Exhibit 10.1
(Bilateral Form) (ISDA Agreements Subject to New York Law Only)
ISDA(R)
International Swaps and Derivatives Association, Inc.
CREDIT SUPPORT ANNEX
to the Schedule to the
2002 ISDA Master Agreement
dated as of November 15, 2004
between
Cogent Capital Corp and Aegis Assessment, Inc.
("Party A") ("Party B")
This Annex supplements, forms part of, and is subject to, the
above-referenced Agreement, is part of its Schedule and is a Credit Support
Document under this Agreement with respect to each party. Accordingly, the
parties agree as follows:
Paragraph 1. Interpretation
(a) Definitions and Inconsistency. Capitalized terms not otherwise defined
herein or elsewhere in this Agreement have the meanings specified pursuant to
Paragraph 12, and all references in this Annex to Paragraphs are to Paragraphs
of this Annex. In the event of any inconsistency between this Annex and the
other provisions of this Schedule, this Annex will prevail, and in the event of
any inconsistency between Paragraph 13 and the other provisions of this Annex,
Paragraph 13 will prevail.
(b) Secured Party and Pledgor. All references in this Annex to the "Secured
Party" will be to either party when acting in that capacity and all
corresponding references to the "Pledgor" will be to the other party when acting
in that capacity; provided, however, that if Other Posted Support is held by a
party to this Annex, all references herein to that party as the Secured Party
with respect to that Other Posted Support will be to that party as the
beneficiary thereof and will not subject that support or that party as the
beneficiary thereof to provisions of law generally relating to security
interests and secured parties.
Paragraph 2. Security Interest
Each party, as the Pledgor, hereby pledges to the other party, as the
Secured Party, as security for its Obligations, and grants to the Secured Party
a first priority continuing security interest in, lien on and right of Set-off
against all Posted Collateral Transferred to or received by the Secured Party
hereunder. Upon the Transfer by the Secured Party to the Pledgor of Posted
Collateral, the security interest and lien granted hereunder on that Posted
Collateral will be released immediately and, to the extent possible, without any
further action by either party.
Copyright (C) 1994 by International Swaps and Derivatives Association, Inc.
Paragraph 3. Credit Support Obligations
(a) Delivery Amount. Subject to Paragraphs 4 and 5, upon a demand made by
the Secured Party on or promptly following a Valuation Date, if the Delivery
Amount for that Valuation Date equals or exceeds the Pledgor's Minimum Transfer
Amount, then the Pledgor will Transfer to the Secured Party Eligible Credit
Support having a Value as of the date of Transfer at least equal to the
applicable Delivery Amount (rounded pursuant to Paragraph 13). Unless otherwise
specified in Paragraph 13, the "Delivery Amount" applicable to the Pledgor for
any Valuation Date will equal the amount by which:
(i) the Credit Support Amount
exceeds
(ii) the Value as of that Valuation Date of all Posted Credit Support held
by the Secured Party.
(b) Return Amount. Subject to Paragraphs 4 and 5, upon a demand made by the
Pledgor on or promptly following a Valuation Date, if the Return Amount for that
Valuation Date equals or exceeds the Secured Party's Minimum Transfer Amount,
then the Secured Party will Transfer to the Pledgor Posted Credit Support
specified by the Pledgor in that demand having a Value as of the date of
Transfer as close as practicable to the applicable Return Amount (rounded
pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the
"Return Amount" applicable to the Secured Party for any Valuation Date will
equal the amount by which:
(i) the Value as of that Valuation Date of all Posted Credit Support held
by the Secured Party exceeds
(ii) the Credit Support Amount.
"Credit Support Amount" means, unless otherwise specified in Paragraph 13,
for any Valuation Date (i) the Secured Party's Exposure for that Valuation Date
plus (ii) the aggregate of all Independent Amounts applicable to the Pledgor, if
any, minus (iii) all Independent Amounts applicable to the Secured Party, if
any, minus (iv) the Pledgor's Threshold; provided, however, that the Credit
Support Amount will be deemed to be zero whenever the calculation of Credit
Support Amount yields a number less than zero.
Paragraph 4. Conditions Precedent, Transfer Timing, Calculations and
Substitutions
(a) Conditions Precedent. Each Transfer obligation of the Pledgor under
Paragraphs 3 and 5 and of the Secured Party under Paragraphs 3, 4(d)(ii), 5 and
6(d) is subject to the conditions precedent that:
(i) no Event of Default, Potential Event of Default or Specified Condition
has occurred and is continuing with respect to the other party; and
(ii) no Early Termination Date for which any unsatisfied payment
obligations exist has occurred or been designated as the result of an
Event of Default or Specified Condition with respect to the other
party.
(b) Transfer Timing. Subject to Paragraphs 4(a) and 5 and unless otherwise
specified, if a demand for the Transfer of Eligible Credit Support or Posted
Credit Support is made by the Notification Time, then the relevant Transfer will
be made not later than the close of business on the next Local Business Day; if
a demand is made after the Notification Time, then the relevant Transfer will be
made not later than the close of business on the second Local Business Day
thereafter.
