(MULTICURRENCY-CROSS BORDER)
ISDA-Registered Trademark-
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of May 20, 1997
LEHMAN BROTHERS FINANCE S.A. AND MAGNETEK, INC.
and
- --------------------------------------------------------------------------------
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:-
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will
have the meanings therein specified for the purpose of this Master Agreement.
(b) INCONSISTENCY. In the event of any inconsistency between the provisions
of the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purposes of the relevant Transaction.
(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmation 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.
1
(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 ("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.
2
(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)).
3
(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 parry 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,
4
organised, managed and controlled, or considered to have its seat, or in which a
branch or office through which it is acting for the purpose of this Agreement is
located ("Stamp Tax Jurisdiction") and will indemnify the other party against
any Stamp Tax levied or imposed upon the other party or in respect of the other
party's execution or performance of this Agreement by any such Stamp Tax
Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the
other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event of
default (an "Event of Default") with respect to such party:-
(i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when
due, any payment under this Agreement or delivery under Section 2(a)(i)
or 2(e) required to be made by it if such failure is not remedied on or
before the third Local Business Day after notice of such failure is
given to the party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or
perform any agreement or obligation (other than an obligation to make
any payment under this Agreement or delivery under Section 2(a)(i) or
2(e) or to give notice of a Termination Event or any agreement or
obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with
or performed by the party in accordance with this Agreement if such
failure is not remedied on or before the thirtieth day after notice of
such failure is given to the party;
(iii) CREDIT SUPPORT DEFAULT.
(1) Failure by the party or any Credit Support Provider of such
party to comply with or perform any agreement or obligation to be
complied with or performed by it in accordance with any Credit
Support Document if such failure is continuing after any
applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support
Document or the failing or ceasing of such Credit Support
Document to be in full force and effect for the purpose of this
Agreement (in either case other than in accordance with its
terms) prior to the satisfaction of all obligations of such party
under each Transaction to which such Credit Support Document
relates without the written consent of the other party; or
(3) the party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part, or
challenges the validity of, such Credit Support Document;
(iv) MISREPRESENTATION. A representation (other than a representation
under Section 3(e) or (f)) made or repeated or deemed to have been made
or repeated by the party or any Credit Support Provider of such party in
this Agreement or any Credit Support Document proves to have been
incorrect or misleading in any material respect when made or repeated or
deemed to have been made or repeated.
(v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit
Support Provider of such party or any applicable Specified Entity of
such party (1) defaults under a Specified Transaction and, after giving
effect to any applicable notice requirement or grace period, there
occurs a liquidation of, an acceleration of obligations under, or an
early termination of, that Specified Transaction, (2) defaults, after
giving effect to any applicable notice requirement or grace period, in
making any payment or delivery due on the last payment, delivery or
exchange date of, or any payment on early termination of, a Specified
Transaction (or such default continues for at least three Local Business
Days if there is no applicable notice requirement or grace period) or
(3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a
Specified Transaction (or such action is taken by any person or entity
appointed or empowered to operate it or act on its behalf);
(vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule
as applying to the party, the occurrence or existence of (1) a default,
event of default or other similar condition or event (however
5
described) in respect of such party, any Credit Support Provider of such
party or any applicable Specified Entity of such party under one or more
agreements or instruments relating to Specified Indebtedness of any of
them (individually or collectively) in an aggregate amount of not less
than the applicable Threshold Amount (as specified in the Schedule)
which has resulted in such Specified Indebtedness becoming, or becoming
capable at such time of being declared, due and payable under such
agreements or instruments, before it would otherwise have been due and
payable or (2) a default by such party, such Credit Support Provider or
such Specified Entity (individually or collectively) in making one or
more payments on the due date thereof in an aggregate amount of not less
than the applicable Specified Amount under such agreements or
instruments (after giving effect to any applicable notice requirement or
grace period);
(vii) BANKRUPTCY. The party, any Credit Support Provider of such party
or any applicable Specified Entity of such party:-
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to
pay its debts or fails or admits in writing its inability
generally to pay its debts as they become due; (3) makes a
general assignment, arrangement or composition with or for the
benefit of its creditors; (4) institutes or has instituted
against it a proceeding seeking a judgment of insolvency or
bankruptcy or any other relief under any bankruptcy or insolvency
law or other similar law affecting creditors' rights, or a
petition is presented for its winding-up or liquidation, and, in
the case of any such proceeding or petition instituted or
presented against it, such proceeding or petition (A) results in
a judgment of insolvency or bankruptcy or the entry of an order
for relief or the making of an order for its winding-up or
liquidation or (B) is not dismissed, discharged, stayed or
restrained in each case within 30 days of the institution or
presentation thereof; (5) has a resolution passed for its
winding-up, official management or liquidation (other than
pursuant to a consolidation, amalgamation or merger); (6) seeks
or becomes subject to the appointment of an administrator,
provisional liquidator, conservator, receiver, trustee, custodian
or other similar official for it or for all or substantially all
its assets; (7) has a secured party take possession of all or
substantially all its assets or has a distress, execution,
attachment, sequestration or other legal process levied, enforced
or sued on or against all or substantially all its assets and
such secured party maintains possession, or any such process is
not dismissed, discharged, staved or restrained, in each case
within 30 days thereafter; (8) causes or is subject to any event
with respect to it which, under the applicable laws of any
jurisdiction, has an analogous effect to any of the events
specified in clauses (1) to (7) (inclusive); or (9) takes any
action in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the foregoing acts; or
(viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or merges with
or into, or transfers all or substantially all its assets to, another
entity and, at the time of such consolidation, amalgamation, merger or
transfer:-
(1) the resulting, surviving or transferee entity fails to
assume all the obligations of such party or such Credit Support
Provider under this Agreement or any Credit Support Document to
which it or its predecessor was a party by operation of law or
pursuant to an agreement reasonably satisfactory to the other
party to this Agreement; or
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the performance by
such resulting, surviving or transferee entity of its obligations
under this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any event specified below constitutes an Illegality if
the event is specified in (i) below, a Tax Event if the event is specified in
(ii) below or a Tax Event Upon Merger if the event is specified in (iii) below,
and, if specified to be applicable, a Credit Event
6
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 tax authority, or
brought in a court of competent jurisdiction, on or after the date on
which a Transaction is entered into (regardless of whether such action
is taken or brought with respect to a party to this Agreement) or (y) a
Change in Tax Law, the party (which will be the Affected Party) will, or
there is a substantial likelihood that it will, on the next succeeding
Scheduled Payment Date (1) be required to pay to the other party an
additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii)
or 6(e)) or (2) receive a payment from which an amount is required to be
deducted or withheld for or on account of a Tax (except in respect of
interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount
is required to be paid in respect of such Tax under Section 2(d)(i)(4)
(other than by reason of Section 2(d)(i)(4)(A) or (B));
(iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the
next succeeding Scheduled Payment Date will either (1) be required to
pay an additional amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has been
deducted or withheld for or on account of any Indemnifiable Tax in
respect of which the other party is not required to pay an additional
amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in either
case as a result of a party consolidating or amalgamating with, or
merging with or into, or transferring all or substantially all its
assets to, another entity (which will be the Affected Party) where such
action does not constitute an event described in Section 5(a)(viii);
(iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merge" is
specified in the Schedule as applying to the party, such party ("X"),
any Credit Support Provider of X or any applicable Specified Entity of X
consolidates or amalgamates with, or merges with or into, or transfers
all or substantially all its assets to, another entity and such action
does not constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case my be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate,
will be the Affected Party); or
(v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination
Event" is specified in the Schedule or any Confirmation as applying, the
occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which
would otherwise constitute or give rise to an Event of Default also constitutes
an Illegality, it will be treated is an Illegality and will not constitute an
Event of Default.
