EXHIBIT 10.2
LEHMAN BROTHERS
Transactions
Date: 28 June 2002
To: Richard Bertrand
Senior Vice President Planning and Development
Extendicare Health Services, Inc.
111 West Michigan Street
Milwaukee, WI 53202-290
Telephone: (414) 908-8298
Telecopier: (414) 908-8111
Cc Laura Brown
Deputy General Counsel
(414) 908-8452
Fax (414) 908-8481
From: Lehman Brothers Special Financing Inc.
745 7th Avenue, 5th Floor
New York, NY 10019
Lorna Brown - Transaction Management Group
Facsimile: 201-524-2080 (United States of America)
Telephone: 212-526-9201
Global ID: 255059
- --------------------------------------------------------------------------------
Dear Sir or Madam:
The purpose of this communication (this "Confirmation") is to confirm the terms
and conditions of the transaction (the "Transaction") entered into between
Lehman Brothers Special Financing Inc. ("Party A") and Extendicare Health
Services, Inc. ("Party B") on the Trade Date specified below. This Confirmation
constitutes a "Confirmation" as referred to in the Agreement specified below.
This Confirmation supplements, forms part of, and is subject to, the ISDA Master
Agreement dated as of 11 June, 2002, as amended and supplemented from time to
time, between Party A and Party B (the "Agreement"). All provisions contained in
the Agreement shall govern this Confirmation except as expressly modified below.
The definitions and provisions contained in the 2000 ISDA Definitions as
published by the International Swaps and Derivatives Association, Inc. (the
"Definitions") are incorporated into this Confirmation. In the event of any
inconsistency between the Definitions and the terms of this Confirmation, this
Confirmation will govern. For the purpose of the Definitions, references herein
to a "Transaction" shall be deemed to be references to a "Swap Transaction".
Party A and Party B each represents that entering into the Transaction is within
its capacity, is duly authorized and does not violate any laws of its
jurisdiction of organization or residence or the terms of any agreement to which
it is a party. Party A and Party B each represents that (a) it is not relying on
the other party in connection with its decision to enter into this Transaction,
and neither party is acting as an advisor to or fiduciary of the other party in
connection with this Transaction regardless of whether the other party provides
it with market information or its views; (b) it understands the risks of the
Transaction and any legal, regulatory, tax, accounting and economic consequences
resulting therefrom; and (c) it has
LEHMAN BROTHERS INC.
745 SEVENTH AVENUE, NEW YORK NY 10019
determined based upon its own judgment and upon any advice received from its own
professional advisors as it has deemed necessary to consult that entering into
the Transaction is appropriate for such party in light of its financial
capabilities and objectives. Party A and Party B each represents that upon due
execution and delivery of this Confirmation, it will constitute a legally valid
and binding obligation, enforceable against it in accordance with its terms,
subject to applicable principles of bankruptcy and creditors' rights generally
and to equitable principles of general application.
The terms of the particular Transaction to which this Confirmation relates are
as follows:
GENERAL TERMS:
Trade Date: 28 June, 2002
Effective Date: 28 June, 2002
Termination Date: 15 December, 2007
Notional Amount: USD 150,000,000
FIXED AMOUNTS:
Fixed Amount Payer: Party B
Fixed Amount Payer The 15th calendar day of each
Period End Dates: month, commencing 15 July, 2002,
and ending on the Termination
Date, subject to adjustment in
accordance with the Modified
Following Business Day
Convention.
Fixed Amount Payer
Payment Dates: The 15th calendar day of each
month, commencing 15 July, 2002,
and ending on the Termination
Date, subject to adjustment in
accordance with the Following
Business Day Convention.
Fixed Rate: 0.24% per annum
Fixed Rate Day Count
Fraction: Actual/360
FLOATING AMOUNTS:
Floating Amount Payer: Party A
Cap Rate: 7.00% per annum
Floating Amount Payer The 15th calendar day of each
Period End Dates: month, commencing 15 July, 2002,
and ending on the Termination
Date, subject to adjustment in
accordance with the Modified
Following Business Day
Convention.
Floating Amount Payer The 15th calendar day of each
Payment Dates: month, commencing 15 July, 2002,
and ending on the Termination
Date, subject to adjustment in
accordance with the Modified
Following Business Day
Convention.
Global id: 255059
Page 2 of 3
Floating Rate for initial
Calculation Period: 1.83875% per annum
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: 1 month
Spread: None
Floating Rate Day Count
Fraction: Actual/360
Reset Dates: The first day of each
Calculation Period
BUSINESS DAYS: New York and London
MISCELLANEOUS:
Calculation Agent: Party A
Office: For the purposes of this
Transaction, Party A is not a
Multibranch Party, and the
Office of Party B is its Head
Office Branch.