(c) Calculations. All calculations of Value and Exposure for purposes of
Paragraphs 3 and 6(d) will be made by the Valuation Agent as of the Valuation
Time. The Valuation Agent will notify each party (or the other party, if the
Valuation Agent is a party) of its calculations not later than the Notification
Time on the Local Business Day following the applicable Valuation Date (or in
the case of Paragraph 6(d), following the date of calculation).
ISDA(R)1994 10
(d) Substitutions.
(i) Unless otherwise specified in Paragraph 13, upon notice to the Secured
Party specifying the items of Posted Credit Support to be exchanged,
the Pledgor may, on any Local Business Day, Transfer to the Secured
Party substitute Eligible Credit Support (the "Substitute Credit
Support"); and
(ii) subject to Paragraph 4(a), the Secured Party will Transfer to the
Pledgor the items of Posted Credit Support specified by the Pledgor in
its notice not later than the Local Business Day following the date on
which the Secured Party receives the Substitute Credit Support, unless
otherwise specified in Paragraph 13 (the "Substitution Date");
provided that the Secured Party will only be obligated to Transfer
Posted Credit Support with a Value as of the date of Transfer of that
Posted Credit Support equal to the Value as of that date of the
Substitute Credit Support.
Paragraph 5. Dispute Resolution
If a party (a "Disputing Party") disputes (I) the Valuation Agent's
calculation of a Delivery Amount or a Return Amount or (II) the Value of any
Transfer of Eligible Credit Support or Posted Credit Support, then (1) the
Disputing Party will notify the other party and the Valuation Agent (if the
Valuation Agent is not the other party) not later than the close of business on
the Local Business Day following (X) the date that the demand is made under
Paragraph 3 in the case of (I) above or (Y) the date of Transfer in the case of
(II) above, (2) subject to Paragraph 4(a), the appropriate party will Transfer
the undisputed amount to the other party not later than the close of business on
the Local Business Day following (X) the date that the demand is made under
Paragraph 3 in the case of (I) above or (Y) the date of Transfer in the case of
(II) above, (3) the parties will consult with each other in an attempt to
resolve the dispute and (4) if they fail to resolve the dispute by the
Resolution Time, then:
(i) In the case of a dispute involving a Delivery Amount or Return Amount,
unless otherwise specified in Paragraph 13, the Valuation Agent will
recalculate the Exposure and the Value as of the Recalculation Date
by:
(A) utilizing any calculations of Exposure for the Transactions (or Swap
Transactions) that the parties have agreed are not in dispute;
(B) calculating the Exposure for the Transactions (or Swap Transactions)
in dispute by seeking four actual quotations at mid-market from
Reference Market-makers for purposes of calculating Market Quotation,
and taking the arithmetic average of those obtained; provided that if
four quotations are not available for a particular Transaction (or
Swap Transaction), then fewer than four quotations may be used for
that Transaction (or Swap Transaction); and if no quotations are
available for a particular Transaction (or Swap Transaction), then the
Valuation Agent's original calculations will be used for that
Transaction (or Swap Transaction); and
(C) utilizing the procedures specified in Paragraph 13 for calculating the
Value, if disputed, of Posted Credit Support.
(ii) In the case of a dispute involving the Value of any Transfer of
Eligible Credit Support or Posted Credit Support, the Valuation Agent will
recalculate the Value as of the date of Transfer pursuant to Paragraph 13.
Following a recalculation pursuant to this Paragraph, the Valuation Agent will
notify each party (or the other party, if the Valuation Agent is a party) not
later than the Notification Time on the Local Business Day following the
Resolution Time. The appropriate party will, upon demand following that notice
by the Valuation Agent or a resolution pursuant to (3) above and subject to
Paragraphs 4(a) and 4(b), make the appropriate Transfer.
ISDA(R)1994 10
Paragraph 6. Holding and Using Posted Collateral
(a) Care of Posted Collateral. Without limiting the Secured Party's rights
under Paragraph 6(c), the Secured Party will exercise reasonable care to assure
the safe custody of all Posted Collateral to the extent required by applicable
law, and in any event the Secured Party will be deemed to have exercised
reasonable care if it exercises at least the same degree of care as it would
exercise with respect to its own property. Except as specified in the preceding
sentence, the Secured Party will have no duty with respect to Posted Collateral,
including, without limitation, any duty to collect any Distributions, or enforce
or preserve any rights pertaining thereto.
(b) Eligibility to Hold Posted Collateral; Custodians.