7
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)(l), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying
the nature of that Termination Event and each Affected Transaction and
will also give such other information about that Termination Event as
the other party may reasonably require.
(ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality
under Section 5(b)(i)(1) or a Tax Event occurs and there is only one
Affected Party, or if a Tax Event Upon Merger occurs and the Burdened
Party is the Affected Party, the Affected Party will, as a condition to
its right to designate an Early Termination Date under Section 6(b)(iv),
use all reasonable efforts (which will not require such party to incur a
loss, excluding immaterial, incidental expenses) to transfer within 20
days after it gives notice under Section 6(b)(i) all its rights and
obligations under this Agreement in respect of the Affected Transactions
to another of its Offices or Affiliates so that such Termination Event
ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days
after the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject
to and conditional upon the prior written consent of the other party,
which consent will not be withheld if such other party's policies in
effect at such time would permit it to enter into transactions with the
transferee on the terms proposed.
(iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1)
or a Tax Event occurs and there are two Affected Parties, each party
will use all reasonable efforts to reach agreement within 30 days after
notice thereof is given under Section 6(b)(i) on action to avoid that
Termination Event.
(iv) RIGHT TO TERMINATE. If:-
(1) a transfer under Section 6(b)(ii) or an agreement under
Section 6(b)(iii), as the case may be, has not been effected with
respect to all Affected Transactions within 30 days after an
Affected Party gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon
Merger or an Additional Termination Event occurs, or a Tax Event
Upon Merger occurs and the Burdened Party is not the Affected
Party,
either party in the case of an Illegality, the Burdened Party in the
case of a Tax Event Upon Merger, any Affected Party in the case of a Tax
Event or an Additional Termination Event if there is more than one
Affected Party, or the party which is not the Affected Party in the case
of a Credit Event Upon Merger or an Additional Termination Event if
there is only one Affected Party may, by not more than 20 days notice to
the other party and provided that the relevant Termination Event is then
8
continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date
so designated, whether or not the relevant Event of Default or
Termination Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section
2(a)(i) or 2(e) in respect of the Terminated Transactions will be
required to be made, but without prejudice to the other provisions of
this Agreement. The amount, if any, payable in respect of an Early
Termination Date shall be determined pursuant to Section 6(e).
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable
detail, such calculations (including all relevant quotations and
specifying any amount payable under Section 6(e)) and (2) giving details
of the relevant account to which any amount payable to it is to be paid.
In the absence of written confirmation from the source of a quotation
obtained in determining a Market Quotation, the records of the party
obtaining such quotation will be conclusive evidence of the existence
and accuracy of such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect of
any Early Termination Date under Section 6(e) will be payable on the day
that notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event
of Default) and on the day which is two Local Business Days after the
day on which notice of the amount payable is effective (in the case of
an Early Termination Date which is designated as a result of a
Termination Event). Such amount will be paid together with (to the
extent permitted under applicable law) interest thereon (before as well
as after judgment) in the Termination Currency, from (and including) the
relevant Early Termination Date to (but excluding) the date such amount
is paid, at the Applicable Rate. Such interest will be calculated on
the basis of daily compounding and the actual number of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) EVENTS OF DEFAULT. If the Early Termination Date results from an
Event of Default:-
(1) First Method and Market Quotation. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A) the
sum of the Settlement Amount (determined by the Non-defaulting
Party) in respect of the Terminated Transactions and the
Termination Currency Equivalent of the Unpaid Amounts owing to
the Non-defaulting Party over (B) the Termination Currency
Equivalent of the Unpaid Amounts owing to the Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply,
the Defaulting Party will pay to the Non-defaulting Party, if a
positive number, the Non-defaulting Party's Loss in respect of
this Agreement.
(3) Second Method and Market Quotation. If the Second Method
and Market Quotation apply, an amount will be payable equal to
(A) the sum of the Settlement Amount (determined by the
9
Non-defaulting Party) in respect of the Terminated Transactions
and the Termination Currency Equivalent of the Unpaid Amounts
owing to the Non-defaulting Party less (B) the Termination
Currency Equivalent of the Unpaid Amounts owing to the Defaulting
Party. If that amount is a positive number, the Defaulting Party
will pay it to the Non-defaulting Party; if it is a negative
number, the Non-defaulting Party will pay the absolute value of
that amount to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss
apply, an amount will be payable equal to the Non-defaulting
Party's Loss in respect of this Agreement. If that amount is a
positive number, the Defaulting Party will pay it to the
Non-defaulting Party; if it is a negative number, the
Non-defaulting Party will pay the absolute value of that amount
to the Defaulting Party.
(ii) TERMINATION EVENTS. If the Early Termination Date results from a
Termination Event:-
(1) ONE AFFECTED PARTY. If there is one Affected Party, the
amount payable will be determined in accordance with Section
6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4),
if Loss applies, except that, in either case, references to the
Defaulting Party and to the Non-defaulting Party will be deemed
to be references to the Affected Party and the party which is not
the Affected Party, respectively, and, if Loss applies and fewer
than all the Transactions are being terminated, Loss shall be
calculated in respect of all Terminated Transactions.
(2) TWO AFFECTED PARTIES. If there are two Affected Parties:-
(A) if Market Quotation applies, each party will determine
a Settlement Amount in respect of the Terminated
Transactions, and an amount will be payable equal to (I) the
sum of (a) one-half of the difference between the Settlement
Amount of the party with the higher Settlement Amount ("X")
and the Settlement Amount of the party with the lower
Settlement Amount ("Y") and (b) the Termination Currency
Equivalent of the Unpaid Amounts owing to X less (II) the
Termination Currency Equivalent of the Unpaid Amounts owing
to Y; and
(B) if Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the
Transactions are being terminated, in respect of all
Terminated Transactions) and an amount will be payable equal
to one-half of the difference between the Loss of the party
with the higher Loss ("X") and the Loss of the party with
the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X;
if it is a negative number, X will pay the absolute value of that
amount to Y.
(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will
be subject to such adjustments as are appropriate and permitted by law
to reflect any payments or deliveries made by one party to the other
under this Agreement (and retained by such other party) during the
period from the relevant Early Termination Date to the date for payment
determined under Section 6(d)(ii).
(iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies
an amount recoverable under this Section 6(e) is a reasonable
pre-estimate of loss and not a penalty. Such amount is payable for the
loss of bargain and the loss of protection against future risks and
except as otherwise provided in this Agreement neither party will be
entitled to recover any additional damages as a consequence of such
losses.