ADDITIONAL PROVISION:
In the event Party B terminates this
Swap Transaction, then the Related
Transactions shall also be terminated.
RELATED TRANSACTION: The Transaction (Lehman Global Id:
255057) with a Trade Date of 28 June,
2002 and a Maturity Date of 15 December,
2007
Please confirm your agreement with the foregoing by executing this Confirmation
and returning such Confirmation, in its entirety, to us at facsimile number
201-524-2080 (United States of America), Attention: Documentation.
Yours sincerely, Accepted and agreed to:
Lehman Brothers Special Financing Inc. Extendicare Health Services, Inc.
Diana Nottingham
Vice President
Lehman Brothers Special Financing Inc. By: /s/ Richard L. Bertrand
/s/ Diana Nottingham ----------------------------
Name: Richard L. Bertrand
Title: Senior Vice President
Global id: 255059
Page 3 of 3
EXHIBIT 10.1
EXECUTION COPY
(MULTICURRENCY-CROSS BORDER)
ISDA(R)
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of June 11, 2002
LEHMAN BROTHERS EXTENDICARE HEALTH
SPECIAL FINANCING INC. SERVICES, INC.
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows: -
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 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 Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement") and the parties would
not otherwise enter into any Transactions.
2. OBLIGATIONS
(a) GENERAL CONDITIONS.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for
value on that date in the place of the account specified in the
relevant Confirmation or otherwise pursuant to this Agreement, in
freely transferable funds and in the manner customary for payments in
the required currency. Where settlement is by delivery (that is, other
than by payment), such delivery will be made for receipt on the due
date in the manner customary for the relevant obligation unless
otherwise specified in the relevant Confirmation or elsewhere in this
Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to
(1) the condition precedent that no Event of Default or Potential Event
of Default with respect to the other party has occurred and is
continuing, (2) the condition precedent that no Early Termination Date
in respect of the relevant Transaction has occurred or been effectively
designated and (3) each other applicable condition precedent specified
in this Agreement.
(b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) NETTING. If on any date amounts would otherwise be payable: -
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of 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
2
governmental revenue authority, then in effect. If a party is so
required to deduct or withhold, then that party ("X") will: -
(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required
to be deducted or withheld (including the full amount required
to be deducted or withheld from any additional amount paid by
X to Y under this Section 2(d)) promptly upon the earlier of
determining that such deduction or withholding is required or
receiving notice that such amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified
copy), or other documentation reasonably acceptable to Y,
evidencing such payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition
to the payment to which Y is otherwise entitled under this
Agreement, such additional amount as is necessary to ensure
that the net amount actually received by Y (free and clear of
Indemnifiable Taxes, whether assessed against X or Y) will
equal the full amount Y would have received had no such
deduction or withholding been required. However, X will not be
required to pay any additional amount to Y to the extent that
it would not be required to be paid but for: -
(A) the failure by Y to comply with or perform any
agreement contained in Section 4(a)(i), 4(a)(iii) or
4(d); or
(B) the failure of a representation made by Y
pursuant to Section 3(f) to be accurate and true
unless such failure would not have occurred but for
(I) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or
after the date on which a Transaction is entered into
(regardless of whether such action is taken or
brought with respect to a party to this Agreement) or
(II) a Change in Tax Law.
(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)).
3
(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)).
4
(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of Default
or, to its knowledge, Termination Event with respect to it has occurred and is
continuing and no such event or circumstance would occur as a result of its
entering into or performing its obligations under this Agreement or any Credit
Support Document to which it is a party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge, threatened
against it or any of its Affiliates any action, suit or proceeding at law or in
equity or before any court, tribunal, governmental body, agency or official or
any arbitrator that is likely to affect the legality, validity or enforceability
against it of this Agreement or any Credit Support Document to which it is a
party or its ability to perform its obligations under this Agreement or such
Credit Support Document.
(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.