(i) General. Subject to the satisfaction of any conditions specified in
Paragraph 13 for holding Posted Collateral, the Secured Party will be
entitled to hold Posted Collateral or to appoint an agent (a
"Custodian") to hold Posted Collateral for the Secured Party. Upon
notice by the Secured Party to the Pledgor of the appointment of a
Custodian, the Pledgor's obligations to make any Transfer will be
discharged by making the Transfer to that Custodian. The holding of
Posted Collateral by a Custodian will be deemed to be the holding of
that Posted Collateral by the Secured Party for which the Custodian is
acting.
(ii) Failure to Satisfy Conditions. If the Secured Party or its Custodian
fails to satisfy any conditions for holding Posted Collateral, then
upon a demand made by the Pledgor, the Secured Party will, not later
than five Local Business Days after the demand, Transfer or cause its
Custodian to Transfer all Posted Collateral held by it to a Custodian
that satisfies those conditions or to the Secured Party if it
satisfies those conditions.
(iii) Liability. The Secured Party will be liable for the acts or omissions
of its Custodian to the same extent that the Secured Party would be
liable hereunder for its own acts or omissions.
(c) Use of Posted Collateral. Unless otherwise specified in Paragraph 13
and without limiting the rights and obligations of the parties under Paragraphs
3, 4(d)(ii), 5, 6(d) and 8, if the Secured Party is not a Defaulting Party or an
Affected Party with respect to a Specified Condition and no Early Termination
Date has occurred or been designated as the result of an Event of Default or
Specified Condition with respect to the Secured Party, then the Secured Party
will, notwithstanding Section 9-207 of the New York Uniform Commercial Code,
have the right to:
(i) sell, pledge, rehypothecate, assign, invest, use, commingle or
otherwise dispose of, or otherwise use in its business any Posted
Collateral it holds, free from any claim or right of any nature
whatsoever of the Pledgor, including any equity or right of redemption
by the Pledgor; and
(ii) register any Posted Collateral in the name of the Secured Party, its
Custodian or a nominee for either.
For purposes of the obligation to Transfer Eligible Credit Support or
Posted Credit Support pursuant to Paragraphs 3 and 5 and any rights or remedies
authorized under this Agreement, the Secured Party will be deemed to continue to
hold all Posted Collateral and to receive Distributions made thereon, regardless
of whether the Secured Party has exercised any rights with respect to any Posted
Collateral pursuant to (i) or (ii) above.
(d) Distributions and Interest Amount.
(i) Distributions. Subject to Paragraph 4(a), if the Secured Party
receives or is deemed to receive Distributions on a Local Business
Day, it will Transfer to the Pledgor not later than the following
Local Business Day any Distributions it receives or is deemed to
receive to the extent that a Delivery Amount would not be created or
increased by that Transfer, as calculated by the Valuation Agent (and
the date of calculation will be deemed to be a Valuation Date for this
purpose).
ISDA(R)1994 10
(ii) Interest Amount. Unless otherwise specified in Paragraph 13 and
subject to Paragraph 4(a), in lieu of any interest, dividends or other
amounts paid or deemed to have been paid with respect to Posted
Collateral in the form of Cash (all of which may be retained by the
Secured Party), the Secured Party will Transfer to the Pledgor at the
times specified in Paragraph 13 the Interest Amount to the extent that
a Delivery Amount would not be created or increased by that Transfer,
as calculated by the Valuation Agent (and the date of calculation will
be deemed to be a Valuation Date for this purpose). The Interest
Amount or portion thereof not Transferred pursuant to this Paragraph
will constitute Posted Collateral in the form of Cash and will be
subject to the security interest granted under Paragraph 2.
Paragraph 7. Events of Default
For purposes of Section 5(a)(iii)(1) of this Agreement, an Event of Default
will exist with respect to a party if:
(i) that party fails (or fails to cause its Custodian) to make, when due,
any Transfer of Eligible Collateral, Posted Collateral or the Interest
Amount, as applicable, required to be made by it and that failure
continues for two Local Business Days after notice of that failure is
given to that party;
(ii) that party fails to comply with any restriction or prohibition
specified in this Annex with respect to any of the rights specified in
Paragraph 6(c) and that failure continues for five Local Business Days
after notice of that failure is given to that party; or
(iii) that party fails to comply with or perform any agreement or
obligation other than those specified in Paragraphs 7(i) and 7(ii) and
that failure continues for 30 days after notice of that failure is
given to that party.
Paragraph 8. Certain Rights and Remedies
(a) Secured Party's Rights and Remedies. If at any time (1) an Event of
Default or Specified Condition with respect to the Pledgor has occurred and is
continuing or (2) an Early Termination Date has occurred or been designated as
the result of an Event of Default or Specified Condition with respect to the
Pledgor, then, unless the Pledgor has paid in full all of its Obligations that
are then due, the Secured Party may exercise one or more of the following rights
and remedies:
(i) all rights and remedies available to a secured party under applicable
law with respect to Posted Collateral held by the Secured Party;
(ii) any other rights and remedies available to the Secured Party under the
terms of Other Posted Support, if any:
(iii) the right to Set-off any amounts payable by the Pledgor with respect
to any Obligations against any Posted Collateral or the Cash
equivalent of any Posted Collateral held by the Secured Party (or any
obligation of the Secured Party to Transfer that Posted Collateral);
and
(iv) the right to liquidate any Posted Collateral held by the Secured Party
through one or more public or private sales or other dispositions with
such notice, if any, as may be required under applicable law, free
from any claim or right of any nature whatsoever of the Pledgor,
including any equity or right of redemption by the Pledgor (with the
Secured Party having the right to purchase any or all of the Posted
Collateral to be sold) and to apply the proceeds (or the Cash
equivalent thereof) from the liquidation of the Posted Collateral to
any amounts payable by the Pledgor with respect to any Obligations in
that order as the Secured Party may elect.