10
7. TRANSFER
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:-
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in
any amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. CONTRACTUAL CURRENCY
(a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement
will be made in the relevant currency specified in this Agreement for that
payment (the "Contractual Currency"). To the extent permitted by applicable
law, any obligation to make payments under this Agreement in the Contractual
Currency will not be discharged or satisfied by any tender in any currency other
than the Contractual Currency, except to the extent such tender results in the
actual receipt by the party to which payment is owed, acting in a reasonable
manner and in good faith in converting the currency so tendered into the
Contractual Currency, of the full amount in the Contractual Currency of all
amounts payable in respect of this Agreement. 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 which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such party.
The term "rate of exchange" includes, without limitation, any premiums and costs
of exchange payable in connection with the purchase of or conversion into the
Contractual Currency.
(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums payable in respect of this
Agreement.
(d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be
sufficient for a party to demonstrate that it would have suffered a loss had an
actual exchange or purchase been made.
11
9. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts (including
by facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of
each Transaction from the moment they agree to those terms (whether
orally or otherwise). A Confirmation shall be entered into as soon as
practicable and may be executed and delivered in counterparts (including
by facsimile transmission) or be created by an exchange of telexes or by
an exchange of electronic messages on an electronic messaging system,
which in each case will be sufficient for all purposes to evidence a
binding supplement to this Agreement. The parties will specify therein
or through another effective means that any such counterpart, telex or
electronic message constitutes a Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power
or privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. OFFICES; MULTIBRANCH PARTIES
(a) If Section 10(a) is specified in the Schedule as applying, each party
that enters into a Transaction through an Office other than its head or home
office represents to the other party that, notwithstanding the place of booking
office or jurisdiction of incorporation or organisation of such party, the
obligations of such party are the same as if it had entered into the Transaction
through its head or home office. This representation will be deemed to be
repeated by such party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
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
12
to which the Defaulting Party is a party or by reason of the early termination
of any Transaction, including, but not limited to, costs of collection.
12. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:-
(i) if in writing and delivered in person or by courier, on the date
it is delivered;
(ii) if sent by telex, on the date the recipient's answerback is
received;
(iii) if sent by facsimile transmission, on the date that transmission
is received by a responsible employee of the recipient in legible form
(it being agreed that the burden of proving receipt will be on the
sender and will not be met by a transmission report generated by the
sender's facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or
the equivalent (return receipt requested), on the date that mail is
delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that
electronic message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating
to this Agreement ("Proceedings"), each party irrevocably:-
(i) submits to the jurisdiction of the English courts, if this
Agreement is expressed to be governed by English law, or to the
non-exclusive jurisdiction of the courts of the State of New York and
the United States District Court located in the Borough of Manhattan in
New York City, if this Agreement is expressed to be governed by the laws
of the State of New York; and
(ii) waives any objection which it may have at any time to the laying
of venue of any Proceedings brought in any such court, waives any claim
that such Proceedings have been brought in an inconvenient forum, and
further waives the right to object, with respect to such Proceedings,
that such court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments 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
13
reason any party's Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a substitute process
agent acceptable to the other party. The parties irrevocably consent to service
of process given in the manner provided for notices in Section 12. Nothing in
this Agreement will affect the right of either party to serve process in any
other manner permitted by law.
(d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest
extent permitted by applicable law, with respect to itself and its revenues and
assets (irrespective of their use or intended use), all immunity on the grounds
of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. DEFINITIONS
As used in this Agreement:-
"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).
"AFFECTED PARTY" has the meaning specified in Section 5(b).
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"APPLICABLE RATE" means:-
(a) in respect of obligations payable or deliverable (or which would have
been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of
either party from and after the date (determined in accordance with Section
6(d)(ii)) on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which
would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the
Non-default Rate; and
(d) in all other cases, the Termination Rate.
"BURDENED PARTY" has the meaning specified in Section 5(b).
"CHANGE IN TAX LAW" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
"CONSENT" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified as
such in this Agreement.
"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus l% per annum.
14
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"ILLEGALITY" has the meaning specified in Section 5(b).
"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"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
15
been required after that date. For this purpose, Unpaid Amounts in respect of
the Terminated Transaction or group of Terminated Transactions are to be
excluded but, without limitation, any payment or delivery that would, but for
the relevant Early Termination Date, have been required (assuming satisfaction
of each applicable condition precedent) after that Early Termination Date is to
be included. The Replacement Transaction would be subject to such documentation
as such party and the Reference Market-maker may, in good faith, agree. The
party making the determination (or its agent) will request each Reference
Market-maker to provide its quotation to the extent reasonably practicable as of
the same day and time (with 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 or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference to
any Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"SPECIFIED ENTITY" has the meaning specified in the Schedule.
16
"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (of any Credit Support Provider of such other parry 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 currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.
"TERMINATION EVENT" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination
Date the aggregate of (a) in respect of all Terminated Transactions, the amounts
that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date
and (b) in respect of each Terminated Transaction, for each obligation under
Section 2(a)(i) which was (or would have been but for Section 2(a)(iii))
required to be settled by delivery to, such party on or prior to such Early
Termination Date and which has not been so settled as at such Early
Termination Date an amount equal to the fair market
17
value of that which was (or would have been) required to be delivered as of the
originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or would
have been required to have been paid or performed to (but excluding) such Early
Termination Date, at the Applicable Rate. Such amounts of interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b)
above shall be reasonably determined by the party obliged to make the
determination under Section 6(e) or, if each party is so obliged, it shall be
the average of the Termination Currency Equivalents of the fair market values
reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
LEHMAN BROTHERS FINANCE S.A. MAGNETEK, INC.
(Name of Party)................... .........(Name of Party)...........
By: By:
............................. .........................
Name: Name:
Title: Title:
Date: Date:
By:
.............................
Name:
Title:
Date:
18
SCHEDULE
TO THE
MASTER AGREEMENT
dated as of May 20, 1997
between LEHMAN BROTHERS FINANCE S.A., a Swiss corporation ("Party A")
and MAGNETEK, INC., a Delaware corporation ("Party B").
PART 1
TERMINATION PROVISIONS
In this Agreement:-
(a) SPECIFIED ENTITY means in relation to Party A for the purpose of:-
SECTION 5(a)(V), Not applicable.
SECTION 5(a)(VI), Not applicable.
SECTION 5(a)(VII), Not applicable.
SECTION 5(b)(IV), Not applicable.
in relation to Party B for the purpose of:-
SECTION 5(a)(V), Not applicable.
SECTION 5(a)(VI), Not applicable.
SECTION 5(a)(VII), Not applicable.
SECTION 5(b)(IV), Not applicable.
(b) SPECIFIED TRANSACTION will have the meaning specified in SECTION 14 of
this Agreement.
(c) The CROSS DEFAULT provisions of SECTION 5(A)(VI) will apply to Party A and
Party B.
The following provisions apply:-
SPECIFIED INDEBTEDNESS will have the meaning specified in SECTION 14.
THRESHOLD AMOUNT means the lesser of (i) USD40,000,000 and (ii) two percent
(2%) of the Stockholders' Equity of Lehman Brothers Holdings Inc.