(f) PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(f) is accurate and true.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party: -
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs: -
(i) any forms, documents or certificates relating to taxation specified
in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any Confirmation;
and
(iii) upon reasonable demand by such other party, any form or document
that may be required or reasonably requested in writing in order to
allow such other party or its Credit Support Provider to make a payment
under this Agreement or any applicable Credit Support Document without
any deduction or withholding for or on account of any Tax or with such
deduction or withholding at a reduced rate (so long as the completion,
execution or submission of such form or document would not materially
prejudice the legal or commercial position of the party in receipt of
such demand), with any such form or document to be accurate and
completed in a manner reasonably satisfactory to such other party and
to be executed and to be delivered with any reasonably required
certification,
5
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, 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;
6
(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 (l) a default,
event of default or other similar condition or event (however
described) in respect of such party, any Credit Support Provider of
such party or any applicable Specified Entity of such party under one
or more agreements or instruments relating to Specified Indebtedness of
any of them (individually or collectively) in an aggregate amount of
not less than the applicable Threshold Amount (as specified in the
Schedule) which has resulted in such Specified Indebtedness becoming,
or becoming capable at such time of being declared, due and payable
under such agreements or instruments, before it would otherwise have
been due and payable or (2) a default by such party, such Credit
Support Provider or such Specified Entity (individually or
collectively) in making one or more payments on the due date thereof in
7
an aggregate amount of not less than the applicable Threshold Amount
under such agreements or instruments (after giving effect to any
applicable notice requirement or grace period);
(vii) BANKRUPTCY. The party, any Credit Support Provider of such party
or any applicable Specified Entity of such party: -
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to
pay its debts or fails or admits in writing its inability
generally to pay its debts as they become due; (3) makes a
general assignment, arrangement or composition with or for the
benefit of its creditors; (4) institutes or has instituted
against it a proceeding seeking a judgment of insolvency or
bankruptcy or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors'
rights, or a petition is presented for its winding-up or
liquidation, and, in the case of any such proceeding or
petition instituted or presented against it, such proceeding
or petition (A) results in a judgment of insolvency or
bankruptcy or the entry of an order for relief or the making
of an order for its winding-up or liquidation or (B) is not
dismissed, discharged, stayed or restrained in each case
within 30 days of the institution or presentation thereof; (5)
has a resolution passed for its winding-up, official
management or liquidation (other than pursuant to a
consolidation, amalgamation or merger); (6) seeks or becomes
subject to the appointment of an administrator, provisional
liquidator, conservator, receiver, trustee, custodian or other
similar official for it or for all or substantially all its
assets; (7) has a secured party take possession of all or
substantially all its assets or has a distress, execution,
attachment, sequestration or other legal process levied,
enforced or sued on or against all or substantially all its
assets and such secured party maintains possession, or any
such process is not dismissed, discharged, stayed or
restrained, in each case within 30 days thereafter; (8) causes
or is subject to any event with respect to it which, under the
applicable laws of any jurisdiction, has an analogous effect
to any of the events specified in clauses (1) to (7)
(inclusive); or (9) takes any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in,
any of the foregoing acts; or
(viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or merges with
or into, or transfers all or substantially all its assets to, another
entity and, at the time of such consolidation, amalgamation, merger or
transfer: -
(1) the resulting, surviving or transferee entity fails to
assume all the obligations of such party or such Credit
Support Provider under this Agreement or any Credit Support
Document to which it or its predecessor was a party by
operation of law or pursuant to an agreement reasonably
satisfactory to the other party to this Agreement; or
8
(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 Upon Merger if the event is
specified pursuant to (iv) below or an Additional Termination Event if the event
is specified pursuant to (v) below: -
(i) ILLEGALITY. Due to the adoption of, or any change in, any
applicable law after the date on which a Transaction is entered into,
or due to the promulgation of, or any change in, the interpretation by
any court, tribunal or regulatory authority with competent jurisdiction
of any applicable law after such date, it becomes unlawful (other than
as a result of a breach by the party of Section 4(b)) for such party
(which will be the Affected Party): -
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in
respect of such Transaction or to comply with any other
material provision of this Agreement relating to such
Transaction; or
(2) to perform, or for any Credit Support Provider of such
party to perform, any contingent or other obligation which the
party (or such Credit Support Provider) has under any Credit
Support Document relating to such Transaction;
(ii) TAX EVENT. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on
which a Transaction is entered into (regardless of whether such action
is taken or brought with respect to a party to this Agreement) or (y) a
Change in Tax Law, the party (which will be the Affected Party) will,
or there is a substantial likelihood that it will, on the next
succeeding Scheduled Payment Date (1) be required to pay to the other
party an additional amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is
required to be deducted or withheld for or on account of 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
9
or amalgamating with, or merging with or into, or transferring all or
substantially all its assets to, another entity (which will be the
Affected Party) where such action does not constitute an event
described in Section 5(a)(viii);
(iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is
specified m the Schedule as applying to the party, such party ("X"),
any Credit Support Provider of X or any applicable Specified Entity of
X consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and
such action does not constitute an event described in Section
5(a)(viii) but the creditworthiness of the resulting, surviving or
transferee entity is materially weaker than that of X, such Credit
Support Provider or such Specified Entity, as the case may be,
immediately prior to such action (and, in such event, X or its
successor or transferee, as appropriate, will be the Affected Party);
or
(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 as an Illegality and will not constitute an Event
of Default.
6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(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)(l) 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
10
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)(l)
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 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
11
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.