Each party acknowledges and agrees that Posted Collateral in the form of
securities may decline speedily in value and is of a type customarily sold on a
recognized market, and, accordingly, the Pledgor is not entitled to prior notice
of any sale of that Posted Collateral by the Secured Party, except any notice
that is required under applicable law and cannot be waived.
ISDA(R)1994 10
(b) Pledgor's Rights and Remedies. If at any time an Early Termination Date
has occurred or been designated as the result of an Event of Default or
Specified Condition with respect to the Secured Party, then (except in the case
of an Early Termination Date relating to less than all Transactions (or Swap
Transactions) where the Secured Party has paid in full all of its obligations
that are then due under Section 6(e) of this Agreement):
(i) the Pledgor may exercise all rights and remedies available to a
pledgor under applicable law with respect to Posted Collateral held by
the Secured Party;
(ii) the Pledgor may exercise any other rights and remedies available to
the Pledgor under the terms of Other Posted Support, if any;
(iii) the Secured Party will be obligated immediately to Transfer all
Posted Collateral and the Interest Amount to the Pledgor; and
(iv) to the extent that Posted Collateral or the Interest Amount is not so
Transferred pursuant to (iii) above, the Pledgor may:
(A) Set-off any amounts payable by the Pledgor with respect to any
Obligations against any Posted Collateral or the Cash equivalent of
any Posted Collateral held by the Secured Party (or any obligation of
the Secured Party to Transfer that Posted Collateral); and
(B) to the extent that the Pledgor does not Set-off under (iv)(A) above,
withhold payment of any remaining amounts payable by the Pledgor with
respect to any Obligations, up to the Value of any remaining Posted
Collateral held by the Secured Party, until that Posted Collateral is
Transferred to the Pledgor.
(c) Deficiencies and Excess Proceeds. The Secured Party will Transfer to
the Pledgor any proceeds and Posted Credit Support remaining after liquidation,
Set-off and/or application under Paragraphs 8(a) and 8(b) after satisfaction in
full of all amounts payable by the Pledgor with respect to any Obligations; the
Pledgor in all events will remain liable for any amounts remaining unpaid after
any liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b).
(d) Final Returns. When no amounts are or thereafter may become payable by
the Pledgor with respect to any Obligations (except for any potential liability
under Section 2(d) of this Agreement), the Secured Party will Transfer to the
Pledgor all Posted Credit Support and the Interest Amount, if any.
Paragraph 9. Representations
Each party represents to the other party (which representations will be
deemed to be repeated as of each date on which it, as the Pledgor, Transfers
Eligible Collateral) that:
(i) it has the power to grant a security interest in and lien on any
Eligible Collateral it Transfers as the Pledgor and has taken all
necessary actions to authorize the granting of that security interest
and lien;
(ii) it is the sole owner of or otherwise has the right to Transfer all
Eligible Collateral it Transfers to the Secured Party hereunder, free
and clear of any security interest, lien, encumbrance or other
restrictions other than the security interest and lien granted under
Paragraph 2;
(iii) upon the Transfer of any Eligible Collateral to the Secured Party
under the terms of this Annex, the Secured Party will have a valid and
perfected first priority security interest therein (assuming that any
central clearing corporation or any third-party financial intermediary
or other entity not within the control of the Pledgor involved in the
Transfer of that Eligible Collateral gives the notices and takes the
action required of it under applicable law for perfection of that
interest); and
(iv) the performance by it of its obligations under this Annex will not
result in the creation of any security interest, lien or other
encumbrance on any Posted Collateral other than the security interest
and lien granted under Paragraph 2.
ISDA(R)1994 10
Paragraph 10. Expenses
(a) General. Except as otherwise provided in Paragraphs 10(b) and 10(c),
each party will pay its own costs and expenses in connection with performing its
obligations under this Annex and neither party will be liable for any costs and
expenses incurred by the other party in connection herewith.
(b) Posted Credit Support. The Pledgor will promptly pay when due all
taxes, assessments or charges of any nature that are imposed with respect to
Posted Credit Support held by the Secured Party upon becoming aware of the same,
regardless of whether any portion of that Posted Credit Support is subsequently
disposed of under Paragraph 6(c), except for those taxes, assessments and
charges that result from the exercise of the Secured Party's rights under
Paragraph 6(c).