("Holdings"), in the case of Party A and Holdings (or its equivalent in any
other currency), and the lesser of (i) USD40,000,000 and (ii) two percent
(2%) of the Stockholders' Equity of Party B, in the case of Party B (or its
equivalent in any other currency).
(d) The CREDIT EVENT UPON MERGER provisions of SECTION 5(hB)(IV) will apply to
Party A and Party B.
(e) The AUTOMATIC EARLY TERMINATION provision of SECTION 6(a) will NOT apply to
either Party A or Party B, provided that where there is an Event of Default
under Section 5(a)(vii)(1), (3), (4), (5), (6) or, to the extent analogous
thereto, (8), and the Defaulting Party is governed by a system of law that
does not permit termination to take place after the occurrence of such
Event of Default, then the Automatic Early Termination provisions of
Section 6(a) will apply.
(f) PAYMENTS ON EARLY TERMINATION. For the purpose of SECTION 6(E) of this
Agreement, Market Quotation and the Second Method will apply.
(g) TERMINATION CURRENCY means United States Dollars ("USD").
PART 2
TAX REPRESENTATIONS
PAYER REPRESENTATIONS. For the purpose of SECTION 3(E) of this Agreement, Party
A will make the following representation and Party B will make 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) of this Agreement) 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) of this Agreement;
(ii) the satisfaction of the agreement contained in SECTION 4(a)(i) or
4(a)(III) of this Agreement and the accuracy and effectiveness of
any document provided by the other party pursuant to SECTION
4(a)(I) or 4(a)(III) of this Agreement; and
(iii) the satisfaction of the agreement of the other party contained in
SECTION 4(D) of this Agreement,
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) of this Agreement by reason of material prejudice to its
legal or commercial position.
PAYEE REPRESENTATIONS. For the purpose of SECTION 3(f) of this Agreement, Party
A will make the following representations:
It is fully eligible for the benefits of the "Business Profits" or
"Industrial and Commercial Profits" provision, as the case may be, the
"Interest" provision or the "Other Income" provision (if any) of the Specified
Treaty with respect to any payment described in such provisions and received or
to be received by it in connection with this Agreement and no such payment is
attributable to a trade or business carried on by it through a permanent
establishment in the Specified Jurisdiction.
If such representation applies, then:-
"SPECIFIED TREATY" means, with respect to a Transaction, the tax treaty
applicable between the United States of America and Switzerland; and
"SPECIFIED JURISDICTION" means, with respect to each Transaction, the United
States of America.
PART 3
DOCUMENTS TO BE DELIVERED
For the purpose of SECTION 4(a):-
(a) Tax forms, documents or certificates to be delivered are:-
PARTY REQUIRED
TO DELIVER DATE BY WHICH
DOCUMENT FORM/DOCUMENT/CERTIFICATE TO BE DELIVERED
- -------------- ------------------------- ----------------
Party A Tax Forms Promptly upon the earlier of (i)
reasonable demand by Party B or
(ii) learning that the form or
document is required.
Party B Tax Forms Promptly upon the earlier of (i)
reasonable demand by Party A or
(ii) learning that the form or
document is required.
(b) Other documents to be delivered are:-
PARTY
REQUIRED COVERED BY
TO DELIVER DATE BY WHICH SECTION 3(d)
DOCUMENT FORM/DOCUMENT/CERTIFICATE TO BE DELIVERED REPRESENTATION
- ---------- ------------------------- --------------- --------------
Party A The Credit Support Document Upon execution No
listed in Part 4, of this Agreement
Section(f).
Party A An incumbency certificate Upon execution of Yes
with respect to the this Agreement
signatory of this Agreement.
Party B An incumbency certificate Upon execution of Yes
with respect to the this Agreement
signatory of this Agreement.
Party B An opinion of Party B's Promptly after Yes
counsel substantially in the execution of this
form of Exhibit B to this Agreement.
Schedule.
Party B A certified copy of the Upon execution of Yes
resolution or resolutions this Agreement
(the Authorizing Resolution) (unless an Authorizing
of the board of directors of Resolution has
Party B, certified by a previously been
secretary, or an assistant furnished by Party B
secretary of Party B, to Party A), and,
pursuant to which Party B is with respect to
authorized to enter into each Transaction
this Agreement and each not covered by a
Transaction entered into previously furnished
under this Agreement. Authorizing Resolution,
within five (5)
Business Days of the
Trade Date.
Party B Unaudited quarterly Within 45 days after Yes
financial statements of each fiscal quarter
Party B end of Party B or,
if publicly available,
when publicly available.
Party B Audited annual financial Within 60 days after Yes
statements of Party B each fiscal year end
of Party B or, if
publicly available,
when publicly available.
PART 4
MISCELLANEOUS
(a) ADDRESSES FOR NOTICES. For the purpose of SECTION 12(a) of this Agreement:
Address for notices or communications to Party A:-
Address: GENFERSTRASSE 24, P.O. BOX 311, CH-8002 ZURICH, SWITZERLAND
Attention: FINANCIAL CONTROLLER
Telex No: 812 906 Answerback: LBFS CH
Facsimile No.: 411-287-8825 Telephone No.: 411-287-8842
(For all purposes)
Address for notices or communications to Party B:-
Address: 9116 Brentmeade Blvd., Brentwood, TN 37027
Attention: John Colling, Jr.
Telex No.: Answerback:
Facsimile No.: (615) 316-5192 Telephone No.: (615) 316-5255
(For all purposes)
(b) PROCESS AGENT. For the purpose of SECTION 13(c):-
Party A appoints as its Process Agent - Lehman Brothers Inc.
3 World Financial Center
New York, NY 10285
Party B appoints as its Process Agent - Not applicable.
(c) OFFICES. The provisions of SECTION 10(a) will apply to this Agreement.
(d) MULTIBRANCH PARTY. For the purpose of SECTION 10(c):
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
(e) CALCULATION AGENT. The Calculation Agent is Party A, unless otherwise
specified in a Confirmation in relation to the relevant Transaction.
(f) CREDIT SUPPORT DOCUMENT. Details of any Credit Support Document:-
In the case of Party A, a guarantee of Party A's obligations hereunder in
the form annexed hereto as Exhibit A to Schedule.
(g) CREDIT SUPPORT PROVIDER.
Credit Support Provider means in relation to Party A: Holdings.
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. SUBPARAGRAPH (ii) of SECTION 2(c) of this Agreement
will not apply to any Transactions (in each case starting from the date of
this Agreement).
(j) AFFILIATE will have the meaning specified in SECTION 14 of this Agreement.
PART 5
OTHER PROVISIONS
(a) CONFIRMATIONS. Party A shall send to Party B its standard form of
Confirmation for each Transaction entered into hereunder, the terms of
which shall be deemed to be agreed to by Party B unless, within three (3)
Local Business Days of Party B's receipt thereof, Party B notifies Party A
of any disagreement thereto.
