Exhibit 10.1
(Multicurrency -- Cross Border)
ISDA(R)
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of [ ] January, 2005
GRANITE FINANCE FUNDING 2 LIMITED
NORTHERN ROCK PLC ("Party A") and ("Party B")
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have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming
those Transactions.
Accordingly, the parties agree as follows: --
1. Interpretation
(a) Definitions. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) Inconsistency. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) Single Agreement. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmations form a single agreement
between the parties (collectively referred to as this "Agreement"), and the
parties would not otherwise enter into any Transactions.
2. Obligations
(a) General Conditions.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for value
on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the
required currency. Where settlement is by delivery (that is, other than
by payment), such delivery will be made for receipt on the due date in
the manner customary for the relevant obligation unless otherwise
specified in the relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to
(1) the condition precedent that no Event of Default or Potential Event
of Default with respect to the other party has occurred and is
continuing, (2) the condition precedent that no Early Termination Date in
respect of the relevant Transaction has occurred or been effectively
designated and (3) each other applicable condition precedent specified in
this Agreement.
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(b) Change of Account. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a
reasonable objection to such change.
(c) Netting. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to
make payment of any such amount will be automatically satisfied and discharged
and, if the aggregate amount that would otherwise have been payable by one
party exceeds the aggregate amount that would otherwise have been payable by
the other party, replaced by an obligation upon the party by whom the larger
aggregate amount would have been payable to pay to the other party the excess
of the larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be
made in the Schedule or a Confirmation by specifying that subparagraph (ii)
above will not apply to the Transactions identified as being subject to the
election, together with the starting date (in which case subparagraph (ii)
above will not, or will cease to, apply to such Transactions from such date).
This election may be made separately for different groups of Transactions and
will apply separately to each pairing of Offices through which the parties
make and receive payments or deliveries.
(d) Deduction or Withholding for Tax.
(i) Gross-Up. All payments under this Agreement will be made without any
deduction or withholding for or on account of any Tax unless such
deduction or withholding is required by any applicable law, as modified
by the practice of any relevant governmental revenue authority, then in
effect. If a party is so required to deduct or withhold, then that party
("X") will:--
(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required to be
deducted or withheld (including the full amount required to be
deducted or withheld from any additional amount paid by X to Y under
this Section 2(d)) promptly upon the earlier of determining that
such deduction or withholding is required or receiving notice that
such amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified copy),
or other documentation reasonably acceptable to Y, evidencing such
payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to
the payment to which Y is otherwise entitled under this Agreement,
such additional amount as is necessary to ensure that the net amount
actually received by Y (free and clear of Indemnifiable Taxes,
whether assessed against X or Y) will equal the full amount Y would
have received had no such deduction or withholding been required.
However, X will not be required to pay any additional amount to Y to
the extent that it would not be required to be paid but for:--
(A) the failure by Y to comply with or perform any agreement
contained in Section 4(a)(i), 4(a)(iii) or 4(d); or
(B) the failure of a representation made by Y pursuant to
Section 3(f) to be accurate and true unless such failure would
not have occurred but for (I) any action taken by a taxing
authority, or brought in a court of competent jurisdiction, on
or after the date on which a Transaction is entered into
(regardless of whether such action is taken or brought with
respect to a party to this Agreement) or (II) a Change in Tax
Law.
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(ii) Liability. If: --
(1) X is required by any applicable law, as modified by the practice
of any relevant governmental revenue authority, to make any
deduction or withholding in respect of which X would not be required
to pay an additional amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly against
X,
then, except to the extent Y has satisfied or then satisfies the
liability resulting from such Tax, Y will promptly pay to X the amount
of such liability (including any related liability for interest, but
including any related liability for penalties only if Y has failed to
comply with or perform any agreement contained in Section 4(a)(i),
4(a)(iii) or 4(d)).
(e) Default Interest; Other Amounts. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant
Transaction, a party that defaults in the performance of any payment
obligation will, to the extent permitted by law and subject to Section 6(c),
be required to pay interest (before as well as after judgment) on the overdue
amount to the other party on demand in the same currency as such overdue
amount, for the period from (and including) the original due date for payment
to (but excluding) the date of actual payment, at the Default Rate. Such
interest will be calculated on the basis of daily compounding and the actual
number of days elapsed. If, prior to the occurrence or effective designation
of an Early Termination Date in respect of the relevant Transaction, a party
defaults in the performance of any obligation required to be settled by
delivery, it will compensate the other party on demand if and to the extent
provided for in the relevant Confirmation or elsewhere in this Agreement.
3. Representations
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered
into and, in the case of the representations in Section 3(f), at all times
until the termination of this Agreement) that:--
(a) Basic Representations.
(i) Status. It is duly organised and validly existing under the laws of
the jurisdiction of its organisation or incorporation and, if relevant
under such laws, in good standing;
(ii) Powers. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to
deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to perform
its obligations under this Agreement and any obligations it has under any
Credit Support Document to which it is a party and has taken all
necessary action to authorise such execution, delivery and performance;
(iii) No Violation or Conflict. Such execution, delivery and performance
do not violate or conflict with any law applicable to it, any provision
of its constitutional documents, any order or judgment of any court or
other agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;
(iv) Consents. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in
full force and effect and all conditions of any such consents have been
complied with; and
(v) Obligations Binding. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal,
valid and binding obligations, enforceable in accordance with their
respective terms (subject to applicable bankruptcy, reorganisation,
insolvency, moratorium or similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).
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(b) Absence of Certain Events. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has
occurred and is continuing and no such event or circumstance would occur as a
result of its entering into or performing its obligations under this Agreement
or any Credit Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding
at law or in equity or before any court, tribunal, governmental body, agency
or official or any arbitrator that is likely to affect the legality, validity
or enforceability against it of this Agreement or any Credit Support Document
to which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is
identified for the purpose of this Section 3(d) in the Schedule is, as of the
date of the information, true, accurate and complete in every material
respect.
(e) Payer Tax Representation. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.
(f) Payee Tax Representations. Each representation specified in the Schedule
as being made by it for the purpose of this Section 3(f) is accurate and true.
4. Agreements
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--
(a) Furnish Specified Information. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:--
(i) any forms, documents or certificates relating to taxation specified
in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any Confirmation;
and
(iii) upon reasonable demand by such other party, any form or document
that may be required or reasonably requested in writing in order to allow
such other party or its Credit Support Provider to make a payment under
this Agreement or any applicable Credit Support Document without any
deduction or withholding for or on account of any Tax or with such
deduction or withholding at a reduced rate (so long as the completion,
execution or submission of such form or document would not materially
prejudice the legal or commercial position of the party in receipt of
such demand), with any such form or document to be accurate and completed
in a manner reasonably satisfactory to such other party and to be
executed and to be delivered with any reasonably required certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) Maintain Authorisations. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) Tax Agreement. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of
such failure.
(e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of
this Agreement by a jurisdiction in which it is incorporated,
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organised, managed and controlled, or considered to have its seat, or in which
a branch or office through which it is acting for the purpose of this
Agreement is located ("Stamp Tax Jurisdiction") and will indemnify the other
party against any Stamp Tax levied or imposed upon the other party or in
respect of the other party's execution or performance of this Agreement by any
such Stamp Tax Jurisdiction which is not also a Stamp Tax Jurisdiction with
respect to the other party.
5. Events of Default and Termination Events
(a) Events of Default. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event of
default (an "Event of Default") with respect to such party:--
(i) Failure to Pay or Deliver. Failure by the party to make, when due,
any payment under this Agreement or delivery under Section 2(a)(i) or
2(e) required to be made by it if such failure is not remedied on or
before the third Local Business Day after notice of such failure is given
to the party;
(ii) Breach of Agreement. Failure by the party to comply with or perform
any agreement or obligation (other than an obligation to make any payment
under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give
notice of a Termination Event or any agreement or obligation under
Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by
the party in accordance with this Agreement if such failure is not
remedied on or before the thirtieth day after notice of such failure is
given to the party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider of such
party to comply with or perform any agreement or obligation to be
complied with or performed by it in accordance with any Credit
Support Document if such failure is continuing after any applicable
grace period has elapsed;
(2) the expiration or termination of such Credit Support Document or
the failing or ceasing of such Credit Support Document to be in full
force and effect for the purpose of this Agreement (in either case
other than in accordance with its terms) prior to the satisfaction
of all obligations of such party under each Transaction to which
such Credit Support Document relates without the written consent of
the other party; or
(3) the party or such Credit Support Provider disaffirms, disclaims,
repudiates or rejects, in whole or in part, or challenges the
validity of, such Credit Support Document;
(iv) Misrepresentation. A representation (other than a representation
under Section 3(e) or (f)) made or repeated or deemed to have been made
or repeated by the party or any Credit Support Provider of such party in
this Agreement or any Credit Support Document proves to have been
incorrect or misleading in any material respect when made or repeated or
deemed to have been made or repeated;
(v) Default under Specified Transaction. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party
(1) defaults under a Specified Transaction and, after giving effect to
any applicable notice requirement or grace period, there occurs a
liquidation of, an acceleration of obligations under, or an early
termination of, that Specified Transaction, (2) defaults, after giving
effect to any applicable notice requirement or grace period, in making
any payment or delivery due on the last payment, delivery or exchange
date of, or any payment on early termination of, a Specified Transaction
(or such default continues for at least three Local Business Days if
there is no applicable notice requirement or grace period) or (3)
disaffirms, disclaims, repudiates or rejects, in whole or in part, a
Specified Transaction (or such action is taken by any person or entity
appointed or empowered to operate it or act on its behalf);
(vi) Cross Default. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of(1) a default, event
of default or other similar condition or event (however
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described) in respect of such party, any Credit Support Provider of such
party or any applicable Specified Entity of such party under one or more
agreements or instruments relating to Specified Indebtedness of any of
them (individually or collectively) in an aggregate amount of not less
than the applicable Threshold Amount (as specified in the Schedule) which
has resulted in such Specified Indebtedness becoming, or becoming capable
at such time of being declared, due and payable under such agreements or
instruments, before it would otherwise have been due and payable or (2) a
default by such party, such Credit Support Provider or such Specified
Entity (individually or collectively) in making one or more payments on
the due date thereof in an aggregate amount of not less than the
applicable Threshold Amount under such agreements or instruments (after
giving effect to any applicable notice requirement or grace period);
(vii) Bankruptcy. The party, any Credit Support Provider of such party or
any applicable Specified Entity of such party: --
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to pay
its debts or fails or admits in writing its inability generally to
pay its debts as they become due; (3) makes a general assignment,
arrangement or composition with or for the benefit of its creditors;
(4) institutes or has instituted against it a proceeding seeking a
judgment of insolvency or bankruptcy or any other relief under any
bankruptcy or insolvency law or other similar law affecting
creditors' rights, or a petition is presented for its winding-up or
liquidation, and, in the case of any such proceeding or petition
instituted or presented against it, such proceeding or petition (A)
results in a judgment of insolvency or bankruptcy or the entry of an
order for relief or the making of an order for its winding-up or
liquidation or (B) is not dismissed, discharged, stayed or
restrained in each case within 30 days of the institution or
presentation thereof; (5) has a resolution passed for its
winding-up, official management or liquidation (other than pursuant
to a consolidation, amalgamation or merger); (6) seeks or becomes
subject to the appointment of an administrator, provisional
liquidator, conservator, receiver, trustee, custodian or other
similar official for it or for all or substantially all its assets;
(7) has a secured party take possession of all or substantially all
its assets or has a distress, execution, attachment, sequestration
or other legal process levied, enforced or sued on or against all or
substantially all its assets and such secured party maintains
possession, or any such process is not dismissed, discharged, stayed
or restrained, in each case within 30 days thereafter; (8) causes or
is subject to any event with respect to it which, under the
applicable laws of any jurisdiction, has an analogous effect to any
of the events specified in clauses (1) to (7) (inclusive); or (9)
takes any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the foregoing acts; or
(viii) Merger Without Assumption. The party or any Credit Support Provider
of such party consolidates or amalgamates with, or merges with or into,
or transfers all or substantially all its assets to, another entity and,
at the time of such consolidation, amalgamation, merger or transfer:--
(1) the resulting, surviving or transferee entity fails to assume
all the obligations of such party or such Credit Support Provider
under this Agreement or any Credit Support Document to which it or
its predecessor was a party by operation of law or pursuant to an
agreement reasonably satisfactory to the other party to this
Agreement; or
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the performance by such
resulting, surviving or transferee entity of its obligations under
this Agreement.
(b) Termination Events. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any event specified below constitutes an Illegality if
the event is specified in (i) below, a Tax Event if the event is specified in
(ii) below or a Tax Event Upon Merger if the event is specified in (iii)
below, and, if specified to be applicable, a Credit Event
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Upon Merger if the event is specified pursuant to (iv) below or an Additional
Termination Event if the event is specified pursuant to (v) below:--
(i) Illegality. Due to the adoption of, or any change in, any applicable
law after the date on which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court,
tribunal or regulatory authority with competent jurisdiction of any
applicable law after such date, it becomes unlawful (other than as a
result of a breach by the party of Section 4(b)) for such party (which
will be the Affected Party):--
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in respect
of such Transaction or to comply with any other material provision
of this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party to
perform, any contingent or other obligation which the party (or such
Credit Support Provider) has under any Credit Support Document
relating to such Transaction;
(ii) Tax Event. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on
which a Transaction is entered into (regardless of whether such action is
taken or brought with respect to a party to this Agreement) or (y) a
Change in Tax Law, the party (which will be the Affected Party) will, or
there is a substantial likelihood that it will, on the next succeeding
Scheduled Payment Date (1) be required to pay to the other party an
additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) or (2) receive a payment from which an amount is required to be
deducted or withheld for or on account of a Tax (except in respect of
interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount
is required to be paid in respect of such Tax under Section 2(d)(i)(4)
(other than by reason of Section 2(d)(i)(4)(A) or (B));
(iii) Tax Event Upon Merger. The party (the "Burdened Party") on the next
succeeding Scheduled Payment Date will either (1) be required to pay an
additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) or (2) receive a payment from which an amount has been deducted or
withheld for or on account of any Indemnifiable Tax in respect of which
the other party is not required to pay an additional amount (other than
by reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of
a party consolidating or amalgamating with, or merging with or into, or
transferring all or substantially all its assets to, another entity
(which will be the Affected Party) where such action does not constitute
an event described in Section 5(a)(viii);
(iv) Credit Event Upon Merger. If "Credit Event Upon Merger" is specified
in the Schedule as applying to the party, such party ("X"), any Credit
Support Provider of X or any applicable Specified Entity of X
consolidates or amalgamates with, or merges with or into, or transfers
all or substantially all its assets to, another entity and such action
does not constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate,
will be the Affected Party); or
(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.
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6. Early Termination
(a) Right to Terminate Following Event of Default. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as
an Early Termination Date in respect of all outstanding Transactions. If,
however, "Automatic Early Termination" is specified in the Schedule as
applying to a party, then an Early Termination Date in respect of all
outstanding Transactions will occur immediately upon the occurrence with
respect to such party of an Event of Default specified in Section
5(a)(vii)(1), (3), (5), (6) or, to the extent analogous thereto, (8), and as
of the time immediately preceding the institution of the relevant proceeding
or the presentation of the relevant petition upon the occurrence with respect
to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to
the extent analogous thereto, (8).
(b) Right to Terminate Following Termination Event.
(i) Notice. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying
the nature of that Termination Event and 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 will, as a condition to its right to
designate an Early Termination Date under Section 6(b)(iv), use all
reasonable efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20 days
after it gives notice under Section 6(b)(i) all its rights and
obligations under this Agreement in respect of the Affected Transactions
to another of its Offices or Affiliates so that such Termination Event
ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days after
the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject
to and conditional upon the prior written consent of the other party,
which consent will not be withheld if such other party's policies in
effect at such time would permit it to enter into transactions with the
transferee on the terms proposed.
(iii) Two Affected Parties. If an Illegality under Section 5(b)(i)(1) or
a Tax Event occurs and there are two Affected Parties, each party will
use all reasonable efforts to reach agreement within 30 days after notice
thereof is given under Section 6(b)(i) on action to avoid that
Termination Event.
(iv) Right to Terminate. If:--
(1) a transfer under Section 6(b)(ii) or an agreement under Section
6(b)(iii), as the case may be, has not been effected with respect to
all Affected Transactions within 30 days after an Affected Party
gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon
Merger or an Additional Termination Event occurs, or a Tax Event
Upon Merger occurs and the Burdened Party is not the Affected Party,
either party in the case of an Illegality, the Burdened Party in the case
of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event
or an Additional Termination Event if there is more than one Affected
Party, or the party which is not the Affected Party in the case of a
Credit Event Upon Merger or an Additional Termination Event if there is
only one Affected Party may, by not more than 20 days notice to the other
party and provided that the relevant Termination Event is then
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continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.
(c) Effect of Designation.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date so
designated, whether or not the relevant Event of Default or Termination
Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early Termination
Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in
respect of the Terminated Transactions will be required to be made, but
without prejudice to the other provisions of this Agreement. The amount,
if any, payable in respect of an Early Termination Date shall be
determined pursuant to Section 6(e).
(d) Calculations.
(i) Statement. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable detail,
such calculations (including all relevant quotations and specifying any
amount payable under Section 6(e)) and (2) giving details of the relevant
account to which any amount payable to it is to be paid. In the absence
of written confirmation from the source of a quotation obtained in
determining a Market Quotation, the records of the party obtaining such
quotation will be conclusive evidence of the existence and accuracy of
such quotation.
(ii) Payment Date. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day that
notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event of
Default) and on the day which is two Local Business Days after the day on
which notice of the amount payable is effective (in the case of an Early
Termination Date which is designated as a result of a Termination Event).
Such amount will be paid together with (to the extent permitted under
applicable law) interest thereon (before as well as after judgment) in
the Termination Currency, from (and including) the relevant Early
Termination Date to (but excluding) the date such amount is paid, at the
Applicable Rate. Such interest will be calculated on the basis of daily
compounding and the actual number of days elapsed.
(e) Payments on Early Termination. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the
Schedule of a payment measure, either "Market Quotation" or "Loss", and a
payment method, either the "First Method" or the "Second Method". If the
parties fail to designate a payment measure or payment method in the Schedule,
it will be deemed that "Market Quotation" or the "Second Method", as the case
may be, shall apply. The amount, if any, payable in respect of an Early
Termination Date and determined pursuant to this Section will be subject to
any Set-off.
(i) Events of Default. If the Early Termination Date results from an
Event of Default: --
(1) First Method and Market Quotation. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of(A) the sum
of the Settlement Amount (determined by the Non-defaulting Party) in
respect of the Terminated Transactions and the Termination Currency
Equivalent of the Unpaid Amounts owing to the Non-defaulting Party
over (B) the Termination Currency Equivalent of the Unpaid Amounts
owing to the Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply, the
Defaulting Party will pay to the Non-defaulting Party, if a positive
number, the Non-defaulting Party's Loss in respect of this
Agreement.