(c) Liquidation/Application of Posted Credit Support. All reasonable costs
and expenses incurred by or on behalf of the Secured Party or the Pledgor in
connection with the liquidation and/or application of any Posted Credit Support
under Paragraph 8 will be payable, on demand and pursuant to the Expenses
Section of this Agreement, by the Defaulting Party or, if there is no Defaulting
Party, equally by the parties.
Paragraph 11. Miscellaneous
(a) Default Interest. A Secured Party that fails to make, when due, any
Transfer of Posted Collateral or the Interest Amount will be obligated to pay
the Pledgor (to the extent permitted under applicable law) an amount equal to
interest at the Default Rate multiplied by the Value of the items of property
that were required to be Transferred, from (and including) the date that Posted
Collateral or Interest Amount was required to be Transferred to (but excluding)
the date of Transfer of that Posted Collateral or Interest Amount. This interest
will be calculated on the basis of daily compounding and the actual number of
days elapsed.
(b) Further Assurances. Promptly following a demand made by a party, the
other party will execute, deliver, file and record any financing statement,
specific assignment or other document and take any other action that may be
necessary or desirable and reasonably requested by that party to create,
preserve, perfect or validate any security interest or lien granted under
Paragraph 2, to enable that party to exercise or enforce its rights under this
Annex with respect to Posted Credit Support or an Interest Amount or to effect
or document a release of a security interest on Posted Collateral or an Interest
Amount.
(c) Further Protection. The Pledgor will promptly give notice to the
Secured Party of, and defend against, any suit, action, proceeding or lien that
involves Posted Credit Support Transferred by the Pledgor or that could
adversely affect the security interest and lien granted by it under Paragraph 2,
unless that suit, action, proceeding or lien results from the exercise of the
Secured Party's rights under Paragraph 6(c).
(d) Good Faith and Commercially Reasonable Manner. Performance of all
obligations under this Annex, including, but not limited to, all calculations,
valuations and determinations made by either party, will be made in good faith
and in a commercially reasonable manner.
(e) Demands and Notices. All demands and notices made by a party under this
Annex will be made as specified in the Notices Section of this Agreement, except
as otherwise provided in Paragraph 13.
(f) Specifications of Certain Matters. Anything referred to in this Annex
as being specified in Paragraph 13 also may be specified in one or more
Confirmations or other documents and this Annex will be construed accordingly.
ISDA(R)1994 10
Paragraph 12. Definitions As used in this Annex:-
"Cash" means the lawful currency of the United States of America.
"Credit Support Amount" has the meaning specified in Paragraph 3.
"Custodian" has the meaning specified in Paragraphs 6(b)(i) and 13.
"Delivery Amount" has the meaning specified in Paragraph 3(a).
"Disputing Party" has the meaning specified in Paragraph 5.
"Distributions" means with respect to Posted Collateral other than Cash,
all principal, interest and other payments and distributions of cash or other
property with respect thereto, regardless of whether the Secured Party has
disposed of that Posted Collateral under Paragraph 6(c). Distributions will not
include any item of property acquired by the Secured Party upon any disposition
or liquidation of Posted Collateral or, with respect to any Posted Collateral in
the form of Cash, any distributions on that collateral, unless otherwise
specified herein.
"Eligible Collateral" means, with respect to a party, the items, if any,
specified as such for that party in Paragraph 13.
"Eligible Credit Support" means Eligible Collateral and Other Eligible Support.
"Exposure" means for any Valuation Date or other date for which Exposure is
calculated and subject to Paragraph 5 in the case of a dispute, the amount, if
any, that would be payable to a party that is the Secured Party by the other
party (expressed as a positive number) or by a party that is the Secured Party
to the other party (expressed as a negative number) pursuant to Section
6(e)(ii)(2)(A) of this Agreement as if all Transactions (or Swap Transactions)
were being teiminated as of the relevant Valuation Time; provided that Market
Quotation will be determined by the Valuation Agent using its estimates at
mid-market of the amounts that would be paid for Replacement Transactions (as
that term is defined in the definition of "Market Quotation").
"Independent Amount" means, with respect to a party, the amount specified
as such for that party in Paragraph 13; if no amount is specified, zero.
"Interest Amount" means, with respect to an Interest Period, the aggregate
sum of the amounts of interest calculated for each day in that Interest Period
on the principal amount of Posted Collateral in the form of Cash held by the
Secured Party on that day, determined by the Secured Party for each such day as
follows:
(x) the amount of that Cash on that day; multiplied by (y) the Interest
Rate in effect for that day; divided by (z) 360.
"Interest Period" means the period from (and including) the last Local
Business Day on which an Interest Amount was Transferred (or, if no Interest
Amount has yet been Transferred, the Local Business Day on which Posted
Collateral in the form of Cash was Transferred to or received by the Secured
Party) to (but excluding) the Local Business Day on which the current Interest
Amount is to be Transferred.