(b) STOCKHOLDERS' EQUITY means with respect to an entity, at any time, the sum
at such time of (i) its capital stock (including preferred stock)
outstanding, taken at par value, (ii) its capital surplus and (iii) its
retained earnings, minus (iv) treasury stock, each to be determined in
accordance with generally accepted accounting principles.
(c) TAX FORMS means any form or document that may be required or reasonably
requested in order to allow the other party to make a payment under the
Transaction without any deduction or withholding for or on account of any
Tax or with such deduction or withholding at a reduced rate.
(d) TRANSFER. For the purposes of Section 7, the following phrase "which
consent shall not be unreasonably withheld" shall be inserted on the third
line thereof, after the word "party," and before the word "except". In
addition, either party may assign a Transaction to an affiliated entity of
such party whose obligations in respect of such assignment are guaranteed
by the transferor party, or, if the transferor's obligations under the
Transaction are guaranteed, by the guarantor of such transferor party's
obligations. Notwithstanding the foregoing, any assignment hereunder shall
not be permitted if, as a result thereof, a
payment becomes subject to any deduction or withholding for or on account
of any tax which would not have arisen had such assignment not been
effected.
(e) TRIAL BY JURY. Each party irrevocably waives any and all rights to trial
by jury in any legal proceeding in connection with this Agreement or any
Transaction.
(f) ACCURACY OF SPECIFIED INFORMATION. Section 3(d) is hereby amended by
adding in the third line thereof after the word "respect" and before the
period the words "or, in the case of audited or unaudited financial
statements or balance sheets, a fair presentation of the financial
condition of the relevant person".
(g) DEFINITIONS. This Agreement, each Confirmation, and each Transaction are
subject to the 1991 ISDA Definitions and the 1994 ISDA Equity Option
Definitions, each as published by the International Swaps and Derivatives
Association, as amended, supplemented, updated, restated and superseded
from time to time (collectively, the "Definitions"), and will be governed
in all respects by the Definitions (except that references to "Swap
Transactions" in the Definitions will be deemed to be references to
"Transactions"). The Definitions as so modified, are incorporated by
reference in, and made part of, this Agreement and each Confirmation as if
set forth in full in this Agreement and such Confirmations. Subject to
Section 1(b), in the event of any inconsistency between the provisions of
this Agreement and the Definitions, this Agreement will prevail. Also,
subject to Section 1(b), in the event of any inconsistency between the
provisions of any Confirmation and this Agreement, or the Definitions, such
Confirmation will prevail for the purpose of the relevant Transaction.
(h) NOTICES. For the purposes of subsections (iii) and (v) of Section 12(a),
the date of receipt shall be presumed to be the date sent if sent on a
Local Business Day or, if not sent on a Local Business Day, the date of
receipt shall be presumed to be the first Local Business Day following the
date sent.
(i) SERVICE OF PROCESS. The penultimate sentence of Section 13(c) shall be
amended by adding the following language at the end thereof: "if permitted
in the jurisdiction where the proceedings are initiated and in the
jurisdiction where service is to be made."
(j) SET-OFF.
(1) In addition to any rights of set-off a party may have as a matter of
law or otherwise, upon the occurrence of an Event of Default or an
Additional Termination Event with respect to a party ("X"), the other
party ("Y") will have the right (but not be obliged) without prior
notice to X or any other person to set-off or apply any obligation of
X owed to Y (and to any Affiliate of Y) (whether or not matured or
contingent and whether or not arising under this Agreement, and
regardless of the currency, place of payment or booking office of the
obligation) against any obligation of Y (and to any Affiliate of Y)
owed to X (whether or not matured or contingent and whether or not
arising under this Agreement, and regardless of the currency, place of
payment or booking office of the obligation.)
(2) For the purpose of cross-currency set-off, Y may convert either
obligation at the applicable market exchange rate selected by Y on the
relevant date.
(3) If the amount of an obligation is unascertained, Y may in good faith
estimate that amount and set-off in respect of the estimate, subject
to the relevant party accounting to the other when the amount of the
obligation is ascertained.
(4) This clause (j) shall not constitute a mortgage, charge, lien or other
security interest upon any of the property or assets of either party
to this Agreement.(k)
ADDITIONAL REPRESENTATIONS. Section 3 is hereby amended by
adding the following additional subsections:
(g) NO AGENCY. It is entering into this Agreement and each
Transaction as principal (and not as agent or in any other capacity,
fiduciary or otherwise).
(h) ELIGIBLE SWAP PARTICIPANT. It is an "eligible swap participant"
as defined in the Part 35 Regulations of the U.S. Commodity Futures Trading
Commission.
(i) LINE OF BUSINESS. It has entered into this Agreement (including
each Transaction evidenced hereby) in conjunction with its line of business
(including financial intermediation services) or the financing of its
business. It represents and warrants that all transactions effected under
this Agreement (i) will be appropriate in the conduct and management of its
business, (ii) will be entered into for non-speculative purposes, and (iii)
constitute transactions entered into for purposes of hedging or managing
risks related to its assets or liabilities as currently owned or incurred,
or likely to be owned or incurred in the conduct of its business.
(j) NO RELIANCE. In connection with the negotiation of, the entering
into, and the confirming of the execution of, this Agreement, any Credit
Support Document to which it is a party, and each Transaction: (i) the
other party is acting for its own account and is not acting as a fiduciary
or financial or investment advisor for it; (ii) it is not relying upon any
communications (whether written or oral) of the other party as investment
advice or as a recommendation to enter into this Agreement, any Credit
Support Document to which it is a party and each Transaction (other than
the representations expressly set forth in this Agreement and in such
Credit Support Document), it being understood that information and
explanations related to the terms and conditions of a Transaction shall not
be considered investment advice or a recommendation to enter into that
Transaction; (iii) it has not received from the other party any assurance
or guarantee as to the expected results of any Transaction; and (iv) it has
consulted with its own legal, regulatory, tax, business, investment,
financial, and accounting advisors to the extent it has deemed necessary,
and it has made its own independent investment, hedging, and trading
decisions based upon its own judgment and upon any advice from such
advisors as it has deemed necessary and not upon any view expressed by the
other party.
(l) ADDITIONAL REPRESENTATIONS OF PARTY B. Party B represents to Party A (at
all times until termination of this Agreement) that:
(i) It understands that the Transactions contemplated
hereunder are subject to complex risks which may arise without
warning, may at times be volatile, and that losses may occur quickly
and in unanticipated magnitude.
(ii) It is a sophisticated investor able to evaluate the terms,
conditions and risks of the Transactions contemplated hereunder and
accepts such terms, conditions and risks.
(iii) It is capable of assuming and assumes, all risks
(financial and otherwise) associated with the Transactions
contemplated hereunder.
(iv) This Agreement and each Transaction have been, and will
be, entered into not for the purpose of speculation but solely in
connection with the portfolio management, asset, risk, and liability
management and hedging activities of Party B.
