND REMEDIES:
Upon the occurrence and continuance of any Event of Default with respect to
the Pledgor or any Termination Event, the Secured Party may, to the extent
permitted by applicable law, exercise as to all Collateral then held by the
Secured Party the rights and remedies of a secured party under the UCC and
as otherwise provided by law and, in addition, at its sole option and
without notice to or demand upon the Pledgor, may exercise any or all of
the following remedies upon two (2) Local Business Days written notice to
the Pledgor:
(a) set off the Secured Party's obligation to repay any Cash to the
Pledgor, against any amounts owing to the Secured Party by the Pledgor
under this Transaction; and/or
(b) liquidate and apply all or any part of any Collateral other than Cash
in any manner deemed commercially reasonable by the Secured Party,
with the proceeds of such liquidation constituting Cash Collateral
hereunder; and/or
(c) set off the Value of such Collateral against any amounts owing to the
Secured Party by the Pledgor.
12. DELIVERY DEFAULT:
If the Pledgor fails to make, when due, any Transfer of Collateral, it
shall pay to the Secured Party, to the extent permitted under applicable
law, an amount equal to interest at the Default Rate (as that expression is
defined in the Agreement) multiplied by the Value of the Collateral which
was required to be Transferred, from (and including) the date that such
Collateral was required to be Transferred to (but excluding) the date of
the Transfer. This interest will be calculated on a daily rate by reference
to the actual number of days elapsed.
13. SET-OFF:
Upon the designation or deemed designation of any Early Termination Date,
in addition to and not in limitation of any other right or remedy
(including any right to set-off, counterclaim, or otherwise withhold
payment) under applicable law, the Non-defaulting Party or the party that
is not the Affected Party (in either case, "X") may, without prior notice
to any person, set off any sum or obligation under the Agreement
(including, without limitation this Appendix), whether matured or unmatured
and irrespective of the currency, place of payment or booking office of the
sum or obligation) owed by the Defaulting Party or Affected Party (in
either case, "Y") to X or to any Affiliate of X, against any sum or
obligation under the Agreement (including, without limitation this
Appendix), whether matured or unmatured and irrespective of the currency,
place of payment or booking office of the sum or obligation) owed by X or
any Affiliate of X to Y, and, for this purpose, may convert one currency
into another. If any sum or obligation is unascertained, X may in good
faith estimate that sum or obligation and set off in respect of that
estimate, subject to X or Y, as the case may be, accounting to the other
party when such sum or obligation is ascertained.
14. SECURITY AND PERFORMANCE ASSURANCE:
For the avoidance of doubt the parties agree that:
(a) Cash Collateral, is not and shall not be deemed to be "client
money" for the purposes of the Financial Services (Client Money)
Regulations 1991 and the Secured Party shall not hold Cash Collateral
as "client money" as contemplated by the Regulations; and
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(b) Collateral constitutes security and performance assurance without
which the Secured Party would not otherwise enter into and continue
any and all Transactions.
15. NOTICES:
Any notice or demand to be given to or made by the Secured Party or the
Pledgor pursuant to this Appendix shall be made in writing as specified in
Section 12 of the Agreement save that such notice or demand:
(a) if given to the Secured Party, shall be given to or made in accordance
with the following details:-
Address: One Cabot Square, London E14 4QJ
Telephone: 0171-888 2502
Facsimile: 0171-888 3866
Telex: 264521 Answerback: CSFINPG
Swift: CSFP GB 2L
Attention: CSFP Operations Settlements
or in accordance with such other details as the Secured Party
may from time to time notify (in accordance with the terms of
this Paragraph 16) to the Pledgor; and
(b) shall be deemed to be effective at the time such written notice is
actually received unless such notice is received on a day which is not
a Banking Day, or after 4.00 p.m. London time on any Banking Day, in
which event such notice shall be deemed to be effective at 9.00 a.m.
London time on the next succeeding Banking Day.
16. DOCUMENTATION AND INCONSISTENCY:
The parties agree to execute a collateral agreement (or such other form of
documentation as Party A deems appropriate) in the form provided by Party
A, subject to good faith negotiation, as an appendix to the Agreement
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