"Interest Rate" means the rate specified in Paragraph 13.
"Local Business Day", unless otherwise specified in Paragraph 13, has the
meaning specified in the Definitions Section of this Agreement, except that
references to a payment in clause (b) thereof will be deemed to include a
Transfer under this Annex.
ISDA(R)1994 10
"Minimum Transfer Amount" means, with respect to a party, the amount
specified as such for that party in Paragraph 13; if no amount is specified,
zero.
"Notification Time" has the meaning specified in Paragraph 13.
"Obligations" means, with respect to a party, all present and future
obligations of that party under this Agreement and any additional obligations
specified for that party in Paragraph 13.
"Other Eligible Support" means, with respect to a party, the items, if any,
specified as such for that party in Paragraph 13.
"Other Posted Support" means all Other Eligible Support Transferred to the
Secured Party that remains in effect for the benefit of that Secured Party.
"Pledgor" means either party, when that party (i) receives a demand for or
is required to Transfer Eligible Credit Support under Paragraph 3(a) or (ii) has
Transferred Eligible Credit Support under Paragraph 3(a). "Posted Collateral"
means all Eligible Collateral, other property, Distributions, and all proceeds
thereof that have been Transferred to or received by the Secured Party under
this Annex and not Transferred to the Pledgor pursuant to Paragraph 3(h),
4(d)(ii) or 6(d)(i) or released by the Secured Party under Paragraph 8. Any
Interest Amount or portion thereof not Transferred pursuant to Paragraph
6(d)(ii) will constitute Posted Collateral in the form of Cash.
"Posted Credit Support" means Posted Collateral and Other Posted Support.
"Recalculation Date" means the Valuation Date that gives rise to the
dispute under Paragraph 5; provided, however, that if a subsequent Valuation
Date occurs under Paragraph 3 prior to the resolution of the dispute, then the
"Recalculation Date" means the most recent Valuation Date under Paragraph 3.
"Resolution Time" has the meaning specified in Paragraph 13.
"Return Amount" has the meaning specified in Paragraph 3(b).
"Secured Party" means either party, when that party (i) makes a demand for
or is entitled to receive Eligible Credit Support under Paragraph 3(a) or (ii)
holds or is deemed to hold Posted Credit Support.
"Specified Condition" means, with respect to a party, any event specified
as such for that party in Paragraph 13.
"Substitute Credit Support" has the meaning specified in Paragraph 4(d)(i).
"Substitution Date" has the meaning specified in Paragraph 4(d)(ii).
"Threshold" means, with respect to a party, the amount specified as such
for that party in Paragraph 13; if no amount is specified, zero.
"Transfer" means, with respect to any Eligible Credit Support, Posted
Credit Support or Interest Amount, and in accordance with the instructions of
the Secured Party, Pledgor or Custodian, as applicable:
(i) in the case of Cash, payment or delivery by wire transfer into one or
more bank accounts specified by the recipient;
(ii) in the case of certificated securities that cannot be paid or
delivered by book-entry, payment or delivery in appropriate physical
form to the recipient or its account accompanied by any duly executed
instruments of transfer, assignments in blank, transfer tax stamps and
any other documents necessary to constitute a legally valid transfer
to the recipient;
(iii) in the case of securities that can be paid or delivered by
book-entry, the giving of written instructions to the relevant
depository institution or other entity specified by the recipient,
together with a written copy thereof to the recipient, sufficient if
complied with to result in a legally effective transfer of the
relevant interest to the recipient; and
(iv) in the case of Other Eligible Support or Other Posted Support, as
specified in Paragraph 13.
ISDA(R)1994 10
"Valuation Agent" has the meaning specified in Paragraph 13.
"Valuation Date" means each date specified in or otherwise determined
pursuant to Paragraph 13. "Valuation Percentage" means, for any item of Eligible
Collateral, the percentage specified in Paragraph 13. "Valuation Time" has the
meaning specified in Paragraph 13.
"Value" means for any Valuation Date or other date for which Value is
calculated and subject to Paragraph 5 in the case of a dispute, with respect to:
(i) Eligible Collateral or Posted Collateral that is:
(A) Cash, the amount thereof; and
(B) a security, the bid price obtained by the Valuation Agent multiplied
by the applicable Valuation Percentage, if any; (ii) Posted Collateral
that consists of items that are not specified as Eligible Collateral,
zero; and (iii) Other Eligible Support and Other Posted Support, as
specified in Paragraph 13.
ISDA(R)1994 10
Paragraph 13. Elections and Variables
(a) Security Interest for "Obligations". The term "Obligations" as used in
this Annex includes the following additional obligations:
With respect to Party A: none.
With respect to Party B: none.
(b) Credit Support Obligations.
(i) Delivery Amount, Return Amount and Credit Support Amount.
(A) "Delivery Amount" has the meaning specified in Paragraph 3(a).