12
(2) First Method and Loss. If the First Method and Loss apply,
the Defaulting Party will pay to the Non-defaulting Party, if
a positive number, the Non-defaulting Party's Loss in respect
of this Agreement.
(3) Second Method and Market Quotation. If the Second Method
and Market Quotation apply, an amount will be payable equal to
(A) the sum of the Settlement Amount (determined by the
Non-defaulting Party) in respect of the Terminated
Transactions and the 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").
13
If the amount payable is a positive number, Y will pay it to
X; if it is a negative number, X will pay the absolute value
of that amount to Y.
(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies
in respect of a party, the amount determined under this Section 6(e)
will be subject to such adjustments as are appropriate and permitted by
law to reflect any payments or deliveries made by one party to the
other under this Agreement (and retained by such other party) during
the period from the relevant Early Termination Date to the date for
payment determined under Section 6(d)(ii).
(iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies
an amount recoverable under this Section 6(e) is a reasonable
pre-estimate of loss and not a penalty. Such amount is payable for the
loss of bargain and the loss of protection against future risks and
except as otherwise provided in this Agreement neither party will be
entitled to recover any additional damages as a consequence of such
losses.
7. TRANSFER
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
14
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.
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.
15
(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 he entered into as soon as
practicable and may he 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.
16
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 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 answer back 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: -
17
(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 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.
18
"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"APPLICABLE RATE" means: -
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"BURDENED PARTY" has the meaning specified in Section 5(b).
"CHANGE IN TAX LAW" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
"CONSENT" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified as
such in this Agreement.
"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
"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).
19
"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)(l) 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 1l. 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
20
Market-makers. Each quotation will be for an amount, if any, that would be paid
to such party (expressed as a negative number) or by such party (expressed as a
positive number) in consideration of an agreement between such party (taking
into account any existing Credit Support Document with respect to the
obligations of such party) and the quoting Reference Market-maker to enter into
a transaction (the "Replacement Transaction") that would have the effect of
preserving for such party the economic equivalent of any payment or delivery
(whether the underlying obligation was absolute or contingent and assuming the
satisfaction of each applicable condition precedent) by the parties under
Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated
Transactions that would, but for the occurrence of the relevant Early
Termination Date, have been required after that date. For this purpose, Unpaid
Amounts in respect of the Terminated Transaction or group of Terminated
Transactions are to be excluded but, without limitation, any payment or delivery
that would, but for the relevant Early Termination Date, have been required
(assuming satisfaction of each applicable condition precedent) after that Early
Termination Date is to be included. The Replacement Transaction would be subject
to such documentation as such party and the Reference Market-maker may, in good
faith, agree. The party making the determination (or its agent) will request
each Reference Market-maker to provide its quotation to the extent reasonably
practicable as of the same day and time (without regard to different time zones)
on or as soon as reasonably practicable after the relevant Early Termination
Date. The day and time as of which those quotations are to be obtained will be
selected in good faith by the party obliged to make a determination under
Section 6(e), and, if each party is so obliged, after consultation with the
other. If more than three quotations are provided, the Market Quotation will be
the arithmetic mean of the quotations, without regard to the quotations having
the highest and lowest values. If exactly three such quotations are provided,
the Market Quotation will be the quotation remaining after disregarding the
highest and lowest quotations. For this purpose, if more than one quotation has
the same highest value or lowest value, then one of such quotations shall be
disregarded. If fewer than three quotations are provided, it will be deemed that
the Market Quotation in respect of such Terminated Transaction or group of
Terminated Transactions cannot be determined.
"NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"NON-DEFAULTING PARTY" has the meaning specified in Section 6(a).
"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
21
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 meanings specified in the Schedule.
"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"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
22
other taxing authority in respect of any payment under this Agreement other than
a stamp, registration, documentation or similar tax.
"TAX EVENT" has the meaning specified in Section 5(b).
"TAX EVENT UPON MERGER" has the meaning specified in Section 5(b).
"TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"TERMINATION CURRENCY" has the meaning specified in the Schedule.
"TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(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 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
23
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 EXTENDICARE HEALTH
SPECIAL FINANCING INC. SERVICES, INC.
(Name of Party) (Name of Party)
/s/ Zdenka S. Griswold /s/ Richard L. Bertrand
- -------------------------------------- ----------------------------------
Name: Zdenka S. Griswold Name: Richard L. Bertrand
--------------------------------- -----------------------------
Title: Authorized Signatory Title: Senior Vice President
-------------------------------- ----------------------------
Date: 6/28/02 Date: 6/28/02
--------------------------------- -----------------------------
24
(MULTICURRENCY-CROSS BORDER)
SCHEDULE
TO THE
MASTER AGREEMENT
DATED AS OF JUNE 11, 2002,
BETWEEN
LEHMAN BROTHERS SPECIAL FINANCING INC. ("PARTY A"),
A CORPORATION ORGANIZED UNDER THE LAWS OF
THE STATE OF DELAWARE
AND
EXTENDICARE HEALTH SERVICES, INC. (PARTY B")
A CORPORATION ORGANIZED UNDER THE LAWS OF
THE STATE OF DELAWARE.