(3) Second Method and Market Quotation. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A) the
sum of the Settlement Amount (determined by the
9
Non-defaulting Party) in respect of the Terminated Transactions and
the Termination Currency Equivalent of the Unpaid Amounts owing to
the Non-defaulting Party less (B) the Termination Currency
Equivalent of the Unpaid Amounts owing to the Defaulting Party. If
that amount is a positive number, the Defaulting Party will pay it
to the Non-defaulting Party; if it is a negative number, the
Non-defaulting Party will pay the absolute value of that amount to
the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply, an
amount will be payable equal to the Non-defaulting Party's Loss in
respect of this Agreement. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party; if it is a
negative number, the Non-defaulting Party will pay the absolute
value of that amount to the Defaulting Party.
(ii) Termination Events. If the Early Termination Date results from a
Termination Event:--
(1) One Affected Party. If there is one Affected Party, the amount
payable will be determined in accordance with Section 6(e)(i)(3), if
Market Quotation applies, or Section 6(e)(i)(4), if Loss applies,
except that, in either case, references to the Defaulting Party and
to the Non-defaulting Party will be deemed to be references to the
Affected Party and the party which is not the Affected Party,
respectively, and, if Loss applies and fewer than all the
Transactions are being terminated, Loss shall be calculated in
respect of all Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties: --
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions,
and an amount will be payable equal to (I) the sum of (a)
one-half of the difference between the Settlement Amount of the
party with the higher Settlement Amount ("X") and the
Settlement Amount of the party with the lower Settlement Amount
("Y") and (b) the Termination Currency Equivalent of the Unpaid
Amounts owing to X less (II) the Termination Currency
Equivalent of the Unpaid Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the
Transactions are being terminated, in respect of all Terminated
Transactions) and an amount will be payable equal to one-half
of the difference between the Loss of the party with the higher
Loss ("X") and the Loss of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if
it is a negative number, X will pay the absolute value of that
amount to Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will be
subject to such adjustments as are appropriate and permitted by law to
reflect any payments or deliveries made by one party to the other under
this Agreement (and retained by such other party) during the period from
the relevant Early Termination Date to the date for payment determined
under Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation applies an
amount recoverable under this Section 6(e) is a reasonable pre-estimate
of loss and not a penalty. Such amount is payable for the loss of bargain
and the loss of protection against future risks and except as otherwise
provided in this Agreement neither party will be entitled to recover any
additional damages as a consequence of such losses.
10
7. Transfer
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of
the other party, except that:
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to
any other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be
void.
8. Contractual Currency
(a) Payment in the Contractual Currency. Each payment under this Agreement
will be made in the relevant currency specified in this Agreement for that
payment (the "Contractual Currency"). To the extent permitted by applicable
law, any obligation to make payments under this Agreement in the Contractual
Currency will not be discharged or satisfied by any tender in any currency
other than the Contractual Currency, except to the extent such tender results
in the actual receipt by the party to which payment is owed, acting in a
reasonable manner and in good faith in converting the currency so tendered
into the Contractual Currency, of the full amount in the Contractual Currency
of all amounts payable in respect of this Agreement. If for any reason the
amount in the Contractual Currency so received falls short of the amount in
the Contractual Currency payable in respect of this Agreement, the party
required to make the payment will, to the extent permitted by applicable law,
immediately pay such additional amount in the Contractual Currency as may be
necessary to compensate for the shortfall. If for any reason the amount in the
Contractual Currency so received exceeds the amount in the Contractual
Currency payable in respect of this Agreement, the party receiving the payment
will refund promptly the amount of such excess.
(b) Judgments. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party
is entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency and will refund promptly to the other party any excess of
the Contractual Currency received by such party as a consequence of sums paid
in such other currency if such shortfall or such excess arises or results from
any variation between the rate of exchange at which the Contractual Currency
is converted into the currency of the judgment or order for the purposes of
such judgment or order and the rate of exchange at which such party is able,
acting in a reasonable manner and in good faith in converting the currency
received into the Contractual Currency, to purchase the Contractual Currency
with the amount of the currency of the judgment or order actually received by
such party. The term "rate of exchange" includes, without limitation, any
premiums and costs of exchange payable in connection with the purchase of or
conversion into the Contractual Currency.
(c) Separate Indemnities. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the
party to which any payment is owed and will not be affected by judgment being
obtained or claim or proof being made for any other sums payable in respect of
this Agreement.
(d) Evidence of Loss. For the purpose of this Section 8, it will be sufficient
for a party to demonstrate that it would have suffered a loss had an actual
exchange or purchase been made.
11
9. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced
by a facsimile transmission) and executed by each of the parties or confirmed
by an exchange of telexes or electronic messages on an electronic messaging
system.
(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts (including
by facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall 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.
11. Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the other
party for and against all reasonable out-of-pocket expenses, including legal
fees and Stamp Tax, incurred by such other party by reason of the enforcement
and protection of its rights under this Agreement or any Credit Support
Document
12
to which the Defaulting Party is a party or by reason of the early
termination of any Transaction, including, but not limited to, costs of
collection.
12. Notices
(a) Effectiveness. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
(i) if in writing and delivered in person or by courier, on the date it
is delivered;
(ii) if sent by telex, on the date the recipient's answerback is
received;
(iii) if sent by facsimile transmission, on the date that transmission is
received by a responsible employee of the recipient in legible form (it
being agreed that the burden of proving receipt will be on the sender and
will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or
the equivalent (return receipt requested), on the date that mail is
delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) Change of Addresses. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) Jurisdiction. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of the State of
New York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an inconvenient forum and further
waives the right to object, with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the
Civil Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) Service of Process. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any
13
reason any party's Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a substitute
process agent acceptable to the other party. The parties irrevocably consent
to service of process given in the manner provided for notices in Section 12.
Nothing in this Agreement will affect the right of either party to serve
process in any other manner permitted by law.
(d) Waiver of Immunities. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and
assets (irrespective of their use or intended use), all immunity on the
grounds of sovereignty or other similar grounds from (i) suit, (ii)
jurisdiction of any court, (iii) relief by way of injunction, order for
specific performance or for recovery of property, (iv) attachment of its
assets (whether before or after judgment) and (v) execution or enforcement of
any judgment to which it or its revenues or assets might otherwise be entitled
in any Proceedings in the courts of any jurisdiction and irrevocably agrees,
to the extent permitted by applicable law, that it will not claim any such
immunity in any Proceedings.
14. Definitions
As used in this Agreement:--
"Additional Termination Event" has the meaning specified in Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control"
of any entity or person means ownership of a majority of the voting power of
the entity or person.
"Applicable Rate" means:--
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the
Non-default Rate; and
(d) in all other cases, the Termination Rate.
"Burdened Party" has the meaning specified in Section 5(b).
"Change in Tax Law" means the enactment, promulgation, execution or
ratification of, or any change in or amendment to, any law (or in the
application or official interpretation of any law) that occurs on or after the
date on which the relevant Transaction is entered into.
"consent" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified
as such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
14
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"Event of Default" has the meaning specified in Section 5(a) and, if
applicable, in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"Indemnifiable Tax" means any Tax other than a Tax that would not be imposed
in respect of a payment under this Agreement but for a present or former
connection between the jurisdiction of the government or taxation authority
imposing such Tax and the recipient of such payment or a person related to
such recipient (including, without limitation, a connection arising from such
recipient or related person being or having been a citizen or resident of such
jurisdiction, or being or having been organised, present or engaged in a trade
or business in such jurisdiction, or having or having had a permanent
establishment or fixed place of business in such jurisdiction, but excluding a
connection arising solely from such recipient or related person having
executed, delivered, performed its obligations or received a payment under, or
enforced, this Agreement or a Credit Support Document).
"law" includes any treaty, law, rule or regulation (as modified, in the case
of tax matters, by the practice of any relevant governmental revenue
authority) and "lawful" and "unlawful" will be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and
foreign currency deposits) (a) in relation to any obligation under Section
2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so
specified, as otherwise agreed by the parties in writing or determined
pursuant to provisions contained, or incorporated by reference, in this
Agreement, (b) in relation to any other payment, in the place where the
relevant account is located and, if different, in the principal financial
centre, if any, of the currency of such payment, (c) in relation to any notice
or other communication, including notice contemplated under Section 5(a)(i),
in the city specified in the address for notice provided by the recipient and,
in the case of a notice contemplated by Section 2(b), in the place where the
relevant new account is to be located and (d) in relation to Section
5(a)(v)(2), in the relevant locations for performance with respect to such
Specified Transaction.
"Loss" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be
its total losses and costs (or gain, in which case expressed as a negative
number) in connection with this Agreement or that Terminated Transaction or
group of Terminated Transactions, as the case may be, including any loss of
bargain, cost of funding or, at the election of such party but without
duplication, loss or cost incurred as a result of its terminating,
liquidating, obtaining or re-establishing any hedge or related trading
position (or any gain resulting from any of them). Loss includes losses and
costs (or gains) in respect of any payment or delivery required to have been
made (assuming satisfaction of each applicable condition precedent) on or
before the relevant Early Termination Date and not made, except, so as to
avoid duplication, if Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies.
Loss does not include a party's legal fees and out-of-pocket expenses referred
to under Section 11. A party will determine its Loss as of the relevant Early
Termination Date, or, if that is not reasonably practicable, as of the
earliest date thereafter as is reasonably practicable. A party may (but need
not) determine its Loss by reference to quotations of relevant rates or prices
from one or more leading dealers in the relevant markets.
"Market Quotation" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or
by such party (expressed as a positive number) in consideration of an
agreement between such party (taking into account any existing Credit Support
Document with respect to the obligations of such party) and the quoting
Reference Market-maker to enter into a transaction (the "Replacement
Transaction") that would have the effect of preserving for such party the
economic equivalent of any payment or delivery (whether the underlying
obligation was absolute or contingent and assuming the satisfaction of each
applicable condition precedent) by the parties under Section 2(a)(i) in
respect of such Terminated Transaction or group of Terminated Transactions
that would, but for the occurrence of the relevant Early Termination Date,
have
15
been required after that date. For this purpose, Unpaid Amounts in respect of
the Terminated Transaction or group of Terminated Transactions are to be
excluded but, without limitation, any payment or delivery that would, but for
the relevant Early Termination Date, have been required (assuming satisfaction
of each applicable condition precedent) after that Early Termination Date is
to be included. The Replacement Transaction would be subject to such
documentation as such party and the Reference Market-maker may, in good faith,
agree. The party making the determination (or its agent) will request each
Reference Market-maker to provide its quotation to the extent reasonably
practicable as of the same day and time (without regard to different time
zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if
more than one quotation has the same highest value or lowest value, then one
of such quotations shall be disregarded. If fewer than three quotations are
provided, it will be deemed that the Market Quotation in respect of such
Terminated Transaction or group of Terminated Transactions cannot be
determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it)
if it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Office" means a branch or office of a party, which may be such party's head
or home office.
"Potential Event of Default" means any event which, with the giving of notice
or the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria
that such party applies generally at the time in deciding whether to offer or
to make an extension of credit and (b) to the extent practicable, from among
such dealers having an office in the same city
"Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a)
in which the party is incorporated, organised, managed and controlled or
considered to have its seat, (b) where an Office through which the party is
acting for purposes of this Agreement is located, (c) in which the party
executes this Agreement and (d) in relation to any payment, from or through
which such payment is made.
"Scheduled Payment Date" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of retention
or withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or
imposed on, such payer.
"Settlement Amount" means, with respect to a party and any Early Termination
Date, the sum of: --
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive 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.
16
"Specified Indebtedness" means, subject to the Schedule, any obligation
(whether present or future, contingent or otherwise, as principal or surety or
otherwise) in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter
entered into between one party to this Agreement (or any Credit Support
Provider of such party or any applicable Specified Entity of such party) and
the other party to this Agreement (or any Credit Support Provider of such
other party or any applicable Specified Entity of such other party) which is a
rate swap transaction, basis swap, forward rate transaction, commodity swap,
commodity option, equity or equity index swap, equity or equity index option,
bond option, interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any other similar
transaction (including any option with respect to any of these transactions),
(b) any combination of these transactions and (c) any other transaction
identified as a Specified Transaction in this Agreement or the relevant
confirmation.
"Stamp Tax" means any stamp, registration, documentation or similar tax.
"Tax" means any present or future tax, levy, impost, duty, charge, assessment
or fee of any nature (including interest, penalties and additions thereto)
that is imposed by any government or other taxing authority in respect of any
payment under this Agreement other than a stamp, registration, documentation
or similar tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section 5(b).
"Terminated Transactions" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in
effect immediately before the effectiveness of the notice designating that
Early Termination Date (or, if "Automatic Early Termination" applies,
immediately before that Early Termination Date).
"Termination Currency" has the meaning specified in the Schedule.
"Termination Currency Equivalent" means, in respect of any amount denominated
in the Termination Currency, such Termination Currency amount and, in respect
of any amount denominated in a currency other than the Termination Currency
(the "Other Currency"), the amount in the Termination Currency determined by
the party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or,
if the relevant Market Quotation or Loss (as the case may be), is determined
as of a later date, that later date, with the Termination Currency at the rate
equal to the spot exchange rate of the foreign exchange agent (selected as
provided below) for the purchase of such Other Currency with the Termination
Currency at or about 11:00 a.m. (in the city in which such foreign exchange
agent is located) on such date as would be customary for the determination of
such a rate for the purchase of such Other Currency for value on the relevant
Early Termination Date or that later date. The foreign exchange agent will, if
only one party is obliged to make a determination under Section 6(e), be
selected in good faith by that party and otherwise will be agreed by the
parties.
"Termination Event" means an Illegality, a Tax Event or a Tax Event Upon
Merger or, if specified to be applicable, a Credit Event Upon Merger or an
Additional Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as
certified by such party) if it were to fund or of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early
Termination Date, the aggregate of (a) in respect of all Terminated
Transactions, the amounts that became payable (or that would have become
payable but for Section 2(a)(iii)) to such party under Section 2(a)(i) on or
prior to such Early Termination Date and which remain unpaid as at such Early
Termination Date and (b) in respect of each Terminated Transaction, for each
obligation under Section 2(a)(i) which was (or would have been but for Section
2(a)(iii)) required to be settled by delivery to such party on or prior to
such Early Termination Date and which has not been so settled as at such Early
Termination Date, an amount equal to the fair market
17
value of that which was (or would have been) required to be delivered as of
the originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or
would have been required to have been paid or performed to (but excluding)
such Early Termination Date, at the Applicable Rate. Such amounts of interest
will be calculated on the basis of daily compounding and the actual number of
days elapsed. The fair market value of any obligation referred to in clause
(b) above shall be reasonably determined by the party obliged to make the
determination under Section 6(e) or, if each party is so obliged, it shall be
the average of the Termination Currency Equivalents of the fair market values
reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
GRANITE FINANCE FUNDING 2 LIMITED,
NORTHERN ROCK PLC, being Party A being Party B
- -------------------------------- -----------------------------------------
(Name of Party) (Name of Party)
By: By:
------------------------------ ---------------------------------------
Name: Name:
Title: Title:
Date: Date:
18
(BASIS RATE SWAP)
SCHEDULE
TO THE
MASTER AGREEMENT
dated as of [*]
between
(1) NORTHERN ROCK PLC ("PARTY A"); and
(2) GRANITE FINANCE FUNDING 2 LIMITED plc ("PARTY B").
Part 1.TERMINATION PROVISIONS.
(a) "Specified Entity" means in relation to Party A for the purpose of:-
Section 5(a)(v), none
Section 5(a)(vi), none
Section 5(a)(vii), none
Section 5(b)(iv), none
and in relation to Party B for the purpose of:-
Section 5(a)(v), none
Section 5(a)(vi), none
Section 5(a)(vii), none
Section 5(b)(iv), none
(b) "SPECIFIED TRANSACTION" will have the meaning specified in Section 14.
(c) The "CROSS DEFAULT" provisions of Section 5(a)(vi) will apply to Party A
and will not apply to Party B.
19
"SPECIFIED INDEBTEDNESS" will have the meaning specified in Section 14 of
this Agreement.
"THRESHOLD AMOUNT" means, with respect to Party A and any guarantor of
Party A's obligations under this Agreement.
(d) The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(iv) will apply
to Party A and will not apply to Party B.
(e) The "AUTOMATIC EARLY TERMINATION" provision of Section 6(a) will not
apply to Party A and will not apply to Party B.
(f) PAYMENTS ON EARLY TERMINATION. For the purpose of Section 6(e) of this
Agreement:-
(i) Market Quotation will apply.
(ii) The Second Method will apply.
(g) "TERMINATION CURRENCY" means Sterling.
(h) ADDITIONAL TERMINATION EVENT will apply. The events which constitute
Additional Termination Events are set forth in Part 5(f), Part 5(k)(iii),
Part 5(l)(v) and Part 5(m)(v) of this Agreement.
20
Part 2.TAX REPRESENTATIONS
(a) PAYER REPRESENTATIONS. For the purpose of Section 3(e) of this
Agreement, Party A and Party B will each make the following
representation:
It is not required by any applicable law, as modified by the practice
of any relevant governmental revenue authority, of any Relevant
Jurisdiction to make any deduction or withholding for or on account of
any Tax from any payment (other than interest under Section 2(e),
6(d)(ii) or 6(e) of this Agreement) to be made by it to the other
party under this Agreement. In making this representation, it may rely
on (i) the accuracy of any representations made by the other party
pursuant to Section 3(f) of this Agreement, (ii) the satisfaction of
the agreement of the other party contained in Section 4(a)(i) or
4(a)(iii) of this Agreement and the accuracy and effectiveness of any
document provided by the other party pursuant to Section 4(a)(i) or
4(a)(iii) of this Agreement and (iii) the satisfaction of the
agreement of the other party contained in Section 4(d) of this
Agreement, provided that it shall not be a breach of this
representation where reliance is placed on clause (ii) and the other
party does not deliver a form or document under Section 4(a)(iii) by
reason of material prejudice to its legal or commercial position.
(b) PAYEE REPRESENTATIONS. For the purposes of Section 3(f) of the
Agreement, the representation will not apply to Party A and will not
apply to Party B.
21
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 DELIVER FORM/DOCUMENT/ CERTIFICATE DATE BY WHICH TO BE
DOCUMENT DELIVERED
None None None
(b) Other documents to be delivered are:-
PARTY REQUIRED FORM/DOCUMENT/ DATE BY COVERED BY
TO DELIVER CERTIFICATE WHICH SECTION 3(D)
DOCUMENT TO BE REPRESENTATION
DELIVERED
Party A and Appropriate evidence of its On signing Yes
Party B signatory's authority of this
Agreement
Party B Certified copy of On signing Yes
board resolution of this
Agreement
Party A Legal opinion of counsel On signing No
of this
Agreement
Party B Legal opinion of counsel On signing No
of this
Agreement
Party A An executed copy of the Credit On signing Yes
Support Document listed in Part 4(f) of this
below Agreement
22
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: Northern Rock House
Gosforth
Newcastle upon Tyne
NE3 4PL
Attention: Senior Manager, Treasury Settlement
Facsimile No.: +44 (0)191 279 4694
Address for notices or communications to Party B:-
Address: Granite Mortgages 04-3 plc
Fifth Floor
100 Wood Street
London
EC2V 7EX
With a copy to: Northern Rock plc
Northern Rock House
Gosforth
Newcastle upon Tyne
NE3 4PL
Attention: Keith M. Currie
Facsimile No.: +44 (0)191 279 4694
With a copy to the Funding 2 Security Trustee:-
Address: The Bank of New York
One Canada Square
48th Floor
London
E14 5AL
Attention: Corporate Trust (Global Structured Finance)
Facsimile No.: +44 (0)20 7964 6061
(b) PROCESS AGENT. For the purpose of Section 13(c) of this Agreement:-
23
Party A appoints as its Process Agent: None.