(B) "Return Amount" has the meaning specified in Paragraph 3(b).
(C) "Credit Support Amount" has the meaning specified in Paragraph 3.
(ii) Eligible Collateral. The following items will qualify as "Eligible
Collateral" for the party specified:
Party A Party B Valuation Percentage
(A) Cash [X] [X] 100%
(B) negotiable debt obligations issued by the U.S. Treasury
Department having an original maturity t issuance of not
more than one year ("Treasury Bills") [X] [X] 100%
(C) negotiable debt obligations issued by the U.S. Treasury
Department having an original maturity at issuance of more
than one year but not more than 10 years ("Treasury Notes") [X] [X] 100%
(D) negotiable debt obligations issued by the U.S. Treasury
Department having an original maturity at issuance of more
than 10 years ("Treasury Bonds") [ ] [ ] [ ]%
(E) other:...............................................
(iii) Other Eligible Support. The following items will qualify as "Other
Eligible Support" for the party specified:
Party A -None.
11
Party B- None
(iv) Thresholds.
(A) "Independent Amount" means with respect to Party A: $ 0.00 (Zero)
"Independent Amount" means with respect to Party B: The amount, if
any, specified as the Independent Amount in the Confirmation for
a particular Transaction.
(B) "Threshold" means with respect to Party A: Infinity "Threshold" means
with respect to Party B: Infinity
(C) "Minimum Transfer Amount" means with respect to Party A: $ 0 "Minimum
Transfer Amount" means with respect to Party B: $ 0
(D) Rounding. The Delivery Amount and the Return Amount will be rounded up
and down to the nearest integral multiple of $1000, respectively.
(c) Valuation and Timing.
(i) "Valuation Agent" means, for purposes of Paragraphs 3 and 5, the party
making the demand under Paragraph 3, and, for purposes of Paragraph
6(d), the Secured Party receiving or deemed to receive the
Distributions or the Interest Amount, as applicable.
(ii) "Valuation Date" means: Valuation Dates as defined by Equity Swap
Confirm dated November 15, 2004 (iii) "Valuation Time" means:
[X] the close of business in the city of the Valuation Agent on
the Valuation Date or date of calculation, as applicable;
[] the close of business on the Local Business Day before the
Valuation Date or date of calculation, as applicable; provided
that the calculations of Value and Exposure will be made as of
approximately the same time on the same date.
(iv) "Notification Time" means 1:00 p.m., New York time, on a Local
Business Day.
(d) Conditions Precedent and Secured Party's Rights and Remedies. The
following Termination Event(s) will be a "Specified Condition" for the party
specified (that party being the Affected Party if the Termination Event occurs
with respect to that party):
Party A Party B
Illegality [ X] [X]
Tax Event [ I] [ ]
12
Tax Event Upon Merger [ ] [ ] Credit Event Upon Merger [ ] [ ] Additional
Termination Event(s):
[ ][ ]
[ ][ ]
(e) Substitution.
(i) "Substitution Date" has the meaning specified in Paragraph
4(d)(ii).
(ii) Consent. If specified here as applicable, then the Pledgor must
obtain the Secured Party's consent for any substitution pursuant
to Paragraph 4(d): applicable.
(f) Dispute Resolution.
(i) "Resolution Time" means 1:00 p.m., New York time, on the Local
Business Day following the date on which the notice is given that
gives rise to a dispute under Paragraph 5.
(ii) Value. For the purpose of Paragraphs 5(i)(C) and 5(ii), the Value
of Posted Credit Support will be calculated as follows: Retain
"AAA" rated bank or investment bank to calculations using
paragraphs 5(i)(A) and 5(i)(B).
(iii) Alternative. The provisions of Paragraph 5 will apply. Holding
and Using Posted Collateral.
(i) Eligibility to Hold Posted Collateral; Custodians. Party A and
its Custodian will be entitled to hold Posted Collateral pursuant
to Paragraph 6(b); provided that the following conditions
applicable to it are satisfied:
(1) Party A is not a Defaulting Party.
(g) (2) Posted Collateral may be held only in the following
jurisdictions: United States of America.
Initially, the Custodian for Party A is Investor's Bank & Trust.
(ii) Use of Posted Collateral. The provisions of Paragraph 6(c) will
not apply to the Party A. (h) Distributions and Interest Amount.
(i) Interest Rate. The "Interest Rate" will be: USD-LIBOR-BBA
(ii) Transfer of Interest Amount. The Transfer of the Interest Amount
will be made on the last Local Business Day of each calendar
month and on any Local Business Day that Posted Collateral in the
form of Cash is Transferred to the Pledgor pursuant to Paragraph
3 (b).
(iii) Alternative to Interest Amount. The provisions of Paragraph
6(d)(ii) will apply. (i) Additional Representation(s).
None.
(j) Other Eligible Support and Other Posted Support.
Not Applicable.
(k) Demands and Notices.