PART 1: TERMINATION PROVISIONS
In this Agreement: -
(a) "SPECIFIED ENTITY" means in relation to Party A for the purpose of:
Section 5(a)(v), Lehman Brothers Finance S.A. and Lehman
--------------- Brothers Commercial Corporation.
Section 5(a)(vi), Not applicable.
----------------
Section 5(a)(vii), Not applicable.
-----------------
Section 5(b)(iv}, Not applicable.
----------------
and in relation to Party B for the purpose of:
Section 5(a)(v), Not applicable.
---------------
Section 5(a)(vi), Not applicable.
----------------
Section 5(a)(vii), Not applicable.
-----------------
Section 5(b)(iv), Not applicable.
----------------
(b) "SPECIFIED TRANSACTION" will have the meaning specified in Section 14
of this Agreement.
(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
of this Agreement.
"THRESHOLD AMOUNT" means the lesser of (i) USD forty (40) million or
(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 USD five (5) million, in the
case of
25
Party B and any Credit Support Provider of Party B (or its
equivalent in any other currency).
For purposes hereof, the term "STOCKHOLDERS' EQUITY" means with respect
to any 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 consistently applied.
(d) The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(iv) will
apply to Party A and Party B; provided, however, that the term
"materially weaker" means, with respect to Party A, that Holdings or
the resulting, surviving or transferee entity of Holdings, as the case
may be, fails to maintain a long-term senior unsecured debt rating of
at least Baa3 as determined by Moody's Investor Services, Inc
("Moody's") and BBB- as determined by Standard & Poor's Ratings
Services ("S&P"). In the event of a split rating, the lower rating
shall be determinative.
(e) The "AUTOMATIC EARLY TERMINATION" provision of Section 6(a) will not
apply to either Party A or Party B.
(f) PAYMENTS ON EARLY TERMINATION. For the purpose of Section 6(e) of this
Agreement, Loss and the Second Method will apply.
(g) "TERMINATION CURRENCY" means United States Dollars ("USD").
(h) ADDITIONAL TERMINATION EVENTS will apply. Each of the following shall
constitute an Additional Termination Event: -
(i) COMPLIANCE CERTIFICATE. Party B fails to deliver to Party A a
Compliance Certificate pursuant to Part 3(b) of the Schedule
to this Agreement.
For the purpose of the foregoing Termination Event, Party B
shall be the Affected Party.
(ii) LBSF AS A SECURED PARTY. At any time (1) Party A ceases to be
a Secured Party, (2) all or substantially all of the
Collateral is released to the relevant Loan Parties, (3) all
or substantially all of the guarantee obligations under any
Loan Document is released, or (4) Party B takes any action
that may render its obligations or liabilities under this
Agreement as unsecured indebtedness. For clarification, except
for the terms "Party A," "Party B" and "Agreement," all
capitalized terms used herein shall have the meanings assigned
to such terms in the Credit Agreement.
For the purpose of the foregoing Termination Event, Party B
shall be the Affected Party.
26
(iii) FINANCIAL COVENANTS. At any time Party B fails to comply with
any of the terms and provisions set forth in the following
sections of the Credit Agreement or any section(s)
substituting for such section(s) in the Substitute Credit
Agreement: (1) Section 7.1(a) (Consolidated Senior Leverage
Ratio); (2) Section 7.1(b) (Consolidated Senior Secured
Leverage Ratio); (3) Section 7.1(c) (Consolidated Fixed Charge
Coverage Ratio); (4) Section 7.1(d) (Maintenance of
Consolidated Tangible Net Worth) (all such financial
covenants, the "EXISTING FINANCIAL COVENANTS"); and (5) any
and all financial covenants added to the Credit Agreement at
any time in the future (all such financial covenants, the
"FUTURE FINANCIAL COVENANTS" and together with the Existing
Financial Covenants, the "FINANCIAL COVENANTS"),
For the purpose of the foregoing Termination Event, Party B
shall be the Affected Party.