Party B appoints as its Process Agent: None.
(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.
Party B is not a Multibranch Party.
(e) CALCULATION AGENT. The Calculation Agent shall be as specified in each
Confirmation.
(f) CREDIT SUPPORT DOCUMENT. Details of any Credit Support Document:-
In respect of Party A: the 1995 Credit Support Annex (Bilateral Form -
Transfer) between Party A and Party B dated as of the date hereof (the
"Credit Support Annex").
In respect of Party B:None.
(g) CREDIT SUPPORT PROVIDER.
Credit Support Provider means, in relation to Party A, none.
Credit Support Provider means, in relation to Party B, none.
(h) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with English law.
(i) NETTING OF PAYMENTS. Sub-paragraph (ii) of Section 2(c) of this
Agreement will apply to Transactions entered into under this Agreement
unless otherwise specified in a Confirmation.
(i) "AFFILIATE" will have the meaning specified in Section 14 of this
Agreement.
24
Part 5.OTHER PROVISIONS
(a) DEFINITIONS AND INTERPRETATION
Capitalised terms used in this Agreement shall, except where the context
otherwise requires and save where otherwise defined in this Agreement,
bear the meanings given to them in the Master Definitions Schedule as
amended and restated by (and appearing in Appendix 1 to) the Master
Definitions Schedule [*] Amendment Deed executed by, among others, the
Note Trustee on [*].
As used in this Agreement, the following terms shall mean:
"BASIS RATE SWAP TRANSACTION CONFIRMATION NO. 1" means the Confirmation
so referenced between Party A and Party B dated on or about the date
hereof;
"BASIS RATE SWAP TRANSACTION CONFIRMATION NO. 2A" means the Confirmation
so referenced between Party A and Party B dated on or about the date
hereof;
"BASIS RATE SWAP TRANSACTION CONFIRMATION NO. 2B" means the Confirmation
so referenced between Party A and Party B dated on or about the date
hereof;
"BASIS RATE SWAP TRANSACTION CONFIRMATION NO. 2C" means the Confirmation
so referenced between Party A and Party B dated on or about the date
hereof;
"BASIS RATE SWAP TRANSACTION NO. 1" means the Transaction entered into
between Party A and Party B dated on or about the date hereof and
confirmed in the Basis Rate Swap Transaction Confirmation No. 1;
"BASIS RATE SWAP TRANSACTION NO. 2A" means the Transaction entered into
between Party A and Party B dated on or about the date hereof and
confirmed in the Basis Rate Swap Transaction Confirmation No. 2A;
"BASIS RATE SWAP TRANSACTION NO. 2B" means the Transaction entered into
between Party A and Party B dated on or about the date hereof and
confirmed in the Basis Rate Swap Transaction Confirmation No. 2B;
"BASIS RATE SWAP TRANSACTION NO. 2C" means the Transaction entered into
between Party A and Party B dated on or about the date hereof and
confirmed in the Basis Rate Swap Transaction No. 2C; and
"BASIS RATE SWAP TRANSACTIONS" means the Basis Rate Swap Transaction No.
1, the Basis Rate Swap Transaction No. 2A, the Basis Rate Swap
Transaction No. 2B and the Basis Rate Swap Transaction Confirmation No.
2C, and "BASIS RATE SWAP TRANSACTION" means any of them.
25
(b) NO SET-OFF
(i) All payments under this Agreement shall be made without set-off or
counterclaim, except as expressly provided for in Section 6. For
the avoidance of doubt, Section 2(c) shall not be affected by this
provision.
(ii) Section 6(e) shall be amended by the deletion of the following
sentence: "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."
(c) SECURITY INTEREST
Notwithstanding Section 7, Party A hereby agrees and consents to the
assignment by way of security by Party B of its interests under this
Agreement (without prejudice to, and after giving effect to, any
contractual netting provision contained in this Agreement) to the Funding
2 Security Trustee (or any successor thereto) pursuant to and in
accordance with the terms and conditions of the Funding 2 Deed of Charge
and acknowledges notice of such assignment.
(d) DISAPPLICATION OF CERTAIN EVENTS OF DEFAULT
Section 5(a)(ii), Section 5(a)(iii), Section 5(a)(iv), Section 5(a)(v),
Section 5(a)(vi), Section 5(a)(vii)(2),(5),(6),(7) and (9) and Section
5(a)(viii) will not apply in respect of Party B.
Section 5(a)(vii)(8) will not apply to Party B to the extent that it
applies to Section 5(a)(vii)(2),(5),(6) and (7).
(e) DISAPPLICATION OF CERTAIN TERMINATION EVENTS
The "Tax Event" and "Tax Event Upon Merger" provisions of Section
5(b)(ii) and 5(b)(iii) will not apply to Party A or to Party B.
(f) ADDITIONAL TERMINATION EVENTS
(A) PARTY B ADDITIONAL TERMINATION EVENTS:
The following shall constitute an Additional Termination Event with
respect to Party B.
"FUNDING 2 INTERCOMPANY LOAN ENFORCEMENT NOTICE. The Note Trustee serves
a [Funding 2 Intercompany Loan Enforcement Notice] on Party B in
accordance with the terms of the Global Intercompany Loan Agreement."
In the case of the Additional Termination Event above, Party B shall be
the sole Affected Party.
(B) PARTY A ADDITIONAL TERMINATION EVENT:
The following shall constitute an Additional Termination Event with
respect to Party A:
26
Without prejudice to any other remedies available to Party B under this
Agreement or otherwise, it shall be an Additional Termination Event under
this Agreement if the Additional Tax Representation in Part 5[m](iii)
proves to have been incorrect or misleading in any material respect with
respect to one or more Transactions when made or repeated or deemed to
have been made or repeated. The sole Affected Party shall be Party A.
(g) NORTHERN ROCK PLC AS PARTY B'S AGENT
Party B hereby declares that pursuant to the Cash Management Agreement it
has appointed Northern Rock plc to act as its agent for the purpose,
inter alia, of the operation of this Agreement and dealing with payments
hereunder. Accordingly, unless and until written notice is received by
Party A from the Note Trustee that such appointment has been terminated,
Party A shall be entitled to treat all communications and acts relating
to this Agreement received from or carried out by Northern Rock plc as
agent for Party B under the Cash Management Agreement as being those of
Party B and Party B hereby agrees to ratify and confirm the same.
(h) SECURITY, ENFORCEMENT AND LIMITED RECOURSE
(i) Party A confirms to Party B and the Note Trustee that it is, or
will be, by the date hereof, bound by the terms of the Funding 2
Deed of Charge and, in particular, confirms that: (i) save as
otherwise expressly set out in the Funding 2 Deed of Charge, no sum
shall be payable by or on behalf of Party B to it except in
accordance with the [Funding 2 Priority of Payments] as set out in
the Funding 2 Deed of Charge (as the same may be amended, restated,
supplemented and/or otherwise modified from time to time); and (ii)
it will not take any steps for the winding up, dissolution or
reorganization or for the appointment of a receiver, administrator,
administrative receiver, trustee, liquidator, sequestrator or
similar officer of Party B or of any or all of its revenues and
assets nor participate in any ex parte proceedings nor seek to
enforce any judgment against Party B except as provided in the
Funding 2 Deed of Charge.
(ii) In relation to all sums due and payable by Party B to Party A,
Party A agrees that it shall have recourse only to sums available
to Party B for the purpose of making payments to Party A in
accordance with the relevant [Funding 2 Priority of Payments] and
the Funding 2 Deed of Charge.
(i) AUTHORISED PERSON
For the purposes of Section 3 of this Agreement, Party A represents to
Party B (which representation will be deemed to be repeated by Party A on
each date on which a Transaction is entered into and until all
outstanding payment and delivery obligations of Party A, from time to
time, under this Agreement have been satisfied in full) that it is an
authorised person for the purposes of the Financial Services and Markets
Act 2000.
27
(j) RATINGS DOWNGRADE OF PARTY A - STANDARD & Poor's Rating Services, a
division of The McGraw-Hill Companies Inc. ("S&P")
(i) Initial S&P Note Downgrade Event
In the event that an Initial S&P Note Downgrade Event occurs, then Party
A shall, within 30 days of the occurrence of such Initial S&P Note
Downgrade Event, at its own cost, either:-
(A) provide collateral in the form of cash and/or securities or
both in support of its obligations under this Agreement in
accordance with the provisions of the Credit Support Annex;
or
(B) transfer all of its rights and obligations with respect to
this Agreement to a replacement third party whose short-term,
unsecured and unsubordinated debt obligations are rated at
least as high as "A-1" (or its equivalent) by S&P or such
other rating as is commensurate with the rating assigned to
any Notes issued by a Funding 2 Issuer by S&P from time to
time; or
(C) procure another person to become co-obligor in respect of the
obligations of Party A under this Agreement whose short-term,
unsecured and unsubordinated debt obligations are rated at
least as high as "A-1" (or its equivalent) by S&P or such
other rating as is commensurate with the rating assigned to
any Notes issued by a Funding 2 Issuer by S&P from time to
time; or
(D) take such other action as Party A may agree with S&P as will
result in the rating of any Notes issued by a Funding 2
Issuer then outstanding following the taking of such action
being rated no lower than the rating of any Notes issued by a
Funding 2 Issuer immediately prior to such downgrade.
If any of sub-paragraphs [(j)(i)(B)], [(j)(i)(C)] or [(j)(i)(D)] above
are satisfied at any time, all collateral (or the equivalent thereof, as
appropriate) transferred by Party A pursuant to sub-paragraph [(j)(i)(A)]
above will be transferred back to Party A, and Party A will not be
required to transfer any additional collateral in respect of such
particular Initial S&P Note Downgrade Event.
(ii) Subsequent S&P Note Downgrade Event
(A) Party A shall, immediately upon the occurrence of a
Subsequent S&P Note Downgrade Event, at its own cost and
expense, use its best endeavours to take the action set out
in sub-paragraph [(i)(B)] above; and
(B) if, at the time a Subsequent S&P Note Downgrade Event occurs,
Party A has provided collateral in accordance with the
provisions of the Credit Support Annex pursuant to sub-
paragraph [(i)(A)] above following an Initial S&P Note
Downgrade Event, it will continue to provide collateral
notwithstanding the occurrence of a Subsequent S&P Note
Downgrade
28
Event until such time as the action in sub-paragraph [(ii)(A)]
above has been taken.
If the action set out in sub-paragraph [(ii)(A)] above is taken at any
time, all collateral (or the equivalent thereof, as appropriate)
transferred by Party A pursuant to sub-paragraph [(i)(A)] above will be
transferred back to Party A, and Party A will not be required to transfer
any additional collateral in respect of such Subsequent S&P Note
Downgrade Event.
(iii) Additional Termination Events
If Party A does not take any of the measures described in sub-
paragraphs [(j)(i)] or [(j)(ii)] above such failure shall not be or
give rise to an Event of Default but shall constitute an Additional
Termination Event with respect to Party A and shall be deemed to
have occurred on the thirtieth day following the Initial S&P Note
Downgrade Event or Subsequent S&P Note Downgrade Event, as
applicable, with Party A as the sole Affected Party.
However, in the event that Party B were to designate an Early
Termination Date and there would be a payment due to Party A, Party
B may only designate such an Early Termination Date in respect of
an Additional Termination Event under this sub-paragraph [(iii)] if
Party B has found a replacement counterparty willing to enter into
a new transaction with Party A on terms that reflect as closely as
reasonably possible (as the Note Trustee, on behalf of Party B may,
in its absolute discretion, determine) the economic, legal and
credit terms of the Terminated Transactions with Party A.
Each Additional Termination Event described in this sub-paragraph
[(iii)] shall, on its occurrence, constitute a "DOWNGRADE
TERMINATION EVENT".
(iv) S&P Definitions
For the purposes of this Part 5[(j)]:
an "INITIAL S&P Note Downgrade Event" will occur where:
(a) the short-term, unsecured and unsubordinated debt obligations
of Party A (or its successor), or any guarantor of Party A's
obligations under this Agreement (or its successor), cease to
be rated at least as high as "A-1" (or its equivalent) by
S&P, and
(b) as a result of such cessation, the then current rating of the
Notes issued by a Funding 2 Issuer may, in the reasonable
opinion of S&P, be downgraded or placed under review for
possible downgrade; and
a "SUBSEQUENT NOTE DOWNGRADE EVENT" will occur where:
29
(a) the long-term, unsecured and unsubordinated debt obligations
of Party A (or its successor), or any guarantor of Party A's
obligations under this Agreement (or its successor), cease to
be rated at least as high as "BBB" (or its equivalent) by
S&P, and
(b) as a result of such cessation, the then current rating of any
Notes issued by a Funding 2 Issuer may, in the reasonable
opinion of S&P, be downgraded or placed under review for
possible downgrade.
(k) RATINGS DOWNGRADE OF PARTY A - MOODY'S INVESTORS SERVICE LIMITED
("MOODY'S")
(i) Initial Moody's Note Downgrade Event
Following the occurrence of an Initial Moody's Note Downgrade
Event, Party A shall, on a reasonable efforts basis and at its own
cost, attempt to:
(A) transfer all of its rights and obligations with respect to
this Agreement to either (x) a replacement third party with
the Required Ratings (as defined below) domiciled in the same
legal jurisdiction as Party A or Party B or (y) a replacement
third party which, as agreed with Moody's, will not adversely
affect the ratings of any Notes issued by a Funding 2 Issuer;
or
(B) procure another person to become co-obligor in respect of the
obligations of Party A under this Agreement. Such co-obligor
may be either (x) a person with the Required Ratings
domiciled in the same legal jurisdiction as Party A or Party
B, or (y) a person, who as agreed with Moody's, will not
adversely affect the ratings of any Notes issued by a Funding
2 Issuer; or
(C) take such other action as Moody's shall confirm to Party A
will remedy an Initial Moody's Note Downgrade Event; or
(ii) Initial Moody's Note Downgrade Event
Pending compliance with any of sub-paragraphs [(k)(i)(A)],
[(k)(i)(B)] or [(k)(i)(C)] above, Party A will, at its own cost,
within 30 days of the occurrence of an Initial Moody's Note
Downgrade Event, provide collateral in the form of cash or
securities or both, in support of its obligations under this
Agreement in accordance with the provisions of the Credit Support
Annex.
If any of sub-paragraphs [(k)(i)(A)], [(k)(i)(B)] or [(k)(i)(C)]
above are satisfied at any time, all collateral (or the equivalent
thereof, as appropriate) transferred by Party A pursuant to this
sub-paragraph [(ii)] will be transferred back to Party A and Party
A will not be required to transfer any additional collateral as a
consequence of such particular Initial Moody's Note Downgrade
Event.
(iii) Subsequent Moody's Note Downgrade Event
30
Party A shall, within 30 days of the occurrence of a Subsequent
Moody's Note Downgrade Event, on a best efforts basis and at its
own cost, attempt to:
(A) transfer all of its rights and obligations with respect to
this Agreement to either (x) a replacement third party with
the Required Ratings domiciled in the same legal jurisdiction
as Party A or Party B, or (y) a replacement third party
which, as agreed with Moody's, will not adversely affect the
ratings of any Notes issued by a Funding 2 Issuer; or
(B) procure another person to become co-obligor in respect of the
obligations of Party A under this Agreement. Such co-obligor
may be either (x) a person with the Required Ratings
domiciled in the same legal jurisdiction as Party A or Party
B, or (y) a person, who as agreed with Moody's, will not
adversely affect the ratings of any Notes issued by a Funding
2 Issuer; or
(C) take such other action as Moody's shall confirm to Party A
will remedy a Subsequent Moody's Note Downgrade Event.
In the event that Party A is unable to comply with either sub-
paragraph (ii)(A), (ii)(B) or (ii)(C) within such 30 day period
then it will continue, on a best efforts basis, to comply with the
same.
(iv) Subsequent Moody's Note Downgrade Event - Collateral Requirements
Pending compliance with sub-paragraphs [(k)(iii)(A)], [(k)(iii)(B)]
or [(k)(iii)(C)] above, Party A will at its own cost, within 10
days of such Subsequent Moody's Note Downgrade Event or 30 days of
the occurrence of an Initial Moody's Note Downgrade Event,
whichever is the earlier, provide collateral in the form of cash or
securities or both, in support of its obligations under this
Agreement in accordance with the provisions of the Credit Support
Annex; provided that, if at the time when a Subsequent Moody's Note
Downgrade Event occurs, Party A has provided collateral pursuant to
the Credit Support Annex pursuant to sub-paragraph [(k)(ii)] above,
it will continue to provide collateral notwithstanding the
occurrence of a Subsequent Moody's Note Downgrade Event.
If any of sub-paragraphs [(k)(iii)(A)], [(k)(iii)(B)] or
[(k)(iii)(C)] above are satisfied at any time, all collateral (or
the equivalent thereof, as appropriate) transferred by Party A
pursuant to this sub-paragraph [(iv)] will be transferred back to
Party A and Party A will not be required to transfer any additional
collateral (subject always to any collateral which may be required
pursuant to sub-paragraph [(k)(ii)] above and unless a further
Subsequent Moody's Note Downgrade Event occurs).
(v) Additional Termination Events and Events of Default
If Party A does not take the measures described in sub-paragraph
[(k)(i)] above such failure shall not be or give rise to an Event
of Default but shall constitute an
31
Additional Termination Event with respect to Party A and shall be
deemed to have occurred on the thirtieth day following an
Initial Moody's Note Downgrade Event with Party A as the sole
Affected Party.
If Party A does not take the measures described in sub-paragraph
[(k)(iv)] above such failure shall give rise to an Event of Default
with respect to Party A and shall be deemed to have occurred on the
thirtieth day following a Subsequent Moody's Note Downgrade Event
(or, if Party A has put in place a collateral agreement in
accordance with the requirements of sub-paragraph (l)(ii)) above,
such Event of Default shall be deemed to have occurred on the tenth
day following such Subsequent Moody's Note Downgrade Event with
Party A as the sole Defaulting Party. Further, it shall constitute
an Additional Termination Event with respect to Party A if, even
after satisfying the requirements of sub-paragraph [(k)(iv)], Party
A has failed, having applied best efforts, to comply with any of
sub-paragraphs [(k)(iii)(A)], [(k)(iii)(B)] or [(k)(iii)(C)] and
such Additional Termination Event shall be deemed to have occurred
on the thirtieth day following such Subsequent Moody's Note
Downgrade Event with Party A as the sole Affected Party.
However, in the event that Party B were to designate an Early
Termination Date and there would be a payment due to Party A, Party
B may only designate such an Early Termination Date in respect of
an Additional Termination Event under this sub-paragraph (v) if
Party B has found a replacement counterparty willing to enter into
a new transaction with Party B on terms that reflect as closely as
reasonably possible (as the Note Trustee, on behalf of Party B,
may, in its absolute discretion, determine) the economic, legal and
credit terms of the Terminated Transactions with Party A.
Each Additional Termination Event described in this sub-paragraph
[(v)] shall, on its occurrence, constitute a "DOWNGRADE TERMINATION
EVENT".