All demands, specifications and notices under this Annex will be made
pursuant to the Notices Section of this Agreement, unless otherwise specified
here:
Party A: Cogent Capital Corp.
Attn: Greg Kofford
11444 S. Jolley Acres Cir. Sandy, UT 84092
Fax 801-576-0583
Party B: Aegis Assessments, Inc.
Attn: Eric D. Johnson
7975 North Hayden Road, Suite D363 Scottsdale, Arizona 85258
Telephone: 480-778-9140 Fax: 480-778-1310
Party A: To be provided
Party B: To be provided
(m) Other Provisions.
(i) Notwithstanding anything herein to the contrary, the parties
agree that:
(A) Party A shall not be a Pledgor under this Credit Support Annex under
any circumstances and shall have no obligation to provide any Collateral to
Party B pursuant to the terms of this Credit Support Annex; and
(B) Party B shall have no obligation to provide Collateral to Party A
pursuant to this Credit Support Annex except for the Independent Amount, if any,
specified in the Confirmation for any Transaction.
(ii) The Collateral to be provided by Party B to Party A pursuant to this
Credit Support Annex is to be held in an account established pursuant to that
certain Escrow Agreement, dated as of November 15, 2004, by and among Party A,
Party B, Ellenahatatlan, Inc., Potente Capital, Inc., Krachtig, Inc.,
Nieodparty, Inc., and Investors Bank & Trust Company (the "Escrow Agreement").
Party B, as Pledgor, hereby confirms that it is hereby granting to Party A a
security interest in all accounts established under the Escrow Agreement in
which such Collateral may from time to time be held to the same extent as the
security interest granted by Party B in the Posted Collateral pursuant to
Section 2 above.
(iii) Notwithstanding anything herein to the contrary, including in
Paragraph 6(d)(i) or 13(h) above, the parties agree that:
(A) All Distributions received by Party A shall be held by Party A in the
Collateral Account referred to in the Escrow Agreement and, on each day that any
Floating Amount is due from Party B to Party A under any
14
Confirmation, Party A shall (and is hereby authorized to) apply any such
Distributions then held in the Collateral Account in satisfaction of Party B's
obligation to pay any such Floating Amount; provided that, if the amount of such
Distributions so held is insufficient to satisfy all of such obligation, Party B
shall remain obligated to make payment of the amount of such shortfall on the
original due date therefor.
(B) For purposes of federal and all other taxes based on income, Party B
shall be treated as the owner of all Distributions referred to in clause (A)
above. Accordingly, the Escrow Agent shall be instructed to report all such
Distributions as income of Party B and to issue or cause to be issued to Party B
such Forms 1099 or other such forms reflecting such income.
(iv) Paragraph 5(i)(B) above is amended to read in its entirety as
follows:
"(B) calculating the Exposure for the Transactions in dispute by
seeking four actual quotations at mid-market from third parties
for purposes of calculating the relevant Close-out Amount, and
taking the arithmetic average of those obtained; provided that if
four quotations are not available for a particular Transaction,
then fewer than four quotations may be used for that Transaction,
and if no quotations are available for a particular Transaction,
then the Valuation Agent's original calculations will be used for
the Transaction; and"
(v) The definition of "Exposure" in Paragraph 12 above is amended to
read in its entirety as follows:
"'Exposure' means for any Valuation Date or other date for which
Exposure is calculated and subject to Paragraph 5 in the case of
a dispute, the amount, if any, that would be payable to a party
that is the Secured Party by the other party (expressed as a
positive number) or by a party that is the Secured Party to the
other party (expressed as a negative number) pursuant to Section
6(e)(ii)(i) of this Agreement if all Transactions were being
terminated as of the relevant Valuation Date, on the basis that
(i) that party is not the Affected Party and (ii) United Stated
Dollars is the Termination Currency; provided that the Close-out
Amount will be determined by the Valuation Agent on behalf of
that party using its estimates of mid-market of the amounts that
would be paid for transactions providing the economic equivalent
of (x) the material terms of the Transactions, including the
payments and deliveries by the parties under Section 2(a)(i) in
respect of the Transactions that would, but for the occurrence of
the relevant Early Termination Date, have been required after
that date (assuming satisfaction of the conditions precedent in
Section 2(a)(iii)); and (y) the option rights of the parties in
respect of the Transactions."
(vi) Paragraph 12 is amended by inserting, between the definitions of
"Secured Party" and "Specified Condition", the following additional definition:
"'Set-off' eans 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 of the Agreement is
entitled or subject (whether arising under the Agreement, under
another contract, applicable law or otherwise) that is exercised
by, or imposed on, such payer.
Cogent Capital Corp. Aegis Assessments, Inc.
Name: Gregory L. Kofford Name: Eric D. Johnson
Title: President Title: President
Date: November 15, 2004 Date: November 15, 2004
By: /s/Gregory L. Kofford By: /s/Eric D. Johnson
--------------------- ------------------
15