For purposes of Part 1(h), all capitalized terms used and not otherwise
defined in this Agreement shall have the meanings assigned to such
terms in the Amended and Restated Credit Agreement, dated as of June
28, 2002 (as amended, supplemented or otherwise modified from time to
time, the "CREDIT AGREEMENT'), by and among (1) Extendicare Holdings,
Inc., a Delaware corporation, (2) Extendicare Health Services, Inc., a
Delaware corporation, (3) the Lenders party thereto, (4) Lehman
Brothers Inc., as Arranger, (5) U.S. Bank, National Association, as
Syndication Agent, (6) General Electric Capital Corporation, GMAC-RFC
Health Capital and LaSalle Bank National Association, as
Co-Documentation Agents, and (7) Lehman Commercial Paper Inc., as
Administrative Agent. To the extent there is a substitute credit
facility (the "SUBSTITUTE CREDIT FACILITY"), the term "Credit
Agreement" shall also reference any agreement (as amended, supplemented
or otherwise modified from time to time, the "SUBSTITUTE CREDIT
AGREEMENT") that evidences such Substitute Credit Facility.
If, prior to the termination of this Agreement, (1) the Credit
Agreement is terminated or is no longer binding on Party B or (2) Party
A or an Affiliate of Party A ceases to be a Lender party to the Credit
Agreement, then the defined terms listed in such Credit Agreement and
used herein and the terms and provisions with respect to the Financial
Covenants shall remain in force and effect for purposes of this
Agreement as though set forth in full herein until the date on which
all of Party B's obligations under this Agreement are fully performed
and this Agreement is terminated. For clarification, such defined terms
and Financial Covenants shall be those that exist prior to the
occurrence of the relevant event,
PART 2: TAX REPRESENTATIONS
(a) PAYER TAX REPRESENTATIONS. Not applicable.
(b) PAYEE TAX REPRESENTATIONS. Not applicable.
27
PART 3: AGREEMENT TO DELIVER DOCUMENTS
For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each party
agrees to deliver the following documents, as applicable:
(a) Tax forms, documents or certificates to be delivered are:
PARTY REQUIRED TO
----------------- DATE BY WHICH
DELIVER DOCUMENT FORM/DOCUMENT/CERTIFICATE TO BE DELIVERED
----------------- ------------------------- ---------------
Party A and Party B Forms and/or documents described in Upon reasonable demand by the other
Section 4(a)(ii) of the Agreement. party.
(b) Other documents to be delivered are:
PARTY REQUIRED TO FORM/DOCUMENT/ DATE BY WHICH COVERED BY
----------------- -------------- ------------- ----------
DELIVER DOCUMENT CERTIFICATE TO BE DELIVERED SECTION 3(D)
---------------- ----------- --------------- ------------
Party A and An incumbency certificate with respect to Upon execution of this Yes
Party B the signatory of this Agreement and any Agreement.
Credit Support Document.
Party A and A copy of the annual report of (i) in the Upon request. Yes
Party B case of Party A, its Credit Support Provider
and (ii) Party B, containing audited consolidated
financial statements for such fiscal year certified
by independent public accountants and prepared in
accordance with generally accepted accounting
principles consistently applied.
Party A and For its most recent fiscal quarter, a Upon request. Yes
Party B copy of the unaudited financial statements of
(i) in the case of Party A, its Credit
Support Provider and (ii) Party B, prepared in
accordance with generally accepted accounting
principles consistently applied.
Party A and A copy of the resolutions or other action Upon execution of this Yes
Party B (the "Authorizing Resolutions") of (i) in Agreement.
the case of
28
PARTY REQUIRED TO FORM/DOCUMENT/ DATE BY WHICH COVERED BY
----------------- -------------- ------------- ----------
DELIVER DOCUMENT CERTIFICATE TO BE DELIVERED SECTION 3(D)
---------------- ----------- --------------- ------------
Party A, the board of directors of Party
A and (ii) in the case of Party B, the board of
directors or loan committee of Party B, certified by
a secretary or assistant secretary of the relevant
entity, pursuant to which such entity is authorized
to enter into this Agreement, any Credit Support
Document, and each Transaction from Lime to time
entered into hereunder.
Party A A guarantee of Holdings in the form of Upon execution of this No
Exhibit A to this Schedule. Agreement.
Party B Compliance Certificate, as of the last Within 45 days after Yes
day of the fiscal quarter or fiscal year the end of each of the
of Party B, certified by a Responsible first three quarterly
Officer (as defined in the Credit periods of each fiscal
Agreement), attesting (1) that no year, and within 90
condition or event has occurred with days after the end of
respect to Party B which would constitute each fiscal year.
an Event of Default, a Potential Event of
Default or a Termination Event under this
Agreement and (2) that Party B is in
compliance with financial covenants
referenced in Part 1(h) of this
Agreement. The Compliance Certificate
shall set forth reasonably detailed
calculations evidencing Party B's
compliance with such financial covenants.