(vi) Moody's Definitions
For the purposes of this Part 5[(k)]:
an "INITIAL MOODY'S NOTE DOWNGRADE EVENT" will occur where:
(a) the long-term, unsecured and unsubordinated debt obligations
of Party A (or its successor) and, if relevant, any guarantor
of Party A's obligations under this Agreement (or its
successor), cease to be rated at least as high as "A2" (or
its equivalent) by Moody's, or
(b) the short-term, unsecured and unsubordinated debt obligations
of Party A (or its successor) and, if relevant, any guarantor
of Party A's obligations under this Agreement (or its
successor), cease to be rated at least as high as "Prime-1"
(or its equivalent) by Moody's;
a "SUBSEQUENT MOODY'S NOTE DOWNGRADE EVENT" will occur where
32
(a) the long-term, unsecured and unsubordinated debt obligations
of Party A (or its successor) and, if relevant, any guarantor
of Party A's obligations under this Agreement (or its
successor), cease to be rated at least as high as "A3" (or
its equivalent) by Moody's, or
(b) the short-term, unsecured and unsubordinated debt obligations
of Party A (or its successor) and, if relevant, any guarantor
of Party A's obligations under this Agreement (or its
successor), cease to be rated at least as high as "Prime-2"
(or its equivalent) by Moody's; and
"REQUIRED RATINGS" means, in respect of a person, its short-term,
unsecured and unsubordinated debt obligations are rated at least as
high as "Prime-1" and its long-term, unsecured and unsubordinated
debt obligations are rated at least as high as "A1", or such other
ratings as may be agreed with Moody's from time to time.
(l) RATINGS DOWNGRADE OF PARTY A - FITCH RATINGS LTD ("FITCH")
(i) Initial Fitch Note Downgrade Event
Party A will, on a best efforts basis, within 30 days of the
occurrence of an Initial Fitch Note Downgrade Event, at its own
cost, either:-
(A) provide collateral in the form of cash or securities or both,
in support of its obligations under this Agreement, in
accordance with the provisions of the Credit Support Annex;
or
(B) transfer all of its rights and obligations with respect to
this Agreement to a replacement third party whose long-term,
unsecured and unsubordinated debt ratings are rated at least
as high as "A+" (or its equivalent) by Fitch, and whose
short-term, unsecured and unsubordinated debt ratings are
rated at least as high as "F1" (or its equivalent) by Fitch
or such other rating as is commensurate with the rating
assigned to any Notes issued by a Funding 2 Issuer by Fitch
from time to time; or
(C) procure another person to become co-obligor or guarantor in
respect of the obligations of Party A under this Agreement
whose long-term, unsecured and unsubordinated debt ratings
are rated at least as high as "A+" (or its equivalent) by
Fitch, and whose short-term, unsecured and unsubordinated
debt ratings are rated at least as high as "F1" (or its
equivalent) by Fitch or such other rating as is commensurate
with the rating assigned to any Notes issued by a Funding 2
Issuer by Fitch from time to time; or
(D) take such other action as Party A may agree with Fitch as
will result in the rating of any Notes issued by a Funding 2
Issuer then outstanding being maintained.
33
If any of sub-paragraphs [(l)(i)(B)], [(l)(i)(C)] or [(l)(i)(D)]
are satisfied at any time all collateral (or the equivalent
thereof, as appropriate) transferred by Party A pursuant to sub-
paragraph [(l)(i)(A)] will be transferred back to Party A and Party
A will not be required to transfer any additional collateral in
consequence of the particular Initial Fitch Note Downgrade Event.
(ii) First Subsequent Fitch Note Downgrade Event
Party A will,
(A) provide, at its own cost, within 30 days of the occurrence of
a First Subsequent Fitch Note Downgrade Event provide
collateral in the form of cash or securities or both, in
support of its obligations under this Agreement in accordance
with the provisions of the Credit Support Annex; provided
that, if at the time when a First Subsequent Fitch Note
Downgrade Event Party A has provided collateral pursuant to
the Credit Support Annex pursuant to sub-paragraph
[(l)(i)(A)] above it will continue to provide collateral
notwithstanding the occurrence of a First Subsequent Fitch
Note Downgrade Event; provided further that in either case,
the mark-to-market calculations and the correct and timely
provision of collateral thereunder are verified by an
independent third party (with the costs of such independent
verification being borne by Party A); or
on a best efforts basis, within 30 days of the occurrence of a
First Subsequent Fitch Note Downgrade Event, at its own cost,
either:
(B) transfer all of its rights and obligations with respect to
this Agreement to a replacement third party whose long-term,
unsecured and unsubordinated debt ratings are rated at least
as high as "A+" (or its equivalent) by Fitch, and whose
short-term, unsecured and unsubordinated debt ratings are
rated at least as high as "F1" (or its equivalent) by Fitch
or such other rating as is commensurate with the rating
assigned to any Notes issued by a Funding 2 Issuer by Fitch
from time to time; or
(C) procure another person to become co-obligor or guarantor in
respect of the obligations of Party A under this Agreement
whose long-term, unsecured and unsubordinated debt ratings
are rated at least as high as "A+" (or its equivalent) by
Fitch, and whose short-term, unsecured and unsubordinated
debt ratings are rated at least as high as "F1" (or its
equivalent) by Fitch or such other rating as is commensurate
with the rating assigned to any Notes issued by a Funding 2
Issuer by Fitch from time to time; or
(D) take such other action as Party A may agree with Fitch as
will result in the rating of any Notes issued by a Funding 2
Issuer then outstanding being maintained.
If any of sub-paragraphs [(l)(ii)(B)], [(l)(ii)(C)] or [(l)(ii)(D)]
above are satisfied at any time, all collateral (or the equivalent
thereof, as appropriate) transferred by
34
Party A pursuant to sub-paragraph [(l)(ii)(A)] above will be
transferred back to Party A and Party A will not be required
to transfer any additional collateral as a consequence of the
particular First Subsequent Fitch Note Downgrade Event.
(iii) Second Subsequent Fitch Note Downgrade Event
Party A will, on a best efforts basis, within 30 days of the
occurrence of a Second Subsequent Fitch Note Downgrade Event, at
its own cost, either:
(A) transfer all of its rights and obligations with respect to
this Agreement to a replacement third party whose long-term,
unsecured and unsubordinated debt ratings are rated at least
as high as "A+" (or its equivalent) by Fitch, and whose
short-term, unsecured and unsubordinated debt ratings are
rated at least as high as "F1" (or its equivalent) by Fitch
or such other rating as is commensurate with the rating
assigned to any Notes issued by a Funding 2 Issuer by Fitch
from time to time; or
(B) procure another person to become co-obligor or guarantor in
respect of the obligations of Party A under this Agreement
whose long-term, unsecured and unsubordinated debt ratings
are rated at least as high as "A+" (or its equivalent) by
Fitch, and whose short-term, unsecured and unsubordinated
debt ratings are rated at least as high as "F1" (or its
equivalent) by Fitch or such other rating as is commensurate
with the rating assigned to any Notes issued by a Funding 2
Issuer by Fitch from time to time; or
(C) take such other action as Party A may agree with Fitch as
will result in the rating of any Notes issued by a Funding 2
Issuer then outstanding being maintained.
(iv) Second Subsequent Fitch Note Downgrade Event - Collateral
Requirements
Pending compliance with sub-paragraphs [(l)(iii)(A)], [(l)(iii)(B)]
or [(l)(iii)(C)] above, Party A will provide, at its own cost,
within 10 days of such Second Subsequent Fitch Note Downgrade Event
or 30 days of the occurrence of First Subsequent Fitch Note
Downgrade Event, whichever is the earlier, collateral in the form
of cash or securities or both, in support of its obligations under
this Agreement in accordance with the provisions of the Credit
Support Annex; provided that, if at the time when an Initial Fitch
Note Downgrade Event or a First Subsequent Fitch Note Downgrade
Event, as the case may be, occurs Party A has provided collateral
pursuant to the Credit Support Annex pursuant to sub-paragraphs
[(l)(i)(A)] or [(l)(ii)(A)] above, it will continue to provide
collateral notwithstanding the occurrence of a Second Subsequent
Fitch Note Downgrade Event; provided further that in either case,
the mark-to-market calculations and the correct and timely
provision of collateral thereunder are verified by an independent
third party (with the costs of such independent verification being
borne by Party A).
35
If any of sub-paragraphs [(l)(iii)(A)], [(l)(iii)(B)] or
[(l)(iii)(C)] above are satisfied at any time, all collateral (or
the equivalent thereof, as appropriate) transferred by Party A
pursuant to this sub-paragraph [(l)(iv)] will be transferred back
to Party A and Party A will not be required to transfer any
additional collateral as a consequence of the particular Second
Subsequent Fitch Note Downgrade Event.
(v) Additional Termination Events
If Party A does not take any of the measures described in sub-
paragraphs [(l)(i)], [(l)(ii)] or [(l)(iii)] above such failure
shall not be or give rise to an Event of Default but shall
constitute an Additional Termination Event with respect to Party A
and shall be deemed to have occurred on the thirtieth day following
such Initial Fitch Note Downgrade Event, First Subsequent Fitch
Note Downgrade Event or Second Subsequent Fitch Note Downgrade
Event, as the case may be, with Party A as the sole Affected Party.
However, in the event that Party B were to designate an Early
Termination Date and there would be a payment due to Party A, Party
B may only designate such an Early Termination Date in respect of
an Additional Termination Event under this sub-paragraph [(v)] if
Party B has found a replacement counterparty willing to enter a new
transaction with Party B on terms that reflect as closely as
reasonably possible (as the Note Trustee, on behalf of Party B,
may, in its absolute discretion, determine) the economic, legal and
credit terms of the Terminated Transactions with Party A.
Each Additional Termination Event described in this sub-paragraph
(v) shall, on its occurrence, constitute a "DOWNGRADE TERMINATION
EVENT".
(vi) Fitch Definitions
For the purposes of this Part 5[(l)]:
an "INITIAL FITCH NOTE DOWNGRADE EVENT" will occur where:
(a) the long-term, unsecured and unsubordinated debt obligations
of Party A (or its successor) or any guarantor of Party A's
obligations under this Agreement (or its successor) cease to
be rated at least as high as "A+" (or its equivalent) by
Fitch, and the short-term, unsecured and unsubordinated debt
obligations of Party A (or its successor) or any guarantor of
Party A's obligations under this Agreement (or its
successor), cease to be rated at least as high as "F1" (or
its equivalent) by Fitch, and
(b) as a result the then current ratings of any Notes issued by a
Funding 2 Issuer may in the reasonable opinion of Fitch be
downgraded or placed on credit watch for possible downgrade;
a "FIRST SUBSEQUENT FITCH NOTE DOWNGRADE EVENT" will occur where:
36
(a) the long-term, unsecured and unsubordinated debt obligations
of Party A (or its successor) or any guarantor of Party A's
obligations under this Agreement (or its successor), cease to
be rated at least as high as "BBB+" (or its equivalent) by
Fitch, and the short-term, unsecured and unsubordinated debt
obligations of Party A (or its successor) or any guarantor of
Party A's obligations under this Agreement (or its
successor), cease to be rated at least as high as "F2" (or
its equivalent) by Fitch, and
(b) as a result the then current ratings of any Notes issued by a
Funding 2 Issuer may in the reasonable opinion of Fitch be
downgraded or placed on credit watch for possible downgrade;
and
a "SECOND SUBSEQUENT FITCH NOTE DOWNGRADE EVENT" will occur where:
(a) the long-term, unsecured and unsubordinated debt obligations
of Party A (or its successor) or any guarantor of Party A's
obligations under this Agreement (or its successor), cease to
be rated at least as high as "BBB" (or its equivalent) by
Fitch, and the short-term, unsecured and unsubordinated debt
obligations of Party A (or its successor) or any guarantor of
Party A's obligations under this Agreement (or its
successor), cease to be rated at least as high as "F3" (or
its equivalent) by Fitch, and
(b) as a result the then current ratings of any Notes issued by a
Funding 2 Issuer may in the reasonable opinion of Fitch be
downgraded or placed on credit watch for possible downgrade.
(b) ADDITIONAL SECTION 3 AND TAX DEDUCTIBILITY REPRESENTATIONS
(i) Section 3 is amended by the addition at the end thereof of the
following additional representation:-
"(g) NO AGENCY. It is entering into this Agreement and each
Transaction as principal and not as agent of any person."
(ii) Party A represents to Party B (which representation will be deemed
to be repeated by Party A on each date on which a Transaction is
entered into) that its obligations under this Agreement rank pari
passu with all of its other unsecured, unsubordinated obligations
except those obligations preferred by operation of law.
(iii) The following representation (the "ADDITIONAL TAX REPRESENTATION")
will apply to Party A and will not apply to Party B and will be
deemed to be repeated by Party A at all times until the termination
of this Agreement. In relation to each Transaction, either:
(A) it is resident in the United Kingdom for United Kingdom tax
purposes, or
37
(B) the conditions of Paragraph 31(6) or Paragraph 31(7) of
Schedule 26 of the Finance Act 2002 (in each case as amended
or re-enacted from time to time) are satisfied with respect
to the relevant Transaction.
(n) RECORDING OF CONVERSATIONS
Each party (i) consents to the recording of telephone conversations
between the trading, marketing and other relevant personnel of the
parties in connection with this Agreement or any potential Transaction,
(ii) agrees to obtain any necessary consent of, and give any necessary
notice of such recording to, its relevant personnel, and (iii) agrees, to
the extent permitted by applicable law, that recordings may be submitted
in evidence in any Proceedings.
(o) RELATIONSHIP BETWEEN THE PARTIES
The Agreement is amended by the insertion after Section 14 of an
additional Section 15, reading in its entirety as follows:
"15. Relationship between the parties
Each party will be deemed to represent to the other party on the date on
which it enters into a Transaction that (absent a written agreement
between the parties that expressly imposes affirmative obligations to the
contrary for that Transaction):-
(i) NON RELIANCE. It is acting for its own account, and it has made
its own decisions to enter into that Transaction and as to whether
that Transaction is appropriate or proper for it based upon its own
judgment and advice from such advisers as it has deemed necessary.
It is not relying on any communication (written or oral) of the
other party as investment advice or as a recommendation to enter
into that Transaction; it being understood that information and
explanations related to the terms and conditions of a Transaction
shall not be considered investment advice or a recommendation to
enter into that Transaction. It has not received from the other
party any assurance or guarantee as to the expected results of that
Transaction.
(ii) ASSESSMENT AND UNDERSTANDING. It is capable of assessing the
merits of and understanding (on its own behalf or through
independent professional advice), and understands and accepts, the
terms, conditions and risks of that Transaction. It is also
capable of assuming, and assumes, the financial and other risks of
that Transaction.
(iii) STATUS OF PARTIES. The other party is not acting as a fiduciary
for or an adviser to it in respect of that Transaction."
(p) TAX
The Agreement is amended by deleting Section 2(d) in its entirety and
replacing it with the following:
38
"(d) Deduction or Withholding for Tax
(i) Requirement to Withhold
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 (including, for the avoidance
of doubt, if such deduction or withholding is required in order for
the payer to obtain relief from Tax) by any applicable law, as
modified by the practice of any relevant governmental revenue
authority, then in effect. If a party ("X") is so required to
deduct or withhold, then that party (the "DEDUCTING PARTY"):-
(A) will promptly notify the other party ("Y") of such
requirement;
(B) will 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 Gross Up Amount
(as defined below) paid by the Deducting Party 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;
(C) will 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
(D) if X is Party A, X will promptly pay in addition to the
payment to which Party B is otherwise entitled under this
Agreement, such additional amount (the "GROSS UP AMOUNT") as
is necessary to ensure that the net amount actually received
by Party B will equal the full amount which Party B would
have received had no such deduction or withholding been
required.
(ii) Liability
If:
(A) X is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, to
make any deduction or withholding for or on account of any
Tax in respect of payments under this Agreement; and
(B) X does not so deduct or withhold; and
(C) a liability resulting from such Tax is assessed directly
against X,
then, except to the extent that Y has satisfied or then satisfies
the liability resulting from such Tax, (A) where X is Party B,
Party A will promptly pay to Party B the amount of such liability
(the "LIABILITY AMOUNT") (including any
39
related liability for interest and together with an amount equal
to the Tax payable by Party B on receipt of such amount but
including any related liability for penalties only if Party A
has failed to comply with or perform any agreement contained in
Section 4(a)(i), 4(a)(iii) or 4(d)) and Party B will promptly pay
to the relevant government revenue authority the amount of such
liability (including any related liability for interest and
penalties) and (B) where X is Party A and Party A would have been
required to pay a Gross Up Amount to Party B, Party A will
promptly pay to the relevant government revenue authority the
amount of such liability (including any related liability for
interest and penalties).
(iii) Tax Credit etc.
(a) Where Party A pays an amount in accordance with Section
2(d)(i)(D) or 2(d)(ii)(C) above, Party B undertakes as
follows:-
(1) To the extent that Party B obtains any Tax credit,
allowance, set-off or repayment from the tax
authorities of any jurisdiction relating to any
deduction or withholding giving rise to such payment or
in the case of Section 2(d)(ii)(B) the amount to be
assessed ("TAX CREDIT"), it shall pay to Party A on the
next Payment Date (as defined in the Master Definitions
Schedule) after receipt of the same so much of the cash
benefit (as calculated below) relating thereto which it
has received as will leave Party B in substantially the
same (but in any event no worse) position as Party B
would have been in if no such deduction or withholding
had been required or the amount had not been so
assessed;
(2) The "cash benefit" shall, in the case of credit,
allowance or set-off, be the additional amount of Tax
which would have been payable by Party B in the
jurisdiction referred to in (1) above but for the
obtaining by it of the said Tax credit, allowance or
set-off and, in the case of a repayment, shall be the
amount of the repayment together, in either case, with
any related interest or similar payment obtained by
Party B; and
(3) It will use all best endeavours to obtain any Tax
Credit as soon as is reasonably practicable provided
that it shall be the sole judge of the amount of any
such Tax Credit and of the date on which the same is
received and shall not be obliged to disclose to Party
A any information regarding its tax affairs or tax
computations save that Party B shall, upon request by
Party A, supply Party A with a reasonably detailed
explanation of its calculation of the amount of any
such Tax Credit and of the date on which the same is
received.
The definition of "Indemnifiable Tax" in Section 14
shall be deleted and the following shall be substituted
therefor:
40
"Indemnifiable Tax" means any Tax."
(q) CHANGE OF ACCOUNT
Section 2(b) of this Agreement is hereby amended by the addition of the
following at the end thereof:
"; provided that such new account shall be in the same legal and tax
jurisdiction as the original account and such new account, in the case of
Party B, is held with a financial institution with a long-term unsecured
and unsubordinated debt obligation rating of at least A1 and a short term
unsecured, unsubordinated and unguaranteed debt obligation rating of at
least P-1 (in the case of Moody's) and A-1+ (in the case of S&P)."
(r) CONDITION PRECEDENT
Section 2(a)(iii) shall be amended by the deletion of the words "a
Potential Event of Default" in respect of conditions precedent to the
obligations of Party A only.
(s) REPRESENTATIONS
(i) Section 3(a)(v) shall be amended by the addition of the words
"(with the exception of Section 11 insofar as it relates to any
Stamp Tax)" after the words "this Agreement".
(ii) Section 3(b) shall be amended by the deletion of the words "or
Potential Event of Default" in respect of the representation given
by Party B only.