(m) TRANSACTIONS. With respect to any Option Transaction that may be entered
into hereunder, Party B represents to Party A (at all times until
termination of this Agreement) that Party B:
(i) understands that the Option Transactions have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act") and are being offered and sold in reliance on the
exemption to the registration requirements of the Securities Act
provided under Section 4(2) thereof:
(ii) understands and acknowledges that Party A has no
obligation to register the Option Transactions under the Securities
Act or any other United States federal or state securities law, and
that the Option Transactions must be held indefinitely by the
purchaser thereof unless subsequently registered under such securities
laws or an exemption from such registration is available;
(iii) agrees that in the event that at some future time it
wishes to dispose of the Option Transactions in whole or in part (such
disposition currently not being foreseen or contemplated), it will not
transfer the same except in a transaction exempt from or not subject
to the registration requirements of the Securities Act; and
(iv) understands that each Confirmation may bear a legend to
substantially the following effect:
THE SECURITIES REPRESENTED BY THE CONFIRMATION HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED, OR ANY OTHER UNITED STATES FEDERAL OR STATE
SECURITIES LAWS; AND SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF APPROPRIATE REGISTRATION UNDER SUCH
SECURITIES LAWS OR EXCEPT IN A TRANSACTION EXEMPT FROM OR NOT SUBJECT TO
THE REGISTRATION REQUIREMENTS OF SUCH SECURITIES LAWS
The parties executing this Schedule have executed the Agreement and have
agreed as to the contents of this Schedule.
LEHMAN BROTHERS FINANCE S.A. MAGNETEK, INC.
By: By:
------------------------- -------------------------
Title: Title:
---------------------- ----------------------
Date: Date:
----------------------- -----------------------
By:
-------------------------
Title:
----------------------
Date:
-----------------------
EXHIBIT A TO SCHEDULE
GUARANTEE OF LEHMAN BROTHERS HOLDINGS INC.
LEHMAN BROTHERS FINANCE S.A. ("Party A") and ("Party B")
have entered into a Master Agreement dated as of , 19 , pursuant to
which Party A and Party B have entered and/or anticipate entering into one or
more transactions (each a "Transaction"), the Confirmation of each of which
supplements, forms part of, and will be read and construed as one with, the
Master Agreement (collectively referred to as the "Agreement"). This Guarantee
is a Credit Support Document as contemplated in the Agreement. For value
received, and in consideration of the financial accommodation accorded to Party
A by Party B under the Agreement, LEHMAN BROTHERS HOLDINGS INC., a corporation
organized and existing under the laws of the State of Delaware ("Guarantor"),
hereby agrees to the following:
(a) Guarantor hereby unconditionally guarantees to Party B the due and
punctual payment of all amounts payable by Party A under each Transaction when
and as Party A's obligations thereunder shall become due and payable in
accordance with the terms of the Agreement. In case of the failure of Party A
to pay punctually any such amounts, Guarantor hereby agrees, upon written demand
by Party B, to pay or cause to be paid any such amounts punctually when and as
the same shall become due and payable.
(b) Guarantor hereby agrees that its obligations under the Guarantee
constitute a guarantee of payment when due and not of collection.
(c) Guarantor hereby agrees that its obligations under the Guarantee shall
be unconditional, irrespective of the validity, regularity or enforceability of
the Agreement against Party A (other than as a result of the unenforceability
thereof against Party B), the absence of any action to enforce Party A's
obligations under the Agreement, any waiver or consent by Party B with respect
to any provisions thereof, the entry by Party A and Party B into additional
Transactions under the Agreement or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor (excluding
the defense of payment or statute of limitations, neither of which are waived);
PROVIDED, HOWEVER, that Guarantor shall be entitled to exercise any right that
Party A could have exercised under the Agreement to cure any default in respect
of its obligations under the Agreement or to setoff, counterclaim or withhold
payment in respect of any Event of Default or Potential Event of Default in
respect of Party B or any Affiliate, but only to the extent such right is
provided to Party A under the Agreement. The Guarantor acknowledges that Party A
and Party B may from time to time enter into one or more Transactions pursuant
to the Agreement and agrees that the obligations of the Guarantor under this
Guarantee will upon the execution of any such Transaction by Party A and Party B
extend to all such Transactions without the taking of further action by the
Guarantor.
(d) This Guarantee shall remain in full force and effect until such time
as Party B shall receive written notice of termination. Termination of this
Guarantee shall not affect Guarantor's liability hereunder as to obligations
incurred or arising out of Transactions entered into prior to the termination
hereof.
(e) Guarantor further agrees that this Guarantee shall continue to be
effective or be reinstated, as the case may be, if at any time, payment, or any
part thereof, of any obligation or interest thereon is rescinded or must
otherwise be restored by Party B upon an Event of Default as set forth in
Section 5(a)(vii) of the Agreement affecting Party A or Guarantor.
(f) Guarantor hereby waives (i) promptness, diligence, presentment, demand
of payment, protest, order and, except as set forth in paragraph (a) hereof,
notice of any kind in connection with the Agreement and this Guarantee, or (ii)
any requirement that Party B exhaust any right to take any action against Party
A or any other person prior to or contemporaneously with proceeding to exercise
any right against Guarantor under this Guarantee.
This Guarantee shall be governed by and construed in accordance with the
laws of the State of New York, without reference to choice of law doctrine. All
capitalized terms not defined in this Guarantee are defined in the Agreement.
Any notice hereunder will be sufficiently given if given in accordance with
the provisions for notices under the Agreement and will be effective as set
forth therein. All notices hereunder shall be delivered to Lehman Brothers
Holdings Inc., Attention: Treasurer, at 200 Vesey Street, 24th Floor, New York,
New York 10285 (Telex No: 175636 Answerback: SLB, Facsimile No. 212-526-1467)
with a copy to Lehman Brothers Finance S.A., Attention: Financial Controller at
Genferstrasse 24, P.O. Box 311, CH-8002 Zurich, Switzerland (Telex No: 812 096
Answerback: LBFS CH, Facsimile No. 411-287-8825).
IN WITNESS WHEREOF, Guarantor has caused this Guarantee to be executed in
its corporate name by its duly authorized officer as of the date of the
Agreement.
LEHMAN BROTHERS HOLDINGS INC.
By:
-------------------------
Name:
Title:
DRAFT - DISCUSSION PURPOSES ONLY
[DRAFT DATE MAY 28, 1997]
____________, 1997
TRANSACTION
MagneTek, Inc.
Master Number:
LBF Reference Number:
Dear Sir or Madam:
The purpose of this letter agreement (this "Confirmation") is to confirm
the terms and conditions of the Swap Transaction entered into between us on the
Trade Date specified below (the "Transaction"). This letter agreement
constitutes a "Confirmation" as referred to in the ISDA Master Agreement
specified below.
The definitions and provisions contained in the 1994 ISDA Equity Option
Definitions (the "Equity Option Definitions") and the 1991 ISDA Definitions
(each as published by the International Swaps and Derivatives Association, Inc.
("ISDA")) are incorporated into this Confirmation. In the event of any
inconsistency between any of those definitions and provisions and this
Confirmation, this Confirmation will govern. Notwithstanding anything therein
to the contrary, the definition of "Transaction" in Section 1.1 of the Equity
Option Definitions shall be deemed to include an over-the-counter equity swap
transaction relating to any of a single share, a basket of shares or an index (a
"Swap Transaction").