Party B An opinion of counsel to Party B in form Upon execution of this No
and substance reasonably satisfactory to Agreement.
Party A.
29
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: Lehman Brothers Special Financing Inc.
c/o Lehman Brothers Inc.
Transaction Management
745 Seventh Avenue, 28th Floor
New York, New York 10019
Attention: Documentation Manager
Telephone No.: (212) 526-7187
Facsimile No.: (212) 526-7672
For all purposes.
Address for notices or communications to Party B;
Address: Extendicare Health Services, Inc.
111 West Michigan Street
Milwaukee, Wisconsin 53203
Attention: Mel Rhinelander
Chairman & Chief Executive Officer
Telephone No.: (212) 908-8555
Facsimile No.: (212) 908-8585
For all purposes; and
Attention: Roch Carter
General Counsel
Telephone No.: (414) 908-8406
Facsimile No.: (212) 908-8481
For all purposes
(b) PROCESS AGENT. For the purpose of Section 13(c) of this Agreement:
Party A appoints as its Process Agent: Not applicable.
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) of this Agreement:
Party A is not a Multibranch Party.
30
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, each
of which is incorporated by reference in, constitutes part of, and is
in connection with, this Agreement and each Confirmation (unless
provided otherwise in a Confirmation) as if set forth in full in this
Agreement or such Confirmation:
In the ease of Party A: A guarantee of Party A's obligations hereunder
in the form annexed hereto as Exhibit A to this Schedule.
In the case of Party B: Each of the Security Documents (as defined in
the Credit Agreement).
(g) CREDIT SUPPORT PROVIDER.
Credit Support Provider means in relation to Party A: Lehman Brothers
Holdings Inc.
Credit Support Provider means in relation to Party B: Each of the Loan
Parties (as defined in the Credit Agreement).
(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) JURISDICTION. Section 13(b) is hereby amended by: (i) deleting in the
second line of subparagraph (i) thereof the word "non-"; and (ii)
deleting the final paragraph thereof.
(j) 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).
(k) "AFFILIATE" will have the meaning specified in Section 14 of this
Agreement.
PART 5: OTHER PROVISIONS
(a) GENERAL CONDITIONS. The condition precedent in Section 2(a)(iii)(l)
does not apply to a payment and delivery owing by a party if the other
party shall have satisfied in full all its payment or delivery
obligations then due under Section 2(a)(i) of this Agreement.
(b) TAX REPRESENTATIONS IN CONFIRMATIONS. For purposes of Sections
2(d)(i)(4) and 3(f), any payee tax representation specified in a
Confirmation under this Agreement shall be deemed to be specified in
this Schedule.
(c) ACCURACY OF SPECIFIED INFORMATION. Section 3(d) is hereby amended by
adding in the third line thereof after the word "respect" and before
the period the words "or, in the case of audited or unaudited financial
statements, a fair presentation, in all material respects, of the
financial condition of the relevant person."
31
(d) NO VIOLATION OR CONFLICT REPRESENTATION. Section 3(a)(iii) is hereby
amended by inserting the words "or investment policies, or guidelines,
procedures, or restrictions" immediately following the word
"documents".
(e) REPRESENTATIONS. Section 3 is hereby amended by adding the following
additional subsections:
(g) NO AGENCY. It is entering into this Agreement, any Credit
Support Document to which it is a party, and each Transaction,
and any other documentation relating to this Agreement or any
Transaction as principal (and not as agent or in any other
capacity, fiduciary or otherwise).
(h) ELIGIBLE CONTRACT PARTICIPANT. It is an "eligible contract
participant" as that term is defined in the Commodities
Futures Modernization Act of 2000.
(i) NON-RELIANCE. In connection with the negotiation of, the
entering into, and 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.
(f) ADDITIONAL REPRESENTATIONS AND AGREEMENTS OF PARTY B. Party B
represents and warrants (which representation will be deemed to be
repeated by Party a at all times until the termination of this
Agreement) each of the following to Party A, and covenants and agrees
the same with Party A, on the date hereof and at all times until the
termination of this Agreement:
(1) Party B is complying and will be in full compliance with each
and every provision in its constitutional documents
(including, but not limited to, any and all resolutions,
investment policies or guidelines, procedures or restrictions,
and other similar documents) and each Transaction contemplated
hereunder is and will be an authorized and permitted
transaction thereunder.
(2) This Agreement (and each and every Transaction entered into
hereunder) is a Specified Hedge Agreement (as defined in the
Loan Documents) entered into by
32
Party B in accordance with and as permitted by relevant
provisions in the Loan Documents, and this Agreement (and each
and every Transaction entered into hereunder) does not and
will not violate or conflict with any provision in the Loan
Documents or any Contractual Obligation of Party B. For
purposes hereof, the terms "Loan Documents" and "Contractual
Obligation" shall have the meanings assigned to such terms in
the Credit Agreement.