(t) TRANSFERS
(i) Section 7 of this Agreement shall not apply to Party A, who shall
be required to comply with, and shall be bound by, the following:
Without prejudice to Section 6(b)(ii) as amended in the Schedule,
Party A may transfer all its interest and obligations in and under
this Agreement to any other entity (a "TRANSFEREE") provided that:
(a) it has given five Business Days prior written notice to the
Funding 2 Security Trustee;
(b) the Transferee's long-term, unsecured and unsubordinated debt
obligations are then rated not less than "A1" by Moody's and
its short-term, unsecured and unsubordinated debt obligations
are then rated not less than "P-1" by Moody's, "A-1+" by S&P
and "F1" by Fitch (or its equivalent by any substitute rating
agency) or such Transferee's obligations under this Agreement
are guaranteed by an entity whose long-term, unsecured and
unsubordinated debt obligations are then rated not less than
"A1" by Moody's and whose short-term, unsecured and
unsubordinated debt
41
obligations are then rated not less than "P-1" by Moody's,
"A-1+" by S&P and "F1"by Fitch (or its equivalent by any
substitute rating agency);
(c) as of the date of such transfer the Transferee will not, as a
result of such transfer, be required to withhold or deduct on
account of Tax under this Agreement;
(d) a Termination Event or an Event of Default does not occur
under this Agreement as a result of such transfer;
(e) no additional amount will be payable by Party B to Party A or
the Transferee on the next succeeding Scheduled Payment Date
as a result of such transfer; and
(f) (if the Transferee is domiciled in a different country from
both Party A and Party B) S&P, Moody's and Fitch have
provided prior written notification that the then current
ratings of any Notes issued by a Funding 2 Issuer will not be
adversely affected.
Following such transfer all references to Party A shall be
deemed to be references to the Transferee.
(u) SCOPE OF AGREEMENT
It is hereby understood and agreed that the provisions of this Agreement
shall only apply to the Basis Rate Swap Transactions and that no other
Transaction may be entered into pursuant hereto except in accordance with
Parts 5[(j)(i)(A)], 5[(k)(ii)], 5((k)(iv)], 5[(l)(i)(A)], 5[(l)(ii)(A)]
or 5[(l)(iv)] or where the Rating Agencies have confirmed in writing that
the then current ratings of any Notes issued by a Funding 2 Issuer would
not be adversely affected by such other Transaction.
(v) CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
A person who is not a party to this Agreement shall have no right under
the Contracts (Rights of Third Parties) Act 1999 to enforce any of its
terms but this shall not affect any right or remedy of a third party
which exists or is available apart from that Act.
(w) CALCULATIONS IF AN EARLY TERMINATION DATE OCCURS AS A RESULT OF AN EVENT
OF DEFAULT OR ADDITIONAL TERMINATION EVENT WHERE PARTY A IS THE
DEFAULTING PARTY OR THE SOLE AFFECTED PARTY.
Subject to compliance with clause [15(n)] of the Funding 2 Deed of
Charge, upon the occurrence of an Event of Default or an Additional
Termination Event with respect to Party A, Party B will be entitled (but
not obliged in the event that it does not designate an Early Termination
Date) to proceed in accordance with Section 6 of the Agreement subject to
the following:
42
(i) For the purposes of Section 6(d)(i) of this Agreement, Party B's
obligation with respect to the extent of information to be provided
with its calculations is limited to information Party B has already
received in writing and provided Party B is able to release this
information without breaching the provisions of any law applicable
to, or any contractual restriction binding upon, Party B.
(ii) The following amendments shall be deemed to be made to the
definitions of "Market Quotation":
(a) the word "firm" shall be added before the word "quotations"
in the second line; and
(b) the words "provided that the documentation relating thereto
is either the same as this Agreement and the Confirmations
with respect to the Terminated Transactions (and the long-
term unsecured and unsubordinated debt obligations of the
Reference Market-maker are rated not less than "A1" by
Moody's, and its short-term, unsecured and unsubordinated
debt obligations are rated not less than "P-1" by Moody's,
"A-1+" by S&P and "F1" by Fitch (or, if such Reference
Market-maker is not rated by a Rating Agency, at such
equivalent rating (by another rating agency) that is
acceptable to each such Rating Agency) or the Rating Agencies
have confirmed in writing such proposed documentation will
not adversely impact the ratings of any Notes issued by a
Funding 2 Issuer" shall be added after "agree" in the
sixteenth line; and
(c) the last sentence shall be deleted and replaced with the
following:
"If, on the last date set for delivery of quotations, exactly
two quotations are provided, the Market Quotation will be the
arithmetic mean of the two quotations. If only one quotation
is provided on such date, Party B may, in its discretion,
accept such quotation as the Market Quotation and if Party B
does not accept such quotation (or if no quotation has been
provided), it will be deemed that the Market Quotation in
respect of the Terminated Transaction cannot be determined."
(iii) For the purpose of the definition of "Market Quotation", and
without limitation of the general rights of Party B under the
Agreement:
(A) Party B will undertake to use its reasonable efforts to
obtain at least three firm quotations as soon as reasonably
practicable after the Early Termination Date and in any event
within the time period specified pursuant to (iii)(C) below;
(B) Party A shall, for the purposes of Section 6(e), be permitted
to obtain quotations from Reference Market-makers; and
(C) if no quotations have been obtained within 10 Local Business
Days after the occurrence of the Early Termination Date or
such longer period as
43
Party B may specify in writing to Party A, then it will be
deemed that the Market Quotation in respect of the
Terminated Transaction cannot be determined.
(iv) Party B will be deemed to have discharged its obligations under
subpart 5[(w)](iii)(A) above if it requests that Party A (such
request to be in writing and made within two Local Business Days
after the occurrence of the Early Termination Date) obtains
quotations from Reference Market-makers and Party A agrees to act
in accordance with such request.
(v) Party B will not be obliged to consult with Party A as to the day
and time of obtaining any quotations.
44
(BILATERAL FORM - TRANSFER)1 (ISDA AGREEMENTS SUBJECT TO ENGLISH LAW)2
ISDA(R)
International Swaps and Derivatives Association, Inc.
CREDIT SUPPORT ANNEX
to the Schedule to the
ISDA MASTER AGREEMENT
dated as of [ ] January 2005
between
NORTHERN ROCK PLC ("Party A") and GRANITE FINANCE FUNDING 2 LIMITED ("Party B")
- ----------------------------- ---------------------------------------------
This Annex supplements, forms part of, and is subject to, the ISDA Master
Agreement referred to above and is part of its Schedule. For the purposes of
this Agreement, including, without limitation, Sections 1(c), 2(a), 5 and 6, the
credit support arrangements set out in this Annex constitute a Transaction (for
which this Annex constitutes the Confirmation).
PARAGRAPH 1. INTERPRETATION
Capitalised terms not otherwise defined in this Annex or elsewhere in this
Agreement have the meanings specified pursuant to Paragraph 10, 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 11 and the other
- ----------
1 This document is not intended to create a charge or other security
interest over the assets transferred under its terms. Persons intending to
establish a collateral arrangement based on the creation of a charge or
other security interest should consider using the ISDA Credit Support Deed
(English law) or the ISDA Credit Support Annex (New York law), as
appropriate.
2 This Credit Support Annex has been prepared for use with ISDA Master
Agreements subject to English law. Users should consult their legal
advisers as to the proper use and effect of this form and the arrangements
it contemplates. In particular, users should consult their legal advisers
if they wish to have the Credit Support Annex made subject to a governing
law other than English law or to have the Credit Support Annex subject to
a different governing law than that governing the rest of the ISDA Master
Agreement (e.g., English law for the Credit Support Annex and New York law
for the rest of the ISDA Master Agreement).
Copyright (C) 1995 by International Swaps
and Derivatives Association, Inc.
provisions of this Annex, Paragraph 11 will prevail. For the avoidance of
doubt, references to "transfer" in this Annex mean, in relation to cash,
payment and, in relation to other assets, delivery.
PARAGRAPH 2. CREDIT SUPPORT OBLIGATIONS
(A) DELIVERY AMOUNT. Subject to Paragraphs 3 and 4, upon a demand made by the
Transferee on or promptly following a Valuation Date, if the Delivery
Amount for that Valuation Date equals or exceeds the Transferor's Minimum
Transfer Amount, then the Transferor will transfer to the Transferee
Eligible Credit Support having a Value as of the date of transfer at least
equal to the applicable Delivery Amount (rounded pursuant to Paragraph
11(b)(iii)(D)). Unless otherwise specified in Paragraph 11(b), the
"Delivery Amount" applicable to the Transferor 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 the Transferor's Credit
Support Balance (adjusted to include any prior Delivery Amount and
to exclude any prior Return Amount, the transfer of which, in either
case, has not yet been completed and for which the relevant
Settlement Day falls on or after such Valuation Date).
(B) RETURN AMOUNT. Subject to Paragraphs 3 and 4, upon a demand made by the
Transferor on or promptly following a Valuation Date, if the Return Amount
for that Valuation Date equals or exceeds the Transferee's Minimum
Transfer Amount, then the Transferee will transfer to the Transferor
Equivalent Credit Support specified by the Transferor 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 11(b)(iii)(D)) and
the Credit Support Balance will, upon such transfer, be reduced
accordingly. Unless otherwise specified in Paragraph 11(b), the "Return
Amount" applicable to the Transferee for any Valuation Date will equal the
amount by which:
(i) the Value as of that Valuation Date of the Transferor's Credit
Support Balance (adjusted to include any prior Delivery Amount and
to exclude any prior Return Amount, the transfer of which, in either
case, has not yet been completed and for which the relevant
Settlement Day falls on or after such Valuation Date)
exceeds
the Credit Support Amount.
PARAGRAPH 3. TRANSFERS, CALCULATIONS AND EXCHANGES
(a) TRANSFERS. All transfers under this Annex of any Eligible Credit Support,
Equivalent Credit Support, Interest Amount or Equivalent Distributions
shall be made in accordance with the instructions of the Transferee or
Transferor, as applicable, and shall be made:
(i) in the case of cash, by transfer into one or more bank accounts
specified by the recipient;
2
(ii) in the case of certificated securities which cannot or which the
parties have agreed will not be delivered by book-entry, by delivery
in appropriate physical form to the recipient or its account
accompanied by any duly executed instruments of transfer, transfer
tax stamps and any other documents necessary to constitute a legally
valid transfer of the transferring party's legal and beneficial
title to the recipient; and
(iii) in the case of securities which the parties have agreed will be
delivered by book-entry, by the giving of written instructions
(including, for the avoidance of doubt, instructions given by telex,
facsimile transmission or electronic messaging system) to the
relevant depository institution or other entity specified by the
recipient, together with a written copy of the instructions to the
recipient, sufficient, if complied with, to result in a legally
effective transfer of the transferring party's legal and beneficial
title to the recipient.
Subject to Paragraph 4 and unless otherwise specified, if a demand for the
transfer of Eligible Credit Support or Equivalent Credit Support is received by
the Notification Time, then the relevant transfer will be made not later than
the close of business on the Settlement Day relating to the date such demand is
received; if a demand is received after the Notification Time, then the relevant
transfer will be made not later than the close of business on the Settlement Day
relating to the day after the date such demand is received.
(B) CALCULATIONS. All calculations of Value and Exposure for purposes of
Paragraphs 2 and 4(a) will be made by the relevant Valuation Agent as of
the relevant 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
4(a), following the date of calculation).
(C) EXCHANGES.
(i) Unless otherwise specified in Paragraph 11, the Transferor may on
any Local Business Day by notice inform the Transferee that it
wishes to transfer to the Transferee Eligible Credit Support
specified in that notice (the "New Credit Support") in exchange for
certain Eligible Credit Support (the "Original Credit Support")
specified in that notice comprised in the Transferor's Credit
Support Balance.
(ii) If the Transferee notifies the Transferor that it has consented to
the proposed exchange, (A) the Transferor will be obliged to
transfer the New Credit Support to the Transferee on the first
Settlement Day following the date on which it receives notice (which
may be oral telephonic notice) from the Transferee of its consent
and (B) the Transferee will be obliged to transfer to the Transferor
Equivalent Credit Support in respect of the Original Credit Support
not later than the Settlement Day following the date on which the
Transferee receives the New Credit Support, unless otherwise
specified in Paragraph 11(d) (the "Exchange Date"); provided that
the Transferee will only be obliged to transfer Equivalent Credit
Support with a Value as of the date of transfer as close as
practicable to, but in any event not more than, the Value of the New
Credit Support as of that date.
3
PARAGRAPH 4. DISPUTE RESOLUTION
(a) DISPUTED CALCULATIONS OR VALUATIONS. If a party (a "Disputing Party")
reasonably 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 Equivalent 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, in the
case of (I) above, the date that the demand is received under
Paragraph 2 or, in the case of (II) above, the date of transfer;
(2) in the case of (I) above, the appropriate party will transfer the
undisputed amount to the other party not later than the close of
business on the Settlement Day following the date that the demand is
received under Paragraph 2;
(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 11(c), the
Valuation Agent will recalculate the Exposure and the Value as
of the Recalculation Date by:
(A) utilising any calculations of that part of the Exposure
attributable to the Transactions that the parties have
agreed are not in dispute;
(B) calculating that part of the Exposure attributable to
the Transactions in dispute by seeking four actual
quotations at mid-market from Reference Marketmakers 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, 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
(C) utilising the procedures specified in Paragraph
11(e)(ii) for calculating the Value, if disputed, of the
outstanding Credit Support Balance;
(ii) in the case of a dispute involving the Value of any transfer
of Eligible Credit Support or Equivalent Credit Support, the
Valuation Agent will recalculate the Value as of the date of
transfer pursuant to Paragraph 11(e)(ii).
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) as
soon as possible but in any event not later than the Notification Time on the
Local Business Day following the Resolution Time. The appropriate party will,
upon demand following such notice given by the Valuation Agent or a resolution
pursuant to (3) above and subject to Paragraph 3(a), make the appropriate
transfer.
4
(b) NO EVENT OF DEFAULT. The failure by a party to make a transfer of any
amount which is the subject of a dispute to which Paragraph 4(a) applies
will not constitute an Event of Default for as long as the procedures set
out in this Paragraph 4 are being carried out. For the avoidance of doubt,
upon completion of those procedures, Section 5(a)(i) of this Agreement
will apply to any failure by a party to make a transfer required under the
final sentence of Paragraph 4(a) on the relevant due date.
PARAGRAPH 5. TRANSFER OF TITLE, NO SECURITY INTEREST, DISTRIBUTIONS
AND INTEREST AMOUNT
(A) TRANSFER OF TITLE. Each party agrees that all right, title and interest in
and to any Eligible Credit Support, Equivalent Credit Support, Equivalent
Distributions or Interest Amount which it transfers to the other party
under the terms of this Annex shall vest in the recipient free and clear
of any liens, claims, charges or encumbrances or any other interest of the
transferring party or of any third person (other than a lien routinely
imposed on all securities in a relevant clearance system).
(B) NO SECURITY INTEREST. Nothing in this Annex is intended to create or does
create in favour of either party any mortgage, charge, lien, pledge,
encumbrance or other security interest in any cash or other property
transferred by one party to the other party under the terms of this Annex.
(C) DISTRIBUTIONS AND INTEREST AMOUNT.
(i) DISTRIBUTIONS. The Transferee will transfer to the Transferor not
later than the Settlement Day following each Distributions Date
cash, securities or other property of the same type, nominal value,
description and amount as the relevant Distributions ("Equivalent
Distributions") to the extent that a Delivery Amount would not be
created or increased by the transfer, as calculated by the Valuation
Agent (and the date of calculation will be deemed a Valuation Date
for this purpose).
(ii) INTEREST AMOUNT. Unless otherwise specified in Paragraph 11(f)(iii),
the Transferee will transfer to the Transferor at the times
specified in Paragraph 11(f)(ii) the relevant Interest Amount to the
extent that a Delivery Amount would not be created or increased by
the transfer, as calculated by the Valuation Agent (and the date of
calculation will be deemed a Valuation Date for this purpose).
PARAGRAPH 6. DEFAULT
If an Early Termination Date is designated or deemed to occur as a result of an
Event of Default in relation to a party, an amount equal to the Value of the
Credit Support Balance, determined as though the Early Termination Date were a
Valuation Date, will be deemed to be an Unpaid Amount due to the Transferor
(which may or may not be the Defaulting Party) for purposes of Section 6(e). For
the avoidance of doubt, if Market Quotation is the applicable payment measure
for purposes of Section 6(e), then the Market Quotation determined under Section
6(e) in relation to the Transaction constituted by this Annex will be deemed to
be zero, and, if Loss is the applicable payment measure for purposes of Section
6(e), then the Loss determined under Section 6(e) in relation to the Transaction
will be limited to the Unpaid Amount representing the Value of the Credit
Support Balance.
5
PARAGRAPH 7. REPRESENTATION
Each party represents to the other party (which representation will be deemed to
be repeated as of each date on which it transfers Eligible Credit Support,
Equivalent Credit Support or Equivalent Distributions) that it is the sole owner
of or otherwise has the right to transfer all Eligible Credit Support,
Equivalent Credit Support or Equivalent Distributions it transfers to the other
party under this Annex, free and clear of any security interest, lien,
encumbrance or other restriction (other than a lien routinely imposed on all
securities in a relevant clearance system).
PARAGRAPH 8. EXPENSES
Each party will pay its own costs and expenses (including any stamp, transfer or
similar transaction tax or duty payable on any transfer it is required to make
under this Annex) in connection with performing its obligations under this
Annex, and neither party will be liable for any such costs and expenses incurred
by the other party.
PARAGRAPH 9. MISCELLANEOUS
(A) DEFAULT INTEREST. Other than in the case of an amount which is the subject
of a dispute under Paragraph 4(a), if a Transferee fails to make, when
due, any transfer of Equivalent Credit Support, Equivalent Distributions
or the Interest Amount, it will be obliged to pay the Transferor (to the
extent permitted under applicable law) an amount equal to interest at the
Default Rate multiplied by the Value on the relevant Valuation Date of the
items of property that were required to be transferred, from (and
including) the date that the Equivalent Credit Support, Equivalent
Distributions or Interest Amount were required to be transferred to (but
excluding) the date of transfer of the Equivalent Credit Support,
Equivalent Distributions or Interest Amount. This interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed.
(B) 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.
(C) DEMANDS AND NOTICES. All demands and notices given by a party under this
Annex will be given as specified in Section 12 of this Agreement.
(D) SPECIFICATIONS OF CERTAIN MATTERS. Anything referred to in this Annex as
being specified in Paragraph 11 also may be specified in one or more
Confirmations or other documents and this Annex will be construed
accordingly.
PARAGRAPH 10. DEFINITIONS As used in this
Annex:
"BASE CURRENCY" means the currency specified as such in Paragraph 11(a)(i).
6
"BASE CURRENCY EQUIVALENT" means, with respect to an amount on a Valuation Date,
in the case of an amount denominated in the Base Currency, such Base Currency
amount and, in the case of an amount denominated in a currency other than the
Base Currency (the "Other Currency"), the amount of Base Currency required to
purchase such amount of the Other Currency at the spot exchange rate determined
by the Valuation Agent for value on such Valuation Date.