1. This Confirmation evidences a complete binding agreement between
Lehman Brothers Finance S.A. ("Party A") and MagneTek, Inc. ("Party B") as to
the terms of the Transaction to which this Confirmation relates. In addition,
you and we agree to use all reasonable efforts promptly to negotiate, execute
and deliver an agreement (the "Master Agreement") in the form of the ISDA Master
Agreement (Multicurrency-Cross Border) (the "ISDA Form"), with such
modifications as you and we will in good faith agree. Upon the execution by you
and us of such an agreement, this Confirmation will supplement, form a part of,
and be subject to that agreement. All provisions contained or incorporated by
reference in that agreement upon its execution will govern this Confirmation
except as expressly modified below. Until we execute and deliver that
agreement, this Confirmation, together with all other documents (each a
"Confirmation") confirming transactions entered into between us and referring to
the ISDA Form, shall supplement, form a part of, and be subject to an agreement
in the form of the ISDA Form as if we had executed an agreement in such form
(but without any Schedule) on the Trade Date of the first such transaction
between us. In the event of any inconsistency between the provisions of that
agreement, or the Master Agreement when executed, and this Confirmation, this
Confirmation will prevail for the purpose of this Transaction.
2. The terms of the Transaction to which this Confirmation relates are as
follows:
Agent: Lehman Brothers Inc. ("LBI") is confirming
this Transaction for both Party A and Party B.
LBI has no obligations, by guarantee,
endorsement or otherwise, with respect to the
performance of this Transaction by either
party hereto.
Notional Amount: USD[Number of Shares x USD16.92]
Trade Date: [June 23], 1997
Effective Date: [3 Business Days following Trade Date]
Termination Date: [123 calendar days following Trade Date]
Elected Termination: Party B may terminate this Transaction on any
day prior to the scheduled Termination Date
by providing five (5) Business Days' written
or telephonic notice to Party A. For
purposes of calculating Capital Appreciation
or Capital Depreciation, Price(t+1) shall be
the price at which the Shares are sold by
Party A.
Net Payments: Applicable
Settlement Currency: USD
Business Day Convention: Modified Following
1
PARTY A EQUITY FLOATING AMOUNT:
Final Valuation Date: Three Exchange Business Days prior to the
Termination Date.
Equity Calculation Period: The Equity Calculation Period shall commence
on and include the Effective Date and will
end on but exclude the Termination Date.
Equity Payment Date: The Termination Date
Shares: MagneTek, Inc. ("the Issuer") (NYSE symbol:
MAG)
Number of Shares: [Aggregate Number of Acquired Shares (as
defined in the Standby Agreement between
Party A and Party B dated________)
Party A Capital Appreciation On the Equity Payment Date, Party A shall
Amount: pay to Party B the Capital Appreciation, as
defined below, if any. Party B shall notify
Party A not later than 60 Business Days prior
to the Termination Date whether such payment
shall be made in USD cash or via Alternative
Settlement.
"Alternative Settlement" means that on the
Termination Date, Party B's Fixed Amount
(plus Capital Depreciation, if any) shall be
netted against Party A's Equity Floating
Amount (resulting in a USD sum hereinafter
referred to as the "Net Payment"). If the
Net Payment is owed to Party B, then on the
Termination Date Party A shall deliver to
Party B, in lieu of the Net Payment, the
number of freely tradable, fully registered
shares of the Issuer, the value of which is
equivalent to the Net Payment (the
"Equivalent Shares"). If the Net Payment is
owed to Party A, then on the Termination Date
Party B shall deliver the Equivalent Shares
to Party A, in lieu of the Net Payment.
Alternative Settlement Execution If Party B is entitled to receive the Net
Make-Whole: Payment and Party B elects Alternative
Settlement, and if the aggregate cost to
Party A of purchasing the Equivalent Shares
exceeds the Net Payment due to changes in the
market price of the shares of the Issuer
during the period from the close of trading
on the Valuation Date to the time that Party
A's activities to purchase the Equivalent
Shares is fully executed, then Party B shall
pay the difference in cash to Party A on the
Business Day immediately following Party B's
receipt of Party A's demand setting forth the
amount of the difference.
If Party A is entitled to receive the Net
Payment and Party B elects Alternative
Settlement, and Party A, in selling the
Equivalent Shares, obtains an aggregate sale
price that is less than the Net Payment due
to changes in the market price of the shares
of the Issuer during the period from the
close of trading on the Valuation Date to the
time that Party A's activities to sell the
Equivalent Shares is fully executed, then
Party B shall pay the difference in cash to
Party A on the Business Day immediately
following Party B's receipt of Party A's
demand setting forth the amount of the
difference.
Dividends: Party A shall pay to Party B, the Dividend
Amount, if any, within two (2) Exchange
Business Days of such amount being paid by
the Issuer to holders of record of the
Shares.
PARTY B FIXED AMOUNT:
Fixed Calculation Period: The Equity Calculation Period
Fixed Payment Date: The Equity Payment Date
2
Fixed Rate: [Four month LIBOR as determined two London
Banking Days prior to the Effective Date
using Telerate page 3750] (exclusive of
Spread)
Spread: Plus 1.50%
Fixed Rate Day Count
Fraction: Actual/360
Reset Dates: Inapplicable
Business Day: New York and London
Compounding: Inapplicable
Party B Capital Depreciation Party B will pay to Party A on the Equity
Amounts: Payment Date the Capital Depreciation (as
defined below), if any.
Early Termination: If the value of the Shares falls below USD12
on any day during the Transaction, then Party
A shall have the right to terminate this
Transaction unless Party B shall, within one
Business Day of Party A's notice thereof,
(a) deliver to Party A credit support in an
amount that will fully collateralize the risk
of loss to Party A hereunder should Party B
default, (b) execute a 1994 ISDA Credit
Support Document (or its successor or other
similar industry standard document) in form
and substance satisfactory to Party A
obligating Party B to maintain credit support
in such an amount from time to time and (c)
execute such amendments to the Master
Agreement as may be appropriate to make that
document a Credit Support Document for
purposes of the Master Agreement.
Governing Law: New York
Transfer: Neither party may transfer this Transaction,
in whole or in part, without the prior
written consent of the non-transferring
party, which consent shall not be
unreasonably withheld. In addition, either
party may assign this Transaction to an
affiliated entity of such party whose
obligations in respect of such assignment are
guaranteed by the transferor party, or, if
the transferor's obligations under this
Transaction are guaranteed, by the guarantor
of such transferor party's obligations.
Notwithstanding the foregoing, any assignment
hereunder shall not be permitted if, as a
result thereof, a payment becomes subject to
any deduction or withholding for or on
account of any tax which would not have
arisen had such assignment not been effected.