(3) Party B has not and will not take any action during the term
of this Agreement that may render any of the representations
and warranties in this Agreement untrue, incorrect or
incomplete, and if any event or condition should occur that
would render any such representations and warranties untrue,
incorrect or incomplete, Party B shall immediately give
written notice thereof to Party A.
(g) OTHER SPECIFIED HEDGE AGREEMENTS. Party B hereby acknowledges and
agrees that if Party B enters into any other Specified Hedge Agreement
and such Specified Hedge Agreement contains covenants, terms or
provisions for the relevant counterparty that are more favorable (as
reasonably determined by Party A) to those provided to Party A herein,
such covenants, terms and provisions shall hereby be incorporated by
reference in, and made part of, this Agreement for the benefit of Party
A to the same extent as if such covenants, terms and provisions were
set forth in full herein.
(h) 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 and the designation
of an Early Termination Date pursuant to Section 6(e) of the
Agreement 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 of 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 (l) shall not constitute a mortgage, charge, lien
or other security interest upon any of the property or assets
of either party to this Agreement. Party A covenants and
agrees that in the event Party A exercises its right of
set-off or application in accordance with the provisions set
forth above, Party A shall
33
provide a notice of its exercise of such right immediately
thereafter to Party B, provided that any failure to give such
notice shall not affect the validity of such setoff and
application.
(i) TRANSFER. Notwithstanding anything to the contrary in Section 7 of this
Agreement, Party A may assign its rights and obligations under this
Agreement, in whole or in part, to (1) any Affiliate of Holdings
effective upon delivery to Party B of the guarantee by Holdings, in
favor of Party B, of the obligations of such Affiliate, such guarantee
to be otherwise identical to the guarantee then in effect of the
obligations of the transferor, or (2) with the prior written consent of
Party B (such consent not to be unreasonably withheld), to any entity
with the same or higher long term senior unsecured debt rating (as
determined by S&P or Moody's) as Holdings at the time of such transfer.
(j) 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.
(k) 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."
(l) OUTSTANDING SPECIFIED TRANSACTIONS. Upon the effectiveness of this
Agreement, unless otherwise agreed to in writing by the parties to this
Agreement with respect to enumerated Specified Transactions, all
Specified Transactions then outstanding between the parties shall be
subject to the terms hereof.
(m) DEFINITIONS. This Agreement, each Confirmation, and each Transaction
are subject to the 2000 ISDA Definitions as published by the
International Swaps and Derivatives Association, Inc. as amended,
supplemented, updated, restated, and superseded from time to time (the
"Definitions") and will be governed in all respects by the Definitions.
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.
(n) WAIVER OF TRIAL BY JURY. INSOFAR AS IS PERMITTED BY LAW, EACH PARTY
IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION, AND
ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO THE OTHER
PARTY'S ENTERING INTO THIS AGREEMENT AND EACH TRANSACTION HEREUNDER.
34
The parties executing this Schedule have executed the Master Agreement and have
agreed as to the contents of this Schedule.
LEHMAN BROTHERS EXTENDICARE HEALTH
SPECIAL FINANCING INC. SERVICES, INC.
(Name of Party) (Name of Party)
/s/ Zdenka S. Griswold /s/ Richard L. Bertrand
- --------------------------------------- ----------------------------------
Name: Zdenka S. Griswold Name: Richard L. Bertrand
---------------------------------- -----------------------------
Title: Authorized Signatory Title: Senior Vice President
--------------------------------- ----------------------------
Date: 6/28/02 Date: 6/28/02
---------------------------------- -----------------------------
35
EXHIBIT A TO SCHEDULE
GUARANTEE OF LEHMAN BROTHERS HOLDINGS INC.
LEHMAN BROTHERS SPECIAL FINANCING INC. ("Party A") and EXTENDICARE
HEALTH SERVICES, INC. ("Party B") have entered into a Master Agreement dated as
of June 11, 2002, (the "Master Agreement"), 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 this
Guarantee constitute a guarantee of payment when due and not of collection.
(c) Guarantor hereby agrees that its obligations under this
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 if statute of limitations, neither
of which is 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 die 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.
36
(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 Master 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, but defined in the
Agreement, shall have the meanings assigned thereto 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 745 Seventh Avenue, 11th Floor, New
York, New York , 10019 USA (Facsimile No. 212-526-0339) with a copy to Lehman
Brothers Special Financing Inc., Attention: Transaction Management, 745 Seventh
Avenue, 28th Floor, New York, New York 10019 USA.
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.
-----------------------------------
Name:
Title:
Date:
37