"CREDIT SUPPORT AMOUNT" means, with respect to a Transferor on a Valuation Date,
(i) the Transferee's Exposure plus (ii) all Independent Amounts applicable to
the Transferor, if any, minus (iii) all Independent Amounts applicable to the
Transferee, if any, minus (iv) the Transferor'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.
"CREDIT SUPPORT BALANCE" means, with respect to a Transferor on a Valuation
Date, the aggregate of all Eligible Credit Support that has been transferred to
or received by the Transferee under this Annex, together with any Distributions
and all proceeds of any such Eligible Credit Support or Distributions, as
reduced pursuant to Paragraph 2(b), 3(c)(ii) or 6. Any Equivalent Distributions
or Interest Amount (or portion of either) not transferred pursuant to Paragraph
5(c)(i) or (ii) will form part of the Credit Support Balance.
"DELIVERY AMOUNT" has the meaning specified in Paragraph 2(a). "DISPUTING PARTY"
has the meaning specified in Paragraph 4.
"DISTRIBUTIONS" means, with respect to any Eligible Credit Support comprised in
the Credit Support Balance consisting of securities, all principal, interest and
other payments and distributions of cash or other property to which a holder of
securities of the same type, nominal value, description and amount as such
Eligible Credit Support would be entitled from time to time.
"DISTRIBUTIONS DATE" means, with respect to any Eligible Credit Support
comprised in the Credit Support Balance other than cash, each date on which a
holder of such Eligible Credit Support is entitled to receive Distributions or,
if that date is not a Local Business Day, the next following Local Business Day.
"ELIGIBLE CREDIT SUPPORT" means, with respect to a party, the items, if any,
specified as such for that party in Paragraph 11(b)(ii) including, in relation
to any securities, if applicable, the proceeds of any redemption in whole or in
part of such securities by the relevant issuer.
"ELIGIBLE CURRENCY" means each currency specified as such in Paragraph
11(a)(ii), if such currency is freely available.
"EQUIVALENT CREDIT SUPPORT" means, in relation to any Eligible Credit Support
comprised in the Credit Support Balance, Eligible Credit Support of the same
type, nominal value, description and amount as that Eligible Credit Support.
"EQUIVALENT DISTRIBUTIONS" has the meaning specified in Paragraph 5(c)(i).
"EXCHANGE DATE" has the meaning specified in Paragraph 11(d).
7
"EXPOSURE" means, with respect to a party on a Valuation Date and subject to
Paragraph 4 in the case of a dispute, the amount, if any, that would be payable
to that party by the other party (expressed as a positive number) or by that
party to the other party (expressed as a negative number) pursuant to Section
6(e)(ii)(1) of this Agreement if all Transactions (other than the Transaction
constituted by this Annex) were being terminated as of the relevant Valuation
Time, on the basis that (i) that party is not the Affected Party and (ii) the
Base Currency is the Termination Currency; provided that Market Quotations will
be determined by the Valuation Agent on behalf of that party using its estimates
at mid-market of the amounts that would be paid for Replacement Transactions (as
that term is defined in the definition of "Market Quotation").
"INDEPENDENT AMOUNT" means, with respect to a party, the Base Currency
Equivalent of the amount specified as such for that party in Paragraph 11
(b)(iii)(A); if no amount is specified, zero.
"INTEREST AMOUNT" means, with respect to an Interest Period, the aggregate sum
of the Base Currency Equivalents of the amounts of interest determined for each
relevant currency and calculated for each day in that Interest Period on the
principal amount of the portion of the Credit Support Balance comprised of cash
in such currency, determined by the Valuation Agent for each such day as
follows:
(x) the amount of cash in such currency on that day; multiplied by
(y) the relevant Interest Rate in effect for that day; divided by
(z) 360 (or, in the case of pounds sterling, 365).
"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 Eligible Credit Support or
Equivalent Credit Support in the form of cash was transferred to or received by
the Transferee) to (but excluding) the Local Business Day on which the current
Interest Amount is transferred.
"INTEREST RATE" means, with respect to an Eligible Currency, the rate specified
in Paragraph 11(f)(i) for that currency.
"LOCAL BUSINESS DAY", unless otherwise specified in Paragraph 1l(h), means:
(i) in relation to a transfer of cash or other property (other than
securities) under this Annex, a day on which commercial banks are open for
business (including dealings in foreign exchange and foreign currency
deposits) 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;
(ii) in relation to a transfer of securities under this Annex, a day on which
the clearance system agreed between the parties for delivery of the
securities is open for the acceptance and execution of settlement
instructions or, if delivery of the securities is contemplated by other
means, a day on which commercial banks are open for business (including
dealings in foreign exchange and foreign currency deposits) in the
place(s) agreed between the parties for this purpose;
8
(iii) in relation to a valuation under this Annex, a day on which commercial
banks are open for business (including dealings in foreign exchange and
foreign currency deposits) in the place of location of the Valuation Agent
and in the place(s) agreed between the parties for this purpose; and
(iv) in relation to any notice or other communication under this Annex, a day
on which commercial banks are open for business (including dealings in
foreign exchange and foreign currency deposits) in the place specified in
the address for notice most recently provided by the recipient.
"MINIMUM TRANSFER AMOUNT" means, with respect to a party, the amount specified
as such for that party in Paragraph 11(b)(iii)(C); if no amount is specified,
zero.
"NEW CREDIT SUPPORT" has the meaning specified in Paragraph 3(c)(i).
"NOTIFICATION TIME" has the meaning specified in Paragraph 11(c)(iv).
"RECALCULATION DATE" means the Valuation Date that gives rise to the dispute
under Paragraph 4; provided, however, that if a subsequent Valuation Date occurs
under Paragraph 2 prior to the resolution of the dispute, then the
"RECALCULATION DATE" means the most recent Valuation Date under Paragraph 2.
"RESOLUTION TIME" has the meaning specified in Paragraph 11(c)(i). "RETURN
AMOUNT" has the meaning specified in Paragraph 2(b).
"SETTLEMENT DAY" means, in relation to a date, (i) with respect to a transfer of
cash or other property (other than securities), the next Local Business Day and
(ii) with respect to a transfer of securities, the first Local Business Day
after such date on which settlement of a trade in the relevant securities, if
effected on such date, would have been settled in accordance with customary
practice when settling through the clearance system agreed between the parties
for delivery of such securities or, otherwise, on the market in which such
securities are principally traded (or, in either case, if there is no such
customary practice, on the first Local Business Day after such date on which it
is reasonably practicable to deliver such securities).
"THRESHOLD" means, with respect to a party, the Base Currency Equivalent of the
amount specified as such for that party in Paragraph 11(b)(iii)(B); if no amount
is specified, zero.
"TRANSFEREE" means, in relation to each Valuation Date, the party in respect of
which Exposure is a positive number and, in relation to a Credit Support
Balance, the party which, subject to this Annex, owes such Credit Support
Balance or, as the case may be, the Value of such Credit Support Balance to the
other party.
"TRANSFEROR" means, in relation to a Transferee, the other party. "VALUATION
AGENT" has the meaning specified in Paragraph 11(c)(i).
"VALUATION DATE" means each date specified in or otherwise determined pursuant
to Paragraph 11(c)(ii).
9
"VALUATION PERCENTAGE" means, for any item of Eligible Credit Support, the
percentage specified in Paragraph 11(b)(ii).
"VALUATION TIME" has the meaning specified in Paragraph 11(c)(iii).
"VALUE" means, for any Valuation Date or other date for which Value is
calculated, and subject to Paragraph 4 in the case of a dispute, with respect
to:
Eligible Credit Support comprised in a Credit Support Balance that is:
(A) an amount of cash, the Base Currency Equivalent of such amount multiplied
by the applicable Valuation Percentage, if any; and
(B) a security, the Base Currency Equivalent of the bid price obtained by the
Valuation Agent multiplied by the applicable Valuation Percentage, if any;
and
items that are comprised in a Credit Support Balance and are not Eligible Credit
Support,
10
PARAGRAPH 11. ELECTIONS AND VARIABLES
(a) BASE CURRENCY AND ELIGIBLE CURRENCY.
(i) "BASE CURRENCY" means GBP.
"ELIGIBLE CURRENCY" means the Base Currency.
(b) CREDIT SUPPORT OBLIGATIONS.
(i) DELIVERY AMOUNT, RETURN AMOUNT AND CREDIT SUPPORT AMOUNT.
"DELIVERY AMOUNT" has the meaning specified in Paragraph 2(a), except that
the words, "upon a demand made by the Transferee" shall be deleted.
"RETURN AMOUNT" has the meaning as specified in Paragraph 2(b).
"CREDIT SUPPORT AMOUNT" has the meaning given to such term in respect of
each of the Rating Agencies' criteria set out in Paragraph 11[(h)(vi)]
below. In circumstances where more than one of the Ratings Criteria apply
to Party A, the Credit Support Amount shall be calculated by reference to
the Ratings Criteria which would result in Party A transferring the
greatest amount of Eligible Credit Support. Under no circumstances will
Party A be required to transfer more Eligible Credit Support than the
greatest amount calculated in accordance with the Ratings Criteria set out
below.
11
(ii) ELIGIBLE CREDIT SUPPORT. The following items will
qualify as "ELIGIBLE CREDIT SUPPORT" for Party A:
VALUATION PERCENTAGE
cash in an Eligible Currency 100 per cent.
[negotiable debt obligations issued by the 98.5 per cent.
Government of the United Kingdom or the United
States of America (with local and foreign currency
issuer ratings equal to or greater than AA- by
S&P, AA- by Fitch and Aa3 by Moody's) having a
remaining time to maturity of not more than one
year;
negotiable debt obligations issued by the 97 per cent.
Government of the United Kingdom or the United
States of America (with local and foreign currency
issuer ratings equal to or greater than AA- by
S&P, AA- by Fitch and Aa3 by Moody's) having a
remaining time to maturity of more than one year
but not more than 5 years;
negotiable debt obligations issued by the 95 per cent.
Government of the United Kingdom or the United
States of America (with local and foreign currency
issuer ratings equal to or greater than AA- by
S&P, AA- by Fitch and Aa3 by Moody's) having a
remaining time to maturity of more than 5 years
but not more than 10 years;
12
negotiable debt obligations issued by the 95 per cent.
Government of the United Kingdom or the United
States of America (with local and foreign currency
issuer ratings equal to or greater than AA- by
S&P, AA- by Fitch and Aa3 by Moody's) having a
remaining time to maturity of more than 10 years;
or
such other items as agreed between Party A and the Such Valuation
Rating Agencies, from time to time, which Party B Percentage as agreed
can lawfully receive from, and transfer back to, between Party A and
Party A as required, that will qualify as Eligible the Rating Agencies
Credit Support. from time to time in
respect of such
Eligible Credit
Support
Where negotiable debt obligations are rated by only one of the above
relevant rating agencies, the rating applied will be based on the rating
of that agency.
Where the ratings of the relevant agencies differ with respect to the same
negotiable debt obligation, for the purposes of B to E above the lower of
the ratings shall apply.
13
(iii) THRESHOLDS.
(A) "INDEPENDENT AMOUNT" means, for Party A and Party B, with respect to
each Transaction, zero.
(B) "THRESHOLD" means, for Party A,
infinity, unless Party A, in the event of: (a) an Initial S&P Note
Downgrade Event or a Subsequent S&P Note Downgrade Event (which in
each case, is continuing) has not otherwise complied with Part
[5(j)(i)(B)], Part [5(j)(i)(C)], Part [5(j)(i)(D)] or Part
[5(2)(ii)(A)] of the Agreement, as the case may be, and/or (b) an
Initial Moody's Note Downgrade Event or a Subsequent Moody's Note
Downgrade Event (which in each case, is continuing), has not
otherwise complied with Part [5(k)(i)(A)], Part [5(k)(i)(B)], Part
[5(k)(i)(C)], Part [5(k)(ii)(A)], Part 5[(k)(ii)(B)] or Part
5[(k)(ii)(C)] of the Agreement, as the case may be, and/or (c) an
Initial Fitch Note Downgrade Event or a First Subsequent Fitch Note
Downgrade Event or a Second Subsequent Fitch Note Downgrade Event
(which in each case, is continuing) has not otherwise complied with
Part [5(l)(i)(B)], Part [5(l)(i)(C)], Part [5(l)(i)(D)], Part
[5(l)(ii)(B)], Part 5[(l)(ii)(C)], Part 5[(l)(ii)(D)], Part
5[(l)(iii)(A)] or Part 5[(l)(iii)(B)] or Part 5[(l)(iii)(C)] of the
Agreement, as the case may be, then its Threshold shall be zero, and
"THRESHOLD" means, for Party B: infinity
(C) "MINIMUM TRANSFER AMOUNT" means, with respect to Party A and Party
B, GBP 50,000 provided, that if (1) an Event of Default has occurred
and is continuing with respect to Party A, or (2) an Additional
Termination Event has occurred in respect of which Party A is an
Affected Party, the Minimum Transfer Amount with respect to such
party shall be zero.
14
(D) "ROUNDING". The Delivery Amount and the Return Amount will be
rounded up and down to the nearest integral multiple of GBP 10,000
respectively, subject to the maximum Return Amount being equal to
the Credit Support Balance.
(c) VALUATION AND TIMING.
(i) "VALUATION AGENT" means, Party A in all circumstances.
(ii) "VALUATION DATE" means every day that is a Local Business Day.
(iii) "VALUATION TIME" means the close of business on the Local Business
Day immediately preceding 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 by 2:00 p.m., London time, on a Local
Business Day.
(d) EXCHANGE DATE. "EXCHANGE DATE" has the meaning specified in Paragraph
3(c)(ii).
(e) DISPUTE RESOLUTION.
15
(i) "RESOLUTION TIME" means 2:00 p.m., London time, on the Local
Business Day following the date on which notice is given that gives
rise to a dispute under Paragraph 4.
(ii) VALUE. For the purpose of Paragraph 4(a)(4)(i)(C) and 4(a)(4)(ii),
the Value of the outstanding Credit Support Balance or of any
transfer of Eligible Credit Support or Equivalent Credit Support, as
the case may be, on the relevant date will be calculated as follows:
(A) with respect to any Eligible Credit Support or Equivalent
Credit Support comprising securities ("SECURITIES") the Base
Currency Equivalent of the sum of (a)(x) the last bid price on
such date for such Securities on the principal national
securities exchange on which such Securities are listed,
multiplied by the applicable Valuation Percentage; or (y)
where any Securities are not listed on a national securities
exchange, the bid price for such Securities quoted as at the
close of business on such date by any principal market maker
(which shall not be and shall be independent from the
Valuation Agent) for such Securities chosen by the Valuation
Agent, multiplied by the applicable Valuation Percentage; or
(z) if no such bid price is able to be obtained for such date
under (x) or (y) above, the last bid price listed determined
pursuant to (x), or failing which (y), as of the day next
preceding such date on which such prices were available,
multiplied by the applicable Valuation Percentage; plus (b)
the accrued interest where applicable on such Securities
(except to the extent that such interest shall have been paid
to the Transferor pursuant to Paragraph 5(c)(ii) or included
in the applicable price referred to in Paragraph
11(e)(ii)(A)(a) above) as of such date, provided that it is
understood that in no circumstances shall the
16
Transferee be required to transfer a Return Amount in excess
of the Credit Support Balance;
(B) with respect to any Cash, the Base Currency Equivalent of the
amount thereof; and
(C) with respect to any Eligible Credit Support or Equivalent
Credit Support other than Securities and Cash, the Base
Currency Equivalent of the fair market value thereof on such
date, as determined in any reasonable manner chosen by the
Valuation Agent, multiplied by the applicable Valuation
Percentage.
(iii) ALTERNATIVE. The provisions of Paragraph 4 will apply.
(f) DISTRIBUTION AND INTEREST AMOUNT.
(i) INTEREST RATE. The "INTEREST RATE" in relation to each Eligible
Currency specified below will be:
Eligible Currency Interest Rate
GBP for the relevant determination date,
"SONIA", which means the reference rate
equal to the overnight rate as calculated by
the Wholesale Market Brokers Association
which appears on Telerate Page 3937 under
the heading "Sterling Overnight Index" as of
9.00 a.m., London time, on the first London
Banking Day following that day.
17
(ii) TRANSFER OF INTEREST AMOUNT. The transfer of the Interest Amount
will be made on the first Local Business Day following the end of
each calendar month, provided that: (1) Party B has earned and
received such amount of interest, and (2) a Delivery Amount would
not arise as a result of, or if already existing, would not be
increased by, such transfer on such date or on any other Local
Business Day on which Equivalent Credit Support is to be transferred
to the Transferor pursuant to Paragraph 2(b).
ALTERNATIVE TO INTEREST AMOUNT. The provisions of Paragraph 5(c)(ii)
will apply. For the purposes of calculating the Interest Amount the
amount of interest calculated for each day of the Interest Period
shall, with respect to any Eligible Currency, be compounded daily.
INTEREST AMOUNT. The definition of "INTEREST AMOUNT" shall be
deleted and replaced with the following:
"INTEREST AMOUNT" means, with respect to an Interest Period and each
portion of the Credit Support Balance comprised of cash in an
Eligible Currency, the sum of the amounts of interest determined for
each day in that Interest Period by the Valuation Agent as follows:
(x) the amount of such currency comprised in the Credit Support
Balance at the close of business for general dealings in the
relevant currency on such day (or, if such day is not a Local
Business Day, on the immediately preceding Local Business
Day); multiplied by
18
(y) the relevant Interest Rate; divided by
(z) 360 (or in the case of Pounds Sterling, 365)."
(g) ADDRESSES FOR TRANSFERS.
Party A:
[Bank]
Sort Code [_]
A/c number: [_]
A/c name: [_]
Ref: Collateral.
Party B: [To be advised].
(h) OTHER PROVISIONS.
(I) TRANSFER TIMING
The final paragraph of Paragraph 3(a) shall be deleted and replaced
with the following:
19
"Subject to Paragraph 4, and unless otherwise specified, any
transfer of Eligible Credit Support or Equivalent Credit Support
(whether by the Transferor pursuant to Paragraph 2(a) or by the
Transferee pursuant to Paragraph 2(b)) shall be made not later than
the close of business on the Settlement Day."
The definition of Settlement Day shall be deleted and replaced with
the following:
"SETTLEMENT DAY" means the next Local Business Day after the
Demand Date.
For the purposes of this Paragraph 11(h)(i):
"DEMAND DATE" means, with respect to a transfer by a party:
(i) in the case of a transfer pursuant to Paragraph 2,
Paragraph 3 or Paragraph 4(a)(2), the relevant Valuation
Date (assuming that, in the case of any transfer to be
made by the Transferee, the Transferee has received a
demand on such date from the Transferor). For the
purposes of Paragraph 2 and Paragraph 4(a)(2), the
Transferor will be deemed to receive notice of the
demand by the Transferee to make a transfer of Eligible
Credit Support; and
(ii) in the case of a transfer pursuant to Paragraph
3(c)(ii)(A), the date on which the Transferee has given
its consent to the proposed exchange.
20
On each Demand Date the Transferor shall deliver to the
Transferee and the Note Trustee a statement showing the
amount of Eligible Credit Support to be delivered.
EARLY TERMINATION
The heading for Paragraph 6 shall be deleted and replaced with
"Early Termination" and the following shall be added after the
word "party" in the second line of Paragraph 6, "or a
Termination Event where all Transactions are Affected
Transactions".