3
Party B Representations: Party B represents that (i) it is not
entering into this Transaction on behalf of
or for the accounts of any other person or
entity, and will not transfer or assign its
obligations under this Transaction or any
portion of such obligations to any other
person or entity except in compliance with
applicable laws and the terms of this
Transaction; (ii) it has provided to LBI, as
agent for Party A, financial and other
information concerning its investment
objectives and risk tolerance, which
information is contained in its LBI account
documentation, and has not been rendered
misleading or obsolete; (iii) it understands
that this Transaction is subject to complex
risks which may arise without warning, may at
times be volatile, and that losses may occur
quickly and in unanticipated magnitude; (iv)
it is authorized to enter into this
Transaction and such action does not violate
any laws of its jurisdiction of organization
or residence or the terms of any agreement to
which it is a party; (v) it has consulted
with its legal advisor(s) and has reached its
own conclusions about this Transaction, and
any legal, regulatory, tax, accounting or
economic consequences arising from this
Transaction; and (vi) it has concluded that
this Transaction is suitable in light of its
own investment objectives, financial
capabilities and expertise.
NEITHER PARTY A NOR ANY OF ITS AFFILIATES HAS
ADVISED PARTY B WITH RESPECT TO ANY LEGAL,
REGULATORY, TAX, ACCOUNTING OR ECONOMIC
CONSEQUENCES ARISING FROM THIS TRANSACTION,
AND NEITHER PARTY A NOR ANY OF ITS AFFILIATES
IS ACTING AS AGENT (OTHER THAN LBI AS DUAL
AGENT IF SPECIFIED ABOVE), OR ADVISOR FOR
PARTY B IN CONNECTION WITH THIS TRANSACTION.
Party B further represents that it is not
entering into this Transaction while in
possession of material non-public information
concerning the business, operations or
prospects of the Issuer(s).
"Material" information for these purposes is
any information to which an investor would
reasonably attach importance in reaching a
decision to buy, sell or hold any securities
of the Issuer(s).
3. CERTAIN DEFINITIONS. For purposes of this Transaction, the following
terms shall have the indicated meanings:
"Capital Appreciation" and "Capital Depreciation" are defined by the
following formula:
PRICE(T+1) - PRICE(T) X NOTIONAL AMOUNT
-------------------------
PRICE(T)
Where:
"Price(t+1)" means the arithmetic average of the per share prices at which
the Shares are sold by Party A during the Valuation Period, net of any
withholding tax, stamp tax, or any other tax, duties, fees or commissions
payable in respect of such sale.
"Price(t)" means USD[16.92]
If the amount calculated under the formula above is a positive amount, then
such amount is the "CAPITAL APPRECIATION," and if such amount is a negative
amount, then the absolute value of such amount is the "CAPITAL DEPRECIATION."
"Dividend Amount" means the cash dividends to which holders of record of
the Shares during the period from, and including, the Effective Date to, but
excluding, the Termination Date would be entitled, net of any withholding tax,
stamp tax, or any other tax, duties, fees or commissions payable in respect of
such dividend payment.
4
"Exchange Business Day" means a day that is (or, but for the occurrence of
a Market Disruption Event, would have been) a trading day on each of the
Exchange and each Related Exchange(s) other than a day on which trading on any
such exchange is scheduled to close prior to its regular weekday closing time.
"Exchange" means the New York Stock Exchange.
"Related Exchange(s)" shall not be applicable to this Transaction.
"Valuation Period" means the period from and including the ninetieth
calendar day immediately preceding the Final Valuation Date to and including the
Final Valuation Date (each Exchange Business Day therein referred to as a
"Valuation Date"), subject to Section 4.
"Valuation Time" means at [the close of trading on the Exchange.] [ :00
a.m./p.m. (local time in ).]
4. MARKET DISRUPTION EVENT. If there is a Market Disruption Event on any
Valuation Date, then the Valuation Date shall be the first succeeding Exchange
Business Day on which there is no Market Disruption Event, unless there is a
Market Disruption Event on each of the five Exchange Business Days immediately
following the original date that, but for the Market Disruption Event, would
have been the Valuation Date. In that case, (a) that fifth Exchange Business
Day shall be deemed to be the Valuation Date notwithstanding the Market
Disruption Event, and (b) the Calculation Agent shall determine the market value
as of the Valuation Time on that fifth Exchange Business Day on the basis of its
good faith estimate of the Exchange traded price that would have prevailed but
for the occurrence of the Market Disruption Event.
"Market Disruption Event" means the occurrence or existence on any Exchange
Business Day during the one-half hour period immediately before the Valuation
Time of any suspension of or limitation imposed on trading (by reason of
movements in price exceeding limits permitted by the relevant Exchange or
otherwise) in (a) the Share on the Exchange, or (b) any options contracts or
futures contracts relating to the Share on any Related Exchange if, in any such
case, that suspension or limitation is material, in the determination of the
Calculation Agent.
The Calculation Agent shall as soon as reasonably practicable under the
circumstances notify the parties or other party, as the case may be, of the
existence of a Market Disruption Event on any day that but for the occurrence or
existence of a Market Disruption Event would have been a Valuation Date.
5. ADJUSTMENTS. For purposes of Article 10 of the Equity Option
Definitions, any reference to the term "Share Transaction" shall be deemed to
mean "Swap Transaction".
Method of Adjustment: Calculation Agent Adjustment
EXTRAORDINARY EVENTS:
Consequences of Merger Events:
(a) Share-for-Share: "Cancellation and Payment," which means
that (i) the Merger Date shall be deemed
the final Valuation Date with respect to
this Transaction and (ii) Price(t+1)
shall be equal to the execution price at
which Party A unwinds its hedge with
respect to the Shares.
(b) Share-for-Other: "Cancellation and Payment," which means
that (i) the Merger Date shall be deemed
the final Valuation Date with respect to
this Transaction and (ii) Price(t+1)
shall be equal to the execution price at
which Party A unwinds its hedge with
respect to the Shares
(c) Share-for-Combined: "Cancellation and Payment," which means
that (i) the Merger Date shall be deemed
the final Valuation Date with respect to
this Transaction and (ii) Price(t+1)
shall be equal to the execution price at
which Party A unwinds its hedge with
respect to the Shares.
5
NATIONALIZATION OR INSOLVENCY: Repurchase; provided that such quotation
shall be determined by the Calculation
Agent in a fair and commercially
reasonable manner.
6. Calculation Agent: LBI, whose determinations and calculations shall
be binding in the absence of manifest error.
7. Party A agrees to provide the following Credit Support Document:
Guarantee of Lehman Brothers Holdings Inc. (unconditional guarantee to Party B
of the due and punctual payment of all amounts payable by Party A under this
Transaction as such payments become due and payable).
Party B agrees to execute the following Credit Support Document:
Credit Support Annex
8. Account Details:
Party A's payment instructions: First Chicago International Bank,
New York, New York
ABA Number: 026-009-797
Account Number: 103-1753-50-01
For Account of: Lehman Brothers
Holdings plc
Favour: Lehman Brothers Finance
S.A.
Party B's payment instructions: Please provide
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us or by sending to us a letter or telex substantially
similar to this letter, which letter or telex sets forth the material terms of
the Transaction to which this Confirmation relates and indicates agreement to
those terms.
Yours sincerely, Confirmed as of the date first above written:
LEHMAN BROTHERS FINANCE S.A. MAGNETEK, INC.
By: By:
--------------------------- ---------------------------
Name: Name:
Title: Title:
By:
---------------------------
Name:
Title:
Execution time will be furnished upon counterparty's written request.
6