COSTS OF TRANSFER ON EXCHANGE
Notwithstanding Paragraph 8, the Transferor will be
responsible for, and will reimburse the Transferee for, all
costs and expenses (including any stamp, transfer or similar
transaction tax or duty payable on any transfer that it is
required to make under this Annex) in connection with
performing both its and the Transferee's obligations under
this Annex, including but not limited to those involved in the
transfer of Eligible Credit Support or Equivalent Credit
Support either from the Transferor to the Transferee or from
the Transferee to the Transferor hereto.
SINGLE TRANSFEROR AND SINGLE TRANSFEREE
Party A and Party B agree that, notwithstanding anything to
the contrary in this Annex, (including, without limitation,
the recital hereto, Paragraph 2 or the definitions in
Paragraph 10), (a) the term "Transferee" as used in this Annex
means only Party B, (b) the term "Transferor" as used in this
Annex means only
21
Party A, (c) only Party A will be required to make transfers
of Delivery Amounts hereunder; and (d) in the calculation of
any Credit Support Amount, where the Transferee's Exposure
would be expressed as a negative number, such Exposure shall
be deemed to be zero.
(VI) "RATINGS CRITERIA" means, the criteria used by S&P, the
criteria used by Moody's and the criteria used by Fitch for
the purposes of determining the amount of Eligible Credit
Support Party A is required to transfer hereunder following a
credit ratings downgrade where Party A has opted to or is
required to transfer Eligible Credit Support in support of its
obligations under the Agreement pursuant to Part 5[(j]), Part
5[(k)] and/or Part 5[(l)], as the case may be, of the Schedule
to the Agreement, in respect of each of which the definition
of "Credit Support Amount" is set out below.
MOODY'S CRITERIA
"CREDIT SUPPORT AMOUNT" shall be calculated in accordance with
the meaning specified in Paragraph 10, provided however, that
the words "plus the Additional Collateral Amount" shall be
added after the words "Transferee's Exposure" in the second
line thereof.
For such purposes "ADDITIONAL COLLATERAL AMOUNT" means with
respect to a Valuation Date, the sum of (a) the Transferee's
Exposure multiplied by "A" and (b) the product of "B"
multiplied by the Basis Swap Transactions No. 2 Aggregate
Notional Amounts, where:
22
(i) "A" means 2 per cent. and "B" means 1.6 per cent. if the
long-term, unsecured and unsubordinated debt obligations of
Party A (or its successor) or any guarantor of Party A's
obligations under the Agreement are downgraded below "A2" " by
Moody's, or the short-term, unsecured and unsubordinated debt
obligations of Party A (or its successor) or any guarantor of
Party A's obligations under the Agreement are downgraded below
"Prime-1" by Moody's;
(ii) "A" means 2 per cent. and "B" shall be equal to 3.7 per cent.
if the long-term, unsecured and unsubordinated debt
obligations of Party A (or its successor) or any guarantor of
Party A's obligations under the Agreement, are downgraded
below "A3" by Moody's, or the short- term, unsecured and
unsubordinated debt obligations of Party A (or its successor)
or any guarantor of Party A's obligations under the Agreement,
are downgraded below "Prime-2" by Moody's; and
(iii) "A" means 0 per cent. and "B" means 0 per cent. in all other
cases.
S&P CRITERIA
"CREDIT SUPPORT AMOUNT" shall mean with respect to a Transferor on a
Valuation Date the greater of:
(A) CR; and
(B) zero,
23
where:
"CR" means the sum of MTM and VB;
"MTM" means the Transferee's Exposure; and "VB" means the Basis Swap
Transactions No. 2 Aggregate Notional Amounts multiplied by the
relevant percentage set out in Table A below.
24
(Basis Rate Swap 1)
From: Northern Rock plc
Northern Rock House
Gosforth
Newcastle Upon Tyne
NE3 4PL
To: Granite Finance Funding 2 Limited
Fifth Floor
100 Wood Street
London
EC2V 7EX
Attention: Securitisation Team, Risk Operations
[Date]
Dear Sirs
BASIS RATE SWAP TRANSACTION NO. 1 CONFIRMATION
The purpose of this letter is to confirm the terms and conditions of the swap
transaction entered into between us on the Trade Date specified below (the SWAP
TRANSACTION). This letter constitutes a "Confirmation" as referred to in, and
supplements forms part of and is subject to, the ISDA Master Agreement dated as
of [*] [January] 2005, as amended and supplemented from time to time (the
AGREEMENT), between us. All provisions contained in the Agreement 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 this Confirmation, this Confirmation
will govern. References herein to a "Transaction" shall be deemed to be
references to a "Swap Transaction" for the purposes of the Definitions. Any
terms not otherwise defined herein or in the Definitions shall have the
meanings given to them in the Programme Master Definitions Schedule signed for
the purposes of identification by Sidley Austin Brown & Wood and Allen & Overy
LLP on [*] [January] 2005 (as the same may be amended, restated, varied,
supplemented and/or otherwise modified from time to time with the consent of
the parties hereto) (the MASTER DEFINITIONS SCHEDULE).
DEFINED TERMS
As used in this Agreement:
AGGREGATE FUNDING 2 AMOUNT means, in respect of a Payment Date, the sum of the
Funding 2 Amount and any Further Issue Funding 2 Amounts.
1
AGGREGATE SWAP PROVIDER AMOUNT means, in respect of a Payment Date, the sum of
the Swap Provider Amount and any Further Issue Swap Provider Amounts.
ASSIGNMENT DATE has the meaning given to such term in the Master Definitions
Schedule.
AVERAGE FIXED RATE MORTGAGE LOAN BALANCE means, (i) in respect of a Swap
Determination Period, an amount equal to the sum of the aggregate of the
outstanding current balances of the Fixed Rate Mortgage Loans at the start of
business on the first day of such Swap Determination Period, and (ii) in
respect of a Further Issue Determination Period, an amount equal to the sum of
the aggregate of the outstanding current balances of the Further Issue Fixed
Rate Mortgage Loans at the start of business on the first day of such Further
Issue Determination Period, in the case of both (i) and (ii) above, as
notified to the Calculation Agent by the Cash Manager in accordance with the
Cash Management Agreement.
AVERAGE FLEXIBLE MORTGAGE LOAN BALANCE means, (i) in respect of a Swap
Determination Period, an amount equal to the sum of the aggregate of the
outstanding current balances of the Flexible Mortgage Loans at the start of
business on the first day of such Swap Determination Period, and (ii) in
respect of a Further Issue Determination Period, an amount equal to the sum of
the aggregate of the outstanding current balances of the Further Issue Flexible
Mortgage Loans at the start of business on the first day of such Further Issue
Determination Period, in the case of both (i) and (ii) above, as notified to
the Calculation Agent by the Cash Manager in accordance with the provisions of
the Cash Management Agreement.
AVERAGE MORTGAGE LOAN BALANCE means, in respect of a Swap Determination Period,
the sum of the Average Fixed Rate Mortgage Loan Balance, the Average Variable
Rate Mortgage Loan Balance and the Average Flexible Mortgage Loan Balance.
AVERAGE VARIABLE RATE MORTGAGE LOAN BALANCE means, (i) in respect of a Swap
Determination Period, an amount equal to the sum of the aggregate of the
outstanding current balances of the Variable Rate Mortgage Loans at the start
of business on the first day of such Swap Determination Period, and (ii) in
respect of a Further Issue Determination Period, an amount equal to the sum of
the aggregate of the outstanding current balances of the Further Issue Variable
Rate Mortgage Loans at the start of business on the first day of such Further
Issue Determination Period, in the case of both (i) and (ii) above, as
notified to the Calculation Agent by the Cash Manager in accordance with the
provisions of the Cash Management Agreement.
BLENDED RATE means, in respect of a Swap Determination Period, a rate of
interest equal to the sum of (i) the Weighted Average Fixed Rate for such Swap
Determination Period multiplied by the Fixed Rate Ratio for such Swap
Determination Period; (ii) the Variable Rate Swap SVR for such Swap
Determination Period multiplied by the Variable Rate Ratio for such Swap
Determination Period, and (iii) the Flexible Swap Rate for such Swap
Determination Period multiplied by the Flexible Ratio for such Swap
Determination Period.
2
BLENDED SPREAD means, in respect of a Swap Determination Period, a percentage
equal to the sum of (i) the Fixed Rate Spread for such Swap Determination
Period multiplied by the Fixed Rate Ratio for such Swap Determination Period;
(ii) the Variable Rate Spread for such Swap Determination Period multiplied by
the Variable Rate Ratio for such Swap Determination Period, and (iii) the
Flexible Spread for such Swap Determination Period multiplied by the Flexible
Ratio for such Swap Determination Period.
CONTRIBUTION DATE has the meaning given to such term in the Master Definitions
Schedule.
FIXED RATE MORTGAGE LOANS means those Mortgage Loans within the Mortgage
Portfolio from time to time which are subject to fixed rates of interest set by
reference to a pre-determined interest rate or series of interest rates for a
fixed period or periods or are subject to a maximum rate of interest (and
charge interest at the lesser of a variable rate and such maximum rate) for a
fixed period or periods (and shall, for the avoidance of doubt, exclude
Variable Rate Mortgage Loans and Flexible Mortgage Loans save for Flexible
Mortgage Loans which are, at the relevant time, subject to such fixed rates of
interest or such maximum rates of interest arrangements and shall also exclude
any Fixed Rate Mortgage Loans which have become Re-Fixed Mortgage Loans during
the immediately preceding Swap Determination Period).
FIXED RATE RATIO means, (i) in respect of a Swap Determination Period, the
Average Fixed Rate Mortgage Loan Balance divided by the Average Mortgage Loan
Balance, and (ii) in respect of a Further Issue Determination Period, the
Further Issue Average Fixed Rate Mortgage Loan Balance divided by the Further
Issue Average Mortgage Loan Balance.
FIXED RATE SPREAD means [0.21] per cent. per annum or such other percentage
amount as Party A may notify to Party B and the Funding 2 Security Trustee in
writing from time to time in accordance with paragraph 4 of this Confirmation.
FLEXIBLE MORTGAGE LOANS means those Mortgage Loans within the Mortgage
Portfolio that typically incorporate features that give the borrower options
(which may be subject to certain conditions) to, among other things, make
further drawings on the mortgage loan account, and/or to overpay or underpay
interest and principal in a given month and/or to take a payment holiday (and
shall, for the avoidance of doubt, exclude: (i) Flexible Mortgage Loans which
are, at the relevant time, subject to fixed rates of interest set by reference
to a pre-determined interest rate or series of interest rates for a fixed
period or periods are subject to a maximum rate of interest (and charge
interest at the lesser of a variable rate and such maximum rate) for a fixed
period or periods (which shall, for such fixed period, constitute Fixed
Mortgage Loans); and (ii) Variable Rate Mortgage Loans).
FLEXIBLE RATIO means, (i) in respect of a Swap Determination Period, the
Average Flexible Mortgage Loan Balance divided by the Average Mortgage Loan
Balance, and (ii) in respect of a Further Issue Determination Period, the
Further Issue Average Flexible Mortgage Loan Balance divided by the Further
Issue Average Mortgage Loan Balance.
3
FLEXIBLE SPREAD means [1.55] per cent. per annum or such other percentage
amount as Party A may notify to Party B and the Funding 2 Security Trustee in
writing from time to time in accordance with paragraph 4 of this Confirmation.
FLEXIBLE SWAP RATE means, (i) in respect of a Swap Determination Period, a rate
of interest equal to the Variable Rate Swap SVR for such Swap Determination
Period minus the weighted average of the discounts charged to borrowers of
Flexible Mortgage Loans as at the start of business on the first day of such
Swap Determination Period, and (ii) in respect of a Further Issue Determination
Period, a rate of interest equal to the Variable Rate Swap SVR for such Further
Issue Determination Period minus the weighted average of the discounts charged
to borrowers of Flexible Mortgage Loans in the New Mortgage Portfolio as at the
start of business on the first day of such Further Issue Determination Period,
in the case of both (i) and (ii), the weighted average being calculated by
reference to the then outstanding current balances of such Flexible Mortgage
Loans as at that date, as determined by the Cash Manager in accordance with the
provisions of the Cash Management Agreement.
FUNDING 2 means Granite Finance Funding 2 Limited.
FUNDING 2 AMOUNT means, in respect of a Swap Determination Period, an amount in
Sterling equal to the amount produced by applying the Blended Rate for such
Swap Determination Period to the Notional Amount, such amount to be calculated
by the Calculation Agent on the basis of the number of days in such Swap
Determination Period, divided by 360 (the number of days to be calculated on
the basis of a year of 360 days with 12 30-day months, without regard to the
date of the first day or last day of the Swap Determination Period).
FUNDING 2 PROGRAMME DATE means [*] [January] 2005.
FUNDING 2 SHARE has the meaning given to such term in the Master Definitions
Schedule.
FURTHER ISSUE means an increase in the Funding 2 Share on a Further Issue Date;
the amount of such increase for a particular Further Issue Date being a FURTHER
ISSUE AMOUNT.
FURTHER ISSUE AVERAGE FIXED RATE MORTGAGE LOAN BALANCE means, in respect of a
Further Issue Determination Period, an amount equal to the sum of the aggregate
of the outstanding current balances of the Fixed Rate Mortgage Loans in the New
Mortgage Portfolio as at the first day of such Further Issue Determination
Period (after taking account of any transfer of a New Mortgage Portfolio to the
Mortgages Trustee on such date) as notified to the Calculation Agent by the
Cash Manager in accordance with the Cash Management Agreement.
FURTHER ISSUE AVERAGE FLEXIBLE MORTGAGE LOAN BALANCE means, in respect of a
Further Issue Determination Period, an amount equal to the sum of the aggregate
of the outstanding current balances of the Flexible Mortgage Loans in the New
Mortgage Portfolio as at the first day of such Further Issue Determination
Period (after taking account of any transfer of a New Mortgage Portfolio to the
Mortgages Trustee on such
4
date) as notified to the Calculation Agent by the Cash Manager in accordance
with the provisions of the Cash Management Agreement.
FURTHER ISSUE AVERAGE MORTGAGE LOAN BALANCE means, in respect of a Further
Issue Determination Period, the sum of the Further Issue Average Fixed Rate
Mortgage Loan Balance, the Further Issue Average Variable Rate Mortgage Loan
Balance and the Further Issue Average Flexible Mortgage Loan Balance.
FURTHER ISSUE AVERAGE VARIABLE RATE MORTGAGE LOAN BALANCE means, in respect of
a Further Issue Determination Period, an amount equal to the sum of the
aggregate of the outstanding current balances of the Variable Rate Mortgage
Loans in the New Mortgage Loan Portfolio as at the first day of such Further
Issue Determination Period (after taking account of any transfer of a New
Mortgage Portfolio to the Mortgages Trustee on such date) as notified to the
Calculation Agent by the Cash Manager in accordance with the provisions of the
Cash Management Agreement.
FURTHER ISSUE BLENDED RATE means, in respect of a Further Issue Determination
Period, a rate of interest equal to the sum of (i) the Weighted Average Fixed
Rate for such Further Issue Determination Period multiplied by the Fixed Rate
Ratio for such Further Issue Determination Period; (ii) the Variable Rate Swap
SVR for such Further Issue Determination Period multiplied by the Variable Rate
Ratio for such Further Issue Determination Period, and (iii) the Flexible Swap
Rate for such Further Issue Determination Period multiplied by the Flexible
Ratio for such Further Issue Determination Period.
FURTHER ISSUE BLENDED SPREAD means in respect of a Further Issue Determination
Period, a percentage equal to the sum of (i) the Fixed Rate Spread for such
Further Issue Determination Period multiplied by the Fixed Rate Ratio for such
Further Issue Determination Period; (ii) the Variable Rate Spread for such
Further Issue Determination Period multiplied by the Variable Rate Ratio for
such Further Issue Determination Period, and (iii) the Flexible Spread for such
Further Issue Determination Period multiplied by the Flexible Ratio for such
Further Issue Determination Period.
FURTHER ISSUE DATE means a Contribution Date or an Assignment Date, as the case
may be and, for the avoidance of doubt, does not include any Distribution Date
regardless of whether or not such date is also a Contribution Date or an
Assignment Date.
FURTHER ISSUE DETERMINATION PERIOD means a period commencing on (and including)
a Further Issue Date and ending on (but excluding) the next occurring Swap
Determination Date.
FURTHER ISSUE FIXED RATE MORTGAGE LOANS means in respect of a Further Issue,
those Fixed Rate Mortgage Loans comprised in the Further Issue Mortgage
Portfolio relating to such Further Issue.
FURTHER ISSUE FLEXIBLE MORTGAGE LOANS means in respect of a Further Issue,
those Flexible Mortgage Loans comprised in the Further Issue Mortgage Portfolio
relating to such Further Issue.
5
FURTHER ISSUE FUNDING 2 AMOUNT means, in respect of a Further Issue
Determination Period, an amount in Sterling equal to the amount produced by
applying (i) in respect of each Contribution Date which is not also an
Assignment Date, the Blended Rate for the Swap Determination Period in which
such Further Issue Determination Period falls, and (ii) in respect of each
Contribution Date which is also an Assignment Date, the Further Issue Blended
Rate for such Further Issue Determination Period, to the Further Issue Notional
Amount, such amount to be calculated by the Calculation Agent on the basis of
the number of days in such Further Issue Determination Period, divided by 360
(the number of days to be calculated on the basis of a year of 360 days with 12
30-day months, without regard to the date of the first day or last day of the
Further Issue Determination Period). For the avoidance of doubt, there will be
a Further Issue Funding 2 Amount in respect of each Further Issue Date that
occurs during a Swap Determination Date.
FURTHER ISSUE MORTGAGE PORTFOLIO means in respect of a Further Issue, the New
Mortgage Portfolio (if any) that is transferred to the Mortgages Trustee on the
relevant Assignment Date.
FURTHER ISSUE NOTIONAL AMOUNT means in respect of a Further Issue, the Further
Issue Amount relating to such Further Issue.
FURTHER ISSUE SWAP PROVIDER AMOUNT means in respect of a Payment Date and a
Further Issue Determination Period which ends immediately prior to such Payment
Date, an amount in Sterling, which is equal to the amount produced by applying,
a rate equal to One Month LIBOR applicable to the Swap Determination Period in
which such Further Issue Determination Period falls, plus (i) in respect of
each Contribution Date which is not also the Assignment Date with respect to
such Contribution Date, the Blended Spread for the Swap Determination Period in
which such Further Issue Determination Period falls, and (ii) in respect of
each Contribution Date which is the Assignment Date with respect to such
Contribution Date, the Further Issue Blended Spread for the Further Issue
Determination Period, to the Further Issue Notional Amount, such amount to be
calculated by the Calculation Agent on the basis of the actual number of days
in such Swap Determination Period, divided by 365. For the avoidance of doubt,
there will be a Further Issue Swap Provider Amount in respect of each Further
Issue Date that occurs during a Swap Determination Date.
FURTHER ISSUER VARIABLE RATE MORTGAGE LOANS means in respect of a Further
Issue, those Variable Rate Mortgage Loans comprised in the Further Issue
Mortgage Portfolio relating to such Further Issue.
LOAN TRANCHE has the meaning given to such term in the Master Definitions
Schedule.
MORTGAGE CONDITIONS has the meaning given to such term in the Master
Definitions Schedule.
MORTGAGE PORTFOLIO has the meaning given to such term in the Master Definitions
Schedule.
6
MORTGAGES TRUSTEE has the meaning given to such term in the Master Definitions
Schedule.
NEW MORTGAGE PORTFOLIO has the meaning given to such term in the Master
Definitions Schedule.
NOTES has the meaning given to such term in the Master Definitions Schedule.
NOTIONAL AMOUNT means, in respect of any Swap Determination Period an amount in
Sterling equal to the Funding 2 Share as determined on the first day of such
Swap Determination Period; and for the avoidance of doubt, such amount shall be
adjusted for any increase or reduction in the Funding 2 Share on such date
(which shall mean that any Further Issue Amounts arising during a Swap
Determination Period shall be added to such amount on the first day of the next
Swap Determination Period).
ONE MONTH LIBOR means, in respect of a Swap Determination Period, GBP-LIBOR-
BBA, where the Reset Date is the first day of the relevant Swap Determination
Period and the Designated Maturity is one month; [except for the first Swap
Determination Period for which Linear Interpolation is applicable and in
respect of which the Linear Interpolation shall be applied by reference to the
[*] week and [*] week rates].
OUTSTANDING PRINCIPAL BALANCE has the meaning given to such term in the Master
Definitions Schedule.
PAYMENT DATE means the [twentieth] day of each calendar month from, and
including [20 February] 2005 to, but excluding, the Termination Date, subject
to adjustment with the Following Business Day Convention. [It is understood
that payments to be made on any given Payment Date shall be those payments
relating to the Swap Determination Period, and any Further Issue Determination
Period, immediately preceding such Payment Date.]
REFERENCE LENDERS means Abbey National PLC, Alliance & Leicester plc, Woolwich
plc, HBOS plc, Lloyds TSB Bank plc, National Westminster Bank Plc and Bradford
and Bingley plc (or their respective successors) and such additional or
replacement residential mortgage lenders as shall be determined by the
Calculation Agent and REFERENCE LENDER means any one of them.
RE-FIXED MORTGAGE LOANS has the meaning given to such term in the Master
Definitions Schedule.
SWAP DETERMINATION DATE means the first Business Day of any calendar month
occurring during the period commencing on the Funding 2 Programme Date and
ending on the Termination Date.
SWAP DETERMINATION PERIOD means the period from (and including) the Funding 2
Programme Date to (but excluding) the first Swap Determination Date and
thereafter from (and including) a Swap Determination Date to (but excluding)
the next Swap Determination Date.
7
SWAP PROVIDER AMOUNT means, in respect of a Payment Date and the Swap
Determination Period which ends immediately prior to such Payment Date, an
amount in Sterling which is equal to the amount produced by applying, a rate
equal to One Month LIBOR applicable to such Swap Determination Period plus the
Blended Spread for the Swap Determination Period, to the Notional Amount, such
amount to be calculated by the Calculation Agent on the basis of the actual
number of days in such Swap Determination Period, divided by 365.
VARIABLE RATE MORTGAGE LOANS means those Mortgage Loans within the Mortgage
Portfolio from time to time which are subject to a rate of interest which at
any time may be varied in accordance with the relevant Mortgage Conditions (and
shall, for the avoidance of doubt, exclude Fixed Rate Mortgage Loans and
Flexible Mortgage Loans).
VARIABLE RATE RATIO means, in respect of a Swap Determination Period, the
Average Variable Rate Mortgage Loan Balance divided by the Average Mortgage
Loan Balance, and in respect of a Further Issue Determination Period, the
Further Issue Average Variable Rate Mortgage Loan Balance divided by the
Further Issue Average Mortgage Loan Balance.
VARIABLE RATE SPREAD means [1.75] per cent. per annum or such other percentage
amount as Party A may notify to Party B and the Funding 2 Security Trustee in
writing from time to time in accordance with paragraph 4 of this Confirmation.
VARIABLE RATE SWAP SVR means, (i) in respect of a Swap Determination Period,
the rate equal to the average of the standard variable rates or their
equivalent charged to existing borrowers on residential mortgage loans as
published from time to time as at the start of business on the first day of
such Swap Determination Period, and (ii) in respect of a Further Issue
Determination Period, the rate equal to the average of the standard variable
rates or their equivalent charged to existing borrowers on residential mortgage
loans as published from time to time as at the start of business on the first
day of such Further Issue Determination Period, in the case of both (i) and
(ii) above, after excluding the highest and lowest rate, of the Reference
Lenders, as determined by the Cash Manager in good faith and notified to the
Calculation Agent from time to time in accordance with the Cash Management
Agreement.
WEIGHTED AVERAGE FIXED RATE means, (i) in respect of a Swap Determination
Period, the rate equal to the weighted average of the fixed rates of interest
charged to borrowers of Fixed Rate Mortgage Loans as at the start of business
on the first day of such Swap Determination Period, and (ii) in respect of a
Further Issue Determination Period, the rate equal to the weighted average of
the fixed rates of interest charged to borrowers of Fixed Rate Mortgage Loans
in the New Mortgage Portfolio as at the start of business on the first day of
such Further Issue Determination Period, in the case of both (i) and (ii)
above, the weighted average being calculated by reference to the then
outstanding current balances of such Fixed Rate Mortgage Loans as at that date,
as notified by the Cash Manager to the Calculation Agent in accordance with the
provisions of the Cash Management Agreement.
8
1. The terms of the Transaction to which this Confirmation relates are as
follows:
PARTY A: Northern Rock plc.
PARTY B: Granite Finance Funding 2 Limited.
TRADE DATE: [*] [January] 2005.
EFFECTIVE DATE: [The Funding 2 Programme Date].
TERMINATION DATE: [One calendar month following the reduction in the
Sterling amount of the Funding 2 Share to zero].
BUSINESS DAYS: London.
CALCULATION OF
AMOUNTS: On the Swap Determination Date immediately preceding
each Payment Date, the Calculation Agent shall
calculate the Aggregate Swap Provider Amount for such
Payment Date and the Aggregate Funding 2 Amount for
such Payment Date, and forthwith notify Party A,
Party B, the Cash Manager and the Issuer Cash Manager
of the amounts so determined and of the net amount
determined as set out below.
PAYMENTS: If in relation to any Payment Date:
(i) the Aggregate Swap Provider Amount for such
Payment Date exceeds the Aggregate Funding 2
Amount for such Payment Date, Party A shall
pay the amount of such excess to Party B on
such Payment Date;
(ii) the Aggregate Funding 2 Amount for such
Payment Date exceeds the Aggregate Swap
Provider Amount for such Payment Date, Party B
shall pay the amount of such excess to Party A
on such Payment Date;
(iii) the Aggregate Swap Provider Amount for such
Payment Date is equal to the Aggregate Funding
2 Amount for such Payment Date, no amount
shall be due and payable by either party
hereunder in relation to such Payment Date
with respect to the Aggregate Swap Provider
Amount and the Aggregate Funding 2 Amount.
9
CALCULATION AGENT: Northern Rock plc acting in its capacity as
Administrator pursuant to the Administration
Agreement or as Cash Manager pursuant to the Cash
Management Agreement, as the case may be.
2. Account Details:
Payments to Party A: Bank: Northern Rock plc
Account Name: Northern Rock Group
Treasury
Sort Code: [30-00-59]
Reference: Granite Finance Funding 2 Limited
Payments to Party B: Bank: Citibank N.A.
Account Name: Granite Finance Funding 2 Limited
Account Number: [10850675]
Sort Code: [18-50-08]
Reference: Northern Rock plc
3. Notice Details:
Party A: Northern Rock plc
Address: Northern Rock House
Gosforth
Newcastle upon Tyne
NE3 4PL
Facsimile Number: 0191-279-4694
Attention: Treasury Settlements Manager
Party B: Granite Finance Funding 2 Limited
Address: Fifth Floor
100 Wood Street
London
EC2V 7EX
With a copy to: Northern Rock plc
Northern Rock House
Gosforth
Newcastle upon Tyne
NE3 4PL
Facsimile Number: 0191 279 4694
Attention: Keith M. Currie
10
With a copy to the
Funding 2 Security Trustee:The Bank of New York
Address: One Canada Square
48th Floor
London
E14 5AL
Facsimile Number: 0207 964 6262
Attention: Global Structured Finance
(Corporate Trust)
4. MISCELLANEOUS
Notwithstanding any other provision of this Confirmation, if on any date
Funding 2 draws down a new Loan Tranche or increases the Outstanding
Principal Balance under an existing Loan Tranche, then to reflect
prevailing market conditions, provided, the Rating Agencies have
confirmed that any adjustments carried out in accordance with this
provision will not result in a lowering, qualification or withdrawal of
the Notes issued by any Funding 2 Issuer to lower than the rating of
such Notes immediately prior to such adjustment, Party A may, by giving
notice in writing to Party B and to the Funding 2 Security Trustee on
such date, make any adjustments it deems appropriate to the Fixed Rate
Spread, the Flexible Spread and the Variable Rate Spread (or any of
them) for the Swap Determination Period in which such date occurs and
for all Swap Determination Periods occurring after such date (subject
always to any further adjustment pursuant to this paragraph 4).
11
Yours faithfully,
NORTHERN ROCK PLC
By:
Name:
Title:
Confirmed as of the date first written:
GRANITE FINANCE FUNDING 2 LIMITED
By:
Name:
Title:
12
(Basis Rate Swap 2)
From: Northern Rock plc
Northern Rock House
Gosforth
Newcastle Upon Tyne
NE3 4PL
Attention: Swaps Administration
To: Granite Finance Funding 2 Limited
Fifth Floor
100 Wood Street
London
EC2V 7EX
Attention: Securitisation Team, Risk Operations
[*] [January] 2005
Dear Sirs
RE: BASIS RATE SWAP TRANSACTION NO. 2[A]/[B]/[C][1] CONFIRMATION RELATING TO
THE RELEVANT ISSUER NOTES
The purpose of this letter is to confirm the terms and conditions of the swap
transaction entered into between us on the Trade Date specified below (the SWAP
TRANSACTION). This letter constitutes a "Confirmation" as referred to in, and
supplements forms part of and is subject to, the ISDA Master Agreement dated as
of [*] [January] 2005, as amended and supplemented from time to time (the
AGREEMENT), between us. All provisions contained in the Agreement 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 this Confirmation, this Confirmation
will govern. References herein to a "Transaction" shall be deemed to be
references to a "Swap Transaction" for the purposes of the Definitions. Any
terms not otherwise defined herein or in the Definitions shall have the
meanings given to them in the Programme Master Definitions Schedule signed for
the purposes of identification by Sidley Austin Brown & Wood and Allen & Overy
LLP on [*] [January] 2005 (as the same may be amended, restated, varied,
supplemented and/or otherwise modified from time to time with the consent of
the parties hereto) (the MASTER DEFINITIONS SCHEDULE).
As used in this Confirmation:
- -------------
1 Delete as applicable.
NOTE PAYMENT DATE means any Payment Date (as defined in the Relevant Issuer
Notes) on which interest is payable.
RELEVANT ISSUER NOTES means the Notes from time to time issued by any Funding 2
Issuer on or after the date of this Confirmation with Note Payment Dates
falling in [January, April, July and October]/[February, May, August and
November]/[March, June, September and December][2].
1 The terms of the particular Swap Transaction to which this Confirmation
relates are as follows:
Party A: Northern Rock plc.
Party B: Granite Finance Funding 2 Limited.
Trade Date: [*] [January] 2005.
Effective Date: [*] [January] 2005.
Termination Date: The earlier of
(a) the Final Maturity Date of the last
remaining Relevant Issuer Notes outstanding
at any time;
(b) the occurrence of a Trigger Event; and
(c) the service of a Funding 2 Enforcement
Notice by the Funding 2 Security Trustee on
Funding 2 or the service of an Issuer
Enforcement Notice by the Note Trustee or the
Master Issuer.
Payment Dates: The [20]th day of each calendar month during
the Term from, and including, [20 February]
2005 to, but excluding, the Termination Date,
subject to adjustment with the Following
Business Day Convention, and the Termination
Date (each a SWAP PAYMENT DATE).
- --------
2 Delete as applicable.
2
Notional Amount: On any Swap Payment Date which is also a
Note Payment Date, an amount in GBP equal to
the aggregate Outstanding Principal Balance
of the Loan Tranches relating to the
Relevant Issuer Notes on the immediately
preceding Note Payment Date; plus, the
aggregate Outstanding Principal Balance of
the Loan Tranches relating to the Relevant
Issuer Notes made in the period between
the applicable date and the immediately
preceding Note Payment Date (which for the
avoidance of doubt will be each Increased
OPB relating to such period); less, a pro
rata share (X) of the balance of the
Principal Deficiency Ledger where "x" is a
fraction with the aggregate Outstanding
Principal Balance of the Loan Tranches
relating to the Relevant Issuer Notes as its
numerator, and the aggregate Outstanding
Principal Balance of all of the Loan Tranches
relating to all of the Notes issued by any
Funding 2 Issuer on such date, as it
denominator; less the aggregate Outstanding
Principal Balance of the Loan Tranches
relating to the Relevant Issuer Notes on the
immediately preceding Note Payment Date in
respect of which the Step-Up Date has
occurred (including, for the avoidance of
doubt, the Relevant Issuer Notes, the Step-Up
Date of which is the immediately preceding
Note Payment Date). It is understood that the
Notional Amount on any Note Payment Date
shall include any reduction of the
Outstanding Principal Balance of the Loan
Tranches relating to the Relevant Issuer
Notes that may occur on such date.
With respect to any Swap Payment Date that is
not a Note Payment Date, the Notional Amount
shall be the Notional Amount for the
immediately preceding Note Payment Date.
3
The Notional Amount in respect of each Swap
Payment Date shall be notified to the
Calculation Agent by the Cash Manager
pursuant to paragraph 1(a) of Schedule 2 to
the Cash Management Agreement.
A. FLOATING PAYMENTS
Floating Amounts I:
Floating Rate Payer I: Party A.
Floating Rate Payer I [GBP-LIBOR-BBA].
Floating Rate Option:
Floating Rate Payer I Three months[; except in respect of the
Designated Maturity: initial Calculation Period for which Linear
Interpolation is applicable and in respect of
which the Linear Interpolation shall be
applied by reference to the [{circle}] month
and [{circle}] month rates].
Floating Rate Payer I Spread:[{circle}] per cent. per annum.
Floating Rate Payer I [Actual/365 (Fixed)].
Floating Rate Day Count
Fraction:
Floating Rate Payer I The first day of each Calculation Period;
Reset Dates: provided however, that in respect of every
Calculation Period that does not start on a
Note Payment Date, the Floating Rate in
effect for such Calculation Period shall be
the Floating Rate for the immediately
preceding Calculation Period.
Floating Amounts II:
Floating Rate Payer II: Party B.
Floating Rate Payer II [GBP-LIBOR-BBA].
Floating Rate Option:
Floating Rate Payer II One month.
Designated Maturity:
Floating Rate Payer II [Actual/365 (Fixed)].
Floating Rate Day Count
Fraction:
4
Floating Rate Payer II The first day of each Calculation Period.
Reset Dates:
Calculation Agent: Party A.
B. ACCOUNT DETAILS:
PAYMENTS TO FLOATING RATE PAYER I:
Account for Payments in GBP: Northern Rock plc
Northern Rock Group Treasury
[30-00-59]
Granite Finance Funding 2 Limited Basis Swap
2[A]/[B]/[C][3]
PAYMENTS TO FLOATING RATE PAYER II:
Account for Payments in GBP: [Citibank N.A.
Granite Finance Funding 2 Limited
[10850675]
[18-50-08]
Northern Rock plc]
C. NOTICE DETAILS:
Floating Rate Payer I: Northern Rock plc
Address: Northern Rock House
Gosforth
Newcastle upon Tyne
NE3 4PL
Facsimile Number: 0191 279 4694
Attention: Treasury Settlements Manager
Floating Rate Payer II: Granite Finance Funding 2 Limited
Address: Fifth Floor
100 Wood Street
London
EC2V 7EX
With a copy to: Northern Rock plc
Northern Rock House
Gosforth
Newcastle upon Tyne
NE3 4PL
- -------
3 Delete as applicable.
5
Facsimile Number: +44 191 279 4694
Attention: [Keith M. Currie]
And with a copy to the [The Bank of New York]
Funding 2 Security Trustee:
Address: [One Canada Square
48th Floor
London
E14 5AL]
Facsimile Number: [+44 207 964 6061]
D. OFFICES: The Office of Party A for each of the
Transactions evidenced by this Confirmation
is London.
E. FURTHER ISSUE AMOUNTS
If on any date during a Calculation Period (other than a Note Payment
Date) (an INCREASED OPB DATE), as a consequence of the issue of Relevant
Issuer Notes during such Calculation Period, the aggregate Outstanding
Principal Balance of the Loan Tranches relating to the Relevant
Issuer Notes increases, (the amount of such increase being an INCREASED
OPB), a further Transaction (a FURTHER ISSUE TRANSACTION) shall be deemed
to have occurred in respect of such Increased OPB on terms identical to
those set out above in respect of the Swap Transaction, except as modified
below.
Notional Amount: The Notional Amount of a Further Issue
Transaction shall be an amount equal to
the relevant Increased OPB (the FURTHER ISSUE
NOTIONAL AMOUNT).
Effective Date: The Effective Date of a Further Issue
Transaction (the FURTHER ISSUE EFFECTIVE
DATE) shall be the relevant Increased OPB
Date.
Termination Date: The Termination Date of a Further Issue
Transaction shall be the Note Payment Date
immediately following the relevant Further
Issue Effective Date (the FURTHER ISSUE
TERMINATION DATE).
Reset Dates: The Reset Dates for a Further Issue
Transaction shall be:
(i) in respect of Party A, the Floating
6
Rate Payer I Reset Dates, except in respect
of the first Calculation Period of the
Further Issue Transaction, the Reset Date for
which will be the Further Issue Effective
Date; and
(ii) in respect of Party B, the Floating Rate
Payer II Reset Dates, including for the
avoidance of doubt in respect of the first
Calculation Period of the Further Issue
Transaction.
Floating Amounts I: The Designated Maturity for a Further Issue
Transaction shall be:
(i) in respect of Party A, the period from,
and including, the further Issue Effective
Date to, but excluding, the Further Issue
Termination Date. Linear Interpolation shall
apply; and
(ii) in respect of Party B, the Floating Rate
Payer II Designated Maturity.
For the purposes of Section 2(c) of the Agreement, any amounts owing by one
party to another party under a Further Issue Transaction on a Swap Payment
Date, shall be deemed to be amounts payable by such party in respect of the
Swap Transaction on such Payment Date and shall be netted in accordance with
Section 2(c).
It is understood, that as at the Further Issue Termination Date, the
calculation of the aggregate Outstanding Principal Balance of the Loan Tranches
relating to the Relevant Issuer Notes will incorporate any Further Issue
Notional Amount in respect of any Further Issue Transaction which terminated on
such date.
Please confirm your agreement to be bound by the terms of the foregoing by
executing a copy of this Confirmation and returning it to us by facsimile.
Yours faithfully
NORTHERN ROCK PLC
By:
Name:
Title:
By:
Name:
Title:
7
Confirmed as of the date first written:
GRANITE FINANCE FUNDING 2 LIMITED
By:
Name:
Title: